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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 29, 1999
REGISTRATION NO. 333-60355
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 10
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 84-1259577
DELAWARE 84-1275621
(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)
</TABLE>
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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, (ii) 34 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.
Baywood Apartments, Ltd.
Buccaneer Trace Limited Partnership
Burgundy Court Associates L.P.
Calmark/Fort Collins, Ltd.
Catawba Club Associates, L.P.
Cedar Tree Investors Limited Partnership
Chapel Hill, Limited
Coastal Commons 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, Ltd.
Northbrook Apartments, Ltd.
Orchard Park Apartments Limited Partnership
Park Towne Place Associates Limited Partnership
Quail Run Associates, L.P.
Ravensworth Associates Limited Partnership
Rivercreek Apartments Limited Partnership
Rivercrest Apartments Ltd.
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, L.P.
Villa Nova, Limited Partnership
Walker Springs, Limited
Wingfield Investors Limited Partnership
Woodmere Associates, L.P.
Yorktown Towers Associates
In accordance with Rule 472(b) the Registrants have not refiled the 57
prospectus supplements for the 56 partnerships listed below which were filed
with previous Amendments since no changes have yet been made to such documents.
Such prospectus supplements remain a part of this Registration Statement and
will be refiled, as appropriate, in future Amendments. This Registration
Statement will not be used for exchange offers with respect to the following
partnerships until the Staff of the Securities and Exchange Commission has
completed its review of the related prospectus supplements:
Angeles Income Properties, Ltd. 6
Angeles Income Properties, Ltd. III
Angeles Income Properties, Ltd. II
Angeles Income Properties, Ltd. IV
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
Brampton Associates Limited Partnership
Casa Del Mar Associates Limited Partnership
Century Properties Fund XIX
Century Properties Fund XVI
Century Properties Fund XVIII
Century Properties Growth Fund XXII
Chestnut Hill Associates Limited Partnership
Consolidated Capital Institutional Properties/3
Consolidated Capital Institutional Properties/2
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.
DFW Apartment Investors Limited Partnership
DFW Residential Investors Limited Partnership
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
Minneapolis Associates II Limited Partnership
Multi-Benefit Realty Fund '87-1-Class B*
Multi-Benefit Realty Fund '87-1-Class A*
National Property Investors 8
Olde Mill Investors Limited Partnership
Riverside Park Associates L.P.
Shelter Properties III
Shelter Properties IV
Shelter Properties VI
Shelter Properties VII Limited Partnership
Shearson/Calmark Heritage Park II, Ltd.
Springhill Lake Investors Limited Partnership
U.S. Realty Partners Limited Partnership
United Investors Growth Properties
United Investors Growth Properties II
United Investors Income Properties
Winrock-Houston Limited Partnership
Winthrop Apartment Investors Limited Partnership
Winthrop Growth Investors 1 Limited Partnership
Winthrop Texas Investors Limited Partnership
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* This offer will be combined into one prospectus supplement.
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PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 26, 1999)
AIMCO Properties, L.P.
is offering to acquire units of limited partnership interest of
Baywood Apartments, Ltd.
in exchange for your choice of:
1,732.75 of our 8.0% Class Two Partnership Preferred Units;
1,151.00 of our Partnership Common Units; or
$43,313 in cash.
Generally, you will not recognize any immediate taxable gain or loss if you
exchange your units solely for our securities. However, you will recognize
taxable gain or loss if you exchange your units for cash.
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 the offer
consideration from a financial point of view.
Our offer consideration will be reduced for any distributions subsequently
made by your partnership prior to the expiration of our offer.
We will only accept a maximum of 25% 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.
You will not pay any fees or commissions if you tender your units.
Our offer and your withdrawal rights will expire at 5:00 p.m., New York
City time, on June 4, 1999, unless we extend the deadline. You may withdraw any
tendered units at any time before we have accepted them for payment.
SEE "RISK FACTORS" BEGINNING ON PAGE S-23 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF RISK FACTORS THAT
YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration of $43,313 per unit without any
arms-length negotiations. Accordingly, our offer consideration may not
reflect the fair market value of your units.
- We cannot predict when the property owned by your partnership may be
sold.
- Your general partner is a subsidiary of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- We are making this offer with a view to making a profit, and therefore,
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.
- Continuation of your partnership will result in our affiliates continuing
to receive management fees from your partnership which would not be
payable if your partnership was liquidated.
- It is possible that we may conduct a subsequent offer at a higher price
more than one year after expiration of this offer.
- Unlike your partnership, our policy is to reinvest proceeds from the sale
of our properties or refinancing of our indebtedness.
- We may change our investment, acquisition or financing policies without a
vote of our securityholders.
- If you acquire our securities, your investment will change from holding
an interest in a single property to holding an interest in our large
portfolio of properties, thereby fundamentally changing the nature of
your investment.
- Recently, Moody's Investors Service revised its outlook for AIMCO's
ratings from stable to negative.
- There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
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.
March 26, 1999
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TABLE OF CONTENTS
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PAGE
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SUMMARY........................................ S-1
The Offer.................................... S-1
The AIMCO Operating Partnership.............. S-1
Affiliation with your General Partner........ S-1
Risk Factors................................. S-1
Background and Reasons for the Offer......... S-6
Valuation of Units........................... S-9
Fairness of the Offer........................ S-10
Stanger Analysis............................. S-11
Your Partnership............................. S-11
Terms of the Offer........................... S-12
Federal Income Tax Consequences.............. S-14
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-14
Comparison of Your Units and AIMCO OP Units.. S-14
Conflicts of Interest........................ S-15
Source and Amount of Funds and Transactional
Expenses................................... S-16
Summary Financial Information of AIMCO
Properties, L.P............................ S-17
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-19
Summary Financial Information of Baywood
Partners, Ltd. ............................ S-21
Comparative Per Unit Data.................... S-21
THE AIMCO OPERATING PARTNERSHIP................ S-22
RISK FACTORS................................... S-23
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-23
Offer Consideration Not Based on Third
Party Appraisal or Arms-Length
Negotiation.............................. S-23
Offer Consideration May Not Represent Fair
Market Value............................. S-23
Offer Consideration Does Not Reflect Future
Prospects................................ S-23
Offer Consideration Based on Our Estimate
of Liquidation Proceeds.................. S-23
Offer Consideration May Be Less Than
Liquidation Value........................ S-23
Holding Units May Result in Greater Future
Value.................................... S-23
Conflicts of Interest with Respect to the
Offer.................................... S-23
Conflicts of Interest Relating to
Management Fees.......................... S-24
Possible Subsequent Offer at a Higher
Price.................................... S-24
Possible Recognition of Taxable Gain on a
Sale of Your Units....................... S-24
Offer Consideration May Be Less Than
Liquidation Value........................ S-24
Fairness Opinion of Third Party Relied on
Information We Provided.................. S-24
Loss of Future Distributions from Your
Partnership.............................. S-25
Possible Effect of the Other Exchange
Offers on Us............................. S-25
Potential Delay in Payment................. S-25
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-25
Fundamental Change in Nature of
Investment............................... S-25
Fundamental Change in Number of Properties
Owned.................................... S-25
Lack of Trading Market for OP Units........ S-25
Uncertain Future Distributions............. S-26
Possible Reduction in Required
Distributions on Preferred OP Units...... S-26
Possible Lower Distributions............... S-26
Possible Redemption of Preferred Stock..... S-26
Possible Recognition of Taxable Gains on OP
Units.................................... S-26
Limitations on Effecting a Change of
Control.................................. S-26
Limitation on Transfer of OP Units......... S-26
Limited Voting Rights of Holders of OP
Units.................................... S-26
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Market Prices for AIMCO's Securities May
Fluctuate................................ S-27
Litigation Associated with Partnership
Acquisitions............................. S-27
Dilution of Interests of Holders of OP
Units.................................... S-27
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-27
Possible Increase in Control of Your
Partnership by Us........................ S-27
Recognition of Gain Resulting from Possible
Future Reduction in Your Partnership
Liabilities.............................. S-27
Possible Termination of Your Partnership
for Federal Income Tax Purposes.......... S-27
Risk of Inability to Transfer Units for
12-Month Period.......................... S-27
Possible Change in Time Frame Regarding
Sale of Property......................... S-28
Balloon Payments........................... S-28
SPECIAL FACTORS TO CONSIDER.................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-28
Background of the Offer...................... S-28
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-32
Disadvantages of the Offer................... S-32
VALUATION OF UNITS............................. S-34
FAIRNESS OF THE OFFER.......................... S-36
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-36
Fairness to Unitholders who Tender their
Units...................................... S-37
Fairness to Unitholders who do not Tender
their Units................................ S-38
Comparison of Consideration to Alternative
Consideration.............................. S-38
Allocation of Consideration.................. S-41
STANGER ANALYSIS............................... S-42
Experience of Stanger........................ S-42
Summary of Materials Considered.............. S-42
Summary of Reviews........................... S-44
Conclusions.................................. S-46
Assumptions, Limitations and
Qualifications............................. S-46
Compensation and Material Relationships...... S-47
YOUR PARTNERSHIP............................... S-48
General...................................... S-48
Your Partnership and its Property............ S-48
Property Management.......................... S-48
Investment Objectives and Policies; Sale or
Financing of Investments................... S-48
Capital Replacement.......................... S-49
Borrowing Policies........................... S-49
Competition.................................. S-50
Legal Proceedings............................ S-50
History of the Partnership................... S-50
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-50
Distributions and Transfers of Units......... S-51
Beneficial Ownership of Interests in Your
Partnership................................ S-51
Compensation Paid to the General Partner and
its Affiliates............................. S-51
SELECTED FINANCIAL INFORMATION OF YOUR
PARTNERSHIP.................................. S-52
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP.......................... S-53
THE OFFER...................................... S-56
Terms of the Offer; Expiration Date.......... S-56
Acceptance for Payment and Payment for
Units...................................... S-56
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Procedure for Tendering Units................ S-57
Withdrawal Rights............................ S-60
Extension of Tender Period; Termination;
Amendment.................................. S-60
Proration.................................... S-61
Fractional OP Units.......................... S-61
Future Plans of the AIMCO Operating
Partnership................................ S-61
Voting by the AIMCO Operating Partnership.... S-62
Dissenters' Rights........................... S-62
Conditions of the Offer...................... S-62
Effects of the Offer......................... S-65
Certain Legal Matters........................ S-65
Fees and Expenses............................ S-67
Accounting Treatment......................... S-67
FEDERAL INCOME TAX CONSEQUENCES................ S-68
Tax Opinions................................. S-68
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-69
Disguised Sales.............................. S-70
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-70
Tax Consequences of Exchanging Units Solely
for Cash................................... S-71
Adjusted Tax Basis........................... S-71
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-71
Passive Activity Losses...................... S-72
Tax Reporting................................ S-72
Foreign Offerees............................. S-72
Tax Consequences of a Termination of Your
Partnership................................ S-72
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-74
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-81
DESCRIPTION OF PREFERRED OP UNITS.............. S-87
General...................................... S-87
Ranking...................................... S-87
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Distributions................................ S-87
Allocation................................... S-88
Liquidation Preference....................... S-88
Redemption................................... S-89
Voting Rights................................ S-89
Restrictions on Transfer..................... S-90
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-90
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-92
CONFLICTS OF INTEREST.......................... S-96
Conflicts of Interest with Respect to the
Offer...................................... S-96
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-96
Competition Among Properties................. S-96
Features Discouraging Potential Takeovers.... S-96
Future Exchange Offers....................... S-97
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-97
LEGAL MATTERS.................................. S-98
EXPERTS........................................ S-98
INDEX TO FINANCIAL STATEMENTS.................. F-1
PRO FORMA FINANCIAL INFORMATION OF AIMCO
PROPERTIES, L.P. ............................ P-1
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
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<PAGE> 6
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- 1,732.75 of our Class Two Partnership Preferred Units;
- 1,151.00 of our Partnership Common Units; or
- $43,313 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 accept a maximum of 25% of the outstanding units in response to our
offer. Our offer is not subject to any minimum number of units being tendered.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline.
The original offer price per unit in 1979 was $62,000. For the five years
ended December 31, 1998, your partnership paid distributions of $4,688 per unit.
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
its wholly owned subsidiary, AIMCO-GP, Inc. ("AIMCO GP"), AIMCO acts as the sole
general partner of the AIMCO Operating Partnership. As of December 31, 1998,
AIMCO-GP and another AIMCO subsidiary, AIMCO-LP, Inc., a limited partner of the
AIMCO Operating Partnership (the "Special Limited Partner"), owned approximately
an 83% interest in the AIMCO Operating Partnership. As of December 31, 1998, our
portfolio of owned or managed properties included 379,363 apartment units in
2,147 properties located in 49 states, the District of Columbia and Puerto Rico.
Based on apartment unit data compiled by the National Multi Housing Council, we
believe that we are one of the largest owners and managers of multifamily
apartment properties in the United States. As of December 31, 1998, we:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 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. and our February 26, 1999 merger with Insignia Properties Trust, we
acquired a 100% ownership interest in the general partner of your partnership,
Angeles Properties, Inc., and the company that manages the property owned by
your partnership.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-25 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the
S-1
<PAGE> 7
risks associated with our offer and the disadvantages of the offer to you and
should be considered when you review "Summary -- Background and Reasons for the
Offer -- Expected Benefits of the Offer":
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. We did not use any third-party appraisal or valuation to determine
the value of any property owned by your partnership. We established the terms of
our offer, including the exchange ratios and the cash consideration, without any
arms-length negotiations.
OFFER CONSIDERATION MAY NOT 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 your units. However,
the offer consideration does not necessarily reflect the price that you would
receive in an open market for your units. Such prices could be higher or lower
than our offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration we estimated your property to be worth $6,043,000, less
approximately $354,355 of deferred maintenance and investment. It is possible,
that a sale of the property could result in your receiving more per unit than in
our offer. Even if our cash offer consideration is equal to liquidation value,
if you accept OP Units, you may not ultimately receive an amount equal to the
cash offer consideration when you sell such OP Units or any AIMCO securities you
may receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
value if you retain your units until your partnership is liquidated.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of ours and, therefore, has substantial conflicts of interest with
respect to our offer. We are making this offer with a view to making a profit.
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 RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its property, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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
S-2
<PAGE> 8
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.
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. You
should review "Federal Income Tax Consequences" 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. 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.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is our subsidiary).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. For any units that we
acquire from you, you will not receive any future distributions from your
partnership's operating cash flow or upon a sale of property owned by your
partnership or a refinancing of any of its debt. If you tender your units in
exchange for OP Units, you will be entitled to future distributions from us from
our operating cash flow and upon a dissolution, liquidation or wind-up of the
AIMCO Operating Partnership.
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from a sale of a property or a refinancing of its indebtedness, to (ii)
a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of 2015 to a much larger partnership with a
partnership termination date of 2093.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you tender your units
for our OP Units, you will have changed your investment from an interest in a
partnership that owns and manages one property to an interest in a partnership
that invests in and manages a large portfolio of properties.
S-3
<PAGE> 9
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE LOWER DISTRIBUTIONS. The Preferred OP Units provide for annual
distributions of $2.00 per unit and no more. Current annualized distributions
with respect to the Common OP Units are $2.50 per unit. This is equivalent to
distributions of $3,465.50 per year on the number of Preferred OP Units, or
distributions of $2,877.50 per year on the number of Common OP Units, that you
would receive in exchange for each of your partnership's units. During 1998,
your partnership paid cash distributions of $4,688.00 per unit. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units may be
substantially less, immediately following our offer, than the distributions with
respect to your units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus.
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions.
S-4
<PAGE> 10
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a result, we may incur costs associated with defending or settling such
litigation or paying any judgment if we lose. As of the present time, no limited
partners of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. As a result of the
offer, we may increase our ability to influence voting decisions with respect to
your partnership. However, we will not be able to control voting decisions
unless we acquire more units in another transaction, which cannot take place for
at least one year after expiration of this offer. Also, removal of your general
partner (which is our subsidiary) or the manager of any property owned by your
partnership may become more difficult or impossible without our consent or
approval.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of units without the
consent of your general partner (which is our subsidiary). Such consent may be
withheld by your general partner in its sole discretion. Your general partner
may withhold its consent if such transfer would result in the termination of
your partnership for tax purposes which would occur if 50% or more of the total
interest in your partnership is transferred within a 12-month period. If we
acquire a significant percentage of the interest in your partnership, your
general partner may not consent to a transfer for a 12-month period following
our offer.
S-5
<PAGE> 11
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investment in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to have to
hold the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns one property. The general partner of your partnership
continually considers whether the property should be sold or otherwise disposed
of after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for your partnership. We cannot
predict when the property will be sold or otherwise disposed of. However, there
is no current plan or intention to sell the property in the near future.
BALLOON PAYMENTS. Your partnership has approximately $4,097,807 of balloon
payments due on its mortgage debt in October 2003. Your partnership will have to
refinance such debt or sell its property prior to the balloon payment dates, or
it will be in default and could lose the property to foreclosure.
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 51% ownership interest in Insignia Properties Trust, which has
a 100% ownership interest in the general partner of your partnership and the
company that manages the property owned by your partnership. On February 26,
1999, we acquired the remaining 49% interest in Insignia Properties Trust in a
merger transaction. One of the consequences of the merger with Insignia is to
allow us to make the offer and, if successful, to increase our ownership in 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 August 28, 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
(which is our subsidiary):
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.
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
S-6
<PAGE> 12
without the offer. 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. Your partnership's mortgage notes are
due in October, 2003 and require balloon payments of $4,097,807. Your
partnership currently has adequate sources of cash to finance its
operations on both a short term and long term basis but will have to sell
its property or refinance its indebtedness to pay such balloon payments. In
addition, continuation of your partnership without the offer would deny you
and your partners the benefits that your general partner (which is our
subsidiary) 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. There is currently no market
for the Preferred OP Units or Common OP Units.
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 three principal advantages of exchanging your units for Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the NYSE.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are four principal advantages of exchanging your units for Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- 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 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.
S-7
<PAGE> 13
Disadvantages of the Offer.
The principal disadvantages of the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and determining the offer consideration, no one separately represented
the interests of the limited partners. Although we have a fiduciary duty
to the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of such property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pretax cash proceeds to you than our
offer.
- OP Units. OP Units lack a public market, have transfer restrictions and
must be held for one year before they can be redeemed by a holder. The
ultimate return on the OP Units is directly tied to the future price of
AIMCO's Class A Common Stock or Class I Preferred Stock. You could
ultimately receive less for your OP Units than the cash price in our
offer. Further, on or after March 1, 2005, we may redeem the Class I
Preferred Stock for $25 per share.
- Lower Preferred Quarterly Distributions. Your partnership paid
distributions of $4,688.00 per unit for the fiscal year ended December
31, 1998. Holders of Preferred OP Units will be entitled to receive
quarterly distributions of $0.50 per unit (equivalent to $2.00 on an
annualized basis) before any distributions are paid to holders of Common
OP Units. This is equivalent to a distribution of $3,465.50 per year on
the number of Preferred OP Units you will receive in exchange for each of
your partnership units.
- Lower Common Quarterly Distributions. Your partnership paid distributions
of $4,688.00 per unit for the fiscal year ended December 31, 1998. In
1998, we paid quarterly distributions on the Common OP Units totalling
$2.25 per unit. In January 1999, we increased our distribution rate on
each of the Common OP Units to $2.50 on an annual basis. See "The AIMCO
Operating Partnership." Assuming no change in the level of our
distributions, this is equivalent to a distribution of $2,877.50 per year
on the number of Common OP Units you will receive in exchange for each of
your partnership units.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
a sale of the property would be advantageous given market conditions, the
condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of the property and the tax consequences to you
and your partners upon a sale of the property.
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
S-8
<PAGE> 14
VALUATION OF UNITS
We determined the offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower of the value produced. We used your partnership's
property income for the fiscal year ended December 31, 1997. Our method for
selecting a capitalization rate begins with each property being assigned a
location and condition rating (e.g., "A" for excellent, "B" for good, "C" for
fair, and "D" for poor). We have rated your property's location B (good) and its
condition B (good). Generally, we assign an initial capitalization rate of
10.25% to properties in this category. We then adjust the capitalization rate
based on whether the mortgage debt that the property is subject to bears
interest at a rate above or below 7.5% per annum. Generally, for every 0.5% in
excess of 7.5%, the capitalization rate would be increased by 0.25%. Your
property's mortgage debt bears interest at 7.80% per annum, which resulted in an
increase from the initial capitalization rate of 0.25%. We also considered any
changes in your partnership's property income from 1997 to 1998. Because your
partnership's property income in 1998 remained relatively unchanged compared to
1997, we made no further revision of the capitalization rate, resulting in a
final capitalization rate of 10.50%. The evaluation of a property's location and
condition, and the determination of an appropriate capitalization rate for a
property, is subjective in nature, and others evaluating the same property might
use a different capitalization rate and derive a different property value.
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. Further, in
applying the direct capitalization method, others may make different assumptions
and obtain different results. 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>
Property income............................................. $ 634,000
Capitalization rate......................................... 10.50%
----------
Gross valuation of partnership property..................... $6,043,000
Plus: Cash and cash equivalents............................. 222,672
Plus: Other partnership assets, net of security deposits.... 252,211
Less: Mortgage debt, including accrued interest............. (4,546,079)
Less: Accounts payable and accrued expenses................. (20,195)
Less: Other liabilities..................................... (58,695)
----------
Partnership valuation before taxes and certain costs........ 1,892,914
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures and deferred
maintenance............................................... (354,355)
Less: Closing costs......................................... (151,075)
----------
Estimates net valuation of your partnership................. 1,387,484
Percentage of estimated net valuation allocated to holders
of units.................................................. 99.89%
----------
Estimated net valuation of units............................ 1,386,001
Total number of units............................. 32.0
----------
Estimated valuation per unit................................ 43,313
==========
Cash consideration per unit................................. $ 43,313
==========
</TABLE>
- ---------------
(1) See "Valuation of Units" for a determination of the estimated gross
valuation for the property and a more detailed explanation of the
calculation of the offer price.
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<PAGE> 15
In order to determine the number of Preferred OP Units we are offering for
each of your units, we divided the cash offer consideration of $43,313 by the
$25 liquidation preference of each Preferred OP Unit to get 1,732.75 Preferred
OP Units per unit.
In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $43,313 by a
price of $37.63 (the average closing price of AIMCO's Class A Common Stock on
the NYSE for the 30 trading days ending on March 23, 1999) to get 1,151.00
Common OP Units per unit.
FAIRNESS OF THE OFFER
Fairness to Unitholders. Your general partner is our subsidiary. 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. Your general partner did not participate in the structuring of the
offer. We and your general partner believe that the offer and all forms of
consideration offered is fair to you and the other limited partners of your
partnership. 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 (which is our subsidiary) 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 (which is our subsidiary) has compared our offer consideration
to:
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated;
- your general partner's estimate of the going concern value of your
partnership if it continued operating as an independent stand-alone
entity; and
- the net book value of your partnership.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C>
Cash offer consideration.................................... $ 43,313
Partnership Preferred Units................................. $ 43,313
Partnership Common Units.................................... $ 43,313
Alternatives:
Estimated liquidation proceeds............................ $ 43,313
Estimated going concern value(1).......................... $ 35,701
Estimated alternative going concern value(2).............. $ 38,501
Net book value (deficit).................................. $(61,711)
</TABLE>
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(1) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(2) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
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. Stanger has
rendered similar fairness opinions with regard to the other tender offers being
made by the AIMCO Operating Partnership. Stanger rendered the opinions only as
to the individual fairness of the offer consideration in each proposed exchange
offer.
YOUR PARTNERSHIP
Your Partnership and its Property. Baywood Apartments, Ltd. is an Alabama
limited partnership which was formed on January 1, 1979 for the purpose of
owning and operating an apartment property located in Gretna, Louisiana, known
as "Baywood Apartments." Baywood Apartments consists of 226 units and was built
in 1974. Your partnership has no employees. As of December 31, 1998, there were
32 units of limited partnership interest issued and outstanding, which were held
of record by 35 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.
Your partnership sold $1,984,000 of limited partnership units in 1979.
Between January 1, 1994 and December 31, 1998 your partnership paid cash
distributions totalling $17,183 per unit. Your partnership currently owns one
property.
Property Management. Your partnership's property has been managed by an
affiliate of ours. 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.
Investment Objectives and Policies; Sale or Financing of Investments. Under
your partnership's agreement of limited partnership, your partnership is not
permitted to raise new capital or reinvest cash in new properties. Your
partnership will terminate in December, 2015, unless earlier dissolved. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership property within any specified time period. An
investment in your partnership is a finite life investment in which partners
receive regular cash distributions out of your partnership's distributable cash
flow, if any, and upon liquidation.
Borrowing Policies. Your partnership's agreement of limited partnership
allows your partnership to incur debt. As of December 31, 1998, your partnership
had a mortgage note outstanding of $4,326,434, payable to FNMA, which bears
interest at the rate of 7.83%. The mortgage debt is due in October, 2003. Your
partnership also has a second mortgage note outstanding of $142,290, on the same
terms as the current mortgage note. Your partnership's agreement of limited
partnership also allows your general partner to lend funds to your partnership.
As of December 31, 1998, your general partner had no outstanding loans to your
partnership.
S-11
<PAGE> 17
Transfers. Your units are not listed on any national securities exchange or
quoted on NASDAQ, and there is no established public trading market for the
units. Secondary sales activity for the units has been limited and sporadic.
Your general partner monitors transfers of the units (i) because the admission
of the transferee as a substitute limited partner in your partnership requires
the consent of your general partner under your partnership agreement, and (ii)
in order to track compliance with applicable safe harbor provisions to avoid
treatment as a "publicly traded partnership" for tax purposes. However, your
general partner does not monitor or regularly receive or maintain information
regarding the prices at which secondary sale transactions in the units have been
effectuated.
TERMS OF THE OFFER
General. We are offering to acquire up to 25% of the outstanding 32 units
of your partnership, which we do not directly or indirectly own, for
consideration per unit of 1,732.75 Preferred OP Units, 1,151.00 Common OP Units,
or $43,313 in cash. If you tender units pursuant to the offer, you may choose 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 Preferred OP Units, 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 January 1, 1999,
although you will be entitled to retain any distributions you may have received
after such date and prior to our commencement of this offer.
If you accept our offer and do not specify the consideration you desire on
the letter of transmittal, we will issue you Preferred OP Units.
Expiration Date. Our offer will expire at 5:00 P.M., New York City time, on
June 4, 1999, 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.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds 25% 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 before their acceptance for payment as provided for herein.
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 Common OP Units or 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.
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;
S-12
<PAGE> 18
- 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.
The offer may be extended or delayed indefinitely, during which time you
will not receive payment for any tendered units.
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 any property owned by
your partnership's because your general partner (which is our subsidiary) and
the property manager will remain unchanged. If we borrow funds for the cash
consideration for these offers, our interest costs would increase which could
adversely affect our future earnings. If all units in this and our other
contemplated offers were purchased for cash and we borrowed all the funds, at
current interest rates, our interest expense would increase by $3,064,000 per
year.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
number of units pursuant to our offer, we may be in a position to influence or
control voting decisions with respect to your partnership. However, we will not
be able to control voting decisions unless we acquire more units in another
transaction, which cannot take place for at least one year after expiration of
this offer.
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 (which is our subsidiary),
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 Letter of Transmittal,
and the legal and accounting fees and expenses in connection with the offer. We
will also pay the fees of Stanger for providing the fairness opinion 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 $50,000.
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.
No Dissenters' Rights. You are not entitled to dissenters' (appraisal)
rights in connection with the offer.
S-13
<PAGE> 19
Other Offers. The AIMCO Operating Partnership is also making similar
exchange offers to approximately 90 other limited partnerships in which it
controls the general partner, interests in substantially all of which were
acquired in the merger on October 1, 1998 with Insignia Financial Group, Inc.
and the February 26, 1999 merger with Insignia Properties Trust. Each of such
exchange offers is being made by a separate prospectus supplement which is
similar to this Prospectus Supplement. Copies of such prospectus supplements may
be obtained upon written request from the Information Agent at the address set
forth in "-- Information Agent" or on the back cover page of this Prospectus
Supplement. The exchange offers may be different for limited partners in each
partnership in terms of pricing and percentage of units sought, but the effects
of the offers will essentially be the same. In general, we believe that the risk
factors (except for certain tax-related risk factors) described herein for this
offer will also be applicable to the other offers.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer. Its telephone numbers are (888)
349-2005 and (201) 896-1900. Its fax number is (201) 896-0910.
FEDERAL INCOME TAX CONSEQUENCES
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Preferred OP
Units or 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.
THE FOREGOING SUMMARY IS A GENERAL DISCUSSION OF THE MATERIAL 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 "FEDERAL INCOME TAX CONSEQUENCES" 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.
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, your general
partner (which is our subsidiary) 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, Preferred
OP Units and 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.
As of February 19, 1999, the AIMCO Operating Partnership had approximately
9,729,130 Common OP Units outstanding (excluding interests held by AIMCO) and no
Class Two Partnership Preferred Units outstanding. The number of OP Units you
may acquire from us in exchange for your units will represent a lower percentage
of the outstanding limited partnership interests in the AIMCO Operating
Partnership than that of your current ownership interest in your partnership. In
response to our offer, you could elect to receive $43,313 in cash, 1,732.75
Preferred OP Units or 1,151.00 Common OP Units. Both your units and the
S-14
<PAGE> 20
OP Units are subject to transfer restrictions and it is unlikely that a real
trading market will ever develop for any of such securities. If you subsequently
redeem OP Units for AIMCO Class A Common Stock or Class I Preferred Stock, we
can make no assurance as to the value of such shares of AIMCO stock, at that
time, which may be less than the cash offer price of $43,313.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
our subsidiary 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
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 the Net Cash Flow (as defined in your
partnership's agreement of limited partnership) from your partnership and may
receive reimbursement for expenses generated in its capacity as general partner.
The property manager received management fees of $64,690 in 1996, $65,846 in
1997 and $65,374 in 1998. The AIMCO Operating Partnership has no current
intention of changing the fee structure of the manager of your partnership
property.
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.
AIMCO's Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is 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.
S-15
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. We might pay a higher price for any future exchange offers we may make
for units of your partnership. In any event, we will not acquire any units for
at least one year after expiration of this offer.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $346,504 will be required to purchase all of
the units sought in our offer, if such units are tendered for cash excluding
expenses. We will obtain all such funds from cash from operations, equity
issuances and short term borrowings. For a detailed description of estimated
expenses to be incurred in the offer, see "Source and Amount of Funds and
Transactional Expenses."
S-16
<PAGE> 21
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
nine months ended September 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 of the AIMCO Operating Partnership" included in the accompanying
Prospectus. All dollar values are in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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............... $ 265,700 $ 127,083 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses........... (101,600) (50,737) (76,168) (38,400) (30,150) (10,330)
Owned property management expenses.... (7,746) (4,344) (6,620) (2,746) (2,276) (711)
Depreciation.......................... (59,792) (23,848) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
96,562 48,154 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income...... 13,968 9,173 13,937 8,367 8,132 3,217
Management and other expenses......... (8,101) (5,029) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation......... (196) (441) (588) (590) (581) --
Other assets, depreciation and
amortization........................ (3) (236) (453) (218) (168) (150)
Owner and seller bonuses.............. -- -- -- -- -- --
Amortization of management company
goodwill............................ -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
5,668 3,467 2,038 1,707 2,002 1,020
Minority interests in service company
business............................ -- 48 (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business............ 5,668 3,515 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative expenses... (7,444) (1,408) (5,396) (1,512) (1,804) (977)
Interest income....................... 18,244 4,458 8,676 523 658 123
Interest expense...................... (56,756) (33,359) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships........................ (1,052) (777) 1,008 (111) -- --
Equity in losses of unconsolidated
partnerships(c)..................... (5,078) (463) (1,798) -- -- --
Equity in earnings of unconsolidated
subsidiaries(d)..................... 8,413 456 4,636 -- -- --
Amortization of goodwill.............. (5,071) (711) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations................ 53,486 19,865 30,246 15,629 14,988 7,702
Gain on disposition of properties..... 2,783 (169) 2,720 44 -- --
Provision for income taxes............ -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before extraordinary
item................................ 56,269 19,696 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt.............. -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)..................... $ 56,269 $ 19,427 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)............................. 241 109 147 94 56 48
Total owned apartment units (end of
period)............................. 62,955 28,773 40,039 23,764 14,453 12,513
Units under management (end of
period)............................. 154,729 71,038 69,587 19,045 19,594 20,758
Basic earnings per Common OP Unit..... $ 0.80 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP Unit... $ 0.79 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit................................ $ 1.6875 $ 1.3875 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities.......................... 50,825 53,435 73,032 38,806 25,911 16,825
Cash flows used in investing
activities.......................... (185,453) (314,814) (717,663) (88,144) (60,821) (186,481)
Cash flows provided by (used in)
financing activities................ 141,221 293,984 668,549 60,129 30,145 176,800
<CAPTION>
AIMCO PROPERTIES, L.P.
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)
Cash flows provided by (used in)
financing activities................ (1,032) 14,114
</TABLE>
S-17
<PAGE> 22
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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>
Funds from operations(e)................ $ 132,881 $ 49,692 $ 81,155 $ 35,185 $ 25,285 $ 9,391
Weighted average number of Common OP
Units outstanding..................... 53,007 24,347 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation.......................... $2,685,487 $1,250,239 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation.......................... 2,355,122 1,107,545 1,503,922 745,145 448,425 392,368
Total assets............................ 3,121,949 1,608,195 2,100,510 827,673 480,361 416,361
Total mortgages and notes payable....... 1,275,401 661,715 808,530 522,146 268,692 141,315
Redeemable Partnership Units............ 232,405 178,321 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994 Cumulative
Senior Preferred Units................ -- -- -- -- -- 107,228
Partners' Capital....................... 1,427,087 560,737 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.
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>
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 10, 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
based on the NAREIT definition, as adjusted for the 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 NINE PERIOD
MONTHS ENDED FOR THE YEAR ENDED JANUARY 10,
SEPTEMBER 30, DECEMBER 31, 1994
------------------ --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
-------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $ 56,269 $19,427 $32,697 $15,673 $14,988 $ 7,702
(Gain) loss on disposition of property...................... (2,783) 169 (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 56,900 21,052 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 7,077 711 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 2,689 3,584 -- -- --
Amortization of management contracts...................... 4,201 430 1,587 -- -- --
Deferred taxes............................................ 6,134 2,164 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 17,379 2,781 6,280 -- -- --
Preferred stock dividends................................. (12,296) -- (135) -- (5,169) (3,114)
-------- ------- ------- ------- ------- -------
Funds from operations....................................... $132,881 $49,692 $81,155 $35,185 $25,285 $ 9,391
======== ======= ======= ======= ======= =======
</TABLE>
S-18
<PAGE> 23
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. (the AIMCO Operating Partnership) for the
nine months ended September 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 NINE
MONTHS FOR THE
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 345,961 $ 442,526
Property operating expenses............................... (136,240) (189,442)
Owned property management expenses........................ (8,933) (11,831)
Depreciation.............................................. (80,420) (98,853)
--------- -----------
120,368 142,400
--------- -----------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 28,912 41,676
Management and other expenses............................. (14,386) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (15,243) (26,480)
--------- -----------
(913) (9,075)
Minority interests in service company business............ -- (10)
--------- -----------
Partnership's shares of income from service company
business............................................... (913) (9,085)
--------- -----------
General and administrative expenses....................... (8,632) (21,371)
Interest expense.......................................... (90,890) (121,699)
Interest income........................................... 40,887 21,734
Minority interest......................................... (8,548) (10,034)
Equity in losses of unconsolidated partnerships........... (23,349) (43,918)
Equity in earnings of unconsolidated subsidiaries......... 851 5,848
Amortization of Goodwill.................................. (5,071) --
--------- -----------
Net income........................................ $ 24,703 $ (36,125)
========= ===========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (.12) $ (1.16)
Diluted earnings (loss) per Common OP Unit.................. $ (.12) $ (1.16)
Distributions paid per Common OP Unit....................... $ 1.69 $ 1.85
Book value per Common OP Unit............................... $ 24.52 $ 26.96
CASH FLOW DATA:
Cash provided by operating activities....................... $ 90,439 $ 130,703
Cash used in investing activities........................... (79,923) (1,135,038)
Cash provided by (used in) financing activities............. 16,740 955,977
OTHER DATA:
Funds from operations(a).................................... $ 187,985 $ 172,733
Weighted average number of Common OP Units outstanding...... 74,946 74,094
</TABLE>
S-19
<PAGE> 24
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, net of accumulated depreciation................ $2,679,195
Total assets................................................ 4,558,819
Total mortgages and notes payable........................... 1,762,105
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 320,443
Partners' capital........................................... 1,984,019
</TABLE>
- ---------------
(a) 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
based upon the NAREIT definition, as adjusted for the 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.
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss)................................. $ 24,703 $(36,125)
HUD release fee and legal reserve................. -- 10,202
Real estate depreciation, net of minority
interests....................................... 76,521 93,050
Amortization of management contracts.............. 9,593 12,790
Amortization of management company goodwill....... 10,997 12,551
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation........................ -- 1,715
Amortization of management company goodwill..... 959 1,918
Amortization of management contracts............ 23,010 30,516
Deferred taxes.................................. (713) (1,356)
Equity in earnings of other partnerships:
Real estate depreciation........................ 79,559 95,285
Interest on convertible debentures................ (7,537) (10,003)
Preferred unit distributions...................... (29,107) (37,810)
-------- --------
Funds from operations............................. $187,985 $172,733
======== ========
</TABLE>
S-20
<PAGE> 25
SUMMARY FINANCIAL INFORMATION OF BAYWOOD APARTMENTS, LTD.
The summary financial information of Baywood Apartments, Ltd. for the nine
months ended September 30, 1998 and 1997 is unaudited. The summary financial
information for Baywood Partners, Ltd. for the years ended December 31, 1997 and
1996, 1995 and 1994 is based on historical information, for which 1997 has been
audited. 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 of Your Partnership"
included herein. See "Index to Financial Statements."
BAYWOOD APARTMENTS, LTD.
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS
ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues................... $989,491 $996,931 $1,328,833 $1,325,546 $1,297,874 $1,237,530 $1,200,446
Net Income/(Loss)................ 20,870 63,563 32,377 40,048 109,250 (26,291) 14,750
Net Income (Loss) per limited
partnership unit............... 646 1,966 1,002 1,239 3,380 (813) 456
Distributions per limited
partnership unit............... 5,041 3,338 3,000 1,558 7,812 -- --
Distributions per limited
partnership unit (which
represent a return of
capital).......................
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents.... $ 288,500 $ 418,976 $ 419,804 $ 476,395 $ 452,632 $ 604,724 $ 442,664
Real Estate, Net of
Accumulated Depreciation... 1,488,553 1,547,195 1,554,033 1,624,314 1,651,705 1,610,346 1,616,291
Total Assets................. 2,137,833 2,355,131 2,304,336 2,440,110 2,515,628 2,766,341 2,738,392
Notes Payable................ 4,429,284 4,475,971 4,469,935 4,518,594 4,563,624 4,605,295 4,644,184
General Partners' Capital/
(Deficit).................... (24,042) (12,252) (22,622) (21,976) (21,873) (20,440) (20,177)
Limited Partners' Capital/
(Deficit).................... (2,380,204) (2,202,908) (2,239,567) (2,175,620) (2,165,419) (2,023,589) (1,997,561)
Partners' Capital/(Deficit).... (2,404,245) (2,225,160) (2,262,189) (2,197,596) (2,187,292) (2,044,029) (2,017,738)
Total Distributions............ 162,927 107,892 96,970 50,352 252,313 -- --
Book value per limited
partnership unit............. (75,133) (69,536) (70,693) (66,875) (68,353) (63,876) (63,054)
Net increase (decrease) in cash
and cash equivalents......... (131,304) (57,419) (56,591) 23,763 (152,092) 162,060 442,664
Net cash provided by operating
activities................... 182,384 186,291
Ratio of earnings to fixed
charges...................... 1.07/1 1.30/1 1.08/1 1.10/1 1.28/1 0.93/1 1.04/1
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per unit of your
partnership for the year ended December 31, 1998, and the cash distributions
payable on the number of Common OP Units and Preferred OP Units issuable in
exchange therefor:
<TABLE>
<CAPTION>
ANNUAL
DISTRIBUTIONS
-------------
<S> <C>
Units of Baywood Apartments, Ltd. .......................... $4,688.00
Equivalent cash distributions on Common OP Units(1)......... $2,877.50
Equivalent cash distributions on Preferred OP Units(2)...... $3,465.50
</TABLE>
- ---------------
(1) Calculated by multiplying the exchange ratio of 1,151.00 Common OP Units per
unit by the annualized distributions paid on the Common OP Units of $2.50
per unit.
(2) Calculated by multiplying the exchange ratio of 1,732.75 Preferred OP Units
per unit by the stated annual distribution rate on the Preferred OP Units of
$2.00 per unit.
S-21
<PAGE> 26
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of AIMCO. AIMCO is a real estate investment
trust that owns and manages multifamily apartment properties throughout the
United States. Through its wholly owned subsidiaries, AIMCO GP, the sole general
partner of the AIMCO Operating Partnership, and the Special Limited Partner, as
of December 31, 1998, AIMCO held approximately an 83% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled by the National
Multi Housing Council, we believe that AIMCO is one of the largest owner and
manager of multifamily apartment properties in the United States, with a total
portfolio of 379,363 apartment units in 2,147 properties located in 49 states,
the District of Columbia and Puerto Rico. As of December 31, 1998, AIMCO:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 apartment properties for third party
owners and affiliates.
AIMCO's Class A Common Stock is listed and traded on the NYSE under the
symbol "AIV." On March 23, 1999, the last reported sale price of AIMCO Class A
Common Stock on the NYSE was $35 3/16. 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 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>
1999
First Quarter (through March 23)........ $41 5/8 $35 3/16 $0.6250 $0.6250
1998
Fourth Quarter.......................... 37 3/8 30 0.5625 0.5625
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>
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.
S-22
<PAGE> 27
RISK FACTORS
The following sets forth certain risks and disadvantages of the offer and
should be read and considered when reviewing the potential benefits of the offer
set forth in "Background and Reasons for the Offer -- Expected Benefits of the
Offer." In addition, you should review the other risks of investing in us
beginning on page 2 of our accompanying Prospectus.
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. 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. 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. 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 CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration we estimated your property to be worth $6,043,000 although
we believe the property needs approximately $354,355 of deferred maintenance. It
is possible that a sale of the properties could result in your receiving more
per unit than in our offer. Even if our cash offer consideration is equal to
liquidation value, if you accept OP Units, you may not ultimately receive an
amount equal to the cash offer consideration when you sell such OP Units or any
AIMCO securities you may receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
pretax cash 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.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and the AIMCO Operating Partnership and, therefore, has
substantial conflicts of interest with respect to our offer. We are making this
offer with a view to making a profit. 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. Another conflict is 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. 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.
S-23
<PAGE> 28
CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its properties, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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 sold. If you exchange your units
for cash and our 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. 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 allocated to such units 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. If you exercise your redemption right with respect to the OP Units
within two years of the date that you transfer your units to the AIMCO Operating
Partnership, your exchange of units for OP Units or OP Units and cash could be
treated as a disguised sale of your units and you would be required to recognize
gain or loss in the year of the exchange on such disguised sale. See "Federal
Income Tax Consequences -- Disguised Sales." 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. 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 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.
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. You
should review "Federal Income Tax Consequences" 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. Because the income tax
consequences of tendering units will not be the same for everyone, you should
consult your own tax advisor before determining whether to tender your units
pursuant to our offer.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimate your property to be worth $6,043,000, less
approximately $354,355 of deferred maintenance and investment. It is possible
that a sale of the properties could result in you receiving more pretax cash per
unit than our offer.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is controlled by us).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the
S-24
<PAGE> 29
fairness opinion will not be updated, changes may occur from the date of the
fairness opinion that might affect the conclusions expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all right 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, for any units that we acquire from you, you will not receive any
future distributions from operating cash flow of your partnership or upon a sale
of property owned by your partnership or a refinancing of any of its debt. If
you tender your units in exchange for OP Units, you will be entitled to future
distributions from the operating cash flow of the AIMCO Operating Partnership
and upon a dissolution, liquidation or winding-up of the AIMCO Operating
Partnership. See "Comparison of Your Units and AIMCO OP Units -- Distributions."
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from the sale of a property or a refinancing of its indebtedness to
(ii) a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of 2015 to a much larger partnership with a
partnership termination date of 2093.
Under the AIMCO Operating Partnership's agreement of limited partnership,
the general partner has the ability, without the concurrence of the limited
partners, to acquire and dispose of properties and to borrow funds. Further,
while it is the intent to distribute net income from operations, sales of
properties and refinancings of indebtedness, the general partner may not make
such distributions. Proceeds of future asset sales or refinancings by the AIMCO
Operating Partnership generally will be reinvested rather than distributed.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you exchange your
units for OP Units, you will have changed your investment from an interest in a
partnership which owns and manages a single property to an interest in the AIMCO
Operating Partnership which 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 and our portfolio of properties as compared to the value of your
units and your partnership.
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.
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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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE LOWER DISTRIBUTIONS. The Preferred OP Units provide for annual
distributions of $2.00 per unit and no more. Current annualized distributions
with respect to the Common OP Units are $2.50 per unit. This is equivalent to
distributions of $3,465.50 per year on the number of Preferred OP Units, or
distributions of $2,877.50 per year on the number of Common OP Units, that you
would receive in exchange for each of your partnership's units. During 1998,
your partnership paid cash distributions of $4,688 per unit. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units may be
substantially less, immediately following our offer, than the distributions with
respect to your units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus. If you
exercise your redemption right with respect to the OP Units within two years of
the date that you transfer your units to the AIMCO Operating Partnership, your
exchange of units for OP Units and cash could be treated as a disguised sale of
your units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
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MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as for your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a result, we may incur costs associated with defending or settling such
litigation or paying any judgment if we lose. As of the present time, no limited
partners of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. 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. However, we will
not be able to control voting decisions unless we acquire more units in another
transaction, which cannot take place for at least one year after expiration of
this offer. Furthermore, in the event that we acquire a substantial number of
units pursuant to our offer, removal of your general partner (which is our
subsidiary) or the manager of any property owned by your partnership may become
more difficult or impossible without our consent.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of units without the
consent of your general partner (which is our subsidiary). Such consent may be
withheld by your general partner in its sole discretion. Your general partner
may withhold its consent if such transfer would result in the termination of
your partnership for tax purposes which would occur if 50% or more of the total
interest in your partnership is transferred within a 12-month
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period. If we acquire a significant percentage of the interest in your
partnership, your general partner may not consent to a transfer for a 12-month
period following our offer.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investments in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to hold
the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns one property. The general partner of your partnership
continually considers whether the property should be sold or otherwise disposed
of after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for your partnership. We cannot
predict when the property will be sold or otherwise disposed of. However, there
is no current plan or intention to sell the property in the near future.
BALLOON PAYMENTS. Your partnership has approximately $4,097,807 of balloon
payments due on its mortgage debt in October, 2003. Your partnership will have
to refinance such debt or sell its property prior to the balloon payment dates,
or it will be in default and could lose the property to foreclosure.
SPECIAL FACTORS TO CONSIDER
In reviewing the offer, you should pay special attention to the information
in the Sections entitled "Background and Reasons for the Offer," "Valuation of
Units," "Fairness of the Offer" and "Stanger Analysis," which contain
information regarding the background and reasons for the offer, the method of
evaluating units in the offer and alternative valuation methods considered, our
view as to the fairness of the offer, and the fairness opinion rendered by
Stanger.
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 liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
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 1.00% interest, consisting of a 0.00%
limited partnership interest and a 1.00% general partnership interest, in your
partnership.
On October 31, 1998, IPT and AIMCO entered into an agreement and plan of
merger, dated as of October 1, 1998 (the "IPT Merger Agreement"), pursuant to
which IPT merged with AIMCO on February 26, 1999 (the "IPT Merger"). Upon
consummation of the IPT Merger, each outstanding share of IPT not owned by AIMCO
was converted into the right to receive 0.3601 shares of AIMCO's Class A Common
Stock (approximately 4,180,000 shares in the aggregate).
One of the reasons we chose to acquire Insignia is that we would be able to
make the exchange 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, and would provide the AIMCO Operating Partnership
with a larger asset and capital base and increased diversification. As of the
date of this offering, the AIMCO Operating Partnership proposes to make offers
to approximately 90 of the Insignia Partnerships, including your partnership.
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During our negotiations with Insignia in early 1998, we decided that if the
merger with Insignia were consummated, we could also benefit from making offers
for limited partnership interests in the Insignia Partnerships. While some of
the Insignia Partnerships are public partnerships and information is publicly
available on such partnerships for weighing the benefits of making an exchange
offer, many of the partnerships are private partnerships and information about
such partnerships comes principally from the general partner. Our control of the
general partner makes it possible to obtain access to such information. Further,
such control also means that we control the operations of the partnerships and
their properties. Insignia did not propose that we conduct such exchange offers,
rather we initiated the offers on our own. We determined in June of 1998 that if
the merger with Insignia were consummated, we would offer to limited partners of
the Insignia Partnerships limited partnership units of the AIMCO Operating
Partnership and/or cash.
In connection with the Insignia Merger we acquired general partnership
interests and certain limited partnership interests in a number of private and
public partnerships. Eight private partnerships out of the 90 partnerships
involved in the proposed exchange offers do not have audited financial
statements prepared in accordance with generally accepted accounting practices
("GAAP"). Certain of these partnerships have audited financial statements
prepared on the basis of federal income taxes and others have unaudited
financial statements which may or may not be prepared on the basis of GAAP or
federal income taxes. For the Insignia Partnerships for which exchange offers
are being made which do not have audited GAAP financial statements for at least
two years, we are making the offer on the basis of either one year of audited
GAAP financial statements and one year of unaudited GAAP financial statements or
just unaudited GAAP financial statements. We tried to obtain two years of
audited GAAP financial statements for all the partnerships for which offers are
being made, but because of the inability to locate records from inception of the
partnerships which would allow auditors to verify the original purchase price of
the properties, no audits were possible. In these cases, the entities which
controlled the general partners prior to Insignia are no longer in business or
have no current knowledge or records of such partnerships. For the same reasons,
we do not have all the records for past years of some of the partnerships.
Therefore, for the partnerships without an audit, we did not have invoices,
escrow statements, property closing statements or the like to support the
original costs of the real property to the satisfaction of independent auditors,
in order for them to render an unqualified audit report. Consequently, we have
no way to support the original cost of the properties. However, we have general
ledgers and related accounting records that enable us to prepare GAAP basis
financial statements. These records were taken from the entities that controlled
the general partners and were subsequently maintained by us. The amount of
capitalized property costs appearing in those books and records has, to our
knowledge, been appropriately rolled forward from year to year and used by the
general partners of the partnerships in question to prepare tax returns and
periodic reports to the investors in the partnerships. Therefore, we believe
that the unaudited financial statements included in the prospectus supplements
for such partnerships have been prepared in accordance with GAAP.
In acquiring Insignia and the interests in the Insignia Partnerships, we
conducted due diligence with regard to certain of the assets acquired including
the major properties held by the Insignia Partnerships. Our due diligence
focused on the condition of the major properties and the terms of the
partnership agreements. Since Insignia had audited GAAP financial statements and
since those partnerships without audited GAAP financial statements are generally
smaller, we did not focus on the issue of audited GAAP based financial
statements for the smaller partnerships at the time of the merger. Further, for
our internal due diligence use, audited tax based financial statements are also
used. The total number of Insignia Partnerships we acquired an interest in was
approximately 550 of which approximately 25 do not have audited GAAP statements.
We were not able to pick and choose the partnerships in which we would acquire
an interest. The Insignia Partnerships were part of the business of Insignia. As
a consequence, we acquired interests in certain small private partnerships which
do not have the ability to obtain audited GAAP financial statements. It is our
policy to acquire properties or partnerships with audited GAAP based financial
statements. However, in connection with large acquisitions of partnerships
interests, such as with the Insignia Merger, we may occasionally acquire a
partnership or property without audited GAAP financial statements.
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Previous Tender Offers
Tender offers have been previously made with respect to certain of the
public Insignia Partnerships. However, there have not been any prior tender
offers to acquire units of your partnership. Except for such tender offers, we
are not aware of any merger, consolidation or other combination involving any of
the Insignia Partnerships, or any acquisitions of any of such partnerships or a
material amount of the assets of such partnerships.
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 August 28, 1998 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
(which is our subsidiary).
Liquidation
Benefits of 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 (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 your general partner (which is our subsidiary), 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 on the order of 1% of the principal balance of the mortgage.
Your general partner believes it currently is in the best interest of your
partnership to continue holding its real estate assets.
Continuation of the Partnership Without the Offer
Benefits of Continuation. Although our offer permits you to continue your
investment in your partnership, 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 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. The
continuation of your partnership will allow you to continue to participate in
the net income and any increases of revenue of your partnership and any net
proceeds from the sale of any property owned by your partnership. The General
Partner continues to review operations and expects to complete capital
expenditures in 1999 and 2000 enabling it to possibly increase rents and lower
expenses. In addition, a sale of the property may cause a tax gain to each
investor.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. If your partnership continues operating as presently
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structured, your partnership could be forced to borrow on terms that could
result in net losses from operations. Your partnership's mortgage notes are due
in October, 2003 and require balloon payments totaling $4,097,807. Your
partnership currently has adequate sources of cash to finance its operations on
both a short term and long term basis but will have to sell the properties or
refinance its indebtedness in 2003 to pay such balloon payments. Continuation of
your partnership without the offer would deny you and your partners the benefits
that your general partner (which is our subsidiary) expects to result from the
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.
Alternative Structures Considered
Before we decided to make our offer, we considered a number of alternative
transactions, including purchasing some or all of your partnership's properties;
making an offer of only cash for your units; making an offer of only Common OP
Units for your units; and making an offer of only Preferred OP Units for your
units. A merger would require a vote of the limited partners of your
partnership. If the merger was approved, all limited partners, including those
who wish to retain their units and continue to participate in your partnership,
would be forced to participate in the merger transaction. If the merger was not
approved, all limited partners, including those who would like to liquidate
their investment in your partnership, would be forced to retain their units.
We also considered purchasing your partnership's properties from your
partnership. However, a sale of your partnership's properties would require an
affirmative vote by holders of a majority of the outstanding limited partnership
units. If the sale was approved, all limited partners, including those who wish
to continue to participate in the ownership of your partnership's properties,
would be forced to participate in the sale transaction, and possibly to
recognize taxable income. If the sale was not approved, all limited partners,
including those who would like to dispose of their investment in your
partnership's properties, would be forced to retain their investment.
In order to give all limited partners in your partnership an opportunity to
make their own investment decision, we elected to make an offer directly to you
and the other limited partners. We considered making an all cash offer in order
to satisfy some limited partners' desire for immediate liquidity. However, an
all cash offer would not be desirable for those limited partners who do not
desire immediate liquidity and do not want to immediately recognize any taxable
income, but might otherwise be interested in disposing of their investment in
your partnership and might want an opportunity to control the timing of any
realization of taxable income associated with liquidating such investment in the
future.
We considered making an offer of only OP Units, either all Common OP Units
or all Preferred OP Units. The primary disadvantage of an all OP Unit offer is
that those limited partners who want immediate liquidity would be forced to wait
at least one year before exchanging their OP Units for cash or AIMCO stock. We
decided to offer limited partners both Common OP Units and Preferred OP Units in
order to permit investors to make their own decision as to whether they
preferred the possibility of future capital appreciation (Common OP Units) or
preferred distribution rights (Preferred OP Units).
After considering these alternatives, we decided to offer limited partners
the possibility of all three forms of consideration: cash, Common OP Units and
Preferred OP Units. We think that such an offer will appeal to a large number of
limited partners in your partnership, while permitting each one to retain any or
all of his or her units and remain a limited partner in your partnership on the
same terms as before.
Sale of Assets
Your partnership could sell the property it owns. The general partner of
your partnership considers sale of your partnership's property from time to
time. However, any such sale would likely be a taxable transaction.
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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 three principal advantages of tendering your units for Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, currently listed and traded on the NYSE.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are four principal advantages of tendering your units for Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- 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 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.
DISADVANTAGES OF THE OFFER
The principal disadvantages to the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and the consideration, no one separately represented the interests of the
limited partners. Although we have a fiduciary duty to
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the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of the property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pre-tax cash proceeds to you than our
offer.
- OP Units. Investing in OP Units has risks that include the lack of a
public market, transfer restrictions and a one year holding period before
they can be redeemed by a holder. The ultimate return on the OP Units is
directly tied to the future price of AIMCO's Class A Common Stock or
Class I Preferred Stock. You could ultimately receive less for your OP
Units than the cash price in our offer. Further, on or after March 1,
2005, we may redeem the Class I Preferred Stock for $25 per share.
- Lower Preferred Quarterly Distributions. Your partnership paid
distributions of $4,688 for the fiscal year ended December 31, 1998.
Holders of Preferred OP Units will be entitled to receive quarterly
distributions of $0.50 per unit (equivalent to $2.00 on an annualized
basis) before any distributions are paid to holders of Common OP Units.
This is equivalent to a distribution of $3,465.50 per year on the number
of Preferred OP Units you will receive in exchange for each of your
partnership units.
- Lower Common Quarterly Distributions. Your partnership paid distributions
of $4,688 for the fiscal year ended December 31, 1998. In 1998, we paid
quarterly distributions on the Common OP Units totalling $2.25. In
January 1999, we increased our distribution rate on each of the Common OP
Units to $2.50 on an annual basis. Assuming no change in the level of our
distributions, this is equivalent to a distribution of $2,877.50 per year
on the number of Common OP Units you will receive in exchange for each of
your partnership units. See "The AIMCO Operating Partnership."
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
the sale of the property would be advantageous given market conditions,
the condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of a property and the tax consequences to you
and your partners on a sale of a property. See also "Your
Partnership -- General Policy Regarding Sales and Refinancings of
Partnership Property."
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
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<PAGE> 38
VALUATION OF UNITS
We determined our cash offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower of the value produced. We used your partnership's
property income for the fiscal year ended December 31, 1997. However, in
determining the appropriate capitalization rate, we considered the partnership's
property income since December 31, 1997. Our method for selecting a
capitalization rate begins with each property being assigned a location and
condition rating (e.g., "A" for excellent, "B" for good, "C" for fair, and "D"
for poor). We have rated your property's location B (good) and its condition B
(good). Generally, we assign an initial capitalization rate of 10.25% to
properties in this category. We then adjust the capitalization rate based on
whether the mortgage debt that the property is subject to bears interest at a
rate above or below 7.5% per annum. Generally, for every 0.5% in excess of 7.5%,
the capitalization rate would be increased by 0.25%. Your property's mortgage
debt bears interest at 7.80% per annum, which resulted in an increase from the
initial capitalization rate of 0.25%. We also considered any changes in your
partnership's property income from 1997 to 1998. Because your partnership's
property income in 1998 remained relatively unchanged compared to 1997, we made
no further revision of the capitalization rate, resulting in a final
capitalization rate of 10.50%. The evaluation of a property's location and
condition, and the determination of an appropriate capitalization rate for a
property, is subjective in nature, and others evaluating the same property might
use a different capitalization rate and derive a different property value.
Property income is the difference between the revenues from the property
and related costs and expenses, excluding income derived from sources other than
its regular activities and before income deductions. Income deductions include
interest, income taxes, prior-year adjustments, charges to reserves, write-offs
of intangibles, adjustments arising from major changes in accounting methods and
other material and nonrecurrent items. In this respect, property income differs
from net income disclosed in the partnership's financial statements, which does
not exclude these income sources and deductions. The following is a
reconciliation of your partnership's net income for the year ended December 31,
1997, to your partnership's property income for the same period.
<TABLE>
<S> <C>
Net Income (Loss)........................................... $ 32,377
Other Non-Operating Expenses................................ (15,787)
Depreciation................................................ 230,742
Interest.................................................... 386,668
--------
Property income............................................. $634,000
</TABLE>
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. Further,
in applying the direct capitalization method, others may make different
assumptions and obtain different results. 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 estimated 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 (property 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,
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<PAGE> 39
however there is no single correct capitalization rate and others might
use different rates. We divided fiscal 1997 property income of $634,000
by the property's capitalization rate of 10.50% to derive an estimated
gross property value of $6,043,000
- 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
certain other costs including required capital expenditures, deferred
maintenance, and closing costs to derive a net equity value for your
partnership of $1,387,484. Closing costs, which are estimated to be 2.5%
of the gross property value, include legal and accounting fees, real
property, transfer taxes, title and escrow costs and broker's fees.
- 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. Accordingly, 99.89% of the estimated liquidation
proceeds are assumed to be distributed to holders of units. Our cash
offer consideration represents the per unit liquidation proceeds
determined in this manner.
<TABLE>
<S> <C>
Property income............................................. $ 634,000
Capitalization rate......................................... 10.50%
-----------
Gross valuation of partnership property..................... 6,043,000
Plus: Cash and cash equivalents............................. 222,672
Plus: Other partnership assets, net of security deposits.... 252,211
Less: Mortgage debt, including accrued interest............. (4,546,079)
Less: Accounts payable and accrued expenses................. (20,195)
Less: Other liabilities..................................... (58,695)
-----------
Partnership valuation before taxes and certain costs........ 1,892,914
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures and deferred
maintenance............................................... (354,355)
Less: Closing costs......................................... (151,075)
-----------
Estimated net valuation of your partnership................. 1,387,484
Percentage of estimated net valuation allocated to holders
of units.................................................. 99.89%
-----------
Estimated net valuation of units............................ $ 1,386,001
Total number of units............................. 32.0
-----------
Estimated valuation per unit................................ $ 43,313
===========
Cash consideration per unit................................. $ 43,313
===========
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration of $43,313 by the $25
liquidation preference of each Preferred OP Unit to get 1,732.75
Preferred OP Units per unit.
- In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $43,313 by
a price of $37.63 (the average closing price of AIMCO's Class A Common
Stock on the NYSE for the 30 trading days ending on March 23, 1999) to
get 1,151.00 Common OP Units per unit.
The total net valuation of all partnerships in which the AIMCO Operating
Partnership is making similar exchange offers, and which were valued using the
same methods as used for your partnership, is $568,751,183, of which, $1,386,001
or .24% is the net valuation of your partnership.
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<PAGE> 40
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
Your general partner is a subsidiary of the AIMCO Operating Partnership. 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. Your general partner did not participate in the structuring of the
offer and has substantial conflicts of interest with regard to the offer.
However, for all of the reasons discussed herein, we and your general partner
believe that the offer and all forms of consideration offered is fair to you and
the limited partners of your partnership. We also reasonably believe that the
similar offers to the limited partners of the other partnerships are fair to
such limited partners. 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 us 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, your
general partner (which is our subsidiary) 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. The net
income of your partnership has decreased from $80,328 for the nine months
ended September 30, 1997 to $20,870 for the nine months ended September 30,
1998. These factors are reflected in our valuation of your partnership.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are substantially the financial
equivalent to your interest in your partnership. 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
and Stanger's estimates of the net asset value ($34,199 per unit), going
concern value ($32,617 per unit) and liquidation value ($29,707 per unit)
of your partnership units. See "Stanger Analysis."
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity. However, we did review whether trading information
was available.
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 by electing to accept Preferred OP Units or
Common OP Units.
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
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<PAGE> 41
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 $43,313, based on a total estimated
value of your partnership's property of $6,043,000. Your general partner
(which is our subsidiary) has no present intention to liquidate your
partnership or to sell or refinance your partnership's property. See
"Background and Reasons for the Offer". See "Valuation of Units" for a
detailed explanation of the methods we used to value your partnership.
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $2.00 and current annualized distributions with respect to the
Common OP Units are $2.50. This is equivalent to distributions of $3,465.50
per year on the number of Preferred OP Units, or distributions of $2,877.50
per year on the number of Common OP Units, that you would receive in
exchange for each of your partnership's units. Distributions with respect
to your units for the fiscal year ended December 31, 1998 were $4,688. See
"Comparison of Your Units and AIMCO OP Units -- Distributions."
13. The fact that if your partnership were liquidated as opposed to
continuing, the general partner (which is our subsidiary) would not receive
the substantial management fees it currently receives. As discussed in
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," we do not believe that
liquidation of the partnership is in the best interests of the unitholders.
Therefore, we believe the offer is fair in that the fees paid to the
general partner would continue even if the offer was not consummated. We
are not proposing to change the current management fee arrangement.
In evaluating these factors, your general partner (which is our subsidiary)
and the AIMCO Operating Partnership did not quantify or otherwise attach
particular weight to any of them.
Your general partner (which is our subsidiary) has not retained an
unaffiliated representative to act on behalf of the limited partners in
negotiating the terms of the offer since each individual limited partner can
make his own decision as to whether or not to tender and what consideration to
take. Unlike a merger or other form of partnership reorganization, a majority or
more of the holders of limited partnership interests in your partnership cannot
bind you. If an unaffiliated representative had been obtained, it is possible
that such representative could have negotiated a higher price for your units
than was unilaterally offered by the AIMCO Operating Partnership. We have
retained Stanger to conduct an analysis of our offer and to render an opinion as
to the fairness to you of the offer consideration from a financial point of
view. Although no representative has been retained to act solely on behalf of
the limited partners for purposes of negotiating the terms of the offer, we have
determined that the transaction is fair to you from a financial point of view.
We made this determination based, in part, on the fairness opinion from Stanger
and the fact that all limited partners may elect to retain their existing
security on the same terms as before our offer.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
Your general partner (which is our subsidiary) 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 and, although there are
other ways to value real estate, is a reasonably fair method to determine the
consideration offered. Although we believe our offer consideration represents
the amount you would receive if we currently liquidated your partnership, an
actual liquidation might generate a higher or lower price for holders of units.
A liquidation in the future might generate a higher or lower 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
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<PAGE> 42
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
Your general partner (which is our subsidiary) 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
sell your partnership's property or refinance its indebtedness within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, your general partner
(which is our subsidiary) has attempted to compare the cash offer consideration
against: (a) estimates of the value of the units on a liquidation basis; (b)
estimates of the going concern value of your units based on continuation of your
partnership as a stand-alone entity; and (c) the net book value of your units.
The general partner of your partnership believes that analyzing the alternatives
in terms of estimated value, 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 us. These assumptions relate to, among other things: the operating
results since December 31, 1997 as to income and expenses of each property,
other projected amounts and the capitalization rates that may be used by
prospective buyers if your partnership assets were to be liquidated. The 1998
budget is discussed in "Stanger Analysis -- Summary of Materials Considered" and
other projected amounts are discussed in "Stanger Analysis -- Summary of
Reviews."
In addition, these estimates are based upon certain information available
to your general partner (which is our subsidiary) 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. 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.
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<PAGE> 43
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December, 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.
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C>
Cash offer price............................................ $ 43,313
Partnership preferred units................................. 43,313(1)
Partnership common units.................................... 43,313(1)
Alternatives:
Estimated liquidation proceeds............................ $ 43,313
Estimated going concern value(2).......................... $ 35,701
Estimated alternative going concern value(3).............. $ 38,501
Net book value (deficit).................................. $(61,711)
</TABLE>
- ---------------
(1) In our discussion of the offer price as being fair with regard to other
methods of valuing your partnership, we believe the number of Common OP
Units and Preferred OP Units to be issued per unit in the offer to be equal
to the cash price per unit. Therefore, the fairness discussion applies
equally to the cash and non-cash forms of consideration being effected. See
"Valuation of Units" for details of how the number of OP Units was
determined.
(2) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(3) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
Prices on Secondary Market
There is no active market for your units. Your general partner (which is
our subsidiary) is unaware of any secondary market activity in the units.
Therefore any comparison to prices on the secondary market is not possible at
the present time. See "Your Partnership -- Distributions and Transfers of
Units -- Transfers."
Prior Tender Offers
There have been no previous tender offers for units of your partnership.
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. Your general
partner (which is our subsidiary) 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
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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<PAGE> 44
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.
Estimated Going Concern Value and Alternative Going Concern Value
Going concern value is a measure of the value of your partnership if it
continued operating as an independent stand-alone entity. The estimated value of
the partnership on a going concern basis is not intended to reflect the
distributions payable to limited partners if its assets were to be sold at their
current fair market value. The general partner of your partnership estimated the
going-concern value of your partnership by analyzing projected cash flows and
performing a discounted cash flow analysis. The general partner of your
partnership assumed that your partnership will be operated in the same manner as
currently, as an independent stand-alone entity, and its assets sold in a
liquidation after a ten-year holding period. Distribution and sale proceeds per
partnership unit were discounted in the projections at a rate of 30%.
The general partner of your partnership assumed that real estate selling
costs will be incurred which will equal 2.5% of the sales price. This analysis
assumes that the partnership property will be sold in a liquidation, at the
expiration of the ten-year holding period, to an independent third-party buyer.
Upon such liquidation, other balance sheet assets (excluding amortizing assets)
and liabilities of your partnership will be sold at their book value, and the
net proceeds of sale will be allocated between the general partners and offerees
in accordance with your partnership's agreement of limited partnership. Should
the assets be liquidated over time, even at prices equal to those projected,
distributions to limited partners of your partnership's cash flow from
operations might be reduced because relatively fixed costs, such as general and
administrative expenses, are not proportionately reduced with the liquidation of
assets. However, for simplification purposes, the sales are assumed to occur
concurrently.
The going concern method relies on a number of assumptions, including among
other things, (i) rental rates for new leases and lease renewals; (ii)
improvements needed to prepare an apartment for a new lease or a renewal lease;
(iii) lease periods; (iv) capital expenditures; (v) broker's commissions; and
(vi) discount rates applied to future cash flows. The use of assumptions or
variables that differ from those described above could produce substantially
different results. Neither we nor the general partner of your partnership
solicited any offers or inquiries from prospective buyers of the property owned
by your partnership in connection with the preparation of the estimates of value
of the properties and the actual amounts for which the partnership's properties
or the partnership could be sold could be significantly higher or lower than any
of the estimates contained herein. The estimated going concern value of your
partnership is $35,701 per unit, which value is below our offer price per unit.
Therefore, we believe the offer price is fair in relation to the going concern
value.
The general partner determined going concern value based upon the
discounted present value of projected cash flows from the partnership over a
ten-year period of operation, which is a standard period for going concern
analyses for real property assets. Such discounted cash flows were based upon
year one property income from the real estate portfolio of $634,000, escalated
at 3% per annum for the ten-year projection period. Property income was reduced
by: (i) partnership administrative expenses of $30,000 per annum; and (ii) debt
service on existing debt through maturity or the end of ten years, whichever
occurs first. For debt which matures during the ten-year period, a refinancing
at a 7% interest rate was assumed. At the end of the ten-year projection period,
the property was assumed to be sold at a price based upon property income for
the immediately following year, capitalized at a capitalization rate of 11%,
less expenses of sale estimated at 3% of the property value. The net cash flow
to limited partners from the continued operation of the property and the net
proceeds of sale were then discounted at a discount rate of 25% to achieve the
going concern value of $35,701 per unit.
Your partnership's property currently has a balloon payment due in October
2003. While the going concern value was based on your partnership refinancing
its indebtedness and continuing to own its property; the alternative going
concern value of $38,501 is based on selling the property when the balloon
payment is
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<PAGE> 45
due and otherwise includes the same assumptions as the going concern value
described above. For the reason set forth above, we believe the offer
consideration is fair in relation to the alternative going concern value.
There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
Net Book Value
Net book value per unit is a deficit of $61,711 and therefore a comparison
with the offering price would not be meaningful in determining the fairness of
the offering price.
Stanger's Estimate of Net Asset Value, Going Concern Value and Liquidation
Value
In rendering its opinion set forth as Appendix A, Stanger did its own
independent estimate of your partnership's net asset value of $34,199 per unit,
going concern value of $32,617 per unit and liquidation value of $29,707 per
unit. For an explanation of how Stanger determined such values see "Stanger
Opinion -- Summary of Reviews -- Comparison of Offer Price To Liquidation Value,
Going Concern Value and Secondary Market Prices." An estimate of your
partnership's net asset value per unit is based on a hypothetical sale of your
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 a liquidation value, after provisions
in full for all of the other known liabilities of your partnership. The net
asset value does not take into account (i) timing considerations discussed under
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," and (ii) costs associated with
winding up of your partnership. Therefore, the AIMCO Operating Partnership
believes that the estimate of net asset value per unit does not necessarily
represent the fair market value of a unit or the amount the limited partner
reasonably could expect to receive if the partnership's property was sold and
the partnership was liquidated. For this above reason, the AIMCO Operating
Partnership considers net asset value estimates to be less meaningful in
determining the offer consideration than the analysis described above under
"Valuation of Units."
Stanger's estimates of net asset value, going concern value and liquidation
value per unit represents discounts to the offer price of $9,114, $10,696 and
$13,606. In light of these discounts and for all the reasons set forth above,
the AIMCO Operating Partnership believes the offer price is fair to the limited
partners. The AIMCO Operating Partnership believes that the best and most
commonly used method of determining the value of a partnership which only owns
an apartment is the capitalization of income approach set forth in "Valuation of
Units."
ALLOCATION OF CONSIDERATION
Your partnership's agreement of limited partnership provides that, in the
event of a liquidation, available proceeds are to be distributed 0.11% to the
general partner and 99.89% to the limited partners. Accordingly, in valuing your
units, we have assumed that 99.89% of the estimated liquidation proceeds are
distributed to holders of units. Since this allocation is in accordance with the
terms of the partnership agreement, we believe the allocation is fair. See
"Valuation of Units."
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<PAGE> 46
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. Stanger has
advised us that the description of Stanger's analysis contained herein describes
the material portions of Stanger's review.
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 any losses, claims,
damages, liabilities or expenses to which Stanger may be subject, under any
applicable federal or state law, including federal and state securities laws,
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 NYSE 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 audited financial statements for the years ended December 31, 1996
and 1997, and its unaudited financial statements for the period ended September
30, 1998, which your partnership's management has indicated to be the most
current available financial statements at the time; (iii) reviewed descriptive
information concerning your partnership's real estate assets (the "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, 1997 and 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 similar
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<PAGE> 47
properties; (viii) reviewed internal financial analyses prepared by your
partnership of the estimated current net liquidation value and going concern
value of your partnership; (ix) reviewed information provided by AIMCO
concerning the AIMCO Operating Partnership, the Common OP Units and the
Preferred OP Units; and (x) conducted other studies, analysis and inquiries as
Stanger deemed appropriate.
A summary of the operating budgets per property for the year ended December
31, 1998, which was supplied by your partnership to Stanger, is as follows:
FISCAL 1998 OPERATING BUDGETS
<TABLE>
<CAPTION>
BAYWOOD
APARTMENTS
----------
<S> <C>
Total Revenues.............................................. $1,430,058
Operating Expenses.......................................... (638,157)
Replacement Reserves -- Net................................. (261,155)
Debt Service................................................ (414,617)
Capital Expenditures........................................ (26,700)
----------
Net Cash Flow..................................... $ 89,429
==========
</TABLE>
The above budgets at the time they were made were forward-looking
information developed by the general partner of your partnership. Therefore, the
budgets were dependent upon future events with respect to the ability of your
partnership to meet such budget. The budgets incorporated various assumptions
including, but not limited to, lease revenue (including occupancy rates),
various operating expenses, general and administrative expenses, depreciation
expenses, capital expenditures, and working capital levels. While we deemed such
budgets to be reasonable and valid at the date made, there is no assurance that
the assumed facts will be validated or that the circumstances will actually
occur. Any estimate of the future performance of a business, such as your
partnership's business, is forward-looking and based on assumptions some of
which inevitably will prove to be incorrect.
The budget amounts provided above are figures that were not computed in
accordance with GAAP. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budget are often
re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budget
presented for fiscal 1998 should not necessarily be considered as indicative of
what the audited operating results for fiscal 1998 will be. For the year ended
December 31, 1998, the partnership expects to report revenues of $1,314,886,
operating expenses of $659,508 and replacement reserves and capital expenditures
of $173,900. Based on these estimates, the partnership's net cash flow before
debt service, which we believe provides a better indication of the partnership's
actual operating performance than net cash flow, was less than the budgeted
amounts.
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.
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<PAGE> 48
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 the third quarter of 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 or
square footage; 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 nine month period ending
September 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 property.
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 property, 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 the
liquidation value calculation prepared by the management of your partnership.
Stanger observed that such liquidation value was based upon the gross property
valuation estimate prepared by management, which in turn is based upon fiscal
year 1997 property income capitalized at a capitalization rate of 10.5%. Stanger
further observed that the gross property valuation was adjusted for the
following additional items to achieve the liquidation value of your partnership:
(i) cash, other assets, mortgage indebtedness and other liabilities determined
as of December 31, 1997; (ii) estimated closing costs equal to approximately
2.5% of gross real estate value; and (iii) extraordinary capital expenditure
estimates in the amount of $354,355. Stanger observed that your partnership
liquidation value of $1,387,484 was allocated 99.89% to the limited partnership
divided by the total units outstanding of 32 to provide the liquidation value
per unit of $43,313.
Review of Partnership Going Concern Analysis. Stanger reviewed the going
concern value calculation prepared by management of your partnership. Stanger
observed that such going concern value was based upon the discounted present
value of projected cash flows from the partnership over a ten-year period of
operation which is a standard period for going concern analysis for real
property assets. Such discounted cash flows were based upon year one property
income from the real estate portfolio of $634,000 escalated at 3% per annum for
the ten-year projection period. Property income was reduced by: (i) partnership
administrative expenses of $30,000 per annum; and (ii) debt service on existing
debt through maturity or the end of ten years, whichever occurs first. For debt
which matures during the ten-year period, a refinancing at a 7% interest rate
was assumed. At the end of the ten-year projection period, the properties were
assumed to be sold based upon: (i) property income for the immediately following
year capitalized at a capitalization rate of
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<PAGE> 49
11.0%; and (ii) expenses of sale estimated at 3% of property value. Stanger
observed that the proceeds of sale were reduced by the estimated debt balance at
the end of the tenth year to provide net proceeds from the sale of your
partnership's property.
The resulting cash flows for the ten-year period were discounted to present
value at a discount rate of 30%. Stanger observed that such discount rate was
based upon the portfolio real estate discount rate of 13%, adjusted for leverage
risk and illiquidity risk. Stanger observed that the resulting partnership going
concern value was divided by units outstanding of 32 to achieve management's
estimate of going concern value of $35,701 per unit.
Review of Secondary Market Prices. Stanger maintains a database of
secondary market information on limited partnership units. Stanger observed for
its data that no units were reported traded in the secondary market during 1998.
Comparison of Offer Price to Liquidation Value, Going Concern Value and
Secondary Market Price. Stanger observed that the offer price of $43,313 per
unit is equal to management's estimate of liquidation value, and reflects a
21.3% premium to management's estimate of going concern value. Stanger further
observed that investors may select cash, Common OP Units or Preferred OP Units
in exchange for their partnership units or they may elect to continue to hold
their partnership units. Stanger further observed that the Common OP Units will
be priced at $37.625 per unit, an amount which equals a recent closing price for
the common shares into which such Common OP Units are convertible for the
30-trading day period ended March 23, 1999. Furthermore, Stanger observed that
the Preferred OP Units to be issued in the transaction will be based upon the
liquidation preference of $25. Stanger noted that the Preferred OP Units are
redeemable for, at AIMCO's option, either: (i) $25 in cash per Preferred OP
Unit; (ii) common stock of AIMCO based upon a ten-day average price at the time
of the requested redemption; or (iii) commencing on the third year following the
closing of this transaction preferred stock of AIMCO with a dividend equal to
the distribution on the Preferred OP units. Stanger observed that the ten day
average closing price of the AIMCO common stock is $36.425, as of March 23, 1999
and therefore an investor receiving AIMCO common shares in redemption of the
Preferred OP Units would receive 0.6863 shares with a value approximating $25
for each $25 Preferred OP Unit redeemed, based upon AIMCO's average common share
price as of March 23, 1999. Stanger noted that commencing in the third year,
investors redeeming Preferred OP Units may receive from AIMCO Preferred Stock
with a dividend equal to the distribution on the AIMCO Preferred OP Units.
Stanger observed that the distribution on the Preferred OP Units is set at 8% of
$25 and that the average dividend yield on AIMCO's outstanding C, D, G and H
Preferred Shares approximates 10.1% as of March 5, 1999. Stanger noted that,
based upon the cash dividend yield on the AIMCO Preferred Shares identified
above as of March 23, 1999, investors would receive Preferred Shares with a
value of approximately $19.80 for each $25 Preferred OP Unit if such redemption
occurred after the second year following the closing of the transaction. Stanger
further observed that the above analysis does not take into consideration the
present value of the earnings on the tax deferral an investor may realize as the
result of selecting Preferred OP Units in lieu of cash in a taxable transaction.
In addition to the above analysis, Stanger prepared an independent estimate
of net asset value, going concern value and liquidation value per unit. Stanger
has advised AIMCO that Stanger's estimates of net asset value, liquidation value
and going concern value are based upon Stanger's independent estimate of
property income, a direct capitalization rate of 10.5% transaction costs of 2.5%
to 5.0%, growth rates of 3% and a terminal capitalization rate of 11.0%. Stanger
has advised us that the direct capitalization rate represents Stanger's estimate
of the capitalization rate applicable to its estimate of property income and is
based upon Stanger's independent estimate of the direct capitalization rate for
such property based upon such property's age, condition and location. Stanger
further advised us that the terminal capitalization rate is the capitalization
rate utilized in Stanger's going concern value estimate which is applied to
Stanger's estimate of property income in the eleventh year to establish the
value of the property at the end of the tenth year. Stanger has advised us that
Stanger estimated the terminal capitalization rate at a 50 basis point premium
to the direct capitalization rate estimate for the property. Stanger utilized
deferred maintenance estimates derived from the Adjusters International, Inc.
reports in the calculation of net asset value, liquidation value and going
concern value. Stanger advised us that Stanger adjusted its estimate of net
asset value and liquidation value
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<PAGE> 50
for the cost of above market debt using a 7% interest rate. With respect to the
going concern value estimate prepared by Stanger, Stanger advised AIMCO that a
ten-year projection period and a discount rate of 30% was utilized. Such
discount rate reflects the risk associated with real estate, leverage and a
limited partnership investment. The 30% discount rate was based upon the
property's estimated internal rate of return derived from the discounted cash
flow analysis, (approximately 13% as described above), plus a premium reflecting
the additional risk associated with mortgage debt equal to more than 70% of
property value. Stanger's estimates were based in part upon information provided
by us. Stanger relied upon the deferred maintenance estimates, property
descriptions, unit configurations, allocation among partners, and other data
provided by us. Stanger's analyses were based on balance sheet data as of
September 30, 1998. Stanger's review also included a site visit, review of
rental rates and occupancy at the properties as well as competing properties.
Stanger's estimate of net asset value, going concern value and liquidation value
per unit were $34,199, $32,617 and $29,707 representing discounts to the offer
price of 21%, 25% and 31%. See "Fairness of the Offer -- Comparison of
Consideration to Alternative Consideration."
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. Stanger has rendered similar fairness opinions with regard to certain
other exchange offers being made by the AIMCO Operating Partnership. Stanger
rendered the opinions only as to the individual fairness of the offer
consideration in each proposed exchange offer. The Fairness Opinion does not
address the fairness of all possible acquisitions of interests in your
partnership. In addition, the Fairness Opinion will not be revised to reflect
the actual participation in the offer.
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 your general partner (which is our subsidiary) and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's property, and the transaction costs and fees associated with a
sale of the property. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's property 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 property 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 property 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 property 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
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<PAGE> 51
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, nor did Stanger
address the fairness of all possible acquisitions of interests in the
partnership. The opinion will not be revised to reflect the actual results of
the offer. 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 or oral 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 $9,000 with
respect to your partnership. The estimated aggregate fee payable to Stanger in
connection with all affiliated partnerships is estimated at $1,510,000, plus
out-of-pocket expenses estimated at $61,000. 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 was
engaged by AIMCO during 1997 to represent AIMCO in negotiations to acquire
interests in a real estate limited partnership. Such transaction was never
consummated and no fee was ever paid to Stanger in connection with such proposed
transaction. AIMCO and its affiliates may retain the services of Stanger in the
future. Any such future services could relate to this offer, some or all of the
concurrent offers, or a completely separate transaction.
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<PAGE> 52
YOUR PARTNERSHIP
GENERAL
Baywood Apartments, Ltd., is an Alabama limited partnership which completed
a private placement of units in 1979. Insignia acquired the general partner of
your partnership in November, 1992. AIMCO acquired Insignia in October 1998.
Each unit was initially sold at a price of $62,000. There are currently a total
of 35 limited partners of your partnership and a total of 32 units of your
partnership outstanding. Your partnership is in the business of owning and
managing residential housing. Currently, your partnership owns and manages the
property described below. Your partnership has no employees. 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.
YOUR PARTNERSHIP AND ITS PROPERTY
Your partnership was formed on January 1, 1979 for the purpose of owning an
apartment property located in Gretna, Louisiana, known as "Baywood Apartments."
Your partnership's property is owned by the partnership but is subject to a
mortgage. The property was built in 1971 and consists of 226 apartment units.
There are 104 one-bedroom apartments, 76 two-bedroom apartments and 46
three-bedroom apartments. Your partnership's property had an average occupancy
rate of approximately 91.20% in 1998, 92.62% in 1997 and 96.02% in 1996.
Your partnership's property provides residents with a number of amenities
and services, such as 24-hour desk service, exercise room and/or sauna, and
party or meeting rooms. Nearly all apartment units are wired for cable
television, and many apartment units also offer one or more additional features,
such as washer/ dryer, microwave, fireplace, and patio/balcony.
Presently, there are no plans for any major renovations or improvements for
the property. Budgeted renovations or improvements for 1999 total $354,355 and
are intended to be paid for out of cash flow or borrowings. Renovation items
include gutters and downspouts, heating, ventilation and air conditioning
systems, plumbing, siding/trim/facia/soffits, sidewalks, landscaping and
irrigation, drainage, and pool.
Set forth below are the average rents for the apartments for the last five
years:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$463 $462 $453 $413 $417
</TABLE>
The apartments are being depreciated for federal income tax purposes using
the accelerated cost recovery method. Depreciation is computed principally by
the straight-line and accelerated methods over estimated lives of 3 to 40 years.
Currently, the real estate taxes on the property are $48,261 of $453,790 of
assessed valuation with a current yearly tax rate of 10.64%. When the proposed
improvements are made it is anticipated that the yearly tax rate may increase by
approximately 10.85% of such improvements.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a wholly 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.
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS
Under your partnership's agreement of limited partnership, your partnership
is not permitted to raise new equity and reinvest cash in new properties.
Consequently, your partnership is limited in its ability to expand its
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<PAGE> 53
investment portfolio. Your partnership will terminate on December 31, 2015
unless earlier dissolved. Your partnership has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
Generally, your partnership is authorized to acquire, develop, improve, own
and operate your partnership's property as an investment and for income
producing purposes. The investment portfolio of your partnership is limited to
the assets acquired with the initial equity raised through the sale of units to
the limited partners of your partnership or the assets initially contributed to
your partnership by the limited partners, as well as the debt financing obtained
by your partnership within the established borrowing restrictions.
An investment in your partnership is a finite life investment, with the
partners to receive regular cash distributions out of your partnership's
distributable cash flow, if available, and to receive cash distributions upon
liquidation of your partnership's real estate investments, if available.
In general, your general partner (which is our subsidiary) regularly
evaluates the partnership's property by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors the property's specific locale and sub-market
conditions (including stability of the surrounding neighborhood) 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 (including any prepayment penalties), tax implications,
availability of attractive mortgage financing to a purchaser, 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. If rental market conditions improve, 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 viable option than it is
currently. After taking into account the foregoing considerations, your general
partner is not currently seeking a sale of your partnership's property primarily
because it expects the property's operating performance to improve in the near
term. In making this assessment, your general partner noted that occupancy and
rental rates at the property were 91% and $466, respectively, at December 31,
1998, compared to 91% and $463, respectively, at December 31, 1997. In
particular, the general partner noted that it expects to spend approximately
$354,355 for capital improvements at the property in 1999 to repair and update
the property's siding and trim, landscaping, irrigation, drainage, plumbing and
pool. Although there can be no assurance as to future performance, however,
these expenditures are expected to improve the desirability of the property to
tenants. The general partner does not believe that a sale of the property at the
present time would adequately reflect the property's future prospects. Another
significant factor considered by your general partner is the likely tax
consequences of a sale of the property for cash. Such a transaction would likely
result in tax liabilities for many limited partners. The general partner has not
received any recent indication of interest or offer to purchase the property.
CAPITAL REPLACEMENT
Your partnership has an ongoing program of capital improvements,
replacements and renovations, including roof replacements, kitchen and bath
renovations, balcony repairs (where applicable), replacement of various building
systems and other replacements and renovations in the ordinary course of
business. All capital improvement and renovation costs are expected to be paid
from operating cash flows, cash reserves, or from short-term or long-term
borrowings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Your Partnership."
BORROWING POLICIES
Your partnership's agreement of limited partnership allows your partnership
to incur debt. As of December 31, 1998, your partnership had a current mortgage
note outstanding of $4,326,434, payable to FNMA, which bears interest at a rate
of 7.83%. The mortgage debt is due in October, 2003. Your partnership
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<PAGE> 54
also has a second mortgage note outstanding of $142,290, on the same terms as
the current mortgage note. Your partnership's agreement of limited partnership
also allows the general partner of your partnership to lend funds to your
partnership. As of December 31, 1998, your general partner had no outstanding
loans to your partnership.
COMPETITION
There are other residential properties within the market area of your
partnership's property. The number and quality of competitive properties in such
an area could have a material effect on the rental market for the apartments at
your partnership's property and the rents that may be charged for such
apartments. While we are a significant factor in the United States in the
apartment industry, competition for apartments is local.
LEGAL PROCEEDINGS
Your partnership is party to a variety of legal proceedings related to its
ownership of the partnership's property and management and leasing business,
respectively, arising in the ordinary course of the business, which are not
expected to have a material adverse effect on your partnership.
HISTORY OF THE PARTNERSHIP
Your partnership sold $1,984,000 of limited partnership units in 1979 for
$62,000 per unit. Your partnership currently owns one apartment property.
Your partnership used the funds raised to purchase its property and it has
expended the funds so raised many years ago. Your partnership currently owns the
property described herein, which is subject to a substantial mortgage. Your
general partner (which is our subsidiary) has not experienced any material
adverse financial developments from January 1, 1997 through the present.
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December , 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.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, your general partner (which is our subsidiary) is
accountable to your partnership as a fiduciary. Your partnership's agreement of
limited partnership does not limit the liability of the general partner to the
partnership or the limited partners for any act performed in its capacity as the
general partner. 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 and save harmless the general partner of your partnership, its
officers, directors, employees, affiliates, designees and nominees from any loss
or damage, including legal fees and expenses and amounts paid in settlement,
incurred by any of them on behalf of your partnership or in furtherance of your
partnership's interest, provided that the general partner or other person sued
will not be entitled to indemnification for losses sustained by reason of its
negligence, gross negligence, willful misconduct or breach of fiduciary
obligations. As part of its assumption of liabilities in the consolidation,
AIMCO will indemnify the general partner of your partnership and their
affiliates for periods prior to and following the consolidation to the extent of
the indemnity under the terms of your partnership's agreement of limited
partnership and applicable law.
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 or any other indemnified person.
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<PAGE> 55
DISTRIBUTIONS AND TRANSFERS OF UNITS
Distributions
The following table shows, for each of the years indicated, the
distributions paid per unit in such years. The original cost per unit was
$62,000.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 AMOUNT
---------------------- -------
<S> <C>
1994........................................................ $ 0
1995........................................................ 7,891
1996........................................................ 1,574
1997........................................................ 3,030
1998........................................................ 4,688
-------
Total....................................................... $17,183
=======
</TABLE>
Transfers
The units are not listed on any national securities exchange or quoted on
the NASDAQ System, the Electronic Bulletin Board or the "pink sheets," and there
is no established public trading market for the units. Secondary sales activity
for the units has been limited and sporadic. The general partner of your
partnership monitors transfers of the units (a) because the admission of the
transferee as a substitute limited partner in your partnership require the
consent of the general partner of your partnership under your partnership's
agreement of limited partnership, and (b) in order to track compliance with safe
harbor provisions to avoid treatment as a "publicly traded partnership" for tax
purposes. However, the general partner of your partnership does not monitor or
regularly receive or maintain information regarding the prices at which
secondary sale transactions in the units have been effectuated. The general
partner of your partnership estimates, based solely on the transfer records of
your partnership (or your partnership's transfer agent), that there have been no
sale transactions.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate, approximately
a 1.00% interest in your partnership 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 two years, 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 following table shows, for each of the years indicated, compensation
paid to your general partner and its affiliates on a historical basis, and on a
pro forma basis assuming that all of the units sought in our offer had been
acquired at the beginning of each period:
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------------------- -------------------------------------------
PARTNERSHIP PROPERTY PARTNERSHIP PROPERTY
FEES AND MANAGEMENT FEES AND MANAGEMENT
YEAR EXPENSES FEES DISTRIBUTIONS EXPENSES FEES DISTRIBUTIONS
---- ----------- ------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1994 $25,620 not available $ 0 $25,620 not available $ 0
1995 41,259 $ 64,085 7,891 41,259 $64,085 65,022
1996 51,614 64,690 1,574 51,614 64,690 12,966
1997 33,198 65,846 3,030 33,198 65,846 24,970
1998 28,071 65,374 4,688 28,071 65,374 38,625
</TABLE>
S-51
<PAGE> 56
SELECTED FINANCIAL INFORMATION
OF YOUR PARTNERSHIP
BAYWOOD APARTMENTS, LTD.
<TABLE>
<CAPTION>
BAYWOOD APARTMENTS, LTD.
-----------------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
SELECTED FINANCIAL INFORMATION
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and Cash Equivalents..... $ 288,500 $ 418,976 $ 419,804 $ 476,395 $ 452,632 $ 604,724 $ 442,664
Land & Building............... 5,031,555 4,854,199 4,910,869 4,750,428 4,565,005 4,336,146 4,192,102
Accumulated Depreciation...... (3,543,002) (3,307,004) (3,356,836) (3,126,094) (2,913,300) (2,725,800) (2,575,811)
Other Assets.................. 360,780 388,960 330,499 339,381 411,291 551,271 679,437
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Assets.......... $ 2,137,833 $ 2,355,131 $ 2,304,336 $ 2,440,110 $ 2,515,628 $ 2,766,341 $ 2,738,392
=========== =========== =========== =========== =========== =========== ===========
Notes Payable................. $ 4,429,284 $ 4,475,971 $ 4,469,935 $ 4,518,594 $ 4,563,624 $ 4,605,295 $ 4,644,184
Other Liabilities............. 112,795 104,320 96,590 119,112 139,296 205,075 111,946
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Liabilities..... $ 4,542,079 $ 4,580,291 $ 4,566,525 $ 4,637,706 $ 4,702,920 $ 4,810,370 $ 4,756,130
----------- ----------- ----------- ----------- ----------- ----------- -----------
Partners Deficit.............. $(2,404,246) $(2,225,160) $(2,262,189) $(2,197,596) $(2,187,292) $(2,044,029) $(2,017,738)
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
BAYWOOD APARTMENTS, LTD.
-----------------------------------------------------------------------------------------------
FOR THE NINE MONTHS
ENDED FOR THE YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Revenue................ $ 942,511 $ 944,228 $ 1,256,240 $ 1,253,668 $ 1,227,468 $ 1,121,158 $ 1,130,064
Other Income.................. 46,980 52,703 72,593 71,878 70,406 116,372 70,382
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Revenue......... $ 989,491 $ 996,931 $ 1,328,833 $ 1,325,546 $ 1,297,874 $ 1,237,530 $ 1,200,446
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating Expenses............ $ 428,044 $ 419,825 $ 593,179 $ 590,698 $ 519,148 $ 627,459 $ 464,102
General & Administrative...... 44,714 20,806 36,996 50,012 42,841 47,220 136,090
Depreciation.................. 175,590 170,334 230,742 212,794 187,499 160,566 148,817
Interest Expense.............. 282,597 285,105 386,668 389,778 394,004 383,204 387,540
Property Taxes................ 37,676 37,298 48,871 42,216 45,132 45,372 49,147
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Expenses........ $ 968,621 $ 933,368 $ 1,296,456 $ 1,285,498 $ 1,188,624 $ 1,263,821 $ 1,185,696
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Income (loss) before
extraordinary items......... $ 20,870 $ 63,563 $ 32,377 $ 40,048 $ 109,250 $ (26,291) $ 14,750
Extraordinary Items........... -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Income (Loss)............. $ 20,870 $ 63,563 $ 32,377 $ 40,048 $ 109,250 $ (26,291) $ 14,750
=========== =========== =========== =========== =========== =========== ===========
Net Income per limited
partnership unit............ $ 646 $ 1,966 $ 1,002 $ 1,239 $ 3,380 $ (813) $ 456
=========== =========== =========== =========== =========== =========== ===========
Distributions per limited
partnership unit............ $ 5,041 $ 3,338 $ 3,000 $ 1,558 $ 7,812 $ -- $ --
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
S-52
<PAGE> 57
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP
OVERVIEW
The following discussion and analysis of the results of operations and
financial condition of your partnership should be read in conjunction with the
audited financial statements of your partnership included herein.
RESULTS OF OPERATIONS
Comparison of the Nine Months Ended September 30,1998 to the Nine Months Ended
September 30, 1997
NET INCOME
Your partnership recognized net income of $20,870 for the nine months ended
September 30, 1998, compared to $63,563 for the nine months ended September 30,
1997. The decrease in net income of $42,693, or 67.20% is due to a decrease in
rental revenues and an increase in operating and interest expenses. These
factors are discussed in more detail in the following paragraphs.
REVENUES
Rental and other property revenues from the partnership's property totaled
$989,491 for the nine months ended September 30, 1998, compared to $996,931 for
the nine months ended September 30, 1997, a slight decrease of $7,440 or .75%.
Rental rates have remained relatively consistent from year to year.
EXPENSES
Operating expenses, consisting of, utilities (net of reimbursements
received from tenants), contract services, turnover costs, repairs and
maintenance, advertising and marketing, and insurance, totaled $428,044 for the
nine months ended September 30, 1998, compared to $419,825 for the nine months
ended September 30, 1997, an increase of $8,219 or 1.96%. Management expenses
totaled $48,709 for the nine months ended September 30, 1998, compared to
$49,638 for the nine months ended September 30, 1997, a decrease of $929 or
1.87%. Operating expenses have remained relatively consistent from period to
period.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $44,714 for the nine months
ended September 30, 1998 compared to $20,806 for the nine months ended September
30, 1997, an increase of $23,908 or 114.91%. The increase is primarily due to an
increase in the partnership asset management fee.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $282,597 for the nine months ended September 30, 1998, compared
to $285,105 for the nine months ended September 30, 1997, a decrease of $2,508,
or .9%. The increase in the interest expense is due to a lower outstanding
balance on the mortgage indebtedness due to principal payment made during the
year.
As part of the ongoing business plan of your partnership, the general
partner monitors the rental market environment of your partnership's investment
property to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting your partnership from increases in
expenses. As part of this plan, the general partner attempts to protect your
partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the general partner will be able to sustain such a plan.
S-53
<PAGE> 58
Comparison of the Year Ended December 31, 1997 to the Year Ended December 31,
1996
NET INCOME
Your partnership recognized net income of $32,377 for the year ended
December 31, 1997, compared to $40,048 for the year ended December 31, 1996, a
decrease in net income of $7,671, or 19.15%. The decrease is primarily
attributable to an increase in depreciation expense. Factors affecting net
income are discussed in more detail in the following paragraphs.
REVENUES
Rental and other property revenues from the partnership's property totaled
$1,328,833 for the year ended December 31, 1997, compared to $1,325,546 for the
year December 31, 1996, an increase of $3,287, or 0.2%. The increase is due to
an increase in market rent of approximately 3% offset partially by the decrease
in the occupancy rate of 1%.
EXPENSES
Operating expenses, consisting of, utilities (net of reimbursements
received from tenants), contract services, turnover costs, repairs and
maintenance, advertising and marketing, property taxes and insurance, totaled
$593,179 for the year ended December 31, 1997, compared to $590,698 for the year
ended December 31, 1996, an increase of $2,481 or 0.42%. Management expenses
totaled $65,846 for the year ended December 31, 1997, compared to $64,690 for
the year ended December 31, 1996, an increase of $1,156, or 1.79%. Overall,
operating expenses remained relatively consistent from period to period.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $36,996 for the year ended
December 31, 1997 compared to $50,012 for the year ended December 31, 1996, a
decrease of $13,016 or 26.03%.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $386,668 for the year ended December 31, 1997, compared to
$389,778 for the year ended December 31, 1996, a decrease of $3,110, or 0.80%.
The decrease is due to a lower outstanding balance on the mortgage indebtedness
due to principal payments made during the year.
DEPRECIATION EXPENSE
Depreciation expense increased over the prior year approximately $18,000,
or 8% due to an increase in the amount of fixed assets at 12/31/97 as compared
to 12/31/96. Purchases of fixed assets for 1997 were approximately $162,000.
Comparison of the Year Ended December 31, 1996 to the Year Ended December 31,
1995
NET INCOME
Your partnership recognized net income of $40,048 for the year ended
December 31, 1996, compared to $109,250 for the year ended December 31, 1995.
The decrease in net income of $69,202 or 63.34% was primarily the result of an
increase in depreciation and operating expenses. These factors are discussed in
more detail in the following paragraphs.
REVENUES
Rental and other property revenues from the partnership's property totaled
$1,325,546 for the year ended December 31, 1996, compared to $1,297,874 for the
year ended December 31, 1995, an increase of $27,672, or 2.13%. The increase in
revenues is due to an increase in rental rates of 2% while vacancy remained
relatively consistent.
S-54
<PAGE> 59
EXPENSES
Operating expenses, consisting of, utilities (net of reimbursements
received from tenants), contract services, turnover costs, repairs and
maintenance, advertising and marketing, and insurance, totaled $590,698 for the
year ended December 31, 1996, compared to $519,148 for the year ended December
31, 1995. The increase of $71,550 or 13.78%, is primarily due to expenses
incurred for paving repairs, new floor coverings and appliances at the property.
Management expenses totaled $64,690 for the year ended December 31, 1996,
compared to $64,085 for the year ended December 31, 1995, an increase of $605,
or 0.94%. These costs were incurred to attract new tenants and increase the curb
appeal at the property.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $50,012 for the year ended
December 31, 1996 compared to $42,841 for the year ended December 31, 1995, an
increase of $7,171 or 16.74%. Increase is due primarily to higher property
management fees and reimbursements to the general partner which is related to
the increase in rental revenues.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $389,778 for the year ended December 31, 1996, compared to
$394,040 for the year ended December 31, 1995, a decrease of $4,226, or 1.07%.
The decrease is due to a lower outstanding balance on the mortgage indebtedness
due to principal payments made during the year.
DEPRECIATION EXPENSE
Depreciation expense increased from $187,499 in 1995 to $212,794 in 1996.
The increase in the expense is due to the purchases of additional $317,000 fixed
assets during the period.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, your Partnership had $288,500 in cash and cash
equivalents. Your Partnership's principal demands for liquidity include normal
operating activities, payments of principal and interest on outstanding debt,
capital improvements, and distributions paid to limited partners. At September
30, 1998, the outstanding balance on the mortgage indebtedness, excluding
discount of $55,410, was $4,429,284. The mortgages require monthly payments of
approximately $34,551 until October 2003. The notes are collateralized by pledge
of land and buildings and have a stated interest rate of 7.8%. Cash used in
investing activities consisted of capital improvements and deposits to escrow
accounts maintained by the mortgage lender. Cash used in financing activities
consisted of payments of principal made on the mortgages encumbering your
partnership's properties and partner distributions.
There are no commitments for material capital expenditures as of September
1998. The sufficiency of existing liquid assets to meet future liquidity and
capital expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and meet other operating needs of the partnership. Such assets are currently
thought to be sufficient for any near-term needs of the partnership. Management
believes that your partnership has adequate sources of cash to finance its
operations, both on a short-term and long-term basis. Presently, there are no
plans for any major renovations or improvements for the property. Budgeted
renovations or improvements for 1999 total $354,355 and are intended to be paid
for out of cash flow or borrowings. Renovation items include gutters and down
spouts, heating, ventilation and air conditioning systems, plumbing,
siding/trim/facia/soffets, sidewalks, landscaping and irrigation, drainage and
pool.
S-55
<PAGE> 60
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to 25% of the outstanding 32 units of your
partnership (up to 8 units) for consideration per unit of (i) 1,732.75 Preferred
OP Units, (ii) 1,151.00 Common OP Units, or (iii) $43,313 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 the commencement of our offer 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., New York City time, on June 4, 1999, 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), although you will be entitled to retain any
distributions you may have received after such date and prior to our
commencement of this offer.
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 January 1, 1999 (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 March 26, 1999.
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
S-56
<PAGE> 61
offer consideration shall be reduced by any interim distributions made by your
partnership between the commencement 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. However, any tendered units may be
withdrawn at any time prior to our accepting them for payment. To the AIMCO
Operating Partnership has an 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.
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.
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.
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.
S-57
<PAGE> 62
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 pays for your units.
You agree not to exercise any rights pertaining to the tendered units without
the prior consent of the AIMCO Operating Partnership. Upon such 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 your general
partner (which is our subsidiary) (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.
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
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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 may
have to provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal.
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 "Federal Income Tax Consequences."
Transfer Taxes
The amount of any transfer taxes (whether imposed on the registered holder
of units or any person) payable on account of the transfer to such person will
be deducted from the purchase price unless satisfactory evidence of the such
taxes or exemption therefrom is submitted.
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.
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WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to our acceptance of such units for payment.
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.
The offer may be extended or delayed indefinitely and no payment will be
made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment. 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 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
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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 25% 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 25% 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 25% 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 25%, 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 the general partner of your partnership and thereby
controls the management of your partnership. In addition, AIMCO owns 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.
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After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units.
However, the AIMCO Operating Partnership and its affiliates will not acquire any
additional units for a period of at least one year after expiration of the
offer. 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. In addition, we are not extending
appraisal rights in connection with the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
No provisions have been made with regard to the offer to allow you or other
limited partners to inspect the books and records of your partnership or to
obtain counsel or appraisal services at our expense or at the expense of your
partnership. However, as described under "Comparison of Your Partnership and the
AIMCO Operating Partnership -- Review of Investor Lists," you have the right
under your partnership's agreement of limited partnership to obtain a list of
the limited partners.
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 the date of this Prospectus Supplement and at or before the expiration
date of the offer, including any extension thereof, 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 reasonable
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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 which, in the reasonable 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 the date hereof, (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
the date hereof, (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 reasonable 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 reasonable judgment of the
AIMCO Operating Partnership, a material acceleration or worsening thereof
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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 your
general partner (which is our subsidiary) 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 reasonable 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
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(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 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 reasonable 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
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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;
or
(h) the offer to purchase may have an adverse effect on AIMCO's status
as a REIT.
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 reasonable 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.
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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. However,
we will not be able to control voting decisions unless we acquire more units in
another transaction, which cannot take place for at least one year after
expiration of this offer. 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 controls the company that manages your partnership's
property. In the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Effect on Trading Market
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.
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. Consummation of
the offer will not affect your partnership's agreement of limited partnership,
the financial condition or results of operations of your partnership, the
business and properties owned, the management compensation payable to your
general partner (which is our subsidiary) or its affiliates or any other matter
relating to your partnership, except it would result in the AIMCO Operating
Partnership substantially increasing its ownership of units of your partnership.
We will receive future distributions from your partnership for any units we
purchase.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by your general partner (which
is our subsidiary), 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
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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 (excluding 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 (which are requests to dismiss the action as a matter
of law) were heard on February 8, 1999, but no decision has been reached by the
Court. While no assurances can be given, we believe that the ultimate outcome of
this litigation will not have a material adverse effect on us.
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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, the accompanying Prospectus, the Letter of Transmittal,
and the legal and accounting fees in connection with this offer. 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 $50,000.
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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FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of the material Federal
income tax consequences of the offer 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
differing interpretations or change, possibly retroactively. This 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 you in light of your specific investment or tax
circumstances, or if you are subject to special tax rules (for example, if you
are a financial institution, broker-dealer, insurance company, or, except to the
extent discussed below, tax-exempt organization or foreign investor, 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 are 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. No clear precedent or authority
may be available on some questions. 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 of your specific tax situation.
TAX OPINIONS
Skadden, Arps, Slate, Meagher & Flom LLP ("Special Tax Counsel") has
delivered an opinion letter with regard to the material United States Federal
income tax consequences of the offer. The opinion letter of Special Tax Counsel
is filed as an exhibit to this Registration Statement. You may obtain a copy of
such opinion letter by sending a written request to the AIMCO Operating
Partnership.
The specific United States Federal income tax opinions that Special Tax
Counsel has provided are:
1. Commencing with AIMCO's initial taxable year ended December 31, 1994,
AIMCO was organized in conformity with the requirements for qualification
as a REIT under the Code, and its actual method of operation has enabled,
and its proposed method of operation will enable, AIMCO to meet the
requirements for qualification and taxation as a REIT. As noted in the
accompanying Prospectus, AIMCO's qualification and taxation as a REIT
depend upon its ability to meet, through actual annual operating results,
certain requirements, including requirements relating to distribution
levels and diversity of stock ownership, and the various qualification
tests imposed under the Code, the results of which have been represented by
the AIMCO's officers and will not be reviewed by Special Tax Counsel. No
assurance can be given that the actual results of AIMCO's future operations
for any one taxable year will satisfy the requirements for taxation as a
REIT under the Code.
2. The AIMCO Operating Partnership will be treated as a partnership and
not as an association taxable as a corporation for Federal income tax
purposes.
3. You will not recognize gain or loss for Federal income tax purposes
when you exchange your units solely for OP Units. If, immediately prior to
such exchange, the amount of your partnership's liabilities allocable to
the units you transfer to the AIMCO Operating Partnership exceeds the
amount of the AIMCO Operating Partnership's liabilities allocable to you
immediately after the exchange, you will receive a deemed distribution in
an amount equal to such liability relief and will recognize gain for
Federal income tax purposes to the extent that the amount of such deemed
distribution exceeds your aggregate adjusted tax basis in your OP Units.
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4. If you exchange your units for cash and OP Units, you will be treated
for Federal income tax purposes as selling some of your units for cash in a
taxable sale and contributing some of your units for OP Units in a tax-free
exchange. With respect to the units that you will be treated as selling for
cash, you will be taxed as described in paragraph number five below. With
respect to the units that you will be treated as exchanging for OP Units,
you will be taxed as described in paragraph number three above.
5. If you sell your units solely for cash, you will recognize gain or
loss for Federal income tax purposes in an amount equal to the difference
between (i) your amount realized on the sale and (ii) your adjusted tax
basis in the units you sold.
6. If you retain all or a portion of your units and your partnership
terminates for Federal income tax purposes, you will not recognize any gain
or loss as a result of such termination and your capital account in your
partnership will not be affected.
7. Because of the factual nature of the inquiry, no opinion is expressed
by Special Tax Counsel as to whether your exercise of a redemption right
with respect to an OP Unit would cause your contribution of units to the
AIMCO Operating Partnership to be a taxable transaction under the disguised
sale rules of the Code.
8. The discussion in the accompanying Prospectus under the captions
"FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS" and "FEDERAL
INCOME TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNIT HOLDERS" and
in this Prospectus Supplement under the caption "FEDERAL INCOME TAX
CONSEQUENCES" is a fair and accurate summary of the material United States
Federal income tax consequences of the offers and of the acquisition,
ownership and disposition of the OP Units and the AIMCO stock by a holder
who acquires the OP Units or AIMCO stock in connection with the offers,
subject to the qualifications set forth therein.
It must be emphasized that these opinions are based and conditioned upon
representations and covenants made by AIMCO and the AIMCO Operating Partnership
as to factual matters (including representations and covenants concerning
AIMCO's properties and the past, present and future conduct of its business and
your partnership's liabilities). These opinions are expressed as of the date of
the opinion letter and Special Tax Counsel has no obligation to advise AIMCO or
the AIMCO Operating Partnership of any subsequent change in the matters stated,
represented, or assumed or any subsequent change in the law. An opinion of
counsel is not binding on the IRS, and no assurance can be given that the IRS
will not challenge the above opinions of Special Tax Counsel.
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 when you exchange your units solely for OP Units. You may
recognize gain upon such exchange if, immediately prior to such exchange, the
amount of liabilities of your partnership allocable to the units you transferred
exceeds the amount of the AIMCO Operating Partnership liabilities allocable to
you immediately after such exchange. If this was true in your case, the excess
would be treated as a deemed distribution of cash to you from the AIMCO
Operating Partnership. This deemed cash distribution would be treated as a
nontaxable return of capital to the extent of your adjusted tax basis in your OP
Units 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 you exchange your units pursuant to the offer,
at least equal to the amount of liabilities of your partnership that were
allocable to your units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most persons who participate in the tender offer
would not recognize gain or loss as a result of an exchange of units solely for
OP Units pursuant to the offer.
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DISGUISED SALES
Under the Code, a transfer of property by a partner to a partnership
followed by a related transfer by the partnership of money or other property to
the partner is treated as a "disguised" sale if (1) the second transfer would
not have occurred but for the first transfer and (2) the second transfer "is not
dependent on the entrepreneurial risks of the partnership operations." In a
disguised sale, the partner is treated as if he or she sold the contributed
property to the partnership as of the date the property was contributed to the
partnership. In addition, unless a few technical exceptions apply, transfers of
money or other property between a partnership and a partner that are made within
two years of each other, including redemptions of OP Units made within two years
of a contribution of your units, must be reported to the IRS and are presumed to
be a "disguised" sale unless the facts and circumstances clearly establish that
the transfers do not constitute a sale.
While there is no authority applying the disguised sale rules to the
exercise of a redemption right by a partner with respect to a partnership
interest received in exchange for property, the exercise of a redemption right
with respect to OP Units within two years of the date of the contribution of
your units to the AIMCO Operating Partnership may be treated as a disguised
sale. If this treatment were to apply, you would be treated for Federal income
tax purposes as if, on the date of the contribution of your units, the AIMCO
Operating Partnership transferred to you an obligation to give you the
redemption proceeds. In that case, you would be required to recognize gain on
the disguised sale in such earlier year. Because of the factual nature of such
an inquiry, Special Tax Counsel is unable to opine whether your exercise of a
redemption right with respect to an OP Unit would cause your contribution of
units to the AIMCO Operating Partnership to be a taxable transaction under the
disguised sale rules of the Code.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Federal Income Taxation of the
AIMCO Operating Partnership and OP Unitholders -- 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
If you exchange your units for cash and OP Units, you will be treated as
selling some of your units for cash in a taxable sale and contributing some of
your units for OP Units in a tax-free exchange. Your adjusted tax basis in your
transferred units will be allocated between the units you will be deemed to have
sold and the units you will be deemed to have contributed to the AIMCO Operating
Partnership.
With respect to the units that you will be treated as selling, you will
recognize gain or loss in an amount equal to the difference between (i) your
"amount realized" on the sale and (ii) your adjusted tax basis in units you
sold. Your "amount realized" on such sale will be equal to the sum of the amount
of cash you received pursuant to the offer (that is, the offer consideration)
plus the amount of your partnership's liabilities attributed to the units you
sold. For purposes of these partial sale rules, the amount of your partnership's
liabilities attributed to the units you sold will be equal to the lesser of (i)
the excess of the amount of your partnership's liabilities allocable to you in
respect of the transferred units immediately prior to the exchange over the
amount of such liabilities allocable to you as determined immediately after the
exchange or (ii) the product of (A) the amount of your partnership's liabilities
allocable to you in respect of the units you are deemed to have sold immediately
prior to the exchange and (B) your "net equity percentage" with respect to those
units. Your "net equity percentage" will be equal to the percentage determined
by dividing (x) the cash you received in the exchange by (y) the excess of the
gross fair market value of the units in the exchange over the amount of your
partnership's liabilities allocable to you in respect of those units immediately
prior to the exchange. Thus, your tax liability could exceed the amount of cash
you receive in the sale.
With respect to the units that you will be treated as exchanging, rather
than selling, you will be taxed as described above under the heading "Tax
Consequences of Exchanging Units Solely for OP Units."
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TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
If you sell your units solely for cash, you will recognize gain or loss on
a sale of your units equal to the difference between (i) your "amount realized"
on the sale and (ii) your adjusted tax basis in the units you sold. The "amount
realized" with respect to a unit will be equal to the sum of the amount of cash
you received for your units (that is, the offer consideration) plus the amount
of the liabilities of your partnership allocable to such units (as determined
under Section 752 of the Code). Thus, your tax liability could exceed the amount
of cash you receive in the sale.
ADJUSTED TAX BASIS
If you acquired your units for cash:
- your initial tax basis in your units will be equal to such cash
investment in your partnership increased by your share of your
partnership's liabilities at the time such units were acquired;
- your initial tax basis generally has been increased by:
- your share of your partnership's income and gains and
- any increases in your share of your partnership's liabilities; and
- your initial tax basis generally has been decreased (but not below zero)
by:
- your share of cash distributions from your partnership,
- any decreases in your share of your partnership's liabilities,
- your share of your partnership's losses, and
- your share of nondeductible expenditures of your partnership that are
not chargeable to capital.
For purposes of determining your adjusted tax basis in your units
immediately prior to a disposition of such units, your adjusted tax basis will
include your 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), the gain you
would recognize pursuant to the offer will exceed the cash proceeds you would
realize upon the sale of your units. The adjusted tax basis of the OP Units you
receive in exchange for your units pursuant to the offer will be equal to (i)
the sum of your adjusted tax basis in the units you transferred plus any gain
recognized in the exchange and will be reduced by (ii) any cash you received or
you were deemed to receive 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 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 that is attributable to your share of "unrealized receivables" of your
partnership exceeds the tax basis attributable to those assets, such excess will
be treated as ordinary income. Among other things, "unrealized receivables"
include depreciation recapture for 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. You will not receive any future distributions
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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 the income or loss. 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 the passive 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 passive losses in the manner described below. If you receive
cash for 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 receive cash for all or a portion of your units
pursuant to the offer and recognize 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
receive cash for all of your units pursuant to the offer, the balance of any
"suspended" losses from your partnership 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.
TAX REPORTING
If you tender any units, you must report the transaction by filing a
statement with your Federal income tax return for the year of the tender which
provides certain required information to the IRS. To prevent the possible
application of back-up Federal income tax withholding of 31% with respect to
payment of the offer consideration, you may have to provide the AIMCO Operating
Partnership with your correct taxpayer identification number. See the
instructions to the Letter of Transmittal.
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"). If you are a foreign person, the AIMCO Operating Partnership will
be required, under the FIRPTA provisions of the Code, to deduct and withhold 10%
of the amount realized by you on the disposition. The amount withheld would be
creditable against your Federal income tax liability and, if the amount withheld
exceeds your actual tax liability you could obtain a refund from the IRS by
filing a U.S. income tax return. See the Instructions to the Letter of
Transmittal.
TAX CONSEQUENCES OF A TERMINATION OF YOUR PARTNERSHIP
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"). The AIMCO Operating Partnership's acquisition of units pursuant
to the offer may result in a Termination of your partnership. If an acquisition
of units results in a
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Termination, the following Federal income tax events will be deemed to occur:
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
interests 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 to the
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
to the New Partnership. A Termination will change (and possibly shorten) a
Remaining Offeree's holding period with respect to its units in your partnership
for Federal income tax purposes. Gains recognized by a Remaining Offeree on the
disposition of New Partnership interests with a holding period of 12 months or
less may be classified as short-term capital gains and subject to taxation at
ordinary income tax rates.
The New Partnership's adjusted tax basis in its assets will be the same as
the Old Partnership's basis in such assets immediately before the Termination. A
Termination will also cause the New Partnership to recalculate the depreciable
lives of its assets. This will cause the assets to be depreciated over a longer
period of time than if there had been no Termination. This would generally
decrease the annual average depreciation deductions allocable to the Remaining
Offerees for a number of years following consummation of the offer (thereby
increasing the taxable income allocable to their retained units in each such
year), but would have no effect on the total depreciation deductions available
over the useful lives of the assets of your partnership.
Elections as to 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.
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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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 The AIMCO Operating Partnership is organized
organized under Alabama law. as a 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 The term of the AIMCO Operating Partnership
partners as a finite life investment, with continues until December 31, 2093, unless
limited partners to receive regular cash the AIMCO Operating Partnership is dissolved
distributions out of your partnership's Net sooner pursuant to the terms of the AIMCO
Cash Flow (as defined in your partner- Operating Partnership's agreement of limited
ship's agreement of limited partnership). partnership (the "AIMCO Operating
The termination date of your partnership is Partnership Agreement") or as provided by
December 31, 2015. law. See "Description of 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 for the The purpose of the AIMCO Operating
sole purpose of being the sole limited Partnership is to conduct any business that
partner of Baywood Apartments, Ltd., an may be lawfully conducted by a limited
Alabama limited partnership, which holds partnership organized pursuant to the
your partnership's property. Subject to Delaware Revised Uniform Limited Part-
restrictions contained in your partnership's nership Act (as amended from time to time,
agreement of limited partnership, your or any successor to such statute) (the
partnership may perform any acts to "Delaware Limited Partnership Act"),
accomplish the foregoing including, without provided that such business is to be
limitation, borrowing funds and creating conducted in a manner that permits AIMCO to
liens. be qualified as a REIT, unless AIMCO ceases
to qualify as a REIT. The AIMCO Operating
Partner-
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship 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 ac-
tion, 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>
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is The general partner is authorized to issue
authorized to issue additional limited additional partnership interests in the
partnership interests in your partnership AIMCO Operating Partnership for any
and may admit up to 32 additional limited partnership purpose from time to time to the
partners by selling not more than 1,984 limited partners and to other persons, and
units for cash and notes to selected persons to admit such other persons as additional
who fulfill the requirements set forth in limited partners, on terms and conditions
your partnership's agreement of limited and for such capital contributions as may be
partnership. The capital contribution need established by the general partner in its
not be equal for all limited partners and no sole discretion. The net capital
action or consent is required in connection contribution need not be equal for all OP
with the admission of any additional limited Unitholders. No action or consent by the OP
partners. 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,
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 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>
The general partner of your partnership and The AIMCO Operating Partnership may lend or
its affiliates may make loans to your contribute funds or other assets to its
partnership but is precluded from receiving subsidiaries or other persons in which it
interest in excess of what has an equity investment,
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
would be charged by unrelated banks for and such persons may borrow funds from the
comparable loans. Your partnership is AIMCO Operating Partnership, on terms and
prohibited from making loans to the general conditions established in the sole and
partner, the limited partners or any their absolute discretion of the general partner.
affiliates and cannot sell or lease its To the extent consistent with the business
interest in your partnership's property to purpose of the AIMCO Operating Partnership
the general partner, the limited partners or and the permitted activities of the general
any of their affiliates. partner, the AIMCO Operating 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
the AIMCO Operating Partnership Agreement
and applicable law as the general partner,
in its sole and absolute discretion,
believes to be advisable. Except as
expressly permitted by the AIMCO Operating
Partnership Agreement, neither the general
partner nor any of its affiliates may sell,
transfer or convey any property to the AIMCO
Operating Partnership, directly or
indirectly, except pursuant to transactions
that are determined by the general partner
in good faith to be fair and reasonable.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is The AIMCO Operating Partnership Agreement
authorized to borrow money and execute contains no restrictions on borrowings, and
promissory notes secured by a mortgage on the general partner has full power and
your partnership's property, provided that authority to borrow money on behalf of the
your partnership may borrow only such AIMCO Operating Partnership. The AIMCO
amounts for which it can reasonably expect Operating Partnership has credit agreements
to meets debt service requirements from that restrict, among other things, its
anticipated Net Cash Flow and may not issue ability to incur indebtedness.
senior securities except as set forth in
your partnership's agreement of limited
partnership.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited Each OP Unitholder has the right, upon
partnership entitles limited partners to written demand with a statement of the
review the records of your partnership at purpose of such demand and at such OP
reasonable times upon reasonable notice at Unitholder's own expense, to obtain a
the location where such records are kept by current list of the name and last known
your partnership. business, residence or mailing address of
the general partner and each other OP
Unitholder.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has All management powers over the business and
complete discretion in the management and affairs of the AIMCO Operating Partnership
control of the business of your partnership, are vested in AIMCO-GP, Inc., which is the
except to the extent specifically limited by general partner. No OP Unitholder has any
your partnership's agreement of limited right to participate in or exercise control
partnership or by law. No limited partner or management power over the business and
may take part in the management of the affairs of the AIMCO Operating Partner-
business of
</TABLE>
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<PAGE> 81
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
your partnership, transact any business for ship. The OP Unitholders have the right to
your partnership or have the power to sign vote on certain matters described under
for or bind your partnership to any "Comparison of Your Units and AIMCO OP
agreement or document. Units -- Voting Rights" below. The general
partner may not be removed by the OP
Unitholders with or without 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 Notwithstanding anything to the contrary set
partnership does not limit the liability of forth in the AIMCO Operating Partnership
the general partner to your partnership or Agreement, the general partner is not liable
the limited partners for any act performed to the AIMCO Operating Partnership for
in its capacity as general partner. How- losses sustained, liabilities incurred or
ever, your partnership will indemnify and benefits not derived as a result of errors
save harmless the general partner of your in judgment or mistakes of fact or law of
partnership, its officers, directors, any act or omission if the general partner
employees, affiliates, designees and acted in good faith. The AIMCO Operating
nominees from any loss or damage, including Partnership Agreement provides for
legal fees and expenses and amounts paid in indemnification of AIMCO, or any director or
settlement, incurred by any of them on officer of AIMCO (in its capacity as the
behalf of your partnership or in furtherance previous general partner of the AIMCO
of your partnership's interest, provided Operating Partnership), the general partner,
that the general partner or other person any officer or director of general partner
sued will not be entitled to indemnification or the AIMCO Operating Partnership and such
for losses sustained by reason of its other persons as the general partner may
negligence, gross negligence, willful designate from and against all losses,
misconduct or breach of fiduciary claims, damages, liabilities, joint or
obligations. several, expenses (including legal fees),
fines, settlements and other
</TABLE>
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<PAGE> 82
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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 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
and certain state securities administrations
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 and their
respective state securities laws.
</TABLE>
S-78
<PAGE> 83
<TABLE>
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Anti-Takeover Provisions
<S> <C>
Under your partnership's agreement of Except in limited circumstances, the general
limited partnership, the general partner of partner has exclusive management power over
your partnership may be removed and an the business and affairs of the AIMCO
additional or substitute general partner may Operating Partnership. The general partner
be elected upon the written consent or may not be removed as general partner of the
affirmative vote of the limited partners AIMCO Operating Partnership by the OP
owning a majority of the limited partnership Unitholders with or without cause. Under the
units outstanding. Such actions may be taken AIMCO Operating Partnership Agreement, the
without the consent of the existing general general partner may, in its sole discretion,
partner or any general partner who has been prevent a transferee of an OP Unit from
removed. With the consent of a majority in becoming a substituted limited partner
interest of the limited partners, the pursuant to the AIMCO Operating Partnership
general partner may add or substitute any Agreement. The general partner may exercise
other person as general partner. Upon ninety this right of approval to deter, delay or
days notice, a general partner may resign hamper attempts by persons to acquire a
provided that your partnership has a controlling interest in the AIMCO Operating
remaining corporation general partner who is Partnership. Additionally, the AIMCO
qualified to act as such or the remaining Operating Partnership Agreement contains
individual general partners have an restrictions on the ability of OP
aggregate net worth that is substantial. A Unitholders to transfer their OP Units. See
limited partner may not transfer his "Description of OP Units -- Transfers and
interests in your partnership without the Withdrawals" in the accompanying Prospectus.
consent of the general partner, provided
that a limited partner may make a gratuitous
transfer to certain specified individuals.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Amendments to your partnership's agreement With the exception of certain circumstances
of limited partnership may be proposed by set forth in the AIMCO Operating Partnership
the general partner of your partnership or Agreement, whereby the general partner may,
by limited partners owning at least 10% of without the consent of the OP Unitholders,
the then outstanding limited partnership amend the AIMCO Operating Partnership
interests. Approval by a majority of the Agreement, amendments to the AIMCO Operating
then outstanding limited partnership Partnership Agreement require the consent of
interests is necessary to effect an the holders of a majority of the outstanding
amendment to your partnership's agreement of Common OP Units, excluding AIMCO and certain
limited partnership. In addition, the other limited exclusions (a "Majority in
general partner may amend your partnership's Interest"). Amendments to the AIMCO
agreement of limited partnership from time Operating Partnership Agreement may be
to time to add representations, duties or proposed by the general partner or by
obligation of the general partner or to holders of a Majority in Interest. Following
surrender rights granted to the general such proposal, the general partner will
partner, cure any ambiguity or make submit any proposed amendment to the OP
modifications required by state or Federal Unitholders. The general partner will seek
securities law. Notwithstanding the the written consent of the OP Unitholders on
foregoing, certain provisions of your the proposed amendment or will call a
partnership's agreement of limited meeting to vote thereon. See "Description of
partnership are not subject to amendment in OP Units -- Amendment of the AIMCO Operating
any case. Partnership Agreement" in the accompanying
Prospectus.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
In addition to the right to distributions in The general partner does not receive
respect of its partnership interest and compensation for its services as general
reimbursement for all partner of the AIMCO
</TABLE>
S-79
<PAGE> 84
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
fees and expenses as set forth in your Operating Partnership. However, the general
partnership's agreement of limited partner is entitled to payments, allocations
partnership, the general partner receives an and distributions in its capacity as general
annual management fee equal to 5% of the Net partner of the AIMCO Operating Partnership.
Cash Flow (as defined in your partnership's In addition, the AIMCO Operating Partnership
agreement of limited partnership. Moreover, is responsible for all expenses incurred
the general partner or certain affiliates relating to the AIMCO Operating Partner-
may be entitled to compensation for ship's ownership of its assets and the
additional services rendered. 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 Except for fraud, willful misconduct or
limited partnership, no limited partner is gross negligence, no OP Unitholder has
personally liable for any of the debts of personal liability for the AIMCO Operating
your partnership or any of the losses Partnership's debts and obligations, and
thereof beyond the amount contributed by the liability of the OP Unitholders for the
limited partner to the capital of your AIMCO Operating Partnership's debts and
partnership, its notes for capital obligations is generally limited to the
contributions to your partnership and the amount of their investment in the AIMCO
limited partner's share of undistributed Operating Partnership. However, the
profits of your partnership. 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 Part-
nership 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
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>
Your partnership's agreement of limited Unless otherwise provided for in the
partnership provides that the general relevant partnership agreement, Delaware law
partner must manage and control the affairs generally requires a general partner of a
of your partnership to the best of its Delaware limited partnership to adhere to
ability and use its best efforts to carry fiduciary duty standards under which it owes
out the purposes of your partnership. The its limited partners the highest duties of
general partner must diligently and good faith, fairness and loyalty and which
faithfully devote such of its time to the generally prohibit such general partner from
business of your partnership at it deems taking any action or engaging in any
necessary to conduct it for the greatest transaction as to which it has a conflict of
advantage of your partnership. The general interest. The AIMCO Operating Partnership
partner has a fiduciary responsibility for Agreement expressly authorizes the general
the safekeeping and use of all funds and partner to enter into, on behalf of the
assets of your partnership, whether or not AIMCO
in its
</TABLE>
S-80
<PAGE> 85
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
immediate possession or control and may not Operating Partnership, a right of first
employ, or permit another to employ, such opportunity arrangement and other conflict
funds or assets in any manner except for the avoidance agreements with various affiliates
exclusive benefit of your partnership. of the AIMCO Operating Partnership and the
general partner, on such terms as the
In general, your partnership's agreement of general partner, in its sole and absolute
limited partnership and the AIMCO Operating discretion, believes are advisable. The
Partnership Agreement have limitations on AIMCO Operating Partnership Agreement
the liability of the general partner but expressly limits the liability of the
such limitations differ and provide more general partner by providing that the
protection for the general partner of the general partner, and its officers and
AIMCO Operating Partnership. directors will not be liable or accountable
in damages to the AIMCO Operating
Partnership, the limited partners or as-
signees 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 The AIMCO Operating Partnership is not
differences between the taxation of your subject to Federal income taxes. Instead,
partnership and the AIMCO Operating each holder of OP Units includes in income
Partnership. 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 nonre-
</TABLE>
S-81
<PAGE> 86
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
course 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>
<CAPTION>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity in- equity interests entitling each equity interests entitling each OP
terests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of and as declared by the board of rata share of cash distributions
distributions to be made to the directors of the general partner made from Available Cash (as such
partners of your partnership. of the AIMCO Operating Part- term is defined in the AIMCO
nership, quarterly cash distribu- Operating Partnership Agreement)
tion at a rate of $0.50 per to the partners of the AIMCO
Preferred OP Unit, subject to ad- Operating Partnership. To the
justments from time to time on or extent the AIMCO Operating
after the fifth anniversary of the Partnership sells or refinances
issue date of the Preferred OP its assets, the net proceeds
Units. therefrom generally will be re-
tained 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 Except as otherwise required Under the AIMCO Operating
agreement of limited by applicable law or in the Partnership Agreement, the
partnership, limited AIMCO Operating Partnership OP Unitholders have voting
partners have voting rights Agreement, the holders of rights only with respect to
in certain circumstances and the Preferred OP Units will certain limited matters such
are not deemed to take part have the same voting rights as certain amendments and
in the control of your as holders of the Common OP termination of the AIMCO
partnership by virtue of Units. See "Description of Operating Partnership
their voting rights. An OP Units" in the accompany- Agreement and certain
affirmative vote by holders ing Prospectus. So long as transactions such as the
of a majority of the any institu-
outstanding units is
necessary
</TABLE>
S-82
<PAGE> 87
<TABLE>
<CAPTION>
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<S> <C> <C>
for: the removal of the Preferred OP Units are tion of bankruptcy
general partner, the outstanding, in addition to proceedings, an assignment
election of an additional or any other vote or consent of for the benefit of creditors
substitute general part- partners required by law or and certain transfers by the
ner, an amendment to your by the AIMCO Operating general partner of its
partnership's agreement of Partnership Agreement, the interest in the AIMCO
limited partnership and the affirmative vote or consent Operating Partnership or the
dissolution of your of holders of at least 50% admission of a successor
partnership before the date of the outstanding Preferred general partner.
of termination set forth in OP Units will be necessary
your partnership's agreement for effecting any amendment Under the AIMCO Operating
of limited partnership. of any of the provisions of Partnership Agreement, the
the Partnership Unit general partner has the
A general partner may cause Designation of the Preferred power to effect the
the dissolution of your OP Units that materially and acquisition, sale, transfer,
partnership by retiring adversely affects the rights exchange or other
unless, the remaining or preferences of the disposition of any assets of
general partner elects to holders of the Preferred OP the AIMCO Operating
continue your partnership or Units. The creation or Partnership (including, but
if the remaining general issuance of any class or not limited to, the exercise
partner fails to do so, the series of partnership units, or grant of any conversion,
limited partners owning more including, without option, privilege or
the 50% of the then limitation, any partner- subscription right or any
outstanding units elect to ship units that may have other right available in
continue your partnership rights senior or superior to connection with any assets
and, if necessary, elect a the Preferred OP Units, at any time held by the
new general partner. shall not be deemed to AIMCO Operating Partnership)
materially adversely affect or the merger,
In general, you have greater the rights or preferences of consolidation,
voting rights in your the holders of Preferred OP reorganization or other
partnership than you will Units. With respect to the combination of the AIMCO
have as an OP Unitholder. OP exercise of the above Operating Partnership with
Unitholders can not remove described voting rights, or into another entity, all
the general partner of the each Preferred OP Units without the consent of the
AIMCO Operating Partnership. shall have one (1) vote per OP Unitholders.
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 limi-
tation, 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 "Descrip-
</TABLE>
S-83
<PAGE> 88
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
tion of OP
Units -- Dissolution and
Winding Up" in the accom-
panying Prospectus.
OP Unitholders cannot remove
the general partner of the
AIMCO Operating Partnership
with or without cause.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
The general partner of your Holders of Preferred OP Subject to the rights of
partnership annually Units will be entitled to holders of any outstanding
distributes substantially receive, when and as Preferred OP Units, the
all of your partnership's declared by the board of AIMCO Operating Partnership
Net Cash Flow (as defined in directors of the general Agreement requires the
your partnership's agreement partner of the AIMCO general partner to cause the
of limited partnership) with Operating Partnership, AIMCO Operating Partnership
each partner receiving their quarterly cash distributions to distribute quarterly all,
pro rata share in accordance at the rate of $0.50 per or such portion as the
with their ownership of Preferred OP Unit; provided, general partner may in its
units. Any proceeds received however, that at any time sole and absolute discretion
from the sale or refi- and from time to time on or determine, of Available Cash
nancing of your after the fifth anniversary (as defined in the AIMCO
partnership's property will of the issue date of the Operating Partnership
be distributed in ac- Preferred OP Units, the Agreement) generated by the
cordance with your AIMCO Operating Partnership AIMCO Operating Partnership
partnership's agreement of may adjust the annual during such quarter to the
limited partnership. The distribution rate on the general partner, the special
distributions payable to the Preferred OP Units to the limited partner and the
partners are not fixed in lower of (i) 2.00% plus the holders of Common OP Units
amount and depend upon the annual interest rate then on the record date es-
operating results and net applicable to U.S. Treasury tablished by the general
sales or refinancing notes with a maturity of partner with respect to such
proceeds available from the five years, and (ii) the quarter, in accordance with
disposition of your annual dividend rate on the their respective interests
partnership's assets. The most recently issued AIMCO in the AIMCO Operating
general partner designates a non-convertible preferred Partnership on such record
record date to determine stock which ranks on a date. Holders of any other
partners entitled to cash parity with its Class H Preferred OP Units issued in
distributions which is not Cumulative Preferred Stock. the future may have priority
be less than fifteen days Such distributions will be over the general partner,
nor more the thirty days cumulative from the date of the special limited partner
before the distribution. No original issue. Holders of and holders of Common OP
limited partner has pri- Preferred OP Units will not Units with respect to
ority over any other limited be entitled to receive any distributions of Available
partner as to distributions. distributions in excess of Cash, distributions upon
cumulative distributions on liquidation or other
the Preferred OP Units. No distributions. See "Per
interest, or sum of money in Share and Per Unit Data" in
lieu of interest, shall be the accompanying Prospectus.
payable in respect of any
distribution payment or pay- The general partner in its
ments on the Preferred OP sole and absolute discretion
Units that may be in may distribute to the OP
arrears. Unitholders Available Cash
on a more frequent basis and
When distributions are not provide for an
paid in full upon the
Preferred OP Units or any
Parity Units (as
</TABLE>
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<PAGE> 89
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
defined below), all appropriate record date.
distributions declared upon
the Preferred OP Units and The AIMCO Operating Partner-
any Parity Units shall be ship Agreement requires the
declared ratably in pro- general partner to take such
portion to the respective reasonable efforts, as
amounts of distributions determined by it in its sole
accumulated, accrued and and absolute discretion and
unpaid on the Preferred OP consistent with AIMCO's
Units and such Parity Units. qualification as a REIT, to
Unless full cumulative dis- cause the AIMCO Operating
tributions on the Preferred Partnership to distribute
OP Units have been declared sufficient amounts to en-
and paid, except in limited able the general partner to
circumstances, no transfer funds to AIMCO and
distributions may be enable AIMCO to pay stock-
declared or paid or set holder dividends that will
apart for payment by the (i) satisfy the requirements
AIMCO Operating Partnership for qualifying as a REIT
and no other distribution of under the Code and the
cash or other property may Treasury Regulations and
be declared or made, (ii) avoid any Federal
directly or indirectly, by income or excise tax
the AIMCO Operating liability of AIMCO. See
Partnership with respect to "Description of OP
any Junior Units (as de- Units -- Distributions" in
fined below), nor shall any the accompanying Prospectus.
Junior Units be redeemed,
purchased or otherwise
acquired for considera-
tion, 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>
S-85
<PAGE> 90
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Liquidity and Transferability/Redemption Rights
<TABLE>
<CAPTION>
<S> <C> <C>
A limited partner may not There is no public market There is no public market
transfer or assign any or for the Preferred OP Units for the OP Units. The AIMCO
any portion of his interest and the Preferred OP Units Operating Partnership
in his limited partnership are not listed on any Agreement restricts the
interest unless the general securities exchange. The transferability of the OP
partner consents (which Preferred OP Units are Units. Until the expiration
consent may be withheld at subject to restrictions on of one year from the date on
the sole discretion of the transfer as set forth in the which an OP Unitholder
general partner) and the AIMCO Operating Partnership acquired OP Units, subject
limited partner complies Agreement. to certain exceptions, such
with applicable state and OP Unitholder may not
Federal securities laws. In Pursuant to the AIMCO transfer all or any por-
addition, no transfer may be Operating Partnership tion of its OP Units to any
made of less than 30 units. Agreement, until the transferee without the
Notwithstanding the expiration of one year from consent of the general
foregoing, a limited partner the date on which a holder partner, which consent may
may gratuitously transfer of Preferred OP Units be withheld in its sole and
all or any portion of his acquired Preferred OP Units, absolute discretion. After
interest in his limited subject to certain the expiration of one year,
partnership interest to his exceptions, such holder of such OP Unitholder has the
spouse, any member of his Preferred OP Units may not right to transfer all or any
family, a trust for the transfer all or any portion portion of its OP Units to
benefit of those individuals of its Preferred OP Units to any person, subject to the
or a corporation in which any transferee without the satisfaction of certain con-
such partner has a majority consent of the general ditions specified in the
interest. No assignment or partner, which consent may AIMCO Operating Partnership
transfers will be permitted be withheld in its sole and Agreement, including the
if such assignment or absolute discretion. After general partner's right of
transfer would result in 50% the expiration of one year, first refusal. See
or more of the limited such holders of Preferred OP "Description of OP Units --
partnership interest being Units has the right to Transfers and Withdrawals"
assigned or transferred transfer all or any portion in the accompanying
within any twelve-month of its Preferred OP Units to Prospectus.
period. any person, subject to the
satisfaction of certain After the first anniversary
There are no redemption conditions specified in the of becoming a holder of
rights associated with your AIMCO Operating Partner- Common OP Units, an OP
units. ship Agreement, including Unitholder has the right,
the general partner's right subject to the terms and
of first refusal. conditions of the AIMCO
Operating Partnership
After a one-year holding Agreement, to require the
period, a holder may redeem AIMCO Operating Partnership
Preferred OP Units and to redeem all or a portion
receive in exchange of the Common OP Units held
therefor, at the AIMCO Oper- by such party in exchange
ating Partnership's option, for a cash amount based on
(i) subject to the terms of the value of shares of Class
any Senior Units (as defined A Common Stock. See
below), cash in an amount "Description of OP
equal to the Liquidation Units -- Redemption Rights"
Preference of the Preferred in the accompanying
OP Units tendered for Prospectus. Upon receipt of
redemption, (ii) a number of a notice of redemption, the
shares of Class A Common AIMCO Operating Partnership
Stock of AIMCO that is equal may, in its sole and
in Value to the Liquidation absolute discretion but
Preference of the Preferred subject to the restrictions
OP Units tendered on the ownership of Class A
Common
</TABLE>
S-86
<PAGE> 91
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
for redemption, or (iii) for Stock imposed under AIMCO's
Preferred OP Units redeemed charter and the transfer
after a two-year holding restrictions and other
period, a number of shares limitations thereof, elect
of Class I Preferred Stock to cause AIMCO to acquire
of AIMCO that pay an some or all of the ten-
aggregate amount of dered Common OP Units in
dividends equivalent to the exchange for Class A Common
distributions on the Stock, based on an exchange
Preferred OP Units tendered ratio of one share of Class
for redemption; provided A Common Stock for each Com-
that such shares are part of mon OP Unit, subject to
a class or series of adjustment as provided in
preferred stock that is then the AIMCO Operating
listed on the NYSE or an- Partnership Agreement.
other national securities
exchange. See "Federal
Income Tax
Consequences -- Disguised
Sales." 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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DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are the Class Two 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 I High Performance 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, the
Class J Partnership Preferred Units, the Class K 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, the Class One 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 $0.50 per Preferred OP
Unit (equivalent to 8.0% per annum of the $25 stated liquidation preference);
provided, however, that at any time and from time to time on or after March 1,
2005, the AIMCO Operating Partnership may adjust the annual distribution rate on
the Preferred OP Units to the lower of (i) 2.0% 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. A reduction in the distribution rate will reduce your rate of return on
the Preferred OP Units and possibly encourage you to redeem such units. 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
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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 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 $25 per Preferred OP
Unit, 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
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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 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 A Common Stock of AIMCO that is equal in Value to the
Liquidation Preference of the Preferred OP Units tendered for redemption, or
(iii) for Preferred OP Units redeemed after a two-year holding period, 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 NYSE or another national securities exchange.
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. Before issuing any preferred
stock upon redemption of Preferred OP Units, AIMCO will register the issuance
and sale of such shares under the Securities Act of 1933. 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.
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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.
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, the Class J 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 8.0% per annum of the $25 liquidation preference (equivalent to
$2.00 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 July 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 March 1, 2005, 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,
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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 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 The Class I Preferred Stock constitutes an
interests entitling each holder of Preferred equity interest entitling each holder of
OP Units to receive, when and as declared by Class I Preferred Stock to receive, when and
the board of directors of the general as declared by the AIMCO board of directors,
partner of the AIMCO Operating Partnership, cash distribution at a rate of $2.00 per
quarterly cash distribution at a rate of annum per share.
$0.50 per 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 Holders of Class I Preferred Stock do not
law or in the AIMCO Operating Partnership's have any voting rights, except as set forth
agreement of limited partnership, the below and except as otherwise required by
holders of the Preferred OP Units will have applicable law.
the same voting rights as holders of the
Common OP Units. See "Description of OP If and whenever dividends on any shares of
Units" in the accompanying Prospectus. So Class I Preferred Stock or any series or
long as any Preferred OP Units are class of Class I Parity Stock are in arrears
outstanding, in addition to any other vote for six or more quarterly periods (whether
or consent of partners required by law or by or not consecutive), the number of directors
the AIMCO Operating Partnership's agreement then constituting the AIMCO board of
of limited partnership, the affirmative vote directors shall be increased by two (if not
or consent of holders of at least 50% of the already increased by reason of similar types
outstanding Preferred OP Units will be of provisions with respect to shares of
necessary for effecting any amendment of any voting preferred stock), and the holders of
of the provisions of the Partnership Unit shares of Class I Preferred Stock, together
Designation of the Preferred OP Units that with the holders of shares of all other
materially and adversely affects the rights voting preferred stock then entitled to
or preferences of the holders of the exercise similar voting rights, voting as a
Preferred OP Units. The creation or issuance single class regardless of series, will be
of any class or series of AIMCO Operating entitled to vote for the election of two
Partnership units, including, without additional directors of AIMCO. Whenever
limitation, any AIMCO Operating Partnership dividends in arrears and dividends for the
units that may have rights senior or current quarterly dividend period have been
superior to the Preferred OP Units, will not paid or declared and set aside in respect of
be deemed to materially adversely affect the the outstanding shares of the Class I
rights or preferences of the holders of Preferred Stock and the voting preferred
Preferred OP Units. With respect to the stock, then the right of the holders of
exercise of the above described voting Class I Preferred Stock and the voting
rights, each Preferred OP Units will have preferred stock to elect such additional two
one (1) vote per Preferred 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
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
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>
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled Holders of Class I Preferred Stock are
to receive, when and as declared by the entitled to receive, when and as declared by
board of directors of the general partner of the AIMCO board of directors, out of funds
the AIMCO Operating Partnership, quarterly legally available for payment, cash
cash distributions at the rate of $0.50 per dividends at the rate of $2.00 per annum per
Preferred OP Unit; provided, however, that share. Such dividends are cumulative from
at any time and from time to time on or the date of original issue. Holders of Class
after the fifth anniversary of the issue I Preferred Stock are not be entitled to
date of the Preferred OP Units, the AIMCO receive any dividends in excess of
Operating Partnership may adjust the annual cumulative dividends on the Class I
distribution rate on the Preferred OP Units Preferred Stock. No interest, or sum of
to the lower of (i) 2.00% plus the annual money in lieu of interest, shall be payable
interest rate then applicable to U.S. in respect of any dividend payment or
Treasury notes with a maturity of five payments on the Class I Preferred Stock that
years, and (ii) the annual dividend rate on may be in arrears.
the most recently issued AIMCO
non-convertible preferred stock which ranks When dividends are not paid in full upon the
on a parity with its Class H Cumulative Class I Preferred Stock or any other class
Preferred Stock. Such distributions will be or series of Class I Parity Stock, all
cumulative from the date of original issue. dividends declared upon the Class I
Holders of Preferred OP Units will not be Preferred Stock and any shares of Class I
entitled to receive any distributions in Parity Stock will be declared ratably in
excess of cumulative distributions on the proportion to the respective amounts of
Preferred OP Units. No interest, or sum of dividends accumulated, accrued and unpaid on
money in lieu of interest, shall be payable the Class I Preferred Stock and such Class I
in respect of any distribution payment or Parity Stock. Unless dividends equal to the
payments on the Preferred OP Units that may full amount of all accumulated, accrued and
be in arrears. unpaid dividends on the Class I Preferred
Stock have been paid, or declared and set
When distributions are not paid in full upon apart for payment, except in limited
the Preferred OP Units or any Parity Units, circumstances, no dividends may be declared
all or paid or set apart for
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
distributions declared upon the Preferred OP payment by AIMCO and no other distribution
Units and any Parity Units will be declared of cash or other property may be declared or
ratably in proportion to the respective made, directly or indirectly, by AIMCO with
amounts of distributions accumulated, respect to any shares of Class I Junior
accrued and unpaid on the Preferred OP Units Stock, nor shall any shares of Class I
and such Parity Units. Unless full Junior Stock be redeemed, purchased or
cumulative distributions on the Preferred OP otherwise acquired for any consideration,
Units have been declared and paid, except in nor shall any other cash or other property
limited circumstances, no distributions may be paid or distributed to or for the benefit
be declared or paid or set apart for payment of holders of shares of Class I Junior
by the AIMCO Operating Partnership and no Stock. See "Description of Class I Preferred
other distribution of cash or other property Stock -- Dividends."
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 Ownership of shares of Class I Preferred
OP Units and the Preferred OP Units are not Stock by any person will be limited such
listed on any securities exchange. The that the sum of the aggregate value of all
Preferred OP Units are subject to certain equity stock (including all shares of Class
restrictions on transferability set forth in 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)
Pursuant to the AIMCO Operating of the aggregate value of all outstanding
Partnership's agreement of limited shares of equity stock. Further, certain
partnership, until the expiration of one transfers which may have the effect of
year from the date on which a holder of causing AIMCO to lose its status as a REIT
Preferred OP Units acquired Preferred OP are void ab initio.
Units, subject to certain exceptions, such
holder of Preferred OP Units may not If any transfer of Class I Preferred Stock
transfer all or any portion of its Preferred occurs which, if effective, would result in
OP Units to any transferee without the any person beneficially or constructively
consent of the general partner, which owning Class I Preferred Stock in excess or
consent may be withheld in its sole and in violation of the Class I Preferred
absolute discretion. After the expiration of Ownership Limit, such shares of Class I
one year, such holders of Preferred OP Units Preferred Stock in excess of the Class I
has the right to transfer all or any portion Preferred Ownership Limit will be
of its Preferred OP Units to any person, automatically transferred to a trustee in
subject to the satisfaction of certain his capacity as trustee of a trust for the
conditions specified in the AIMCO Operating exclusive benefit of one or more charitable
Partnership's agreement of limited beneficiaries designated by AIMCO, and the
partnership, including the general partner's prohibited transferee will generally have no
right of first refusal. rights in such shares, except upon sale of
the shares by the trustee. The trustee will
After a one-year holding period, a holder have all voting rights and rights to
may redeem Preferred OP Units and receive in dividends with respect to shares of Class I
exchange therefor, at the AIMCO Operating Preferred Stock held in the trust, which
Partnership's option, (i) subject to the rights will be exercised for the benefit of
terms of any Senior Units, cash in an amount the charitable beneficiaries.
equal to the Liquidation Preference of the
Preferred OP Units tendered for
</TABLE>
S-95
<PAGE> 100
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
redemption, (ii) a number of shares of Class The trustee may sell the Class I Preferred
A Common Stock of AIMCO that is equal in Stock held in the trust to AIMCO or a
value to the Liquidation Preference of the person, designated by the trustee, whose
Preferred OP Units tendered for redemption, ownership of the Class I Preferred Stock
or (iii) for Preferred OP Units redeemed will not violate the Class I Preferred
after a two-year holding period, a number of Ownership Limit. Upon such sale, the
shares of Class I Preferred Stock of AIMCO interest of the charitable beneficiaries in
that pay an aggregate amount of dividends the shares sold will terminate and the
equivalent to the distributions on the trustee will distribute to the prohibited
Preferred OP Units tendered for redemption; transferee, the lesser of (i) the price paid
provided that such shares are part of a by the prohibited transferee for the shares
class or series of preferred stock that is or if the prohibited transferee did not give
then listed on the NYSE or another national value for the shares in connection with the
securities exchange. See "Federal Income Tax event causing the shares to be held in the
Consequences -- Disguised Sales." The trust, the market price of such shares on
Preferred OP Units may not be redeemed at the day of the event causing the shares to
the option of the AIMCO Operating be held in the trust and (ii) the price per
Partnership. See "Description of Preferred share received by the trustee from the sale
OP Units -- Redemption." 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 March 1, 2005, 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-96
<PAGE> 101
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. Your general
partner became a wholly owned subsidiary on February 26, 1999 of AIMCO when IPT
merged with AIMCO. Accordingly, the general partner of your partnership 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 Unitholders 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 own 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 the Net Cash Flow (as defined in your
partnership's agreement of limited partnership) from your partnership and may
receive reimbursement for expenses generated in its capacity as general partner.
The property manager received management fees of $64,690 in 1996, $65,846 in
1997 and $65,374 in 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." AIMCO's
Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is
S-97
<PAGE> 102
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.
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. However, we will not acquire any
additional units for a period of at least one year after expiration of the
offer. Any such future offers that we might make could be for consideration that
is more or less than the consideration we are currently offering.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $346,504 will be
required to purchase all of the units sought in the offer, if such units are
tendered for cash excluding expenses as itemized below. The AIMCO Operating
Partnership will obtain all such funds from cash from operations, equity
issuances and short term borrowings. The AIMCO Operating Partnership will pay
all of the costs of the offer and not your partnership.
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...................................... $ 5,000
Accountant's Fees........................................... $ 5,000
Legal Fees.................................................. $10,000
Printing Fees............................................... $10,000
Stanger's Fees.............................................. $ 9,000
Other....................................................... $11,000
Total....................................................... $50,000
</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 Bank of America's reference rate, at the election of
the Company, plus, 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 2.25% and 2.75% in the case of LIBOR-based
loans and between 0.75% and 1.25% 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
September 30, 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
S-98
<PAGE> 103
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.
We may obtain funds pursuant to a credit agreement entered into by our
subsidiary, Insignia Properties, L.P. ("IPLP"), 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, 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). IPLP 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. The AIMCO Operating
Partnership intends to repay any funds borrowed out of working capital in the
ordinary course of business.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP has delivered 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 has delivered an opinion with regard to
the material Federal income tax consequences of the offer. 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 two opinions of Skadden, Arps, Slate, Meagher & Flom LLP are 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 opinions will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of Baywood Partners, Limited as of
December 31, 1997 and for the year then ended, have been included herein and in
the registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
S-99
<PAGE> 104
INDEX TO THE FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed Balance Sheet -- as of September 30, 1998
(unaudited)............................................... F-2
Condensed Statements of Operations -- for the nine months
ended September 30, 1998 and 1997 (unaudited)............. F-3
Condensed Statements of Cash Flows -- for the nine months
ended September 30, 1998 and 1997 (unaudited)............. F-4
Notes to Condensed Financial Statements..................... F-5
Independent Auditors' Report................................ F-7
Consolidated Balance Sheet -- as of December 31, 1997 and
1996 (Unaudited).......................................... F-8
Consolidated Statements of Operations -- for the year ended
December 31, 1997 and 1996 (Unaudited).................... F-9
Consolidated Statements of Cash Flows -- for the year ended
December 31, 1997 and 1996 (Unaudited).................... F-10
</TABLE>
F-1
<PAGE> 105
BAYWOOD PARTNERS, LIMITED
CONDENSED BALANCE SHEET -- UNAUDITED
SEPTEMBER 30, 1998
<TABLE>
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 288,500
Other assets................................................ 360,780
Investment property
Land...................................................... $ 260,000
Building and related personal property.................... 4,771,555
-----------
5,031,555
Less: Accumulated depreciation.............................. (3,543,002) 1,488,553
----------- -----------
Total assets...................................... $ 2,137,833
===========
LIABILITIES AND PARTNERS' DEFICIT
Other accrued liabilities................................... $ 112,795
Notes payable............................................... 4,429,284
Partners' deficit................................. (2,404,246)
-----------
Total liabilities and partners' deficit........... $ 2,137,833
===========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 106
BAYWOOD PARTNERS, LIMITED
CONDENSED STATEMENT OF OPERATIONS -- UNAUDITED
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
SEPTEMBER 30,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Revenues:
Rental income............................................. $942,511 $944,228
Other income.............................................. 46,980 52,703
-------- --------
Total revenues.................................... 989,491 996,931
Expenses:
Operating expenses........................................ 472,758 440,631
Depreciation expense...................................... 175,590 170,334
Interest expense.......................................... 282,597 285,105
Property tax expense...................................... 37,676 37,298
-------- --------
Total expenses.................................... 968,621 933,368
Net income........................................ $ 20,870 $ 63,563
======== ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 107
BAYWOOD PARTNERS, LIMITED
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
SEPTEMBER 30,
----------------------
1998 1997
--------- ---------
<S> <C> <C>
Operating Activities:
Net income................................................ $ 20,870 $ 80,328
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization.......................... 175,590 170,334
Changes in accounts:
Receivables and deposits and other assets............ (30,281) (49,579)
Accounts payable and accrued expenses................ 16,205 (14,792)
--------- ---------
Net cash provided by operating activities......... 182,384 186,291
--------- ---------
Investing Activities:
Property improvements and replacements.................... (110,110) (93,195)
--------- ---------
Net cash used in investing activities............. (110,110) (93,195)
--------- ---------
Financing Activities:
Payments on mortgage...................................... (40,651) (42,623)
Partners' distributions................................... (162,927) (107,892)
--------- ---------
Net cash used in financing activities............. (203,578) (150,515)
--------- ---------
Net decrease in cash and cash equivalents......... (131,304) (57,419)
Cash and cash equivalents at beginning of year............ 419,804 476,395
--------- ---------
Cash and cash equivalents at end of period................ $ 288,500 $ 418,976
========= =========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 108
BAYWOOD PARTNERS, LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements of Baywood Partners,
Limited as of September 30, 1998 and for the nine months ended September 30,
1998 and 1997 have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included and all such adjustments are of a recurring nature.
The financial statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31, 1997. It
should be understood that the accounting measurements at interim dates
inherently involve greater reliance on estimates than at year-end. The results
of operations for the interim periods are not necessarily indicative of the
results for the entire year.
NOTE B -- SUBSEQUENT EVENT
On March 17, 1998, Insignia Financial Group, Inc., an affiliate of the
corporate general partner of the Partnership, entered into an agreement to merge
its national residential property management operations and its controlling
interest in Insignia Properties Trust, with Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust. The merger
was completed effective October 1, 1998, and accordingly, as of that date AIMCO
acquired the corporate general partner and the company that manages the
Partnership.
F-5
<PAGE> 109
BAYWOOD PARTNERS, LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
F-6
<PAGE> 110
INDEPENDENT AUDITORS' REPORT
General Partners
Baywood Partners, Limited:
We have audited the consolidated balance sheet of Baywood Partners, Limited
(a limited partnership) and its limited partnership interest as of December 31,
1997, and the related consolidated statements of operations and changes in
partners' deficit and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Baywood
Partners, Limited and its limited partnership interest as of December 31, 1997,
and the results of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Greenville, South Carolina
December 9, 1998
F-7
<PAGE> 111
BAYWOOD PARTNERS, LIMITED
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents................................... $ 419,804 $ 476,395
Receivables and deposits.................................... 93,448 92,753
Restricted escrows (Note B)................................. 98,611 94,558
Other assets................................................ 138,440 152,070
Investment properties (Note C):
Land...................................................... 260,000 260,000
Buildings and related personal property................... 4,650,869 4,490,428
----------- -----------
4,910,869 4,750,428
Less accumulated depreciation............................. (3,356,836) (3,126,094)
----------- -----------
1,554,033 1,624,334
----------- -----------
$ 2,304,336 $ 2,440,110
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 19,844 $ 33,019
Tenant security deposits.................................. 27,490 33,490
Other liabilities......................................... 49,256 52,603
Mortgage notes payable (Note C)........................... 4,469,935 4,518,594
Partners' deficit........................................... (2,262,189) (2,197,596)
----------- -----------
$ 2,304,336 $ 2,440,110
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 112
BAYWOOD PARTNERS, LIMITED
CONDENSED STATEMENT OF OPERATIONS AND
CHANGES IN PARTNERS' DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------
1997 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Revenues:
Rental income............................................. $ 1,256,240 $ 1,253,668
Other income.............................................. 72,593 71,878
----------- -----------
Total revenues.................................... 1,328,833 1,325,546
----------- -----------
Expenses:
Operating (Note D)........................................ 593,179 590,698
General and administrative (Note D)....................... 36,996 50,012
Depreciation.............................................. 230,742 212,794
Interest.................................................. 386,668 389,778
Property taxes............................................ 48,871 42,216
----------- -----------
Total expenses.................................... 1,296,456 1,285,498
----------- -----------
Net income.................................................. 32,377 40,048
Distributions to partners................................... (96,970) (50,352)
Partners' deficit at beginning of year...................... (2,197,596) (2,187,292)
----------- -----------
Partners' deficit at end of year............................ $(2,262,189) $(2,197,596)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE> 113
BAYWOOD PARTNERS, LIMITED
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------------
1997 1996
--------- -----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 32,377 $ 40,048
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 230,742 212,794
Amortization of discounts and loan costs............... 29,445 29,113
Change in accounts:
Receivables and deposits............................. (695) (11,132)
Other assets......................................... (7,079) --
Accounts payable..................................... (13,175) 16,195
Tenant security deposit liabilities.................. (6,000) 1,800
Other liabilities.................................... (3,347) (38,179)
--------- ---------
Net cash provided by operating activities......... 262,268 250,639
--------- ---------
Cash flows from investing activities:
Property improvements and replacements.................... (160,441) (185,423)
Net (deposits) receipts to restricted escrows............. (4,053) 61,984
--------- ---------
Net cash used in investing activities............. (164,494) (123,439)
--------- ---------
Cash flows from financing activities:
Payments on mortgage notes payable........................ (57,395) (53,085)
Distributions to partners................................. (96,970) (50,352)
--------- ---------
Net cash used in financing activities............. (154,365) (103,437)
--------- ---------
Net increase (decrease) in cash and cash equivalents........ (56,591) 23,763
Cash and cash equivalents at beginning of year.............. 476,395 452,632
--------- ---------
Cash and cash equivalents at end of year.................... $ 419,804 $ 476,695
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest.................... $ 357,223 $ 361,532
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
F-10
<PAGE> 114
BAYWOOD PARTNERS, LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996 (UNAUDITED)
NOTE A -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
The consolidated financial statements include the accounts of Baywood
Partners, Limited (the "Partnership"), and its limited partnership interest in
Baywood Apartments (the "Project Partnership"). The Partnership was organized
solely to invest in the Project Partnership. The Project Partnership owns and
operates a 226 unit apartment complex located in Jefferson Parish, Louisiana.
The Partnership was organized as an Alabama limited partnership on February
15, 1979. The General Partner of the Partnership is Angeles Properties, Inc.
("API"), which acts as a general partner in other limited partnerships and is an
affiliate of Angeles Investment Properties, Inc. ("AIPI"), the general partner
of the Project Partnership. Pursuant to the terms of the Agreement and Amended
Certificate of Limited Partnership (the "Agreement"), API has contributed
$100,000 to the Partnership for which it is entitled to a 1% operating interest
in the profits, losses, credits and cash distributions of the Partnership.
On March 17, 1998, Insignia Financial Group, Inc., an affiliate of the
corporate general partner of the Partnership, entered into an agreement to merge
its national residential property management operations and its controlling
interest in Insignia Properties Trust, with Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust. The merger
was completed effective October 1, 1998, and accordingly, as of that date AIMCO
acquired the corporate general partner and the company that manages the
Partnership.
Capital contributions of the limited partners aggregated $1,936,200.
Pursuant to the terms of the Agreement, the limited partners will receive a 99%
interest in the operating profits, losses, credits and cash distributions of the
Partnership.
The Partnership had made capital contributions of $1,442,000 to the Project
Partnership and is entitled to a 99% interest in the operating profits, losses,
credits and cash distributions of the Project Partnership. AIPI is entitled to
the remaining 1% of the same.
Income Taxes
On the basis of Treasury Regulations, the general partners believe that the
Partnership will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss and cash distributions of the
Partnership are allocated in accordance with the partnership agreement and the
Internal Revenue Code and are reportable in the income tax returns of its
partners.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Depreciation
Depreciation is computed principally by use of the straight-line method
based upon the estimated useful lives of various classes of assets; buildings
are depreciated over 25 years and personal property assets are depreciated over
a 5 to 15 year period.
F-11
<PAGE> 115
BAYWOOD PARTNERS, LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996 (UNAUDITED)
Other Assets
Other assets at December 31, 1997 and 1996 include deferred loan costs of
$111,612 and $131,024, respectively, which are amortized over the term of the
related borrowing. Deferred loan costs are shown net of accumulated
amortization.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Partnership considers cash and
highly liquid investments, with an original maturity of three months or less
when purchased, to be cash and cash equivalents.
NOTE B -- RESTRICTED ESCROWS
Restricted escrow deposits at December 31, 1997 and 1996 were $98,611 and
$94,558, respectively, and consist of a reserve escrow established with a
portion of the proceeds of the loan. The funds are used for certain repair work,
debt service, expenses and property taxes or insurance. The funds in the reserve
escrow exceed the minimum balance required to be maintained by the lender during
the term of the loan.
NOTE C -- MORTGAGE NOTES PAYABLE
Mortgage notes payable at December 31, 1997 and 1996 consist of the
following:
<TABLE>
<CAPTION>
1997 1996
---------- -----------
(UNAUDITED)
<S> <C> <C>
First mortgage note payable in monthly installments of
$33,623, including interest at 7.83%, due October 2003;
collateralized by land and buildings...................... $4,388,487 $4,445,882
Second mortgage note payable in interest only monthly
installments of $928, at a rate of 7.83%, with principal
due October 2003; collateralized by land and buildings.... 142,290 142,290
---------- ----------
Principal balance at year end............................... 4,530,777 4,588,172
Less unamortized discount................................... (60,842) (69,578)
---------- ----------
$4,469,935 $4,518,594
========== ==========
</TABLE>
Scheduled net principal payments of the mortgage notes during the years
subsequent to December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 62,053
1999........................................................ 67,090
2000........................................................ 72,536
2001........................................................ 78,424
2002........................................................ 84,789
Thereafter.................................................. 4,165,885
----------
$4,530,777
==========
</TABLE>
The principal balance of the mortgage notes may be prepaid in whole upon
payment of a penalty of the greater of one percent of the unpaid principal
balance at the time of payment or the present value of the excess of interest
which would be incurred at the stated rate under the notes over the interest
which would be incurred at the Treasury constant maturity for U.S. Government
obligations.
F-12
<PAGE> 116
BAYWOOD PARTNERS, LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996 (UNAUDITED)
NOTE D -- TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership and the Project Partnership have no administrative or
management employees and are dependent on the general partners for the
management and administration of all partnership activities. The Project
Partnership is obligated to pay a property management fee equal to 5% of gross
monthly collections. In addition to the management fee, the partnership
agreement provides for payments to general partners of a partnership
administration fee and reimbursement of certain expenses incurred by general
partners on behalf of the Partnership and the Project Partnership.
Transactions with the General Partner and its affiliates are as follows:
<TABLE>
<CAPTION>
1997 1996
TYPE OF TRANSACTION AMOUNT AMOUNT
- ------------------- ------- -----------
(UNAUDITED)
<S> <C> <C>
Property management fee..................................... $65,846 $64,690
Reimbursement for services to affiliates.................... $29,742 $28,914
Construction fee............................................ $ -- $ 4,916
Construction oversight reimbursements....................... $ 3,456 $17,784
</TABLE>
For the period from January 19, 1996, to August 31, 1997 the Partnership
insured its properties under a master policy through an agency and insurer
unaffiliated with the General Partner. An affiliate of the General Partner
acquired, in the acquisition of a business, certain financial obligations from
an insurance agency which was later acquired by the agent who placed the master
policy. The agent assumed the financial obligations to the affiliate of the
General Partner, who receives payments on these obligations from the agent. The
amount of the Partnership's insurance premiums accruing to the benefit of the
affiliate of the General Partner by virtue of the agent's obligations was not
significant.
F-13
<PAGE> 117
PRO FORMA FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
AS OF SEPTEMBER 30, 1998 AND FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1998
INTRODUCTION
On October 1, 1998, Apartment Investment and Management Company ("AIMCO")
completed its merger with Insignia Financial Group ("IFG") ("the IFG Merger").
In the IFG Merger, IFG's common stock was converted into 8,423,751 shares of
Class E Cumulative Convertible Preferred Stock of AIMCO ("Class E Preferred
Stock") whose issue date market value approximately equaled $292 million. In
addition to receiving the same dividends as holders of AIMCO Common Stock,
holders of Class E Preferred Stock will be entitled to a special dividend of
approximately $50 million in the aggregate. When that special dividend is paid
in full, the Class E Preferred Stock will automatically convert into AIMCO
Common Stock on a one-for-one basis, subject to antidilution adjustments, if
any. In addition, AIMCO assumed approximately $411 million in indebtedness and
other liabilities of IFG and its subsidiaries and subsidiaries of AIMCO, assumed
approximately $149.5 million of convertible securities and purchased
approximately $5 million of IFG stock prior to the Merger. AIMCO and Insignia
Properties Trust ("IPT") have completed a merger in which IPT has be merged into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). In the IPT Merger, shares of
IPT common stock not held by AIMCO were converted into 4,826,745 shares of AIMCO
Class A Common Stock whose market value approximately equaled $152 million.
AIMCO assumed approximately $68 million in indebtedness. In connection with the
IFG Merger and the IPT Merger, AIMCO incurred approximately $55 million in
transaction costs for a combined transactional value of approximately $1,183
million. AIMCO contributed substantially all the assets and liabilities of
Insignia acquired in the Insignia Merger to AIMCO Properties, L.P. (together
with its subsidiaries and other controlled entities, the "Partnership") (and
together with entities in which that Partnership has a controlling financial
interest, the "Company") in exchange for 8,423,751 Class E Preferred Units. The
Class E Preferred Units have terms substantially the same as the Class E
Preferred Stock. In addition, AIMCO contributed substantially all the assets and
liabilities of IPT acquired in the IPT Merger to the Partnership in exchange for
4,826,745 limited partnership units in the Partnership ("OP Units"). In
connection with the IFG Merger, the Partnership assumed property management of
approximately 192,000 multifamily units which consist of general and limited
partnership investments in 115,000 units and third party management of 77,000
units. Insignia Properties Trust ("IPT"), which prior to the IFG Merger was a
subsidiary of IFG, owns a 32% weighted average general and limited partnership
interest in approximately 51,000 units.
Immediately following the IFG Merger, in order to satisfy certain
requirements of the Internal Revenue Code of 1986 (the "Code") applicable to
AIMCO's status as a REIT, AIMCO engaged in a reorganization (the "IFG
Reorganization") of the assets and operations of IFG whereby IFG's operations
are being conducted through corporations (the "Unconsolidated Subsidiaries") in
which the Partnership holds non-voting preferred stock that represents a 95%
economic interest, and certain officers and/or directors of AIMCO hold, directly
or indirectly, all of the voting common stock, representing a 5% economic
interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
In May and September of 1997, AIMCO directly or indirectly through a
subsidiary, acquired (the "NHP Stock Purchase") an aggregate of 6,930,122 shares
of common stock ("NHP Common Stock") of NHP. On December 8, 1997, AIMCO acquired
the remaining shares of NHP Common Stock in a merger transaction accounted for
as a purchase (the "NHP Merger"). As a result of the NHP Merger, AIMCO issued
6,759,148 shares of AIMCO Common Stock, valued at $180.8 million, and paid $86.5
million in cash. The total cost of the purchase of NHP was $349.5 million.
Substantially all assets and liabilities of NHP were contributed by AIMCO to the
Partnership.
In June 1997, the Company purchased a group of companies (the "NHP Real
Estate Companies") affiliated with NHP that hold general and limited partnership
interests in partnerships (the "NHP
P-1
<PAGE> 118
Partnerships") that own 534 conventional and affordable multifamily apartment
properties (the "NHP Properties") containing 87,659 units, a captive insurance
subsidiary and certain related assets (the "NHP Real Estate Acquisition"). The
Company paid aggregate consideration of $54.8 million in cash and warrants that
entitle the holders to purchase 399,999 shares of AIMCO Common Stock at an
exercise price of $36.00 per share. The Company engaged in a reorganization (the
"NHP Real Estate Reorganization") of its interests in the NHP Real Estate
Companies, which resulted in certain of the assets of the NHP Real Estate
Companies being owned by a limited partnership (the "Unconsolidated
Partnership") in which the Partnership holds 99% limited partner interest and
certain directors and officers of AIMCO directly or indirectly, hold a 1%
general partner interest.
Immediately following the NHP Merger, in order to satisfy certain
requirements of the Code applicable to AIMCO's status as a REIT, AIMCO engaged
in a reorganization (the "NHP Reorganization") of the assets and operations of
NHP that resulted in the Master Property Management Agreement being terminated
and NHP's operations being conducted through Unconsolidated Subsidiaries in
which the AIMCO Operating Partnership holds non-voting preferred stock that
represents a 95% economic interest, and certain officers and/or directors of
AIMCO hold, directly or indirectly, all of the voting common stock, representing
a 5% economic interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
On May 8, 1998, AIMCO completed a merger with Ambassador Apartments, Inc.
("Ambassador"), pursuant to which Ambassador was merged into AIMCO (the
"Ambassador Merger"). Each outstanding share of stock ("Ambassador Common
Stock") of Ambassador, other than those shares held by AIMCO or Ambassador, were
converted into 0.553 (the "Conversion Ratio") shares of AIMCO Common Stock. Any
outstanding options to purchase Ambassador Common Stock were converted, at the
election of the option holder, into cash or options to purchase AIMCO Common
Stock at such options' then current exercise price divided by the Conversion
Ratio. In accordance with the Agreement and Plan of Merger, dated December 23,
1997 and supplemented by letter dated as of March 11, 1998 (the "Ambassador
Merger Agreement"), the outstanding shares of Class A Senior Cumulative
Convertible Preferred Stock of Ambassador, (the "Ambassador Preferred Stock")
were redeemed and converted into Ambassador Common Stock prior to the Ambassador
Merger. Following the consummation of the Ambassador Merger, a subsidiary of the
Partnership was merged with and into the Ambassador Operating Partnership (the
"Ambassador OP Merger"). Each outstanding unit of limited partnership interest
in the Ambassador Operating Partnership was converted into the right to receive
0.553 OP Units, and as a result, the Ambassador Operating Partnership became a
99.9% owned subsidiary partnership of the Partnership.
Also during 1997, the Partnership (i) (a) acquired 44 properties for
aggregate purchase consideration of $467.4 million, of which $56 million was
paid in the form of 1.9 million OP Units (b) paid $34.2 million in cash and
issued OP Units valued at $7.3 million in connection with the acquisition of
partnership interests through tender offers in certain partnerships ((a) and (b)
together are the "1997 Property Acquisitions") and (c) paid $19.9 million to
acquire 886,600 shares of Ambassador Common Stock (together with the 1997
Property Acquisitions, the "1997 Acquisitions"); (ii) sold (a) approximately
16,367,000 shares of AIMCO Common Stock for aggregate net proceeds of $513.4
million; (b) 750,000 shares of AIMCO Class B Cumulative Convertible Preferred
Stock for net proceeds of $75 million; and (c) 2,400,000 shares of AIMCO Class C
9% Cumulative Preferred Stock for net proceeds of $58.1 million; of which all
proceeds were contributed by AIMCO to the Partnership in exchange for 16,367,000
OP Units, 750,000 Class B Preferred Units, and 2,400,000 Class C Preferred Units
(collectively, the "1997 Stock Offerings"); and (iii) sold five real estate
properties (the "1997 Dispositions").
Also during 1998, AIMCO (i) (a) sold 4,200,000 shares of its Class D
Cumulative Preferred Stock for net proceeds of $101.5 million (the "Class D
Preferred Stock Offering"); (b) sold 4,050,000 shares of its Class G Cumulative
Preferred Stock for net proceeds of $98.0 million (the "Class G Preferred Stock
Offering"); (c) sold 2,000,000 shares of its Class H Cumulative Preferred Stock
for net proceeds of $48.1 million (the "Class H Preferred Stock Offering"); and
(d) sold 1,000,000 shares of its Class J Cumulative Convertible Preferred Stock
in a private placement for $100.0 million (the "Class J Preferred
P-2
<PAGE> 119
Stock Offering"); of which all proceeds were contributed by AIMCO to the
Partnership in exchange for 4,050,000 Class G Preferred Units, 2,000,000 Class H
Preferred Units and 1,000,000 shares of Class J Preferred Units (collectively,
the "1998 Stock Offerings"); (ii) purchased 29 properties for aggregate purchase
consideration of $312.7 million, of which $52.2 million was paid in the form of
OP Units (the "1998 Acquisitions"); (iii) sold two real estate properties (the
"1998 Dispositions"); (iv) contracted to purchase two properties for aggregate
purchase consideration of $62.1 million, of which $26.4 million will be paid in
the form of OP units (the "Probable Purchases") and (v) sold 1,400,000 Class B
Preferred Partnership Units of a subsidiary and warrants to purchase 875,000
shares of AIMCO Class A Common Stock for $35.0 million (the "Preferred
Partnership Unit Offering").
PRO FORMA FINANCIAL INFORMATION OF THE PARTNERSHIP (INSIGNIA MERGER)
The following Pro Forma Consolidated Balance Sheet (Insignia Merger) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) the purchase
of nine properties for an aggregate purchase price of $62.5 million; (ii) the
Class J Preferred Stock Offering; (iii) the Probable Purchases; (iv) the IFG
Merger; (v) the IPT Merger; (vi) the IFG Reorganization; and (vii) the Preferred
Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) the
1997 Acquisitions; (ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions;
(iv) the NHP Real Estate Acquisition; (v) the NHP Real Estate Reorganization;
(vi) the NHP Stock Purchase; (vii) the NHP Merger; (viii) the NHP
Reorganization; (ix) the 1998 Stock Offerings; (x) the 1998 Acquisitions; (xi)
the Probable Purchases; (xii) the 1998 Dispositions; (xiii) the Ambassador
Merger; (xiv) the IFG Merger; (xv) the merger between IPT and Angeles Mortgage
Investment Trust ("AMIT") ("the AMIT Merger"); (xvi) the IPT Merger; (xvii) the
IFG Reorganization; and (xviii) the Preferred Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1997: (i)
the 1998 Stock Offerings; (ii) the 1998 Acquisitions; (iii) the Probable
Purchases; (iv) the 1998 Dispositions; (v) the Ambassador Merger; (vi) the IFG
Merger; (vii) the AMIT Merger; (viii) the IPT Merger; (ix) the IFG
Reorganization; and (x) the Preferred Partnership Unit offering.
The following Pro Forma Financial Information (Insignia Merger) is based,
in part, on the following historical financial statements: (i) the audited
Consolidated Financial Statements of the Partnership for the year ended December
31, 1997; (ii) the unaudited Consolidated Financial Statements of the
Partnership for the nine months ended September 30, 1998; (iii) the audited
Consolidated Financial Statements of Ambassador for the year ended December 31,
1997; (iv) the unaudited Consolidated Financial Statements of Ambassador for the
four months ended April 30, 1998; (v) the audited Consolidated Financial
Statements of IFG for the year ended December 31, 1997; (vi) the audited
Consolidated Financial Statements of AMIT for the year ended December 31, 1997;
(vii) the unaudited Consolidated Financial Statements of IFG for the nine months
ended September 30, 1998; (viii) the unaudited Financial Statements of AMIT for
the period from January 1, 1998 to September 17, 1998; (ix) the unaudited
Consolidated Financial Statements of NHP for the nine months ended September 30,
1997; (x) the unaudited Combined Financial Statements of the NHP Real Estate
Companies for the three months ended March 31, 1997; (xi) the unaudited
Financial Statements of NHP Southwest Partners, L.P. for the three months ended
March 31, 1997; (xii) the unaudited Combined Financial Statements of the NHP New
LP Entities for the three months ended March 31, 1997; (xiii) the unaudited
Combined Financial Statements of the NHP Borrower Entities for the three months
ended March 31, 1997; (xiv) the unaudited Historical Summaries of Gross Income
and Certain Expenses of The Bay Club at Aventura for the three months ended
March 31, 1997; (xv) the unaudited Historical Summary of Gross Income and Direct
Operating Expenses of Morton Towers for the six months ended June 30, 1997;
(xvi) the unaudited Combined Statement of Revenues and Certain Expenses of the
Thirty-Five Acquisition Properties for the six months ended June 30, 1997;
(xvii) the unaudited Statement of
P-3
<PAGE> 120
Revenues and Certain Expenses of First Alexandria Associates, a Limited
Partnership for the nine months ended September 30, 1997; (xviii) the unaudited
Statement of Revenues and Certain Expenses of Country Lakes Associates Two, a
Limited Partnership for the nine months ended September 30, 1997; (xix) the
unaudited Statement of Revenues and Certain Expenses of Point West Limited
Partnership, A Limited Partnership for the nine months ended September 30, 1997;
(xx) the unaudited Statement of Revenues and Certain Expenses for The Oak Park
Partnership for the nine months ended September 30, 1997; (xxi) the audited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the year ended December 31, 1997,
(xxii) the audited Combined Historical Summary or Gross Income and Direct
Operating Expenses of the Cirque Apartment Communities for the year ended
December 31, 1997; (xxiii) the audited Combined Historical Summary of Gross
Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the year ended December 31, 1997; (xxiv) the audited
Historical Summary of Gross Income and Direct Operating Expenses of the Calhoun
Beach Club Apartments for the year ended December 31, 1997; (xxv) the unaudited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the nine months ended September
30, 1998; (xxvi) the unaudited Combined Historical Summary of Gross Income and
Direct Operating Expenses of the Cirque Apartment Communities for the three
months ended March 31, 1998; (xxvii) the unaudited Combined Historical Summary
of Gross Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the nine months ended September 30, 1998; and (xxviii) the
unaudited Historical Summary of Gross Income and Direct Operating Expenses of
Calhoun Beach Club Apartments for the nine months ended September 30, 1998. The
following Pro Forma Financial Information should be read in conjunction with
such financial statements and the notes thereto incorporated by reference
herein.
The unaudited Pro Forma Financial Information (Insignia Merger) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
1997 Acquisitions, the 1998 Acquisitions, and the Probable Purchases are
adjusted to estimated fair market value, based upon preliminary estimates, which
are subject to change as additional information is obtained. The allocations of
purchase costs are subject to final determination based upon estimates and other
evaluations of fair market value. Therefore, the allocations reflected in the
following unaudited Pro Forma Financial Information may differ from the amounts
ultimately determined.
The following unaudited Pro Forma Financial Information (Insignia Merger)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions or results of
operations. In the opinion of the Partnership's management, all material
adjustments necessary to reflect the effects of these transactions have been
made.
P-4
<PAGE> 121
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS IFG AIMCO BEFORE IFG
AND PROBABLE IFG MERGER IFG REORGANIZATION
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) REORGANIZATION(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Real estate.............. $2,355,122 $202,332 $ 44,488 $ 23,880(G) $2,625,822 $ --
Property held for sale... 42,212 -- -- -- 42,212 --
Investments in
securities............. -- -- -- 443,513(G)
(443,513)(H) -- --
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 127,082 -- -- -- 127,082 59,195(I)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 246,847 -- 232,892 444,570(G) 924,309 --
Mortgage notes
receivable............. -- -- 20,916 -- 20,916
Cash and cash
equivalents............ 43,681 6,107 73,064 -- 122,852 (17,897)(J)
Restricted cash.......... 83,187 -- 2,691 -- 85,878 (1,352)(J)
Accounts receivable...... 11,545 -- 54,060 (32,234)(G) 33,371 (5,471)(J)
Deferred financing
costs.................. 21,835 -- 7,020 (7,020)(G) 21,835 --
Goodwill................. 120,503 -- 19,503 111,018(G) 251,024 --
Property management
contracts.............. -- -- 86,419 31,147(G) 117,566 (79,195)(I)
Other assets............. 69,935 -- 20,128 (4,533)(G) 85,530 (2,860)(J)
---------- -------- -------- --------- ---------- --------
Total Assets..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
Secured notes payable.... $ 774,676 $122,568 $ 29,002 $ -- $ 926,246 $ --
Secured tax-exempt bond
financing.............. 399,925 -- -- -- 399,925 --
Secured short-term
financing.............. 50,000 (50,000) 332,691 (300,000)(G) 32,691 --
Unsecured short-term
financing.............. 50,800 (50,800) -- 300,000(G) 300,000 --
Accounts payable, accrued
and other
liabilities............ 131,799 -- 33,241 50,000(G)
53,333(G)
4,935(G)
2,525(G) 275,833 (27,580)(J)
Deferred tax liability... -- -- 18,802 1,198(G) 20,000 (20,000)(I)
Security deposits and
prepaid rents.......... 13,171 -- 3,533 (3,533) 13,171 --
---------- -------- -------- --------- ---------- --------
1,420,371 21,768 417,269 108,458 1,967,866 (47,580)
Minority interest........ 42,086 37,345 108,485 (108,485)(G) 79,431 --
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. -- -- 144,282 5,218 149,500 --
Redeemable Partnership
Units.................. 232,405 45,176 -- -- 277,581 --
Partners' capital and
shareholders' equity
Common stock........... -- -- 320 (320)(G) -- --
Additional paid-in
capital.............. -- -- (86,959) 86,959(G) -- --
Distributions in excess
of earnings.......... -- -- (22,216) 22,216(G) -- --
General and Special
Limited Partner...... 1,039,525 4,150 -- 443,513(H)
9,269(G) 1,496,457 --
Preferred Units........ 387,562 100,000 -- -- 487,562 --
---------- -------- -------- --------- ---------- --------
1,427,087 104,150 (108,855) 561,637 1,984,019 --
---------- -------- -------- --------- ---------- --------
Total Liabilities
and Equity..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
<CAPTION>
PRO FORMA
----------
<S> <C>
Real estate.............. $2,625,822
Property held for sale... 42,212
Investments in
securities.............
--
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 186,277(K)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 924,309
Mortgage notes
receivable............. 20,916
Cash and cash
equivalents............ 104,955
Restricted cash.......... 84,526
Accounts receivable...... 27,900
Deferred financing
costs.................. 21,835
Goodwill................. 251,024
Property management
contracts.............. 38,371
Other assets............. 82,670
----------
Total Assets..... $4,410,817
==========
Secured notes payable.... $ 926,246
Secured tax-exempt bond
financing.............. 399,925
Secured short-term
financing.............. 32,691
Unsecured short-term
financing.............. 300,000
Accounts payable, accrued
and other
liabilities............
248,253
Deferred tax liability... --
Security deposits and
prepaid rents.......... 13,171
----------
1,920,286
Minority interest........ 79,431
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. 149,500
Redeemable Partnership
Units.................. 277,581
Partners' capital and
shareholders' equity
Common stock........... --
Additional paid-in
capital.............. --
Distributions in excess
of earnings.......... --
General and Special
Limited Partner......
1,496,457
Preferred Units........ 487,562
----------
1,984,019
----------
Total Liabilities
and Equity..... $4,410,817
==========
</TABLE>
P-5
<PAGE> 122
- ---------------
(A) Represents the unaudited historical consolidated financial position of the
Partnership as of September 30, 1998.
(B) Represents adjustments to reflect the purchase of ten properties for an
aggregate purchase price of $140.2 million; the Class J Preferred Stock
Offering; the Probable Purchases; and the Preferred Partnership Unit
Offering.
(C) Represents the unaudited historical consolidated financial position of IFG
as of September 30, 1998.
(D) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the issuance of 8,423,751 shares of AIMCO Common Stock, based
on consideration to holders of IFG common stock outstanding as of the date
of the IFG Merger; (ii) the issuance of 4,826,745 shares of AIMCO Class A
Common Stock to holders of IPT common stock (other than AIMCO); (iii) the
payment of a special dividend of $50,000; (iv) the assumption of $149,500
of the convertible debentures of IFG; (v) the allocation of the combined
purchase price of IFG and IPT based on the preliminary estimates of
relative fair market value of the assets and liabilities of IFG and IPT;
and (vi) the contribution by AIMCO of substantially all the assets and
liabilities of Insignia and IPT to the Partnership in exchange for OP
Units.
(E) Represents the effects of AIMCO's acquisition of IFG immediately after the
IFG Merger. These amounts do not give effect to the IFG Reorganization,
which includes the transfers of certain assets and liabilities of IFG to
the combined Unconsolidated Subsidiaries. The IFG Reorganization occurred
immediately after the IFG Merger so that AIMCO could maintain its
qualification as a REIT. This column is included as an intermediate step to
assist the reader in understanding the entire nature of the IFG Merger and
related transactions.
(F) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party property management operations.
The adjustments reflect the transfer of assets valued at the Partnership's
new basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(G) In connection with the IFG Merger and the IPT Merger, AIMCO became
obligated to issue a total of 13,250,496 shares of AIMCO Common Stock
The total purchase price of IFG and IPT is $1,128,009, as follows:
<TABLE>
<S> <C>
Issuance of 8,423,751 shares of AIMCO Common Stock in the
IFG Merger, at $34.658 per share.......................... $ 291,949
Issuance of 4,826,745 shares of AIMCO Common Stock in the
IPT Merger, at $31.50 per share........................... 151,564
Assumption of Convertible Debentures........................ 149,500
Assumption of liabilities as indicated in the Merger
Agreement................................................. 397,459
Transaction costs........................................... 53,333
Generation of deferred tax liability........................ 20,000
Special dividend............................................ 50,000
Purchase of IFG Common Stock prior to merger................ 4,935
Consideration for options................................... 9,269
----------
Total............................................. $1,128,009
==========
</TABLE>
P-6
<PAGE> 123
The purchase price was allocated to the various assets of IFG acquired in
the IFG Merger, as follows:
<TABLE>
<S> <C>
Purchase price.............................................. $1,128,009
Historical basis of IFG's assets acquired................... (561,181)
----------
Step-up to record the fair value of IFG's assets
acquired............................................... $ 566,828
==========
</TABLE>
This step-up was applied to IFG's assets as follows:
<TABLE>
<S> <C>
Real estate................................................. $ 23,880
Investment in real estate partnerships...................... 444,570
Decrease in accounts receivable............................. (32,234)
Decrease in deferred loan costs............................. (7,020)
Management contracts........................................ 31,147
Increase in goodwill........................................ 111,018
Reduction in value of other assets.......................... (4,533)
--------
Total............................................. $566,828
========
</TABLE>
The fair value of IFG's assets, primarily the real estate and management
contracts, was calculated based on estimated future cash flows of the
underlying assets.
As of September 30, 1998, IFG's stockholder's equity was $(108,855), which
is detailed as follows:
<TABLE>
<S> <C>
Common stock................................................ $ 320
Additional paid-in capital.................................. (86,959)
Distributions in excess of earnings......................... (22,216)
---------
Total............................................. $(108,855)
=========
</TABLE>
Upon completion of the IFG Merger, the entire amount of the stockholder's
equity was eliminated.
In addition, the minority interest in other partnerships of IFG of $108,485
will be eliminated upon the IPT Merger.
At the time of the IFG Merger, AIMCO obtained unsecured short-term
financing of $300 million. The proceeds were used to repay secured
short-term financing of IFG that AIMCO assumed.
(H) Represents the issuance of a total of 13,250,496 OP Units to AIMCO and the
concurrent issuance of 13,250,496 shares of AIMCO Common Stock to IFG and
IPT stockholders, in exchange for all the shares of IFG and IPT common
stock.
In accordance with the IFG Merger Agreement, AIMCO became obligated to
issue 8,423,751 shares of Class E Preferred Stock, approximately equal to
$292 million. Each share of Class E Preferred Stock will automatically
convert to one share of AIMCO Common Stock upon the payment of the special
dividend thereon. As such, for the purpose of preparing the pro forma
financial statements, AIMCO's management believes that the Class E
Preferred Stock is substantially the same as AIMCO Common Stock, and that
the fair value of the Class E Preferred Stock approximates the fair value
of the AIMCO Common Stock. Upon the payment of the special dividend on the
Class E Preferred Stock and the conversion of the Class E Preferred Stock
to AIMCO Common Stock, the former IFG stockholders will own approximately
15.0% of the AIMCO Common Stock and the IPT stockholders will own
approximately 7.3% of AIMCO Common Stock. The special dividend on the Class
E Preferred Stock is intended to represent a distribution in an amount at
least equal to the earnings and profits of IFG at the time of the IFG
Merger, to which AIMCO succeeds.
Concurrent with the issuance of Class E Preferred Stock, the Partnership
will issue comparable Class E Preferred Units to AIMCO. The Class E
Preferred Units will have terms substantially the same as the Class E
Preferred Stock.
(I) Represents the increase in the Partnership's investment in Unconsolidated
Subsidiaries to reflect the contribution or sale of property management
contracts, including the related deferred tax liability, in exchange for
preferred stock and a note payable from the Unconsolidated Subsidiaries.
These assets and
P-7
<PAGE> 124
liabilities are valued at the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(J) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries,
(K) Represents notes receivable from the Unconsolidated Subsidiaries of
$95,000, advances to the Unconsolidated Subsidiaries of $42,792, and equity
in the Unconsolidated Subsidiaries of $48,485. The combined pro forma
balance sheet of the Unconsolidated Subsidiaries as of September 30, 1998
is presented below, which reflects the effects of the IFG Merger, the IPT
Merger, and the IFG Reorganization as if such transactions had occurred as
of September 30, 1998.
P-8
<PAGE> 125
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
IFG
HISTORICAL REORGANIZATION(i) PRO FORMA
---------- ----------------- ---------
<S> <C> <C> <C>
ASSETS
Real estate............................................ $ 22,376 $ -- $ 22,376
Cash and cash equivalents.............................. 16,919 17,897(ii) 34,816
Restricted cash........................................ 5,507 1,352(ii) 6,859
Management contracts................................... 47,846 79,195(iii) 127,041
Accounts receivable.................................... 13,109 5,471(ii) 18,580
Deferred financing costs............................... 3,117 -- 3,117
Goodwill............................................... 43,544 -- 43,544
Other assets........................................... 51,498 2,860(ii) 54,358
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable.................................. $114,302 $ 45,000(iii) $159,302
Accounts payable, accrued and other liabilities........ 56,773 27,580(ii) 84,353
Security deposits and deferred income.................. 334 --(ii) 334
Deferred tax liability................................. -- 20,000(iii) 20,000
-------- -------- --------
171,409 92,580 263,989
Common stock........................................... 2,061 747(iv) 2,808
Preferred stock........................................ 34,290 14,195(iii) 48,485
Retained earnings...................................... (3,844) -- (3,844)
Notes receivable on common stock purchases............. -- (747)(iv) (747)
-------- -------- --------
32,507 14,195 46,702
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
</TABLE>
- ---------------
(i) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the transfer of assets valued at the Partnership's new
basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(ii) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries, valued at the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(iii)Represents the transfer or sale of management contracts, the establishment
of an intercompany note, and the establishment of the related estimated net
deferred Federal and state tax liabilities at a combined rate of 40% for
the estimated difference between the book and tax basis of the net assets
of the Unconsolidated Subsidiaries. The primary component of the deferred
tax liability is the difference between the new basis of the property
management contracts, as a result of the allocation of the purchase price
of IFG, and the historical tax basis.
(iv) Represents the issuance of common stock to the common stockholders of the
Unconsolidated Subsidiaries in exchange for notes receivable, in order for
the common stockholders to maintain their respective ownership interest in
the Unconsolidated Subsidiaries.
P-9
<PAGE> 126
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE NHP AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rental and other property
revenues........................ $193,006 $120,337(I)
11,012(J) $ 6,660 $ 93,329 $ -- $ 6,912
Property operating expenses....... (76,168) (59,466)(I)
(4,860)(J) (2,941) (36,088) -- (3,307)
Owned property management
expense......................... (6,620) (4,327)(I)
(602)(J) (282) -- -- --
Depreciation...................... (37,741) (26,645)(I)
(2,172)(J) (1,414) (18,979) (5,997)(O) (966)
-------- -------- ------- -------- ------- --------
Income from property operations... 72,477 33,277 2,023 38,262 (5,997) 2,639
-------- -------- ------- -------- ------- --------
Management fees and other
income.......................... 13,937 -- 7,813 -- -- 94,330
Management and other expenses..... (9,910) -- (5,394) -- -- (57,615)
Corporate overhead allocation..... (588) -- -- -- -- --
Amortization...................... (1,401) -- (5,800) -- -- (16,768)
-------- -------- ------- -------- ------- --------
Income from service company
business........................ 2,038 -- (3,381) -- -- 19,947
Minority interest in service
company business................ (10) -- -- -- -- --
-------- -------- ------- -------- ------- --------
AIMCO's share of income from
service company business........ 2,028 -- (3,381) -- -- 19,947
-------- -------- ------- -------- ------- --------
General and administrative
expenses........................ (5,396) -- (1,025) (7,392) 7,392(P) (21,199)
Interest expense.................. (51,385) (3,451)(K)
(2,497)(L) (5,462) (26,987) (221)(Q) (9,035)
Interest income................... 8,676 -- 1,900 -- -- 10,967
Minority interest................. 1,008 458(M) 16 (851) 705(R) (12,871)
Equity in losses of unconsolidated
partnerships.................... (1,798) (122)(N) (8,542) 405 -- 12,515
Equity in earnings of
unconsolidated subsidiaries..... 4,636 -- 5,790 -- -- --
-------- -------- ------- -------- ------- --------
Income (loss) from operations..... 30,246 27,665 (8,681) 3,437 1,879 2,963
Income tax provision.............. -- -- -- -- -- 1,701
Gain on dispositions of
property........................ 2,720 (2,720) -- -- -- 80
-------- -------- ------- -------- ------- --------
Income (loss) before extraordinary
item............................ 32,966 24,945 (8,681) 3,437 1,879 4,744
Extraordinary item -- early
extinguishment of debt.......... (269) 269 -- -- -- --
-------- -------- ------- -------- ------- --------
Net income........................ 32,697 25,214 (8,681) 3,437 1,879 4,744
Income attributable to preferred
unitholders..................... 2,315 39,859 -- -- -- --
-------- -------- ------- -------- ------- --------
Income attributable to common
unitholders..................... $ 30,382 $(14,645) $(8,681) $ 3,437 $ 1,879 $ 4,744
======== ======== ======= ======== ======= ========
Basic earnings per OP unit........ $ 1.09
========
Diluted earnings per OP unit...... $ 1.08
========
Weighted average OP units
outstanding..................... 27,732
========
Weighted average OP units and
equivalents outstanding......... 28,113
========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(G) ADJUSTMENTS(H) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property
revenues........................
$ -- $ -- $ 431,256
Property operating expenses.......
-- -- (182,830)
Owned property management
expense.........................
-- -- (11,831)
Depreciation......................
(2,350)(S) -- (96,264)
-------- -------- ---------
Income from property operations... (2,350) -- 140,331
-------- -------- ---------
Management fees and other
income.......................... -- (74,404)(X) 41,676
Management and other expenses..... -- 49,236(X) (23,683)
Corporate overhead allocation..... -- -- (588)
Amortization...................... (32,699)(T) 30,188(Y) (26,480)
-------- -------- ---------
Income from service company
business........................ (32,699) 5,020 (9,075)
Minority interest in service
company business................ -- -- (10)
-------- -------- ---------
AIMCO's share of income from
service company business........ (32,699) 5,020 (9,085)
-------- -------- ---------
General and administrative
expenses........................ -- 6,249(X) (21,371)
Interest expense..................
(14,750) -- (113,788)
Interest income................... -- 191(Z) 21,734(BB)
Minority interest................. 1,552(U) -- (9,983)
Equity in losses of unconsolidated
partnerships.................... (29,995)(V) -- (27,537)
Equity in earnings of
unconsolidated subsidiaries..... -- (4,578)(AA) 5,848(DD)
-------- -------- ---------
Income (loss) from operations..... (78,242) 6,882 (13,851)
Income tax provision.............. (1,701)(W) -- --
Gain on dispositions of
property........................ (80) -- --
-------- -------- ---------
Income (loss) before extraordinary
item............................ (80,023) 6,882 (13,851)
Extraordinary item -- early
extinguishment of debt.......... -- -- --
-------- -------- ---------
Net income........................ (80,023) 6,882 (13,851)
Income attributable to preferred
unitholders..................... -- -- 42,174(CC)
-------- -------- ---------
Income attributable to common
unitholders..................... $(80,023) $ 6,882 $ (56,025)(BB)
======== ======== =========
Basic earnings per OP unit........ $ (0.83)(BB)
=========
Diluted earnings per OP unit...... $ (0.83)(BB)
=========
Weighted average OP units
outstanding..................... 67,522
=========
Weighted average OP units and
equivalents outstanding......... 68,366
=========
</TABLE>
P-10
<PAGE> 127
- ---------------
(A) Represents the Partnership's audited consolidated results of operations
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1997: (i) the 1997 Acquisitions; (ii) the 1997 Stock
Offerings; (iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings;
(v) the 1998 Acquisitions; (vi) the Probable Purchases; (vii) the 1998
Dispositions; and (v) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues................. $ 6,660(v) $ 16,842 $ -- $(16,842)(xvii) $ 6,660
Property operating
expenses................. (2,941)(v) (8,411) -- 8,411 (xvii (2,941)
Owned property management
expense.................. (282)(v) (862) -- 862 (xvii (282)
Depreciation............... (1,414)(vi) (2,527) (693)(xi) 3,220 (xvii (1,414)
------- -------- ------- -------- -------
Income from property
operations............... 2,023 5,042 (693) (4,349) 2,023
------- -------- ------- -------- -------
Management fees and other
income................... 1,405(vii) 72,176 -- (65,768)(xviii) 7,813
Management and other
expenses................. (2,263)(viii) (35,267) -- 32,136 (xviii (5,394)
Amortization............... -- (9,111) (4,432)(xii) 7,743 (xix (5,800)
------- -------- ------- -------- -------
Income from service company
business................. (858) 27,798 (4,432) (25,889) (3,381)
------- -------- ------- -------- -------
General and administrative
expenses................. -- (16,266) 8,668 (xiii 6,573 (xviii (1,025)
Interest expense........... (5,082)(ix) (10,685) -- 10,305(xx) (5,462)
Interest income............ 540(v) 1,963 -- (603)(xxi) 1,900
Minority interest.......... 16(v) -- -- -- 16
Equity in losses of
unconsolidated
partnerships............. (3,905)(x) -- (4,631)(xiv) (6) (8,542)
Equity in earnings of
unconsolidated
subsidiaries............. -- -- (4,636)(xv) 10,426 (xxii 5,790
------- -------- ------- -------- -------
Income (loss) from
operations............... (7,266) 7,852 (5,724) (3,543) (8,681)
Income tax provision....... -- (3,502) 3,502 (xvi -- --
------- -------- ------- -------- -------
Net income (loss).......... $(7,266) $ 4,350 $(2,222) $ (3,543) $(8,681)
======= ======== ======= ======== =======
</TABLE>
- ---------------
(i) Represents the adjustment to record activity from January 1, 1997 to
the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. The historical
financial statements of the NHP Real Estate Companies consolidate
certain real estate partnerships in which they have an interest that
will be presented on the equity method by the Partnership as a
result of the NHP Real Estate Reorganization. In addition,
represents adjustments to record additional depreciation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest
expense incurred in connection with borrowings incurred by the
Partnership to consummate the NHP Real Estate Acquisition.
(ii)Represents the unaudited consolidated results of operations of NHP
for the period from January 1, 1997 through December 8, 1997 (date
of the NHP Merger).
P-11
<PAGE> 128
(iii)
Represents the following adjustments occurring as a result of the
NHP Merger: (i) the reduction in personnel costs, primarily
severance costs, pursuant to a restructuring plan; (ii) the
incremental depreciation of the purchase price adjustment related to
real estate; (iii) the incremental amortization of the purchase
price adjustment related to the management contracts, furniture,
fixtures and equipment, and goodwill; (iv) the reversal of equity in
earnings of NHP during the pre-merger period when the Partnership
held a 47.62% interest in NHP; and (v) the amortization of the
increased basis in investments in real estate partnerships based on
the purchase price adjustment related to real estate and an
estimated average life of 20 years.
(iv)Represents adjustments related to the NHP Reorganization, whereby
the Partnership contributed or sold to the Unconsolidated
Subsidiaries and the Unconsolidated Partnership: (i) certain assets
and liabilities of NHP, primarily related to the management
operations and other businesses owned by NHP and (ii) 12 real estate
properties containing 2,905 apartment units. The adjustments
represent (i) the related revenues and expenses primarily related to
the management operations and other businesses owned by NHP and (ii)
the historical results of operations of such real estate
partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis
resulting from the allocation of the combined purchase price of NHP
and the NHP Real Estate Companies.
(v) Represents adjustments to reflect the acquisition of the NHP Real
Estate Companies and the corresponding historical results of
operations as if they had occurred on January 1, 1997.
(vi)Represents incremental depreciation related to the consolidated real
estate assets purchased from the NHP Real Estate Companies.
Buildings and improvements are depreciated on the straight-line
method over a period of 30 years, and furniture and fixtures are
depreciated on the straight-line method over a period of 5 years.
(vii)
Represents the adjustment to record the revenues from ancillary
businesses purchased from the NHP Real Estate Companies as if the
acquisition had occurred on January 1, 1997.
(viii)
Represents $4,878 related to the adjustment to record the expenses
from ancillary businesses purchased from the NHP Real Estate
Companies as if the acquisition had occurred on January 1, 1997,
less $2,615 related to a reduction in personnel costs pursuant to a
restructuring plan, approved by the Company's senior management,
assuming that the acquisition of the NHP Real Estate Companies had
occurred on January 1, 1997 and that the restructuring plan was
completed on January 1, 1997. The restructuring plan specifically
identifies all significant actions to be taken to complete the
restructuring plan, including the reduction of personnel, job
functions, location and the date of completion.
(ix)Represents adjustments in the amount of $3,391 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as the increase in interest expense in the amount
of $1,691 related to borrowings on the Partnership's credit
facilities of $55,807 to finance the NHP Real Estate Acquisition.
(x) Represents adjustments in the amount of $2,432 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as amortization of $1,473 related to the increased
basis in investment in real estate partnerships, as a result of the
allocation of the purchase price of the NHP Real Estate Companies,
based on an estimated average life of 20 years.
(xi)Represents incremental depreciation related to the real estate
assets purchased from NHP. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years,
and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(xii)
Represents incremental depreciation and amortization of the tangible
and intangible assets related to the property management and other
business operated by the Unconsolidated
P-12
<PAGE> 129
Subsidiaries, based on the Partnership's new basis as adjusted by
the allocation of the combined purchase price of NHP including
amortization of management contracts of $3,782, depreciation of
furniture, fixtures and equipment of $2,018 and amortization of
goodwill of $7,743, less NHP's historical depreciation and
amortization of $9,111. Management contracts are amortized using the
straight-line method over the weighted average life of the contracts
estimated to be approximately 15 years. Furniture, fixtures and
equipment are depreciated using the straight-line method over the
estimated life of 3 years. Goodwill is amortized using the
straight-line method over 20 years.
(xiii)
Represents a reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan, approved by the Company's
senior management, specifically identifying all significant actions
to be taken to complete the restructuring plan, assuming that the
NHP Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997.
(xiv)
Represents adjustment for amortization of the increased basis in
investments in real estate partnerships, as a result of the
allocation of the combined purchase price of NHP and the NHP Real
Estate Companies, based on an estimated average life of 20 years.
(xv)Represents the reversal of equity in earnings in NHP during the
pre-merger period when the Partnership held a 47.62% interest in
NHP, as a result of the Partnership's acquisition of 100% of the NHP
Common Stock.
(xvi)
Represents the reversal of NHP's income tax provision due to the
restructuring of the management business to the Unconsolidated
Subsidiaries.
(xvii)
Represents the contribution of NHP's 12 real estate properties
containing 2,905 apartment units to the Unconsolidated Partnership
pursuant to the NHP Reorganization.
(xviii)
Represents the historical income and expenses associated with
certain assets and liabilities of NHP that were contributed or sold
to the Unconsolidated Subsidiaries, primarily related to the
management operations and other businesses owned by NHP.
(xix)
Represents the amortization and depreciation of certain management
contracts and other assets of NHP, based on the Partnership's new
basis resulting from the allocation of the purchase price of NHP,
that will be contributed or sold to the Unconsolidated Subsidiaries,
primarily related to the management operations and other businesses
owned by NHP.
(xx)Represents interest expense of $6,020 related to the contribution of
NHP's 12 real estate properties containing 2,905 apartment units to
the Unconsolidated Partnership and interest expense of $4,285
related to the certain assets and liabilities that will be
contributed or sold to the Unconsolidated Subsidiaries pursuant to
the NHP Reorganization.
(xxi)
Represents the interest income of $5,000 earned on notes payable of
$50,000 to the Partnership issued as consideration for certain
assets and liabilities sold to the Unconsolidated Subsidiaries by
the Partnership, net of the elimination of the Partnership's share
of the related interest expense of $4,750 reflected in the equity in
earnings of the Unconsolidated Subsidiaries operating results,
offset by $853 in interest income primarily related to the
management operations and other businesses owned by NHP contributed
or sold to the Unconsolidated Subsidiaries pursuant to the NHP
Reorganization.
(xxii)
Represents the Partnership's equity in earnings of the
Unconsolidated Subsidiaries.
(D) Represents the audited historical statement of operations of Ambassador
for the year ended December 31, 1997. Certain reclassifications have been
made to Ambassador's historical statement of operations to conform to the
Partnership's Statement of Operations presentation. The Ambassador
historical statement of operations excludes extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of
P-13
<PAGE> 130
interest expense resulting from the net reduction of debt; and (iv) the
elimination of the minority interest associated with Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger, and the spin-off of Holdings as if these transactions had
occurred on January 1, 1997. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
IFG AMIT HOLDINGS IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property
revenues....................... $ 6,646 $ 266 $ -- $ 6,912
Property operating expenses...... (3,251) (56) -- (3,307)
Depreciation..................... (966) -- -- (966)
--------- ------- --------- --------
Income from property
operations..................... 2,429 210 -- 2,639
--------- ------- --------- --------
Management fees and other
income......................... 389,626 -- (295,296) 94,330
Management and other expenses.... (315,653) -- 258,038 (57,615)
Amortization..................... (31,709) (303) 15,244 (16,768)
--------- ------- --------- --------
Income from service company
business....................... 42,264 (303) (22,014) 19,947
--------- ------- --------- --------
General and administrative
expenses....................... (20,435) (1,351) 587 (21,199)
Interest expense................. (9,353) -- 318 (9,035)
Interest income.................. 4,571 6,853 (457) 10,967
Minority interest................ (12,448) (382) (41) (12,871)
Equity in income (losses) of
unconsolidated partnership..... 10,027 2,639 (151) 12,515
--------- ------- --------- --------
Income (loss) from operations.... 17,055 7,666 (21,758) 2,963
Income tax provision............. (6,822) (180) 8,703 1,701
Gain on sale of property......... -- 80 -- 80
--------- ------- --------- --------
Net income (loss)................ 10,233 7,566 (13,055) 4,744
========= ======= ========= ========
</TABLE>
- ---------------
(i) Represents the audited consolidated results of operations of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report
on Form 10-K. Certain reclassifications have been made to IFG's
historical statement of operations to conform to the Partnership's
statement of operations presentation.
(ii)Represents the historical statement of operations of AMIT, as well
as pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger: (i) the incremental depreciation of the
purchase price adjustment related to consolidated real estate and
investments in real estate partnerships; (ii) the amortization of
goodwill and property management contracts resulting from the IFG Merger;
(iii) the increase in interest expense resulting from the net increase in
debt; and (iv) the elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
P-14
<PAGE> 131
(I) Represents adjustments to reflect the 1997 Property Acquisitions and the
1998 Acquisitions, less the 1997 Dispositions and the 1998 Dispositions
as if they had occurred on January 1, 1997. These pro forma operating
results are based on historical results of the properties, except for
depreciation, which is based on the Partnership's investment in the
properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1997 PROPERTY 1997 1998 1998
ACQUISITIONS DISPOSITIONS ACQUISITIONS DISPOSITIONS TOTAL
------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Rental and other
property
revenues........... $ 88,589 $(4,081) $ 39,132 $(3,303) $120,337
Property operating
expense............ (44,109) 1,944 (18,655) 1,354 (59,466)
Owned property
management
expense............ (3,233) 133 (1,349) 122 (4,327)
Depreciation......... (16,839) 452 (10,946) 688 (26,645)
</TABLE>
(J) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1997. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(K) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1997
Property Acquisitions..................................... $(29,490)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1997 Dispositions and
the 1997 Stock Offerings.................................. 19,568
Repayments on the Partnership's credit facilities with
proceeds from a dividend received from one of the
Unconsolidated Subsidiaries............................... 1,889
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1998
Acquisitions.............................................. (15,994)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1998 Dispositions and
the 1998 Stock Offerings.................................. 20,113
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred Partnership
Unit Offering............................................. 463
--------
$ (3,451)
========
</TABLE>
(L) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the Probable Purchases.
(M) Represents (i) loss of $181 related to limited partners in consolidated
partnerships acquired in connection with the 1997 Property Acquisitions
and the 1998 Property Acquisitions and (ii) income of $502 allocable to
the Partnership Preferred Units.
(N) Represents the reduction in the Partnership's earnings in unconsolidated
partnerships as a result of the consolidation of additional partnerships
resulting from additional ownership acquired through tender offers.
(O) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
P-15
<PAGE> 132
(P) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 724
Reduction in salaries and benefits.......................... 4,197
Merger related costs........................................ 524
Other....................................................... 1,947
------
$7,392
======
</TABLE>
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(Q) Represents the decrease in interest expense of $3,612 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$3,833 related to borrowings under the Partnership's credit facilities.
(R) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(S) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(T) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $38,885, amortization of goodwill of $6,526, and
depreciation of furniture, fixtures, and equipment of $3,753, less IFG's
historical depreciation and amortization of $16,465. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(U) Represents elimination of minority interest of IPT resulting from the IPT
merger.
(V) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(W) Represents the reversal of IFG's income tax provision.
(X) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(Y) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Z) Represents interest income of $3,825 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries by the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $3,634 reflected on the equity in earnings of the
Unconsolidated Subsidiaries.
(AA) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-16
<PAGE> 133
(BB) The following table presents the net impact to pro forma net loss
applicable to holders of OP Units and net loss per OP Units assuming the
interest rate per annum increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest expense................................ $ 938
========
Net income.................................................. $(14,789)
========
Net loss attributable to OP unitholders..................... $(56,963)
========
Basic loss per OP unit...................................... $ (0.84)
========
Diluted loss per OP unit.................................... $ (0.84)
========
</TABLE>
(CC) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred
Units, the Class G Preferred Units, the Class H Preferred Units and the
Class J Preferred Units as if these Preferred Units had been issued as of
January 1, 1997.
(DD) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(2,536), plus the elimination of intercompany interest
expense of $8,384. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the year ended December 31, 1997 is
presented below, which represents the effects of the Ambassador Merger,
the NHP Merger, the NHP Reorganization, the IFG Merger, and the IFG
Reorganization as if these transactions had occurred as of January 1,
1997.
P-17
<PAGE> 134
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZATION IFG
HISTORICAL(i) ADJUSTMENTS(ii) REORGANIZATION(iii) PRO FORMA
------------- --------------- ------------------- ---------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 6,194 $ 6,371(iv) $ -- $ 12,565
Property operating expenses............. (3,355) (3,531)(iv) -- (6,886)
Owned property management expense....... (147) (478)(iv) -- (625)
Depreciation expense.................... (1,038) (767)(iv) -- (1,805)
-------- -------- -------- --------
Income from property operations......... 1,654 1,595 -- 3,249
-------- -------- -------- --------
Management fees and other income........ 23,776 41,992(v) 74,404(x) 140,172
Management and other expenses........... (11,733) (20,403)(v) (49,236)(x) (81,372)
Amortization............................ (3,726) (4,017)(v) (30,188)(xi) (37,931)
-------- -------- -------- --------
Income from service company............. 8,317 17,572 (5,020) 20,869
General and administrative expense...... -- (6,573)(v) (6,249)(x) (12,822)
Interest expense........................ (6,058) (5,849)(vi) (3,825)(xii) (15,732)
Interest income......................... 1,001 (148)(v) -- 853
Minority interest....................... (2,819) 2,198(viii) -- (621)
Equity in losses of unconsolidated
partnerships.......................... (1,028) 1,028(iv) -- --
Equity in earnings of Unconsolidated
Subsidiaries.......................... 2,943 (2,943)(vii) -- --
-------- -------- -------- --------
Income (loss) from operations........... 4,010 6,880 (15,094) (4,204)
Income tax provision.................... (1,902) (3,013)(ix) 6,450(xiii) 1,535
-------- -------- -------- --------
Net income (loss)....................... $ 2,108 $ 3,867 $ (8,644) $ (2,669)
======== ======== ======== ========
Income attributable to preferred
unitholders........................... $ 2,198 $ 3,478 $ (8,212) $ (2,536)
======== ======== ======== ========
Income (loss) attributable to common
unitholders........................... $ (90) $ 389 $ (432) $ (133)
======== ======== ======== ========
</TABLE>
- ---------------
(i) Represents the historical results of operations of the Unconsolidated
Subsidiaries for the year ended December 31, 1997.
(ii) Represents adjustments related to the NHP Reorganization, which includes
the sale or contribution of 14 properties containing 2,725 apartment units
from the unconsolidated partnerships to the Unconsolidated Subsidiaries,
as well as the sale or contribution of 12 properties containing 2,905
apartment units from the Unconsolidated Subsidiaries to the Unconsolidated
Partnership.
(iii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iv) Represents adjustments for the historical results of operations of the 14
real estate properties contributed or sold to the Unconsolidated
Subsidiaries, offset by the historical results of operations of the 12
real estate properties contributed or sold to the Unconsolidated
Partnership, with additional depreciation recorded related to the
Partnership's new basis resulting from the allocation of purchase price of
NHP and the NHP Real Estate Companies.
P-18
<PAGE> 135
(v) Represents adjustments to reflect income and expenses associated with
certain assets and liabilities of NHP contributed or sold to the
Unconsolidated Subsidiaries.
(vi) Represents adjustments of $6,058 to reverse the historical interest
expense of the Unconsolidated Subsidiaries, which resulted from its
original purchase of NHP Common Stock, offset by $2,622 related to the
contribution or sale of the 14 real estate properties, $4,285 related to
assets and liabilities transferred from the Partnership to the
Unconsolidated Subsidiaries and $5,000 related to a note payable to the
Partnership.
(vii) Represents the reversal of the historical equity in earnings of NHP for
the period in which NHP was not consolidated by the Unconsolidated
Subsidiaries.
(viii)Represents the minority interest in the operations of the 14 real estate
properties.
(ix) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill which is not deductible
for tax purposes.
(x) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(xi) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(xii) Represents adjustment for interest expense related to a note payable to
the Partnership.
(xiii)Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-19
<PAGE> 136
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR
AND PROBABLE AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E)
------------- ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Rental and other property revenues............. $ 265,700 $ 19,603(H) $ $ $
8,398(I) 35,480 -- 8,126
Property operating expenses.................... (101,600) (9,009)(H)
(3,745)(I) (14,912) -- (2,585)
Owned property management expense.............. (7,746) (728)(H)
(459)(I) -- -- --
Depreciation................................... (59,792) (4,886)(H)
(2,624)(I) (7,270) (1,420)(M) (904)
--------- -------- -------- ------- --------
Income from property operations................ 96,562 6,550 13,298 (1,420) 4,637
--------- -------- -------- ------- --------
Management fees and other income............... 13,968 -- -- -- 71,155
Management and other expenses.................. (8,101) -- -- -- (41,477)
Corporate overhead allocation.................. (196) -- -- -- --
Amortization................................... (3) -- -- -- (13,986)
--------- -------- -------- ------- --------
Income from service company business........... 5,668 -- -- -- 15,692
--------- -------- -------- ------- --------
General and administrative expenses............ (7,444) -- (5,278) 5,278(N) (61,386)
Interest expense............................... (56,756) 1,975(J)
(2,469)(K) (10,079) 145(O) (24,871)
Interest income................................ 18,244 (1) -- -- 22,501
Minority interest.............................. (1,052) 160(L) (252) 252(P) (14,159)
Equity in losses of unconsolidated
partnerships................................. (5,078) -- (71) -- 13,492
Equity in earnings of unconsolidated
subsidiaries................................. 8,413 -- -- -- --
Amortization of goodwill....................... (5,071) -- -- -- --
--------- -------- -------- ------- --------
Income (loss) from operations.................. 53,486 6,215 (2,382) 4,255 (44,094)
Income tax provision........................... -- -- -- -- 1,180
Gain on dispositions of property............... 2,783 (2,783) -- -- 6,576
--------- -------- -------- ------- --------
Net income..................................... 56,269 3,432 (2,382) 4,255 (36,338)
Income attributable to preferred unitholders... 16,320 16,094 -- -- --
--------- -------- -------- ------- --------
Income (loss) attributable to common
unitholders.................................. $ 39,949 $(12,662) $ (2,382) $ 4,255 $(36,338)
========= ======== ======== ======= ========
Basic earnings (loss) per OP Unit.............. $ 0.80
=========
Diluted earnings (loss) per OP Unit............ $ 0.79
=========
Weighted average OP Units outstanding.......... 50,420
=========
Weighted average OP Unit and equivalents
outstanding.................................. 50,544
=========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(F) ADJUSTMENTS(G) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property revenues............. $ $ $
-- -- 337,307
Property operating expenses....................
-- -- (131,851)
Owned property management expense..............
-- -- (8,933)
Depreciation...................................
(1,583)(Q) -- (78,479)
-------- -------- ---------
Income from property operations................ (1,583) -- 118,044
-------- -------- ---------
Management fees and other income............... -- (56,211)(W) 28,912
Management and other expenses.................. -- 35,192(W) (14,386)
Corporate overhead allocation.................. -- -- (196)
Amortization................................... (23,895)(R) 22,641(X) (15,243)
-------- -------- ---------
Income from service company business........... (23,895) 1,622 (913)
-------- -------- ---------
General and administrative expenses............ 45,823(S) 14,375(W) (8,632)
Interest expense...............................
7,045 -- (85,010)(AA)
Interest income................................ -- 143(Y) 40,887
Minority interest.............................. 6,622(T) -- (8,429)
Equity in losses of unconsolidated
partnerships................................. (18,577)(U) -- (10,234)
Equity in earnings of unconsolidated
subsidiaries................................. -- (7,562)(Z) 851(CC)
Amortization of goodwill....................... -- -- (5,071)
-------- -------- ---------
Income (loss) from operations.................. 15,435 8,578 41,493
Income tax provision........................... (1,180)(V) -- --
Gain on dispositions of property............... (6,576) -- --
-------- -------- ---------
Net income..................................... 7,679 8,578 41,493
Income attributable to preferred unitholders... -- -- 32,414(BB)
-------- -------- ---------
Income (loss) attributable to common
unitholders.................................. $ 7,679 $ 8,578 $ 9,079(AA)
======== ======== =========
Basic earnings (loss) per OP Unit.............. $ 0.13(AA)
=========
Diluted earnings (loss) per OP Unit............ $ 0.13(AA)
=========
Weighted average OP Units outstanding.......... 68,554
=========
Weighted average OP Unit and equivalents
outstanding.................................. 69,218
=========
</TABLE>
P-20
<PAGE> 137
- ---------------
(A) Represents the Partnership's unaudited consolidated results of operations
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1998: (i) the 1998 Stock Offerings; (ii) the 1998
Acquisitions; (iii) the Probable Purchases; (iv) the 1998 Dispositions;
and (v) the Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of operations of Ambassador
for the four months ended April 30, 1998. Certain reclassifications have
been made to Ambassador's historical Statement of Operations to conform
to the Partnership's Statement of Operations presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger and the spin-off of the common stock of Holdings as if these
transactions had occurred on January 1, 1998. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
HOLDINGS
IFG AMIT SPIN- IFG
HISTORICAL(i) MERGER(ii) OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 7,566 $ 560 $ -- $ 8,126
Property operating expenses............. (2,585) -- -- (2,585)
Depreciation............................ (904) -- -- (904)
--------- ------ --------- --------
Income from property operations......... 4,077 560 -- 4,637
--------- ------ --------- --------
Management fees and other income........ 311,475 -- (240,320) 71,155
Management and other expenses........... (252,295) -- 210,818 (41,477)
Amortization............................ (26,781) (48) 12,843 (13,986)
--------- ------ --------- --------
Income from service company business.... 32,399 (48) (16,659) 15,692
--------- ------ --------- --------
General and administrative expenses..... (66,272) (675) 5,561 (61,386)
Interest expense........................ (24,164) -- (707) (24,871)
Interest income......................... 18,817 4,193 (509) 22,501
Minority interest....................... (14,159) -- -- (14,159)
Equity in losses of unconsolidated
partnerships.......................... 12,169 1,323 13,492
--------- ------ --------- --------
Income (loss) from operations........... (37,133) 4,030 (10,991) (44,094)
Income tax provision.................... (4,772) -- 5,952 1,180
Gain on disposition of property......... 5,888 688 -- 6,576
--------- ------ --------- --------
Item income (loss)...................... $ (36,017) $4,718 $ (5,039) $(36,338)
========= ====== ========= ========
</TABLE>
----------------------
(i)
Represents the unaudited consolidated results of operations of IFG for
the nine months ended September 30, 1998.
Certain reclassifications have been made to IFG's historical statement
of operations to conform to the Partnership's statement of operations
presentation.
(ii)
Represents the historical statement of operations of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock for
each three shares of IFG common stock to holders of IFG common stock.
(F) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the incremental depreciation of the purchase price adjustment
related to consolidated real estate and investments in real estate
partnerships; (ii) the amortization of goodwill and property management
contracts
P-21
<PAGE> 138
resulting from the IFG Merger; (iii) the increase in interest expense
resulting from the net increase in debt; and (iv) the elimination of the
income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of
IFG, primarily management contracts and related working capital assets
and liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(H) Represents adjustments to reflect the 1998 Acquisitions, less the 1998
Dispositions as if they had occurred on January 1, 1998. These pro forma
operating results are based on historical results of the properties,
except for depreciation, which is based on the Partnership's investment
in the properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1998 1998
ACQUISITIONS DISPOSITIONS TOTAL
------------ ------------ -------
<S> <C> <C> <C>
Rental and other property revenues......... $20,554 $(951) $19,603
Property operating expense................. (9,385) 376 (9,009)
Owned property management expense.......... (765) 37 (728)
Depreciation............................... (4,979) 93 (4,886)
</TABLE>
(I) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1998. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(J) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and
other loans and mortgages assumed in connection with
the 1998 Acquisitions.................................. $(8,698)
Repayments on the Partnership's credit facilities and
other indebtedness with proceeds from the 1998
Dispositions and the 1998 Stock
Offerings.............................................. 10,326
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred
Partnership Unit Offering.............................. 347
-------
$ 1,975
=======
</TABLE>
(K) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the probable purchases.
(L) Represents (i) loss of $537 related to limited partners in consolidated
partnerships acquired in connection with the 1998 Acquisitions and (ii)
income of $377 allocable to the Partnership Preferred Units.
(M) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(N) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses.................... $ 355
Reduction in salaries and benefits........................ 2,482
Merger related costs...................................... 1,212
Other..................................................... 1,229
------
$5,278
======
</TABLE>
P-22
<PAGE> 139
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1998 and that the
restructuring plan was completed on January 1, 1998. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(O) Represents the decrease in interest expense of $1,480 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$1,335 related to borrowings under the Partnership's line of credit.
(P) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(Q) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(R) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $30,096, amortization of goodwill of $4,895, and
depreciation of furniture, fixtures, and equipment of $2,842, less IFG's
historical depreciation and amortization of $13,938. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(S) Represents the elimination of merger related expenses recorded by IFG
during the nine months ended September 30, 1998. In connection with the
IFG Merger, certain IFG executives will receive one-time lump-sum
payments in connection with the termination of their employment and
option agreements. The total of these lump sum payments is estimated to
be approximately $50,000.
(T) Represents elimination of minority interest in IPT resulting from the IPT
merger.
(U) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(V) Represents the reversal of IFG's income tax provision.
(W) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(X) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Y) Represents interest income of $2,861 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries of the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $2,718 reflected in the equity in earnings of the
Unconsolidated Subsidiaries.
(Z) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-23
<PAGE> 140
(AA) The following table presents the net impact to pro forma net income
applicable to holders of shares of AIMCO Common Stock and net income per
share of AIMCO Common Stock assuming the interest rate per annum
increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest........................................ $ 702
=======
Net income.................................................. $40,791
=======
Net income attributable to OP Unitholders................... $ 8,377
=======
Basic loss per OP Unit...................................... $ 0.12
=======
Diluted loss per OP Unit.................................... $ 0.12
=======
</TABLE>
(BB) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred Units
the Class G Preferred Units, the Class H Preferred Units and the Class J
Preferred Units as if these stock offerings had occurred as of January 1,
1997.
(CC) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(1,867) plus the elimination of intercompany interest of
$2,718. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the nine months ended September 30, 1998
is presented below, which represents the effects of the Ambassador
Merger, the IFG Merger and the IFG Reorganization as if these
transactions had occurred as of January 1, 1997.
P-24
<PAGE> 141
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
IFG
HISTORICAL(i) REORGANIZATION(ii) PRO FORMA
------------- ------------------ ---------
<S> <C> <C> <C>
Rental and other property revenues................... $ 9,910 $ -- $ 9,910
Property operating expense........................... (5,139) -- (5,139)
Owned property management expense.................... (345) -- (345)
Depreciation expense................................. (1,026) -- (1,026)
-------- -------- --------
Income from property operations...................... 3,400 -- 3,400
-------- -------- --------
Management fees and other income..................... 57,665 56,211(iii) 113,876
Management and other expenses........................ (36,221) (35,192)(iii) (71,413)
Amortization......................................... (2,111) (22,641)(iv) (24,752)
-------- -------- --------
Income from service company.......................... 19,333 (1,622) 17,711
General and administrative expense................... -- (14,375)(iii) (14,375)
Interest expense..................................... (6,931) (2,861)(v) (9,792)
Interest income...................................... 617 -- 617
Minority interest.................................... (526) -- (526)
-------- -------- --------
Income (loss) from operations........................ 15,893 (18,858) (2,965)
Income tax provision................................. (7,037) 8,037(vi) 1,000
-------- -------- --------
Net income (loss).................................... $ 8,856 $(10,821) $ (1,965)
======== ======== ========
Income (loss) attributable to preferred
stockholders....................................... $ 8,413 $(10,280) $ (1,867)
======== ======== ========
Income (loss) attributable to common stockholders.... $ 443 $ (541) $ (98)
======== ======== ========
</TABLE>
- ---------------
(i) Represents the Unconsolidated Subsidiaries historical consolidated results
of operations.
(ii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iii)Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG.
(iv) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG, based on the Partnership's new basis resulting from the allocation
of the purchase price of IFG.
(v) Represents adjustment for interest expense related to a note payable to the
Partnership.
(vi) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-25
<PAGE> 142
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR IFG
AND PROBABLE NHP AMBASSADOR PURCHASE PRICE AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $ 32,697 $ 25,214 $ (8,681) $ 3,437 $ 1,879 $ 4,744
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 43,520 28,817 7,354 20,372 5,997 17,248
Gain on investments............ -- -- (12) -- -- --
(Gain) loss on disposition of
properties.................... (2,720) 2,720 (3,882) -- -- (80)
Minority interests............. (1,008) (458) (16) 851 (705) 12,871
Equity in earnings of
unconsolidated partnerships... 1,798 122 8,542 (405) -- (12,515)
Equity in earnings of
unconsolidated subsidiaries... (4,636) -- (5,790) -- -- --
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 269 (269) -- -- -- (5,366)
Changes in operating assets and
operating liabilities......... 3,112 -- 5,314 (3,523) -- (4,384)
--------- --------- --------- --------- -------- --------
Total adjustments........... 40,335 30,932 11,510 17,295 5,292 7,774
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) operating activities... 73,032 56,146 2,829 20,732 7,171 12,518
Net cash used in
discontinued operations.... -- -- (7,999) -- -- --
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) continuing
operations................. 73,032 56,146 (5,170) 20,732 7,171 12,518
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... 21,792 19,627(I) -- -- -- --
Purchase of real estate.......... (376,315) (220,995)(J) (4,114) (24,179) -- --
Additions to real estate,
investments and property held
for sale....................... (26,966) (5,217)(K) (522) (19,033) -- (4,154)
Proceeds from sale of property
held for sale.................. 303 -- -- -- -- --
Purchase of general and limited
partnership interests.......... (199,146) -- (1,208) -- -- (76,104)
Purchase of management
contracts...................... -- -- (11,686) -- -- (36,868)
Purchase of/additions to notes
receivable..................... (59,787) -- (4,236) -- -- (17,647)
Proceeds from repayments of notes
receivable..................... -- -- 214 1,000 -- 8,838
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... 45,791 -- 3,097 3,183 -- 42,615
Contribution to unconsolidated
subsidiaries................... (42,879) -- -- -- -- --
Proceeds from sale of
securities..................... -- -- 642 -- -- --
Purchase of investments held for
sale........................... -- -- (73) -- -- --
Purchase of NHP mortgage loans... (60,575) -- -- -- -- --
Purchase of Ambassador common
stock.......................... (19,881) -- -- -- -- --
--------- --------- --------- --------- -------- --------
Net cash used in investing
activities................. (717,663) (206,585) (17,886) (39,029) -- (83,320)
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. 225,436 122,568(L) 145,519 156,746 -- 111,001
Principal repayments on secured
notes payable.................. (12,512) -- (141,032) (141,676) -- (12,697)
Proceeds from secured short-term
financing...................... 19,050 -- -- -- -- --
Repayments on secured short-term
financing...................... -- (259,027)(M) (434) -- -- --
Principal repayments on unsecured
short-term notes payable....... (79) (50,800)(M) -- -- -- --
Proceeds (payoff) from unsecured
short-term financing........... (12,500) -- -- -- -- --
Principal repayments on secured
tax-exempt bond financing...... (1,487) -- -- -- -- --
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... (162,008) -- -- -- -- --
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... (6,387) -- (245) (8,095) -- (2,305)
Proceeds from issuance of common
and preferred stock, net....... 643,224 357,389(N) 6,286 28,946 -- 62,420
Proceeds from exercises of
employee stock options and
warrants....................... 871 -- -- 3,195 -- 7,487
Repurchase of common stock....... -- -- -- -- -- (3,283)
Principal repayments received on
notes due from Officers........ 25,957 -- -- 1,323 -- --
Investments made by minority
interests...................... -- -- -- -- -- 249
Receipt of contributions from
minority interests............. -- 37,345(O) -- -- -- --
Payments of distribution to
minority interests............. -- (2,713)(P) -- -- -- --
Payment of distributions......... (44,660) (19,396)(Q) (11,503)(T) (15,717) (12,173)(U) (2,695)
Payment of distributions to
limited partners............... -- (5,193)(R) -- -- (15)(U) --
Payment of preferred unit
distributions.................. (846) (39,859)(S) -- (2,279) -- --
Payment of distributions to
minority interests............. (5,510) -- -- (3,700) -- (12,578)
Net transactions with
Insignia/ESG................... -- -- -- -- -- (57,612)
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) financing activities... 668,549 140,314 (1,409) 18,743 (12,188) 89,987
--------- --------- --------- --------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. 23,918 (10,125) (24,465) 446 (5,017) 19,185
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. 13,170 -- 36,277 4,002 -- 64,447
--------- --------- --------- --------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $ 37,088 $ (10,125) $ 11,812 $ 4,448 $ (5,017) $ 83,632
========= ========= ========= ========= ======== ========
<CAPTION>
IFG IFG
MERGER REORGANIZATION PRO
ADJUSTMENTS(G) ADJUSTMENTS(H) FORMA
-------------- -------------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $(80,023) $ 6,882 $ (13,851)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 35,049 (30,188) 128,169
Gain on investments............ -- -- (12)
(Gain) loss on disposition of
properties.................... 80 -- (3,882)
Minority interests............. (1,552) -- 9,983
Equity in earnings of
unconsolidated partnerships... 29,995 -- 27,537
Equity in earnings of
unconsolidated subsidiaries... -- 4,578 (5,848)
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 5,366 --
Changes in operating assets and
operating liabilities......... -- -- 519
-------- -------- -----------
Total adjustments........... 68,938 (25,610) 156,466
-------- -------- -----------
Net cash provided by (used
in) operating activities... (11,085) (18,728) 142,615
Net cash used in
discontinued operations.... -- -- (7,999)
-------- -------- -----------
Net cash provided by (used
in) continuing
operations................. (11,085) (18,728) 134,616
-------- -------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... -- -- 41,419
Purchase of real estate.......... -- -- (625,603)
Additions to real estate,
investments and property held
for sale....................... -- -- (55,892)
Proceeds from sale of property
held for sale.................. -- -- 303
Purchase of general and limited
partnership interests.......... -- -- (276,458)
Purchase of management
contracts...................... -- -- (48,554)
Purchase of/additions to notes
receivable..................... -- -- (81,670)
Proceeds from repayments of notes
receivable..................... -- -- 10,052
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... -- -- 94,686
Contribution to unconsolidated
subsidiaries................... -- -- (42,879)
Proceeds from sale of
securities..................... -- -- 642
Purchase of investments held for
sale........................... -- -- (73)
Purchase of NHP mortgage loans... -- -- (60,575)
Purchase of Ambassador common
stock.......................... -- -- (19,881)
-------- -------- -----------
Net cash used in investing
activities................. -- -- (1,064,483)
-------- -------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. -- -- 761,270
Principal repayments on secured
notes payable.................. -- -- (307,917)
Proceeds from secured short-term
financing...................... -- -- 19,050
Repayments on secured short-term
financing...................... -- -- (259,461)
Principal repayments on unsecured
short-term notes payable....... -- -- (50,879)
Proceeds (payoff) from unsecured
short-term financing........... -- -- (12,500)
Principal repayments on secured
tax-exempt bond financing...... -- -- (1,487)
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... -- -- (162,008)
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... -- -- (17,032)
Proceeds from issuance of common
and preferred stock, net....... -- -- 1,098,265
Proceeds from exercises of
employee stock options and
warrants....................... -- -- 11,553
Repurchase of common stock....... -- -- (3,283)
Principal repayments received on
notes due from Officers........ -- -- 27,280
Investments made by minority
interests...................... -- -- 249
Receipt of contributions from
minority interests............. -- -- 37,345
Payments of distribution to
minority interests............. -- -- (2,713)
Payment of distributions......... (24,513)(V) -- (130,657)
Payment of distributions to
limited partners............... -- -- (5,208)
Payment of preferred unit
distributions.................. -- -- (42,984)
Payment of distributions to
minority interests............. -- -- (21,788)
Net transactions with
Insignia/ESG................... -- -- (57,612)
-------- -------- -----------
Net cash provided by (used
in) financing activities... (24,513) -- 879,483
-------- -------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. (35,598) (18,728) (50,384)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. -- -- 117,896
-------- -------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $(35,598) $(18,728) $ 67,512
======== ======== ===========
</TABLE>
P-26
<PAGE> 143
- ---------------
(A) Represents the Partnership's audited consolidated statement of cash flows
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1997 Acquisitions; (ii) the 1997 Stock Offerings;
(iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings; (v) the 1998
Acquisitions; (vi) the Probably Purchases; (vii) the 1998 Dispositions; and
(viii) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)................. $ (7,266) $ 4,350 $(2,222) $ (3,543) $ (8,681)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 4,058 9,134 5,125 (10,963) 7,354
Gain on investments............. (12) -- -- -- (12)
(Gain) loss on disposition of
properties.................... (3,882) -- -- -- (3,882)
Minority interests.............. (16) -- -- -- (16)
Equity in earnings of
unconsolidated partnerships... 3,905 -- 4,631 6 8,542
Equity in earnings of
unconsolidated subsidiaries... -- -- 4,636 (10,426) (5,790)
Changes in operating assets and
operating liabilities......... (1,036) 6,350 -- -- 5,314
-------- -------- ------- -------- ---------
Total adjustments........... 3,017 15,484 14,392 (21,383) 11,510
-------- -------- ------- -------- ---------
Net cash provided by (used
in) operating
activities................ (4,249) 19,834 12,170 (24,926) 2,829
Net cash used in
discontinued operations... -- (7,999) -- -- (7,999)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) continuing
operations................ (4,249) 11,835 12,170 (24,926) (5,170)
-------- -------- ------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate........... -- (4,114) -- -- (4,114)
Additions to real estate,
investments and property held
for sale........................ (522) -- -- -- (522)
Purchase of general and limited
partnership interests........... (1,208) -- -- -- (1,208)
Purchase of management
contracts....................... -- (11,686) -- -- (11,686)
Purchase of/additions to notes
receivable...................... -- (4,236) -- -- (4,236)
Proceeds from repayments of notes
receivable...................... 214 -- -- -- 214
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 3,097 -- -- -- 3,097
Proceeds from sale of
securities...................... 642 -- -- -- 642
Purchase of investments held for
sale............................ (73) -- -- -- (73)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) investing
activities................ 2,150 (20,036) -- -- (17,886)
-------- -------- ------- -------- ---------
</TABLE>
P-27
<PAGE> 144
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes
payable borrowings.............. $ 74,019 $ 71,500 $ -- $ -- $ 145,519
Principal repayments on secured
notes payable................... (71,256) (69,776) -- -- (141,032)
Repayments on secured short-term
financing....................... (434) -- -- -- (434)
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (245) -- -- (245)
Proceeds from issuances of common
and preferred stock, net........ -- 6,286 -- -- 6,286
Payment of distributions.......... (2,000) -- (9,503) -- (11,503)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) financing
activities................ 329 7,765 (9,503) -- (1,409)
-------- -------- ------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (1,770) (436) 2,667 (24,926) (24,465)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 25,795 10,482 -- -- 36,277
-------- -------- ------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 24,025 $ 10,046 $ 2,667 $(24,926) $ 11,812
======== ======== ======= ======== =========
</TABLE>
- ---------------
(i)Represents the adjustment to record cash flow activity from January 1,
1997 to the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. In addition,
represents adjustments to record additional deprecation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest expense
incurred in connection with borrowings incurred by the Partnership to
consummate the NHP Real Estate Acquisition.
(ii)
Represents the unaudited consolidated statement of cash flows of NHP
for the period from January 1, 1997 through December 8, 1997 (date of
the NHP Merger).
(iii)
Represents the following adjustments occurring as a result of the NHP
Merger: (i) the reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan; (ii) the incremental
depreciation of the purchase price adjustment related to real estate;
(iii) the incremental amortization of the purchase price adjustment
related to management contracts, furniture, fixtures and equipment, and
goodwill; (iv) the reversal of equity in earnings of NHP during the
pre-merger period when the Partnership held a 47.62% interest in NHP;
and (v) the amortization of the increased basis in investments in real
estate partnerships, based on the purchase price adjustment related to
real estate and an estimated average life of 20 years.
(iv)
Represents adjustments related to the NHP Reorganization, whereby the
Partnership contributed or sold to the Unconsolidated Subsidiaries and
the Unconsolidated Partnership; (i) certain assets and liabilities of
NHP, primarily related to the management operations and other
businesses owned by NHP and (ii) 12 real estate properties containing
2,905 apartment units. The adjustments represent (i) the related cash
flow activity primarily related to the management operations of such
real estate partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis resulting
from the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies.
(D) Represents the audited historical statement of cash flows of Ambassador for
the year ended December 31, 1997. Certain reclassifications have been made
to Ambassador's historical statement of cash flows to conform to the
Partnership's statement of cash flows presentation. The Ambassador
P-28
<PAGE> 145
historical statement of cash flows excludes an extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................... $ 10,233 $ 7,566 $(13,055) $ 4,744
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization...... 32,675 63 (15,490) 17,248
Gain on disposition of property.... -- (80) -- (80)
Minority interests................. 12,448 382 41 12,871
Equity in earnings of
unconsolidated partnerships...... (10,027) (2,639) 151 (12,515)
Extraordinary gain on early
extinguishment of debt........... (5,366) -- -- (5,366)
Changes in operating assets and
liabilities...................... -- (2,405) (1,979) (4,384)
--------- -------- -------- --------
Total adjustments............. 29,730 (4,679) (17,277) 7,774
--------- -------- -------- --------
Net cash provided by (used in) operating
activities............................ 39,963 2,887 (30,332) 12,518
--------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to real estate, investments
and property held for sale......... (7,695) 665 2,876 (4,154)
Purchase of general and limited
partnership interests.............. (93,118) -- 17,014 (76,104)
Purchase of management contracts...... (99,540) -- 62,672 (36,868)
Purchase of/additions to notes
receivable......................... (9,172) (14,251) 5,776 (17,647)
Proceeds from repayments of notes
receivable......................... 4,523 7,552 (3,237) 8,838
Distributions from investments in real
estate partnerships and
unconsolidated subsidiaries........ 44,823 -- (2,208) 42,615
--------- -------- -------- --------
Net cash provided by (used in)
investing activities........ (160,179) (6,034) 82,893 (83,320)
--------- -------- -------- --------
</TABLE>
P-29
<PAGE> 146
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable
borrowings......................... $ 118,141 $ -- $ (7,140) $111,001
Principal repayments on secured notes
payable............................ (15,682) -- 2,985 (12,697)
Payment of loan costs, net of proceeds
from interest rate hedge........... (2,305) -- -- (2,305)
Proceeds from issuance of common and
preferred stock, net............... 62,420 -- -- 62,420
Proceeds from exercises of employee
stock options and warrants......... 7,487 -- -- 7,487
Repurchase of common stock............ (3,283) -- -- (3,283)
Investment made by minority
interests.......................... 249 -- -- 249
Payment of distributions.............. -- (2,695) -- (2,695)
Payment of distributions to minority
interests.......................... (12,578) -- -- (12,578)
Net transactions with Insignia/ESG.... -- -- (57,612) (57,612)
--------- -------- -------- --------
Net cash provided by (used in)
financing activities........ 154,449 (2,695) (61,767) 89,987
--------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 34,233 (5,842) (9,206) 19,185
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD............................. 54,614 9,789 44 64,447
--------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................ $ 88,847 $ 3,947 $ (9,162) $ 83,632
========= ======== ======== ========
</TABLE>
- ---------------
(i)Represents the audited consolidated statement of cash flows of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report on
Form 10-K. Certain reclassifications have been made to IFG's historical
statement of cash flows to conform to the Partnership's statement of
cash flows presentation.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(I) Represents proceeds from the sale of the 1998 Dispositions, as if these
dispositions occurred on January 1, 1997.
P-30
<PAGE> 147
(J) Represents the use of cash to purchase the 1998 Acquisitions and the
Probable Purchases, as if these acquisitions occurred on January 1, 1997.
(K) Represents cash payments for capital improvements of $300 per unit on the
1997 Acquisitions, the 1998 Acquisitions and the Probable Purchases.
(L) Represents notes payable assumed in connection with the 1998 Acquisitions
and the Probable Purchases, assuming these transactions occurred January 1,
1997.
(M) Represents net principal repayments assuming the 1998 Acquisitions, the
1998 Dispositions, the Probable Purchases, the 1998 Stock Offerings and the
Preferred Partnership Unit Offering occurred January 1, 1997.
(N) Represents cash proceeds from the 1998 Stock Offerings, as if these
offerings occurred on January 1, 1997.
(O) Represents contributions from minority interests assuming the Preferred
Partnership Unit Offering occurred January 1, 1997.
(P) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(Q) Represents distributions paid on the 1997 Stock Offerings as if these
occurred on January 1, 1997.
(R) Represents distributions paid to limited partners on OP Units issued in
connection with the 1997 Acquisitions, the 1998 Acquisitions and the
Probable Purchases, as if the issuance of the OP Units occurred on January
1, 1997.
(S) Represents preferred unit distributions paid on the Class B Preferred
Stock, the Class C Preferred Stock and the 1998 Stock Offerings as if these
occurred on January 1, 1997.
(T) Represents historical distributions of $2,000 and pro forma distributions
on the shares issued in the NHP Merger as if these shares had been issued
on January 1, 1997.
(U) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(V) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-31
<PAGE> 148
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE AMBASSADOR PURCHASE PRICE IFG AS IFG MERGER
HISTORICAL(A) PURCHASE(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 56,269 $ 3,432 $ (2,382) $ 4,255 $ (36,338) $ 7,679
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 67,344 7,512 7,520 1,420 14,890 25,478
(Gain) loss on disposition of
properties..................... (2,783) 2,783 -- -- (6,576) 6,576
Minority interests.............. 1,052 (160) 252 (252) 14,159 (6,622)
Equity in earnings of
unconsolidated partnerships.... 5,078 -- 71 -- (13,492) 18,577
Equity in earnings of
unconsolidated subsidiaries.... (8,413) -- -- -- -- --
Non-cash compensation........... -- -- -- -- 796 --
Changes in operating assets and
operating liabilities.......... (67,722) -- 5,948 -- (7,775) --
--------- -------- -------- ------- --------- --------
Total adjustments............ (5,444) 10,135 13,791 1,168 2,002 44,009
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) operating activities... 50,825 13,567 11,409 5,423 (34,336) 51,688
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... (63,839) 63,839(H) -- -- 27,122 --
Additions to real estate.......... (47,878) (1,198)(I) (17,759) -- 9,309 --
Proceeds from sale of property and
investments held for sale....... 19,627 (19,627)(J) -- -- (35) --
Additions to property held for
sale............................ (1,986) -- -- -- -- --
Purchase of general and limited
partnership interests........... (27,016) -- -- -- 17,420 --
Purchase of/additions to notes
receivable...................... (72,445) -- -- -- (27,589) --
Proceeds from repayments/sale of
notes receivable................ 21,562 -- -- -- 21,185 --
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 513 -- 1,063 -- 22,053 --
Payment of trust based preferred
dividends....................... -- -- -- -- (7,415) --
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... 4,492 -- -- -- 13,423 --
Contribution to unconsolidated
subsidiaries.................... (13,032) -- -- -- -- --
Purchase of investments held for
sale............................ (4,935) -- -- -- -- --
Redemption of OP Units............ (516) -- -- -- -- --
Merger costs...................... -- -- -- -- (1,402) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) investing activities... (185,453) 43,014 (16,696) -- 74,071 --
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. 77,489 -- 37,162 -- 177,234 --
Principal repayments on secured
notes payable................... (56,262) -- -- -- 4,239 --
Principal advances on secured
tax-exempt bond financing....... -- -- 21,784 -- -- --
Principal repayments on secured
tax-exempt bond financing....... (1,436) -- -- -- -- --
Net borrowings/repayments on
secured short-term financing.... (30,693) 209,027(K) (43,002) -- -- --
Net borrowings (paydowns) on the
revolving credit facilities..... -- -- 2,513 -- -- --
Principal repayments on unsecured
short-term notes payable........ -- -- -- -- 2,644 --
Payment of loan costs, net of
proceeds from interest rate
hedge........................... (5,727) -- -- -- (83) --
Proceeds from issuance of common
stock and preferred stock,
net............................. 253,239 (253,239)(L) -- -- -- --
Repurchase of common stock........ (10,972) -- -- -- -- --
Proceeds from exercises of
employee stock options and
warrants........................ -- -- 9,761 -- 6,533 --
Principal repayments received on
notes due from Officers......... 8,084 -- -- -- -- --
Payments of distributions to
minority interests.............. -- (2,034)(M) -- -- -- --
Payment of distributions.......... (73,322) -- -- (3,701)(P) (8,606) (22,360)(Q)
Payment of distributions to
limited partners................ (10,251) (1,919)(N) -- (5)(P) (494) --
Payment of preferred unit
distributions................... (10,916) (16,094)(O) -- -- -- --
Proceeds from issuance of High
Performance Units............... 1,988 -- -- -- -- --
Net transactions with
Insignia/ESG.................... -- -- -- -- (241,003) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) financing activities... 141,221 (64,259) 28,218 (3,706) (59,536) (22,360)
--------- -------- -------- ------- --------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. 6,593 (7,678) 22,931 1,717 (19,801) 29,328
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 37,088 (10,125) 4,448 (5,017) 83,632 (35,598)
--------- -------- -------- ------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 43,681 $(17,803) $ 27,379 $(3,300) $ 63,831 $ (6,270)
========= ======== ======== ======= ========= ========
<CAPTION>
IFG
REORGANIZATION PRO
ADJUSTMENTS(G) FORMA
-------------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 8,578 $ 41,493
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... (22,641) 101,523
(Gain) loss on disposition of
properties..................... -- --
Minority interests.............. -- 8,429
Equity in earnings of
unconsolidated partnerships.... -- 10,234
Equity in earnings of
unconsolidated subsidiaries.... 7,562 (851)
Non-cash compensation........... -- 796
Changes in operating assets and
operating liabilities.......... -- (69,549)
-------- ---------
Total adjustments............ (15,079) 50,582
-------- ---------
Net cash provided by (used
in) operating activities... (6,501) 92,075
-------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... -- 27,122
Additions to real estate.......... -- (57,526)
Proceeds from sale of property and
investments held for sale....... -- (35)
Additions to property held for
sale............................ -- (1,986)
Purchase of general and limited
partnership interests........... -- (9,596)
Purchase of/additions to notes
receivable...................... -- (100,034)
Proceeds from repayments/sale of
notes receivable................ -- 42,747
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... -- 23,629
Payment of trust based preferred
dividends....................... -- (7,415)
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... -- 17,915
Contribution to unconsolidated
subsidiaries.................... -- (13,032)
Purchase of investments held for
sale............................ -- (4,935)
Redemption of OP Units............ -- (516)
Merger costs...................... -- (1,402)
-------- ---------
Net cash provided by (used
in) investing activities... -- (85,064)
-------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. -- 291,885
Principal repayments on secured
notes payable................... -- (52,023)
Principal advances on secured
tax-exempt bond financing....... -- 21,784
Principal repayments on secured
tax-exempt bond financing....... -- (1,436)
Net borrowings/repayments on
secured short-term financing.... -- 135,332
Net borrowings (paydowns) on the
revolving credit facilities..... -- 2,513
Principal repayments on unsecured
short-term notes payable........ -- 2,644
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (5,810)
Proceeds from issuance of common
stock and preferred stock,
net............................. -- --
Repurchase of common stock........ -- (10,972)
Proceeds from exercises of
employee stock options and
warrants........................ -- 16,294
Principal repayments received on
notes due from Officers......... -- 8,084
Payments of distributions to
minority interests.............. -- (2,034)
Payment of distributions.......... -- (107,989)
Payment of distributions to
limited partners................ -- (12,669)
Payment of preferred unit
distributions................... -- (27,010)
Proceeds from issuance of High
Performance Units............... -- 1,988
Net transactions with
Insignia/ESG.................... -- (241,003)
-------- ---------
Net cash provided by (used
in) financing activities... -- 19,578
-------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (6,501) 26,589
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... (18,728) 55,700
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $(25,229) $ 82,289
======== =========
</TABLE>
P-32
<PAGE> 149
- ---------------
(A) Represents the Partnership's unaudited consolidated statement of cash flows
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1998 Stock Offerings; (ii) the 1998 Acquisitions;
(iii) the Probably Purchases; (iv) the 1998 Dispositions and (v) the
Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of cash flows of Ambassador
for the four months ended April 20, 1998. Certain reclassifications have
been made to Ambassador's historical statement of cash flows to conform to
the Partnership's statement of cash flows presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ (36,017) $ 4,718 $ (5,039) $(36,338)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 27,685 48 (12,843) 14,890
Gain on disposition of property......................... (5,888) (688) -- (6,576)
Minority interests...................................... 14,159 -- -- 14,159
Equity in earnings of unconsolidated partnerships....... (12,169) -- (1,323) (13,492)
Non-cash compensation................................... 796 -- -- 796
Changes in operating assets and liabilities............. (18,853) (1,499) 12,577 (7,775)
--------- -------- --------- --------
Total adjustments................................... 5,730 (2,139) (1,589) 2,002
--------- -------- --------- --------
Net cash provided by (used in) operating
activities........................................ (30,287) 2,579 (6,628) (34,336)
--------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... (3,804) -- 30,926 27,122
Additions to real estate.................................. (2,252) (25) 11,586 9,309
Proceeds from sales of property and investments held for
sale.................................................... -- 161 (196) (35)
Purchase of general and limited partnership interests..... (44,270) -- 61,690 17,420
Purchases of / additions to notes receivable.............. (17,107) (15,407) 4,925 (27,589)
Proceeds from repayments/sale of notes receivable......... 151 23,672 (2,638) 21,185
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 21,360 -- 693 22,053
Payment of trust based preferred dividends................ (7,415) -- -- (7,415)
Cash received in connection with AMIT Merger.............. 13,423 -- -- 13,423
Merger costs.............................................. (1,402) -- -- (1,402)
--------- -------- --------- --------
Net cash provided by (used in) investing
activities........................................ (41,316) 8,401 106,986 74,071
--------- -------- --------- --------
</TABLE>
P-33
<PAGE> 150
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 186,000 -- (8,766) 177,234
Principal repayments on secured notes payable............. (1,874) -- 6,113 4,239
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (83) -- -- (83)
Proceeds from exercises of employee stock options and
warrants................................................ 6,533 -- -- 6,533
Payment of distributions.................................. (6,541) (2,065) -- (8,606)
Payment of distributions minority interests............... (494) -- -- (494)
Net transactions with Insignia/ESG........................ (118,424) -- (122,579) (241,003)
--------- -------- --------- --------
Net cash provided by (used in) financing
activities........................................ 67,761 (2,065) (125,232) (59,536)
--------- -------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (3,842) 8,915 (24,874) (19,801)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 88,847 3,947 (9,162) 83,632
--------- -------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 85,005 $ 12,862 $ (34,036) $ 63,831
========= ======== ========= ========
</TABLE>
- ---------------
(i)Represents the unaudited consolidated statement of cash flows of IFG
for the nine months ended September 30, 1998. Certain reclassifications
have been made to IFG's historical statement of cash flows to conform
to the Partnership's statement of cash flows presentation. In addition,
the cash and cash equivalents at the beginning of the period has been
adjusted.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock. In addition, the cash and cash equivalents at the beginning of
the period has been adjusted.
(F) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(H) Represents adjustment to remove the use of cash to purchase the 1998
Acquisitions, as if these acquisitions occurred on January 1, 1997;
therefore, the purchases are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(I) Represents cash payments for capital improvements of $300 per unit on the
1998 Acquisitions.
(J) Represents adjustment to remove the proceeds from the sale of the 1998
Dispositions, as if these dispositions occurred on January 1, 1997;
therefore, the proceeds are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(K) Represents adjustment to remove net principal repayments assuming the 1998
Acquisitions, the 1998 Dispositions and the 1998 Stock Offerings occurred
January 1, 1997; therefore, the repayments are included on the Pro Forma
Consolidated Statement of Cash Flows for the year ended December 31, 1997.
(L) Represents adjustment to remove cash proceeds from the 1998 Stock
Offerings, as if these offerings occurred on January 1, 1997; therefore,
the repayments are included on the Pro Forma Consolidated Statement of Cash
Flows for the year ended December 31, 1997.
P-34
<PAGE> 151
(M) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(N) Represents distributions paid to limited partners on OP Units issued in
connection with the 1998 Acquisitions and the Probable Purchases, as if the
issuance of the OP Units occurred on January 1, 1997.
(O) Represents preferred unit distributions paid on the 1998 Stock Offerings as
if these occurred on January 1, 1997.
(P) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(Q) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-35
<PAGE> 152
PRO FORMA FINANCIAL INFORMATION OF
AIMCO PROPERTIES, L.P.
(EXCHANGE OFFERS)
INTRODUCTION
AIMCO Properties L.P. (the "Partnership") intends to offer to purchase
limited partnership interests in syndicated real estate limited partnerships in
which AIMCO holds partnership interests. The Partnership, is subject to
applicable law, plans to offer to purchase certain of such limited partnership
interests in exchange for (i) equity securities of the Partnership; (ii) cash or
(iii) a combination of such equity securities and cash. Such offers are expected
to include terms that will allow limited partners to continue to hold their
limited partnership interests.
The following Pro Forma Consolidated Balance Sheet (Exchange Offers) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) all the
transactions discussed in the Pro Forma Financial Statements (Insignia Merger)
appearing elsewhere herein; and (ii) the acceptance of exchange offers by
limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) all
the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1998: (i)
all the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The Pro Forma Financial Information (Exchange Offers) is based, in part, on
the historical financial statements of the partnerships in which the Exchange
Offers are made. The Pro Forma Financial Information (Exchange Offers) is also
based, in part, on the Pro Forma Financial Information (Insignia Merger) of the
Partnership included elsewhere herein. Such pro forma information is based in
part upon: (i) the audited Consolidated Financial Statements of Insignia for the
year ended December 31, 1997; (ii) the audited Consolidated Financial Statements
of Angeles Mortgage Investment Trust ("AMIT") for the year ended December 31,
1997; (iii) the unaudited Consolidated Financial Statements of Insignia for the
nine months ended September 30, 1998; and (iv) the unaudited Consolidated
Financial Statements of AMIT for the period from January 1, 1998 to September
17, 1998. The Pro Forma Financial Information (Insignia Merger) is also based,
in part, upon: (i) the audited Consolidated Financial Statements of Ambassador
for the year ended December 31, 1997; (ii) the audited Consolidated Financial
Statements of the Partnership for the year ended December 31, 1997; (iii) the
unaudited Consolidated Financial Statements of Ambassador for the four months
ended April 30, 1998; (iv) the unaudited Consolidated Financial Statements of
the Partnership for the nine months ended September 30, 1998; and (v) the
historical financial statements of certain properties and companies acquired by
AIMCO filed in AIMCO's Current Reports on Form 8-K, dated April 16, 1997, May 5,
1997, June 3, 1997, September 19, 1997, October 15, 1997, December 1, 1997 and
November 2, 1998. The following Pro Forma Financial Information (Exchange
Offers) should be read in conjunction with such financial statements and notes
thereto.
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared under the assumption that after the exchange offers are accepted, AIMCO
will own varying ownership percentages of each partnership, and that the limited
partners will choose to elect to receive 35% of the consideration in the form of
equity securities of AIMCO Properties, L.P. and 65% of the consideration in the
form of cash. The
P-36
<PAGE> 153
interest to be acquired in each of the partnerships, the estimated purchase
price for each partnership, including cash, common units, or preferred units is
summarized below:
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Angeles Income Properties, Ltd. II.................... 26.70 $ 4,946 $ 3,215 $1,731
Angeles Income Properties, Ltd. III................... 30.63 2,156 1,401 755
Angeles Income Properties, Ltd. IV.................... 18.64 1,154 750 404
Angeles Income Properties, Ltd. 6..................... 37.29 4,523 2,940 1,583
Angeles Opportunity Properties, Ltd................... 37.94 1,729 1,124 605
Angeles Partners VII.................................. 24.86 610 397 213
Angeles Partners VIII................................. 24.80 0 0 0
Angeles Partners IX................................... 18.92 1,171 761 410
Angeles Partners X.................................... 22.97 709 461 248
Angeles Partners XI................................... 21.83 205 133 72
Angeles Partners XII.................................. 11.89 2,877 1,870 1,007
Angeles Partners XIV.................................. 24.93 0 0 0
Baywood Partners, Ltd................................. 25.00 347 226 121
Brampton Associates Partnership....................... 25.00 382 248 134
Buccaneer Trace Limited Partnership................... 25.00 2 1 1
Burgundy Court Associates, L.P........................ 25.00 1,074 698 376
Calmark/Fort Collins, Ltd............................. 25.00 192 125 67
Calmark Heritage Park II Ltd.......................... 25.00 47 31 16
Casa Del Mar Associates Limited Partnership........... 21.16 503 327 176
Catawba Club Associates, L.P.......................... 25.00 85 55 30
Cedar Tree Investors Limited Partnership.............. 25.00 1,037 674 363
Century Properties Fund XVI........................... 12.52 831 540 291
Century Properties Fund XVIII......................... 13.08 474 308 166
Century Properties Fund XIX........................... 15.30 1,765 1,147 618
Century Properties Growth Fund XXII................... 21.43 4,977 3,235 1,742
Chapel Hill, Limited.................................. 21.15 569 370 199
Chestnut Hill Associates Limited Partnership.......... 26.75 1,582 1,028 554
Coastal Commons Limited Partnership................... 25.00 566 368 198
Consolidated Capital Institutional Properties/2 &
Consolidated Capital Equity Properties/2............ 18.98 7,320 4,758 2,562
Consolidated Capital Institutional Properties/3....... 16.37 6,770 4,401 2,369
Consolidated Capital Properties III................... 13.02 1,134 737 397
Consolidated Capital Properties IV.................... 18.04 9,407 6,112 3,295
Consolidated Capital Properties V..................... 16.69 560 364 196
Consolidated Capital Properties VI.................... 25.82 556 361 195
DFW Apartment Investors Limited Partnership........... 35.65 2,719 1,767 952
DFW Residential Investors Limited Partnership......... 37.60 1,092 710 382
Davidson Diversified Real Estate I, L.P............... 34.78 627 408 219
Davidson Diversified Real Estate II, L.P.............. 35.11 1,318 857 461
Davidson Diversified Real Estate III, L.P............. 21.76 0 0 0
Davidson Growth Plus, L.P............................. 23.91 2,304 1,498 806
Davidson Income Real Estate, L.P...................... 30.81 2,691 1,749 942
Drexel Burnham Lambert Real Estate Associates II...... 19.58 994 646 348
Four Quarters Habitat Apartment Associates, Ltd....... 25.00 174 113 61
Fox Strategic Housing Income Partners................. 33.18 2,414 1,569 845
Georgetown of Columbus Associates, L.P................ 25.00 227 148 79
HCW Pension Real Estate Fund Limited Partnership...... 32.64 2,368 1,539 829
Investors First-Staged Equity......................... 49.00 306 199 107
Johnstown/Consolidated Income Partners................ 25.66 1,871 1,216 655
La Colina Partners, Ltd............................... 25.00 583 379 204
Lake Eden Associates, L.P............................. 25.00 632 411 221
Landmark Associates, L.P.............................. 25.00 48 31 17
</TABLE>
P-37
<PAGE> 154
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Minneapolis Associates II Limited Partnership......... 25.00 $ 2 $ 1 $ 1
Multi-Benefit Realty Fund "87-1-Class A & Class B..... 21.89 1,657 1,077 580
National Property Investors 8......................... 11.13 988 642 346
Northbrook Apartments, Ltd............................ 25.00 209 136 73
Olde Mill Investors Limited Partnership............... 8.75 170 111 59
Orchard Park Apartments Limited Partnership........... 25.00 1 1 0
Park Town Place Associates Limited Partnership........ 24.70 298 194 104
Quail Run Associates, L.P............................. 25.00 487 317 170
Ravensworth Associates Limited Partnership............ 25.00 1 1 0
Rivercreek Apartments Limited Partnership............. 25.00 180 117 63
Rivercrest Apartments, Limited........................ 25.00 1,687 1,097 590
Riverside Park Associates L.P......................... 13.69 590 384 206
Salem Arms of Augusta Limited Partnership............. 25.00 278 181 97
Shaker Square, L.P.................................... 23.75 631 410 221
Shannon Mannor Apartments, Limited Partnership........ 25.00 1,170 761 409
Sharon Woods, L.P..................................... 22.75 499 324 175
Shelter Properties III................................ 15.20 1,960 1,274 686
Shelter Properties IV................................. 50.52 12,764 8,295 4,469
Shelter Properties VI................................. 13.78 1,919 1,247 672
Shelter Properties VII Limited Partnership............ 26.65 1,975 1,284 691
Snowden Village Associates, L.P....................... 25.00 443 288 155
Springhill Lake Investors Limited Partnership......... 11.84 2,908 1,890 1,018
Sturbrook Investors, Ltd.............................. 25.00 377 245 132
Sycamore Creek Associates, L.P........................ 25.00 1 1 0
Texas Residential Investors Limited Partnership....... 18.45 1,147 746 401
Thurber Manor Associates, Limited Partnership......... 25.00 218 142 76
U.S. Realty Partners Limited Partnership.............. 25.00 1,441 937 504
United Investors Growth Properties.................... 39.01 165 107 58
United Investors Growth Properties II................. 25.00 351 228 123
United Investors Income Properties.................... 23.44 1,977 1,285 692
Villa Nova, Limited Partnership....................... 25.00 228 148 80
Walker Springs, Limited............................... 23.99 95 62 33
Wingfield Investors Limited Partnership............... 25.00 179 116 63
Winrock-Houston Limited Partnership................... 13.60 1,041 677 364
Winthrop Apartment Investors Limited Partnership...... 31.60 1,318 857 461
Winthrop Growth Investors 1 Limited Partnership....... 27.94 1,233 801 432
Winthrop Texas Investors Limited Partnership.......... 5.27 158 103 55
Woodmere Associates, L.P.............................. 25.00 280 182 98
Yorktown Towers Associates............................ 25.00 809 526 283
-------- ------- ------
Total (See adjustment C to the Pro Forma Consolidated
Balance Sheet)...................................... $122,463 $79,601 42,862
======== ======= ======
</TABLE>
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
Exchange Offers, the 1997 Acquisitions, the 1998 Acquisitions and the Probable
Purchases are adjusted to estimated fair market value, based on preliminary
estimates, which are subject to change as additional information is obtained.
The allocations of purchase costs are subject to final determination based upon
estimates and other evaluations of fair market value. Therefore, the allocations
reflected in the following unaudited Pro Forma Financial Information (Exchange
Offers) may differ from the amounts ultimately determined.
P-38
<PAGE> 155
The following unaudited Pro Forma Financial Information (Exchange Offers)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions, results of
operations or cash flows. In the opinion of the Partnership's management, all
material adjustments necessary to reflect the effects of these transactions have
been made.
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (EXCHANGE OFFERS)
AS OF SEPTEMBER 30, 1998
ASSETS
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C>
Real estate....................................... $2,625,822 $ 12,764(C)
26,954(D)
13,655(E) $2,679,195
Property held for sale............................ 42,212 -- 42,212
Investments in and notes receivable from
unconsolidated subsidiaries..................... 186,277 -- 186,277
Investments in and notes receivable from
unconsolidated partnerships..................... 924,309 109,699(C)
(13,655)(E)
(8,161)(F)
816(G) 1,013,008
Mortgage notes receivable......................... 20,916 -- 20,916
Cash and cash equivalents......................... 104,955 2,620(D) 107,575
Restricted cash................................... 84,526 1,807(D) 86,333
Accounts receivable............................... 27,900 1,081(D) 28,981
Deferred financing costs.......................... 21,835 -- 21,835
Goodwill.......................................... 251,024 -- 251,024
Property management contracts..................... 38,371 -- 38,371
Other assets...................................... 82,670 422(D) 83,092
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
LIABILITIES AND PARTNERS' CAPITAL
Secured notes payable............................. $ 926,246 $ 23,642(D) $ 949,888
Secured tax-exempt bond financing................. 399,925 -- 399,925
Secured short-term financing...................... 32,691 -- 32,691
Unsecured short-term financing.................... 300,000 79,601(C) 379,601
Accounts payable, accrued and other liabilities... 248,253 826(D) 249,079
Security deposits and deferred income............. 13,171 255(D) 13,426
---------- -------- ----------
1,920,286 104,324 2,024,610
Minority interests................................ 79,431 816(G) 80,247
Company obligated mandatorily redeemable
convertible securities of a subsidiary trust.... 149,500 -- 149,500
Redeemable common partnership units............... 277,581 8,161(D)
(8,161)(F)
30,616(C) 308,197
Redeemable preferred partnership units............ -- 12,246(C) 12,246
Partner's capital
General and Special Limited Partner............. 1,496,457 -- 1,496,457
Preferred Units................................. 487,562 -- 487,562
---------- -------- ----------
1,984,019 -- 1,984,019
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
P-39
<PAGE> 156
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical balance sheet data as of September 30, 1998 (unaudited) related
to the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Real estate................................................. $1,082,652
Cash........................................................ 151,024
Total assets................................................ 1,493,409
Mortgages payable........................................... 1,585,196
Partners' capital (deficit)................................. (171,740)
</TABLE>
(C) Represents the purchase price paid by the Partnership to the limited
partners in order to obtain additional ownership by AIMCO in 91 real estate
partnerships. For the purposes of the pro-forma presentation, it is
assumed: (i) 65% of the purchase price is funded with cash by drawing down
on the Partnership's unsecured short term credit facility; (ii) 25% of the
purchase price is funded by the issuance of 749,362 OP Units at $40 per OP
Unit; and (iii) 10% of the purchase price is funded by the issuance of 8%
Preferred OP Units.
(D) Represents historical balance sheet data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(E) Represent the adjustment to real estate recorded in the IFG Merger related
to the one real estate partnership that will be consolidated as a result of
the Partnership's purchase of additional partnership interests.
(F) Represents the elimination of the partners' capital in the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(G) Represents minority interest of the one real estate partnership that will
be consolidated as a result of the Partnership's purchase of additional
partnership interests.
P-40
<PAGE> 157
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations.............. $ 431,256 $ 11,270(C) $ 442,526
Property operating expenses....................... (182,830) (6,612)(C) (189,442)
Owned property management expense................. (11,831) -- (11,831)
Depreciation...................................... (96,264) (2,589)(C) (98,853)
--------- -------- ---------
Income from property operations................... 140,331 2,069 142,400
--------- -------- ---------
Management fees and other income.................. 41,676 -- 41,676
Management and other expenses..................... (23,683) -- (23,683)
Corporate overhead allocation..................... (588) -- (588)
Amortization...................................... (26,480) -- (26,480)
--------- -------- ---------
Income from service company business.............. (9,075) -- (9,075)
Minority interest in service company business..... (10) -- (10)
--------- -------- ---------
Partnership's share of income from service company
business........................................ (9,085) -- (9,085)
--------- -------- ---------
General and administrative expenses............... (21,371) -- (21,371)
Interest expense.................................. (113,788) (5,691)(D)
(2,220)(C) (121,699)(H)
Interest income................................... 21,734 21,734
Minority interests................................ (9,983) (51)(E) (10,034)
Equity in losses of unconsolidated partnerships... (27,537) (16,864)(F)
483(G) (43,918)(I)
Equity in earnings of Unconsolidated
Subsidiaries.................................... 5,848 -- 5,848
--------- -------- ---------
Net income (loss)................................. (13,851) (22,274) (36,125)(H)
Income attributable to Preferred Unitholders...... 42,174 980 43,154(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders...... (56,025) $(23,254) $ (79,279)(H)
========= ======== =========
Basic earnings (loss) per OP Unit................. (.83) $ (1.16)(H)
========= =========
Diluted earnings (loss) per OP Unit............... $ (.83) $ (1.16)(H)
========= =========
Weighted average OP Units outstanding............. 67,522 68,287
========= =========
Weighted average OP Units and equivalents
outstanding..................................... 68,366 69,131
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $456,968
Operating expense........................................... 249,097
Depreciation................................................ 87,344
Interest.................................................... 138,778
Net income.................................................. 15,005
</TABLE>
P-41
<PAGE> 158
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $10,740 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $6,124 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net loss,
preferred unit distributions, and net loss per OP Unit in the event that
the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- --------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense......... $(121,699) $(124,763) $(116,008) $(116,008)
Net loss................. (36,125) (39,189 (30,434) (30,434)
Preferred unit
distributions.......... 43,154 42,174 42,174 51,971
Net loss attributable to
OP Unitholders......... (79,279) (81,363) (72,608) (82,405)
Net loss per OP Unit..... (1.16) (1.20) (1.03) (1.22)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................. $ 1,137 $ 1,245 $ 938 $ 938
Net loss................... (37,262) (40,434) (31,372) (31,372)
Net loss attributable to OP
Unitholders.............. (80,416) (82,608) (73,546) (83,343)
Net loss per OP Unit....... (1.18) (1.22) (1.04) (1.23)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, the Partnership will own 49%
of certain 88 Partnerships, 25% of two Partnerships, and 100% of one
Partnership. The amount included in the pro forma financial statements
assume an acceptance rate of 100%. The following table shows the effect on
equity in earnings of unconsolidated partnerships, net loss, net loss
attributable to OP Unitholders, and net loss per OP Unit in the event that
the Partnership will have an acceptance rate of 50% of the interests
tendered and will own varying percentages of each partnership:
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(36,510)
Net loss.................................................... (26,084)
Net loss attributable to OP Unitholders..................... (68,784)
Net loss per OP Unit........................................ (1.01)
</TABLE>
P-42
<PAGE> 159
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-43
<PAGE> 160
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations............... $ 337,307 $ 8,654(C) $ 345,961
Property operating expenses........................ (131,851) (4,389)(C) (136,240)
Owned property management expense.................. (8,933) -- (8,933)
Depreciation....................................... (78,479) (1,941)(C) (80,420)
--------- -------- ---------
Income from property operations.................... 118,044 2,324 120,368
--------- -------- ---------
Management fees and other income................... 28,912 -- 28,912
Management and other expenses...................... (14,386) -- (14,386)
Corporate overhead allocation...................... (196) -- (196)
Amortization....................................... (15,243) -- (15,243)
--------- -------- ---------
Income from service company business............... (913) -- (913)
Minority interest in service company business...... -- -- --
--------- -------- ---------
Partnership's share of income from service company
business......................................... (913) -- (913)
--------- -------- ---------
General and administrative expenses................ (8,632) -- (8,632)
Interest expense................................... (85,010) (4,250)(D)
(1,630)(C) (90,890)(H)
Interest income.................................... 40,887 40,887
Minority interests................................. (8,429) (119)(E) (8,548)
Equity in losses of unconsolidated partnerships.... (10,234) (13,156)(F)
41(G) (23,349)(I)
Equity in earnings of Unconsolidated
Subsidiaries..................................... 851 -- 851
Amortization of goodwill........................... (5,071) -- (5,071)
--------- -------- ---------
Net income (loss).................................. 41,493 (16,790) 24,703(H)
Income attributable to Preferred Unitholders....... 32,414 735 33,149(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders....... $ 9,079 $(17,525) $ (8,446)(H)
========= ======== =========
Basic earnings (loss) per OP Unit.................. $ .13 $ (.12)(H)
========= =========
Diluted earnings (loss) per OP Unit................ $ .13 $ (.12)(H)
========= =========
Weighted average OP Units outstanding.............. 68,554 69,319
========= =========
Weighted average OP Units and equivalents
outstanding...................................... 69,218 69,983
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data (unaudited) for the nine months ended September
30, 1998 related to the 91 real estate partnerships is as follows (dollars
in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $338,937
Operating expense........................................... 182,529
Depreciation................................................ 64,127
Interest.................................................... 103,756
Net income.................................................. (9,329)
</TABLE>
P-44
<PAGE> 161
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $8,552 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $4,604 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net
income, preferred unit distributions, and net loss per OP Unit in the event
that the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense........... $(90,890) $(93,184) $(86,640) $(86,640)
Net income................. 24,703 22,409 28,953 28,953
Preferred unit
distributions............ 33,149 32,414 32,414 39,762
Net loss attributable to OP
Unitholders.............. (8,446) (10,005) (3,461) (10,809)
Net loss per OP Unit....... (.12) (.15) (.05) (.16)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- ------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................... $ 851 $ 931 $ 702 $ 702
Net income................... 24,703 21,478 28,251 28,251
Net loss attributable to OP
Unitholders................ (9,296) (10,936) (4,163) (11,511)
Net loss per OP Unit......... (.13) (.16) (.06) (.17)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, AIMCO will own 49% of certain
88 Partnerships, 25% of two Partnerships, and 100% of one Partnership. The
following table shows the effect on equity in earnings of unconsolidated
partnerships, net income, net income (loss) attributable to OP Unitholders,
and net loss per OP Unit in the event the Partnership will own varying
percentages of each partnership.
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(17,797)
Net income.................................................. 32,216
Net income (loss) attributable to OP Unitholders............ (593)
Net income (loss) per OP Unit............................... (.01)
</TABLE>
P-45
<PAGE> 162
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-46
<PAGE> 163
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ (13,851) $(22,274)(C) $ (36,125)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 128,169 2,589(D) 130,758
Gain on investments..................................... (12) -- (12)
(Gain) loss on disposition of properties................ (3,882) -- (3,882)
Minority interests...................................... 9,983 51 10,034
Equity in earnings of unconsolidated partnerships....... 27,537 16,864(E)
(483)(F) 43,918
Equity in earnings of unconsolidated subsidiaries....... (5,848) -- (5,848)
Extraordinary (gain) loss on early extinguishment of
debt.................................................. --
Changes in operating assets and operating liabilities... 519 (660)(G) (141)
---------- -------- ----------
Total adjustments................................... 156,466 18,361 174,827
---------- -------- ----------
Net cash provided by (used in) operating
activities........................................ 142,615 (3,913) 138,702
Net cash used in discontinued operations............ (7,999) -- (7,999)
---------- -------- ----------
Net cash provided by (used in) continuing
operations........................................ 134,616 (3,913) 130,703
---------- -------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate......................... 41,419 -- 41,419
Purchase of real estate................................... (625,603) -- (625,603)
Additions to real estate, investments and property held
for sale................................................ (55,892) (1,024)(G) (56,916)
Proceeds from sale of property held for sale.............. 303 -- 303
Purchase of general and limited partnership interests..... (276,458) (79,601)(H) (356,059)
Purchase of management contracts.......................... (48,554) -- (48,554)
Purchase of/additions to notes receivable................. (81,670) -- (81,670)
Proceeds from repayments of notes receivable.............. 10,052 -- 10,052
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 94,686 10,070(I) 104,756
Contribution to unconsolidated subsidiaries............... (42,879) -- (42,879)
Proceeds from sale of securities.......................... 642 -- 642
Purchase of investments held for sale..................... (73) -- (73)
Purchase of NHP........................................... (60,575) -- (60,575)
Purchase of Ambassador common stock....................... (19,881) -- (19,881)
---------- -------- ----------
Net cash used in investing activities............... (1,064,483) (70,555) (1,135,038)
---------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 761,270 -- 761,270
Principal repayments on secured notes payable............. (307,917) (713)(G) (308,630)
Proceeds from secured short-term financing................ 19,050 79,601(H) 98,651
Repayments on secured short-term financing................ (259,461) -- (259,461)
Principal repayments on unsecured short-term notes
payable................................................. (50,879) -- (50,879)
Proceeds (payoff) from unsecured short-term financing..... (12,500) -- (12,500)
Principal repayments on secured tax-exempt bond
financing............................................... (1,487) -- (1,487)
Net borrowings (paydowns) on the Company's revolving
credit facilities....................................... (162,008) -- (162,008)
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (17,032) -- (17,032)
Proceeds from issuance of common and preferred stock,
net..................................................... 1,098,265 -- 1,098,265
Proceeds from exercises of employee stock options and
warrants................................................ 11,553 -- 11,553
Repurchase of common stock................................ (3,283) -- (3,283)
Principal repayments received on notes due from
Officers................................................ 27,280 -- 27,280
Investments made by minority interests.................... 249 -- 249
Receipt of contributions from minority interests.......... 37,345 -- 37,345
Payments of distributions to minority interests........... (2,713) -- (2,713)
Payment of distributions.................................. (130,657) -- (130,657)
Payment of distributions to limited partners.............. (5,208) (1,415)(J) (6,623)
Payment of preferred unit distributions................... (42,984) (979)(K) (43,963)
Payment of distributions to minority interests............ (21,788) -- (21,788)
Net transactions with Insignia/ESG........................ (57,612) -- (57,612)
---------- -------- ----------
Net cash provided by financing activities........... 879,483 76,494 955,977
---------- -------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (50,384) 2,026 (48,358)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 117,896 2,291 120,187
---------- -------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 67,512 $ 4,317 $ 71,829
========== ======== ==========
</TABLE>
P-47
<PAGE> 164
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 65,372
Cash used in investing activities......................... (11,713)
Cash used in financing activities......................... (74,617)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the cash portion of the purchase price (and additional
borrowings by the Partnership) related to the acquisition by the
Partnership of additional limited partnership interests in 91 real estate
limited partnerships.
(I) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(J) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.85 per Common OP Unit.
(K) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-48
<PAGE> 165
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ 41,493 $(16,790)(C) $ 24,703
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 101,523 1,941(D) 103,464
(Gain) loss on disposition of properties................ -- -- --
Minority interests...................................... 8,429 119 8,548
Equity in earnings of unconsolidated partnerships....... 10,234 13,156(E)
(41)(F) 23,349
Equity in earnings of unconsolidated subsidiaries....... (851) -- (851)
Non-cash compensation................................... 796 -- 796
Changes in operating assets and operating liabilities... (69,549) (21)(G) (69,570)
--------- -------- ---------
Total adjustments................................... 50,582 15,154 65,736
--------- -------- ---------
Net cash provided by operating activities........... 92,075 (1,636) 90,439
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... 27,122 -- 27,122
Additions to real estate.................................. (57,526) (668)(G) (58,194)
Proceeds from sale of property and investments held for
sale.................................................... (35) -- (35)
Additions to property held for sale....................... (1,986) -- (1,986)
Purchase of general and limited partnership interests..... (9,596) -- (9,596)
Purchase of/additions to notes receivable................. (100,034) -- (100,034)
Proceeds from repayments/sale of notes receivable......... 42,747 -- 42,747
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 23,629 5,809(H) 29,438
Payment of trust based preferred dividends................ (7,415) -- (7,415)
Cash received in connection with Ambassador Merger and
AMIT Merger............................................. 17,915 -- 17,915
Contribution to unconsolidated subsidiaries............... (13,032) -- (13,032)
Purchase of investments held for sale..................... (4,935) -- (4,935)
Redemption of OP Units.................................... (516) -- (516)
Merger costs.............................................. (1,402) -- (1,402)
--------- -------- ---------
Net cash used in investing activities............... (85,064) 5,141 (79,923)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 291,885 -- 291,885
Principal repayments on secured notes payable............. (52,023) -- (52,023)
Principal advances on secured tax-exempt bond financing... 21,784 -- 21,784
Principal repayments on secured tax-exempt bond
financing............................................... (1,436) -- (1,436)
Net borrowings/ repayments on secured short-term
financing............................................... 135,332 -- 135,332
Net borrowings (paydowns) on the revolving credit
facilities.............................................. 2,513 (812)(G) 1,701
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (5,810) -- (5,810)
Proceeds from issuance of common stock and preferred
stock, net.............................................. -- -- --
Repurchase of common stock................................ (10,972) -- (10,972)
Proceeds from exercises of employee stock options and
warrants................................................ 16,294 -- 16,294
Principal repayments received on notes due from
Officers................................................ 8,084 -- 8,084
Receipt of contributions from minority interests.......... -- -- --
Payments of distributions to minority interests........... (2,034) (2,034)
Payment of distributions.................................. (107,989) -- (107,989)
Payment of distributions to limited partners.............. (12,669) (1,291)(I) (13,960)
Payment of preferred unit distributions................... (27,010) (735)(J) (27,745)
Proceeds from issuance of High Performance Units.......... 1,988 -- 1,988
Net transactions with Insignia/ESG........................ (241,003) -- (241,003)
--------- -------- ---------
Net cash provided by financing activities........... 19,578 (2,838) 16,740
--------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 26,589 667 27,256
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 55,700 4,316 60,016
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 82,289 $ 4,983 $ 87,272
========= ======== =========
</TABLE>
P-49
<PAGE> 166
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the nine months ended September 30, 1998
related to the 91 real estate partnerships is as follows (dollars in
thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 76,113
Cash used in investing activities......................... (22,616)
Cash used in financing activities......................... (42,273)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 30 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(I) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.6875 per Common OP Unit.
(J) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-50
<PAGE> 167
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: Baywood Apartments, Ltd.
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
Baywood Apartments, Ltd. (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 limited partnership interests in the Partnership (the "Units") will be
acquired by the Purchaser in exchange for an offer price per Unit of $43,313 in
cash, or 1,151.00 Common OP Units of the Purchaser, or 1,732.75 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 financial statements for the years ended
December 31, 1996 and 1997 and the quarterly report for the period ending
September 30, 1998, which the Partnership's management has indicated to be
the most current available financial statements;
3. Reviewed descriptive information concerning the real property owned
by the Partnership (the "Property"), including location, number of units
and unit mix, age, amenities and land acreage;
4. Reviewed summary historical operating statements for the Property,
for the years ended December 31, 1996 and 1997, and the nine months ending
September 30, 1998;
A-1
<PAGE> 168
5. Reviewed the 1998 operating budget for the Property prepared by the
Partnership's management. Such budgets are summarized in the Prospectus
Supplement under the section "Stanger Analysis -- Summary of Materials
Considered";
6. Reviewed the estimate of liquidation value and going concern value
provided by the general partner to Stanger. Such estimates are described in
the Prospectus Supplement under the section "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration." In
addition, we reviewed the 1998 operating budgets for each property provided
by the Partnership;
7. Discussed with management market conditions for the Property;
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 Property and the Partnership; the physical condition
of the Property including any deferred maintenance; and other factors
influencing value of the Property and the Partnership;
8. Performed a site inspection of the Property;
9. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Property, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Property;
10. Reviewed information provided by the Company relating to debt
encumbering the Property; and
11. 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 Property, the allocation of net
Partnership values between the General Partner and Limited Partners, and the
transaction costs and fees associated with a sale of the Property. 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 Property 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 Property 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 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
A-2
<PAGE> 169
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
March , 1999
A-3
<PAGE> 170
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 directors
of AIMCO are set forth below. The two directors of AIMCO-GP are Terry Considine
and Peter Kompaniez. The two directors of the general partner of your
partnership are Peter K. Kompaniez and Patrick J. Foye. The two executive
officers of the general partner of your partnership are Patrick J. Foye,
Executive Vice President, and Timothy R. Garrick, Vice President -- Accounting.
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
Paul J. McAuliffe............................ Executive Vice President -- Capital Markets
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
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
</TABLE>
B-1
<PAGE> 171
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
B.A. from Harvard College, a J.D. from Harvard Law School
and is admitted as a member of the Massachusetts Bar.
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.
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
</TABLE>
B-2
<PAGE> 172
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
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.
Paul J. McAuliffe.................... Mr. McAuliffe was appointed Executive Vice
President -- Capital Markets in February 1999. Prior to
joining AIMCO, Mr. McAuliffe was Senior Managing Director of
Secured Capital Corp and prior to that time had been a
Managing Director of Smith Barney, Inc. from 1993 to 1996,
where he was a key member of the underwriting team that led
AIMCO's initial public offering in 1994. Mr. McAuliffe was
also a Managing Director and head of the real estate group
at CS First Boston from 1990 to 1993 and he was a Principal
in the real estate group at Morgan Stanley & Co., Inc. from
1983 to 1990. Mr. McAuliffe received a B.A. from Columbia
College and an MBA from University of Virginia, Darden
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
</TABLE>
B-3
<PAGE> 173
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
and the Apartment Association of Metro Denver. Mr. Ira
received a B.S. from Metropolitan State College in 1975.
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.
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,
</TABLE>
B-4
<PAGE> 174
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Mr. Martin is a director of Dresser, which is engaged in the
petroleum services, hydrocarbon and engineering industries.
Timothy R. Garrick................... Mr. Garrick has been Vice President -- Accounting of the
general partner and AIMCO since October 1, 1998. Prior to
that date, Mr. Garrick served as Vice
President -- Accounting Services of Insignia Financial Group
from June 1997 until October 1998. From 1992 until June of
1997, Mr. Garrick served as Vice President of Partnership
Accounting for Insignia Financial Group. From 1987 to 1990,
Mr. Garrick served as Investment Advisor for U.S. Shelter
Corporation. From 1984 to 1987, Mr. Garrick served as
Partnership Investment Analyst for U.S. Shelter Corporation.
From 1979 to 1984, Mr. Garrick worked on the audit staff of
Ernst & Whinney. Mr. Garrick received his B.S. Degree from
the University of South Carolina in 1979 and is a certified
public accountant.
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> 175
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
By Fax:
(201) 896-0910
<PAGE> 176
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 26, 1999)
AIMCO Properties, L.P.
is offering to acquire units of limited partnership interest of
Buccaneer Trace Limited Partnership
in exchange for your choice of:
4.00 of our 8.0% Class Two Partnership Preferred Units;
2.75 of our Partnership Common Units; or
$100 in cash.
Generally, you will not recognize any immediate taxable gain or loss if you
exchange your units solely for our securities. However, you will recognize
taxable gain or loss if you exchange your units for cash.
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 the offer
consideration from a financial point of view.
Our offer consideration will be reduced for any distributions subsequently
made by your partnership prior to the expiration of our offer.
We will only accept a maximum of 25% 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.
You will not pay any fees or commissions if you tender your units.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline. You may withdraw any tendered units at any time
before we have accepted them for payment.
SEE "RISK FACTORS" BEGINNING ON PAGE S-23 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF RISK FACTORS THAT
YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration of $100 per unit without any
arms-length negotiations. Accordingly, our offer consideration may not
reflect the fair market value of your units. In March 1997, the property
owned by your partnership was appraised at $8,800,000. Based on this
appraised value, your units have a liquidation value of $0 per unit.
- We cannot predict when the property owned by your partnership may be
sold.
- Your general partner is a subsidiary of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- We are making this offer with a view to making a profit and 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.
- Continuation of your partnership will result in our affiliates continuing
to receive management fees from your partnership which would not be
payable if your partnership was liquidated.
- It is possible that we may conduct a subsequent offer at a higher price
more than one year after expiration of this offer.
- Unlike your partnership, our policy is to reinvest proceeds from the sale
of our properties or refinancing of our indebtedness.
- We may change our investment, acquisition or financing policies without a
vote of our securityholders.
- If you acquire our securities, your investment will change from holding
an interest in a single property to holding an interest in our large
portfolio of properties, thereby fundamentally changing the nature of
your investment.
- Recently, Moody's Investors Service revised its outlook for AIMCO's
ratings from stable to negative.
- There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
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.
March 26, 1999
<PAGE> 177
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY........................................ S-1
The Offer.................................... S-1
The AIMCO Operating Partnership.............. S-1
Affiliation with your General Partner........ S-1
Risk Factors................................. S-1
Background and Reasons for the Offer......... S-6
Valuation of Units........................... S-9
Fairness of the Offer........................ S-10
Stanger Analysis............................. S-11
Your Partnership............................. S-11
Terms of the Offer........................... S-12
Federal Income Tax Consequences.............. S-14
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-14
Comparison of Your Units and AIMCO OP Units.. S-14
Conflicts of Interest........................ S-15
Source and Amount of Funds and Transactional
Expenses................................... S-16
Summary Financial Information of AIMCO
Properties, L.P............................ S-17
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-19
Summary Financial Information of Buccaneer
Trace Limited Partnership.................. S-21
Comparative Per Unit Data.................... S-21
THE AIMCO OPERATING PARTNERSHIP................ S-22
RISK FACTORS................................... S-23
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-23
Offer Consideration Note Based on Third
Party Appraisal or Arms-Length
Negotiation.............................. S-23
Offer Consideration May Not Represent Fair
Market Value............................. S-23
Recent Appraisal Indicates a Higher
Valuation Per Unit....................... S-23
Offer Consideration Does Not Reflect Future
Prospects................................ S-23
Offer Consideration Based on Our Estimate
of Liquidation Proceeds.................. S-23
Offer Consideration May Be Less Than
Liquidation Value........................ S-23
Holding Units May Result in Greater Future
Value.................................... S-23
Conflicts of Interest with Respect to the
Offer.................................... S-23
Conflicts of Interest Relating to
Management Fees.......................... S-24
Possible Subsequent Offer at a Higher
Price.................................... S-24
Possible Recognition of Taxable Gain on a
Sale of Your Units....................... S-24
Fairness Opinion of Third Party Relied on
Information We Provided.................. S-25
Loss of Future Distributions from Your
Partnership.............................. S-25
Possible Effect of the Other Exchange
Offers on Us............................. S-25
Lack of Availability of Audited Financial
Statements............................... S-25
Potential Delay in Payment................. S-25
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-25
Fundamental Change in Nature of
Investment............................... S-25
Fundamental Change in Number of Properties
Owned.................................... S-25
Lack of Trading Market for OP Units........ S-26
Uncertain Future Distributions............. S-26
Possible Reduction in Required
Distributions on Preferred OP Units...... S-26
Possible Redemption of Preferred Stock..... S-26
Possible Recognition of Taxable Gains on OP
Units.................................... S-26
Limitations on Effecting a Change of
Control.................................. S-26
Limitation on Transfer of OP Units......... S-26
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Limited Voting Rights of Holders of OP
Units.................................... S-26
Market Prices for AIMCO's Securities May
Fluctuate................................ S-27
Litigation Associated with Partnership
Acquisitions............................. S-27
Dilution of Interests of Holders of OP
Units.................................... S-27
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-27
Possible Increase in Control of Your
Partnership by Us........................ S-27
Recognition of Gain Resulting from Possible
Future Reduction in Your Partnership
Liabilities.............................. S-27
Possible Termination of Your Partnership
for Federal Income Tax Purposes.......... S-27
Risk of Inability to Transfer Units for
12-Month Period.......................... S-27
Possible Change in Time Frame Regarding
Sale of Property......................... S-28
SPECIAL FACTORS TO CONSIDER.................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-28
Background of the Offer...................... S-28
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-32
Disadvantages of the Offer................... S-33
VALUATION OF UNITS............................. S-34
FAIRNESS OF THE OFFER.......................... S-36
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-36
Fairness to Unitholders who Tender their
Units...................................... S-37
Fairness to Unitholders who do not Tender
their Units................................ S-37
Comparison of Consideration to Alternative
Consideration.............................. S-38
Allocation of Consideration.................. S-41
STANGER ANALYSIS............................... S-41
Experience of Stanger........................ S-42
Summary of Materials Considered.............. S-42
Summary of Reviews........................... S-43
Conclusions.................................. S-46
Assumptions, Limitations and
Qualifications............................. S-46
Compensation and Material Relationships...... S-47
YOUR PARTNERSHIP............................... S-48
General...................................... S-48
Your Partnership and its Property............ S-48
Property Management.......................... S-48
Investment Objectives and Policies; Sale or
Financing of Investments................... S-48
Capital Replacement.......................... S-49
Borrowing Policies........................... S-49
Competition.................................. S-50
Legal Proceedings............................ S-50
History of the Partnership................... S-50
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-50
Distributions and Transfers of Units......... S-51
Beneficial Ownership of Interests in Your
Partnership................................ S-51
Compensation Paid to the General Partner and
its Affiliates............................. S-51
SELECTED FINANCIAL INFORMATION OF YOUR
PARTNERSHIP.................................. S-52
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP.......................... S-53
THE OFFER...................................... S-56
Terms of the Offer; Expiration Date.......... S-56
Acceptance for Payment and Payment for
Units...................................... S-56
</TABLE>
i
<PAGE> 178
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Procedure for Tendering Units................ S-57
Withdrawal Rights............................ S-60
Extension of Tender Period; Termination;
Amendment.................................. S-60
Proration.................................... S-61
Fractional OP Units.......................... S-61
Future Plans of the AIMCO Operating
Partnership................................ S-61
Voting by the AIMCO Operating Partnership.... S-62
Dissenters' Rights........................... S-62
Conditions of the Offer...................... S-62
Effects of the Offer......................... S-65
Certain Legal Matters........................ S-65
Fees and Expenses............................ S-67
Accounting Treatment......................... S-67
FEDERAL INCOME TAX CONSEQUENCES................ S-68
Tax Opinions................................. S-68
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-69
Disguised Sales.............................. S-70
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-70
Tax Consequences of Exchanging Units Solely
for Cash................................... S-71
Adjusted Tax Basis........................... S-71
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-71
Passive Activity Losses...................... S-72
Tax Reporting................................ S-72
Foreign Offerees............................. S-72
Tax Consequences of a Termination of Your
Partnership................................ S-72
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-74
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-81
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
DESCRIPTION OF PREFERRED OP UNITS.............. S-87
General...................................... S-87
Ranking...................................... S-87
Distributions................................ S-87
Allocation................................... S-88
Liquidation Preference....................... S-88
Redemption................................... S-89
Voting Rights................................ S-89
Restrictions on Transfer..................... S-90
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-90
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-92
CONFLICTS OF INTEREST.......................... S-96
Conflicts of Interest with Respect to the
Offer...................................... S-96
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-96
Competition Among Properties................. S-96
Features Discouraging Potential Takeovers.... S-96
Future Exchange Offers....................... S-97
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-97
LEGAL MATTERS.................................. S-98
INDEX TO FINANCIAL STATEMENTS.................. F-1
PRO FORMA FINANCIAL INFORMATION OF AIMCO
PROPERTIES, L.P. ............................ P-1
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> 179
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- 4.00 of our Class Two Partnership Preferred Units;
- 2.75 of our Partnership Common Units; or
- $100 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 accept a maximum of 25% of the outstanding units in response to our
offer. Our offer is not subject to any minimum number of units being tendered.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline.
The original offer price per unit in 1985 was $54,348. For the five years
ended December 31, 1998, your partnership paid no distributions.
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-GP, Inc. ("AIMCO GP") acts as the sole general
partner of the AIMCO Operating Partnership. As of December 31, 1998, AIMCO-GP
and AIMCO-LP, Inc., a limited partner of the AIMCO Operating Partnership (the
"Special Limited Partner"), owned approximately an 83% interest in the AIMCO
Operating Partnership. As of December 31, 1998, our portfolio of owned or
managed properties included 379,363 apartment units in 2,147 properties located
in 49 states, the District of Columbia and Puerto Rico. Based on apartment unit
data compiled by the National Multi Housing Council, we believe that we are one
of the largest owners and managers of multifamily apartment properties in the
United States. As of December 31, 1998, we:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 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. and our February 26, 1999 merger with Insignia Properties Trust, we
acquired a 100% ownership interest in the general partner of your partnership,
AmReal Realty, Inc., and the company that manages the property owned by your
partnership.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-24 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the
S-1
<PAGE> 180
risks associated with our offer and the disadvantages of the offer to you and
should be considered when you review "Summary -- Background and Reasons for the
Offer -- Expected Benefits of the Offer":
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. We did not use any third-party appraisal or valuation to determine
the value of any property owned by your partnership. We established the terms of
our offer, including the exchange ratios and the cash consideration, without any
arms-length negotiations.
OFFER CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
RECENT APPRAISAL INDICATES A HIGHER VALUATION PER UNIT. In March 1997, an
independent appraiser valued the property on an unencumbered basis to be
$8,800,000. Based on this appraised value, your units have a liquidation value
of $0 per unit. In determining our offer consideration, we estimated your
property to be worth $7,306,000 less approximately $465,245 of deferred
maintenance and investment. It is possible that a sale of the property could
result in your receiving more per unit than in our offer.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. The actual proceeds
obtained from a liquidation are highly uncertain and could be more or less than
our estimate. Accordingly, our offer consideration could be less than the net
proceeds that you would realize upon an actual liquidation of your partnership.
Even if our cash offer consideration is equal to liquidation value, if you
accept OP Units, you may not ultimately receive an amount equal to the cash
offer consideration when you sell such OP Units or any AIMCO securities you may
receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
value if you retain your units until your partnership is liquidated.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of ours and, therefore, has substantial conflicts of interest with
respect to our offer. We are making this offer with a view to making a profit.
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 RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its property, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
S-2
<PAGE> 181
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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.
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. You
should review "Federal Income Tax Consequences" 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. 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.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is our subsidiary).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. For any units that we
acquire from you, you will not receive any future distributions from your
partnership's operating cash flow or upon a sale of property owned by your
partnership or a refinancing of any of its debt. If you tender your units in
exchange for OP Units, you will be entitled to future distributions from us from
our operating cash flow and upon a dissolution, liquidation or wind-up of the
AIMCO Operating Partnership.
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from a sale of a property or a refinancing of its indebtedness, to (ii)
a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of December 31, 2013 to a much larger
partnership with a partnership termination date of 2093.
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FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you tender your units
for our OP Units, you will have changed your investment from an interest in a
partnership that owns and manages one property to an interest in a partnership
that invests in and manages a large portfolio of properties.
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus.
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions.
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as your partnership), we have acquired the general
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partner of a partnership and then made an offer to acquire the limited partners'
interests in the partnership. There is a risk that we will be 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. As a result, we may incur costs associated with defending
or settling such litigation or paying any judgment if we lose. As of the present
time, no limited partners of your partnership have initiated lawsuits on such
grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. As a result of the
offer, we may increase our ability to influence voting decisions with respect to
your partnership. However, we will not be able to control voting decisions
unless we acquire more units in another transaction, which cannot take place for
at least one year after expiration of this offer. Also, removal of your general
partner (which is our subsidiary) or the manager of any property owned by your
partnership may become more difficult or impossible without our consent or
approval.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of units without the
consent of your general partner (which is our subsidiary). Such consent may be
withheld by your general partner in its sole discretion. Your general partner
may withhold its consent if such transfer would result in the termination of
your partnership for tax purposes which would occur if 50% or more of the total
interest in your partnership is transferred within a 12-month period. If we
acquire a significant percentage of the interest in your partnership, your
general partner may not consent to a transfer for a 12-month period following
our offer.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investment in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to have to
hold the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns one property. The general partner of your partnership
continually considers whether the property should be sold or otherwise disposed
of after consideration of relevant factors, including prevailing economic
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conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for your partnership. We cannot
predict when the property will be sold or otherwise disposed of. However, there
is no current plan or intention to sell the property in the near future.
BALLOON PAYMENTS. Your partnership has approximately a balloon payment of
$6,644,000 of balloon payments due on its mortgage debt in May 2004. Your
partnership will have to refinance such debt or sell its property prior to the
balloon payment dates, or it will be in default and could lose the property to
foreclosure.
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 51% ownership interest in Insignia Properties Trust, which has
a 100% ownership interest in the general partner of your partnership and the
company that manages the property owned by your partnership. On February 26,
1999, we acquired the remaining 49% interest in Insignia Properties Trust in a
merger transaction. One of the consequences of the merger with Insignia is to
allow us to make the offer and, if successful, to increase our ownership in 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 August 28, 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
(which is our subsidiary):
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.
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. 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. Your partnership's mortgage notes are due in May 2004, and
require a balloon payment of $6,644,000 at that time. Your partnership
currently has adequate sources of cash to finance its operations on both a
short term and long term basis. In addition, continuation of your
partnership without the offer would deny you and your partners the benefits
that your general partner (which is our subsidiary) expects to result from
the offer. For example,
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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. There is
currently no market for the Preferred OP Units or Common OP Units.
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 Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the NYSE.
- Preferred Quarterly Distributions. Your partnership paid no distributions
for the fiscal year ended December 31, 1998. Holders of Preferred OP
Units will be entitled to receive quarterly distributions of $0.50 per
unit (equivalent to $2.00 on an annualized basis) before any
distributions are paid to holders of Common OP Units. This is equivalent
to a distribution of $8.00 per year on the number of Preferred OP Units
you will receive in exchange for each of your partnership 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 Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- Quarterly Distributions. Your partnership paid no distributions for the
fiscal year ended December 31, 1998. In 1998, we paid quarterly
distributions on the Common OP Units totalling $2.25 per unit. In January
1999, we increased our distribution rate on each of the Common OP Units
to $2.50 on an annual basis. See "The AIMCO Operating Partnership."
Assuming no change in the level of our distributions, this is equivalent
to a distribution of $6.88 per year on the number of Common OP Units you
will receive in exchange for each of your partnership units.
- 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 Common OP Units.
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- 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.
The principal disadvantages of the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and determining the offer consideration, no one separately represented
the interests of the limited partners. Although we have a fiduciary duty
to the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of such property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pretax cash proceeds to you than our
offer.
- OP Units. OP Units lack a public market, have transfer restrictions and
must be held for one year before they can be redeemed by a holder. The
ultimate return on the OP Units is directly tied to the future price of
AIMCO's Class A Common Stock or Class I Preferred Stock. You could
ultimately receive less for your OP Units than the cash price in our
offer. Further, on or after March 1, 2005, we may redeem the Class I
Preferred Stock for $25 per share.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
a sale of the property would be advantageous given market conditions, the
condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of the property and the tax consequences to you
and your partners upon a sale of the property.
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
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VALUATION OF UNITS
We determined the offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower the value produced. We used your partnership's property
income for the fiscal year ended December 31, 1997. Our method for selecting a
capitalization rate begins with each property being assigned a location and
condition rating (e.g., "A" for excellent, "B" for good, "C" for fair, and "D"
for poor). We have rated your property's location B (good) and its condition B
(good). Generally, we assign an initial capitalization rate of 10.25% to
properties in this category. We then adjust the capitalization rate based on
whether the mortgage debt that the property is subject to bears interest at a
rate above or below 7.5% per annum. Generally, for every 0.5% in excess of 7.5%,
the capitalization rate would be increased by 0.25%. Your property's mortgage
debt bears interest at 8.94% per annum, which resulted in an increase from the
initial capitalization rate of 0.75%. We also considered any changes in your
partnership's property income from 1997 to 1998. Because your partnership's
property income in 1998 remained relatively unchanged compared to 1997, we made
no further revision of the capitalization rate, resulting in a final
capitalization rate of 11.00%. The evaluation of a property's location and
condition, and the determination of an appropriate capitalization rate for a
property, is subjective in nature, and others evaluating the same property might
use a different capitalization rate and derive a different property value.
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. Further, in
applying the direct capitalization method, others may make different assumptions
and obtain different results. 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 believe that if your
partnership was liquidated there would not be enough value to fully discharge
all known liabilities. We have, however, decided to offer you $100 per unit. We
determined your partnership's value as follows:
<TABLE>
<S> <C>
Property income............................................. $ 804,000
Capitalization rate......................................... 11.00%
-----------
Gross valuation of partnership property..................... $ 7,306,000
Net Cash Shortfall.......................................... 231,274
Plus: Cash and cash equivalents............................. 44,764
Plus: Other partnership assets, net of security deposits.... 239,503
Less: Mortgage debt, including accrued interest............. (7,012,127)
Less: Accounts payable and accrued expenses................. (124,948)
Less: Other liabilities..................................... (36,571)
-----------
Partnership valuation before taxes and certain costs........ 647,895
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures and deferred
maintenance............................................... (485,245)
Less: Closing costs......................................... (182,650)
-----------
Estimated net valuation of your partnership................. 0
Percentage of estimated net valuation allocated to holders
of units.................................................. n/a
-----------
Estimated net valuation of units............................ 0
Total number of units............................. 61.0
-----------
Estimated valuation per unit................................ 0
===========
Cash consideration per unit................................. $ 0
===========
</TABLE>
In order to determine the number of Preferred OP Units we are offering for
each of your units, we divided the cash offer consideration of $100 by the $25
liquidation preference of each Preferred OP Unit to get 4 Preferred OP Units per
unit.
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In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $100 by a price
of $37.63 (the average closing price of AIMCO's Class A Common Stock on the NYSE
for the 30 trading days ended March 23, 1999) to get 2.75 Common OP Units per
unit.
FAIRNESS OF THE OFFER
FAIRNESS TO UNITHOLDERS. Your general partner is our subsidiary. 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. Your general partner did not participate in the structuring of the
offer. We and your general partner believe that the offer and all forms of
consideration offered is fair to you and the other limited partners of your
partnership. 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 (which is our subsidiary) 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 (which is our subsidiary) has compared our offer consideration
to:
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated;
- your general partner's estimate of the going concern value of your
partnership if it continued operating as an independent stand-alone
entity; and
- the net book value of your partnership; and
- recent appraisal for the property for $8,800,000, which appraisal did not
take into account the mortgages, other assets and liabilities, costs of
sale of the property and approximately $465,245 of deferred maintenance
of the property.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C> <C>
Cash offer consideration.................................... $ 100
Partnership Preferred Units................................. $ 100
Partnership Common Units.................................... $ 100
Alternatives:
Estimated liquidation proceeds............................ $ 100
Estimated going concern value(1).......................... $ 0
Estimated alternative going concern value(2).............. $ 0
Net book value (deficit).................................. $(64,063)
</TABLE>
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- ---------------
(1) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(2) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
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. Stanger has
rendered similar fairness opinions with regard to the other tender offers being
made by the AIMCO Operating Partnership. Stanger rendered the opinions only as
to the individual fairness of the offer consideration in each proposed exchange
offer.
YOUR PARTNERSHIP
Your Partnership and its Property. Buccaneer Trace Limited Partnership is a
South Carolina limited partnership which was formed on October 31, 1985 for the
purpose of owning and operating a single apartment property located in Savannah,
Georgia, known as "Buccaneer Trace Apartments." Buccaneer Trace Apartments
consists of 208 units and was built in 1986. Your partnership has no employees.
As of September 30, 1998, there were 61 units of limited partnership interest
issued and outstanding, which were held of record by 56 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.
Your partnership sold $2,928,000 of limited partnership units in 1985.
Between January 1, 1993 and December 31, 1998 your partnership did not pay any
distributions. Your partnership currently owns one property.
Property Management. Your partnership's property has been managed by an
affiliate of ours. 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.
Investment Objectives and Policies; Sale or Financing of Investments. Under
your partnership's agreement of limited partnership, your partnership is not
permitted to raise new capital or reinvest cash in new properties. Your
partnership will terminate on December 31, 2013, unless earlier dissolved. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership property within any specified time period. An
investment in your partnership is a finite life investment in which partners
receive regular cash distributions out of your partnership's distributable cash
flow, if any, and upon liquidation.
Borrowing Policies. Your partnership's agreement of limited partnership
allows your partnership to incur debt. As of December 31, 1998, your partnership
had a mortgage note outstanding of $6,960,843, payable to 1st Union and Lehman,
which bears interest at the rate of 8.94%. The mortgage debt is due in May 2004.
Your partnership's agreement of limited partnership also allows your general
partner to lend funds to your partnership. Currently, your general partner has
no outstanding loans to your partnership.
Transfers. Your units are not listed on any national securities exchange or
quoted on NASDAQ, and there is no established public trading market for the
units. Secondary sales activity for the units has been
S-11
<PAGE> 190
limited and sporadic. Your general partner monitors transfers of the units (i)
because the admission of the transferee as a substitute limited partner in your
partnership requires the consent of your general partner under your partnership
agreement, and (ii) in order to track compliance with applicable safe harbor
provisions to avoid treatment as a "publicly traded partnership" for tax
purposes. However, your general partner does not monitor or regularly receive or
maintain information regarding the prices at which secondary sale transactions
in the units have been effectuated.
TERMS OF THE OFFER
General. We are offering to acquire up to 25% of the outstanding 61 units
of your partnership, which we do not directly or indirectly own, for
consideration per unit of 4.00 Preferred OP Units, 2.75 Common OP Units, or $100
in cash. If you tender units pursuant to the offer, you may choose 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 Preferred OP Units, 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 January 1, 1999, although you will
be entitled to retain any distributions you may have received after such date
and prior to our commencement of this offer.
If you accept our offer and do not specify the consideration you desire on
the letter of transmittal, we will issue you Preferred OP Units.
Expiration Date. Our offer will expire at 5:00 P.M., New York City time, on
June 4, 1999, 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.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds 25% 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 their acceptance for payment as provided for herein.
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 Common OP Units or 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.
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;
S-12
<PAGE> 191
- 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.
The offer may be extended or delayed indefinitely, during which time you
will not receive payment for any tendered units.
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 any property owned by
your partnership's because your general partner (which is our subsidiary) and
the property manager will remain unchanged. If we borrow funds for the cash
consideration for these offers, our interest costs would increase which could
adversely affect our future earnings. If all units in this and our other
contemplated offers were purchased for cash and we borrowed all the funds, at
current interest rates, our interest expense would increase by $3,064,000 per
year.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
number of units pursuant to our offer, we may be in a position to influence
voting decisions with respect to your partnership. However, we will not be able
to control voting decisions unless we acquire more units in another transaction,
which cannot take place for at least one year after expiration of this offer.
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 (which is our subsidiary),
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 Letter of Transmittal,
and the legal and accounting fees and expenses in connection with the offer. We
will also pay the fees of Stanger for providing the fairness opinion 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 $50,000.
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.
No Dissenters' Rights. You are not entitled to dissenters' (appraisal)
rights in connection with the offer.
S-13
<PAGE> 192
Other Offers. The AIMCO Operating Partnership is also making similar
exchange offers to approximately 90 other limited partnerships in which it
controls the general partner, interests in substantially all of which were
acquired in the merger on October 1, 1998 with Insignia Financial Group, Inc.
and the February 26, 1999 merger with Insignia Properties Trust. Each of such
exchange offers is being made by a separate prospectus supplement which is
similar to this Prospectus Supplement. Copies of such prospectus supplements may
be obtained upon written request from the Information Agent at the address set
forth in "-- Information Agent" or on the back cover page of this Prospectus
Supplement. The exchange offers may be different for limited partners in each
partnership in terms of pricing and percentage of units sought, but the effects
of the offers will essentially be the same. In general, we believe that the risk
factors (except for certain tax-related risk factors) described herein for this
offer will also be applicable to the other offers.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer. Its telephone numbers are (888)
349-2005 and (201) 896-1900. Its fax number is (201) 896-0910.
FEDERAL INCOME TAX CONSEQUENCES
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Preferred OP
Units or 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.
THE FOREGOING SUMMARY IS A GENERAL DISCUSSION OF THE MATERIAL 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 "FEDERAL INCOME TAX CONSEQUENCES" 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.
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, your general
partner (which is our subsidiary) 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, Preferred
OP Units and 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.
As of February 19, 1999, the AIMCO Operating Partnership had approximately
9,729,130 Common OP Units outstanding (excluding interests held by AIMCO) and no
Class Two Partnership Preferred Units outstanding. The number of OP Units you
may acquire from us in exchange for your units will represent a lower percentage
of the outstanding limited partnership interests in the AIMCO Operating
Partnership than that of your current ownership interest in your partnership. In
response to our offer, you could elect to receive $100 in cash, 4.00 Preferred
OP Units or 2.75 Common OP Units. Both your units and the OP Units are
S-14
<PAGE> 193
subject to transfer restrictions and it is unlikely that a real trading market
will ever develop for any of such securities. If you subsequently redeem OP
Units for AIMCO Class A Common Stock or Class I Preferred Stock, we can make no
assurance as to the value of such shares of AIMCO stock, at that time, which may
be less than the cash offer price of $100.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
our subsidiary 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
both the general partner of your partnership and the manager of your
partnership's property. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $11,999.92 for the fiscal year ended December
31, 1998. The property manager received management fees of $75,349.03 for the
fiscal year ended December 31, 1998. We have no current intention of changing
the fee structure for your general partner or the 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.
AIMCO's Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is 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.
S-15
<PAGE> 194
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. We might pay a higher price for any future exchange offers we may make
for units of your partnership. In any event, we will not acquire any units for
at least one year after expiration of this offer.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $1,525 will be required to purchase all of the
units sought in our offer, if such units are tendered for cash excluding
expenses. We will obtain all such funds from cash from operations, equity
issuances and short term borrowings. For a detailed description of estimated
expenses to be incurred in the offer, see "Source and Amount of Funds and
Transactional Expenses."
S-16
<PAGE> 195
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
nine months ended September 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 of the AIMCO Operating Partnership" included in the accompanying
Prospectus. All dollar values are in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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............... $ 265,700 $ 127,083 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses........... (101,600) (50,737) (76,168) (38,400) (30,150) (10,330)
Owned property management expenses.... (7,746) (4,344) (6,620) (2,746) (2,276) (711)
Depreciation.......................... (59,792) (23,848) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
96,562 48,154 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income...... 13,968 9,173 13,937 8,367 8,132 3,217
Management and other expenses......... (8,101) (5,029) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation......... (196) (441) (588) (590) (581) --
Other assets, depreciation and
amortization........................ (3) (236) (453) (218) (168) (150)
Owner and seller bonuses.............. -- -- -- -- -- --
Amortization of management company
goodwill............................ -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
5,668 3,467 2,038 1,707 2,002 1,020
Minority interests in service company
business............................ -- 48 (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business............ 5,668 3,515 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative expenses... (7,444) (1,408) (5,396) (1,512) (1,804) (977)
Interest income....................... 18,244 4,458 8,676 523 658 123
Interest expense...................... (56,756) (33,359) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships........................ (1,052) (777) 1,008 (111) -- --
Equity in losses of unconsolidated
partnerships(c)..................... (5,078) (463) (1,798) -- -- --
Equity in earnings of unconsolidated
subsidiaries(d)..................... 8,413 456 4,636 -- -- --
Amortization of goodwill.............. (5,071) (711) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations................ 53,486 19,865 30,246 15,629 14,988 7,702
Gain on disposition of properties..... 2,783 (169) 2,720 44 -- --
Provision for income taxes............ -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before extraordinary
item................................ 56,269 19,696 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt.............. -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)..................... $ 56,269 $ 19,427 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)............................. 241 109 147 94 56 48
Total owned apartment units (end of
period)............................. 62,955 28,773 40,039 23,764 14,453 12,513
Units under management (end of
period)............................. 154,729 71,038 69,587 19,045 19,594 20,758
Basic earnings per Common OP Unit..... $ 0.80 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP Unit... $ 0.79 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit................................ $ 1.6875 $ 1.3875 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities.......................... 50,825 53,435 73,032 38,806 25,911 16,825
Cash flows used in investing
activities.......................... (185,453) (314,814) (717,663) (88,144) (60,821) (186,481)
Cash flows provided by (used in)
financing activities................ 141,221 293,984 668,549 60,129 30,145 176,800
<CAPTION>
AIMCO PROPERTIES, L.P.
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)
Cash flows provided by (used in)
financing activities................ (1,032) 14,114
</TABLE>
S-17
<PAGE> 196
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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>
Funds from operations(e)................ $ 132,881 $ 49,692 $ 81,155 $ 35,185 $ 25,285 $ 9,391
Weighted average number of Common OP
Units outstanding..................... 53,007 24,347 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation.......................... $2,685,487 $1,250,239 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation.......................... 2,355,122 1,107,545 1,503,922 745,145 448,425 392,368
Total assets............................ 3,121,949 1,608,195 2,100,510 827,673 480,361 416,361
Total mortgages and notes payable....... 1,275,401 661,715 808,530 522,146 268,692 141,315
Redeemable Partnership Units............ 232,405 178,321 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994 Cumulative
Senior Preferred Units................ -- -- -- -- -- 107,228
Partners' Capital....................... 1,427,087 560,737 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.
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>
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 10, 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
based on the NAREIT definition, as adjusted for the 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 NINE PERIOD
MONTHS ENDED FOR THE YEAR ENDED JANUARY 10,
SEPTEMBER 30, DECEMBER 31, 1994
------------------ --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
-------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $ 56,269 $19,427 $32,697 $15,673 $14,988 $ 7,702
(Gain) loss on disposition of property...................... (2,783) 169 (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 56,900 21,052 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 7,077 711 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 2,689 3,584 -- -- --
Amortization of management contracts...................... 4,201 430 1,587 -- -- --
Deferred taxes............................................ 6,134 2,164 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 17,379 2,781 6,280 -- -- --
Preferred stock dividends................................. (12,296) -- (135) -- (5,169) (3,114)
-------- ------- ------- ------- ------- -------
Funds from operations....................................... $132,881 $49,692 $81,155 $35,185 $25,285 $ 9,391
======== ======= ======= ======= ======= =======
</TABLE>
S-18
<PAGE> 197
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. (the AIMCO Operating Partnership) for the
nine months ended September 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 NINE
MONTHS FOR THE
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 345,961 $ 442,526
Property operating expenses............................... (136,240) (189,442)
Owned property management expenses........................ (8,933) (11,831)
Depreciation.............................................. (80,420) (98,853)
--------- -----------
120,368 142,400
--------- -----------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 28,912 41,676
Management and other expenses............................. (14,386) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (15,243) (26,480)
--------- -----------
(913) (9,075)
Minority interests in service company business............ -- (10)
--------- -----------
Partnership's shares of income from service company
business............................................... (913) (9,085)
--------- -----------
General and administrative expenses....................... (8,632) (21,371)
Interest expense.......................................... (90,890) (121,699)
Interest income........................................... 40,887 21,734
Minority interest......................................... (8,548) (10,034)
Equity in losses of unconsolidated partnerships........... (23,349) (43,918)
Equity in earnings of unconsolidated subsidiaries......... 851 5,848
Amortization of Goodwill.................................. (5,071) --
--------- -----------
Net income........................................ $ 24,703 $ (36,125)
========= ===========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (.12) $ (1.16)
Diluted earnings (loss) per Common OP Unit.................. $ (.12) $ (1.16)
Distributions paid per Common OP Unit....................... $ 1.69 $ 1.85
Book value per Common OP Unit............................... $ 24.52 $ 26.96
CASH FLOW DATA:
Cash provided by operating activities....................... $ 90,439 $ 130,703
Cash used in investing activities........................... (79,923) (1,135,038)
Cash provided by (used in) financing activities............. (16,740) 955,977
OTHER DATA:
Funds from operations(a).................................... $ 187,985 $ 172,733
Weighted average number of Common OP Units outstanding...... 74,946 74,094
</TABLE>
S-19
<PAGE> 198
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, net of accumulated depreciation................ $2,679,195
Total assets................................................ 4,558,819
Total mortgages and notes payable........................... 1,762,105
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 320,443
Partners' capital........................................... 1,984,019
</TABLE>
- ---------------
(a) 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
based upon the NAREIT definition, as adjusted for the 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.
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss)................................. $ 24,703 $(36,125)
HUD release fee and legal reserve................. -- 10,202
Real estate depreciation, net of minority
interests....................................... 76,521 93,050
Amortization of management contracts.............. 9,593 12,790
Amortization of management company goodwill....... 10,997 12,551
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation........................ -- 1,715
Amortization of management company goodwill..... 959 1,918
Amortization of management contracts............ 23,010 30,516
Deferred taxes.................................. (713) (1,356)
Equity in earnings of other partnerships:
Real estate depreciation........................ 79,559 95,285
Interest on convertible debentures................ (7,537) (10,003)
Preferred unit distributions...................... (29,107) (37,810)
-------- --------
Funds from operations............................. $187,985 $172,733
======== ========
</TABLE>
S-20
<PAGE> 199
SUMMARY FINANCIAL INFORMATION OF BUCCANEER TRACE LIMITED PARTNERSHIP
The summary financial information of Buccaneer Trace Limited Partnership
for the nine months ended September 30, 1998 and 1997 is unaudited. The summary
financial information for Buccaneer Trace Limited Partnership for the years
ended December 31, 1997, and 1996 is based on unaudited financial statements.
The December 31, 1995, 1994, and 1993 information is based on unaudited
financial information which is not included in the Prospectus Supplement. This
information should be read in conjunction with such unaudited financial
statements, including the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Your Partnership"
included herein. See "Index to Financial Statements."
BUCCANEER TRACE LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
-------------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- --------- ---------- -------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues.................... $ 1,089 $ 1,071 $ 1,458 $ 1,509 $ 1,407 $ 1,390 $ 1,364
Net Income/(Loss)................. $ (52) $ (54) $ (142) $ (43) $ (206) $ (128) $ (159)
Net Income per limited partnership
unit............................ $(836.07) $ (868.85) $(2,311.48) $(704.92) $(3,344.26) $(2,081.97) $(2,573.77)
Distributions per limited
partnership unit................ $ -- $ -- $ -- $ -- $ -- $ -- $ --
Distributions per limited
partnership unit (which
represent a return of
capital)........................ $ -- $ -- $ -- $ -- $ -- $ -- $ --
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents............................. $ 53 $ 66 $ 76 $ 275 $ 237 $ 493 $ 449
Real Estate, Net of Accumulated Depreciation.......... $ 4,554 $ 4,719 $ 4,701 $ 4,848 $ 5,002 $ 5,110 $ 5,289
Total Assets.......................................... $ 4,932 $ 5,068 $ 5,050 $ 5,353 $ 5,460 $ 5,842 $ 5,896
Notes Payable......................................... $ 6,974 $ 7,024 $ 7,012 $ 7,331 $ 7,398 $ 7,460 $ 7,515
General Partners' Capital/ (Deficit).................... $ (53) $ (53) $ (53) $ (52) $ (52) $ (50) $ (49)
Limited Partners' Capital/ (Deficit).................... $(2,176) $(2,036) $(2,124) $(1,983) $(1,940) $(1,736) $(1,609)
Partners' Capital (Deficit)............................. $(2,229) $(2,089) $(2,177) $(2,035) $(1,992)) $(1,786) $(1,658)
Total Distributions..................................... $ -- $ -- $ -- $ -- $ -- $ -- $ --
Book value per limited partnership unit................. $(35.67) $(33.38) $ 34.82 $(32.51) $(31.80) $(28.46) $(26.38)
Net increase (decrease) in cash and cash equivalents.... $ (23) $ (209) $ (199) $ 38 $ (256) $ 44 $ 313
Net cash provided by operating activities............... $ 52 $ 317 $ 419 $ 181 $ (84) $ 131 $ 169
Ratio of earnings to fixed charges...................... 0.89/1 0.89/1 0.78/1 0.94/1 0.71/1 0.82/1 0.78/1
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per unit of your
partnership for the year ended December 31, 1998, and the cash distributions
payable on the number of Common OP Units and Preferred OP Units issuable in
exchange therefor:
<TABLE>
<CAPTION>
ANNUAL
DISTRIBUTIONS
-------------
<S> <C>
Units of Buccaneer Trace Limited Partnership ............... $ 0
Equivalent cash distributions on Common OP Units(1)......... $6.88
Equivalent cash distributions on Preferred OP Units(2)...... $8.00
</TABLE>
- ---------------
(1) Calculated by multiplying the exchange ratio of 2.75 Common OP Units per
unit by the annualized distributions paid on the Common OP Units of $2.50
per unit.
(2) Calculated by multiplying the exchange ratio of 4.00 Preferred OP Units per
unit by the stated annual distribution rate on the Preferred OP Units of
$2.00 per unit.
S-21
<PAGE> 200
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of AIMCO. AIMCO is a real estate investment
trust that owns and manages multifamily apartment properties throughout the
United States. Through its wholly owned subsidiaries, AIMCO GP, the sole general
partner of the AIMCO Operating Partnership, and the Special Limited Partner, as
of December 31, 1998, AIMCO held approximately an 83% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled by the National
Multi Housing Council, we believe that AIMCO is one of the largest owner and
manager of multifamily apartment properties in the United States, with a total
portfolio of 379,363 apartment units in 2,147 properties located in 49 states,
the District of Columbia and Puerto Rico. As of December 31, 1998, AIMCO:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 apartment properties for third party
owners and affiliates.
AIMCO's Class A Common Stock is listed and traded on the NYSE under the
symbol "AIV." On March 23, 1999, the last reported sale price of AIMCO Class A
Common Stock on the NYSE was $35 3/16. 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 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>
1999
First Quarter (through March 23)........ $41 5/8 $35 3/16 $0.6250 $0.6250
1998
Fourth Quarter.......................... 37 3/8 30 0.5625 0.5625
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>
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.
S-22
<PAGE> 201
RISK FACTORS
The following sets forth certain risks and disadvantages of the offer and
should be read and considered when reviewing the potential benefits of the offer
set forth in "Background and Reasons for the Offer -- Expected Benefits of the
Offer." In addition, you should review the other risks of investing in us
beginning on page 2 of our accompanying Prospectus.
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. 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. 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. 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 CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
RECENT APPRAISAL INDICATES A HIGHER VALUATION PER UNIT. In March 1997, an
independent appraiser valued the property on an unencumbered basis to be
$8,800,000. Based on this appraised value, your units have a liquidation value
of $0 per unit. In determining our offer consideration, we estimate your
property to be worth $7,306,000 less approximately $465,245 of deferred
maintenance and investment not considered by the appraiser. It is possible that
a sale of the property could result in you receiving more pretax cash per unit
than our offer.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. The actual proceeds
obtained from a liquidation are highly uncertain and could be more or less than
our estimate. Accordingly, our offer consideration could be less than the net
proceeds that you would realize upon an actual liquidation of your partnership.
Even if our cash offer consideration is equal to liquidation value, if you
accept OP Units, you may not ultimately receive an amount equal to the cash
offer consideration when you sell such OP Units or any AIMCO securities you may
receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
pretax cash 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.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and the AIMCO Operating Partnership and, therefore, has
substantial conflicts of interest with respect to our offer.
S-23
<PAGE> 202
We are making this offer with a view to making a profit. 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. Another conflict is 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. 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.
CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its property, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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 sold. If you exchange your units
for cash and our 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. 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 allocated to such units 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. If you exercise your redemption right with respect to the OP Units
within two years of the date that you transfer your units to the AIMCO Operating
Partnership, your exchange of units for OP Units or OP Units and cash could be
treated as a disguised sale of your units and you would be required to recognize
gain or loss in the year of the exchange on such disguised sale. See "Federal
Income Tax Consequences -- Disguised Sales." 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. 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 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.
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. You
should review "Federal Income Tax Consequences" 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. Because the income tax
consequences of tendering units will not be the same for everyone, you should
consult your own tax advisor before determining whether to tender your units
pursuant to our offer.
S-24
<PAGE> 203
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is controlled by us).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all right 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, for any units that we acquire from you, you will not receive any
future distributions from operating cash flow of your partnership or upon a sale
of property owned by your partnership or a refinancing of any of its debt. If
you tender your units in exchange for OP Units, you will be entitled to future
distributions from the operating cash flow of the AIMCO Operating Partnership
and upon a dissolution, liquidation or winding-up of the AIMCO Operating
Partnership. See "Comparison of Your Units and AIMCO OP Units -- Distributions."
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
LACK OF AVAILABILITY OF AUDITED FINANCIAL STATEMENTS. The unaudited
financial statements of Buccaneer Trace Limited Partnership have been prepared
from the books and records of the Partnership in accordance with generally
accepted accounting principles. An audit of the Partnership's financial
statements could not be completed because the General Partner does not have
sufficient audit evidence to support the historical capitalized costs of the
Partnership's property, including the initial construction, which occurred in
1985. Nevertheless, the General Partner believes that such financial statements
appropriately reflect the financial condition and results of operations of the
Partnership for the periods presented in accordance with generally accepted
accounting principles.
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from the sale of a property or a refinancing of its indebtedness to
(ii) a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of December 31, 2013 to a much larger
partnership with a partnership termination date of 2093.
Under the AIMCO Operating Partnership's agreement of limited partnership,
the general partner has the ability, without the concurrence of the limited
partners, to acquire and dispose of properties and to borrow funds. Further,
while it is the intent to distribute net income from operations, sales of
properties and refinancings of indebtedness, the general partner may not make
such distributions. Proceeds of future asset sales or refinancings by the AIMCO
Operating Partnership generally will be reinvested rather than distributed.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you exchange your
units for OP Units, you will have changed your investment from an interest in a
partnership which owns and manages a single property to
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an interest in the AIMCO Operating Partnership which 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 and our portfolio of
properties as compared to the value of your units and your partnership.
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus. If you
exercise your redemption right with respect to the OP Units within two years of
the date that you transfer your units to the AIMCO Operating Partnership, your
exchange of units for OP Units and cash could be treated as a disguised sale of
your units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution
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policies, property purchases, and potential mergers or acquisitions. See
"Comparison of Your Units and AIMCO OP Units -- Voting Rights."
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as for your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a result, we may incur costs associated with defending or settling such
litigation or paying any judgment if we lose. As of the present time, no limited
partners of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. 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. However, we will
not be able to control voting decisions unless we acquire more units in another
transaction, which cannot take place for at least one year after expiration of
this offer. Furthermore, in the event that we acquire a substantial number of
units pursuant to our offer, removal of your general partner (which is our
subsidiary) or the manager of any property owned by your partnership may become
more difficult or impossible without our consent.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of units without the
consent of your general partner (which is our subsidiary). Such consent may be
withheld by your general partner in its sole discretion. If we acquire a
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significant percentage of the interest in your partnership, your general partner
may not consent to a transfer for a 12-month period following our offer.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investments in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to hold
the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns one property. The general partner of your partnership
continually considers whether the property should be sold or otherwise disposed
of after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for your partnership. We cannot
predict when the property will be sold or otherwise disposed of. However, there
is no current plan or intention to sell the property in the near future.
BALLOON PAYMENTS. Your partnership has approximately a balloon payment of
$6,674,000 of balloon payments due on its mortgage debt in May 2004. Your
partnership will have to refinance such debt or sell its property prior to the
balloon payment dates, or it will be in default and could lose the property to
foreclosure.
SPECIAL FACTORS TO CONSIDER
In reviewing the offer, you should pay special attention to the information
in the Sections entitled "Background and Reasons for the Offer," "Valuation of
Units," "Fairness of the Offer" and "Stanger Analysis," which contain
information regarding the background and reasons for the offer, the method of
evaluating units in the offer and alternative valuation methods considered, our
view as to the fairness of the offer, and the fairness opinion rendered by
Stanger.
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 liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
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 .6% interest, consisting of a 0 %
limited partnership interest and a .6% general partnership interest, in your
partnership.
On October 31, 1998, IPT and AIMCO entered into an agreement and plan of
merger, dated as of October 1, 1998 (the "IPT Merger Agreement"), pursuant to
which IPT merged with AIMCO on February 26, 1999 (the "IPT Merger"). Upon
consummation of the IPT Merger, each outstanding share of IPT not owned by AIMCO
was converted into the right to receive 0.3601 shares of AIMCO's Class A Common
Stock (approximately 4,180,000 shares in the aggregate).
One of the reasons we chose to acquire Insignia is that we would be able to
make the exchange 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, and would provide the AIMCO Operating Partnership
with a larger asset and capital base and increased diversification. As of the
date of this offering, the AIMCO Operating Partnership proposes to make offers
to approximately 90 of the Insignia Partnerships, including your partnership.
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During our negotiations with Insignia in early 1998, we decided that if the
merger with Insignia were consummated, we could also benefit from making offers
for limited partnership interests in the Insignia Partnerships. While some of
the Insignia Partnerships are public partnerships and information is publicly
available on such partnerships for weighing the benefits of making an exchange
offer, many of the partnerships are private partnerships and information about
such partnerships comes principally from the general partner. Our control of the
general partner makes it possible to obtain access to such information. Further,
such control also means that we control the operations of the partnerships and
their properties. Insignia did not propose that we conduct such exchange offers,
rather we initiated the offers on our own. We determined in June of 1998 that if
the merger with Insignia were consummated, we would offer to limited partners of
the Insignia Partnerships limited partnership units of the AIMCO Operating
Partnership and/or cash.
In connection with the Insignia Merger we acquired general partnership
interests and certain limited partnership interests in a number of private and
public partnerships. Eight private partnerships out of the 90 partnerships
involved in the proposed exchange offers do not have audited financial
statements prepared in accordance with generally accepted accounting practices
("GAAP"). Certain of these partnerships have audited financial statements
prepared on the basis of federal income taxes and others have unaudited
financial statements which may or may not be prepared on the basis of GAAP or
federal income taxes. For the Insignia Partnerships for which exchange offers
are being made which do not have audited GAAP financial statements for at least
two years, we are making the offer on the basis of either one year of audited
GAAP financial statements and one year of unaudited GAAP financial statements or
just unaudited GAAP financial statements. We tried to obtain two years of
audited GAAP financial statements for all the partnerships for which offers are
being made, but because of the inability to locate records from inception of the
partnerships which would allow auditors to verify the original purchase price of
the properties, no audits were possible. In these cases, the entities which
controlled the general partners prior to Insignia are no longer in business or
have no current knowledge or records of such partnerships. For the same reasons,
we do not have all the records for past years of some of the partnerships.
Therefore, for the partnerships without an audit, we did not have invoices,
escrow statements, property closing statements or the like to support the
original costs of the real property to the satisfaction of independent auditors,
in order for them to render an unqualified audit report. Consequently, we have
no way to support the original cost of the properties. However, we have general
ledgers and related accounting records that enable us to prepare GAAP basis
financial statements. These records were taken from the entities that controlled
the general partners and were subsequently maintained by us. The amount of
capitalized property costs appearing in those books and records has, to our
knowledge, been appropriately rolled forward from year to year and used by the
general partners of the partnerships in question to prepare tax returns and
periodic reports to the investors in the partnerships. Therefore, we believe
that the unaudited financial statements included in the prospectus supplements
for such partnerships have been prepared in accordance with GAAP.
In acquiring Insignia and the interests in the Insignia Partnerships, we
conducted due diligence with regard to certain of the assets acquired including
the major properties held by the Insignia Partnerships. Our due diligence
focused on the condition of the major properties and the terms of the
partnership agreements. Since Insignia had audited GAAP financial statements and
since those partnerships without audited GAAP financial statements are generally
smaller, we did not focus on the issue of audited GAAP based financial
statements for the smaller partnerships at the time of the merger. Further, for
our internal due diligence use, audited tax based financial statements are also
used. The total number of Insignia Partnerships we acquired an interest in was
approximately 550 of which approximately 25 do not have audited GAAP statements.
We were not able to pick and choose the partnerships in which we would acquire
an interest. The Insignia Partnerships were part of the business of Insignia. As
a consequence, we acquired interests in certain small private partnerships which
do not have the ability to obtain audited GAAP financial statements. It is our
policy to acquire properties or partnerships with audited GAAP based financial
statements. However, in connection with large acquisitions of partnerships
interests, such as with the Insignia Merger, we may occasionally acquire a
partnership or property without audited GAAP financial statements.
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Previous Tender Offers
Tender offers have been previously made with respect to certain of the
public Insignia Partnerships. However, there have not been any prior tender
offers to acquire units of your partnership. Except for such tender offers, we
are not aware of any merger, consolidation or other combination involving any of
the Insignia Partnerships, or any acquisitions of any of such partnerships or a
material amount of the assets of such partnerships.
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 August 28, 1998 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
(which is our subsidiary).
Liquidation
Benefits of 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 (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 your general partner (which is our subsidiary), 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 on the order of 1% of the principal amount
of the mortgage. Your general partner believes it currently is in the best
interest of your partnership to continue holding its real estate assets.
Continuation of the Partnership Without the Offer
Benefits of Continuation. Although our offer permits you to continue your
investment in your partnership, 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 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. The
continuation of your partnership will allow you to continue to participate in
the net income and any increases of revenue of your partnership and any net
proceeds from the sale of any property owned by your partnership. The General
Partner continues to review operations and expects to complete capital
expenditures in 1999 and 2000 enabling it to possibly increase rents and lower
expenses. In addition, a sale of the property may cause a tax gain to each
investor.
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Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. If your partnership continues operating as presently structured, your
partnership could be forced to borrow on terms that could result in net losses
from operations. Your partnership's mortgage notes are due in May 2004 and
require a balloon payment of $6,644,000 at that time. Your partnership currently
has adequate sources of cash to finance its operations on both a short term and
long term basis. Continuation of your partnership without the offer would deny
you and your partners the benefits that your general partner (which is our
subsidiary) expects to result from the 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.
Alternative Structures Considered
Before we decided to make our offer, we considered a number of alternative
transactions, including purchasing your partnership's property; making an offer
of only cash for your units; making an offer of only Common OP Units for your
units; and making an offer of only Preferred OP Units for your units. A merger
would require a vote of the limited partners of your partnership. If the merger
was approved, all limited partners, including those who wish to retain their
units and continue to participate in your partnership, would be forced to
participate in the merger transaction. If the merger was not approved, all
limited partners, including those who would like to liquidate their investment
in your partnership, would be forced to retain their units.
We also considered purchasing your partnership's property from your
partnership. However, a sale of your partnership's property would require a vote
of a majority of the limited partners. If the sale was approved, all limited
partners, including those who wish to continue to participate in the ownership
of your partnership's property, would be forced to participate in the sale
transaction, and possibly to recognize taxable income. If the sale was not
approved, all limited partners, including those who would like to dispose of
their investment in your partnership's properties, would be forced to retain
their investment.
In order to give all limited partners in your partnership an opportunity to
make their own investment decision, we elected to make an offer directly to you
and the other limited partners. We considered making an all cash offer in order
to satisfy some limited partners' desire for immediate liquidity. However, an
all cash offer would not be desirable for those limited partners who do not
desire immediate liquidity and do not want to immediately recognize any taxable
income, but might otherwise be interested in disposing of their investment in
your partnership and might want an opportunity to control the timing of any
realization of taxable income associated with liquidating such investment in the
future.
We considered making an offer of only OP Units, either all Common OP Units
or all Preferred OP Units. The primary disadvantage of an all OP Unit offer is
that those limited partners who want immediate liquidity would be forced to wait
at least one year before exchanging their OP Units for cash or AIMCO stock. We
decided to offer limited partners both Common OP Units and Preferred OP Units in
order to permit investors to make their own decision as to whether they
preferred the possibility of future capital appreciation (Common OP Units) or
preferred distribution rights (Preferred OP Units).
After considering these alternatives, we decided to offer limited partners
the possibility of all three forms of consideration: cash, Common OP Units and
Preferred OP Units. We think that such an offer will appeal to a large number of
limited partners in your partnership, while permitting each one to retain any or
all of his or her units and remain a limited partner in your partnership on the
same terms as before.
Sale of Assets
Your partnership could sell the property it owns. The general partner of
your partnership considers sale of your partnership's property from time to
time. However, any such sale would likely be a taxable transaction.
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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:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, currently listed and traded on the NYSE.
- Preferred Quarterly Distributions. Your partnership paid no distributions
for the fiscal year ended December 31, 1998. Holders of Preferred OP
Units will be entitled to receive quarterly distributions of $0.50 per
unit (equivalent to $2.00 on an annualized basis) before any
distributions are paid to holders of Common OP Units. This is equivalent
to a distribution of $8.00 per year on the number of Preferred OP Units
you will receive in exchange for each of your partnership 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:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- Quarterly Distributions. Your partnership paid no distributions for the
fiscal year ended December 31, 1998. In 1998, we paid quarterly
distributions on the Common OP Units totalling $2.25. In January 1999, we
increased our distribution rate on each of the Common OP Units to $2.50
on an annual basis. Assuming no change in the level of our distributions,
this is equivalent to a distribution of $6.88 per year on the number of
Common OP Units you will receive in exchange for each of your partnership
units. See "The AIMCO Operating Partnership."
- 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 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.
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DISADVANTAGES OF THE OFFER
The principal disadvantages to the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and the consideration, no one separately represented the interests of the
limited partners. Although we have a fiduciary duty to the limited
partners, we also have conflicting responsibilities to our equity
holders. We did not appoint, or ask the limited partners to appoint, a
party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of the property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pre-tax cash proceeds to you than our
offer.
- OP Units. Investing in OP Units has risks that include the lack of a
public market, transfer restrictions and a one year holding period before
they can be redeemed by a holder. The ultimate return on the OP Units is
directly tied to the future price of AIMCO's Class A Common Stock or
Class I Preferred Stock. You could ultimately receive less for your OP
Units than the cash price in our offer. Further, on or after March 1,
2005, we may redeem the Class I Preferred Stock for $25 per share.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
the sale of the property would be advantageous given market conditions,
the condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of a property and the tax consequences to you
and your partners on a sale of a property. See also "Your
Partnership -- General Policy Regarding Sales and Refinancings of
Partnership Property."
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
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VALUATION OF UNITS
We determined our cash offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower the value produced. We used your partnership's property
income for the fiscal year ended December 31, 1997. Our method for selecting a
capitalization rate begins with each property being assigned a location and
condition rating (e.g., "A" for excellent, "B" for good, "C" for fair, and "D"
for poor). We have rated your property's location B (good) and its condition B
(good). Generally, we assign an initial capitalization rate of 10.25% to
properties in this category. We then adjust the capitalization rate based on
whether the mortgage debt that the property is subject to bears interest at a
rate above or below 7.5% per annum. Generally, for every 0.5% in excess of 7.5%,
the capitalization rate would be increased by 0.25%. Your property's mortgage
debt bears interest at 8.94% per annum, which resulted in an increase from the
initial capitalization rate of 0.75%. We also considered any changes in your
partnership's property income from 1997 to 1998. Because your partnership's
property income in 1998 remained relatively unchanged compared to 1997, we made
no further revision of the capitalization rate, resulting in a final
capitalization rate of 11.00%. The evaluation of a property's location and
condition, and the determination of an appropriate capitalization rate for a
property, is subjective in nature, and others evaluating the same property might
use a different capitalization rate and derive a different property value.
Property income is the difference between the revenues from the property
and related costs and expenses, excluding income derived from sources other than
its regular activities and before income deductions. Income deductions include
interest, income taxes, prior-year adjustments, charges to reserves, write-offs
of intangibles, adjustments arising from major changes in accounting methods and
other material and nonrecurrent items. In this respect, property income differs
from net income disclosed in the partnership's financial statements, which does
not exclude these income sources and deductions. The following is a
reconciliation of your partnership's net income for the year ended December 31,
1997, to your partnership's property income for the same period.
<TABLE>
<S> <C>
Net Income (Loss)........................................... (142,000)
Other Non-Operating Expenses................................ 52,000
Depreciation................................................ 240,000
Interest.................................................... 654,000
---------
Property Income............................................. 804,000
</TABLE>
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. Further,
in applying the direct capitalization method, others may make different
assumptions and obtain different results. 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 estimated 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 (property 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 divided
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fiscal 1997 net operating income of $804,000 by the property's
capitalization rate of 11.00% to derive an estimated gross property value
of $7,306,000.
- 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
certain other costs including required capital expenditures, deferred
maintenance, and closing costs to derive a net equity value for your
partnership of $0. Closing costs, which are estimated to be 2.5% of the
gross property value, include legal and accounting fees, real property,
transfer taxes, title and escrow costs and broker's fees.
- 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. We believe that if the partnership was liquidated
there would not be enough value to fully discharge all known liabilities.
We have, however, decided to offer you $100 per unit.
<TABLE>
<S> <C>
Property income............................................. $ 804,000
Capitalization rate......................................... 11.00%
-----------
Gross valuation of partnership property..................... 7,306,000
Net Cash Shortfall.......................................... 231,274
Plus: Cash and cash equivalents............................. 44,764
Plus: Other partnership assets, net of security deposits.... 239,503
Less: Mortgage debt, including accrued interest............. (7,012,127)
Less: Accounts payable and accrued expenses................. (124,948)
Less: Other liabilities..................................... (36,571)
Partnership valuation before taxes and certain costs........ 647,895
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures and deferred
maintenance............................................... (485,245)
Less: Closing costs......................................... (182,650)
-----------
Estimated net valuation of your partnership................. 0
Percentage of estimated net valuation allocated to holders
of units.................................................. n/a
-----------
Estimated net valuation of units............................ 0
Total number of units............................. 61.0
-----------
Estimated valuation per unit................................ $ 0
===========
Cash consideration per unit................................. $ 0
===========
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration of $100 by the $25
liquidation preference of each Preferred OP Unit to get 4 Preferred OP
Units per unit.
- In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $100 by a
price of $37.63 (the average closing price of AIMCO's Class A Common
Stock on the NYSE for the 30 trading days ending on March 23, 1999) to
get 2.75 Common OP Units per unit.
The total net valuation of all partnerships in which the AIMCO Operating
Partnership is making similar exchange offers, and which were valued using the
same methods as used for your partnership, is $568,751,183, of which, $0 or
0.00% is the net valuation of your partnership.
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FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
Your general partner is a subsidiary of the AIMCO Operating Partnership. 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. Your general partner has substantial conflicts of interest with
regard to the offer. However, for all of the reasons discussed herein, we and
your general partner believe that the offer and all forms of consideration
offered is fair to you and the limited partners of your partnership. We also
reasonably believe that the similar offers to the limited partners of the other
partnerships are fair to such limited partners. 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 us 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, your
general partner (which is our subsidiary) 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. The net
loss of your partnership has decreased from $54,000 for the nine months
ended September 30, 1997 to $52,000 for the nine months ended September 30,
1998. These factors are reflected in our valuation of your partnership.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are substantially the financial
equivalent to your interest in your partnership. 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
and Stanger's estimates of the net asset value ($0 per unit), going concern
value ($0 per unit) and liquidation value ($0 per unit) of your partnership
units. See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity. However, we did review whether trading information
was available.
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 by electing to accept Preferred OP Units or
Common OP Units.
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.
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11. The estimated unit value of $100, based on a total estimated value
of your partnership's property of $7,306,000. Your general partner (which
is our subsidiary) has no present intention to liquidate your partnership
or to sell or refinance your partnership's property. See "Background and
Reasons for the Offer". See "Valuation of Units" for a detailed explanation
of the methods we used to value your partnership.
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $2.00 and current annualized distributions with respect to the
Common OP Units are $2.50. This is equivalent to distributions of $8.00 per
year on the number of Preferred OP Units, or distributions of $6.88 per
year on the number of Common OP Units, that you would receive in exchange
for each of your partnership's units. There were no distributions with
respect to your units for the fiscal year ended December 31, 1998. See
"Comparison of Your Units and AIMCO OP Units -- Distributions."
13. The fact that if your partnership were liquidated as opposed to
continuing, the general partner (which is our subsidiary) would not receive
the substantial management fees it currently receives. As discussed in
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," we do not believe that
liquidation of the partnership is in the best interests of the unitholders.
Therefore, we believe the offer is fair in that the fees paid to the
general partner would continue even if the offer was not consummated. We
are not proposing to change the current management fee arrangement.
In evaluating these factors, your general partner (which is our subsidiary)
and the AIMCO Operating Partnership did not quantify or otherwise attach
particular weight to any of them.
Your general partner (which is our subsidiary) has not retained an
unaffiliated representative to act on behalf of the limited partners in
negotiating the terms of the offer since each individual limited partner can
make his own decision as to whether or not to tender and what consideration to
take. Unlike a merger or other form of partnership reorganization, a majority or
more of the holders of limited partnership interests in your partnership cannot
bind you. If an unaffiliated representative had been obtained, it is possible
that such representative could have negotiated a higher price for your units
than was unilaterally offered by the AIMCO Operating Partnership. We have
retained Stanger to conduct an analysis of our offer and to render an opinion as
to the fairness to you of the offer consideration from a financial point of
view. Although no representative has been retained to act solely on behalf of
the limited partners for purposes of negotiating the terms of the offer, we have
determined that the transaction is fair to you from a financial point of view.
We made this determination based, in part, on the fairness opinion from Stanger
and the fact that all limited partners may elect to retain their existing
security on the same terms as before our offer.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
Your general partner (which is our subsidiary) 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 and, although there are
other ways to value real estate, is a reasonably fair method to determine the
consideration offered. Although we believe our offer consideration represents
the amount you would receive if we currently liquidated your partnership, an
actual liquidation might generate a higher or lower price for holders of units.
A liquidation in the future might generate a higher or lower 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
Your general partner (which is our subsidiary) 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
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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 sell your partnership's property or refinance its
indebtedness within any specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, your general partner
(which is our subsidiary) has attempted to compare the cash offer consideration
against: (a) estimates of the value of the units on a liquidation basis; (b)
estimates of the going concern value of your units based on continuation of your
partnership as a stand-alone entity; (c) the net book value of your units; and
(d) the recent appraisal of your partnership's property. The general partner of
your partnership believes that analyzing the alternatives in terms of estimated
value, 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 us. These assumptions relate to, among other things: the operating
results since December 31, 1997 as to income and expenses of each property,
other projected amounts and the capitalization rates that may be used by
prospective buyers if your partnership assets were to be liquidated. The 1998
budget is discussed in "Stanger Analysis -- Summary of Materials Considered" and
other projected amounts are discussed in "Stanger Analysis -- Summary of
Reviews."
In addition, these estimates are based upon certain information available
to your general partner (which is our subsidiary) 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. 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.
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.
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C>
Cash offer price............................................ $ 100
Partnership preferred units................................. $ 100(1)
Partnership common units.................................... $ 100(1)
Alternatives:
Estimated liquidation proceeds............................ $ 100
Estimated going concern value............................. $ 0(2)
Estimated alternative going concern value................. $ 0(3)
Net book value (deficit).................................. $(64,063)
</TABLE>
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- ---------------
(1) In our discussion of the offer price as being fair with regard to other
methods of valuing your partnership, we believe the number of Common OP
Units and Preferred OP Units to be issued per unit in the offer to be equal
to the cash price per unit. Therefore, the fairness discussion applies
equally to the cash and non-cash forms of consideration being effected. See
"Valuation of Units" for details of how the number of OP Units was
determined.
(2) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(3) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
Prices on Secondary Market
There is no active market for your units. Your general partner (which is
our subsidiary) is unaware of any secondary market activity in the units.
Therefore any comparison to prices on the secondary market is not possible at
the present time. See "Your Partnership -- Distributions and Transfers of
Units -- Transfers."
Prior Tender Offers
There have been no previous tender offers for units of your partnership.
Appraisal
Your partnership's property was appraised in 1997 by an independent third
party appraiser, J. Blake and Associates (the "Appraiser") but not in connection
with the offer. 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 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. The estimated market value of the
fee simple estate of the property was $8,800,000 as of March 1997.
The total appraised value of the property is $8,800,000 and was not brought
down to a per unit basis by us since such appraisal does not reflect the
mortgage encumbering the property of $7,012,000 (including interest), other
assets and liabilities of the partnership or any costs of sales of the property
as reflected in "Valuation of Units." However, using the appraisal amount
instead of the "estimated gross valuation of your partnership's property" in the
table in the "Valuation of Units" would result in a higher amount per unit than
our offer. If this appraised value was used as the gross valuation of
partnership property, the liquidation value of your units would be $0 per unit.
We believe that, based on the condition of the property, the appraisals
substantially overstate its value. The appraisals did not take into account the
deferred maintenance costs of the partnership's property. Therefore, we believe
that the appraisals are less meaningful in assessing the fairness of our offer
consideration than the analysis reorganize gain or loss in the year of the
exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
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. Your general
partner (which is our subsidiary) 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
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
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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.
Estimated Going Concern Value and Alternative Going Concern Value
Going concern value is a measure of the value of your partnership if it
continued operating as an independent stand-alone entity. The estimated value of
the partnership on a going concern basis is not intended to reflect the
distributions payable to limited partners if its assets were to be sold at their
current fair market value. The general partner of your partnership estimated the
going-concern value of your partnership by analyzing projected cash flows and
performing a discounted cash flow analysis. The general partner of your
partnership assumed that your partnership will be operated in the same manner as
currently, as an independent stand-alone entity, and its assets sold in a
liquidation after a ten-year holding period. Distribution and sale proceeds per
partnership unit were discounted in the projections at a rate of 17.5%.
The general partner of your partnership assumed that real estate selling
costs will be incurred which will equal 2.5% of the sales price. This analysis
assumes that the partnership property will be sold in a liquidation, at the
expiration of the ten-year holding period, to an independent third-party buyer.
Upon such liquidation, other balance sheet assets (excluding amortizing assets)
and liabilities of your partnership will be sold at their book value, and the
net proceeds of sale will be allocated between the general partners and offerees
in accordance with your partnership's agreement of limited partnership. Should
the assets be liquidated over time, even at prices equal to those projected,
distributions to limited partners of your partnership's cash flow from
operations might be reduced because relatively fixed costs, such as general and
administrative expenses, are not proportionately reduced with the liquidation of
assets. However, for simplification purposes, the sales are assumed to occur
concurrently.
The going concern method relies on a number of assumptions, including among
other things, (i) rental rates for new leases and lease renewals; (ii)
improvements needed to prepare an apartment for a new lease or a renewal lease;
(iii) lease periods; (iv) capital expenditures; (v) broker's commissions; (vi)
cash reserves; and (vii) discount rates applied to future cash flows. The use of
assumptions or variables that differ from those described above could produce
substantially different results. Neither we nor the general partner of your
partnership solicited any offers or inquiries from prospective buyers of the
property owned by your partnership in connection with the preparation of the
estimates of value of the properties and the actual amounts for which the
partnership's properties or the partnership could be sold could be significantly
higher or lower than any of the estimates contained herein. The estimated going
concern value of your partnership is $0 per unit, which value is below our offer
price per unit. Therefore, we believe the offer price is fair in relation to the
going concern value.
The general partner determined going concern value based upon the
discounted present value of projected cash flows from the partnership over a
ten-year period of operation, which is a standard period for going concern
analyses for real property assets. Such discounted cash flows were based upon
year one property income from the real estate portfolio of $804,000, escalated
at a 3% per annum for the ten-year projection period. Property income was
reduced by: (i) partnership administrative expenses of $20,000 per annum; and
(ii) debt service on existing debt through maturity or the end of ten years,
whichever occurs first. For debt which matures during the ten-year period, a
refinancing at a 7% interest rate was assumed. At the end of the ten-year
projection period, the property was assumed to be sold at a price based upon
property income for the immediately following year capitalized at a
capitalization rate of 11.25%, less expenses of sale estimated at 3% of the
property value. The net cash flow to limited partners from the continued
operation of the property and the net proceeds of sale was then discounted at a
discount rate of 25% to achieve the going concern value of $0 per unit.
Your partnership's property currently has a balloon payment due in May
2004. While the going concern value was based on your partnership refinancing
its indebtedness and continuing to own its property; the alternative going
concern value of $0 is based on selling the property when the balloon payment is
due and
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otherwise includes the same assumptions as the going concern value described
above. For the reason set forth above, we believe the offer consideration is
fair in relation to the alternative going concern value.
There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
NET BOOK VALUE
Net book value per unit is a deficit of $64,063 and therefore a comparison
with the offering price would not be meaningful in determining the fairness of
the offering price.
STANGER'S ESTIMATE OF NET ASSET VALUE, GOING CONCERN VALUE AND LIQUIDATION
VALUE
In rendering its opinion set forth as Appendix A, Stanger did its own
independent estimate of your partnership's net asset value of $0 per unit, going
concern value of $0 per unit and liquidation value of $0 per unit. For an
explanation of how Stanger determined such values see "Stanger
Opinion -- Summary of Reviews -- Comparison of Offer Price To Liquidation Value,
Going Concern Value and Secondary Market Prices." An estimate of your
partnership's net asset value per is based on a hypothetical sale of your
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 a liquidation value, after provisions
in full for all of the other known liabilities of your partnership. The net
asset value does not take into account (i) timing considerations discussed under
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," and (ii) costs associated with
winding up of your partnership. Therefore, the AIMCO Operating Partnership
believes that the estimate of net asset value per unit does not necessarily
represent the fair market value of a unit or the amount the limited partner
reasonably could expect to receive if the partnership's property was sold and
the partnership was liquidated. For this above reason, the AIMCO Operating
Partnership considers net asset value estimates to be less meaningful in
determining the offer consideration than the analysis described above under
"Valuation of Units."
Stanger's estimates of net asset value, going concern value and liquidation
value per unit represents discounts to the offer price of $100, $100 and $100.
In light of these discounts and for all the reasons set forth above, the AIMCO
Operating Partnership believes the offer price is fair to the limited partners.
The AIMCO Operating Partnerships believes that the best and most commonly used
method of determining the value of a partnership which only owns an apartment is
the capitalization of income approach set forth in "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. We
believe that if your partnership was liquidated there would not be enough value
to fully discharge all known liabilities. We have, however, decided to offer you
$100 per unit. Since the allocation was made in accordance with the terms of
such partnership agreement, we believe the allocation is fair. 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. Stanger has advised us that the description of Stanger's analysis
contained herein describes the material portions of Stanger's review. 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 any losses, claims,
damages, liabilities or expenses to which Stanger may be subject, under any
applicable federal or state law, including federal and state securities laws,
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 NYSE 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 financial statements for the years ended December 31, 1996 and
1997, and its unaudited financial statements for the period ended September 30,
1998, which your partnership's management has indicated to be the most current
available financial statements at the time; (iii) reviewed descriptive
information concerning your partnership's real estate assets (the "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, 1997 and 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 similar properties; (viii) reviewed
internal financial analyses prepared by your partnership of the estimated
current net liquidation value and going concern value of your partnership; (ix)
reviewed information provided by AIMCO concerning the AIMCO Operating
Partnership, the Common OP Units and the Preferred OP Units; and (x) conducted
other studies, analysis and inquiries as Stanger deemed appropriate.
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A summary of the operating budgets per property for the year ended December
31, 1998, which was supplied by your partnership to Stanger, is as follows:
FISCAL 1998 OPERATING BUDGETS
<TABLE>
<CAPTION>
----------
<S> <C>
Total Revenues.............................................. $1,532,560
Operating Expenses.......................................... (652,234)
Replacement Reserves -- Net................................. (89,827)
Debt Service................................................ (676,101)
Capital Expenditures........................................ (39,950)
----------
Net Cash Flow..................................... $ 74,248
==========
</TABLE>
The above budgets at the time they were made were forward-looking
information developed by the general partner of your partnership. Therefore, the
budgets were dependent upon future events with respect to the ability of your
partnership to meet such budget. The budgets incorporated various assumptions
including, but not limited to, lease revenue (including occupancy rates),
various operating expenses, general and administrative expenses, depreciation
expenses, capital expenditures, and working capital levels. While we deemed such
budgets to be reasonable and valid at the date made, there is no assurance that
the assumed facts will be validated or that the circumstances will actually
occur. Any estimate of the future performance of a business, such as your
partnership's business, is forward-looking and based on assumptions some of
which inevitably will prove to be incorrect.
The budget amounts provided above are figures that were not computed in
accordance with GAAP. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budget are often
re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budget
presented for fiscal 1998 should not necessarily be considered as indicative of
what the audited operating results for fiscal 1998 will be. For the year ended
December 31, 1998, the partnership expects to report revenues of $1,467,818,
operating expenses of $621,084 and replacement reserves and capital expenditures
of $80,693. Based on these estimates, the partnership's net cash flow before
debt service, which we believe provides a better indication of the partnership's
actual operating performance, their net cash flow, was greater than the budgeted
amounts.
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 the third quarter of
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,
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income, expenses, reserve requirements, cash flow and related financial
information; property descriptive information including unit mix or square
footage; 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 nine month period ending
September 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 property.
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 property, 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 the
liquidation value calculation prepared by the management of your partnership.
Stanger observed that such liquidation value was based upon the gross property
valuation estimate prepared by management, which in turn is based upon fiscal
year 1997 net operating income capitalized at a capitalization rate of 11%.
Stanger further observed that the gross property valuation was adjusted for the
following additional items to achieve the liquidation value of your partnership:
(i) cash, other assets, mortgage indebtedness and other liabilities determined
as of December 31, 1997; (ii) estimated closing costs equal to approximately
2.5% of gross real estate value; and (iii) extraordinary capital expenditure
estimates in the amount of $465,245. Stanger observed that your partnership
liquidation value was negative, however a minimum value of $100 was ascribed to
a unit.
Review of Partnership Going Concern Analysis. Stanger reviewed the going
concern value calculation prepared by management of your partnership. Stanger
observed that such going concern value was based upon the discounted present
value of projected cash flows from the partnership over a ten-year period of
operation which is a standard period for going concern analysis for real
property assets. Such discounted cash flows were based upon year one property
income from the real estate portfolio of $804,000 escalated at 3% per annum for
the ten-year projection period. Property income was reduced by: (i) partnership
administrative expenses of $20,000 per annum; (ii) cash reserves; and (iii) debt
service on existing debt through maturity or the end of ten years, whichever
occurs first. For debt which matures during the ten-year period, a refinancing
at a 7% interest rate was assumed. At the end of the ten-year projection period,
the properties were assumed to be sold based upon: (i) property income for the
immediately following year capitalized at a capitalization rate of 11.25%; and
(ii) expenses of sale estimated at 3% of property value. Stanger observed that
the proceeds of sale were reduced by the estimated debt balance at the end of
the tenth year to provide net proceeds from the sale of your partnership's
property.
The resulting cash flows for the ten-year period were discounted to present
value at a discount rate of 40%. Stanger observed that such discount rate was
based upon the portfolio real estate discount rate of 13.7%, adjusted for
leverage risk and illiquidity risk. Stanger observed that the resulting
partnership going concern value was negative and therefore deemed 0.
Review of Secondary Market Prices. Stanger maintains a database of
secondary market information on limited partnership units. Stanger observed for
its data that no units were reported traded in the secondary market during 1998.
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Comparison of Offer Price to Liquidation Value, Going Concern Value and
Secondary Market Price. Stanger observed that the offer price of $100 per unit
is equal to management's estimate of liquidation value, and reflects a $100
premium to management's estimate of going concern value of $0. Stanger further
observed that investors may select cash, Common OP Units or Preferred OP Units
in exchange for their partnership units or they may elect to continue to hold
their partnership units. Stanger further observed that the Common OP Units will
be priced at $37.625 per unit, an amount which equals the average of the closing
prices for the common shares into which such Common OP Units are convertible for
the 30-trading day period ended March 23, 1999. Furthermore, Stanger observed
that the Preferred OP Units to be issued in the transaction will be based upon
the liquidation preference of $25. Stanger noted that the Preferred OP Units are
redeemable for, at AIMCO's option, either: (i) $25 in cash per Preferred OP
Unit; (ii) common stock of AIMCO based upon a ten-day average price at the time
of the requested redemption; or (iii) commencing on the third year following the
closing of this transaction, preferred stock of AIMCO with a dividend equal to
the distribution on the Preferred OP Units. Stanger observed that the ten-day
average closing price of the AIMCO common stock is $36.425, as of March 23, 1999
and therefore an investor receiving AIMCO common shares in redemption of the
Preferred OP Units would receive 0.6863 shares with a value approximating $25
for each $25 Preferred OP Unit redeemed, based upon AIMCO's common share price
as of March 23, 1999. Stanger noted that commencing in the third year, investors
redeeming Preferred OP Units may receive from AIMCO Preferred Stock with a
dividend equal to the distribution on the AIMCO Preferred OP Units. Stanger
observed that the distribution on the Preferred OP Units is set at 8% of $25 and
that the average dividend yield on AIMCO's outstanding C, D, G and H Preferred
Shares approximates 10.17% as of March 23, 1999. Stanger noted that, based upon
the cash dividend yield on the AIMCO Preferred Shares identified above as of
March 23, 1999, investors would receive Preferred Shares with a value of
approximately $19.80 for each $25 Preferred OP Unit if such redemption occurred
after the second year following the closing of the transaction. Stanger further
observed that the above analysis does not take into consideration the present
value of the earnings on the tax deferral an investor may realize as the result
of selecting Preferred OP Units in lieu of cash in a taxable transaction.
In addition to the above analysis, Stanger prepared an independent estimate
of net asset value, going concern value and liquidation value per unit. Stanger
has advised AIMCO that Stanger's estimates of net asset value, liquidation value
and going concern value are based upon Stanger's independent estimate of
property income and cash reserves for the property, a direct capitalization rate
of 9.75%, transaction costs of 2.5% to 5.0%, growth rates of 3% and a terminal
capitalization rate of 10.25%. Stanger has advised us that the direct
capitalization rate represents Stanger's estimate of the capitalization rate
applicable to its estimate of property income for the property and is based upon
Stanger's independent estimate of the direct capitalization rate for such
property based upon such property's age, condition and location. Stanger further
advised us that the terminal capitalization rate is the capitalization rate
utilized in Stanger's going concern value estimate which is applied to Stanger's
estimate of property income in the eleventh year to establish the value of the
property at the end of the tenth year. Stanger has advised us that Stanger
estimated the terminal capitalization rate at a 50 basis point premium to the
direct capitalization rate estimate for the property. Stanger advised us that
Stanger adjusted its estimate of net asset value and liquidation value for the
cost of above market debt assuming a 7% interest rate. Stanger utilized deferred
maintenance estimates derived from the Adjusters International, Inc. reports in
the calculation of net asset value, liquidation value and going concern value.
With respect to the going concern value estimate prepared by Stanger, Stanger
advised AIMCO that a ten-year projection period and a discount rate of 40% was
utilized. Such discount rate reflects the risk associated with real estate,
leverage and a limited partnership investment. The 40% discount rate was based
upon the property's estimated internal rate of return derived from the
discounted cash flow analysis, (12.2% as described above), plus a premium
reflecting the additional risk associated with mortgage debt equal to
approximately more than 85% of property value. Stanger's estimates were based in
part upon information provided by us. Stanger relied upon the deferred
maintenance estimates, property descriptions, unit configurations, allocation
among partners, and other data provided by us. Stanger's analyses were based on
balance sheet data as of September 30, 1998. Stanger's review also included a
site visit, review of rental rates and occupancy at the properties as well as
competing properties. Stanger's estimate of net asset value, going
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concern value and liquidation value per unit were $0, $0 and $0 representing
premiums (discounts) to the offer price of $100. See "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration."
Review of Appraisal. Stanger observed that an appraisal was prepared by
Joseph J. Blake and Associates as of March 18, 1997 which estimated the fee
simple market value of the property at $8,800,000. Stanger observed that such
appraisal indicates that the appraiser relied primarily upon the income approach
to value and secondarily on the sales comparison approach to value. The
appraiser did not consider the cost approach in its final estimate of value.
Stanger further observed that in performing the income approach, the appraiser
estimated effective gross income at $1,478,256 and expenses, after a $200 per
unit replacement reserve, at $594,287 resulting in net operating income of
$883,969 which the appraiser then capitalized at a capitalization rate of 10% to
derive an estimate of value of $8,839,692 which was rounded to $8,800,000. The
appraiser identified sales comparables with a capitalization rate range of 10.3%
to 11.5% with an average of 11.0% and utilized a 10.0% capitalization rate in
the income approach.
Stanger observed that the actual net operating income as reported by us for
1997 was $804,000 after a $300 replacement reserve or approximately $80,000 less
than estimated by the appraiser. Stanger observed that utilizing the same
capitalization rate utilized by the appraiser and the 1997 net operating income
reported by us would result in a value of approximately $8,000,000.
Stanger observed that in connection with Stanger's estimate of net asset
value, Stanger estimated the value of the property at $7,940,000, or
approximately 99.25% of the appraisal value adjusted for actual reported net
operating income capitalized at 10%. Further, Stanger observed that even if
Stanger had utilized the adjusted value of $8,000,000 in its analysis of net
asset value, Stanger's net asset value would have been zero. Stanger has advised
us that they did not assign specific weightings to any portions of its review
and analysis.
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. Stanger has rendered similar fairness opinions with regard to certain
other exchange offers being made by the AIMCO Operating Partnership. Stanger
rendered the opinions only as to the individual fairness of the offer
consideration in each proposed exchange offer. The Fairness Opinion does not
address the fairness of all possible acquisitions of interests in your
partnership. In addition, the Fairness Opinion will not be revised to reflect
the actual participation in the offer.
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 your general partner (which is our subsidiary) and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's property, and the transaction costs and fees associated with a
sale of the property. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's property 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
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partnership's property 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 property 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 property 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, nor did Stanger
address the fairness of all possible acquisitions of interests in the
partnership. The opinion will not be revised to reflect the actual results of
the offer. 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 or oral 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 $9,000 with
respect to your partnership. The estimated aggregate fee payable to Stanger in
connection with all affiliated partnerships is estimated at $1,510,000, plus
out-of-pocket expenses estimated at $61,000. 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 was
engaged by AIMCO during 1997 to represent AIMCO in negotiations to acquire
interests in a real estate limited partnership. Such transaction was never
consummated and no fee was ever paid to Stanger in connection with such proposed
transaction. AIMCO and its affiliates may retain the services of Stanger in the
future. Any such future services could relate to this offer, some or all of the
concurrent offers, or a completely separate transaction.
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YOUR PARTNERSHIP
GENERAL
Buccaneer Trace Limited Partnership, is a South Carolina limited
partnership which completed a private placement of units in 1985. Each unit was
initially sold at a price of $54,348. Insignia acquired the general partner of
your partnership in December 1990. AIMCO acquired Insignia in October 1998.
There are currently a total of 56 limited partners of your partnership and a
total of 61 units of your partnership outstanding. Your partnership is in the
business of owning and managing residential housing. Currently, your partnership
owns and manages the property described below. Your partnership has no
employees. 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.
YOUR PARTNERSHIP AND ITS PROPERTY
Your partnership was formed on October 31, 1985 for the purpose of owning
an apartment property located in Savannah, Georgia, known as "Buccaneer Trace
Apartments." Your partnership's property is owned by the partnership but is
subject to a mortgage. The property was built in 1986 and consists of 208
apartment units. There are 160 one-bedroom apartments and 48 two-bedroom
apartments. Your partnership's property had an average occupancy rate of
approximately 91.49% in 1998, 97.12% in 1997 and 97.12% in 1996.
Your partnership's property provides residents with a number of amenities
and services, such as 24-hour desk service, exercise room and/or sauna, and
party or meeting rooms. Nearly all apartment units are wired for cable
television, and many apartment units also offer one or more additional features,
such as washer/ dryer, microwave, fireplace, and patio/balcony.
Presently, there are no plans for any major renovations or improvements for
the property. Budgeted renovations or improvements for 1999 total $465,245 and
are intended to be paid for out of cash flow or borrowings. Renovation items
include roofing, gutters and downspouts, plumbing, stairwells, drives and
parking lot, landscape and irrigation, and drainage.
Set forth below are the average rents for the apartments for the last five
years:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$558 $575 $531 $524 $522
</TABLE>
The apartments are being depreciated for federal income tax purposes using
the accelerated cost recovery method. Depreciation is computed principally by
the straight-line and accelerated methods over estimated lives of 3 to 40 years.
Currently, the real estate taxes on the property are $106,916 of $2,993,172
of assessed valuation with a current yearly tax rate of 3.57%. When the proposed
improvements are made it is anticipated that the yearly tax rate may increase by
approximately 3.64% of such improvements.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a wholly 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.
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS
Under your partnership's agreement of limited partnership, your partnership
is not permitted to raise new equity and reinvest cash in new properties.
Consequently, your partnership is limited in its ability to expand its
investment portfolio. Your partnership will terminate on December 31, 2013
unless earlier dissolved. Your
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partnership has no present intention to liquidate, sell, finance or refinance
your partnership property within any specified time period.
Generally, your partnership is authorized to acquire, develop, improve, own
and operate your partnership's property as an investment and for income
producing purposes. The investment portfolio of your partnership is limited to
the assets acquired with the initial equity raised through the sale of units to
the limited partners of your partnership or the assets initially contributed to
your partnership by the limited partners, as well as the debt financing obtained
by your partnership within the established borrowing restrictions.
An investment in your partnership is a finite life investment, with the
partners to receive regular cash distributions out of your partnership's
distributable cash flow, if available, and to receive cash distributions upon
liquidation of your partnership's real estate investments, if available.
In general, your general partner (which is our subsidiary) regularly
evaluates the partnership's property by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors the property's specific locale and sub-market
conditions (including stability of the surrounding neighborhood) 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 (including any prepayment penalties), tax implications,
availability of attractive mortgage financing to a purchaser, 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. If rental market conditions improve, 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 viable option than it is
currently. After taking into account the foregoing considerations, your general
partner is not currently seeking a sale of your partnership's property primarily
because it expects the property's operating performance to improve in the near
term. In making this assessment, your general partner noted that occupancy and
rental rates at the property were 92% and $545, respectively, at December 31,
1998, compared to 97% and $558, respectively, at December 31, 1997. Although
there can be no assurance as to future performance, the general partner expects
occupancy and rental rates to improve in the near future because of the
property's desirable location and planned improvements. In addition, the general
partner noted that it expects to spend approximately $465,245 for capital
replacements and improvements at the property in 1999 to repair and improve the
property's roofing, gutters, plumbing, stairwells, parking lot, landscape and
irrigation, and drainage. These expenditures are expected to improve the
desirability of the property to tenants. The general partner does not believe
that a sale of the property at the present time would adequately reflect the
property's future prospects. Another significant factor considered by your
general partner is the likely tax consequences of a sale of the property for
cash. Such a transaction would likely result in tax liabilities for many limited
partners. The general partner has not received any recent indication of interest
or offer to purchase the property.
CAPITAL REPLACEMENT
Your partnership has an ongoing program of capital improvements,
replacements and renovations, including roof replacements, kitchen and bath
renovations, balcony repairs (where applicable), replacement of various building
systems and other replacements and renovations in the ordinary course of
business. All capital improvement and renovation costs are expected to be paid
from operating cash flows, cash reserves, or from short-term or long-term
borrowings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Your Partnership."
BORROWING POLICIES
Your partnership's agreement of limited partnership allows your partnership
to incur debt. As of December 31, 1998, your partnership had a current mortgage
note outstanding of $6,960,843, payable to 1st Union and Lehman, which bears
interest at a rate of 8.94%. The mortgage debt is due on May 2004. Your
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partnership's agreement of limited partnership also allows the general partner
of your partnership to lend funds to your partnership. Currently, your general
partner has no outstanding loans payable to your partnership.
COMPETITION
There are other residential properties within the market area of your
partnership's property. The number and quality of competitive properties in such
an area could have a material effect on the rental market for the apartments at
your partnership's property and the rents that may be charged for such
apartments. While we are a significant factor in the United States in the
apartment industry, competition for apartments is local.
LEGAL PROCEEDINGS
Your partnership is party to a variety of legal proceedings related to its
ownership of the partnership's property and management and leasing business,
respectively, arising in the ordinary course of the business, which are not
expected to have a material adverse effect on your partnership.
HISTORY OF THE PARTNERSHIP
Your partnership sold $2,928,000 of limited partnership units in 1985 for
$54,348 per unit. Your partnership currently owns one apartment property.
Your partnership used the funds raised to purchase its property and it has
expended the funds so raised many years ago. Your partnership currently owns the
property described herein, which is subject to a substantial mortgage. Your
general partner (which is our subsidiary) has not experienced any material
adverse financial developments from January 1, 1997 through the present.
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.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, your general partner (which is our subsidiary) is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partners of your partnership are
not liable to your partnership or the limited partners for any loss or damage
resulting from any act or omission performed or omitted in good faith, which
does not constitute fraud, gross negligence or willful misconduct, pursuant of
the authority granted to promote the interests of your partnership. Moreover,
the general partners will not be liable to your partnership or limited partner
because any taxing authorities disallow or adjust any deduction or credits in
your partnership income tax returns. 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, the general
partners of your partnership are indemnified for any loss or damage resulting
from any act or omission performed or omitted in good faith, which does not
constitute fraud, gross negligence or willful misconduct, pursuant of the
authority granted to promote the interests of your partnership. Such
indemnification includes reasonable fees and expenses of attorneys engaged by
the general partners in defense of such act or omission and other reasonable
costs and expenses of litigation and appeal.
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 partners of your partnership.
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DISTRIBUTIONS AND TRANSFERS OF UNITS
Distributions
The original cost per unit was $54,348. There have been no distributions
since 1993.
Transfers
The units are not listed on any national securities exchange or quoted on
the NASDAQ System, the Electronic Bulletin Board or the "pink sheets," and there
is no established public trading market for the units. Secondary sales activity
for the units has been limited and sporadic. The general partner of your
partnership monitors transfers of the units (a) because the admission of the
transferee as a substitute limited partner in your partnership require the
consent of the general partner of your partnership under your partnership's
agreement of limited partnership, and (b) in order to track compliance with safe
harbor provisions to avoid treatment as a "publicly traded partnership" for tax
purposes. However, the general partner of your partnership does not monitor or
regularly receive or maintain information regarding the prices at which
secondary sale transactions in the units have been effectuated. The general
partner of your partnership estimates, based solely on the transfer records of
your partnership (or your partnership's transfer agent), that there have been no
sale transactions.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate, approximately
a .6% interest in your partnership, including no limited partnership units held
by us and the interest held by us 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
two years, 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 following table shows, for each of the years indicated, compensation
paid to your general partner and its affiliates on a historical basis, and on a
pro forma basis assuming that all of the units sought in our offer had been
acquired at the beginning of each period:
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------- ----------------------------------------
PARTNERSHIP PROPERTY PARTNERSHIP PROPERTY
FEES AND MANAGEMENT FEES AND MANAGEMENT
YEAR EXPENSES FEES DISTRIBUTIONS EXPENSES FEES DISTRIBUTIONS
---- ----------- ---------- ------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
1995 $11,480 $71,380 $0 $11,480 $71,380 $0
1996 13,000 74,140 0 13,000 74,140 0
1997 15,000 73,000 0 15,000 73,000 0
1998 12,000 75,349 0 12,000 75,349 0
</TABLE>
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SELECTED FINANCIAL INFORMATION
OF YOUR PARTNERSHIP
Set forth on page F1 of this Prospectus Supplement is the index to the
financial statements of your partnership. You are urged to read the financial
statements carefully before making any decision whether to tender your units in
the offer.
Below is selected financial information for Buccaneer Trace Limited
Partnership taken from the financial statements described above. The amounts for
1995, 1994 and 1993 have been derived from financial information which is not
included in this Prospectus Supplement. See "Index to Financial Statements."
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ---------- -------- ---------- ---------- ----------
(in thousands, except per unit data)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and Cash Equivalents........... $ 53 $ 66 $ 76 $ 275 $ 237 $ 493 $ 449
Land & Building..................... 7,951 7,876 7,918 7,825 7,749 7,639 7,607
Accumulated Depreciation............ (3,397) (3,157) (3,217) (2,977) (2,747) (2,529) (2,318)
Other Assets........................ 325 283 273 230 221 239 158
-------- -------- ---------- -------- ---------- ---------- ----------
Total Assets................ $ 4,932 $ 5,068 $ 5,050 $ 5,353 $ 5,460 $ 5,842 $ 5,896
======== ======== ========== ======== ========== ========== ==========
Notes Payable....................... $ 6,974 $ 7,024 $ 7,012 $ 7,331 $ 7,398 $ 7,460 $ 7,515
Other Liabilities................... 187 133 215 57 54 168 39
-------- -------- ---------- -------- ---------- ---------- ----------
Total Liabilities........... 7,161 $ 7,157 $ 7,227 $ 7,388 $ 7,452 $ 7,628 $ 7,554
-------- -------- ---------- -------- ---------- ---------- ----------
Partners Capital
(Deficit)................. $ (2,229) $ (2,089) $ (2,177) $ (2,035) $ (1,992) $ (1,786) $ (1,658)
======== ======== ========== ======== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
------------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ---------- -------- ---------- ---------- ----------
(in thousands, except per unit data)
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Revenue...................... $ 1,007 $ 1,028 $ 1,393 $ 1,434 $ 1,325 $ 1,309 $ 1,302
Other Income........................ 82 43 65 75 82 81 62
-------- -------- ---------- -------- ---------- ---------- ----------
Total Revenue............... $ 1,089 $ 1,071 $ 1,458 $ 1,509 $ 1,407 $ 1,390 $ 1,364
-------- -------- ---------- -------- ---------- ---------- ----------
Operating Expenses.................. $ 401 $ 361 $ 596 $ 491 $ 560 $ 464 $ 445
Depreciation........................ 180 180 240 230 218 211 236
Interest Expense.................... 474 497 654 713 717 724 730
Property Taxes...................... 86 87 110 118 118 119 112
-------- -------- ---------- -------- ---------- ---------- ----------
Total Expenses.............. $ 1,141 $ 1,125 $ 1,600 $ 1,552 $ 1,613 $ 1,518 $ 1,523
-------- -------- ---------- -------- ---------- ---------- ----------
Net loss before ordinary items...... $ (52) $ (54) $ (142) $ (43) $ (206) (128) $ (159)
Extraordinary Items................. -- -- -- -- -- -- --
-------- -------- ---------- -------- ---------- ---------- ----------
Net loss............................ $ (52) $ (54) $ (142)_ $ (43) $ (206) $ (128) $ (159)
======== ======== ========== ======== ========== ========== ==========
Net Income per limited partnership
unit.............................. $(836.07) $(886.85) $(2,311.48) $(704.92) $(3,344.26) $(2,081.97) $(2,573.77)
======== ======== ========== ======== ========== ========== ==========
Distributions per limited
partnership unit.................. $ -- $ -- $ -- $ -- $ -- $ $ --
======== ======== ========== ======== ========== ========== ==========
</TABLE>
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP
OVERVIEW
The following discussion and analysis of the results of operations and
financial condition of your partnership should be read in conjunction with the
financial statements of your partnership included herein.
RESULTS OF OPERATIONS
Comparison of the Nine Months Ended September 30, 1998 to the Nine Months
Ended September 30, 1997
NET INCOME
Your partnership incurred a net loss of $52,000 for the nine months ended
September 30, 1998, compared to $54,000 for the nine months ended September 30,
1997. The decrease in net loss of $2,000 was primarily the result of an increase
in revenues, coupled with a decrease in interest expense, offset by higher
operating expenses. These factors are discussed in more detail in the following
paragraphs.
REVENUES
Rental and other property revenues from the partnership property totaled
$1,089,000 for the nine months ended September 30, 1998, compared to $1,071,000
for the nine months ended September 30, 1997, an increase of $18,000, or 1.68%.
The partnership increased average rental rates by an average of 1.5%. However,
this was offset by a decrease in occupancy of 5.63% to 91.4%. Overall, the
slight increase in total revenues was due to higher laundry income, lease
cancellation fees, clubhouse rentals and corporate units rentals.
EXPENSES
Partnership property operating expenses, consisting of utilities (net of
reimbursements received from tenants), contract services, turnover costs,
repairs and maintenance, advertising and marketing, and insurance totaled
$401,000 for the nine months ended September 30, 1998, compared to $361,000 for
the nine months ended September 30, 1997, an increase of $40,000, or 11.08%. The
increase is due to increased administrative salaries and property maintenance
expenses. The partnership incurred higher plumbing repairs and interior painting
costs during 1998 as compared to 1997. Partnership property management expenses
totaled $55,000 for both periods.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $474,000 for the nine months ended September 30, 1998, compared
to $497,000 for the nine months ended September 30, 1997, a decrease of $23,000,
or 4.63%. This decrease is due to a lower interest rate on the debt that was
refinanced during the second quarter of 1997. The expense for 1998 reflects the
new debt for the entire period, whereas the 1997 amount reflects the lower
expense for only one quarter.
As part of the ongoing business plan of Your Partnership, the General
Partner monitors the rental market environment of Your Partnership's investment
property to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting Your Partnership from increases in
expenses. As part of this plan, the General Partner attempts to protect Your
Partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the General Partner will be able to sustain such a plan.
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Comparison of the Year Ended December 31, 1997 to the Year Ended December 31,
1996
NET INCOME
Your Partnership incurred a net loss of $142,000 for the year ended
December 31, 1997, compared to a net loss of $43,000 for the year ended December
31, 1996. The increase in net loss of $99,000 was primarily the result of a
decrease in revenues and an increase in operating expenses. These factors are
discussed in more detail in the following paragraphs.
REVENUES
Rental and other property revenues from the partnership's property totaled
$1,458,000 for the year ended December 31, 1997, compared to $1,509,000 for the
year ended December 31, 1996, a decrease of $51,000, or 3.38%. This decrease is
due primarily to a $14,000 increase in bad debts during 1997 due to an increase
in delinquent tenants and the move-out of tenants with outstanding past due
rent.
EXPENSES
Operating expenses, consisting of utilities (net of reimbursements received
from tenants), contract services, turnover costs, repairs and maintenance,
advertising and marketing, and insurance totaled $596,000 for the year ended
December 31, 1997, compared to $491,000 for the year ended December 31, 1996, an
increase of $105,000 or 21.38%. The increase is primarily due to an increase in
rental concessions and promotions and is also due to gutter repair and exterior
painting projects undertaken at the property during 1997, with no similar
projects during 1996. Management expenses totaled $73,000 for the year ended
December 31, 1997, compared to $74,000 for the year ended December 31, 1996, a
decrease of $1,000, or 1.35%.
DEPRECIATION EXPENSE
Depreciation expense increased $10,000 (4.35%) to $240,000 due primarily to
capitalized additions to the investment property during the year ended December
31, 1997.
INTEREST EXPENSE
Interest expense totaled $654,000 for the year ended December 31, 1997,
compared to $713,000 for the year ended December 31, 1996, a decrease of
$59,000, or 8.27%. The decrease is primarily due to a lower interest rate and a
reduced principal balance as a result of the refinancing of the mortgage during
the second quarter of 1997.
Comparison of the Year Ended December 31, 1996 to the Year Ended December 31,
1995
NET INCOME
Your partnership incurred a net loss of $43,000 for the year ended December
31, 1996, compared to a net loss of $206,000 for the year ended December 31,
1995. The decrease in net loss of $163,000 was primarily the result of an
increase in revenues and a decrease in operating expenses. These factors are
discussed in more detail in the following paragraphs.
REVENUES
Rental and other property revenues from the partnership's property totaled
$1,509,000 for the year ended December 31, 1996, compared to $1,407,000 for the
year ended December 31, 1995, an increase of $102,000, or 7.25%. This increase
is due primarily to an 8.3% increase in average rental rates.
EXPENSES
Operating expenses, consisting of utilities (net of reimbursements received
from tenants), contract services, turnover costs, repairs and maintenance,
advertising and marketing, and insurance totaled $491,000
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for the year ended December 31, 1996, compared to $560,000 for the year ended
December 31, 1995, a decrease of $69,000 or 12.32%. This decrease is primarily
due to interior and exterior maintenance projects undertaken at the property
during 1996, with no similar projects during 1995. Management expenses totaled
$74,000 for the year ended December 31, 1996, compared to $68,000 for the year
ended December 31, 1995, an increase of $6,000, or 8.82%. The increase resulted
from higher revenues as management fees are paid based on a percentage of rental
revenues.
DEPRECIATION EXPENSE
Depreciation expense increased $12,000 (5.50%) to $230,000 due primarily to
capitalized additions to the investment property during the year ended December
31, 1996.
INTEREST EXPENSE
Interest expense totaled $713,000 for the year ended December 31, 1996,
compared to $717,000 for the year ended December 31, 1995, a decrease of $4,000,
or 0.56%. The decrease is due to a lower outstanding balance on the mortgage
indebtedness due to principal payments made during 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, your partnership had $53,000 in cash and cash
equivalents. Your partnership's principal demands for liquidity include normal
operating activities, payments of principal and interest on outstanding debt,
capital improvements, and distributions paid to limited partners. The mortgage
indebtedness was successfully refinanced during the second quarter of 1997. At
September 30, 1998, the outstanding balance was $6,974,000. The mortgage
requires monthly payments of approximately $56,000 until May, 2004, at which
time a balloon payment of approximately $6,644,000 will be due. The note is
collateralized by pledge of land and buildings and has a stated interest rate of
8.94%. There are no commitments for material capital expenditures as of
September 1998. The sufficiency of existing liquid assets to meet future
liquidity and capital expenditure requirements is directly related to the level
of capital expenditures required at the property to adequately maintain the
physical assets and meet other operating needs of the partnership. Such assets
are currently thought to be sufficient for any near-term needs of the
partnership. Management believes that your partnership has adequate sources of
cash to finance its operations, both on a short-term and long-term basis.
Presently, there are no plans for any major renovations or improvements for
the property. Budgeted renovations or improvements for 1999 total $465,245 and
are intended to be paid for out of cash flow or borrowings. Renovation items
include roofing, gutters and downspouts, plumbing, stairwells, drives and
parking lot, landscape and irrigation, and drainage.
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THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to 25% of the outstanding 61 units of your
partnership (up to 15.25 units) for consideration per unit of (i) 4.00 Preferred
OP Units, (ii) 2.75 Common OP Units, or (iii) $100 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 the commencement of our offer 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., New York City time, on June 4, 1999, 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 January 1, 1999 (subject to proration
as described below), although you will be entitled to retain any distributions
you may have received after such date and prior to our commencement of this
offer.
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 March 26, 1999.
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
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<PAGE> 235
offer consideration shall be reduced by any interim distributions made by your
partnership between the commencement 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. However, any tendered units may be
withdrawn at any time prior to our accepting them for payment. The AIMCO
Operating Partnership's has an 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.
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.
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.
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.
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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 pays for your units.
You agree not to exercise any rights pertaining to the tendered units without
the prior consent of the AIMCO Operating Partnership. Upon such 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 your general
partner (which is our subsidiary) (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.
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
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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 may
have to provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal.
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 "Federal Income Tax Consequences."
Transfer Taxes
The amount of any transfer taxes (whether imposed on the registered holder
of units or any person) payable on account of the transfer to such person will
be deducted from the purchase price unless satisfactory evidence of the such
taxes or exemption therefrom is submitted.
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.
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WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to our acceptance of such units for payment.
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.
The offer may be extended or delayed indefinitely and no payment will be
made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment. 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 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
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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 25% 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 25% 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 25% 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 25%, 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 the general partner of your partnership and thereby
controls the management of your partnership. In addition, AIMCO owns 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.
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After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units.
However, the AIMCO Operating Partnership and its affiliates will not acquire any
additional units for a period of at least one year after expiration of the
offer. 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. In addition, we are not extending
appraisal rights in connection with the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
No provisions have been made with regard to the offer to allow you or other
limited partners to inspect the books and records of your partnership or to
obtain counsel or appraisal services at our expense or at the expense of your
partnership. However, as described under "Comparison of Your Partnership and the
AIMCO Operating Partnership -- Review of Investor Lists," you have the right
under your partnership's agreement of limited partnership to obtain a list of
the limited partners.
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 the date of this Prospectus Supplement and at or before the expiration
date of the offer, including any extension thereof, 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 reasonable
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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 which, in the reasonable 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 the date hereof, (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
the date hereof, (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 reasonable 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 reasonable judgment of the
AIMCO Operating Partnership, a material acceleration or worsening thereof
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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 your
general partner (which is our subsidiary) 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 reasonable 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
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(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 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 reasonable 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
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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;
or
(h) the offer to purchase may have an adverse effect on AIMCO's status
as a REIT.
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 reasonable 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.
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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. However,
we will not be able to control voting decisions unless we acquire more units in
another transaction, which cannot take place for at least one year after
expiration of this offer. 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 controls the company that manages your partnership's
property. In the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Effect on Trading Market
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.
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. Consummation of
the offer will not affect your partnership's agreement of limited partnership,
the financial condition or results of operations of your partnership, the
business and properties owned, the management compensation payable to your
general partner (which is our subsidiary) or its affiliates or any other matter
relating to your partnership, except it would result in the AIMCO Operating
Partnership substantially increasing its ownership of units of your partnership.
We will receive future distributions from your partnership for any units we
purchase.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by your general partner (which
is our subsidiary), 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
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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 (excluding 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 (which are requests to dismiss the action as a matter
of law) were heard on February 8, 1999, but no decision has been reached by the
Court. While no assurances can be given, we believe that the ultimate outcome of
this litigation will not have a material adverse effect on us.
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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, the accompanying Prospectus, the Letter of Transmittal,
and the legal and accounting fees in connection with this offer. 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 $50,000.
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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FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of the material Federal
income tax consequences of the offer 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
differing interpretations or change, possibly retroactively. This 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 you in light of your specific investment or tax
circumstances, or if you are subject to special tax rules (for example, if you
are a financial institution, broker-dealer, insurance company, or, except to the
extent discussed below, tax-exempt organization or foreign investor, 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 are 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. No clear precedent or authority
may be available on some questions. 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 of your specific tax situation.
TAX OPINIONS
Skadden, Arps, Slate, Meagher & Flom LLP ("Special Tax Counsel") has
delivered an opinion letter with regard to the material United States Federal
income tax consequences of the offer. The opinion letter of Special Tax Counsel
is filed as an exhibit to this Registration Statement. You may obtain a copy of
such opinion letter by sending a written request to the AIMCO Operating
Partnership.
The specific United States Federal income tax opinions that Special Tax
Counsel has provided are:
1. Commencing with AIMCO's initial taxable year ended December 31, 1994,
AIMCO was organized in conformity with the requirements for qualification
as a REIT under the Code, and its actual method of operation has enabled,
and its proposed method of operation will enable, AIMCO to meet the
requirements for qualification and taxation as a REIT. As noted in the
accompanying Prospectus, AIMCO's qualification and taxation as a REIT
depend upon its ability to meet, through actual annual operating results,
certain requirements, including requirements relating to distribution
levels and diversity of stock ownership, and the various qualification
tests imposed under the Code, the results of which have been represented by
the AIMCO's officers and will not be reviewed by Special Tax Counsel. No
assurance can be given that the actual results of AIMCO's future operations
for any one taxable year will satisfy the requirements for taxation as a
REIT under the Code.
2. The AIMCO Operating Partnership will be treated as a partnership and
not as an association taxable as a corporation for Federal income tax
purposes.
3. You will not recognize gain or loss for Federal income tax purposes
when you exchange your units solely for OP Units. If, immediately prior to
such exchange, the amount of your partnership's liabilities allocable to
the units you transfer to the AIMCO Operating Partnership exceeds the
amount of the AIMCO Operating Partnership's liabilities allocable to you
immediately after the exchange, you will receive a deemed distribution in
an amount equal to such liability relief and will recognize gain for
Federal income tax purposes to the extent that the amount of such deemed
distribution exceeds your aggregate adjusted tax basis in your OP Units.
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4. If you exchange your units for cash and OP Units, you will be treated
for Federal income tax purposes as selling some of your units for cash in a
taxable sale and contributing some of your units for OP Units in a tax-free
exchange. With respect to the units that you will be treated as selling for
cash, you will be taxed as described in paragraph number five below. With
respect to the units that you will be treated as exchanging for OP Units,
you will be taxed as described in paragraph number three above.
5. If you sell your units solely for cash, you will recognize gain or
loss for Federal income tax purposes in an amount equal to the difference
between (i) your amount realized on the sale and (ii) your adjusted tax
basis in the units you sold.
6. If you retain all or a portion of your units and your partnership
terminates for Federal income tax purposes, you will not recognize any gain
or loss as a result of such termination and your capital account in your
partnership will not be affected.
7. Because of the factual nature of the inquiry, no opinion is expressed
by Special Tax Counsel as to whether your exercise of a redemption right
with respect to an OP Unit would cause your contribution of units to the
AIMCO Operating Partnership to be a taxable transaction under the disguised
sale rules of the Code.
8. The discussion in the accompanying Prospectus under the captions
"FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS" and "FEDERAL
INCOME TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNIT HOLDERS" and
in this Prospectus Supplement under the caption "FEDERAL INCOME TAX
CONSEQUENCES" is a fair and accurate summary of the material United States
Federal income tax consequences of the offers and of the acquisition,
ownership and disposition of the OP Units and the AIMCO stock by a holder
who acquires the OP Units or AIMCO stock in connection with the offers,
subject to the qualifications set forth therein.
It must be emphasized that these opinions are based and conditioned upon
representations and covenants made by AIMCO and the AIMCO Operating Partnership
as to factual matters (including representations and covenants concerning
AIMCO's properties and the past, present and future conduct of its business and
your partnership's liabilities). These opinions are expressed as of the date of
the opinion letter and Special Tax Counsel has no obligation to advise AIMCO or
the AIMCO Operating Partnership of any subsequent change in the matters stated,
represented, or assumed or any subsequent change in the law. An opinion of
counsel is not binding on the IRS, and no assurance can be given that the IRS
will not challenge the above opinions of Special Tax Counsel.
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 when you exchange your units solely for OP Units. You may
recognize gain upon such exchange if, immediately prior to such exchange, the
amount of liabilities of your partnership allocable to the units you transferred
exceeds the amount of the AIMCO Operating Partnership liabilities allocable to
you immediately after such exchange. If this was true in your case, the excess
would be treated as a deemed distribution of cash to you from the AIMCO
Operating Partnership. This deemed cash distribution would be treated as a
nontaxable return of capital to the extent of your adjusted tax basis in your OP
Units 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 you exchange your units pursuant to the offer,
at least equal to the amount of liabilities of your partnership that were
allocable to your units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most persons who participate in the tender offer
would not recognize gain or loss as a result of an exchange of units solely for
OP Units pursuant to the offer.
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DISGUISED SALES
Under the Code, a transfer of property by a partner to a partnership
followed by a related transfer by the partnership of money or other property to
the partner is treated as a "disguised" sale if (1) the second transfer would
not have occurred but for the first transfer and (2) the second transfer "is not
dependent on the entrepreneurial risks of the partnership operations." In a
disguised sale, the partner is treated as if he or she sold the contributed
property to the partnership as of the date the property was contributed to the
partnership. In addition, unless a few technical exceptions apply, transfers of
money or other property between a partnership and a partner that are made within
two years of each other, including redemptions of OP Units made within two years
of a contribution of your units, must be reported to the IRS and are presumed to
be a "disguised" sale unless the facts and circumstances clearly establish that
the transfers do not constitute a sale.
While there is no authority applying the disguised sale rules to the
exercise of a redemption right by a partner with respect to a partnership
interest received in exchange for property, the exercise of a redemption right
with respect to OP Units within two years of the date of the contribution of
your units to the AIMCO Operating Partnership may be treated as a disguised
sale. If this treatment were to apply, you would be treated for Federal income
tax purposes as if, on the date of the contribution of your units, the AIMCO
Operating Partnership transferred to you an obligation to give you the
redemption proceeds. In that case, you would be required to recognize gain on
the disguised sale in such earlier year. Because of the factual nature of such
an inquiry, Special Tax Counsel is unable to opine whether your exercise of a
redemption right with respect to an OP Unit would cause your contribution of
units to the AIMCO Operating Partnership to be a taxable transaction under the
disguised sale rules of the Code.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Federal Income Taxation of the
AIMCO Operating Partnership and OP Unitholders -- 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
If you exchange your units for cash and OP Units, you will be treated as
selling some of your units for cash in a taxable sale and contributing some of
your units for OP Units in a tax-free exchange. Your adjusted tax basis in your
transferred units will be allocated between the units you will be deemed to have
sold and the units you will be deemed to have contributed to the AIMCO Operating
Partnership.
With respect to the units that you will be treated as selling, you will
recognize gain or loss in an amount equal to the difference between (i) your
"amount realized" on the sale and (ii) your adjusted tax basis in units you
sold. Your "amount realized" on such sale will be equal to the sum of the amount
of cash you received pursuant to the offer (that is, the offer consideration)
plus the amount of your partnership's liabilities attributed to the units you
sold. For purposes of these partial sale rules, the amount of your partnership's
liabilities attributed to the units you sold will be equal to the lesser of (i)
the excess of the amount of your partnership's liabilities allocable to you in
respect of the transferred units immediately prior to the exchange over the
amount of such liabilities allocable to you as determined immediately after the
exchange or (ii) the product of (A) the amount of your partnership's liabilities
allocable to you in respect of the units you are deemed to have sold immediately
prior to the exchange and (B) your "net equity percentage" with respect to those
units. Your "net equity percentage" will be equal to the percentage determined
by dividing (x) the cash you received in the exchange by (y) the excess of the
gross fair market value of the units in the exchange over the amount of your
partnership's liabilities allocable to you in respect of those units immediately
prior to the exchange. Thus, your tax liability could exceed the amount of cash
you receive in the sale.
With respect to the units that you will be treated as exchanging, rather
than selling, you will be taxed as described above under the heading "Tax
Consequences of Exchanging Units Solely for OP Units."
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TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
If you sell your units solely for cash, you will recognize gain or loss on
a sale of your units equal to the difference between (i) your "amount realized"
on the sale and (ii) your adjusted tax basis in the units you sold. The "amount
realized" with respect to a unit will be equal to the sum of the amount of cash
you received for your units (that is, the offer consideration) plus the amount
of the liabilities of your partnership allocable to such units (as determined
under Section 752 of the Code). Thus, your tax liability could exceed the amount
of cash you receive in the sale.
ADJUSTED TAX BASIS
If you acquired your units for cash:
- your initial tax basis in your units will be equal to such cash
investment in your partnership increased by your share of your
partnership's liabilities at the time such units were acquired;
- your initial tax basis generally has been increased by:
- your share of your partnership's income and gains and
- any increases in your share of your partnership's liabilities; and
- your initial tax basis generally has been decreased (but not below zero)
by:
- your share of cash distributions from your partnership,
- any decreases in your share of your partnership's liabilities,
- your share of your partnership's losses, and
- your share of nondeductible expenditures of your partnership that are
not chargeable to capital.
For purposes of determining your adjusted tax basis in your units
immediately prior to a disposition of such units, your adjusted tax basis will
include your 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), the gain you
would recognize pursuant to the offer will exceed the cash proceeds you would
realize upon the sale of your units. The adjusted tax basis of the OP Units you
receive in exchange for your units pursuant to the offer will be equal to (i)
the sum of your adjusted tax basis in the units you transferred plus any gain
recognized in the exchange and will be reduced by (ii) any cash you received or
you were deemed to receive 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 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 that is attributable to your share of "unrealized receivables" of your
partnership exceeds the tax basis attributable to those assets, such excess will
be treated as ordinary income. Among other things, "unrealized receivables"
include depreciation recapture for 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. You will not receive any future distributions
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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 the income or loss. 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 the passive 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 passive losses in the manner described below. If you receive
cash for 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 receive cash for all or a portion of your units
pursuant to the offer and recognize 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
receive cash for all of your units pursuant to the offer, the balance of any
"suspended" losses from your partnership 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.
TAX REPORTING
If you tender any units, you must report the transaction by filing a
statement with your Federal income tax return for the year of the tender which
provides certain required information to the IRS. To prevent the possible
application of back-up Federal income tax withholding of 31% with respect to
payment of the offer consideration, you may have to provide the AIMCO Operating
Partnership with your correct taxpayer identification number. See the
instructions to the Letter of Transmittal.
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"). If you are a foreign person, the AIMCO Operating Partnership will
be required, under the FIRPTA provisions of the Code, to deduct and withhold 10%
of the amount realized by you on the disposition. The amount withheld would be
creditable against your Federal income tax liability and, if the amount withheld
exceeds your actual tax liability you could obtain a refund from the IRS by
filing a U.S. income tax return. See the Instructions to the Letter of
Transmittal.
TAX CONSEQUENCES OF A TERMINATION OF YOUR PARTNERSHIP
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"). The AIMCO Operating Partnership's acquisition of units pursuant
to the offer may result in a Termination of your partnership. If an acquisition
of units results in a
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Termination, the following Federal income tax events will be deemed to occur:
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
interests 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 to the
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
to the New Partnership. A Termination will change (and possibly shorten) a
Remaining Offeree's holding period with respect to its units in your partnership
for Federal income tax purposes. Gains recognized by a Remaining Offeree on the
disposition of New Partnership interests with a holding period of 12 months or
less may be classified as short-term capital gains and subject to taxation at
ordinary income tax rates.
The New Partnership's adjusted tax basis in its assets will be the same as
the Old Partnership's basis in such assets immediately before the Termination. A
Termination will also cause the New Partnership to recalculate the depreciable
lives of its assets. This will cause the assets to be depreciated over a longer
period of time than if there had been no Termination. This would generally
decrease the annual average depreciation deductions allocable to the Remaining
Offerees for a number of years following consummation of the offer (thereby
increasing the taxable income allocable to their retained units in each such
year), but would have no effect on the total depreciation deductions available
over the useful lives of the assets of your partnership.
Elections as to 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.
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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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 The AIMCO Operating Partnership is organized
organized under South Carolina law. as a 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 The term of the AIMCO Operating Partnership
partners as a finite life investment, with continues until December 31, 2093, unless
limited partners to receive regular cash the AIMCO Operating Partnership is dissolved
distributions out of your partnership's Net sooner pursuant to the terms of the AIMCO
Cash From Operations (as defined in your Operating Partnership's agreement of limited
partnership's agreement of limited partner- partnership (the "AIMCO Operating
ship). The termination date of your Partnership Agreement") or as provided by
partnership is December 31, 2013. law. See "Description of 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, The purpose of the AIMCO Operating
operate, lease, manage, deal with, finance Partnership is to conduct any business that
and refinance your partnership's property may be lawfully conducted by a limited
for investment, capital appreciation and the partnership organized pursuant to the
production of income. Subject to Delaware Revised Uniform Limited Part-
restrictions contained in your partnership's nership Act (as amended from time to time,
agreement of limited partnership, your or any successor to such statute) (the
partnership may do all things necessary for "Delaware Limited Partnership Act"),
or incidental to the protection and benefit provided that such business is to be
of your partnership, including, without conducted in a manner that permits AIMCO to
limitation, borrowing funds and creating be qualified as a REIT, unless AIMCO ceases
liens. to qualify as a REIT. The AIMCO Operating
Partner-
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship 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 ac-
tion, 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>
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is The general partner is authorized to issue
authorized to issue additional limited additional partnership interests in the
partnership interests in your partnership AIMCO Operating Partnership for any
and may admit additional limited partners by partnership purpose from time to time to the
selling not more than 61 units for cash and limited partners and to other persons, and
notes to selected persons who fulfill the to admit such other persons as additional
requirements set forth in your partnership's limited partners, on terms and conditions
agreement of limited partnership. The and for such capital contributions as may be
capital contribution need not be equal for established by the general partner in its
all limited partners and no action or sole discretion. The net capital
consent is required in connection with the contribution need not be equal for all OP
admission of any additional limited Unitholders. No action or consent by the OP
partners. 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,
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 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>
The general partner of your partnership may The AIMCO Operating Partnership may lend or
not enter into agreements with itself or any contribute funds or other assets to its
of its affiliates for services, except for subsidiaries or other persons in which it
agreements for the man- has an equity investment,
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
agement and operations of your partnership's and such persons may borrow funds from the
property and other such agreements set forth AIMCO Operating Partnership, on terms and
in your partnership's agreement of limited conditions established in the sole and
partnership. The general partner may also absolute discretion of the general partner.
lend money to your partnership as the To the extent consistent with the business
general partner deems necessary for the purpose of the AIMCO Operating Partnership
payment of any partnership obligations and and the permitted activities of the general
expenses, which loans, will be repaid with partner, the AIMCO Operating Partnership may
interest at the rate of 1% per annum over transfer assets to joint ventures, limited
such general partners' own cost of funds liability companies, partnerships,
(but in no event to exceed the maximum legal corporations, business trusts or other
rate); provided, however, that the general business entities in which it is or thereby
partner must first make reasonable efforts becomes a participant upon such terms and
to secure loans from an unaffiliated third subject to such conditions consistent with
party. the AIMCO Operating Partnership Agreement
and applicable law as the general partner,
in its sole and absolute discretion,
believes to be advisable. Except as
expressly permitted by the AIMCO Operating
Partnership Agreement, neither the general
partner nor any of its affiliates may sell,
transfer or convey any property to the AIMCO
Operating Partnership, directly or
indirectly, except pursuant to transactions
that are determined by the general partner
in good faith to be fair and reasonable.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is The AIMCO Operating Partnership Agreement
authorized, on behalf of your partnership, contains no restrictions on borrowings, and
to borrow funds, execute and issue mortgage the general partner has full power and
notes and other evidences of indebtedness authority to borrow money on behalf of the
and secure such indebtedness by mortgage, AIMCO Operating Partnership. The AIMCO
deed of trust, pledge or other lien; Operating Partnership has credit agreements
provided, however, that a refinancing of that restrict, among other things, its
your partnership's property will be in the ability to incur indebtedness.
sole discretion of the managing general
partner.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited Each OP Unitholder has the right, upon
partnership entitles the limited partners or written demand with a statement of the
their duly authorized representative to purpose of such demand and at such OP
review the books and records of your Unitholder's own expense, to obtain a
partnership upon reasonable notice during current list of the name and last known
business hours at the registered office of business, residence or mailing address of
your partnership at such limited partners' the general partner and each other OP
expense. Unitholder.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership is All management powers over the business and
responsible for management of your affairs of the AIMCO Operating Partnership
partnership's business and assets and have are vested in AIMCO-GP, Inc., which is the
all rights and powers generally conferred by general partner. No OP Unitholder has any
law or which are necessary, advisable or right to participate in or exercise control
consistent in connection therewith, subject or management power over the business and
to the limitations contained in your affairs of the AIMCO Operating Partner-
partnership's agreement of limited ship. The OP Unitholders have the right to
partnership. No limited partner has vote on
</TABLE>
S-76
<PAGE> 255
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
the right to take part in or interfere in certain matters described under "Comparison
any manner with the conduct or control of of Your Units and AIMCO OP Units -- Voting
the business of your partnership or the Rights" below. The general partner may not
right or authority to act for or bind your be removed by the OP Unitholders with or
partnership. without 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>
Under your partnership's agreement of Notwithstanding anything to the contrary set
limited partnership, the general partner of forth in the AIMCO Operating Partnership
your partnership is not liable to your Agreement, the general partner is not liable
partnership or the limited partners and is to the AIMCO Operating Partnership for
indemnified for any loss or damage resulting losses sustained, liabilities incurred or
from any act or omission performed or benefits not derived as a result of errors
omitted in good faith, which does not in judgment or mistakes of fact or law of
constitute fraud, gross negligence or any act or omission if the general partner
willful misconduct, pursuant of the author- acted in good faith. The AIMCO Operating
ity granted to promote the interests of your Partnership Agreement provides for
partnership. Moreover, the general partner indemnification of AIMCO, or any director or
will not be liable to your partnership or officer of AIMCO (in its capacity as the
the limited partner because any taxing previous general partner of the AIMCO
authorities disallow or adjust any deduction Operating Partnership), the general partner,
or credits in your partnership income tax any officer or director of general partner
returns. or the AIMCO Operating Partnership and such
other persons as the general partner 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
</TABLE>
S-77
<PAGE> 256
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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
and certain state securities administrations
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 and their
respective state securities laws.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of Except in limited circumstances, the general
limited partnership, the limited partners partner has exclusive management power over
may remove the general partner upon a vote the business and affairs of the AIMCO
of the limited partners owning more than 50% Operating Partnership. The general partner
of the units. A general partner may resign may not be removed as general partner of the
at any time; provided, however that such AIMCO Operating Partnership by the OP
resignation does not cause the default under Unitholders with or without cause. Under the
or result in the acceleration of the payment AIMCO Operating Partnership Agreement, the
of any loan secured by your partnership's general partner may, in its sole discretion,
property. The affirmative vote or written prevent a transferee of an OP Unit from
consent of all of the limited partners and becoming a substituted limited partner
the general partner is required for the pursuant to the AIMCO Operating Partnership
election and admission of a substitute Agreement. The general partner may exercise
general partner. A limited partner may not this right of approval to deter, delay or
transfer its units without the written hamper attempts by persons to acquire a
consent of the general partner which may be controlling interest in the AIMCO Operating
withheld in sole and absolute discretion of Partnership. Additionally, the AIMCO
the general partner. 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 With the exception of certain circumstances
partnership may be amended by the unanimous set forth in the AIMCO Operating Partnership
action of the general partner to effect a Agreement, whereby the general partner may,
ministerial change which does not materially without the consent of the OP Unitholders,
affect the rights of the limited partners amend the AIMCO Operating Partnership
and as required by law. All other amend- Agreement, amendments to the AIMCO Operating
ments must be approved by the limited Partnership Agreement require the consent of
partners owning more than 50% of the units the holders of a majority of the outstanding
and the general partner. Limited partners Common OP Units, excluding AIMCO and certain
owning at least 10% of the units have the other limited exclusions (a "Majority in
power to propose amendments to your Interest"). Amendments to the AIMCO
partnership's agreement of limited Operating
partnership.
</TABLE>
S-78
<PAGE> 257
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
Partnership Agreement may be proposed by the
general partner or by holders of a Majority
in Interest. Following such proposal, the
general partner will submit any proposed
amendment to the OP Unitholders. The general
partner will seek the written consent of the
OP Unitholders on the proposed amendment or
will call a meeting to vote thereon. See
"Description of OP Units -- Amendment of the
AIMCO Operating Partnership Agreement" in
the accompanying Prospectus.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
In addition to the right to distributions in The general partner does not receive
respect of its partnership interest and compensation for its services as general
reimbursement for all fees and expenses as partner of the AIMCO Operating Partnership.
set forth in your partnership's agreement of However, the general partner is entitled to
limited partnership, the general partner payments, allocations and distributions in
receives 1/2 of 1% of the gross operating its capacity as general partner of the AIMCO
revenue of your partnership's property as a Operating Partnership. In addition, the
partnership administration fee. Moreover, AIMCO Operating Partnership is responsible
the general partner or certain affiliates for all expenses incurred relating to the
may be entitled to compensation for addi- AIMCO Operating Partnership's ownership of
tional services rendered. 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>
No limited partner, unless it is deemed to Except for fraud, willful misconduct or
be taking part in the control of the gross negligence, no OP Unitholder has
business, is bound by, or is personally personal liability for the AIMCO Operating
liable for the expenses, liabilities or Partnership's debts and obligations, and
obligation of your partnership and his liability of the OP Unitholders for the
liability is limited solely to the amount of AIMCO Operating Partnership's debts and
his capital contribution to your obligations is generally limited to the
partnership, together with the undistributed amount of their investment in the AIMCO
share of the profits of your partnership Operating Partnership. However, the
form time to time credited to its capital limitations on the liability of limited
account and any money or other property partners for the obligations of a limited
wrongfully paid or conveyed to him on partnership have not been clearly
account of his contribution. established in some states. If it were
determined that the AIMCO Operating Part-
nership 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
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 Partner-
</TABLE>
S-79
<PAGE> 258
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship's obligations to the same extent as the
general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
The general partner of your partnership Unless otherwise provided for in the
possesses an overriding fiduciary obligation relevant partnership agreement, Delaware law
to your partnership. However, the general generally requires a general partner of a
partner is not required to devote all of its Delaware limited partnership to adhere to
time or business efforts to the affairs of fiduciary duty standards under which it owes
your partnership, but it must devote so much its limited partners the highest duties of
of its time and attention to your good faith, fairness and loyalty and which
partnership as is necessary and advisable to generally prohibit such general partner from
successfully manage the affairs of your taking any action or engaging in any
partnership. In addition, any partner may transaction as to which it has a conflict of
engage in or possess an interest in other interest. The AIMCO Operating Partnership
business ventures of every nature and Agreement expressly authorizes the general
description even if such ventures are partner to enter into, on behalf of the
competitive with your partnership and are AIMCO Operating Partnership, a right of
located in the market area or vicinity of first opportunity arrangement and other
your partnership's property. conflict avoidance agreements with various
affiliates of the AIMCO Operating
In general, your partnership's agreement of Partnership and the general partner, on such
limited partnership and the AIMCO Operating terms as the general partner, in its sole
Partnership Agreement have limitations on and absolute discretion, believes are
the liability of the general partner but advisable. The AIMCO Operating Partnership
such limitations differ and provide more Agreement expressly limits the liability of
protection for the general partner of the the general partner by providing that the
AIMCO Operating Partnership. general partner, and its officers and
directors will not be liable or accountable
in damages to the AIMCO Operating
Partnership, the limited partners or as-
signees 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 The AIMCO Operating Partnership is not
differences between the taxation of your subject to Federal income taxes. Instead,
partnership and the AIMCO Operating each holder of OP Units includes in income
Partnership. 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
</TABLE>
S-80
<PAGE> 259
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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 nonre-
course 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>
<CAPTION>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity in- equity interests entitling each equity interests entitling each OP
terests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of and as declared by the board of rata share of cash distributions
distributions to be made to the directors of the general partner made from Available Cash (as such
partners of your partnership. of the AIMCO Operating Part- term is defined in the AIMCO
nership, quarterly cash distribu- Operating Partnership Agreement)
tion at a rate of $0.50 per to the partners of the AIMCO
Preferred OP Unit, subject to ad- Operating Partnership. To the
justments from time to time on or extent the AIMCO Operating
after the fifth anniversary of the Partnership sells or refinances
issue date of the Preferred OP its assets, the net proceeds
Units. therefrom generally will be re-
tained by the AIMCO Operating
Partnership for working capital
</TABLE>
S-81
<PAGE> 260
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
and new investments rather than
being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's Except as otherwise required Under the AIMCO Operating
agreement of limited by applicable law or in the Partnership Agreement, the
partnership, the limited AIMCO Operating Partnership OP Unitholders have voting
partners have voting rights Agreement, the holders of rights only with respect to
only with respect to the the Preferred OP Units will certain limited matters such
following issues: sale or have the same voting rights as certain amendments and
conversion to condominiums as holders of the Common OP termination of the AIMCO
or other disposition of all Units. See "Description of Operating Partnership
or substantially all of the OP Units" in the accompany- Agreement and certain
assets of your partner- ing Prospectus. So long as transactions such as the
ship, amendments to your any Preferred OP Units are institution of bankruptcy
partnership's agreement of outstanding, in addition to proceedings, an assignment
limited partnership, any other vote or consent of for the benefit of creditors
termination of your partners required by law or and certain transfers by the
partnership, removal of a by the AIMCO Operating general partner of its
general partner, election Partnership Agreement, the interest in the AIMCO
and admission of a affirmative vote or consent Operating Partnership or the
substitute general partner of holders of at least 50% admission of a successor
and election of a trustee to of the outstanding Preferred general partner.
liquidate and distribute OP Units will be necessary
your partnership's assets for effecting any amendment Under the AIMCO Operating
upon retirement of the last of any of the provisions of Partnership Agreement, the
remaining general partner. the Partnership Unit general partner has the
Each matter requires the Designation of the Preferred power to effect the
majority vote of the holders OP Units that materially and acquisition, sale, transfer,
of units for approval, adversely affects the rights exchange or other
except that the election of or preferences of the disposition of any assets of
a substitute general partner holders of the Preferred OP the AIMCO Operating
requires the unanimous vote Units. The creation or Partnership (including, but
of all limited partners and issuance of any class or not limited to, the exercise
the consent of the general series of partnership units, or grant of any conversion,
partner. including, without option, privilege or
limitation, any partner- subscription right or any
A general partner may cause ship units that may have other right available in
the dissolution of your rights senior or superior to connection with any assets
partnership by retiring the Preferred OP Units, at any time held by the
unless, the remaining shall not be deemed to AIMCO Operating Partnership)
general partner, or if none, materially adversely affect or the merger,
all of the limited partners, the rights or preferences of consolidation,
agree to continue your the holders of Preferred OP reorganization or other
partnership and elect a Units. With respect to the combination of the AIMCO
successor general partner by exercise of the above Operating Partnership with
the affirmative vote of all described voting rights, or into another entity, all
of the limited partners. each Preferred OP Units without the consent of the
shall have one (1) vote per OP Unitholders.
In general, you have greater Preferred OP Unit.
voting rights in your The general partner may
partnership than you will cause the dissolution of the
have as an OP Unitholder. OP AIMCO Operating Partnership
Unitholders can not remove by an "event of withdrawal,"
the general partner of the as defined in the Delaware
AIMCO Operating Partnership. Limited Partnership Act
(including, without limi-
tation, bankruptcy), unless,
</TABLE>
S-82
<PAGE> 261
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
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 "Descrip-
tion of OP
Units -- Dissolution and
Winding Up" in the accom-
panying Prospectus.
OP Unitholders cannot remove
the general partner of the
AIMCO Operating Partnership
with or without cause.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement Holders of Preferred OP Subject to the rights of
of limited partnership Units will be entitled to holders of any outstanding
specifies how the cash receive, when and as Preferred OP Units, the
available for distribution, declared by the board of AIMCO Operating Partnership
whether arising from directors of the general Agreement requires the
operations or sales or partner of the AIMCO general partner to cause the
refinancing, is to be shared Operating Partnership, AIMCO Operating Partnership
among the partners. Dis- quarterly cash distributions to distribute quarterly all,
tributions of Net Cash from at the rate of $0.50 per or such portion as the
Operations are to be Preferred OP Unit; provided, general partner may in its
distributed no less often however, that at any time sole and absolute discretion
than quarterly. The dis- and from time to time on or determine, of Available Cash
tributions payable to the after the fifth anniversary (as defined in the AIMCO
partners are not fixed in of the issue date of the Operating Partnership
amount and depend upon the Preferred OP Units, the Agreement) generated by the
operating results and net AIMCO Operating Partnership AIMCO Operating Partnership
sales or refinancing pro- may adjust the annual during such quarter to the
ceeds available from the distribution rate on the general partner, the special
disposition of your Preferred OP Units to the limited partner and the
partnership's assets. No lower of (i) 2.00% plus the holders of Common OP Units
limited partner has the annual interest rate then on the record date es-
right to demand or receive applicable to U.S. Treasury tablished by the general
property other than cash, notes with a maturity of partner with respect to such
although the general partner five years, and (ii) the quarter, in accordance with
may distribute property annual dividend rate on the their respective interests
other than cash. Your most recently issued AIMCO in the AIMCO Operating
partnership has not made non-convertible preferred Partnership on such record
distributions in the past stock which ranks on a date. Holders of any other
and is not projected to make parity with its Class H Preferred OP Units issued in
distributions in 1999. Cumulative Preferred Stock. the
Such distributions will be
</TABLE>
S-83
<PAGE> 262
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
cumulative from the date of future may have priority
original issue. Holders of over the general partner,
Preferred OP Units will not the special limited partner
be entitled to receive any and holders of Common OP
distributions in excess of Units with respect to
cumulative distributions on distributions of Available
the Preferred OP Units. No Cash, distributions upon
interest, or sum of money in liquidation or other
lieu of interest, shall be distributions. See "Per
payable in respect of any Share and Per Unit Data" in
distribution payment or pay- the accompanying Prospectus.
ments on the Preferred OP
Units that may be in The general partner in its
arrears. sole and absolute discretion
may distribute to the OP
When distributions are not Unitholders Available Cash
paid in full upon the on a more frequent basis and
Preferred OP Units or any provide for an appropriate
Parity Units (as defined record date.
below), all distributions
declared upon the Preferred The AIMCO Operating Partner-
OP Units and any Parity ship Agreement requires the
Units shall be declared general partner to take such
ratably in proportion to the reasonable efforts, as
respective amounts of determined by it in its sole
distributions accumulated, and absolute discretion and
accrued and unpaid on the consistent with AIMCO's
Preferred OP Units and such qualification as a REIT, to
Parity Units. Unless full cause the AIMCO Operating
cumulative distributions on Partnership to distribute
the Preferred OP Units have sufficient amounts to en-
been declared and paid, able the general partner to
except in limited circum- transfer funds to AIMCO and
stances, no distributions enable AIMCO to pay stock-
may be declared or paid or holder dividends that will
set apart for payment by the (i) satisfy the requirements
AIMCO Operating Partnership for qualifying as a REIT
and no other distribution of under the Code and the
cash or other property may Treasury Regulations and
be declared or made, (ii) avoid any Federal
directly or indirectly, by income or excise tax
the AIMCO Operating liability of AIMCO. See
Partnership with respect to "Description of OP
any Junior Units (as de- Units -- Distributions" in
fined below), nor shall any the accompanying Prospectus.
Junior Units be redeemed,
purchased or otherwise
acquired for considera-
tion, 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>
<CAPTION>
<S> <C> <C>
A limited partner may There is no public market There is no public market
transfer his units to any for the Preferred OP Units for the OP Units. The AIMCO
person and be substituted as and the Preferred OP Units Operating Partnership
a limited partner are not listed Agreement re-
</TABLE>
S-84
<PAGE> 263
<TABLE>
<CAPTION>
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<S> <C> <C>
by such person if: (1) such on any securities exchange. stricts the transferability
transfer is not in The Preferred OP Units are of the OP Units. Until the
contravention with any of subject to restrictions on expiration of one year from
the provision of your part- transfer as set forth in the the date on which an OP
nership's agreement of AIMCO Operating Partnership Unitholder acquired OP
limited partnership, Agreement. Units, subject to certain
including the investment exceptions, such OP
representations required to Pursuant to the AIMCO Unitholder may not transfer
be made by each limited Operating Partnership all or any portion of its OP
partner, (2) such transfer Agreement, until the Units to any transferee
will not cause a termination expiration of one year from without the consent of the
of your partnership for the date on which a holder general partner, which
Federal income tax purposes, of Preferred OP Units consent may be withheld in
(3) a written assignment has acquired Preferred OP Units, its sole and absolute
been duly executed and subject to certain discretion. After the
acknowledged by the assignor exceptions, such holder of expiration of one year, such
and assignee, with the Preferred OP Units may not OP Unitholder has the right
written approval of the transfer all or any portion to transfer all or any
managing general partner of its Preferred OP Units to portion of its OP Units to
which may be withheld in the any transferee without the any person, subject to the
sole and absolute discretion consent of the general satisfaction of certain con-
of the managing general partner, which consent may ditions specified in the
partner, (4) the assignee be withheld in its sole and AIMCO Operating Partnership
represents it satisfies the absolute discretion. After Agreement, including the
suitability requirement the expiration of one year, general partner's right of
applicable to limited such holders of Preferred OP first refusal. See
partners, (5) the interest Units has the right to "Description of OP Units --
assigned is not less than transfer all or any portion Transfers and Withdrawals"
1/2 unit, except in speci- of its Preferred OP Units to in the accompanying
fied circumstances and (6) any person, subject to the Prospectus.
the assignee and assignor satisfaction of certain
satisfy other conditions set conditions specified in the After the first anniversary
for in your partnership's AIMCO Operating Partner- of becoming a holder of
agreement of limited ship Agreement, including Common OP Units, an OP
partnership. the general partner's right Unitholder has the right,
There are no redemption of first refusal. subject to the terms and
rights associated with your conditions of the AIMCO
units. After a one-year holding Operating Partnership
period, a holder may redeem Agreement, to require the
Preferred OP Units and AIMCO Operating Partnership
receive in exchange to redeem all or a portion
therefor, at the AIMCO Oper- of the Common OP Units held
ating Partnership's option, by such party in exchange
(i) subject to the terms of for a cash amount based on
any Senior Units (as defined the value of shares of Class
below), cash in an amount A Common Stock. See
equal to the Liquidation "Description of OP
Preference of the Preferred Units -- Redemption Rights"
OP Units tendered for in the accompanying
redemption, (ii) a number of Prospectus. Upon receipt of
shares of Class A Common a notice of redemption, the
Stock of AIMCO that is equal AIMCO Operating Partnership
in Value to the Liquidation may, in its sole and
Preference of the Preferred absolute discretion but
OP Units tendered for subject to the restrictions
redemption, or (iii) for on the ownership of Class A
Preferred OP Units redeemed Common Stock imposed under
after a two-year holding AIMCO's charter and the
period, a number of shares transfer restrictions and
of Class I Preferred Stock other limitations thereof,
of AIMCO that pay an elect to cause AIMCO to
acquire some or all of the
ten-
</TABLE>
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
aggregate amount of dered Common OP Units in
dividends equivalent to the exchange for Class A Common
distributions on the Stock, based on an exchange
Preferred OP Units tendered ratio of one share of Class
for redemption; provided A Common Stock for each Com-
that such shares are part of mon OP Unit, subject to
a class or series of adjustment as provided in
preferred stock that is then the AIMCO Operating
listed on the NYSE or an- Partnership Agreement.
other national securities
exchange. See "Federal
Income Tax
Consequences -- Disguised
Sales." 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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DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are the Class Two 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 I High Performance 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, the
Class J Partnership Preferred Units, the Class K 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, the Class One 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 $0.50 per Preferred OP
Unit (equivalent to 8.0% per annum of the $25 stated liquidation preference);
provided, however, that at any time and from time to time on or after March 1,
2005, the AIMCO Operating Partnership may adjust the annual distribution rate on
the Preferred OP Units to the lower of (i) 2.0% 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. A reduction in the distribution rate will reduce your rate of return on
the Preferred OP Units and possibly encourage you to redeem such units. 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
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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 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 $25 per Preferred OP
Unit, 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
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<PAGE> 267
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 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 A Common Stock of AIMCO that is equal in Value to the
Liquidation Preference of the Preferred OP Units tendered for redemption, or
(iii) for Preferred OP Units redeemed after a two-year holding period, 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 NYSE or another national securities exchange.
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. Before issuing any preferred
stock upon redemption of Preferred OP Units, AIMCO will register the issuance
and sale of such shares under the Securities Act of 1933. 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.
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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.
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, the Class J 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 8.0% per annum of the $25 liquidation preference (equivalent to
$2.00 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 July 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 March 1, 2005, 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,
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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 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> 270
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 The Class I Preferred Stock constitutes an
interests entitling each holder of Preferred equity interest entitling each holder of
OP Units to receive, when and as declared by Class I Preferred Stock to receive, when and
the board of directors of the general as declared by the AIMCO board of directors,
partner of the AIMCO Operating Partnership, cash distribution at a rate of $2.00 per
quarterly cash distribution at a rate of annum per share.
$0.50 per 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 Holders of Class I Preferred Stock do not
law or in the AIMCO Operating Partnership's have any voting rights, except as set forth
agreement of limited partnership, the below and except as otherwise required by
holders of the Preferred OP Units will have applicable law.
the same voting rights as holders of the
Common OP Units. See "Description of OP If and whenever dividends on any shares of
Units" in the accompanying Prospectus. So Class I Preferred Stock or any series or
long as any Preferred OP Units are class of Class I Parity Stock are in arrears
outstanding, in addition to any other vote for six or more quarterly periods (whether
or consent of partners required by law or by or not consecutive), the number of directors
the AIMCO Operating Partnership's agreement then constituting the AIMCO board of
of limited partnership, the affirmative vote directors shall be increased by two (if not
or consent of holders of at least 50% of the already increased by reason of similar types
outstanding Preferred OP Units will be of provisions with respect to shares of
necessary for effecting any amendment of any voting preferred stock), and the holders of
of the provisions of the Partnership Unit shares of Class I Preferred Stock, together
Designation of the Preferred OP Units that with the holders of shares of all other
materially and adversely affects the rights voting preferred stock then entitled to
or preferences of the holders of the exercise similar voting rights, voting as a
Preferred OP Units. The creation or issuance single class regardless of series, will be
of any class or series of AIMCO Operating entitled to vote for the election of two
Partnership units, including, without additional directors of AIMCO. Whenever
limitation, any AIMCO Operating Partnership dividends in arrears and dividends for the
units that may have rights senior or current quarterly dividend period have been
superior to the Preferred OP Units, will not paid or declared and set aside in respect of
be deemed to materially adversely affect the the outstanding shares of the Class I
rights or preferences of the holders of Preferred Stock and the voting preferred
Preferred OP Units. With respect to the stock, then the right of the holders of
exercise of the above described voting Class I Preferred Stock and the voting
rights, each Preferred OP Units will have preferred stock to elect such additional two
one (1) vote per Preferred 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
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
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>
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled Holders of Class I Preferred Stock are
to receive, when and as declared by the entitled to receive, when and as declared by
board of directors of the general partner of the AIMCO board of directors, out of funds
the AIMCO Operating Partnership, quarterly legally available for payment, cash
cash distributions at the rate of $0.50 per dividends at the rate of $2.00 per annum per
Preferred OP Unit; provided, however, that share. Such dividends are cumulative from
at any time and from time to time on or the date of original issue. Holders of Class
after the fifth anniversary of the issue I Preferred Stock are not be entitled to
date of the Preferred OP Units, the AIMCO receive any dividends in excess of
Operating Partnership may adjust the annual cumulative dividends on the Class I
distribution rate on the Preferred OP Units Preferred Stock. No interest, or sum of
to the lower of (i) 2.00% plus the annual money in lieu of interest, shall be payable
interest rate then applicable to U.S. in respect of any dividend payment or
Treasury notes with a maturity of five payments on the Class I Preferred Stock that
years, and (ii) the annual dividend rate on may be in arrears.
the most recently issued AIMCO
non-convertible preferred stock which ranks When dividends are not paid in full upon the
on a parity with its Class H Cumulative Class I Preferred Stock or any other class
Preferred Stock. Such distributions will be or series of Class I Parity Stock, all
cumulative from the date of original issue. dividends declared upon the Class I
Holders of Preferred OP Units will not be Preferred Stock and any shares of Class I
entitled to receive any distributions in Parity Stock will be declared ratably in
excess of cumulative distributions on the proportion to the respective amounts of
Preferred OP Units. No interest, or sum of dividends accumulated, accrued and unpaid on
money in lieu of interest, shall be payable the Class I Preferred Stock and such Class I
in respect of any distribution payment or Parity Stock. Unless dividends equal to the
payments on the Preferred OP Units that may full amount of all accumulated, accrued and
be in arrears. unpaid dividends on the Class I Preferred
Stock have been paid, or declared and set
When distributions are not paid in full upon apart for payment, except in limited
the Preferred OP Units or any Parity Units, circumstances, no dividends may be declared
all or paid or set apart for
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
distributions declared upon the Preferred OP payment by AIMCO and no other distribution
Units and any Parity Units will be declared of cash or other property may be declared or
ratably in proportion to the respective made, directly or indirectly, by AIMCO with
amounts of distributions accumulated, respect to any shares of Class I Junior
accrued and unpaid on the Preferred OP Units Stock, nor shall any shares of Class I
and such Parity Units. Unless full Junior Stock be redeemed, purchased or
cumulative distributions on the Preferred OP otherwise acquired for any consideration,
Units have been declared and paid, except in nor shall any other cash or other property
limited circumstances, no distributions may be paid or distributed to or for the benefit
be declared or paid or set apart for payment of holders of shares of Class I Junior
by the AIMCO Operating Partnership and no Stock. See "Description of Class I Preferred
other distribution of cash or other property Stock -- Dividends."
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 Ownership of shares of Class I Preferred
OP Units and the Preferred OP Units are not Stock by any person will be limited such
listed on any securities exchange. The that the sum of the aggregate value of all
Preferred OP Units are subject to certain equity stock (including all shares of Class
restrictions on transferability set forth in 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)
Pursuant to the AIMCO Operating of the aggregate value of all outstanding
Partnership's agreement of limited shares of equity stock. Further, certain
partnership, until the expiration of one transfers which may have the effect of
year from the date on which a holder of causing AIMCO to lose its status as a REIT
Preferred OP Units acquired Preferred OP are void ab initio.
Units, subject to certain exceptions, such
holder of Preferred OP Units may not If any transfer of Class I Preferred Stock
transfer all or any portion of its Preferred occurs which, if effective, would result in
OP Units to any transferee without the any person beneficially or constructively
consent of the general partner, which owning Class I Preferred Stock in excess or
consent may be withheld in its sole and in violation of the Class I Preferred
absolute discretion. After the expiration of Ownership Limit, such shares of Class I
one year, such holders of Preferred OP Units Preferred Stock in excess of the Class I
has the right to transfer all or any portion Preferred Ownership Limit will be
of its Preferred OP Units to any person, automatically transferred to a trustee in
subject to the satisfaction of certain his capacity as trustee of a trust for the
conditions specified in the AIMCO Operating exclusive benefit of one or more charitable
Partnership's agreement of limited beneficiaries designated by AIMCO, and the
partnership, including the general partner's prohibited transferee will generally have no
right of first refusal. rights in such shares, except upon sale of
the shares by the trustee. The trustee will
After a one-year holding period, a holder have all voting rights and rights to
may redeem Preferred OP Units and receive in dividends with respect to shares of Class I
exchange therefor, at the AIMCO Operating Preferred Stock held in the trust, which
Partnership's option, (i) subject to the rights will be exercised for the benefit of
terms of any Senior Units, cash in an amount the charitable beneficiaries.
equal to the Liquidation Preference of the
Preferred OP Units tendered for The trustee may sell the Class I Preferred
Stock held
</TABLE>
S-94
<PAGE> 273
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
redemption, (ii) a number of shares of Class in the trust to AIMCO or a person,
A Common Stock of AIMCO that is equal in designated by the trustee, whose ownership
value to the Liquidation Preference of the of the Class I Preferred Stock will not
Preferred OP Units tendered for redemption, violate the Class I Preferred Ownership
or (iii) for Preferred OP Units redeemed Limit. Upon such sale, the interest of the
after a two-year holding period, a number of charitable beneficiaries in the shares sold
shares of Class I Preferred Stock of AIMCO will terminate and the trustee will
that pay an aggregate amount of dividends distribute to the prohibited transferee, the
equivalent to the distributions on the lesser of (i) the price paid by the
Preferred OP Units tendered for redemption; prohibited transferee for the shares or if
provided that such shares are part of a the prohibited transferee did not give value
class or series of preferred stock that is for the shares in connection with the event
then listed on the NYSE or another national causing the shares to be held in the trust,
securities exchange. See "Federal Income Tax the market price of such shares on the day
Consequences -- Disguised Sales." The of the event causing the shares to be held
Preferred OP Units may not be redeemed at in the trust and (ii) the price per share
the option of the AIMCO Operating received by the trustee from the sale or
Partnership. See "Description of Preferred other disposition of the shares held in the
OP Units -- Redemption." trust. Any proceeds in excess of the amount
payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after March 1, 2005, 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> 274
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. Your general
partner became a wholly owned subsidiary on February 26, 1999 of AIMCO when IPT
merged with AIMCO. Accordingly, the general partner of your partnership 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 Unitholders 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 own both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives 1/2 of
1% of the gross operating revenue of your partnership's property as a
partnership administration fee from your partnership and may receive
reimbursement for expenses generated in its capacity as general partner. The
property manager received management fees of $74,140 in 1996, $73,000 in 1997
and $75,349 in 1998. The AIMCO Operating Partnership has no current intention of
changing the fee structure for the general partner or for the manager of your
partnership's 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." AIMCO's
Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is
S-96
<PAGE> 275
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.
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. However, we will not acquire any
additional units for a period of at least one year after expiration of the
offer. Any such future offers that we might make could be for consideration that
is more or less than the consideration we are currently offering.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $1,525 will be
required to purchase all of the units sought in the offer, if such units are
tendered for cash excluding expenses as itemized below. The AIMCO Operating
Partnership will obtain all such funds from cash from operations, equity
issuances and short term borrowings. The AIMCO Operating Partnership will pay
all of the costs of the offer and not your partnership.
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...................................... $ 5,000
Accountant's Fees........................................... $ 5,000
Legal Fees.................................................. $10,000
Printing Fees............................................... $10,000
Stanger's Fees.............................................. $ 9,000
Other....................................................... $11,000
-------
Total............................................. $50,000
=======
</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 Bank of America's reference rate, at the election of
the Company, plus 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 2.25% and 2.75% in the case of LIBOR-based
loans and between 0.75% and 1.25% 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
September 30, 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
S-97
<PAGE> 276
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.
We may obtain funds pursuant to a credit agreement entered into by our
subsidiary, Insignia Properties, L.P. ("IPLP"), 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, 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). IPLP 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. The AIMCO Operating
Partnership intends to repay any funds borrowed out of working capital in the
ordinary course of business.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP has delivered 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 has delivered an opinion with regard to
the material Federal income tax consequences of the offer. 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 two opinions of Skadden, Arps, Slate, Meagher & Flom LLP are 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 opinions will be sent by the Information Agent.
S-98
<PAGE> 277
BUCCANEER TRACE LIMITED PARTNERSHIP
INDEX TO THE FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed Balance Sheet as of September 30, 1998
(unaudited)............................................... F-2
Condensed Statements of Operations for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-3
Condensed Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-4
Note A -- Basis of Presentation............................. F-4
Balance Sheet as of December 31, 1997 (unaudited)........... F-5
Statements of Operations for the years ended December 31,
1997 and 1996 (unaudited)................................. F-6
Statement of Changes in Partners' Deficit for years ended
December 31, 1997 and 1996 (unaudited).................... F-7
Statements of Cash Flows for the years ended December 31,
1997 and 1996 (unaudited)................................. F-8
Notes to Financial Statements (unaudited)................... F-9
</TABLE>
F-1
<PAGE> 278
BUCCANEER TRACE LIMITED PARTNERSHIP
CONDENSED BALANCE SHEET (UNAUDITED)
(IN THOUSANDS)
SEPTEMBER 30, 1998
ASSETS
<TABLE>
<S> <C> <C>
Cash and cash equivalents................................... $ 53
Receivables and deposits.................................... 117
Restricted escrows.......................................... 138
Other assets................................................ 70
Investment Property:
Land...................................................... $ 727
Building and related personal property.................... 7,224
-------
7,951
Less Accumulated depreciation............................. (3,397) 4,554
------- -------
Total Assets...................................... $ 4,932
=======
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable and accrued liabilities.................... $ 187
Notes payable............................................... 6,974
Partners' Deficit........................................... (2,229)
-------
Total Liabilities and Partners' Deficit........... $ 4,932
=======
</TABLE>
See accompanying note
F-2
<PAGE> 279
BUCCANEER TRACE LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1998 1997
------ ------
<S> <C> <C>
Revenues:
Rental income............................................. $1,007 $1,028
Other income.............................................. 82 43
------ ------
Total Revenues.................................... 1,089 1,071
Expenses:
Operating expenses........................................ 401 361
Depreciation expense...................................... 180 180
Interest expense.......................................... 474 497
Property tax expense...................................... 86 87
------ ------
Total Expenses.................................... 1,141 1,125
------ ------
Net Loss.......................................... $ (52) $ (54)
====== ======
</TABLE>
See accompanying note
F-3
<PAGE> 280
BUCCANEER TRACE LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1998 1997
----- --------
<S> <C> <C>
Operating Activities:
Net loss.................................................. $(52) $ (54)
Adjustments to reconcile net loss to net cash provided by
operating activities
Depreciation and amortization.......................... 185 184
Changes in accounts:
Receivables and deposits and other assets............ (53) 111
Accounts payable and accrued expenses................ (28) 76
---- -------
Net cash provided by operating activities......... 52 317
---- -------
Investing Activities:
Property improvements and replacements.................... (33) (51)
Net decrease in restricted escrows........................ (4) (96)
---- -------
Net cash used in investing activities............. (37) (147)
Financing Activities:
Payments on mortgage...................................... (38) (7,347)
Proceeds from refinancing................................. -- 7,040
Loan costs................................................ -- (72)
---- -------
Net cash used in financing activities............. (38) (379)
---- -------
Net decrease in cash and cash equivalents......... (23) (209)
Cash and cash equivalents at beginning of year............ 76 275
---- -------
Cash and cash equivalents at end of period................ $ 53 $ 66
==== =======
</TABLE>
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements of Buccaneer Trace Limited
Partnership as of September 30, 1998 and for the nine months ended September 30,
1998 and 1997 have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included and all such adjustments are of a recurring nature.
The financial statements should be read in conjunction with the unaudited
financial statements and notes thereto for the year ended December 31, 1997. It
should be understood that accounting measurements at interim dates inherently
involve greater reliance on estimates than at year-end. The results of
operations for the interim periods presented are not necessarily indicative of
the results for the entire year.
F-4
<PAGE> 281
BUCCANEER TRACE LIMITED PARTNERSHIP
BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT UNIT DATA)
ASSETS
<TABLE>
<S> <C> <C>
Cash and cash equivalents................................... $ 76
Receivables and deposits.................................... 66
Restricted escrows.......................................... 134
Other assets................................................ 73
Investment property (Notes B and D)
Land...................................................... $ 727
Buildings and related personal property................... 7,191
-------
7,918
Less accumulated depreciation............................. (3,217) 4,701
------- -------
$ 5,050
=======
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Accounts payable and other accrued liabilities............ $ 184
Tenant security deposit liability......................... 31
Mortgage note payable (Notes B and D)..................... 7,012
-------
7,227
Partners' deficit
General partners.......................................... $ (53)
Limited partners (61 units issued and outstanding)........ (2,124) (2,177)
------- -------
$ 5,050
=======
</TABLE>
See accompanying notes
F-5
<PAGE> 282
BUCCANEER TRACE LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996
----------- ---------
<S> <C> <C>
Revenues
Rental income............................................. $ 1,393 $ 1,434
Other income.............................................. 65 75
---------- --------
1,458 1,509
Expenses
Operating................................................. $ 596 $ 491
Depreciation.............................................. 240 230
Interest.................................................. 654 713
Property taxes............................................ 110 118
---------- --------
1,600 1,552
---------- --------
Net loss.......................................... $ (142) $ (43)
========== ========
Net loss allocated to general partners (1%)................. (1) --
Net loss allocated to limited partners (99%)................ (141) (43)
---------- --------
$ (142) $ (43)
========== ========
Net loss per limited partnership unit............. $(2,311.48) $(704.92)
========== ========
</TABLE>
See accompanying notes
F-6
<PAGE> 283
BUCCANEER TRACE LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' DEFICIT (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- -------- -------
<S> <C> <C> <C>
Deficit at December 31, 1995................................ $(52) $(1,940) $(1,992)
Net loss for the year ended December 31, 1996............. -- (43) (43)
---- ------- -------
Deficit at December 31, 1996................................ (52) (1,983) (2,035)
Net loss for the year ended December 31, 1997............. (1) (141) (142)
---- ------- -------
Deficit at December 31, 1997................................ $(53) $(2,124) $(2,177)
==== ======= =======
</TABLE>
See accompanying notes
F-7
<PAGE> 284
BUCCANEER TRACE LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1997 1996
------- ----
<S> <C> <C>
Cash flows from operating activities
Net loss.................................................. $ (142) $(43)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation........................................... 240 230
Amortization of loan costs............................. 7 --
Change in accounts:
Receivables and deposits and other assets............ 156 (9)
Accounts payable and other liabilities............... 158 3
------- ----
Net cash provided by operating activities......... 419 181
Cash flows from investing activities
Property improvements and replacements.................... (93) (76)
Net deposits to restricted escrows........................ (134) --
------- ----
Net cash used in investing activities............. (227) (76)
Cash flows from financing activities
Principal payments on mortgage note payable............... (7,359) (67)
Proceeds from refinancing mortgage note payable........... 7,040 --
Payment of loan costs..................................... (72) --
------- ----
Net cash used in financing activities............. (391) (67)
------- ----
Net increase (decrease) in cash and cash equivalents...... (199) 38
Cash and cash equivalents at beginning of year............ 275 237
------- ----
Cash and cash equivalents at end of year.................. $ 76 $275
======= ====
Supplemental disclosure of cash flow information
Cash paid for interest.................................... $ 602 $713
======= ====
</TABLE>
See accompanying notes
F-8
<PAGE> 285
BUCCANEER TRACE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1997
NOTE A -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The limited partnership was organized for the purpose of acquiring, owning
and operating the Buccaneer Trace Apartments in Savannah, Georgia. Sixty-one
units of limited partnership interests, a managing general partner interest and
a non-managing general partner interest were issued. The Partnership shall
terminate on December 31, 2013, unless terminated sooner, pursuant to the
agreement.
Investment Property
Investment property is stated at cost. Acquisition fees are capitalized as
a cost of real estate. The Partnership records impairment losses on long-lived
assets used in operations when events and circumstances indicated that the
assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets. No
adjustments for impairment of value were necessary for the years ended December
31, 1997 or 1996.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Risks and Uncertainties
The real estate business is highly competitive. The Partnership's real
property investments are subject to competition from similar types of properties
in the vicinities in which they are located and the Partnership is not a
significant factor in its industry. In addition, various limited partnerships
have been formed by related parties to engage in business which may be
competitive with the Partnership.
Cash and Cash Equivalents
Cash on hand and in banks, and money market funds and certificates of
deposit with original maturities of three months or less are considered to be
unrestricted cash. At certain times, the amount of cash deposited at a bank may
exceed the limit on insured deposits.
Fair Value of Financial Instruments
The Partnership believes that the carrying amount of its financial
instruments (except for long term debt) approximates their fair value due to the
short term maturity of these instruments. The fair value of the Partnership's
long-term debt, after discounting the scheduled loan payments at an estimated
borrowing rate currently available to the Partnership, approximates its carrying
value.
Loan Costs
Loan costs incurred with the financing of long-term debt are amortized on a
straight-line basis over the life of the debt.
Tenant Security Deposits
The Partnership requires security deposits from all lessees for the
duration of the lease and such deposits are included in "Receivables and
deposits." Deposits are refunded when the tenant vacates the apartment if there
has been no damage to the unit and the tenant is current on its rental payments.
F-9
<PAGE> 286
BUCCANEER TRACE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Partnership Allocations
Net income or losses are allocated 99% to the limited partners and 1% to
the general partners in accordance with the partnership agreement. Distributions
of available cash (cash-flow) or proceeds from financing or sale of the property
are allocated among the general and limited partners in accordance with the
partnership agreement.
Leases
The Partnership generally leases apartment units for twelve-month terms or
less. Rental revenue is recognized as earned.
Advertising Costs
The Partnership expenses the costs of advertising as incurred.
Depreciation
Building and improvements are depreciated using the straight-line method
over the estimated useful lives of the assets, ranging from 5 to 30 years.
Restricted Escrows
Restricted escrows consist of funds established to cover necessary repairs
and replacements of existing improvements at the property.
NOTE B -- MORTGAGE NOTE PAYABLE
Mortgage note payable consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Mortgage note payable to a lending institution bearing
interest of 8.94% per annum. Monthly payments of principal
and interest of approximately $56,000 are due through
April 2004, with a balloon payment of approximately
$6,644,000 due in May 2004................................ $7,012
======
</TABLE>
The Partnership's indebtedness matured in December 1996. In April 1997, the
Partnership successfully refinanced the mortgage note payable, capitalizing loan
costs of approximately $72,000 associated with the refinancing.
Principal maturities of the mortgage note payable at December 31, 1997 are
as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $ 51
1999........................................................ 56
2000........................................................ 61
2001........................................................ 67
2002........................................................ 73
Thereafter.................................................. 6,704
------
$7,012
======
</TABLE>
The apartment property is pledged as collateral on the mortgage notes.
F-10
<PAGE> 287
BUCCANEER TRACE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE C -- TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on its managing general
partner and its affiliates for the administration and management of all
partnership activities. Affiliates of Insignia Financial Group, Inc.
("Insignia"), who is an affiliate of the managing general partner of Buccaneer
Trace Limited Partnership, provide property management and asset management
services to the Partnership.
The following items were incurred with Insignia and its affiliates (in
thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Property management fees.................................... $73 $74
Reimbursement for investor services, asset management and
partnership accounting.................................... 15 13
</TABLE>
NOTE D -- INVESTMENT PROPERTY AND ACCUMULATED DEPRECIATION
INITIAL COST TO PARTNERSHIP
(IN THOUSANDS)
<TABLE>
<CAPTION>
BUILDINGS AND
RELATED COST CAPITALIZED
PERSONAL SUBSEQUENT TO
DESCRIPTION ENCUMBRANCES LAND PROPERTY ACQUISITION
- ----------- ------------ ---- ------------- ----------------
<S> <C> <C> <C> <C>
Buccaneer Trace Apts.
Savannah, Georgia............................ $7,012 $727 $6,798 $393
</TABLE>
GROSS AMOUNT AT WHICH CARRIED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BUILDINGS AND
RELATED
PERSONAL ACCUMULATED DATE DEPRECIABLE
DESCRIPTION LAND PROPERTY TOTAL DEPRECIATION ACQUIRED LIFE-YEARS
- ----------- ---- ------------- ------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Buccaneer Trace.................... $727 $7,191 $7,918 $3,217 04/80 5-30
</TABLE>
The depreciable lives included above are for the buildings and components.
The depreciable lives for related personal property are for 5 to 7 years.
Reconciliation of "Investment Property and Accumulated Depreciation" (in
thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Investment Property
Balance at beginning of year.............................. $7,825 $7,749
Property improvements..................................... 93 76
------ ------
Balance at end of year............................ $7,918 $7,825
====== ======
Accumulated Depreciation
Balance at beginning of year.............................. $2,977 $2,747
Additions charged to expense.............................. 240 230
------ ------
Balance at end of year............................ $3,217 $2,977
====== ======
</TABLE>
The aggregate cost of the investment property for Federal income tax
purposes at December 31, 1997 and 1996 is $7,918,000 and $7,825,000,
respectively. The accumulated depreciation taken for Federal income tax purposes
at December 31, 1997 and 1996 is $5,372,000 and $5,021,000, respectively.
F-11
<PAGE> 288
BUCCANEER TRACE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE E -- INCOME TAXES
Taxable income or loss of the Partnership is reported in the income tax
returns of its partners. Accordingly, no provision for income taxes is made in
the financial statements of the Partnership.
The following is a reconciliation of reported net loss and Federal taxable
loss (in thousands, except per unit data):
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Net loss as reported........................................ $ (142) $ (43)
Deduct:
Depreciation differences.................................. (110) (113)
Other..................................................... 52 --
---------- ----------
Federal taxable loss........................................ $ (200) $ (156)
========== ==========
Federal taxable loss per limited partnership unit........... $(3,245.90) $(2,531.80)
========== ==========
</TABLE>
The following is a reconciliation between the Partnership's reported
amounts and Federal tax basis of net assets and liabilities at December 31, 1997
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
Net deficit as reported..................................... $(2,177)
Accumulated depreciation.................................... (2,155)
Other....................................................... 53
Syndication fees............................................ 371
-------
Net deficit -- tax basis.......................... $(3,908)
=======
</TABLE>
NOTE F -- SUBSEQUENT EVENT
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations and its controlling interest in
Insignia Properties Trust, with Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. The merger was
completed effective October 1, 1998, and accordingly, as of that date AIMCO
acquired the general partner of the Partnership and the company that manages the
Partnership.
F-12
<PAGE> 289
PRO FORMA FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
AS OF SEPTEMBER 30, 1998 AND FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1998
INTRODUCTION
On October 1, 1998, Apartment Investment and Management Company ("AIMCO")
completed its merger with Insignia Financial Group ("IFG") ("the IFG Merger").
In the IFG Merger, IFG's common stock was converted into 8,423,751 shares of
Class E Cumulative Convertible Preferred Stock of AIMCO ("Class E Preferred
Stock") whose issue date market value approximately equaled $292 million. In
addition to receiving the same dividends as holders of AIMCO Common Stock,
holders of Class E Preferred Stock will be entitled to a special dividend of
approximately $50 million in the aggregate. When that special dividend is paid
in full, the Class E Preferred Stock will automatically convert into AIMCO
Common Stock on a one-for-one basis, subject to antidilution adjustments, if
any. In addition, AIMCO assumed approximately $411 million in indebtedness and
other liabilities of IFG and its subsidiaries and subsidiaries of AIMCO, assumed
approximately $149.5 million of convertible securities and purchased
approximately $5 million of IFG stock prior to the Merger. AIMCO and Insignia
Properties Trust ("IPT") have completed the merger in which IPT has merged into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). In the IPT Merger, shares of
IPT common stock not held by AIMCO were converted into 4,826,745 shares of AIMCO
Class A Common Stock whose market value approximately equaled $152 million.
AIMCO assumed approximately $68 million in indebtedness. In connection with the
IFG Merger and the IPT Merger, AIMCO incurred approximately $55 million in
transaction costs for a combined transactional value of approximately $1,183
million. AIMCO contributed substantially all the assets and liabilities of
Insignia acquired in the Insignia Merger to AIMCO Properties, L.P. (together
with its subsidiaries and other controlled entities, the "Partnership") (and
together with entities in which that Partnership has a controlling financial
interest, the "Company") in exchange for 8,423,751 Class E Preferred Units. The
Class E Preferred Units have terms substantially the same as the Class E
Preferred Stock. In addition, AIMCO contributed substantially all the assets and
liabilities of IPT acquired in the IPT Merger to the Partnership in exchange for
4,826,745 limited partnership units in the Partnership ("OP Units"). In
connection with the IFG Merger, the Partnership assumed property management of
approximately 192,000 multifamily units which consist of general and limited
partnership investments in 115,000 units and third party management of 77,000
units. Insignia Properties Trust ("IPT"), which prior to the IFG Merger was a
subsidiary of IFG, owns a 32% weighted average general and limited partnership
interest in approximately 51,000 units.
Immediately following the IFG Merger, in order to satisfy certain
requirements of the Internal Revenue Code of 1986 (the "Code") applicable to
AIMCO's status as a REIT, AIMCO engaged in a reorganization (the "IFG
Reorganization") of the assets and operations of IFG whereby IFG's operations
are being conducted through corporations (the "Unconsolidated Subsidiaries") in
which the Partnership holds non-voting preferred stock that represents a 95%
economic interest, and certain officers and/or directors of AIMCO hold, directly
or indirectly, all of the voting common stock, representing a 5% economic
interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
In May and September of 1997, AIMCO directly or indirectly through a
subsidiary, acquired (the "NHP Stock Purchase") an aggregate of 6,930,122 shares
of common stock ("NHP Common Stock") of NHP. On December 8, 1997, AIMCO acquired
the remaining shares of NHP Common Stock in a merger transaction accounted for
as a purchase (the "NHP Merger"). As a result of the NHP Merger, AIMCO issued
6,759,148 shares of AIMCO Common Stock, valued at $180.8 million, and paid $86.5
million in cash. The total cost of the purchase of NHP was $349.5 million.
Substantially all assets and liabilities of NHP were contributed by AIMCO to the
Partnership.
In June 1997, the Company purchased a group of companies (the "NHP Real
Estate Companies") affiliated with NHP that hold general and limited partnership
interests in partnerships (the "NHP
P-1
<PAGE> 290
Partnerships") that own 534 conventional and affordable multifamily apartment
properties (the "NHP Properties") containing 87,659 units, a captive insurance
subsidiary and certain related assets (the "NHP Real Estate Acquisition"). The
Company paid aggregate consideration of $54.8 million in cash and warrants that
entitle the holders to purchase 399,999 shares of AIMCO Common Stock at an
exercise price of $36.00 per share. The Company engaged in a reorganization (the
"NHP Real Estate Reorganization") of its interests in the NHP Real Estate
Companies, which resulted in certain of the assets of the NHP Real Estate
Companies being owned by a limited partnership (the "Unconsolidated
Partnership") in which the Partnership holds 99% limited partner interest and
certain directors and officers of AIMCO directly or indirectly, hold a 1%
general partner interest.
Immediately following the NHP Merger, in order to satisfy certain
requirements of the Code applicable to AIMCO's status as a REIT, AIMCO engaged
in a reorganization (the "NHP Reorganization") of the assets and operations of
NHP that resulted in the Master Property Management Agreement being terminated
and NHP's operations being conducted through Unconsolidated Subsidiaries in
which the AIMCO Operating Partnership holds non-voting preferred stock that
represents a 95% economic interest, and certain officers and/or directors of
AIMCO hold, directly or indirectly, all of the voting common stock, representing
a 5% economic interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
On May 8, 1998, AIMCO completed a merger with Ambassador Apartments, Inc.
("Ambassador"), pursuant to which Ambassador was merged into AIMCO (the
"Ambassador Merger"). Each outstanding share of stock ("Ambassador Common
Stock") of Ambassador, other than those shares held by AIMCO or Ambassador, were
converted into 0.553 (the "Conversion Ratio") shares of AIMCO Common Stock. Any
outstanding options to purchase Ambassador Common Stock were converted, at the
election of the option holder, into cash or options to purchase AIMCO Common
Stock at such options' then current exercise price divided by the Conversion
Ratio. In accordance with the Agreement and Plan of Merger, dated December 23,
1997 and supplemented by letter dated as of March 11, 1998 (the "Ambassador
Merger Agreement"), the outstanding shares of Class A Senior Cumulative
Convertible Preferred Stock of Ambassador, (the "Ambassador Preferred Stock")
were redeemed and converted into Ambassador Common Stock prior to the Ambassador
Merger. Following the consummation of the Ambassador Merger, a subsidiary of the
Partnership was merged with and into the Ambassador Operating Partnership (the
"Ambassador OP Merger"). Each outstanding unit of limited partnership interest
in the Ambassador Operating Partnership was converted into the right to receive
0.553 OP Units, and as a result, the Ambassador Operating Partnership became a
99.9% owned subsidiary partnership of the Partnership.
Also during 1997, the Partnership (i) (a) acquired 44 properties for
aggregate purchase consideration of $467.4 million, of which $56 million was
paid in the form of 1.9 million OP Units (b) paid $34.2 million in cash and
issued OP Units valued at $7.3 million in connection with the acquisition of
partnership interests through tender offers in certain partnerships ((a) and (b)
together are the "1997 Property Acquisitions") and (c) paid $19.9 million to
acquire 886,600 shares of Ambassador Common Stock (together with the 1997
Property Acquisitions, the "1997 Acquisitions"); (ii) sold (a) approximately
16,367,000 shares of AIMCO Common Stock for aggregate net proceeds of $513.4
million; (b) 750,000 shares of AIMCO Class B Cumulative Convertible Preferred
Stock for net proceeds of $75 million; and (c) 2,400,000 shares of AIMCO Class C
9% Cumulative Preferred Stock for net proceeds of $58.1 million; of which all
proceeds were contributed by AIMCO to the Partnership in exchange for 16,367,000
OP Units, 750,000 Class B Preferred Units, and 2,400,000 Class C Preferred Units
(collectively, the "1997 Stock Offerings"); and (iii) sold five real estate
properties (the "1997 Dispositions").
Also during 1998, AIMCO (i) (a) sold 4,200,000 shares of its Class D
Cumulative Preferred Stock for net proceeds of $101.5 million (the "Class D
Preferred Stock Offering"); (b) sold 4,050,000 shares of its Class G Cumulative
Preferred Stock for net proceeds of $98.0 million (the "Class G Preferred Stock
Offering"); (c) sold 2,000,000 shares of its Class H Cumulative Preferred Stock
for net proceeds of $48.1 million (the "Class H Preferred Stock Offering"); and
(d) sold 1,000,000 shares of its Class J Cumulative Convertible Preferred Stock
in a private placement for $100.0 million (the "Class J Preferred
P-2
<PAGE> 291
Stock Offering"); of which all proceeds were contributed by AIMCO to the
Partnership in exchange for 4,050,000 Class G Preferred Units, 2,000,000 Class H
Preferred Units and 1,000,000 shares of Class J Preferred Units (collectively,
the "1998 Stock Offerings"); (ii) purchased 29 properties for aggregate purchase
consideration of $312.7 million, of which $52.2 million was paid in the form of
OP Units (the "1998 Acquisitions"); (iii) sold two real estate properties (the
"1998 Dispositions"); (iv) contracted to purchase two properties for aggregate
purchase consideration of $62.1 million, of which $26.4 million will be paid in
the form of OP units (the "Probable Purchases") and (v) sold 1,400,000 Class B
Preferred Partnership Units of a subsidiary and warrants to purchase 875,000
shares of AIMCO Class A Common Stock for $35.0 million (the "Preferred
Partnership Unit Offering").
PRO FORMA FINANCIAL INFORMATION OF THE PARTNERSHIP (INSIGNIA MERGER)
The following Pro Forma Consolidated Balance Sheet (Insignia Merger) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) the purchase
of nine properties for an aggregate purchase price of $62.5 million; (ii) the
Class J Preferred Stock Offering; (iii) the Probable Purchases; (iv) the IFG
Merger; (v) the IPT Merger; (vi) the IFG Reorganization; and (vii) the Preferred
Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) the
1997 Acquisitions; (ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions;
(iv) the NHP Real Estate Acquisition; (v) the NHP Real Estate Reorganization;
(vi) the NHP Stock Purchase; (vii) the NHP Merger; (viii) the NHP
Reorganization; (ix) the 1998 Stock Offerings; (x) the 1998 Acquisitions; (xi)
the Probable Purchases; (xii) the 1998 Dispositions; (xiii) the Ambassador
Merger; (xiv) the IFG Merger; (xv) the merger between IPT and Angeles Mortgage
Investment Trust ("AMIT") ("the AMIT Merger"); (xvi) the IPT Merger; (xvii) the
IFG Reorganization; and (xviii) the Preferred Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1997: (i)
the 1998 Stock Offerings; (ii) the 1998 Acquisitions; (iii) the Probable
Purchases; (iv) the 1998 Dispositions; (v) the Ambassador Merger; (vi) the IFG
Merger; (vii) the AMIT Merger; (viii) the IPT Merger; (ix) the IFG
Reorganization; and (x) the Preferred Partnership Unit offering.
The following Pro Forma Financial Information (Insignia Merger) is based,
in part, on the following historical financial statements: (i) the audited
Consolidated Financial Statements of the Partnership for the year ended December
31, 1997; (ii) the unaudited Consolidated Financial Statements of the
Partnership for the nine months ended September 30, 1998; (iii) the audited
Consolidated Financial Statements of Ambassador for the year ended December 31,
1997; (iv) the unaudited Consolidated Financial Statements of Ambassador for the
four months ended April 30, 1998; (v) the audited Consolidated Financial
Statements of IFG for the year ended December 31, 1997; (vi) the audited
Consolidated Financial Statements of AMIT for the year ended December 31, 1997;
(vii) the unaudited Consolidated Financial Statements of IFG for the nine months
ended September 30, 1998; (viii) the unaudited Financial Statements of AMIT for
the period from January 1, 1998 to September 17, 1998; (ix) the unaudited
Consolidated Financial Statements of NHP for the nine months ended September 30,
1997; (x) the unaudited Combined Financial Statements of the NHP Real Estate
Companies for the three months ended March 31, 1997; (xi) the unaudited
Financial Statements of NHP Southwest Partners, L.P. for the three months ended
March 31, 1997; (xii) the unaudited Combined Financial Statements of the NHP New
LP Entities for the three months ended March 31, 1997; (xiii) the unaudited
Combined Financial Statements of the NHP Borrower Entities for the three months
ended March 31, 1997; (xiv) the unaudited Historical Summaries of Gross Income
and Certain Expenses of The Bay Club at Aventura for the three months ended
March 31, 1997; (xv) the unaudited Historical Summary of Gross Income and Direct
Operating Expenses of Morton Towers for the six months ended June 30, 1997;
(xvi) the unaudited Combined Statement of Revenues and Certain Expenses of the
Thirty-Five Acquisition Properties for the six months ended June 30, 1997;
(xvii) the unaudited Statement of
P-3
<PAGE> 292
Revenues and Certain Expenses of First Alexandria Associates, a Limited
Partnership for the nine months ended September 30, 1997; (xviii) the unaudited
Statement of Revenues and Certain Expenses of Country Lakes Associates Two, a
Limited Partnership for the nine months ended September 30, 1997; (xix) the
unaudited Statement of Revenues and Certain Expenses of Point West Limited
Partnership, A Limited Partnership for the nine months ended September 30, 1997;
(xx) the unaudited Statement of Revenues and Certain Expenses for The Oak Park
Partnership for the nine months ended September 30, 1997; (xxi) the audited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the year ended December 31, 1997,
(xxii) the audited Combined Historical Summary or Gross Income and Direct
Operating Expenses of the Cirque Apartment Communities for the year ended
December 31, 1997; (xxiii) the audited Combined Historical Summary of Gross
Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the year ended December 31, 1997; (xxiv) the audited
Historical Summary of Gross Income and Direct Operating Expenses of the Calhoun
Beach Club Apartments for the year ended December 31, 1997; (xxv) the unaudited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the nine months ended September
30, 1998; (xxvi) the unaudited Combined Historical Summary of Gross Income and
Direct Operating Expenses of the Cirque Apartment Communities for the three
months ended March 31, 1998; (xxvii) the unaudited Combined Historical Summary
of Gross Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the nine months ended September 30, 1998; and (xxviii) the
unaudited Historical Summary of Gross Income and Direct Operating Expenses of
Calhoun Beach Club Apartments for the nine months ended September 30, 1998. The
following Pro Forma Financial Information should be read in conjunction with
such financial statements and the notes thereto incorporated by reference
herein.
The unaudited Pro Forma Financial Information (Insignia Merger) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
1997 Acquisitions, the 1998 Acquisitions, and the Probable Purchases are
adjusted to estimated fair market value, based upon preliminary estimates, which
are subject to change as additional information is obtained. The allocations of
purchase costs are subject to final determination based upon estimates and other
evaluations of fair market value. Therefore, the allocations reflected in the
following unaudited Pro Forma Financial Information may differ from the amounts
ultimately determined.
The following unaudited Pro Forma Financial Information (Insignia Merger)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions or results of
operations. In the opinion of the Partnership's management, all material
adjustments necessary to reflect the effects of these transactions have been
made.
P-4
<PAGE> 293
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS IFG AIMCO BEFORE IFG
AND PROBABLE IFG MERGER IFG REORGANIZATION
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) REORGANIZATION(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Real estate.............. $2,355,122 $202,332 $ 44,488 $ 23,880(G) $2,625,822 $ --
Property held for sale... 42,212 -- -- -- 42,212 --
Investments in
securities............. -- -- -- 443,513(G)
(443,513)(H) -- --
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 127,082 -- -- -- 127,082 59,195(I)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 246,847 -- 232,892 444,570(G) 924,309 --
Mortgage notes
receivable............. -- -- 20,916 -- 20,916
Cash and cash
equivalents............ 43,681 6,107 73,064 -- 122,852 (17,897)(J)
Restricted cash.......... 83,187 -- 2,691 -- 85,878 (1,352)(J)
Accounts receivable...... 11,545 -- 54,060 (32,234)(G) 33,371 (5,471)(J)
Deferred financing
costs.................. 21,835 -- 7,020 (7,020)(G) 21,835 --
Goodwill................. 120,503 -- 19,503 111,018(G) 251,024 --
Property management
contracts.............. -- -- 86,419 31,147(G) 117,566 (79,195)(I)
Other assets............. 69,935 -- 20,128 (4,533)(G) 85,530 (2,860)(J)
---------- -------- -------- --------- ---------- --------
Total Assets..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
Secured notes payable.... $ 774,676 $122,568 $ 29,002 $ -- $ 926,246 $ --
Secured tax-exempt bond
financing.............. 399,925 -- -- -- 399,925 --
Secured short-term
financing.............. 50,000 (50,000) 332,691 (300,000)(G) 32,691 --
Unsecured short-term
financing.............. 50,800 (50,800) -- 300,000(G) 300,000 --
Accounts payable, accrued
and other
liabilities............ 131,799 -- 33,241 50,000(G)
53,333(G)
4,935(G)
2,525(G) 275,833 (27,580)(J)
Deferred tax liability... -- -- 18,802 1,198(G) 20,000 (20,000)(I)
Security deposits and
prepaid rents.......... 13,171 -- 3,533 (3,533) 13,171 --
---------- -------- -------- --------- ---------- --------
1,420,371 21,768 417,269 108,458 1,967,866 (47,580)
Minority interest........ 42,086 37,345 108,485 (108,485)(G) 79,431 --
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. -- -- 144,282 5,218 149,500 --
Redeemable Partnership
Units.................. 232,405 45,176 -- -- 277,581 --
Partners' capital and
shareholders' equity
Common stock........... -- -- 320 (320)(G) -- --
Additional paid-in
capital.............. -- -- (86,959) 86,959(G) -- --
Distributions in excess
of earnings.......... -- -- (22,216) 22,216(G) -- --
General and Special
Limited Partner...... 1,039,525 4,150 -- 443,513(H)
9,269(G) 1,496,457 --
Preferred Units........ 387,562 100,000 -- -- 487,562 --
---------- -------- -------- --------- ---------- --------
1,427,087 104,150 (108,855) 561,637 1,984,019 --
---------- -------- -------- --------- ---------- --------
Total Liabilities
and Equity..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
<CAPTION>
PRO FORMA
----------
<S> <C>
Real estate.............. $2,625,822
Property held for sale... 42,212
Investments in
securities.............
--
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 186,277(K)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 924,309
Mortgage notes
receivable............. 20,916
Cash and cash
equivalents............ 104,955
Restricted cash.......... 84,526
Accounts receivable...... 27,900
Deferred financing
costs.................. 21,835
Goodwill................. 251,024
Property management
contracts.............. 38,371
Other assets............. 82,670
----------
Total Assets..... $4,410,817
==========
Secured notes payable.... $ 926,246
Secured tax-exempt bond
financing.............. 399,925
Secured short-term
financing.............. 32,691
Unsecured short-term
financing.............. 300,000
Accounts payable, accrued
and other
liabilities............
248,253
Deferred tax liability... --
Security deposits and
prepaid rents.......... 13,171
----------
1,920,286
Minority interest........ 79,431
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. 149,500
Redeemable Partnership
Units.................. 277,581
Partners' capital and
shareholders' equity
Common stock........... --
Additional paid-in
capital.............. --
Distributions in excess
of earnings.......... --
General and Special
Limited Partner......
1,496,457
Preferred Units........ 487,562
----------
1,984,019
----------
Total Liabilities
and Equity..... $4,410,817
==========
</TABLE>
P-5
<PAGE> 294
- ---------------
(A) Represents the unaudited historical consolidated financial position of the
Partnership as of September 30, 1998.
(B) Represents adjustments to reflect the purchase of ten properties for an
aggregate purchase price of $140.2 million; the Class J Preferred Stock
Offering; the Probable Purchases; and the Preferred Partnership Unit
Offering.
(C) Represents the unaudited historical consolidated financial position of IFG
as of September 30, 1998.
(D) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the issuance of 8,423,751 shares of AIMCO Common Stock, based
on consideration to holders of IFG common stock outstanding as of the date
of the IFG Merger; (ii) the issuance of 4,826,745 shares of AIMCO Class A
Common Stock to holders of IPT common stock (other than AIMCO); (iii) the
payment of a special dividend of $50,000; (iv) the assumption of $149,500
of the convertible debentures of IFG; (v) the allocation of the combined
purchase price of IFG and IPT based on the preliminary estimates of
relative fair market value of the assets and liabilities of IFG and IPT;
and (vi) the contribution by AIMCO of substantially all the assets and
liabilities of Insignia and IPT to the Partnership in exchange for OP
Units.
(E) Represents the effects of AIMCO's acquisition of IFG immediately after the
IFG Merger. These amounts do not give effect to the IFG Reorganization,
which includes the transfers of certain assets and liabilities of IFG to
the combined Unconsolidated Subsidiaries. The IFG Reorganization occurred
immediately after the IFG Merger so that AIMCO could maintain its
qualification as a REIT. This column is included as an intermediate step to
assist the reader in understanding the entire nature of the IFG Merger and
related transactions.
(F) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party property management operations.
The adjustments reflect the transfer of assets valued at the Partnership's
new basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(G) In connection with the IFG Merger and the IPT Merger, AIMCO became
obligated to issue a total of 13,250,496 shares of AIMCO Common Stock
The total purchase price of IFG and IPT is $1,128,009, as follows:
<TABLE>
<S> <C>
Issuance of 8,423,751 shares of AIMCO Common Stock in the
IFG Merger, at $34.658 per share.......................... $ 291,949
Issuance of 4,826,745 shares of AIMCO Common Stock in the
IPT Merger, at $31.50 per share........................... 151,564
Assumption of Convertible Debentures........................ 149,500
Assumption of liabilities as indicated in the Merger
Agreement................................................. 397,459
Transaction costs........................................... 53,333
Generation of deferred tax liability........................ 20,000
Special dividend............................................ 50,000
Purchase of IFG Common Stock prior to merger................ 4,935
Consideration for options................................... 9,269
----------
Total............................................. $1,128,009
==========
</TABLE>
P-6
<PAGE> 295
The purchase price was allocated to the various assets of IFG acquired in
the IFG Merger, as follows:
<TABLE>
<S> <C>
Purchase price.............................................. $1,128,009
Historical basis of IFG's assets acquired................... (561,181)
----------
Step-up to record the fair value of IFG's assets
acquired............................................... $ 566,828
==========
</TABLE>
This step-up was applied to IFG's assets as follows:
<TABLE>
<S> <C>
Real estate................................................. $ 23,880
Investment in real estate partnerships...................... 444,570
Decrease in accounts receivable............................. (32,234)
Decrease in deferred loan costs............................. (7,020)
Management contracts........................................ 31,147
Increase in goodwill........................................ 111,018
Reduction in value of other assets.......................... (4,533)
--------
Total............................................. $566,828
========
</TABLE>
The fair value of IFG's assets, primarily the real estate and management
contracts, was calculated based on estimated future cash flows of the
underlying assets.
As of September 30, 1998, IFG's stockholder's equity was $(108,855), which
is detailed as follows:
<TABLE>
<S> <C>
Common stock................................................ $ 320
Additional paid-in capital.................................. (86,959)
Distributions in excess of earnings......................... (22,216)
---------
Total............................................. $(108,855)
=========
</TABLE>
Upon completion of the IFG Merger, the entire amount of the stockholder's
equity was eliminated.
In addition, the minority interest in other partnerships of IFG of $108,485
will be eliminated upon the IPT Merger.
At the time of the IFG Merger, AIMCO obtained unsecured short-term
financing of $300 million. The proceeds were used to repay secured
short-term financing of IFG that AIMCO assumed.
(H) Represents the issuance of a total of 13,250,496 OP Units to AIMCO and the
concurrent issuance of 13,250,496 shares of AIMCO Common Stock to IFG and
IPT stockholders, in exchange for all the shares of IFG and IPT common
stock.
In accordance with the IFG Merger Agreement, AIMCO became obligated to
issue 8,423,751 shares of Class E Preferred Stock, approximately equal to
$292 million. Each share of Class E Preferred Stock will automatically
convert to one share of AIMCO Common Stock upon the payment of the special
dividend thereon. As such, for the purpose of preparing the pro forma
financial statements, AIMCO's management believes that the Class E
Preferred Stock is substantially the same as AIMCO Common Stock, and that
the fair value of the Class E Preferred Stock approximates the fair value
of the AIMCO Common Stock. Upon the payment of the special dividend on the
Class E Preferred Stock and the conversion of the Class E Preferred Stock
to AIMCO Common Stock, the former IFG stockholders will own approximately
15.0% of the AIMCO Common Stock and the IPT stockholders will own
approximately 7.3% of AIMCO Common Stock. The special dividend on the Class
E Preferred Stock is intended to represent a distribution in an amount at
least equal to the earnings and profits of IFG at the time of the IFG
Merger, to which AIMCO succeeds.
Concurrent with the issuance of Class E Preferred Stock, the Partnership
will issue comparable Class E Preferred Units to AIMCO. The Class E
Preferred Units will have terms substantially the same as the Class E
Preferred Stock.
(I) Represents the increase in the Partnership's investment in Unconsolidated
Subsidiaries to reflect the contribution or sale of property management
contracts, including the related deferred tax liability, in exchange for
preferred stock and a note payable from the Unconsolidated Subsidiaries.
These assets and
P-7
<PAGE> 296
liabilities are valued at the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(J) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries,
(K) Represents notes receivable from the Unconsolidated Subsidiaries of
$95,000, advances to the Unconsolidated Subsidiaries of $42,792, and equity
in the Unconsolidated Subsidiaries of $48,485. The combined pro forma
balance sheet of the Unconsolidated Subsidiaries as of September 30, 1998
is presented below, which reflects the effects of the IFG Merger, the IPT
Merger, and the IFG Reorganization as if such transactions had occurred as
of September 30, 1998.
P-8
<PAGE> 297
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
IFG
HISTORICAL REORGANIZATION(I) PRO FORMA
---------- ----------------- ---------
<S> <C> <C> <C>
ASSETS
Real estate............................................ $ 22,376 $ -- $ 22,376
Cash and cash equivalents.............................. 16,919 17,897(ii) 34,816
Restricted cash........................................ 5,507 1,352(ii) 6,859
Management contracts................................... 47,846 79,195(iii) 127,041
Accounts receivable.................................... 13,109 5,471(ii) 18,580
Deferred financing costs............................... 3,117 -- 3,117
Goodwill............................................... 43,544 -- 43,544
Other assets........................................... 51,498 2,860(ii) 54,358
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable.................................. $114,302 $ 45,000(iii) $159,302
Accounts payable, accrued and other liabilities........ 56,773 27,580(ii) 84,353
Security deposits and deferred income.................. 334 --(ii) 334
Deferred tax liability................................. -- 20,000(iii) 20,000
-------- -------- --------
171,409 92,580 263,989
Common stock........................................... 2,061 747(iv) 2,808
Preferred stock........................................ 34,290 14,195(iii) 48,485
Retained earnings...................................... (3,844) -- (3,844)
Notes receivable on common stock purchases............. -- (747)(iv) (747)
-------- -------- --------
32,507 14,195 46,702
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
</TABLE>
- ---------------
(i) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the transfer of assets valued at the Partnership's new
basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(ii) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries, valued at the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(iii)Represents the transfer or sale of management contracts, the establishment
of an intercompany note, and the establishment of the related estimated net
deferred Federal and state tax liabilities at a combined rate of 40% for
the estimated difference between the book and tax basis of the net assets
of the Unconsolidated Subsidiaries. The primary component of the deferred
tax liability is the difference between the new basis of the property
management contracts, as a result of the allocation of the purchase price
of IFG, and the historical tax basis.
(iv) Represents the issuance of common stock to the common stockholders of the
Unconsolidated Subsidiaries in exchange for notes receivable, in order for
the common stockholders to maintain their respective ownership interest in
the Unconsolidated Subsidiaries.
P-9
<PAGE> 298
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE NHP AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rental and other property
revenues........................ $193,006 $120,337(I)
11,012(J) $ 6,660 $ 93,329 $ -- $ 6,912
Property operating expenses....... (76,168) (59,466)(I)
(4,860)(J) (2,941) (36,088) -- (3,307)
Owned property management
expense......................... (6,620) (4,327)(I)
(602)(J) (282) -- -- --
Depreciation...................... (37,741) (26,645)(I)
(2,172)(J) (1,414) (18,979) (5,997)(O) (966)
-------- -------- ------- -------- ------- --------
Income from property operations... 72,477 33,277 2,023 38,262 (5,997) 2,639
-------- -------- ------- -------- ------- --------
Management fees and other
income.......................... 13,937 -- 7,813 -- -- 94,330
Management and other expenses..... (9,910) -- (5,394) -- -- (57,615)
Corporate overhead allocation..... (588) -- -- -- -- --
Amortization...................... (1,401) -- (5,800) -- -- (16,768)
-------- -------- ------- -------- ------- --------
Income from service company
business........................ 2,038 -- (3,381) -- -- 19,947
Minority interest in service
company business................ (10) -- -- -- -- --
-------- -------- ------- -------- ------- --------
AIMCO's share of income from
service company business........ 2,028 -- (3,381) -- -- 19,947
-------- -------- ------- -------- ------- --------
General and administrative
expenses........................ (5,396) -- (1,025) (7,392) 7,392(P) (21,199)
Interest expense.................. (51,385) (3,451)(K)
(2,497)(L) (5,462) (26,987) (221)(Q) (9,035)
Interest income................... 8,676 -- 1,900 -- -- 10,967
Minority interest................. 1,008 458(M) 16 (851) 705(R) (12,871)
Equity in losses of unconsolidated
partnerships.................... (1,798) (122)(N) (8,542) 405 -- 12,515
Equity in earnings of
unconsolidated subsidiaries..... 4,636 -- 5,790 -- -- --
-------- -------- ------- -------- ------- --------
Income (loss) from operations..... 30,246 27,665 (8,681) 3,437 1,879 2,963
Income tax provision.............. -- -- -- -- -- 1,701
Gain on dispositions of
property........................ 2,720 (2,720) -- -- -- 80
-------- -------- ------- -------- ------- --------
Income (loss) before extraordinary
item............................ 32,966 24,945 (8,681) 3,437 1,879 4,744
Extraordinary item -- early
extinguishment of debt.......... (269) 269 -- -- -- --
-------- -------- ------- -------- ------- --------
Net income........................ 32,697 25,214 (8,681) 3,437 1,879 4,744
Income attributable to preferred
unitholders..................... 2,315 39,859 -- -- -- --
-------- -------- ------- -------- ------- --------
Income attributable to common
unitholders..................... $ 30,382 $(14,645) $(8,681) $ 3,437 $ 1,879 $ 4,744
======== ======== ======= ======== ======= ========
Basic earnings per OP unit........ $ 1.09
========
Diluted earnings per OP unit...... $ 1.08
========
Weighted average OP units
outstanding..................... 27,732
========
Weighted average OP units and
equivalents outstanding......... 28,113
========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(G) ADJUSTMENTS(H) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property
revenues........................
$ -- $ -- $ 431,256
Property operating expenses.......
-- -- (182,830)
Owned property management
expense.........................
-- -- (11,831)
Depreciation......................
(2,350)(S) -- (96,264)
-------- -------- ---------
Income from property operations... (2,350) -- 140,331
-------- -------- ---------
Management fees and other
income.......................... -- (74,404)(X) 41,676
Management and other expenses..... -- 49,236(X) (23,683)
Corporate overhead allocation..... -- -- (588)
Amortization...................... (32,699)(T) 30,188(Y) (26,480)
-------- -------- ---------
Income from service company
business........................ (32,699) 5,020 (9,075)
Minority interest in service
company business................ -- -- (10)
-------- -------- ---------
AIMCO's share of income from
service company business........ (32,699) 5,020 (9,085)
-------- -------- ---------
General and administrative
expenses........................ -- 6,249(X) (21,371)
Interest expense..................
(14,750) -- (113,788)
Interest income................... -- 191(Z) 21,734(BB)
Minority interest................. 1,552(U) -- (9,983)
Equity in losses of unconsolidated
partnerships.................... (29,995)(V) -- (27,537)
Equity in earnings of
unconsolidated subsidiaries..... -- (4,578)(AA) 5,848(DD)
-------- -------- ---------
Income (loss) from operations..... (78,242) 6,882 (13,851)
Income tax provision.............. (1,701)(W) -- --
Gain on dispositions of
property........................ (80) -- --
-------- -------- ---------
Income (loss) before extraordinary
item............................ (80,023) 6,882 (13,851)
Extraordinary item -- early
extinguishment of debt.......... -- -- --
-------- -------- ---------
Net income........................ (80,023) 6,882 (13,851)
Income attributable to preferred
unitholders..................... -- -- 42,174(CC)
-------- -------- ---------
Income attributable to common
unitholders..................... $(80,023) $ 6,882 $ (56,025)(BB)
======== ======== =========
Basic earnings per OP unit........ $ (0.83)(BB)
=========
Diluted earnings per OP unit...... $ (0.83)(BB)
=========
Weighted average OP units
outstanding..................... 67,522
=========
Weighted average OP units and
equivalents outstanding......... 68,366
=========
</TABLE>
P-10
<PAGE> 299
- ---------------
(A) Represents the Partnership's audited consolidated results of operations
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1997: (i) the 1997 Acquisitions; (ii) the 1997 Stock
Offerings; (iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings;
(v) the 1998 Acquisitions; (vi) the Probable Purchases; (vii) the 1998
Dispositions; and (v) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(I) HISTORICAL(II) ADJUSTMENTS(III) REORGANIZATION(IV) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues................. $ 6,660(v) $ 16,842 $ -- $(16,842)(xvii) $ 6,660
Property operating
expenses................. (2,941)(v) (8,411) -- 8,411 (xvii (2,941)
Owned property management
expense.................. (282)(v) (862) -- 862 (xvii (282)
Depreciation............... (1,414)(vi) (2,527) (693)(xi) 3,220 (xvii (1,414)
------- -------- ------- -------- -------
Income from property
operations............... 2,023 5,042 (693) (4,349) 2,023
------- -------- ------- -------- -------
Management fees and other
income................... 1,405(vii) 72,176 -- (65,768)(xviii) 7,813
Management and other
expenses................. (2,263)(viii) (35,267) -- 32,136 (xviii (5,394)
Amortization............... -- (9,111) (4,432)(xii) 7,743 (xix (5,800)
------- -------- ------- -------- -------
Income from service company
business................. (858) 27,798 (4,432) (25,889) (3,381)
------- -------- ------- -------- -------
General and administrative
expenses................. -- (16,266) 8,668 (xiii 6,573 (xviii (1,025)
Interest expense........... (5,082)(ix) (10,685) -- 10,305(xx) (5,462)
Interest income............ 540(v) 1,963 -- (603)(xxi) 1,900
Minority interest.......... 16(v) -- -- -- 16
Equity in losses of
unconsolidated
partnerships............. (3,905)(x) -- (4,631)(xiv) (6) (8,542)
Equity in earnings of
unconsolidated
subsidiaries............. -- -- (4,636)(xv) 10,426 (xxii 5,790
------- -------- ------- -------- -------
Income (loss) from
operations............... (7,266) 7,852 (5,724) (3,543) (8,681)
Income tax provision....... -- (3,502) 3,502 (xvi -- --
------- -------- ------- -------- -------
Net income (loss).......... $(7,266) $ 4,350 $(2,222) $ (3,543) $(8,681)
======= ======== ======= ======== =======
</TABLE>
- ---------------
(i) Represents the adjustment to record activity from January 1, 1997 to
the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. The historical
financial statements of the NHP Real Estate Companies consolidate
certain real estate partnerships in which they have an interest that
will be presented on the equity method by the Partnership as a
result of the NHP Real Estate Reorganization. In addition,
represents adjustments to record additional depreciation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest
expense incurred in connection with borrowings incurred by the
Partnership to consummate the NHP Real Estate Acquisition.
(ii)Represents the unaudited consolidated results of operations of NHP
for the period from January 1, 1997 through December 8, 1997 (date
of the NHP Merger).
P-11
<PAGE> 300
(iii)
Represents the following adjustments occurring as a result of the
NHP Merger: (i) the reduction in personnel costs, primarily
severance costs, pursuant to a restructuring plan; (ii) the
incremental depreciation of the purchase price adjustment related to
real estate; (iii) the incremental amortization of the purchase
price adjustment related to the management contracts, furniture,
fixtures and equipment, and goodwill; (iv) the reversal of equity in
earnings of NHP during the pre-merger period when the Partnership
held a 47.62% interest in NHP; and (v) the amortization of the
increased basis in investments in real estate partnerships based on
the purchase price adjustment related to real estate and an
estimated average life of 20 years.
(iv)Represents adjustments related to the NHP Reorganization, whereby
the Partnership contributed or sold to the Unconsolidated
Subsidiaries and the Unconsolidated Partnership: (i) certain assets
and liabilities of NHP, primarily related to the management
operations and other businesses owned by NHP and (ii) 12 real estate
properties containing 2,905 apartment units. The adjustments
represent (i) the related revenues and expenses primarily related to
the management operations and other businesses owned by NHP and (ii)
the historical results of operations of such real estate
partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis
resulting from the allocation of the combined purchase price of NHP
and the NHP Real Estate Companies.
(v) Represents adjustments to reflect the acquisition of the NHP Real
Estate Companies and the corresponding historical results of
operations as if they had occurred on January 1, 1997.
(vi)Represents incremental depreciation related to the consolidated real
estate assets purchased from the NHP Real Estate Companies.
Buildings and improvements are depreciated on the straight-line
method over a period of 30 years, and furniture and fixtures are
depreciated on the straight-line method over a period of 5 years.
(vii)
Represents the adjustment to record the revenues from ancillary
businesses purchased from the NHP Real Estate Companies as if the
acquisition had occurred on January 1, 1997.
(viii)
Represents $4,878 related to the adjustment to record the expenses
from ancillary businesses purchased from the NHP Real Estate
Companies as if the acquisition had occurred on January 1, 1997,
less $2,615 related to a reduction in personnel costs pursuant to a
restructuring plan, approved by the Company's senior management,
assuming that the acquisition of the NHP Real Estate Companies had
occurred on January 1, 1997 and that the restructuring plan was
completed on January 1, 1997. The restructuring plan specifically
identifies all significant actions to be taken to complete the
restructuring plan, including the reduction of personnel, job
functions, location and the date of completion.
(ix)Represents adjustments in the amount of $3,391 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as the increase in interest expense in the amount
of $1,691 related to borrowings on the Partnership's credit
facilities of $55,807 to finance the NHP Real Estate Acquisition.
(x) Represents adjustments in the amount of $2,432 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as amortization of $1,473 related to the increased
basis in investment in real estate partnerships, as a result of the
allocation of the purchase price of the NHP Real Estate Companies,
based on an estimated average life of 20 years.
(xi)Represents incremental depreciation related to the real estate
assets purchased from NHP. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years,
and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(xii)
Represents incremental depreciation and amortization of the tangible
and intangible assets related to the property management and other
business operated by the Unconsolidated
P-12
<PAGE> 301
Subsidiaries, based on the Partnership's new basis as adjusted by
the allocation of the combined purchase price of NHP including
amortization of management contracts of $3,782, depreciation of
furniture, fixtures and equipment of $2,018 and amortization of
goodwill of $7,743, less NHP's historical depreciation and
amortization of $9,111. Management contracts are amortized using the
straight-line method over the weighted average life of the contracts
estimated to be approximately 15 years. Furniture, fixtures and
equipment are depreciated using the straight-line method over the
estimated life of 3 years. Goodwill is amortized using the
straight-line method over 20 years.
(xiii)
Represents a reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan, approved by the Company's
senior management, specifically identifying all significant actions
to be taken to complete the restructuring plan, assuming that the
NHP Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997.
(xiv)
Represents adjustment for amortization of the increased basis in
investments in real estate partnerships, as a result of the
allocation of the combined purchase price of NHP and the NHP Real
Estate Companies, based on an estimated average life of 20 years.
(xv)Represents the reversal of equity in earnings in NHP during the
pre-merger period when the Partnership held a 47.62% interest in
NHP, as a result of the Partnership's acquisition of 100% of the NHP
Common Stock.
(xvi)
Represents the reversal of NHP's income tax provision due to the
restructuring of the management business to the Unconsolidated
Subsidiaries.
(xvii)
Represents the contribution of NHP's 12 real estate properties
containing 2,905 apartment units to the Unconsolidated Partnership
pursuant to the NHP Reorganization.
(xviii)
Represents the historical income and expenses associated with
certain assets and liabilities of NHP that were contributed or sold
to the Unconsolidated Subsidiaries, primarily related to the
management operations and other businesses owned by NHP.
(xix)
Represents the amortization and depreciation of certain management
contracts and other assets of NHP, based on the Partnership's new
basis resulting from the allocation of the purchase price of NHP,
that will be contributed or sold to the Unconsolidated Subsidiaries,
primarily related to the management operations and other businesses
owned by NHP.
(xx)Represents interest expense of $6,020 related to the contribution of
NHP's 12 real estate properties containing 2,905 apartment units to
the Unconsolidated Partnership and interest expense of $4,285
related to the certain assets and liabilities that will be
contributed or sold to the Unconsolidated Subsidiaries pursuant to
the NHP Reorganization.
(xxi)
Represents the interest income of $5,000 earned on notes payable of
$50,000 to the Partnership issued as consideration for certain
assets and liabilities sold to the Unconsolidated Subsidiaries by
the Partnership, net of the elimination of the Partnership's share
of the related interest expense of $4,750 reflected in the equity in
earnings of the Unconsolidated Subsidiaries operating results,
offset by $853 in interest income primarily related to the
management operations and other businesses owned by NHP contributed
or sold to the Unconsolidated Subsidiaries pursuant to the NHP
Reorganization.
(xxii)
Represents the Partnership's equity in earnings of the
Unconsolidated Subsidiaries.
(D) Represents the audited historical statement of operations of Ambassador
for the year ended December 31, 1997. Certain reclassifications have been
made to Ambassador's historical statement of operations to conform to the
Partnership's Statement of Operations presentation. The Ambassador
historical statement of operations excludes extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of
P-13
<PAGE> 302
interest expense resulting from the net reduction of debt; and (iv) the
elimination of the minority interest associated with Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger, and the spin-off of Holdings as if these transactions had
occurred on January 1, 1997. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
IFG AMIT HOLDINGS IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property
revenues....................... $ 6,646 $ 266 $ -- $ 6,912
Property operating expenses...... (3,251) (56) -- (3,307)
Depreciation..................... (966) -- -- (966)
--------- ------- --------- --------
Income from property
operations..................... 2,429 210 -- 2,639
--------- ------- --------- --------
Management fees and other
income......................... 389,626 -- (295,296) 94,330
Management and other expenses.... (315,653) -- 258,038 (57,615)
Amortization..................... (31,709) (303) 15,244 (16,768)
--------- ------- --------- --------
Income from service company
business....................... 42,264 (303) (22,014) 19,947
--------- ------- --------- --------
General and administrative
expenses....................... (20,435) (1,351) 587 (21,199)
Interest expense................. (9,353) -- 318 (9,035)
Interest income.................. 4,571 6,853 (457) 10,967
Minority interest................ (12,448) (382) (41) (12,871)
Equity in income (losses) of
unconsolidated partnership..... 10,027 2,639 (151) 12,515
--------- ------- --------- --------
Income (loss) from operations.... 17,055 7,666 (21,758) 2,963
Income tax provision............. (6,822) (180) 8,703 1,701
Gain on sale of property......... -- 80 -- 80
--------- ------- --------- --------
Net income (loss)................ 10,233 7,566 (13,055) 4,744
========= ======= ========= ========
</TABLE>
- ---------------
(i) Represents the audited consolidated results of operations of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report
on Form 10-K. Certain reclassifications have been made to IFG's
historical statement of operations to conform to the Partnership's
statement of operations presentation.
(ii)Represents the historical statement of operations of AMIT, as well
as pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger: (i) the incremental depreciation of the
purchase price adjustment related to consolidated real estate and
investments in real estate partnerships; (ii) the amortization of
goodwill and property management contracts resulting from the IFG Merger;
(iii) the increase in interest expense resulting from the net increase in
debt; and (iv) the elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
P-14
<PAGE> 303
(I) Represents adjustments to reflect the 1997 Property Acquisitions and the
1998 Acquisitions, less the 1997 Dispositions and the 1998 Dispositions
as if they had occurred on January 1, 1997. These pro forma operating
results are based on historical results of the properties, except for
depreciation, which is based on the Partnership's investment in the
properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1997 PROPERTY 1997 1998 1998
ACQUISITIONS DISPOSITIONS ACQUISITIONS DISPOSITIONS TOTAL
------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Rental and other
property
revenues........... $ 88,589 $(4,081) $ 39,132 $(3,303) $120,337
Property operating
expense............ (44,109) 1,944 (18,655) 1,354 (59,466)
Owned property
management
expense............ (3,233) 133 (1,349) 122 (4,327)
Depreciation......... (16,839) 452 (10,946) 688 (26,645)
</TABLE>
(J) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1997. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(K) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1997
Property Acquisitions..................................... $(29,490)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1997 Dispositions and
the 1997 Stock Offerings.................................. 19,568
Repayments on the Partnership's credit facilities with
proceeds from a dividend received from one of the
Unconsolidated Subsidiaries............................... 1,889
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1998
Acquisitions.............................................. (15,994)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1998 Dispositions and
the 1998 Stock Offerings.................................. 20,113
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred Partnership
Unit Offering............................................. 463
--------
$ (3,451)
========
</TABLE>
(L) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the Probable Purchases.
(M) Represents (i) loss of $181 related to limited partners in consolidated
partnerships acquired in connection with the 1997 Property Acquisitions
and the 1998 Property Acquisitions and (ii) income of $502 allocable to
the Partnership Preferred Units.
(N) Represents the reduction in the Partnership's earnings in unconsolidated
partnerships as a result of the consolidation of additional partnerships
resulting from additional ownership acquired through tender offers.
(O) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
P-15
<PAGE> 304
(P) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 724
Reduction in salaries and benefits.......................... 4,197
Merger related costs........................................ 524
Other....................................................... 1,947
------
$7,392
======
</TABLE>
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(Q) Represents the decrease in interest expense of $3,612 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$3,833 related to borrowings under the Partnership's credit facilities.
(R) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(S) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(T) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $38,885, amortization of goodwill of $6,526, and
depreciation of furniture, fixtures, and equipment of $3,753, less IFG's
historical depreciation and amortization of $16,465. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(U) Represents elimination of minority interest of IPT resulting from the IPT
merger.
(V) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(W) Represents the reversal of IFG's income tax provision.
(X) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(Y) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Z) Represents interest income of $3,825 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries by the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $3,634 reflected on the equity in earnings of the
Unconsolidated Subsidiaries.
(AA) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-16
<PAGE> 305
(BB) The following table presents the net impact to pro forma net loss
applicable to holders of OP Units and net loss per OP Units assuming the
interest rate per annum increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest expense................................ $ 938
========
Net income.................................................. $(14,789)
========
Net loss attributable to OP unitholders..................... $(56,963)
========
Basic loss per OP unit...................................... $ (0.84)
========
Diluted loss per OP unit.................................... $ (0.84)
========
</TABLE>
(CC) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred
Units, the Class G Preferred Units, the Class H Preferred Units and the
Class J Preferred Units as if these Preferred Units had been issued as of
January 1, 1997.
(DD) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(2,536), plus the elimination of intercompany interest
expense of $8,384. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the year ended December 31, 1997 is
presented below, which represents the effects of the Ambassador Merger,
the NHP Merger, the NHP Reorganization, the IFG Merger, and the IFG
Reorganization as if these transactions had occurred as of January 1,
1997.
P-17
<PAGE> 306
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZATION IFG
HISTORICAL(I) ADJUSTMENTS(II) REORGANIZATION(III) PRO FORMA
------------- --------------- ------------------- ---------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 6,194 $ 6,371(iv) $ -- $ 12,565
Property operating expenses............. (3,355) (3,531)(iv) -- (6,886)
Owned property management expense....... (147) (478)(iv) -- (625)
Depreciation expense.................... (1,038) (767)(iv) -- (1,805)
-------- -------- -------- --------
Income from property operations......... 1,654 1,595 -- 3,249
-------- -------- -------- --------
Management fees and other income........ 23,776 41,992(v) 74,404(x) 140,172
Management and other expenses........... (11,733) (20,403)(v) (49,236)(x) (81,372)
Amortization............................ (3,726) (4,017)(v) (30,188)(xi) (37,931)
-------- -------- -------- --------
Income from service company............. 8,317 17,572 (5,020) 20,869
General and administrative expense...... -- (6,573)(v) (6,249)(x) (12,822)
Interest expense........................ (6,058) (5,849)(vi) (3,825)(xii) (15,732)
Interest income......................... 1,001 (148)(v) -- 853
Minority interest....................... (2,819) 2,198(viii) -- (621)
Equity in losses of unconsolidated
partnerships.......................... (1,028) 1,028(iv) -- --
Equity in earnings of Unconsolidated
Subsidiaries.......................... 2,943 (2,943)(vii) -- --
-------- -------- -------- --------
Income (loss) from operations........... 4,010 6,880 (15,094) (4,204)
Income tax provision.................... (1,902) (3,013)(ix) 6,450(xiii) 1,535
-------- -------- -------- --------
Net income (loss)....................... $ 2,108 $ 3,867 $ (8,644) $ (2,669)
======== ======== ======== ========
Income attributable to preferred
unitholders........................... $ 2,198 $ 3,478 $ (8,212) $ (2,536)
======== ======== ======== ========
Income (loss) attributable to common
unitholders........................... $ (90) $ 389 $ (432) $ (133)
======== ======== ======== ========
</TABLE>
- ---------------
(i) Represents the historical results of operations of the Unconsolidated
Subsidiaries for the year ended December 31, 1997.
(ii) Represents adjustments related to the NHP Reorganization, which includes
the sale or contribution of 14 properties containing 2,725 apartment units
from the unconsolidated partnerships to the Unconsolidated Subsidiaries,
as well as the sale or contribution of 12 properties containing 2,905
apartment units from the Unconsolidated Subsidiaries to the Unconsolidated
Partnership.
(iii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iv) Represents adjustments for the historical results of operations of the 14
real estate properties contributed or sold to the Unconsolidated
Subsidiaries, offset by the historical results of operations of the 12
real estate properties contributed or sold to the Unconsolidated
Partnership, with additional depreciation recorded related to the
Partnership's new basis resulting from the allocation of purchase price of
NHP and the NHP Real Estate Companies.
P-18
<PAGE> 307
(v) Represents adjustments to reflect income and expenses associated with
certain assets and liabilities of NHP contributed or sold to the
Unconsolidated Subsidiaries.
(vi) Represents adjustments of $6,058 to reverse the historical interest
expense of the Unconsolidated Subsidiaries, which resulted from its
original purchase of NHP Common Stock, offset by $2,622 related to the
contribution or sale of the 14 real estate properties, $4,285 related to
assets and liabilities transferred from the Partnership to the
Unconsolidated Subsidiaries and $5,000 related to a note payable to the
Partnership.
(vii) Represents the reversal of the historical equity in earnings of NHP for
the period in which NHP was not consolidated by the Unconsolidated
Subsidiaries.
(viii)Represents the minority interest in the operations of the 14 real estate
properties.
(ix) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill which is not deductible
for tax purposes.
(x) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(xi) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(xii) Represents adjustment for interest expense related to a note payable to
the Partnership.
(xiii)Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-19
<PAGE> 308
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR
AND PROBABLE AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E)
------------- ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Rental and other property revenues............. $ 265,700 $ 19,603(H) $ $ $
8,398(I) 35,480 -- 8,126
Property operating expenses.................... (101,600) (9,009)(H)
(3,745)(I) (14,912) -- (2,585)
Owned property management expense.............. (7,746) (728)(H)
(459)(I) -- -- --
Depreciation................................... (59,792) (4,886)(H)
(2,624)(I) (7,270) (1,420)(M) (904)
--------- -------- -------- ------- --------
Income from property operations................ 96,562 6,550 13,298 (1,420) 4,637
--------- -------- -------- ------- --------
Management fees and other income............... 13,968 -- -- -- 71,155
Management and other expenses.................. (8,101) -- -- -- (41,477)
Corporate overhead allocation.................. (196) -- -- -- --
Amortization................................... (3) -- -- -- (13,986)
--------- -------- -------- ------- --------
Income from service company business........... 5,668 -- -- -- 15,692
--------- -------- -------- ------- --------
General and administrative expenses............ (7,444) -- (5,278) 5,278(N) (61,386)
Interest expense............................... (56,756) 1,975(J)
(2,469)(K) (10,079) 145(O) (24,871)
Interest income................................ 18,244 (1) -- -- 22,501
Minority interest.............................. (1,052) 160(L) (252) 252(P) (14,159)
Equity in losses of unconsolidated
partnerships................................. (5,078) -- (71) -- 13,492
Equity in earnings of unconsolidated
subsidiaries................................. 8,413 -- -- -- --
Amortization of goodwill....................... (5,071) -- -- -- --
--------- -------- -------- ------- --------
Income (loss) from operations.................. 53,486 6,215 (2,382) 4,255 (44,094)
Income tax provision........................... -- -- -- -- 1,180
Gain on dispositions of property............... 2,783 (2,783) -- -- 6,576
--------- -------- -------- ------- --------
Net income..................................... 56,269 3,432 (2,382) 4,255 (36,338)
Income attributable to preferred unitholders... 16,320 16,094 -- -- --
--------- -------- -------- ------- --------
Income (loss) attributable to common
unitholders.................................. $ 39,949 $(12,662) $ (2,382) $ 4,255 $(36,338)
========= ======== ======== ======= ========
Basic earnings (loss) per OP Unit.............. $ 0.80
=========
Diluted earnings (loss) per OP Unit............ $ 0.79
=========
Weighted average OP Units outstanding.......... 50,420
=========
Weighted average OP Unit and equivalents
outstanding.................................. 50,544
=========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(F) ADJUSTMENTS(G) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property revenues............. $ $ $
-- -- 337,307
Property operating expenses....................
-- -- (131,851)
Owned property management expense..............
-- -- (8,933)
Depreciation...................................
(1,583)(Q) -- (78,479)
-------- -------- ---------
Income from property operations................ (1,583) -- 118,044
-------- -------- ---------
Management fees and other income............... -- (56,211)(W) 28,912
Management and other expenses.................. -- 35,192(W) (14,386)
Corporate overhead allocation.................. -- -- (196)
Amortization................................... (23,895)(R) 22,641(X) (15,243)
-------- -------- ---------
Income from service company business........... (23,895) 1,622 (913)
-------- -------- ---------
General and administrative expenses............ 45,823(S) 14,375(W) (8,632)
Interest expense...............................
7,045 -- (85,010)(AA)
Interest income................................ -- 143(Y) 40,887
Minority interest.............................. 6,622(T) -- (8,429)
Equity in losses of unconsolidated
partnerships................................. (18,577)(U) -- (10,234)
Equity in earnings of unconsolidated
subsidiaries................................. -- (7,562)(Z) 851(CC)
Amortization of goodwill....................... -- -- (5,071)
-------- -------- ---------
Income (loss) from operations.................. 15,435 8,578 41,493
Income tax provision........................... (1,180)(V) -- --
Gain on dispositions of property............... (6,576) -- --
-------- -------- ---------
Net income..................................... 7,679 8,578 41,493
Income attributable to preferred unitholders... -- -- 32,414(BB)
-------- -------- ---------
Income (loss) attributable to common
unitholders.................................. $ 7,679 $ 8,578 $ 9,079(AA)
======== ======== =========
Basic earnings (loss) per OP Unit.............. $ 0.13(AA)
=========
Diluted earnings (loss) per OP Unit............ $ 0.13(AA)
=========
Weighted average OP Units outstanding.......... 68,554
=========
Weighted average OP Unit and equivalents
outstanding.................................. 69,218
=========
</TABLE>
P-20
<PAGE> 309
- ---------------
(A) Represents the Partnership's unaudited consolidated results of operations
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1998: (i) the 1998 Stock Offerings; (ii) the 1998
Acquisitions; (iii) the Probable Purchases; (iv) the 1998 Dispositions;
and (v) the Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of operations of Ambassador
for the four months ended April 30, 1998. Certain reclassifications have
been made to Ambassador's historical Statement of Operations to conform
to the Partnership's Statement of Operations presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger and the spin-off of the common stock of Holdings as if these
transactions had occurred on January 1, 1998. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
HOLDINGS
IFG AMIT SPIN- IFG
HISTORICAL(I) MERGER(II) OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 7,566 $ 560 $ -- $ 8,126
Property operating expenses............. (2,585) -- -- (2,585)
Depreciation............................ (904) -- -- (904)
--------- ------ --------- --------
Income from property operations......... 4,077 560 -- 4,637
--------- ------ --------- --------
Management fees and other income........ 311,475 -- (240,320) 71,155
Management and other expenses........... (252,295) -- 210,818 (41,477)
Amortization............................ (26,781) (48) 12,843 (13,986)
--------- ------ --------- --------
Income from service company business.... 32,399 (48) (16,659) 15,692
--------- ------ --------- --------
General and administrative expenses..... (66,272) (675) 5,561 (61,386)
Interest expense........................ (24,164) -- (707) (24,871)
Interest income......................... 18,817 4,193 (509) 22,501
Minority interest....................... (14,159) -- -- (14,159)
Equity in losses of unconsolidated
partnerships.......................... 12,169 1,323 13,492
--------- ------ --------- --------
Income (loss) from operations........... (37,133) 4,030 (10,991) (44,094)
Income tax provision.................... (4,772) -- 5,952 1,180
Gain on disposition of property......... 5,888 688 -- 6,576
--------- ------ --------- --------
Item income (loss)...................... $ (36,017) $4,718 $ (5,039) $(36,338)
========= ====== ========= ========
</TABLE>
----------------------
(i)
Represents the unaudited consolidated results of operations of IFG for
the nine months ended September 30, 1998.
Certain reclassifications have been made to IFG's historical statement
of operations to conform to the Partnership's statement of operations
presentation.
(ii)
Represents the historical statement of operations of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock for
each three shares of IFG common stock to holders of IFG common stock.
(F) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the incremental depreciation of the purchase price adjustment
related to consolidated real estate and investments in real estate
partnerships; (ii) the amortization of goodwill and property management
contracts
P-21
<PAGE> 310
resulting from the IFG Merger; (iii) the increase in interest expense
resulting from the net increase in debt; and (iv) the elimination of the
income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of
IFG, primarily management contracts and related working capital assets
and liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(H) Represents adjustments to reflect the 1998 Acquisitions, less the 1998
Dispositions as if they had occurred on January 1, 1998. These pro forma
operating results are based on historical results of the properties,
except for depreciation, which is based on the Partnership's investment
in the properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1998 1998
ACQUISITIONS DISPOSITIONS TOTAL
------------ ------------ -------
<S> <C> <C> <C>
Rental and other property revenues......... $20,554 $(951) $19,603
Property operating expense................. (9,385) 376 (9,009)
Owned property management expense.......... (765) 37 (728)
Depreciation............................... (4,979) 93 (4,886)
</TABLE>
(I) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1998. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(J) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and
other loans and mortgages assumed in connection with
the 1998 Acquisitions.................................. $(8,698)
Repayments on the Partnership's credit facilities and
other indebtedness with proceeds from the 1998
Dispositions and the 1998 Stock
Offerings.............................................. 10,326
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred
Partnership Unit Offering.............................. 347
-------
$ 1,975
=======
</TABLE>
(K) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the probable purchases.
(L) Represents (i) loss of $537 related to limited partners in consolidated
partnerships acquired in connection with the 1998 Acquisitions and (ii)
income of $377 allocable to the Partnership Preferred Units.
(M) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(N) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses.................... $ 355
Reduction in salaries and benefits........................ 2,482
Merger related costs...................................... 1,212
Other..................................................... 1,229
------
$5,278
======
</TABLE>
P-22
<PAGE> 311
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1998 and that the
restructuring plan was completed on January 1, 1998. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(O) Represents the decrease in interest expense of $1,480 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$1,335 related to borrowings under the Partnership's line of credit.
(P) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(Q) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(R) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $30,096, amortization of goodwill of $4,895, and
depreciation of furniture, fixtures, and equipment of $2,842, less IFG's
historical depreciation and amortization of $13,938. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(S) Represents the elimination of merger related expenses recorded by IFG
during the nine months ended September 30, 1998. In connection with the
IFG Merger, certain IFG executives will receive one-time lump-sum
payments in connection with the termination of their employment and
option agreements. The total of these lump sum payments is estimated to
be approximately $50,000.
(T) Represents elimination of minority interest in IPT resulting from the IPT
merger.
(U) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(V) Represents the reversal of IFG's income tax provision.
(W) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(X) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Y) Represents interest income of $2,861 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries of the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $2,718 reflected in the equity in earnings of the
Unconsolidated Subsidiaries.
(Z) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-23
<PAGE> 312
(AA) The following table presents the net impact to pro forma net income
applicable to holders of shares of AIMCO Common Stock and net income per
share of AIMCO Common Stock assuming the interest rate per annum
increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest........................................ $ 702
=======
Net income.................................................. $40,791
=======
Net income attributable to OP Unitholders................... $ 8,377
=======
Basic loss per OP Unit...................................... $ 0.12
=======
Diluted loss per OP Unit.................................... $ 0.12
=======
</TABLE>
(BB) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred Units
the Class G Preferred Units, the Class H Preferred Units and the Class J
Preferred Units as if these stock offerings had occurred as of January 1,
1997.
(CC) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(1,867) plus the elimination of intercompany interest of
$2,718. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the nine months ended September 30, 1998
is presented below, which represents the effects of the Ambassador
Merger, the IFG Merger and the IFG Reorganization as if these
transactions had occurred as of January 1, 1997.
P-24
<PAGE> 313
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
IFG
HISTORICAL(I) REORGANIZATION(II) PRO FORMA
------------- ------------------ ---------
<S> <C> <C> <C>
Rental and other property revenues................... $ 9,910 $ -- $ 9,910
Property operating expense........................... (5,139) -- (5,139)
Owned property management expense.................... (345) -- (345)
Depreciation expense................................. (1,026) -- (1,026)
-------- -------- --------
Income from property operations...................... 3,400 -- 3,400
-------- -------- --------
Management fees and other income..................... 57,665 56,211(iii) 113,876
Management and other expenses........................ (36,221) (35,192)(iii) (71,413)
Amortization......................................... (2,111) (22,641)(iv) (24,752)
-------- -------- --------
Income from service company.......................... 19,333 (1,622) 17,711
General and administrative expense................... -- (14,375)(iii) (14,375)
Interest expense..................................... (6,931) (2,861)(v) (9,792)
Interest income...................................... 617 -- 617
Minority interest.................................... (526) -- (526)
-------- -------- --------
Income (loss) from operations........................ 15,893 (18,858) (2,965)
Income tax provision................................. (7,037) 8,037(vi) 1,000
-------- -------- --------
Net income (loss).................................... $ 8,856 $(10,821) $ (1,965)
======== ======== ========
Income (loss) attributable to preferred
stockholders....................................... $ 8,413 $(10,280) $ (1,867)
======== ======== ========
Income (loss) attributable to common stockholders.... $ 443 $ (541) $ (98)
======== ======== ========
</TABLE>
- ---------------
(i) Represents the Unconsolidated Subsidiaries historical consolidated results
of operations.
(ii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iii)Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG.
(iv) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG, based on the Partnership's new basis resulting from the allocation
of the purchase price of IFG.
(v) Represents adjustment for interest expense related to a note payable to the
Partnership.
(vi) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-25
<PAGE> 314
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR IFG
AND PROBABLE NHP AMBASSADOR PURCHASE PRICE AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $ 32,697 $ 25,214 $ (8,681) $ 3,437 $ 1,879 $ 4,744
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 43,520 28,817 7,354 20,372 5,997 17,248
Gain on investments............ -- -- (12) -- -- --
(Gain) loss on disposition of
properties.................... (2,720) 2,720 (3,882) -- -- (80)
Minority interests............. (1,008) (458) (16) 851 (705) 12,871
Equity in earnings of
unconsolidated partnerships... 1,798 122 8,542 (405) -- (12,515)
Equity in earnings of
unconsolidated subsidiaries... (4,636) -- (5,790) -- -- --
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 269 (269) -- -- -- (5,366)
Changes in operating assets and
operating liabilities......... 3,112 -- 5,314 (3,523) -- (4,384)
--------- --------- --------- --------- -------- --------
Total adjustments........... 40,335 30,932 11,510 17,295 5,292 7,774
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) operating activities... 73,032 56,146 2,829 20,732 7,171 12,518
Net cash used in
discontinued operations.... -- -- (7,999) -- -- --
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) continuing
operations................. 73,032 56,146 (5,170) 20,732 7,171 12,518
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... 21,792 19,627(I) -- -- -- --
Purchase of real estate.......... (376,315) (220,995)(J) (4,114) (24,179) -- --
Additions to real estate,
investments and property held
for sale....................... (26,966) (5,217)(K) (522) (19,033) -- (4,154)
Proceeds from sale of property
held for sale.................. 303 -- -- -- -- --
Purchase of general and limited
partnership interests.......... (199,146) -- (1,208) -- -- (76,104)
Purchase of management
contracts...................... -- -- (11,686) -- -- (36,868)
Purchase of/additions to notes
receivable..................... (59,787) -- (4,236) -- -- (17,647)
Proceeds from repayments of notes
receivable..................... -- -- 214 1,000 -- 8,838
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... 45,791 -- 3,097 3,183 -- 42,615
Contribution to unconsolidated
subsidiaries................... (42,879) -- -- -- -- --
Proceeds from sale of
securities..................... -- -- 642 -- -- --
Purchase of investments held for
sale........................... -- -- (73) -- -- --
Purchase of NHP mortgage loans... (60,575) -- -- -- -- --
Purchase of Ambassador common
stock.......................... (19,881) -- -- -- -- --
--------- --------- --------- --------- -------- --------
Net cash used in investing
activities................. (717,663) (206,585) (17,886) (39,029) -- (83,320)
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. 225,436 122,568(L) 145,519 156,746 -- 111,001
Principal repayments on secured
notes payable.................. (12,512) -- (141,032) (141,676) -- (12,697)
Proceeds from secured short-term
financing...................... 19,050 -- -- -- -- --
Repayments on secured short-term
financing...................... -- (259,027)(M) (434) -- -- --
Principal repayments on unsecured
short-term notes payable....... (79) (50,800)(M) -- -- -- --
Proceeds (payoff) from unsecured
short-term financing........... (12,500) -- -- -- -- --
Principal repayments on secured
tax-exempt bond financing...... (1,487) -- -- -- -- --
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... (162,008) -- -- -- -- --
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... (6,387) -- (245) (8,095) -- (2,305)
Proceeds from issuance of common
and preferred stock, net....... 643,224 357,389(N) 6,286 28,946 -- 62,420
Proceeds from exercises of
employee stock options and
warrants....................... 871 -- -- 3,195 -- 7,487
Repurchase of common stock....... -- -- -- -- -- (3,283)
Principal repayments received on
notes due from Officers........ 25,957 -- -- 1,323 -- --
Investments made by minority
interests...................... -- -- -- -- -- 249
Receipt of contributions from
minority interests............. -- 37,345(O) -- -- -- --
Payments of distribution to
minority interests............. -- (2,713)(P) -- -- -- --
Payment of distributions......... (44,660) (19,396)(Q) (11,503)(T) (15,717) (12,173)(U) (2,695)
Payment of distributions to
limited partners............... -- (5,193)(R) -- -- (15)(U) --
Payment of preferred unit
distributions.................. (846) (39,859)(S) -- (2,279) -- --
Payment of distributions to
minority interests............. (5,510) -- -- (3,700) -- (12,578)
Net transactions with
Insignia/ESG................... -- -- -- -- -- (57,612)
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) financing activities... 668,549 140,314 (1,409) 18,743 (12,188) 89,987
--------- --------- --------- --------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. 23,918 (10,125) (24,465) 446 (5,017) 19,185
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. 13,170 -- 36,277 4,002 -- 64,447
--------- --------- --------- --------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $ 37,088 $ (10,125) $ 11,812 $ 4,448 $ (5,017) $ 83,632
========= ========= ========= ========= ======== ========
<CAPTION>
IFG IFG
MERGER REORGANIZATION PRO
ADJUSTMENTS(G) ADJUSTMENTS(H) FORMA
-------------- -------------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $(80,023) $ 6,882 $ (13,851)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 35,049 (30,188) 128,169
Gain on investments............ -- -- (12)
(Gain) loss on disposition of
properties.................... 80 -- (3,882)
Minority interests............. (1,552) -- 9,983
Equity in earnings of
unconsolidated partnerships... 29,995 -- 27,537
Equity in earnings of
unconsolidated subsidiaries... -- 4,578 (5,848)
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 5,366 --
Changes in operating assets and
operating liabilities......... -- -- 519
-------- -------- -----------
Total adjustments........... 68,938 (25,610) 156,466
-------- -------- -----------
Net cash provided by (used
in) operating activities... (11,085) (18,728) 142,615
Net cash used in
discontinued operations.... -- -- (7,999)
-------- -------- -----------
Net cash provided by (used
in) continuing
operations................. (11,085) (18,728) 134,616
-------- -------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... -- -- 41,419
Purchase of real estate.......... -- -- (625,603)
Additions to real estate,
investments and property held
for sale....................... -- -- (55,892)
Proceeds from sale of property
held for sale.................. -- -- 303
Purchase of general and limited
partnership interests.......... -- -- (276,458)
Purchase of management
contracts...................... -- -- (48,554)
Purchase of/additions to notes
receivable..................... -- -- (81,670)
Proceeds from repayments of notes
receivable..................... -- -- 10,052
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... -- -- 94,686
Contribution to unconsolidated
subsidiaries................... -- -- (42,879)
Proceeds from sale of
securities..................... -- -- 642
Purchase of investments held for
sale........................... -- -- (73)
Purchase of NHP mortgage loans... -- -- (60,575)
Purchase of Ambassador common
stock.......................... -- -- (19,881)
-------- -------- -----------
Net cash used in investing
activities................. -- -- (1,064,483)
-------- -------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. -- -- 761,270
Principal repayments on secured
notes payable.................. -- -- (307,917)
Proceeds from secured short-term
financing...................... -- -- 19,050
Repayments on secured short-term
financing...................... -- -- (259,461)
Principal repayments on unsecured
short-term notes payable....... -- -- (50,879)
Proceeds (payoff) from unsecured
short-term financing........... -- -- (12,500)
Principal repayments on secured
tax-exempt bond financing...... -- -- (1,487)
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... -- -- (162,008)
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... -- -- (17,032)
Proceeds from issuance of common
and preferred stock, net....... -- -- 1,098,265
Proceeds from exercises of
employee stock options and
warrants....................... -- -- 11,553
Repurchase of common stock....... -- -- (3,283)
Principal repayments received on
notes due from Officers........ -- -- 27,280
Investments made by minority
interests...................... -- -- 249
Receipt of contributions from
minority interests............. -- -- 37,345
Payments of distribution to
minority interests............. -- -- (2,713)
Payment of distributions......... (24,513)(V) -- (130,657)
Payment of distributions to
limited partners............... -- -- (5,208)
Payment of preferred unit
distributions.................. -- -- (42,984)
Payment of distributions to
minority interests............. -- -- (21,788)
Net transactions with
Insignia/ESG................... -- -- (57,612)
-------- -------- -----------
Net cash provided by (used
in) financing activities... (24,513) -- 879,483
-------- -------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. (35,598) (18,728) (50,384)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. -- -- 117,896
-------- -------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $(35,598) $(18,728) $ 67,512
======== ======== ===========
</TABLE>
P-26
<PAGE> 315
- ---------------
(A) Represents the Partnership's audited consolidated statement of cash flows
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1997 Acquisitions; (ii) the 1997 Stock Offerings;
(iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings; (v) the 1998
Acquisitions; (vi) the Probably Purchases; (vii) the 1998 Dispositions; and
(viii) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(I) HISTORICAL(II) ADJUSTMENTS(III) REORGANIZATION(IV) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)................. $ (7,266) $ 4,350 $(2,222) $ (3,543) $ (8,681)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 4,058 9,134 5,125 (10,963) 7,354
Gain on investments............. (12) -- -- -- (12)
(Gain) loss on disposition of
properties.................... (3,882) -- -- -- (3,882)
Minority interests.............. (16) -- -- -- (16)
Equity in earnings of
unconsolidated partnerships... 3,905 -- 4,631 6 8,542
Equity in earnings of
unconsolidated subsidiaries... -- -- 4,636 (10,426) (5,790)
Changes in operating assets and
operating liabilities......... (1,036) 6,350 -- -- 5,314
-------- -------- ------- -------- ---------
Total adjustments........... 3,017 15,484 14,392 (21,383) 11,510
-------- -------- ------- -------- ---------
Net cash provided by (used
in) operating
activities................ (4,249) 19,834 12,170 (24,926) 2,829
Net cash used in
discontinued operations... -- (7,999) -- -- (7,999)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) continuing
operations................ (4,249) 11,835 12,170 (24,926) (5,170)
-------- -------- ------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate........... -- (4,114) -- -- (4,114)
Additions to real estate,
investments and property held
for sale........................ (522) -- -- -- (522)
Purchase of general and limited
partnership interests........... (1,208) -- -- -- (1,208)
Purchase of management
contracts....................... -- (11,686) -- -- (11,686)
Purchase of/additions to notes
receivable...................... -- (4,236) -- -- (4,236)
Proceeds from repayments of notes
receivable...................... 214 -- -- -- 214
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 3,097 -- -- -- 3,097
Proceeds from sale of
securities...................... 642 -- -- -- 642
Purchase of investments held for
sale............................ (73) -- -- -- (73)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) investing
activities................ 2,150 (20,036) -- -- (17,886)
-------- -------- ------- -------- ---------
</TABLE>
P-27
<PAGE> 316
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(I) HISTORICAL(II) ADJUSTMENTS(III) REORGANIZATION(IV) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes
payable borrowings.............. $ 74,019 $ 71,500 $ -- $ -- $ 145,519
Principal repayments on secured
notes payable................... (71,256) (69,776) -- -- (141,032)
Repayments on secured short-term
financing....................... (434) -- -- -- (434)
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (245) -- -- (245)
Proceeds from issuances of common
and preferred stock, net........ -- 6,286 -- -- 6,286
Payment of distributions.......... (2,000) -- (9,503) -- (11,503)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) financing
activities................ 329 7,765 (9,503) -- (1,409)
-------- -------- ------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (1,770) (436) 2,667 (24,926) (24,465)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 25,795 10,482 -- -- 36,277
-------- -------- ------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 24,025 $ 10,046 $ 2,667 $(24,926) $ 11,812
======== ======== ======= ======== =========
</TABLE>
- ---------------
(i)Represents the adjustment to record cash flow activity from January 1,
1997 to the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. In addition,
represents adjustments to record additional deprecation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest expense
incurred in connection with borrowings incurred by the Partnership to
consummate the NHP Real Estate Acquisition.
(ii)
Represents the unaudited consolidated statement of cash flows of NHP
for the period from January 1, 1997 through December 8, 1997 (date of
the NHP Merger).
(iii)
Represents the following adjustments occurring as a result of the NHP
Merger: (i) the reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan; (ii) the incremental
depreciation of the purchase price adjustment related to real estate;
(iii) the incremental amortization of the purchase price adjustment
related to management contracts, furniture, fixtures and equipment, and
goodwill; (iv) the reversal of equity in earnings of NHP during the
pre-merger period when the Partnership held a 47.62% interest in NHP;
and (v) the amortization of the increased basis in investments in real
estate partnerships, based on the purchase price adjustment related to
real estate and an estimated average life of 20 years.
(iv)
Represents adjustments related to the NHP Reorganization, whereby the
Partnership contributed or sold to the Unconsolidated Subsidiaries and
the Unconsolidated Partnership; (i) certain assets and liabilities of
NHP, primarily related to the management operations and other
businesses owned by NHP and (ii) 12 real estate properties containing
2,905 apartment units. The adjustments represent (i) the related cash
flow activity primarily related to the management operations of such
real estate partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis resulting
from the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies.
(D) Represents the audited historical statement of cash flows of Ambassador for
the year ended December 31, 1997. Certain reclassifications have been made
to Ambassador's historical statement of cash flows to conform to the
Partnership's statement of cash flows presentation. The Ambassador
P-28
<PAGE> 317
historical statement of cash flows excludes an extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................... $ 10,233 $ 7,566 $(13,055) $ 4,744
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization...... 32,675 63 (15,490) 17,248
Gain on disposition of property.... -- (80) -- (80)
Minority interests................. 12,448 382 41 12,871
Equity in earnings of
unconsolidated partnerships...... (10,027) (2,639) 151 (12,515)
Extraordinary gain on early
extinguishment of debt........... (5,366) -- -- (5,366)
Changes in operating assets and
liabilities...................... -- (2,405) (1,979) (4,384)
--------- -------- -------- --------
Total adjustments............. 29,730 (4,679) (17,277) 7,774
--------- -------- -------- --------
Net cash provided by (used in) operating
activities............................ 39,963 2,887 (30,332) 12,518
--------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to real estate, investments
and property held for sale......... (7,695) 665 2,876 (4,154)
Purchase of general and limited
partnership interests.............. (93,118) -- 17,014 (76,104)
Purchase of management contracts...... (99,540) -- 62,672 (36,868)
Purchase of/additions to notes
receivable......................... (9,172) (14,251) 5,776 (17,647)
Proceeds from repayments of notes
receivable......................... 4,523 7,552 (3,237) 8,838
Distributions from investments in real
estate partnerships and
unconsolidated subsidiaries........ 44,823 -- (2,208) 42,615
--------- -------- -------- --------
Net cash provided by (used in)
investing activities........ (160,179) (6,034) 82,893 (83,320)
--------- -------- -------- --------
</TABLE>
P-29
<PAGE> 318
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable
borrowings......................... $ 118,141 $ -- $ (7,140) $111,001
Principal repayments on secured notes
payable............................ (15,682) -- 2,985 (12,697)
Payment of loan costs, net of proceeds
from interest rate hedge........... (2,305) -- -- (2,305)
Proceeds from issuance of common and
preferred stock, net............... 62,420 -- -- 62,420
Proceeds from exercises of employee
stock options and warrants......... 7,487 -- -- 7,487
Repurchase of common stock............ (3,283) -- -- (3,283)
Investment made by minority
interests.......................... 249 -- -- 249
Payment of distributions.............. -- (2,695) -- (2,695)
Payment of distributions to minority
interests.......................... (12,578) -- -- (12,578)
Net transactions with Insignia/ESG.... -- -- (57,612) (57,612)
--------- -------- -------- --------
Net cash provided by (used in)
financing activities........ 154,449 (2,695) (61,767) 89,987
--------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 34,233 (5,842) (9,206) 19,185
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD............................. 54,614 9,789 44 64,447
--------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................ $ 88,847 $ 3,947 $ (9,162) $ 83,632
========= ======== ======== ========
</TABLE>
- ---------------
(i)Represents the audited consolidated statement of cash flows of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report on
Form 10-K. Certain reclassifications have been made to IFG's historical
statement of cash flows to conform to the Partnership's statement of
cash flows presentation.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(I) Represents proceeds from the sale of the 1998 Dispositions, as if these
dispositions occurred on January 1, 1997.
P-30
<PAGE> 319
(J) Represents the use of cash to purchase the 1998 Acquisitions and the
Probable Purchases, as if these acquisitions occurred on January 1, 1997.
(K) Represents cash payments for capital improvements of $300 per unit on the
1997 Acquisitions, the 1998 Acquisitions and the Probable Purchases.
(L) Represents notes payable assumed in connection with the 1998 Acquisitions
and the Probable Purchases, assuming these transactions occurred January 1,
1997.
(M) Represents net principal repayments assuming the 1998 Acquisitions, the
1998 Dispositions, the Probable Purchases, the 1998 Stock Offerings and the
Preferred Partnership Unit Offering occurred January 1, 1997.
(N) Represents cash proceeds from the 1998 Stock Offerings, as if these
offerings occurred on January 1, 1997.
(O) Represents contributions from minority interests assuming the Preferred
Partnership Unit Offering occurred January 1, 1997.
(P) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(Q) Represents distributions paid on the 1997 Stock Offerings as if these
occurred on January 1, 1997.
(R) Represents distributions paid to limited partners on OP Units issued in
connection with the 1997 Acquisitions, the 1998 Acquisitions and the
Probable Purchases, as if the issuance of the OP Units occurred on January
1, 1997.
(S) Represents preferred unit distributions paid on the Class B Preferred
Stock, the Class C Preferred Stock and the 1998 Stock Offerings as if these
occurred on January 1, 1997.
(T) Represents historical distributions of $2,000 and pro forma distributions
on the shares issued in the NHP Merger as if these shares had been issued
on January 1, 1997.
(U) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(V) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-31
<PAGE> 320
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE AMBASSADOR PURCHASE PRICE IFG AS IFG MERGER
HISTORICAL(A) PURCHASE(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 56,269 $ 3,432 $ (2,382) $ 4,255 $ (36,338) $ 7,679
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 67,344 7,512 7,520 1,420 14,890 25,478
(Gain) loss on disposition of
properties..................... (2,783) 2,783 -- -- (6,576) 6,576
Minority interests.............. 1,052 (160) 252 (252) 14,159 (6,622)
Equity in earnings of
unconsolidated partnerships.... 5,078 -- 71 -- (13,492) 18,577
Equity in earnings of
unconsolidated subsidiaries.... (8,413) -- -- -- -- --
Non-cash compensation........... -- -- -- -- 796 --
Changes in operating assets and
operating liabilities.......... (67,722) -- 5,948 -- (7,775) --
--------- -------- -------- ------- --------- --------
Total adjustments............ (5,444) 10,135 13,791 1,168 2,002 44,009
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) operating activities... 50,825 13,567 11,409 5,423 (34,336) 51,688
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... (63,839) 63,839(H) -- -- 27,122 --
Additions to real estate.......... (47,878) (1,198)(I) (17,759) -- 9,309 --
Proceeds from sale of property and
investments held for sale....... 19,627 (19,627)(J) -- -- (35) --
Additions to property held for
sale............................ (1,986) -- -- -- -- --
Purchase of general and limited
partnership interests........... (27,016) -- -- -- 17,420 --
Purchase of/additions to notes
receivable...................... (72,445) -- -- -- (27,589) --
Proceeds from repayments/sale of
notes receivable................ 21,562 -- -- -- 21,185 --
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 513 -- 1,063 -- 22,053 --
Payment of trust based preferred
dividends....................... -- -- -- -- (7,415) --
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... 4,492 -- -- -- 13,423 --
Contribution to unconsolidated
subsidiaries.................... (13,032) -- -- -- -- --
Purchase of investments held for
sale............................ (4,935) -- -- -- -- --
Redemption of OP Units............ (516) -- -- -- -- --
Merger costs...................... -- -- -- -- (1,402) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) investing activities... (185,453) 43,014 (16,696) -- 74,071 --
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. 77,489 -- 37,162 -- 177,234 --
Principal repayments on secured
notes payable................... (56,262) -- -- -- 4,239 --
Principal advances on secured
tax-exempt bond financing....... -- -- 21,784 -- -- --
Principal repayments on secured
tax-exempt bond financing....... (1,436) -- -- -- -- --
Net borrowings/repayments on
secured short-term financing.... (30,693) 209,027(K) (43,002) -- -- --
Net borrowings (paydowns) on the
revolving credit facilities..... -- -- 2,513 -- -- --
Principal repayments on unsecured
short-term notes payable........ -- -- -- -- 2,644 --
Payment of loan costs, net of
proceeds from interest rate
hedge........................... (5,727) -- -- -- (83) --
Proceeds from issuance of common
stock and preferred stock,
net............................. 253,239 (253,239)(L) -- -- -- --
Repurchase of common stock........ (10,972) -- -- -- -- --
Proceeds from exercises of
employee stock options and
warrants........................ -- -- 9,761 -- 6,533 --
Principal repayments received on
notes due from Officers......... 8,084 -- -- -- -- --
Payments of distributions to
minority interests.............. -- (2,034)(M) -- -- -- --
Payment of distributions.......... (73,322) -- -- (3,701)(P) (8,606) (22,360)(Q)
Payment of distributions to
limited partners................ (10,251) (1,919)(N) -- (5)(P) (494) --
Payment of preferred unit
distributions................... (10,916) (16,094)(O) -- -- -- --
Proceeds from issuance of High
Performance Units............... 1,988 -- -- -- -- --
Net transactions with
Insignia/ESG.................... -- -- -- -- (241,003) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) financing activities... 141,221 (64,259) 28,218 (3,706) (59,536) (22,360)
--------- -------- -------- ------- --------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. 6,593 (7,678) 22,931 1,717 (19,801) 29,328
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 37,088 (10,125) 4,448 (5,017) 83,632 (35,598)
--------- -------- -------- ------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 43,681 $(17,803) $ 27,379 $(3,300) $ 63,831 $ (6,270)
========= ======== ======== ======= ========= ========
<CAPTION>
IFG
REORGANIZATION PRO
ADJUSTMENTS(G) FORMA
-------------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 8,578 $ 41,493
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... (22,641) 101,523
(Gain) loss on disposition of
properties..................... -- --
Minority interests.............. -- 8,429
Equity in earnings of
unconsolidated partnerships.... -- 10,234
Equity in earnings of
unconsolidated subsidiaries.... 7,562 (851)
Non-cash compensation........... -- 796
Changes in operating assets and
operating liabilities.......... -- (69,549)
-------- ---------
Total adjustments............ (15,079) 50,582
-------- ---------
Net cash provided by (used
in) operating activities... (6,501) 92,075
-------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... -- 27,122
Additions to real estate.......... -- (57,526)
Proceeds from sale of property and
investments held for sale....... -- (35)
Additions to property held for
sale............................ -- (1,986)
Purchase of general and limited
partnership interests........... -- (9,596)
Purchase of/additions to notes
receivable...................... -- (100,034)
Proceeds from repayments/sale of
notes receivable................ -- 42,747
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... -- 23,629
Payment of trust based preferred
dividends....................... -- (7,415)
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... -- 17,915
Contribution to unconsolidated
subsidiaries.................... -- (13,032)
Purchase of investments held for
sale............................ -- (4,935)
Redemption of OP Units............ -- (516)
Merger costs...................... -- (1,402)
-------- ---------
Net cash provided by (used
in) investing activities... -- (85,064)
-------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. -- 291,885
Principal repayments on secured
notes payable................... -- (52,023)
Principal advances on secured
tax-exempt bond financing....... -- 21,784
Principal repayments on secured
tax-exempt bond financing....... -- (1,436)
Net borrowings/repayments on
secured short-term financing.... -- 135,332
Net borrowings (paydowns) on the
revolving credit facilities..... -- 2,513
Principal repayments on unsecured
short-term notes payable........ -- 2,644
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (5,810)
Proceeds from issuance of common
stock and preferred stock,
net............................. -- --
Repurchase of common stock........ -- (10,972)
Proceeds from exercises of
employee stock options and
warrants........................ -- 16,294
Principal repayments received on
notes due from Officers......... -- 8,084
Payments of distributions to
minority interests.............. -- (2,034)
Payment of distributions.......... -- (107,989)
Payment of distributions to
limited partners................ -- (12,669)
Payment of preferred unit
distributions................... -- (27,010)
Proceeds from issuance of High
Performance Units............... -- 1,988
Net transactions with
Insignia/ESG.................... -- (241,003)
-------- ---------
Net cash provided by (used
in) financing activities... -- 19,578
-------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (6,501) 26,589
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... (18,728) 55,700
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $(25,229) $ 82,289
======== =========
</TABLE>
P-32
<PAGE> 321
- ---------------
(A) Represents the Partnership's unaudited consolidated statement of cash flows
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1998 Stock Offerings; (ii) the 1998 Acquisitions;
(iii) the Probably Purchases; (iv) the 1998 Dispositions and (v) the
Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of cash flows of Ambassador
for the four months ended April 20, 1998. Certain reclassifications have
been made to Ambassador's historical statement of cash flows to conform to
the Partnership's statement of cash flows presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ (36,017) $ 4,718 $ (5,039) $(36,338)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 27,685 48 (12,843) 14,890
Gain on disposition of property......................... (5,888) (688) -- (6,576)
Minority interests...................................... 14,159 -- -- 14,159
Equity in earnings of unconsolidated partnerships....... (12,169) -- (1,323) (13,492)
Non-cash compensation................................... 796 -- -- 796
Changes in operating assets and liabilities............. (18,853) (1,499) 12,577 (7,775)
--------- -------- --------- --------
Total adjustments................................... 5,730 (2,139) (1,589) 2,002
--------- -------- --------- --------
Net cash provided by (used in) operating
activities........................................ (30,287) 2,579 (6,628) (34,336)
--------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... (3,804) -- 30,926 27,122
Additions to real estate.................................. (2,252) (25) 11,586 9,309
Proceeds from sales of property and investments held for
sale.................................................... -- 161 (196) (35)
Purchase of general and limited partnership interests..... (44,270) -- 61,690 17,420
Purchases of / additions to notes receivable.............. (17,107) (15,407) 4,925 (27,589)
Proceeds from repayments/sale of notes receivable......... 151 23,672 (2,638) 21,185
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 21,360 -- 693 22,053
Payment of trust based preferred dividends................ (7,415) -- -- (7,415)
Cash received in connection with AMIT Merger.............. 13,423 -- -- 13,423
Merger costs.............................................. (1,402) -- -- (1,402)
--------- -------- --------- --------
Net cash provided by (used in) investing
activities........................................ (41,316) 8,401 106,986 74,071
--------- -------- --------- --------
</TABLE>
P-33
<PAGE> 322
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 186,000 -- (8,766) 177,234
Principal repayments on secured notes payable............. (1,874) -- 6,113 4,239
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (83) -- -- (83)
Proceeds from exercises of employee stock options and
warrants................................................ 6,533 -- -- 6,533
Payment of distributions.................................. (6,541) (2,065) -- (8,606)
Payment of distributions minority interests............... (494) -- -- (494)
Net transactions with Insignia/ESG........................ (118,424) -- (122,579) (241,003)
--------- -------- --------- --------
Net cash provided by (used in) financing
activities........................................ 67,761 (2,065) (125,232) (59,536)
--------- -------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (3,842) 8,915 (24,874) (19,801)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 88,847 3,947 (9,162) 83,632
--------- -------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 85,005 $ 12,862 $ (34,036) $ 63,831
========= ======== ========= ========
</TABLE>
- ---------------
(i)Represents the unaudited consolidated statement of cash flows of IFG
for the nine months ended September 30, 1998. Certain reclassifications
have been made to IFG's historical statement of cash flows to conform
to the Partnership's statement of cash flows presentation. In addition,
the cash and cash equivalents at the beginning of the period has been
adjusted.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock. In addition, the cash and cash equivalents at the beginning of
the period has been adjusted.
(F) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(H) Represents adjustment to remove the use of cash to purchase the 1998
Acquisitions, as if these acquisitions occurred on January 1, 1997;
therefore, the purchases are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(I) Represents cash payments for capital improvements of $300 per unit on the
1998 Acquisitions.
(J) Represents adjustment to remove the proceeds from the sale of the 1998
Dispositions, as if these dispositions occurred on January 1, 1997;
therefore, the proceeds are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(K) Represents adjustment to remove net principal repayments assuming the 1998
Acquisitions, the 1998 Dispositions and the 1998 Stock Offerings occurred
January 1, 1997; therefore, the repayments are included on the Pro Forma
Consolidated Statement of Cash Flows for the year ended December 31, 1997.
(L) Represents adjustment to remove cash proceeds from the 1998 Stock
Offerings, as if these offerings occurred on January 1, 1997; therefore,
the repayments are included on the Pro Forma Consolidated Statement of Cash
Flows for the year ended December 31, 1997.
P-34
<PAGE> 323
(M) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(N) Represents distributions paid to limited partners on OP Units issued in
connection with the 1998 Acquisitions and the Probable Purchases, as if the
issuance of the OP Units occurred on January 1, 1997.
(O) Represents preferred unit distributions paid on the 1998 Stock Offerings as
if these occurred on January 1, 1997.
(P) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(Q) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-35
<PAGE> 324
PRO FORMA FINANCIAL INFORMATION OF
AIMCO PROPERTIES, L.P.
(EXCHANGE OFFERS)
INTRODUCTION
AIMCO Properties L.P. (the "Partnership") intends to offer to purchase
limited partnership interests in syndicated real estate limited partnerships in
which AIMCO holds partnership interests. The Partnership, is subject to
applicable law, plans to offer to purchase certain of such limited partnership
interests in exchange for (i) equity securities of the Partnership; (ii) cash or
(iii) a combination of such equity securities and cash. Such offers are expected
to include terms that will allow limited partners to continue to hold their
limited partnership interests.
The following Pro Forma Consolidated Balance Sheet (Exchange Offers) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) all the
transactions discussed in the Pro Forma Financial Statements (Insignia Merger)
appearing elsewhere herein; and (ii) the acceptance of exchange offers by
limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) all
the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1998: (i)
all the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The Pro Forma Financial Information (Exchange Offers) is based, in part, on
the historical financial statements of the partnerships in which the Exchange
Offers are made. The Pro Forma Financial Information (Exchange Offers) is also
based, in part, on the Pro Forma Financial Information (Insignia Merger) of the
Partnership included elsewhere herein. Such pro forma information is based in
part upon: (i) the audited Consolidated Financial Statements of Insignia for the
year ended December 31, 1997; (ii) the audited Consolidated Financial Statements
of Angeles Mortgage Investment Trust ("AMIT") for the year ended December 31,
1997; (iii) the unaudited Consolidated Financial Statements of Insignia for the
nine months ended September 30, 1998; and (iv) the unaudited Consolidated
Financial Statements of AMIT for the period from January 1, 1998 to September
17, 1998. The Pro Forma Financial Information (Insignia Merger) is also based,
in part, upon: (i) the audited Consolidated Financial Statements of Ambassador
for the year ended December 31, 1997; (ii) the audited Consolidated Financial
Statements of the Partnership for the year ended December 31, 1997; (iii) the
unaudited Consolidated Financial Statements of Ambassador for the four months
ended April 30, 1998; (iv) the unaudited Consolidated Financial Statements of
the Partnership for the nine months ended September 30, 1998; and (v) the
historical financial statements of certain properties and companies acquired by
AIMCO filed in AIMCO's Current Reports on Form 8-K, dated April 16, 1997, May 5,
1997, June 3, 1997, September 19, 1997, October 15, 1997, December 1, 1997 and
November 2, 1998. The following Pro Forma Financial Information (Exchange
Offers) should be read in conjunction with such financial statements and notes
thereto.
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared under the assumption that after the exchange offers are accepted, AIMCO
will own varying ownership percentages of each partnership, and that the limited
partners will choose to elect to receive 35% of the consideration in the form of
equity securities of AIMCO Properties, L.P. and 65% of the consideration in the
form of cash. The
P-36
<PAGE> 325
interest to be acquired in each of the partnerships, the estimated purchase
price for each partnership, including cash, common units, or preferred units is
summarized below:
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Angeles Income Properties, Ltd. II.................... 26.70 $ 4,946 $ 3,215 $1,731
Angeles Income Properties, Ltd. III................... 30.63 2,156 1,401 755
Angeles Income Properties, Ltd. IV.................... 18.64 1,154 750 404
Angeles Income Properties, Ltd. 6..................... 37.29 4,523 2,940 1,583
Angeles Opportunity Properties, Ltd................... 37.94 1,729 1,124 605
Angeles Partners VII.................................. 24.86 610 397 213
Angeles Partners VIII................................. 24.80 0 0 0
Angeles Partners IX................................... 18.92 1,171 761 410
Angeles Partners X.................................... 22.97 709 461 248
Angeles Partners XI................................... 21.83 205 133 72
Angeles Partners XII.................................. 11.89 2,877 1,870 1,007
Angeles Partners XIV.................................. 24.93 0 0 0
Baywood Partners, Ltd................................. 25.00 347 226 121
Brampton Associates Partnership....................... 25.00 382 248 134
Buccaneer Trace Limited Partnership................... 25.00 2 1 1
Burgundy Court Associates, L.P........................ 25.00 1,074 698 376
Calmark/Fort Collins, Ltd............................. 25.00 192 125 67
Calmark Heritage Park II Ltd.......................... 25.00 47 31 16
Casa Del Mar Associates Limited Partnership........... 21.16 503 327 176
Catawba Club Associates, L.P.......................... 25.00 85 55 30
Cedar Tree Investors Limited Partnership.............. 25.00 1,037 674 363
Century Properties Fund XVI........................... 12.52 831 540 291
Century Properties Fund XVIII......................... 13.08 474 308 166
Century Properties Fund XIX........................... 15.30 1,765 1,147 618
Century Properties Growth Fund XXII................... 21.43 4,977 3,235 1,742
Chapel Hill, Limited.................................. 21.15 569 370 199
Chestnut Hill Associates Limited Partnership.......... 26.75 1,582 1,028 554
Coastal Commons Limited Partnership................... 25.00 566 368 198
Consolidated Capital Institutional Properties/2 &
Consolidated Capital Equity Properties/2............ 18.98 7,320 4,758 2,562
Consolidated Capital Institutional Properties/3....... 16.37 6,770 4,401 2,369
Consolidated Capital Properties III................... 13.02 1,134 737 397
Consolidated Capital Properties IV.................... 18.04 9,407 6,112 3,295
Consolidated Capital Properties V..................... 16.69 560 364 196
Consolidated Capital Properties VI.................... 25.82 556 361 195
DFW Apartment Investors Limited Partnership........... 35.65 2,719 1,767 952
DFW Residential Investors Limited Partnership......... 37.60 1,092 710 382
Davidson Diversified Real Estate I, L.P............... 34.78 627 408 219
Davidson Diversified Real Estate II, L.P.............. 35.11 1,318 857 461
Davidson Diversified Real Estate III, L.P............. 21.76 0 0 0
Davidson Growth Plus, L.P............................. 23.91 2,304 1,498 806
Davidson Income Real Estate, L.P...................... 30.81 2,691 1,749 942
Drexel Burnham Lambert Real Estate Associates II...... 19.58 994 646 348
Four Quarters Habitat Apartment Associates, Ltd....... 25.00 174 113 61
Fox Strategic Housing Income Partners................. 33.18 2,414 1,569 845
Georgetown of Columbus Associates, L.P................ 25.00 227 148 79
HCW Pension Real Estate Fund Limited Partnership...... 32.64 2,368 1,539 829
Investors First-Staged Equity......................... 49.00 306 199 107
Johnstown/Consolidated Income Partners................ 25.66 1,871 1,216 655
La Colina Partners, Ltd............................... 25.00 583 379 204
Lake Eden Associates, L.P............................. 25.00 632 411 221
Landmark Associates, L.P.............................. 25.00 48 31 17
</TABLE>
P-37
<PAGE> 326
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Minneapolis Associates II Limited Partnership......... 25.00 $ 2 $ 1 $ 1
Multi-Benefit Realty Fund "87-1-Class A & Class B..... 21.89 1,657 1,077 580
National Property Investors 8......................... 11.13 988 642 346
Northbrook Apartments, Ltd............................ 25.00 209 136 73
Olde Mill Investors Limited Partnership............... 8.75 170 111 59
Orchard Park Apartments Limited Partnership........... 25.00 1 1 0
Park Town Place Associates Limited Partnership........ 24.70 298 194 104
Quail Run Associates, L.P............................. 25.00 487 317 170
Ravensworth Associates Limited Partnership............ 25.00 1 1 0
Rivercreek Apartments Limited Partnership............. 25.00 180 117 63
Rivercrest Apartments, Limited........................ 25.00 1,687 1,097 590
Riverside Park Associates L.P......................... 13.69 590 384 206
Salem Arms of Augusta Limited Partnership............. 25.00 278 181 97
Shaker Square, L.P.................................... 23.75 631 410 221
Shannon Mannor Apartments, Limited Partnership........ 25.00 1,170 761 409
Sharon Woods, L.P..................................... 22.75 499 324 175
Shelter Properties III................................ 15.20 1,960 1,274 686
Shelter Properties IV................................. 50.52 12,764 8,295 4,469
Shelter Properties VI................................. 13.78 1,919 1,247 672
Shelter Properties VII Limited Partnership............ 26.65 1,975 1,284 691
Snowden Village Associates, L.P....................... 25.00 443 288 155
Springhill Lake Investors Limited Partnership......... 11.84 2,908 1,890 1,018
Sturbrook Investors, Ltd.............................. 25.00 377 245 132
Sycamore Creek Associates, L.P........................ 25.00 1 1 0
Texas Residential Investors Limited Partnership....... 18.45 1,147 746 401
Thurber Manor Associates, Limited Partnership......... 25.00 218 142 76
U.S. Realty Partners Limited Partnership.............. 25.00 1,441 937 504
United Investors Growth Properties.................... 39.01 165 107 58
United Investors Growth Properties II................. 25.00 351 228 123
United Investors Income Properties.................... 23.44 1,977 1,285 692
Villa Nova, Limited Partnership....................... 25.00 228 148 80
Walker Springs, Limited............................... 23.99 95 62 33
Wingfield Investors Limited Partnership............... 25.00 179 116 63
Winrock-Houston Limited Partnership................... 13.60 1,041 677 364
Winthrop Apartment Investors Limited Partnership...... 31.60 1,318 857 461
Winthrop Growth Investors 1 Limited Partnership....... 27.94 1,233 801 432
Winthrop Texas Investors Limited Partnership.......... 5.27 158 103 55
Woodmere Associates, L.P.............................. 25.00 280 182 98
Yorktown Towers Associates............................ 25.00 809 526 283
-------- ------- ------
Total (See adjustment C to the Pro Forma Consolidated
Balance Sheet)...................................... $122,463 $79,601 42,862
======== ======= ======
</TABLE>
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
Exchange Offers, the 1997 Acquisitions, the 1998 Acquisitions and the Probable
Purchases are adjusted to estimated fair market value, based on preliminary
estimates, which are subject to change as additional information is obtained.
The allocations of purchase costs are subject to final determination based upon
estimates and other evaluations of fair market value. Therefore, the allocations
reflected in the following unaudited Pro Forma Financial Information (Exchange
Offers) may differ from the amounts ultimately determined.
P-38
<PAGE> 327
The following unaudited Pro Forma Financial Information (Exchange Offers)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions, results of
operations or cash flows. In the opinion of the Partnership's management, all
material adjustments necessary to reflect the effects of these transactions have
been made.
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (EXCHANGE OFFERS)
AS OF SEPTEMBER 30, 1998
ASSETS
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C>
Real estate....................................... $2,625,822 $ 12,764(C)
26,954(D)
13,655(E) $2,679,195
Property held for sale............................ 42,212 -- 42,212
Investments in and notes receivable from
unconsolidated subsidiaries..................... 186,277 -- 186,277
Investments in and notes receivable from
unconsolidated partnerships..................... 924,309 109,699(C)
(13,655)(E)
(8,161)(F)
816(G) 1,013,008
Mortgage notes receivable......................... 20,916 -- 20,916
Cash and cash equivalents......................... 104,955 2,620(D) 107,575
Restricted cash................................... 84,526 1,807(D) 86,333
Accounts receivable............................... 27,900 1,081(D) 28,981
Deferred financing costs.......................... 21,835 -- 21,835
Goodwill.......................................... 251,024 -- 251,024
Property management contracts..................... 38,371 -- 38,371
Other assets...................................... 82,670 422(D) 83,092
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
LIABILITIES AND PARTNERS' CAPITAL
Secured notes payable............................. $ 926,246 $ 23,642(D) $ 949,888
Secured tax-exempt bond financing................. 399,925 -- 399,925
Secured short-term financing...................... 32,691 -- 32,691
Unsecured short-term financing.................... 300,000 79,601(C) 379,601
Accounts payable, accrued and other liabilities... 248,253 826(D) 249,079
Security deposits and deferred income............. 13,171 255(D) 13,426
---------- -------- ----------
1,920,286 104,324 2,024,610
Minority interests................................ 79,431 816(G) 80,247
Company obligated mandatorily redeemable
convertible securities of a subsidiary trust.... 149,500 -- 149,500
Redeemable common partnership units............... 277,581 8,161(D)
(8,161)(F)
30,616(C) 308,197
Redeemable preferred partnership units............ -- 12,246(C) 12,246
Partner's capital
General and Special Limited Partner............. 1,496,457 -- 1,496,457
Preferred Units................................. 487,562 -- 487,562
---------- -------- ----------
1,984,019 -- 1,984,019
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
P-39
<PAGE> 328
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical balance sheet data as of September 30, 1998 (unaudited) related
to the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Real estate................................................. $1,082,652
Cash........................................................ 151,024
Total assets................................................ 1,493,409
Mortgages payable........................................... 1,585,196
Partners' capital (deficit)................................. (171,740)
</TABLE>
(C) Represents the purchase price paid by the Partnership to the limited
partners in order to obtain additional ownership by AIMCO in 91 real estate
partnerships. For the purposes of the pro-forma presentation, it is
assumed: (i) 65% of the purchase price is funded with cash by drawing down
on the Partnership's unsecured short term credit facility; (ii) 25% of the
purchase price is funded by the issuance of 749,362 OP Units at $40 per OP
Unit; and (iii) 10% of the purchase price is funded by the issuance of 8%
Preferred OP Units.
(D) Represents historical balance sheet data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(E) Represent the adjustment to real estate recorded in the IFG Merger related
to the one real estate partnership that will be consolidated as a result of
the Partnership's purchase of additional partnership interests.
(F) Represents the elimination of the partners' capital in the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(G) Represents minority interest of the one real estate partnership that will
be consolidated as a result of the Partnership's purchase of additional
partnership interests.
P-40
<PAGE> 329
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations.............. $ 431,256 $ 11,270(C) $ 442,526
Property operating expenses....................... (182,830) (6,612)(C) (189,442)
Owned property management expense................. (11,831) -- (11,831)
Depreciation...................................... (96,264) (2,589)(C) (98,853)
--------- -------- ---------
Income from property operations................... 140,331 2,069 142,400
--------- -------- ---------
Management fees and other income.................. 41,676 -- 41,676
Management and other expenses..................... (23,683) -- (23,683)
Corporate overhead allocation..................... (588) -- (588)
Amortization...................................... (26,480) -- (26,480)
--------- -------- ---------
Income from service company business.............. (9,075) -- (9,075)
Minority interest in service company business..... (10) -- (10)
--------- -------- ---------
Partnership's share of income from service company
business........................................ (9,085) -- (9,085)
--------- -------- ---------
General and administrative expenses............... (21,371) -- (21,371)
Interest expense.................................. (113,788) (5,691)(D)
(2,220)(C) (121,699)(H)
Interest income................................... 21,734 21,734
Minority interests................................ (9,983) (51)(E) (10,034)
Equity in losses of unconsolidated partnerships... (27,537) (16,864)(F)
483(G) (43,918)(I)
Equity in earnings of Unconsolidated
Subsidiaries.................................... 5,848 -- 5,848
--------- -------- ---------
Net income (loss)................................. (13,851) (22,274) (36,125)(H)
Income attributable to Preferred Unitholders...... 42,174 980 43,154(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders...... (56,025) $(23,254) $ (79,279)(H)
========= ======== =========
Basic earnings (loss) per OP Unit................. (.83) $ (1.16)(H)
========= =========
Diluted earnings (loss) per OP Unit............... $ (.83) $ (1.16)(H)
========= =========
Weighted average OP Units outstanding............. 67,522 68,287
========= =========
Weighted average OP Units and equivalents
outstanding..................................... 68,366 69,131
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $456,968
Operating expense........................................... 249,097
Depreciation................................................ 87,344
Interest.................................................... 138,778
Net income.................................................. 15,005
</TABLE>
P-41
<PAGE> 330
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $10,740 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $6,124 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net loss,
preferred unit distributions, and net loss per OP Unit in the event that
the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- --------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense......... $(121,699) $(124,763) $(116,008) $(116,008)
Net loss................. (36,125) (39,189 (30,434) (30,434)
Preferred unit
distributions.......... 43,154 42,174 42,174 51,971
Net loss attributable to
OP Unitholders......... (79,279) (81,363) (72,608) (82,405)
Net loss per OP Unit..... (1.16) (1.20) (1.03) (1.22)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................. $ 1,137 $ 1,245 $ 938 $ 938
Net loss................... (37,262) (40,434) (31,372) (31,372)
Net loss attributable to OP
Unitholders.............. (80,416) (82,608) (73,546) (83,343)
Net loss per OP Unit....... (1.18) (1.22) (1.04) (1.23)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, the Partnership will own 49%
of certain 88 Partnerships, 25% of two Partnerships, and 100% of one
Partnership. The amount included in the pro forma financial statements
assume an acceptance rate of 100%. The following table shows the effect on
equity in earnings of unconsolidated partnerships, net loss, net loss
attributable to OP Unitholders, and net loss per OP Unit in the event that
the Partnership will have an acceptance rate of 50% of the interests
tendered and will own varying percentages of each partnership:
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(36,510)
Net loss.................................................... (26,084)
Net loss attributable to OP Unitholders..................... (68,784)
Net loss per OP Unit........................................ (1.01)
</TABLE>
P-42
<PAGE> 331
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-43
<PAGE> 332
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations............... $ 337,307 $ 8,654(C) $ 345,961
Property operating expenses........................ (131,851) (4,389)(C) (136,240)
Owned property management expense.................. (8,933) -- (8,933)
Depreciation....................................... (78,479) (1,941)(C) (80,420)
--------- -------- ---------
Income from property operations.................... 118,044 2,324 120,368
--------- -------- ---------
Management fees and other income................... 28,912 -- 28,912
Management and other expenses...................... (14,386) -- (14,386)
Corporate overhead allocation...................... (196) -- (196)
Amortization....................................... (15,243) -- (15,243)
--------- -------- ---------
Income from service company business............... (913) -- (913)
Minority interest in service company business...... -- -- --
--------- -------- ---------
Partnership's share of income from service company
business......................................... (913) -- (913)
--------- -------- ---------
General and administrative expenses................ (8,632) -- (8,632)
Interest expense................................... (85,010) (4,250)(D)
(1,630)(C) (90,890)(H)
Interest income.................................... 40,887 40,887
Minority interests................................. (8,429) (119)(E) (8,548)
Equity in losses of unconsolidated partnerships.... (10,234) (13,156)(F)
41(G) (23,349)(I)
Equity in earnings of Unconsolidated
Subsidiaries..................................... 851 -- 851
Amortization of goodwill........................... (5,071) -- (5,071)
--------- -------- ---------
Net income (loss).................................. 41,493 (16,790) 24,703(H)
Income attributable to Preferred Unitholders....... 32,414 735 33,149(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders....... $ 9,079 $(17,525) $ (8,446)(H)
========= ======== =========
Basic earnings (loss) per OP Unit.................. $ .13 $ (.12)(H)
========= =========
Diluted earnings (loss) per OP Unit................ $ .13 $ (.12)(H)
========= =========
Weighted average OP Units outstanding.............. 68,554 69,319
========= =========
Weighted average OP Units and equivalents
outstanding...................................... 69,218 69,983
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data (unaudited) for the nine months ended September
30, 1998 related to the 91 real estate partnerships is as follows (dollars
in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $338,937
Operating expense........................................... 182,529
Depreciation................................................ 64,127
Interest.................................................... 103,756
Net income.................................................. (9,329)
</TABLE>
P-44
<PAGE> 333
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $8,552 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $4,604 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net
income, preferred unit distributions, and net loss per OP Unit in the event
that the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense........... $(90,890) $(93,184) $(86,640) $(86,640)
Net income................. 24,703 22,409 28,953 28,953
Preferred unit
distributions............ 33,149 32,414 32,414 39,762
Net loss attributable to OP
Unitholders.............. (8,446) (10,005) (3,461) (10,809)
Net loss per OP Unit....... (.12) (.15) (.05) (.16)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- ------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................... $ 851 $ 931 $ 702 $ 702
Net income................... 24,703 21,478 28,251 28,251
Net loss attributable to OP
Unitholders................ (9,296) (10,936) (4,163) (11,511)
Net loss per OP Unit......... (.13) (.16) (.06) (.17)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, AIMCO will own 49% of certain
88 Partnerships, 25% of two Partnerships, and 100% of one Partnership. The
following table shows the effect on equity in earnings of unconsolidated
partnerships, net income, net income (loss) attributable to OP Unitholders,
and net loss per OP Unit in the event the Partnership will own varying
percentages of each partnership.
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(17,797)
Net income.................................................. 32,216
Net income (loss) attributable to OP Unitholders............ (593)
Net income (loss) per OP Unit............................... (.01)
</TABLE>
P-45
<PAGE> 334
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-46
<PAGE> 335
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ (13,851) $(22,274)(C) $ (36,125)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 128,169 2,589(D) 130,758
Gain on investments..................................... (12) -- (12)
(Gain) loss on disposition of properties................ (3,882) -- (3,882)
Minority interests...................................... 9,983 51 10,034
Equity in earnings of unconsolidated partnerships....... 27,537 16,864(E)
(483)(F) 43,918
Equity in earnings of unconsolidated subsidiaries....... (5,848) -- (5,848)
Extraordinary (gain) loss on early extinguishment of
debt.................................................. --
Changes in operating assets and operating liabilities... 519 (660)(G) (141)
---------- -------- ----------
Total adjustments................................... 156,466 18,361 174,827
---------- -------- ----------
Net cash provided by (used in) operating
activities........................................ 142,615 (3,913) 138,702
Net cash used in discontinued operations............ (7,999) -- (7,999)
---------- -------- ----------
Net cash provided by (used in) continuing
operations........................................ 134,616 (3,913) 130,703
---------- -------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate......................... 41,419 -- 41,419
Purchase of real estate................................... (625,603) -- (625,603)
Additions to real estate, investments and property held
for sale................................................ (55,892) (1,024)(G) (56,916)
Proceeds from sale of property held for sale.............. 303 -- 303
Purchase of general and limited partnership interests..... (276,458) (79,601)(H) (356,059)
Purchase of management contracts.......................... (48,554) -- (48,554)
Purchase of/additions to notes receivable................. (81,670) -- (81,670)
Proceeds from repayments of notes receivable.............. 10,052 -- 10,052
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 94,686 10,070(I) 104,756
Contribution to unconsolidated subsidiaries............... (42,879) -- (42,879)
Proceeds from sale of securities.......................... 642 -- 642
Purchase of investments held for sale..................... (73) -- (73)
Purchase of NHP........................................... (60,575) -- (60,575)
Purchase of Ambassador common stock....................... (19,881) -- (19,881)
---------- -------- ----------
Net cash used in investing activities............... (1,064,483) (70,555) (1,135,038)
---------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 761,270 -- 761,270
Principal repayments on secured notes payable............. (307,917) (713)(G) (308,630)
Proceeds from secured short-term financing................ 19,050 79,601(H) 98,651
Repayments on secured short-term financing................ (259,461) -- (259,461)
Principal repayments on unsecured short-term notes
payable................................................. (50,879) -- (50,879)
Proceeds (payoff) from unsecured short-term financing..... (12,500) -- (12,500)
Principal repayments on secured tax-exempt bond
financing............................................... (1,487) -- (1,487)
Net borrowings (paydowns) on the Company's revolving
credit facilities....................................... (162,008) -- (162,008)
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (17,032) -- (17,032)
Proceeds from issuance of common and preferred stock,
net..................................................... 1,098,265 -- 1,098,265
Proceeds from exercises of employee stock options and
warrants................................................ 11,553 -- 11,553
Repurchase of common stock................................ (3,283) -- (3,283)
Principal repayments received on notes due from
Officers................................................ 27,280 -- 27,280
Investments made by minority interests.................... 249 -- 249
Receipt of contributions from minority interests.......... 37,345 -- 37,345
Payments of distributions to minority interests........... (2,713) -- (2,713)
Payment of distributions.................................. (130,657) -- (130,657)
Payment of distributions to limited partners.............. (5,208) (1,415)(J) (6,623)
Payment of preferred unit distributions................... (42,984) (979)(K) (43,963)
Payment of distributions to minority interests............ (21,788) -- (21,788)
Net transactions with Insignia/ESG........................ (57,612) -- (57,612)
---------- -------- ----------
Net cash provided by financing activities........... 879,483 76,494 955,977
---------- -------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (50,384) 2,026 (48,358)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 117,896 2,291 120,187
---------- -------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 67,512 $ 4,317 $ 71,829
========== ======== ==========
</TABLE>
P-47
<PAGE> 336
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 65,372
Cash used in investing activities......................... (11,713)
Cash used in financing activities......................... (74,617)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the cash portion of the purchase price (and additional
borrowings by the Partnership) related to the acquisition by the
Partnership of additional limited partnership interests in 91 real estate
limited partnerships.
(I) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(J) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.85 per Common OP Unit.
(K) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-48
<PAGE> 337
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ 41,493 $(16,790)(C) $ 24,703
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 101,523 1,941(D) 103,464
(Gain) loss on disposition of properties................ -- -- --
Minority interests...................................... 8,429 119 8,548
Equity in earnings of unconsolidated partnerships....... 10,234 13,156(E)
(41)(F) 23,349
Equity in earnings of unconsolidated subsidiaries....... (851) -- (851)
Non-cash compensation................................... 796 -- 796
Changes in operating assets and operating liabilities... (69,549) (21)(G) (69,570)
--------- -------- ---------
Total adjustments................................... 50,582 15,154 65,736
--------- -------- ---------
Net cash provided by operating activities........... 92,075 (1,636) 90,439
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... 27,122 -- 27,122
Additions to real estate.................................. (57,526) (668)(G) (58,194)
Proceeds from sale of property and investments held for
sale.................................................... (35) -- (35)
Additions to property held for sale....................... (1,986) -- (1,986)
Purchase of general and limited partnership interests..... (9,596) -- (9,596)
Purchase of/additions to notes receivable................. (100,034) -- (100,034)
Proceeds from repayments/sale of notes receivable......... 42,747 -- 42,747
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 23,629 5,809(H) 29,438
Payment of trust based preferred dividends................ (7,415) -- (7,415)
Cash received in connection with Ambassador Merger and
AMIT Merger............................................. 17,915 -- 17,915
Contribution to unconsolidated subsidiaries............... (13,032) -- (13,032)
Purchase of investments held for sale..................... (4,935) -- (4,935)
Redemption of OP Units.................................... (516) -- (516)
Merger costs.............................................. (1,402) -- (1,402)
--------- -------- ---------
Net cash used in investing activities............... (85,064) 5,141 (79,923)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 291,885 -- 291,885
Principal repayments on secured notes payable............. (52,023) -- (52,023)
Principal advances on secured tax-exempt bond financing... 21,784 -- 21,784
Principal repayments on secured tax-exempt bond
financing............................................... (1,436) -- (1,436)
Net borrowings/ repayments on secured short-term
financing............................................... 135,332 -- 135,332
Net borrowings (paydowns) on the revolving credit
facilities.............................................. 2,513 (812)(G) 1,701
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (5,810) -- (5,810)
Proceeds from issuance of common stock and preferred
stock, net.............................................. -- -- --
Repurchase of common stock................................ (10,972) -- (10,972)
Proceeds from exercises of employee stock options and
warrants................................................ 16,294 -- 16,294
Principal repayments received on notes due from
Officers................................................ 8,084 -- 8,084
Receipt of contributions from minority interests.......... -- -- --
Payments of distributions to minority interests........... (2,034) (2,034)
Payment of distributions.................................. (107,989) -- (107,989)
Payment of distributions to limited partners.............. (12,669) (1,291)(I) (13,960)
Payment of preferred unit distributions................... (27,010) (735)(J) (27,745)
Proceeds from issuance of High Performance Units.......... 1,988 -- 1,988
Net transactions with Insignia/ESG........................ (241,003) -- (241,003)
--------- -------- ---------
Net cash provided by financing activities........... 19,578 (2,838) 16,740
--------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 26,589 667 27,256
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 55,700 4,316 60,016
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 82,289 $ 4,983 $ 87,272
========= ======== =========
</TABLE>
P-49
<PAGE> 338
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the nine months ended September 30, 1998
related to the 91 real estate partnerships is as follows (dollars in
thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 76,113
Cash used in investing activities......................... (22,616)
Cash used in financing activities......................... (42,273)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 30 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(I) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.6875 per Common OP Unit.
(J) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-50
<PAGE> 339
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: Buccaneer Trace Limited Partnership
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
Buccaneer Trace Limited Partnership (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 limited partnership interests in the Partnership (the "Units")
will be acquired by the Purchaser in exchange for an offer price per Unit of
$100 in cash, or 2.75 Common OP Units of the Purchaser, or 4.00 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 financial statements for the years ended
December 31, 1996 and 1997, and the quarterly report on period ending
September 30, 1998, which the Partnership's management has indicated to be
the most current available financial statements;
3. Reviewed descriptive information concerning the real property owned
by the Partnership (the "Property"), including location, number of units
and unit mix, age, amenities and land acreage;
4. Reviewed summary historical operating statements for the Property,
for the years ended December 31, 1996 and 1997, and the nine months ending
September 30, 1998;
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<PAGE> 340
5. Reviewed the 1998 operating budget for the Property prepared by the
Partnership's management. Such budgets are summarized in the Prospectus
Supplement under the section "Stanger Analysis -- Summary of Materials
Considered";
6. Reviewed the estimate of liquidation value and going concern value
provided by the general partner to Stanger. Such estimates are described in
the Prospectus Supplement under the section "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration." In
addition, we reviewed the 1998 operating budgets for each property provided
by the Partnership;
7. Discussed with management market conditions for the Property;
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 Property and the Partnership; the physical condition
of the Property including any deferred maintenance; and other factors
influencing value of the Property and the Partnership;
8. Performed a site inspection of the Property;
9. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Property, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Property;
10. Reviewed information provided by the Company relating to debt
encumbering the Property; and
11. 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 Property, 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 Property. 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 Property 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 Property 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 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
A-2
<PAGE> 341
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
March , 1999
A-3
<PAGE> 342
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 directors
of AIMCO are set forth below. The two directors of AIMCO-GP are Terry Considine
and Peter Kompaniez. The two directors of the general partner of your
partnership are Peter K. Kompaniez and Patrick J. Foye. The two executive
officers of the general partner of your partnership are Patrick J. Foye,
Executive Vice President, and Timothy R. Garrick, Vice President -- Accounting.
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
Paul J. McAuliffe............................ Executive Vice President -- Capital Markets
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
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
</TABLE>
B-1
<PAGE> 343
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
B.A. from Harvard College, a J.D. from Harvard Law School
and is admitted as a member of the Massachusetts Bar.
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.
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
</TABLE>
B-2
<PAGE> 344
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
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.
Paul J. McAuliffe.................... Mr. McAuliffe was appointed Executive Vice
President -- Capital Markets in February 1999. Prior to
joining AIMCO, Mr. McAuliffe was Senior Managing Director of
Secured Capital Corp and prior to that time had been a
Managing Director of Smith Barney, Inc. from 1993 to 1996,
where he was a key member of the underwriting team that led
AIMCO's initial public offering in 1994. Mr. McAuliffe was
also a Managing Director and head of the real estate group
at CS First Boston from 1990 to 1993 and he was a Principal
in the real estate group at Morgan Stanley & Co., Inc. from
1983 to 1990. Mr. McAuliffe received a B.A. from Columbia
College and an MBA from University of Virginia, Darden
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
</TABLE>
B-3
<PAGE> 345
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
and the Apartment Association of Metro Denver. Mr. Ira
received a B.S. from Metropolitan State College in 1975.
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.
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,
</TABLE>
B-4
<PAGE> 346
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Mr. Martin is a director of Dresser, which is engaged in the
petroleum services, hydrocarbon and engineering industries.
Timothy R. Garrick................... Mr. Garrick has been Vice President -- Accounting of the
general partner and AIMCO since October 1, 1998. Prior to
that date, Mr. Garrick served as Vice
President -- Accounting Services of Insignia Financial Group
from June 1997 until October 1998. From 1992 until June of
1997, Mr. Garrick served as Vice President of Partnership
Accounting for Insignia Financial Group. From 1987 to 1990,
Mr. Garrick served as Investment Advisor for U.S. Shelter
Corporation. From 1984 to 1987, Mr. Garrick served as
Partnership Investment Analyst for U.S. Shelter Corporation.
From 1979 to 1984, Mr. Garrick worked on the audit staff of
Ernst & Whinney. Mr. Garrick received his B.S. Degree from
the University of South Carolina in 1979 and is a certified
public accountant.
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> 347
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
By Fax:
(201) 896-0910
<PAGE> 348
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 26, 1999)
AIMCO Properties, L.P.
is offering to acquire units of limited partnership interest of
Burgundy Court Associates, L.P.
in exchange for your choice of:
3,437.50 of our 8.0% Class Two Partnership Preferred Units;
2,283.75 of our Partnership Common Units; or
$85,934 in cash.
Generally, you will not recognize any immediate taxable gain or loss if you
exchange your units solely for our securities. However, you will recognize
taxable gain or loss if you exchange your units for cash.
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 the offer
consideration from a financial point of view.
Our offer consideration will be reduced for any distributions subsequently
made by your partnership prior to the expiration of our offer.
We will only accept a maximum of 25% 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.
You will not pay any fees or commissions if you tender your units.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline. You may withdraw any tendered units at any time
before we have accepted them for payment.
SEE "RISK FACTORS" BEGINNING ON PAGE S-23 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF RISK FACTORS THAT
YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration of $43,313 per unit without any
arms-length negotiations. Accordingly, our offer consideration may not
reflect the fair market value of your units. Stanger, in rendering its
fairness opinion, determined that the net asset value of your partnership
units was $87,859 per unit.
- We cannot predict when the property owned by your partnership may be
sold.
- Your general partner is a subsidiary of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- We are making this offer with a view to making a profit and 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.
- Continuation of your partnership will result in our affiliates continuing
to receive management fees from your partnership which would not be
payable if your partnership was liquidated.
- It is possible that we may conduct a subsequent offer at a higher price
more than one year after expiration of this offer.
- Unlike your partnership, our policy is to reinvest proceeds from the sale
of our properties or refinancing of our indebtedness.
- We may change our investment, acquisition or financing policies without a
vote of our securityholders.
- If you acquire our securities, your investment will change from holding
an interest in a single property to holding an interest in our large
portfolio of properties, thereby fundamentally changing the nature of
your investment.
- Recently, Moody's Investors Service revised its outlook for AIMCO's
ratings from stable to negative.
- There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
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.
March 26, 1999
<PAGE> 349
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY........................................ S-1
The Offer.................................... S-1
The AIMCO Operating Partnership.............. S-1
Affiliation with your General Partner........ S-1
Risk Factors................................. S-1
Background and Reasons for the Offer......... S-6
Valuation of Units........................... S-9
Fairness of the Offer........................ S-10
Stanger Analysis............................. S-11
Your Partnership............................. S-11
Terms of the Offer........................... S-12
Federal Income Tax Consequences.............. S-14
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-14
Comparison of Your Units and AIMCO OP Units.. S-14
Conflicts of Interest........................ S-15
Source and Amount of Funds and Transactional
Expenses................................... S-16
Summary Financial Information of AIMCO
Properties, L.P............................ S-17
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-19
Summary Financial Information of Burgundy
Court Associates, L.P...................... S-21
Comparative Per Unit Data.................... S-21
THE AIMCO OPERATING PARTNERSHIP................ S-22
RISK FACTORS................................... S-23
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-23
Offer Consideration Not Based on Third
Party or Appraisal or Arms-Length
Negotiation.............................. S-23
Offer Consideration May Not Represent Fair
Market Value............................. S-23
Offer Consideration Does Not Reflect Future
Prospects................................ S-23
Offer Consideration Based on Our Estimate
of Liquidation Proceeds.................. S-23
Offer Consideration May Be Less Than
Liquidation Value........................ S-23
Holding Units May Result in Greater Future
Value.................................... S-23
Conflicts of Interest with Respect to the
Offer.................................... S-23
Conflicts of Interest Relating to
Management Fees.......................... S-24
Possible Subsequent Offer at a Higher
Price.................................... S-24
Possible Recognition of Taxable Gain on a
Sale of Your Units....................... S-24
Fairness Opinion of Third Party Relied on
Information We Provided.................. S-24
Loss of Future Distributions from Your
Partnership.............................. S-25
Possible Effect of the Other Exchange
Offers on Us............................. S-25
Potential Delay in Payment................... S-25
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-25
Fundamental Change in Nature of
Investment............................... S-25
Fundamental Change in Number of Properties
Owned.................................... S-25
Lack of Trading Market for OP Units........ S-25
Uncertain Future Distributions............. S-25
Possible Reduction in Required
Distributions on Preferred OP Units...... S-26
Possible Redemption of Preferred Stock..... S-26
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Possible Recognition of Taxable Gains on OP
Units.................................... S-26
Limitations on Effecting a Change of
Control.................................. S-26
Limitation on Transfer of OP Units......... S-26
Limited Voting Rights of Holders of OP
Units.................................... S-26
Market Prices for AIMCO's Securities May
Fluctuate................................ S-26
Litigation Associated with Partnership
Acquisitions............................. S-26
Dilution of Interests of Holders of OP
Units.................................... S-27
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-27
Possible Increase in Control of Your
Partnership by Us........................ S-27
Recognition of Gain Resulting from Possible
Future Reduction in Your Partnership
Liabilities.............................. S-27
Possible Termination of Your Partnership
for Federal Income Tax Purposes.......... S-27
Risk of Inability to Transfer Units for
12-Month Period.......................... S-27
Possible Change in Time Frame Regarding
Sale of Property......................... S-27
Balloon Payments........................... S-28
SPECIAL FACTORS TO CONSIDER.................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-28
Background of the Offer...................... S-28
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
Disadvantages of the Offer................... S-32
VALUATION OF UNITS............................. S-34
FAIRNESS OF THE OFFER.......................... S-36
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-36
Fairness to Unitholders who Tender their
Units...................................... S-37
Fairness to Unitholders who do not Tender
their Units................................ S-38
Comparison of Consideration to Alternative
Consideration.............................. S-38
Allocation of Consideration.................. S-41
STANGER ANALYSIS............................... S-42
Experience of Stanger........................ S-42
Summary of Materials Considered.............. S-42
Summary of Reviews........................... S-44
Conclusions.................................. S-46
Assumptions, Limitations and
Qualifications............................. S-46
Compensation and Material Relationships...... S-47
YOUR PARTNERSHIP............................... S-48
General...................................... S-48
Your Partnership and its Property............ S-48
Property Management.......................... S-48
Investment Objectives and Policies; Sale or
Financing of Investments................... S-48
Capital Replacement.......................... S-49
Borrowing Policies........................... S-49
Competition.................................. S-50
Legal Proceedings............................ S-50
History of the Partnership................... S-50
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-50
Distributions and Transfers of Units......... S-51
</TABLE>
i
<PAGE> 350
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Beneficial Ownership of Interests in Your
Partnership................................ S-51
Compensation Paid to the General Partner and
its Affiliates............................. S-51
SELECTED FINANCIAL INFORMATION OF YOUR
PARTNERSHIP.................................. S-52
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP.......................... S-53
THE OFFER...................................... S-56
Terms of the Offer; Expiration Date.......... S-56
Acceptance for Payment and Payment for
Units...................................... S-56
Procedure for Tendering Units................ S-57
Withdrawal Rights............................ S-60
Extension of Tender Period; Termination;
Amendment.................................. S-60
Prorations................................... S-61
Fractional OP Units.......................... S-61
Future Plans of the AIMCO Operating
Partnership................................ S-61
Voting by the AIMCO Operating Partnership.... S-62
Dissenters' Rights........................... S-62
Conditions of the Offer...................... S-62
Effects of the Offer......................... S-65
Certain Legal Matters........................ S-65
Fees and Expenses............................ S-67
Accounting Treatment......................... S-67
FEDERAL INCOME TAX CONSEQUENCES................ S-68
Tax Opinions................................. S-68
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-69
Disguised Sales.............................. S-70
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-70
Tax Consequences of Exchanging Units Solely
for Cash................................... S-71
Adjusted Tax Basis........................... S-71
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-71
Passive Activity Losses...................... S-72
Tax Reporting................................ S-72
Foreign Offerees............................. S-72
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Tax Consequences of a Termination of Your
Partnership................................ S-72
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-74
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-81
DESCRIPTION OF PREFERRED OP UNITS.............. S-87
General...................................... S-87
Ranking...................................... S-87
Distributions................................ S-87
Allocation................................... S-88
Liquidation Preference....................... S-88
Redemption................................... S-89
Voting Rights................................ S-89
Restrictions on Transfer..................... S-90
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-90
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-92
CONFLICTS OF INTEREST.......................... S-96
Conflicts of Interest with Respect to the
Offer...................................... S-96
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-96
Competition Among Properties................. S-96
Features Discouraging Potential Takeovers.... S-96
Future Exchange Offers....................... S-97
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-97
LEGAL MATTERS.................................. S-98
EXPERTS........................................ S-98
INDEX TO FINANCIAL STATEMENTS.................. F-1
PRO FORMA FINANCIAL INFORMATION OF AIMCO
PROPERTIES, L.P. ............................ P-1
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> 351
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- 3,437.50 of our Class Two Partnership Preferred Units;
- 2,283.75 of our Partnership Common Units; or
- $85,934 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 accept a maximum of 25% of the outstanding units in response to our
offer. Our offer is not subject to any minimum number of units being tendered.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline.
The original offer price per unit in 1985 was $30,328. For the six years
ended December 31, 1998, your partnership paid distributions of $25,634 per
unit.
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
its wholly owned subsidiary, AIMCO-GP, Inc. ("AIMCO GP"), AIMCO acts as the sole
general partner of the AIMCO Operating Partnership. As of December 31, 1998,
AIMCO-GP and another AIMCO subsidiary, AIMCO-LP, Inc., a limited partner of the
AIMCO Operating Partnership (the "Special Limited Partner"), owned approximately
an 83% interest in the AIMCO Operating Partnership. As of December 31, 1998, our
portfolio of owned or managed properties included 379,363 apartment units in
2,147 properties located in 49 states, the District of Columbia and Puerto Rico.
Based on apartment unit data compiled by the National Multi Housing Council, we
believe that we are one of the largest owners and managers of multifamily
apartment properties in the United States. As of December 31, 1998, we:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 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. and our February 26, 1999 merger with Insignia Properties Trust, we
acquired a 100% ownership interest in the general partner of your partnership,
Jacques - Miller Associates, and the company that manages the property owned by
your partnership.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-23 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the
S-1
<PAGE> 352
risks associated with our offer and the disadvantages of the offer to you and
should be considered when you review "Summary -- Background and Reasons for the
Offer -- Expected Benefits of the Offer":
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. We did not use any third-party appraisal or valuation to determine
the value of any property owned by your partnership. We established the terms of
our offer, including the exchange ratios and the cash consideration, without any
arms-length negotiations.
OFFER CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimated your property to be worth $7,615,000, less
approximately $150,505 of deferred maintenance and investment. It is possible
that a sale of the property could result in your receiving more per unit than in
our offer. Even if our cash offer consideration is equal to liquidation value,
if you accept OP Units, you may not ultimately receive an amount equal to the
cash offer consideration when you sell such OP Units or any AIMCO securities you
may receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
value if you retain your units until your partnership is liquidated.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of ours and, therefore, has substantial conflicts of interest with
respect to our offer. We are making this offer with a view to making a profit.
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 RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its property, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration this offer. Such a decision will depend on, among other things, the
performance of your partnership, prevailing interest rates, and our interest in
acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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
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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.
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. You
should review "Federal Income Tax Consequences" 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. 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.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is our subsidiary).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. For any units that we
acquire from you, you will not receive any future distributions from your
partnership's operating cash flow or upon a sale of property owned by your
partnership or a refinancing of any of its debt. If you tender your units in
exchange for OP Units, you will be entitled to future distributions from us from
our operating cash flow and upon a dissolution, liquidation or wind-up of the
AIMCO Operating Partnership.
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from a sale of a property or a refinancing of its indebtedness, to (ii)
a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of 2008 to a much larger partnership with a
partnership termination date of 2093.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you tender your units
for our OP Units, you will have changed your investment from an interest in a
partnership that owns and manages one property to an interest in a partnership
that invests in and manages a large portfolio of properties.
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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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus.
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions.
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a
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result, we may incur costs associated with defending or settling such litigation
or paying any judgment if we lose. As of the present time, no limited partners
of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. As a result of the
offer, we may increase our ability to influence voting decisions with respect to
your partnership. However, we will not be able to control voting decisions
unless we acquire more units in another transaction, which cannot take place for
at least one year after expiration of this offer. Also, removal of your general
partner (which is our subsidiary) or the manager of any property owned by your
partnership may become more difficult or impossible without our consent or
approval.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of units without the
consent of your general partner (which is our subsidiary). Such consent may be
withheld by your general partner in its sole discretion. Your general partner
may withhold its consent if such transfer would result in the termination of
your partnership for tax purposes which would occur if 50% or more of the total
interest in your partnership is transferred within a 12-month period. If we
acquire a significant percentage of the interest in your partnership, your
general partner may not consent to a transfer for a 12-month period following
our offer.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investment in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to have to
hold the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns one property. The general partner of your partnership
continually considers whether the property should be sold or otherwise disposed
of after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for your partnership. We cannot
predict when the property will be sold or otherwise disposed of. However, there
is no current plan or intention to sell the property in the near future.
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BALLOON PAYMENTS. Your partnership has approximately $2,755,871 of balloon
payments due on its mortgage debt in November 2002. Your partnership will have
to refinance such debt or sell its property prior to the balloon payment dates,
or it will be in default and could lose the property to foreclosure.
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 51% ownership interest in Insignia Properties Trust, which has
a 100% ownership interest in the general partner of your partnership and the
company that manages the property owned by your partnership. On February 26,
1999, we acquired the remaining 49% interest in Insignia Properties Trust in a
merger transaction. One of the consequences of the merger with Insignia is to
allow us to make the offer and, if successful, to increase our ownership in 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 August 28, 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
(which is our subsidiary):
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.
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. 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. Your partnership's mortgage notes are due in November 2002 and
require balloon payments of $2,755,871. Your partnership currently has
adequate sources of cash to finance its operations on both a short term and
long term basis but will have to sell its property or refinance its
indebtedness to pay such balloon payments. In addition, continuation of
your partnership without the offer would deny you and your partners the
benefits that your general partner (which is our subsidiary) 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
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of the fair market value of your partnership's property. There is currently
no market for the Preferred OP Units or Common OP Units.
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 Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the NYSE.
- Preferred Quarterly Distributions. Your partnership paid distributions of
$4,000 for the fiscal year ended December 31, 1998. Holders of Preferred
OP Units will be entitled to receive quarterly distributions of $0.50 per
unit (equivalent to $2.00 on an annualized basis) before any
distributions are paid to holders of Common OP Units. This is equivalent
to a distribution of $6,875 per year on the number of Preferred OP Units
you will receive in exchange for each of your partnership 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 Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- Quarterly Distributions. Your partnership paid distributions of $4,000
for the fiscal year ended December 31, 1998. In 1998, we paid quarterly
distributions on the Common OP Units totalling $2.25 per unit. In January
1999, we increased our distribution rate on each of the Common OP Units
to $2.50 on an annual basis. See "The AIMCO Operating Partnership."
Assuming no change in the level of our distributions, this is equivalent
to a distribution of $5,709.38 per year on the number of Common OP Units
you will receive in exchange for each of your partnership units.
- 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 Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
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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.
Disadvantages of the Offer.
The principal disadvantages of the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and determining the offer consideration, no one separately represented
the interests of the limited partners. Although we have a fiduciary duty
to the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of such property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pretax cash proceeds to you than our
offer.
- OP Units. OP Units lack a public market, have transfer restrictions and
must be held for one year before they can be redeemed by a holder. The
ultimate return on the OP Units is directly tied to the future price of
AIMCO's Class A Common Stock or Class I Preferred Stock. You could
ultimately receive less for your OP Units than the cash price in our
offer. Further, on or after March 1, 2005, we may redeem the Class I
Preferred Stock for $25 per share.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
a sale of the property would be advantageous given market conditions, the
condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of the property and the tax consequences to you
and your partners upon a sale of the property.
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
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VALUATION OF UNITS
We determined the offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower the value produced. We used your partnership's property
income for the fiscal year ended December 31, 1997. However, in determining the
appropriate capitalization rate, we considered the property's net operating
income since December 31, 1997. Our method for selecting a capitalization rate
begins with each property being assigned a location and condition rating (e.g.,
"A" for excellent, "B" for good, "C" for fair, and "D" for poor). We have rated
your property's location B (good) and its condition B (good). Generally, we
assign an initial capitalization rate of 10.25% to properties in this category.
We then adjust the capitalization rate based on whether the mortgage debt that
the property is subject to bears interest at a rate above or below 7.5% per
annum. Generally, for every 0.5% in excess of 7.5%, the capitalization rate
would be increased by 0.25%. Your property's mortgage debt bears interest at
7.60% per annum, which resulted in an increase from the initial capitalization
rate of 0.25%. We also considered any changes in your partnership's property
income from 1997 to 1998. Because your partnership's property income in 1998
remained relatively unchanged compared to 1997, we made no further revision of
the capitalization rate, resulting in a final capitalization rate of 10.50%. The
evaluation of a property's location and condition, and the determination of an
appropriate capitalization rate for a property, is subjective in nature, and
others evaluating the same property might use a different capitalization rate
and derive a different property value. 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. Further, in applying the direct capitalization method,
others may make different assumptions and obtain different results. 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>
Property income............................................. $ 800,000
Capitalization rate......................................... 10.50%
-----------
Gross valuation of partnership property..................... $ 7,615,000
Plus: Cash and cash equivalents............................. 300,451
Plus: Other partnership assets, net of security deposits.... 418,834
Less: Mortgage debt, including accrued interest............. (3,340,138)
Less: Accounts payable and accrued expenses................. (18,355)
Less: Other liabilities..................................... (64,372)
-----------
Partnership valuation before taxes and certain costs........ 4,911,420
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures for deferred
maintenance............................................... (150,505)
Less: Closing costs......................................... (190,375)
-----------
Estimated net valuation of your partnership................. 4,570,540
Percentage of estimated net valuation allocated to holders
of units.................................................. 94.01%
-----------
Estimated net valuation of units............................ 4,296,707
Total number of units............................. 50.0
-----------
Estimated valuation per unit................................ $ 85,934
===========
Cash consideration per unit................................. $ 85,934
===========
</TABLE>
In order to determine the number of Preferred OP Units we are offering for
each of your units, we divided the cash offer consideration of $85,934 by the
$25 liquidation preference of each Preferred OP Unit to get 3,437.50 Preferred
OP Units per unit.
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In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $85,934 by a
price of $37.63 (the closing price of AIMCO's Class A Common Stock on the NYSE
for the 30 trading days ended on March 23, 1999) to get 2,283.75 Common OP Units
per unit.
FAIRNESS OF THE OFFER
Fairness to Unitholders. Your general partner is our subsidiary. 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. Your general partner did not participate in the structuring of the
offer. We and your general partner believe that the offer and all forms of
consideration offered is fair to you and the other limited partners of your
partnership. 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 (which is our subsidiary) 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 (which is our subsidiary) has compared our offer consideration
to:
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated;
- your general partner's estimate of the going concern value of your
partnership if it continued operating as an independent stand-alone
entity; and
- the net book value of your partnership.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C>
Cash offer consideration.................................... $ 85,934
Partnership Preferred Units................................. $ 85,934
Partnership Common Units.................................... $ 85,934
Alternatives:
Estimated liquidation proceeds............................ $ 85,934
Estimated going concern value(1).......................... $ 78,985
Estimated alternative going concern value(2).............. $ 79,855
Net book value (deficit).................................. $(10,301)
</TABLE>
- ---------------
(1) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(2) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
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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. Stanger has
rendered similar fairness opinions with regard to the other tender offers being
made by the AIMCO Operating Partnership. Stanger rendered the opinions only as
to the individual fairness of the offer consideration in each proposed exchange
offer.
YOUR PARTNERSHIP
Your Partnership and its Property. Burgundy Court Associates, L.P. is a
Delaware limited partnership which was formed on January 31, 1995 for the
purpose of owning and operating an apartment property located in Cincinnati,
Ohio, known as "Burgundy Court Apartments." Burgundy Court Apartments consists
of 234 units and was built in 1969. Your partnership has no employees. As of
December 31, 1998, there were 50 units of limited partnership interest issued
and outstanding, which were held of record by 53 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.
Your partnership sold $1,850,000 of limited partnership units in 1985.
Between January 1, 1993 and December 31, 1998 your partnership paid cash
distributions totalling $25,634 per unit. Your partnership currently owns one
property.
Property Management. Your partnership's property has been managed by an
affiliate of ours. 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.
Investment Objectives and Policies; Sale or Financing of Investments. Under
your partnership's agreement of limited partnership, your partnership is not
permitted to raise new capital or reinvest cash in new properties. Your
partnership will terminate on December, 2008, unless earlier dissolved. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership property within any specified time period. An
investment in your partnership is a finite life investment in which partners
receive regular cash distributions out of your partnership's distributable cash
flow, if any, and upon liquidation.
Borrowing Policies. Your partnership's agreement of limited partnership
allows your partnership to incur debt. As of December 31, 1998, your partnership
had a mortgage note outstanding of $3,123,002, payable to Bank of America, which
bears interest at the rate of 7.60%. The mortgage debt is due in November, 2002.
Your partnership also has a second mortgage note outstanding of $112,855, on the
same terms as the current mortgage note. Your partnership's agreement of limited
partnership also allows your general partner to lend funds to your partnership.
As of December 31, 1998, your general partner had no outstanding loans to your
partnership.
Transfers. Your units are not listed on any national securities exchange or
quoted on NASDAQ, and there is no established public trading market for the
units. Secondary sales activity for the units has been limited and sporadic.
Your general partner monitors transfers of the units (i) because the admission
of the transferee as a substitute limited partner in your partnership requires
the consent of your general partner under your partnership agreement, and (ii)
in order to track compliance with applicable safe harbor provisions to avoid
treatment as a "publicly traded partnership" for tax purposes. However, your
general partner does not
S-11
<PAGE> 362
monitor or regularly receive or maintain information regarding the prices at
which secondary sale transactions in the units have been effectuated.
TERMS OF THE OFFER
General. We are offering to acquire up to 25% of the outstanding 50 units
of your partnership, which we do not directly or indirectly own, for
consideration per unit of 3,437.50 Preferred OP Units, 2,283.75 Common OP Units,
or $85,934 in cash. If you tender units pursuant to the offer, you may choose 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 Preferred OP Units, 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 January 1, 1999,
although you will be entitled to retain any distributions you may have received
after such date and prior to our commencement of this offer.
If you accept our offer and do not specify the consideration you desire on
the letter of transmittal, we will issue you Preferred OP Units.
Expiration Date. Our offer will expire at 5:00 P.M., New York City time, on
June 4, 1999, 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.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds 25% 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 their acceptance for payment as provided for herein.
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 Common OP Units or 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.
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
S-12
<PAGE> 363
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
The offer may be extended or delayed indefinitely, during which time you
will not receive payment for any tendered units.
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 any property owned by
your partnership's because your general partner (which is our subsidiary) and
the property manager will remain unchanged. If we borrow funds for the cash
consideration for these offers, our interest costs would increase which could
adversely affect our future earnings. If all units in this and our other
contemplated offers were purchased for cash and we borrowed all the funds, at
current interest rates, our interest expense would increase by $3,064,000 per
year.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
number of units pursuant to our offer, we may be in a position to influence
voting decisions with respect to your partnership. However, we will not be able
to control voting decisions unless we acquire more units in another transaction,
which cannot take place for at least one year after expiration of this offer.
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 (which is our subsidiary),
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 Letter of Transmittal,
and the legal and accounting fees and expenses in connection with the offer. We
will also pay the fees of Stanger for providing the fairness opinion 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 $50,000.
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.
No Dissenters' Rights. You are not entitled to dissenters' (appraisal)
rights in connection with the offer.
Other Offers. The AIMCO Operating Partnership is also making similar
exchange offers to approximately 90 other limited partnerships in which it
controls the general partner, interests in substantially all of which were
acquired in the merger on October 1, 1998 with Insignia Financial Group, Inc.
and the February 26, 1999 merger with Insignia Properties Trust. Each of such
exchange offers is being made by a separate prospectus supplement which is
similar to this Prospectus Supplement. Copies of such prospectus supplements may
be obtained upon written request from the Information Agent at the address set
forth in
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<PAGE> 364
"-- Information Agent" or on the back cover page of this Prospectus Supplement.
The exchange offers may be different for limited partners in each partnership in
terms of pricing and percentage of units sought, but the effects of the offers
will essentially be the same. In general, we believe that the risk factors
(except for certain tax-related risk factors) described herein for this offer
will also be applicable to the other offers.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer. Its telephone numbers are (888)
349-2005 and (201) 896-1900. Its fax number is (201) 896-0910.
FEDERAL INCOME TAX CONSEQUENCES
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Preferred OP
Units or 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.
THE FOREGOING SUMMARY IS A GENERAL DISCUSSION OF THE MATERIAL 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 "FEDERAL INCOME TAX CONSEQUENCES" 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.
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, your general
partner (which is our subsidiary) 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, Preferred
OP Units and 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.
As of February 19, 1999, the AIMCO Operating Partnership had approximately
9,729,130 Common OP Units outstanding (excluding interests held by AIMCO) and no
Class Two Partnership Preferred Units outstanding. The number of OP Units you
may acquire from us in exchange for your units will represent a lower percentage
of the outstanding limited partnership interests in the AIMCO Operating
Partnership than that of your current ownership interest in your partnership. In
response to our offer, you could elect to receive $85,934 in cash, 3,437.50
Preferred OP Units or 2,283.75 Common OP Units. Both your units and the OP Units
are subject to transfer restrictions and it is unlikely that a real trading
market will ever develop for any of such securities. If you subsequently redeem
OP Units for AIMCO Class A Common Stock or Class I Preferred Stock, we can make
no assurance as to the value of such shares of AIMCO stock, at that time, which
may be less than the cash offer price of $85,934.
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<PAGE> 365
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
our subsidiary 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
both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives a
monthly fee equal to 1% of the gross collected income from your partnership's
property as an administrative service fee from your partnership and may be
reimbursed for expenses generated in that capacity. The property manager
received management fees of $76,344 in 1996, $79,518 in 1997 and $82,495 in
1998. The AIMCO Operating Partnership has no current intention of changing the
fee structure for the manager of your partnership's property.
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.
AIMCO's Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is 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.
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. We might pay a higher price for any future exchange offers we may make
for units of your partnership. In any event, we will not acquire any units for
at least one year after expiration of this offer.
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<PAGE> 366
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $1,074,175 will be required to purchase all of
the units sought in our offer, if such units are tendered for cash excluding
expenses. We will obtain all such funds from cash from operations, equity
issuances and short term borrowings. For a detailed description of estimated
expenses to be incurred in the offer, see "Source and Amount of Funds and
Transactional Expenses."
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<PAGE> 367
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
nine months ended September 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 of the AIMCO Operating Partnership" included in the accompanying
Prospectus. All dollar values are in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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............... $ 265,700 $ 127,083 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses........... (101,600) (50,737) (76,168) (38,400) (30,150) (10,330)
Owned property management expenses.... (7,746) (4,344) (6,620) (2,746) (2,276) (711)
Depreciation.......................... (59,792) (23,848) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
96,562 48,154 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income...... 13,968 9,173 13,937 8,367 8,132 3,217
Management and other expenses......... (8,101) (5,029) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation......... (196) (441) (588) (590) (581) --
Other assets, depreciation and
amortization........................ (3) (236) (453) (218) (168) (150)
Owner and seller bonuses.............. -- -- -- -- -- --
Amortization of management company
goodwill............................ -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
5,668 3,467 2,038 1,707 2,002 1,020
Minority interests in service company
business............................ -- 48 (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business............ 5,668 3,515 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative expenses... (7,444) (1,408) (5,396) (1,512) (1,804) (977)
Interest income....................... 18,244 4,458 8,676 523 658 123
Interest expense...................... (56,756) (33,359) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships........................ (1,052) (777) 1,008 (111) -- --
Equity in losses of unconsolidated
partnerships(c)..................... (5,078) (463) (1,798) -- -- --
Equity in earnings of unconsolidated
subsidiaries(d)..................... 8,413 456 4,636 -- -- --
Amortization of goodwill.............. (5,071) (711) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations................ 53,486 19,865 30,246 15,629 14,988 7,702
Gain on disposition of properties..... 2,783 (169) 2,720 44 -- --
Provision for income taxes............ -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before extraordinary
item................................ 56,269 19,696 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt.............. -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)..................... $ 56,269 $ 19,427 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)............................. 241 109 147 94 56 48
Total owned apartment units (end of
period)............................. 62,955 28,773 40,039 23,764 14,453 12,513
Units under management (end of
period)............................. 154,729 71,038 69,587 19,045 19,594 20,758
Basic earnings per Common OP Unit..... $ 0.80 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP Unit... $ 0.79 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit................................ $ 1.6875 $ 1.3875 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities.......................... 50,825 53,435 73,032 38,806 25,911 16,825
Cash flows used in investing
activities.......................... (185,453) (314,814) (717,663) (88,144) (60,821) (186,481)
Cash flows provided by (used in)
financing activities................ 141,221 293,984 668,549 60,129 30,145 176,800
<CAPTION>
AIMCO PROPERTIES, L.P.
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)
Cash flows provided by (used in)
financing activities................ (1,032) 14,114
</TABLE>
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<PAGE> 368
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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>
Funds from operations(e)................ $ 132,881 $ 49,692 $ 81,155 $ 35,185 $ 25,285 $ 9,391
Weighted average number of Common OP
Units outstanding..................... 53,007 24,347 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation.......................... $2,685,487 $1,250,239 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation.......................... 2,355,122 1,107,545 1,503,922 745,145 448,425 392,368
Total assets............................ 3,121,949 1,608,195 2,100,510 827,673 480,361 416,361
Total mortgages and notes payable....... 1,275,401 661,715 808,530 522,146 268,692 141,315
Redeemable Partnership Units............ 232,405 178,321 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994 Cumulative
Senior Preferred Units................ -- -- -- -- -- 107,228
Partners' Capital....................... 1,427,087 560,737 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.
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>
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 10, 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
based on the NAREIT definition, as adjusted for the 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 NINE PERIOD
MONTHS ENDED FOR THE YEAR ENDED JANUARY 10,
SEPTEMBER 30, DECEMBER 31, 1994
------------------ --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
-------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $ 56,269 $19,427 $32,697 $15,673 $14,988 $ 7,702
(Gain) loss on disposition of property...................... (2,783) 169 (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 56,900 21,052 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 7,077 711 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 2,689 3,584 -- -- --
Amortization of management contracts...................... 4,201 430 1,587 -- -- --
Deferred taxes............................................ 6,134 2,164 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 17,379 2,781 6,280 -- -- --
Preferred stock dividends................................. (12,296) -- (135) -- (5,169) (3,114)
-------- ------- ------- ------- ------- -------
Funds from operations....................................... $132,881 $49,692 $81,155 $35,185 $25,285 $ 9,391
======== ======= ======= ======= ======= =======
</TABLE>
S-18
<PAGE> 369
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. (the AIMCO Operating Partnership) for the
nine months ended September 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 NINE
MONTHS FOR THE
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 345,961 $ 442,526
Property operating expenses............................... (136,240) (189,442)
Owned property management expenses........................ (8,933) (11,831)
Depreciation.............................................. (80,420) (98,853)
--------- -----------
120,368 142,400
--------- -----------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 28,912 41,676
Management and other expenses............................. (14,386) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (15,243) (26,480)
--------- -----------
(913) (9,075)
Minority interests in service company business............ -- (10)
--------- -----------
Partnership's shares of income from service company
business............................................... (913) (9,085)
--------- -----------
General and administrative expenses....................... (8,632) (21,371)
Interest expense.......................................... (90,890) (121,699)
Interest income........................................... 40,887 21,734
Minority interest......................................... (8,548) (10,034)
Equity in losses of unconsolidated partnerships........... (23,349) (43,918)
Equity in earnings of unconsolidated subsidiaries......... 851 5,848
Amortization of Goodwill.................................. (5,071) --
--------- -----------
Net income........................................ $ 24,703 $ (36,125)
========= ===========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (.12) $ (1.16)
Diluted earnings (loss) per Common OP Unit.................. $ (.12) $ (1.16)
Distributions paid per Common OP Unit....................... $ 1.69 $ 1.85
Book value per Common OP Unit............................... $ 24.52 $ 26.96
CASH FLOW DATA:
Cash provided by operating activities....................... $ 90,439 $ 130,703
Cash used in investing activities........................... (79,923) (1,135,038)
Cash provided by (used in) financing activities............. 16,740 955,977
OTHER DATA:
Funds from operations(a).................................... $ 187,985 $ 172,733
Weighted average number of Common OP Units outstanding...... 74,946 74,094
</TABLE>
S-19
<PAGE> 370
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, net of accumulated depreciation................ $2,679,195
Total assets................................................ 4,558,819
Total mortgages and notes payable........................... 1,762,105
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 320,443
Partners' capital........................................... 1,984,019
</TABLE>
- ---------------
(a) 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
based upon the NAREIT definition, as adjusted for the 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.
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss)................................. $ 24,703 $(36,125)
HUD release fee and legal reserve................. -- 10,202
Real estate depreciation, net of minority
interests....................................... 76,521 93,050
Amortization of management contracts.............. 9,593 12,790
Amortization of management company goodwill....... 10,997 12,551
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation........................ -- 1,715
Amortization of management company goodwill..... 959 1,918
Amortization of management contracts............ 23,010 30,516
Deferred taxes.................................. (713) (1,356)
Equity in earnings of other partnerships:
Real estate depreciation........................ 79,559 95,285
Interest on convertible debentures................ (7,537) (10,003)
Preferred unit distributions...................... (29,107) (37,810)
-------- --------
Funds from operations............................. $187,985 $172,733
======== ========
</TABLE>
S-20
<PAGE> 371
SUMMARY FINANCIAL INFORMATION OF BURGUNDY COURT ASSOCIATES, L.P.
The summary financial information of Burgundy Court Associates, L.P. for
the nine months ended September 30, 1998 and 1997 is unaudited. The summary
financial information for Burgundy Court Associates, L.P. for the years ended
December 31, 1997, 1996, 1995, 1994 and 1993 is derived from the 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 of Your
Partnership" included herein. See "Index to Financial Statements."
BURGUNDY COURT ASSOCIATES, L.P.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues...................... $1,252,000 $1,195,000 $1,616,000 $1,547,000 $1,475,000 $1,419,000 $1,389,000
Net Income.......................... 298,000 249,000 282,000 238,000 228,000 100,000 125,000
Net income per limited partnership
unit.............................. 5,900.40 4,930.20 5,583.60 4,712.40 4,514.40 1,980.00 2,475.00
Distributions per limited
partnership unit.................. 3,960.00 3,960.00 3,960.00 6,435.00 2,752.20 6,039.00 2,237.40
Distributions per limited
partnership unit (which represent
a return of capital).............. -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents........... $ 571,000 $ 466,000 $ 500,000 $ 481,000 $ 520,000 $ 689,000 $ 785,000
Real Estate, Net of Accumulated
Depreciation...................... 1,857,000 1,919,000 1,901,000 1,953,000 2,026,000 1,933,000 1,939,000
Total Assets........................ 2,869,000 2,848,000 2,887,000 2,879,000 3,009,000 3,052,000 3,247,000
Notes Payable....................... 3,132,000 3,208,000 3,197,000 3,268,000 3,333,000 3,392,000 3,446,000
Partners' Deficit................... (417,000) (547,000) (515,000) (598,000) (510,000) (598,000) (396,000)
Total Distributions................. 200,000 200,000 200,000 325,000 140,000 305,000 113,000
Net increase (decrease) in cash and
cash equivalents.................. 71,000 (15,000) 19,000 (39,000) (121,000) (98,000) 107,000
Net cash provided by operating
activities........................ 455,000 361,000 453,000 484,000 396,000 499,000 445,000
Ratio of earnings to fixed
charges........................... 2.43/1 2.17/1 1.95/1 1.79/1 1.74/1 1.33/1 1.41/1
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per unit of your
partnership for the year ended December 31, 1998, and the cash distributions
payable on the number of Common OP Units and Preferred OP Units issuable in
exchange therefor:
<TABLE>
<CAPTION>
ANNUAL
DISTRIBUTIONS
-------------
<S> <C>
Units of Burgundy Court Associates, L.P. ................... $4,000.00
Equivalent cash distributions on Common OP Units(1)......... $5,709.38
Equivalent cash distributions on Preferred OP Units(2)...... $6,875.00
</TABLE>
- ---------------
(1) Calculated by multiplying the exchange ratio of 2,283.75 Common OP Units per
unit by the annualized distributions paid on the Common OP Units of $2.50
per unit.
(2) Calculated by multiplying the exchange ratio of 3,437.5 Preferred OP Units
per unit by the stated annual distribution rate on the Preferred OP Units of
$2.00 per unit.
S-21
<PAGE> 372
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of AIMCO. AIMCO is a real estate investment
trust that owns and manages multifamily apartment properties throughout the
United States. Through its wholly owned subsidiaries, AIMCO GP, the sole general
partner of the AIMCO Operating Partnership, and the Special Limited Partner, as
of December 31, 1998, AIMCO held approximately an 83% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled by the National
Multi Housing Council, we believe that AIMCO is one of the largest owner and
manager of multifamily apartment properties in the United States, with a total
portfolio of 379,363 apartment units in 2,147 properties located in 49 states,
the District of Columbia and Puerto Rico. As of December 31, 1998, AIMCO:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 apartment properties for third party
owners and affiliates.
AIMCO's Class A Common Stock is listed and traded on the NYSE under the
symbol "AIV." On March 23, 1999, the last reported sale price of AIMCO Class A
Common Stock on the NYSE was $35 3/16. 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 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>
1999
First Quarter (through March 23)........ $41 5/8 $35 3/16 $0.6250 $0.6250
1998
Fourth Quarter.......................... 37 3/8 30 0.5625 0.5625
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>
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.
S-22
<PAGE> 373
RISK FACTORS
The following sets forth certain risks and disadvantages of the offer and
should be read and considered when reviewing the potential benefits of the offer
set forth in "Background and Reasons for the Offer -- Expected Benefits of the
Offer." In addition, you should review the other risks of investing in us
beginning on page 2 of our accompanying Prospectus.
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY OR APPRAISAL OR ARMS-LENGTH
NEGOTIATION. 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. 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. 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 CONSIDERATION MAY NOT 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 your units. However,
the offer consideration does not necessarily reflect the price that you would
receive in an open market for your units. Such prices could be higher or lower
than our offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property. It does not
ascribe and value to potential future improvements in the operating performance
of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimate your property to be worth $7,615,000, less
approximately $150,505 of deferred maintenance and investment. It is possible,
that a sale of the properties could result in you receiving more pretax cash per
unit than our offer. Even if our cash offer consideration is equal to
liquidation value, if you accept OP Units, you may not ultimately receive an
amount equal to the cash offer consideration when you sell such OP Units or any
AIMCO securities you may receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
pretax cash 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.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and the AIMCO Operating Partnership and, therefore, has
substantial conflicts of interest with respect to our offer. We are making this
offer with a view to making a profit. 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. Another conflict is 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
S-23
<PAGE> 374
partnership. 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.
CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its properties, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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 sold. If you exchange your units
for cash and our 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. 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 allocated to such units 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. If you exercise your redemption right with respect to the OP Units
within two years of the date that you transfer your units to the AIMCO Operating
Partnership, your exchange of units for OP Units or OP Units and cash could be
treated as a disguised sale of your units and you would be required to recognize
gain or loss in the year of the exchange on such disguised sale. See "Federal
Income Tax Consequences -- Disguised Sales." 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. 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 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.
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. You
should review "Federal Income Tax Consequences" 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. Because the income tax
consequences of tendering units will not be the same for everyone, you should
consult your own tax advisor before determining whether to tender your units
pursuant to our offer.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is controlled by us).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
S-24
<PAGE> 375
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all right 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, for any units that we acquire from you, you will not receive any
future distributions from operating cash flow of your partnership or upon a sale
of property owned by your partnership or a refinancing of any of its debt. If
you tender your units in exchange for OP Units, you will be entitled to future
distributions from the operating cash flow of the AIMCO Operating Partnership
and upon a dissolution, liquidation or winding-up of the AIMCO Operating
Partnership. See "Comparison of Your Units and AIMCO OP Units -- Distributions."
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from the sale of a property or a refinancing of its indebtedness to
(ii) a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of December 31, 2008 to a much larger
partnership with a partnership termination date of 2093.
Under the AIMCO Operating Partnership's agreement of limited partnership,
the general partner has the ability, without the concurrence of the limited
partners, to acquire and dispose of properties and to borrow funds. Further,
while it is the intent to distribute net income from operations, sales of
properties and refinancings of indebtedness, the general partner may not make
such distributions. Proceeds of future asset sales or refinancings by the AIMCO
Operating Partnership generally will be reinvested rather than distributed.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you exchange your
units for OP Units, you will have changed your investment from an interest in a
partnership which owns and manages a single property to an interest in the AIMCO
Operating Partnership which 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 and our portfolio of properties as compared to the value of your
units and your partnership.
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.
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.
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POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAIN ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus. If you
exercise your redemption right with respect to the OP Units within two years of
the date that you transfer your units to the AIMCO Operating Partnership, your
exchange of units for OP Units and cash could be treated as a disguised sale of
your units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as for your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a result, we may incur costs associated with defending or settling such
litigation or paying any judgment if we lose. As of the present time, no limited
partners of your partnership have initiated lawsuits on such grounds.
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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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. 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. However, we will
not be able to control voting decisions unless we acquire more units in another
transaction, which cannot take place for at least one year after expiration of
this offer. Furthermore, in the event that we acquire a substantial number of
units pursuant to our offer, removal of your general partner (which is our
subsidiary) or the manager of any property owned by your partnership may become
more difficult or impossible without our consent.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of units without the
consent of your general partner (which is our subsidiary). Such consent may be
withheld by your general partner in its sole discretion. Your general partner
may withhold its consent if such transfer would result in the termination of
your partnership for tax purposes which would occur if 50% or more of the total
interest in your partnership is transferred within a 12-month period. If we
acquire a significant percentage of the interest in your partnership, your
general partner may not consent to a transfer for a 12-month period following
our offer.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investments in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to hold
the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns one property. The general partner of your partnership
continually considers whether the property should be sold or otherwise disposed
of after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for your partnership. We cannot
predict when the property will be sold or otherwise disposed of. However, there
is no current plan or intention to sell the property in the near future.
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BALLOON PAYMENTS. Your partnership has approximately $2,755,871 of balloon
payments due on its mortgage debt in November, 2002. Your partnership will have
to refinance such debt or sell its property prior to the balloon payment dates,
or it will be in default and could lose the property to foreclosure.
SPECIAL FACTORS TO CONSIDER
In reviewing the offer, you should pay special attention to the information
in the Sections entitled "Background and Reasons for the Offer," "Valuation of
Units," "Fairness of the Offer" and "Stanger Analysis," which contain
information regarding the background and reasons for the offer, the method of
evaluating units in the offer and alternative valuation methods considered, our
view as to the fairness of the offer, and the fairness opinion rendered by
Stanger.
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 liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
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 .992% interest, consisting of a 0%
limited partnership interest and a .992% general partnership interest, in your
partnership.
On October 31, 1998, IPT and AIMCO entered into an agreement and plan of
merger, dated as of October 1, 1998 (the "IPT Merger Agreement"), pursuant to
which IPT merged with AIMCO on February 26, 1999 (the "IPT Merger"). Upon
consummation of the IPT Merger, each outstanding share of IPT not owned by AIMCO
was converted into the right to receive 0.3601 shares of AIMCO's Class A Common
Stock (approximately 4,180,000 shares in the aggregate).
One of the reasons we chose to acquire Insignia is that we would be able to
make the exchange 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, and would provide the AIMCO Operating Partnership
with a larger asset and capital base and increased diversification. As of the
date of this offering, the AIMCO Operating Partnership proposes to make offers
to approximately 90 of the Insignia Partnerships, including your partnership.
During our negotiations with Insignia in early 1998, we decided that if the
merger with Insignia were consummated, we could also benefit from making offers
for limited partnership interests in the Insignia Partnerships. While some of
the Insignia Partnerships are public partnerships and information is publicly
available on such partnerships for weighing the benefits of making an exchange
offer, many of the partnerships are private partnerships and information about
such partnerships comes principally from the general partner. Our control of the
general partner makes it possible to obtain access to such information. Further,
such control also means that we control the operations of the partnerships and
their properties. Insignia did not propose that we conduct such exchange offers,
rather we initiated the offers on our own. We determined in June of 1998 that if
the merger with Insignia were consummated, we would offer to limited partners of
the Insignia Partnerships limited partnership units of the AIMCO Operating
Partnership and/or cash.
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In connection with the Insignia Merger we acquired general partnership
interests and certain limited partnership interests in a number of private and
public partnerships. Eight private partnerships out of the 90 partnerships
involved in the proposed exchange offers do not have audited financial
statements prepared in accordance with generally accepted accounting practices
("GAAP"). Certain of these partnerships have audited financial statements
prepared on the basis of federal income taxes and others have unaudited
financial statements which may or may not be prepared on the basis of GAAP or
federal income taxes. For the Insignia Partnerships for which exchange offers
are being made which do not have audited GAAP financial statements for at least
two years, we are making the offer on the basis of either one year of audited
GAAP financial statements and one year of unaudited GAAP financial statements or
just unaudited GAAP financial statements. We tried to obtain two years of
audited GAAP financial statements for all the partnerships for which offers are
being made, but because of the inability to locate records from inception of the
partnerships which would allow auditors to verify the original purchase price of
the properties, no audits were possible. In these cases, the entities which
controlled the general partners prior to Insignia are no longer in business or
have no current knowledge or records of such partnerships. For the same reasons,
we do not have all the records for past years of some of the partnerships.
Therefore, for the partnerships without an audit, we did not have invoices,
escrow statements, property closing statements or the like to support the
original costs of the real property to the satisfaction of independent auditors,
in order for them to render an unqualified audit report. Consequently, we have
no way to support the original cost of the properties. However, we have general
ledgers and related accounting records that enable us to prepare GAAP basis
financial statements. These records were taken from the entities that controlled
the general partners and were subsequently maintained by us. The amount of
capitalized property costs appearing in those books and records has, to our
knowledge, been appropriately rolled forward from year to year and used by the
general partners of the partnerships in question to prepare tax returns and
periodic reports to the investors in the partnerships. Therefore, we believe
that the unaudited financial statements included in the prospectus supplements
for such partnerships have been prepared in accordance with GAAP.
In acquiring Insignia and the interests in the Insignia Partnerships, we
conducted due diligence with regard to certain of the assets acquired including
the major properties held by the Insignia Partnerships. Our due diligence
focused on the condition of the major properties and the terms of the
partnership agreements. Since Insignia had audited GAAP financial statements and
since those partnerships without audited GAAP financial statements are generally
smaller, we did not focus on the issue of audited GAAP based financial
statements for the smaller partnerships at the time of the merger. Further, for
our internal due diligence use, audited tax based financial statements are also
used. The total number of Insignia Partnerships we acquired an interest in was
approximately 550 of which approximately 25 do not have audited GAAP statements.
We were not able to pick and choose the partnerships in which we would acquire
an interest. The Insignia Partnerships were part of the business of Insignia. As
a consequence, we acquired interests in certain small private partnerships which
do not have the ability to obtain audited GAAP financial statements. It is our
policy to acquire properties or partnerships with audited GAAP based financial
statements. However, in connection with large acquisitions of partnerships
interests, such as with the Insignia Merger, we may occasionally acquire a
partnership or property without audited GAAP financial statements.
Previous Tender Offers
Tender offers have been previously made with respect to certain of the
public Insignia Partnerships. However, there have not been any prior tender
offers to acquire units of your partnership. Except for such tender offers, we
are not aware of any merger, consolidation or other combination involving any of
the Insignia Partnerships, or any acquisitions of any of such partnerships or a
material amount of the assets of such partnerships.
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
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dated August 28, 1998 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
(which is our subsidiary).
Liquidation
Benefits of 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 (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 your general partner (which is our subsidiary), 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 on the order of 1% of the principal balance of the mortgage.
Your general partner believes it currently is in the best interest of your
partnership to continue holding its real estate assets.
Continuation of the Partnership Without the Offer
Benefits of Continuation. Although our offer permits you to continue your
investment in your partnership, 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. Your
partnership's net income has increased from $249,000 for the nine months ended
September 30, 1997, to $298,000 for the nine months ended September 30, 1998. 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. The continuation of your partnership will allow you to continue to
participate in the net income and any increases of revenue of your partnership
and any net proceeds from the sale of any property owned by your partnership.
The General Partner continues to review operations and expects to complete
capital expenditures in 1999 and 2000 enabling it to possibly increase rents and
lower expenses. In addition, a sale of the property may cause a tax gain to each
investor.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. If your partnership continues operating as presently structured, your
partnership could be forced to borrow on terms that could result in net losses
from operations. Your partnership's mortgage notes are due on November, 2002 and
require balloon payments totaling $2,755,871. Your partnership currently has
adequate sources of cash to finance its operations on both a short term and long
term basis but will have to sell the properties or refinance its indebtedness in
2002 to pay such balloon payments. Continuation of your partnership without the
offer would deny you and your partners the benefits that your general partner
(which is our subsidiary) expects to result from the 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.
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Alternative Structures Considered
Before we decided to make our offer, we considered a number of alternative
transactions, including purchasing some or all of your partnership's properties;
making an offer of only cash for your units; making an offer of only Common OP
Units for your units; and making an offer of only Preferred OP Units for your
units. A merger would require a vote of the limited partners of your
partnership. If the merger was approved, all limited partners, including those
who wish to retain their units and continue to participate in your partnership,
would be forced to participate in the merger transaction. If the merger was not
approved, all limited partners, including those who would like to liquidate
their investment in your partnership, would be forced to retain their units.
We also considered purchasing your partnership's properties from your
partnership. However, a sale of your partnership's properties would require an
affirmative vote by holders of a majority of the outstanding limited partnership
units. If the sale was approved, all limited partners, including those who wish
to continue to participate in the ownership of your partnership's properties,
would be forced to participate in the sale transaction, and possibly to
recognize taxable income. If the sale was not approved, all limited partners,
including those who would like to dispose of their investment in your
partnership's properties, would be forced to retain their investment.
In order to give all limited partners in your partnership an opportunity to
make their own investment decision, we elected to make an offer directly to you
and the other limited partners. We considered making an all cash offer in order
to satisfy some limited partners' desire for immediate liquidity. However, an
all cash offer would not be desirable for those limited partners who do not
desire immediate liquidity and do not want to immediately recognize any taxable
income, but might otherwise be interested in disposing of their investment in
your partnership and might want an opportunity to control the timing of any
realization of taxable income associated with liquidating such investment in the
future.
We considered making an offer of only OP Units, either all Common OP Units
or all Preferred OP Units. The primary disadvantage of an all OP Unit offer is
that those limited partners who want immediate liquidity would be forced to wait
at least one year before exchanging their OP Units for cash or AIMCO stock. We
decided to offer limited partners both Common OP Units and Preferred OP Units in
order to permit investors to make their own decision as to whether they
preferred the possibility of future capital appreciation (Common OP Units) or
preferred distribution rights (Preferred OP Units).
After considering these alternatives, we decided to offer limited partners
the possibility of all three forms of consideration: cash, Common OP Units and
Preferred OP Units. We think that such an offer will appeal to a large number of
limited partners in your partnership, while permitting each one to retain any or
all of his or her units and remain a limited partner in your partnership on the
same terms as before.
Sale of Assets
Your partnership could sell the property it owns. The general partner of
your partnership considers sale of your partnership's property from time to
time. However, any such sale would likely be a taxable transaction.
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:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
after a one-year holding period, you may choose to redeem
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your Preferred OP Units and receive, at our option, shares of AIMCO's
Class A Common Stock or cash. After a two-year holding period, if you
choose to redeem your Preferred OP Units, you may receive, at our option,
cash, shares of AIMCO's Class I Preferred Stock or shares of AIMCO's
Class A Common Stock. AIMCO's Class A Common Stock is, and AIMCO's Class
I Preferred Stock is expected to be, currently listed and traded on the
NYSE.
- Preferred Quarterly Distributions. Your partnership paid distributions of
$4,000 for the fiscal year ended December 31, 1998. Holders of Preferred
OP Units will be entitled to receive quarterly distributions of $0.50 per
unit (equivalent to $2.00 on an annualized basis) before any
distributions are paid to holders of Common OP Units. This is equivalent
to a distribution of $6,875 per year on the number of Preferred OP Units
you will receive in exchange for each of your partnership 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:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- Quarterly Distributions. Your partnership paid distributions of $4,000
for the fiscal year ended December 31, 1998. In 1998, we paid quarterly
distributions on the Common OP Units totalling $2.25. In January 1999, we
increased our distribution rate on each of the Common OP Units to $2.50
on an annual basis. Assuming no change in the level of our distributions,
this is equivalent to a distribution of $5,709.38 per year on the number
of Common OP Units you will receive in exchange for each of your
partnership units. See "The AIMCO Operating Partnership."
- 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 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.
DISADVANTAGES OF THE OFFER
The principal disadvantages to the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and the consideration, no one separately represented the interests of the
limited partners. Although we have a fiduciary duty to
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the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of the property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pre-tax cash proceeds to you than our
offer.
- OP Units. Investing in OP Units has risks that include the lack of a
public market, transfer restrictions and a one year holding period before
they can be redeemed by a holder. The ultimate return on the OP Units is
directly tied to the future price of AIMCO's Class A Common Stock or
Class I Preferred Stock. You could ultimately receive less for your OP
Units than the cash price in our offer. Further, on or after March 1,
2005, we may redeem the Class I Preferred Stock for $25 per share.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
the sale of the property would be advantageous given market conditions,
the condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of a property and the tax consequences to you
and your partners on a sale of a property. See also "Your
Partnership -- General Policy Regarding Sales and Refinancings of
Partnership Property."
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
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VALUATION OF UNITS
We determined our cash offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower of the value produced. We used your partnership's
property income for the fiscal year ended December 31, 1997. However, in
determining the appropriate capitalization rate, we considered the partnership's
property income since December 31, 1997. Our method for selecting a
capitalization rate begins with each property being assigned a location and
condition rating (e.g., "A" for excellent, "B" for good, "C" for fair, and "D"
for poor). We have rated your property's location B (good) and its condition B
(good). Generally, we assign an initial capitalization rate of 10.25% to
properties in this category. We then adjust the capitalization rate based on
whether the mortgage debt that the property is subject to bears interest at a
rate above or below 7.5% per annum. Generally, for every 0.5% in excess of 7.5%,
the capitalization rate would be increased by 0.25%. Your property's mortgage
debt bears interest at 7.60% per annum, which resulted in an increase from the
initial capitalization rate of 0.25%. We also considered any changes in your
partnership's property income from 1997 to 1998. Because your partnership's
property income in 1998 remained relatively unchanged compared to 1997, we made
no further revision of the capitalization rate, resulting in a final
capitalization rate of 10.50%. The evaluation of a property's location and
condition, and the determination of an appropriate capitalization rate for a
property, is subjective in nature, and others evaluating the same property might
use a different capitalization rate and derive a different property value.
Property income is the difference between the revenues from the property
and related costs and expenses, excluding income derived from sources other than
its regular activities and before income deductions. Income deductions include
interest, income taxes, prior-year adjustments, charges to reserves, write-offs
of intangibles, adjustments arising from major changes in accounting methods and
other material and nonrecurrent items. In this respect, property income differs
from net income disclosed in the partnership's financial statements, which does
not exclude these income sources and deductions.
The following is a reconciliation of your partnership's net income for the
year ended December 31, 1997, to your partnership's property income for the same
period.
<TABLE>
<S> <C>
Net Income (Loss)........................................... $282,771
Other Non-Operating Expenses................................ 30,072
Depreciation................................................ 190,533
Interest.................................................... 296,624
--------
Property income............................................. $800,000
</TABLE>
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. Further,
in applying the direct capitalization method, others may make different
assumptions and obtain different results. 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 estimated 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 (property 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,
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however there is no single correct capitalization rate and others might
use different rates. We divided fiscal 1997 property income of $799,576
by the property's capitalization rate of 10.50% to derive an estimated
gross property value of $7,615,010.
- 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
certain other costs including required capital expenditures, deferred
maintenance, and closing costs to derive a net equity value for your
partnership of $4,570,540. Closing costs, which are estimated to be 2.5%
of the gross property value, include legal and accounting fees, real
property, transfer taxes, title and escrow costs and broker's fees.
- 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. Accordingly, 94.01% of the estimated liquidation
proceeds are assumed to be distributed to holders of units. Our cash
offer consideration represents the per unit liquidation proceeds
determined in this manner.
<TABLE>
<S> <C>
Property income............................................. $ 800,000
Capitalization rate......................................... 10.50%
------------
Gross valuation of partnership property..................... $ 7,615,000
Plus: Cash and cash equivalents............................. 300,451
Plus: Other partnership assets, net of security deposits.... 418,834
Less: Mortgage debt, including accrued interest............. (3,340,138)
Less: Accounts payable and accrued expenses................. (18,355)
Less: Other liabilities..................................... (64,372)
------------
Partnership valuation before taxes and certain costs........ 4,911,420
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures and deferred
maintenance............................................... (150,505)
Less: Closing costs......................................... (190,375)
------------
Estimated net valuation of your partnership................. 4,570,540
Percentage of estimated net valuation allocated to holders
of units.................................................. 94.01%
------------
Estimated net valuation of units............................ 4,296,707
Total number of units............................. 50.0
------------
Estimated valuation per unit................................ 85,934
============
Cash consideration per unit................................. $ 85,934
============
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration of $85,934 by the $25
liquidation preference of each Preferred OP Unit to get 3,437.50
Preferred OP Units per unit.
- In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $85,934
(the average closing price of AIMCO's Class A Common Stock on the NYSE
for the 30 trading days ending on March 23, 1999) by a price of $37.63 to
get 2,283.75 Common OP Units per unit.
The total net valuation of all partnerships in which the AIMCO Operating
Partnership is making similar exchange offers, and which were valued using the
same methods as used for your partnership, is $568,751,183, of which, $4,570,540
or .80% is the net valuation of your partnership.
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FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
Your general partner is a subsidiary of the AIMCO Operating Partnership. 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. Your general partner has substantial conflicts of interest with
regard to the offer. However, for all of the reasons discussed herein, we and
your general partner believe that the offer and all forms of consideration
offered is fair to you and the limited partners of your partnership. We also
reasonably believe that the similar offers to the limited partners of the other
partnerships are fair to such limited partners. 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 us 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, your
general partner (which is our subsidiary) 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. The net
income of your partnership has increased from $249,000 for the nine months
ended September 30, 1997 to $298,000 for the nine months ended September
30, 1998. These factors are reflected in our valuation of your partnership.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are substantially the financial
equivalent to your interest in your partnership. 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
and Stanger's estimates of the net asset value ($87,659 per unit), going
concern value ($80,360 per unit) and liquidation value ($84,463 per unit)
of your partnership units. See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity. However, we did review whether trading information
was available.
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 by electing to accept Preferred OP Units or
Common OP Units.
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
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<PAGE> 387
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 $85,934, based on a total estimated
value of your partnership's property of $7,615,000. Your general partner
(which is our subsidiary) has no present intention to liquidate your
partnership or to sell or refinance your partnership's property. See
"Background and Reasons for the Offer". See "Valuation of Units" for a
detailed explanation of the methods we used to value your partnership.
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $2.00 and current annualized distributions with respect to the
Common OP Units are $2.50. This is equivalent to distributions of $6,875
per year on the number of Preferred OP Units, or distributions of $5,709.38
per year on the number of Common OP Units, that you would receive in
exchange for each of your partnership's units. Distributions with respect
to your units for the fiscal year ended December 31, 1998 were $4,000. See
"Comparison of Your Units and AIMCO OP Units -- Distributions."
13. The fact that if your partnership were liquidated as opposed to
continuing, the general partner (which is our subsidiary) would not receive
the substantial management fees it currently receives. As discussed in
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," we do not believe that
liquidation of the partnership is in the best interests of the unitholders.
Therefore, we believe the offer is fair in that the fees paid to the
general partner would continue even if the offer was not consummated. We
are not proposing to change the current management fee arrangement.
In evaluating these factors, your general partner (which is our subsidiary)
and the AIMCO Operating Partnership did not quantify or otherwise attach
particular weight to any of them.
Your general partner (which is our subsidiary) has not retained an
unaffiliated representative to act on behalf of the limited partners in
negotiating the terms of the offer since each individual limited partner can
make his own decision as to whether or not to tender and what consideration to
take. Unlike a merger or other form of partnership reorganization, a majority or
more of the holders of limited partnership interests in your partnership cannot
bind you. If an unaffiliated representative had been obtained, it is possible
that such representative could have negotiated a higher price for your units
than was unilaterally offered by the AIMCO Operating Partnership. We have
retained Stanger to conduct an analysis of our offer and to render an opinion as
to the fairness to you of the offer consideration from a financial point of
view. Although no representative has been retained to act solely on behalf of
the limited partners for purposes of negotiating the terms of the offer, we have
determined that the transaction is fair to you from a financial point of view.
We made this determination based, in part, on the fairness opinion from Stanger
and the fact that all limited partners may elect to retain their existing
security on the same terms as before our offer.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
Your general partner (which is our subsidiary) 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 and, although there are
other ways to value real estate, is a reasonably fair method to determine the
consideration offered. Although we believe our offer consideration represents
the amount you would receive if we currently liquidated your partnership, an
actual liquidation might generate a higher or lower price for holders of units.
A liquidation in the future might generate a higher or lower 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
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<PAGE> 388
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
Your general partner (which is our subsidiary) 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
sell your partnership's property or refinance its indebtedness within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, your general partner
(which is our subsidiary) has attempted to compare the cash offer consideration
against: (a) estimates of the value of the units on a liquidation basis; (b)
estimates of the going concern value of your units based on continuation of your
partnership as a stand-alone entity; and (c) the net book value of your units.
The general partner of your partnership believes that analyzing the alternatives
in terms of estimated value, 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 us. These assumptions relate to, among other things: the operating
results since December 31, 1997 as to income and expenses of each property,
other projected amounts and the capitalization rates that may be used by
prospective buyers if your partnership assets were to be liquidated. The 1998
budget is discussed in "Stanger Analysis -- Summary of Materials Considered" and
other projected amounts are discussed in "Stanger Analysis -- Summary of
Reviews."
In addition, these estimates are based upon certain information available
to your general partner (which is our subsidiary) 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. 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.
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Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December, 2008, 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.
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C>
Cash offer price............................................ $ 85,934
Partnership preferred units................................. $ 85,934(1)
Partnership common units.................................... $ 85,934(1)
Alternatives:
Estimated liquidation proceeds............................ $ 85,934
Estimated going concern value............................. $ 78,985(2)
Estimated alternative going concern value................. $ 79,855(3)
Net book value (deficit).................................. $(10,301)
</TABLE>
- ---------------
(1) In our discussion of the offer price as being fair with regard to other
methods of valuing your partnership, we believe the number of Common OP
Units and Preferred OP Units to be issued per unit in the offer to be equal
to the cash price per unit. Therefore, the fairness discussion applies
equally to the cash and non-cash forms of consideration being effected. See
"Valuation of Units" for details of how the number of OP Units was
determined.
(2) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(3) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
Prices on Secondary Market
There is no active market for your units. Your general partner (which is
our subsidiary) is unaware of any secondary market activity in the units.
Therefore any comparison to prices on the secondary market is not possible at
the present time. See "Your Partnership -- Distributions and Transfers of
Units -- Transfers."
Prior Tender Offers
There have been no previous tender offers for units of your partnership.
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. Your general
partner (which is our subsidiary) 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
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.
Estimated Going Concern Value and Estimated Alternative Going Concern Value
Going concern value is a measure of the value of your partnership if it
continued operating as an independent stand-alone entity. The estimated value of
the partnership on a going concern basis is not intended to reflect the
distributions payable to limited partners if its assets were to be sold at their
current fair market value. The general partner of your partnership estimated the
going-concern value of your partnership by analyzing projected cash flows and
performing a discounted cash flow analysis. The general partner of your
partnership assumed that your partnership will be operated in the same manner as
currently, as an independent stand-alone entity, and its assets sold in a
liquidation after a ten-year holding period. Distribution and sale proceeds per
partnership unit were discounted in the projections at a rate of 18%.
The general partner of your partnership assumed that real estate selling
costs will be incurred which will equal 2.5% of the sales price. This analysis
assumes that the partnership property will be sold in a liquidation, at the
expiration of the ten-year holding period, to an independent third-party buyer.
Upon such liquidation, other balance sheet assets (excluding amortizing assets)
and liabilities of your partnership will be sold at their book value, and the
net proceeds of sale will be allocated between the general partners and offerees
in accordance with your partnership's agreement of limited partnership. Should
the assets be liquidated over time, even at prices equal to those projected,
distributions to limited partners of your partnership's cash flow from
operations might be reduced because relatively fixed costs, such as general and
administrative expenses, are not proportionately reduced with the liquidation of
assets. However, for simplification purposes, the sales are assumed to occur
concurrently.
The going concern method relies on a number of assumptions, including among
other things, (i) rental rates for new leases and lease renewals; (ii)
improvements needed to prepare an apartment for a new lease or a renewal lease;
(iii) lease periods; (iv) capital expenditures; (v) broker's commissions; (vi)
cash reserves and (vii) discount rates applied to future cash flows. The use of
assumptions or variables that differ from those described above could produce
substantially different results. Neither we nor the general partner of your
partnership solicited any offers or inquiries from prospective buyers of the
property owned by your partnership in connection with the preparation of the
estimates of value of the properties and the actual amounts for which the
partnership's properties or the partnership could be sold could be significantly
higher or lower than any of the estimates contained herein. The estimated going
concern value of your partnership is $78,985 per unit, which value is below our
offer price per unit. Therefore, we believe the offer price is fair in relation
to the going concern value.
The general partner determined going concern value based upon the
discounted present value of projected cash flows from the partnership over a
ten-year period of operation, which is a standard period for going concern
analyses for real property assets. Such discounted cash flows were based upon
year one property income from the real estate portfolio of $800,000, escalated
at a 3% per annum for the ten-year projection period. Property income was
reduced by: (i) partnership administrative expenses of $50,000 per annum; and
(ii) debt service on existing debt through maturity or the end of ten years,
whichever occurs first. For debt which matures during the ten-year period, a
refinancing at a 7% interest rate was assumed. At the end of the ten-year
projection period, the property was assumed to be sold at a price based upon
property income for the immediately following year capitalized at a
capitalization rate of 11%, less expenses of sale estimated at 3% of the
property value. The net cash flow to limited partners from the continued
operation of the property and the net proceeds of sale was then discounted at a
discount rate of 25% to achieve the going concern value of $78,985 per unit.
Your partnership's property currently has balloon payments due in 2002.
While the going concern value was based on your partnership refinancing its
indebtedness and continuing to own its property, the alternative going concern
value of $79,855 is based on selling the property when the balloon payment is
due. For the
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reasons set forth above, we believe the offer consideration is fair in
relationship to the alternative going concern value.
There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
Net Book Value
Net book value per unit is a deficit of $10,301 and therefore a comparison
with the offering price would not be meaningful in determining the fairness of
the offering price.
Stanger's Estimate of Net Asset Value, Going Concern Value and Liquidation
Value
In rendering its opinion set forth as Appendix A, Stanger did its own
independent estimate of your partnership's net asset value of $87,659 per unit,
going concern value of $80,360 per unit and liquidation value of $84,463 per
unit. For an explanation of how Stanger determined such values see "Stanger
Opinion -- Summary of Reviews -- Comparison of Offer Price To Liquidation Value,
Going Concern Value and Secondary Market Prices." An estimate of your
partnership's net asset value per unit is based on a hypothetical sale of your
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 a liquidation value, after provisions
in full for all of the other known liabilities of your partnership. The net
asset value does not take into account (i) timing considerations discussed under
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," and (ii) costs associated with
winding up of your partnership. Therefore, the AIMCO Operating Partnership
believes that the estimate of net asset value per unit does not necessarily
represent the fair market value of a unit or the amount the limited partner
reasonably could expect to receive if the partnership's property was sold and
the partnership was liquidated. For this above reason, the AIMCO Operating
Partnership considers net asset value estimates to be less meaningful in
determining the offer consideration than the analysis described above under
"Valuation of Units."
Stanger's estimates of net asset value, going concern value and liquidation
value per unit represents premiums (discounts) to the offer price of $1,725,
$(5,574) and $(1,471). In light of these premiums (discounts) and for all the
reasons set forth above, the AIMCO Operating Partnership believes the offer
price is fair to the limited partners. The AIMCO Operating Partnership believes
that the best and most commonly used method of determining the value of a
partnership which only owns an apartment is the capitalization of income
approach set forth in "Valuation of Units."
ALLOCATION OF CONSIDERATION
Your partnership's agreement of limited partnership provides that, in the
event of a liquidation, available proceeds are to be distributed 5.99% to the
general partner and 94.01% to the limited partners. Accordingly, in valuing your
units, we have assumed that 94.01% of the estimated liquidation proceeds are
distributed to holders of units. Since this allocation is in accordance with the
terms of the partnership agreement, we believe the allocation is fair. 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. Stanger has
advised us that the description of Stanger's analysis contained herein describes
the material portions of Stanger's review. 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 any losses, claims,
damages, liabilities or expenses to which Stanger may be subject, under any
applicable federal or state law, including federal and state securities laws,
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 NYSE 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 audited financial statements for the years ended December 31, 1996
and 1997, and its unaudited financial statements for the period ended September
30, 1998, which your partnership's management has indicated to be the most
current available financial statements at the time; (iii) reviewed descriptive
information concerning your partnership's real estate assets (the "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, 1997 and 1998; (v) reviewed
operating budgets for your partnership's property for 1998, as prepared by your
partnership; (vi) reviewed
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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 similar properties; (viii) reviewed internal financial analyses prepared by
your partnership of the estimated current net liquidation value and going
concern value of your partnership; (ix) reviewed information provided by AIMCO
concerning the AIMCO Operating Partnership, the Common OP Units and the
Preferred OP Units; and (x) conducted other studies, analysis and inquiries as
Stanger deemed appropriate.
A summary of the operating budgets per property for the year ended December
31, 1998, which was supplied by your partnership to Stanger, is as follows:
FISCAL 1998 OPERATING BUDGETS
<TABLE>
<CAPTION>
BURGUNDY
COURT
----------
<S> <C>
Total Revenues.............................................. $1,686,986
Operating Expenses.......................................... (765,765)
Replacement Reserves -- Net................................. (188,521)
Debt Service................................................ (354,180)
Capital Expenditures........................................ (7,600)
----------
Net Cash Flow..................................... $ 370,920
==========
</TABLE>
The above budgets at the time they were made were forward-looking
information developed by the general partner of your partnership. Therefore, the
budgets were dependent upon future events with respect to the ability of your
partnership to meet such budget. The budgets incorporated various assumptions
including, but not limited to, lease revenue (including occupancy rates),
various operating expenses, general and administrative expenses, depreciation
expenses, capital expenditures, and working capital levels. While we deemed such
budgets to be reasonable and valid at the date made, there is no assurance that
the assumed facts will be validated or that the circumstances will actually
occur. Any estimate of the future performance of a business, such as your
partnership's business, is forward-looking and based on assumptions some of
which inevitably will prove to be incorrect.
The budget amounts provided above are figures that were not computed in
accordance with GAAP. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budget are often
re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budget
presented for fiscal 1998 should not necessarily be considered as indicative of
what the audited operating results for fiscal 1998 will be. For the year ended
December 31, 1998, the partnership expects to report revenues of $1,655,239,
operating expenses of $754,171 and replacement reserves and capital expenditures
of $173,936. Based on these estimates, the partnership's net cash flow before
debt service, which we believe provides a better indication of the partnership's
actual operating performance than net cash flow, was greater than the budgeted
amounts.
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.
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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 property during the third quarter of 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 or
square footage; 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 nine month period ending
September 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 property.
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 property, 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 the
liquidation value calculation prepared by the management of your partnership.
Stanger observed that such liquidation value was based upon the gross property
valuation estimate prepared by management, which in turn is based upon fiscal
year 1997 property income capitalized at a capitalization rate of 10.5%. Stanger
further observed that the gross property valuation was adjusted for the
following additional items to achieve the liquidation value of your partnership:
(i) cash, other assets, mortgage indebtedness and other liabilities determined
as of December 31, 1997; (ii) estimated closing costs equal to approximately
2.5% of gross real estate value; and (iii) extraordinary capital expenditure
estimates in the amount of $150,505. Stanger observed that your partnership
liquidation value of $4,570,540 was allocated 94.01% to the limited partners and
was divided by the total units outstanding of 50 to provide the liquidation
value per unit of $85,934.
Review of Partnership Going Concern Analysis. Stanger reviewed the going
concern value calculation prepared by management of your partnership. Stanger
observed that such going concern value was based upon the discounted present
value of projected cash flows from the partnership over a ten-year period of
operation which is a standard period for going concern analysis for real
property assets. Such discounted cash flows were based upon year one property
income from the real estate portfolio of $800,000 escalated at 3% per annum for
the ten-year projection period. Property income was reduced by: (i) partnership
administrative expenses of $50,000 per annum; and (ii) debt service on existing
debt through maturity or the end of ten years, whichever occurs first. For debt
which matures during the ten-year period, a refinancing at a 7% interest rate
was assumed. At the end of the ten-year projection period, the properties were
assumed to be sold based upon: (i) property income for the immediately following
year capitalized at a capitalization rate of
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11.0%; and (ii) expenses of sale estimated at 3% of property value. Stanger
observed that the proceeds of sale were reduced by the estimated debt balance at
the end of the tenth year to provide net proceeds from the sale of your
partnership's property.
The resulting cash flows for the ten-year period were discounted to present
value at a discount rate of 18%. Stanger observed that such discount rate was
based upon the portfolio real estate discount rate of approximately 13%,
adjusted for leverage risk and illiquidity risk. Stanger observed that the
resulting partnership going concern value was divided by units outstanding of 50
to achieve management's estimate of going concern value of $78,985 per unit.
Review of Secondary Market Prices. Stanger maintains a database of
secondary market information on limited partnership units. Stanger observed for
its data that no units were reported traded in the secondary market during 1998.
Comparison of Offer Price to Liquidation Value, Going Concern Value and
Secondary Market Price. Stanger observed that the offer price of $85,934 per
unit is equal to management's estimate of liquidation value, and reflects a 8.8%
premium to management's estimate of going concern value of $78,985. Stanger
further observed that investors may select cash, Common OP Units or Preferred OP
Units in exchange for their partnership units or they may elect to continue to
hold their partnership units. Stanger further observed that the Common OP Units
will be priced at $37.625 per unit, an amount which equals the average of the
closing prices for the common shares into which such Common OP Units are
convertible for the 30-trading day period ended March 23, 1999. Furthermore,
Stanger observed that the Preferred OP Units to be issued in the transaction
will be based upon the liquidation preference of $25. Stanger noted that the
Preferred OP Units are redeemable for, at AIMCO's option, either: (i) $25 in
cash per Preferred OP Unit; (ii) common stock of AIMCO based upon a ten-day
average price at the time of the requested redemption; or (iii) commencing on
the third year following the closing of this transaction, preferred stock of
AIMCO with a dividend equal to the distribution on the Preferred OP Units.
Stanger observed that the ten-day average closing price of the AIMCO common
stock is $36.425, as of March 23, 1999 and therefore an investor receiving AIMCO
common shares in redemption of the Preferred OP Units would receive 0.6863
shares with a value approximating $25 for each $25 Preferred OP Unit redeemed,
based upon AIMCO's average common share price as of March 23, 1999. Stanger
noted that commencing in the third year, investors redeeming Preferred OP Units
may receive from AIMCO Preferred Stock with a dividend equal to the distribution
on the AIMCO Preferred OP Units. Stanger observed that the distribution on the
Preferred OP Units is set at 8% of $25 and that the average dividend yield on
AIMCO's outstanding C, D, G and H Preferred Shares approximates 10.1% as of
March 23, 1999. Stanger noted that, based upon the cash dividend yield on the
AIMCO Preferred Shares identified above as of March 23, 1999, investors would
receive Preferred Shares with a value of approximately $19.80 for each $25
Preferred OP Unit if such redemption occurred after the second year following
the closing of the transaction. Stanger further observed that the above analysis
does not take into consideration the present value of the earnings on the tax
deferral an investor may realize as the result of selecting Preferred OP Units
in lieu of cash in a taxable transaction.
In addition to the above analysis, Stanger prepared an independent estimate
of net asset value, going concern value and liquidation value per unit. Stanger
has advised AIMCO that Stanger's estimates of net asset value, liquidation value
and going concern value are based upon Stanger's independent estimate of
property income, a direct capitalization rate of 10.5% transaction costs of 2.5%
to 5.0%, growth rates of 3% and a terminal capitalization rate of 11.0%. Stanger
has advised us that the direct capitalization rate represents Stanger's estimate
of the capitalization rate applicable to its estimate of property income and is
based upon Stanger's independent estimate of the direct capitalization rate for
such property based upon such property's age, condition and location. Stanger
further advised us that the terminal capitalization rate is the capitalization
rate utilized in Stanger's going concern value estimate which is applied to
Stanger's estimate of property income in the eleventh year to establish the
value of the property at the end of the tenth year. Stanger has advised us that
Stanger estimated the terminal capitalization rate at a 50 basis point premium
to the direct capitalization rate estimate for the property. Stanger utilized
deferred maintenance estimates derived from the Adjusters International, Inc.
reports in the calculation of net asset value, liquidation value and going
concern value. Stanger advised us that Stanger adjusted its estimate of net
asset value and liquidation value
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on the cost of above market debt using a 7% interest rate. With respect to the
going concern value estimate prepared by Stanger, Stanger advised AIMCO that a
ten-year projection period and a discount rate of 18% was utilized. Such
discount rate reflects the risk associated with real estate, leverage and a
limited partnership investment. The 18% discount rate was based upon the
property's estimated internal rate of return derived from the discounted cash
flow analysis, 13% (as described above), plus 500 basis points reflecting the
additional risk associated with mortgage debt equal to more than 40% of property
value. Stanger's estimates were based in part upon information provided by us.
Stanger relied upon the deferred maintenance estimates, property descriptions,
unit configurations, allocation among partners, and other data provided by us.
Stanger's analyses were based on balance sheet data as of September 30, 1998.
Stanger's review also included a site visit, review of rental rates and
occupancy at the properties as well as competing properties. Stanger's estimates
of net asset value, going concern value and liquidation value per unit were
$87,659, $80,360, and $84,463 representing premiums (discounts) to the offer
price of 2.0%, (6.5%) and (1.7%). See "Fairness of the Offer -- Comparison of
Consideration to Alternative Consideration."
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. Stanger has rendered similar fairness opinions with regard to certain
other exchange offers being made by the AIMCO Operating Partnership. Stanger
rendered the opinions only as to the individual fairness of the offer
consideration in each proposed exchange offer. The Fairness Opinion does not
address the fairness of all possible acquisitions of interests in your
partnership. In addition, the Fairness Opinion will not be revised to reflect
the actual participation in the offer.
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 your general partner (which is our subsidiary) and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's property, and the transaction costs and fees associated with a
sale of the property. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's property 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 property 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 property 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 property 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
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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, nor did Stanger
address the fairness of all possible acquisitions of interests in the
partnership. The opinion will not be revised to reflect the actual results of
the offer. 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 or oral 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 $9,000 with
respect to your partnership. The estimated aggregate fee payable to Stanger in
connection with all affiliated partnerships is estimated at $1,510,000, plus
out-of-pocket expenses estimated at $61,000. 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 was
engaged by AIMCO during 1997 to represent AIMCO in negotiations to acquire
interests in a real estate limited partnership. Such transaction was never
consummated and no fee was ever paid to Stanger in connection with such proposed
transaction. AIMCO and its affiliates may retain the services of Stanger in the
future. Any such future services could relate to this offer, some or all of the
concurrent offers, or a completely separate transaction.
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YOUR PARTNERSHIP
GENERAL
Burgundy Court Associates, L.P., is a Delaware limited partnership which
completed a private placement of units in 1985. Each unit was initially sold at
a price of $30,328. Insignia acquired the general partner of your partnership in
1991. AIMCO acquired Insignia in October 1998. There are currently a total of 53
limited partners of your partnership and a total of 50 units of your partnership
outstanding. Your partnership is in the business of owning and managing
residential housing. Currently, your partnership owns and manages the property
described below. Your partnership has no employees. 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.
YOUR PARTNERSHIP AND ITS PROPERTY
Your partnership was formed on January 31, 1985 for the purpose of owning
an apartment property located in Cincinnati,Ohio, known as "Burgundy Court
Apartments." Your partnership's property is owned by the partnership but is
subject to a mortgage. The property was built in 1960 and consists of 234
apartment units. There are 32 one-bedroom apartments, 140 two-bedroom apartments
and 62 three-bedroom apartments. Your partnership's property had an average
occupancy rate of approximately 94.47% in 1998, 94.44% in 1997 and 94.44% in
1996.
Your partnership's property provides residents with a number of amenities
and services, such as 24-hour desk service, exercise room and/or sauna, and
party or meeting rooms. Nearly all apartment units are wired for cable
television, and many apartment units also offer one or more additional features,
such as washer/ dryer, microwave, fireplace, and patio/balcony.
Budgeted renovations or improvements for 1999 total $150,505 and are
intended to be paid for out of cash flow or borrowings. Major renovation items
include electrical, sidewalks, exterior lighting, landscape and irrigation, and
drainage.
Set forth below are the average rents for the apartments for the last five
years:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$549 $523 $499 $479 $470
</TABLE>
The apartments are being depreciated for federal income tax purposes using
the accelerated cost recovery method. Depreciation is computed principally by
the straight-line and accelerated methods over estimated lives of 3 to 40 years.
Currently, the real estate taxes on the property are $124,349 of $2,285,710
of assessed valuation with a current yearly tax rate of 5.44%. When the proposed
improvements are made it is anticipated that the yearly tax rate may increase by
approximately 5.71% of such improvements.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a wholly 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.
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS
Under your partnership's agreement of limited partnership, your partnership
is not permitted to raise new equity and reinvest cash in new properties.
Consequently, your partnership is limited in its ability to expand its
investment portfolio. Your partnership will terminate on December 31, 2015
unless earlier dissolved. Your
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partnership has no present intention to liquidate, sell, finance or refinance
your partnership's property within any specified time period.
Generally, your partnership is authorized to acquire, develop, improve, own
and operate your partnership's property as an investment and for income
producing purposes. The investment portfolio of your partnership is limited to
the assets acquired with the initial equity raised through the sale of units to
the limited partners of your partnership or the assets initially contributed to
your partnership by the limited partners, as well as the debt financing obtained
by your partnership within the established borrowing restrictions.
An investment in your partnership is a finite life investment, with the
partners to receive regular cash distributions out of your partnership's
distributable cash flow, if available, and to receive cash distributions upon
liquidation of your partnership's real estate investments, if available.
In general, your general partner (which is our subsidiary) regularly
evaluates the partnership's property by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors the property's specific locale and sub-market
conditions (including stability of the surrounding neighborhood) 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 (including any prepayment penalties), tax implications,
availability of attractive mortgage financing to a purchaser, 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. If rental market conditions improve, 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 viable option than it is
currently. After taking into account the foregoing considerations, your general
partner is not currently seeking a sale of your partnership's property primarily
because it expects the property's operating performance to remain strong in the
near term. In making this assessment, your general partner noted that occupancy
and rental rates at the property were 95% and $562, respectively, at December
31, 1998, compared to 94% and $549, respectively, at December 31, 1997. Although
there can be no assurance as to future performance, the general partner expects
this trend to continue in the near future because of improving market
conditions. In addition, the general partner noted that it expects to spend
approximately $150,505 for capital improvements at the property in 1999 to
repair and improve the property's electrical, sidewalks, exterior lighting,
landscape and irrigation and cleaning. These expenditures are expected to
improve the desirability of the property to tenants. The general partner does
not believe that a sale of the property at the present time would adequately
reflect the property's future prospects. Another significant factor considered
by your general partner is the likely tax consequences of a sale of the property
for cash. Such a transaction would likely result in tax liabilities for many
limited partners. The general partner has not received any recent indication of
interest or offer to purchase the property.
CAPITAL REPLACEMENT
Your partnership has an ongoing program of capital improvements,
replacements and renovations, including roof replacements, kitchen and bath
renovations, balcony repairs (where applicable), replacement of various building
systems and other replacements and renovations in the ordinary course of
business. All capital improvement and renovation costs are expected to be paid
from operating cash flows, cash reserves, or from short-term or long-term
borrowings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Your Partnership."
BORROWING POLICIES
Your partnership's agreement of limited partnership allows your partnership
to incur debt. As of December 31, 1998, your partnership had a current mortgage
note outstanding of $3,123,002, payable to Bank of America, which bears interest
at a rate of 7.60%. The mortgage debt is due in November 2002. Your
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partnership also has a second mortgage note outstanding of $112,855 on the same
terms as the current mortgage note. Your partnership's agreement of limited
partnership also allows the general partner of your partnership to lend funds to
your partnership. As of December 31, 1998, your general partner had no
outstanding loans to your partnership.
COMPETITION
There are other residential properties within the market area of your
partnership's property. The number and quality of competitive properties in such
an area could have a material effect on the rental market for the apartments at
your partnership's property and the rents that may be charged for such
apartments. While we are a significant factor in the United States in the
apartment industry, competition for apartments is local.
LEGAL PROCEEDINGS
Your partnership is party to a variety of legal proceedings related to its
ownership of the partnership's property and management and leasing business,
respectively, arising in the ordinary course of the business, which are not
expected to have a material adverse effect on your partnership.
HISTORY OF THE PARTNERSHIP
Your partnership sold $1,850,000 of limited partnership units in 1985 for
$30,328 per unit. Your partnership currently owns one apartment property.
Your partnership used the funds raised to purchase its property and it has
expended the funds so raised many years ago. Your partnership currently owns the
property described herein, which is subject to a substantial mortgage. Your
general partner (which is our subsidiary) has not experienced any material
adverse financial developments from January 1, 1997 through the present.
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December, 2008, 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.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, your general partner (which is our subsidiary) is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner of your partnership is not
liable to your partnership or any other partner for any mistakes or errors in
judgment or for any act or omission believed by the general partner in good
faith to be within the scope of authority conferred upon it by your
partnership's agreement of limited 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 owned by AIMCO.
See "Conflicts of Interest." The general partner of your partnership is
majority-owned by AIMCO. See "Conflicts of Interest."
Your partnership will, to the extent permitted by law, indemnify and save
harmless the general partner, against and from any personal loss, liability
(including attorneys' fee) or damage incurred by them as a result of any act or
omission in its capacity as general partner unless such loss, liability or
damage results from gross negligence or willful misconduct of the general
partner. As part of its assumption of liabilities in the consolidation, AIMCO
will indemnify the general partner of your partnership and their affiliates for
periods prior to and following the consolidation to the extent of the indemnity
under the terms of your partnership's agreement of limited partnership and
applicable law.
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 partners of your partnership.
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DISTRIBUTIONS AND TRANSFERS OF UNITS
Distributions
The following table shows, for each of the years indicated, the
distributions paid per unit in such years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 AMOUNT
---------------------- -------
<S> <C>
1993........................................................ $ 2,273
1994........................................................ 6,061
1995........................................................ 2,800
1996........................................................ 6,500
1997........................................................ 4,000
1998........................................................ 4,000
-------
Total............................................. $25,634
=======
</TABLE>
Transfers
The units are not listed on any national securities exchange or quoted on
the NASDAQ System, the Electronic Bulletin Board or the "pink sheets," and there
is no established public trading market for the units. Secondary sales activity
for the units has been limited and sporadic. The general partner of your
partnership monitors transfers of the units (a) because the admission of the
transferee as a substitute limited partner in your partnership require the
consent of the general partner of your partnership under your partnership's
agreement of limited partnership, and (b) in order to track compliance with safe
harbor provisions to avoid treatment as a "publicly traded partnership" for tax
purposes. However, the general partner of your partnership does not monitor or
regularly receive or maintain information regarding the prices at which
secondary sale transactions in the units have been effectuated. The general
partner of your partnership estimates, based solely on the transfer records of
your partnership (or your partnership's transfer agent), that there have been no
sale transactions.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate, approximately
a .992% interest in your partnership 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 two years, 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 following table shows, for each of the years indicated, compensation
paid to your general partner and its affiliates on a historical basis, and on a
pro forma basis assuming that all of the units sought in our offer had been
acquired at the beginning of each period:
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------------------ ------------------------------------------
PARTNERSHIP PROPERTY PARTNERSHIP PROPERTY
FEES AND MANAGEMENT FEES AND MANAGEMENT
YEAR EXPENSES FEES DISTRIBUTIONS EXPENSES FEES DISTRIBUTIONS
---- ----------- ---------- ------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
not not not not
1994 available available $6,061 available available $78,788
1995 $44,298 $72,215 2,800 $44,298 $72,215 36,400
1996 42,194 76,344 6,500 42,194 76,344 84,500
1997 42,463 79,518 4,000 42,463 79,518 52,000
1998 30,398 82,945 4,000 30,398 82,915 52,000
</TABLE>
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<PAGE> 402
SELECTED FINANCIAL INFORMATION
OF BURGUNDY COURT ASSOCIATES, L.P.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and Cash Equivalents..... $ 571,000 $ 466,000 $ 500,000 $ 481,000 $ 567,000 $ 689,000 $ 785,000
Land & Building............... 5,624,000 5,485,000 5,525,000 5,386,000 5,279,000 4,972,000 4,681,000
Accumulated Depreciation...... (3,767,000) (3,576,000) (3,624,000) (3,433,000) (3,263,000) (3,039,000) (2,742,000)
Other Assets.................. 441,000 463,000 486,000 445,000 416,000 430,000 523,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Assets.......... $ 2,869,000 $ 2,848,000 $ 2,887,000 $ 2,879,000 $ 3,009,000 $ 3,052,000 $ 3,247,000
=========== =========== =========== =========== =========== =========== ===========
Notes Payable................. $ 3,132,000 $ 3,208,000 $ 3,197,000 $ 3,268,000 $ 3,333,000 $ 3,392,000 $ 3,446,000
Other Liabilities............. 154,000 187,000 205,000 209,000 186,000 269,000 195,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Liabilities..... $ 3,286,000 $ 3,395,000 $ 3,402,000 $ 3,477,000 $ 3,519,000 $ 3,651,000 $ 3,641,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Partners Deficit...... $ (417,000) $ (547,000) $ (515,000) $ (598,000) $ (510,000) $ (599,000) $ (396,000)
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED FOR THE YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Revenue................. $1,182,000 $1,141,000 $1,542,000 $1,469,000 $1,401,000 $1,346,000 $1,326,000
Other Income................... 70,000 54,000 74,000 78,000 74,000 73,000 63,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Revenue.......... $1,252,000 $1,195,000 $1,616,000 $1,547,000 $1,475,000 $1,419,000 $1,389,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating Expenses............. $ 465,000 $ 467,000 $ 670,000 $ 663,000 $ 572,000 $ 565,000 $ 527,000
General & Administrative....... 41,000 35,000 52,000 50,000 53,000 55,000 57,000
Depreciation................... 143,000 143,000 191,000 181,000 214,000 297,000 275,000
Interest Expense............... 209,000 212,000 297,000 303,000 308,000 299,000 305,000
Property Taxes................. 96,000 89,000 124,000 112,000 100,000 103,000 100,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Expenses......... $ 954,000 $ 946,000 $1,334,000 $1,309,000 $1,247,000 $1,319,000 $1,264,000
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income..................... $ 298,000 $ 249,000 $ 282,000 $ 238,000 $ 228,000 $ 100,000 $ 125,000
========== ========== ========== ========== ========== ========== ==========
Net Income per limited
partnership unit............. $ 5,900.40 $ 4,930.20 $ 5,583.60 $ 4,712.40 $ 4,514.40 $ 1,980.00 $ 2,475.00
========== ========== ========== ========== ========== ========== ==========
Distributions per limited
partnership unit............. $ 3,960.00 $ 3,960.00 $ 3,960.00 $ 6,435.00 $ 2,772.00 $ 6,000.00 $ 2,237.40
========== ========== ========== ========== ========== ========== ==========
</TABLE>
S-52
<PAGE> 403
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP
OVERVIEW
The following discussion and analysis of the results of operations and
financial condition of your partnership should be read in conjunction with the
audited financial statements of your partnership included herein.
RESULTS OF OPERATIONS
Comparison of the Nine Months Ended September 30, 1998 to the Nine Months
Ended September 30, 1997
NET INCOME
Your partnership recognized net income of $298,000 for the nine months
ended September 30, 1998, compared to $249,000 for the nine months ended
September 30, 1997. The increase in net income of $49,000 was primarily the
result of an increase in revenues, partially offset by an increase in general
and administrative and property tax expenses. These factors are discussed in
more detail in the following paragraphs.
REVENUES
Rental and other property revenues from the partnership property totaled
$1,252,000 for the nine months ended September 30, 1998, compared to $1,195,000
for the nine months ended September 30, 1997, an increase of $57,000, or 4.8%.
The partnership increased rental rates by an average of 4.5%, while occupancy
decreased 0.5% to 95%. The increase in other income of $16,000 was due primarily
to higher interest income, resulting from increases in the average cash balances
on hand.
EXPENSES
Partnership property operating expenses, consisting of utilities (net of
reimbursements received from tenants), contract services, turnover costs,
repairs and maintenance, advertising and marketing, and insurance totaled
$465,000 for the nine months ended September 30, 1998, compared to $467,000 for
the nine months ended September 30, 1997, a decrease of $2,000. This decrease is
due to exterior building and parking lot repairs during 1997 partially offset by
increases in salaries and marketing expenses in 1998. Partnership property
management expenses totaled $62,000 for the nine months ended September 30,
1998, compared to $59,000 for the nine months ended September 30, 1997, an
increase of $3,000. This increase is primarily the result of the increase in
rental revenues, as management fees are calculated based on a percentage of
revenue.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses increased $6,000 for the nine months
ended September 30, 1998, compared to the corresponding period for 1997. This
increase is due primarily to higher partnership administrative expenses and
asset management fees.
PROPERTY TAX EXPENSE
Property tax expense totaled $96,000 for the nine months ended September
30, 1998, compared to $89,000 for the nine months ended September 30, 1997, an
increase of $7,000. This increase is due to a estimated increase in the property
tax assessment for 1998.
As part of the ongoing business plan of your partnership, the general
partner monitors the rental market environment of your partnership's investment
property to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting your partnership from increases in
expenses. As part of this plan, the general partner attempts to protect your
partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing
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<PAGE> 404
market conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
general partner will be able to sustain such a plan.
Comparison of the Year Ended December 31, 1997 to the Year Ended December 31,
1996
NET INCOME
Your partnership recognized net income of $282,771 for the year ended
December 31, 1997, compared to $237,063 for the year ended December 31, 1996.
The increase in net income of $45,708, or 19.3% was primarily the result of
increased revenues due to rental rate increases during 1997. These factors are
discussed in more detail in the following paragraphs.
REVENUES
Rental and other property revenues from the partnership's property totaled
$1,616,282 for the year ended December 31, 1997, compared to $1,546,366 for the
year ended December 31, 1996, an increase of $69,916, or 4.5%. The partnership
increased rental rates by an average of 5% which was partially offset by a
decrease in occupancy of 1.3% to 96%.
EXPENSES
Operating expenses, consisting of utilities (net of reimbursements received
from tenants), contract services, turnover costs, repairs and maintenance,
advertising and marketing, and insurance, totaled $669,873 for the year ended
December 31, 1997, compared to $663,184 for the year ended December 31, 1996, an
increase of $6,689 or 1.0%. Management expenses totaled $79,518 for the year
ended December 31, 1997, compared to $76,344 for the year ended December 31,
1996, an increase of $3,174, or 4.2% due to increased rental revenue as
management fees are based on a percentage of revenue. Advertising and rental
expenses increased by $5,000, mainly attributable to a $1,300 increase in
resident relations gatherings, a $1,600 increase in newspaper advertising and a
$1,300 increase in concessions.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $52,232 for the year ended
December 31, 1997 compared to $50,169 for the year ended December 31, 1996, an
increase of $2,063 or 4.1%.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $296,624 for the year ended December 31, 1997, compared to
$302,991 for the year ended December 31, 1996, a decrease of $6,367, or 2.1%.
This decrease is due to a lower outstanding balance on the mortgage indebtedness
due to principal payments made during the period.
Comparison of the Year Ended December 31, 1996 to the Year Ended December 31,
1995
NET INCOME
Your partnership recognized net income of $237,063 for the year ended
December 31, 1996, compared to $227,738 for the year ended December 31, 1995, an
increase in net income of $9,325, or 4.1%.
REVENUES
Rental and other property revenues from the partnership's property totaled
$1,546,366 for the year ended December 31, 1996, compared to $1,475,376 for the
year ended December 31, 1995, an increase of $70,990, or 4.8%. The partnership
increased rental rates by an average of 4.8% while occupancy rates remained
consistent at 95%. Additional increases in other income of $3,509 to $77,679 was
due to higher cleaning and damage fees, lease cancellation fees and pet fees.
S-54
<PAGE> 405
EXPENSES
Operating expenses, consisting of utilities (net of reimbursements received
from tenants), contract services, turnover costs, repairs and maintenance,
advertising and marketing, and insurance, totaled $663,184 for the year ended
December 31, 1996, compared to $572,345 for the year ended December 31, 1995, an
increase of $90,839 or 15.9%. The increase is due primarily to an exterior
property improvement maintenance project during 1996. Property tax expense also
increased in 1996 due to higher tax rates and property valuation. Management
expenses totaled $76,344 for the year ended December 31, 1996, compared to
$72,215 for the year ended December 31, 1995, for the year ended December 31,
1995, an increase of $4,129, or 5.7%. The increase is due primarily to the
increased revenue considering management fees are based on a percentage of
revenue.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $50,169 for the year ended
December 31, 1996 compared to $53,039 for the year ended December 31, 1995, a
decrease of $2,870 or 5.4%. The decrease is primarily due to audit fees.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $302,991 for the year ended December 31, 1996, compared to
$308,410 for the year ended December 31, 1995, a decrease of $5,419, or 1.8%.
This decrease is due to a lower outstanding balance on mortgage indebtedness due
to principal payments made during the period.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, your partnership had $571,000 in cash and cash
equivalents. Your partnership's principal demands for liquidity include normal
operating activities, payments of principal and interest on outstanding debt,
capital improvements, and distributions paid to limited partners. At September
30, 1998, the outstanding balance on the mortgage indebtedness, was $3,132,000.
The mortgages require monthly payments of approximately $28,800 until November
2002, at which time a balloon payment of approximately $2,872,740 will be due.
The notes are collateralized by pledge of land and buildings and have a stated
interest rate of 7.60%. Cash used in investing activities consisted of capital
improvements and deposits to escrow accounts maintained by the mortgage lender.
Cash used in financing activities consisted of payments of principal made on the
mortgages encumbering your partnership's properties and partner distributions.
There are no commitments for material capital expenditures as of September
1998. The sufficiency of existing liquid assets to meet future liquidity and
capital expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and meet other operating needs of the partnership. Such assets are currently
thought to be sufficient for any near-term needs of the partnership. Management
believes that your partnership has adequate sources of cash to finance its
operations, both on a short-term and long-term basis. Budgeted renovations or
improvements for 1999 total $150,505 and are intended to be paid out of cash
flow or borrowings. Major renovation items include electrical, sidewalks,
exterior lighting, landscape and irrigation, and drainage.
S-55
<PAGE> 406
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to 25% of the outstanding 50 units of your
partnership (up to 12 units) for consideration per unit of (i) 3437.50 Preferred
OP Units, (ii) 2,283.75 Common OP Units, or (iii) $85,934 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 the commencement of our offer 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., New York City time, on June 4, 1999, 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 January 1, 1999 (subject to proration
as described below), although you will be entitled to retain any distributions
you may have received after such date and prior to our commencement of this
offer.
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 March 26, 1999.
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
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<PAGE> 407
offer consideration shall be reduced by any interim distributions made by your
partnership between the commencement 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. However, any tendered units may be
withdrawn of any time prior to our accepting them for payment. The AIMCO
Operating Partnership has an 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.
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.
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.
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.
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<PAGE> 408
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 pays for your units.
You agree not to exercise any rights pertaining to the tendered units without
the prior consent of the AIMCO Operating Partnership. Upon such 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 your general
partner (which is our subsidiary) (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.
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
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<PAGE> 409
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 may
have to provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal.
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 "Federal Income Tax Consequences."
Transfer Taxes
The amount of any transfer taxes (whether imposed on the registered holder
of units or any person) payable on account of the transfer to such person will
be deducted from the purchase price unless satisfactory evidence of the such
taxes or exemption therefrom is submitted.
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.
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WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to our acceptance of such for payment.
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.
The offer may be extended or delayed indefinitely and no payment will be
made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment. 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 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
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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 25% 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 25% 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 25% 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 25%, 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 the general partner of your partnership and thereby
controls the management of your partnership. In addition, AIMCO owns 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.
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After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units.
However, the AIMCO Operating Partnership and its affiliates will not acquire any
additional units for a period of at least one year after expiration of the
offer. 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. In addition, we are not extending
appraisal rights in connection with the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
No provisions have been made with regard to the offer to allow you or other
limited partners to inspect the books and records of your partnership or to
obtain counsel or appraisal services at our expense or at the expense of your
partnership. However, as described under "Comparison of Your Partnership and the
AIMCO Operating Partnership -- Review of Investor Lists," you have the right
under your partnership's agreement of limited partnership to obtain a list of
the limited partners.
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 the date of this Prospectus Supplement and at or before the expiration
date of the offer, including any extension thereof, 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 reasonable
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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 which, in the reasonable 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 the date hereof, (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
the date hereof, (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 reasonable 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 reasonable judgment of the
AIMCO Operating Partnership, a material acceleration or worsening thereof
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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 your
general partner (which is our subsidiary) 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 reasonable 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
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(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 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 reasonable 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
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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;
or
(h) the offer to purchase may have an adverse effect on AIMCO's status
as a REIT.
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 reasonable 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.
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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. However,
we will not be able to control voting decisions unless we acquire more units in
another transaction, which cannot take place for at least one year after
expiration of this offer. 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 controls the company that manages your partnership's
property. In the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Effect on Trading Market
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.
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. Consummation of
the offer will not affect your partnership's agreement of limited partnership,
the financial condition or results of operations of your partnership, the
business and properties owned, the management compensation payable to your
general partner (which is our subsidiary) or its affiliates or any other matter
relating to your partnership, except it would result in the AIMCO Operating
Partnership substantially increasing its ownership of units of your partnership.
We will receive future distributions from your partnership for any units we
purchase.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by your general partner (which
is our subsidiary), 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
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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 (excluding 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 (which are requests to dismiss the action as a matter
of law) were heard on February 8, 1999, but no decision has been reached by the
Court. While no assurances can be given, we believe that the ultimate outcome of
this litigation will not have a material adverse effect on us.
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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, the accompanying Prospectus, the Letter of Transmittal,
and the legal and accounting fees in connection with this offer. 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 $50,000.
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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FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of the material Federal
income tax consequences of the offer 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
differing interpretations or change, possibly retroactively. This 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 you in light of your specific investment or tax
circumstances, or if you are subject to special tax rules (for example, if you
are a financial institution, broker-dealer, insurance company, or, except to the
extent discussed below, tax-exempt organization or foreign investor, 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 are 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. No clear precedent or authority
may be available on some questions. 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 of your specific tax situation.
TAX OPINIONS
Skadden, Arps, Slate, Meagher & Flom LLP ("Special Tax Counsel") has
delivered an opinion letter with regard to the material United States Federal
income tax consequences of the offer. The opinion letter of Special Tax Counsel
is filed as an exhibit to this Registration Statement. You may obtain a copy of
such opinion letter by sending a written request to the AIMCO Operating
Partnership.
The specific United States Federal income tax opinions that Special Tax
Counsel has provided are:
1. Commencing with AIMCO's initial taxable year ended December 31, 1994,
AIMCO was organized in conformity with the requirements for qualification
as a REIT under the Code, and its actual method of operation has enabled,
and its proposed method of operation will enable, AIMCO to meet the
requirements for qualification and taxation as a REIT. As noted in the
accompanying Prospectus, AIMCO's qualification and taxation as a REIT
depend upon its ability to meet, through actual annual operating results,
certain requirements, including requirements relating to distribution
levels and diversity of stock ownership, and the various qualification
tests imposed under the Code, the results of which have been represented by
the AIMCO's officers and will not be reviewed by Special Tax Counsel. No
assurance can be given that the actual results of AIMCO's future operations
for any one taxable year will satisfy the requirements for taxation as a
REIT under the Code.
2. The AIMCO Operating Partnership will be treated as a partnership and
not as an association taxable as a corporation for Federal income tax
purposes.
3. You will not recognize gain or loss for Federal income tax purposes
when you exchange your units solely for OP Units. If, immediately prior to
such exchange, the amount of your partnership's liabilities allocable to
the units you transfer to the AIMCO Operating Partnership exceeds the
amount of the AIMCO Operating Partnership's liabilities allocable to you
immediately after the exchange, you will receive a deemed distribution in
an amount equal to such liability relief and will recognize gain for
Federal income tax purposes to the extent that the amount of such deemed
distribution exceeds your aggregate adjusted tax basis in your OP Units.
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4. If you exchange your units for cash and OP Units, you will be treated
for Federal income tax purposes as selling some of your units for cash in a
taxable sale and contributing some of your units for OP Units in a tax-free
exchange. With respect to the units that you will be treated as selling for
cash, you will be taxed as described in paragraph number five below. With
respect to the units that you will be treated as exchanging for OP Units,
you will be taxed as described in paragraph number three above.
5. If you sell your units solely for cash, you will recognize gain or
loss for Federal income tax purposes in an amount equal to the difference
between (i) your amount realized on the sale and (ii) your adjusted tax
basis in the units you sold.
6. If you retain all or a portion of your units and your partnership
terminates for Federal income tax purposes, you will not recognize any gain
or loss as a result of such termination and your capital account in your
partnership will not be affected.
7. Because of the factual nature of the inquiry, no opinion is expressed
by Special Tax Counsel as to whether your exercise of a redemption right
with respect to an OP Unit would cause your contribution of units to the
AIMCO Operating Partnership to be a taxable transaction under the disguised
sale rules of the Code.
8. The discussion in the accompanying Prospectus under the captions
"FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS" and "FEDERAL
INCOME TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNIT HOLDERS" and
in this Prospectus Supplement under the caption "FEDERAL INCOME TAX
CONSEQUENCES" is a fair and accurate summary of the material United States
Federal income tax consequences of the offers and of the acquisition,
ownership and disposition of the OP Units and the AIMCO stock by a holder
who acquires the OP Units or AIMCO stock in connection with the offers,
subject to the qualifications set forth therein.
It must be emphasized that these opinions are based and conditioned upon
representations and covenants made by AIMCO and the AIMCO Operating Partnership
as to factual matters (including representations and covenants concerning
AIMCO's properties and the past, present and future conduct of its business and
your partnership's liabilities). These opinions are expressed as of the date of
the opinion letter and Special Tax Counsel has no obligation to advise AIMCO or
the AIMCO Operating Partnership of any subsequent change in the matters stated,
represented, or assumed or any subsequent change in the law. An opinion of
counsel is not binding on the IRS, and no assurance can be given that the IRS
will not challenge the above opinions of Special Tax Counsel.
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 when you exchange your units solely for OP Units. You may
recognize gain upon such exchange if, immediately prior to such exchange, the
amount of liabilities of your partnership allocable to the units you transferred
exceeds the amount of the AIMCO Operating Partnership liabilities allocable to
you immediately after such exchange. If this was true in your case, the excess
would be treated as a deemed distribution of cash to you from the AIMCO
Operating Partnership. This deemed cash distribution would be treated as a
nontaxable return of capital to the extent of your adjusted tax basis in your OP
Units 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 you exchange your units pursuant to the offer,
at least equal to the amount of liabilities of your partnership that were
allocable to your units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most persons who participate in the tender offer
would not recognize gain or loss as a result of an exchange of units solely for
OP Units pursuant to the offer.
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DISGUISED SALES
Under the Code, a transfer of property by a partner to a partnership
followed by a related transfer by the partnership of money or other property to
the partner is treated as a "disguised" sale if (1) the second transfer would
not have occurred but for the first transfer and (2) the second transfer "is not
dependent on the entrepreneurial risks of the partnership operations." In a
disguised sale, the partner is treated as if he or she sold the contributed
property to the partnership as of the date the property was contributed to the
partnership. In addition, unless a few technical exceptions apply, transfers of
money or other property between a partnership and a partner that are made within
two years of each other, including redemptions of OP Units made within two years
of a contribution of your units, must be reported to the IRS and are presumed to
be a "disguised" sale unless the facts and circumstances clearly establish that
the transfers do not constitute a sale.
While there is no authority applying the disguised sale rules to the
exercise of a redemption right by a partner with respect to a partnership
interest received in exchange for property, the exercise of a redemption right
with respect to OP Units within two years of the date of the contribution of
your units to the AIMCO Operating Partnership may be treated as a disguised
sale. If this treatment were to apply, you would be treated for Federal income
tax purposes as if, on the date of the contribution of your units, the AIMCO
Operating Partnership transferred to you an obligation to give you the
redemption proceeds. In that case, you would be required to recognize gain on
the disguised sale in such earlier year. Because of the factual nature of such
an inquiry, Special Tax Counsel is unable to opine whether your exercise of a
redemption right with respect to an OP Unit would cause your contribution of
units to the AIMCO Operating Partnership to be a taxable transaction under the
disguised sale rules of the Code.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Federal Income Taxation of the
AIMCO Operating Partnership and OP Unitholders -- 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
If you exchange your units for cash and OP Units, you will be treated as
selling some of your units for cash in a taxable sale and contributing some of
your units for OP Units in a tax-free exchange. Your adjusted tax basis in your
transferred units will be allocated between the units you will be deemed to have
sold and the units you will be deemed to have contributed to the AIMCO Operating
Partnership.
With respect to the units that you will be treated as selling, you will
recognize gain or loss in an amount equal to the difference between (i) your
"amount realized" on the sale and (ii) your adjusted tax basis in units you
sold. Your "amount realized" on such sale will be equal to the sum of the amount
of cash you received pursuant to the offer (that is, the offer consideration)
plus the amount of your partnership's liabilities attributed to the units you
sold. For purposes of these partial sale rules, the amount of your partnership's
liabilities attributed to the units you sold will be equal to the lesser of (i)
the excess of the amount of your partnership's liabilities allocable to you in
respect of the transferred units immediately prior to the exchange over the
amount of such liabilities allocable to you as determined immediately after the
exchange or (ii) the product of (A) the amount of your partnership's liabilities
allocable to you in respect of the units you are deemed to have sold immediately
prior to the exchange and (B) your "net equity percentage" with respect to those
units. Your "net equity percentage" will be equal to the percentage determined
by dividing (x) the cash you received in the exchange by (y) the excess of the
gross fair market value of the units in the exchange over the amount of your
partnership's liabilities allocable to you in respect of those units immediately
prior to the exchange. Thus, your tax liability could exceed the amount of cash
you receive in the sale.
With respect to the units that you will be treated as exchanging, rather
than selling, you will be taxed as described above under the heading "Tax
Consequences of Exchanging Units Solely for OP Units."
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TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
If you sell your units solely for cash, you will recognize gain or loss on
a sale of your units equal to the difference between (i) your "amount realized"
on the sale and (ii) your adjusted tax basis in the units you sold. The "amount
realized" with respect to a unit will be equal to the sum of the amount of cash
you received for your units (that is, the offer consideration) plus the amount
of the liabilities of your partnership allocable to such units (as determined
under Section 752 of the Code). Thus, your tax liability could exceed the amount
of cash you receive in the sale.
ADJUSTED TAX BASIS
If you acquired your units for cash:
- your initial tax basis in your units will be equal to such cash
investment in your partnership increased by your share of your
partnership's liabilities at the time such units were acquired;
- your initial tax basis generally has been increased by:
- your share of your partnership's income and gains and
- any increases in your share of your partnership's liabilities; and
- your initial tax basis generally has been decreased (but not below zero)
by:
- your share of cash distributions from your partnership,
- any decreases in your share of your partnership's liabilities,
- your share of your partnership's losses, and
- your share of nondeductible expenditures of your partnership that are
not chargeable to capital.
For purposes of determining your adjusted tax basis in your units
immediately prior to a disposition of such units, your adjusted tax basis will
include your 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), the gain you
would recognize pursuant to the offer will exceed the cash proceeds you would
realize upon the sale of your units. The adjusted tax basis of the OP Units you
receive in exchange for your units pursuant to the offer will be equal to (i)
the sum of your adjusted tax basis in the units you transferred plus any gain
recognized in the exchange and will be reduced by (ii) any cash you received or
you were deemed to receive 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 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 that is attributable to your share of "unrealized receivables" of your
partnership exceeds the tax basis attributable to those assets, such excess will
be treated as ordinary income. Among other things, "unrealized receivables"
include depreciation recapture for 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. You will not receive any future distributions
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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 the income or loss. 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 the passive 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 passive losses in the manner described below. If you receive
cash for 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 receive cash for all or a portion of your units
pursuant to the offer and recognize 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
receive cash for all of your units pursuant to the offer, the balance of any
"suspended" losses from your partnership 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.
TAX REPORTING
If you tender any units, you must report the transaction by filing a
statement with your Federal income tax return for the year of the tender which
provides certain required information to the IRS. To prevent the possible
application of back-up Federal income tax withholding of 31% with respect to
payment of the offer consideration, you may have to provide the AIMCO Operating
Partnership with your correct taxpayer identification number. See the
instructions to the Letter of Transmittal.
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"). If you are a foreign person, the AIMCO Operating Partnership will
be required, under the FIRPTA provisions of the Code, to deduct and withhold 10%
of the amount realized by you on the disposition. The amount withheld would be
creditable against your Federal income tax liability and, if the amount withheld
exceeds your actual tax liability you could obtain a refund from the IRS by
filing a U.S. income tax return. See the Instructions to the Letter of
Transmittal.
TAX CONSEQUENCES OF A TERMINATION OF YOUR PARTNERSHIP
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"). The AIMCO Operating Partnership's acquisition of units pursuant
to the offer may result in a Termination of your partnership. If an acquisition
of units results in a
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Termination, the following Federal income tax events will be deemed to occur:
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
interests 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 to the
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
to the New Partnership. A Termination will change (and possibly shorten) a
Remaining Offeree's holding period with respect to its units in your partnership
for Federal income tax purposes. Gains recognized by a Remaining Offeree on the
disposition of New Partnership interests with a holding period of 12 months or
less may be classified as short-term capital gains and subject to taxation at
ordinary income tax rates.
The New Partnership's adjusted tax basis in its assets will be the same as
the Old Partnership's basis in such assets immediately before the Termination. A
Termination will also cause the New Partnership to recalculate the depreciable
lives of its assets. This will cause the assets to be depreciated over a longer
period of time than if there had been no Termination. This would generally
decrease the annual average depreciation deductions allocable to the Remaining
Offerees for a number of years following consummation of the offer (thereby
increasing the taxable income allocable to their retained units in each such
year), but would have no effect on the total depreciation deductions available
over the useful lives of the assets of your partnership.
Elections as to 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.
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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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 The AIMCO Operating Partnership is organized
organized under Delaware law. as a 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 The term of the AIMCO Operating Partnership
partners as a finite life investment, with continues until December 31, 2093, unless
limited partners to receive regular cash the AIMCO Operating Partnership is dissolved
distributions out of your partnership's sooner pursuant to the terms of the AIMCO
Distributable Cash (as defined in your Operating Partnership's agreement of limited
partnership's agreement of limited partnership (the "AIMCO Operating
partnership). The termination date of your Partnership Agreement") or as provided by
partnership is December 31, 2008. law. See "Description of 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, The purpose of the AIMCO Operating
develop, operate, lease, manage and hold for Partnership is to conduct any business that
investment and the production of income your may be lawfully conducted by a limited
partnership's property. Subject to partnership organized pursuant to the
restrictions contained in your partnership's Delaware Revised Uniform Limited Part-
agreement of limited partnership, your nership Act (as amended from time to time,
partnership may perform all acts necessary or any successor to such statute) (the
or appropriate in connection therewith and "Delaware Limited Partnership Act"),
reasonably related thereto, including provided that such business is to be
acquiring or borrowing money and creating conducted in a manner that permits AIMCO to
liens. be qualified as a REIT, unless AIMCO ceases
to qualify as a REIT. The AIMCO Operating
Partner-
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship 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 ac-
tion, 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>
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is The general partner is authorized to issue
authorized to issue additional limited additional partnership interests in the
partnership interests in your partnership AIMCO Operating Partnership for any
and may admit additional limited partners by partnership purpose from time to time to the
selling not more than 50 units for cash and limited partners and to other persons, and
notes to selected persons who fulfill the to admit such other persons as additional
requirements set forth in your partnership's limited partners, on terms and conditions
agreement of limited partnership. The and for such capital contributions as may be
capital contribution need not be equal for established by the general partner in its
all limited partners and no action or sole discretion. The net capital
consent is required in connection with the contribution need not be equal for all OP
admission of any additional limited Unitholders. No action or consent by the OP
partners. 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,
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 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>
The general partner, in connection with the The AIMCO Operating Partnership may lend or
management of your partnership, are contribute funds or other assets to its
authorized to acquire goods from or utilize subsidiaries or other persons in which it
the services of affiliates; pro- has an equity investment,
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
vided that the terms and conditions of such and such persons may borrow funds from the
dealing are as favorable as could reasonably AIMCO Operating Partnership, on terms and
be obtained from third parties offering conditions established in the sole and
similar goods and services of similar absolute discretion of the general partner.
quality and reliability. Your partnership To the extent consistent with the business
may borrow money on commercially reasonable purpose of the AIMCO Operating Partnership
terms from one or more of the partners and the permitted activities of the general
without notification to any of the other partner, the AIMCO Operating Partnership may
partners and all or a portion of your transfer assets to joint ventures, limited
partnership's property may be conveyed as liability companies, partnerships,
security for any such indebtedness; pro- corporations, business trusts or other
vided, however, that loans from limited business entities in which it is or thereby
partners may be made only to the extent becomes a participant upon such terms and
allowed by applicable law. The time and subject to such conditions consistent with
amount of the repayment on any loan from a the AIMCO Operating Partnership Agreement
partner will be in the sole discretion of and applicable law as the general partner,
the general partner but the principal and in its sole and absolute discretion,
interest will be paid in full prior to any believes to be advisable. Except as
distribution of funds to the partners unless expressly permitted by the AIMCO Operating
such loans contain a specific provision to Partnership Agreement, neither the general
the contrary and such lending partner will partner nor any of its affiliates may sell,
be considered an unrelated creditor with transfer or convey any property to the AIMCO
respect to such loan to the extent allowed Operating Partnership, directly or
by applicable law. Loans from the general indirectly, except pursuant to transactions
partner and their affiliates will accrue that are determined by the general partner
interest at the greater of 2 1/2% over the in good faith to be fair and reasonable.
prime interest rate charged by the Third
National Bank in Nashville, or the actual
interest cost in borrowing such amounts.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is The AIMCO Operating Partnership Agreement
authorized to borrow money and as security contains no restrictions on borrowings, and
therefor to mortgage all or any part of the the general partner has full power and
real property your partnership. However, any authority to borrow money on behalf of the
amendment to your partnership wraparound AIMCO Operating Partnership. The AIMCO
note (as defined in your partnership's Operating Partnership has credit agreements
agreement of limited partnership) requires that restrict, among other things, its
the consent of holders of 51% of the ability to incur indebtedness.
outstanding units.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited Each OP Unitholder has the right, upon
partnership entitles the limited partners to written demand with a statement of the
have access to the current list of the names purpose of such demand and at such OP
and addresses of all limited partners at the Unitholder's own expense, to obtain a
principal office of your partnership at all current list of the name and last known
reasonable times. business, residence or mailing address of
the general partner and each other OP
Unitholder.
</TABLE>
Management Control
<TABLE>
<S> <C>
Subject to the limitations set forth in your All management powers over the business and
partnership's agreement of limited affairs of the AIMCO Operating Partnership
partnership and under applicable law, the are vested in AIMCO-GP, Inc., which is the
general partner of your partnership has the general partner. No OP Unitholder has any
power on behalf of your partnership to do right to participate in or exercise control
all things set forth in your partnership's or management power over the business and
agreement of limited partnership. The affairs of the AIMCO Operating Partner-
general partner
</TABLE>
S-76
<PAGE> 427
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
represent your partnership in all ship. The OP Unitholders have the right to
transactions with third parties. No limited vote on certain matters described under
partner has any right or power to take part "Comparison of Your Units and AIMCO OP
in any way in the management of your Units -- Voting Rights" below. The general
partnership business except as may be partner may not be removed by the OP
expressly provided in your partnership's Unitholders with or without cause.
agreement of limited partnership or by
applicable statutes. 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 Notwithstanding anything to the contrary set
limited partnership, the general partner of forth in the AIMCO Operating Partnership
your partnership is not liable to your Agreement, the general partner is not liable
partnership or any other partner for any to the AIMCO Operating Partnership for
mistakes or errors in judgment or for any losses sustained, liabilities incurred or
act or omission believed by the general benefits not derived as a result of errors
partner in good faith to be within the scope in judgment or mistakes of fact or law of
of authority conferred upon it by your any act or omission if the general partner
partnership's agreement of limited acted in good faith. The AIMCO Operating
partnership. In addition, your partnership Partnership Agreement provides for
will, to the extent permitted by law, indemnification of AIMCO, or any director or
indemnify and save harmless the general officer of AIMCO (in its capacity as the
partner, against and from any personal loss, previous general partner of the AIMCO
liability (including attorneys' fee) or Operating Partnership), the general partner,
damage incurred by them as a result of any any officer or director of general partner
act or omission in its capacity as general or the AIMCO Operating Partnership and such
partner unless such loss, liability or other persons as the general partner may
damage results from gross negligence or designate from and against all losses,
willful misconduct of the general partners. claims, damages, liabilities, joint or
several, expenses (including legal fees),
fines, settlements and other
</TABLE>
S-77
<PAGE> 428
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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 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
and certain state securities administrations
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 and their
respective state securities laws.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of Except in limited circumstances, the general
limited partnership, the limited partners partner has exclusive management power over
may remove a general partner for cause upon the business and affairs of the AIMCO
a vote of the limited partners owning 51% of Operating Partnership. The general partner
the outstanding units. A general partner may may not be removed as general partner of the
not transfer, assign, sell, withdraw or AIMCO Operating Partnership by the OP
otherwise dispose of its interest unless it Unitholders with or without cause. Under the
obtains the prior written consent of those AIMCO Operating Partnership Agreement, the
persons owning 51% of the units. Such general partner may, in its sole discretion,
consent is also necessary for the approval prevent a transferee of an OP Unit from
of a new general partner. A limited partner becoming a substituted limited partner
may not transfer his interests without the pursuant to the AIMCO Operating Partnership
written consent of the general partner which Agreement. The general partner may exercise
may be withheld at the sole discretion of this right of approval to deter, delay or
the general partner. hamper attempts by persons to acquire a
controlling interest in the AIMCO Operating
Partnership. 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 With the exception of certain circumstances
partnership may be amended by the limited set forth in the AIMCO Operating Partnership
partner holding 51% of the then outstanding Agreement, whereby the general partner may,
units; provided that any amendment which without the consent of the OP Unitholders,
affects a partner's interest in the capital amend the AIMCO Operating Partnership
profits or Distributable Cash of your Agreement, amendments to the AIMCO Operating
partnership may be altered only with such Partnership Agreement require the consent of
partner's consent. On its own motion or upon the holders of a majority of the outstanding
receipt of a written request for the Common OP Units, excluding AIMCO and certain
adoption of an amendment executed by limited other limited exclusions (a "Majority in
partners owning at least 10% of the units
</TABLE>
S-78
<PAGE> 429
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
then outstanding, the general partner will Interest"). Amendments to the AIMCO
submit the proposed amendment to the limited Operating Partnership Agreement may be
partner for their approval. For the purposes proposed by the general partner or by
of obtaining the consent of the limited holders of a Majority in Interest. Following
partners, the general partner may require such proposal, the general partner will
responses within a specified time, which may submit any proposed amendment to the OP
not be less than thirty days, and failure to Unitholders. The general partner will seek
respond within such time will constitute a the written consent of the OP Unitholders on
vote which is consistent with the general the proposed amendment or will call a
partner's recommendation with respect to meeting to vote thereon. See "Description of
such proposal. OP Units -- Amendment of the AIMCO Operating
Partnership Agreement" in the accompanying
Prospectus.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
In addition to the right to distributions in The general partner does not receive
respect of its partnership interest and compensation for its services as general
reimbursement for all fees and expenses as partner of the AIMCO Operating Partnership.
set forth in your partnership's agreement of However, the general partner is entitled to
limited partnership, the general partner payments, allocations and distributions in
receives a monthly fee equal to 1% of the its capacity as general partner of the AIMCO
gross collected income from your Operating Partnership. In addition, the
partnership's property as an administrative AIMCO Operating Partnership is responsible
service fee. Moreover, the general partner for all expenses incurred relating to the
or certain affiliates may be entitled to AIMCO Operating Partnership's ownership of
compensation for additional services its assets and the operation of the AIMCO
rendered. 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 Except for fraud, willful misconduct or
limited partnership, the liability of each gross negligence, no OP Unitholder has
of the limited partners for its share of the personal liability for the AIMCO Operating
losses or debts of your partnership is Partnership's debts and obligations, and
limited to the total capital contributions liability of the OP Unitholders for the
of such limited partners (subject to the AIMCO Operating Partnership's debts and
terms and conditions pursuant to which such obligations is generally limited to the
capital contribution is to be paid) plus, to amount of their investment in the AIMCO
the extent that such limited partner Operating Partnership. However, the
rightfully received the return of such limitations on the liability of limited
capital contribution, any sum, not in excess partners for the obligations of a limited
of such return, necessary to discharge partnership have not been clearly
liabilities of your partnership to all established in some states. If it were
creditors who extended credit before such determined that the AIMCO Operating Part-
return; provided that the liability with nership had been conducting business in any
respect to rightfully returned capital state without compliance with the applicable
contributions is limited to one year from limited partnership statute, or that the
the date of such return. 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 Partner-
</TABLE>
S-79
<PAGE> 430
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship's obligations to the same extent as the
general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
The general partner must act as fiduciaries Unless otherwise provided for in the
with respect to the assets and business of relevant partnership agreement, Delaware law
your partnership. Under your partnership's generally requires a general partner of a
agreement of limited partnership, the Delaware limited partnership to adhere to
general partner must devote such of its time fiduciary duty standards under which it owes
and that of its employees to your its limited partners the highest duties of
partnership business as may be reasonably good faith, fairness and loyalty and which
necessary to carry on and conduct your generally prohibit such general partner from
partnership's business. The general partner taking any action or engaging in any
must use its best effort to do all other transaction as to which it has a conflict of
things and perform such other duties as may interest. The AIMCO Operating Partnership
be reasonably necessary to the successful Agreement expressly authorizes the general
operation of your partnership. partner to enter into, on behalf of the
AIMCO Operating Partnership, a right of
In general, your partnership's agreement of first opportunity arrangement and other
limited partnership and the AIMCO Operating conflict avoidance agreements with various
Partnership Agreement have limitations on affiliates of the AIMCO Operating
the liability of the general partner but Partnership and the general partner, on such
such limitations differ and provide more terms as the general partner, in its sole
protection for the general partner of the and absolute discretion, believes are
AIMCO Operating Partnership. 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 as-
signees 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 The AIMCO Operating Partnership is not
differences between the taxation of your subject to Federal income taxes. Instead,
partnership and the AIMCO Operating each holder of OP Units includes in income
Partnership. 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
</TABLE>
S-80
<PAGE> 431
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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 nonre-
course 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>
<CAPTION>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity in- equity interests entitling each equity interests entitling each OP
terests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of and as declared by the board of rata share of cash distributions
distributions to be made to the directors of the general partner made from Available Cash (as such
partners of your partnership. of the AIMCO Operating Part- term is defined in the AIMCO
nership, quarterly cash distribu- Operating Partnership Agreement)
tion at a rate of $0.50 per to the partners of the AIMCO
Preferred OP Unit, subject to ad- Operating Partnership. To the
justments from time to time on or extent the AIMCO Operating
after the fifth anniversary of the Partnership sells or refinances
issue date of the Preferred OP its assets, the net proceeds
Units. therefrom generally will be re-
tained by the AIMCO Operating
Partnership for working capital
</TABLE>
S-81
<PAGE> 432
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
and new investments rather than
being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's Except as otherwise required Under the AIMCO Operating
agreement of limited by applicable law or in the Partnership Agreement, the
partnership, upon the vote AIMCO Operating Partnership OP Unitholders have voting
of the limited partners Agreement, the holders of rights only with respect to
owning 51% of the the Preferred OP Units will certain limited matters such
outstanding units, the have the same voting rights as certain amendments and
limited partners may amend as holders of the Common OP termination of the AIMCO
your partnership's agree- Units. See "Description of Operating Partnership
ment of limited partnership, OP Units" in the accompany- Agreement and certain
subject to certain ing Prospectus. So long as transactions such as the
limitations; dissolve and any Preferred OP Units are institution of bankruptcy
terminate your part- outstanding, in addition to proceedings, an assignment
nership; amend your any other vote or consent of for the benefit of creditors
partnership Wraparound Note partners required by law or and certain transfers by the
(as defined in your by the AIMCO Operating general partner of its
partnership's agreement of Partnership Agreement, the interest in the AIMCO
limited partnership); remove affirmative vote or consent Operating Partnership or the
a general partner for cause; of holders of at least 50% admission of a successor
approve the retirement of a of the outstanding Preferred general partner.
general partner and the OP Units will be necessary
election of a successor for effecting any amendment Under the AIMCO Operating
general partner; and approve of any of the provisions of Partnership Agreement, the
or disapprove the sale of the Partnership Unit general partner has the
your partnership's property. Designation of the Preferred power to effect the
OP Units that materially and acquisition, sale, transfer,
A general partner may cause adversely affects the rights exchange or other
the dissolution of your or preferences of the disposition of any assets of
partnership by retiring holders of the Preferred OP the AIMCO Operating
unless, within ninety days Units. The creation or Partnership (including, but
of such occurrence, the issuance of any class or not limited to, the exercise
limited partners owning 51% series of partnership units, or grant of any conversion,
of the then outstanding including, without option, privilege or
units vote to continue the limitation, any partner- subscription right or any
business. If there are no ship units that may have other right available in
remaining general partners, rights senior or superior to connection with any assets
all of the limited partners the Preferred OP Units, at any time held by the
must vote to reform your shall not be deemed to AIMCO Operating Partnership)
partnership and by a vote of materially adversely affect or the merger,
the holders of 51% of the the rights or preferences of consolidation,
outstanding units, elect one the holders of Preferred OP reorganization or other
or more successor general Units. With respect to the combination of the AIMCO
partners to continue the exercise of the above Operating Partnership with
business of your described voting rights, or into another entity, all
partnership. In the event of each Preferred OP Units without the consent of the
such reformation, your shall have one (1) vote per OP Unitholders.
partnership will dissolve Preferred OP Unit.
and all of the assets and The general partner may
liabilities of your cause the dissolution of the
partnership will be AIMCO Operating Partnership
contributed to a new by an "event of withdrawal,"
partnership which will be as defined in the Delaware
formed and all parties to Limited Partnership Act
your partnership's agreement (including, without limi-
of limited partnership will tation, bankruptcy), unless,
become parties to such new
partnership.
In general, you have greater
vot-
</TABLE>
S-82
<PAGE> 433
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
ing rights in your within 90 days after the
partnership than you will withdrawal, holders of a
have as an OP Unitholder. OP "majority in interest," as
Unitholders can not remove defined in the Delaware
the general partner of the Limited Partnership Act,
AIMCO Operating Partnership. 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 "Descrip-
tion of OP
Units -- Dissolution and
Winding Up" in the accom-
panying Prospectus.
OP Unitholders cannot remove
the general partner of the
AIMCO Operating Partnership
with or without cause.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement Holders of Preferred OP Subject to the rights of
of limited partnership Units will be entitled to holders of any outstanding
specifies how the cash receive, when and as Preferred OP Units, the
available for distribution, declared by the board of AIMCO Operating Partnership
whether arising from directors of the general Agreement requires the
operations or sales or partner of the AIMCO general partner to cause the
refinancing, is to be shared Operating Partnership, AIMCO Operating Partnership
among the partners. Dis- quarterly cash distributions to distribute quarterly all,
tributions of Distributable at the rate of $0.50 per or such portion as the
Cash will be distributed Preferred OP Unit; provided, general partner may in its
quarterly by the general however, that at any time sole and absolute discretion
partners, on or about and from time to time on or determine, of Available Cash
January 15, April 15, July after the fifth anniversary (as defined in the AIMCO
15 and October 15. The of the issue date of the Operating Partnership
distributions payable to the Preferred OP Units, the Agreement) generated by the
partners are not fixed in AIMCO Operating Partnership AIMCO Operating Partnership
amount and depend upon the may adjust the annual during such quarter to the
operating results and net distribution rate on the general partner, the special
sales or refinancing Preferred OP Units to the limited partner and the
proceeds available from the lower of (i) 2.00% plus the holders of Common OP Units
disposition of your part- annual interest rate then on the record date es-
nership's assets. No limited applicable to U.S. Treasury tablished by the general
partner has any priority notes with a maturity of partner with respect to such
over any other limited five years, and (ii) the quarter, in accordance with
partner as to distri- annual dividend rate on the their respective interests
butions nor does any limited most recently issued AIMCO in the AIMCO Operating
partner have the right to non-convertible preferred Partnership on such record
demand that distributions to stock which ranks on a date. Holders of any other
it be in any form other than parity with its Class H Preferred OP Units issued in
cash. Cumulative Preferred Stock. the future may have priority
Such distributions will be over the
cumulative from the date of
origi-
</TABLE>
S-83
<PAGE> 434
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
nal issue. Holders of general partner, the special
Preferred OP Units will not limited partner and holders
be entitled to receive any of Common OP Units with
distributions in excess of respect to distributions of
cumulative distributions on Available Cash,
the Preferred OP Units. No distributions upon
interest, or sum of money in liquidation or other
lieu of interest, shall be distributions. See "Per
payable in respect of any Share and Per Unit Data" in
distribution payment or pay- the accompanying Prospectus.
ments on the Preferred OP
Units that may be in The general partner in its
arrears. sole and absolute discretion
may distribute to the OP
When distributions are not Unitholders Available Cash
paid in full upon the on a more frequent basis and
Preferred OP Units or any provide for an appropriate
Parity Units (as defined record date.
below), all distributions
declared upon the Preferred The AIMCO Operating Partner-
OP Units and any Parity ship Agreement requires the
Units shall be declared general partner to take such
ratably in proportion to the reasonable efforts, as
respective amounts of determined by it in its sole
distributions accumulated, and absolute discretion and
accrued and unpaid on the consistent with AIMCO's
Preferred OP Units and such qualification as a REIT, to
Parity Units. Unless full cause the AIMCO Operating
cumulative distributions on Partnership to distribute
the Preferred OP Units have sufficient amounts to en-
been declared and paid, able the general partner to
except in limited circum- transfer funds to AIMCO and
stances, no distributions enable AIMCO to pay stock-
may be declared or paid or holder dividends that will
set apart for payment by the (i) satisfy the requirements
AIMCO Operating Partnership for qualifying as a REIT
and no other distribution of under the Code and the
cash or other property may Treasury Regulations and
be declared or made, (ii) avoid any Federal
directly or indirectly, by income or excise tax
the AIMCO Operating liability of AIMCO. See
Partnership with respect to "Description of OP
any Junior Units (as de- Units -- Distributions" in
fined below), nor shall any the accompanying Prospectus.
Junior Units be redeemed,
purchased or otherwise
acquired for considera-
tion, 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>
<CAPTION>
<S> <C> <C>
A limited partner may There is no public market There is no public market
transfer his units to any for the Preferred OP Units for the OP Units. The AIMCO
person and be substituted as and the Preferred OP Units Operating Partnership
a limited partner by such are not listed on any Agreement restricts the
person if: (1) the as- securities exchange. The transferability of the
</TABLE>
S-84
<PAGE> 435
<TABLE>
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<S> <C> <C>
signee agrees to be bound by Preferred OP Units are OP Units. Until the
the terms of your subject to restrictions on expiration of one year from
partnership's agreement of transfer as set forth in the the date on which an OP
limited partnership and AIMCO Operating Partnership Unitholder acquired OP
represents that he is over Agreement. Units, subject to certain
18 years of age, is a exceptions, such OP
citizen and resident of the Pursuant to the AIMCO Unitholder may not transfer
United States, has Operating Partnership all or any portion of its OP
sufficient financial Agreement, until the Units to any transferee
resources to maintain the expiration of one year from without the consent of the
interest and is acquiring the date on which a holder general partner, which
the interest for investment of Preferred OP Units consent may be withheld in
and not for distribution, acquired Preferred OP Units, its sole and absolute
(2) a written assignment has subject to certain discretion. After the
been duly executed and exceptions, such holder of expiration of one year, such
acknowledged by the assignor Preferred OP Units may not OP Unitholder has the right
and assignee and has been transfer all or any portion to transfer all or any
delivered to the general of its Preferred OP Units to portion of its OP Units to
partner, (3) the written any transferee without the any person, subject to the
approval of the general consent of the general satisfaction of certain con-
partner which may be partner, which consent may ditions specified in the
withheld in the sole and be withheld in its sole and AIMCO Operating Partnership
absolute discretion of the absolute discretion. After Agreement, including the
general partner has been the expiration of one year, general partner's right of
granted and (4) the assignor such holders of Preferred OP first refusal. See
and assignee have complied Units has the right to "Description of OP Units --
with such other conditions transfer all or any portion Transfers and Withdrawals"
as set forth in your of its Preferred OP Units to in the accompanying
partnership's agreement of any person, subject to the Prospectus.
limited partnership. The satisfaction of certain
general partner will conditions specified in the After the first anniversary
withhold its consent if the AIMCO Operating Partner- of becoming a holder of
transferee is not authorized ship Agreement, including Common OP Units, an OP
to acquire the units or does the general partner's right Unitholder has the right,
not have sufficient of first refusal. subject to the terms and
financial resources, the conditions of the AIMCO
transfer would result in After a one-year holding Operating Partnership
your partnership being taxed period, a holder may redeem Agreement, to require the
as a corporation, the trans- Preferred OP Units and AIMCO Operating Partnership
fer would violate Federal or receive in exchange to redeem all or a portion
state securities laws or the therefor, at the AIMCO Oper- of the Common OP Units held
transfer would cause a ating Partnership's option, by such party in exchange
termination of your (i) subject to the terms of for a cash amount based on
partnership for tax any Senior Units (as defined the value of shares of Class
purposes. below), cash in an amount A Common Stock. See
equal to the Liquidation "Description of OP
Preference of the Preferred Units -- Redemption Rights"
OP Units tendered for in the accompanying
redemption, (ii) a number of Prospectus. Upon receipt of
shares of Class A Common a notice of redemption, the
Stock of AIMCO that is equal AIMCO Operating Partnership
in Value to the Liquidation may, in its sole and
Preference of the Preferred absolute discretion but
OP Units tendered for subject to the restrictions
redemption, or (iii) for on the ownership of Class A
Preferred OP Units redeemed Common Stock imposed under
after a two-year holding AIMCO's charter and the
period, a number of shares transfer restrictions and
of Class I Preferred Stock other limitations thereof,
of AIMCO that pay an elect to cause AIMCO to
aggregate amount of acquire some or all of the
dividends tendered Common OP Units in
</TABLE>
S-85
<PAGE> 436
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
equivalent to the exchange for Class A Common
distributions on the Stock, based on an exchange
Preferred OP Units tendered ratio of one share of Class
for redemption; provided A Common Stock for each Com-
that such shares are part of mon OP Unit, subject to
a class or series of adjustment as provided in
preferred stock that is then the AIMCO Operating
listed on the NYSE or an- Partnership Agreement.
other national securities
exchange. See "Federal
Income Tax
Consequences -- Disguised
Sales." 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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DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are the Class Two 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 I High Performance 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, the
Class J Partnership Preferred Units, the Class K 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, the Class One 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 $0.50 per Preferred OP
Unit (equivalent to 8.0% per annum of the $25 stated liquidation preference);
provided, however, that at any time and from time to time on or after March 1,
2005, the AIMCO Operating Partnership may adjust the annual distribution rate on
the Preferred OP Units to the lower of (i) 2.0% 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. A reduction in the distribution rate will reduce your rate of return on
the Preferred OP Units and possibly encourage you to redeem such units. 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
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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 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 $25 per Preferred OP
Unit, 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
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<PAGE> 439
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 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 A Common Stock of AIMCO that is equal in Value to the
Liquidation Preference of the Preferred OP Units tendered for redemption, or
(iii) for Preferred OP Units redeemed after a two-year holding period, 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 NYSE or another national securities exchange.
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. Before issuing any preferred
stock upon redemption of Preferred OP Units, AIMCO will register the issuance
and sale of such shares under the Securities Act of 1933. 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.
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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.
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, the Class J 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 8.0% per annum of the $25 liquidation preference (equivalent to
$2.00 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 July 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 March 1, 2005, 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,
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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 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 The Class I Preferred Stock constitutes an
interests entitling each holder of Preferred equity interest entitling each holder of
OP Units to receive, when and as declared by Class I Preferred Stock to receive, when and
the board of directors of the general as declared by the AIMCO board of directors,
partner of the AIMCO Operating Partnership, cash distribution at a rate of $2.00 per
quarterly cash distribution at a rate of annum per share.
$0.50 per 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 Holders of Class I Preferred Stock do not
law or in the AIMCO Operating Partnership's have any voting rights, except as set forth
agreement of limited partnership, the below and except as otherwise required by
holders of the Preferred OP Units will have applicable law.
the same voting rights as holders of the
Common OP Units. See "Description of OP If and whenever dividends on any shares of
Units" in the accompanying Prospectus. So Class I Preferred Stock or any series or
long as any Preferred OP Units are class of Class I Parity Stock are in arrears
outstanding, in addition to any other vote for six or more quarterly periods (whether
or consent of partners required by law or by or not consecutive), the number of directors
the AIMCO Operating Partnership's agreement then constituting the AIMCO board of
of limited partnership, the affirmative vote directors shall be increased by two (if not
or consent of holders of at least 50% of the already increased by reason of similar types
outstanding Preferred OP Units will be of provisions with respect to shares of
necessary for effecting any amendment of any voting preferred stock), and the holders of
of the provisions of the Partnership Unit shares of Class I Preferred Stock, together
Designation of the Preferred OP Units that with the holders of shares of all other
materially and adversely affects the rights voting preferred stock then entitled to
or preferences of the holders of the exercise similar voting rights, voting as a
Preferred OP Units. The creation or issuance single class regardless of series, will be
of any class or series of AIMCO Operating entitled to vote for the election of two
Partnership units, including, without additional directors of AIMCO. Whenever
limitation, any AIMCO Operating Partnership dividends in arrears and dividends for the
units that may have rights senior or current quarterly dividend period have been
superior to the Preferred OP Units, will not paid or declared and set aside in respect of
be deemed to materially adversely affect the the outstanding shares of the Class I
rights or preferences of the holders of Preferred Stock and the voting preferred
Preferred OP Units. With respect to the stock, then the right of the holders of
exercise of the above described voting Class I Preferred Stock and the voting
rights, each Preferred OP Units will have preferred stock to elect such additional two
one (1) vote per Preferred 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
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
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>
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled Holders of Class I Preferred Stock are
to receive, when and as declared by the entitled to receive, when and as declared by
board of directors of the general partner of the AIMCO board of directors, out of funds
the AIMCO Operating Partnership, quarterly legally available for payment, cash
cash distributions at the rate of $0.50 per dividends at the rate of $2.00 per annum per
Preferred OP Unit; provided, however, that share. Such dividends are cumulative from
at any time and from time to time on or the date of original issue. Holders of Class
after the fifth anniversary of the issue I Preferred Stock are not be entitled to
date of the Preferred OP Units, the AIMCO receive any dividends in excess of
Operating Partnership may adjust the annual cumulative dividends on the Class I
distribution rate on the Preferred OP Units Preferred Stock. No interest, or sum of
to the lower of (i) 2.00% plus the annual money in lieu of interest, shall be payable
interest rate then applicable to U.S. in respect of any dividend payment or
Treasury notes with a maturity of five payments on the Class I Preferred Stock that
years, and (ii) the annual dividend rate on may be in arrears.
the most recently issued AIMCO
non-convertible preferred stock which ranks When dividends are not paid in full upon the
on a parity with its Class H Cumulative Class I Preferred Stock or any other class
Preferred Stock. Such distributions will be or series of Class I Parity Stock, all
cumulative from the date of original issue. dividends declared upon the Class I
Holders of Preferred OP Units will not be Preferred Stock and any shares of Class I
entitled to receive any distributions in Parity Stock will be declared ratably in
excess of cumulative distributions on the proportion to the respective amounts of
Preferred OP Units. No interest, or sum of dividends accumulated, accrued and unpaid on
money in lieu of interest, shall be payable the Class I Preferred Stock and such Class I
in respect of any distribution payment or Parity Stock. Unless dividends equal to the
payments on the Preferred OP Units that may full amount of all accumulated, accrued and
be in arrears. unpaid dividends on the Class I Preferred
Stock have been paid, or declared and set
When distributions are not paid in full upon apart for payment, except in limited
the Preferred OP Units or any Parity Units, circumstances, no dividends may be declared
all or paid or set apart for
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
distributions declared upon the Preferred OP payment by AIMCO and no other distribution
Units and any Parity Units will be declared of cash or other property may be declared or
ratably in proportion to the respective made, directly or indirectly, by AIMCO with
amounts of distributions accumulated, respect to any shares of Class I Junior
accrued and unpaid on the Preferred OP Units Stock, nor shall any shares of Class I
and such Parity Units. Unless full Junior Stock be redeemed, purchased or
cumulative distributions on the Preferred OP otherwise acquired for any consideration,
Units have been declared and paid, except in nor shall any other cash or other property
limited circumstances, no distributions may be paid or distributed to or for the benefit
be declared or paid or set apart for payment of holders of shares of Class I Junior
by the AIMCO Operating Partnership and no Stock. See "Description of Class I Preferred
other distribution of cash or other property Stock -- Dividends."
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 Ownership of shares of Class I Preferred
OP Units and the Preferred OP Units are not Stock by any person will be limited such
listed on any securities exchange. The that the sum of the aggregate value of all
Preferred OP Units are subject to certain equity stock (including all shares of Class
restrictions on transferability set forth in 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)
Pursuant to the AIMCO Operating of the aggregate value of all outstanding
Partnership's agreement of limited shares of equity stock. Further, certain
partnership, until the expiration of one transfers which may have the effect of
year from the date on which a holder of causing AIMCO to lose its status as a REIT
Preferred OP Units acquired Preferred OP are void ab initio.
Units, subject to certain exceptions, such
holder of Preferred OP Units may not If any transfer of Class I Preferred Stock
transfer all or any portion of its Preferred occurs which, if effective, would result in
OP Units to any transferee without the any person beneficially or constructively
consent of the general partner, which owning Class I Preferred Stock in excess or
consent may be withheld in its sole and in violation of the Class I Preferred
absolute discretion. After the expiration of Ownership Limit, such shares of Class I
one year, such holders of Preferred OP Units Preferred Stock in excess of the Class I
has the right to transfer all or any portion Preferred Ownership Limit will be
of its Preferred OP Units to any person, automatically transferred to a trustee in
subject to the satisfaction of certain his capacity as trustee of a trust for the
conditions specified in the AIMCO Operating exclusive benefit of one or more charitable
Partnership's agreement of limited beneficiaries designated by AIMCO, and the
partnership, including the general partner's prohibited transferee will generally have no
right of first refusal. rights in such shares, except upon sale of
the shares by the trustee. The trustee will
After a one-year holding period, a holder have all voting rights and rights to
may redeem Preferred OP Units and receive in dividends with respect to shares of Class I
exchange therefor, at the AIMCO Operating Preferred Stock held in the trust, which
Partnership's option, (i) subject to the rights will be exercised for the benefit of
terms of any Senior Units, cash in an amount the charitable beneficiaries.
equal to the Liquidation Preference of the
Preferred OP Units tendered for The trustee may sell the Class I Preferred
Stock held
</TABLE>
S-94
<PAGE> 445
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
redemption, (ii) a number of shares of Class in the trust to AIMCO or a person,
A Common Stock of AIMCO that is equal in designated by the trustee, whose ownership
value to the Liquidation Preference of the of the Class I Preferred Stock will not
Preferred OP Units tendered for redemption, violate the Class I Preferred Ownership
or (iii) for Preferred OP Units redeemed Limit. Upon such sale, the interest of the
after a two-year holding period, a number of charitable beneficiaries in the shares sold
shares of Class I Preferred Stock of AIMCO will terminate and the trustee will
that pay an aggregate amount of dividends distribute to the prohibited transferee, the
equivalent to the distributions on the lesser of (i) the price paid by the
Preferred OP Units tendered for redemption; prohibited transferee for the shares or if
provided that such shares are part of a the prohibited transferee did not give value
class or series of preferred stock that is for the shares in connection with the event
then listed on the NYSE or another national causing the shares to be held in the trust,
securities exchange. See "Federal Income Tax the market price of such shares on the day
Consequences -- Disguised Sales." The of the event causing the shares to be held
Preferred OP Units may not be redeemed at in the trust and (ii) the price per share
the option of the AIMCO Operating received by the trustee from the sale or
Partnership. See "Description of Preferred other disposition of the shares held in the
OP Units -- Redemption." trust. Any proceeds in excess of the amount
payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after March 1, 2005, 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-95
<PAGE> 446
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. Your general
partner became a wholly owned subsidiary on February 26, 1999 of AIMCO when IPT
merged with AIMCO. Accordingly, the general partner of your partnership 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 Unitholders 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 own both the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives a
monthly fee equal to 1% of the gross collected income from your partnership's
property as an administrative service fee from your partnership and may be
reimbursed for expenses generated in that capacity. The property manager
received management fees of $76,344 in 1996, $79,518 in 1997 and $82,945 in
1998. The AIMCO Operating Partnership has no current intention of changing the
fee structure for the manager of your partnership's 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." AIMCO's
Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is subject to various Maryland laws which may have the effect
of discouraging offers to acquire us and of
S-96
<PAGE> 447
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.
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. However, we will not acquire any
additional units for a period of at least one year after expiration of the
offer. Any such future offers that we might make could be for consideration that
is more or less than the consideration we are currently offering.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $1,074,175 will
be required to purchase all of the units sought in the offer, if such units are
tendered for cash excluding expenses as itemized below. The AIMCO Operating
Partnership will obtain all such funds from cash from operations, equity
issuances and short term borrowings. The AIMCO Operating Partnership will pay
all of the costs of the offer and not your partnership.
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...................................... $ 5,000
Accountant's Fees........................................... $ 5,000
Legal Fees.................................................. $10,000
Printing Fees............................................... $10,000
Stanger's Fees.............................................. $ 9,000
Other....................................................... $11,000
-------
Total....................................................... $50,000
</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 Bank of America's reference rate, at the election of
the company, plus 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 2.25% and 2.75% in the case of LIBOR-based
loans and between negative 0.75% and positive 1.25% 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 September 30, 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
S-97
<PAGE> 448
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.
We may obtain funds pursuant to a credit agreement entered into by our
subsidiary, Insignia Properties, L.P. ("IPLP"), 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, 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). IPLP 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. The AIMCO Operating
Partnership intends to repay any funds borrowed out of working capital in the
ordinary course of business.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP has delivered 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 has delivered an opinion with regard to
the material Federal income tax consequences of the offer. 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 two opinions of Skadden, Arps, Slate, Meagher & Flom LLP are 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 opinions will be sent by the Information Agent.
EXPERTS
The financial statements of Burgundy Court, Limited as of December 31, 1997
and 1996 and for each of the years in the three-year period ended December 31,
1997, have been included herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
S-98
<PAGE> 449
INDEX TO THE FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed Balance Sheet as of September 30, 1998
(unaudited)............................................... F-2
Condensed Statements of Operations for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-3
Condensed Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-4
Notes to Condensed Financial Statements..................... F-5
Independent Auditors' Report................................ F-6
Balance Sheets as of December 31, 1997 and 1996............. F-7
Statements of Operations and Changes in Partners' Deficit
for the years ended December 31, 1997 and 1996............ F-8
Statements of Cash Flows for the years ended December 31,
1997 and 1996............................................. F-9
Notes to Financial Statements............................... F-10
Independent Auditors' Report................................ F-14
Balance Sheets as of December 31, 1996 and 1995............. F-15
Statements of Operations and Changes in Partners' Deficit
for the years ended December 31, 1996 and 1995............ F-16
Statements of Cash Flows for the years ended December 31,
1996 and 1995............................................. F-17
Notes to Financial Statements............................... F-18
</TABLE>
F-1
<PAGE> 450
BURGUNDY COURT, LIMITED
CONDENSED BALANCE SHEET -- UNAUDITED
SEPTEMBER 30, 1998
<TABLE>
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $571,000
Receivables and deposits.................................... 118,000
Restricted escrows.......................................... 258,000
Other assets................................................ 65,000
Investment property
Land...................................................... $330,000
Building and related personal property.................... 5,294,000
-----------
5,624,000
-----------
Less: Accumulated depreciation............................ (3,767,000) 1,857,000
----------- ----------
Total assets...................................... $2,869,000
==========
LIABILITIES AND PARTNERS' DEFICIT
Accrued liabilities......................................... $21,000
Property taxes payable...................................... 96,000
Tenant security deposits.................................... 37,000
Notes payable............................................... 3,132,000
Partners' deficit................................. (417,000)
----------
Total liabilities and partners' deficit........... $2,869,000
----------
----------
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 451
BURGUNDY COURT, LIMITED
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenues:
Rental Income............................................. $1,182,000 $1,141,000
Other Income.............................................. 70,000 54,000
---------- ----------
Total Revenues.................................... 1,252,000 1,195,000
Expenses:
Operating Expenses........................................ 465,000 467,000
General and Administrative Expenses....................... 41,000 35,000
Depreciation Expense...................................... 143,000 143,000
Interest Expense.......................................... 209,000 212,000
Property Tax Expense...................................... 96,000 89,000
---------- ----------
Total Expenses.................................... 954,000 946,000
Net Income........................................ $ 298,000 $ 249,000
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 452
BURGUNDY COURT, LIMITED
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1998 1997
--------- ---------
<S> <C> <C>
Operating Activities:
Net Income................................................ $ 298,000 $ 249,000
Adjustments to reconcile net income to net cash provided
by operating Activities:
Depreciation and Amortization.......................... 163,000 162,000
Changes in accounts:
Receivables and deposits and other assets............ 47,000 (28,000)
Accounts Payable and accrued expenses................ (52,000) (22,000)
--------- ---------
Net cash provided by (used in) operating
activities...................................... 456,000 361,000
--------- ---------
Investing Activities:
Property improvements and replacements.................... (99,000) (109,000)
Net (increase)/decrease in restricted escrows............. (9,000) 5,000
--------- ---------
Net cash provided by (used in) investing
activities...................................... (108,000) (104,000)
--------- ---------
Financing Activities:
Payments on mortgage...................................... (77,000) (72,000)
Partners' Distributions................................... (200,000) (200,000)
--------- ---------
Net cash provided by (used in) financing
activities...................................... (277,000) (272,000)
--------- ---------
Net increase (decrease) in cash and cash
equivalents..................................... 71,000 (16,000)
Cash and cash equivalents at beginning of period............ 500,000 481,000
--------- ---------
Cash and cash equivalents at end of period.................. $ 571,000 $ 465,000
========= =========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 453
BURGUNDY COURT, LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements of Burgundy Court Limited
as of September 30, 1998 and for the nine months ended September 30, 1998 and
1997 have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not include
all the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included and
all such adjustments are of a recurring nature.
The financial statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31, 1997. It
should be understood that the accounting measurements at interim dates
inherently involve greater reliance on estimates than at year-end. The results
of operations for the interim periods are not necessarily indicative of the
results for the entire year.
NOTE B -- SUBSEQUENT EVENT
On March 17, 1998, Insignia Financial Group, Inc., an affiliate of the
corporate general partner of the Partnership, entered into an agreement to merge
its national residential property management operations and its controlling
interest in Insignia Properties Trust, with Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust. The merger
was completed effective October 1, 1998, and accordingly, as of that date AIMCO
acquired the corporate general partner and the company that manages the
Partnership.
F-5
<PAGE> 454
INDEPENDENT AUDITORS' REPORT
General Partners
Burgundy Court, Limited:
We have audited the accompanying balance sheets of Burgundy Court, Limited
as of December 31, 1997 and 1996 and the related statements of operations and
changes in partners' deficit and cash flows for the years then ended. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, a well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Burgundy Court, Limited as
of December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
Greenville, South Carolina
February 20, 1998
F-6
<PAGE> 455
BURGUNDY COURT, LIMITED
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash and cash equivalents................................... $ 500,457 $ 481,291
Receivables and deposits.................................... 161,263 113,559
Restricted escrows (Note B)................................. 249,128 251,130
Other assets................................................ 75,972 80,721
Investment properties (Note C):
Land...................................................... 330,171 330,171
Buildings and related personal property................... 5,194,898 5,055,759
----------- -----------
5,525,069 5,385,930
Less accumulated depreciation............................. (3,623,942) (3,433,409)
----------- -----------
1,901,127 1,952,521
----------- -----------
$ 2,887,947 $ 2,879,222
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 18,347 $ 19,315
Tenant security deposit liabilities....................... 39,480 41,177
Accrued taxes............................................. 122,506 111,431
Other liabilities......................................... 25,683 37,395
Mortgage notes payable (Note C)........................... 3,197,062 3,267,806
Partners' deficit........................................... (515,131) (597,902)
----------- -----------
$ 2,887,947 $ 2,879,222
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
F-7
<PAGE> 456
BURGUNDY COURT, LIMITED
STATEMENTS OF OPERATIONS AND CHANGES IN PARTNERS' DEFICIT
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Revenues:
Rental income............................................. $1,541,890 $1,468,687
Other income.............................................. 74,392 77,679
---------- ----------
Total revenues......................................... 1,616,282 1,546,366
---------- ----------
Expenses:
Operating (Note D)........................................ 669,873 663,184
General and administrative (Note D)....................... 52,232 50,169
Depreciation.............................................. 190,533 180,705
Interest.................................................. 296,624 302,991
Property taxes............................................ 124,249 112,254
---------- ----------
Total expenses......................................... 1,333,511 1,309,303
---------- ----------
Net income................................................ 282,771 237,063
Distributions to partners................................... (200,000) (325,000)
Partners' deficit at beginning of year...................... (597,902) (509,965)
---------- ----------
Partners' deficit at end of year............................ $ (515,131) $ (597,902)
========== ==========
</TABLE>
See Accompanying Notes to Financial Statements
F-8
<PAGE> 457
BURGUNDY COURT, LIMITED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 282,771 $ 237,063
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation......................................... 190,533 180,705
Amortization of discounts and loan costs............. 38,788 38,126
Change in accounts:
Receivables and deposits............................. (47,704) 4,941
Other assets......................................... (8,441) --
Accounts payable..................................... (968) 13,516
Tenant security deposit liabilities.................. (1,697) (5,175)
Accrued taxes........................................ 11,075 12,495
Other liabilities.................................... (11,712) _2,117
--------- ---------
Net cash provided by operating activities......... 452,645 483,788
--------- ---------
Cash flows from investing activities:
Property improvements and replacements.................... (139,139) (107,288)
Deposits to restricted escrows............................ (10,240) (10,396)
Receipts from restricted escrows.......................... 12,242 9,145
--------- ---------
Net cash used in investing activities............. (137,137) (108,539)
--------- ---------
Cash flows from financing activities:
Payments on mortgage notes payable........................ (96,342) (89,312)
Distributions to partners................................. (200,000) (325,000)
--------- ---------
Net cash used in financing activities............. (296,342) (414,312)
--------- ---------
Net increase (decrease) in cash and cash equivalents........ 19,166 (39,063)
Cash and cash equivalents at beginning of year.............. 481,291 520,354
--------- ---------
Cash and cash equivalents at end of year.................... $ 500,457 $ 481,291
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 257,836 $ 264,865
========= =========
</TABLE>
See Accompanying Notes to Financial Statements
F-9
<PAGE> 458
BURGUNDY COURT, LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE A -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Burgundy Court, Limited (the "Partnership") was organized as a limited
partnership under the laws of the State of Delaware pursuant to a Limited
Partnership Agreement and Certificate of Limited Partnership dated January 31,
1985. The Partnership owns and operates a 234 unit apartment complex, Burgundy
Court Apartments, in Cincinnati, Ohio.
The Partnership's Managing General Partner is Jacques-Miller Associates, an
affiliate of Insignia Financial Group, Inc. ("Insignia"). The property is
managed by Insignia Residential Group, an affiliate of Insignia.
Depreciation
Depreciation is computed principally by use of the straight-line method
based upon the estimated useful lives of various classes of assets; buildings
are depreciated over 25 years and the personal property assets are depreciated
over a 5 to 10 year period.
Other Assets
Other assets at December 31, 1997 and 1996 include deferred loan costs of
$67,530 and $80,721, respectively, which are amortized over the term of the
related borrowing. They are shown net of accumulated amortization.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Partnership considers
unrestricted cash and unrestricted highly liquid investments, with an original
maturity of three months or less when purchased, to be cash and cash
equivalents.
Income Taxes
On the basis of Treasury Regulations, the general partners believe that the
Partnership will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss and cash distributions of the
Partnership are allocated in accordance with the partnership agreement and the
Internal Revenue Code and are reportable in the income tax returns of its
partners.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Tenant Security Deposits
The Partnership requires security deposits from lessees for the duration of
the lease and such deposits are included in receivables and deposits. The
security deposits are refunded when the tenant vacates, provided the tenant has
not damaged its space and is current on its rental payments.
F-10
<PAGE> 459
BURGUNDY COURT, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Reclassifications
Certain 1996 amounts have been reclassified to conform to the 1997
presentation. These reclassifications had no impact on net income or partners'
deficit as previously reported.
NOTE B -- RESTRICTED ESCROWS
Restricted escrow deposits at December 31, 1997 and 1996 consist of the
following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Capital Improvement Escrow -- A portion of the proceeds of
the loan were placed into a capital improvement reserve
account to be used for certain capital improvements. The
capital improvements were completed in calendar year 1997
and excess funds were returned for property operations in
1997. .................................................... $ -- $ 12,242
Reserve Escrow -- Established with a portion of the proceeds
of the loan. The funds are used for certain repair work,
debt service, expenses and property taxes or insurance.
The funds in the reserve escrow exceed the minimum balance
required to be maintained by the lender during the term of
the loan. ................................................ 249,128 238,888
-------- --------
$249,128 $251,130
======== ========
</TABLE>
NOTE C -- MORTGAGE NOTES PAYABLE
Mortgage notes payable at December 31, 1997 and 1996 consist of the
following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
First mortgage note payable in monthly installments of
$28,800, including interest at 7.60%, due November 2002;
collateralized by land and buildings...................... $3,227,283 $3,323,625
Second mortgage note payable in interest only monthly
installments of $715, at a rate of 7.60%, with principal
due November 2002; collateralized by land and buildings... 112,855 112,855
---------- ----------
Principal balance at year end............................... 3,340,138 3,436,480
Less unamortized discount................................... (143,076) (168,674)
---------- ----------
$3,197,062 $3,267,806
========== ==========
</TABLE>
Scheduled principal payments of the mortgage notes during the years
subsequent to December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998................................................... $ 103,924
1999................................................... 112,103
2000................................................... 120,927
2001................................................... 130,444
2002................................................... 2,872,740
----------
$3,340,138
==========
</TABLE>
The principal balance of the mortgage notes may be prepaid in whole upon
payment of a penalty of the greater of one percent of the unpaid principal
balance at the time of prepayment or the present value of the
F-11
<PAGE> 460
BURGUNDY COURT, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
excess of interest which would be incurred at the stated rate under the notes
over the interest which would be incurred at the Treasury constant maturity for
U.S. Government obligations.
NOTE D -- TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no administrative or management employees and is
dependent on the Managing General Partner and its affiliates for the management
and administration of all partnership activities. The Partnership is obligated
to pay a property management fee equal to 5% of gross monthly collections. In
addition to the management fee, the partnership agreement provides for payments
to affiliates of a partnership administration fee and reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
Transactions with the Managing General Partner and its affiliates are as
follows:
<TABLE>
<CAPTION>
1997 1996
TYPE OF TRANSACTION AMOUNT AMOUNT
- ------------------- ------- -------
<S> <C> <C>
Management fee........................................... $79,518 $76,344
Partnership administration fee........................... $14,501 $15,268
Reimbursement for services of affiliates................. $27,124 $26,926
Construction services reimbursement...................... $ 838 $ --
</TABLE>
F-12
<PAGE> 461
BURGUNDY COURT, LIMITED
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
F-13
<PAGE> 462
INDEPENDENT AUDITORS' REPORT
General Partners
Burgundy Court, Limited:
We have audited the accompanying balance sheets of Burgundy Court, Limited
as of December 31, 1996 and 1995 and the related statements of operations and
changes in partners' deficit and cash flows for the years then ended. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Burgundy Court, Limited as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
Greenville, South Carolina
February 25, 1997
F-14
<PAGE> 463
BURGUNDY COURT, LIMITED
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash and cash equivalents:
Unrestricted.............................................. $ 481,291 $ 520,354
Restricted -- tenant security deposits.................... 41,177 46,352
Accounts receivable......................................... 2,333 227
Escrow for taxes............................................ 70,049 71,921
Restricted escrows (Note B)................................. 251,130 249,879
Other assets................................................ 80,721 94,366
Investment properties (Note C):
Land...................................................... 330,171 330,171
Buildings and related personal property................... 5,055,759 4,948,471
----------- -----------
5,385,930 5,278,642
Less accumulated depreciation............................. (3,433,409) (3,252,704)
----------- -----------
1,952,521 2,025,938
----------- -----------
$ 2,879,222 $ 3,009,037
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 19,315 $ 5,799
Tenant security deposits.................................. 41,177 46,352
Accrued taxes............................................. 111,431 98,936
Other liabilities......................................... 37,395 35,278
Mortgage notes payable (Note C)........................... 3,267,806 3,332,637
Partners' deficit........................................... (597,902) (509,965)
----------- -----------
$ 2,879,222 $ 3,009,037
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
F-15
<PAGE> 464
BURGUNDY COURT, LIMITED
STATEMENTS OF OPERATIONS AND CHANGES IN PARTNERS' DEFICIT
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Revenues:
Rental income............................................. $1,468,687 $1,401,205
Other income.............................................. 77,679 74,171
---------- ----------
Total revenues......................................... 1,546,366 1,475,376
---------- ----------
Expenses:
Operating (Note D)........................................ 453,897 421,913
General and administrative (Note D)....................... 50,169 53,039
Maintenance............................................... 209,287 150,432
Depreciation.............................................. 180,705 214,023
Interest.................................................. 302,991 308,410
Property taxes............................................ 112,254 99,821
---------- ----------
Total expenses......................................... 1,309,303 1,247,638
---------- ----------
Net income.................................................. 237,063 227,738
Distributions to partners................................... (325,000) (140,000)
Partners' deficit at beginning of year...................... (509,965) (597,703)
---------- ----------
Partners' deficit at end of year............................ $ (597,902) $ (509,965)
========== ==========
</TABLE>
See Accompanying Notes to Financial Statements
F-16
<PAGE> 465
BURGUNDY COURT, LIMITED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 237,063 $ 227,738
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 180,705 214,023
Amortization of discounts and loan costs............... 38,126 37,030
Change in accounts:
Restricted cash...................................... 5,175 2,236
Accounts receivable.................................. (2,106) (227)
Escrow for taxes..................................... 1,872 (12,190)
Accounts payable..................................... 13,516 (8,755)
Tenant security deposit liabilities.................. (5,175) (538)
Accrued taxes........................................ 12,495 (3,095)
Other liabilities.................................... 2,117 (59,897)
--------- ---------
Net cash provided by operating activities......... 483,788 396,325
--------- ---------
Cash flows from investing activities:
Property investments and replacements..................... (107,288) (306,206)
Deposits to restricted escrows............................ (10,396) (9,021)
Receipts from restricted escrows.......................... 9,145 21,166
--------- ---------
Net cash used in investing activities............. (108,539) (294,061)
--------- ---------
Cash flows from financing activities:
Payments on mortgage notes payable........................ (89,312) (82,797)
Distributions to partners................................. (325,000) (140,000)
--------- ---------
Net cash used in financing activities............. (414,312) (222,797)
--------- ---------
Net decrease in cash........................................ (39,063) (120,533)
Cash and cash equivalents at beginning of year.............. 520,354 640,887
--------- ---------
Cash and cash equivalents at end of year.................... $ 481,291 $ 520,354
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 264,865 $ 271,380
========= =========
</TABLE>
See Accompanying Notes to Financial Statements
F-17
<PAGE> 466
BURGUNDY COURT, LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE A -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Burgundy Court, Limited (the "Partnership") was organized as a limited
partnership under the laws of the State of Delaware pursuant to a Limited
Partnership Agreement and Certificate of Limited Partnership dated January 31,
1985. The Partnership owns and operates a 234 unit apartment complex, Burgundy
Court Apartments, in Cincinnati, Ohio.
The Partnership's Managing General Partner is Jacques-Miller Associates, an
affiliate of Insignia Financial Group, Inc. ("Insignia"). The property is
managed by Insignia Management Group, an affiliate of Insignia.
Depreciation
Depreciation is computed principally by use of the straight-line method
based upon the estimated useful lives of various classes of assets; buildings
are depreciated over 25 years and the personal property assets are depreciated
over a 5 to 10 year period.
Other Assets
Other assets at December 31, 1996 and 1995 consist of deferred loan costs
which are amortized over the term of the related borrowing. They are shown net
of accumulated amortization.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Partnership considers
unrestricted cash and unrestricted highly liquid investments, with an original
maturity of three months or less when purchased, to be cash and cash
equivalents.
Income Taxes
On the basis of counsel's opinion, the general partners believe that the
Partnership will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss and cash distributions of the
Partnership are allocated in accordance with the partnership agreement and the
Internal Revenue Code and are reportable in the income tax returns of its
partners.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain 1995 amounts have been reclassified to conform to the 1996
presentation. These reclassifications had no impact on net income or partners'
deficit as previously reported.
F-18
<PAGE> 467
BURGUNDY COURT, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B -- RESTRICTED ESCROWS
Restricted escrow deposits at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Capital Improvement Escrow -- A portion of the proceeds of
the loan were placed into a capital improvement reserve
account to be used for certain capital improvements. The
capital improvements will be completed in calendar year
1997 and any excess funds will be returned for property
operations in 1997. ...................................... $ 12,242 $ 11,857
Reserve Escrow -- Established with a portion of the proceeds
of the loan. The funds are used for certain repair work,
debt service, expenses and property taxes or insurance.
The funds in the reserve escrow exceed the minimum balance
required to be maintained by the lender during the term of
the loan. ................................................ 238,888 238,022
-------- --------
$251,130 $249,879
======== ========
</TABLE>
NOTE C -- MORTGAGE NOTES PAYABLE
Mortgage notes payable at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
First mortgage note payable in monthly installments of
$28,800, including interest at 7.60%, due November 2002;
collateralized by land and buildings...................... $3,323,625 $3,412,937
Second mortgage note payable in interest only monthly
installments of $715, at a rate of 7.60%, with principal
due November 2002; collateralized by land and buildings... 112,855 112,855
---------- ----------
Principal balance at year end............................... 3,436,480 3,525,792
Less unamortized discount................................... (168,674) (193,155)
---------- ----------
$3,267,806 $3,332,637
========== ==========
</TABLE>
Scheduled principal payments of the mortgage notes during the years
subsequent to December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997..................................................... $ 96,342
1998..................................................... 103,924
1999..................................................... 112,103
2000..................................................... 120,927
2001..................................................... 130,444
Thereafter............................................... 2,872,740
----------
$3,436,480
==========
</TABLE>
The principal balance of the mortgage notes may not be prepaid, in whole or
in part, prior to November 15, 1997. Thereafter the principal may be prepaid in
whole upon payment of a penalty of the greater of one percent of the unpaid
principal balance at the time of prepayment or the present value of the excess
of interest which would be incurred at the stated rate under the notes over the
interest which would be incurred at the Treasury constant maturity for U.S.
Government obligations.
F-19
<PAGE> 468
BURGUNDY COURT, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no administrative or management employees and is
dependent on the Managing General Partner and its affiliates for the management
and administration of all partnership activities. The Partnership is obligated
to pay a property management fee equal to 5% of gross monthly collections. In
addition to the management fee, the partnership agreement provides for payments
to affiliates of a partnership administration fee and reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
Transactions with the Managing General Partner and its affiliates are as
follows:
<TABLE>
<CAPTION>
1996 1995
TYPE OF TRANSACTION AMOUNT AMOUNT
------------------- ------- -------
<S> <C> <C>
Management fee........................................... $76,344 $72,215
Partnership administration fee........................... $15,268 $14,442
Reimbursement for services of affiliates................. $26,926 $23,766
Construction fee......................................... $ -- $ 6,090
</TABLE>
F-20
<PAGE> 469
PRO FORMA FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
AS OF SEPTEMBER 30, 1998 AND FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1998
INTRODUCTION
On October 1, 1998, Apartment Investment and Management Company ("AIMCO")
completed its merger with Insignia Financial Group ("IFG") ("the IFG Merger").
In the IFG Merger, IFG's common stock was converted into 8,423,751 shares of
Class E Cumulative Convertible Preferred Stock of AIMCO ("Class E Preferred
Stock") whose issue date market value approximately equaled $292 million. In
addition to receiving the same dividends as holders of AIMCO Common Stock,
holders of Class E Preferred Stock will be entitled to a special dividend of
approximately $50 million in the aggregate. When that special dividend is paid
in full, the Class E Preferred Stock will automatically convert into AIMCO
Common Stock on a one-for-one basis, subject to antidilution adjustments, if
any. In addition, AIMCO assumed approximately $411 million in indebtedness and
other liabilities of IFG and its subsidiaries and subsidiaries of AIMCO, assumed
approximately $149.5 million of convertible securities and purchased
approximately $5 million of IFG stock prior to the Merger. AIMCO and Insignia
Properties Trust ("IPT") have completed a merger in which IPT has merged into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). In the IPT Merger, shares of
IPT common stock not held by AIMCO were converted into 4,826,745 shares of AIMCO
Class A Common Stock whose market value approximately equaled $152 million.
AIMCO assumed approximately $68 million in indebtedness. In connection with the
IFG Merger and the IPT Merger, AIMCO incurred approximately $55 million in
transaction costs for a combined transactional value of approximately $1,183
million. AIMCO contributed substantially all the assets and liabilities of
Insignia acquired in the Insignia Merger to AIMCO Properties, L.P. (together
with its subsidiaries and other controlled entities, the "Partnership") (and
together with entities in which that Partnership has a controlling financial
interest, the "Company") in exchange for 8,423,751 Class E Preferred Units. The
Class E Preferred Units have terms substantially the same as the Class E
Preferred Stock. In addition, AIMCO contributed substantially all the assets and
liabilities of IPT acquired in the IPT Merger to the Partnership in exchange for
4,826,745 limited partnership units in the Partnership ("OP Units"). In
connection with the IFG Merger, the Partnership assumed property management of
approximately 192,000 multifamily units which consist of general and limited
partnership investments in 115,000 units and third party management of 77,000
units. Insignia Properties Trust ("IPT"), which prior to the IFG Merger was a
subsidiary of IFG, owns a 32% weighted average general and limited partnership
interest in approximately 51,000 units.
Immediately following the IFG Merger, in order to satisfy certain
requirements of the Internal Revenue Code of 1986 (the "Code") applicable to
AIMCO's status as a REIT, AIMCO engaged in a reorganization (the "IFG
Reorganization") of the assets and operations of IFG whereby IFG's operations
are being conducted through corporations (the "Unconsolidated Subsidiaries") in
which the Partnership holds non-voting preferred stock that represents a 95%
economic interest, and certain officers and/or directors of AIMCO hold, directly
or indirectly, all of the voting common stock, representing a 5% economic
interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
In May and September of 1997, AIMCO directly or indirectly through a
subsidiary, acquired (the "NHP Stock Purchase") an aggregate of 6,930,122 shares
of common stock ("NHP Common Stock") of NHP. On December 8, 1997, AIMCO acquired
the remaining shares of NHP Common Stock in a merger transaction accounted for
as a purchase (the "NHP Merger"). As a result of the NHP Merger, AIMCO issued
6,759,148 shares of AIMCO Common Stock, valued at $180.8 million, and paid $86.5
million in cash. The total cost of the purchase of NHP was $349.5 million.
Substantially all assets and liabilities of NHP were contributed by AIMCO to the
Partnership.
P-1
<PAGE> 470
In June 1997, the Company purchased a group of companies (the "NHP Real
Estate Companies") affiliated with NHP that hold general and limited partnership
interests in partnerships (the "NHP Partnerships") that own 534 conventional and
affordable multifamily apartment properties (the "NHP Properties") containing
87,659 units, a captive insurance subsidiary and certain related assets (the
"NHP Real Estate Acquisition"). The Company paid aggregate consideration of
$54.8 million in cash and warrants that entitle the holders to purchase 399,999
shares of AIMCO Common Stock at an exercise price of $36.00 per share. The
Company engaged in a reorganization (the "NHP Real Estate Reorganization") of
its interests in the NHP Real Estate Companies, which resulted in certain of the
assets of the NHP Real Estate Companies being owned by a limited partnership
(the "Unconsolidated Partnership") in which the Partnership holds 99% limited
partner interest and certain directors and officers of AIMCO directly or
indirectly, hold a 1% general partner interest.
Immediately following the NHP Merger, in order to satisfy certain
requirements of the Code applicable to AIMCO's status as a REIT, AIMCO engaged
in a reorganization (the "NHP Reorganization") of the assets and operations of
NHP that resulted in the Master Property Management Agreement being terminated
and NHP's operations being conducted through Unconsolidated Subsidiaries in
which the AIMCO Operating Partnership holds non-voting preferred stock that
represents a 95% economic interest, and certain officers and/or directors of
AIMCO hold, directly or indirectly, all of the voting common stock, representing
a 5% economic interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
On May 8, 1998, AIMCO completed a merger with Ambassador Apartments, Inc.
("Ambassador"), pursuant to which Ambassador was merged into AIMCO (the
"Ambassador Merger"). Each outstanding share of stock ("Ambassador Common
Stock") of Ambassador, other than those shares held by AIMCO or Ambassador, were
converted into 0.553 (the "Conversion Ratio") shares of AIMCO Common Stock. Any
outstanding options to purchase Ambassador Common Stock were converted, at the
election of the option holder, into cash or options to purchase AIMCO Common
Stock at such options' then current exercise price divided by the Conversion
Ratio. In accordance with the Agreement and Plan of Merger, dated December 23,
1997 and supplemented by letter dated as of March 11, 1998 (the "Ambassador
Merger Agreement"), the outstanding shares of Class A Senior Cumulative
Convertible Preferred Stock of Ambassador, (the "Ambassador Preferred Stock")
were redeemed and converted into Ambassador Common Stock prior to the Ambassador
Merger. Following the consummation of the Ambassador Merger, a subsidiary of the
Partnership was merged with and into the Ambassador Operating Partnership (the
"Ambassador OP Merger"). Each outstanding unit of limited partnership interest
in the Ambassador Operating Partnership was converted into the right to receive
0.553 OP Units, and as a result, the Ambassador Operating Partnership became a
99.9% owned subsidiary partnership of the Partnership.
Also during 1997, the Partnership (i) (a) acquired 44 properties for
aggregate purchase consideration of $467.4 million, of which $56 million was
paid in the form of 1.9 million OP Units (b) paid $34.2 million in cash and
issued OP Units valued at $7.3 million in connection with the acquisition of
partnership interests through tender offers in certain partnerships ((a) and (b)
together are the "1997 Property Acquisitions") and (c) paid $19.9 million to
acquire 886,600 shares of Ambassador Common Stock (together with the 1997
Property Acquisitions, the "1997 Acquisitions"); (ii) sold (a) approximately
16,367,000 shares of AIMCO Common Stock for aggregate net proceeds of $513.4
million; (b) 750,000 shares of AIMCO Class B Cumulative Convertible Preferred
Stock for net proceeds of $75 million; and (c) 2,400,000 shares of AIMCO Class C
9% Cumulative Preferred Stock for net proceeds of $58.1 million; of which all
proceeds were contributed by AIMCO to the Partnership in exchange for 16,367,000
OP Units, 750,000 Class B Preferred Units, and 2,400,000 Class C Preferred Units
(collectively, the "1997 Stock Offerings"); and (iii) sold five real estate
properties (the "1997 Dispositions").
Also during 1998, AIMCO (i) (a) sold 4,200,000 shares of its Class D
Cumulative Preferred Stock for net proceeds of $101.5 million (the "Class D
Preferred Stock Offering"); (b) sold 4,050,000 shares of its Class G Cumulative
Preferred Stock for net proceeds of $98.0 million (the "Class G Preferred Stock
Offering"); (c) sold 2,000,000 shares of its Class H Cumulative Preferred Stock
for net proceeds of
P-2
<PAGE> 471
$48.1 million (the "Class H Preferred Stock Offering"); and (d) sold 1,000,000
shares of its Class J Cumulative Convertible Preferred Stock in a private
placement for $100.0 million (the "Class J Preferred Stock Offering"); of which
all proceeds were contributed by AIMCO to the Partnership in exchange for
4,050,000 Class G Preferred Units, 2,000,000 Class H Preferred Units and
1,000,000 shares of Class J Preferred Units (collectively, the "1998 Stock
Offerings"); (ii) purchased 29 properties for aggregate purchase consideration
of $312.7 million, of which $52.2 million was paid in the form of OP Units (the
"1998 Acquisitions"); (iii) sold two real estate properties (the "1998
Dispositions"); (iv) contracted to purchase two properties for aggregate
purchase consideration of $62.1 million, of which $26.4 million will be paid in
the form of OP units (the "Probable Purchases") and (v) sold 1,400,000 Class B
Preferred Partnership Units of a subsidiary and warrants to purchase 875,000
shares of AIMCO Class A Common Stock for $35.0 million (the "Preferred
Partnership Unit Offering").
PRO FORMA FINANCIAL INFORMATION OF THE PARTNERSHIP (INSIGNIA MERGER)
The following Pro Forma Consolidated Balance Sheet (Insignia Merger) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) the purchase
of nine properties for an aggregate purchase price of $62.5 million; (ii) the
Class J Preferred Stock Offering; (iii) the Probable Purchases; (iv) the IFG
Merger; (v) the IPT Merger; (vi) the IFG Reorganization; and (vii) the Preferred
Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) the
1997 Acquisitions; (ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions;
(iv) the NHP Real Estate Acquisition; (v) the NHP Real Estate Reorganization;
(vi) the NHP Stock Purchase; (vii) the NHP Merger; (viii) the NHP
Reorganization; (ix) the 1998 Stock Offerings; (x) the 1998 Acquisitions; (xi)
the Probable Purchases; (xii) the 1998 Dispositions; (xiii) the Ambassador
Merger; (xiv) the IFG Merger; (xv) the merger between IPT and Angeles Mortgage
Investment Trust ("AMIT") ("the AMIT Merger"); (xvi) the IPT Merger; (xvii) the
IFG Reorganization; and (xviii) the Preferred Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1997: (i)
the 1998 Stock Offerings; (ii) the 1998 Acquisitions; (iii) the Probable
Purchases; (iv) the 1998 Dispositions; (v) the Ambassador Merger; (vi) the IFG
Merger; (vii) the AMIT Merger; (viii) the IPT Merger; (ix) the IFG
Reorganization; and (x) the Preferred Partnership Unit offering.
The following Pro Forma Financial Information (Insignia Merger) is based,
in part, on the following historical financial statements: (i) the audited
Consolidated Financial Statements of the Partnership for the year ended December
31, 1997; (ii) the unaudited Consolidated Financial Statements of the
Partnership for the nine months ended September 30, 1998; (iii) the audited
Consolidated Financial Statements of Ambassador for the year ended December 31,
1997; (iv) the unaudited Consolidated Financial Statements of Ambassador for the
four months ended April 30, 1998; (v) the audited Consolidated Financial
Statements of IFG for the year ended December 31, 1997; (vi) the audited
Consolidated Financial Statements of AMIT for the year ended December 31, 1997;
(vii) the unaudited Consolidated Financial Statements of IFG for the nine months
ended September 30, 1998; (viii) the unaudited Financial Statements of AMIT for
the period from January 1, 1998 to September 17, 1998; (ix) the unaudited
Consolidated Financial Statements of NHP for the nine months ended September 30,
1997; (x) the unaudited Combined Financial Statements of the NHP Real Estate
Companies for the three months ended March 31, 1997; (xi) the unaudited
Financial Statements of NHP Southwest Partners, L.P. for the three months ended
March 31, 1997; (xii) the unaudited Combined Financial Statements of the NHP New
LP Entities for the three months ended March 31, 1997; (xiii) the unaudited
Combined Financial Statements of the NHP Borrower Entities for the three months
ended March 31, 1997; (xiv) the unaudited Historical Summaries of Gross Income
and Certain Expenses of The Bay Club at Aventura for the three months ended
March 31, 1997; (xv) the unaudited Historical Summary of Gross Income and Direct
Operating Expenses of Morton Towers for the six months
P-3
<PAGE> 472
ended June 30, 1997; (xvi) the unaudited Combined Statement of Revenues and
Certain Expenses of the Thirty-Five Acquisition Properties for the six months
ended June 30, 1997; (xvii) the unaudited Statement of Revenues and Certain
Expenses of First Alexandria Associates, a Limited Partnership for the nine
months ended September 30, 1997; (xviii) the unaudited Statement of Revenues and
Certain Expenses of Country Lakes Associates Two, a Limited Partnership for the
nine months ended September 30, 1997; (xix) the unaudited Statement of Revenues
and Certain Expenses of Point West Limited Partnership, A Limited Partnership
for the nine months ended September 30, 1997; (xx) the unaudited Statement of
Revenues and Certain Expenses for The Oak Park Partnership for the nine months
ended September 30, 1997; (xxi) the audited Combined Historical Summary of Gross
Income and Direct Operating Expenses of the Realty Investment Apartment
Communities I for the year ended December 31, 1997, (xxii) the audited Combined
Historical Summary or Gross Income and Direct Operating Expenses of the Cirque
Apartment Communities for the year ended December 31, 1997; (xxiii) the audited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities II for the year ended December 31, 1997;
(xxiv) the audited Historical Summary of Gross Income and Direct Operating
Expenses of the Calhoun Beach Club Apartments for the year ended December 31,
1997; (xxv) the unaudited Combined Historical Summary of Gross Income and Direct
Operating Expenses of the Realty Investment Apartment Communities I for the nine
months ended September 30, 1998; (xxvi) the unaudited Combined Historical
Summary of Gross Income and Direct Operating Expenses of the Cirque Apartment
Communities for the three months ended March 31, 1998; (xxvii) the unaudited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities II for the nine months ended September
30, 1998; and (xxviii) the unaudited Historical Summary of Gross Income and
Direct Operating Expenses of Calhoun Beach Club Apartments for the nine months
ended September 30, 1998. The following Pro Forma Financial Information should
be read in conjunction with such financial statements and the notes thereto
incorporated by reference herein.
The unaudited Pro Forma Financial Information (Insignia Merger) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
1997 Acquisitions, the 1998 Acquisitions, and the Probable Purchases are
adjusted to estimated fair market value, based upon preliminary estimates, which
are subject to change as additional information is obtained. The allocations of
purchase costs are subject to final determination based upon estimates and other
evaluations of fair market value. Therefore, the allocations reflected in the
following unaudited Pro Forma Financial Information may differ from the amounts
ultimately determined.
The following unaudited Pro Forma Financial Information (Insignia Merger)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions or results of
operations. In the opinion of the Partnership's management, all material
adjustments necessary to reflect the effects of these transactions have been
made.
P-4
<PAGE> 473
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS IFG AIMCO BEFORE IFG
AND PROBABLE IFG MERGER IFG REORGANIZATION
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) REORGANIZATION(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Real estate.............. $2,355,122 $202,332 $ 44,488 $ 23,880(G) $2,625,822 $ --
Property held for sale... 42,212 -- -- -- 42,212 --
Investments in
securities............. -- -- -- 443,513(G)
(443,513)(H) -- --
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 127,082 -- -- -- 127,082 59,195(I)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 246,847 -- 232,892 444,570(G) 924,309 --
Mortgage notes
receivable............. -- -- 20,916 -- 20,916
Cash and cash
equivalents............ 43,681 6,107 73,064 -- 122,852 (17,897)(J)
Restricted cash.......... 83,187 -- 2,691 -- 85,878 (1,352)(J)
Accounts receivable...... 11,545 -- 54,060 (32,234)(G) 33,371 (5,471)(J)
Deferred financing
costs.................. 21,835 -- 7,020 (7,020)(G) 21,835 --
Goodwill................. 120,503 -- 19,503 111,018(G) 251,024 --
Property management
contracts.............. -- -- 86,419 31,147(G) 117,566 (79,195)(I)
Other assets............. 69,935 -- 20,128 (4,533)(G) 85,530 (2,860)(J)
---------- -------- -------- --------- ---------- --------
Total Assets..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
Secured notes payable.... $ 774,676 $122,568 $ 29,002 $ -- $ 926,246 $ --
Secured tax-exempt bond
financing.............. 399,925 -- -- -- 399,925 --
Secured short-term
financing.............. 50,000 (50,000) 332,691 (300,000)(G) 32,691 --
Unsecured short-term
financing.............. 50,800 (50,800) -- 300,000(G) 300,000 --
Accounts payable, accrued
and other
liabilities............ 131,799 -- 33,241 50,000(G)
53,333(G)
4,935(G)
2,525(G) 275,833 (27,580)(J)
Deferred tax liability... -- -- 18,802 1,198(G) 20,000 (20,000)(I)
Security deposits and
prepaid rents.......... 13,171 -- 3,533 (3,533) 13,171 --
---------- -------- -------- --------- ---------- --------
1,420,371 21,768 417,269 108,458 1,967,866 (47,580)
Minority interest........ 42,086 37,345 108,485 (108,485)(G) 79,431 --
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. -- -- 144,282 5,218 149,500 --
Redeemable Partnership
Units.................. 232,405 45,176 -- -- 277,581 --
Partners' capital and
shareholders' equity
Common stock........... -- -- 320 (320)(G) -- --
Additional paid-in
capital.............. -- -- (86,959) 86,959(G) -- --
Distributions in excess
of earnings.......... -- -- (22,216) 22,216(G) -- --
General and Special
Limited Partner...... 1,039,525 4,150 -- 443,513(H)
9,269(G) 1,496,457 --
Preferred Units........ 387,562 100,000 -- -- 487,562 --
---------- -------- -------- --------- ---------- --------
1,427,087 104,150 (108,855) 561,637 1,984,019 --
---------- -------- -------- --------- ---------- --------
Total Liabilities
and Equity..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
<CAPTION>
PRO FORMA
----------
<S> <C>
Real estate.............. $2,625,822
Property held for sale... 42,212
Investments in
securities.............
--
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 186,277(K)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 924,309
Mortgage notes
receivable............. 20,916
Cash and cash
equivalents............ 104,955
Restricted cash.......... 84,526
Accounts receivable...... 27,900
Deferred financing
costs.................. 21,835
Goodwill................. 251,024
Property management
contracts.............. 38,371
Other assets............. 82,670
----------
Total Assets..... $4,410,817
==========
Secured notes payable.... $ 926,246
Secured tax-exempt bond
financing.............. 399,925
Secured short-term
financing.............. 32,691
Unsecured short-term
financing.............. 300,000
Accounts payable, accrued
and other
liabilities............
248,253
Deferred tax liability... --
Security deposits and
prepaid rents.......... 13,171
----------
1,920,286
Minority interest........ 79,431
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. 149,500
Redeemable Partnership
Units.................. 277,581
Partners' capital and
shareholders' equity
Common stock........... --
Additional paid-in
capital.............. --
Distributions in excess
of earnings.......... --
General and Special
Limited Partner......
1,496,457
Preferred Units........ 487,562
----------
1,984,019
----------
Total Liabilities
and Equity..... $4,410,817
==========
</TABLE>
P-5
<PAGE> 474
- ---------------
(A) Represents the unaudited historical consolidated financial position of the
Partnership as of September 30, 1998.
(B) Represents adjustments to reflect the purchase of ten properties for an
aggregate purchase price of $140.2 million; the Class J Preferred Stock
Offering; the Probable Purchases; and the Preferred Partnership Unit
Offering.
(C) Represents the unaudited historical consolidated financial position of IFG
as of September 30, 1998.
(D) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the issuance of 8,423,751 shares of AIMCO Common Stock, based
on consideration to holders of IFG common stock outstanding as of the date
of the IFG Merger; (ii) the issuance of 4,826,745 shares of AIMCO Class A
Common Stock to holders of IPT common stock (other than AIMCO); (iii) the
payment of a special dividend of $50,000; (iv) the assumption of $149,500
of the convertible debentures of IFG; (v) the allocation of the combined
purchase price of IFG and IPT based on the preliminary estimates of
relative fair market value of the assets and liabilities of IFG and IPT;
and (vi) the contribution by AIMCO of substantially all the assets and
liabilities of Insignia and IPT to the Partnership in exchange for OP
Units.
(E) Represents the effects of AIMCO's acquisition of IFG immediately after the
IFG Merger. These amounts do not give effect to the IFG Reorganization,
which includes the transfers of certain assets and liabilities of IFG to
the combined Unconsolidated Subsidiaries. The IFG Reorganization occurred
immediately after the IFG Merger so that AIMCO could maintain its
qualification as a REIT. This column is included as an intermediate step to
assist the reader in understanding the entire nature of the IFG Merger and
related transactions.
(F) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party property management operations.
The adjustments reflect the transfer of assets valued at the Partnership's
new basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(G) In connection with the IFG Merger and the IPT Merger, AIMCO became
obligated to issue a total of 13,250,496 shares of AIMCO Common Stock
The total purchase price of IFG and IPT is $1,128,009, as follows:
<TABLE>
<S> <C>
Issuance of 8,423,751 shares of AIMCO Common Stock in the
IFG Merger, at $34.658 per share.......................... $ 291,949
Issuance of 4,826,745 shares of AIMCO Common Stock in the
IPT Merger, at $31.50 per share........................... 151,564
Assumption of Convertible Debentures........................ 149,500
Assumption of liabilities as indicated in the Merger
Agreement................................................. 397,459
Transaction costs........................................... 53,333
Generation of deferred tax liability........................ 20,000
Special dividend............................................ 50,000
Purchase of IFG Common Stock prior to merger................ 4,935
Consideration for options................................... 9,269
----------
Total............................................. $1,128,009
==========
</TABLE>
P-6
<PAGE> 475
The purchase price was allocated to the various assets of IFG acquired in
the IFG Merger, as follows:
<TABLE>
<S> <C>
Purchase price.............................................. $1,128,009
Historical basis of IFG's assets acquired................... (561,181)
----------
Step-up to record the fair value of IFG's assets
acquired............................................... $ 566,828
==========
</TABLE>
This step-up was applied to IFG's assets as follows:
<TABLE>
<S> <C>
Real estate................................................. $ 23,880
Investment in real estate partnerships...................... 444,570
Decrease in accounts receivable............................. (32,234)
Decrease in deferred loan costs............................. (7,020)
Management contracts........................................ 31,147
Increase in goodwill........................................ 111,018
Reduction in value of other assets.......................... (4,533)
--------
Total............................................. $566,828
========
</TABLE>
The fair value of IFG's assets, primarily the real estate and management
contracts, was calculated based on estimated future cash flows of the
underlying assets.
As of September 30, 1998, IFG's stockholder's equity was $(108,855), which
is detailed as follows:
<TABLE>
<S> <C>
Common stock................................................ $ 320
Additional paid-in capital.................................. (86,959)
Distributions in excess of earnings......................... (22,216)
---------
Total............................................. $(108,855)
=========
</TABLE>
Upon completion of the IFG Merger, the entire amount of the stockholder's
equity was eliminated.
In addition, the minority interest in other partnerships of IFG of $108,485
will be eliminated upon the IPT Merger.
At the time of the IFG Merger, AIMCO obtained unsecured short-term
financing of $300 million. The proceeds were used to repay secured
short-term financing of IFG that AIMCO assumed.
(H) Represents the issuance of a total of 13,250,496 OP Units to AIMCO and the
concurrent issuance of 13,250,496 shares of AIMCO Common Stock to IFG and
IPT stockholders, in exchange for all the shares of IFG and IPT common
stock.
In accordance with the IFG Merger Agreement, AIMCO became obligated to
issue 8,423,751 shares of Class E Preferred Stock, approximately equal to
$292 million. Each share of Class E Preferred Stock will automatically
convert to one share of AIMCO Common Stock upon the payment of the special
dividend thereon. As such, for the purpose of preparing the pro forma
financial statements, AIMCO's management believes that the Class E
Preferred Stock is substantially the same as AIMCO Common Stock, and that
the fair value of the Class E Preferred Stock approximates the fair value
of the AIMCO Common Stock. Upon the payment of the special dividend on the
Class E Preferred Stock and the conversion of the Class E Preferred Stock
to AIMCO Common Stock, the former IFG stockholders will own approximately
15.0% of the AIMCO Common Stock and the IPT stockholders will own
approximately 7.3% of AIMCO Common Stock. The special dividend on the Class
E Preferred Stock is intended to represent a distribution in an amount at
least equal to the earnings and profits of IFG at the time of the IFG
Merger, to which AIMCO succeeds.
Concurrent with the issuance of Class E Preferred Stock, the Partnership
will issue comparable Class E Preferred Units to AIMCO. The Class E
Preferred Units will have terms substantially the same as the Class E
Preferred Stock.
(I) Represents the increase in the Partnership's investment in Unconsolidated
Subsidiaries to reflect the contribution or sale of property management
contracts, including the related deferred tax liability, in exchange for
preferred stock and a note payable from the Unconsolidated Subsidiaries.
These assets and
P-7
<PAGE> 476
liabilities are valued at the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(J) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries,
(K) Represents notes receivable from the Unconsolidated Subsidiaries of
$95,000, advances to the Unconsolidated Subsidiaries of $42,792, and equity
in the Unconsolidated Subsidiaries of $48,485. The combined pro forma
balance sheet of the Unconsolidated Subsidiaries as of September 30, 1998
is presented below, which reflects the effects of the IFG Merger, the IPT
Merger, and the IFG Reorganization as if such transactions had occurred as
of September 30, 1998.
P-8
<PAGE> 477
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
IFG
HISTORICAL REORGANIZATION(I) PRO FORMA
---------- ----------------- ---------
<S> <C> <C> <C>
ASSETS
Real estate............................................ $ 22,376 $ -- $ 22,376
Cash and cash equivalents.............................. 16,919 17,897(ii) 34,816
Restricted cash........................................ 5,507 1,352(ii) 6,859
Management contracts................................... 47,846 79,195(iii) 127,041
Accounts receivable.................................... 13,109 5,471(ii) 18,580
Deferred financing costs............................... 3,117 -- 3,117
Goodwill............................................... 43,544 -- 43,544
Other assets........................................... 51,498 2,860(ii) 54,358
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable.................................. $114,302 $ 45,000(iii) $159,302
Accounts payable, accrued and other liabilities........ 56,773 27,580(ii) 84,353
Security deposits and deferred income.................. 334 --(ii) 334
Deferred tax liability................................. -- 20,000(iii) 20,000
-------- -------- --------
171,409 92,580 263,989
Common stock........................................... 2,061 747(iv) 2,808
Preferred stock........................................ 34,290 14,195(iii) 48,485
Retained earnings...................................... (3,844) -- (3,844)
Notes receivable on common stock purchases............. -- (747)(iv) (747)
-------- -------- --------
32,507 14,195 46,702
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
</TABLE>
- ---------------
(i) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the transfer of assets valued at the Partnership's new
basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(ii) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries, valued at the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(iii)Represents the transfer or sale of management contracts, the establishment
of an intercompany note, and the establishment of the related estimated net
deferred Federal and state tax liabilities at a combined rate of 40% for
the estimated difference between the book and tax basis of the net assets
of the Unconsolidated Subsidiaries. The primary component of the deferred
tax liability is the difference between the new basis of the property
management contracts, as a result of the allocation of the purchase price
of IFG, and the historical tax basis.
(iv) Represents the issuance of common stock to the common stockholders of the
Unconsolidated Subsidiaries in exchange for notes receivable, in order for
the common stockholders to maintain their respective ownership interest in
the Unconsolidated Subsidiaries.
P-9
<PAGE> 478
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE NHP AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rental and other property
revenues........................ $193,006 $120,337(I)
11,012(J) $ 6,660 $ 93,329 $ -- $ 6,912
Property operating expenses....... (76,168) (59,466)(I)
(4,860)(J) (2,941) (36,088) -- (3,307)
Owned property management
expense......................... (6,620) (4,327)(I)
(602)(J) (282) -- -- --
Depreciation...................... (37,741) (26,645)(I)
(2,172)(J) (1,414) (18,979) (5,997)(O) (966)
-------- -------- ------- -------- ------- --------
Income from property operations... 72,477 33,277 2,023 38,262 (5,997) 2,639
-------- -------- ------- -------- ------- --------
Management fees and other
income.......................... 13,937 -- 7,813 -- -- 94,330
Management and other expenses..... (9,910) -- (5,394) -- -- (57,615)
Corporate overhead allocation..... (588) -- -- -- -- --
Amortization...................... (1,401) -- (5,800) -- -- (16,768)
-------- -------- ------- -------- ------- --------
Income from service company
business........................ 2,038 -- (3,381) -- -- 19,947
Minority interest in service
company business................ (10) -- -- -- -- --
-------- -------- ------- -------- ------- --------
AIMCO's share of income from
service company business........ 2,028 -- (3,381) -- -- 19,947
-------- -------- ------- -------- ------- --------
General and administrative
expenses........................ (5,396) -- (1,025) (7,392) 7,392(P) (21,199)
Interest expense.................. (51,385) (3,451)(K)
(2,497)(L) (5,462) (26,987) (221)(Q) (9,035)
Interest income................... 8,676 -- 1,900 -- -- 10,967
Minority interest................. 1,008 458(M) 16 (851) 705(R) (12,871)
Equity in losses of unconsolidated
partnerships.................... (1,798) (122)(N) (8,542) 405 -- 12,515
Equity in earnings of
unconsolidated subsidiaries..... 4,636 -- 5,790 -- -- --
-------- -------- ------- -------- ------- --------
Income (loss) from operations..... 30,246 27,665 (8,681) 3,437 1,879 2,963
Income tax provision.............. -- -- -- -- -- 1,701
Gain on dispositions of
property........................ 2,720 (2,720) -- -- -- 80
-------- -------- ------- -------- ------- --------
Income (loss) before extraordinary
item............................ 32,966 24,945 (8,681) 3,437 1,879 4,744
Extraordinary item -- early
extinguishment of debt.......... (269) 269 -- -- -- --
-------- -------- ------- -------- ------- --------
Net income........................ 32,697 25,214 (8,681) 3,437 1,879 4,744
Income attributable to preferred
unitholders..................... 2,315 39,859 -- -- -- --
-------- -------- ------- -------- ------- --------
Income attributable to common
unitholders..................... $ 30,382 $(14,645) $(8,681) $ 3,437 $ 1,879 $ 4,744
======== ======== ======= ======== ======= ========
Basic earnings per OP unit........ $ 1.09
========
Diluted earnings per OP unit...... $ 1.08
========
Weighted average OP units
outstanding..................... 27,732
========
Weighted average OP units and
equivalents outstanding......... 28,113
========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(G) ADJUSTMENTS(H) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property
revenues........................
$ -- $ -- $ 431,256
Property operating expenses.......
-- -- (182,830)
Owned property management
expense.........................
-- -- (11,831)
Depreciation......................
(2,350)(S) -- (96,264)
-------- -------- ---------
Income from property operations... (2,350) -- 140,331
-------- -------- ---------
Management fees and other
income.......................... -- (74,404)(X) 41,676
Management and other expenses..... -- 49,236(X) (23,683)
Corporate overhead allocation..... -- -- (588)
Amortization...................... (32,699)(T) 30,188(Y) (26,480)
-------- -------- ---------
Income from service company
business........................ (32,699) 5,020 (9,075)
Minority interest in service
company business................ -- -- (10)
-------- -------- ---------
AIMCO's share of income from
service company business........ (32,699) 5,020 (9,085)
-------- -------- ---------
General and administrative
expenses........................ -- 6,249(X) (21,371)
Interest expense..................
(14,750) -- (113,788)
Interest income................... -- 191(Z) 21,734(BB)
Minority interest................. 1,552(U) -- (9,983)
Equity in losses of unconsolidated
partnerships.................... (29,995)(V) -- (27,537)
Equity in earnings of
unconsolidated subsidiaries..... -- (4,578)(AA) 5,848(DD)
-------- -------- ---------
Income (loss) from operations..... (78,242) 6,882 (13,851)
Income tax provision.............. (1,701)(W) -- --
Gain on dispositions of
property........................ (80) -- --
-------- -------- ---------
Income (loss) before extraordinary
item............................ (80,023) 6,882 (13,851)
Extraordinary item -- early
extinguishment of debt.......... -- -- --
-------- -------- ---------
Net income........................ (80,023) 6,882 (13,851)
Income attributable to preferred
unitholders..................... -- -- 42,174(CC)
-------- -------- ---------
Income attributable to common
unitholders..................... $(80,023) $ 6,882 $ (56,025)(BB)
======== ======== =========
Basic earnings per OP unit........ $ (0.83)(BB)
=========
Diluted earnings per OP unit...... $ (0.83)(BB)
=========
Weighted average OP units
outstanding..................... 67,522
=========
Weighted average OP units and
equivalents outstanding......... 68,366
=========
</TABLE>
P-10
<PAGE> 479
- ---------------
(A) Represents the Partnership's audited consolidated results of operations
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1997: (i) the 1997 Acquisitions; (ii) the 1997 Stock
Offerings; (iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings;
(v) the 1998 Acquisitions; (vi) the Probable Purchases; (vii) the 1998
Dispositions; and (v) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(I) HISTORICAL(II) ADJUSTMENTS(III) REORGANIZATION(IV) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues................. $ 6,660(v) $ 16,842 $ -- $(16,842)(xvii) $ 6,660
Property operating
expenses................. (2,941)(v) (8,411) -- 8,411 (xvii (2,941)
Owned property management
expense.................. (282)(v) (862) -- 862 (xvii (282)
Depreciation............... (1,414)(vi) (2,527) (693)(xi) 3,220 (xvii (1,414)
------- -------- ------- -------- -------
Income from property
operations............... 2,023 5,042 (693) (4,349) 2,023
------- -------- ------- -------- -------
Management fees and other
income................... 1,405(vii) 72,176 -- (65,768)(xviii) 7,813
Management and other
expenses................. (2,263)(viii) (35,267) -- 32,136 (xviii (5,394)
Amortization............... -- (9,111) (4,432)(xii) 7,743 (xix (5,800)
------- -------- ------- -------- -------
Income from service company
business................. (858) 27,798 (4,432) (25,889) (3,381)
------- -------- ------- -------- -------
General and administrative
expenses................. -- (16,266) 8,668 (xiii 6,573 (xviii (1,025)
Interest expense........... (5,082)(ix) (10,685) -- 10,305(xx) (5,462)
Interest income............ 540(v) 1,963 -- (603)(xxi) 1,900
Minority interest.......... 16(v) -- -- -- 16
Equity in losses of
unconsolidated
partnerships............. (3,905)(x) -- (4,631)(xiv) (6) (8,542)
Equity in earnings of
unconsolidated
subsidiaries............. -- -- (4,636)(xv) 10,426 (xxii 5,790
------- -------- ------- -------- -------
Income (loss) from
operations............... (7,266) 7,852 (5,724) (3,543) (8,681)
Income tax provision....... -- (3,502) 3,502 (xvi -- --
------- -------- ------- -------- -------
Net income (loss).......... $(7,266) $ 4,350 $(2,222) $ (3,543) $(8,681)
======= ======== ======= ======== =======
</TABLE>
- ---------------
(i) Represents the adjustment to record activity from January 1, 1997 to
the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. The historical
financial statements of the NHP Real Estate Companies consolidate
certain real estate partnerships in which they have an interest that
will be presented on the equity method by the Partnership as a
result of the NHP Real Estate Reorganization. In addition,
represents adjustments to record additional depreciation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest
expense incurred in connection with borrowings incurred by the
Partnership to consummate the NHP Real Estate Acquisition.
(ii)Represents the unaudited consolidated results of operations of NHP
for the period from January 1, 1997 through December 8, 1997 (date
of the NHP Merger).
P-11
<PAGE> 480
(iii)
Represents the following adjustments occurring as a result of the
NHP Merger: (i) the reduction in personnel costs, primarily
severance costs, pursuant to a restructuring plan; (ii) the
incremental depreciation of the purchase price adjustment related to
real estate; (iii) the incremental amortization of the purchase
price adjustment related to the management contracts, furniture,
fixtures and equipment, and goodwill; (iv) the reversal of equity in
earnings of NHP during the pre-merger period when the Partnership
held a 47.62% interest in NHP; and (v) the amortization of the
increased basis in investments in real estate partnerships based on
the purchase price adjustment related to real estate and an
estimated average life of 20 years.
(iv)Represents adjustments related to the NHP Reorganization, whereby
the Partnership contributed or sold to the Unconsolidated
Subsidiaries and the Unconsolidated Partnership: (i) certain assets
and liabilities of NHP, primarily related to the management
operations and other businesses owned by NHP and (ii) 12 real estate
properties containing 2,905 apartment units. The adjustments
represent (i) the related revenues and expenses primarily related to
the management operations and other businesses owned by NHP and (ii)
the historical results of operations of such real estate
partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis
resulting from the allocation of the combined purchase price of NHP
and the NHP Real Estate Companies.
(v) Represents adjustments to reflect the acquisition of the NHP Real
Estate Companies and the corresponding historical results of
operations as if they had occurred on January 1, 1997.
(vi)Represents incremental depreciation related to the consolidated real
estate assets purchased from the NHP Real Estate Companies.
Buildings and improvements are depreciated on the straight-line
method over a period of 30 years, and furniture and fixtures are
depreciated on the straight-line method over a period of 5 years.
(vii)
Represents the adjustment to record the revenues from ancillary
businesses purchased from the NHP Real Estate Companies as if the
acquisition had occurred on January 1, 1997.
(viii)
Represents $4,878 related to the adjustment to record the expenses
from ancillary businesses purchased from the NHP Real Estate
Companies as if the acquisition had occurred on January 1, 1997,
less $2,615 related to a reduction in personnel costs pursuant to a
restructuring plan, approved by the Company's senior management,
assuming that the acquisition of the NHP Real Estate Companies had
occurred on January 1, 1997 and that the restructuring plan was
completed on January 1, 1997. The restructuring plan specifically
identifies all significant actions to be taken to complete the
restructuring plan, including the reduction of personnel, job
functions, location and the date of completion.
(ix)Represents adjustments in the amount of $3,391 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as the increase in interest expense in the amount
of $1,691 related to borrowings on the Partnership's credit
facilities of $55,807 to finance the NHP Real Estate Acquisition.
(x) Represents adjustments in the amount of $2,432 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as amortization of $1,473 related to the increased
basis in investment in real estate partnerships, as a result of the
allocation of the purchase price of the NHP Real Estate Companies,
based on an estimated average life of 20 years.
(xi)Represents incremental depreciation related to the real estate
assets purchased from NHP. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years,
and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(xii)
Represents incremental depreciation and amortization of the tangible
and intangible assets related to the property management and other
business operated by the Unconsolidated
P-12
<PAGE> 481
Subsidiaries, based on the Partnership's new basis as adjusted by
the allocation of the combined purchase price of NHP including
amortization of management contracts of $3,782, depreciation of
furniture, fixtures and equipment of $2,018 and amortization of
goodwill of $7,743, less NHP's historical depreciation and
amortization of $9,111. Management contracts are amortized using the
straight-line method over the weighted average life of the contracts
estimated to be approximately 15 years. Furniture, fixtures and
equipment are depreciated using the straight-line method over the
estimated life of 3 years. Goodwill is amortized using the
straight-line method over 20 years.
(xiii)
Represents a reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan, approved by the Company's
senior management, specifically identifying all significant actions
to be taken to complete the restructuring plan, assuming that the
NHP Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997.
(xiv)
Represents adjustment for amortization of the increased basis in
investments in real estate partnerships, as a result of the
allocation of the combined purchase price of NHP and the NHP Real
Estate Companies, based on an estimated average life of 20 years.
(xv)Represents the reversal of equity in earnings in NHP during the
pre-merger period when the Partnership held a 47.62% interest in
NHP, as a result of the Partnership's acquisition of 100% of the NHP
Common Stock.
(xvi)
Represents the reversal of NHP's income tax provision due to the
restructuring of the management business to the Unconsolidated
Subsidiaries.
(xvii)
Represents the contribution of NHP's 12 real estate properties
containing 2,905 apartment units to the Unconsolidated Partnership
pursuant to the NHP Reorganization.
(xviii)
Represents the historical income and expenses associated with
certain assets and liabilities of NHP that were contributed or sold
to the Unconsolidated Subsidiaries, primarily related to the
management operations and other businesses owned by NHP.
(xix)
Represents the amortization and depreciation of certain management
contracts and other assets of NHP, based on the Partnership's new
basis resulting from the allocation of the purchase price of NHP,
that will be contributed or sold to the Unconsolidated Subsidiaries,
primarily related to the management operations and other businesses
owned by NHP.
(xx)Represents interest expense of $6,020 related to the contribution of
NHP's 12 real estate properties containing 2,905 apartment units to
the Unconsolidated Partnership and interest expense of $4,285
related to the certain assets and liabilities that will be
contributed or sold to the Unconsolidated Subsidiaries pursuant to
the NHP Reorganization.
(xxi)
Represents the interest income of $5,000 earned on notes payable of
$50,000 to the Partnership issued as consideration for certain
assets and liabilities sold to the Unconsolidated Subsidiaries by
the Partnership, net of the elimination of the Partnership's share
of the related interest expense of $4,750 reflected in the equity in
earnings of the Unconsolidated Subsidiaries operating results,
offset by $853 in interest income primarily related to the
management operations and other businesses owned by NHP contributed
or sold to the Unconsolidated Subsidiaries pursuant to the NHP
Reorganization.
(xxii)
Represents the Partnership's equity in earnings of the
Unconsolidated Subsidiaries.
(D) Represents the audited historical statement of operations of Ambassador
for the year ended December 31, 1997. Certain reclassifications have been
made to Ambassador's historical statement of operations to conform to the
Partnership's Statement of Operations presentation. The Ambassador
historical statement of operations excludes extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of
P-13
<PAGE> 482
interest expense resulting from the net reduction of debt; and (iv) the
elimination of the minority interest associated with Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger, and the spin-off of Holdings as if these transactions had
occurred on January 1, 1997. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
IFG AMIT HOLDINGS IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property
revenues....................... $ 6,646 $ 266 $ -- $ 6,912
Property operating expenses...... (3,251) (56) -- (3,307)
Depreciation..................... (966) -- -- (966)
--------- ------- --------- --------
Income from property
operations..................... 2,429 210 -- 2,639
--------- ------- --------- --------
Management fees and other
income......................... 389,626 -- (295,296) 94,330
Management and other expenses.... (315,653) -- 258,038 (57,615)
Amortization..................... (31,709) (303) 15,244 (16,768)
--------- ------- --------- --------
Income from service company
business....................... 42,264 (303) (22,014) 19,947
--------- ------- --------- --------
General and administrative
expenses....................... (20,435) (1,351) 587 (21,199)
Interest expense................. (9,353) -- 318 (9,035)
Interest income.................. 4,571 6,853 (457) 10,967
Minority interest................ (12,448) (382) (41) (12,871)
Equity in income (losses) of
unconsolidated partnership..... 10,027 2,639 (151) 12,515
--------- ------- --------- --------
Income (loss) from operations.... 17,055 7,666 (21,758) 2,963
Income tax provision............. (6,822) (180) 8,703 1,701
Gain on sale of property......... -- 80 -- 80
--------- ------- --------- --------
Net income (loss)................ 10,233 7,566 (13,055) 4,744
========= ======= ========= ========
</TABLE>
- ---------------
(i) Represents the audited consolidated results of operations of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report
on Form 10-K. Certain reclassifications have been made to IFG's
historical statement of operations to conform to the Partnership's
statement of operations presentation.
(ii)Represents the historical statement of operations of AMIT, as well
as pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger: (i) the incremental depreciation of the
purchase price adjustment related to consolidated real estate and
investments in real estate partnerships; (ii) the amortization of
goodwill and property management contracts resulting from the IFG Merger;
(iii) the increase in interest expense resulting from the net increase in
debt; and (iv) the elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
P-14
<PAGE> 483
(I) Represents adjustments to reflect the 1997 Property Acquisitions and the
1998 Acquisitions, less the 1997 Dispositions and the 1998 Dispositions
as if they had occurred on January 1, 1997. These pro forma operating
results are based on historical results of the properties, except for
depreciation, which is based on the Partnership's investment in the
properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1997 PROPERTY 1997 1998 1998
ACQUISITIONS DISPOSITIONS ACQUISITIONS DISPOSITIONS TOTAL
------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Rental and other
property
revenues........... $ 88,589 $(4,081) $ 39,132 $(3,303) $120,337
Property operating
expense............ (44,109) 1,944 (18,655) 1,354 (59,466)
Owned property
management
expense............ (3,233) 133 (1,349) 122 (4,327)
Depreciation......... (16,839) 452 (10,946) 688 (26,645)
</TABLE>
(J) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1997. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(K) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1997
Property Acquisitions..................................... $(29,490)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1997 Dispositions and
the 1997 Stock Offerings.................................. 19,568
Repayments on the Partnership's credit facilities with
proceeds from a dividend received from one of the
Unconsolidated Subsidiaries............................... 1,889
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1998
Acquisitions.............................................. (15,994)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1998 Dispositions and
the 1998 Stock Offerings.................................. 20,113
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred Partnership
Unit Offering............................................. 463
--------
$ (3,451)
========
</TABLE>
(L) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the Probable Purchases.
(M) Represents (i) loss of $181 related to limited partners in consolidated
partnerships acquired in connection with the 1997 Property Acquisitions
and the 1998 Property Acquisitions and (ii) income of $502 allocable to
the Partnership Preferred Units.
(N) Represents the reduction in the Partnership's earnings in unconsolidated
partnerships as a result of the consolidation of additional partnerships
resulting from additional ownership acquired through tender offers.
(O) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
P-15
<PAGE> 484
(P) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 724
Reduction in salaries and benefits.......................... 4,197
Merger related costs........................................ 524
Other....................................................... 1,947
------
$7,392
======
</TABLE>
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(Q) Represents the decrease in interest expense of $3,612 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$3,833 related to borrowings under the Partnership's credit facilities.
(R) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(S) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(T) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $38,885, amortization of goodwill of $6,526, and
depreciation of furniture, fixtures, and equipment of $3,753, less IFG's
historical depreciation and amortization of $16,465. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(U) Represents elimination of minority interest of IPT resulting from the IPT
merger.
(V) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(W) Represents the reversal of IFG's income tax provision.
(X) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(Y) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Z) Represents interest income of $3,825 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries by the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $3,634 reflected on the equity in earnings of the
Unconsolidated Subsidiaries.
(AA) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-16
<PAGE> 485
(BB) The following table presents the net impact to pro forma net loss
applicable to holders of OP Units and net loss per OP Units assuming the
interest rate per annum increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest expense................................ $ 938
========
Net income.................................................. $(14,789)
========
Net loss attributable to OP unitholders..................... $(56,963)
========
Basic loss per OP unit...................................... $ (0.84)
========
Diluted loss per OP unit.................................... $ (0.84)
========
</TABLE>
(CC) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred
Units, the Class G Preferred Units, the Class H Preferred Units and the
Class J Preferred Units as if these Preferred Units had been issued as of
January 1, 1997.
(DD) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(2,536), plus the elimination of intercompany interest
expense of $8,384. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the year ended December 31, 1997 is
presented below, which represents the effects of the Ambassador Merger,
the NHP Merger, the NHP Reorganization, the IFG Merger, and the IFG
Reorganization as if these transactions had occurred as of January 1,
1997.
P-17
<PAGE> 486
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZATION IFG
HISTORICAL(I) ADJUSTMENTS(II) REORGANIZATION(III) PRO FORMA
------------- --------------- ------------------- ---------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 6,194 $ 6,371(iv) $ -- $ 12,565
Property operating expenses............. (3,355) (3,531)(iv) -- (6,886)
Owned property management expense....... (147) (478)(iv) -- (625)
Depreciation expense.................... (1,038) (767)(iv) -- (1,805)
-------- -------- -------- --------
Income from property operations......... 1,654 1,595 -- 3,249
-------- -------- -------- --------
Management fees and other income........ 23,776 41,992(v) 74,404(x) 140,172
Management and other expenses........... (11,733) (20,403)(v) (49,236)(x) (81,372)
Amortization............................ (3,726) (4,017)(v) (30,188)(xi) (37,931)
-------- -------- -------- --------
Income from service company............. 8,317 17,572 (5,020) 20,869
General and administrative expense...... -- (6,573)(v) (6,249)(x) (12,822)
Interest expense........................ (6,058) (5,849)(vi) (3,825)(xii) (15,732)
Interest income......................... 1,001 (148)(v) -- 853
Minority interest....................... (2,819) 2,198(viii) -- (621)
Equity in losses of unconsolidated
partnerships.......................... (1,028) 1,028(iv) -- --
Equity in earnings of Unconsolidated
Subsidiaries.......................... 2,943 (2,943)(vii) -- --
-------- -------- -------- --------
Income (loss) from operations........... 4,010 6,880 (15,094) (4,204)
Income tax provision.................... (1,902) (3,013)(ix) 6,450(xiii) 1,535
-------- -------- -------- --------
Net income (loss)....................... $ 2,108 $ 3,867 $ (8,644) $ (2,669)
======== ======== ======== ========
Income attributable to preferred
unitholders........................... $ 2,198 $ 3,478 $ (8,212) $ (2,536)
======== ======== ======== ========
Income (loss) attributable to common
unitholders........................... $ (90) $ 389 $ (432) $ (133)
======== ======== ======== ========
</TABLE>
- ---------------
(i) Represents the historical results of operations of the Unconsolidated
Subsidiaries for the year ended December 31, 1997.
(ii) Represents adjustments related to the NHP Reorganization, which includes
the sale or contribution of 14 properties containing 2,725 apartment units
from the unconsolidated partnerships to the Unconsolidated Subsidiaries,
as well as the sale or contribution of 12 properties containing 2,905
apartment units from the Unconsolidated Subsidiaries to the Unconsolidated
Partnership.
(iii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iv) Represents adjustments for the historical results of operations of the 14
real estate properties contributed or sold to the Unconsolidated
Subsidiaries, offset by the historical results of operations of the 12
real estate properties contributed or sold to the Unconsolidated
Partnership, with additional depreciation recorded related to the
Partnership's new basis resulting from the allocation of purchase price of
NHP and the NHP Real Estate Companies.
P-18
<PAGE> 487
(v) Represents adjustments to reflect income and expenses associated with
certain assets and liabilities of NHP contributed or sold to the
Unconsolidated Subsidiaries.
(vi) Represents adjustments of $6,058 to reverse the historical interest
expense of the Unconsolidated Subsidiaries, which resulted from its
original purchase of NHP Common Stock, offset by $2,622 related to the
contribution or sale of the 14 real estate properties, $4,285 related to
assets and liabilities transferred from the Partnership to the
Unconsolidated Subsidiaries and $5,000 related to a note payable to the
Partnership.
(vii) Represents the reversal of the historical equity in earnings of NHP for
the period in which NHP was not consolidated by the Unconsolidated
Subsidiaries.
(viii)Represents the minority interest in the operations of the 14 real estate
properties.
(ix) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill which is not deductible
for tax purposes.
(x) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(xi) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(xii) Represents adjustment for interest expense related to a note payable to
the Partnership.
(xiii)Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-19
<PAGE> 488
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR
AND PROBABLE AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E)
------------- ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Rental and other property revenues............. $ 265,700 $ 19,603(H) $ $ $
8,398(I) 35,480 -- 8,126
Property operating expenses.................... (101,600) (9,009)(H)
(3,745)(I) (14,912) -- (2,585)
Owned property management expense.............. (7,746) (728)(H)
(459)(I) -- -- --
Depreciation................................... (59,792) (4,886)(H)
(2,624)(I) (7,270) (1,420)(M) (904)
--------- -------- -------- ------- --------
Income from property operations................ 96,562 6,550 13,298 (1,420) 4,637
--------- -------- -------- ------- --------
Management fees and other income............... 13,968 -- -- -- 71,155
Management and other expenses.................. (8,101) -- -- -- (41,477)
Corporate overhead allocation.................. (196) -- -- -- --
Amortization................................... (3) -- -- -- (13,986)
--------- -------- -------- ------- --------
Income from service company business........... 5,668 -- -- -- 15,692
--------- -------- -------- ------- --------
General and administrative expenses............ (7,444) -- (5,278) 5,278(N) (61,386)
Interest expense............................... (56,756) 1,975(J)
(2,469)(K) (10,079) 145(O) (24,871)
Interest income................................ 18,244 (1) -- -- 22,501
Minority interest.............................. (1,052) 160(L) (252) 252(P) (14,159)
Equity in losses of unconsolidated
partnerships................................. (5,078) -- (71) -- 13,492
Equity in earnings of unconsolidated
subsidiaries................................. 8,413 -- -- -- --
Amortization of goodwill....................... (5,071) -- -- -- --
--------- -------- -------- ------- --------
Income (loss) from operations.................. 53,486 6,215 (2,382) 4,255 (44,094)
Income tax provision........................... -- -- -- -- 1,180
Gain on dispositions of property............... 2,783 (2,783) -- -- 6,576
--------- -------- -------- ------- --------
Net income..................................... 56,269 3,432 (2,382) 4,255 (36,338)
Income attributable to preferred unitholders... 16,320 16,094 -- -- --
--------- -------- -------- ------- --------
Income (loss) attributable to common
unitholders.................................. $ 39,949 $(12,662) $ (2,382) $ 4,255 $(36,338)
========= ======== ======== ======= ========
Basic earnings (loss) per OP Unit.............. $ 0.80
=========
Diluted earnings (loss) per OP Unit............ $ 0.79
=========
Weighted average OP Units outstanding.......... 50,420
=========
Weighted average OP Unit and equivalents
outstanding.................................. 50,544
=========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(F) ADJUSTMENTS(G) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property revenues............. $ $ $
-- -- 337,307
Property operating expenses....................
-- -- (131,851)
Owned property management expense..............
-- -- (8,933)
Depreciation...................................
(1,583)(Q) -- (78,479)
-------- -------- ---------
Income from property operations................ (1,583) -- 118,044
-------- -------- ---------
Management fees and other income............... -- (56,211)(W) 28,912
Management and other expenses.................. -- 35,192(W) (14,386)
Corporate overhead allocation.................. -- -- (196)
Amortization................................... (23,895)(R) 22,641(X) (15,243)
-------- -------- ---------
Income from service company business........... (23,895) 1,622 (913)
-------- -------- ---------
General and administrative expenses............ 45,823(S) 14,375(W) (8,632)
Interest expense...............................
7,045 -- (85,010)(AA)
Interest income................................ -- 143(Y) 40,887
Minority interest.............................. 6,622(T) -- (8,429)
Equity in losses of unconsolidated
partnerships................................. (18,577)(U) -- (10,234)
Equity in earnings of unconsolidated
subsidiaries................................. -- (7,562)(Z) 851(CC)
Amortization of goodwill....................... -- -- (5,071)
-------- -------- ---------
Income (loss) from operations.................. 15,435 8,578 41,493
Income tax provision........................... (1,180)(V) -- --
Gain on dispositions of property............... (6,576) -- --
-------- -------- ---------
Net income..................................... 7,679 8,578 41,493
Income attributable to preferred unitholders... -- -- 32,414(BB)
-------- -------- ---------
Income (loss) attributable to common
unitholders.................................. $ 7,679 $ 8,578 $ 9,079(AA)
======== ======== =========
Basic earnings (loss) per OP Unit.............. $ 0.13(AA)
=========
Diluted earnings (loss) per OP Unit............ $ 0.13(AA)
=========
Weighted average OP Units outstanding.......... 68,554
=========
Weighted average OP Unit and equivalents
outstanding.................................. 69,218
=========
</TABLE>
P-20
<PAGE> 489
- ---------------
(A) Represents the Partnership's unaudited consolidated results of operations
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1998: (i) the 1998 Stock Offerings; (ii) the 1998
Acquisitions; (iii) the Probable Purchases; (iv) the 1998 Dispositions;
and (v) the Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of operations of Ambassador
for the four months ended April 30, 1998. Certain reclassifications have
been made to Ambassador's historical Statement of Operations to conform
to the Partnership's Statement of Operations presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger and the spin-off of the common stock of Holdings as if these
transactions had occurred on January 1, 1998. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
HOLDINGS
IFG AMIT SPIN- IFG
HISTORICAL(I) MERGER(II) OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 7,566 $ 560 $ -- $ 8,126
Property operating expenses............. (2,585) -- -- (2,585)
Depreciation............................ (904) -- -- (904)
--------- ------ --------- --------
Income from property operations......... 4,077 560 -- 4,637
--------- ------ --------- --------
Management fees and other income........ 311,475 -- (240,320) 71,155
Management and other expenses........... (252,295) -- 210,818 (41,477)
Amortization............................ (26,781) (48) 12,843 (13,986)
--------- ------ --------- --------
Income from service company business.... 32,399 (48) (16,659) 15,692
--------- ------ --------- --------
General and administrative expenses..... (66,272) (675) 5,561 (61,386)
Interest expense........................ (24,164) -- (707) (24,871)
Interest income......................... 18,817 4,193 (509) 22,501
Minority interest....................... (14,159) -- -- (14,159)
Equity in losses of unconsolidated
partnerships.......................... 12,169 1,323 13,492
--------- ------ --------- --------
Income (loss) from operations........... (37,133) 4,030 (10,991) (44,094)
Income tax provision.................... (4,772) -- 5,952 1,180
Gain on disposition of property......... 5,888 688 -- 6,576
--------- ------ --------- --------
Item income (loss)...................... $ (36,017) $4,718 $ (5,039) $(36,338)
========= ====== ========= ========
</TABLE>
----------------------
(i)
Represents the unaudited consolidated results of operations of IFG for
the nine months ended September 30, 1998.
Certain reclassifications have been made to IFG's historical statement
of operations to conform to the Partnership's statement of operations
presentation.
(ii)
Represents the historical statement of operations of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock for
each three shares of IFG common stock to holders of IFG common stock.
(F) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the incremental depreciation of the purchase price adjustment
related to consolidated real estate and investments in real estate
partnerships; (ii) the amortization of goodwill and property management
contracts
P-21
<PAGE> 490
resulting from the IFG Merger; (iii) the increase in interest expense
resulting from the net increase in debt; and (iv) the elimination of the
income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of
IFG, primarily management contracts and related working capital assets
and liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(H) Represents adjustments to reflect the 1998 Acquisitions, less the 1998
Dispositions as if they had occurred on January 1, 1998. These pro forma
operating results are based on historical results of the properties,
except for depreciation, which is based on the Partnership's investment
in the properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1998 1998
ACQUISITIONS DISPOSITIONS TOTAL
------------ ------------ -------
<S> <C> <C> <C>
Rental and other property revenues......... $20,554 $(951) $19,603
Property operating expense................. (9,385) 376 (9,009)
Owned property management expense.......... (765) 37 (728)
Depreciation............................... (4,979) 93 (4,886)
</TABLE>
(I) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1998. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(J) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and
other loans and mortgages assumed in connection with
the 1998 Acquisitions.................................. $(8,698)
Repayments on the Partnership's credit facilities and
other indebtedness with proceeds from the 1998
Dispositions and the 1998 Stock
Offerings.............................................. 10,326
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred
Partnership Unit Offering.............................. 347
-------
$ 1,975
=======
</TABLE>
(K) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the probable purchases.
(L) Represents (i) loss of $537 related to limited partners in consolidated
partnerships acquired in connection with the 1998 Acquisitions and (ii)
income of $377 allocable to the Partnership Preferred Units.
(M) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(N) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses.................... $ 355
Reduction in salaries and benefits........................ 2,482
Merger related costs...................................... 1,212
Other..................................................... 1,229
------
$5,278
======
</TABLE>
P-22
<PAGE> 491
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1998 and that the
restructuring plan was completed on January 1, 1998. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(O) Represents the decrease in interest expense of $1,480 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$1,335 related to borrowings under the Partnership's line of credit.
(P) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(Q) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(R) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $30,096, amortization of goodwill of $4,895, and
depreciation of furniture, fixtures, and equipment of $2,842, less IFG's
historical depreciation and amortization of $13,938. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(S) Represents the elimination of merger related expenses recorded by IFG
during the nine months ended September 30, 1998. In connection with the
IFG Merger, certain IFG executives will receive one-time lump-sum
payments in connection with the termination of their employment and
option agreements. The total of these lump sum payments is estimated to
be approximately $50,000.
(T) Represents elimination of minority interest in IPT resulting from the IPT
merger.
(U) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(V) Represents the reversal of IFG's income tax provision.
(W) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(X) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Y) Represents interest income of $2,861 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries of the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $2,718 reflected in the equity in earnings of the
Unconsolidated Subsidiaries.
(Z) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-23
<PAGE> 492
(AA) The following table presents the net impact to pro forma net income
applicable to holders of shares of AIMCO Common Stock and net income per
share of AIMCO Common Stock assuming the interest rate per annum
increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest........................................ $ 702
=======
Net income.................................................. $40,791
=======
Net income attributable to OP Unitholders................... $ 8,377
=======
Basic loss per OP Unit...................................... $ 0.12
=======
Diluted loss per OP Unit.................................... $ 0.12
=======
</TABLE>
(BB) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred Units
the Class G Preferred Units, the Class H Preferred Units and the Class J
Preferred Units as if these stock offerings had occurred as of January 1,
1997.
(CC) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(1,867) plus the elimination of intercompany interest of
$2,718. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the nine months ended September 30, 1998
is presented below, which represents the effects of the Ambassador
Merger, the IFG Merger and the IFG Reorganization as if these
transactions had occurred as of January 1, 1997.
P-24
<PAGE> 493
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
IFG
HISTORICAL(I) REORGANIZATION(II) PRO FORMA
------------- ------------------ ---------
<S> <C> <C> <C>
Rental and other property revenues................... $ 9,910 $ -- $ 9,910
Property operating expense........................... (5,139) -- (5,139)
Owned property management expense.................... (345) -- (345)
Depreciation expense................................. (1,026) -- (1,026)
-------- -------- --------
Income from property operations...................... 3,400 -- 3,400
-------- -------- --------
Management fees and other income..................... 57,665 56,211(iii) 113,876
Management and other expenses........................ (36,221) (35,192)(iii) (71,413)
Amortization......................................... (2,111) (22,641)(iv) (24,752)
-------- -------- --------
Income from service company.......................... 19,333 (1,622) 17,711
General and administrative expense................... -- (14,375)(iii) (14,375)
Interest expense..................................... (6,931) (2,861)(v) (9,792)
Interest income...................................... 617 -- 617
Minority interest.................................... (526) -- (526)
-------- -------- --------
Income (loss) from operations........................ 15,893 (18,858) (2,965)
Income tax provision................................. (7,037) 8,037(vi) 1,000
-------- -------- --------
Net income (loss).................................... $ 8,856 $(10,821) $ (1,965)
======== ======== ========
Income (loss) attributable to preferred
stockholders....................................... $ 8,413 $(10,280) $ (1,867)
======== ======== ========
Income (loss) attributable to common stockholders.... $ 443 $ (541) $ (98)
======== ======== ========
</TABLE>
- ---------------
(i) Represents the Unconsolidated Subsidiaries historical consolidated results
of operations.
(ii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iii)Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG.
(iv) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG, based on the Partnership's new basis resulting from the allocation
of the purchase price of IFG.
(v) Represents adjustment for interest expense related to a note payable to the
Partnership.
(vi) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-25
<PAGE> 494
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR IFG
AND PROBABLE NHP AMBASSADOR PURCHASE PRICE AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $ 32,697 $ 25,214 $ (8,681) $ 3,437 $ 1,879 $ 4,744
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 43,520 28,817 7,354 20,372 5,997 17,248
Gain on investments............ -- -- (12) -- -- --
(Gain) loss on disposition of
properties.................... (2,720) 2,720 (3,882) -- -- (80)
Minority interests............. (1,008) (458) (16) 851 (705) 12,871
Equity in earnings of
unconsolidated partnerships... 1,798 122 8,542 (405) -- (12,515)
Equity in earnings of
unconsolidated subsidiaries... (4,636) -- (5,790) -- -- --
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 269 (269) -- -- -- (5,366)
Changes in operating assets and
operating liabilities......... 3,112 -- 5,314 (3,523) -- (4,384)
--------- --------- --------- --------- -------- --------
Total adjustments........... 40,335 30,932 11,510 17,295 5,292 7,774
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) operating activities... 73,032 56,146 2,829 20,732 7,171 12,518
Net cash used in
discontinued operations.... -- -- (7,999) -- -- --
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) continuing
operations................. 73,032 56,146 (5,170) 20,732 7,171 12,518
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... 21,792 19,627(I) -- -- -- --
Purchase of real estate.......... (376,315) (220,995)(J) (4,114) (24,179) -- --
Additions to real estate,
investments and property held
for sale....................... (26,966) (5,217)(K) (522) (19,033) -- (4,154)
Proceeds from sale of property
held for sale.................. 303 -- -- -- -- --
Purchase of general and limited
partnership interests.......... (199,146) -- (1,208) -- -- (76,104)
Purchase of management
contracts...................... -- -- (11,686) -- -- (36,868)
Purchase of/additions to notes
receivable..................... (59,787) -- (4,236) -- -- (17,647)
Proceeds from repayments of notes
receivable..................... -- -- 214 1,000 -- 8,838
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... 45,791 -- 3,097 3,183 -- 42,615
Contribution to unconsolidated
subsidiaries................... (42,879) -- -- -- -- --
Proceeds from sale of
securities..................... -- -- 642 -- -- --
Purchase of investments held for
sale........................... -- -- (73) -- -- --
Purchase of NHP mortgage loans... (60,575) -- -- -- -- --
Purchase of Ambassador common
stock.......................... (19,881) -- -- -- -- --
--------- --------- --------- --------- -------- --------
Net cash used in investing
activities................. (717,663) (206,585) (17,886) (39,029) -- (83,320)
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. 225,436 122,568(L) 145,519 156,746 -- 111,001
Principal repayments on secured
notes payable.................. (12,512) -- (141,032) (141,676) -- (12,697)
Proceeds from secured short-term
financing...................... 19,050 -- -- -- -- --
Repayments on secured short-term
financing...................... -- (259,027)(M) (434) -- -- --
Principal repayments on unsecured
short-term notes payable....... (79) (50,800)(M) -- -- -- --
Proceeds (payoff) from unsecured
short-term financing........... (12,500) -- -- -- -- --
Principal repayments on secured
tax-exempt bond financing...... (1,487) -- -- -- -- --
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... (162,008) -- -- -- -- --
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... (6,387) -- (245) (8,095) -- (2,305)
Proceeds from issuance of common
and preferred stock, net....... 643,224 357,389(N) 6,286 28,946 -- 62,420
Proceeds from exercises of
employee stock options and
warrants....................... 871 -- -- 3,195 -- 7,487
Repurchase of common stock....... -- -- -- -- -- (3,283)
Principal repayments received on
notes due from Officers........ 25,957 -- -- 1,323 -- --
Investments made by minority
interests...................... -- -- -- -- -- 249
Receipt of contributions from
minority interests............. -- 37,345(O) -- -- -- --
Payments of distribution to
minority interests............. -- (2,713)(P) -- -- -- --
Payment of distributions......... (44,660) (19,396)(Q) (11,503)(T) (15,717) (12,173)(U) (2,695)
Payment of distributions to
limited partners............... -- (5,193)(R) -- -- (15)(U) --
Payment of preferred unit
distributions.................. (846) (39,859)(S) -- (2,279) -- --
Payment of distributions to
minority interests............. (5,510) -- -- (3,700) -- (12,578)
Net transactions with
Insignia/ESG................... -- -- -- -- -- (57,612)
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) financing activities... 668,549 140,314 (1,409) 18,743 (12,188) 89,987
--------- --------- --------- --------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. 23,918 (10,125) (24,465) 446 (5,017) 19,185
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. 13,170 -- 36,277 4,002 -- 64,447
--------- --------- --------- --------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $ 37,088 $ (10,125) $ 11,812 $ 4,448 $ (5,017) $ 83,632
========= ========= ========= ========= ======== ========
<CAPTION>
IFG IFG
MERGER REORGANIZATION PRO
ADJUSTMENTS(G) ADJUSTMENTS(H) FORMA
-------------- -------------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $(80,023) $ 6,882 $ (13,851)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 35,049 (30,188) 128,169
Gain on investments............ -- -- (12)
(Gain) loss on disposition of
properties.................... 80 -- (3,882)
Minority interests............. (1,552) -- 9,983
Equity in earnings of
unconsolidated partnerships... 29,995 -- 27,537
Equity in earnings of
unconsolidated subsidiaries... -- 4,578 (5,848)
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 5,366 --
Changes in operating assets and
operating liabilities......... -- -- 519
-------- -------- -----------
Total adjustments........... 68,938 (25,610) 156,466
-------- -------- -----------
Net cash provided by (used
in) operating activities... (11,085) (18,728) 142,615
Net cash used in
discontinued operations.... -- -- (7,999)
-------- -------- -----------
Net cash provided by (used
in) continuing
operations................. (11,085) (18,728) 134,616
-------- -------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... -- -- 41,419
Purchase of real estate.......... -- -- (625,603)
Additions to real estate,
investments and property held
for sale....................... -- -- (55,892)
Proceeds from sale of property
held for sale.................. -- -- 303
Purchase of general and limited
partnership interests.......... -- -- (276,458)
Purchase of management
contracts...................... -- -- (48,554)
Purchase of/additions to notes
receivable..................... -- -- (81,670)
Proceeds from repayments of notes
receivable..................... -- -- 10,052
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... -- -- 94,686
Contribution to unconsolidated
subsidiaries................... -- -- (42,879)
Proceeds from sale of
securities..................... -- -- 642
Purchase of investments held for
sale........................... -- -- (73)
Purchase of NHP mortgage loans... -- -- (60,575)
Purchase of Ambassador common
stock.......................... -- -- (19,881)
-------- -------- -----------
Net cash used in investing
activities................. -- -- (1,064,483)
-------- -------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. -- -- 761,270
Principal repayments on secured
notes payable.................. -- -- (307,917)
Proceeds from secured short-term
financing...................... -- -- 19,050
Repayments on secured short-term
financing...................... -- -- (259,461)
Principal repayments on unsecured
short-term notes payable....... -- -- (50,879)
Proceeds (payoff) from unsecured
short-term financing........... -- -- (12,500)
Principal repayments on secured
tax-exempt bond financing...... -- -- (1,487)
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... -- -- (162,008)
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... -- -- (17,032)
Proceeds from issuance of common
and preferred stock, net....... -- -- 1,098,265
Proceeds from exercises of
employee stock options and
warrants....................... -- -- 11,553
Repurchase of common stock....... -- -- (3,283)
Principal repayments received on
notes due from Officers........ -- -- 27,280
Investments made by minority
interests...................... -- -- 249
Receipt of contributions from
minority interests............. -- -- 37,345
Payments of distribution to
minority interests............. -- -- (2,713)
Payment of distributions......... (24,513)(V) -- (130,657)
Payment of distributions to
limited partners............... -- -- (5,208)
Payment of preferred unit
distributions.................. -- -- (42,984)
Payment of distributions to
minority interests............. -- -- (21,788)
Net transactions with
Insignia/ESG................... -- -- (57,612)
-------- -------- -----------
Net cash provided by (used
in) financing activities... (24,513) -- 879,483
-------- -------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. (35,598) (18,728) (50,384)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. -- -- 117,896
-------- -------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $(35,598) $(18,728) $ 67,512
======== ======== ===========
</TABLE>
P-26
<PAGE> 495
- ---------------
(A) Represents the Partnership's audited consolidated statement of cash flows
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1997 Acquisitions; (ii) the 1997 Stock Offerings;
(iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings; (v) the 1998
Acquisitions; (vi) the Probably Purchases; (vii) the 1998 Dispositions; and
(viii) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(I) HISTORICAL(II) ADJUSTMENTS(III) REORGANIZATION(IV) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)................. $ (7,266) $ 4,350 $(2,222) $ (3,543) $ (8,681)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 4,058 9,134 5,125 (10,963) 7,354
Gain on investments............. (12) -- -- -- (12)
(Gain) loss on disposition of
properties.................... (3,882) -- -- -- (3,882)
Minority interests.............. (16) -- -- -- (16)
Equity in earnings of
unconsolidated partnerships... 3,905 -- 4,631 6 8,542
Equity in earnings of
unconsolidated subsidiaries... -- -- 4,636 (10,426) (5,790)
Changes in operating assets and
operating liabilities......... (1,036) 6,350 -- -- 5,314
-------- -------- ------- -------- ---------
Total adjustments........... 3,017 15,484 14,392 (21,383) 11,510
-------- -------- ------- -------- ---------
Net cash provided by (used
in) operating
activities................ (4,249) 19,834 12,170 (24,926) 2,829
Net cash used in
discontinued operations... -- (7,999) -- -- (7,999)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) continuing
operations................ (4,249) 11,835 12,170 (24,926) (5,170)
-------- -------- ------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate........... -- (4,114) -- -- (4,114)
Additions to real estate,
investments and property held
for sale........................ (522) -- -- -- (522)
Purchase of general and limited
partnership interests........... (1,208) -- -- -- (1,208)
Purchase of management
contracts....................... -- (11,686) -- -- (11,686)
Purchase of/additions to notes
receivable...................... -- (4,236) -- -- (4,236)
Proceeds from repayments of notes
receivable...................... 214 -- -- -- 214
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 3,097 -- -- -- 3,097
Proceeds from sale of
securities...................... 642 -- -- -- 642
Purchase of investments held for
sale............................ (73) -- -- -- (73)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) investing
activities................ 2,150 (20,036) -- -- (17,886)
-------- -------- ------- -------- ---------
</TABLE>
P-27
<PAGE> 496
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(I) HISTORICAL(II) ADJUSTMENTS(III) REORGANIZATION(IV) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes
payable borrowings.............. $ 74,019 $ 71,500 $ -- $ -- $ 145,519
Principal repayments on secured
notes payable................... (71,256) (69,776) -- -- (141,032)
Repayments on secured short-term
financing....................... (434) -- -- -- (434)
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (245) -- -- (245)
Proceeds from issuances of common
and preferred stock, net........ -- 6,286 -- -- 6,286
Payment of distributions.......... (2,000) -- (9,503) -- (11,503)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) financing
activities................ 329 7,765 (9,503) -- (1,409)
-------- -------- ------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (1,770) (436) 2,667 (24,926) (24,465)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 25,795 10,482 -- -- 36,277
-------- -------- ------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 24,025 $ 10,046 $ 2,667 $(24,926) $ 11,812
======== ======== ======= ======== =========
</TABLE>
- ---------------
(i)Represents the adjustment to record cash flow activity from January 1,
1997 to the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. In addition,
represents adjustments to record additional deprecation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest expense
incurred in connection with borrowings incurred by the Partnership to
consummate the NHP Real Estate Acquisition.
(ii)
Represents the unaudited consolidated statement of cash flows of NHP
for the period from January 1, 1997 through December 8, 1997 (date of
the NHP Merger).
(iii)
Represents the following adjustments occurring as a result of the NHP
Merger: (i) the reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan; (ii) the incremental
depreciation of the purchase price adjustment related to real estate;
(iii) the incremental amortization of the purchase price adjustment
related to management contracts, furniture, fixtures and equipment, and
goodwill; (iv) the reversal of equity in earnings of NHP during the
pre-merger period when the Partnership held a 47.62% interest in NHP;
and (v) the amortization of the increased basis in investments in real
estate partnerships, based on the purchase price adjustment related to
real estate and an estimated average life of 20 years.
(iv)
Represents adjustments related to the NHP Reorganization, whereby the
Partnership contributed or sold to the Unconsolidated Subsidiaries and
the Unconsolidated Partnership; (i) certain assets and liabilities of
NHP, primarily related to the management operations and other
businesses owned by NHP and (ii) 12 real estate properties containing
2,905 apartment units. The adjustments represent (i) the related cash
flow activity primarily related to the management operations of such
real estate partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis resulting
from the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies.
(D) Represents the audited historical statement of cash flows of Ambassador for
the year ended December 31, 1997. Certain reclassifications have been made
to Ambassador's historical statement of cash flows to conform to the
Partnership's statement of cash flows presentation. The Ambassador
P-28
<PAGE> 497
historical statement of cash flows excludes an extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................... $ 10,233 $ 7,566 $(13,055) $ 4,744
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization...... 32,675 63 (15,490) 17,248
Gain on disposition of property.... -- (80) -- (80)
Minority interests................. 12,448 382 41 12,871
Equity in earnings of
unconsolidated partnerships...... (10,027) (2,639) 151 (12,515)
Extraordinary gain on early
extinguishment of debt........... (5,366) -- -- (5,366)
Changes in operating assets and
liabilities...................... -- (2,405) (1,979) (4,384)
--------- -------- -------- --------
Total adjustments............. 29,730 (4,679) (17,277) 7,774
--------- -------- -------- --------
Net cash provided by (used in) operating
activities............................ 39,963 2,887 (30,332) 12,518
--------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to real estate, investments
and property held for sale......... (7,695) 665 2,876 (4,154)
Purchase of general and limited
partnership interests.............. (93,118) -- 17,014 (76,104)
Purchase of management contracts...... (99,540) -- 62,672 (36,868)
Purchase of/additions to notes
receivable......................... (9,172) (14,251) 5,776 (17,647)
Proceeds from repayments of notes
receivable......................... 4,523 7,552 (3,237) 8,838
Distributions from investments in real
estate partnerships and
unconsolidated subsidiaries........ 44,823 -- (2,208) 42,615
--------- -------- -------- --------
Net cash provided by (used in)
investing activities........ (160,179) (6,034) 82,893 (83,320)
--------- -------- -------- --------
</TABLE>
P-29
<PAGE> 498
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable
borrowings......................... $ 118,141 $ -- $ (7,140) $111,001
Principal repayments on secured notes
payable............................ (15,682) -- 2,985 (12,697)
Payment of loan costs, net of proceeds
from interest rate hedge........... (2,305) -- -- (2,305)
Proceeds from issuance of common and
preferred stock, net............... 62,420 -- -- 62,420
Proceeds from exercises of employee
stock options and warrants......... 7,487 -- -- 7,487
Repurchase of common stock............ (3,283) -- -- (3,283)
Investment made by minority
interests.......................... 249 -- -- 249
Payment of distributions.............. -- (2,695) -- (2,695)
Payment of distributions to minority
interests.......................... (12,578) -- -- (12,578)
Net transactions with Insignia/ESG.... -- -- (57,612) (57,612)
--------- -------- -------- --------
Net cash provided by (used in)
financing activities........ 154,449 (2,695) (61,767) 89,987
--------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 34,233 (5,842) (9,206) 19,185
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD............................. 54,614 9,789 44 64,447
--------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................ $ 88,847 $ 3,947 $ (9,162) $ 83,632
========= ======== ======== ========
</TABLE>
- ---------------
(i)Represents the audited consolidated statement of cash flows of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report on
Form 10-K. Certain reclassifications have been made to IFG's historical
statement of cash flows to conform to the Partnership's statement of
cash flows presentation.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(I) Represents proceeds from the sale of the 1998 Dispositions, as if these
dispositions occurred on January 1, 1997.
P-30
<PAGE> 499
(J) Represents the use of cash to purchase the 1998 Acquisitions and the
Probable Purchases, as if these acquisitions occurred on January 1, 1997.
(K) Represents cash payments for capital improvements of $300 per unit on the
1997 Acquisitions, the 1998 Acquisitions and the Probable Purchases.
(L) Represents notes payable assumed in connection with the 1998 Acquisitions
and the Probable Purchases, assuming these transactions occurred January 1,
1997.
(M) Represents net principal repayments assuming the 1998 Acquisitions, the
1998 Dispositions, the Probable Purchases, the 1998 Stock Offerings and the
Preferred Partnership Unit Offering occurred January 1, 1997.
(N) Represents cash proceeds from the 1998 Stock Offerings, as if these
offerings occurred on January 1, 1997.
(O) Represents contributions from minority interests assuming the Preferred
Partnership Unit Offering occurred January 1, 1997.
(P) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(Q) Represents distributions paid on the 1997 Stock Offerings as if these
occurred on January 1, 1997.
(R) Represents distributions paid to limited partners on OP Units issued in
connection with the 1997 Acquisitions, the 1998 Acquisitions and the
Probable Purchases, as if the issuance of the OP Units occurred on January
1, 1997.
(S) Represents preferred unit distributions paid on the Class B Preferred
Stock, the Class C Preferred Stock and the 1998 Stock Offerings as if these
occurred on January 1, 1997.
(T) Represents historical distributions of $2,000 and pro forma distributions
on the shares issued in the NHP Merger as if these shares had been issued
on January 1, 1997.
(U) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(V) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-31
<PAGE> 500
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE AMBASSADOR PURCHASE PRICE IFG AS IFG MERGER
HISTORICAL(A) PURCHASE(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 56,269 $ 3,432 $ (2,382) $ 4,255 $ (36,338) $ 7,679
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 67,344 7,512 7,520 1,420 14,890 25,478
(Gain) loss on disposition of
properties..................... (2,783) 2,783 -- -- (6,576) 6,576
Minority interests.............. 1,052 (160) 252 (252) 14,159 (6,622)
Equity in earnings of
unconsolidated partnerships.... 5,078 -- 71 -- (13,492) 18,577
Equity in earnings of
unconsolidated subsidiaries.... (8,413) -- -- -- -- --
Non-cash compensation........... -- -- -- -- 796 --
Changes in operating assets and
operating liabilities.......... (67,722) -- 5,948 -- (7,775) --
--------- -------- -------- ------- --------- --------
Total adjustments............ (5,444) 10,135 13,791 1,168 2,002 44,009
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) operating activities... 50,825 13,567 11,409 5,423 (34,336) 51,688
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... (63,839) 63,839(H) -- -- 27,122 --
Additions to real estate.......... (47,878) (1,198)(I) (17,759) -- 9,309 --
Proceeds from sale of property and
investments held for sale....... 19,627 (19,627)(J) -- -- (35) --
Additions to property held for
sale............................ (1,986) -- -- -- -- --
Purchase of general and limited
partnership interests........... (27,016) -- -- -- 17,420 --
Purchase of/additions to notes
receivable...................... (72,445) -- -- -- (27,589) --
Proceeds from repayments/sale of
notes receivable................ 21,562 -- -- -- 21,185 --
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 513 -- 1,063 -- 22,053 --
Payment of trust based preferred
dividends....................... -- -- -- -- (7,415) --
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... 4,492 -- -- -- 13,423 --
Contribution to unconsolidated
subsidiaries.................... (13,032) -- -- -- -- --
Purchase of investments held for
sale............................ (4,935) -- -- -- -- --
Redemption of OP Units............ (516) -- -- -- -- --
Merger costs...................... -- -- -- -- (1,402) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) investing activities... (185,453) 43,014 (16,696) -- 74,071 --
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. 77,489 -- 37,162 -- 177,234 --
Principal repayments on secured
notes payable................... (56,262) -- -- -- 4,239 --
Principal advances on secured
tax-exempt bond financing....... -- -- 21,784 -- -- --
Principal repayments on secured
tax-exempt bond financing....... (1,436) -- -- -- -- --
Net borrowings/repayments on
secured short-term financing.... (30,693) 209,027(K) (43,002) -- -- --
Net borrowings (paydowns) on the
revolving credit facilities..... -- -- 2,513 -- -- --
Principal repayments on unsecured
short-term notes payable........ -- -- -- -- 2,644 --
Payment of loan costs, net of
proceeds from interest rate
hedge........................... (5,727) -- -- -- (83) --
Proceeds from issuance of common
stock and preferred stock,
net............................. 253,239 (253,239)(L) -- -- -- --
Repurchase of common stock........ (10,972) -- -- -- -- --
Proceeds from exercises of
employee stock options and
warrants........................ -- -- 9,761 -- 6,533 --
Principal repayments received on
notes due from Officers......... 8,084 -- -- -- -- --
Payments of distributions to
minority interests.............. -- (2,034)(M) -- -- -- --
Payment of distributions.......... (73,322) -- -- (3,701)(P) (8,606) (22,360)(Q)
Payment of distributions to
limited partners................ (10,251) (1,919)(N) -- (5)(P) (494) --
Payment of preferred unit
distributions................... (10,916) (16,094)(O) -- -- -- --
Proceeds from issuance of High
Performance Units............... 1,988 -- -- -- -- --
Net transactions with
Insignia/ESG.................... -- -- -- -- (241,003) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) financing activities... 141,221 (64,259) 28,218 (3,706) (59,536) (22,360)
--------- -------- -------- ------- --------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. 6,593 (7,678) 22,931 1,717 (19,801) 29,328
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 37,088 (10,125) 4,448 (5,017) 83,632 (35,598)
--------- -------- -------- ------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 43,681 $(17,803) $ 27,379 $(3,300) $ 63,831 $ (6,270)
========= ======== ======== ======= ========= ========
<CAPTION>
IFG
REORGANIZATION PRO
ADJUSTMENTS(G) FORMA
-------------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 8,578 $ 41,493
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... (22,641) 101,523
(Gain) loss on disposition of
properties..................... -- --
Minority interests.............. -- 8,429
Equity in earnings of
unconsolidated partnerships.... -- 10,234
Equity in earnings of
unconsolidated subsidiaries.... 7,562 (851)
Non-cash compensation........... -- 796
Changes in operating assets and
operating liabilities.......... -- (69,549)
-------- ---------
Total adjustments............ (15,079) 50,582
-------- ---------
Net cash provided by (used
in) operating activities... (6,501) 92,075
-------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... -- 27,122
Additions to real estate.......... -- (57,526)
Proceeds from sale of property and
investments held for sale....... -- (35)
Additions to property held for
sale............................ -- (1,986)
Purchase of general and limited
partnership interests........... -- (9,596)
Purchase of/additions to notes
receivable...................... -- (100,034)
Proceeds from repayments/sale of
notes receivable................ -- 42,747
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... -- 23,629
Payment of trust based preferred
dividends....................... -- (7,415)
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... -- 17,915
Contribution to unconsolidated
subsidiaries.................... -- (13,032)
Purchase of investments held for
sale............................ -- (4,935)
Redemption of OP Units............ -- (516)
Merger costs...................... -- (1,402)
-------- ---------
Net cash provided by (used
in) investing activities... -- (85,064)
-------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. -- 291,885
Principal repayments on secured
notes payable................... -- (52,023)
Principal advances on secured
tax-exempt bond financing....... -- 21,784
Principal repayments on secured
tax-exempt bond financing....... -- (1,436)
Net borrowings/repayments on
secured short-term financing.... -- 135,332
Net borrowings (paydowns) on the
revolving credit facilities..... -- 2,513
Principal repayments on unsecured
short-term notes payable........ -- 2,644
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (5,810)
Proceeds from issuance of common
stock and preferred stock,
net............................. -- --
Repurchase of common stock........ -- (10,972)
Proceeds from exercises of
employee stock options and
warrants........................ -- 16,294
Principal repayments received on
notes due from Officers......... -- 8,084
Payments of distributions to
minority interests.............. -- (2,034)
Payment of distributions.......... -- (107,989)
Payment of distributions to
limited partners................ -- (12,669)
Payment of preferred unit
distributions................... -- (27,010)
Proceeds from issuance of High
Performance Units............... -- 1,988
Net transactions with
Insignia/ESG.................... -- (241,003)
-------- ---------
Net cash provided by (used
in) financing activities... -- 19,578
-------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (6,501) 26,589
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... (18,728) 55,700
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $(25,229) $ 82,289
======== =========
</TABLE>
P-32
<PAGE> 501
- ---------------
(A) Represents the Partnership's unaudited consolidated statement of cash flows
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1998 Stock Offerings; (ii) the 1998 Acquisitions;
(iii) the Probably Purchases; (iv) the 1998 Dispositions and (v) the
Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of cash flows of Ambassador
for the four months ended April 20, 1998. Certain reclassifications have
been made to Ambassador's historical statement of cash flows to conform to
the Partnership's statement of cash flows presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ (36,017) $ 4,718 $ (5,039) $(36,338)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 27,685 48 (12,843) 14,890
Gain on disposition of property......................... (5,888) (688) -- (6,576)
Minority interests...................................... 14,159 -- -- 14,159
Equity in earnings of unconsolidated partnerships....... (12,169) -- (1,323) (13,492)
Non-cash compensation................................... 796 -- -- 796
Changes in operating assets and liabilities............. (18,853) (1,499) 12,577 (7,775)
--------- -------- --------- --------
Total adjustments................................... 5,730 (2,139) (1,589) 2,002
--------- -------- --------- --------
Net cash provided by (used in) operating
activities........................................ (30,287) 2,579 (6,628) (34,336)
--------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... (3,804) -- 30,926 27,122
Additions to real estate.................................. (2,252) (25) 11,586 9,309
Proceeds from sales of property and investments held for
sale.................................................... -- 161 (196) (35)
Purchase of general and limited partnership interests..... (44,270) -- 61,690 17,420
Purchases of / additions to notes receivable.............. (17,107) (15,407) 4,925 (27,589)
Proceeds from repayments/sale of notes receivable......... 151 23,672 (2,638) 21,185
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 21,360 -- 693 22,053
Payment of trust based preferred dividends................ (7,415) -- -- (7,415)
Cash received in connection with AMIT Merger.............. 13,423 -- -- 13,423
Merger costs.............................................. (1,402) -- -- (1,402)
--------- -------- --------- --------
Net cash provided by (used in) investing
activities........................................ (41,316) 8,401 106,986 74,071
--------- -------- --------- --------
</TABLE>
P-33
<PAGE> 502
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 186,000 -- (8,766) 177,234
Principal repayments on secured notes payable............. (1,874) -- 6,113 4,239
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (83) -- -- (83)
Proceeds from exercises of employee stock options and
warrants................................................ 6,533 -- -- 6,533
Payment of distributions.................................. (6,541) (2,065) -- (8,606)
Payment of distributions minority interests............... (494) -- -- (494)
Net transactions with Insignia/ESG........................ (118,424) -- (122,579) (241,003)
--------- -------- --------- --------
Net cash provided by (used in) financing
activities........................................ 67,761 (2,065) (125,232) (59,536)
--------- -------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (3,842) 8,915 (24,874) (19,801)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 88,847 3,947 (9,162) 83,632
--------- -------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 85,005 $ 12,862 $ (34,036) $ 63,831
========= ======== ========= ========
</TABLE>
- ---------------
(i)Represents the unaudited consolidated statement of cash flows of IFG
for the nine months ended September 30, 1998. Certain reclassifications
have been made to IFG's historical statement of cash flows to conform
to the Partnership's statement of cash flows presentation. In addition,
the cash and cash equivalents at the beginning of the period has been
adjusted.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock. In addition, the cash and cash equivalents at the beginning of
the period has been adjusted.
(F) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(H) Represents adjustment to remove the use of cash to purchase the 1998
Acquisitions, as if these acquisitions occurred on January 1, 1997;
therefore, the purchases are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(I) Represents cash payments for capital improvements of $300 per unit on the
1998 Acquisitions.
(J) Represents adjustment to remove the proceeds from the sale of the 1998
Dispositions, as if these dispositions occurred on January 1, 1997;
therefore, the proceeds are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(K) Represents adjustment to remove net principal repayments assuming the 1998
Acquisitions, the 1998 Dispositions and the 1998 Stock Offerings occurred
January 1, 1997; therefore, the repayments are included on the Pro Forma
Consolidated Statement of Cash Flows for the year ended December 31, 1997.
(L) Represents adjustment to remove cash proceeds from the 1998 Stock
Offerings, as if these offerings occurred on January 1, 1997; therefore,
the repayments are included on the Pro Forma Consolidated Statement of Cash
Flows for the year ended December 31, 1997.
P-34
<PAGE> 503
(M) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(N) Represents distributions paid to limited partners on OP Units issued in
connection with the 1998 Acquisitions and the Probable Purchases, as if the
issuance of the OP Units occurred on January 1, 1997.
(O) Represents preferred unit distributions paid on the 1998 Stock Offerings as
if these occurred on January 1, 1997.
(P) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(Q) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-35
<PAGE> 504
PRO FORMA FINANCIAL INFORMATION OF
AIMCO PROPERTIES, L.P.
(EXCHANGE OFFERS)
INTRODUCTION
AIMCO Properties L.P. (the "Partnership") intends to offer to purchase
limited partnership interests in syndicated real estate limited partnerships in
which AIMCO holds partnership interests. The Partnership, is subject to
applicable law, plans to offer to purchase certain of such limited partnership
interests in exchange for (i) equity securities of the Partnership; (ii) cash or
(iii) a combination of such equity securities and cash. Such offers are expected
to include terms that will allow limited partners to continue to hold their
limited partnership interests.
The following Pro Forma Consolidated Balance Sheet (Exchange Offers) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) all the
transactions discussed in the Pro Forma Financial Statements (Insignia Merger)
appearing elsewhere herein; and (ii) the acceptance of exchange offers by
limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) all
the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1998: (i)
all the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The Pro Forma Financial Information (Exchange Offers) is based, in part, on
the historical financial statements of the partnerships in which the Exchange
Offers are made. The Pro Forma Financial Information (Exchange Offers) is also
based, in part, on the Pro Forma Financial Information (Insignia Merger) of the
Partnership included elsewhere herein. Such pro forma information is based in
part upon: (i) the audited Consolidated Financial Statements of Insignia for the
year ended December 31, 1997; (ii) the audited Consolidated Financial Statements
of Angeles Mortgage Investment Trust ("AMIT") for the year ended December 31,
1997; (iii) the unaudited Consolidated Financial Statements of Insignia for the
nine months ended September 30, 1998; and (iv) the unaudited Consolidated
Financial Statements of AMIT for the period from January 1, 1998 to September
17, 1998. The Pro Forma Financial Information (Insignia Merger) is also based,
in part, upon: (i) the audited Consolidated Financial Statements of Ambassador
for the year ended December 31, 1997; (ii) the audited Consolidated Financial
Statements of the Partnership for the year ended December 31, 1997; (iii) the
unaudited Consolidated Financial Statements of Ambassador for the four months
ended April 30, 1998; (iv) the unaudited Consolidated Financial Statements of
the Partnership for the nine months ended September 30, 1998; and (v) the
historical financial statements of certain properties and companies acquired by
AIMCO filed in AIMCO's Current Reports on Form 8-K, dated April 16, 1997, May 5,
1997, June 3, 1997, September 19, 1997, October 15, 1997, December 1, 1997 and
November 2, 1998. The following Pro Forma Financial Information (Exchange
Offers) should be read in conjunction with such financial statements and notes
thereto.
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared under the assumption that after the exchange offers are accepted, AIMCO
will own varying ownership percentages of each partnership, and that the limited
partners will choose to elect to receive 35% of the consideration in the form of
equity securities of AIMCO Properties, L.P. and 65% of the consideration in the
form of cash. The
P-36
<PAGE> 505
interest to be acquired in each of the partnerships, the estimated purchase
price for each partnership, including cash, common units, or preferred units is
summarized below:
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Angeles Income Properties, Ltd. II.................... 26.70 $ 4,946 $ 3,215 $1,731
Angeles Income Properties, Ltd. III................... 30.63 2,156 1,401 755
Angeles Income Properties, Ltd. IV.................... 18.64 1,154 750 404
Angeles Income Properties, Ltd. 6..................... 37.29 4,523 2,940 1,583
Angeles Opportunity Properties, Ltd................... 37.94 1,729 1,124 605
Angeles Partners VII.................................. 24.86 610 397 213
Angeles Partners VIII................................. 24.80 0 0 0
Angeles Partners IX................................... 18.92 1,171 761 410
Angeles Partners X.................................... 22.97 709 461 248
Angeles Partners XI................................... 21.83 205 133 72
Angeles Partners XII.................................. 11.89 2,877 1,870 1,007
Angeles Partners XIV.................................. 24.93 0 0 0
Baywood Partners, Ltd................................. 25.00 347 226 121
Brampton Associates Partnership....................... 25.00 382 248 134
Buccaneer Trace Limited Partnership................... 25.00 2 1 1
Burgundy Court Associates, L.P........................ 25.00 1,074 698 376
Calmark/Fort Collins, Ltd............................. 25.00 192 125 67
Calmark Heritage Park II Ltd.......................... 25.00 47 31 16
Casa Del Mar Associates Limited Partnership........... 21.16 503 327 176
Catawba Club Associates, L.P.......................... 25.00 85 55 30
Cedar Tree Investors Limited Partnership.............. 25.00 1,037 674 363
Century Properties Fund XVI........................... 12.52 831 540 291
Century Properties Fund XVIII......................... 13.08 474 308 166
Century Properties Fund XIX........................... 15.30 1,765 1,147 618
Century Properties Growth Fund XXII................... 21.43 4,977 3,235 1,742
Chapel Hill, Limited.................................. 21.15 569 370 199
Chestnut Hill Associates Limited Partnership.......... 26.75 1,582 1,028 554
Coastal Commons Limited Partnership................... 25.00 566 368 198
Consolidated Capital Institutional Properties/2 &
Consolidated Capital Equity Properties/2............ 18.98 7,320 4,758 2,562
Consolidated Capital Institutional Properties/3....... 16.37 6,770 4,401 2,369
Consolidated Capital Properties III................... 13.02 1,134 737 397
Consolidated Capital Properties IV.................... 18.04 9,407 6,112 3,295
Consolidated Capital Properties V..................... 16.69 560 364 196
Consolidated Capital Properties VI.................... 25.82 556 361 195
DFW Apartment Investors Limited Partnership........... 35.65 2,719 1,767 952
DFW Residential Investors Limited Partnership......... 37.60 1,092 710 382
Davidson Diversified Real Estate I, L.P............... 34.78 627 408 219
Davidson Diversified Real Estate II, L.P.............. 35.11 1,318 857 461
Davidson Diversified Real Estate III, L.P............. 21.76 0 0 0
Davidson Growth Plus, L.P............................. 23.91 2,304 1,498 806
Davidson Income Real Estate, L.P...................... 30.81 2,691 1,749 942
Drexel Burnham Lambert Real Estate Associates II...... 19.58 994 646 348
Four Quarters Habitat Apartment Associates, Ltd....... 25.00 174 113 61
Fox Strategic Housing Income Partners................. 33.18 2,414 1,569 845
Georgetown of Columbus Associates, L.P................ 25.00 227 148 79
HCW Pension Real Estate Fund Limited Partnership...... 32.64 2,368 1,539 829
Investors First-Staged Equity......................... 49.00 306 199 107
Johnstown/Consolidated Income Partners................ 25.66 1,871 1,216 655
La Colina Partners, Ltd............................... 25.00 583 379 204
Lake Eden Associates, L.P............................. 25.00 632 411 221
Landmark Associates, L.P.............................. 25.00 48 31 17
</TABLE>
P-37
<PAGE> 506
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Minneapolis Associates II Limited Partnership......... 25.00 $ 2 $ 1 $ 1
Multi-Benefit Realty Fund "87-1-Class A & Class B..... 21.89 1,657 1,077 580
National Property Investors 8......................... 11.13 988 642 346
Northbrook Apartments, Ltd............................ 25.00 209 136 73
Olde Mill Investors Limited Partnership............... 8.75 170 111 59
Orchard Park Apartments Limited Partnership........... 25.00 1 1 0
Park Town Place Associates Limited Partnership........ 24.70 298 194 104
Quail Run Associates, L.P............................. 25.00 487 317 170
Ravensworth Associates Limited Partnership............ 25.00 1 1 0
Rivercreek Apartments Limited Partnership............. 25.00 180 117 63
Rivercrest Apartments, Limited........................ 25.00 1,687 1,097 590
Riverside Park Associates L.P......................... 13.69 590 384 206
Salem Arms of Augusta Limited Partnership............. 25.00 278 181 97
Shaker Square, L.P.................................... 23.75 631 410 221
Shannon Mannor Apartments, Limited Partnership........ 25.00 1,170 761 409
Sharon Woods, L.P..................................... 22.75 499 324 175
Shelter Properties III................................ 15.20 1,960 1,274 686
Shelter Properties IV................................. 50.52 12,764 8,295 4,469
Shelter Properties VI................................. 13.78 1,919 1,247 672
Shelter Properties VII Limited Partnership............ 26.65 1,975 1,284 691
Snowden Village Associates, L.P....................... 25.00 443 288 155
Springhill Lake Investors Limited Partnership......... 11.84 2,908 1,890 1,018
Sturbrook Investors, Ltd.............................. 25.00 377 245 132
Sycamore Creek Associates, L.P........................ 25.00 1 1 0
Texas Residential Investors Limited Partnership....... 18.45 1,147 746 401
Thurber Manor Associates, Limited Partnership......... 25.00 218 142 76
U.S. Realty Partners Limited Partnership.............. 25.00 1,441 937 504
United Investors Growth Properties.................... 39.01 165 107 58
United Investors Growth Properties II................. 25.00 351 228 123
United Investors Income Properties.................... 23.44 1,977 1,285 692
Villa Nova, Limited Partnership....................... 25.00 228 148 80
Walker Springs, Limited............................... 23.99 95 62 33
Wingfield Investors Limited Partnership............... 25.00 179 116 63
Winrock-Houston Limited Partnership................... 13.60 1,041 677 364
Winthrop Apartment Investors Limited Partnership...... 31.60 1,318 857 461
Winthrop Growth Investors 1 Limited Partnership....... 27.94 1,233 801 432
Winthrop Texas Investors Limited Partnership.......... 5.27 158 103 55
Woodmere Associates, L.P.............................. 25.00 280 182 98
Yorktown Towers Associates............................ 25.00 809 526 283
-------- ------- ------
Total (See adjustment C to the Pro Forma Consolidated
Balance Sheet)...................................... $122,463 $79,601 42,862
======== ======= ======
</TABLE>
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
Exchange Offers, the 1997 Acquisitions, the 1998 Acquisitions and the Probable
Purchases are adjusted to estimated fair market value, based on preliminary
estimates, which are subject to change as additional information is obtained.
The allocations of purchase costs are subject to final determination based upon
estimates and other evaluations of fair market value. Therefore, the allocations
reflected in the following unaudited Pro Forma Financial Information (Exchange
Offers) may differ from the amounts ultimately determined.
P-38
<PAGE> 507
The following unaudited Pro Forma Financial Information (Exchange Offers)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions, results of
operations or cash flows. In the opinion of the Partnership's management, all
material adjustments necessary to reflect the effects of these transactions have
been made.
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (EXCHANGE OFFERS)
AS OF SEPTEMBER 30, 1998
ASSETS
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C>
Real estate....................................... $2,625,822 $ 12,764(C)
26,954(D)
13,655(E) $2,679,195
Property held for sale............................ 42,212 -- 42,212
Investments in and notes receivable from
unconsolidated subsidiaries..................... 186,277 -- 186,277
Investments in and notes receivable from
unconsolidated partnerships..................... 924,309 109,699(C)
(13,655)(E)
(8,161)(F)
816(G) 1,013,008
Mortgage notes receivable......................... 20,916 -- 20,916
Cash and cash equivalents......................... 104,955 2,620(D) 107,575
Restricted cash................................... 84,526 1,807(D) 86,333
Accounts receivable............................... 27,900 1,081(D) 28,981
Deferred financing costs.......................... 21,835 -- 21,835
Goodwill.......................................... 251,024 -- 251,024
Property management contracts..................... 38,371 -- 38,371
Other assets...................................... 82,670 422(D) 83,092
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
LIABILITIES AND PARTNERS' CAPITAL
Secured notes payable............................. $ 926,246 $ 23,642(D) $ 949,888
Secured tax-exempt bond financing................. 399,925 -- 399,925
Secured short-term financing...................... 32,691 -- 32,691
Unsecured short-term financing.................... 300,000 79,601(C) 379,601
Accounts payable, accrued and other liabilities... 248,253 826(D) 249,079
Security deposits and deferred income............. 13,171 255(D) 13,426
---------- -------- ----------
1,920,286 104,324 2,024,610
Minority interests................................ 79,431 816(G) 80,247
Company obligated mandatorily redeemable
convertible securities of a subsidiary trust.... 149,500 -- 149,500
Redeemable common partnership units............... 277,581 8,161(D)
(8,161)(F)
30,616(C) 308,197
Redeemable preferred partnership units............ -- 12,246(C) 12,246
Partner's capital
General and Special Limited Partner............. 1,496,457 -- 1,496,457
Preferred Units................................. 487,562 -- 487,562
---------- -------- ----------
1,984,019 -- 1,984,019
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
P-39
<PAGE> 508
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical balance sheet data as of September 30, 1998 (unaudited) related
to the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Real estate................................................. $1,082,652
Cash........................................................ 151,024
Total assets................................................ 1,493,409
Mortgages payable........................................... 1,585,196
Partners' capital (deficit)................................. (171,740)
</TABLE>
(C) Represents the purchase price paid by the Partnership to the limited
partners in order to obtain additional ownership by AIMCO in 91 real estate
partnerships. For the purposes of the pro-forma presentation, it is
assumed: (i) 65% of the purchase price is funded with cash by drawing down
on the Partnership's unsecured short term credit facility; (ii) 25% of the
purchase price is funded by the issuance of 749,362 OP Units at $40 per OP
Unit; and (iii) 10% of the purchase price is funded by the issuance of 8%
Preferred OP Units.
(D) Represents historical balance sheet data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(E) Represent the adjustment to real estate recorded in the IFG Merger related
to the one real estate partnership that will be consolidated as a result of
the Partnership's purchase of additional partnership interests.
(F) Represents the elimination of the partners' capital in the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(G) Represents minority interest of the one real estate partnership that will
be consolidated as a result of the Partnership's purchase of additional
partnership interests.
P-40
<PAGE> 509
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations.............. $ 431,256 $ 11,270(C) $ 442,526
Property operating expenses....................... (182,830) (6,612)(C) (189,442)
Owned property management expense................. (11,831) -- (11,831)
Depreciation...................................... (96,264) (2,589)(C) (98,853)
--------- -------- ---------
Income from property operations................... 140,331 2,069 142,400
--------- -------- ---------
Management fees and other income.................. 41,676 -- 41,676
Management and other expenses..................... (23,683) -- (23,683)
Corporate overhead allocation..................... (588) -- (588)
Amortization...................................... (26,480) -- (26,480)
--------- -------- ---------
Income from service company business.............. (9,075) -- (9,075)
Minority interest in service company business..... (10) -- (10)
--------- -------- ---------
Partnership's share of income from service company
business........................................ (9,085) -- (9,085)
--------- -------- ---------
General and administrative expenses............... (21,371) -- (21,371)
Interest expense.................................. (113,788) (5,691)(D)
(2,220)(C) (121,699)(H)
Interest income................................... 21,734 21,734
Minority interests................................ (9,983) (51)(E) (10,034)
Equity in losses of unconsolidated partnerships... (27,537) (16,864)(F)
483(G) (43,918)(I)
Equity in earnings of Unconsolidated
Subsidiaries.................................... 5,848 -- 5,848
--------- -------- ---------
Net income (loss)................................. (13,851) (22,274) (36,125)(H)
Income attributable to Preferred Unitholders...... 42,174 980 43,154(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders...... (56,025) $(23,254) $ (79,279)(H)
========= ======== =========
Basic earnings (loss) per OP Unit................. (.83) $ (1.16)(H)
========= =========
Diluted earnings (loss) per OP Unit............... $ (.83) $ (1.16)(H)
========= =========
Weighted average OP Units outstanding............. 67,522 68,287
========= =========
Weighted average OP Units and equivalents
outstanding..................................... 68,366 69,131
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $456,968
Operating expense........................................... 249,097
Depreciation................................................ 87,344
Interest.................................................... 138,778
Net income.................................................. 15,005
</TABLE>
P-41
<PAGE> 510
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $10,740 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $6,124 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net loss,
preferred unit distributions, and net loss per OP Unit in the event that
the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- --------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense......... $(121,699) $(124,763) $(116,008) $(116,008)
Net loss................. (36,125) (39,189 (30,434) (30,434)
Preferred unit
distributions.......... 43,154 42,174 42,174 51,971
Net loss attributable to
OP Unitholders......... (79,279) (81,363) (72,608) (82,405)
Net loss per OP Unit..... (1.16) (1.20) (1.03) (1.22)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................. $ 1,137 $ 1,245 $ 938 $ 938
Net loss................... (37,262) (40,434) (31,372) (31,372)
Net loss attributable to OP
Unitholders.............. (80,416) (82,608) (73,546) (83,343)
Net loss per OP Unit....... (1.18) (1.22) (1.04) (1.23)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, the Partnership will own 49%
of certain 88 Partnerships, 25% of two Partnerships, and 100% of one
Partnership. The amount included in the pro forma financial statements
assume an acceptance rate of 100%. The following table shows the effect on
equity in earnings of unconsolidated partnerships, net loss, net loss
attributable to OP Unitholders, and net loss per OP Unit in the event that
the Partnership will have an acceptance rate of 50% of the interests
tendered and will own varying percentages of each partnership:
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(36,510)
Net loss.................................................... (26,084)
Net loss attributable to OP Unitholders..................... (68,784)
Net loss per OP Unit........................................ (1.01)
</TABLE>
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-42
<PAGE> 511
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations............... $ 337,307 $ 8,654(C) $ 345,961
Property operating expenses........................ (131,851) (4,389)(C) (136,240)
Owned property management expense.................. (8,933) -- (8,933)
Depreciation....................................... (78,479) (1,941)(C) (80,420)
--------- -------- ---------
Income from property operations.................... 118,044 2,324 120,368
--------- -------- ---------
Management fees and other income................... 28,912 -- 28,912
Management and other expenses...................... (14,386) -- (14,386)
Corporate overhead allocation...................... (196) -- (196)
Amortization....................................... (15,243) -- (15,243)
--------- -------- ---------
Income from service company business............... (913) -- (913)
Minority interest in service company business...... -- -- --
--------- -------- ---------
Partnership's share of income from service company
business......................................... (913) -- (913)
--------- -------- ---------
General and administrative expenses................ (8,632) -- (8,632)
Interest expense................................... (85,010) (4,250)(D)
(1,630)(C) (90,890)(H)
Interest income.................................... 40,887 40,887
Minority interests................................. (8,429) (119)(E) (8,548)
Equity in losses of unconsolidated partnerships.... (10,234) (13,156)(F)
41(G) (23,349)(I)
Equity in earnings of Unconsolidated
Subsidiaries..................................... 851 -- 851
Amortization of goodwill........................... (5,071) -- (5,071)
--------- -------- ---------
Net income (loss).................................. 41,493 (16,790) 24,703(H)
Income attributable to Preferred Unitholders....... 32,414 735 33,149(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders....... $ 9,079 $(17,525) $ (8,446)(H)
========= ======== =========
Basic earnings (loss) per OP Unit.................. $ .13 $ (.12)(H)
========= =========
Diluted earnings (loss) per OP Unit................ $ .13 $ (.12)(H)
========= =========
Weighted average OP Units outstanding.............. 68,554 69,319
========= =========
Weighted average OP Units and equivalents
outstanding...................................... 69,218 69,983
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data (unaudited) for the nine months ended September
30, 1998 related to the 91 real estate partnerships is as follows (dollars
in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $338,937
Operating expense........................................... 182,529
Depreciation................................................ 64,127
Interest.................................................... 103,756
Net income.................................................. (9,329)
</TABLE>
P-43
<PAGE> 512
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $8,552 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $4,604 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net
income, preferred unit distributions, and net loss per OP Unit in the event
that the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense........... $(90,890) $(93,184) $(86,640) $(86,640)
Net income................. 24,703 22,409 28,953 28,953
Preferred unit
distributions............ 33,149 32,414 32,414 39,762
Net loss attributable to OP
Unitholders.............. (8,446) (10,005) (3,461) (10,809)
Net loss per OP Unit....... (.12) (.15) (.05) (.16)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- ------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................... $ 851 $ 931 $ 702 $ 702
Net income................... 24,703 21,478 28,251 28,251
Net loss attributable to OP
Unitholders................ (9,296) (10,936) (4,163) (11,511)
Net loss per OP Unit......... (.13) (.16) (.06) (.17)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, AIMCO will own 49% of certain
88 Partnerships, 25% of two Partnerships, and 100% of one Partnership. The
following table shows the effect on equity in earnings of unconsolidated
partnerships, net income, net income (loss) attributable to OP Unitholders,
and net loss per OP Unit in the event the Partnership will own varying
percentages of each partnership.
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(17,797)
Net income.................................................. 32,216
Net income (loss) attributable to OP Unitholders............ (593)
Net income (loss) per OP Unit............................... (.01)
</TABLE>
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-44
<PAGE> 513
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ (13,851) $(22,274)(C) $ (36,125)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 128,169 2,589(D) 130,758
Gain on investments..................................... (12) -- (12)
(Gain) loss on disposition of properties................ (3,882) -- (3,882)
Minority interests...................................... 9,983 51 10,034
Equity in earnings of unconsolidated partnerships....... 27,537 16,864(E)
(483)(F) 43,918
Equity in earnings of unconsolidated subsidiaries....... (5,848) -- (5,848)
Extraordinary (gain) loss on early extinguishment of
debt.................................................. --
Changes in operating assets and operating liabilities... 519 (660)(G) (141)
---------- -------- ----------
Total adjustments................................... 156,466 18,361 174,827
---------- -------- ----------
Net cash provided by (used in) operating
activities........................................ 142,615 (3,913) 138,702
Net cash used in discontinued operations............ (7,999) -- (7,999)
---------- -------- ----------
Net cash provided by (used in) continuing
operations........................................ 134,616 (3,913) 130,703
---------- -------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate......................... 41,419 -- 41,419
Purchase of real estate................................... (625,603) -- (625,603)
Additions to real estate, investments and property held
for sale................................................ (55,892) (1,024)(G) (56,916)
Proceeds from sale of property held for sale.............. 303 -- 303
Purchase of general and limited partnership interests..... (276,458) (79,601)(H) (356,059)
Purchase of management contracts.......................... (48,554) -- (48,554)
Purchase of/additions to notes receivable................. (81,670) -- (81,670)
Proceeds from repayments of notes receivable.............. 10,052 -- 10,052
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 94,686 10,070(I) 104,756
Contribution to unconsolidated subsidiaries............... (42,879) -- (42,879)
Proceeds from sale of securities.......................... 642 -- 642
Purchase of investments held for sale..................... (73) -- (73)
Purchase of NHP........................................... (60,575) -- (60,575)
Purchase of Ambassador common stock....................... (19,881) -- (19,881)
---------- -------- ----------
Net cash used in investing activities............... (1,064,483) (70,555) (1,135,038)
---------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 761,270 -- 761,270
Principal repayments on secured notes payable............. (307,917) (713)(G) (308,630)
Proceeds from secured short-term financing................ 19,050 79,601(H) 98,651
Repayments on secured short-term financing................ (259,461) -- (259,461)
Principal repayments on unsecured short-term notes
payable................................................. (50,879) -- (50,879)
Proceeds (payoff) from unsecured short-term financing..... (12,500) -- (12,500)
Principal repayments on secured tax-exempt bond
financing............................................... (1,487) -- (1,487)
Net borrowings (paydowns) on the Company's revolving
credit facilities....................................... (162,008) -- (162,008)
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (17,032) -- (17,032)
Proceeds from issuance of common and preferred stock,
net..................................................... 1,098,265 -- 1,098,265
Proceeds from exercises of employee stock options and
warrants................................................ 11,553 -- 11,553
Repurchase of common stock................................ (3,283) -- (3,283)
Principal repayments received on notes due from
Officers................................................ 27,280 -- 27,280
Investments made by minority interests.................... 249 -- 249
Receipt of contributions from minority interests.......... 37,345 -- 37,345
Payments of distributions to minority interests........... (2,713) -- (2,713)
Payment of distributions.................................. (130,657) -- (130,657)
Payment of distributions to limited partners.............. (5,208) (1,415)(J) (6,623)
Payment of preferred unit distributions................... (42,984) (979)(K) (43,963)
Payment of distributions to minority interests............ (21,788) -- (21,788)
Net transactions with Insignia/ESG........................ (57,612) -- (57,612)
---------- -------- ----------
Net cash provided by financing activities........... 879,483 76,494 955,977
---------- -------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (50,384) 2,026 (48,358)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 117,896 2,291 120,187
---------- -------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 67,512 $ 4,317 $ 71,829
========== ======== ==========
</TABLE>
P-45
<PAGE> 514
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 65,372
Cash used in investing activities......................... (11,713)
Cash used in financing activities......................... (74,617)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the cash portion of the purchase price (and additional
borrowings by the Partnership) related to the acquisition by the
Partnership of additional limited partnership interests in 91 real estate
limited partnerships.
(I) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(J) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.85 per Common OP Unit.
(K) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-46
<PAGE> 515
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ 41,493 $(16,790)(C) $ 24,703
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 101,523 1,941(D) 103,464
(Gain) loss on disposition of properties................ -- -- --
Minority interests...................................... 8,429 119 8,548
Equity in earnings of unconsolidated partnerships....... 10,234 13,156(E)
(41)(F) 23,349
Equity in earnings of unconsolidated subsidiaries....... (851) -- (851)
Non-cash compensation................................... 796 -- 796
Changes in operating assets and operating liabilities... (69,549) (21)(G) (69,570)
--------- -------- ---------
Total adjustments................................... 50,582 15,154 65,736
--------- -------- ---------
Net cash provided by operating activities........... 92,075 (1,636) 90,439
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... 27,122 -- 27,122
Additions to real estate.................................. (57,526) (668)(G) (58,194)
Proceeds from sale of property and investments held for
sale.................................................... (35) -- (35)
Additions to property held for sale....................... (1,986) -- (1,986)
Purchase of general and limited partnership interests..... (9,596) -- (9,596)
Purchase of/additions to notes receivable................. (100,034) -- (100,034)
Proceeds from repayments/sale of notes receivable......... 42,747 -- 42,747
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 23,629 5,809(H) 29,438
Payment of trust based preferred dividends................ (7,415) -- (7,415)
Cash received in connection with Ambassador Merger and
AMIT Merger............................................. 17,915 -- 17,915
Contribution to unconsolidated subsidiaries............... (13,032) -- (13,032)
Purchase of investments held for sale..................... (4,935) -- (4,935)
Redemption of OP Units.................................... (516) -- (516)
Merger costs.............................................. (1,402) -- (1,402)
--------- -------- ---------
Net cash used in investing activities............... (85,064) 5,141 (79,923)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 291,885 -- 291,885
Principal repayments on secured notes payable............. (52,023) -- (52,023)
Principal advances on secured tax-exempt bond financing... 21,784 -- 21,784
Principal repayments on secured tax-exempt bond
financing............................................... (1,436) -- (1,436)
Net borrowings/ repayments on secured short-term
financing............................................... 135,332 -- 135,332
Net borrowings (paydowns) on the revolving credit
facilities.............................................. 2,513 (812)(G) 1,701
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (5,810) -- (5,810)
Proceeds from issuance of common stock and preferred
stock, net.............................................. -- -- --
Repurchase of common stock................................ (10,972) -- (10,972)
Proceeds from exercises of employee stock options and
warrants................................................ 16,294 -- 16,294
Principal repayments received on notes due from
Officers................................................ 8,084 -- 8,084
Receipt of contributions from minority interests.......... -- -- --
Payments of distributions to minority interests........... (2,034) (2,034)
Payment of distributions.................................. (107,989) -- (107,989)
Payment of distributions to limited partners.............. (12,669) (1,291)(I) (13,960)
Payment of preferred unit distributions................... (27,010) (735)(J) (27,745)
Proceeds from issuance of High Performance Units.......... 1,988 -- 1,988
Net transactions with Insignia/ESG........................ (241,003) -- (241,003)
--------- -------- ---------
Net cash provided by financing activities........... 19,578 (2,838) 16,740
--------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 26,589 667 27,256
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 55,700 4,316 60,016
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 82,289 $ 4,983 $ 87,272
========= ======== =========
</TABLE>
P-47
<PAGE> 516
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the nine months ended September 30, 1998
related to the 91 real estate partnerships is as follows (dollars in
thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 76,113
Cash used in investing activities......................... (22,616)
Cash used in financing activities......................... (42,273)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 30 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(I) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.6875 per Common OP Unit.
(J) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-48
<PAGE> 517
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: Burgundy Court Associates, L.P.
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
Burgundy Court Associates, L.P. (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 limited partnership interests in the Partnership (the "Units")
will be acquired by the Purchaser in exchange for an offer price per Unit of
$85,934 in cash, or 2283.75 Common OP Units of the Purchaser, or 3,437.50
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 financial statements for the years ended
December 31, 1996 and 1997, and the quarterly report for the period ending
September 30, 1998, which the Partnership's management has indicated to be
the most current available financial statements;
3. Reviewed descriptive information concerning the real property owned
by the Partnership (the "Property"), including location, number of units
and unit mix, age, amenities and land acreage;
4. Reviewed summary historical operating statements for the Property,
for the years ended December 31, 1996 and 1997, and the nine months ending
September 30, 1998;
A-1
<PAGE> 518
5. Reviewed the 1998 operating budget for the Property prepared by the
Partnership's management. Such budgets are summarized in the Prospectus
Supplement under the section "Stanger Analysis -- Summary of Materials
Considered";
6. Reviewed the estimate of liquidation value and going concern value
provided by the general partner to Stanger. Such estimates are described in
the Prospectus Supplement under the section "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration." In
addition, we reviewed the 1998 operating budgets for each property provided
by the Partnership;
7. Discussed with management market conditions for the Property;
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 Property and the Partnership; the physical condition
of the Property including any deferred maintenance; and other factors
influencing value of the Property and the Partnership;
8. Performed a site inspection of the Property;
9. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Property, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Property;
10. Reviewed information provided by the Company relating to debt
encumbering the Property; and
11. 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 Property, the allocation of net
Partnership values between the General Partner and Limited Partners, and the
transaction costs and fees associated with a sale of the Property. 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 Property 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 Property 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 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
A-2
<PAGE> 519
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
March , 1999
A-3
<PAGE> 520
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 directors
of AIMCO are set forth below. The two directors of AIMCO-GP are Terry Considine
and Peter Kompaniez. The two directors of the general partner of your
partnership are Peter K. Kompaniez and Patrick J. Foye. The two executive
officers of the general partner of your partnership are Patrick J. Foye,
Executive Vice President, and Timothy R. Garrick, Vice President -- Accounting.
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
Paul J. McAuliffe............................ Executive Vice President -- Capital Markets
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
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
</TABLE>
B-1
<PAGE> 521
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
B.A. from Harvard College, a J.D. from Harvard Law School
and is admitted as a member of the Massachusetts Bar.
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.
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
</TABLE>
B-2
<PAGE> 522
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
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.
Paul J. McAuliffe.................... Mr. McAuliffe was appointed Executive Vice
President -- Capital Markets in February 1999. Prior to
joining AIMCO, Mr. McAuliffe was Senior Managing Director of
Secured Capital Corp and prior to that time had been a
Managing Director of Smith Barney, Inc. from 1993 to 1996,
where he was a key member of the underwriting team that led
AIMCO's initial public offering in 1994. Mr. McAuliffe was
also a Managing Director and head of the real estate group
at CS First Boston from 1990 to 1993 and he was a Principal
in the real estate group at Morgan Stanley & Co., Inc. from
1983 to 1990. Mr. McAuliffe received a B.A. from Columbia
College and an MBA from University of Virginia, Darden
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
</TABLE>
B-3
<PAGE> 523
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
and the Apartment Association of Metro Denver. Mr. Ira
received a B.S. from Metropolitan State College in 1975.
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.
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,
</TABLE>
B-4
<PAGE> 524
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Mr. Martin is a director of Dresser, which is engaged in the
petroleum services, hydrocarbon and engineering industries.
Timothy R. Garrick................... Mr. Garrick has been Vice President -- Accounting of the
general partner and AIMCO since October 1, 1998. Prior to
that date, Mr. Garrick served as Vice
President -- Accounting Services of Insignia Financial Group
from June 1997 until October 1998. From 1992 until June of
1997, Mr. Garrick served as Vice President of Partnership
Accounting for Insignia Financial Group. From 1987 to 1990,
Mr. Garrick served as Investment Advisor for U.S. Shelter
Corporation. From 1984 to 1987, Mr. Garrick served as
Partnership Investment Analyst for U.S. Shelter Corporation.
From 1979 to 1984, Mr. Garrick worked on the audit staff of
Ernst & Whinney. Mr. Garrick received his B.S. Degree from
the University of South Carolina in 1979 and is a certified
public accountant.
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> 525
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
By Fax:
(201) 896-0910
<PAGE> 526
PROSPECTUS SUPPLEMENT
(To Prospectus dated March 26, 1999)
AIMCO Properties, L.P.
is offering to acquire units of limited partnership interest of
Calmark/Fort Collins, Ltd.
in exchange for your choice of:
906 of our 8.0% Class Two Partnership Preferred Units;
601.75 of our Partnership Common Units; or
$22,646 in cash.
Generally, you will not recognize any immediate taxable gain or loss if you
exchange your units solely for our securities. However, you will recognize
taxable gain or loss if you exchange your units for cash.
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 the offer
consideration from a financial point of view.
Our offer consideration will be reduced for any distributions subsequently
made by your partnership prior to the expiration of our offer.
We will only accept a maximum of 25% 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.
You will not pay any fees or commissions if you tender your units.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline. You may withdraw any tendered units at any time
before we have accepted them for payment.
SEE "RISK FACTORS" BEGINNING ON PAGE S-24 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF RISK FACTORS THAT
YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration of $22,646 per unit without any
arms-length negotiations. Accordingly, our offer consideration may not
reflect the fair market value of your units. In August 1997, the property
owned by your partnership was appraised at $3,900,000. Based on this
appraised value, your units have a liquidation value of $29,178 per unit.
- Although your partnership's agreement of limited partnership provides for
termination in the year 2031, the private placement memorandum pursuant
to which the units were sold in 1982 indicated that the property owned by
your partnership might be sold within 3 to 7 years of its acquisition if
conditions permitted.
- We cannot predict when the property owned by your partnership may be
sold.
- Your general partner is a subsidiary of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- We are making this offer with a view to making a profit and 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.
- Continuation of your partnership will result in our affiliates continuing
to receive management fees from your partnership which would not be
payable if your partnership was liquidated.
- It is possible that we may conduct a subsequent offer at a higher price
more than one year after expiration of this offer.
- Unlike your partnership, our policy is to reinvest proceeds from the sale
of our properties or refinancing of our indebtedness.
- We may change our investment, acquisition or financing policies without a
vote of our securityholders.
- If you acquire our securities, your investment will change from holding
an interest in a single property to holding an interest in our large
portfolio of properties, thereby fundamentally changing the nature of
your investment.
- Recently, Moody's Investors Service revised its outlook for AIMCO's
ratings from stable to negative.
- There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
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.
March 26, 1999
<PAGE> 527
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY........................................ S-1
The Offer.................................... S-1
The AIMCO Operating Partnership.............. S-1
Affiliation with your General Partner........ S-1
Risk Factors................................. S-1
Background and Reasons for the Offer......... S-6
Valuation of Units........................... S-10
Fairness of the Offer........................ S-11
Stanger Analysis............................. S-12
Your Partnership............................. S-12
Terms of the Offer........................... S-13
Federal Income Tax Consequences.............. S-15
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-15
Comparison of Your Units and AIMCO OP Units.. S-16
Conflicts of Interest........................ S-16
Source and Amount of Funds and Transactional
Expenses................................... S-17
Summary Financial Information of AIMCO
Properties, L.P............................ S-18
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-20
Summary Financial Information of Calmark/Fort
Collins, Ltd............................... S-22
Comparative Per Unit Data.................... S-22
THE AIMCO OPERATING PARTNERSHIP................ S-23
RISK FACTORS................................... S-24
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-24
Offer Consideration Not Based on Third
Party Appraisal or Arms-Length
Negotiation.............................. S-24
Offer Consideration May Not Represent Fair
Market Value............................. S-24
Recent Appraisal Indicates a Higher
Valuation Per Unit....................... S-24
Offer Consideration Does Not Reflect Future
Prospects................................ S-24
Offer Consideration Based on Our Estimate
of Liquidation Proceeds.................. S-24
Offer Consideration May Be Less Than
Liquidation Value........................ S-24
Holding Units May Result in Greater Future
Value.................................... S-24
Conflicts of Interest with Respect to the
Offer.................................... S-25
Conflicts of Interest Relating to
Management Fees.......................... S-25
Possible Subsequent Offer at a Higher
Price.................................... S-25
Possible Recognition of Taxable Gain on a
Sale of Your Units....................... S-25
Fairness Opinion of Third Party Relied on
Information We Provided.................. S-26
Loss of Future Distributions from Your
Partnership.............................. S-26
Possible Effect of the Other Exchange
Offers on Us............................. S-26
Lack of Availability of Audited Financial
Statements............................... S-26
Potential Delay in Payment................. S-26
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-26
Fundamental Change in Nature of
Investment............................... S-26
Fundamental Change in Number of Properties
Owned.................................... S-26
Lack of Trading Market for OP Units........ S-27
Uncertain Future Distributions............. S-27
Possible Reduction in Required
Distributions on Preferred OP Units...... S-27
Possible Lower Distributions............... S-27
Possible Redemption of Preferred Stock..... S-27
Possible Recognition of Taxable Gains on OP
Units.................................... S-27
Limitations on Effecting a Change of
Control.................................. S-27
Limitation on Transfer of OP Units......... S-27
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Limited Voting Rights of Holders of OP
Units.................................... S-28
Market Prices for AIMCO's Securities May
Fluctuate................................ S-28
Litigation Associated with Partnership
Acquisitions............................. S-28
Dilution of Interests of Holders of OP
Units.................................... S-28
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-28
Possible Increase in Control of Your
Partnership by Us........................ S-28
Recognition of Gain Resulting from Possible
Future Reduction in Your Partnership
Liabilities.............................. S-28
Possible Termination of Your Partnership
for Federal Income Tax Purposes.......... S-28
Risk of Inability to Transfer Units for
12-Month Period.......................... S-29
Possible Change in Time Frame Regarding
Sale of Property......................... S-29
Balloon Payments........................... S-29
SPECIAL FACTORS TO CONSIDER.................... S-29
BACKGROUND AND REASONS FOR THE OFFER........... S-29
Background of the Offer...................... S-29
Alternatives Considered...................... S-31
Expected Benefits of the Offer............... S-33
Disadvantages of the Offer................... S-34
VALUATION OF UNITS............................. S-35
FAIRNESS OF THE OFFER.......................... S-37
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-37
Fairness to Unitholders who Tender their
Units...................................... S-38
Fairness to Unitholders who do not Tender
their Units................................ S-39
Comparison of Consideration to Alternative
Consideration.............................. S-39
Allocation of Consideration.................. S-43
STANGER ANALYSIS............................... S-43
Experience of Stanger........................ S-43
Summary of Materials Considered.............. S-44
Summary of Reviews........................... S-45
Review of Appraisal.......................... S-47
Conclusions.................................. S-47
Assumptions, Limitations and
Qualifications............................. S-48
Compensation and Material Relationships...... S-49
YOUR PARTNERSHIP............................... S-49
General...................................... S-49
Your Partnership and its Property............ S-49
Property Management.......................... S-50
Investment Objectives and Policies; Sale or
Financing of Investments................... S-50
Capital Replacement.......................... S-51
Borrowing Policies........................... S-51
Competition.................................. S-51
Legal Proceedings............................ S-51
History of the Partnership................... S-51
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-52
Distributions and Transfers of Units......... S-52
Beneficial Ownership of Interests in Your
Partnership................................ S-53
Compensation Paid to the General Partner and
its Affiliates............................. S-53
SELECTED FINANCIAL INFORMATION OF CALMARK/FORT
COLLINS, LTD................................. S-54
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP.......................... S-55
Overview..................................... S-55
Results of Operations........................ S-55
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
THE OFFER...................................... S-58
Terms of the Offer; Expiration Date.......... S-58
Acceptance for Payment and Payment for
Units...................................... S-58
Procedure for Tendering Units................ S-59
Withdrawal Rights............................ S-62
Extension of Tender Period; Termination;
Amendment.................................. S-62
Proration.................................... S-63
Fractional OP Units.......................... S-63
Future Plans of the AIMCO Operating
Partnership................................ S-63
Voting by the AIMCO Operating Partnership.... S-64
Dissenters' Rights........................... S-64
Conditions of the Offer...................... S-64
Effects of the Offer......................... S-67
Certain Legal Matters........................ S-67
Fees and Expenses............................ S-69
Accounting Treatment......................... S-69
FEDERAL INCOME TAX CONSEQUENCES................ S-70
Tax Opinions................................. S-70
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-71
Disguised Sales.............................. S-77
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-72
Tax Consequences of Exchanging Units Solely
for Cash................................... S-73
Adjusted Tax Basis........................... S-73
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-73
Passive Activity Losses...................... S-74
Tax Reporting................................ S-74
Foreign Offerees............................. S-74
Tax Consequences of a Termination of Your
Partnership................................ S-74
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-76
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-83
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
DESCRIPTION OF PREFERRED OP UNITS.............. S-89
General...................................... S-89
Ranking...................................... S-89
Distributions................................ S-89
Allocation................................... S-90
Liquidation Preference....................... S-90
Redemption................................... S-91
Voting Rights................................ S-91
Restrictions on Transfer..................... S-92
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-92
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-94
CONFLICTS OF INTEREST.......................... S-98
Conflicts of Interest with Respect to the
Offer...................................... S-98
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-98
Competition Among Properties................. S-98
Features Discouraging Potential Takeovers.... S-98
Future Exchange Offers....................... S-99
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-99
LEGAL MATTERS.................................. S-100
INDEX TO FINANCIAL STATEMENTS.................. F-1
PRO FORMA FINANCIAL INFORMATION OF AIMCO
PROPERTIES, L.P. ............................ P-1
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>
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<PAGE> 529
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- 906.00 of our Class Two Partnership Preferred Units;
- 601.75 of our Partnership Common Units; or
- $22,646 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 accept a maximum of 25% of the outstanding units in response to our
offer. Our offer is not subject to any minimum number of units being tendered.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline.
The original offer price per unit in 1982 was $41,500. For the five years
ended December 31, 1998, your partnership paid distributions of $14,706 per
unit.
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
its wholly owned subsidiary, AIMCO-GP, Inc. ("AIMCO GP"), AIMCO acts as the sole
general partner of the AIMCO Operating Partnership. As of December 31, 1998,
AIMCO-GP and another AIMCO subsidiary, AIMCO-LP, Inc., a limited partner of the
AIMCO Operating Partnership (the "Special Limited Partner"), owned approximately
an 83% interest in the AIMCO Operating Partnership. As of December 31, 1998, our
portfolio of owned or managed properties included 379,363 apartment units in
2,147 properties located in 49 states, the District of Columbia and Puerto Rico.
Based on apartment unit data compiled by the National Multi Housing Council, we
believe that we are one of the largest owners and managers of multifamily
apartment properties in the United States. As of December 31, 1998, we:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 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. and our February 26, 1999 merger with Insignia Properties Trust, we
acquired a 100% ownership interest in the general partner of your partnership,
Calmark/Fort Collins, Inc., and the company that manages the property owned by
your partnership.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-24 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the
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risks associated with our offer and the disadvantages of the offer to you and
should be considered when you review "Summary -- Background and Reasons for the
Offer -- Expected Benefits of the Offer":
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. We did not use any third-party appraisal or valuation to determine
the value of any property owned by your partnership. We established the terms of
our offer, including the exchange ratios and the cash consideration, without any
arms-length negotiations.
OFFER CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
RECENT APPRAISAL INDICATES A HIGHER VALUATION PER UNIT. In August 1997, an
independent appraiser valued the property on an unencumbered basis to be
$3,900,000. Based on this appraised value, your units have a liquidation value
of $29,178 per unit. In determining our offer consideration, we estimated your
property to be worth $3,665,000, less approximately $58,410 of deferred
maintenance and investment. Therefore, it is possible that a sale of the
property could result in your receiving more per unit than in our offer and you
would receive more than our offer if the property was actually sold for such
appraised value.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. The actual proceeds
obtained from a liquidation are highly uncertain and could be more or less than
our estimate. Accordingly, our offer consideration could be less than the net
proceeds that you would realize upon an actual liquidation of your partnership.
Even if our cash offer consideration is equal to liquidation value, if you
accept OP Units, you may not ultimately receive an amount equal to the cash
offer consideration when you sell such OP Units or any AIMCO securities you may
receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
value if you retain your units until your partnership is liquidated.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. We are making this offer
with a view to making a profit. 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 RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its property, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration this offer. Such a decision will depend on, among other things, the
performance of your partnership, prevailing interest rates, and our interest in
acquiring additional limited partnership interests.
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POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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.
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. You
should review "Federal Income Tax Consequences" 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. 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.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is our subsidiary).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. For any units that we
acquire from you, you will not receive any future distributions from your
partnership's operating cash flow or upon a sale of property owned by your
partnership or a refinancing of any of its debt. If you tender your units in
exchange for OP Units, you will be entitled to future distributions from us from
our operating cash flow and upon a dissolution, liquidation or wind-up of the
AIMCO Operating Partnership.
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from a sale of a property or a refinancing of its indebtedness, to (ii)
a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of 2031 to a much larger partnership with a
partnership termination date of 2093.
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FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you tender your units
for our OP Units, you will have changed your investment from an interest in a
partnership that owns and manages one property to an interest in a partnership
that invests in and manages a large portfolio of properties.
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE LOWER DISTRIBUTIONS. The Preferred OP Units provide for annual
distributions of $2.00 per unit and no more. Current annualized distributions
with respect to the Common OP Units are $2.50 per unit. This is equivalent to
distributions of $1,812.00 per year on the number of Preferred OP Units, or
distributions of $1,504.38 per year on the number of Common OP Units, that you
would receive in exchange for each of your partnership's units. During 1998,
your partnership paid cash distributions of $14,706.00 per unit. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units may be
substantially less, immediately following our offer, than the distributions with
respect to your units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus.
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such
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<PAGE> 533
matters affecting the operation of the AIMCO Operating Partnership include
liquidation and distribution policies, property purchases, and potential mergers
or acquisitions.
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a result, we may incur costs associated with defending or settling such
litigation or paying any judgment if we lose. As of the present time, no limited
partners of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. As a result of the
offer, we may increase our ability to influence voting decisions with respect to
your partnership. However, we will not be able to control voting decisions
unless we acquire more units in another transaction, which cannot take place for
at least one year after expiration of this offer. Also, removal of your general
partner (which is our subsidiary) or the manager of any property owned by your
partnership may become more difficult or impossible without our consent or
approval.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of units without the
consent of your general partner (which is our subsidiary). Such consent may be
withheld by your general partner in its sole discretion. Your general partner
may withhold its consent if such transfer would result in the termination of
your partnership for tax purposes which would occur if 50% or more of the total
interest in your partnership is transferred within a 12-month
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<PAGE> 534
period. If we acquire a significant percentage of the interest in your
partnership, your general partner may not consent to a transfer for a 12-month
period following our offer.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investment in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to have to
hold the units not exchanged in this offer for an indefinite period of time.
Your partnership's private placement memorandum, dated December 10, 1982,
pursuant to which units in your partnership were sold, indicated that your
partnership was intended to be self-liquidating and that it was anticipated that
the partnership's property would generally be sold within 3 to 7 years of their
acquisition, provided market conditions permit. The prospectus also indicated
that there could be no assurance that the partnership would be able to so
liquidate and that, unless sooner terminated as provided in the partnership
agreement, the existence of the partnership would continue until the year 2031.
The partnership currently owns one property. The general partner of your
partnership continually considers whether the property should be sold or
otherwise disposed of after consideration of relevant factors, including
prevailing economic conditions, availability of favorable financing and tax
considerations, with a view to achieving maximum capital appreciation for your
partnership. We cannot predict when the property will be sold or otherwise
disposed of. However, there is no current plan or intention to sell the property
in the near future.
BALLOON PAYMENTS. Your partnership has a balloon payment of approximately
$2,585,000 due on its mortgage debt in December 2004. Your partnership will have
to refinance such debt or sell its property prior to the balloon payment date,
or it will be in default and could lose the property to foreclosure.
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 51% ownership interest in Insignia Properties Trust, which has
a 100% ownership interest in the general partner of your partnership and the
company that manages the property owned by your partnership. On February 26,
1999, we acquired the remaining 49% interest in Insignia Properties Trust in a
merger transaction. One of the consequences of the merger with Insignia is to
allow us to make the offer and, if successful, to increase our ownership in 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 August 28, 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
(which is our subsidiary):
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> 535
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.
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. 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. Your partnership's mortgage note is due in December 2004 and
requires a balloon payment of $2,585,000. In addition, continuation of your
partnership without the offer would deny you and your partners the benefits
that your general partner (which is our subsidiary) 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. There is currently no market for the Preferred OP
Units or Common OP Units.
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 three principal advantages of exchanging your units for Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the NYSE.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are four principal advantages of exchanging your units for Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- 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
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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.
Disadvantages of the Offer
The principal disadvantages of the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and determining the offer consideration, no one separately represented
the interests of the limited partners. Although we have a fiduciary duty
to the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of such property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pretax cash proceeds to you than our
offer.
- OP Units. OP Units lack a public market, have transfer restrictions and
must be held for one year before they can be redeemed by a holder. The
ultimate return on the OP Units is directly tied to the future price of
AIMCO's Class A Common Stock or Class I Preferred Stock. You could
ultimately receive less for your OP Units than the cash price in our
offer. Further, on or after March 1, 2005, we may redeem the Class I
Preferred Stock for $25 per share.
- Lower Preferred Quarterly Distributions. Your partnership paid
distributions of $14,706 for the fiscal year ended December 31, 1998.
Holders of Preferred OP Units will be entitled to receive quarterly
distributions of $0.50 per unit (equivalent to $2.00 on an annualized
basis) before any distributions are paid to holders of Common OP Units.
This is equivalent to a distribution of $1,812.00 per year on the number
of Preferred OP Units you will receive in exchange for each of your
partnership units.
- Lower Common Quarterly Distributions. Your partnership paid distributions
of $14,706 for the fiscal year ended December 31, 1998. In 1998, we paid
quarterly distributions on the Common OP Units totalling $2.25 per unit.
In January 1999, we increased our distribution rate on each of the Common
OP Units to $2.50 on an annual basis. See "The AIMCO Operating
Partnership." Assuming no change in the level of our distributions, this
is equivalent to a distribution of $1,504.38 per year on the number of
Common OP Units you will receive in exchange for each of your partnership
units.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. Further, while the original projected time
frame in the original offering document for your partnership units stated
that the property may be sold in approximately 3 to 7 years from the date
of acquisition, such property was not so sold. At the current time we do
not believe that a sale of the property would be advantageous given
market conditions, the condition of the property and tax
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considerations. In particular, we considered the changes in the local
rental market, the potential for appreciation in the value of the
property and the tax consequences to you and your partners upon a sale of
the property.
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
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VALUATION OF UNITS
We determined the offer consideration by estimating the value of the
property owned by your partnership using the direct capitalization method. This
method involves applying a capitalization rate to the partnership's property
annual property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower the value produced. We used your partnership's property
income for the fiscal year ended December 31, 1997. However, in determining the
appropriate capitalization rate, we considered your partnership's property
income since December 31, 1997. Our method for selecting a capitalization rate
begins with each property being assigned a location and condition rating (e.g.,
"A" for excellent, "B" for good, "C" for fair, and "D" for poor). We have rated
your property's location B (good) and its condition B (good). Generally, we
assign an initial capitalization rate of 10.25% to properties in this category.
We then adjust the capitalization rate based on whether the mortgage debt that
the property is subject to bears interest at a rate above or below 7.5% per
annum. Generally, for every 0.5% in excess of 7.5%, the capitalization rate
would be increased by 0.25%. We also considered any changes in your
partnership's property income from 1997 to 1998. Because your partnership's
property income in 1998 remained relatively unchanged compared to 1997, we made
no further revision of the capitalization rate, resulting in a final
capitalization rate of 10.25%. The evaluation of a property's location and
condition, and the determination of an appropriate capitalization rate for a
property, is subjective in nature, and others evaluating the same property might
use a different capitalization rate and derive a different property value.
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. Further, in
applying the direct capitalization method, others may make different assumptions
and obtain different results. 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>
Property income............................................. $ 375,564
Capitalization rate......................................... 10.25%
-----------
Gross valuation of partnership properties................... 3,665,000
Plus: Cash and cash equivalents............................. 189,069
Plus: Other partnership assets, net of security deposits.... 46,259
Less: Mortgage debt, including accrued interest............. (2,817,127)
Less: Accounts payable and accrued expenses................. (34,577)
Less: Other liabilities..................................... (18,675)
Partnership valuation before taxes and certain costs........ 1,029,949
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures and deferred
maintenance............................................... (58,410)
Less: Closing costs......................................... (201,575)
-----------
Estimates net valuation of your partnership................. 769,964
Percentage of estimated net valuation allocated to holders
of units.................................................. 100.00%
-----------
Estimated net valuation of units............................ 769,964
Total number of units............................. 34.0
-----------
Estimated valuation per unit................................ 22,646
===========
Cash consideration per unit................................. 22,646
===========
</TABLE>
In order to determine the number of Preferred OP Units we are offering for
each of your units, we divided the cash offer consideration of $22,646 by the
$25 liquidation preference of each Preferred OP Unit to get 906 Preferred OP
Units per unit.
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In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $22,646 by a
price of $37.63 (the average closing price of AIMCO's Class A Common Stock on
the NYSE for the 30 trading days ending on March 23, 1999) to get 601.75 Common
OP Units per unit.
FAIRNESS OF THE OFFER
Fairness to Unitholders. Your general partner is our subsidiary. 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. Your general partner did not participate in the structuring of the
offer. We and your general partner believe that the offer and all forms of
consideration offered is fair to you and the other limited partners of your
partnership. 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 (which is our subsidiary) 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 (which is our subsidiary) has compared our offer consideration
to:
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated;
- your general partner's estimate of the going concern value of your
partnership if it continued operating as an independent stand-alone
entity;
- the net book value of your partnership; and
- recent appraisal for the property for $3,900,000, which appraisal did
not take into account the mortgages, other assets and liabilities, costs
of sale of the property and over $58,410 of deferred maintenance of the
property.
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The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C>
Cash offer consideration.................................... $ 22,646
Partnership Preferred Units................................. 22,646
Partnership Common Units.................................... 22,646
Alternatives:
Estimated liquidation proceeds............................ $ 22,646
Estimated going concern value(1).......................... $ 21,751
Estimated alternative going concern value(2).............. $ 21,597
Net book value (deficit).................................. $(51,234)
Estimated liquidation value based on appraised property
value.................................................. $ 29,178
</TABLE>
- ---------------
(1) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(2) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
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. Stanger has
rendered similar fairness opinions with regard to the other tender offers being
made by the AIMCO Operating Partnership. Stanger rendered the opinions only as
to the individual fairness of the offer consideration in each proposed exchange
offer.
YOUR PARTNERSHIP
Your Partnership and its Property. Calmark/Fort Collins, Ltd. is a
California limited partnership which was formed on January 29, 1982 for the
purpose of owning and operating a single apartment property located in Fort
Collins, Colorado, known as "Scotch Pines East." Your partnership property
consists of 102 apartment units and was built in 1977. Your partnership has no
employees. As of September 30, 1998, there were 34 units of limited partnership
interest issued and outstanding, which were held of record by 37 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.
Your partnership sold 34 limited partnership units in 1982. Between January
1, 1993 and December 31, 1998 your partnership paid cash distributions totalling
$14,706 per unit. Your partnership currently owns one property.
Property Management. Your partnership's property has been managed by an
affiliate of ours. 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.
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Your partnership will terminate in 2031, unless earlier dissolved. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership property within any specified time period. An
investment in your partnership is a finite life investment in which partners
receive regular cash distributions out of your partnership's distributable cash
flow, if any, and upon liquidation.
Borrowing Policies. Your partnership's agreement of limited partnership
allows your partnership to incur debt. As of December 31, 1998, your partnership
had a mortgage note outstanding of $2,773,370, payable to Lehman, which bears
interest at the rate of 7.34%. The mortgage debt is due in December 2004. Your
partnership's agreement of limited partnership also allows your general partner
to lend funds to your partnership. As of December 31, 1998, your general partner
had no outstanding loans to your partnership.
Transfers. Your units are not listed on any national securities exchange or
quoted on NASDAQ, and there is no established public trading market for the
units. Secondary sales activity for the units has been limited and sporadic.
Your general partner monitors transfers of the units (i) because the admission
of the transferee as a substitute limited partner in your partnership requires
the consent of your general partner under your partnership agreement, and (ii)
in order to track compliance with applicable safe harbor provisions to avoid
treatment as a "publicly traded partnership" for tax purposes. However, your
general partner does not monitor or regularly receive or maintain information
regarding the prices at which secondary sale transactions in the units have been
effectuated.
TERMS OF THE OFFER
General. We are offering to acquire up to 25% of the outstanding 34 units
of your partnership, which we do not directly or indirectly own, for
consideration per unit of 906.00 Preferred OP Units, 601.75 Common OP Units, or
$22,646 in cash. If you tender units pursuant to the offer, you may choose 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 Preferred OP Units, 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 January 1, 1999,
although you will be entitled to retain any distributions you may have received
after such date and prior to our commencement of this offer.
If you accept our offer and do not specify the consideration you desire on
the letter of transmittal, we will issue you Preferred OP Units.
Expiration Date. Our offer will expire at 5:00 P.M., New York City time, on
June 4, 1999, 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.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds 25% 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 their acceptance for payment as provided for herein.
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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 Common OP Units or 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.
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.
The offer may be extended or delayed indefinitely, during which time you
will not receive payment for any tendered units.
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 any property owned by
your partnership's because your general partner (which is our subsidiary) and
the property manager will remain unchanged. If we borrow funds for the cash
consideration for these offers, our interest costs would increase which could
adversely affect our future earnings. If all units in this and our other
contemplated offers were purchased for cash and we borrowed all the funds, at
current interest rates, our interest expense would increase by $3,064,000 per
year.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
number of units pursuant to our offer, we may be in a position to influence
voting decisions with respect to your partnership. However, we will not be able
to control voting decisions unless we acquire more units in another transaction,
which cannot take place for at least one year after expiration of this offer.
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 (which is our subsidiary),
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.
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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 Letter of Transmittal, and the
legal and accounting fees and expenses in connection with the offer. We will
also pay the fees of Stanger for providing the fairness opinion 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 $50,000.
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.
No Dissenters' Rights. You are not entitled to dissenters' (appraisal)
rights in connection with the offer.
Other Offers. The AIMCO Operating Partnership is also making similar
exchange offers to approximately 90 other limited partnerships in which it
controls the general partner, interests in substantially all of which were
acquired in the merger on October 1, 1998 with Insignia Financial Group, Inc.
and the February 26, 1999 merger with Insignia Properties Trust. Each of such
exchange offers is being made by a separate prospectus supplement which is
similar to this Prospectus Supplement. Copies of such prospectus supplements may
be obtained upon written request from the Information Agent at the address set
forth in "-- Information Agent" or on the back cover page of this Prospectus
Supplement. The exchange offers may be different for limited partners in each
partnership in terms of pricing and percentage of units sought, but the effects
of the offers will essentially be the same. In general, we believe that the risk
factors (except for certain tax-related risk factors) described herein for this
offer will also be applicable to the other offers.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer. Its telephone numbers are (888)
349-2005 and (201) 896-1900. Its fax number is (201) 896-0910.
FEDERAL INCOME TAX CONSEQUENCES
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Preferred OP
Units or 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.
THE FOREGOING SUMMARY IS A GENERAL DISCUSSION OF THE MATERIAL 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 "FEDERAL INCOME TAX CONSEQUENCES" 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.
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, your general
partner (which is our subsidiary) 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.
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COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units, Preferred
OP Units and 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.
As of February 19, 1999, the AIMCO Operating Partnership had approximately
9,729,130 Common OP Units outstanding (excluding interests held by AIMCO) and no
Class Two Partnership Preferred Units outstanding. The number of OP Units you
may acquire from us in exchange for your units will represent a lower percentage
of the outstanding limited partnership interests in the AIMCO Operating
Partnership than that of your current ownership interest in your partnership. In
response to our offer, you could elect to receive $22,646 in cash, 906.00
Preferred OP Units or 601.75 Common OP Units. Both your units and the OP Units
are subject to transfer restrictions and it is unlikely that a real trading
market will ever develop for any of such securities. If you subsequently redeem
OP Units for AIMCO Class A Common Stock or Class I Preferred Stock, we can make
no assurance as to the value of such shares of AIMCO stock, at that time, which
may be less than the cash offer price of $22,646.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
our subsidiary 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
both the general partner of your partnership and the manager of your
partnership's property. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $9,618.95 for the fiscal year ended December
31, 1998. The property manager received management fees of $34,823.96 for the
fiscal year ended December 31, 1998. We have no current intention of changing
the fee structure for your general partner or the 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.
AIMCO's Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is
S-16
<PAGE> 545
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.
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. We might pay a higher price for any future exchange offers we may make
for units of your partnership. In any event, we will not acquire any units for
at least one year after expiration of this offer.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $192,491 will be required to purchase all of
the units sought in our offer, if such units are tendered for cash excluding
expenses. We will obtain all such funds from cash from operations, equity
issuances and short term borrowings. For a detailed description of estimated
expenses to be incurred in the offer, see "Source and Amount of Funds and
Transactional Expenses."
S-17
<PAGE> 546
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
nine months ended September 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 of the AIMCO Operating Partnership" included in the accompanying
Prospectus. All dollar values are in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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............... $ 265,700 $ 127,083 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses........... (101,600) (50,737) (76,168) (38,400) (30,150) (10,330)
Owned property management expenses.... (7,746) (4,344) (6,620) (2,746) (2,276) (711)
Depreciation.......................... (59,792) (23,848) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
96,562 48,154 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income...... 13,968 9,173 13,937 8,367 8,132 3,217
Management and other expenses......... (8,101) (5,029) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation......... (196) (441) (588) (590) (581) --
Other assets, depreciation and
amortization........................ (3) (236) (453) (218) (168) (150)
Owner and seller bonuses.............. -- -- -- -- -- --
Amortization of management company
goodwill............................ -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
5,668 3,467 2,038 1,707 2,002 1,020
Minority interests in service company
business............................ -- 48 (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business............ 5,668 3,515 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative expenses... (7,444) (1,408) (5,396) (1,512) (1,804) (977)
Interest income....................... 18,244 4,458 8,676 523 658 123
Interest expense...................... (56,756) (33,359) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships........................ (1,052) (777) 1,008 (111) -- --
Equity in losses of unconsolidated
partnerships(c)..................... (5,078) (463) (1,798) -- -- --
Equity in earnings of unconsolidated
subsidiaries(d)..................... 8,413 456 4,636 -- -- --
Amortization of goodwill.............. (5,071) (711) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations................ 53,486 19,865 30,246 15,629 14,988 7,702
Gain on disposition of properties..... 2,783 (169) 2,720 44 -- --
Provision for income taxes............ -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before extraordinary
item................................ 56,269 19,696 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt.............. -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)..................... $ 56,269 $ 19,427 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)............................. 241 109 147 94 56 48
Total owned apartment units (end of
period)............................. 62,955 28,773 40,039 23,764 14,453 12,513
Units under management (end of
period)............................. 154,729 71,038 69,587 19,045 19,594 20,758
Basic earnings per Common OP Unit..... $ 0.80 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP Unit... $ 0.79 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit................................ $ 1.6875 $ 1.3875 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities.......................... 50,825 53,435 73,032 38,806 25,911 16,825
Cash flows used in investing
activities.......................... (185,453) (314,814) (717,663) (88,144) (60,821) (186,481)
Cash flows provided by (used in)
financing activities................ 141,221 293,984 668,549 60,129 30,145 176,800
<CAPTION>
AIMCO PROPERTIES, L.P.
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)
Cash flows provided by (used in)
financing activities................ (1,032) 14,114
</TABLE>
S-18
<PAGE> 547
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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>
Funds from operations(e)................ $ 132,881 $ 49,692 $ 81,155 $ 35,185 $ 25,285 $ 9,391
Weighted average number of Common OP
Units outstanding..................... 53,007 24,347 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation.......................... $2,685,487 $1,250,239 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation.......................... 2,355,122 1,107,545 1,503,922 745,145 448,425 392,368
Total assets............................ 3,121,949 1,608,195 2,100,510 827,673 480,361 416,361
Total mortgages and notes payable....... 1,275,401 661,715 808,530 522,146 268,692 141,315
Redeemable Partnership Units............ 232,405 178,321 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994 Cumulative
Senior Preferred Units................ -- -- -- -- -- 107,228
Partners' Capital....................... 1,427,087 560,737 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.
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>
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 10, 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
based on the NAREIT definition, as adjusted for the 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 NINE PERIOD
MONTHS ENDED FOR THE YEAR ENDED JANUARY 10,
SEPTEMBER 30, DECEMBER 31, 1994
------------------ --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
-------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $ 56,269 $19,427 $32,697 $15,673 $14,988 $ 7,702
(Gain) loss on disposition of property...................... (2,783) 169 (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 56,900 21,052 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 7,077 711 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 2,689 3,584 -- -- --
Amortization of management contracts...................... 4,201 430 1,587 -- -- --
Deferred taxes............................................ 6,134 2,164 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 17,379 2,781 6,280 -- -- --
Preferred stock dividends................................. (12,296) -- (135) -- (5,169) (3,114)
-------- ------- ------- ------- ------- -------
Funds from operations....................................... $132,881 $49,692 $81,155 $35,185 $25,285 $ 9,391
======== ======= ======= ======= ======= =======
</TABLE>
S-19
<PAGE> 548
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. (the AIMCO Operating Partnership) for the
nine months ended September 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 NINE
MONTHS FOR THE
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 345,961 $ 442,526
Property operating expenses............................... (136,240) (189,442)
Owned property management expenses........................ (8,933) (11,831)
Depreciation.............................................. (80,420) (98,853)
--------- -----------
120,368 142,400
--------- -----------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 28,912 41,676
Management and other expenses............................. (14,386) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (15,243) (26,480)
--------- -----------
(913) (9,075)
Minority interests in service company business............ -- (10)
--------- -----------
Partnership's shares of income from service company
business............................................... (913) (9,085)
--------- -----------
General and administrative expenses....................... (8,632) (21,371)
Interest expense.......................................... (90,890) (121,699)
Interest income........................................... 40,887 21,734
Minority interest......................................... (8,548) (10,034)
Equity in losses of unconsolidated partnerships........... (23,349) (43,918)
Equity in earnings of unconsolidated subsidiaries......... 851 5,848
Amortization of Goodwill.................................. (5,071) --
--------- -----------
Net income........................................ $ 24,703 $ (36,125)
========= ===========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (.12) $ (1.16)
Diluted earnings (loss) per Common OP Unit.................. $ (.12) $ (1.16)
Distributions paid per Common OP Unit....................... $ 1.69 $ 1.85
Book value per Common OP Unit............................... $ 24.52 $ 26.96
CASH FLOW DATA:
Cash provided by operating activities....................... $ 90,439 $ 130,703
Cash used in investing activities........................... (79,923) (1,135,038)
Cash provided by (used in) financing activities............. 16,740 955,977
OTHER DATA:
Funds from operations(a).................................... $ 187,985 $ 172,733
Weighted average number of Common OP Units outstanding...... 74,946 74,094
</TABLE>
S-20
<PAGE> 549
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, net of accumulated depreciation................ $2,679,195
Total assets................................................ 4,558,819
Total mortgages and notes payable........................... 1,762,105
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 320,443
Partners' capital........................................... 1,984,019
</TABLE>
- ---------------
(a) 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
based upon the NAREIT definition, as adjusted for the 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.
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss)................................. $ 24,703 $(36,125)
HUD release fee and legal reserve................. -- 10,202
Real estate depreciation, net of minority
interests....................................... 76,521 93,050
Amortization of management contracts.............. 9,593 12,790
Amortization of management company goodwill....... 10,997 12,551
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation........................ -- 1,715
Amortization of management company goodwill..... 959 1,918
Amortization of management contracts............ 23,010 30,516
Deferred taxes.................................. (713) (1,356)
Equity in earnings of other partnerships:
Real estate depreciation........................ 79,559 95,285
Interest on convertible debentures................ (7,537) (10,003)
Preferred unit distributions...................... (29,107) (37,810)
-------- --------
Funds from operations............................. $187,985 $172,733
======== ========
</TABLE>
S-21
<PAGE> 550
SUMMARY FINANCIAL INFORMATION OF CALMARK/FORT COLLINS, LTD.
The summary financial information of Calmark/Fort Collins, Ltd. for the
nine months ended September 30, 1998 and 1997 is unaudited. The summary
financial information for Calmark/Fort Collins, Ltd. for the years ended
December 31, 1997 and 1996, is based unaudited on financial statements. The
December 31, 1995, 1994, and 1993 information is based on unaudited financial
information and is not included in this Prospectus Supplement. This information
should be read in conjunction with such unaudited financial statements,
including the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Your Partnership" included
herein. See "Index to Financial Statements."
CALMARK/FORT COLLINS, LTD.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues............... $ 514 $ 494 $ 662 $ 607 $ 577 $ 528 $ 477
Net Income/(Loss)............ 28 44 (116) 27 (31) (59) (83)
Net Income per limited
partnership unit........... 815.29 1,281.18 (3,382.35) 794.12 (902.65) (1,717.94) (2,416.76)
Distributions per limited
partnership unit........... 14,558.82 -- -- -- -- -- --
Distributions per limited
partnership unit (which
represent a return of
capital)................... 14,558.82 -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents.... $ 174 $ 53 $ 689 $ 38 $ 22 $ 33 $ 15
Real Estate, Net of
Accumulated Depreciation... 1,501 1,501 1,484 1,524 1,566 1,631 1,687
Total Assets................. 1,783 1,652 2,285 1,683 1,713 1,781 1,842
Notes Payable................ 2,780 2,012 2,800 2,059 2,151 2,169 2,184
General Partners' Capital/
(Deficit).................... (23) (17) (18) (17) (17) (17) (16)
Limited Partners' Capital/
(Deficit).................... (1,035) (408) (567) (452) (479) (448) (390)
Partners' Capital/(Deficit).... (1,058) (425) (585) (469) (496) (465) (406)
Total Distributions............ 500 -- -- -- -- -- --
Book value per limited
partnership unit............. (30,449.41) (12,012.94) (16,676.47) (13,294.12) (14,088.24) (13,176.47) (11,470.59)
Net increase (decrease) in cash
and cash equivalents......... (515) 15 651 16 (11) 18 (43)
Net cash provided by operating
activities................... 96 132 187 184 93 62 34
Ratio of earnings to fixed
charges...................... 1.17/1 1.27/1 1.30/1 1.12/1 0.86/1 0.74/1 0.64/1
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per unit of your
partnership for the year ended December 31, 1998, and the cash distributions
payable on the number of Common OP Units and Preferred OP Units issuable in
exchange therefor:
<TABLE>
<CAPTION>
ANNUAL
DISTRIBUTIONS
-------------
<S> <C>
Units of Calmark/Fort Collins, Ltd. ........................ $14,706
Equivalent cash distributions on Common OP Units(1)......... $ 1,504
Equivalent cash distributions on Preferred OP Units(2)...... $ 1,812
</TABLE>
- ---------------
(1) Calculated by multiplying the exchange ratio of 601.75 Common OP Units per
unit by the annualized distributions paid on the Common OP Units of $2.50
per unit.
(2) Calculated by multiplying the exchange ratio of 906 Preferred OP Units per
unit by the stated annual distribution rate on the Preferred OP Units of
$2.00 per unit.
S-22
<PAGE> 551
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of AIMCO. AIMCO is a real estate investment
trust that owns and manages multifamily apartment properties throughout the
United States. Through its wholly owned subsidiaries, AIMCO GP, the sole general
partner of the AIMCO Operating Partnership, and the Special Limited Partner, as
of December 31, 1998, AIMCO held approximately an 83% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled by the National
Multi Housing Council, we believe that AIMCO is one of the largest owner and
manager of multifamily apartment properties in the United States, with a total
portfolio of 379,363 apartment units in 2,147 properties located in 49 states,
the District of Columbia and Puerto Rico. As of December 31, 1998, AIMCO:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 apartment properties for third party
owners and affiliates.
AIMCO's Class A Common Stock is listed and traded on the NYSE under the
symbol "AIV." On March 23, 1999, the last reported sale price of AIMCO Class A
Common Stock on the NYSE was $35 3/16. 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 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>
1999
First Quarter (through March 23)........ $41 5/8 $35 3/16 $0.6250 $0.6250
1998
Fourth Quarter.......................... 37 3/8 30 0.5625 0.5625
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>
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.
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RISK FACTORS
The following sets forth certain risks and disadvantages of the offer and
should be read and considered when reviewing the potential benefits of the offer
set forth in "Background and Reasons for the Offer -- Expected Benefits of the
Offer." In addition, you should review the other risks of investing in us
beginning on page 2 of our accompanying Prospectus.
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. 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. 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. 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 CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
RECENT APPRAISAL INDICATES A HIGHER VALUATION PER UNIT. In August 1997, an
independent appraiser valued the property on an unencumbered basis to be
$3,900,000. Based on this appraised value, your units have a liquidation value
of $1,029 per unit. In determining our offer consideration, we estimated your
property to be worth $3,665,000 although we believe the property needs
approximately $58,410 of deferred maintenance and investment not considered by
the appraiser. Therefore, it is possible that a sale of the property could
result in your receiving more pretax cash per unit than our offer and you would
receive more than our offer if the property was actually sold for any of such
estimated amounts.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. The actual proceeds
obtained from a liquidation are highly uncertain and could be more or less than
our estimate. Accordingly, our offer consideration could be less than the net
proceeds that you would realize upon an actual liquidation of your partnership.
Even if our cash offer consideration is equal to liquidation value, if you
accept OP Units, you may not ultimately receive an amount equal to the cash
offer consideration when you sell such OP Units or any AIMCO securities you may
receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
pretax cash 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.
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CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and the AIMCO Operating Partnership and, therefore, has
substantial conflicts of interest with respect to our offer. We are making this
offer with a view to making a profit. 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. Another conflict is 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. 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.
CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its properties, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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 sold. If you exchange your units
for cash and our 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. 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 allocated to such units 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. If you exercise your redemption right with respect to the Preferred
OP Units within two years of the date that you transfer your units to the AIMCO
Operating Partnership, your exchange of units for OP Units or OP Units and cash
could be treated as a disguised sale of your units and you would be required to
recognize gain or loss in the year of the exchange on such disguised sale. See
"Federal Income Tax Consequences -- Disguised Sales." 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. 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 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.
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. You
should review "Federal Income Tax Consequences" 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. Because the income tax
consequences of tendering units will not be the same for everyone, you should
consult your own tax advisor before determining whether to tender your units
pursuant to our offer.
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FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is controlled by us).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all right 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, for any units that we acquire from you, you will not receive any
future distributions from operating cash flow of your partnership or upon a sale
of property owned by your partnership or a refinancing of any of its debt. If
you tender your units in exchange for OP Units, you will be entitled to future
distributions from the operating cash flow of the AIMCO Operating Partnership
and upon a dissolution, liquidation or winding-up of the AIMCO Operating
Partnership. See "Comparison of Your Units and AIMCO OP Units -- Distributions."
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
LACK OF AVAILABILITY OF AUDITED FINANCIAL STATEMENTS. The unaudited
financial statements of Calmark/Fort Collins, Ltd. have been prepared from the
books and records of the Partnership in accordance with generally accepted
accounting principles. An audit of the Partnership's financial statements could
not be completed because the General Partner does not have sufficient audit
evidence to support the historical capitalized costs of the Partnership's
properties, including the initial construction, which occurred in 1977.
Nevertheless, the General Partner believes that such financial statements
appropriately reflect the financial condition and results of operations of the
Partnership for the periods presented in accordance with generally accepted
accounting principles.
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from the sale of a property or a refinancing of its indebtedness to
(ii) a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of 2,031 to a much larger partnership with a
partnership termination date of 2093.
Under the AIMCO Operating Partnership's agreement of limited partnership,
the general partner has the ability, without the concurrence of the limited
partners, to acquire and dispose of properties and to borrow funds. Further,
while it is the intent to distribute net income from operations, sales of
properties and refinancings of indebtedness, the general partner may not make
such distributions. Proceeds of future asset sales or refinancings by the AIMCO
Operating Partnership generally will be reinvested rather than distributed.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you exchange your
units for OP Units, you will have changed your investment from an interest in a
partnership which owns and manages a single property to
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an interest in the AIMCO Operating Partnership which 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 and our portfolio of
properties as compared to the value of your units and your partnership.
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE LOWER DISTRIBUTIONS. The Preferred OP Units provide for annual
distributions of $2.00 per unit and no more. Current annualized distributions
with respect to the Common OP Units are $2.50 per unit. This is equivalent to
distributions of $1,812.00 per year on the number of Preferred OP Units, or
distributions of $1,504.38 per year on the number of Common OP Units, that you
would receive in exchange for each of your partnership's units. During 1998,
your partnership paid cash distributions of $14,706 per unit. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units may be
substantially less, immediately following our offer, than the distributions with
respect to your units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus. If you
exercise your redemption right with respect to the OP Units within two years of
the date that you transfer your units to the AIMCO Operating Partnership, your
exchange of units for OP Units and cash could be treated as a disguised sale of
your units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as for your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a result, we may incur costs associated with defending or settling such
litigation or paying any judgment if we lose. As of the present time, no limited
partners of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. 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. However, we will
not be able to control voting decisions unless we acquire more units in another
transaction, which cannot take place for at least one year after expiration of
this offer. Furthermore, in the event that we acquire a substantial number of
units pursuant to our offer, removal of your general partner (which is our
subsidiary) or the manager of any property owned by your partnership may become
more difficult or impossible without our consent.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such year), but would have no effect on the total
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<PAGE> 557
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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of units without the
consent of your general partner (which is our subsidiary). Such consent may be
withheld by your general partner in its sole discretion. Your general partner
may withhold its consent if such transfer would result in the termination of
your partnership for tax purposes which would occur if 50% or more of the total
interest in your partnership is transferred within a 12-month period. If we
acquire a significant percentage of the interest in your partnership, your
general partner may not consent to a transfer for a 12-month period following
our offer.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investments in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to hold
the units not exchanged in this offer for an indefinite period of time. Your
partnership's private placement memorandum, dated December 10, 1982, pursuant to
which units in your partnership were sold, indicated that your partnership was
intended to be self-liquidating and that it was anticipated that the
partnership's property would generally be sold within 3 to 7 years of their
acquisition, provided market conditions permit. The private placement memorandum
also indicated that there could be no assurance that the partnership would be
able to so liquidate and that, unless sooner terminated as provided in the
partnership agreement, the existence of the partnership would continue until the
year 2031. The partnership currently owns one property. The general partner of
your partnership continually considers whether the property should be sold or
otherwise disposed of after consideration of relevant factors, including
prevailing economic conditions, availability of favorable financing and tax
considerations, with a view to achieving maximum capital appreciation for your
partnership. We cannot predict when the property will be sold or otherwise
disposed of. However, there is no current plan or intention to sell the property
in the near future.
BALLOON PAYMENTS. Your partnership has a balloon payment of approximately
$2,585,000 due on its mortgage debt in December 2004. Your partnership will have
to refinance such debt or sell its property prior to the balloon payment date,
or it will be in default and could lose the property to foreclosure.
SPECIAL FACTORS TO CONSIDER
In reviewing the offer, you should pay special attention to the information
in the Sections entitled "Background and Reasons for the Offer," "Valuation of
Units," "Fairness of the Offer" and "Stanger Analysis," which contain
information regarding the background and reasons for the offer, the method of
evaluating units in the offer and alternative valuation methods considered, our
view as to the fairness of the offer, and the fairness opinion rendered by
Stanger.
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 liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
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 the entity that manages the
properties owned by your partnership. Through subsidiaries, AIMCO currently
controls the general partnership interest.
On October 31, 1998, IPT and AIMCO entered into an agreement and plan of
merger, dated as of October 1, 1998 (the "IPT Merger Agreement"), pursuant to
which IPT merged with AIMCO on February 26, 1999 (the "IPT Merger"). Upon
consummation of the IPT Merger, each outstanding share of IPT not owned by AIMCO
was converted into the right to receive 0.3601 shares of AIMCO's Class A Common
Stock (approximately 4,180,000 shares in the aggregate).
One of the reasons we chose to acquire Insignia is that we would be able to
make the exchange 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, and would provide the AIMCO Operating Partnership
with a larger asset and capital base and increased diversification. As of the
date of this offering, the AIMCO Operating Partnership proposes to make offers
to approximately 90 of the Insignia Partnerships, including your partnership.
During our negotiations with Insignia in early 1998, we decided that if the
merger with Insignia were consummated, we could also benefit from making offers
for limited partnership interests in the Insignia Partnerships. While some of
the Insignia Partnerships are public partnerships and information is publicly
available on such partnerships for weighing the benefits of making an exchange
offer, many of the partnerships are private partnerships and information about
such partnerships comes principally from the general partner. Our control of the
general partner makes it possible to obtain access to such information. Further,
such control also means that we control the operations of the partnerships and
their properties. Insignia did not propose that we conduct such exchange offers,
rather we initiated the offers on our own. We determined in June of 1998 that if
the merger with Insignia were consummated, we would offer to limited partners of
the Insignia Partnerships limited partnership units of the AIMCO Operating
Partnership and/or cash.
In connection with the Insignia Merger we acquired general partnership
interests and certain limited partnership interests in a number of private and
public partnerships. Eight private partnerships out of the 90 partnerships
involved in the proposed exchange offers do not have audited financial
statements prepared in accordance with generally accepted accounting practices
("GAAP"). Certain of these partnerships have audited financial statements
prepared on the basis of federal income taxes and others have unaudited
financial statements which may or may not be prepared on the basis of GAAP or
federal income taxes. For the Insignia Partnerships for which exchange offers
are being made which do not have audited GAAP financial statements for at least
two years, we are making the offer on the basis of either one year of audited
GAAP financial statements and one year of unaudited GAAP financial statements or
just unaudited GAAP financial statements. We tried to obtain two years of
audited GAAP financial statements for all the partnerships for which offers are
being made, but because of the inability to locate records from inception of the
partnerships which would allow auditors to verify the original purchase price of
the properties, no audits were possible. In these cases, the entities which
controlled the general partners prior to Insignia are no longer in business or
have no current knowledge or records of such partnerships. For the same reasons,
we do not have all the records for past years of some of the partnerships.
Therefore, for the partnerships without an audit, we did not have invoices,
escrow statements, property closing statements or the like to support the
original costs of the real property to the satisfaction of independent auditors,
in order for them to render an unqualified audit report. Consequently, we have
no way to support the original cost of the properties. However, we have general
ledgers and related accounting records that enable us to prepare GAAP basis
financial statements. These records were taken from the entities that controlled
the general partners and were subsequently maintained by us. The amount of
capitalized property costs appearing in those books and records has, to our
knowledge, been appropriately rolled forward from year to year and used by the
general partners of the partnerships in question to prepare tax returns and
periodic reports to the investors in the partnerships. Therefore, we believe
that the unaudited financial statements included in the prospectus supplements
for such partnerships have been prepared in accordance with GAAP.
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In acquiring Insignia and the interests in the Insignia Partnerships, we
conducted due diligence with regard to certain of the assets acquired including
the major properties held by the Insignia Partnerships. Our due diligence
focused on the condition of the major properties and the terms of the
partnership agreements. Since Insignia had audited GAAP financial statements and
since those partnerships without audited GAAP financial statements are generally
smaller, we did not focus on the issue of audited GAAP based financial
statements for the smaller partnerships at the time of the merger. Further, for
our internal due diligence use, audited tax based financial statements are also
used. The total number of Insignia Partnerships we acquired an interest in was
approximately 550 of which approximately 25 do not have audited GAAP statements.
We were not able to pick and choose the partnerships in which we would acquire
an interest. The Insignia Partnerships were part of the business of Insignia. As
a consequence, we acquired interests in certain small private partnerships which
do not have the ability to obtain audited GAAP financial statements. It is our
policy to acquire properties or partnerships with audited GAAP based financial
statements. However, in connection with large acquisitions of partnerships
interests, such as with the Insignia Merger, we may occasionally acquire a
partnership or property without audited GAAP financial statements.
Previous Tender Offers
Tender offers have been previously made with respect to certain of the
public Insignia Partnerships. However, there have not been any prior tender
offers to acquire units of your partnership. Except for such tender offers, we
are not aware of any merger, consolidation or other combination involving any of
the Insignia Partnerships, or any acquisitions of any of such partnerships or a
material amount of the assets of such partnerships.
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 August 28, 1998 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
(which is our subsidiary).
Liquidation
Benefits of 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 (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 your general partner (which is our subsidiary), 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 on the order of 1% of the principal amount of the mortgage.
Your general partner believes it currently is in the best interest of your
partnership to continue holding its real estate assets.
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Continuation of the Partnership Without the Offer
Benefits of Continuation. Although our offer permits you to continue your
investment in your partnership, 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 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. The
continuation of your partnership will allow you to continue to participate in
the net income and any increases of revenue of your partnership and any net
proceeds from the sale of any property owned by your partnership. The General
Partner continues to review operations and expects to complete capital
expenditures in 1999 and 2000 enabling it to possibly increase rents and lower
expenses. In addition, a sale of the property may cause a tax gain to each
investor.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. If your partnership continues operating as presently structured, your
partnership could be forced to borrow on terms that could result in net losses
from operations. Your partnership's mortgage notes are due on December, 2004 and
requires a balloon payment of approximately $2,585,000. Continuation of your
partnership without the offer would deny you and your partners the benefits that
your general partner (which is our subsidiary) expects to result from the 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.
Alternative Structures Considered
Before we decided to make our offer, we considered a number of alternative
transactions, including purchasing some or all of your partnership's properties;
making an offer of only cash for your units; making an offer of only Common OP
Units for your units; and making an offer of only Preferred OP Units for your
units. A merger would require a vote of the limited partners of your
partnership. If the merger was approved, all limited partners, including those
who wish to retain their units and continue to participate in your partnership,
would be forced to participate in the merger transaction. If the merger was not
approved, all limited partners, including those who would like to liquidate
their investment in your partnership, would be forced to retain their units.
We also considered purchasing your partnership's properties from your
partnership. However, a sale of your partnership's properties would require a
vote of the limited partners holding at least a majority of the units of your
partnership. If the sale was approved, all limited partners, including those who
wish to continue to participate in the ownership of your partnership's
properties, would be forced to participate in the sale transaction, and possibly
to recognize taxable income. If the sale was not approved, all limited partners,
including those who would like to dispose of their investment in your
partnership's properties, would be forced to retain their investment.
In order to give all limited partners in your partnership an opportunity to
make their own investment decision, we elected to make an offer directly to you
and the other limited partners. We considered making an all cash offer in order
to satisfy some limited partners' desire for immediate liquidity. However, an
all cash offer would not be desirable for those limited partners who do not
desire immediate liquidity and do not want to immediately recognize any taxable
income, but might otherwise be interested in disposing of their investment in
your partnership and might want an opportunity to control the timing of any
realization of taxable income associated with liquidating such investment in the
future.
We considered making an offer of only OP Units, either all Common OP Units
or all Preferred OP Units. The primary disadvantage of an all OP Unit offer is
that those limited partners who want immediate liquidity
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would be forced to wait at least one year before exchanging their OP Units for
cash or AIMCO stock. We decided to offer limited partners both Common OP Units
and Preferred OP Units in order to permit investors to make their own decision
as to whether they preferred the possibility of future capital appreciation
(Common OP Units) or preferred distribution rights (Preferred OP Units).
After considering these alternatives, we decided to offer limited partners
the possibility of all three forms of consideration: cash, Common OP Units and
Preferred OP Units. We think that such an offer will appeal to a large number of
limited partners in your partnership, while permitting each one to retain any or
all of his or her units and remain a limited partner in your partnership on the
same terms as before.
Sale of Assets
Your partnership could sell the property it owns. The general partner of
your partnership considers sale of your partnership's property from time to
time. However, any such sale would likely be a taxable transaction.
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 three principal advantages of tendering your units for Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, currently listed and traded on the NYSE.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are four principal advantages of tendering your units for Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- 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 Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
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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.
DISADVANTAGES OF THE OFFER
The principal disadvantages to the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and the consideration, no one separately represented the interests of the
limited partners. Although we have a fiduciary duty to the limited
partners, we also have conflicting responsibilities to our equity
holders. We did not appoint, or ask the limited partners to appoint, a
party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of the property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pre-tax cash proceeds to you than our
offer.
- OP Units. Investing in OP Units has risks that include the lack of a
public market, transfer restrictions and a one year holding period before
they can be redeemed by a holder. The ultimate return on the OP Units is
directly tied to the future price of AIMCO's Class A Common Stock or
Class I Preferred Stock. You could ultimately receive less for your OP
Units than the cash price in our offer. Further, on or after March 1,
2005, we may redeem the Class I Preferred Stock for $25 per share.
- Lower Preferred Quarterly Distributions. Your partnership paid
distributions of $14,706 for the fiscal year ended December 31, 1998.
Holders of Preferred OP Units will be entitled to receive quarterly
distributions of $0.50 per unit (equivalent to $2.00 on an annualized
basis) before any distributions are paid to holders of Common OP Units.
This is equivalent to a distribution of $1,812.00 per year on the number
of Preferred OP Units you will receive in exchange for each of your
partnership units.
- Lower Common Quarterly Distributions. Your partnership paid distributions
of $14,706 for the fiscal year ended December 31, 1998. In 1998, we paid
quarterly distributions on the Common OP Units totalling $2.25. In
January 1999, we increased our distribution rate on each of the Common OP
Units to $2.50 on an annual basis. Assuming no change in the level of our
distributions, this is equivalent to a distribution of $1,504.38 per year
on the number of Common OP Units you will receive in exchange for each of
your partnership units. See "The AIMCO Operating Partnership."
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. Further, while the original projected time
frame in the original offering document for your partnership units stated
that the properties may be sold in approximately 3 to 7 years from the
date of acquisition, such properties were not so sold. At the current
time we do not believe that the sale of the property would be
advantageous given market conditions, the condition of the property and
tax considerations. In particular, we considered the changes in the local
rental market, the potential for appreciation in the value of a property
and the tax consequences to you and your partners on a sale of a
property. See also "Your Partnership -- General Policy Regarding Sales
and Refinancings of Partnership Property."
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- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
VALUATION OF UNITS
We determined our cash offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower the value produced. We used your partnership's property
income for the fiscal year ended December 31, 1997. However, in determining the
appropriate capitalization rate, we considered your partnership's property
income since December 31, 1997. Our method for selecting a capitalization rate
begins with each property being assigned a location and condition rating (e.g.,
"A" for excellent, "B" for good, "C" for fair, and "D" for poor). We have rated
your property's location B (good) and its condition B (good). Generally, we
assign an initial capitalization rate of 10.25% to properties in this category.
We then adjust the capitalization rate based on whether the mortgage debt that
the property is subject to bears interest at a rate above or below 7.5% per
annum. Generally, for every 0.5% in excess of 7.5%, the capitalization rate
would be increased by 0.25%. We also considered any changes in your
partnership's property income from 1997 to 1998. Because your partnership's
property income in 1998 remained relatively unchanged compared to 1997, we made
no further revision of the capitalization rate, resulting in a final
capitalization rate of 10.25%. The evaluation of a property's location and
condition, and the determination of an appropriate capitalization rate for a
property, is subjective in nature, and others evaluating the same property might
use a different capitalization rate and derive a different property value.
Property income is the difference between the revenues from the property
and related costs and expenses, excluding income derived from sources other than
its regular activities and before income deductions. Income deductions include
interest, income taxes, prior-year adjustments, charges to reserves, write-offs
of intangibles, adjustments arising from major changes in accounting methods and
other material and nonrecurrent items. In this respect, property income differs
from net income disclosed in the partnership's financial statements, which does
not exclude these income sources and deductions. The following is a
reconciliation of your partnership's net income for the year ended December 31,
1997, to your partnership's property income for the same period.
<TABLE>
<S> <C>
Net Income (Loss)........................................... $ 66,000
Other Non-Operating Expenses................................ (6,000)
Depreciation................................................ 99,000
Interest.................................................... 217,000
--------
Property income............................................. $376,000
</TABLE>
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. Further,
in applying the direct capitalization method, others may make different
assumptions and obtain different results. 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 estimated 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
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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 (property 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 divided
fiscal 1997 property income of $375,564 by the property's capitalization
rate of 10.25% to derive an estimated gross property value of $3,665,000.
- 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
certain other costs including required capital expenditures, deferred
maintenance, and closing costs to derive a net equity value for your
partnership of $769,964. Closing costs, which are estimated to be 2.5% of
the gross property value, include legal and accounting fees, real
property, transfer taxes, title and escrow costs and broker's fees.
- 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. Accordingly, 100% of the estimated liquidation
proceeds are assumed to be distributed to holders of units. Our cash
offer consideration represents the per unit liquidation proceeds
determined in this manner.
<TABLE>
<S> <C>
Property income............................................. $ 375,564
Capitalization rate....................................... 10.25%
-----------
Gross valuation of partnership property..................... 3,665,000
Plus: Cash and cash equivalents............................. 189,069
Plus: Other partnership assets, net of security deposits.... 46,259
Less: Mortgage debt, including accrued interest............. (2,817,127)
Less: Accounts payable and accrued expenses................. (34,577)
Less: Other liabilities..................................... (18,675)
Partnership valuation before taxes and certain costs........ 1,029,949
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures and deferred
maintenance............................................... (58,410)
Less: Closing costs......................................... (201,575)
-----------
Estimated net valuation of your partnership................. 769,964
Percentage of estimated net valuation allocated to holders
of units.................................................. 100.00%
-----------
Estimated net valuation of units............................ 769,964
Total number of units............................. 34.0
-----------
Estimated valuation per unit................................ 22,646
===========
Cash consideration per unit................................. 22,646
===========
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration of $22,646 by the $25
liquidation preference of each Preferred OP Unit to get 906.00 Preferred
OP Units per unit.
- In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $22,646 by
a price of $37.63 (the average closing price of AIMCO's Class A Common
Stock on the NYSE for the 30 trading days ending on March 23, 1999) to
get 601.75 Common OP Units per unit.
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The total net valuation of all partnerships in which the AIMCO Operating
Partnership is making similar exchange offers, and which were valued using the
same methods as used for your partnership, is $568,751,183, of which, $769,964
or .14% is the net valuation of your partnership.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
Your general partner is a subsidiary of the AIMCO Operating Partnership. 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. Your general partner did not participate in the structuring of the
offer and has substantial conflicts of interest with regard to the offer.
However, for all of the reasons discussed herein, we and your general partner
believe that the offer and all forms of consideration offered is fair to you and
the limited partners of your partnership. We also reasonably believe that the
similar offers to the limited partners of the other partnerships are fair to
such limited partners. 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 us 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, your
general partner (which is our subsidiary) 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. The net
income of your partnership has decreased from $44,000 for the nine months
ended September 30, 1997 to $28,000 for the nine months ended September 30,
1998. These factors are reflected in our valuation of your partnership.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are substantially the financial
equivalent to your interest in your partnership. 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
and Stanger's estimates of the net asset value ($21,157 per unit), going
concern value ($20,300 per unit) and liquidation value ($18,376 per unit)
of your partnership units. See "Stanger Analysis."
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity. However, we did review whether trading information
was available.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
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9. The fact that the offer provides holders of units with the
opportunity to defer taxes by electing to accept Preferred OP Units or
Common OP Units.
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 $22,646, based on a total estimated
value of your partnership's property of $3,665,000. Your general partner
(which is our subsidiary) has no present intention to liquidate your
partnership or to sell or refinance your partnership's property. See
"Background and Reasons for the Offer". See "Valuation of Units" for a
detailed explanation of the methods we used to value your partnership.
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $2.00 and current annualized distributions with respect to the
Common OP Units are $2.50. This is equivalent to distributions of $1,812.00
per year on the number of Preferred OP Units, or distributions of $1,504.38
per year on the number of Common OP Units, that you would receive in
exchange for each of your partnership's units. Distributions with respect
to your units for the fiscal year ended December 31, 1998 were $14,706. See
"Comparison of Your Units and AIMCO OP Units -- Distributions."
13. The fact that if your partnership were liquidated as opposed to
continuing, the general partner (which is our subsidiary) would not receive
the substantial management fees it currently receives. As discussed in
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," we do not believe that
liquidation of the partnership is in the best interests of the unitholders.
Therefore, we believe the offer is fair in that the fees paid to the
general partner would continue even if the offer was not consummated. We
are not proposing to change the current management fee arrangement.
In evaluating these factors, your general partner (which is our subsidiary)
and the AIMCO Operating Partnership did not quantify or otherwise attach
particular weight to any of them.
Your general partner (which is our subsidiary) has not retained an
unaffiliated representative to act on behalf of the limited partners in
negotiating the terms of the offer since each individual limited partner can
make his own decision as to whether or not to tender and what consideration to
take. Unlike a merger or other form of partnership reorganization, a majority or
more of the holders of limited partnership interests in your partnership cannot
bind you. If an unaffiliated representative had been obtained, it is possible
that such representative could have negotiated a higher price for your units
than was unilaterally offered by the AIMCO Operating Partnership. We have
retained Stanger to conduct an analysis of our offer and to render an opinion as
to the fairness to you of the offer consideration from a financial point of
view. Although no representative has been retained to act solely on behalf of
the limited partners for purposes of negotiating the terms of the offer, we have
determined that the transaction is fair to you from a financial point of view.
We made this determination based, in part, on the fairness opinion from Stanger
and the fact that all limited partners may elect to retain their existing
security on the same terms as before our offer.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
Your general partner (which is our subsidiary) 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 and, although there are
other ways to value real estate, is a reasonably fair method to determine the
consideration offered. Although we believe our offer consideration represents
the amount you would receive if we currently liquidated your partnership, an
actual liquidation might generate a higher or lower price for holders of units.
A liquidation in the future might generate a higher or lower price for holders
of units.
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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
Your general partner (which is our subsidiary) 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
sell your partnership's property or refinance its indebtedness within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, your general partner
(which is our subsidiary) has attempted to compare the cash offer consideration
against: (a) the prices at which the units have been sold in the illiquid
secondary market, if available; (b) estimates of the value of the units on a
liquidation basis; (c) estimates of the going concern value of your units based
on continuation of your partnership as a stand-alone entity; and (d) the net
book value of your units. The general partner of your partnership believes that
analyzing the alternatives in terms of estimated value, 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 your general partner (which is our subsidiary) and others. These
assumptions relate to, among other things: the operating results since December
31, 1997 as to income and expenses of each property, other projected amounts and
the capitalization rates that may be used by prospective buyers if your
partnership assets were to be liquidated. The 1998 budget is discussed in
"Stanger Analysis -- Summary of Materials Considered" and other projected
amounts are discussed in "Stanger Analysis -- Summary of Reviews."
In addition, these estimates are based upon certain information available
to your general partner (which is our subsidiary) 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. 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.
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Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 2031, 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.
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C>
Cash offer price............................................ $ 22,646
Partnership preferred units................................. $ 22,646(1)
Partnership common units.................................... $ 22,646(1)
Alternatives:
Estimated liquidation proceeds............................ $ 22,646
Estimated going concern value............................. $ 21,751(2)
Estimated alternative going concern value................. $ 21,597(3)
Net book value (deficit).................................. $(51,234)
Estimated liquidation value based on appraised property
value.................................................. $ 29,178
</TABLE>
- ---------------
(1) In our discussion of the offer price as being fair with regard to other
methods of valuing your partnership, we believe the number of Common OP
Units and Preferred OP Units to be issued per unit in the offer to be equal
to the cash price per unit. Therefore, the fairness discussion applies
equally to the cash and non-cash forms of consideration being effected. See
"Valuation of Units" for details of how the number of OP Units was
determined.
(2) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(3) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
Prices on Secondary Market
There is no active market for your units. Your general partner (which is
our subsidiary) is unaware of any secondary market activity in the units.
Therefore any comparison to prices on the secondary market is not possible at
the present time. See "Your Partnership -- Distributions and Transfers of
Units -- Transfers."
Prior Tender Offers
There have been no previous tender offers for units of your partnership.
Appraisals
Your partnership's property was appraised in 1997 by an independent third
party appraiser, Joseph J. Blake & Associates, Inc. (the "Appraiser"), in
connection with a proposed financing and not in connection with the offer.
According to the appraisal reports, the scope of the appraisals 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 those reports was $3,900,000 for
Scotch Pines East on August 14, 1998.
The total appraised value of the property is $3,900,000 and was not brought
down to a per unit basis by us since such appraisal does not reflect the
mortgage encumbering the property of $2,817,127 (including interest), other
assets and liabilities of the partnership or any costs of sales of the property
as reflected in
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"Valuation of Units." However, using the appraisal amount instead of the
"estimated gross valuation of your partnership's property" in the table in the
"Valuation of Units" would result in a higher amount per unit than our offer.
We believe that, based on the condition of the property, the appraisals
substantially overstate its value. The appraisals did not take into account the
deferred maintenance costs of the partnership's property. Therefore, we believe
that the appraisals are less meaningful in assessing the fairness of our offer
consideration than the analysis described above under "Valuation of Units." On
this basis, we believe that our offer consideration is fair in relation to such
appraisal amounts. The Appraiser performed the real estate appraisals in the
normal course of its business and the executive officers who rendered the report
are members of the Appraisal Institute. No limitations were imposed on the
Appraiser by the general partner. A copy of the appraisals may be obtained by
contacting the Information Agent at the address and telephone numbers set forth
on the back cover page of this Prospectus Supplement.
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. Your general
partner (which is our subsidiary) 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
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.
Estimated Going Concern Value and Alternative Going Concern Value
Going concern value is a measure of the value of your partnership if it
continued operating as an independent stand-alone entity. The estimated value of
the partnership on a going concern basis is not intended to reflect the
distributions payable to limited partners if its assets were to be sold at their
current fair market value. The general partner of your partnership estimated the
going-concern value of your partnership by analyzing projected cash flows and
performing a discounted cash flow analysis. The general partner of your
partnership assumed that your partnership will be operated in the same manner as
currently, as an independent stand-alone entity, and its assets sold in a
liquidation after a ten-year holding period. Distribution and sale proceeds per
partnership unit were discounted in the projections at a rate of 30% reflecting
real estate risk and the relatively high leverage of more than 75% of real
estate value.
The general partner of your partnership assumed that real estate selling
costs will be incurred which will equal 2.5% of the sales price. This analysis
assumes that the partnership property will be sold in a liquidation, at the
expiration of the ten-year holding period, to an independent third-party buyer.
Upon such liquidation, other balance sheet assets (excluding amortizing assets)
and liabilities of your partnership will be sold at their book value, and the
net proceeds of sale will be allocated between the general partners and offerees
in accordance with your partnership's agreement of limited partnership. Should
the assets be liquidated over time, even at prices equal to those projected,
distributions to limited partners of your partnership's cash flow from
operations might be reduced because relatively fixed costs, such as general and
administrative expenses,
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are not proportionately reduced with the liquidation of assets. However, for
simplification purposes, the sales are assumed to occur concurrently.
The going concern method relies on a number of assumptions, including among
other things, (i) rental rates for new leases and lease renewals; (ii)
improvements needed to prepare an apartment for a new lease or a renewal lease;
(iii) lease periods; (iv) capital expenditures; (v) broker's commissions; and
(vi) discount rates applied to future cash flows. The use of assumptions or
variables that differ from those described above could produce substantially
different results. Neither we nor the general partner of your partnership
solicited any offers or inquiries from prospective buyers of the property owned
by your partnership in connection with the preparation of the estimates of value
of the properties and the actual amounts for which the partnership's properties
or the partnership could be sold could be significantly higher or lower than any
of the estimates contained herein. The estimated going concern value of your
partnership is $21,751 per unit, which value is below our offer price per unit.
Therefore, we believe the offer price is fair in relation to the going concern
value.
The general partner determined going concern value based upon the
discounted present value of projected cash flows from the partnership over a
ten-year period of operation, which is a standard period for going concern
analyses for real property assets. Such discounted cash flows were based upon
year one property income from the real estate portfolio of $375,564, escalated
at 3% per annum for the ten-year projection period. Property income was reduced
by: (i) partnership administrative expenses of $27,000 per annum; and (ii) debt
service on existing debt through maturity or the end of ten years, whichever
occurs first. For debt which matures during the ten-year period, a refinancing
at a 7% interest rate was assumed. At the end of the ten-year projection period,
the property was assumed to be sold at a price based upon property income for
the immediately following year, capitalized at a capitalization rate of 10.75%,
less expenses of sale estimated at 3% of the property value. The net cash flow
to limited partners from the continued operation of the property and the net
proceeds of sale were then discounted at a discount rate of 25% to achieve the
going concern value of $21,751 per unit.
Your partnership's property currently has a balloon payment due in December
2004. While the going concern value was based on your partnership refinancing
its indebtedness and continuing to own its property, the alternative going
concern value of $21,597 is based on selling the property when the balloon
payment is due and otherwise includes the same assumptions as the going concern
value described above. For the reason set forth above, we believe the offer
consideration is fair in relation to the alternative going concern value.
There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
Net Book Value
Net book value per unit is a deficit of $51,234 and therefore a comparison
with the offering price would not be meaningful in determining the fairness of
the offering price.
Stanger's Estimate of Net Asset Value, Going Concern Value and Liquidation
Value
In rendering its opinion set forth as Appendix A, Stanger did its own
independent estimate of your partnership's net asset value of $21,157 per unit,
going concern value of $20,300 per unit and liquidation value of $18,375 per
unit. For an explanation of how Stanger determined such values see "Stanger
Opinion -- Summary of Reviews -- Comparison of Offer Price To Liquidation Value,
Going Concern Value and Secondary Market Prices." An estimate of your
partnership's net asset value per unit is based on a hypothetical sale of your
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 a liquidation value, after provisions
in full for all of the other known liabilities of your partnership. The net
asset value does not take into account (i) timing considerations discussed under
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," and (ii) costs associated with
winding up of your partnership. Therefore, the AIMCO Operating Partnership
believes that the estimate of net asset value per unit does not necessarily
represent the fair market value of a unit or the amount the limited partner
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reasonably could expect to receive if the partnership's property was sold and
the partnership was liquidated. For this above reason, the AIMCO Operating
Partnership considers net asset value estimates to be less meaningful in
determining the offer consideration than the analysis described above under
"Valuation of Units."
Stanger's estimates of net asset value, going concern value and liquidation
value per unit represents discounts to the offer price of $1,489, $2,346 and
$4,271. In light of these discounts and for all the reasons set forth above, the
AIMCO Operating Partnership believes the offer price is fair to the limited
partners. The AIMCO Operating Partnership believes that the best and most
commonly used method of determining the value of a partnership which only owns
an apartment is the capitalization of income approach set forth in "Valuation of
Units."
ALLOCATION OF CONSIDERATION
Your partnership's agreement of limited partnership provides that, in the
event of a liquidation, available proceeds are to be distributed 0% to the
general partner and 100% to the limited partners. Accordingly, in valuing your
units, we have assumed that 100% of the estimated liquidation proceeds are
distributed to holders of units. Since this allocation is in accordance with the
terms of the partnership agreement, we believe the allocation is fair. 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. Stanger has
advised us that the description of Stanger's analysis contained herein describes
the material portions of Stanger's review. 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 any losses, claims,
damages, liabilities or expenses to which Stanger may be subject, under any
applicable federal or state law, including federal and state securities laws,
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 NYSE 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
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<PAGE> 572
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 audited financial statements for the years ended December 31, 1996
and 1997, and its unaudited financial statements for the period ended September
30, 1998, which your partnership's management has indicated to be the most
current available financial statements at the time; (iii) reviewed descriptive
information concerning your partnership's real estate assets (the "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, 1997 and 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 similar properties; (viii) reviewed
internal financial analyses prepared by your partnership of the estimated
current net liquidation value and going concern value of your partnership; (ix)
reviewed information provided by AIMCO concerning the AIMCO Operating
Partnership, the Common OP Units and the Preferred OP Units; and (x) conducted
other studies, analysis and inquiries as Stanger deemed appropriate.
A summary of the operating budgets per property for the year ended December
31, 1998, which was supplied by your partnership to Stanger, is as follows:
FISCAL 1998 OPERATING BUDGETS
<TABLE>
<S> <C>
Total Revenues.............................................. $ 660,513
Operating Expenses.......................................... (269,826)
Replacement Reserves -- Net................................. (62,626)
Debt Service................................................ (243,168)
Capital Expenditures........................................ (3,840)
---------
Net Cash Flow..................................... $ 81,053
=========
</TABLE>
The above budgets at the time they were made were forward-looking
information developed by the general partner of your partnership. Therefore, the
budgets were dependent upon future events with respect to the ability of your
partnership to meet such budget. The budgets incorporated various assumptions
including, but not limited to, lease revenue (including occupancy rates),
various operating expenses, general and administrative expenses, depreciation
expenses, capital expenditures, and working capital levels. While we deemed such
budgets to be reasonable and valid at the date made, there is no assurance that
the assumed facts will be validated or that the circumstances will actually
occur. Any estimate of the future performance of a business, such as your
partnership's business, is forward-looking and based on assumptions some of
which inevitably will prove to be incorrect.
The budget amounts provided above are figures that were not computed in
accordance with GAAP. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budget are often
re-categorized as expenses when the financial statements are audited and
presented in accordance
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with GAAP. Therefore, the summary operating budget presented for fiscal 1998
should not necessarily be considered as indicative of what the audited operating
results for fiscal 1998 will be. For the year ended December 31, 1998, the
partnership expects to report revenues of $689,693, operating expenses of
$269,487 and replacement reserves and capital expenditures of $101,595. Based on
these estimates, the partnership's net cash flow before debt service, which we
believe provides a better indication of the partnership's actual operating
performance than net cash flow, was less than the budgeted amounts.
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 the third quarter of 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 or
square footage; 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 nine month period ending
September 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 property.
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 property, 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 the
liquidation value calculation prepared by the management of your partnership.
Stanger observed that such liquidation value was based upon the gross property
valuation estimate prepared by management, which in turn is based upon fiscal
year 1997 property income capitalized at a capitalization rate of 10.25%.
Stanger further observed that the gross property valuation was adjusted for the
following additional items to achieve the liquidation value of your partnership:
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(i) cash, other assets, mortgage indebtedness and other liabilities determined
as of December 31, 1997; (ii) estimated closing costs equal to approximately
2.5% of gross real estate value; and (iii) extraordinary capital expenditure
estimates in the amount of $58,410. Stanger observed that your partnership
liquidation value of $769,964 was divided by the total units outstanding of 34
to provide the liquidation value per unit of $22,646.
Review of Partnership Going Concern Analysis. Stanger reviewed the going
concern value calculation prepared by management of your partnership. Stanger
observed that such going concern value was based upon the discounted present
value of projected cash flows from the partnership over a ten-year period of
operation which is a standard period for going concern analysis for real
property assets. Such discounted cash flows were based upon year one property
income from the real estate portfolio of $375,564 escalated at 3% per annum for
the ten-year projection period. Property income was reduced by: (i) partnership
administrative expenses of $27,000 per annum; and (ii) debt service on existing
debt through maturity or the end of ten years, whichever occurs first. For debt
which matures during the ten-year period, a refinancing at a 7% interest rate
was assumed. At the end of the ten-year projection period, the properties were
assumed to be sold based upon: (i) property income for the immediately following
year capitalized at a capitalization rate of 10.75%; and (ii) expenses of sale
estimated at 3% of property value. Stanger observed that the proceeds of sale
were reduced by the estimated debt balance at the end of the tenth year to
provide net proceeds from the sale of your partnership's property.
The resulting cash flows for the ten-year period were discounted to present
value at a discount rate of 30%. Stanger observed that such discount rate was
based upon the portfolio real estate discount rate of 12.75%, adjusted for
leverage risk and illiquidity risk. Stanger observed that the resulting
partnership going concern value was divided by units outstanding of 34 to
achieve management's estimate of going concern value of $21,751 per unit.
Review of Secondary Market Prices. Stanger maintains a database of
secondary market information. Stanger observed for its data that no units were
reported traded in the secondary market during 1998 on limited partnership
units.
Comparison of Offer Price to Liquidation Value, Going Concern Value and
Secondary Market Price. Stanger observed that the offer price of $22,646 per
unit is equal to management's estimate of liquidation value, and reflects a 4.1%
premium to management's estimate of going concern value of $21,751. Stanger
further observed that investors may select cash, Common OP Units or Preferred OP
Units in exchange for their partnership units or they may elect to continue to
hold their partnership units. Stanger further observed that the Common OP Units
will be priced at $37.625 per unit, an amount which equals the average of the
closing prices of the common shares into which such Common OP Units are
convertible for the 30-trading day period ended March 23, 1999. Furthermore,
Stanger observed that the Preferred OP Units to be issued in the transaction
will be based upon the liquidation preference of $25. Stanger noted that the
Preferred OP Units are redeemable for, at AIMCO's option, either: (i) $25 in
cash per Preferred OP Unit; (ii) common stock of AIMCO based upon a ten-day
average price at the time of the requested redemption; or (iii) commencing in
the third year following the closing, preferred stock of AIMCO with a dividend
equal to the distributions on the Preferred OP Units. Stanger observed that the
ten-day average price of the AIMCO common stock is $36.425, as of March 23, 1999
and therefore an investor receiving AIMCO common shares in redemption of the
Preferred OP Units would receive 0.6863 shares with a value approximating $25
for each $25 Preferred OP Unit redeemed, based upon AIMCO's ten day average
common share price as of March 23, 1999. Stanger noted that commencing in the
third year, investors redeeming Preferred OP Units may receive from AIMCO
Preferred Stock with a dividend equal to the distribution on the AIMCO Preferred
OP Units. Stanger observed that the distribution on the Preferred OP Units is
set at 8% of $25 and that the average dividend yield on AIMCO's outstanding C,
D, G and H Preferred Shares approximates 10.1% as of March 23, 1999. Stanger
noted that, based upon the cash dividend yield on the AIMCO Preferred Shares
identified above as of March 23, 1999, investors would receive Preferred Shares
with a value of approximately $19.80 for each $25 Preferred OP Unit if such
redemption occurred after the second year following the closing of the
transaction. Stanger further observed that the above analysis does not take into
consideration the present value
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of the earnings on the tax deferral an investor may realize as the result of
selecting Preferred OP Units in lieu of cash in a taxable transaction.
In addition to the above analysis, Stanger prepared an independent estimate
of net asset value, going concern value and liquidation value per unit. Stanger
has advised AIMCO that Stanger's estimates of net asset value, liquidation value
and going concern value are based upon Stanger's independent estimate of
property income for the property income, direct capitalization rate of 10.5%,
transaction costs of 2.5% to 5.0%, growth rates of 3% and a terminal
capitalization rates of 11.0%. Stanger has advised us that the direct
capitalization rate represents Stanger's estimate of the capitalization rate
applicable to its estimate of property income and is based upon Stanger's
independent estimate of the direct capitalization rate for such property based
upon such property's age, condition and location. Stanger further advised us
that the terminal capitalization rate is the capitalization rate utilized in
Stanger's going concern value estimate which is applied to Stanger's estimate of
property income in the eleventh year to establish the value of the property at
the end of the tenth year. Stanger has advised us that Stanger estimated the
terminal capitalization rate at a 50 basis point premium to the direct
capitalization rate estimate for the property. Stanger utilized deferred
maintenance estimates derived from the Adjusters International, Inc. reports and
AIMCO in the calculation of net asset value, liquidation value and going concern
value. Stanger advised us that Stanger adjusted its estimate of net asset value
and liquidation value on the cost of above market debt using a 7% interest rate.
With respect to the going concern value estimate prepared by Stanger, Stanger
advised AIMCO that a ten-year projection period and a discount rate of 30% was
utilized. Such discount rate reflects the risk associated with real estate,
leverage and a limited partnership investment. The 30% discount rate was based
upon the property's estimated internal rate of return derived from the
discounted cash flow analysis, (13% as described above), plus a premium
reflecting the additional risk associated with mortgage debt equal to more than
75% of property value. Stanger's estimates were based in part upon information
provided by us. Stanger relied upon the deferred maintenance estimates, property
descriptions, unit configurations, allocation among partners, and other data
provided by us. Stanger's analyses were based on balance sheet data as of
September 30, 1998. Stanger's review also included a site visit, review of
rental rates and occupancy at the properties as well as competing properties.
Stanger's estimate of net asset value, going concern value and liquidation value
per unit were $21,157, $20,300, and $18,376 representing discounts to the offer
price of 6.6%, 10.35% and 18.9%. See "Fairness of the Offer -- Comparison of
Consideration to Alternative Consideration."
REVIEW OF APPRAISAL
Stanger observed that the property was appraised by Joseph J. Blake &
Associates Inc. as of August 14, 1997 in connection with a proposed financing.
The appraised value of the property was 3,900,000 and was estimated by using the
income approach and sales comparison approach to valuation wherein values of
3,900,000 and 3,875,000 were derived. Stanger observed that in the income
approach, the appraiser estimated net operating income at $389,614 and utilized
a 10% capitalization rate to derive value. Stanger observed that AIMCO utilized
net operating income of $375,564 and a capitalization rate of 10.25% to derive
the estimate of property value at $3,665,000 and that such amount is
approximately 6% less than the appraisal. Stanger further observed that
properties such as the property owned by the partnership often experience
replacement reserves of $300 per unit or more and that utilizing a 300 per unit
replacement reserve instead of a $200 per unit replacement reserve in the
appraisal would have reduced the value therein to approximately $3,800,000 and
that our property value estimate of $3,664,000 is 3.5% lower.
Stanger advised us that Stanger considered the appraisals in connection
with the preparation of its Fairness Opinion.
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. Stanger has rendered similar fairness opinions with regard to certain
other exchange offers being made by the AIMCO Operating Partnership. Stanger
rendered the opinions only as to the individual fairness of the offer
consideration in each
S-47
<PAGE> 576
proposed exchange offer. The Fairness Opinion does not address the fairness of
all possible acquisitions of interests in your partnership. In addition, the
Fairness Opinion will not be revised to reflect the actual participation in the
offer.
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 your general partner (which is our subsidiary), and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's property, and the transaction costs and fees associated with a
sale of the property. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's property 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 property 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 property 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 property 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, nor did Stanger
address the fairness of all possible acquisitions of interests in the
partnership. The opinion will not be revised to reflect the actual results of
the offer. 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-48
<PAGE> 577
In connection with preparing the Fairness Opinion, Stanger was not engaged
to, and consequently did not, prepare any written or oral 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 $9,000 with
respect to your partnership. The estimated aggregate fee payable to Stanger in
connection with all affiliated partnerships is estimated at $1,510,000, plus
out-of-pocket expenses estimated at $61,000. 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 was
engaged by AIMCO during 1997 to represent AIMCO in negotiations to acquire
interests in a real estate limited partnership. Such transaction was never
consummated and no fee was ever paid to Stanger in connection with such proposed
transaction. AIMCO and its affiliates may retain the services of Stanger in the
future. Any such future services could relate to this offer, some or all of the
concurrent offers, or a completely separate transaction.
YOUR PARTNERSHIP
GENERAL
Calmark/Fort Collins, Ltd., is a California limited partnership which
completed a private offering in 1982. Insignia acquired the general partner of
your partnership in 1992. AIMCO acquired Insignia in October 1998. There are
currently a total of 37 limited partners of your partnership and a total of 34
units of your partnership outstanding. Your partnership is in the business of
owning and managing residential housing. Currently, your partnership owns and
manages the property described below. Your partnership has no employees. 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.
YOUR PARTNERSHIP AND ITS PROPERTY
Your partnership was formed on January 29, 1982 for the purpose of owning
an apartment property located in Fort Collins, Colorado, known as "Scotch Pines
East." Your partnership's property is owned by the partnership but is subject to
a mortgage. The property consists of 102 apartment units. There are 53 one-
bedroom apartments and 1 two-bedroom apartments. Your partnership's property had
an average occupancy rate of approximately 97.79% in 1998, 99.02% in 1997 and
99.02% in 1996.
Your partnership's property provides residents with a number of amenities
and services, such as 24-hour desk service, exercise room and/or sauna, and
party or meeting rooms. Nearly all apartment units are wired for cable
television, and many apartment units also offer one or more additional features,
such as washer/ dryer, microwave, fireplace, and patio/balcony.
Presently, there are no plans for any Renovations or improvements for the
property. Budgeted renovations or improvements for 1999 total $58,410 and are
intended to be paid for out of cash flow or borrowings. Renovations or
improvements include, but are not limited to, gutter and downspout repairs, hot
water heater replacement, exterior lighting and irrigation repairs.
Set forth below are the average rents for the apartments for the last five
years:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$519 $483 $457 $414 $382
</TABLE>
S-49
<PAGE> 578
The apartments are being depreciated for federal income tax purposes using
the accelerated cost recovery method. Depreciation is computed principally by
the straight-line and accelerated methods over estimated lives of 3 to 40 years.
Currently, the real estate taxes on the property are $28,048 of $3,283,400
of assessed valuation with a current yearly tax rate of 0.85%. When the proposed
improvements are made it is anticipated that the yearly tax rate may increase by
approximately 0.86% of such improvements.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a wholly 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.
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS
Under your partnership's agreement of limited partnership, your partnership
is permitted to raise new equity and reinvest cash in new properties.
Consequently, your partnership is not limited in its ability to expand its
investment portfolio. Your partnership will terminate on December 31, 2031
unless earlier dissolved. Your partnership has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
Generally, your partnership is authorized to acquire, develop, improve, own
and operate your partnership's property as an investment and for income
producing purposes. The investment portfolio of your partnership is not is
limited to the assets acquired with the initial equity raised through the sale
of units to the limited partners of your partnership or the assets initially
contributed to your partnership by the limited partners, as well as the debt
financing obtained by your partnership within the established borrowing
restrictions.
An investment in your partnership is a finite life investment, with the
partners to receive regular cash distributions out of your partnership's
distributable cash flow, if available, and to receive cash distributions upon
liquidation of your partnership's real estate investments, if available.
In general, your general partner (which is our subsidiary) regularly
evaluates the partnership's property by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors the property's specific locale and sub-market
conditions (including stability of the surrounding neighborhood) 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 (including any prepayment penalties), tax implications,
availability of attractive mortgage financing to a purchaser, 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. If rental market conditions improve, 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 viable option than it is
currently. After taking into account the foregoing considerations, your general
partner is not currently seeking a sale of your partnership's property primarily
because it expects the property's operating performance to remain strong in the
near term. In making this assessment, your general partner noted that occupancy
and rental rates at the property were 98% and $541, respectively, at December
31, 1998, compared to 99% and $518, respectively, at December 31, 1997. Although
there can be no assurance as to future performance, the general partner expects
occupancy to remain strong in the near future due to demand in the area and
amenities of the property which appeal to students. In addition, the general
partner noted that it expects to spend approximately $58,410 for capital
expenditures/capital improvements at the property in 1999 to repair and improve
the property's gutters and downspouts, lighting, and irrigation. These
S-50
<PAGE> 579
expenditures are expected to improve the desirability of the property to tenants
and reduce operating expenses at the property. The general partner does not
believe that a sale of the property at the present time would adequately reflect
the property's future prospects. Another significant factor considered by your
general partner is the likely tax consequences of a sale of the property for
cash. Such a transaction would likely result in tax liabilities for many limited
partners. The general partner has not received any recent indication of interest
or offer to purchase the property.
CAPITAL REPLACEMENT
Your partnership has an ongoing program of capital improvements,
replacements and renovations, including roof replacements, kitchen and bath
renovations, balcony repairs (where applicable), replacement of various building
systems and other replacements and renovations in the ordinary course of
business. All capital improvement and renovation costs are expected to be paid
from operating cash flows, cash reserves, or from short-term or long-term
borrowings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Your Partnership."
BORROWING POLICIES
Your partnership's agreement of limited partnership allows your partnership
to incur debt. As of December 31, 1998, your partnership had a current mortgage
note outstanding of $2,773,370, payable to Lehman, which bears interest at a
rate of 7.34%. The mortgage debt is due in December 2004. Your partnership's
agreement of limited partnership also allows the general partner of your
partnership to lend funds to your partnership. As of December 31, 1998, your
general partner had no outstanding loans to your partnership.
COMPETITION
There are other residential properties within the market area of your
partnership's property. The number and quality of competitive properties in such
an area could have a material effect on the rental market for the apartments at
your partnership's property and the rents that may be charged for such
apartments. While we are a significant factor in the United States in the
apartment industry, competition for apartments is local.
LEGAL PROCEEDINGS
Your partnership is party to a variety of legal proceedings related to its
ownership of the partnership's property and management and leasing business,
respectively, arising in the ordinary course of the business, which are not
expected to have a material adverse effect on your partnership.
HISTORY OF THE PARTNERSHIP
Your partnership sold $1,411,000 of limited partnership units in 1982 for
$41,500 per unit. Your partnership currently owns one apartment property.
Your partnership used the funds raised to purchase its property and it has
expended the funds so raised many years ago. Your partnership currently owns the
property described herein, which is subject to a substantial mortgage. Your
general partner (which is our subsidiary) has not experienced any material
adverse financial developments from January 1, 1997 through the present.
According to the private placement memorandum dated December 10, 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) indicated
that prior partnerships sponsored by affiliates of the general partner had, on
average, begun selling their properties during the third year after the
investments were made and had sold all of their properties after seven years of
ownership. The private placement memorandum further stated, however, that the
general partner was unable to predict how long the partnership would remain
invested in the property and that the partnership acquired such property for
investment rather than resale. In any event, according to the private placement
memorandum, the general partner anticipated that a disposition of the
S-51
<PAGE> 580
property would depend on, among other things, the current real estate and money
markets, economic climate and income tax consequences to the limited partners.
We do not know why your partnership did not sell all of its properties within
such holding period. Under your partnership's agreement of limited partnership,
the term of the partnership will continue until December 31, 2031, 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.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, your general partner (which is our subsidiary) is
accountable to your partnership as a fiduciary. Your partnership's agreement of
limited partnership does not limit the liability of the general partners to your
Partners or the limited partners for any act performed in their capacity as
general partner. Under your partnership's agreement of limited partnership, the
general partners of your partnership and their affiliates are not liable to your
partnership or the limited partners for any loss or damage resulting from any
act or omission performed or omitted in good faith, pursuant to the authority
granted to them to promote the interests of your partnership. Moreover, the
general partners will not liable to your partnership or limited partners because
any taxing authorities disallow or adjust any deduction or credits in your
partnership income tax returns. 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 partnership's agreement of limited partnership provides that the
general partners of your partnership and their affiliates are entitled to
indemnification from any expense, liability or loss, including attorneys' fees
incurred in connection with the defense of any action, based on any act or
omission by the general partners within the scope of the authority conferred by
your partnership's agreement of limited partnership, including all such
liabilities under Federal and state securities laws as permitted by law, except
for acts or omissions constituting fraud, bad faith, willful misconduct or gross
negligence. Such attorneys' fees may be paid as incurred. If such a claim for
indemnification (other than for expenses incurred in a successful defense) is
asserted against your partnership, your partnership will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy and will be governed by the final adjudication of
such issue. Your partnership is provide indemnification to the extent of its
assets. As part of its assumption of liabilities in the consolidation, AIMCO
will indemnify the general partner of your partnership and their affiliates for
periods prior to and following the consolidation to the extent of the indemnity
under the terms of your partnership's agreement of limited partnership and
applicable law.
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 partners of your partnership.
DISTRIBUTIONS AND TRANSFERS OF UNITS
Distributions
The following table shows, for each of the years indicated the
distributions paid per unit in such years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 AMOUNT
---------------------- -------
<S> <C>
1993........................................................ $ 0
1994........................................................ 0
1995........................................................ 0
1996........................................................ 0
1997........................................................ 0
1998........................................................ 14,706
-------
Total............................................. $14,706
=======
</TABLE>
S-52
<PAGE> 581
Transfers
The units are not listed on any national securities exchange or quoted on
the NASDAQ System, the Electronic Bulletin Board or the "pink sheets," and there
is no established public trading market for the units. Secondary sales activity
for the units has been limited and sporadic. The general partner of your
partnership monitors transfers of the units (a) because the admission of the
transferee as a substitute limited partner in your partnership require the
consent of the general partner of your partnership under your partnership's
agreement of limited partnership, and (b) in order to track compliance with safe
harbor provisions to avoid treatment as a "publicly traded partnership" for tax
purposes. However, the general partner of your partnership does not monitor or
regularly receive or maintain information regarding the prices at which
secondary sale transactions in the units have been effectuated. The general
partner of your partnership estimates, based solely on the transfer records of
your partnership (or your partnership's transfer agent), that there have been no
transfers in privately negotiated transactions or in transactions believed to be
between related parties, family members or the same beneficial owner.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
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 two years,
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 following table shows, for each of the years indicated, compensation
paid to your general partner and its affiliates on a historical basis, and on a
pro forma basis assuming that all of the units sought in our offer had been
acquired at the beginning of each period:
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------- ----------------------------------------
PARTNERSHIP PROPERTY PARTNERSHIP PROPERTY
FEES AND MANAGEMENT FEES AND MANAGEMENT
YEAR EXPENSES FEES DISTRIBUTIONS EXPENSES FEES DISTRIBUTIONS
---- ----------- ---------- ------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
1995................. $4,671 $30,621 $ 0 $4,671 $30,621 $ 0
1996................. 7,000 31,000 0 7,000 31,000 0
1997................. 8,091 33,000 0 8,091 33,000 0
1998................. 9,619 34,824 14,706 9,619 34,824 125,001
</TABLE>
S-53
<PAGE> 582
SELECTED FINANCIAL INFORMATION
OF CALMARK/FORT COLLINS, LTD.
Set forth on page F-1 of this Prospectus Supplement is the Index to the
Financial Statements of Your Partnership. You are urged to read the Financial
Statements carefully before making any decision whether to tender your units in
the offer.
Below is selected financial information for Calmark/Fort Collins, Ltd.
taken from the financial statements described above. The amounts for 1995, 1994
and 1993 have been derived from unaudited financial information which are not
included in this Prospectus Supplement. See "Index to Financial Statements."
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
-------------------- --------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ------- ---------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and Cash Equivalents......................... $ 174 $ 53 $ 689 $ 38 $ 22 $ 33 $ 15
Land & Building................................... 3,017 2,918 2,926 2,867 2,816 2,793 2,764
Accumulated Depreciation.......................... (1,516) (1,417) (1,442) (1,343) (1,250) (1,162) (1,077)
Other Assets...................................... 108 98 112 121 125 117 140
---------- ------- ---------- ------- ------- ------- -------
Total Assets.............................. $ 1,783 $ 1,652 $ 2,285 $ 1,683 $ 1,713 $ 1,781 $ 1,842
========== ======= ========== ======= ======= ======= =======
Notes Payable..................................... $ 2,780 $ 2,012 $ 2,800 $ 2,059 $ 2,151 $ 2,169 $ 2,184
Other Liabilities................................. 61 65 70 93 58 77 64
---------- ------- ---------- ------- ------- ------- -------
Total Liabilities......................... $ 2,841 $ 2,077 $ 2,870 $ 2,152 $ 2,209 $ 2,246 $ 2,248
---------- ------- ---------- ------- ------- ------- -------
Partners Capital (Deficit)................ $ (1,058) $ (425) $ (585) $ (469) $ (496) $ (465) $ (406)
========== ======= ========== ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
---------------------- ---------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- --------- ---------- ------- -------- ---------- ----------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Revenue............................ $ 487 $ 474 $ 635 $ 591 $ 559 $ 507 $ 467
Other Income.............................. 27 20 27 16 19 21 10
---------- --------- ---------- ------- -------- ---------- ----------
Total Revenue..................... $ 514 $ 494 $ 662 $ 607 $ 578 $ 528 $ 477
---------- --------- ---------- ------- -------- ---------- ----------
Operating Expenses........................ $ 201 $ 165 $ 224 $ 218 $ 256 $ 187 $ 151
General & Administrative.................. 26 25 28 18 21 55 52
Depreciation.............................. 74 74 99 93 88 85 81
Interest Expense.......................... 161 163 217 224 221 226 229
Property Taxes............................ 24 23 28 27 23 34 47
---------- --------- ---------- ------- -------- ---------- ----------
Total Expenses.................... $ 486 $ 450 $ 596 $ 580 $ 609 $ 418 $ 560
---------- --------- ---------- ------- -------- ---------- ----------
Net Income before extraordinary items..... $ 28 $ 44 $ 66 $ 27 $ (31) $ (59) $ (83)
Extraordinary Items....................... -- -- (182) --
---------- --------- ---------- ------- -------- ---------- ----------
Net Income................................ $ 28 $ 44 $ (116) $ 27 $ (31) $ (59) $ (83)
========== ========= ========== ======= ======== ========== ==========
Net Income per limited partnership unit... $ 815.29 $1,281.18 $(3,382.35) $794.12 $(902.65) $(1,717.94) $(2,416.76)
========== ========= ========== ======= ======== ========== ==========
Distributions per limited partnership
unit.................................... $14,558.82 $ -- $ -- $ -- $ -- $ -- $ --
========== ========= ========== ======= ======== ========== ==========
</TABLE>
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<PAGE> 583
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP
OVERVIEW
The following discussion and analysis of the results of operations and
financial condition of Your Partnership should be read in conjunction with the
financial statements of Your Partnership included herein.
RESULTS OF OPERATIONS
Comparison of the Nine Months Ended September 30, 1998 to the Nine Months
Ended September 30, 1997
NET INCOME
Your Partnership recognized net income of $28,000 for the nine months ended
September 30, 1998, compared to $44,000 for the nine months ended September 30,
1997. The decrease in net income of $16,000 was primarily the result of an
increase in operating expenses, partially offset by an increase in rental
revenue and other income
REVENUES
Rental and other property revenues from the Partnership Property totaled
$514,000 for the nine months ended September 30, 1998, compared to $494,000 for
the nine months ended September 30, 1997. The increase of $20,000, or 4%, was
due to an increase in rental rates of approximately 6%, off-set by a 1% decrease
in occupancy. Other income increased by $7,000 due primarily to higher interest
income, resulting from the excess proceeds received when the mortgage
indebtedness was refinanced during the fourth quarter of 1997.
EXPENSES
Partnership Property operating expenses, consisting of utilities (net of
reimbursements received from tenants), contract services, turnover costs,
repairs and maintenance, advertising and marketing, and insurance totaled
$201,000 for the nine months ended September 30, 1998, compared to $165,000 for
the nine months ended September 30, 1997, an increase of $36,000 or 22%. The
increase was the result of higher costs for advertising, combined with an
increase in on-site property management salaries and expenses. Partnership
Property management expenses totaled $26,000 for the nine months ended September
30, 1998, compared to $25,000 for the nine months ended September 30, 1997, an
increase of $1,000. General and administrative, depreciation, interest and
property tax expenses were comparative with the respective expenses incurred for
the previous period.
As part of the ongoing business plan of your partnership, the general
partner monitors the rental market environment of your partnership's investment
property to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting your partnership from increases in
expenses. As part of this plan, the general partner attempts to protect your
partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the general partner will be able to sustain such a plan.
Comparison of the Year Ended December 31, 1997 to the Year Ended December 31,
1996
NET INCOME
Your Partnership recognized a net loss of $116,000 for the year ended
December 31, 1997, compared to net income of $27,000 for the year ended December
31, 1996. The increase in net loss of $143,000 was primarily the result of the
extraordinary loss of $182,000 recognized on the refinancing of the mortgage in
1997.
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REVENUES
Rental and other property revenues from the partnership's property totaled
$662,000 for the year ended December 31, 1997, compared to $607,000 for the year
ended December 31, 1996. The increase of $55,000, or 9%, was primarily due to a
6% increase in average rental, while occupancy remained stable at 98%. There was
also an increase in other income due to interest earned on the excess proceeds
received from the refinancing of the mortgage indebtedness during the fourth
quarter of 1997.
EXPENSES
Operating expenses, consisting of, utilities (net of reimbursements
received from tenants), contract services, turnover costs, repairs and
maintenance, advertising and marketing, and insurance totaled $224,000 for the
year ended December 31, 1997, which is comparable to the operating expenses of
$218,000 incurred in the year ended December 31, 1996. Management expenses
totaled $33,000 for the year ended December 31, 1997, compared to $31,000 for
the year ended December 31, 1996, an increase of $2,000. This increase is due to
increased rental revenue, as management fees are a function based on a
percentage of revenue.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $28,000 for the year ended
December 31, 1997 compared to $18,000 for the year ended December 31, 1996, an
increase of $10,000. The increase is primarily due to an increase in partnership
administrative expenses and asset management fees.
DEPRECIATION EXPENSE
Depreciation expense increased $6,000 to $99,000, due primarily to
capitalized additions to the investment property during the year ended December
31, 1997.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $217,000 for the year ended December 31, 1997, compared to
$224,000 for the year ended December 31, 1996, a decrease of $7,000. The
decrease is due to a lower interest rate on the mortgage indebtedness that was
refinanced in the fourth quarter of 1997.
EXTRAORDINARY ITEM
The Partnership recognized a loss on extinguishment of the old debt of
$182,000 in the fourth quarter of 1997. This loss was due to writing off the
unamortized debt discount and loan costs associated with the old debt.
Comparison of the Year Ended December 31, 1996 to the Year Ended December 31,
1995
NET INCOME
Your Partnership recognized net income of $27,000 for the year ended
December 31, 1996, compared to a net loss of $32,000 for the year ended December
31, 1995. The increase in net income of $59,000 was the result of an increase in
revenues, combined with a decrease in operating expenses.
REVENUES
Rental and other property revenues from the partnership's property totaled
$607,000 for the year ended December 31, 1996, compared to $577,000 for the year
ended December 31, 1995. The increase of $30,000, or 5%, was due to an increase
in average rental rates, while occupancy remained stable.
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EXPENSES
Operating expenses, consisting of, utilities (net of reimbursements
received from tenants), contract services, turnover costs, repairs and
maintenance, advertising and marketing, and insurance totaled $218,000 for the
year ended December 31, 1996, compared to $256,000 for the year ended December
31, 1995, a decrease of $38,000 or 15%. This decrease is due primarily to higher
maintenance expenses in 1995, as the property incurred extensive exterior
painting costs. Management expenses totaled $31,000 for the year ended December
31, 1996, compared to $33,000 for the year ended December 31, 1995, a decrease
of $2,000. General and administrative, interest and property tax expenses for
1996 were comparable with the respective expenses incurred in the preceding
year.
DEPRECIATION EXPENSE
Depreciation expense increased $5,000 to $93,000, due primarily to
capitalized additions to the investment property during the year ended December
31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, your partnership had $174,000 in cash and cash
equivalents. Your Partnership's principal demands for liquidity include normal
operating activities, payments of principal and interest on outstanding debt,
capital improvements, and distributions paid to limited partners. At September
30, 1998, the outstanding balance on the mortgage indebtedness was $2,780,000.
The mortgages require monthly payments of approximately $19,000 until December,
2004, at which time a balloon payment of approximately $2,585,000 will be due.
The notes are collateralized by pledge of land and buildings and have a stated
interest rate of 7.34%. There are no commitments for material capital
expenditures as of September 1998. The sufficiency of existing liquid assets to
meet future liquidity and capital expenditure requirements is directly related
to the level of capital expenditures required at the property to adequately
maintain the physical assets and meet other operating needs of the partnership.
Such assets are currently thought to be sufficient for any near-term needs of
the partnership. Management believes that your partnership has adequate sources
of cash to finance its operations, both on a short-term and long-term basis.
Presently, there are no plans for any renovations or improvements for the
property. Budgeted renovations or improvements for 1999 total $58,410 and are
intended to be paid for out of cash flow or borrowings. Renovations or
improvements include, but are not limited to, gutter and downspout repairs, hot
water heater replacement, exterior lighting and irrigation repairs.
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THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to 25% of the outstanding 34 units of your
partnership (up to 8.5 units) for consideration per unit of (i) 906.00 Preferred
OP Units, (ii) 601.75 Common OP Units, or (iii) $22,646 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 the commencement of our offer 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., New York City time, on June 4, 1999, 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), although you will be entitled to retain any
distributions you may have received after such date and prior to our
commencement of this offer.
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 January 1, 1999 (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 March 26, 1999.
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
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offer consideration shall be reduced by any interim distributions made by your
partnership between the commencement 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. However, any tendered units may be
withdrawn at any time prior to our accepting them for payment. The AIMCO
Operating Partnership has an 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.
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.
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.
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.
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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 pays for your units.
You agree not to exercise any rights pertaining to the tendered units without
the prior consent of the AIMCO Operating Partnership. Upon such 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 your general
partner (which is our subsidiary) (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.
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
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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 may
have to provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal.
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 "Federal Income Tax Consequences."
Transfer Taxes
The amount of any transfer taxes (whether imposed on the registered holder
of units or any person) payable on account of the transfer to such person will
be deducted from the purchase price unless satisfactory evidence of the such
taxes or exemption therefrom is submitted.
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.
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WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to our acceptance of such units for payment.
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.
The offer may be extended or delayed indefinitely and no payment will be
made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment. 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 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
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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 25% 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 25% 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 25% 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 25%, 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 the general partner of your partnership and thereby
controls the management of your partnership. In addition, AIMCO owns 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.
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After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units.
However, the AIMCO Operating Partnership and its affiliates will not acquire any
additional units for a period of at least one year after expiration of the
offer. 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. In addition, we are not extending
appraisal rights in connection with the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
No provisions have been made with regard to the offer to allow you or other
limited partners to inspect the books and records of your partnership or to
obtain counsel or appraisal services at our expense or at the expense of your
partnership. However, as described under "Comparison of Your Partnership and the
AIMCO Operating Partnership -- Review of Investor Lists," you have the right
under your partnership's agreement of limited partnership to obtain a list of
the limited partners.
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 the date of this Prospectus Supplement and at or before the expiration
date of the offer, including any extension thereof, 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 reasonable
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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 which, in the reasonable 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 the date hereof, (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
the date hereof, (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 reasonable 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 reasonable judgment of the
AIMCO Operating Partnership, a material acceleration or worsening thereof
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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 your
general partner (which is our subsidiary) 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 reasonable 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
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(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 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 reasonable 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
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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;
or
(h) the offer to purchase may have an adverse effect on AIMCO's status
as a REIT.
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 reasonable 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.
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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. However,
we will not be able to control voting decisions unless we acquire more units in
another transaction, which cannot take place for at least one year after
expiration of this offer. 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 controls the company that manages your partnership's
property. In the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Effect on Trading Market
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.
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. Consummation of
the offer will not affect your partnership's agreement of limited partnership,
the financial condition or results of operations of your partnership, the
business and properties owned, the management compensation payable to your
general partner (which is our subsidiary) or its affiliates or any other matter
relating to your partnership, except it would result in the AIMCO Operating
Partnership substantially increasing its ownership of units of your partnership.
We will receive future distributions from your partnership for any units we
purchase.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by your general partner (which
is our subsidiary), 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
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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 (excluding 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 (which are requests to dismiss the action as a matter
of law) were heard on February 8, 1999, but no decision has been reached by the
Court. While no assurances can be given, we believe that the ultimate outcome of
this litigation will not have a material adverse effect on us.
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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, the accompanying Prospectus, the Letter of Transmittal,
and the legal and accounting fees in connection with this offer. 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 $50,000.
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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FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of the material Federal
income tax consequences of the offer 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
differing interpretations or change, possibly retroactively. This 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 you in light of your specific investment or tax
circumstances, or if you are subject to special tax rules (for example, if you
are a financial institution, broker-dealer, insurance company, or, except to the
extent discussed below, tax-exempt organization or foreign investor, 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 are 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. No clear precedent or authority
may be available on some questions. 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 of your specific tax situation.
TAX OPINIONS
Skadden, Arps, Slate, Meagher & Flom LLP ("Special Tax Counsel") has
delivered an opinion letter with regard to the material United States Federal
income tax consequences of the offer. The opinion letter of Special Tax Counsel
is filed as an exhibit to this Registration Statement. You may obtain a copy of
such opinion letter by sending a written request to the AIMCO Operating
Partnership.
The specific United States Federal income tax opinions that Special Tax
Counsel has provided are:
1. Commencing with AIMCO's initial taxable year ended December 31, 1994,
AIMCO was organized in conformity with the requirements for qualification
as a REIT under the Code, and its actual method of operation has enabled,
and its proposed method of operation will enable, AIMCO to meet the
requirements for qualification and taxation as a REIT. As noted in the
accompanying Prospectus, AIMCO's qualification and taxation as a REIT
depend upon its ability to meet, through actual annual operating results,
certain requirements, including requirements relating to distribution
levels and diversity of stock ownership, and the various qualification
tests imposed under the Code, the results of which have been represented by
the AIMCO's officers and will not be reviewed by Special Tax Counsel. No
assurance can be given that the actual results of AIMCO's future operations
for any one taxable year will satisfy the requirements for taxation as a
REIT under the Code.
2. The AIMCO Operating Partnership will be treated as a partnership and
not as an association taxable as a corporation for Federal income tax
purposes.
3. You will not recognize gain or loss for Federal income tax purposes
when you exchange your units solely for OP Units. If, immediately prior to
such exchange, the amount of your partnership's liabilities allocable to
the units you transfer to the AIMCO Operating Partnership exceeds the
amount of the AIMCO Operating Partnership's liabilities allocable to you
immediately after the exchange, you will receive a deemed distribution in
an amount equal to such liability relief and will recognize gain for
Federal income tax purposes to the extent that the amount of such deemed
distribution exceeds your aggregate adjusted tax basis in your OP Units.
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4. If you exchange your units for cash and OP Units, you will be treated
for Federal income tax purposes as selling some of your units for cash in a
taxable sale and contributing some of your units for OP Units in a tax-free
exchange. With respect to the units that you will be treated as selling for
cash, you will be taxed as described in paragraph number five below. With
respect to the units that you will be treated as exchanging for OP Units,
you will be taxed as described in paragraph number three above.
5. If you sell your units solely for cash, you will recognize gain or
loss for Federal income tax purposes in an amount equal to the difference
between (i) your amount realized on the sale and (ii) your adjusted tax
basis in the units you sold.
6. If you retain all or a portion of your units and your partnership
terminates for Federal income tax purposes, you will not recognize any gain
or loss as a result of such termination and your capital account in your
partnership will not be affected.
7. Because of the factual nature of the inquiry, no opinion is expressed
by Special Tax Counsel as to whether your exercise of a redemption right
with respect to an OP Unit would cause your contribution of units to the
AIMCO Operating Partnership to be a taxable transaction under the disguised
sale rules of the Code.
8. The discussion in the accompanying Prospectus under the captions
"FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS" and "FEDERAL
INCOME TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNIT HOLDERS" and
in this Prospectus Supplement under the caption "FEDERAL INCOME TAX
CONSEQUENCES" is a fair and accurate summary of the material United States
Federal income tax consequences of the offers and of the acquisition,
ownership and disposition of the OP Units and the AIMCO stock by a holder
who acquires the OP Units or AIMCO stock in connection with the offers,
subject to the qualifications set forth therein.
It must be emphasized that these opinions are based and conditioned upon
representations and covenants made by AIMCO and the AIMCO Operating Partnership
as to factual matters (including representations and covenants concerning
AIMCO's properties and the past, present and future conduct of its business and
your partnership's liabilities). These opinions are expressed as of the date of
the opinion letter and Special Tax Counsel has no obligation to advise AIMCO or
the AIMCO Operating Partnership of any subsequent change in the matters stated,
represented, or assumed or any subsequent change in the law. An opinion of
counsel is not binding on the IRS, and no assurance can be given that the IRS
will not challenge the above opinions of Special Tax Counsel.
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 when you exchange your units solely for OP Units. You may
recognize gain upon such exchange if, immediately prior to such exchange, the
amount of liabilities of your partnership allocable to the units you transferred
exceeds the amount of the AIMCO Operating Partnership liabilities allocable to
you immediately after such exchange. If this was true in your case, the excess
would be treated as a deemed distribution of cash to you from the AIMCO
Operating Partnership. This deemed cash distribution would be treated as a
nontaxable return of capital to the extent of your adjusted tax basis in your OP
Units 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 you exchange your units pursuant to the offer,
at least equal to the amount of liabilities of your partnership that were
allocable to your units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most persons who participate in the tender offer
would not recognize gain or loss as a result of an exchange of units solely for
OP Units pursuant to the offer.
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DISGUISED SALES
Under the Code, a transfer of property by a partner to a partnership
followed by a related transfer by the partnership of money or other property to
the partner is treated as a "disguised" sale if (1) the second transfer would
not have occurred but for the first transfer and (2) the second transfer "is not
dependent on the entrepreneurial risks of the partnership operations." In a
disguised sale, the partner is treated as if he or she sold the contributed
property to the partnership as of the date the property was contributed to the
partnership. In addition, unless a few technical exceptions apply, transfers of
money or other property between a partnership and a partner that are made within
two years of each other, including redemptions of OP Units made within two years
of a contribution of your units, must be reported to the IRS and are presumed to
be a "disguised" sale unless the facts and circumstances clearly establish that
the transfers do not constitute a sale.
While there is no authority applying the disguised sale rules to the
exercise of a redemption right by a partner with respect to a partnership
interest received in exchange for property, the exercise of a redemption right
with respect to OP Units within two years of the date of the contribution of
your units to the AIMCO Operating Partnership may be treated as a disguised
sale. If this treatment were to apply, you would be treated for Federal income
tax purposes as if, on the date of the contribution of your units, the AIMCO
Operating Partnership transferred to you an obligation to give you the
redemption proceeds. In that case, you would be required to recognize gain on
the disguised sale in such earlier year. Because of the factual nature of such
an inquiry, Special Tax Counsel is unable to opine whether your exercise of a
redemption right with respect to an OP Unit would cause your contribution of
units to the AIMCO Operating Partnership to be a taxable transaction under the
disguised sale rules of the Code.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Federal Income Taxation of the
AIMCO Operating Partnership and OP Unitholders -- 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
If you exchange your units for cash and OP Units, you will be treated as
selling some of your units for cash in a taxable sale and contributing some of
your units for OP Units in a tax-free exchange. Your adjusted tax basis in your
transferred units will be allocated between the units you will be deemed to have
sold and the units you will be deemed to have contributed to the AIMCO Operating
Partnership.
With respect to the units that you will be treated as selling, you will
recognize gain or loss in an amount equal to the difference between (i) your
"amount realized" on the sale and (ii) your adjusted tax basis in units you
sold. Your "amount realized" on such sale will be equal to the sum of the amount
of cash you received pursuant to the offer (that is, the offer consideration)
plus the amount of your partnership's liabilities attributed to the units you
sold. For purposes of these partial sale rules, the amount of your partnership's
liabilities attributed to the units you sold will be equal to the lesser of (i)
the excess of the amount of your partnership's liabilities allocable to you in
respect of the transferred units immediately prior to the exchange over the
amount of such liabilities allocable to you as determined immediately after the
exchange or (ii) the product of (A) the amount of your partnership's liabilities
allocable to you in respect of the units you are deemed to have sold immediately
prior to the exchange and (B) your "net equity percentage" with respect to those
units. Your "net equity percentage" will be equal to the percentage determined
by dividing (x) the cash you received in the exchange by (y) the excess of the
gross fair market value of the units in the exchange over the amount of your
partnership's liabilities allocable to you in respect of those units immediately
prior to the exchange. Thus, your tax liability could exceed the amount of cash
you receive in the sale.
With respect to the units that you will be treated as exchanging, rather
than selling, you will be taxed as described above under the heading "Tax
Consequences of Exchanging Units Solely for OP Units."
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TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
If you sell your units solely for cash, you will recognize gain or loss on
a sale of your units equal to the difference between (i) your "amount realized"
on the sale and (ii) your adjusted tax basis in the units you sold. The "amount
realized" with respect to a unit will be equal to the sum of the amount of cash
you received for your units (that is, the offer consideration) plus the amount
of the liabilities of your partnership allocable to such units (as determined
under Section 752 of the Code). Thus, your tax liability could exceed the amount
of cash you receive in the sale.
ADJUSTED TAX BASIS
If you acquired your units for cash:
- your initial tax basis in your units will be equal to such cash
investment in your partnership increased by your share of your
partnership's liabilities at the time such units were acquired;
- your initial tax basis generally has been increased by:
- your share of your partnership's income and gains and
- any increases in your share of your partnership's liabilities; and
- your initial tax basis generally has been decreased (but not below zero)
by:
- your share of cash distributions from your partnership,
- any decreases in your share of your partnership's liabilities,
- your share of your partnership's losses, and
- your share of nondeductible expenditures of your partnership that are
not chargeable to capital.
For purposes of determining your adjusted tax basis in your units
immediately prior to a disposition of such units, your adjusted tax basis will
include your 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), the gain you
would recognize pursuant to the offer will exceed the cash proceeds you would
realize upon the sale of your units. The adjusted tax basis of the OP Units you
receive in exchange for your units pursuant to the offer will be equal to (i)
the sum of your adjusted tax basis in the units you transferred plus any gain
recognized in the exchange and will be reduced by (ii) any cash you received or
you were deemed to receive 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 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 that is attributable to your share of "unrealized receivables" of your
partnership exceeds the tax basis attributable to those assets, such excess will
be treated as ordinary income. Among other things, "unrealized receivables"
include depreciation recapture for 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. You will not receive any future distributions
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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 the income or loss. 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 the passive 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 passive losses in the manner described below. If you receive
cash for 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 receive cash for all or a portion of your units
pursuant to the offer and recognize 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
receive cash for all of your units pursuant to the offer, the balance of any
"suspended" losses from your partnership 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.
TAX REPORTING
If you tender any units, you must report the transaction by filing a
statement with your Federal income tax return for the year of the tender which
provides certain required information to the IRS. To prevent the possible
application of back-up Federal income tax withholding of 31% with respect to
payment of the offer consideration, you may have to provide the AIMCO Operating
Partnership with your correct taxpayer identification number. See the
instructions to the Letter of Transmittal.
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"). If you are a foreign person, the AIMCO Operating Partnership will
be required, under the FIRPTA provisions of the Code, to deduct and withhold 10%
of the amount realized by you on the disposition. The amount withheld would be
creditable against your Federal income tax liability and, if the amount withheld
exceeds your actual tax liability you could obtain a refund from the IRS by
filing a U.S. income tax return. See the Instructions to the Letter of
Transmittal.
TAX CONSEQUENCES OF A TERMINATION OF YOUR PARTNERSHIP
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"). The AIMCO Operating Partnership's acquisition of units pursuant
to the offer may result in a Termination of your partnership. If an acquisition
of units results in a
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Termination, the following Federal income tax events will be deemed to occur:
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
interests 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 to the
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
to the New Partnership. A Termination will change (and possibly shorten) a
Remaining Offeree's holding period with respect to its units in your partnership
for Federal income tax purposes. Gains recognized by a Remaining Offeree on the
disposition of New Partnership interests with a holding period of 12 months or
less may be classified as short-term capital gains and subject to taxation at
ordinary income tax rates.
The New Partnership's adjusted tax basis in its assets will be the same as
the Old Partnership's basis in such assets immediately before the Termination. A
Termination will also cause the New Partnership to recalculate the depreciable
lives of its assets. This will cause the assets to be depreciated over a longer
period of time than if there had been no Termination. This would generally
decrease the annual average depreciation deductions allocable to the Remaining
Offerees for a number of years following consummation of the offer (thereby
increasing the taxable income allocable to their retained units in each such
year), but would have no effect on the total depreciation deductions available
over the useful lives of the assets of your partnership.
Elections as to 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.
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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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 The AIMCO Operating Partnership is organized
organized under California law. as a 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 The term of the AIMCO Operating Partnership
partners as a finite life investment, with continues until December 31, 2093, unless
limited partners to receive regular cash the AIMCO Operating Partnership is dissolved
distributions out of your partnership's Net sooner pursuant to the terms of the AIMCO
Cash from Operations (as defined in your Operating Partnership's agreement of limited
partnership's agreement of limited partner- partnership (the "AIMCO Operating
ship). The termination date of your Partnership Agreement") or as provided by
partnership is December 31, 2031. law. See "Description of 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, The purpose of the AIMCO Operating
directly or indirectly, develop, own, hold, Partnership is to conduct any business that
maintain, operate for the production of may be lawfully conducted by a limited
income and dispose of property situated in partnership organized pursuant to the
the United States. Subject to restrictions Delaware Revised Uniform Limited Part-
contained in your partnership's agreement of nership Act (as amended from time to time,
limited partnership, your partnership may or any successor to such statute) (the
perform all acts necessary or appropriate in "Delaware Limited Partnership Act"),
connection therewith and reasonably related provided that such business is to be
thereto, including borrowing money, creating conducted in a manner that permits AIMCO to
liens and investing funds in financial be qualified as a REIT, unless AIMCO ceases
instruments. to qualify as a REIT. The AIMCO Operating
Partner-
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship 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 ac-
tion, 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>
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is The general partner is authorized to issue
authorized to issue additional limited additional partnership interests in the
partnership interests in your partnership AIMCO Operating Partnership for any
and may admit additional limited partners by partnership purpose from time to time to the
selling not less than 20 nor more than 34 limited partners and to other persons, and
units for cash and notes to selected persons to admit such other persons as additional
who fulfill the requirements set forth in limited partners, on terms and conditions
your partnership's agreement of limited and for such capital contributions as may be
partnership. The capital contribution need established by the general partner in its
not be equal for all limited partners and no sole discretion. The net capital
action or consent is required in connection contribution need not be equal for all OP
with the admission of any additional limited Unitholders. No action or consent by the OP
partners. Unitholders is required in connection with
the admission of any additional OP
The general partner is also authorized to Unitholder. See "Description of OP
issue additional units for sale from time to Units -- Management by the AIMCO GP" in the
time, the number, price and terms of which accompanying Prospectus. Subject to Delaware
shall be determined at the sole discretion law, any additional partnership interests
of the general partner. In certain may be issued in one or more classes, or one
circumstances set forth in your or more series of any of such classes, with
partnership's agreement of limited such designations, preferences and relative,
partnership, limited partners who purchased participating, optional or other special
the units described in the previous para- rights, powers and duties as shall be
graph may possess preemptive rights in determined by the general partner, in its
connection with the sale of additional sole and absolute discretion without the
units. 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>
The general partner of your partnership may The AIMCO Operating Partnership may lend or
contract with affiliated persons for the contribute funds or other assets to its
management or supervision of any or all of subsidiaries or other persons in which it
the assets of your partnership has an equity investment,
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
or for the performance of any other services and such persons may borrow funds from the
which the general partner deem necessary or AIMCO Operating Partnership, on terms and
advisable for the operation of your conditions established in the sole and
partnership. Any and all compensation paid absolute discretion of the general partner.
to such affiliated persons in connection To the extent consistent with the business
with services performed for your partnership purpose of the AIMCO Operating Partnership
must be reasonable and fair to your and the permitted activities of the general
partnership and the partners. Such contracts partner, the AIMCO Operating Partnership may
between your partnership and the general transfer assets to joint ventures, limited
partner or any affiliates must provide that liability companies, partnerships,
they may be cancelled at any time by your corporations, business trusts or other
partnership without penalty upon 60 days business entities in which it is or thereby
prior written notice. In addition, the becomes a participant upon such terms and
general partner and its affiliates may lend subject to such conditions consistent with
money to your partnership which will be the AIMCO Operating Partnership Agreement
repaid in accordance with the terms of the and applicable law as the general partner,
advances out of the gross receipts of your in its sole and absolute discretion,
partnership with interest at the then believes to be advisable. Except as
prevailing commercial rate or at the highest expressly permitted by the AIMCO Operating
rate permitted by the applicable usury law, Partnership Agreement, neither the general
whichever is less. Your partnership may lend partner nor any of its affiliates may sell,
working capital reserves which are not transfer or convey any property to the AIMCO
needed to meet partnership expenses or make Operating Partnership, directly or
distributions as determined in the sole indirectly, except pursuant to transactions
discretion of the general partner to that are determined by the general partner
affiliates of the general partner. Such in good faith to be fair and reasonable.
loans are payable on demand and bear
interest at the then prevailing commercial
rate of interest, are otherwise commercially
reasonable and in the aggregate, do not
exceed the amount of excess working capital
reserves of your partnership.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is The AIMCO Operating Partnership Agreement
authorized to borrow money on the credit of contains no restrictions on borrowings, and
and enter into obligations, recourse and the general partner has full power and
nonrecourse, on behalf of your partnership authority to borrow money on behalf of the
and to give as security therefore any AIMCO Operating Partnership. The AIMCO
partnership's property. Operating Partnership has credit agreements
that restrict, among other things, its
ability to incur indebtedness.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited Each OP Unitholder has the right, upon
partnership entitles the limited partners or written demand with a statement of the
their designated representative to inspect purpose of such demand and at such OP
and, at their sole cost and expense, copy Unitholder's own expense, to obtain a
the contents of the books and records of current list of the name and last known
your partnership at the principal place of business, residence or mailing address of
business of your partnership during normal the general partner and each other OP
business hours. Unitholder.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership All management powers over the business and
manages and controls your partnership and affairs of the AIMCO Operating Partnership
all aspects of its business. The general are vested in AIMCO-GP, Inc., which is the
partner has all the rights and powers which general partner. No OP Unitholder has any
may be possessed by a general partner right to participate in or
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
under California law. Subject to the exercise control or management power over
limitations contained in your partnership's the business and affairs of the AIMCO
agreement of limited partnership, the Operating Partnership. The OP Unitholders
general partner has the power to perform have the right to vote on certain matters
acts, upon such terms and conditions as the described under "Comparison of Your Units
general partner deem appropriate and in and AIMCO OP Units -- Voting Rights" below.
furtherance of your partnership's business. The general partner may not be removed by
The limited partners have no right to the OP Unitholders with or without cause.
participate in the management or control of
your partnership, to act on behalf of your In addition to the powers granted a general
partnership, to bind your partnership, or, partner of a limited partnership under
except as specifically authorized in your applicable law or that are granted to the
partnership's agreement of limited general partner under any other provision of
partnership, to vote upon any matter the AIMCO Operating Partnership Agreement,
involving your partnership. 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 Notwithstanding anything to the contrary set
partnership does not limit the liability of forth in the AIMCO Operating Partnership
the general partner to your partnership or Agreement, the general partner is not liable
the limited partners for any act performed to the AIMCO Operating Partnership for
in its capacity as general partner. How- losses sustained, liabilities incurred or
ever, your partnership's agreement of benefits not derived as a result of errors
limited partnership does provide that the in judgment or mistakes of fact or law of
general partner of your partnership and its any act or omission if the general partner
affiliates are entitled to indemnification acted in good faith. The AIMCO Operating
from any expense, liability or loss, Partnership Agreement provides for
including attorneys' fees incurred in indemnification of AIMCO, or any director or
connection with the defense of any action, officer of AIMCO (in its capacity as the
based on any act or omission by the general previous general partner of the AIMCO
partner within the scope of the authority Operating Partnership), the general partner,
conferred by your partnership's agreement of any officer or director of general partner
limited partnership, including all such or the AIMCO Operating Partnership and such
liabilities under Federal and state other persons as the general partner may
securities laws as permitted by law, except designate from and against all losses,
for acts or omissions constituting fraud, claims,
bad
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
faith, willful misconduct or gross damages, liabilities, joint or several,
negligence. 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 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
and certain state securities administrations
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 and their
respective state securities laws.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of Except in limited circumstances, the general
limited partnership, the limited partners partner has exclusive management power over
may remove the general partner upon a vote the business and affairs of the AIMCO
of the limited partners owning a majority of Operating Partnership. The general partner
the outstanding units and elect a substi- may not be removed as general partner of the
tute general partner if no general partner AIMCO Operating Partnership by the OP
remains. Subject to limitations set forth in Unitholders with or without cause. Under the
your partnership's agreement of limited AIMCO Operating Partnership Agreement, the
partnership, the general partner may general partner may, in its sole discretion,
withdraw from your partnership at any time. prevent a transferee of an OP Unit from
A limited partner may not transfer its becoming a substituted limited partner
interests without the written consent of the pursuant to the AIMCO Operating Partnership
general partner which may be withheld at the Agreement. The general partner may exercise
sole discretion of the general partner. this right of approval to deter, delay or
hamper attempts by persons to acquire a
controlling interest in the AIMCO Operating
Partnership. 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 With the exception of certain circumstances
partnership may be amended by the general set forth in the AIMCO Operating Partnership
partner to add representations, duties or Agreement, whereby the general partner may,
obligations of the general partner or without the consent of the OP Unitholders,
surrender a right or power granted to the amend the AIMCO Operating Partnership
general partner, effect a ministerial change Agreement, amendments to the AIMCO Operating
which does not materially affect the rights Partnership Agreement require the consent of
of the limited partners and as required by the holders of a majority of the
law. All other amend-
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ments must be approved by the limited outstanding Common OP Units, excluding AIMCO
partners owning more than 50% of the units and certain other limited exclusions (a
and the general partner. Amendments of "Majority in Interest"). Amendments to the
provisions that require the consent of a AIMCO Operating Partnership Agreement may be
greater percentage than a majority may be proposed by the general partner or by
amended only the percentage required in such holders of a Majority in Interest. Following
provisions. In addition, any amendment that such proposal, the general partner will
adversely affects a partner or partners must submit any proposed amendment to the OP
be approved by the affected parties. Unitholders. The general partner will seek
the written consent of the OP Unitholders on
the proposed amendment or will call a
meeting to vote thereon. See "Description of
OP Units -- Amendment of the AIMCO Operating
Partnership Agreement" in the accompanying
Prospectus.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
In addition to the right to distributions in The general partner does not receive
respect of its partnership interest and compensation for its services as general
reimbursement for all fees and expenses as partner of the AIMCO Operating Partnership.
set forth in your partnership's agreement of However, the general partner is entitled to
limited partnership, the general partner payments, allocations and distributions in
receives no fees for its services as general its capacity as general partner of the AIMCO
partner. Moreover, the general partner or Operating Partnership. In addition, the
certain affiliates may be entitled to AIMCO Operating Partnership is responsible
compensation for additional services for all expenses incurred relating to the
rendered. 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 Except for fraud, willful misconduct or
limited partnership, no limited partner is gross negligence, no OP Unitholder has
personally liable for claims by creditors of personal liability for the AIMCO Operating
your partnership, except as provided under Partnership's debts and obligations, and
California law. liability of the OP Unitholders for the
AIMCO Operating Partnership's debts and
obligations 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 Part-
nership 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
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
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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>
The general partner has the responsibility Unless otherwise provided for in the
for the safekeeping and use of all funds and relevant partnership agreement, Delaware law
assets of your partnership and must not generally requires a general partner of a
employ or permit others to employ such funds Delaware limited partnership to adhere to
or assets in any manner except for the fiduciary duty standards under which it owes
exclusive benefit of your partnership. Your its limited partners the highest duties of
partnership's agreement of limited good faith, fairness and loyalty and which
partnership provides that the general generally prohibit such general partner from
partner and its affiliates with whom they taking any action or engaging in any
contract on behalf of your partnership must transaction as to which it has a conflict of
devote such of their time to the business of interest. The AIMCO Operating Partnership
your partnership as they may, in their sole Agreement expressly authorizes the general
discretion, deem necessary to conduct said partner to enter into, on behalf of the
business. The general partner and its AIMCO Operating Partnership, a right of
affiliates may engage for their own account first opportunity arrangement and other
and for the account of others in any conflict avoidance agreements with various
business ventures, including the purchase of affiliates of the AIMCO Operating
real estate properties, the development, Partnership and the general partner, on such
operation, management or syndication of real terms as the general partner, in its sole
estate properties, and your partnership and absolute discretion, believes are
shall have no right to participate therein. advisable. The AIMCO Operating Partnership
However, the general partner must at all Agreement expressly limits the liability of
times act in the best interests of your the general partner by providing that the
partnership and in no event contrary to the general partner, and its officers and
fiduciary relationship that it bears at all directors will not be liable or accountable
times in relation to your partnership and to in damages to the AIMCO Operating
each of the partners with regard to your Partnership, the limited partners or as-
partnership's business. signees for errors in judgment or mistakes
of fact or law or of any act or omission if
In general, your partnership's agreement of the general partner or such director or
limited partnership and the AIMCO Operating officer acted in good faith. See
Partnership Agreement have limitations on "Description of OP Units -- Fiduciary
the liability of the general partner but Responsibilities" in the accompanying
such limitations differ and provide more Prospectus.
protection for the general partner of the
AIMCO Operating Partnership.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material The AIMCO Operating Partnership is not
differences between the taxation of your subject to Federal income taxes. Instead,
partnership and the AIMCO Operating each holder of OP Units includes in income
Partnership. 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
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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 nonre-
course 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>
<CAPTION>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity in- equity interests entitling each equity interests entitling each OP
terests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of and as declared by the board of rata share of cash distributions
distributions to be made to the directors of the general partner made from Available Cash (as such
partners of your partnership. of the AIMCO Operating Part- term is defined in the AIMCO
nership, quarterly cash distribu- Operating Partnership Agreement)
tion at a rate of $0.50 per to the partners of the AIMCO
Preferred OP Unit, subject to ad- Operating Partnership. To the
justments from time to time on or extent the AIMCO Oper-
</TABLE>
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YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
after the fifth anniversary of the ating Partnership sells or refi-
issue date of the Preferred OP nances its assets, the net
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 Except as otherwise required Under the AIMCO Operating
agreement of limited by applicable law or in the Partnership Agreement, the
partnership, the limited AIMCO Operating Partnership OP Unitholders have voting
partners owning a majority Agreement, the holders of rights only with respect to
of the outstanding units may the Preferred OP Units will certain limited matters such
without the concurrence of have the same voting rights as certain amendments and
the general partners, vote as holders of the Common OP termination of the AIMCO
to amend your partnership's Units. See "Description of Operating Partnership
agreement of limited OP Units" in the accompany- Agreement and certain
partnership, subject to ing Prospectus. So long as transactions such as the
certain limitations; any Preferred OP Units are institution of bankruptcy
dissolve and terminate your outstanding, in addition to proceedings, an assignment
partnership; remove the any other vote or consent of for the benefit of creditors
general partner; elect the partners required by law or and certain transfers by the
general partner; and approve by the AIMCO Operating general partner of its
or disapprove the sale of Partnership Agreement, the interest in the AIMCO
all or substantially all of affirmative vote or consent Operating Partnership or the
the assets of your of holders of at least 50% admission of a successor
partnership. of the outstanding Preferred general partner.
OP Units will be necessary
The general partner may for effecting any amendment Under the AIMCO Operating
cause the dissolution of the of any of the provisions of Partnership Agreement, the
your partnership by retiring the Partnership Unit general partner has the
unless, the remaining Designation of the Preferred power to effect the
general partner elects to OP Units that materially and acquisition, sale, transfer,
continue your partnership adversely affects the rights exchange or other
within 120 days or if there or preferences of the disposition of any assets of
is no remaining general holders of the Preferred OP the AIMCO Operating
partner, the limited Units. The creation or Partnership (including, but
partners owning more than issuance of any class or not limited to, the exercise
50% of the then outstanding series of partnership units, or grant of any conversion,
units may elect new general including, without option, privilege or
partner to continue your limitation, any partner- subscription right or any
partnership. ship units that may have other right available in
rights senior or superior to connection with any assets
In general, you have greater the Preferred OP Units, at any time held by the
voting rights in your shall not be deemed to AIMCO Operating Partnership)
partnership than you will materially adversely affect or the merger,
have as an OP Unitholder. OP the rights or preferences of consolidation,
Unitholders cannot remove the holders of Preferred OP reorganization or other
the general partner of the Units. With respect to the combination of the AIMCO
AIMCO Operating Partnership. exercise of the above Operating Partnership with
described voting rights, or into another entity, all
each Preferred OP Units without the consent of the
shall have one (1) vote per OP Unitholders.
Preferred OP Unit.
The general partner may
cause the dissolution of the
AIMCO
</TABLE>
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<PAGE> 613
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
Operating Partnership by an
"event of withdrawal," as
defined in the Delaware
Limited Partnership Act
(including, without limi-
tation, 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 "Descrip-
tion of OP
Units -- Dissolution and
Winding Up" in the accom-
panying Prospectus.
OP Unitholders cannot remove
the general partner of the
AIMCO Operating Partnership
with or without cause.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement Holders of Preferred OP Subject to the rights of
of limited partnership Units will be entitled to holders of any outstanding
specifies how the cash receive, when and as Preferred OP Units, the
available for distribution, declared by the board of AIMCO Operating Partnership
whether arising from directors of the general Agreement requires the
operations or sales or partner of the AIMCO general partner to cause the
refinancing, is to be shared Operating Partnership, AIMCO Operating Partnership
among the partners. Dis- quarterly cash distributions to distribute quarterly all,
tributions of Net Cash from at the rate of $0.50 per or such portion as the
Operations (as defined in Preferred OP Unit; provided, general partner may in its
your partnership's agreement however, that at any time sole and absolute discretion
of limited partnership) are and from time to time on or determine, of Available Cash
to be distributed from time after the fifth anniversary (as defined in the AIMCO
to time but no less often of the issue date of the Operating Partnership
than quarterly and not later Preferred OP Units, the Agreement) generated by the
than ninety days after the AIMCO Operating Partnership AIMCO Operating Partnership
end of the fiscal quarter. may adjust the annual during such quarter to the
The distributions payable to distribution rate on the general partner, the special
the partners are not fixed Preferred OP Units to the limited partner and the
in amount and depend upon lower of (i) 2.00% plus the holders of Common OP Units
the operating results and annual interest rate then on the record date es-
net sales or refinancing applicable to U.S. Treasury tablished by the general
proceeds available from the notes with a maturity of partner with respect to such
disposition of your five years, and (ii) the quarter, in
partnership's assets. annual dividend rate on
</TABLE>
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<PAGE> 614
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
the most recently issued accordance with their
AIMCO non-convertible respective interests in the
preferred stock which ranks AIMCO Operating Partnership
on a parity with its Class H on such record date. Holders
Cumulative Preferred Stock. of any other Preferred OP
Such distributions will be Units issued in the future
cumulative from the date of may have priority over the
original issue. Holders of general partner, the special
Preferred OP Units will not limited partner and holders
be entitled to receive any of Common OP Units with
distributions in excess of respect to distributions of
cumulative distributions on Available Cash,
the Preferred OP Units. No distributions upon
interest, or sum of money in liquidation or other
lieu of interest, shall be distributions. See "Per
payable in respect of any Share and Per Unit Data" in
distribution payment or pay- the accompanying Prospectus.
ments on the Preferred OP
Units that may be in The general partner in its
arrears. sole and absolute discretion
may distribute to the OP
When distributions are not Unitholders Available Cash
paid in full upon the on a more frequent basis and
Preferred OP Units or any provide for an appropriate
Parity Units (as defined record date.
below), all distributions
declared upon the Preferred The AIMCO Operating Partner-
OP Units and any Parity ship Agreement requires the
Units shall be declared general partner to take such
ratably in proportion to the reasonable efforts, as
respective amounts of determined by it in its sole
distributions accumulated, and absolute discretion and
accrued and unpaid on the consistent with AIMCO's
Preferred OP Units and such qualification as a REIT, to
Parity Units. Unless full cause the AIMCO Operating
cumulative distributions on Partnership to distribute
the Preferred OP Units have sufficient amounts to en-
been declared and paid, able the general partner to
except in limited circum- transfer funds to AIMCO and
stances, no distributions enable AIMCO to pay stock-
may be declared or paid or holder dividends that will
set apart for payment by the (i) satisfy the requirements
AIMCO Operating Partnership for qualifying as a REIT
and no other distribution of under the Code and the
cash or other property may Treasury Regulations and
be declared or made, (ii) avoid any Federal
directly or indirectly, by income or excise tax
the AIMCO Operating liability of AIMCO. See
Partnership with respect to "Description of OP
any Junior Units (as de- Units -- Distributions" in
fined below), nor shall any the accompanying Prospectus.
Junior Units be redeemed,
purchased or otherwise
acquired for considera-
tion, 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>
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<PAGE> 615
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Liquidity and Transferability/Redemption Rights
<TABLE>
<CAPTION>
<S> <C> <C>
A limited partner may There is no public market There is no public market
transfer his units to any for the Preferred OP Units for the OP Units. The AIMCO
person and be substituted as and the Preferred OP Units Operating Partnership
a limited partner by such are not listed on any Agreement restricts the
person if: (1) such trans- securities exchange. The transferability of the OP
fer is in compliance with Preferred OP Units are Units. Until the expiration
applicable Federal and state subject to restrictions on of one year from the date on
securities law, (2) a transfer as set forth in the which an OP Unitholder
written assignment has been AIMCO Operating Partnership acquired OP Units, subject
duly executed by the as- Agreement. to certain exceptions, such
signor and assignee, (3) the OP Unitholder may not
written approval of the Pursuant to the AIMCO transfer all or any por-
managing general partner Operating Partnership tion of its OP Units to any
which may be withheld in the Agreement, until the transferee without the
sole and absolute discretion expiration of one year from consent of the general
of the general partner has the date on which a holder partner, which consent may
been granted and (4) the of Preferred OP Units be withheld in its sole and
assignor or the assignee acquired Preferred OP Units, absolute discretion. After
pays a transfer fee. subject to certain the expiration of one year,
exceptions, such holder of such OP Unitholder has the
There are no redemption Preferred OP Units may not right to transfer all or any
rights associated with your transfer all or any portion portion of its OP Units to
units. of its Preferred OP Units to any person, subject to the
any transferee without the satisfaction of certain con-
consent of the general ditions specified in the
partner, which consent may AIMCO Operating Partnership
be withheld in its sole and Agreement, including the
absolute discretion. After general partner's right of
the expiration of one year, first refusal. See
such holders of Preferred OP "Description of OP Units --
Units has the right to Transfers and Withdrawals"
transfer all or any portion in the accompanying
of its Preferred OP Units to Prospectus.
any person, subject to the
satisfaction of certain After the first anniversary
conditions specified in the of becoming a holder of
AIMCO Operating Partner- Common OP Units, an OP
ship Agreement, including Unitholder has the right,
the general partner's right subject to the terms and
of first refusal. conditions of the AIMCO
Operating Partnership
After a one-year holding Agreement, to require the
period, a holder may redeem AIMCO Operating Partnership
Preferred OP Units and to redeem all or a portion
receive in exchange of the Common OP Units held
therefor, at the AIMCO Oper- by such party in exchange
ating Partnership's option, for a cash amount based on
(i) subject to the terms of the value of shares of Class
any Senior Units (as defined A Common Stock. See
below), cash in an amount "Description of OP
equal to the Liquidation Units -- Redemption Rights"
Preference of the Preferred in the accompanying
OP Units tendered for Prospectus. Upon receipt of
redemption, (ii) a number of a notice of redemption, the
shares of Class A Common AIMCO Operating Partnership
Stock of AIMCO that is equal may, in its sole and
in Value to the Liquidation absolute discretion but
Preference of the Preferred subject to the restrictions
OP Units tendered on the ownership of Class A
Common
</TABLE>
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<PAGE> 616
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
for redemption, or (iii) for Stock imposed under AIMCO's
Preferred OP Units redeemed charter and the transfer
after a two-year holding restrictions and other
period, a number of shares limitations thereof, elect
of Class I Preferred Stock to cause AIMCO to acquire
of AIMCO that pay an some or all of the ten-
aggregate amount of dered Common OP Units in
dividends equivalent to the exchange for Class A Common
distributions on the Stock, based on an exchange
Preferred OP Units tendered ratio of one share of Class
for redemption; provided A Common Stock for each Com-
that such shares are part of mon OP Unit, subject to
a class or series of adjustment as provided in
preferred stock that is then the AIMCO Operating
listed on the NYSE or an- Partnership Agreement.
other national securities
exchange. See "Federal
Income Tax
Consequences -- Disguised
Sales." 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> 617
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are the Class Two 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 I High Performance 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, the
Class J Partnership Preferred Units, the Class K 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, the Class One 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 $0.50 per Preferred OP
Unit (equivalent to 8.0% per annum of the $25 stated liquidation preference);
provided, however, that at any time and from time to time on or after March 1,
2005, the AIMCO Operating Partnership may adjust the annual distribution rate on
the Preferred OP Units to the lower of (i) 2.0% 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. A reduction in the distribution rate will reduce your rate of return on
the Preferred OP Units and possibly encourage you to redeem such units. 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
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<PAGE> 618
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 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 $25 per Preferred OP
Unit, 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
S-90
<PAGE> 619
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 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 A Common Stock of AIMCO that is equal in Value to the
Liquidation Preference of the Preferred OP Units tendered for redemption, or
(iii) for Preferred OP Units redeemed after a two-year holding period, 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 NYSE or another national securities exchange.
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. Before issuing any preferred
stock upon redemption of Preferred OP Units, AIMCO will register the issuance
and sale of such shares under the Securities Act of 1933. 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.
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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.
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, the Class J 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 8.0% per annum of the $25 liquidation preference (equivalent to
$2.00 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 July 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 March 1, 2005, 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,
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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 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 The Class I Preferred Stock constitutes an
interests entitling each holder of Preferred equity interest entitling each holder of
OP Units to receive, when and as declared by Class I Preferred Stock to receive, when and
the board of directors of the general as declared by the AIMCO board of directors,
partner of the AIMCO Operating Partnership, cash distribution at a rate of $2.00 per
quarterly cash distribution at a rate of annum per share.
$0.50 per 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 Holders of Class I Preferred Stock do not
law or in the AIMCO Operating Partnership's have any voting rights, except as set forth
agreement of limited partnership, the below and except as otherwise required by
holders of the Preferred OP Units will have applicable law.
the same voting rights as holders of the
Common OP Units. See "Description of OP If and whenever dividends on any shares of
Units" in the accompanying Prospectus. So Class I Preferred Stock or any series or
long as any Preferred OP Units are class of Class I Parity Stock are in arrears
outstanding, in addition to any other vote for six or more quarterly periods (whether
or consent of partners required by law or by or not consecutive), the number of directors
the AIMCO Operating Partnership's agreement then constituting the AIMCO board of
of limited partnership, the affirmative vote directors shall be increased by two (if not
or consent of holders of at least 50% of the already increased by reason of similar types
outstanding Preferred OP Units will be of provisions with respect to shares of
necessary for effecting any amendment of any voting preferred stock), and the holders of
of the provisions of the Partnership Unit shares of Class I Preferred Stock, together
Designation of the Preferred OP Units that with the holders of shares of all other
materially and adversely affects the rights voting preferred stock then entitled to
or preferences of the holders of the exercise similar voting rights, voting as a
Preferred OP Units. The creation or issuance single class regardless of series, will be
of any class or series of AIMCO Operating entitled to vote for the election of two
Partnership units, including, without additional directors of AIMCO. Whenever
limitation, any AIMCO Operating Partnership dividends in arrears and dividends for the
units that may have rights senior or current quarterly dividend period have been
superior to the Preferred OP Units, will not paid or declared and set aside in respect of
be deemed to materially adversely affect the the outstanding shares of the Class I
rights or preferences of the holders of Preferred Stock and the voting preferred
Preferred OP Units. With respect to the stock, then the right of the holders of
exercise of the above described voting Class I Preferred Stock and the voting
rights, each Preferred OP Units will have preferred stock to elect such additional two
one (1) vote per Preferred 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
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
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>
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled Holders of Class I Preferred Stock are
to receive, when and as declared by the entitled to receive, when and as declared by
board of directors of the general partner of the AIMCO board of directors, out of funds
the AIMCO Operating Partnership, quarterly legally available for payment, cash
cash distributions at the rate of $0.50 per dividends at the rate of $2.00 per annum per
Preferred OP Unit; provided, however, that share. Such dividends are cumulative from
at any time and from time to time on or the date of original issue. Holders of Class
after the fifth anniversary of the issue I Preferred Stock are not be entitled to
date of the Preferred OP Units, the AIMCO receive any dividends in excess of
Operating Partnership may adjust the annual cumulative dividends on the Class I
distribution rate on the Preferred OP Units Preferred Stock. No interest, or sum of
to the lower of (i) 2.00% plus the annual money in lieu of interest, shall be payable
interest rate then applicable to U.S. in respect of any dividend payment or
Treasury notes with a maturity of five payments on the Class I Preferred Stock that
years, and (ii) the annual dividend rate on may be in arrears.
the most recently issued AIMCO
non-convertible preferred stock which ranks When dividends are not paid in full upon the
on a parity with its Class H Cumulative Class I Preferred Stock or any other class
Preferred Stock. Such distributions will be or series of Class I Parity Stock, all
cumulative from the date of original issue. dividends declared upon the Class I
Holders of Preferred OP Units will not be Preferred Stock and any shares of Class I
entitled to receive any distributions in Parity Stock will be declared ratably in
excess of cumulative distributions on the proportion to the respective amounts of
Preferred OP Units. No interest, or sum of dividends accumulated, accrued and unpaid on
money in lieu of interest, shall be payable the Class I Preferred Stock and such Class I
in respect of any distribution payment or Parity Stock. Unless dividends equal to the
payments on the Preferred OP Units that may full amount of all accumulated, accrued and
be in arrears. unpaid dividends on the Class I Preferred
Stock have been paid, or declared and set
When distributions are not paid in full upon apart for payment, except in limited
the Preferred OP Units or any Parity Units, circumstances, no dividends may be declared
all or paid or set apart for
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
distributions declared upon the Preferred OP payment by AIMCO and no other distribution
Units and any Parity Units will be declared of cash or other property may be declared or
ratably in proportion to the respective made, directly or indirectly, by AIMCO with
amounts of distributions accumulated, respect to any shares of Class I Junior
accrued and unpaid on the Preferred OP Units Stock, nor shall any shares of Class I
and such Parity Units. Unless full Junior Stock be redeemed, purchased or
cumulative distributions on the Preferred OP otherwise acquired for any consideration,
Units have been declared and paid, except in nor shall any other cash or other property
limited circumstances, no distributions may be paid or distributed to or for the benefit
be declared or paid or set apart for payment of holders of shares of Class I Junior
by the AIMCO Operating Partnership and no Stock. See "Description of Class I Preferred
other distribution of cash or other property Stock -- Dividends."
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 Ownership of shares of Class I Preferred
OP Units and the Preferred OP Units are not Stock by any person will be limited such
listed on any securities exchange. The that the sum of the aggregate value of all
Preferred OP Units are subject to certain equity stock (including all shares of Class
restrictions on transferability set forth in 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)
Pursuant to the AIMCO Operating of the aggregate value of all outstanding
Partnership's agreement of limited shares of equity stock. Further, certain
partnership, until the expiration of one transfers which may have the effect of
year from the date on which a holder of causing AIMCO to lose its status as a REIT
Preferred OP Units acquired Preferred OP are void ab initio.
Units, subject to certain exceptions, such
holder of Preferred OP Units may not If any transfer of Class I Preferred Stock
transfer all or any portion of its Preferred occurs which, if effective, would result in
OP Units to any transferee without the any person beneficially or constructively
consent of the general partner, which owning Class I Preferred Stock in excess or
consent may be withheld in its sole and in violation of the Class I Preferred
absolute discretion. After the expiration of Ownership Limit, such shares of Class I
one year, such holders of Preferred OP Units Preferred Stock in excess of the Class I
has the right to transfer all or any portion Preferred Ownership Limit will be
of its Preferred OP Units to any person, automatically transferred to a trustee in
subject to the satisfaction of certain his capacity as trustee of a trust for the
conditions specified in the AIMCO Operating exclusive benefit of one or more charitable
Partnership's agreement of limited beneficiaries designated by AIMCO, and the
partnership, including the general partner's prohibited transferee will generally have no
right of first refusal. rights in such shares, except upon sale of
the shares by the trustee. The trustee will
After a one-year holding period, a holder have all voting rights and rights to
may redeem Preferred OP Units and receive in dividends with respect to shares of Class I
exchange therefor, at the AIMCO Operating Preferred Stock held in the trust, which
Partnership's option, (i) subject to the rights will be exercised for the benefit of
terms of any Senior Units, cash in an amount the charitable beneficiaries.
equal to the Liquidation Preference of the
Preferred OP Units tendered for The trustee may sell the Class I Preferred
Stock held
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
redemption, (ii) a number of shares of Class in the trust to AIMCO or a person,
A Common Stock of AIMCO that is equal in designated by the trustee, whose ownership
value to the Liquidation Preference of the of the Class I Preferred Stock will not
Preferred OP Units tendered for redemption, violate the Class I Preferred Ownership
or (iii) for Preferred OP Units redeemed Limit. Upon such sale, the interest of the
after a two-year holding period, a number of charitable beneficiaries in the shares sold
shares of Class I Preferred Stock of AIMCO will terminate and the trustee will
that pay an aggregate amount of dividends distribute to the prohibited transferee, the
equivalent to the distributions on the lesser of (i) the price paid by the
Preferred OP Units tendered for redemption; prohibited transferee for the shares or if
provided that such shares are part of a the prohibited transferee did not give value
class or series of preferred stock that is for the shares in connection with the event
then listed on the NYSE or another national causing the shares to be held in the trust,
securities exchange. See "Federal Income Tax the market price of such shares on the day
Consequences -- Disguised Sales." The of the event causing the shares to be held
Preferred OP Units may not be redeemed at in the trust and (ii) the price per share
the option of the AIMCO Operating received by the trustee from the sale or
Partnership. See "Description of Preferred other disposition of the shares held in the
OP Units -- Redemption." trust. Any proceeds in excess of the amount
payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after March 1, 2005, 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. Your general
partner became a wholly owned subsidiary on February 26, 1999 of AIMCO when IPT
merged with AIMCO. Accordingly, the general partner of your partnership 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 Unitholders 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 own both the general partner of your partnership and the manager of your
partnership's property. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $7,000 in 1996, $8,091 in 1997 and $9,619 in
1998. The property manager received management fees of $31,000 in 1996, $33,000
in 1997 and $34,824 in 1998. The AIMCO Operating Partnership has no current
intention of changing the fee structure for the general partner or for the
manager of your partnership's 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." AIMCO's
Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is
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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.
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. However, we will not acquire any
additional units for a period of at least one year after expiration of the
offer. Any such future offers that we might make could be for consideration that
is more or less than the consideration we are currently offering.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $192,491 will be
required to purchase all of the units sought in the offer, if such units are
tendered for cash excluding expenses as itemized below. The AIMCO Operating
Partnership will obtain all such funds from cash from operations, equity
issuances and short term borrowings. The AIMCO Operating Partnership will pay
all of the costs of the offer and not your partnership.
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...................................... $ 5,000
Accountant's Fees........................................... $ 5,000
Legal Fees.................................................. $10,000
Printing Fees............................................... $10,000
Stanger's Fees.............................................. $ 9,000
Other....................................................... $11,000
-------
Total............................................. $50,000
=======
</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 Bank of America's reference rate, at the election of
the Company, plus 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 2.25% and 2.75% in the case of LIBOR-based
loans and between 0.75% and 1.25% 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
September 30, 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
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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.
We may obtain funds pursuant to a credit agreement entered into by our
subsidiary, Insignia Properties, L.P. ("IPLP"), 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, 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). IPLP 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. The AIMCO Operating
Partnership intends to repay any funds borrowed out of working capital in the
ordinary course of business.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP has delivered 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 has delivered an opinion with regard to
the material Federal income tax consequences of the offer. 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 two opinions of Skadden, Arps, Slate, Meagher & Flom LLP are 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 opinions will be sent by the Information Agent.
S-100
<PAGE> 629
CALMARK/FORT COLLINS, LTD.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed Balance Sheet as of September 30, 1998
(Unaudited)............................................... F-2
Condensed Statement of Operations for the nine months ended
September 30, 1998 and 1997 (Unaudited)................... F-3
Condensed Statement of Cash Flows for the nine months ended
September 30, 1998 and 1997 (Unaudited)................... F-4
Note A -- Basis of Presentation (Unaudited)................. F-5
Balance Sheet as of December 31, 1997 (Unaudited)........... F-6
Statement of Operations for the year ended December 31, 1997
(Unaudited)............................................... F-7
Statement of Changes in Partners' Deficit for the year ended
December 31, 1997 (Unaudited)............................. F-8
Statement of Cash Flows for the year ended December 31, 1997
(Unaudited)............................................... F-9
Notes to Financial Statements (Unaudited)................... F-10
Balance Sheet as of December 31, 1996 (Unaudited)........... F-15
Statement of Operations for the year ended December 31, 1996
(Unaudited)............................................... F-16
Statement of Changes in Partners' Deficit for the year ended
December 31, 1996 (Unaudited)............................. F-17
Statement of Cash Flows for the year ended December 31, 1996
(Unaudited)............................................... F-18
Notes to Financial Statements (Unaudited)................... F-19
</TABLE>
F-1
<PAGE> 630
CALMARK/FORT COLLINS, LTD.
CONDENSED BALANCE SHEET -- UNAUDITED
SEPTEMBER 30, 1998
ASSETS
<TABLE>
<S> <C> <C>
Cash and cash equivalents................................... $ 174,000
Receivables and deposits.................................... 30,000
Other assets................................................ 78,000
Investment property:
Land...................................................... $ 190,000
Building and related personal property.................... 2,827,000
-----------
3,017,000
Less: Accumulated depreciation............................ (1,516,000) 1,501,000
----------- -----------
Total assets...................................... $ 1,783,000
===========
LIABILITIES AND PARTNERS' DEFICIT
Accrued liabilities....................................... $ 25,000
Property taxes payable.................................... 22,000
Tenant security deposits.................................. 14,000
Notes payable............................................. 2,780,000
Partners' deficit................................. (1,058,000)
-----------
Total liabilities and partners' deficit........... $ 1,783,000
===========
</TABLE>
See accompanying note.
F-2
<PAGE> 631
CALMARK/FORT COLLINS, LTD.
CONDENSED STATEMENT OF OPERATIONS -- UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Revenues:
Rental income............................................. $487,000 $474,000
Other income.............................................. 27,000 20,000
-------- --------
Total revenues.................................... 514,000 494,000
Expenses:
Operating expenses........................................ 201,000 165,000
General and administrative expenses....................... 26,000 25,000
Depreciation expense...................................... 74,000 74,000
Interest expense.......................................... 161,000 163,000
Property tax expense...................................... 24,000 23,000
-------- --------
Total expenses.................................... 486,000 450,000
Net income (loss)................................. $ 28,000 $ 44,000
======== ========
</TABLE>
See accompanying note.
F-3
<PAGE> 632
CALMARK/FORT COLLINS, LTD.
CONDENSED STATEMENTS OF CASH FLOWS -- UNAUDITED
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
<S> <C> <C>
Operating activities:
Net income (loss)......................................... $ 28,000 $ 44,000
Adjustments to reconcile net income (loss) to net cash
provided by operating activities.......................
Depreciation and amortization............................. 101,000 101,000
Changes in accounts:
Receivables and deposits and other assets.............. (4,000) 15,000
Accounts payable and accrued expenses.................. (29,000) (28,000)
--------- --------
Net cash provided by (used in) operating
activities...................................... 96,000 132,000
Investing activities:
Property improvements and replacements.................... (91,000) (51,000)
--------- --------
Net cash provided by (used in) investing activities....... (91,000) (51,000)
Financing activities:
Payments on mortgage...................................... (20,000) (66,000)
Partners' distributions................................... (500,000) --
--------- --------
Net cash provided by (used in) financing activities....... (520,000) (66,000)
--------- --------
Net increase (decrease) in cash and cash equivalents...... (515,000) 15,000
Cash and cash equivalents at beginning of year............ 689,000 38,000
--------- --------
Cash and cash equivalents at end of period................ $ 174,000 $ 53,000
========= ========
</TABLE>
See accompanying note.
F-4
<PAGE> 633
CALMARK/FORT COLLINS, LTD
NOTE TO CONDENSED FINANCIAL STATEMENTS
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements of Calmark/Fort Collins,
Ltd. as of September 30, 1998 and for the nine months ended September 30, 1998
and 1997 have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included and
all such adjustments are of a recurring nature.
The financial statements should be read in conjunction with the unaudited
financial statements and notes thereto for the year ended December 31, 1997. It
should be understood that accounting measurements at interim dates inherently
involve greater reliance on estimates than at year-end. The results of
operations for the interim periods presented are not necessarily indicative of
the results for the entire year.
F-5
<PAGE> 634
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEET -- UNAUDITED
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT UNIT DATA)
ASSETS
<TABLE>
<S> <C> <C>
Cash and cash equivalents................................... $ 689
Receivables and deposits.................................... 38
Loan costs, net of accumulated amortization of $1........... 66
Other assets................................................ 8
Apartment property, at cost (Notes 3 and 4):
Land and improvements..................................... $ 190
Buildings and related personal property................... 2,736
2,926
Less accumulated depreciation............................. (1,442) 1,484
------- -------
$ 2,285
=======
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 6
Accrued liabilities....................................... 45
Long-term debt (Notes 3 and 4)............................ 2,800
Tenant security deposit liabilities....................... 19
-------
2,870
Partners' deficit:
Limited Partners (34 units issued and outstanding)........ $ (567)
General Partners.......................................... (18) (585)
------- -------
$ 2,285
=======
</TABLE>
See accompanying notes.
F-6
<PAGE> 635
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT UNIT DATA)
<TABLE>
<S> <C> <C>
Revenues:
Rental income............................................. $ 635
Other income.............................................. 27
----------
662
Expenses:
Operating................................................. $224
General and administrative................................ 28
Interest.................................................. 217
Depreciation.............................................. 99
Property taxes............................................ 28 596
---- ----------
Income before extraordinary item............................ $ 66
Extraordinary loss on extinguishment of debt (Note 4)....... (182)
----------
Net loss.................................................... $ (116)
==========
Net loss allocated to general partners (1%)................. $ (1)
Net loss allocated to limited partners (99%)................ (115)
----------
$ (116)
==========
Per limited partnership unit:
Income before extraordinary item.......................... $ 1,917.06
Extraordinary loss on extinguishment of debt.............. (5,299.41)
----------
Net loss.................................................... $(3,382.35)
==========
</TABLE>
See accompanying notes.
F-7
<PAGE> 636
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF CHANGES IN PARTNERS' DEFICIT -- UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- -------- -----
<S> <C> <C> <C>
Partners' deficit at December 31, 1996...................... $(17) $(452) $(469)
Net loss.................................................. (1) (115) (116)
---- ----- -----
Partners' deficit at December 31, 1997...................... $(18) $(567) $(585)
==== ===== =====
</TABLE>
See accompanying notes.
F-8
<PAGE> 637
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF CASH FLOWS -- UNAUDITED
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Operating activities
Net loss.................................................. $ (116)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Extraordinary loss on extinguishment of debt........... 182
Depreciation........................................... 99
Amortization of loan costs and discount................ 34
Changes in accounts:
Receivables and deposits............................. 12
Other assets......................................... (1)
Accounts payable..................................... (23)
Accrued liabilities.................................. 1
Tenant security deposit liabilities.................. (1)
-------
Net cash provided by operating activities......... 187
Investing activities
Property improvements and replacements.................... (59)
Financing activities
Payments on long-term debt................................ (2,208)
Additional borrowings on long-term debt................... 2,800
Loan costs................................................ (66)
Debt extinguishment costs................................. (3)
-------
Net cash provided by financing activities......... 523
-------
Net increase in cash and cash equivalents......... 651
Cash and cash equivalents at December 31, 1996............ 38
-------
Cash and cash equivalents at December 31, 1997............ $ 689
=======
Supplemental disclosure of cash flow information
Cash paid during the year for interest.................... $ 180
=======
</TABLE>
See accompanying notes.
F-9
<PAGE> 638
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1997
1. ORGANIZATION
Description of Partnership
Calmark/Fort Collins, Ltd., a California limited partnership (the
"Partnership"), was formed in January 1982 to acquire and operate a 102-unit
apartment complex in Fort Collins, Colorado. This property was acquired from
Calmark Asset Management, Inc. (CAMI), an affiliate of the Corporate General
Partner, Calmark/Fort Collins, Inc., a California corporation. Thirty-four units
of limited partnership interest were issued.
The Partnership will terminate on December 31, 2031 unless terminated
sooner by the retirement or dissolution of the General Partners or unless the
Partners elect to continue the Partnership.
The General Partners of the Partnership are Calmark/Fort Collins, Inc., a
California corporation (the Corporate General Partner) and Fort Collins Company,
Ltd., a California limited partnership (Associate General Partner). In January
1993, MAE California, Inc., an affiliate of Insignia Financial Group, Inc.,
purchased all of the outstanding stock of the Corporate General Partner and
assumed the role and obligations of the Managing General Partner of the
Partnership.
Allocations to Partners
In general, income and losses from operations and losses upon sale of the
property and/or dissolution of the Partnership are allocated 1% to the General
Partners and 99% to the Limited Partners.
Income from disposition or partial disposition of the Partnership's
property and income upon termination and liquidation of the Partnership will be
allocated as follows:
a. Ordinary income under Section 751(c) of the Internal Revenue Code
will be allocated between the Partners as a class in the same proportion as
such deductions were allocated to them.
b. To Partners with negative adjusted capital account balances (as
defined), after accounting for distributions described below, in proportion
to their negative adjusted capital account balances.
c. Any remaining income will be allocated so as to produce a 25:75 ratio
between the aggregate positive adjusted capital account balances of the
General Partners and the aggregate positive adjusted capital account
balances of the Limited Partners after accounting for the distributions
described below.
Cash Distributions
Net cash from operations (as defined) is to be distributed not less than
quarterly and not later than ninety days after the end of each fiscal quarter of
the Partnership in the following order of priority:
a. To the General Partners an amount equal to the excess gross rental
income (as defined), not to exceed $66,500.
b. 1% to the General Partners and 99% to the Limited Partners as a class
until such time as the Limited Partners have received in the aggregate an
amount equal to an 8% per annum cumulative (but not compounded) return on
their adjusted investment interest (as defined).
c. The remainder is allocated 25% to the General Partners and 75% to the
Limited Partners as a class. In general, any proceeds remaining after the
sale of the properties and dissolution of the Partnership shall be
distributed to the Partners in accordance with their capital accounts after
payment of certain items specified in the Partnership Agreement.
F-10
<PAGE> 639
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- UNAUDITED -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment Property
The investment property is stated at cost. Acquisition fees are capitalized
as a cost of real estate. The Partnership records impairment losses on
long-lived assets used in operations when events and circumstances indicate that
the assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets. No
adjustments for impairment of value were necessary for the year ended December
31, 1996.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Risks and Uncertainties
The real estate business is highly competitive. The Partnership's real
property investments are subject to competition from similar types of properties
in the vicinities in which they are located and the Partnership is not a
significant factor in its industry. In addition, various limited partnerships
have been formed by related parties to engage in business which may be
competitive with the Partnership.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with a maturity
when purchased of three months or less to be cash equivalents. At certain times,
the amount of cash deposited at a bank may exceed the limit on insured deposits.
Fair Value
The Partnership believes that the carrying amount of its financial
instruments (except for long term debt) approximates their fair value due to the
short term maturity of these instruments. The fair value of the Partnership's
long term debt, after discounting the scheduled loan payments at an estimated
borrowing rate currently available to the Partnership, approximates its carrying
value.
Tenant Security Deposits
The Partnership requires security deposits from all lessees for the
duration of the lease and such deposits are included in "Receivables and
deposits." Deposits are refunded when the tenant vacates the apartment if there
has been no damage to the unit and the tenant is current on its rental payments.
Loan Costs
Loan costs are being amortized using the straight-line method over the life
of the loan.
Leases
The Partnership generally leases apartment units for twelve-month terms or
less. Rental revenue is recognized as earned.
F-11
<PAGE> 640
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- UNAUDITED -- (CONTINUED)
Advertising Costs
The Partnership expenses the costs of advertising as incurred.
Depreciation
Building and improvements are depreciated using the straight-line method
over the estimated useful lives of the assets, ranging from 5 to 30 years.
Restricted Escrows
Restricted escrows consist of funds established to cover necessary repairs
and replacements of existing improvements at the property.
3. INVESTMENT PROPERTY AND ACCUMULATED DEPRECIATION
INITIAL COST TO PARTNERSHIP
(IN THOUSANDS)
<TABLE>
<CAPTION>
BUILDINGS AND COST CAPITALIZED
RELATED PERSONAL SUBSEQUENT TO
DESCRIPTION ENCUMBRANCES LAND PROPERTY ACQUISITION
- ----------- ------------ ---- ---------------- ----------------
<S> <C> <C> <C> <C>
Fort Collins Apartments..................... $2,800 $190 $2,540 $196
====== ==== ====== ====
</TABLE>
GROSS AMOUNT AT WHICH CARRIED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BUILDINGS AND
RELATED
PERSONAL ACCUMULATED DATE DEPRECIABLE
DEPRECIATION LAND PROPERTY TOTAL DEPRECIATION ACQUIRED LIFE-YEARS
- ------------ ---- ------------- ------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Fort Collins Apartments......... $190 $2,736 $2,926 $1,442 1/82 5-30
==== ====== ====== ====== ==== ====
</TABLE>
The depreciable lives included above are for the buildings and components.
The depreciable lives for related personal property are for 5 to 7 years.
Reconciliation of "Investment Property and Accumulated Depreciation" (in
thousands):
<TABLE>
<S> <C>
Investment Property
Balance at beginning of year.............................. $2,867
Property improvements..................................... 59
------
$2,926
======
Accumulated Depreciation
Balance at beginning of year.............................. $1,343
Additions charged to expense.............................. 99
------
Balance at end of year.................................... $1,442
======
</TABLE>
The aggregate cost of the investment property for Federal income tax
purposes at December 31, 1996 is approximately $2,926,000. The accumulated
depreciation taken for Federal income tax purposes at December 31, 1996 is
approximately $2,619,000.
F-12
<PAGE> 641
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- UNAUDITED -- (CONTINUED)
4. LONG-TERM DEBT
Long-term debt payable at December 31, 1997 consists of the following
(dollar amounts in thousands):
<TABLE>
<S> <C>
Mortgage note payable to Lehman Brothers Holdings, Inc.
secured by a first deed of trust on the property. This
note bears interest at 7.34% per annum. Principal and
interest payments of $19 are payable monthly, with a
balloon payment of $2,585 due on December 1, 2004......... $2,800
======
</TABLE>
During 1997, the Partnership refinanced its long-term debt. The Partnership
recognized a loss on extinguishment of the old debt of approximately $182,000
primarily due to writing off unamortized debt discount and loan costs. In
addition, the Partnership incurred approximately $66,000 in costs associated
with the new debt. The new debt contains prepayment penalties if repaid prior to
maturity.
Scheduled principal payments of long-term debt subsequent to December 31,
1997 are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $ 27
1999........................................................ 29
2000........................................................ 31
2001........................................................ 33
2002........................................................ 36
Thereafter.................................................. 2,644
------
$2,800
======
</TABLE>
5. RELATED PARTY TRANSACTIONS
Affiliates of Insignia Financial Group, Inc. ("Insignia") own the
controlling ownership interest in the Partnership's Managing General Partner,
with certain affiliates of Insignia providing property management and asset
management services to the Partnership.
The following payments were made to Insignia and its affiliates in 1997 (in
thousands):
<TABLE>
<S> <C>
Property management fees.................................... $33
Reimbursements for general partner expenses................. $ 8
</TABLE>
For the period of January 1, 1997 to August 31, 1997, the Partnership
insured its property under a master policy through an agency and insurer
unaffiliated with the Managing General Partner. An affiliate of the Managing
General Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the master policy. The agent assumed the financial obligations to the
affiliate of the Managing General Partner who received payments on these
obligations from the agent. The amount of the Partnership's insurance premiums
that accrued to the benefit of the affiliate of the Managing General Partner by
virtue of the agent's obligations was not significant.
6. INCOME TAXES
Taxable income or loss of the Partnership is reported in the income tax
returns of its partners. Accordingly, no provision for income taxes is made in
the financial statements of the Partnership.
F-13
<PAGE> 642
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- UNAUDITED -- (CONTINUED)
The following is a reconciliation of reported net loss and Federal taxable
loss (in thousands, except unit data):
<TABLE>
<S> <C>
Net loss as reported........................................ $ (116)
Deduct:
Depreciation differences.................................. (42)
----------
Federal taxable loss........................................ $ (158)
==========
Federal taxable loss per limited partnership unit........... $(4,600.59)
==========
</TABLE>
The following is a reconciliation between the Partnership's reported
amounts and Federal tax basis of net assets and liabilities (in thousands):
<TABLE>
<S> <C>
Net liabilities as reported................................. $ (585)
Accumulated depreciation.................................... (1,177)
Syndication costs........................................... 20
-------
Net liabilities -- tax basis................................ $(1,742)
=======
</TABLE>
7. SUBSEQUENT EVENT
On March 17, 1998, Insignia Financial Group, Inc. an affiliate of the
corporate general partner of the Partnership, entered into an agreement to merge
its national residential property management operations and its controlling
interest in Insignia Properties Trust, with Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust. The merger
was completed effective October 1, 1998, and accordingly, as of that date AIMCO
acquired the corporate general partner and the company that manages the
Partnership.
F-14
<PAGE> 643
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT UNIT DATA)
ASSETS
<TABLE>
<S> <C> <C>
Cash........................................................ $ 38
Receivables and deposits.................................... 50
Loan costs, net of accumulated amortization of $44.......... 64
Other assets................................................ 7
Apartment property, at cost (Notes 3 and 4):
Land and improvements..................................... $ 190
Buildings and related personal property................... 2,677
-------
2,867
Less accumulated depreciation............................. (1,343) 1,524
------- ------
$1,683
======
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 29
Accrued liabilities....................................... 44
Long-term debt (Notes 3 and 4)............................ 2,059
Tenant security deposits.................................. 20
------
2,152
Partners' deficit:
Limited Partners (34 units issued and outstanding)........ $ (452)
General Partners.......................................... (17) (469)
------- ------
$1,683
======
</TABLE>
See accompanying notes.
F-15
<PAGE> 644
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
Revenues:
Rental income............................................. $ 591
Other income.............................................. 16
-------
607
Expenses:
Interest.................................................. $224
Depreciation.............................................. 93
Operating expenses........................................ 218
Property taxes............................................ 27
General and administrative................................ 18 580
---- -------
Net income.................................................. $ 27
=======
Net income allocated to general partners (1%)............... --
Net income allocated to limited partners (99%).............. $ 27
=======
Net income per limited partnership unit..................... $ .79
=======
</TABLE>
See accompanying notes.
F-16
<PAGE> 645
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF CHANGES IN PARTNERS' DEFICIT (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- -------- -----
<S> <C> <C> <C>
Partners' deficit at December 31, 1995...................... $(17) $(479) $(496)
Net income................................................ -- 27 27
---- ----- -----
Partners' deficit at December 31, 1996...................... $(17) $(452) $(469)
==== ===== =====
</TABLE>
See accompanying notes.
F-17
<PAGE> 646
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF CASH FLOWS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
Operating activities
Net income................................................ $ 27
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 93
Amortization of loan costs and discount................ 36
Changes in accounts:
Receivables and deposits............................. (4)
Other assets......................................... (3)
Accounts payable..................................... 19
Accrued liabilities.................................. 16
-----
Net cash provided by operating activities......... 184
Investing activities
Property improvements and replacements.................... (51)
Financing activities
Payments on long-term debt................................ (117)
-----
Net increase in cash.............................. 16
Cash at December 31, 1995................................... 22
-----
Cash at December 31, 1996................................... $ 38
=====
Supplemental disclosure of cash flow information
Cash paid for interest expense............................ $ 175
=====
</TABLE>
See accompanying notes.
F-18
<PAGE> 647
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1996
1. ORGANIZATION
Description of Partnership
Calmark/Fort Collins, Ltd., a California limited partnership (the
"Partnership"), was formed in January 1982 to acquire and operate a 102-unit
apartment complex in Fort Collins, Colorado. This property was acquired from
Calmark Asset Management, Inc. (CAMI), an affiliate of the Corporate General
Partner, Calmark/Fort Collins, Inc., a California corporation. Thirty-four units
of limited partnership interest were issued.
The Partnership will terminate on December 31, 2031 unless terminated
sooner by the retirement or dissolution of the General Partners or unless the
Partners elect to continue the Partnership.
The General Partners of the Partnership are Calmark/Fort Collins, Inc., a
California corporation (the Corporate General Partner) and Fort Collins Company,
Ltd., a California limited partnership (Associate General Partner). In January
1993, MAE California, Inc., an affiliate of Insignia Financial Group, Inc.,
purchased all of the outstanding stock of the Corporate General Partner and
assumed the role and obligations of the Managing General Partner of the
Partnership.
Allocations to Partners
In general, income and losses from operations and losses upon sale of the
property and/or dissolution of the Partnership are allocated 1% to the General
Partners and 99% to the Limited Partners.
Income from disposition or partial disposition of the Partnership's
property and income upon termination and liquidation of the Partnership will be
allocated as follows:
a. Ordinary income under Section 751(c) of the Internal Revenue Code
will be allocated between the Partners as a class in the same proportion as
such deductions were allocated to them.
b. To Partners with negative adjusted capital account balances (as
defined), after accounting for distributions described below, in proportion
to their negative adjusted capital account balances.
c. Any remaining income will be allocated so as to produce a 25:75 ratio
between the aggregate positive adjusted capital account balances of the
General Partners and the aggregate positive adjusted capital account
balances of the Limited Partners after accounting for the distributions
described below.
Cash Distributions
Net cash from operations (as defined) is to be distributed not less than
quarterly and not later than ninety days after the end of each fiscal quarter of
the Partnership in the following order of priority:
a. To the General Partners an amount equal to the excess gross rental
income (as defined), not to exceed $66,500.
b. 1% to the General Partners and 99% to the Limited Partners as a class
until such time as the Limited Partners have received in the aggregate an
amount equal to an 8% per annum cumulative (but not compounded) return on
their adjusted investment interest (as defined).
c. The remainder is allocated 25% to the General Partners and 75% to the
Limited Partners as a class. In general, any proceeds remaining after the
sale of the properties and dissolution of the Partnership shall be
distributed to the Partners in accordance with their capital accounts after
payment of certain items specified in the Partnership Agreement.
F-19
<PAGE> 648
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investment Property
The investment property is stated at cost. Acquisition fees are capitalized
as a cost of real estate. The Partnership records impairment losses on
long-lived assets used in operations when events and circumstances indicate that
the assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets. No
adjustments for impairment of value were necessary for the year ended December
31, 1996.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Risks and Uncertainties
The real estate business is highly competitive. The Partnership's real
property investments are subject to competition from similar types of properties
in the vicinities in which they are located and the Partnership is not a
significant factor in its industry. In addition, various limited partnerships
have been formed by related parties to engage in business which may be
competitive with the Partnership.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with a maturity
when purchased of three months or less to be cash equivalents. At certain times,
the amount of cash deposited at a bank may exceed the limit on insured deposits.
Fair Value
The Partnership believes that the carrying amount of its financial
instruments (except for long term debt) approximates their fair value due to the
short term maturity of these instruments. The fair value of the Partnership's
long term debt, after discounting the scheduled loan payments at an estimated
borrowing rate currently available to the Partnership, approximates its carrying
value.
Tenant Security Deposits
The Partnership requires security deposits from all lessees for the
duration of the lease and such deposits are included in "Receivables and
deposits." Deposits are refunded when the tenant vacates the apartment if there
has been no damage to the unit and the tenant is current on its rental payments.
Loan Costs
Loan costs are being amortized using the straight-line method over the life
of the loan.
Leases
The Partnership generally leases apartment units for twelve-month terms or
less. Rental revenue is recognized as earned.
F-20
<PAGE> 649
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Advertising Costs
The Partnership expenses the costs of advertising as incurred.
Depreciation
Building and improvements are depreciated using the straight-line method
over the estimated useful lives of the assets, ranging from 5 to 30 years.
Restricted Escrows
Restricted escrows consist of funds established to cover necessary repairs
and replacements of existing improvements at the property.
3. INVESTMENT PROPERTY AND ACCUMULATED DEPRECIATION
INITIAL COST TO PARTNERSHIP
(IN THOUSANDS)
<TABLE>
<CAPTION>
BUILDINGS AND COST CAPITALIZED
RELATED PERSONAL SUBSEQUENT TO
DESCRIPTION ENCUMBRANCES LAND PROPERTY ACQUISITION
----------- ------------ ---- ---------------- ----------------
<S> <C> <C> <C> <C>
Fort Collins Apartments........................ $2,059 $190 $2,540 $137
====== ==== ====== ====
</TABLE>
GROSS AMOUNT AT WHICH CARRIED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BUILDINGS AND
RELATED
PERSONAL ACCUMULATED DATE DEPRECIABLE
DESCRIPTION LAND PROPERTY TOTAL DEPRECIATION ACQUIRED LIFE-YEARS
----------- ---- ------------- ------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Fort Collins Apartments............... $190 $2,677 $2,867 $1,343 1/82 5-30
==== ====== ====== ======
</TABLE>
The depreciable lives included above are for the buildings and components.
The depreciable lives for related personal property are for 5 to 7 years.
Reconciliation of "Investment Property and Accumulated Depreciation" (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Investment Property
Balance at beginning of year.............................. $2,816
Property improvements..................................... 51
------
Balance at end of year.................................... $2,867
======
Accumulated Depreciation
Balance at beginning of year.............................. $1,250
Additions charged to expense.............................. 93
------
Balance at end of year.................................... $1,343
======
</TABLE>
F-21
<PAGE> 650
CALMARK/FORT COLLINS, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
The aggregate cost of the investment property for Federal income tax
purposes at December 31, 1996 is approximately $2,867,000. The accumulated
depreciation taken for Federal income tax purposes at December 31, 1996 is
approximately $2,478,000.
4. LONG-TERM DEBT
Long-term debt payable at December 31, 1996 consists of the following (in
thousands).
The aggregate cost of the investment property for Federal income tax
purposes at December 31, 1996 is approximately $2,867,000. The accumulated
depreciation taken for Federal income tax purposes at December 31, 1996 is
approximately $2,478,000.
4. LONG-TERM DEBT
Long-term debt payable at December 31, 1996 consists of the following (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Mortgage note payable to Metmor Financial, Inc. secured by a
first deed of trust on the property. This note bears
interest at 8.25% per annum. Principal and interest
payments of $18 are payable monthly, with a balloon
payment of $1,664 due on January 1, 2003.................. $2,039
Promissory note payable to E.E. Mitchell and Co. This note
bears interest at 8.8% per annum. Interest and principal
payments based on cash flow (as defined in the note) are
made monthly. The unpaid principal and interest is due on
December 1, 1997.......................................... 169
------
2,208
Less unamortized loan discount fee.......................... (149)
------
$2,059
======
</TABLE>
F-22
<PAGE> 651
PRO FORMA FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
AS OF SEPTEMBER 30, 1998 AND FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1998
INTRODUCTION
On October 1, 1998, Apartment Investment and Management Company ("AIMCO")
completed its merger with Insignia Financial Group ("IFG") ("the IFG Merger").
In the IFG Merger, IFG's common stock was converted into 8,423,751 shares of
Class E Cumulative Convertible Preferred Stock of AIMCO ("Class E Preferred
Stock") whose issue date market value approximately equaled $292 million. In
addition to receiving the same dividends as holders of AIMCO Common Stock,
holders of Class E Preferred Stock will be entitled to a special dividend of
approximately $50 million in the aggregate. When that special dividend is paid
in full, the Class E Preferred Stock will automatically convert into AIMCO
Common Stock on a one-for-one basis, subject to antidilution adjustments, if
any. In addition, AIMCO assumed approximately $411 million in indebtedness and
other liabilities of IFG and its subsidiaries and subsidiaries of AIMCO, assumed
approximately $149.5 million of convertible securities and purchased
approximately $5 million of IFG stock prior to the Merger. AIMCO and Insignia
Properties Trust ("IPT") have completed a merger in which IPT has merged into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). In the IPT Merger, shares of
IPT common stock not held by AIMCO were converted into 4,826,745 shares of AIMCO
Class A Common Stock whose market value approximately equaled $152 million.
AIMCO assumed approximately $68 million in indebtedness. In connection with the
IFG Merger and the IPT Merger, AIMCO incurred approximately $55 million in
transaction costs for a combined transactional value of approximately $1,183
million. AIMCO contributed substantially all the assets and liabilities of
Insignia acquired in the Insignia Merger to AIMCO Properties, L.P. (together
with its subsidiaries and other controlled entities, the "Partnership") (and
together with entities in which that Partnership has a controlling financial
interest, the "Company") in exchange for 8,423,751 Class E Preferred Units. The
Class E Preferred Units have terms substantially the same as the Class E
Preferred Stock. In addition, AIMCO contributed substantially all the assets and
liabilities of IPT acquired in the IPT Merger to the Partnership in exchange for
4,826,745 limited partnership units in the Partnership ("OP Units"). In
connection with the IFG Merger, the Partnership assumed property management of
approximately 192,000 multifamily units which consist of general and limited
partnership investments in 115,000 units and third party management of 77,000
units. Insignia Properties Trust ("IPT"), which prior to the IFG Merger was a
subsidiary of IFG, owns a 32% weighted average general and limited partnership
interest in approximately 51,000 units.
Immediately following the IFG Merger, in order to satisfy certain
requirements of the Internal Revenue Code of 1986 (the "Code") applicable to
AIMCO's status as a REIT, AIMCO engaged in a reorganization (the "IFG
Reorganization") of the assets and operations of IFG whereby IFG's operations
are being conducted through corporations (the "Unconsolidated Subsidiaries") in
which the Partnership holds non-voting preferred stock that represents a 95%
economic interest, and certain officers and/or directors of AIMCO hold, directly
or indirectly, all of the voting common stock, representing a 5% economic
interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
In May and September of 1997, AIMCO directly or indirectly through a
subsidiary, acquired (the "NHP Stock Purchase") an aggregate of 6,930,122 shares
of common stock ("NHP Common Stock") of NHP. On December 8, 1997, AIMCO acquired
the remaining shares of NHP Common Stock in a merger transaction accounted for
as a purchase (the "NHP Merger"). As a result of the NHP Merger, AIMCO issued
6,759,148 shares of AIMCO Common Stock, valued at $180.8 million, and paid $86.5
million in cash. The total cost of the purchase of NHP was $349.5 million.
Substantially all assets and liabilities of NHP were contributed by AIMCO to the
Partnership.
In June 1997, the Company purchased a group of companies (the "NHP Real
Estate Companies") affiliated with NHP that hold general and limited partnership
interests in partnerships (the "NHP
P-1
<PAGE> 652
Partnerships") that own 534 conventional and affordable multifamily apartment
properties (the "NHP Properties") containing 87,659 units, a captive insurance
subsidiary and certain related assets (the "NHP Real Estate Acquisition"). The
Company paid aggregate consideration of $54.8 million in cash and warrants that
entitle the holders to purchase 399,999 shares of AIMCO Common Stock at an
exercise price of $36.00 per share. The Company engaged in a reorganization (the
"NHP Real Estate Reorganization") of its interests in the NHP Real Estate
Companies, which resulted in certain of the assets of the NHP Real Estate
Companies being owned by a limited partnership (the "Unconsolidated
Partnership") in which the Partnership holds 99% limited partner interest and
certain directors and officers of AIMCO directly or indirectly, hold a 1%
general partner interest.
Immediately following the NHP Merger, in order to satisfy certain
requirements of the Code applicable to AIMCO's status as a REIT, AIMCO engaged
in a reorganization (the "NHP Reorganization") of the assets and operations of
NHP that resulted in the Master Property Management Agreement being terminated
and NHP's operations being conducted through Unconsolidated Subsidiaries in
which the AIMCO Operating Partnership holds non-voting preferred stock that
represents a 95% economic interest, and certain officers and/or directors of
AIMCO hold, directly or indirectly, all of the voting common stock, representing
a 5% economic interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
On May 8, 1998, AIMCO completed a merger with Ambassador Apartments, Inc.
("Ambassador"), pursuant to which Ambassador was merged into AIMCO (the
"Ambassador Merger"). Each outstanding share of stock ("Ambassador Common
Stock") of Ambassador, other than those shares held by AIMCO or Ambassador, were
converted into 0.553 (the "Conversion Ratio") shares of AIMCO Common Stock. Any
outstanding options to purchase Ambassador Common Stock were converted, at the
election of the option holder, into cash or options to purchase AIMCO Common
Stock at such options' then current exercise price divided by the Conversion
Ratio. In accordance with the Agreement and Plan of Merger, dated December 23,
1997 and supplemented by letter dated as of March 11, 1998 (the "Ambassador
Merger Agreement"), the outstanding shares of Class A Senior Cumulative
Convertible Preferred Stock of Ambassador, (the "Ambassador Preferred Stock")
were redeemed and converted into Ambassador Common Stock prior to the Ambassador
Merger. Following the consummation of the Ambassador Merger, a subsidiary of the
Partnership was merged with and into the Ambassador Operating Partnership (the
"Ambassador OP Merger"). Each outstanding unit of limited partnership interest
in the Ambassador Operating Partnership was converted into the right to receive
0.553 OP Units, and as a result, the Ambassador Operating Partnership became a
99.9% owned subsidiary partnership of the Partnership.
Also during 1997, the Partnership (i) (a) acquired 44 properties for
aggregate purchase consideration of $467.4 million, of which $56 million was
paid in the form of 1.9 million OP Units (b) paid $34.2 million in cash and
issued OP Units valued at $7.3 million in connection with the acquisition of
partnership interests through tender offers in certain partnerships ((a) and (b)
together are the "1997 Property Acquisitions") and (c) paid $19.9 million to
acquire 886,600 shares of Ambassador Common Stock (together with the 1997
Property Acquisitions, the "1997 Acquisitions"); (ii) sold (a) approximately
16,367,000 shares of AIMCO Common Stock for aggregate net proceeds of $513.4
million; (b) 750,000 shares of AIMCO Class B Cumulative Convertible Preferred
Stock for net proceeds of $75 million; and (c) 2,400,000 shares of AIMCO Class C
9% Cumulative Preferred Stock for net proceeds of $58.1 million; of which all
proceeds were contributed by AIMCO to the Partnership in exchange for 16,367,000
OP Units, 750,000 Class B Preferred Units, and 2,400,000 Class C Preferred Units
(collectively, the "1997 Stock Offerings"); and (iii) sold five real estate
properties (the "1997 Dispositions").
Also during 1998, AIMCO (i) (a) sold 4,200,000 shares of its Class D
Cumulative Preferred Stock for net proceeds of $101.5 million (the "Class D
Preferred Stock Offering"); (b) sold 4,050,000 shares of its Class G Cumulative
Preferred Stock for net proceeds of $98.0 million (the "Class G Preferred Stock
Offering"); (c) sold 2,000,000 shares of its Class H Cumulative Preferred Stock
for net proceeds of $48.1 million (the "Class H Preferred Stock Offering"); and
(d) sold 1,000,000 shares of its Class J Cumulative Convertible Preferred Stock
in a private placement for $100.0 million (the "Class J Preferred
P-2
<PAGE> 653
Stock Offering"); of which all proceeds were contributed by AIMCO to the
Partnership in exchange for 4,050,000 Class G Preferred Units, 2,000,000 Class H
Preferred Units and 1,000,000 shares of Class J Preferred Units (collectively,
the "1998 Stock Offerings"); (ii) purchased 29 properties for aggregate purchase
consideration of $312.7 million, of which $52.2 million was paid in the form of
OP Units (the "1998 Acquisitions"); (iii) sold two real estate properties (the
"1998 Dispositions"); (iv) contracted to purchase two properties for aggregate
purchase consideration of $62.1 million, of which $26.4 million will be paid in
the form of OP units (the "Probable Purchases") and (v) sold 1,400,000 Class B
Preferred Partnership Units of a subsidiary and warrants to purchase 875,000
shares of AIMCO Class A Common Stock for $35.0 million (the "Preferred
Partnership Unit Offering").
PRO FORMA FINANCIAL INFORMATION OF THE PARTNERSHIP (INSIGNIA MERGER)
The following Pro Forma Consolidated Balance Sheet (Insignia Merger) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) the purchase
of nine properties for an aggregate purchase price of $62.5 million; (ii) the
Class J Preferred Stock Offering; (iii) the Probable Purchases; (iv) the IFG
Merger; (v) the IPT Merger; (vi) the IFG Reorganization; and (vii) the Preferred
Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) the
1997 Acquisitions; (ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions;
(iv) the NHP Real Estate Acquisition; (v) the NHP Real Estate Reorganization;
(vi) the NHP Stock Purchase; (vii) the NHP Merger; (viii) the NHP
Reorganization; (ix) the 1998 Stock Offerings; (x) the 1998 Acquisitions; (xi)
the Probable Purchases; (xii) the 1998 Dispositions; (xiii) the Ambassador
Merger; (xiv) the IFG Merger; (xv) the merger between IPT and Angeles Mortgage
Investment Trust ("AMIT") ("the AMIT Merger"); (xvi) the IPT Merger; (xvii) the
IFG Reorganization; and (xviii) the Preferred Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1997: (i)
the 1998 Stock Offerings; (ii) the 1998 Acquisitions; (iii) the Probable
Purchases; (iv) the 1998 Dispositions; (v) the Ambassador Merger; (vi) the IFG
Merger; (vii) the AMIT Merger; (viii) the IPT Merger; (ix) the IFG
Reorganization; and (x) the Preferred Partnership Unit offering.
The following Pro Forma Financial Information (Insignia Merger) is based,
in part, on the following historical financial statements: (i) the audited
Consolidated Financial Statements of the Partnership for the year ended December
31, 1997; (ii) the unaudited Consolidated Financial Statements of the
Partnership for the nine months ended September 30, 1998; (iii) the audited
Consolidated Financial Statements of Ambassador for the year ended December 31,
1997; (iv) the unaudited Consolidated Financial Statements of Ambassador for the
four months ended April 30, 1998; (v) the audited Consolidated Financial
Statements of IFG for the year ended December 31, 1997; (vi) the audited
Consolidated Financial Statements of AMIT for the year ended December 31, 1997;
(vii) the unaudited Consolidated Financial Statements of IFG for the nine months
ended September 30, 1998; (viii) the unaudited Financial Statements of AMIT for
the period from January 1, 1998 to September 17, 1998; (ix) the unaudited
Consolidated Financial Statements of NHP for the nine months ended September 30,
1997; (x) the unaudited Combined Financial Statements of the NHP Real Estate
Companies for the three months ended March 31, 1997; (xi) the unaudited
Financial Statements of NHP Southwest Partners, L.P. for the three months ended
March 31, 1997; (xii) the unaudited Combined Financial Statements of the NHP New
LP Entities for the three months ended March 31, 1997; (xiii) the unaudited
Combined Financial Statements of the NHP Borrower Entities for the three months
ended March 31, 1997; (xiv) the unaudited Historical Summaries of Gross Income
and Certain Expenses of The Bay Club at Aventura for the three months ended
March 31, 1997; (xv) the unaudited Historical Summary of Gross Income and Direct
Operating Expenses of Morton Towers for the six months ended June 30, 1997;
(xvi) the unaudited Combined Statement of Revenues and Certain Expenses of the
Thirty-Five Acquisition Properties for the six months ended June 30, 1997;
(xvii) the unaudited Statement of
P-3
<PAGE> 654
Revenues and Certain Expenses of First Alexandria Associates, a Limited
Partnership for the nine months ended September 30, 1997; (xviii) the unaudited
Statement of Revenues and Certain Expenses of Country Lakes Associates Two, a
Limited Partnership for the nine months ended September 30, 1997; (xix) the
unaudited Statement of Revenues and Certain Expenses of Point West Limited
Partnership, A Limited Partnership for the nine months ended September 30, 1997;
(xx) the unaudited Statement of Revenues and Certain Expenses for The Oak Park
Partnership for the nine months ended September 30, 1997; (xxi) the audited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the year ended December 31, 1997,
(xxii) the audited Combined Historical Summary or Gross Income and Direct
Operating Expenses of the Cirque Apartment Communities for the year ended
December 31, 1997; (xxiii) the audited Combined Historical Summary of Gross
Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the year ended December 31, 1997; (xxiv) the audited
Historical Summary of Gross Income and Direct Operating Expenses of the Calhoun
Beach Club Apartments for the year ended December 31, 1997; (xxv) the unaudited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the nine months ended September
30, 1998; (xxvi) the unaudited Combined Historical Summary of Gross Income and
Direct Operating Expenses of the Cirque Apartment Communities for the three
months ended March 31, 1998; (xxvii) the unaudited Combined Historical Summary
of Gross Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the nine months ended September 30, 1998; and (xxviii) the
unaudited Historical Summary of Gross Income and Direct Operating Expenses of
Calhoun Beach Club Apartments for the nine months ended September 30, 1998. The
following Pro Forma Financial Information should be read in conjunction with
such financial statements and the notes thereto incorporated by reference
herein.
The unaudited Pro Forma Financial Information (Insignia Merger) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
1997 Acquisitions, the 1998 Acquisitions, and the Probable Purchases are
adjusted to estimated fair market value, based upon preliminary estimates, which
are subject to change as additional information is obtained. The allocations of
purchase costs are subject to final determination based upon estimates and other
evaluations of fair market value. Therefore, the allocations reflected in the
following unaudited Pro Forma Financial Information may differ from the amounts
ultimately determined.
The following unaudited Pro Forma Financial Information (Insignia Merger)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions or results of
operations. In the opinion of the Partnership's management, all material
adjustments necessary to reflect the effects of these transactions have been
made.
P-4
<PAGE> 655
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS IFG AIMCO BEFORE IFG
AND PROBABLE IFG MERGER IFG REORGANIZATION
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) REORGANIZATION(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Real estate.............. $2,355,122 $202,332 $ 44,488 $ 23,880(G) $2,625,822 $ --
Property held for sale... 42,212 -- -- -- 42,212 --
Investments in
securities............. -- -- -- 443,513(G)
(443,513)(H) -- --
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 127,082 -- -- -- 127,082 59,195(I)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 246,847 -- 232,892 444,570(G) 924,309 --
Mortgage notes
receivable............. -- -- 20,916 -- 20,916
Cash and cash
equivalents............ 43,681 6,107 73,064 -- 122,852 (17,897)(J)
Restricted cash.......... 83,187 -- 2,691 -- 85,878 (1,352)(J)
Accounts receivable...... 11,545 -- 54,060 (32,234)(G) 33,371 (5,471)(J)
Deferred financing
costs.................. 21,835 -- 7,020 (7,020)(G) 21,835 --
Goodwill................. 120,503 -- 19,503 111,018(G) 251,024 --
Property management
contracts.............. -- -- 86,419 31,147(G) 117,566 (79,195)(I)
Other assets............. 69,935 -- 20,128 (4,533)(G) 85,530 (2,860)(J)
---------- -------- -------- --------- ---------- --------
Total Assets..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
Secured notes payable.... $ 774,676 $122,568 $ 29,002 $ -- $ 926,246 $ --
Secured tax-exempt bond
financing.............. 399,925 -- -- -- 399,925 --
Secured short-term
financing.............. 50,000 (50,000) 332,691 (300,000)(G) 32,691 --
Unsecured short-term
financing.............. 50,800 (50,800) -- 300,000(G) 300,000 --
Accounts payable, accrued
and other
liabilities............ 131,799 -- 33,241 50,000(G)
53,333(G)
4,935(G)
2,525(G) 275,833 (27,580)(J)
Deferred tax liability... -- -- 18,802 1,198(G) 20,000 (20,000)(I)
Security deposits and
prepaid rents.......... 13,171 -- 3,533 (3,533) 13,171 --
---------- -------- -------- --------- ---------- --------
1,420,371 21,768 417,269 108,458 1,967,866 (47,580)
Minority interest........ 42,086 37,345 108,485 (108,485)(G) 79,431 --
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. -- -- 144,282 5,218 149,500 --
Redeemable Partnership
Units.................. 232,405 45,176 -- -- 277,581 --
Partners' capital and
shareholders' equity
Common stock........... -- -- 320 (320)(G) -- --
Additional paid-in
capital.............. -- -- (86,959) 86,959(G) -- --
Distributions in excess
of earnings.......... -- -- (22,216) 22,216(G) -- --
General and Special
Limited Partner...... 1,039,525 4,150 -- 443,513(H)
9,269(G) 1,496,457 --
Preferred Units........ 387,562 100,000 -- -- 487,562 --
---------- -------- -------- --------- ---------- --------
1,427,087 104,150 (108,855) 561,637 1,984,019 --
---------- -------- -------- --------- ---------- --------
Total Liabilities
and Equity..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
<CAPTION>
PRO FORMA
----------
<S> <C>
Real estate.............. $2,625,822
Property held for sale... 42,212
Investments in
securities.............
--
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 186,277(K)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 924,309
Mortgage notes
receivable............. 20,916
Cash and cash
equivalents............ 104,955
Restricted cash.......... 84,526
Accounts receivable...... 27,900
Deferred financing
costs.................. 21,835
Goodwill................. 251,024
Property management
contracts.............. 38,371
Other assets............. 82,670
----------
Total Assets..... $4,410,817
==========
Secured notes payable.... $ 926,246
Secured tax-exempt bond
financing.............. 399,925
Secured short-term
financing.............. 32,691
Unsecured short-term
financing.............. 300,000
Accounts payable, accrued
and other
liabilities............
248,253
Deferred tax liability... --
Security deposits and
prepaid rents.......... 13,171
----------
1,920,286
Minority interest........ 79,431
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. 149,500
Redeemable Partnership
Units.................. 277,581
Partners' capital and
shareholders' equity
Common stock........... --
Additional paid-in
capital.............. --
Distributions in excess
of earnings.......... --
General and Special
Limited Partner......
1,496,457
Preferred Units........ 487,562
----------
1,984,019
----------
Total Liabilities
and Equity..... $4,410,817
==========
</TABLE>
P-5
<PAGE> 656
- ---------------
(A) Represents the unaudited historical consolidated financial position of the
Partnership as of September 30, 1998.
(B) Represents adjustments to reflect the purchase of ten properties for an
aggregate purchase price of $140.2 million; the Class J Preferred Stock
Offering; the Probable Purchases; and the Preferred Partnership Unit
Offering.
(C) Represents the unaudited historical consolidated financial position of IFG
as of September 30, 1998.
(D) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the issuance of 8,423,751 shares of AIMCO Common Stock, based
on consideration to holders of IFG common stock outstanding as of the date
of the IFG Merger; (ii) the issuance of 4,826,745 shares of AIMCO Class A
Common Stock to holders of IPT common stock (other than AIMCO); (iii) the
payment of a special dividend of $50,000; (iv) the assumption of $149,500
of the convertible debentures of IFG; (v) the allocation of the combined
purchase price of IFG and IPT based on the preliminary estimates of
relative fair market value of the assets and liabilities of IFG and IPT;
and (vi) the contribution by AIMCO of substantially all the assets and
liabilities of Insignia and IPT to the Partnership in exchange for OP
Units.
(E) Represents the effects of AIMCO's acquisition of IFG immediately after the
IFG Merger. These amounts do not give effect to the IFG Reorganization,
which includes the transfers of certain assets and liabilities of IFG to
the combined Unconsolidated Subsidiaries. The IFG Reorganization occurred
immediately after the IFG Merger so that AIMCO could maintain its
qualification as a REIT. This column is included as an intermediate step to
assist the reader in understanding the entire nature of the IFG Merger and
related transactions.
(F) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party property management operations.
The adjustments reflect the transfer of assets valued at the Partnership's
new basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(G) In connection with the IFG Merger and the IPT Merger, AIMCO became
obligated to issue a total of 13,250,496 shares of AIMCO Common Stock
The total purchase price of IFG and IPT is $1,128,009, as follows:
<TABLE>
<S> <C>
Issuance of 8,423,751 shares of AIMCO Common Stock in the
IFG Merger, at $34.658 per share.......................... $ 291,949
Issuance of 4,826,745 shares of AIMCO Common Stock in the
IPT Merger, at $31.50 per share........................... 151,564
Assumption of Convertible Debentures........................ 149,500
Assumption of liabilities as indicated in the Merger
Agreement................................................. 397,459
Transaction costs........................................... 53,333
Generation of deferred tax liability........................ 20,000
Special dividend............................................ 50,000
Purchase of IFG Common Stock prior to merger................ 4,935
Consideration for options................................... 9,269
----------
Total............................................. $1,128,009
==========
</TABLE>
P-6
<PAGE> 657
The purchase price was allocated to the various assets of IFG acquired in
the IFG Merger, as follows:
<TABLE>
<S> <C>
Purchase price.............................................. $1,128,009
Historical basis of IFG's assets acquired................... (561,181)
----------
Step-up to record the fair value of IFG's assets
acquired............................................... $ 566,828
==========
</TABLE>
This step-up was applied to IFG's assets as follows:
<TABLE>
<S> <C>
Real estate................................................. $ 23,880
Investment in real estate partnerships...................... 444,570
Decrease in accounts receivable............................. (32,234)
Decrease in deferred loan costs............................. (7,020)
Management contracts........................................ 31,147
Increase in goodwill........................................ 111,018
Reduction in value of other assets.......................... (4,533)
--------
Total............................................. $566,828
========
</TABLE>
The fair value of IFG's assets, primarily the real estate and management
contracts, was calculated based on estimated future cash flows of the
underlying assets.
As of September 30, 1998, IFG's stockholder's equity was $(108,855), which
is detailed as follows:
<TABLE>
<S> <C>
Common stock................................................ $ 320
Additional paid-in capital.................................. (86,959)
Distributions in excess of earnings......................... (22,216)
---------
Total............................................. $(108,855)
=========
</TABLE>
Upon completion of the IFG Merger, the entire amount of the stockholder's
equity was eliminated.
In addition, the minority interest in other partnerships of IFG of $108,485
will be eliminated upon the IPT Merger.
At the time of the IFG Merger, AIMCO obtained unsecured short-term
financing of $300 million. The proceeds were used to repay secured
short-term financing of IFG that AIMCO assumed.
(H) Represents the issuance of a total of 13,250,496 OP Units to AIMCO and the
concurrent issuance of 13,250,496 shares of AIMCO Common Stock to IFG and
IPT stockholders, in exchange for all the shares of IFG and IPT common
stock.
In accordance with the IFG Merger Agreement, AIMCO became obligated to
issue 8,423,751 shares of Class E Preferred Stock, approximately equal to
$292 million. Each share of Class E Preferred Stock will automatically
convert to one share of AIMCO Common Stock upon the payment of the special
dividend thereon. As such, for the purpose of preparing the pro forma
financial statements, AIMCO's management believes that the Class E
Preferred Stock is substantially the same as AIMCO Common Stock, and that
the fair value of the Class E Preferred Stock approximates the fair value
of the AIMCO Common Stock. Upon the payment of the special dividend on the
Class E Preferred Stock and the conversion of the Class E Preferred Stock
to AIMCO Common Stock, the former IFG stockholders will own approximately
15.0% of the AIMCO Common Stock and the IPT stockholders will own
approximately 7.3% of AIMCO Common Stock. The special dividend on the Class
E Preferred Stock is intended to represent a distribution in an amount at
least equal to the earnings and profits of IFG at the time of the IFG
Merger, to which AIMCO succeeds.
Concurrent with the issuance of Class E Preferred Stock, the Partnership
will issue comparable Class E Preferred Units to AIMCO. The Class E
Preferred Units will have terms substantially the same as the Class E
Preferred Stock.
(I) Represents the increase in the Partnership's investment in Unconsolidated
Subsidiaries to reflect the contribution or sale of property management
contracts, including the related deferred tax liability, in exchange for
preferred stock and a note payable from the Unconsolidated Subsidiaries.
These assets and
P-7
<PAGE> 658
liabilities are valued at the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(J) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries,
(K) Represents notes receivable from the Unconsolidated Subsidiaries of
$95,000, advances to the Unconsolidated Subsidiaries of $42,792, and equity
in the Unconsolidated Subsidiaries of $48,485. The combined pro forma
balance sheet of the Unconsolidated Subsidiaries as of September 30, 1998
is presented below, which reflects the effects of the IFG Merger, the IPT
Merger, and the IFG Reorganization as if such transactions had occurred as
of September 30, 1998.
P-8
<PAGE> 659
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
IFG
HISTORICAL REORGANIZATION(i) PRO FORMA
---------- ----------------- ---------
<S> <C> <C> <C>
ASSETS
Real estate............................................ $ 22,376 $ -- $ 22,376
Cash and cash equivalents.............................. 16,919 17,897(ii) 34,816
Restricted cash........................................ 5,507 1,352(ii) 6,859
Management contracts................................... 47,846 79,195(iii) 127,041
Accounts receivable.................................... 13,109 5,471(ii) 18,580
Deferred financing costs............................... 3,117 -- 3,117
Goodwill............................................... 43,544 -- 43,544
Other assets........................................... 51,498 2,860(ii) 54,358
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable.................................. $114,302 $ 45,000(iii) $159,302
Accounts payable, accrued and other liabilities........ 56,773 27,580(ii) 84,353
Security deposits and deferred income.................. 334 --(ii) 334
Deferred tax liability................................. -- 20,000(iii) 20,000
-------- -------- --------
171,409 92,580 263,989
Common stock........................................... 2,061 747(iv) 2,808
Preferred stock........................................ 34,290 14,195(iii) 48,485
Retained earnings...................................... (3,844) -- (3,844)
Notes receivable on common stock purchases............. -- (747)(iv) (747)
-------- -------- --------
32,507 14,195 46,702
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
</TABLE>
- ---------------
(i) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the transfer of assets valued at the Partnership's new
basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(ii) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries, valued at the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(iii)Represents the transfer or sale of management contracts, the establishment
of an intercompany note, and the establishment of the related estimated net
deferred Federal and state tax liabilities at a combined rate of 40% for
the estimated difference between the book and tax basis of the net assets
of the Unconsolidated Subsidiaries. The primary component of the deferred
tax liability is the difference between the new basis of the property
management contracts, as a result of the allocation of the purchase price
of IFG, and the historical tax basis.
(iv) Represents the issuance of common stock to the common stockholders of the
Unconsolidated Subsidiaries in exchange for notes receivable, in order for
the common stockholders to maintain their respective ownership interest in
the Unconsolidated Subsidiaries.
P-9
<PAGE> 660
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE NHP AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rental and other property
revenues........................ $193,006 $120,337(I)
11,012(J) $ 6,660 $ 93,329 $ -- $ 6,912
Property operating expenses....... (76,168) (59,466)(I)
(4,860)(J) (2,941) (36,088) -- (3,307)
Owned property management
expense......................... (6,620) (4,327)(I)
(602)(J) (282) -- -- --
Depreciation...................... (37,741) (26,645)(I)
(2,172)(J) (1,414) (18,979) (5,997)(O) (966)
-------- -------- ------- -------- ------- --------
Income from property operations... 72,477 33,277 2,023 38,262 (5,997) 2,639
-------- -------- ------- -------- ------- --------
Management fees and other
income.......................... 13,937 -- 7,813 -- -- 94,330
Management and other expenses..... (9,910) -- (5,394) -- -- (57,615)
Corporate overhead allocation..... (588) -- -- -- -- --
Amortization...................... (1,401) -- (5,800) -- -- (16,768)
-------- -------- ------- -------- ------- --------
Income from service company
business........................ 2,038 -- (3,381) -- -- 19,947
Minority interest in service
company business................ (10) -- -- -- -- --
-------- -------- ------- -------- ------- --------
AIMCO's share of income from
service company business........ 2,028 -- (3,381) -- -- 19,947
-------- -------- ------- -------- ------- --------
General and administrative
expenses........................ (5,396) -- (1,025) (7,392) 7,392(P) (21,199)
Interest expense.................. (51,385) (3,451)(K)
(2,497)(L) (5,462) (26,987) (221)(Q) (9,035)
Interest income................... 8,676 -- 1,900 -- -- 10,967
Minority interest................. 1,008 458(M) 16 (851) 705(R) (12,871)
Equity in losses of unconsolidated
partnerships.................... (1,798) (122)(N) (8,542) 405 -- 12,515
Equity in earnings of
unconsolidated subsidiaries..... 4,636 -- 5,790 -- -- --
-------- -------- ------- -------- ------- --------
Income (loss) from operations..... 30,246 27,665 (8,681) 3,437 1,879 2,963
Income tax provision.............. -- -- -- -- -- 1,701
Gain on dispositions of
property........................ 2,720 (2,720) -- -- -- 80
-------- -------- ------- -------- ------- --------
Income (loss) before extraordinary
item............................ 32,966 24,945 (8,681) 3,437 1,879 4,744
Extraordinary item -- early
extinguishment of debt.......... (269) 269 -- -- -- --
-------- -------- ------- -------- ------- --------
Net income........................ 32,697 25,214 (8,681) 3,437 1,879 4,744
Income attributable to preferred
unitholders..................... 2,315 39,859 -- -- -- --
-------- -------- ------- -------- ------- --------
Income attributable to common
unitholders..................... $ 30,382 $(14,645) $(8,681) $ 3,437 $ 1,879 $ 4,744
======== ======== ======= ======== ======= ========
Basic earnings per OP unit........ $ 1.09
========
Diluted earnings per OP unit...... $ 1.08
========
Weighted average OP units
outstanding..................... 27,732
========
Weighted average OP units and
equivalents outstanding......... 28,113
========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(G) ADJUSTMENTS(H) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property
revenues........................
$ -- $ -- $ 431,256
Property operating expenses.......
-- -- (182,830)
Owned property management
expense.........................
-- -- (11,831)
Depreciation......................
(2,350)(S) -- (96,264)
-------- -------- ---------
Income from property operations... (2,350) -- 140,331
-------- -------- ---------
Management fees and other
income.......................... -- (74,404)(X) 41,676
Management and other expenses..... -- 49,236(X) (23,683)
Corporate overhead allocation..... -- -- (588)
Amortization...................... (32,699)(T) 30,188(Y) (26,480)
-------- -------- ---------
Income from service company
business........................ (32,699) 5,020 (9,075)
Minority interest in service
company business................ -- -- (10)
-------- -------- ---------
AIMCO's share of income from
service company business........ (32,699) 5,020 (9,085)
-------- -------- ---------
General and administrative
expenses........................ -- 6,249(X) (21,371)
Interest expense..................
(14,750) -- (113,788)
Interest income................... -- 191(Z) 21,734(BB)
Minority interest................. 1,552(U) -- (9,983)
Equity in losses of unconsolidated
partnerships.................... (29,995)(V) -- (27,537)
Equity in earnings of
unconsolidated subsidiaries..... -- (4,578)(AA) 5,848(DD)
-------- -------- ---------
Income (loss) from operations..... (78,242) 6,882 (13,851)
Income tax provision.............. (1,701)(W) -- --
Gain on dispositions of
property........................ (80) -- --
-------- -------- ---------
Income (loss) before extraordinary
item............................ (80,023) 6,882 (13,851)
Extraordinary item -- early
extinguishment of debt.......... -- -- --
-------- -------- ---------
Net income........................ (80,023) 6,882 (13,851)
Income attributable to preferred
unitholders..................... -- -- 42,174(CC)
-------- -------- ---------
Income attributable to common
unitholders..................... $(80,023) $ 6,882 $ (56,025)(BB)
======== ======== =========
Basic earnings per OP unit........ $ (0.83)(BB)
=========
Diluted earnings per OP unit...... $ (0.83)(BB)
=========
Weighted average OP units
outstanding..................... 67,522
=========
Weighted average OP units and
equivalents outstanding......... 68,366
=========
</TABLE>
P-10
<PAGE> 661
- ---------------
(A) Represents the Partnership's audited consolidated results of operations
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1997: (i) the 1997 Acquisitions; (ii) the 1997 Stock
Offerings; (iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings;
(v) the 1998 Acquisitions; (vi) the Probable Purchases; (vii) the 1998
Dispositions; and (v) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(IV) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues................. $ 6,660(v) $ 16,842 $ -- $(16,842)(xvii) $ 6,660
Property operating
expenses................. (2,941)(v) (8,411) -- 8,411 (xvii) (2,941)
Owned property management
expense.................. (282)(v) (862) -- 862 (xvii) (282)
Depreciation............... (1,414)(vi) (2,527) (693)(xi) 3,220 (xvii) (1,414)
------- -------- ------- -------- -------
Income from property
operations............... 2,023 5,042 (693) (4,349) 2,023
------- -------- ------- -------- -------
Management fees and other
income................... 1,405(vii) 72,176 -- (65,768)(xviii) 7,813
Management and other
expenses................. (2,263)(viii) (35,267) -- 32,136 (xviii (5,394)
Amortization............... -- (9,111) (4,432)(xii) 7,743 (xix) (5,800)
------- -------- ------- -------- -------
Income from service company
business................. (858) 27,798 (4,432) (25,889) (3,381)
------- -------- ------- -------- -------
General and administrative
expenses................. -- (16,266) 8,668 (xiii) 6,573 (xviii) (1,025)
Interest expense........... (5,082)(ix) (10,685) -- 10,305(xx) (5,462)
Interest income............ 540(v) 1,963 -- (603)(xxi) 1,900
Minority interest.......... 16(v) -- -- -- 16
Equity in losses of
unconsolidated
partnerships............. (3,905)(x) -- (4,631)(xiv) (6) (8,542)
Equity in earnings of
unconsolidated
subsidiaries............. -- -- (4,636)(xv) 10,426 (xxii) 5,790
------- -------- ------- -------- -------
Income (loss) from
operations............... (7,266) 7,852 (5,724) (3,543) (8,681)
Income tax provision....... -- (3,502) 3,502 (xvi) -- --
------- -------- ------- -------- -------
Net income (loss).......... $(7,266) $ 4,350 $(2,222) $ (3,543) $(8,681)
======= ======== ======= ======== =======
</TABLE>
- ---------------
(i) Represents the adjustment to record activity from January 1, 1997 to
the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. The historical
financial statements of the NHP Real Estate Companies consolidate
certain real estate partnerships in which they have an interest that
will be presented on the equity method by the Partnership as a
result of the NHP Real Estate Reorganization. In addition,
represents adjustments to record additional depreciation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest
expense incurred in connection with borrowings incurred by the
Partnership to consummate the NHP Real Estate Acquisition.
(ii)Represents the unaudited consolidated results of operations of NHP
for the period from January 1, 1997 through December 8, 1997 (date
of the NHP Merger).
P-11
<PAGE> 662
(iii)
Represents the following adjustments occurring as a result of the
NHP Merger: (i) the reduction in personnel costs, primarily
severance costs, pursuant to a restructuring plan; (ii) the
incremental depreciation of the purchase price adjustment related to
real estate; (iii) the incremental amortization of the purchase
price adjustment related to the management contracts, furniture,
fixtures and equipment, and goodwill; (iv) the reversal of equity in
earnings of NHP during the pre-merger period when the Partnership
held a 47.62% interest in NHP; and (v) the amortization of the
increased basis in investments in real estate partnerships based on
the purchase price adjustment related to real estate and an
estimated average life of 20 years.
(iv)Represents adjustments related to the NHP Reorganization, whereby
the Partnership contributed or sold to the Unconsolidated
Subsidiaries and the Unconsolidated Partnership: (i) certain assets
and liabilities of NHP, primarily related to the management
operations and other businesses owned by NHP and (ii) 12 real estate
properties containing 2,905 apartment units. The adjustments
represent (i) the related revenues and expenses primarily related to
the management operations and other businesses owned by NHP and (ii)
the historical results of operations of such real estate
partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis
resulting from the allocation of the combined purchase price of NHP
and the NHP Real Estate Companies.
(v) Represents adjustments to reflect the acquisition of the NHP Real
Estate Companies and the corresponding historical results of
operations as if they had occurred on January 1, 1997.
(vi)Represents incremental depreciation related to the consolidated real
estate assets purchased from the NHP Real Estate Companies.
Buildings and improvements are depreciated on the straight-line
method over a period of 30 years, and furniture and fixtures are
depreciated on the straight-line method over a period of 5 years.
(vii)
Represents the adjustment to record the revenues from ancillary
businesses purchased from the NHP Real Estate Companies as if the
acquisition had occurred on January 1, 1997.
(viii)
Represents $4,878 related to the adjustment to record the expenses
from ancillary businesses purchased from the NHP Real Estate
Companies as if the acquisition had occurred on January 1, 1997,
less $2,615 related to a reduction in personnel costs pursuant to a
restructuring plan, approved by the Company's senior management,
assuming that the acquisition of the NHP Real Estate Companies had
occurred on January 1, 1997 and that the restructuring plan was
completed on January 1, 1997. The restructuring plan specifically
identifies all significant actions to be taken to complete the
restructuring plan, including the reduction of personnel, job
functions, location and the date of completion.
(ix)Represents adjustments in the amount of $3,391 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as the increase in interest expense in the amount
of $1,691 related to borrowings on the Partnership's credit
facilities of $55,807 to finance the NHP Real Estate Acquisition.
(x) Represents adjustments in the amount of $2,432 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as amortization of $1,473 related to the increased
basis in investment in real estate partnerships, as a result of the
allocation of the purchase price of the NHP Real Estate Companies,
based on an estimated average life of 20 years.
(xi)Represents incremental depreciation related to the real estate
assets purchased from NHP. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years,
and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(xii)
Represents incremental depreciation and amortization of the tangible
and intangible assets related to the property management and other
business operated by the Unconsolidated
P-12
<PAGE> 663
Subsidiaries, based on the Partnership's new basis as adjusted by
the allocation of the combined purchase price of NHP including
amortization of management contracts of $3,782, depreciation of
furniture, fixtures and equipment of $2,018 and amortization of
goodwill of $7,743, less NHP's historical depreciation and
amortization of $9,111. Management contracts are amortized using the
straight-line method over the weighted average life of the contracts
estimated to be approximately 15 years. Furniture, fixtures and
equipment are depreciated using the straight-line method over the
estimated life of 3 years. Goodwill is amortized using the
straight-line method over 20 years.
(xiii)
Represents a reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan, approved by the Company's
senior management, specifically identifying all significant actions
to be taken to complete the restructuring plan, assuming that the
NHP Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997.
(xiv)
Represents adjustment for amortization of the increased basis in
investments in real estate partnerships, as a result of the
allocation of the combined purchase price of NHP and the NHP Real
Estate Companies, based on an estimated average life of 20 years.
(xv)Represents the reversal of equity in earnings in NHP during the
pre-merger period when the Partnership held a 47.62% interest in
NHP, as a result of the Partnership's acquisition of 100% of the NHP
Common Stock.
(xvi)
Represents the reversal of NHP's income tax provision due to the
restructuring of the management business to the Unconsolidated
Subsidiaries.
(xvii)
Represents the contribution of NHP's 12 real estate properties
containing 2,905 apartment units to the Unconsolidated Partnership
pursuant to the NHP Reorganization.
(xviii)
Represents the historical income and expenses associated with
certain assets and liabilities of NHP that were contributed or sold
to the Unconsolidated Subsidiaries, primarily related to the
management operations and other businesses owned by NHP.
(xix)
Represents the amortization and depreciation of certain management
contracts and other assets of NHP, based on the Partnership's new
basis resulting from the allocation of the purchase price of NHP,
that will be contributed or sold to the Unconsolidated Subsidiaries,
primarily related to the management operations and other businesses
owned by NHP.
(xx)Represents interest expense of $6,020 related to the contribution of
NHP's 12 real estate properties containing 2,905 apartment units to
the Unconsolidated Partnership and interest expense of $4,285
related to the certain assets and liabilities that will be
contributed or sold to the Unconsolidated Subsidiaries pursuant to
the NHP Reorganization.
(xxi)
Represents the interest income of $5,000 earned on notes payable of
$50,000 to the Partnership issued as consideration for certain
assets and liabilities sold to the Unconsolidated Subsidiaries by
the Partnership, net of the elimination of the Partnership's share
of the related interest expense of $4,750 reflected in the equity in
earnings of the Unconsolidated Subsidiaries operating results,
offset by $853 in interest income primarily related to the
management operations and other businesses owned by NHP contributed
or sold to the Unconsolidated Subsidiaries pursuant to the NHP
Reorganization.
(xxii)
Represents the Partnership's equity in earnings of the
Unconsolidated Subsidiaries.
(D) Represents the audited historical statement of operations of Ambassador
for the year ended December 31, 1997. Certain reclassifications have been
made to Ambassador's historical statement of operations to conform to the
Partnership's Statement of Operations presentation. The Ambassador
historical statement of operations excludes extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of
P-13
<PAGE> 664
interest expense resulting from the net reduction of debt; and (iv) the
elimination of the minority interest associated with Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger, and the spin-off of Holdings as if these transactions had
occurred on January 1, 1997. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
IFG AMIT HOLDINGS IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property
revenues....................... $ 6,646 $ 266 $ -- $ 6,912
Property operating expenses...... (3,251) (56) -- (3,307)
Depreciation..................... (966) -- -- (966)
--------- ------- --------- --------
Income from property
operations..................... 2,429 210 -- 2,639
--------- ------- --------- --------
Management fees and other
income......................... 389,626 -- (295,296) 94,330
Management and other expenses.... (315,653) -- 258,038 (57,615)
Amortization..................... (31,709) (303) 15,244 (16,768)
--------- ------- --------- --------
Income from service company
business....................... 42,264 (303) (22,014) 19,947
--------- ------- --------- --------
General and administrative
expenses....................... (20,435) (1,351) 587 (21,199)
Interest expense................. (9,353) -- 318 (9,035)
Interest income.................. 4,571 6,853 (457) 10,967
Minority interest................ (12,448) (382) (41) (12,871)
Equity in income (losses) of
unconsolidated partnership..... 10,027 2,639 (151) 12,515
--------- ------- --------- --------
Income (loss) from operations.... 17,055 7,666 (21,758) 2,963
Income tax provision............. (6,822) (180) 8,703 1,701
Gain on sale of property......... -- 80 -- 80
--------- ------- --------- --------
Net income (loss)................ 10,233 7,566 (13,055) 4,744
========= ======= ========= ========
</TABLE>
- ---------------
(i) Represents the audited consolidated results of operations of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report
on Form 10-K. Certain reclassifications have been made to IFG's
historical statement of operations to conform to the Partnership's
statement of operations presentation.
(ii)Represents the historical statement of operations of AMIT, as well
as pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger: (i) the incremental depreciation of the
purchase price adjustment related to consolidated real estate and
investments in real estate partnerships; (ii) the amortization of
goodwill and property management contracts resulting from the IFG Merger;
(iii) the increase in interest expense resulting from the net increase in
debt; and (iv) the elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
P-14
<PAGE> 665
(I) Represents adjustments to reflect the 1997 Property Acquisitions and the
1998 Acquisitions, less the 1997 Dispositions and the 1998 Dispositions
as if they had occurred on January 1, 1997. These pro forma operating
results are based on historical results of the properties, except for
depreciation, which is based on the Partnership's investment in the
properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1997 PROPERTY 1997 1998 1998
ACQUISITIONS DISPOSITIONS ACQUISITIONS DISPOSITIONS TOTAL
------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Rental and other
property
revenues........... $ 88,589 $(4,081) $ 39,132 $(3,303) $120,337
Property operating
expense............ (44,109) 1,944 (18,655) 1,354 (59,466)
Owned property
management
expense............ (3,233) 133 (1,349) 122 (4,327)
Depreciation......... (16,839) 452 (10,946) 688 (26,645)
</TABLE>
(J) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1997. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(K) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1997
Property Acquisitions..................................... $(29,490)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1997 Dispositions and
the 1997 Stock Offerings.................................. 19,568
Repayments on the Partnership's credit facilities with
proceeds from a dividend received from one of the
Unconsolidated Subsidiaries............................... 1,889
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1998
Acquisitions.............................................. (15,994)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1998 Dispositions and
the 1998 Stock Offerings.................................. 20,113
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred Partnership
Unit Offering............................................. 463
--------
$ (3,451)
========
</TABLE>
(L) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the Probable Purchases.
(M) Represents (i) loss of $181 related to limited partners in consolidated
partnerships acquired in connection with the 1997 Property Acquisitions
and the 1998 Property Acquisitions and (ii) income of $502 allocable to
the Partnership Preferred Units.
(N) Represents the reduction in the Partnership's earnings in unconsolidated
partnerships as a result of the consolidation of additional partnerships
resulting from additional ownership acquired through tender offers.
(O) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
P-15
<PAGE> 666
(P) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 724
Reduction in salaries and benefits.......................... 4,197
Merger related costs........................................ 524
Other....................................................... 1,947
------
$7,392
======
</TABLE>
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(Q) Represents the decrease in interest expense of $3,612 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$3,833 related to borrowings under the Partnership's credit facilities.
(R) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(S) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(T) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $38,885, amortization of goodwill of $6,526, and
depreciation of furniture, fixtures, and equipment of $3,753, less IFG's
historical depreciation and amortization of $16,465. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(U) Represents elimination of minority interest of IPT resulting from the IPT
merger.
(V) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(W) Represents the reversal of IFG's income tax provision.
(X) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(Y) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Z) Represents interest income of $3,825 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries by the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $3,634 reflected on the equity in earnings of the
Unconsolidated Subsidiaries.
(AA) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-16
<PAGE> 667
(BB) The following table presents the net impact to pro forma net loss
applicable to holders of OP Units and net loss per OP Units assuming the
interest rate per annum increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest expense................................ $ 938
========
Net income.................................................. $(14,789)
========
Net loss attributable to OP unitholders..................... $(56,963)
========
Basic loss per OP unit...................................... $ (0.84)
========
Diluted loss per OP unit.................................... $ (0.84)
========
</TABLE>
(CC) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred
Units, the Class G Preferred Units, the Class H Preferred Units and the
Class J Preferred Units as if these Preferred Units had been issued as of
January 1, 1997.
(DD) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(2,536), plus the elimination of intercompany interest
expense of $8,384. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the year ended December 31, 1997 is
presented below, which represents the effects of the Ambassador Merger,
the NHP Merger, the NHP Reorganization, the IFG Merger, and the IFG
Reorganization as if these transactions had occurred as of January 1,
1997.
P-17
<PAGE> 668
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZATION IFG
HISTORICAL(i) ADJUSTMENTS(ii) REORGANIZATION(iii) PRO FORMA
------------- --------------- ------------------- ---------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 6,194 $ 6,371(iv) $ -- $ 12,565
Property operating expenses............. (3,355) (3,531)(iv) -- (6,886)
Owned property management expense....... (147) (478)(iv) -- (625)
Depreciation expense.................... (1,038) (767)(iv) -- (1,805)
-------- -------- -------- --------
Income from property operations......... 1,654 1,595 -- 3,249
-------- -------- -------- --------
Management fees and other income........ 23,776 41,992(v) 74,404(x) 140,172
Management and other expenses........... (11,733) (20,403)(v) (49,236)(x) (81,372)
Amortization............................ (3,726) (4,017)(v) (30,188)(xi) (37,931)
-------- -------- -------- --------
Income from service company............. 8,317 17,572 (5,020) 20,869
General and administrative expense...... -- (6,573)(v) (6,249)(x) (12,822)
Interest expense........................ (6,058) (5,849)(vi) (3,825)(xii) (15,732)
Interest income......................... 1,001 (148)(v) -- 853
Minority interest....................... (2,819) 2,198(viii) -- (621)
Equity in losses of unconsolidated
partnerships.......................... (1,028) 1,028(iv) -- --
Equity in earnings of Unconsolidated
Subsidiaries.......................... 2,943 (2,943)(vii) -- --
-------- -------- -------- --------
Income (loss) from operations........... 4,010 6,880 (15,094) (4,204)
Income tax provision.................... (1,902) (3,013)(ix) 6,450(xiii) 1,535
-------- -------- -------- --------
Net income (loss)....................... $ 2,108 $ 3,867 $ (8,644) $ (2,669)
======== ======== ======== ========
Income attributable to preferred
unitholders........................... $ 2,198 $ 3,478 $ (8,212) $ (2,536)
======== ======== ======== ========
Income (loss) attributable to common
unitholders........................... $ (90) $ 389 $ (432) $ (133)
======== ======== ======== ========
</TABLE>
- ---------------
(i) Represents the historical results of operations of the Unconsolidated
Subsidiaries for the year ended December 31, 1997.
(ii) Represents adjustments related to the NHP Reorganization, which includes
the sale or contribution of 14 properties containing 2,725 apartment units
from the unconsolidated partnerships to the Unconsolidated Subsidiaries,
as well as the sale or contribution of 12 properties containing 2,905
apartment units from the Unconsolidated Subsidiaries to the Unconsolidated
Partnership.
(iii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iv) Represents adjustments for the historical results of operations of the 14
real estate properties contributed or sold to the Unconsolidated
Subsidiaries, offset by the historical results of operations of the 12
real estate properties contributed or sold to the Unconsolidated
Partnership, with additional depreciation recorded related to the
Partnership's new basis resulting from the allocation of purchase price of
NHP and the NHP Real Estate Companies.
P-18
<PAGE> 669
(v) Represents adjustments to reflect income and expenses associated with
certain assets and liabilities of NHP contributed or sold to the
Unconsolidated Subsidiaries.
(vi) Represents adjustments of $6,058 to reverse the historical interest
expense of the Unconsolidated Subsidiaries, which resulted from its
original purchase of NHP Common Stock, offset by $2,622 related to the
contribution or sale of the 14 real estate properties, $4,285 related to
assets and liabilities transferred from the Partnership to the
Unconsolidated Subsidiaries and $5,000 related to a note payable to the
Partnership.
(vii) Represents the reversal of the historical equity in earnings of NHP for
the period in which NHP was not consolidated by the Unconsolidated
Subsidiaries.
(viii)Represents the minority interest in the operations of the 14 real estate
properties.
(ix) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill which is not deductible
for tax purposes.
(x) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(xi) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(xii) Represents adjustment for interest expense related to a note payable to
the Partnership.
(xiii)Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-19
<PAGE> 670
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR
AND PROBABLE AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E)
------------- ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Rental and other property revenues............. $ 265,700 $ 19,603(H) $ $ $
8,398(I) 35,480 -- 8,126
Property operating expenses.................... (101,600) (9,009)(H)
(3,745)(I) (14,912) -- (2,585)
Owned property management expense.............. (7,746) (728)(H)
(459)(I) -- -- --
Depreciation................................... (59,792) (4,886)(H)
(2,624)(I) (7,270) (1,420)(M) (904)
--------- -------- -------- ------- --------
Income from property operations................ 96,562 6,550 13,298 (1,420) 4,637
--------- -------- -------- ------- --------
Management fees and other income............... 13,968 -- -- -- 71,155
Management and other expenses.................. (8,101) -- -- -- (41,477)
Corporate overhead allocation.................. (196) -- -- -- --
Amortization................................... (3) -- -- -- (13,986)
--------- -------- -------- ------- --------
Income from service company business........... 5,668 -- -- -- 15,692
--------- -------- -------- ------- --------
General and administrative expenses............ (7,444) -- (5,278) 5,278(N) (61,386)
Interest expense............................... (56,756) 1,975(J)
(2,469)(K) (10,079) 145(O) (24,871)
Interest income................................ 18,244 (1) -- -- 22,501
Minority interest.............................. (1,052) 160(L) (252) 252(P) (14,159)
Equity in losses of unconsolidated
partnerships................................. (5,078) -- (71) -- 13,492
Equity in earnings of unconsolidated
subsidiaries................................. 8,413 -- -- -- --
Amortization of goodwill....................... (5,071) -- -- -- --
--------- -------- -------- ------- --------
Income (loss) from operations.................. 53,486 6,215 (2,382) 4,255 (44,094)
Income tax provision........................... -- -- -- -- 1,180
Gain on dispositions of property............... 2,783 (2,783) -- -- 6,576
--------- -------- -------- ------- --------
Net income..................................... 56,269 3,432 (2,382) 4,255 (36,338)
Income attributable to preferred unitholders... 16,320 16,094 -- -- --
--------- -------- -------- ------- --------
Income (loss) attributable to common
unitholders.................................. $ 39,949 $(12,662) $ (2,382) $ 4,255 $(36,338)
========= ======== ======== ======= ========
Basic earnings (loss) per OP Unit.............. $ 0.80
=========
Diluted earnings (loss) per OP Unit............ $ 0.79
=========
Weighted average OP Units outstanding.......... 50,420
=========
Weighted average OP Unit and equivalents
outstanding.................................. 50,544
=========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(F) ADJUSTMENTS(G) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property revenues............. $ $ $
-- -- 337,307
Property operating expenses....................
-- -- (131,851)
Owned property management expense..............
-- -- (8,933)
Depreciation...................................
(1,583)(Q) -- (78,479)
-------- -------- ---------
Income from property operations................ (1,583) -- 118,044
-------- -------- ---------
Management fees and other income............... -- (56,211)(W) 28,912
Management and other expenses.................. -- 35,192(W) (14,386)
Corporate overhead allocation.................. -- -- (196)
Amortization................................... (23,895)(R) 22,641(X) (15,243)
-------- -------- ---------
Income from service company business........... (23,895) 1,622 (913)
-------- -------- ---------
General and administrative expenses............ 45,823(S) 14,375(W) (8,632)
Interest expense...............................
7,045 -- (85,010)(AA)
Interest income................................ -- 143(Y) 40,887
Minority interest.............................. 6,622(T) -- (8,429)
Equity in losses of unconsolidated
partnerships................................. (18,577)(U) -- (10,234)
Equity in earnings of unconsolidated
subsidiaries................................. -- (7,562)(Z) 851(CC)
Amortization of goodwill....................... -- -- (5,071)
-------- -------- ---------
Income (loss) from operations.................. 15,435 8,578 41,493
Income tax provision........................... (1,180)(V) -- --
Gain on dispositions of property............... (6,576) -- --
-------- -------- ---------
Net income..................................... 7,679 8,578 41,493
Income attributable to preferred unitholders... -- -- 32,414(BB)
-------- -------- ---------
Income (loss) attributable to common
unitholders.................................. $ 7,679 $ 8,578 $ 9,079(AA)
======== ======== =========
Basic earnings (loss) per OP Unit.............. $ 0.13(AA)
=========
Diluted earnings (loss) per OP Unit............ $ 0.13(AA)
=========
Weighted average OP Units outstanding.......... 68,554
=========
Weighted average OP Unit and equivalents
outstanding.................................. 69,218
=========
</TABLE>
P-20
<PAGE> 671
- ---------------
(A) Represents the Partnership's unaudited consolidated results of operations
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1998: (i) the 1998 Stock Offerings; (ii) the 1998
Acquisitions; (iii) the Probable Purchases; (iv) the 1998 Dispositions;
and (v) the Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of operations of Ambassador
for the four months ended April 30, 1998. Certain reclassifications have
been made to Ambassador's historical Statement of Operations to conform
to the Partnership's Statement of Operations presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger and the spin-off of the common stock of Holdings as if these
transactions had occurred on January 1, 1998. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
HOLDINGS
IFG AMIT SPIN- IFG
HISTORICAL(i) MERGER(ii) OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 7,566 $ 560 $ -- $ 8,126
Property operating expenses............. (2,585) -- -- (2,585)
Depreciation............................ (904) -- -- (904)
--------- ------ --------- --------
Income from property operations......... 4,077 560 -- 4,637
--------- ------ --------- --------
Management fees and other income........ 311,475 -- (240,320) 71,155
Management and other expenses........... (252,295) -- 210,818 (41,477)
Amortization............................ (26,781) (48) 12,843 (13,986)
--------- ------ --------- --------
Income from service company business.... 32,399 (48) (16,659) 15,692
--------- ------ --------- --------
General and administrative expenses..... (66,272) (675) 5,561 (61,386)
Interest expense........................ (24,164) -- (707) (24,871)
Interest income......................... 18,817 4,193 (509) 22,501
Minority interest....................... (14,159) -- -- (14,159)
Equity in losses of unconsolidated
partnerships.......................... 12,169 1,323 13,492
--------- ------ --------- --------
Income (loss) from operations........... (37,133) 4,030 (10,991) (44,094)
Income tax provision.................... (4,772) -- 5,952 1,180
Gain on disposition of property......... 5,888 688 -- 6,576
--------- ------ --------- --------
Item income (loss)...................... $ (36,017) $4,718 $ (5,039) $(36,338)
========= ====== ========= ========
</TABLE>
----------------------
(i)
Represents the unaudited consolidated results of operations of IFG for
the nine months ended September 30, 1998.
Certain reclassifications have been made to IFG's historical statement
of operations to conform to the Partnership's statement of operations
presentation.
(ii)
Represents the historical statement of operations of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock for
each three shares of IFG common stock to holders of IFG common stock.
(F) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the incremental depreciation of the purchase price adjustment
related to consolidated real estate and investments in real estate
partnerships; (ii) the amortization of goodwill and property management
contracts
P-21
<PAGE> 672
resulting from the IFG Merger; (iii) the increase in interest expense
resulting from the net increase in debt; and (iv) the elimination of the
income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of
IFG, primarily management contracts and related working capital assets
and liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(H) Represents adjustments to reflect the 1998 Acquisitions, less the 1998
Dispositions as if they had occurred on January 1, 1998. These pro forma
operating results are based on historical results of the properties,
except for depreciation, which is based on the Partnership's investment
in the properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1998 1998
ACQUISITIONS DISPOSITIONS TOTAL
------------ ------------ -------
<S> <C> <C> <C>
Rental and other property revenues......... $20,554 $(951) $19,603
Property operating expense................. (9,385) 376 (9,009)
Owned property management expense.......... (765) 37 (728)
Depreciation............................... (4,979) 93 (4,886)
</TABLE>
(I) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1998. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(J) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and
other loans and mortgages assumed in connection with
the 1998 Acquisitions.................................. $(8,698)
Repayments on the Partnership's credit facilities and
other indebtedness with proceeds from the 1998
Dispositions and the 1998 Stock
Offerings.............................................. 10,326
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred
Partnership Unit Offering.............................. 347
-------
$ 1,975
=======
</TABLE>
(K) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the probable purchases.
(L) Represents (i) loss of $537 related to limited partners in consolidated
partnerships acquired in connection with the 1998 Acquisitions and (ii)
income of $377 allocable to the Partnership Preferred Units.
(M) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(N) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses.................... $ 355
Reduction in salaries and benefits........................ 2,482
Merger related costs...................................... 1,212
Other..................................................... 1,229
------
$5,278
======
</TABLE>
P-22
<PAGE> 673
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1998 and that the
restructuring plan was completed on January 1, 1998. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(O) Represents the decrease in interest expense of $1,480 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$1,335 related to borrowings under the Partnership's line of credit.
(P) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(Q) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(R) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $30,096, amortization of goodwill of $4,895, and
depreciation of furniture, fixtures, and equipment of $2,842, less IFG's
historical depreciation and amortization of $13,938. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(S) Represents the elimination of merger related expenses recorded by IFG
during the nine months ended September 30, 1998. In connection with the
IFG Merger, certain IFG executives will receive one-time lump-sum
payments in connection with the termination of their employment and
option agreements. The total of these lump sum payments is estimated to
be approximately $50,000.
(T) Represents elimination of minority interest in IPT resulting from the IPT
merger.
(U) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(V) Represents the reversal of IFG's income tax provision.
(W) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(X) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Y) Represents interest income of $2,861 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries of the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $2,718 reflected in the equity in earnings of the
Unconsolidated Subsidiaries.
(Z) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-23
<PAGE> 674
(AA) The following table presents the net impact to pro forma net income
applicable to holders of shares of AIMCO Common Stock and net income per
share of AIMCO Common Stock assuming the interest rate per annum
increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest........................................ $ 702
=======
Net income.................................................. $40,791
=======
Net income attributable to OP Unitholders................... $ 8,377
=======
Basic loss per OP Unit...................................... $ 0.12
=======
Diluted loss per OP Unit.................................... $ 0.12
=======
</TABLE>
(BB) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred Units
the Class G Preferred Units, the Class H Preferred Units and the Class J
Preferred Units as if these stock offerings had occurred as of January 1,
1997.
(CC) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(1,867) plus the elimination of intercompany interest of
$2,718. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the nine months ended September 30, 1998
is presented below, which represents the effects of the Ambassador
Merger, the IFG Merger and the IFG Reorganization as if these
transactions had occurred as of January 1, 1997.
P-24
<PAGE> 675
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
IFG
HISTORICAL(i) REORGANIZATION(ii) PRO FORMA
------------- ------------------ ---------
<S> <C> <C> <C>
Rental and other property revenues................... $ 9,910 $ -- $ 9,910
Property operating expense........................... (5,139) -- (5,139)
Owned property management expense.................... (345) -- (345)
Depreciation expense................................. (1,026) -- (1,026)
-------- -------- --------
Income from property operations...................... 3,400 -- 3,400
-------- -------- --------
Management fees and other income..................... 57,665 56,211(iii) 113,876
Management and other expenses........................ (36,221) (35,192)(iii) (71,413)
Amortization......................................... (2,111) (22,641)(iv) (24,752)
-------- -------- --------
Income from service company.......................... 19,333 (1,622) 17,711
General and administrative expense................... -- (14,375)(iii) (14,375)
Interest expense..................................... (6,931) (2,861)(v) (9,792)
Interest income...................................... 617 -- 617
Minority interest.................................... (526) -- (526)
-------- -------- --------
Income (loss) from operations........................ 15,893 (18,858) (2,965)
Income tax provision................................. (7,037) 8,037(vi) 1,000
-------- -------- --------
Net income (loss).................................... $ 8,856 $(10,821) $ (1,965)
======== ======== ========
Income (loss) attributable to preferred
stockholders....................................... $ 8,413 $(10,280) $ (1,867)
======== ======== ========
Income (loss) attributable to common stockholders.... $ 443 $ (541) $ (98)
======== ======== ========
</TABLE>
- ---------------
(i) Represents the Unconsolidated Subsidiaries historical consolidated results
of operations.
(ii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iii)Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG.
(iv) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG, based on the Partnership's new basis resulting from the allocation
of the purchase price of IFG.
(v) Represents adjustment for interest expense related to a note payable to the
Partnership.
(vi) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-25
<PAGE> 676
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR IFG
AND PROBABLE NHP AMBASSADOR PURCHASE PRICE AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $ 32,697 $ 25,214 $ (8,681) $ 3,437 $ 1,879 $ 4,744
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 43,520 28,817 7,354 20,372 5,997 17,248
Gain on investments............ -- -- (12) -- -- --
(Gain) loss on disposition of
properties.................... (2,720) 2,720 (3,882) -- -- (80)
Minority interests............. (1,008) (458) (16) 851 (705) 12,871
Equity in earnings of
unconsolidated partnerships... 1,798 122 8,542 (405) -- (12,515)
Equity in earnings of
unconsolidated subsidiaries... (4,636) -- (5,790) -- -- --
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 269 (269) -- -- -- (5,366)
Changes in operating assets and
operating liabilities......... 3,112 -- 5,314 (3,523) -- (4,384)
--------- --------- --------- --------- -------- --------
Total adjustments........... 40,335 30,932 11,510 17,295 5,292 7,774
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) operating activities... 73,032 56,146 2,829 20,732 7,171 12,518
Net cash used in
discontinued operations.... -- -- (7,999) -- -- --
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) continuing
operations................. 73,032 56,146 (5,170) 20,732 7,171 12,518
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... 21,792 19,627(I) -- -- -- --
Purchase of real estate.......... (376,315) (220,995)(J) (4,114) (24,179) -- --
Additions to real estate,
investments and property held
for sale....................... (26,966) (5,217)(K) (522) (19,033) -- (4,154)
Proceeds from sale of property
held for sale.................. 303 -- -- -- -- --
Purchase of general and limited
partnership interests.......... (199,146) -- (1,208) -- -- (76,104)
Purchase of management
contracts...................... -- -- (11,686) -- -- (36,868)
Purchase of/additions to notes
receivable..................... (59,787) -- (4,236) -- -- (17,647)
Proceeds from repayments of notes
receivable..................... -- -- 214 1,000 -- 8,838
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... 45,791 -- 3,097 3,183 -- 42,615
Contribution to unconsolidated
subsidiaries................... (42,879) -- -- -- -- --
Proceeds from sale of
securities..................... -- -- 642 -- -- --
Purchase of investments held for
sale........................... -- -- (73) -- -- --
Purchase of NHP mortgage loans... (60,575) -- -- -- -- --
Purchase of Ambassador common
stock.......................... (19,881) -- -- -- -- --
--------- --------- --------- --------- -------- --------
Net cash used in investing
activities................. (717,663) (206,585) (17,886) (39,029) -- (83,320)
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. 225,436 122,568(L) 145,519 156,746 -- 111,001
Principal repayments on secured
notes payable.................. (12,512) -- (141,032) (141,676) -- (12,697)
Proceeds from secured short-term
financing...................... 19,050 -- -- -- -- --
Repayments on secured short-term
financing...................... -- (259,027)(M) (434) -- -- --
Principal repayments on unsecured
short-term notes payable....... (79) (50,800)(M) -- -- -- --
Proceeds (payoff) from unsecured
short-term financing........... (12,500) -- -- -- -- --
Principal repayments on secured
tax-exempt bond financing...... (1,487) -- -- -- -- --
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... (162,008) -- -- -- -- --
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... (6,387) -- (245) (8,095) -- (2,305)
Proceeds from issuance of common
and preferred stock, net....... 643,224 357,389(N) 6,286 28,946 -- 62,420
Proceeds from exercises of
employee stock options and
warrants....................... 871 -- -- 3,195 -- 7,487
Repurchase of common stock....... -- -- -- -- -- (3,283)
Principal repayments received on
notes due from Officers........ 25,957 -- -- 1,323 -- --
Investments made by minority
interests...................... -- -- -- -- -- 249
Receipt of contributions from
minority interests............. -- 37,345(O) -- -- -- --
Payments of distribution to
minority interests............. -- (2,713)(P) -- -- -- --
Payment of distributions......... (44,660) (19,396)(Q) (11,503)(T) (15,717) (12,173)(U) (2,695)
Payment of distributions to
limited partners............... -- (5,193)(R) -- -- (15)(U) --
Payment of preferred unit
distributions.................. (846) (39,859)(S) -- (2,279) -- --
Payment of distributions to
minority interests............. (5,510) -- -- (3,700) -- (12,578)
Net transactions with
Insignia/ESG................... -- -- -- -- -- (57,612)
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) financing activities... 668,549 140,314 (1,409) 18,743 (12,188) 89,987
--------- --------- --------- --------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. 23,918 (10,125) (24,465) 446 (5,017) 19,185
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. 13,170 -- 36,277 4,002 -- 64,447
--------- --------- --------- --------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $ 37,088 $ (10,125) $ 11,812 $ 4,448 $ (5,017) $ 83,632
========= ========= ========= ========= ======== ========
<CAPTION>
IFG IFG
MERGER REORGANIZATION PRO
ADJUSTMENTS(G) ADJUSTMENTS(H) FORMA
-------------- -------------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $(80,023) $ 6,882 $ (13,851)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 35,049 (30,188) 128,169
Gain on investments............ -- -- (12)
(Gain) loss on disposition of
properties.................... 80 -- (3,882)
Minority interests............. (1,552) -- 9,983
Equity in earnings of
unconsolidated partnerships... 29,995 -- 27,537
Equity in earnings of
unconsolidated subsidiaries... -- 4,578 (5,848)
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 5,366 --
Changes in operating assets and
operating liabilities......... -- -- 519
-------- -------- -----------
Total adjustments........... 68,938 (25,610) 156,466
-------- -------- -----------
Net cash provided by (used
in) operating activities... (11,085) (18,728) 142,615
Net cash used in
discontinued operations.... -- -- (7,999)
-------- -------- -----------
Net cash provided by (used
in) continuing
operations................. (11,085) (18,728) 134,616
-------- -------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... -- -- 41,419
Purchase of real estate.......... -- -- (625,603)
Additions to real estate,
investments and property held
for sale....................... -- -- (55,892)
Proceeds from sale of property
held for sale.................. -- -- 303
Purchase of general and limited
partnership interests.......... -- -- (276,458)
Purchase of management
contracts...................... -- -- (48,554)
Purchase of/additions to notes
receivable..................... -- -- (81,670)
Proceeds from repayments of notes
receivable..................... -- -- 10,052
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... -- -- 94,686
Contribution to unconsolidated
subsidiaries................... -- -- (42,879)
Proceeds from sale of
securities..................... -- -- 642
Purchase of investments held for
sale........................... -- -- (73)
Purchase of NHP mortgage loans... -- -- (60,575)
Purchase of Ambassador common
stock.......................... -- -- (19,881)
-------- -------- -----------
Net cash used in investing
activities................. -- -- (1,064,483)
-------- -------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. -- -- 761,270
Principal repayments on secured
notes payable.................. -- -- (307,917)
Proceeds from secured short-term
financing...................... -- -- 19,050
Repayments on secured short-term
financing...................... -- -- (259,461)
Principal repayments on unsecured
short-term notes payable....... -- -- (50,879)
Proceeds (payoff) from unsecured
short-term financing........... -- -- (12,500)
Principal repayments on secured
tax-exempt bond financing...... -- -- (1,487)
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... -- -- (162,008)
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... -- -- (17,032)
Proceeds from issuance of common
and preferred stock, net....... -- -- 1,098,265
Proceeds from exercises of
employee stock options and
warrants....................... -- -- 11,553
Repurchase of common stock....... -- -- (3,283)
Principal repayments received on
notes due from Officers........ -- -- 27,280
Investments made by minority
interests...................... -- -- 249
Receipt of contributions from
minority interests............. -- -- 37,345
Payments of distribution to
minority interests............. -- -- (2,713)
Payment of distributions......... (24,513)(V) -- (130,657)
Payment of distributions to
limited partners............... -- -- (5,208)
Payment of preferred unit
distributions.................. -- -- (42,984)
Payment of distributions to
minority interests............. -- -- (21,788)
Net transactions with
Insignia/ESG................... -- -- (57,612)
-------- -------- -----------
Net cash provided by (used
in) financing activities... (24,513) -- 879,483
-------- -------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. (35,598) (18,728) (50,384)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. -- -- 117,896
-------- -------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $(35,598) $(18,728) $ 67,512
======== ======== ===========
</TABLE>
P-26
<PAGE> 677
- ---------------
(A) Represents the Partnership's audited consolidated statement of cash flows
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1997 Acquisitions; (ii) the 1997 Stock Offerings;
(iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings; (v) the 1998
Acquisitions; (vi) the Probably Purchases; (vii) the 1998 Dispositions; and
(viii) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)................. $ (7,266) $ 4,350 $(2,222) $ (3,543) $ (8,681)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 4,058 9,134 5,125 (10,963) 7,354
Gain on investments............. (12) -- -- -- (12)
(Gain) loss on disposition of
properties.................... (3,882) -- -- -- (3,882)
Minority interests.............. (16) -- -- -- (16)
Equity in earnings of
unconsolidated partnerships... 3,905 -- 4,631 6 8,542
Equity in earnings of
unconsolidated subsidiaries... -- -- 4,636 (10,426) (5,790)
Changes in operating assets and
operating liabilities......... (1,036) 6,350 -- -- 5,314
-------- -------- ------- -------- ---------
Total adjustments........... 3,017 15,484 14,392 (21,383) 11,510
-------- -------- ------- -------- ---------
Net cash provided by (used
in) operating
activities................ (4,249) 19,834 12,170 (24,926) 2,829
Net cash used in
discontinued operations... -- (7,999) -- -- (7,999)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) continuing
operations................ (4,249) 11,835 12,170 (24,926) (5,170)
-------- -------- ------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate........... -- (4,114) -- -- (4,114)
Additions to real estate,
investments and property held
for sale........................ (522) -- -- -- (522)
Purchase of general and limited
partnership interests........... (1,208) -- -- -- (1,208)
Purchase of management
contracts....................... -- (11,686) -- -- (11,686)
Purchase of/additions to notes
receivable...................... -- (4,236) -- -- (4,236)
Proceeds from repayments of notes
receivable...................... 214 -- -- -- 214
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 3,097 -- -- -- 3,097
Proceeds from sale of
securities...................... 642 -- -- -- 642
Purchase of investments held for
sale............................ (73) -- -- -- (73)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) investing
activities................ 2,150 (20,036) -- -- (17,886)
-------- -------- ------- -------- ---------
</TABLE>
P-27
<PAGE> 678
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes
payable borrowings.............. $ 74,019 $ 71,500 $ -- $ -- $ 145,519
Principal repayments on secured
notes payable................... (71,256) (69,776) -- -- (141,032)
Repayments on secured short-term
financing....................... (434) -- -- -- (434)
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (245) -- -- (245)
Proceeds from issuances of common
and preferred stock, net........ -- 6,286 -- -- 6,286
Payment of distributions.......... (2,000) -- (9,503) -- (11,503)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) financing
activities................ 329 7,765 (9,503) -- (1,409)
-------- -------- ------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (1,770) (436) 2,667 (24,926) (24,465)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 25,795 10,482 -- -- 36,277
-------- -------- ------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 24,025 $ 10,046 $ 2,667 $(24,926) $ 11,812
======== ======== ======= ======== =========
</TABLE>
- ---------------
(i)Represents the adjustment to record cash flow activity from January 1,
1997 to the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. In addition,
represents adjustments to record additional deprecation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest expense
incurred in connection with borrowings incurred by the Partnership to
consummate the NHP Real Estate Acquisition.
(ii)
Represents the unaudited consolidated statement of cash flows of NHP
for the period from January 1, 1997 through December 8, 1997 (date of
the NHP Merger).
(iii)
Represents the following adjustments occurring as a result of the NHP
Merger: (i) the reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan; (ii) the incremental
depreciation of the purchase price adjustment related to real estate;
(iii) the incremental amortization of the purchase price adjustment
related to management contracts, furniture, fixtures and equipment, and
goodwill; (iv) the reversal of equity in earnings of NHP during the
pre-merger period when the Partnership held a 47.62% interest in NHP;
and (v) the amortization of the increased basis in investments in real
estate partnerships, based on the purchase price adjustment related to
real estate and an estimated average life of 20 years.
(iv)
Represents adjustments related to the NHP Reorganization, whereby the
Partnership contributed or sold to the Unconsolidated Subsidiaries and
the Unconsolidated Partnership; (i) certain assets and liabilities of
NHP, primarily related to the management operations and other
businesses owned by NHP and (ii) 12 real estate properties containing
2,905 apartment units. The adjustments represent (i) the related cash
flow activity primarily related to the management operations of such
real estate partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis resulting
from the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies.
(D) Represents the audited historical statement of cash flows of Ambassador for
the year ended December 31, 1997. Certain reclassifications have been made
to Ambassador's historical statement of cash flows to conform to the
Partnership's statement of cash flows presentation. The Ambassador
P-28
<PAGE> 679
historical statement of cash flows excludes an extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................... $ 10,233 $ 7,566 $(13,055) $ 4,744
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization...... 32,675 63 (15,490) 17,248
Gain on disposition of property.... -- (80) -- (80)
Minority interests................. 12,448 382 41 12,871
Equity in earnings of
unconsolidated partnerships...... (10,027) (2,639) 151 (12,515)
Extraordinary gain on early
extinguishment of debt........... (5,366) -- -- (5,366)
Changes in operating assets and
liabilities...................... -- (2,405) (1,979) (4,384)
--------- -------- -------- --------
Total adjustments............. 29,730 (4,679) (17,277) 7,774
--------- -------- -------- --------
Net cash provided by (used in) operating
activities............................ 39,963 2,887 (30,332) 12,518
--------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to real estate, investments
and property held for sale......... (7,695) 665 2,876 (4,154)
Purchase of general and limited
partnership interests.............. (93,118) -- 17,014 (76,104)
Purchase of management contracts...... (99,540) -- 62,672 (36,868)
Purchase of/additions to notes
receivable......................... (9,172) (14,251) 5,776 (17,647)
Proceeds from repayments of notes
receivable......................... 4,523 7,552 (3,237) 8,838
Distributions from investments in real
estate partnerships and
unconsolidated subsidiaries........ 44,823 -- (2,208) 42,615
--------- -------- -------- --------
Net cash provided by (used in)
investing activities........ (160,179) (6,034) 82,893 (83,320)
--------- -------- -------- --------
</TABLE>
P-29
<PAGE> 680
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable
borrowings......................... $ 118,141 $ -- $ (7,140) $111,001
Principal repayments on secured notes
payable............................ (15,682) -- 2,985 (12,697)
Payment of loan costs, net of proceeds
from interest rate hedge........... (2,305) -- -- (2,305)
Proceeds from issuance of common and
preferred stock, net............... 62,420 -- -- 62,420
Proceeds from exercises of employee
stock options and warrants......... 7,487 -- -- 7,487
Repurchase of common stock............ (3,283) -- -- (3,283)
Investment made by minority
interests.......................... 249 -- -- 249
Payment of distributions.............. -- (2,695) -- (2,695)
Payment of distributions to minority
interests.......................... (12,578) -- -- (12,578)
Net transactions with Insignia/ESG.... -- -- (57,612) (57,612)
--------- -------- -------- --------
Net cash provided by (used in)
financing activities........ 154,449 (2,695) (61,767) 89,987
--------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 34,233 (5,842) (9,206) 19,185
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD............................. 54,614 9,789 44 64,447
--------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................ $ 88,847 $ 3,947 $ (9,162) $ 83,632
========= ======== ======== ========
</TABLE>
- ---------------
(i)Represents the audited consolidated statement of cash flows of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report on
Form 10-K. Certain reclassifications have been made to IFG's historical
statement of cash flows to conform to the Partnership's statement of
cash flows presentation.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(I) Represents proceeds from the sale of the 1998 Dispositions, as if these
dispositions occurred on January 1, 1997.
P-30
<PAGE> 681
(J) Represents the use of cash to purchase the 1998 Acquisitions and the
Probable Purchases, as if these acquisitions occurred on January 1, 1997.
(K) Represents cash payments for capital improvements of $300 per unit on the
1997 Acquisitions, the 1998 Acquisitions and the Probable Purchases.
(L) Represents notes payable assumed in connection with the 1998 Acquisitions
and the Probable Purchases, assuming these transactions occurred January 1,
1997.
(M) Represents net principal repayments assuming the 1998 Acquisitions, the
1998 Dispositions, the Probable Purchases, the 1998 Stock Offerings and the
Preferred Partnership Unit Offering occurred January 1, 1997.
(N) Represents cash proceeds from the 1998 Stock Offerings, as if these
offerings occurred on January 1, 1997.
(O) Represents contributions from minority interests assuming the Preferred
Partnership Unit Offering occurred January 1, 1997.
(P) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(Q) Represents distributions paid on the 1997 Stock Offerings as if these
occurred on January 1, 1997.
(R) Represents distributions paid to limited partners on OP Units issued in
connection with the 1997 Acquisitions, the 1998 Acquisitions and the
Probable Purchases, as if the issuance of the OP Units occurred on January
1, 1997.
(S) Represents preferred unit distributions paid on the Class B Preferred
Stock, the Class C Preferred Stock and the 1998 Stock Offerings as if these
occurred on January 1, 1997.
(T) Represents historical distributions of $2,000 and pro forma distributions
on the shares issued in the NHP Merger as if these shares had been issued
on January 1, 1997.
(U) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(V) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-31
<PAGE> 682
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE AMBASSADOR PURCHASE PRICE IFG AS IFG MERGER
HISTORICAL(A) PURCHASE(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 56,269 $ 3,432 $ (2,382) $ 4,255 $ (36,338) $ 7,679
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 67,344 7,512 7,520 1,420 14,890 25,478
(Gain) loss on disposition of
properties..................... (2,783) 2,783 -- -- (6,576) 6,576
Minority interests.............. 1,052 (160) 252 (252) 14,159 (6,622)
Equity in earnings of
unconsolidated partnerships.... 5,078 -- 71 -- (13,492) 18,577
Equity in earnings of
unconsolidated subsidiaries.... (8,413) -- -- -- -- --
Non-cash compensation........... -- -- -- -- 796 --
Changes in operating assets and
operating liabilities.......... (67,722) -- 5,948 -- (7,775) --
--------- -------- -------- ------- --------- --------
Total adjustments............ (5,444) 10,135 13,791 1,168 2,002 44,009
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) operating activities... 50,825 13,567 11,409 5,423 (34,336) 51,688
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... (63,839) 63,839(H) -- -- 27,122 --
Additions to real estate.......... (47,878) (1,198)(I) (17,759) -- 9,309 --
Proceeds from sale of property and
investments held for sale....... 19,627 (19,627)(J) -- -- (35) --
Additions to property held for
sale............................ (1,986) -- -- -- -- --
Purchase of general and limited
partnership interests........... (27,016) -- -- -- 17,420 --
Purchase of/additions to notes
receivable...................... (72,445) -- -- -- (27,589) --
Proceeds from repayments/sale of
notes receivable................ 21,562 -- -- -- 21,185 --
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 513 -- 1,063 -- 22,053 --
Payment of trust based preferred
dividends....................... -- -- -- -- (7,415) --
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... 4,492 -- -- -- 13,423 --
Contribution to unconsolidated
subsidiaries.................... (13,032) -- -- -- -- --
Purchase of investments held for
sale............................ (4,935) -- -- -- -- --
Redemption of OP Units............ (516) -- -- -- -- --
Merger costs...................... -- -- -- -- (1,402) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) investing activities... (185,453) 43,014 (16,696) -- 74,071 --
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. 77,489 -- 37,162 -- 177,234 --
Principal repayments on secured
notes payable................... (56,262) -- -- -- 4,239 --
Principal advances on secured
tax-exempt bond financing....... -- -- 21,784 -- -- --
Principal repayments on secured
tax-exempt bond financing....... (1,436) -- -- -- -- --
Net borrowings/repayments on
secured short-term financing.... (30,693) 209,027(K) (43,002) -- -- --
Net borrowings (paydowns) on the
revolving credit facilities..... -- -- 2,513 -- -- --
Principal repayments on unsecured
short-term notes payable........ -- -- -- -- 2,644 --
Payment of loan costs, net of
proceeds from interest rate
hedge........................... (5,727) -- -- -- (83) --
Proceeds from issuance of common
stock and preferred stock,
net............................. 253,239 (253,239)(L) -- -- -- --
Repurchase of common stock........ (10,972) -- -- -- -- --
Proceeds from exercises of
employee stock options and
warrants........................ -- -- 9,761 -- 6,533 --
Principal repayments received on
notes due from Officers......... 8,084 -- -- -- -- --
Payments of distributions to
minority interests.............. -- (2,034)(M) -- -- -- --
Payment of distributions.......... (73,322) -- -- (3,701)(P) (8,606) (22,360)(Q)
Payment of distributions to
limited partners................ (10,251) (1,919)(N) -- (5)(P) (494) --
Payment of preferred unit
distributions................... (10,916) (16,094)(O) -- -- -- --
Proceeds from issuance of High
Performance Units............... 1,988 -- -- -- -- --
Net transactions with
Insignia/ESG.................... -- -- -- -- (241,003) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) financing activities... 141,221 (64,259) 28,218 (3,706) (59,536) (22,360)
--------- -------- -------- ------- --------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. 6,593 (7,678) 22,931 1,717 (19,801) 29,328
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 37,088 (10,125) 4,448 (5,017) 83,632 (35,598)
--------- -------- -------- ------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 43,681 $(17,803) $ 27,379 $(3,300) $ 63,831 $ (6,270)
========= ======== ======== ======= ========= ========
<CAPTION>
IFG
REORGANIZATION PRO
ADJUSTMENTS(G) FORMA
-------------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 8,578 $ 41,493
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... (22,641) 101,523
(Gain) loss on disposition of
properties..................... -- --
Minority interests.............. -- 8,429
Equity in earnings of
unconsolidated partnerships.... -- 10,234
Equity in earnings of
unconsolidated subsidiaries.... 7,562 (851)
Non-cash compensation........... -- 796
Changes in operating assets and
operating liabilities.......... -- (69,549)
-------- ---------
Total adjustments............ (15,079) 50,582
-------- ---------
Net cash provided by (used
in) operating activities... (6,501) 92,075
-------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... -- 27,122
Additions to real estate.......... -- (57,526)
Proceeds from sale of property and
investments held for sale....... -- (35)
Additions to property held for
sale............................ -- (1,986)
Purchase of general and limited
partnership interests........... -- (9,596)
Purchase of/additions to notes
receivable...................... -- (100,034)
Proceeds from repayments/sale of
notes receivable................ -- 42,747
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... -- 23,629
Payment of trust based preferred
dividends....................... -- (7,415)
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... -- 17,915
Contribution to unconsolidated
subsidiaries.................... -- (13,032)
Purchase of investments held for
sale............................ -- (4,935)
Redemption of OP Units............ -- (516)
Merger costs...................... -- (1,402)
-------- ---------
Net cash provided by (used
in) investing activities... -- (85,064)
-------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. -- 291,885
Principal repayments on secured
notes payable................... -- (52,023)
Principal advances on secured
tax-exempt bond financing....... -- 21,784
Principal repayments on secured
tax-exempt bond financing....... -- (1,436)
Net borrowings/repayments on
secured short-term financing.... -- 135,332
Net borrowings (paydowns) on the
revolving credit facilities..... -- 2,513
Principal repayments on unsecured
short-term notes payable........ -- 2,644
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (5,810)
Proceeds from issuance of common
stock and preferred stock,
net............................. -- --
Repurchase of common stock........ -- (10,972)
Proceeds from exercises of
employee stock options and
warrants........................ -- 16,294
Principal repayments received on
notes due from Officers......... -- 8,084
Payments of distributions to
minority interests.............. -- (2,034)
Payment of distributions.......... -- (107,989)
Payment of distributions to
limited partners................ -- (12,669)
Payment of preferred unit
distributions................... -- (27,010)
Proceeds from issuance of High
Performance Units............... -- 1,988
Net transactions with
Insignia/ESG.................... -- (241,003)
-------- ---------
Net cash provided by (used
in) financing activities... -- 19,578
-------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (6,501) 26,589
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... (18,728) 55,700
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $(25,229) $ 82,289
======== =========
</TABLE>
P-32
<PAGE> 683
- ---------------
(A) Represents the Partnership's unaudited consolidated statement of cash flows
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1998 Stock Offerings; (ii) the 1998 Acquisitions;
(iii) the Probably Purchases; (iv) the 1998 Dispositions and (v) the
Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of cash flows of Ambassador
for the four months ended April 20, 1998. Certain reclassifications have
been made to Ambassador's historical statement of cash flows to conform to
the Partnership's statement of cash flows presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ (36,017) $ 4,718 $ (5,039) $(36,338)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 27,685 48 (12,843) 14,890
Gain on disposition of property......................... (5,888) (688) -- (6,576)
Minority interests...................................... 14,159 -- -- 14,159
Equity in earnings of unconsolidated partnerships....... (12,169) -- (1,323) (13,492)
Non-cash compensation................................... 796 -- -- 796
Changes in operating assets and liabilities............. (18,853) (1,499) 12,577 (7,775)
--------- -------- --------- --------
Total adjustments................................... 5,730 (2,139) (1,589) 2,002
--------- -------- --------- --------
Net cash provided by (used in) operating
activities........................................ (30,287) 2,579 (6,628) (34,336)
--------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... (3,804) -- 30,926 27,122
Additions to real estate.................................. (2,252) (25) 11,586 9,309
Proceeds from sales of property and investments held for
sale.................................................... -- 161 (196) (35)
Purchase of general and limited partnership interests..... (44,270) -- 61,690 17,420
Purchases of / additions to notes receivable.............. (17,107) (15,407) 4,925 (27,589)
Proceeds from repayments/sale of notes receivable......... 151 23,672 (2,638) 21,185
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 21,360 -- 693 22,053
Payment of trust based preferred dividends................ (7,415) -- -- (7,415)
Cash received in connection with AMIT Merger.............. 13,423 -- -- 13,423
Merger costs.............................................. (1,402) -- -- (1,402)
--------- -------- --------- --------
Net cash provided by (used in) investing
activities........................................ (41,316) 8,401 106,986 74,071
--------- -------- --------- --------
</TABLE>
P-33
<PAGE> 684
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 186,000 -- (8,766) 177,234
Principal repayments on secured notes payable............. (1,874) -- 6,113 4,239
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (83) -- -- (83)
Proceeds from exercises of employee stock options and
warrants................................................ 6,533 -- -- 6,533
Payment of distributions.................................. (6,541) (2,065) -- (8,606)
Payment of distributions minority interests............... (494) -- -- (494)
Net transactions with Insignia/ESG........................ (118,424) -- (122,579) (241,003)
--------- -------- --------- --------
Net cash provided by (used in) financing
activities........................................ 67,761 (2,065) (125,232) (59,536)
--------- -------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (3,842) 8,915 (24,874) (19,801)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 88,847 3,947 (9,162) 83,632
--------- -------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 85,005 $ 12,862 $ (34,036) $ 63,831
========= ======== ========= ========
</TABLE>
- ---------------
(i)Represents the unaudited consolidated statement of cash flows of IFG
for the nine months ended September 30, 1998. Certain reclassifications
have been made to IFG's historical statement of cash flows to conform
to the Partnership's statement of cash flows presentation. In addition,
the cash and cash equivalents at the beginning of the period has been
adjusted.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock. In addition, the cash and cash equivalents at the beginning of
the period has been adjusted.
(F) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(H) Represents adjustment to remove the use of cash to purchase the 1998
Acquisitions, as if these acquisitions occurred on January 1, 1997;
therefore, the purchases are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(I) Represents cash payments for capital improvements of $300 per unit on the
1998 Acquisitions.
(J) Represents adjustment to remove the proceeds from the sale of the 1998
Dispositions, as if these dispositions occurred on January 1, 1997;
therefore, the proceeds are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(K) Represents adjustment to remove net principal repayments assuming the 1998
Acquisitions, the 1998 Dispositions and the 1998 Stock Offerings occurred
January 1, 1997; therefore, the repayments are included on the Pro Forma
Consolidated Statement of Cash Flows for the year ended December 31, 1997.
(L) Represents adjustment to remove cash proceeds from the 1998 Stock
Offerings, as if these offerings occurred on January 1, 1997; therefore,
the repayments are included on the Pro Forma Consolidated Statement of Cash
Flows for the year ended December 31, 1997.
P-34
<PAGE> 685
(M) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(N) Represents distributions paid to limited partners on OP Units issued in
connection with the 1998 Acquisitions and the Probable Purchases, as if the
issuance of the OP Units occurred on January 1, 1997.
(O) Represents preferred unit distributions paid on the 1998 Stock Offerings as
if these occurred on January 1, 1997.
(P) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(Q) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-35
<PAGE> 686
PRO FORMA FINANCIAL INFORMATION OF
AIMCO PROPERTIES, L.P.
(EXCHANGE OFFERS)
INTRODUCTION
AIMCO Properties L.P. (the "Partnership") intends to offer to purchase
limited partnership interests in syndicated real estate limited partnerships in
which AIMCO holds partnership interests. The Partnership, is subject to
applicable law, plans to offer to purchase certain of such limited partnership
interests in exchange for (i) equity securities of the Partnership; (ii) cash or
(iii) a combination of such equity securities and cash. Such offers are expected
to include terms that will allow limited partners to continue to hold their
limited partnership interests.
The following Pro Forma Consolidated Balance Sheet (Exchange Offers) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) all the
transactions discussed in the Pro Forma Financial Statements (Insignia Merger)
appearing elsewhere herein; and (ii) the acceptance of exchange offers by
limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) all
the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1998: (i)
all the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The Pro Forma Financial Information (Exchange Offers) is based, in part, on
the historical financial statements of the partnerships in which the Exchange
Offers are made. The Pro Forma Financial Information (Exchange Offers) is also
based, in part, on the Pro Forma Financial Information (Insignia Merger) of the
Partnership included elsewhere herein. Such pro forma information is based in
part upon: (i) the audited Consolidated Financial Statements of Insignia for the
year ended December 31, 1997; (ii) the audited Consolidated Financial Statements
of Angeles Mortgage Investment Trust ("AMIT") for the year ended December 31,
1997; (iii) the unaudited Consolidated Financial Statements of Insignia for the
nine months ended September 30, 1998; and (iv) the unaudited Consolidated
Financial Statements of AMIT for the period from January 1, 1998 to September
17, 1998. The Pro Forma Financial Information (Insignia Merger) is also based,
in part, upon: (i) the audited Consolidated Financial Statements of Ambassador
for the year ended December 31, 1997; (ii) the audited Consolidated Financial
Statements of the Partnership for the year ended December 31, 1997; (iii) the
unaudited Consolidated Financial Statements of Ambassador for the four months
ended April 30, 1998; (iv) the unaudited Consolidated Financial Statements of
the Partnership for the nine months ended September 30, 1998; and (v) the
historical financial statements of certain properties and companies acquired by
AIMCO filed in AIMCO's Current Reports on Form 8-K, dated April 16, 1997, May 5,
1997, June 3, 1997, September 19, 1997, October 15, 1997, December 1, 1997 and
November 2, 1998. The following Pro Forma Financial Information (Exchange
Offers) should be read in conjunction with such financial statements and notes
thereto.
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared under the assumption that after the exchange offers are accepted, AIMCO
will own varying ownership percentages of each partnership, and that the limited
partners will choose to elect to receive 35% of the consideration in the form of
equity securities of AIMCO Properties, L.P. and 65% of the consideration in the
form of cash. The
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<PAGE> 687
interest to be acquired in each of the partnerships, the estimated purchase
price for each partnership, including cash, common units, or preferred units is
summarized below:
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Angeles Income Properties, Ltd. II.................... 26.70 $ 4,946 $ 3,215 $1,731
Angeles Income Properties, Ltd. III................... 30.63 2,156 1,401 755
Angeles Income Properties, Ltd. IV.................... 18.64 1,154 750 404
Angeles Income Properties, Ltd. 6..................... 37.29 4,523 2,940 1,583
Angeles Opportunity Properties, Ltd................... 37.94 1,729 1,124 605
Angeles Partners VII.................................. 24.86 610 397 213
Angeles Partners VIII................................. 24.80 0 0 0
Angeles Partners IX................................... 18.92 1,171 761 410
Angeles Partners X.................................... 22.97 709 461 248
Angeles Partners XI................................... 21.83 205 133 72
Angeles Partners XII.................................. 11.89 2,877 1,870 1,007
Angeles Partners XIV.................................. 24.93 0 0 0
Baywood Partners, Ltd................................. 25.00 347 226 121
Brampton Associates Partnership....................... 25.00 382 248 134
Buccaneer Trace Limited Partnership................... 25.00 2 1 1
Burgundy Court Associates, L.P........................ 25.00 1,074 698 376
Calmark/Fort Collins, Ltd............................. 25.00 192 125 67
Calmark Heritage Park II Ltd.......................... 25.00 47 31 16
Casa Del Mar Associates Limited Partnership........... 21.16 503 327 176
Catawba Club Associates, L.P.......................... 25.00 85 55 30
Cedar Tree Investors Limited Partnership.............. 25.00 1,037 674 363
Century Properties Fund XVI........................... 12.52 831 540 291
Century Properties Fund XVIII......................... 13.08 474 308 166
Century Properties Fund XIX........................... 15.30 1,765 1,147 618
Century Properties Growth Fund XXII................... 21.43 4,977 3,235 1,742
Chapel Hill, Limited.................................. 21.15 569 370 199
Chestnut Hill Associates Limited Partnership.......... 26.75 1,582 1,028 554
Coastal Commons Limited Partnership................... 25.00 566 368 198
Consolidated Capital Institutional Properties/2 &
Consolidated Capital Equity Properties/2............ 18.98 7,320 4,758 2,562
Consolidated Capital Institutional Properties/3....... 16.37 6,770 4,401 2,369
Consolidated Capital Properties III................... 13.02 1,134 737 397
Consolidated Capital Properties IV.................... 18.04 9,407 6,112 3,295
Consolidated Capital Properties V..................... 16.69 560 364 196
Consolidated Capital Properties VI.................... 25.82 556 361 195
DFW Apartment Investors Limited Partnership........... 35.65 2,719 1,767 952
DFW Residential Investors Limited Partnership......... 37.60 1,092 710 382
Davidson Diversified Real Estate I, L.P............... 34.78 627 408 219
Davidson Diversified Real Estate II, L.P.............. 35.11 1,318 857 461
Davidson Diversified Real Estate III, L.P............. 21.76 0 0 0
Davidson Growth Plus, L.P............................. 23.91 2,304 1,498 806
Davidson Income Real Estate, L.P...................... 30.81 2,691 1,749 942
Drexel Burnham Lambert Real Estate Associates II...... 19.58 994 646 348
Four Quarters Habitat Apartment Associates, Ltd....... 25.00 174 113 61
Fox Strategic Housing Income Partners................. 33.18 2,414 1,569 845
Georgetown of Columbus Associates, L.P................ 25.00 227 148 79
HCW Pension Real Estate Fund Limited Partnership...... 32.64 2,368 1,539 829
Investors First-Staged Equity......................... 49.00 306 199 107
Johnstown/Consolidated Income Partners................ 25.66 1,871 1,216 655
La Colina Partners, Ltd............................... 25.00 583 379 204
Lake Eden Associates, L.P............................. 25.00 632 411 221
Landmark Associates, L.P.............................. 25.00 48 31 17
</TABLE>
P-37
<PAGE> 688
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Minneapolis Associates II Limited Partnership......... 25.00 $ 2 $ 1 $ 1
Multi-Benefit Realty Fund "87-1-Class A & Class B..... 21.89 1,657 1,077 580
National Property Investors 8......................... 11.13 988 642 346
Northbrook Apartments, Ltd............................ 25.00 209 136 73
Olde Mill Investors Limited Partnership............... 8.75 170 111 59
Orchard Park Apartments Limited Partnership........... 25.00 1 1 0
Park Town Place Associates Limited Partnership........ 24.70 298 194 104
Quail Run Associates, L.P............................. 25.00 487 317 170
Ravensworth Associates Limited Partnership............ 25.00 1 1 0
Rivercreek Apartments Limited Partnership............. 25.00 180 117 63
Rivercrest Apartments, Limited........................ 25.00 1,687 1,097 590
Riverside Park Associates L.P......................... 13.69 590 384 206
Salem Arms of Augusta Limited Partnership............. 25.00 278 181 97
Shaker Square, L.P.................................... 23.75 631 410 221
Shannon Mannor Apartments, Limited Partnership........ 25.00 1,170 761 409
Sharon Woods, L.P..................................... 22.75 499 324 175
Shelter Properties III................................ 15.20 1,960 1,274 686
Shelter Properties IV................................. 50.52 12,764 8,295 4,469
Shelter Properties VI................................. 13.78 1,919 1,247 672
Shelter Properties VII Limited Partnership............ 26.65 1,975 1,284 691
Snowden Village Associates, L.P....................... 25.00 443 288 155
Springhill Lake Investors Limited Partnership......... 11.84 2,908 1,890 1,018
Sturbrook Investors, Ltd.............................. 25.00 377 245 132
Sycamore Creek Associates, L.P........................ 25.00 1 1 0
Texas Residential Investors Limited Partnership....... 18.45 1,147 746 401
Thurber Manor Associates, Limited Partnership......... 25.00 218 142 76
U.S. Realty Partners Limited Partnership.............. 25.00 1,441 937 504
United Investors Growth Properties.................... 39.01 165 107 58
United Investors Growth Properties II................. 25.00 351 228 123
United Investors Income Properties.................... 23.44 1,977 1,285 692
Villa Nova, Limited Partnership....................... 25.00 228 148 80
Walker Springs, Limited............................... 23.99 95 62 33
Wingfield Investors Limited Partnership............... 25.00 179 116 63
Winrock-Houston Limited Partnership................... 13.60 1,041 677 364
Winthrop Apartment Investors Limited Partnership...... 31.60 1,318 857 461
Winthrop Growth Investors 1 Limited Partnership....... 27.94 1,233 801 432
Winthrop Texas Investors Limited Partnership.......... 5.27 158 103 55
Woodmere Associates, L.P.............................. 25.00 280 182 98
Yorktown Towers Associates............................ 25.00 809 526 283
-------- ------- ------
Total (See adjustment C to the Pro Forma Consolidated
Balance Sheet)...................................... $122,463 $79,601 42,862
======== ======= ======
</TABLE>
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
Exchange Offers, the 1997 Acquisitions, the 1998 Acquisitions and the Probable
Purchases are adjusted to estimated fair market value, based on preliminary
estimates, which are subject to change as additional information is obtained.
The allocations of purchase costs are subject to final determination based upon
estimates and other evaluations of fair market value. Therefore, the allocations
reflected in the following unaudited Pro Forma Financial Information (Exchange
Offers) may differ from the amounts ultimately determined.
P-38
<PAGE> 689
The following unaudited Pro Forma Financial Information (Exchange Offers)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions, results of
operations or cash flows. In the opinion of the Partnership's management, all
material adjustments necessary to reflect the effects of these transactions have
been made.
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (EXCHANGE OFFERS)
AS OF SEPTEMBER 30, 1998
ASSETS
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C>
Real estate....................................... $2,625,822 $ 12,764(C)
26,954(D)
13,655(E) $2,679,195
Property held for sale............................ 42,212 -- 42,212
Investments in and notes receivable from
unconsolidated subsidiaries..................... 186,277 -- 186,277
Investments in and notes receivable from
unconsolidated partnerships..................... 924,309 109,699(C)
(13,655)(E)
(8,161)(F)
816(G) 1,013,008
Mortgage notes receivable......................... 20,916 -- 20,916
Cash and cash equivalents......................... 104,955 2,620(D) 107,575
Restricted cash................................... 84,526 1,807(D) 86,333
Accounts receivable............................... 27,900 1,081(D) 28,981
Deferred financing costs.......................... 21,835 -- 21,835
Goodwill.......................................... 251,024 -- 251,024
Property management contracts..................... 38,371 -- 38,371
Other assets...................................... 82,670 422(D) 83,092
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
LIABILITIES AND PARTNERS' CAPITAL
Secured notes payable............................. $ 926,246 $ 23,642(D) $ 949,888
Secured tax-exempt bond financing................. 399,925 -- 399,925
Secured short-term financing...................... 32,691 -- 32,691
Unsecured short-term financing.................... 300,000 79,601(C) 379,601
Accounts payable, accrued and other liabilities... 248,253 826(D) 249,079
Security deposits and deferred income............. 13,171 255(D) 13,426
---------- -------- ----------
1,920,286 104,324 2,024,610
Minority interests................................ 79,431 816(G) 80,247
Company obligated mandatorily redeemable
convertible securities of a subsidiary trust.... 149,500 -- 149,500
Redeemable common partnership units............... 277,581 8,161(D)
(8,161)(F)
30,616(C) 308,197
Redeemable preferred partnership units............ -- 12,246(C) 12,246
Partner's capital
General and Special Limited Partner............. 1,496,457 -- 1,496,457
Preferred Units................................. 487,562 -- 487,562
---------- -------- ----------
1,984,019 -- 1,984,019
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
P-39
<PAGE> 690
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical balance sheet data as of September 30, 1998 (unaudited) related
to the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Real estate................................................. $1,082,652
Cash........................................................ 151,024
Total assets................................................ 1,493,409
Mortgages payable........................................... 1,585,196
Partners' capital (deficit)................................. (171,740)
</TABLE>
(C) Represents the purchase price paid by the Partnership to the limited
partners in order to obtain additional ownership by AIMCO in 91 real estate
partnerships. For the purposes of the pro-forma presentation, it is
assumed: (i) 65% of the purchase price is funded with cash by drawing down
on the Partnership's unsecured short term credit facility; (ii) 25% of the
purchase price is funded by the issuance of 749,362 OP Units at $40 per OP
Unit; and (iii) 10% of the purchase price is funded by the issuance of 8%
Preferred OP Units.
(D) Represents historical balance sheet data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(E) Represent the adjustment to real estate recorded in the IFG Merger related
to the one real estate partnership that will be consolidated as a result of
the Partnership's purchase of additional partnership interests.
(F) Represents the elimination of the partners' capital in the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(G) Represents minority interest of the one real estate partnership that will
be consolidated as a result of the Partnership's purchase of additional
partnership interests.
P-40
<PAGE> 691
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations.............. $ 431,256 $ 11,270(C) $ 442,526
Property operating expenses....................... (182,830) (6,612)(C) (189,442)
Owned property management expense................. (11,831) -- (11,831)
Depreciation...................................... (96,264) (2,589)(C) (98,853)
--------- -------- ---------
Income from property operations................... 140,331 2,069 142,400
--------- -------- ---------
Management fees and other income.................. 41,676 -- 41,676
Management and other expenses..................... (23,683) -- (23,683)
Corporate overhead allocation..................... (588) -- (588)
Amortization...................................... (26,480) -- (26,480)
--------- -------- ---------
Income from service company business.............. (9,075) -- (9,075)
Minority interest in service company business..... (10) -- (10)
--------- -------- ---------
Partnership's share of income from service company
business........................................ (9,085) -- (9,085)
--------- -------- ---------
General and administrative expenses............... (21,371) -- (21,371)
Interest expense.................................. (113,788) (5,691)(D)
(2,220)(C) (121,699)(H)
Interest income................................... 21,734 21,734
Minority interests................................ (9,983) (51)(E) (10,034)
Equity in losses of unconsolidated partnerships... (27,537) (16,864)(F)
483(G) (43,918)(I)
Equity in earnings of Unconsolidated
Subsidiaries.................................... 5,848 -- 5,848
--------- -------- ---------
Net income (loss)................................. (13,851) (22,274) (36,125)(H)
Income attributable to Preferred Unitholders...... 42,174 980 43,154(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders...... (56,025) $(23,254) $ (79,279)(H)
========= ======== =========
Basic earnings (loss) per OP Unit................. (.83) $ (1.16)(H)
========= =========
Diluted earnings (loss) per OP Unit............... $ (.83) $ (1.16)(H)
========= =========
Weighted average OP Units outstanding............. 67,522 68,287
========= =========
Weighted average OP Units and equivalents
outstanding..................................... 68,366 69,131
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $456,968
Operating expense........................................... 249,097
Depreciation................................................ 87,344
Interest.................................................... 138,778
Net income.................................................. 15,005
</TABLE>
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<PAGE> 692
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $10,740 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $6,124 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net loss,
preferred unit distributions, and net loss per OP Unit in the event that
the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- --------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense......... $(121,699) $(124,763) $(116,008) $(116,008)
Net loss................. (36,125) (39,189 (30,434) (30,434)
Preferred unit
distributions.......... 43,154 42,174 42,174 51,971
Net loss attributable to
OP Unitholders......... (79,279) (81,363) (72,608) (82,405)
Net loss per OP Unit..... (1.16) (1.20) (1.03) (1.22)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................. $ 1,137 $ 1,245 $ 938 $ 938
Net loss................... (37,262) (40,434) (31,372) (31,372)
Net loss attributable to OP
Unitholders.............. (80,416) (82,608) (73,546) (83,343)
Net loss per OP Unit....... (1.18) (1.22) (1.04) (1.23)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, the Partnership will own 49%
of certain 88 Partnerships, 25% of two Partnerships, and 100% of one
Partnership. The amount included in the pro forma financial statements
assume an acceptance rate of 100%. The following table shows the effect on
equity in earnings of unconsolidated partnerships, net loss, net loss
attributable to OP Unitholders, and net loss per OP Unit in the event that
the Partnership will have an acceptance rate of 50% of the interests
tendered and will own varying percentages of each partnership:
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(36,510)
Net loss.................................................... (26,084)
Net loss attributable to OP Unitholders..................... (68,784)
Net loss per OP Unit........................................ (1.01)
</TABLE>
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<PAGE> 693
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-43
<PAGE> 694
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations............... $ 337,307 $ 8,654(C) $ 345,961
Property operating expenses........................ (131,851) (4,389)(C) (136,240)
Owned property management expense.................. (8,933) -- (8,933)
Depreciation....................................... (78,479) (1,941)(C) (80,420)
--------- -------- ---------
Income from property operations.................... 118,044 2,324 120,368
--------- -------- ---------
Management fees and other income................... 28,912 -- 28,912
Management and other expenses...................... (14,386) -- (14,386)
Corporate overhead allocation...................... (196) -- (196)
Amortization....................................... (15,243) -- (15,243)
--------- -------- ---------
Income from service company business............... (913) -- (913)
Minority interest in service company business...... -- -- --
--------- -------- ---------
Partnership's share of income from service company
business......................................... (913) -- (913)
--------- -------- ---------
General and administrative expenses................ (8,632) -- (8,632)
Interest expense................................... (85,010) (4,250)(D)
(1,630)(C) (90,890)(H)
Interest income.................................... 40,887 40,887
Minority interests................................. (8,429) (119)(E) (8,548)
Equity in losses of unconsolidated partnerships.... (10,234) (13,156)(F)
41(G) (23,349)(I)
Equity in earnings of Unconsolidated
Subsidiaries..................................... 851 -- 851
Amortization of goodwill........................... (5,071) -- (5,071)
--------- -------- ---------
Net income (loss).................................. 41,493 (16,790) 24,703(H)
Income attributable to Preferred Unitholders....... 32,414 735 33,149(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders....... $ 9,079 $(17,525) $ (8,446)(H)
========= ======== =========
Basic earnings (loss) per OP Unit.................. $ .13 $ (.12)(H)
========= =========
Diluted earnings (loss) per OP Unit................ $ .13 $ (.12)(H)
========= =========
Weighted average OP Units outstanding.............. 68,554 69,319
========= =========
Weighted average OP Units and equivalents
outstanding...................................... 69,218 69,983
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data (unaudited) for the nine months ended September
30, 1998 related to the 91 real estate partnerships is as follows (dollars
in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $338,937
Operating expense........................................... 182,529
Depreciation................................................ 64,127
Interest.................................................... 103,756
Net income.................................................. (9,329)
</TABLE>
P-44
<PAGE> 695
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $8,552 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $4,604 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net
income, preferred unit distributions, and net loss per OP Unit in the event
that the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense........... $(90,890) $(93,184) $(86,640) $(86,640)
Net income................. 24,703 22,409 28,953 28,953
Preferred unit
distributions............ 33,149 32,414 32,414 39,762
Net loss attributable to OP
Unitholders.............. (8,446) (10,005) (3,461) (10,809)
Net loss per OP Unit....... (.12) (.15) (.05) (.16)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- ------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................... $ 851 $ 931 $ 702 $ 702
Net income................... 24,703 21,478 28,251 28,251
Net loss attributable to OP
Unitholders................ (9,296) (10,936) (4,163) (11,511)
Net loss per OP Unit......... (.13) (.16) (.06) (.17)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, AIMCO will own 49% of certain
88 Partnerships, 25% of two Partnerships, and 100% of one Partnership. The
following table shows the effect on equity in earnings of unconsolidated
partnerships, net income, net income (loss) attributable to OP Unitholders,
and net loss per OP Unit in the event the Partnership will own varying
percentages of each partnership.
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(17,797)
Net income.................................................. 32,216
Net income (loss) attributable to OP Unitholders............ (593)
Net income (loss) per OP Unit............................... (.01)
</TABLE>
P-45
<PAGE> 696
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-46
<PAGE> 697
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ (13,851) $(22,274)(C) $ (36,125)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 128,169 2,589(D) 130,758
Gain on investments..................................... (12) -- (12)
(Gain) loss on disposition of properties................ (3,882) -- (3,882)
Minority interests...................................... 9,983 51 10,034
Equity in earnings of unconsolidated partnerships....... 27,537 16,864(E)
(483)(F) 43,918
Equity in earnings of unconsolidated subsidiaries....... (5,848) -- (5,848)
Extraordinary (gain) loss on early extinguishment of
debt.................................................. --
Changes in operating assets and operating liabilities... 519 (660)(G) (141)
---------- -------- ----------
Total adjustments................................... 156,466 18,361 174,827
---------- -------- ----------
Net cash provided by (used in) operating
activities........................................ 142,615 (3,913) 138,702
Net cash used in discontinued operations............ (7,999) -- (7,999)
---------- -------- ----------
Net cash provided by (used in) continuing
operations........................................ 134,616 (3,913) 130,703
---------- -------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate......................... 41,419 -- 41,419
Purchase of real estate................................... (625,603) -- (625,603)
Additions to real estate, investments and property held
for sale................................................ (55,892) (1,024)(G) (56,916)
Proceeds from sale of property held for sale.............. 303 -- 303
Purchase of general and limited partnership interests..... (276,458) (79,601)(H) (356,059)
Purchase of management contracts.......................... (48,554) -- (48,554)
Purchase of/additions to notes receivable................. (81,670) -- (81,670)
Proceeds from repayments of notes receivable.............. 10,052 -- 10,052
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 94,686 10,070(I) 104,756
Contribution to unconsolidated subsidiaries............... (42,879) -- (42,879)
Proceeds from sale of securities.......................... 642 -- 642
Purchase of investments held for sale..................... (73) -- (73)
Purchase of NHP........................................... (60,575) -- (60,575)
Purchase of Ambassador common stock....................... (19,881) -- (19,881)
---------- -------- ----------
Net cash used in investing activities............... (1,064,483) (70,555) (1,135,038)
---------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 761,270 -- 761,270
Principal repayments on secured notes payable............. (307,917) (713)(G) (308,630)
Proceeds from secured short-term financing................ 19,050 79,601(H) 98,651
Repayments on secured short-term financing................ (259,461) -- (259,461)
Principal repayments on unsecured short-term notes
payable................................................. (50,879) -- (50,879)
Proceeds (payoff) from unsecured short-term financing..... (12,500) -- (12,500)
Principal repayments on secured tax-exempt bond
financing............................................... (1,487) -- (1,487)
Net borrowings (paydowns) on the Company's revolving
credit facilities....................................... (162,008) -- (162,008)
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (17,032) -- (17,032)
Proceeds from issuance of common and preferred stock,
net..................................................... 1,098,265 -- 1,098,265
Proceeds from exercises of employee stock options and
warrants................................................ 11,553 -- 11,553
Repurchase of common stock................................ (3,283) -- (3,283)
Principal repayments received on notes due from
Officers................................................ 27,280 -- 27,280
Investments made by minority interests.................... 249 -- 249
Receipt of contributions from minority interests.......... 37,345 -- 37,345
Payments of distributions to minority interests........... (2,713) -- (2,713)
Payment of distributions.................................. (130,657) -- (130,657)
Payment of distributions to limited partners.............. (5,208) (1,415)(J) (6,623)
Payment of preferred unit distributions................... (42,984) (979)(K) (43,963)
Payment of distributions to minority interests............ (21,788) -- (21,788)
Net transactions with Insignia/ESG........................ (57,612) -- (57,612)
---------- -------- ----------
Net cash provided by financing activities........... 879,483 76,494 955,977
---------- -------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (50,384) 2,026 (48,358)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 117,896 2,291 120,187
---------- -------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 67,512 $ 4,317 $ 71,829
========== ======== ==========
</TABLE>
P-47
<PAGE> 698
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 65,372
Cash used in investing activities......................... (11,713)
Cash used in financing activities......................... (74,617)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the cash portion of the purchase price (and additional
borrowings by the Partnership) related to the acquisition by the
Partnership of additional limited partnership interests in 91 real estate
limited partnerships.
(I) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(J) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.85 per Common OP Unit.
(K) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-48
<PAGE> 699
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ 41,493 $(16,790)(C) $ 24,703
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 101,523 1,941(D) 103,464
(Gain) loss on disposition of properties................ -- -- --
Minority interests...................................... 8,429 119 8,548
Equity in earnings of unconsolidated partnerships....... 10,234 13,156(E)
(41)(F) 23,349
Equity in earnings of unconsolidated subsidiaries....... (851) -- (851)
Non-cash compensation................................... 796 -- 796
Changes in operating assets and operating liabilities... (69,549) (21)(G) (69,570)
--------- -------- ---------
Total adjustments................................... 50,582 15,154 65,736
--------- -------- ---------
Net cash provided by operating activities........... 92,075 (1,636) 90,439
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... 27,122 -- 27,122
Additions to real estate.................................. (57,526) (668)(G) (58,194)
Proceeds from sale of property and investments held for
sale.................................................... (35) -- (35)
Additions to property held for sale....................... (1,986) -- (1,986)
Purchase of general and limited partnership interests..... (9,596) -- (9,596)
Purchase of/additions to notes receivable................. (100,034) -- (100,034)
Proceeds from repayments/sale of notes receivable......... 42,747 -- 42,747
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 23,629 5,809(H) 29,438
Payment of trust based preferred dividends................ (7,415) -- (7,415)
Cash received in connection with Ambassador Merger and
AMIT Merger............................................. 17,915 -- 17,915
Contribution to unconsolidated subsidiaries............... (13,032) -- (13,032)
Purchase of investments held for sale..................... (4,935) -- (4,935)
Redemption of OP Units.................................... (516) -- (516)
Merger costs.............................................. (1,402) -- (1,402)
--------- -------- ---------
Net cash used in investing activities............... (85,064) 5,141 (79,923)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 291,885 -- 291,885
Principal repayments on secured notes payable............. (52,023) -- (52,023)
Principal advances on secured tax-exempt bond financing... 21,784 -- 21,784
Principal repayments on secured tax-exempt bond
financing............................................... (1,436) -- (1,436)
Net borrowings/ repayments on secured short-term
financing............................................... 135,332 -- 135,332
Net borrowings (paydowns) on the revolving credit
facilities.............................................. 2,513 (812)(G) 1,701
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (5,810) -- (5,810)
Proceeds from issuance of common stock and preferred
stock, net.............................................. -- -- --
Repurchase of common stock................................ (10,972) -- (10,972)
Proceeds from exercises of employee stock options and
warrants................................................ 16,294 -- 16,294
Principal repayments received on notes due from
Officers................................................ 8,084 -- 8,084
Receipt of contributions from minority interests.......... -- -- --
Payments of distributions to minority interests........... (2,034) (2,034)
Payment of distributions.................................. (107,989) -- (107,989)
Payment of distributions to limited partners.............. (12,669) (1,291)(I) (13,960)
Payment of preferred unit distributions................... (27,010) (735)(J) (27,745)
Proceeds from issuance of High Performance Units.......... 1,988 -- 1,988
Net transactions with Insignia/ESG........................ (241,003) -- (241,003)
--------- -------- ---------
Net cash provided by financing activities........... 19,578 (2,838) 16,740
--------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 26,589 667 27,256
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 55,700 4,316 60,016
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 82,289 $ 4,983 $ 87,272
========= ======== =========
</TABLE>
P-49
<PAGE> 700
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the nine months ended September 30, 1998
related to the 91 real estate partnerships is as follows (dollars in
thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 76,113
Cash used in investing activities......................... (22,616)
Cash used in financing activities......................... (42,273)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 30 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(I) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.6875 per Common OP Unit.
(J) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-50
<PAGE> 701
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: Calmark Ft. Collins Ltd.
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
Calmark Ft. Collins Ltd. (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 limited partnership interests in the Partnership (the "Units") will be
acquired by the Purchaser in exchange for an offer price per Unit of $22,646 in
cash, or 601.75 Common OP Units of the Purchaser, or 906 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 financial statements for the years ended
December 31, 1996 and 1997, and the quarterly report for the period ending
September 30, 1998, which the Partnership's management has indicated to be
the most current available financial statements;
3. Reviewed descriptive information concerning the real property owned
by the Partnership (the "Property"), including location, number of units
and unit mix, age, amenities and land acreage;
A-1
<PAGE> 702
4. Reviewed summary historical operating statements for the Property,
for the years ended December 31, 1996 and 1997, and the nine months ending
September 30, 1998;
5. Reviewed the 1998 operating budget for the Property prepared by the
Partnership's management. Such budgets are summarized in the Prospectus
Supplement under the section "Stanger Analysis -- Summary of Materials
Considered";
6. Revised the estimate of liquidation value and going concern value
provided by the general partner to Stanger. Such estimates are described in
the Prospectus Supplement under the section "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration." In
addition, we reviewed the 1998 operating budgets for each property provided
by the partnership;
7. Discussed with management market conditions for the Property;
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 Property and the Partnership; the physical condition
of the Property including any deferred maintenance; and other factors
influencing value of the Property and the Partnership;
8. Performed a site inspection of the Property;
9. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Property, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Property;
10. Reviewed information provided by the Company relating to debt
encumbering the Property;
11. 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 Property, the allocation of net
Partnership values between the General Partner and Limited Partners, and the
transaction costs and fees associated with a sale of the Property. 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 Property 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 Property is as improved; and that all calculations were made in
accordance with the terms of the Partnership Agreement.
A-2
<PAGE> 703
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 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
March , 1999
A-3
<PAGE> 704
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 directors
of AIMCO are set forth below. The two directors of AIMCO-GP are Terry Considine
and Peter Kompaniez. The two directors of the general partner of your
partnership are Peter K. Kompaniez and Patrick J. Foye. The two executive
officers of the general partner of your partnership are Patrick J. Foye,
Executive Vice President, and Timothy R. Garrick, Vice President -- Accounting.
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
Paul J. McAuliffe............................ Executive Vice President -- Capital Markets
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
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
</TABLE>
B-1
<PAGE> 705
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
B.A. from Harvard College, a J.D. from Harvard Law School
and is admitted as a member of the Massachusetts Bar.
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.
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
</TABLE>
B-2
<PAGE> 706
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
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.
Paul J. McAuliffe.................... Mr. McAuliffe was appointed Executive Vice
President -- Capital Markets in February 1999. Prior to
joining AIMCO, Mr. McAuliffe was Senior Managing Director of
Secured Capital Corp and prior to that time had been a
Managing Director of Smith Barney, Inc. from 1993 to 1996,
where he was a key member of the underwriting team that led
AIMCO's initial public offering in 1994. Mr. McAuliffe was
also a Managing Director and head of the real estate group
at CS First Boston from 1990 to 1993 and he was a Principal
in the real estate group at Morgan Stanley & Co., Inc. from
1983 to 1990. Mr. McAuliffe received a B.A. from Columbia
College and an MBA from University of Virginia, Darden
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
</TABLE>
B-3
<PAGE> 707
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
and the Apartment Association of Metro Denver. Mr. Ira
received a B.S. from Metropolitan State College in 1975.
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.
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,
</TABLE>
B-4
<PAGE> 708
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Mr. Martin is a director of Dresser, which is engaged in the
petroleum services, hydrocarbon and engineering industries.
Timothy R. Garrick................... Mr. Garrick has been Vice President -- Accounting of the
general partner and AIMCO since October 1, 1998. Prior to
that date, Mr. Garrick served as Vice
President -- Accounting Services of Insignia Financial Group
from June 1997 until October 1998. From 1992 until June of
1997, Mr. Garrick served as Vice President of Partnership
Accounting for Insignia Financial Group. From 1987 to 1990,
Mr. Garrick served as Investment Advisor for U.S. Shelter
Corporation. From 1984 to 1987, Mr. Garrick served as
Partnership Investment Analyst for U.S. Shelter Corporation.
From 1979 to 1984, Mr. Garrick worked on the audit staff of
Ernst & Whinney. Mr. Garrick received his B.S. Degree from
the University of South Carolina in 1979 and is a certified
public accountant.
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> 709
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
By Fax:
(201) 896-0910
<PAGE> 710
PROSPECTUS SUPPLEMENT
(To Prospectus dated March 26, 1999)
AIMCO Properties, L.P.
is offering to acquire units of limited partnership interest of
Catawba Club Associates, L.P.
in exchange for your choice of:
446.25 of our 8.0% Class Two Partnership Preferred Units;
296.50 of our Partnership Common Units; or
$11,155 in cash.
Generally, you will not recognize any immediate taxable gain or loss if you
exchange your units solely for our securities. However, you will recognize
taxable gain or loss if you exchange your units for cash.
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 the offer
consideration from a financial point of view.
Our offer consideration will be reduced for any distributions subsequently
made by your partnership prior to the expiration of our offer.
We will only accept a maximum of 25% 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.
You will not pay any fees or commissions if you tender your units.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline. You may withdraw any tendered units at any time
before we have accepted them for payment.
SEE "RISK FACTORS" BEGINNING ON PAGE S-23 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF RISK FACTORS THAT
YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration of $11,155 per unit without any
arms-length negotiations. Accordingly, our offer consideration may not
reflect the fair market value of your units.
- We cannot predict when the property owned by your partnership may be
sold.
- Your general partner is a subsidiary of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- We are making this offer with a view to making a profit and 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.
- Continuation of your partnership will result in our affiliates continuing
to receive management fees from your partnership which would not be
payable if your partnership was liquidated.
- It is possible that we may conduct a subsequent offer at a higher price
more than one year after expiration of this offer.
- Unlike your partnership, our policy is to reinvest proceeds from the sale
of our properties or refinancing of our indebtedness.
- We may change our investment, acquisition or financing policies without a
vote of our securityholders.
- If you acquire our securities, your investment will change from holding
an interest in a single property to holding an interest in our large
portfolio of properties, thereby fundamentally changing the nature of
your investment.
- Recently, Moody's Investors Service revised its outlook for AIMCO's
ratings from stable to negative.
- There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
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.
March 26, 1999
<PAGE> 711
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY........................................ S-1
The Offer.................................... S-1
The AIMCO Operating Partnership.............. S-1
Affiliation with your General Partner........ S-1
Risk Factors................................. S-1
Background and Reasons for the Offer......... S-6
Valuation of Units........................... S-9
Fairness of the Offer........................ S-10
Stanger Analysis............................. S-11
Your Partnership............................. S-11
Terms of the Offer........................... S-12
Federal Income Tax Consequences.............. S-14
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-14
Comparison of Your Units and AIMCO OP Units.. S-14
Conflicts of Interest........................ S-15
Source and Amount of Funds and Transactional
Expenses................................... S-16
Summary Financial Information of AIMCO
Properties, L.P............................ S-17
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-19
Summary Financial Information of Catawba Club
Associates, L.P............................ S-21
Comparative Per Unit Data.................... S-21
THE AIMCO OPERATING PARTNERSHIP................ S-22
RISK FACTORS................................... S-23
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-23
Offer Consideration Not Based on Third
Party Appraisal or Arms-Length
Negotiation.............................. S-23
Offer Consideration May Not Represent Fair
Market Value............................. S-23
Offer Consideration Does Not Reflect Future
Prospects................................ S-23
Offer Consideration Based on Our Estimate
of Liquidation Proceeds.................. S-23
Offer Consideration May Be Less Than
Liquidation Value........................ S-23
Holding Units May Result in Greater Future
Value.................................... S-23
Conflicts of Interest with Respect to the
Offer.................................... S-23
Conflicts of Interest Relating to
Management Fees.......................... S-24
Possible Subsequent Offer at a Higher
Price.................................... S-24
Possible Recognition of Taxable Gain on a
Sale of Your Units....................... S-24
Fairness Opinion of Third Party Relied on
Information We Provided.................. S-24
Loss of Future Distributions from Your
Partnership.............................. S-25
Possible Effect of the Other Exchange
Offers on Us............................. S-25
Potential Delay in Payment................. S-25
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-25
Fundamental Change in Nature of
Investment............................... S-25
Fundamental Change in Number of Properties
Owned.................................... S-25
Lack of Trading Market for OP Units........ S-25
Uncertain Future Distributions............. S-25
Possible Reduction in Required
Distributions on Preferred OP Units...... S-26
Possible Redemption of Preferred Stock..... S-26
Possible Recognition of Taxable Gains on OP
Units.................................... S-26
Limitations on Effecting a Change of
Control.................................. S-26
Limitation on Transfer of OP Units......... S-26
Limited Voting Rights of Holders of OP
Units.................................... S-26
Market Prices for AIMCO's Securities May
Fluctuate................................ S-26
Litigation Associated with Partnership
Acquisitions............................. S-26
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Dilution of Interests of Holders of OP
Units.................................... S-27
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-27
Possible Increase in Control of Your
Partnership by Us........................ S-27
Recognition of Gain Resulting from Possible
Future Reduction in Your Partnership
Liabilities.............................. S-27
Possible Termination of Your Partnership
for Federal Income Tax Purposes.......... S-27
Risk of Inability to Transfer Units for
12-Month Period.......................... S-27
Possible Change in Time Frame Regarding
Sale of Property......................... S-27
Balloon Payments........................... S-28
SPECIAL FACTORS TO CONSIDER.................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-28
Background of the Offer...................... S-28
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
Disadvantages of the Offer................... S-32
VALUATION OF UNITS............................. S-34
FAIRNESS OF THE OFFER.......................... S-36
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-36
Fairness to Unitholders who Tender their
Units...................................... S-37
Fairness to Unitholders who do not Tender
their Units................................ S-38
Comparison of Consideration to Alternative
Consideration.............................. S-38
Allocation of Consideration.................. S-41
STANGER ANALYSIS............................... S-42
Experience of Stanger........................ S-42
Summary of Materials Considered.............. S-42
Summary of Reviews........................... S-44
Conclusions.................................. S-46
Assumptions, Limitations and
Qualifications............................. S-46
Compensation and Material Relationships...... S-47
YOUR PARTNERSHIP............................... S-48
General...................................... S-48
Your Partnership and its Property............ S-48
Property Management.......................... S-48
Investment Objectives and Policies; Sale or
Financing of Investments................... S-48
Capital Replacement.......................... S-49
Borrowing Policies........................... S-50
Competition.................................. S-50
Legal Proceedings............................ S-50
History of the Partnership................... S-50
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-50
Distributions and Transfers of Units......... S-51
Beneficial Ownership of Interests in Your
Partnership................................ S-51
Compensation Paid to the General Partner and
its Affiliates............................. S-51
SELECTED FINANCIAL INFORMATION OF YOUR
PARTNERSHIP.................................. S-52
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP.......................... S-53
THE OFFER...................................... S-56
Terms of the Offer; Expiration Date.......... S-56
Acceptance for Payment and Payment for
Units...................................... S-56
Procedure for Tendering Units................ S-57
Withdrawal Rights............................ S-60
Extension of Tender Period; Termination;
Amendment.................................. S-60
</TABLE>
i
<PAGE> 712
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Proration.................................... S-61
Fractional OP Units.......................... S-61
Future Plans of the AIMCO Operating
Partnership................................ S-61
Voting by the AIMCO Operating Partnership.... S-62
Dissenters' Rights........................... S-62
Conditions of the Offer...................... S-62
Effects of the Offer......................... S-65
Certain Legal Matters........................ S-65
Fees and Expenses............................ S-67
Accounting Treatment......................... S-67
FEDERAL INCOME TAX CONSEQUENCES................ S-68
Tax Opinions................................. S-68
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-69
Disguised Sales.............................. S-70
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-70
Tax Consequences of Exchanging Units Solely
for Cash................................... S-71
Adjusted Tax Basis........................... S-71
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-71
Passive Activity Losses...................... S-72
Tax Reporting................................ S-72
Foreign Offerees............................. S-72
Tax Consequences of a Termination of Your
Partnership................................ S-72
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-74
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-81
DESCRIPTION OF PREFERRED OP UNITS.............. S-87
General...................................... S-87
Ranking...................................... S-87
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Distributions................................ S-87
Allocation................................... S-88
Liquidation Preference....................... S-88
Redemption................................... S-89
Voting Rights................................ S-89
Restrictions on Transfer..................... S-90
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-90
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-92
CONFLICTS OF INTEREST.......................... S-96
Conflicts of Interest with Respect to the
Offer...................................... S-96
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-96
Competition Among Properties................. S-96
Features Discouraging Potential Takeovers.... S-96
Future Exchange Offers....................... S-97
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-97
LEGAL MATTERS.................................. S-98
EXPERTS........................................ S-98
INDEX TO FINANCIAL STATEMENTS.................. F-1
PRO FORMA FINANCIAL INFORMATION OF AIMCO
PROPERTIES, L.P. ............................ P-1
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> 713
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- 446.25 of our Class Two Partnership Preferred Units;
- 296.50 of our Partnership Common Units; or
- $11,155 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 accept a maximum of 25% of the outstanding units in response to our
offer. Our offer is not subject to any minimum number of units being tendered.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline.
For the five years ended December 31, 1998, your partnership paid no
distributions.
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
its wholly owned subsidiary, AIMCO-GP, Inc. ("AIMCO GP"), AIMCO acts as the sole
general partner of the AIMCO Operating Partnership. As of December 31, 1998,
AIMCO-GP and another AIMCO subsidiary, AIMCO-LP, Inc., a limited partner of the
AIMCO Operating Partnership (the "Special Limited Partner"), owned approximately
an 83% interest in the AIMCO Operating Partnership. As of December 31, 1998, our
portfolio of owned or managed properties included 379,363 apartment units in
2,147 properties located in 49 states, the District of Columbia and Puerto Rico.
Based on apartment unit data compiled by the National Multi Housing Council, we
believe that we are one of the largest owners and managers of multifamily
apartment properties in the United States. As of December 31, 1998, we:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 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. and our February 26, 1999 merger with Insignia Properties Trust, we
acquired a 100% ownership interest in the general partner of your partnership,
Jacques-Miller Associates, and the company that manages the property owned by
your partnership.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-23 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the
S-1
<PAGE> 714
risks associated with our offer and the disadvantages of the offer to you and
should be considered when you review "Summary -- Background and Reasons for the
Offer -- Expected Benefits of the Offer":
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. We did not use any third-party appraisal or valuation to determine
the value of any property owned by your partnership. We established the terms of
our offer, including the exchange ratios and the cash consideration, without any
arms-length negotiations.
OFFER CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimate your property to be worth $5,313,000 less
approximately $515,785 of deferred maintenance and investment. It is possible
that a sale of the property could result in your receiving more per unit than in
our offer. Even if our cash offer consideration is equal to liquidation value,
if you accept OP Units, you may not ultimately receive an amount equal to the
cash offer consideration when you sell such OP Units or any AIMCO securities you
may receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
value if you retain your units until your partnership is liquidated.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of ours and, therefore, has substantial conflicts of interest with
respect to our offer. We are making this offer with a view to making a profit.
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 RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its property, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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
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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.
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. You
should review "Federal Income Tax Consequences" 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. 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.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is our subsidiary).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. For any units that we
acquire from you, you will not receive any future distributions from your
partnership's operating cash flow or upon a sale of property owned by your
partnership or a refinancing of any of its debt. If you tender your units in
exchange for OP Units, you will be entitled to future distributions from us from
our operating cash flow and upon a dissolution, liquidation or wind-up of the
AIMCO Operating Partnership.
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from a sale of a property or a refinancing of its indebtedness, to (ii)
a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of 2008 to a much larger partnership with a
partnership termination date of 2093.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you tender your units
for our OP Units, you will have changed your investment from an interest in a
partnership that owns and manages one property to an interest in a partnership
that invests in and manages a large portfolio of properties.
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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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus.
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions.
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a
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result, we may incur costs associated with defending or settling such litigation
or paying any judgment if we lose. As of the present time, no limited partners
of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. As a result of the
offer, we may increase our ability to influence voting decisions with respect to
your partnership. However, we will not be able to control voting decisions
unless we acquire more units in another transaction, which cannot take place for
at least one year after expiration of this offer. Also, removal of your general
partner (which is our subsidiary) or the manager of any property owned by your
partnership may become more difficult or impossible without our consent or
approval.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
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.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investment in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to have to
hold the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns one property. The general partner of your partnership
continually considers whether the property should be sold or otherwise disposed
of after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for your partnership. We cannot
predict when the property will be sold or otherwise disposed of. However, there
is no current plan or intention to sell the property in the near future.
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BALLOON PAYMENTS. Your partnership has approximately $3,177,177 of balloon
payments due on its mortgage debt on November 15, 2002. Your partnership will
have to refinance such debt or sell its property prior to the balloon payment
date, or it will be in default and could lose the property to foreclosure.
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 51% ownership interest in Insignia Properties Trust, which has
a 100% ownership interest in the general partner of your partnership and the
company that manages the property owned by your partnership. On February 26,
1999, we acquired the remaining 49% interest in Insignia Properties Trust in a
merger transaction. One of the consequences of the merger with Insignia is to
allow us to make the offer and, if successful, to increase our ownership in 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 August 28, 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
(which is our subsidiary):
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.
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. 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. Your partnership's mortgage notes are due in November, 2002 and
requires balloon payments of $3,177,177. Your partnership currently has
adequate sources of cash to finance its operations on both a short term and
long term basis but will have to sell its property or refinance its
indebtedness to pay such balloon payments. In addition, continuation of
your partnership without the offer would deny you and your partners the
benefits that your general partner (which is our subsidiary) 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
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of the fair market value of your partnership's property. There is currently
no market for the Preferred OP Units or Common OP Units.
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 Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the NYSE.
- Preferred Quarterly Distributions. Your partnership made no distributions
for the fiscal year ended December 31, 1998. Holders of Preferred OP
Units will be entitled to receive quarterly distributions of $0.50 per
unit (equivalent to $2.00 on an annualized basis) before any
distributions are paid to holders of Common OP Units. This is equivalent
to a distribution of $892.50 per year on the number of Preferred OP Units
you will receive in exchange for each of your partnership 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 Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- Quarterly Distributions. Your partnership made no distributions for the
fiscal year ended December 31, 1998. In 1998, we paid quarterly
distributions on the Common OP Units totalling $2.25 per unit. In January
1999, we increased our distribution rate on each of the Common OP Units
to $2.50 on an annual basis. See "The AIMCO Operating Partnership."
Assuming no change in the level of our distributions, this is equivalent
to a distribution of $741.25 per year on the number of Common OP Units
you will receive in exchange for each of your partnership units.
- 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 Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
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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.
Disadvantages of the Offer.
The principal disadvantages of the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and determining the offer consideration, no one separately represented
the interests of the limited partners. Although we have a fiduciary duty
to the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of such property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pretax cash proceeds to you than our
offer.
- OP Units. OP Units lack a public market, have transfer restrictions and
must be held for one year before they can be redeemed by a holder. The
ultimate return on the OP Units is directly tied to the future price of
AIMCO's Class A Common Stock or Class I Preferred Stock. You could
ultimately receive less for your OP Units than the cash price in our
offer. Further, on or after March 1, 2005, we may redeem the Class I
Preferred Stock for $25 per share.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
a sale of the property would be advantageous given market conditions, the
condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of the property and the tax consequences to you
and your partners upon a sale of the property.
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
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VALUATION OF UNITS
We determined the offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower of the value produced. We used your partnership's
property income for the fiscal year ended December 31, 1997. However, in
determining the appropriate capitalization rate, we considered the partnership's
property income since December 31, 1997. Our method for selecting a
capitalization rate begins with each property being assigned a location and
condition rating (e.g., "A" for excellent, "B" for good, "C" for fair, and "D"
for poor). We have rated your property's location B (good) and its condition C
(fair). Generally, we assign an initial capitalization rate of 10.50% to
properties in this category. We then adjust the capitalization rate based on
whether the mortgage debt that the property is subject to bears interest at a
rate above or below 7.5% per annum. Generally, for every 0.5% in excess of 7.5%,
the capitalization rate would be increased by 0.25%. Your property's mortgage
debt bears interest at 7.60% per annum, which resulted in an increase from the
initial capitalization rate of 0.25%. We also considered any changes in your
partnership's property income from 1997 to 1998. Because your partnership's
property income in 1998 remained relatively unchanged compared to 1997, we made
no further revision of the capitalization rate, resulting in a final
capitalization rate of 10.75%. The evaluation of a property's location and
condition, and the determination of an appropriate capitalization rate for a
property, is subjective in nature, and others evaluating the same property might
use a different capitalization rate and derive a different property value.
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. Further, in
applying the direct capitalization method, others may make different assumptions
and obtain different results. 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>
Property income (January 1, 1997 to December 31, 1997)...... $ 571,000
Capitalization rate......................................... 10.75%
-----------
Gross valuation of partnership property..................... $ 5,313,000
Plus: Cash and cash equivalents............................. 10,388
Plus: Other partnership assets, net of security deposits.... 314,283
Less: Mortgage debt, including accrued interest............. (3,850,312)
Less: Accounts payable and accrued expenses................. (62,657)
Less: Other liabilities..................................... (731,150)
-----------
Partnership valuation before taxes and certain costs........ 993,552
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures for deferred
maintenance............................................... (515,785)
Less: Closing costs......................................... (132,825)
-----------
Estimated net valuation of your partnership................. 344,942
Percentage of estimated net valuation allocated to holders
of units.................................................. 98.63%
-----------
Estimated net valuation of units............................ 340,231
Total number of units............................. 30.5
-----------
Estimated valuation per unit................................ 11,155
===========
Cash consideration per unit................................. $ 11,155
===========
</TABLE>
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In order to determine the number of Preferred OP Units we are offering for
each of your units, we divided the cash offer consideration of $11,155 by the
$25 liquidation preference of each Preferred OP Unit to get 446.25 Preferred OP
Units per unit.
In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $11,155 by a
price of $37.63 (the average closing price of AIMCO's Class A Common Stock on
the NYSE for the 30 trading days ended March 23, 1999) to get 296.50 Common OP
Units per unit.
FAIRNESS OF THE OFFER
Fairness to Unitholders. Your general partner is our subsidiary. 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. Your general partner did not participate in the structuring of the
offer. We and your general partner believe that the offer and all forms of
consideration offered is fair to you and the other limited partners of your
partnership. 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 (which is our subsidiary) 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 (which is our subsidiary) has compared our offer consideration
to:
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated;
- your general partner's estimate of the going concern value of your
partnership if it continued operating as an independent stand-alone
entity; and
- the net book value of your partnership.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C> <C>
Cash offer consideration.................................... $ 11,155
Partnership Preferred Units................................. $ 11,155
Partnership Common Units.................................... $ 11,155
Alternatives:
Estimated liquidation proceeds............................ $ 11,155
Estimated going concern value(1).......................... $ 2,506
Estimated alternative going concern value(2).............. $ 4,649
Net book value (deficit).................................. $(79,615)
</TABLE>
S-10
<PAGE> 723
- ---------------
(1) Assumes a refinancing of the partnership's indebtedness when it comes due.
(2) Assumes a sale of the partnership property when the mortgages are due,
rather than a refinancing of the mortgages.
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. Stanger has
rendered similar fairness opinions with regard to the other tender offers being
made by the AIMCO Operating Partnership. Stanger rendered the opinions only as
to the individual fairness of the offer consideration in each proposed exchange
offer.
YOUR PARTNERSHIP
Your Partnership and its Property. Catawba Club Associates, L.P. is a
Delaware limited partnership which was formed on May 28, 1985 for the purpose of
owning and operating a single apartment property located in Columbus, Ohio,
known as "Catawba Club Apartments." Your partnership's property consists of 186
units and was built in 1975. Your partnership has no employees. As of September
30, 1998, there were 30.5 units of limited partnership interest issued and
outstanding, which were held of record by 45 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.
Your partnership sold $1,966,400 of limited partnership units in 1985.
Between January 1, 1993 and December 31, 1998 your partnership made no cash
distributions. Your partnership currently owns one property.
Property Management. Your partnership's property has been managed by an
affiliate of ours. 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.
Investment Objectives and Policies; Sale or Financing of Investments. Your
partnership will terminate on December 31, 2008, unless earlier dissolved. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership property within any specified time period. An
investment in your partnership is a finite life investment in which partners
receive regular cash distributions out of your partnership's distributable cash
flow, if any, and upon liquidation.
Borrowing Policies. Your partnership's agreement of limited partnership
allows your partnership to incur debt. As of December 31, 1998, your partnership
had a mortgage note outstanding of $3,600,402, payable to Marine Midland, Bank
of America and FNMA, which bears interest at the rate of 7.60%. The mortgage
debt is due on November 2002. Your partnership also has a second mortgage note
outstanding of $130,106, on the same terms as the current mortgage note. Your
partnership's agreement of limited partnership also allows your general partner
to lend funds to your partnership. As of December 31, 1998, the general partner
of your partnership has no loans outstanding to your partnership.
Transfers. Your units are not listed on any national securities exchange or
quoted on NASDAQ, and there is no established public trading market for the
units. Secondary sales activity for the units has been
S-11
<PAGE> 724
limited and sporadic. Your general partner monitors transfers of the units (i)
because the admission of the transferee as a substitute limited partner in your
partnership requires the consent of your general partner under your partnership
agreement, and (ii) in order to track compliance with applicable safe harbor
provisions to avoid treatment as a "publicly traded partnership" for tax
purposes. However, your general partner does not monitor or regularly receive or
maintain information regarding the prices at which secondary sale transactions
in the units have been effectuated.
TERMS OF THE OFFER
General. We are offering to acquire up to 25% of the outstanding 30.5 units
of your partnership, which we do not directly or indirectly own, for
consideration per unit of 446.25 Preferred OP Units, 296.50, Common OP Units, or
$11,155 in cash. If you tender units pursuant to the offer, you may choose 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 Preferred OP Units, 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 January 1, 1999,
although you will be entitled to retain any distributions you may have received
after such date and prior to our commencement of this offer.
If you accept our offer and do not specify the consideration you desire on
the letter of transmittal, we will issue you Preferred OP Units.
Expiration Date. Our offer will expire at 5:00 P.M., New York City time, on
June 4, 1999, 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.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds 25% 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 their acceptance for payment as provided for herein.
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 Common OP Units or 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.
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;
S-12
<PAGE> 725
- 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.
The offer may be extended or delayed indefinitely, during which time you
will not receive payment for any tendered units.
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 any property owned by
your partnership's because your general partner (which is our subsidiary) and
the property manager will remain unchanged. If we borrow funds for the cash
consideration for these offers, our interest costs would increase which could
adversely affect our future earnings. If all units in this and the other
contemplated offers were purchased for cash and we borrowed all the funds, at
current interest rates, our interest expense would increase by $3,064,000 per
year.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
number of units pursuant to our offer, we may be in a position to influence
voting decisions with respect to your partnership. However, we will not be able
to control voting decisions unless we acquire more units in another transaction,
which cannot take place for at least one year after expiration of this offer.
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 (which is our subsidiary),
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 Letter of Transmittal,
and the legal and accounting fees and expenses in connection with the offer. We
will also pay the fees of Stanger for providing the fairness opinion 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 $50,000.
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.
No Dissenters' Rights. You are not entitled to dissenters' (appraisal)
rights in connection with the offer.
S-13
<PAGE> 726
Other Offers. The AIMCO Operating Partnership is also making similar
exchange offers to approximately 90 other limited partnerships in which it
controls the general partner, interests in substantially all of which were
acquired in the merger on October 1, 1998 with Insignia Financial Group, Inc.
and the February 26, 1999 merger with Insignia Properties Trust. Each of such
exchange offers is being made by a separate prospectus supplement which is
similar to this Prospectus Supplement. Copies of such prospectus supplements may
be obtained upon written request from the Information Agent at the address set
forth in "-- Information Agent" or on the back cover page of this Prospectus
Supplement. The exchange offers may be different for limited partners in each
partnership in terms of pricing and percentage of units sought, but the effects
of the offers will essentially be the same. In general, we believe that the risk
factors (except for certain tax-related risk factors) described herein for this
offer will also be applicable to the other offers.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer. Its telephone numbers are (888)
349-2005 and (201) 896-1900. Its fax number is (201) 896-0910.
FEDERAL INCOME TAX CONSEQUENCES
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Preferred OP
Units or 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.
THE FOREGOING SUMMARY IS A GENERAL DISCUSSION OF THE MATERIAL 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 "FEDERAL INCOME TAX CONSEQUENCES" 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.
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, your general
partner (which is our subsidiary) 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, Preferred
OP Units and 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.
As of February 19, 1999, the AIMCO Operating Partnership had approximately
9,729,130 Common OP Units outstanding excluding interests held by AIMCO) and no
Class Two Partnership Preferred Units outstanding. The number of OP Units you
may acquire from us in exchange for your units will represent a lower percentage
of the outstanding limited partnership interests in the AIMCO Operating
Partnership than that of your current ownership interest in your partnership. In
response to our offer, you could elect to receive $11,155 in cash, 446.25
Preferred OP Units or 296.50 Common OP Units. Both your units and the OP Units
S-14
<PAGE> 727
are subject to transfer restrictions and it is unlikely that a real trading
market will ever develop for any of such securities. If you subsequently redeem
OP Units for AIMCO Class A Common Stock or Class I Preferred Stock, we can make
no assurance as to the value of such shares of AIMCO stock, at that time, which
may be less than the cash offer price of $11,155.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
our subsidiary 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
both the general partner of your partnership and the manager of your
partnership's property. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $24,729 for the fiscal year ended December 31,
1998. The property manager received management fees of $58,102 for the fiscal
year ended December 31, 1998. We have no current intention of changing the fee
structure for your general partner or the 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.
AIMCO's Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is 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.
S-15
<PAGE> 728
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. We might pay a higher price for any future exchange offers we may make
for units of your partnership. In any event, we will not acquire any units for
at least one year after expiration of this offer.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $85,057 will be required to purchase all of
the units sought in our offer, if such units are tendered for cash excluding
expenses. We will obtain all such funds from cash from operations, equity
issuances and short term borrowings. For a detailed description of estimated
expenses to be incurred in the offer, see "Source and Amount of Funds and
Transactional Expenses."
S-16
<PAGE> 729
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
nine months ended September 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 of the AIMCO Operating Partnership" included in the accompanying
Prospectus. All dollar values are in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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............... $ 265,700 $ 127,083 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses........... (101,600) (50,737) (76,168) (38,400) (30,150) (10,330)
Owned property management expenses.... (7,746) (4,344) (6,620) (2,746) (2,276) (711)
Depreciation.......................... (59,792) (23,848) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
96,562 48,154 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income...... 13,968 9,173 13,937 8,367 8,132 3,217
Management and other expenses......... (8,101) (5,029) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation......... (196) (441) (588) (590) (581) --
Other assets, depreciation and
amortization........................ (3) (236) (453) (218) (168) (150)
Owner and seller bonuses.............. -- -- -- -- -- --
Amortization of management company
goodwill............................ -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
5,668 3,467 2,038 1,707 2,002 1,020
Minority interests in service company
business............................ -- 48 (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business............ 5,668 3,515 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative expenses... (7,444) (1,408) (5,396) (1,512) (1,804) (977)
Interest income....................... 18,244 4,458 8,676 523 658 123
Interest expense...................... (56,756) (33,359) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships........................ (1,052) (777) 1,008 (111) -- --
Equity in losses of unconsolidated
partnerships(c)..................... (5,078) (463) (1,798) -- -- --
Equity in earnings of unconsolidated
subsidiaries(d)..................... 8,413 456 4,636 -- -- --
Amortization of goodwill.............. (5,071) (711) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations................ 53,486 19,865 30,246 15,629 14,988 7,702
Gain on disposition of properties..... 2,783 (169) 2,720 44 -- --
Provision for income taxes............ -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before extraordinary
item................................ 56,269 19,696 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt.............. -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)..................... $ 56,269 $ 19,427 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)............................. 241 109 147 94 56 48
Total owned apartment units (end of
period)............................. 62,955 28,773 40,039 23,764 14,453 12,513
Units under management (end of
period)............................. 154,729 71,038 69,587 19,045 19,594 20,758
Basic earnings per Common OP Unit..... $ 0.80 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP Unit... $ 0.79 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit................................ $ 1.6875 $ 1.3875 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities.......................... 50,825 53,435 73,032 38,806 25,911 16,825
Cash flows used in investing
activities.......................... (185,453) (314,814) (717,663) (88,144) (60,821) (186,481)
Cash flows provided by (used in)
financing activities................ 141,221 293,984 668,549 60,129 30,145 176,800
<CAPTION>
AIMCO PROPERTIES, L.P.
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)
Cash flows provided by (used in)
financing activities................ (1,032) 14,114
</TABLE>
S-17
<PAGE> 730
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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>
Funds from operations(e)................ $ 132,881 $ 49,692 $ 81,155 $ 35,185 $ 25,285 $ 9,391
Weighted average number of Common OP
Units outstanding..................... 53,007 24,347 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation.......................... $2,685,487 $1,250,239 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation.......................... 2,355,122 1,107,545 1,503,922 745,145 448,425 392,368
Total assets............................ 3,121,949 1,608,195 2,100,510 827,673 480,361 416,361
Total mortgages and notes payable....... 1,275,401 661,715 808,530 522,146 268,692 141,315
Redeemable Partnership Units............ 232,405 178,321 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994 Cumulative
Senior Preferred Units................ -- -- -- -- -- 107,228
Partners' Capital....................... 1,427,087 560,737 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.
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>
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 10, 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
based on the NAREIT definition, as adjusted for the 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 NINE PERIOD
MONTHS ENDED FOR THE YEAR ENDED JANUARY 10,
SEPTEMBER 30, DECEMBER 31, 1994
------------------ --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
-------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $ 56,269 $19,427 $32,697 $15,673 $14,988 $ 7,702
(Gain) loss on disposition of property...................... (2,783) 169 (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 56,900 21,052 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 7,077 711 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 2,689 3,584 -- -- --
Amortization of management contracts...................... 4,201 430 1,587 -- -- --
Deferred taxes............................................ 6,134 2,164 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 17,379 2,781 6,280 -- -- --
Preferred stock dividends................................. (12,296) -- (135) -- (5,169) (3,114)
-------- ------- ------- ------- ------- -------
Funds from operations....................................... $132,881 $49,692 $81,155 $35,185 $25,285 $ 9,391
======== ======= ======= ======= ======= =======
</TABLE>
S-18
<PAGE> 731
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. (the AIMCO Operating Partnership) for the
nine months ended September 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 NINE
MONTHS FOR THE
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 345,961 $ 442,526
Property operating expenses............................... (136,240) (189,442)
Owned property management expenses........................ (8,933) (11,831)
Depreciation.............................................. (80,420) (98,853)
--------- -----------
120,368 142,400
--------- -----------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 28,912 41,676
Management and other expenses............................. (14,386) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (15,243) (26,480)
--------- -----------
(913) (9,075)
Minority interests in service company business............ -- (10)
--------- -----------
Partnership's shares of income from service company
business............................................... (913) (9,085)
--------- -----------
General and administrative expenses....................... (8,632) (21,371)
Interest expense.......................................... (90,890) (121,699)
Interest income........................................... 40,887 21,734
Minority interest......................................... (8,548) (10,034)
Equity in losses of unconsolidated partnerships........... (23,349) (43,918)
Equity in earnings of unconsolidated subsidiaries......... 851 5,848
Amortization of Goodwill.................................. (5,071) --
--------- -----------
Net income........................................ $ 24,703 $ (36,125)
========= ===========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (.12) $ (1.16)
Diluted earnings (loss) per Common OP Unit.................. $ (.12) $ (1.16)
Distributions paid per Common OP Unit....................... $ 1.69 $ 1.85
Book value per Common OP Unit............................... $ 24.52 $ 26.96
CASH FLOW DATA:
Cash provided by operating activities....................... $ 90,439 $ 130,703
Cash used in investing activities........................... (79,923) (1,135,038)
Cash provided by (used in) financing activities............. 16,740 955,977
OTHER DATA:
Funds from operations(a).................................... $ 187,985 $ 172,733
Weighted average number of Common OP Units outstanding...... 74,946 74,094
</TABLE>
S-19
<PAGE> 732
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, net of accumulated depreciation................ $2,679,195
Total assets................................................ 4,558,819
Total mortgages and notes payable........................... 1,762,105
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 320,443
Partners' capital........................................... 1,984,019
</TABLE>
- ---------------
(a) 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
based upon the NAREIT definition, as adjusted for the 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.
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss)................................. $ 24,703 $(36,125)
HUD release fee and legal reserve................. -- 10,202
Real estate depreciation, net of minority
interests....................................... 76,521 93,050
Amortization of management contracts.............. 9,593 12,790
Amortization of management company goodwill....... 10,997 12,551
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation........................ -- 1,715
Amortization of management company goodwill..... 959 1,918
Amortization of management contracts............ 23,010 30,516
Deferred taxes.................................. (713) (1,356)
Equity in earnings of other partnerships:
Real estate depreciation........................ 79,559 95,285
Interest on convertible debentures................ (7,537) (10,003)
Preferred unit distributions...................... (29,107) (37,810)
-------- --------
Funds from operations............................. $187,985 $172,733
======== ========
</TABLE>
S-20
<PAGE> 733
SUMMARY FINANCIAL INFORMATION OF CATAWBA CLUB ASSOCIATES, L.P.
The summary financial information of Catawba Club Associates, L.P. for the
nine months ended September 30, 1998 and 1997 is unaudited. The summary
financial information for Catawba Club Associates, L.P. for the years ended
December 31, 1997, 1996, 1995, 1994 and 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 of Your Partnership"
included herein. See "Index to Financial Statements."
CATAWBA CLUB ASSOCIATES, L.P.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS FOR THE YEAR ENDED
ENDED SEPTEMBER 30, DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues................. $ 876,000 $ 895,000 $ 1,196,000 $ 1,138,000 $ 1,081,000 $ 1,089,000 $ 1,064,000
Net Income/(Loss).............. 31,000 67,000 39,000 -- (122,000) (209,000) (268,000)
Net Income (Loss) per limited
partnership unit............. 1,006 2,175 1,266 -- (3,960) (6,751) (8,699)
Distributions per limited
partnership unit............. -- -- -- -- -- -- --
Distributions per limited
partnership unit (which
represent a return of
capital)..................... -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents...... $ 61,000 $ 53,000 $ 16,000 $ 38,000 $ 71,000 $ 86,000 $ 86,000
Real Estate, Net of Accumulated
Depreciation................. 1,737,000 359,000 1,766,000 1,715,000 1,736,000 1,799,000 2,044,000
Total Assets................... 2,148,000 2,169,000 2,161,000 2,110,000 2,151,000 2,269,000 2,468,000
Notes Payable.................. 4,028,000 4,117,000 4,097,000 4,179,000 4,254,000 4,323,000 4,386,000
General Partners
Capital/(Deficit).............. -- -- -- -- -- -- --
Limited Partners
Capital/(Deficit).............. -- -- -- -- -- -- --
Partners' Capital/(Deficit)...... (2,397,000) (2,400,000) (2,428,000) (2,467,000) (2,467,000) (2,345,000) (2,137,000)
Total Distributions.............. -- -- -- -- -- -- --
Book value per limited
partnership unit............... -- -- -- -- -- -- --
Net increase (decrease) in cash
and cash equivalents........... 45,000 15,000 (22,000) (10,000) (12,000) (2,000) (4,700)
Net cash provided by operating
activities..................... 201,000 219,000 251,000 181,000 198,000 176,000 207,000
Ratio of earnings to fixed
charges........................ 1.12/1 1.26/1 1.10/1 1.00/1 0.70/1 0.49/1 0.37/1
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per unit of your
partnership for the year ended December 31, 1998, and the cash distributions
payable on the number of Common OP Units and Preferred OP Units issuable in
exchange therefor:
<TABLE>
<CAPTION>
ANNUAL
DISTRIBUTIONS
-------------
<S> <C>
Units of Catawba Club Associates, L.P....................... $ 0
Equivalent cash distributions on Common OP Units(1)......... $741.25
Equivalent cash distributions on Preferred OP Units(2)...... $892.50
</TABLE>
- ---------------
(1) Calculated by multiplying the exchange ratio of 296.50 Common OP Units per
unit by the annualized distributions paid on the Common OP Units of $2.50
per unit.
(2) Calculated by multiplying the exchange ratio of 446.25 Preferred OP Units
per unit by the stated annual distribution rate on the Preferred OP Units of
$2.00 per unit.
S-21
<PAGE> 734
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of AIMCO. AIMCO is a real estate investment
trust that owns and manages multifamily apartment properties throughout the
United States. Through its wholly owned subsidiaries, AIMCO GP, the sole general
partner of the AIMCO Operating Partnership, and the Special Limited Partner, as
of December 31, 1998, AIMCO held approximately an 83% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled by the National
Multi Housing Council, we believe that AIMCO is one of the largest owner and
manager of multifamily apartment properties in the United States, with a total
portfolio of 379,363 apartment units in 2,147 properties located in 49 states,
the District of Columbia and Puerto Rico. As of December 31, 1998, AIMCO:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 apartment properties for third party
owners and affiliates.
AIMCO's Class A Common Stock is listed and traded on the NYSE under the
symbol "AIV." On March 23, 1999, the last reported sale price of AIMCO Class A
Common Stock on the NYSE was $35 3/16. 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 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>
1999
First Quarter (through March 23)........ $41 5/8 $35 3/16 $0.6250 $0.6250
1998
Fourth Quarter.......................... 37 3/8 30 0.5625 0.5625
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>
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.
S-22
<PAGE> 735
RISK FACTORS
The following sets forth certain risks and disadvantages of the offer and
should be read and considered when reviewing the potential benefits of the offer
set forth in "Background and Reasons for the Offer -- Expected Benefits of the
Offer." In addition, you should review the other risks of investing in us
beginning on page 2 of our accompanying Prospectus.
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. 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. 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. 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 CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimate your property to be worth $5,313,000 although
we believe the property needs approximately $515,785 of deferred maintenance and
investment not considered by the appraiser. It is possible that a sale of the
property could result in you receiving more pretax cash per unit than our offer.
Even if our cash offer consideration is equal to liquidation value, if you
accept OP Units, you may not ultimately receive an amount equal to the cash
offer consideration when you sell such OP Units or any AIMCO securities you may
receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
pretax cash 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.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and the AIMCO Operating Partnership and, therefore, has
substantial conflicts of interest with respect to our offer. We are making this
offer with a view to making a profit. 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. Another conflict is 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
S-23
<PAGE> 736
partnership. 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.
CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its properties, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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 sold. If you exchange your units
for cash and our 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. 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 allocated to such units 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. If you exercise your redemption right with respect to the OP Units
within two years of the date that you transfer your units to the AIMCO Operating
Partnership, your exchange of units for OP Units or OP Units and cash could be
treated as a disguised sale of your units and you would be required to recognize
gain or loss in the year of the exchange on such disguised sale. See "Federal
Income Tax Consequences -- Disguised Sales." 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. 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 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.
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. You
should review "Federal Income Tax Consequences" 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. Because the income tax
consequences of tendering units will not be the same for everyone, you should
consult your own tax advisor before determining whether to tender your units
pursuant to our offer.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is controlled by us).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
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LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all right 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, for any units that we acquire from you, you will not receive any
future distributions from operating cash flow of your partnership or upon a sale
of property owned by your partnership or a refinancing of any of its debt. If
you tender your units in exchange for OP Units, you will be entitled to future
distributions from the operating cash flow of the AIMCO Operating Partnership
and upon a dissolution, liquidation or winding-up of the AIMCO Operating
Partnership. See "Comparison of Your Units and AIMCO OP Units -- Distributions."
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from the sale of a property or a refinancing of its indebtedness to
(ii) a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of December 31, 2008 to a much larger
partnership with a partnership termination date of 2093.
Under the AIMCO Operating Partnership's agreement of limited partnership,
the general partner has the ability, without the concurrence of the limited
partners, to acquire and dispose of properties and to borrow funds. Further,
while it is the intent to distribute net income from operations, sales of
properties and refinancings of indebtedness, the general partner may not make
such distributions. Proceeds of future asset sales or refinancings by the AIMCO
Operating Partnership generally will be reinvested rather than distributed.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you exchange your
units for OP Units, you will have changed your investment from an interest in a
partnership which owns and manages a single property to an interest in the AIMCO
Operating Partnership which 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 and our portfolio of properties as compared to the value of your
units and your partnership.
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.
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.
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POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus. If you
exercise your redemption right with respect to the OP Units within two years of
the date that you transfer your units to the AIMCO Operating Partnership, your
exchange of units for OP Units and cash could be treated as a disguised sale of
your units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as for your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a result, we may incur costs associated with defending or settling such
litigation or paying any judgment if we lose. As of the present time, no limited
partners of your partnership have initiated lawsuits on such grounds.
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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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. 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. However, we will
not be able to control voting decisions unless we acquire more units in another
transaction, which cannot take place for at least one year after expiration of
this offer. Furthermore, in the event that we acquire a substantial number of
units pursuant to our offer, removal of your general partner (which is our
subsidiary) or the manager of any property owned by your partnership may become
more difficult or impossible without our consent.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
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.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investments in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to hold
the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns one property. The general partner of your partnership
continually considers whether the property should be sold or otherwise disposed
of after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for your partnership. We cannot
predict when the property will be sold or otherwise disposed of. However, there
is no current plan or intention to sell the property in the near future.
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BALLOON PAYMENTS. Your partnership has approximately a $3,177,177 balloon
payment due on its mortgage debt on November 15, 2002. Your partnership will
have to refinance such debt or sell its property prior to the balloon payment
date, or it will be in default and could lose the property to foreclosure.
SPECIAL FACTORS TO CONSIDER
In reviewing the offer, you should pay special attention to the information
in the Sections entitled "Background and Reasons for the Offer," "Valuation of
Units," "Fairness of the Offer" and "Stanger Analysis," which contain
information regarding the background and reasons for the offer, the method of
evaluating units in the offer and alternative valuation methods considered, our
view as to the fairness of the offer, and the fairness opinion rendered by
Stanger.
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 liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
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 .992% interest, consisting of a 0%
limited partnership interest and a .992% general partnership interest, in your
partnership.
On October 31, 1998, IPT and AIMCO entered into an agreement and plan of
merger, dated as of October 1, 1998 (the "IPT Merger Agreement"), pursuant to
which IPT merged with AIMCO on February 26, 1999 (the "IPT Merger"). Upon
consummation of the IPT Merger, each outstanding share of IPT not owned by AIMCO
was converted into the right to receive 0.3601 shares of AIMCO's Class A Common
Stock (approximately 4,180,000 shares in the aggregate).
One of the reasons we chose to acquire Insignia is that we would be able to
make the exchange 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, and would provide the AIMCO Operating Partnership
with a larger asset and capital base and increased diversification. As of the
date of this offering, the AIMCO Operating Partnership proposes to make offers
to approximately 90 of the Insignia Partnerships, including your partnership.
During our negotiations with Insignia in early 1998, we decided that if the
merger with Insignia were consummated, we could also benefit from making offers
for limited partnership interests in the Insignia Partnerships. While some of
the Insignia Partnerships are public partnerships and information is publicly
available on such partnerships for weighing the benefits of making an exchange
offer, many of the partnerships are private partnerships and information about
such partnerships comes principally from the general partner. Our control of the
general partner makes it possible to obtain access to such information. Further,
such control also means that we control the operations of the partnerships and
their properties. Insignia did not propose that we conduct such exchange offers,
rather we initiated the offers on our own. We determined in June of 1998 that if
the merger with Insignia were consummated, we would offer to limited partners of
the Insignia Partnerships limited partnership units of the AIMCO Operating
Partnership and/or cash.
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In connection with the Insignia Merger we acquired general partnership
interests and certain limited partnership interests in a number of private and
public partnerships. Eight private partnerships out of the 90 partnerships
involved in the proposed exchange offers do not have audited financial
statements prepared in accordance with generally accepted accounting practices
("GAAP"). Certain of these partnerships have audited financial statements
prepared on the basis of federal income taxes and others have unaudited
financial statements which may or may not be prepared on the basis of GAAP or
federal income taxes. For the Insignia Partnerships for which exchange offers
are being made which do not have audited GAAP financial statements for at least
two years, we are making the offer on the basis of either one year of audited
GAAP financial statements and one year of unaudited GAAP financial statements or
just unaudited GAAP financial statements. We tried to obtain two years of
audited GAAP financial statements for all the partnerships for which offers are
being made, but because of the inability to locate records from inception of the
partnerships which would allow auditors to verify the original purchase price of
the properties, no audits were possible. In these cases, the entities which
controlled the general partners prior to Insignia are no longer in business or
have no current knowledge or records of such partnerships. For the same reasons,
we do not have all the records for past years of some of the partnerships.
Therefore, for the partnerships without an audit, we did not have invoices,
escrow statements, property closing statements or the like to support the
original costs of the real property to the satisfaction of independent auditors,
in order for them to render an unqualified audit report. Consequently, we have
no way to support the original cost of the properties. However, we have general
ledgers and related accounting records that enable us to prepare GAAP basis
financial statements. These records were taken from the entities that controlled
the general partners and were subsequently maintained by us. The amount of
capitalized property costs appearing in those books and records has, to our
knowledge, been appropriately rolled forward from year to year and used by the
general partners of the partnerships in question to prepare tax returns and
periodic reports to the investors in the partnerships. Therefore, we believe
that the unaudited financial statements included in the prospectus supplements
for such partnerships have been prepared in accordance with GAAP.
In acquiring Insignia and the interests in the Insignia Partnerships, we
conducted due diligence with regard to certain of the assets acquired including
the major properties held by the Insignia Partnerships. Our due diligence
focused on the condition of the major properties and the terms of the
partnership agreements. Since Insignia had audited GAAP financial statements and
since those partnerships without audited GAAP financial statements are generally
smaller, we did not focus on the issue of audited GAAP based financial
statements for the smaller partnerships at the time of the merger. Further, for
our internal due diligence use, audited tax based financial statements are also
used. The total number of Insignia Partnerships we acquired an interest in was
approximately 550 of which approximately 25 do not have audited GAAP statements.
We were not able to pick and choose the partnerships in which we would acquire
an interest. The Insignia Partnerships were part of the business of Insignia. As
a consequence, we acquired interests in certain small private partnerships which
do not have the ability to obtain audited GAAP financial statements. It is our
policy to acquire properties or partnerships with audited GAAP based financial
statements. However, in connection with large acquisitions of partnerships
interests, such as with the Insignia Merger, we may occasionally acquire a
partnership or property without audited GAAP financial statements.
Previous Tender Offers
Tender offers have been previously made with respect to certain of the
public Insignia Partnerships. However, there have not been any prior tender
offers to acquire units of your partnership. Except for such tender offers, we
are not aware of any merger, consolidation or other combination involving any of
the Insignia Partnerships, or any acquisitions of any of such partnerships or a
material amount of the assets of such partnerships.
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
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dated August 28, 1998 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
(which is our subsidiary).
Liquidation
Benefits of 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 (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 your general partner (which is our subsidiary), 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 on the order of 1% of the principal amount of the mortgage.
Your general partner believes it currently is in the best interest of your
partnership to continue holding its real estate assets.
Continuation of the Partnership Without the Offer
Benefits of Continuation. Although our offer permits you to continue your
investment in your partnership, 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 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. The
continuation of your partnership will allow you to continue to participate in
the net income and any increases of revenue of your partnership and any net
proceeds from the sale of any property owned by your partnership. The General
Partner continues to review operations and expects to complete capital
expenditures in 1999 and 2000 enabling it to possibly increase rents and lower
expenses. In addition, a sale of the property may cause a tax gain to each
investor.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. If your partnership continues operating as presently structured, your
partnership could be forced to borrow on terms that could result in net losses
from operations. Your partnership's mortgage notes are due on November 15, 2002
and require balloon payments totaling $3,177,177. Your partnership currently has
adequate sources of cash to finance its operations on both a short term and long
term basis but will have to sell the properties or refinance its indebtedness in
2002 to pay such balloon payment. Continuation of your partnership without the
offer would deny you and your partners the benefits that your general partner
(which is our subsidiary) expects to result from the 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.
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Alternative Structures Considered
Before we decided to make our offer, we considered a number of alternative
transactions, including purchasing some or all of your partnership's properties;
making an offer of only cash for your units; making an offer of only Common OP
Units for your units; and making an offer of only Preferred OP Units for your
units. A merger would require a vote of the limited partners of your
partnership. If the merger was approved, all limited partners, including those
who wish to retain their units and continue to participate in your partnership,
would be forced to participate in the merger transaction. If the merger was not
approved, all limited partners, including those who would like to liquidate
their investment in your partnership, would be forced to retain their units.
We also considered purchasing your partnership's property from your
partnership. However, a sale of your partnership's property would require a vote
of a majority of the limited partners. If the sale was approved, all limited
partners, including those who wish to continue to participate in the ownership
of your partnership's property, would be forced to participate in the sale
transaction, and possibly to recognize taxable income. If the sale was not
approved, all limited partners, including those who would like to dispose of
their investment in your partnership's property, would be forced to retain their
investment.
In order to give all limited partners in your partnership an opportunity to
make their own investment decision, we elected to make an offer directly to you
and the other limited partners. We considered making an all cash offer in order
to satisfy some limited partners' desire for immediate liquidity. However, an
all cash offer would not be desirable for those limited partners who do not
desire immediate liquidity and do not want to immediately recognize any taxable
income, but might otherwise be interested in disposing of their investment in
your partnership and might want an opportunity to control the timing of any
realization of taxable income associated with liquidating such investment in the
future.
We considered making an offer of only OP Units, either all Common OP Units
or all Preferred OP Units. The primary disadvantage of an all OP Unit offer is
that those limited partners who want immediate liquidity would be forced to wait
at least one year before exchanging their OP Units for cash or AIMCO stock. We
decided to offer limited partners both Common OP Units and Preferred OP Units in
order to permit investors to make their own decision as to whether they
preferred the possibility of future capital appreciation (Common OP Units) or
preferred distribution rights (Preferred OP Units).
After considering these alternatives, we decided to offer limited partners
the possibility of all three forms of consideration: cash, Common OP Units and
Preferred OP Units. We think that such an offer will appeal to a large number of
limited partners in your partnership, while permitting each one to retain any or
all of his or her units and remain a limited partner in your partnership on the
same terms as before.
Sale of Assets
Your partnership could sell the property it owns. The general partner of
your partnership considers sale of your partnership's property from time to
time. However, any such sale would likely be a taxable transaction.
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:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or
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cash. After a two-year holding period, if you choose to redeem your
Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, currently listed and traded on the NYSE.
- Preferred Quarterly Distributions. Your partnership made no distributions
for the fiscal year ended December 31, 1998. Holders of Preferred OP
Units will be entitled to receive quarterly distributions of $0.50 per
unit (equivalent to $2.00 on an annualized basis) before any
distributions are paid to holders of Common OP Units. This is equivalent
to a distribution of $892.50 per year on the number of Preferred OP Units
you will receive in exchange for each of your partnership 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:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- Quarterly Distributions. Your partnership made no distributions for the
fiscal year ended December 31, 1998. In 1998, we paid quarterly
distributions on the Common OP Units totalling $2.25. In January 1999, we
increased our distribution rate on each of the Common OP Units to $2.50
on an annual basis. Assuming no change in the level of our distributions,
this is equivalent to a distribution of $741.25 per year on the number of
Common OP Units you will receive in exchange for each of your partnership
units. See "The AIMCO Operating Partnership."
- 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 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.
DISADVANTAGES OF THE OFFER
The principal disadvantages to the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and the consideration, no one separately represented the interests of the
limited partners. Although we have a fiduciary duty to
S-32
<PAGE> 745
the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of the property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pre-tax cash proceeds to you than our
offer.
- OP Units. Investing in OP Units has risks that include the lack of a
public market, transfer restrictions and a one year holding period before
they can be redeemed by a holder. The ultimate return on the OP Units is
directly tied to the future price of AIMCO's Class A Common Stock or
Class I Preferred Stock. You could ultimately receive less for your OP
Units than the cash price in our offer. Further, on or after March 1,
2005, we may redeem the Class I Preferred Stock for $25 per share.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
the sale of the property would be advantageous given market conditions,
the condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of a property and the tax consequences to you
and your partners on a sale of a property. See also "Your
Partnership -- General Policy Regarding Sales and Refinancings of
Partnership Property."
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
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<PAGE> 746
VALUATION OF UNITS
We determined our cash offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower of the value produced. We used your partnership's
property income for the fiscal year ended December 31, 1997. However, in
determining the appropriate capitalization rate, we considered the partnership's
property income since December 31, 1997. Our method for selecting a
capitalization rate begins with each property being assigned a location and
condition rating (e.g., "A" for excellent, "B" for good, "C" for fair, and "D"
for poor). We have rated your property's location B (good) and its condition C
(fair). Generally, we assign an initial capitalization rate of 10.50% to
properties in this category. We then adjust the capitalization rate based on
whether the mortgage debt that the property is subject to bears interest at a
rate above or below 7.5% per annum. Generally, for every 0.5% in excess of 7.5%,
the capitalization rate would be increased by 0.25%. Your property's mortgage
debt bears interest at 7.6% per annum, which resulted in an increase from the
initial capitalization rate of 0.25%. We also considered any changes in your
partnership's property income from 1997 to 1998. Because your partnership's
property income in 1998 remained relatively unchanged compared to 1997, we made
no further revision of the capitalization rate, resulting in a final
capitalization rate of 10.75%. The evaluation of a property's location and
condition, and the determination of an appropriate capitalization rate for a
property, is subjective in nature, and others evaluating the same property might
use a different capitalization rate and derive a different property value.
Property income is the difference between the revenues from the property
and related costs and expenses, excluding income derived from sources other than
its regular activities and before income deductions. Income deductions include
interest, income taxes, prior-year adjustments, charges to reserves, write-offs
of intangibles, adjustments arising from major changes in accounting methods and
other material and nonrecurrent items. In this respect, property income differs
from net income disclosed in the partnership's financial statements, which does
not exclude these income sources and deductions.
The following is a reconciliation of your partnership's net income for the
year ended December 31, 1997, to your partnership's property income for the same
period.
<TABLE>
<S> <C>
Net Income (Loss)........................................... $ 38,586
Other Non-Operating Expenses................................ 24,830
Depreciation................................................ 117,678
Interest.................................................... 389,906
--------
Property income............................................. $571,000
</TABLE>
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. Further,
in applying the direct capitalization method, others may make different
assumptions and obtain different results. 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 estimated 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 (property 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 divided
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<PAGE> 747
each property's fiscal 1997 property income of $571,000 by the property's
capitalization rate of 10.75% to derive an estimated gross property value
of $5,313,000.
- 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
certain other costs including required capital expenditures, deferred
maintenance, and closing costs to derive a net equity value for your
partnership of $344,942. Closing costs, which are estimated to be 2.5% of
the gross property value, include legal and accounting fees, real
property, transfer taxes, title and escrow costs and broker's fees.
- 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. Accordingly, 98.63% of the estimated liquidation
proceeds are assumed to be distributed to holders of units. Our cash
offer consideration represents the per unit liquidation proceeds
determined in this manner.
<TABLE>
<S> <C>
Property income (January 1, 1997 to December 31, 1997)...... $ 571,000
Capitalization Rate......................................... 10.75%
-----------
Gross valuation of partnership property..................... 5,313,000
Plus: Cash and cash equivalents............................. 10,388
Plus: Other partnership assets, net of security deposits.... 314,283
Less: Mortgage debt, including accrued interest............. (3,850,312)
Less: Accounts payable and accrued expenses................. (62,657)
Less: Other liabilities..................................... (731,150)
-----------
Partnership valuation before taxes and certain costs........ 993,552
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures and deferred
maintenance............................................... (515,785)
Less: Closing costs......................................... (132,825)
-----------
Estimated net valuation of your partnership................. 344,942
Percentage of estimated net valuation allocated to holders
of units.................................................. 98.63%
-----------
Estimated net valuation of units............................ 340,231
Total number of units............................. 30.5
-----------
Estimated valuation per unit................................ 11,155
===========
Cash consideration per unit................................. $ 11,155
===========
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration of $11,155 by the $25
liquidation preference of each Preferred OP Unit to get 446.25 Preferred
OP Units per unit.
- In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $11,155 by
a price of $37.63 (the average closing price of AIMCO's Class A Common
Stock on the NYSE on March 23, 1999) to get 296.50 Common OP Units per
unit.
The total net valuation of all partnerships in which the AIMCO Operating
Partnership is making similar exchange offers, and which were valued using the
same methods as used for your partnership, is $568,751,183, of which, $344,942
or .06% is the net valuation of your partnership.
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<PAGE> 748
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
Your general partner is a subsidiary of the AIMCO Operating Partnership. 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. Your general partner has substantial conflicts of interest with
regard to the offer. However, for all of the reasons discussed herein, we and
your general partner believe that the offer and all forms of consideration
offered is fair to you and the limited partners of your partnership. We also
reasonably believe that the similar offers to the limited partners of the other
partnerships are fair to such limited partners. 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 us 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, your
general partner (which is our subsidiary) 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. The net
income of your partnership has decreased from $67,000 for the nine months
ended September 30, 1997 to $31,000 for the nine months ended September 30,
1998. These factors are reflected in our valuation of your partnership.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are substantially the financial
equivalent to your interest in your partnership. 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
and Stanger's estimates of the net asset value ($5,810 per unit), going
concern value ($5,426 per unit) and liquidation value ($1,574 per unit) of
your partnership units. See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity. However, we did review whether trading information
was available.
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 by electing to accept Preferred OP Units or
Common OP Units.
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
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<PAGE> 749
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 $11,155, based on a total estimated
value of your partnership's property of $5,313,000. Your general partner
(which is our subsidiary) has no present intention to liquidate your
partnership or to sell or refinance your partnership's property. See
"Background and Reasons for the Offer". See "Valuation of Units" for a
detailed explanation of the methods we used to value your partnership.
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $2.00 and current annualized distributions with respect to the
Common OP Units are $2.50. This is equivalent to distributions of $892.50
per year on the number of Preferred OP Units, or distributions of $741.25
per year on the number of Common OP Units, that you would receive in
exchange for each of your partnership's units. There were no distributions
with respect to your units for the fiscal year ended December 31, 1998. See
"Comparison of Your Units and AIMCO OP Units -- Distributions."
13. The fact that if your partnership were liquidated as opposed to
continuing, the general partner (which is our subsidiary) would not receive
the substantial management fees it currently receives. As discussed in
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," we do not believe that
liquidation of the partnership is in the best interests of the unitholders.
Therefore, we believe the offer is fair in that the fees paid to the
general partner would continue even if the offer was not consummated. We
are not proposing to change the current management fee arrangement.
In evaluating these factors, your general partner (which is our subsidiary)
and the AIMCO Operating Partnership did not quantify or otherwise attach
particular weight to any of them.
Your general partner (which is our subsidiary) has not retained an
unaffiliated representative to act on behalf of the limited partners in
negotiating the terms of the offer since each individual limited partner can
make his own decision as to whether or not to tender and what consideration to
take. Unlike a merger or other form of partnership reorganization, a majority or
more of the holders of limited partnership interests in your partnership cannot
bind you. If an unaffiliated representative had been obtained, it is possible
that such representative could have negotiated a higher price for your units
than was unilaterally offered by the AIMCO Operating Partnership. We have
retained Stanger to conduct an analysis of our offer and to render an opinion as
to the fairness to you of the offer consideration from a financial point of
view. Although no representative has been retained to act solely on behalf of
the limited partners for purposes of negotiating the terms of the offer, we have
determined that the transaction is fair to you from a financial point of view.
We made this determination based, in part, on the fairness opinion from Stanger
and the fact that all limited partners may elect to retain their existing
security on the same terms as before our offer.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
Your general partner (which is our subsidiary) 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 and, although there are
other ways to value real estate, is a reasonably fair method to determine the
consideration offered. Although we believe our offer consideration represents
the amount you would receive if we currently liquidated your partnership, an
actual liquidation might generate a higher or lower price for holders of units.
A liquidation in the future might generate a higher or lower 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
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<PAGE> 750
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
Your general partner (which is our subsidiary) 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
sell your partnership's property or refinance its indebtedness within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, your general partner
(which is our subsidiary) has attempted to compare the cash offer consideration
against: (a) estimates of the value of the units on a liquidation basis; (b)
estimates of the going concern value of your units based on continuation of your
partnership as a stand-alone entity; and (c) the net book value of your units.
The general partner of your partnership believes that analyzing the alternatives
in terms of estimated value, 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 us. These assumptions relate to, among other things: the operating
results since December 31, 1997 as to income and expenses of each property,
other projected amounts and the capitalization rates that may be used by
prospective buyers if your partnership assets were to be liquidated. The 1998
budget is discussed in "Stanger Analysis -- Summary of Materials Considered" and
other projected amounts are discussed in "Stanger Analysis -- Summary of
Reviews."
In addition, these estimates are based upon certain information available
to your general partner (which is our subsidiary) 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. 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.
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<PAGE> 751
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2008, 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.
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C> <C>
Cash offer price............................................ $ 11,155
Partnership preferred units................................. 11,155(1)
Partnership common units.................................... 11,155(1)
Alternatives:
Estimated liquidation proceeds............................ $ 11,155
Estimated going concern value(2).......................... $ 2,506
Estimated alternative going concern value................. $ 4,649(3)
Net book value (deficit).................................. $(79,615)
</TABLE>
- ---------------
(1) In our discussion of the offer price as being fair with regard to other
methods of valuing your partnership, we believe the number of Common OP
Units and Preferred OP Units to be issued per unit in the offer to be equal
to the cash price per unit. Therefore, the fairness discussion applies
equally to the cash and non-cash forms of consideration being effected. See
"Valuation of Units" for details of how the number of OP Units was
determined.
(2) Assumes a refinancing of the partnership's indebtedness when it comes due.
(3) Assumes a sale of the partnership property when the mortgages are due,
rather than a refinancing of the mortgages.
Prices on Secondary Market
There is no active market for your units. Your general partner (which is
our subsidiary) is unaware of any secondary market activity in the units.
Therefore any comparison to prices on the secondary market is not possible at
the present time. See "Your Partnership -- Distributions and Transfers of
Units -- Transfers."
Prior Tender Offers
There have been no previous tender offers for units of your partnership.
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. Your general
partner (which is our subsidiary) 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
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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<PAGE> 752
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.
Estimated Going Concern Value and Alternative Going Concern Value
Going concern value is a measure of the value of your partnership if it
continued operating as an independent stand-alone entity. The estimated value of
the partnership on a going concern basis is not intended to reflect the
distributions payable to limited partners if its assets were to be sold at their
current fair market value. The general partner of your partnership estimated the
going-concern value of your partnership by analyzing projected cash flows and
performing a discounted cash flow analysis. The general partner of your
partnership assumed that your partnership will be operated in the same manner as
currently, as an independent stand-alone entity, and its assets sold in a
liquidation after a ten-year holding period. Distribution and sale proceeds per
partnership unit were discounted in the projections at a rate of 30%.
The general partner of your partnership assumed that real estate selling
costs will be incurred which will equal 2.5% of the sales price. This analysis
assumes that the partnership property will be sold in a liquidation, at the
expiration of the ten-year holding period, to an independent third-party buyer.
Upon such liquidation, other balance sheet assets (excluding amortizing assets)
and liabilities of your partnership will be sold at their book value, and the
net proceeds of sale will be allocated between the general partners and offerees
in accordance with your partnership's agreement of limited partnership. Should
the assets be liquidated over time, even at prices equal to those projected,
distributions to limited partners of your partnership's cash flow from
operations might be reduced because relatively fixed costs, such as general and
administrative expenses, are not proportionately reduced with the liquidation of
assets. However, for simplification purposes, the sales are assumed to occur
concurrently.
The going concern method relies on a number of assumptions, including among
other things, (i) rental rates for new leases and lease renewals; (ii)
improvements needed to prepare an apartment for a new lease or a renewal lease;
(iii) lease periods; (iv) capital expenditures; (v) cash reserves; (vi) broker's
commissions; and (vii) discount rates applied to future cash flows. The use of
assumptions or variables that differ from those described above could produce
substantially different results. Neither we nor the general partner of your
partnership solicited any offers or inquiries from prospective buyers of the
property owned by your partnership in connection with the preparation of the
estimates of value of the properties and the actual amounts for which the
partnership's properties or the partnership could be sold could be significantly
higher or lower than any of the estimates contained herein. The estimated going
concern value of your partnership is $2,506 per unit, which value is below our
offer price per unit. Therefore, we believe the offer price is fair in relation
to the going concern value.
The general partner determined going concern value based upon the
discounted present value of projected cash flows from the partnership over a
ten-year period of operation, which is a standard period for going concern
analyses for real property assets. Such discounted cash flows were based upon
year one property income from the real estate portfolio of $571,000, escalated
at 3% per annum for the ten-year projection period. Property income was reduced
by: (i) partnership administrative expenses of $35,000 per annum; and (ii) debt
service on existing debt through maturity or the end of ten years, whichever
occurs first. For debt which matures during the ten-year period, a refinancing
at a 7% interest rate was assumed. At the end of the ten-year projection period,
the property was assumed to be sold at a price based upon property income for
the immediately following year, capitalized at a capitalization rate of 11.25%,
less expenses of sale estimated at 3% of the property value. The net cash flow
to limited partners from the continued operation of the property and the net
proceeds of sale were then discounted at a discount rate of 25% to achieve the
going concern value of $2,506 per unit.
Your partnership's property currently has balloon payments due in November
2002. While the going concern value was based on your partnership refinancing
its indebtedness and continuing to own its property, the alternative going
concern value of $4,649 is based on selling the property when the balloon
payment is due
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<PAGE> 753
and otherwise includes the same assumptions as the going concern value described
above. For the reason set forth above, we believe the offer consideration is
fair in relation to the alternative going concern value.
There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
Net Book Value
Net book value per unit is a deficit of $79,615 and therefore a comparison
with the offering price would not be meaningful in determining the fairness of
the offering price.
Stanger's Estimate of Net Asset Value, Going Concern Value and Liquidation
Value
In rendering its opinion set forth as Appendix A, Stanger did its own
independent estimate of your partnership's net asset value of $5,810 per unit,
going concern value of $5,426 per unit and liquidation value of $1,574 per unit.
For an explanation of how Stanger determined such values see "Stanger Opinion --
Summary of Reviews -- Comparison of Offer Price To Liquidation Value, Going
Concern Value and Secondary Market Prices." An estimate of your partnership's
net asset value per unit is based on a hypothetical sale of your 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 a liquidation value, after provisions in full for all of the
other known liabilities of your partnership. The net asset value does not take
into account (i) timing considerations discussed under "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration -- Estimated
Liquidation Proceeds," and (ii) costs associated with winding up of your
partnership. Therefore, the AIMCO Operating Partnership believes that the
estimate of net asset value per unit does not necessarily represent the fair
market value of a unit or the amount the limited partner reasonably could expect
to receive if the partnership's property was sold and the partnership was
liquidated. For this above reason, the AIMCO Operating Partnership considers net
asset value estimates to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
Stanger's estimates of net asset value, going concern value and liquidation
value per unit represents discounts to the offer price of $5,345, $5,729 and
$9,581. In light of these discounts and for all the reasons set forth above, the
AIMCO Operating Partnership believes the offer price is fair to the limited
partners. The AIMCO Operating Partnership believes that the best and most
commonly used method of determining the value of a partnership which only owns
an apartment is the capitalization of income approach set forth in "Valuation of
Units."
ALLOCATION OF CONSIDERATION
Your partnership's agreement of limited partnership provides that, in the
event of a liquidation, available proceeds are to be distributed 1.37% to the
general partner and 98.63% to the limited partners. Accordingly, in valuing your
units, we have assumed that 98.63% of the estimated liquidation proceeds are
distributed to holders of units. Since this allocation is in accordance with the
terms of the partnership agreement, we believe the allocation is fair. See
"Valuation of Units."
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<PAGE> 754
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. Stanger has
advised us that the description of Stanger's analysis contained herein describes
the material portions of Stanger's review. 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 any losses, claims,
damages, liabilities or expenses to which Stanger may be subject, under any
applicable federal or state law, including federal and state securities laws,
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 NYSE 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 audited financial statements for the years ended December 31, 1996
and 1997, and its unaudited financial statements for the period ended September
30, 1998, which your partnership's management has indicated to be the most
current available financial statements at the time; (iii) reviewed descriptive
information concerning your partnership's real estate assets (the "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, 1997 and 1998; (v) reviewed
operating budgets for your partnership's property for 1998, as prepared by your
partnership; (vi) reviewed
S-42
<PAGE> 755
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 similar properties; (viii) reviewed internal financial analyses prepared by
your partnership of the estimated current net liquidation value and going
concern value of your partnership; (ix) reviewed information provided by AIMCO
concerning the AIMCO Operating Partnership, the Common OP Units and the
Preferred OP Units; and (x) conducted other studies, analysis and inquiries as
Stanger deemed appropriate.
A summary of the operating budgets per property for the year ended December
31, 1998, which was supplied by your partnership to Stanger, is as follows:
FISCAL 1998 OPERATING BUDGETS
<TABLE>
<S> <C>
Total Revenues.............................................. $1,236,223
Operating Expenses.......................................... (593,364)
Replacement Reserves -- Net................................. (158,692)
Debt Service................................................ (408,312)
Capital Expenditures........................................ (122,100)
----------
Net Cash Flow..................................... $ (46,245)
==========
</TABLE>
The above budgets at the time they were made were forward-looking
information developed by the general partner of your partnership. Therefore, the
budgets were dependent upon future events with respect to the ability of your
partnership to meet such budget. The budgets incorporated various assumptions
including, but not limited to, lease revenue (including occupancy rates),
various operating expenses, general and administrative expenses, depreciation
expenses, capital expenditures, and working capital levels. While we deemed such
budgets to be reasonable and valid at the date made, there is no assurance that
the assumed facts will be validated or that the circumstances will actually
occur. Any estimate of the future performance of a business, such as your
partnership's business, is forward-looking and based on assumptions some of
which inevitably will prove to be incorrect.
The budget amounts provided above are figures that were not computed in
accordance with GAAP. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budget are often
re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budget
presented for fiscal 1998 should not necessarily be considered as indicative of
what the audited operating results for fiscal 1998 will be. For the year ended
December 31, 1998, the partnership expects to report revenues of $1,160,271,
operating expenses of $589,569 and replacement reserves and capital expenditures
of $105,327. Based on these estimates, the partnership's net cash flow before
debt service, which we believe provides a better indication of the partnership's
actual operating performance than net cash flow was greater than the budgeted
amounts.
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.
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<PAGE> 756
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 the third quarter of 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 or
square footage; 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 nine month period ending
September 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 property.
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 property, 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 the
liquidation value calculation prepared by the management of your partnership.
Stanger observed that such liquidation value was based upon the gross property
valuation estimate prepared by management, which in turn is based upon fiscal
year 1997 net operating income capitalized at a capitalization rate of 10.75%.
Stanger further observed that the gross property valuation was adjusted for the
following additional items to achieve the liquidation value of your partnership:
(i) cash, other assets, mortgage indebtedness and other liabilities determined
as of December 31, 1997; (ii) estimated closing costs equal to approximately
2.5% of gross real estate value; and (iii) extraordinary capital expenditure
estimates in the amount of $515,785. Stanger observed that your partnership
liquidation value of $344,942 was allocated 98.63% to limited partners and was
divided by the total units outstanding of 30.5 to provide the liquidation value
per unit of $11,155.
Review of Partnership Going Concern Analysis. Stanger reviewed the going
concern value calculation prepared by management of your partnership. Stanger
observed that such going concern value was based upon the discounted present
value of projected cash flows from the partnership over a ten-year period of
operation which is a standard period for going concern analysis for real
property assets. Such discounted cash flows were based upon year one property
income from the real estate portfolio of $571,000 escalated at 3% per annum for
the ten-year projection period. Property income was reduced by: (i) partnership
administrative expenses of $35,000 per annum; (ii) debt service on existing debt
through maturity or the end of ten years, whichever occurs first. For debt which
matures during the ten-year period, a refinancing at a 7% interest rate was
assumed. At the end of the ten-year projection period, the properties were
assumed to be sold based upon: (i) property income for the immediately following
year capitalized at a capitalization rate of 11.25%;
S-44
<PAGE> 757
and (ii) expenses of sale estimated at 3% of property value. Stanger observed
that the proceeds of sale were reduced by the estimated debt balance at the end
of the tenth year to provide net proceeds from the sale of your partnership's
property.
The resulting cash flows for the ten-year period were discounted to present
value at a discount rate of 30%. Stanger observed that such discount rate was
based upon the portfolio real estate discount rate of 13.3%, adjusted for
leverage risk and illiquidity risk. Stanger observed that the resulting
partnership going concern value was divided by units outstanding of 30.5 to
achieve management's estimate of going concern value of $2,506 per unit.
Review of Secondary Market Prices. Stanger maintains a database of
secondary market information on limited partnership units. Stanger observed for
its data that no units were reported traded in the secondary market during 1998.
Comparison of Offer Price to Liquidation Value, Going Concern Value and
Secondary Market Price. Stanger observed that the offer price of $11,155 per
unit is equal to management's estimate of liquidation value, and reflects a
substantial premium to management's estimate of going concern value of $2,506.
Stanger further observed that investors may select cash, Common OP Units or
Preferred OP Units in exchange for their partnership units or they may elect to
continue to hold their partnership units. Stanger further observed that the
Common OP Units will be priced at $37.625 per unit, an amount which equals the
average of the closing prices the common shares into which such Common OP Units
are convertible for the 30 trading day period ended March 23, 1999. Furthermore,
Stanger observed that the Preferred OP Units to be issued in the transaction
will be based upon the liquidation preference of $25. Stanger noted that the
Preferred OP Units are redeemable for, at AIMCO's option, either: (i) $25 in
cash per Preferred OP Unit; (ii) common stock of AIMCO based upon a ten-day
average price at the time of the requested redemption; or (iii) commencing on
the third year following the closing of this transaction, preferred stock of
AIMCO with a dividend equal to the distributions on the Preferred OP Units.
Stanger observed that the ten day average closing price of the AIMCO common
stock is $36.425, as of March 23, 1999 and therefore an investor receiving AIMCO
common shares in redemption of the Preferred OP Units would receive .6863 shares
with a value approximating $25 for each $25 Preferred OP Unit redeemed, based
upon AIMCO's average common share price as of March 23, 1999. Stanger noted that
commencing in the third year, investors redeeming Preferred OP Units may receive
from AIMCO Preferred Stock with a dividend equal to the distribution on the
AIMCO Preferred OP Units. Stanger observed that the distribution on the
Preferred OP Units is set at 8% of $25 and that the average dividend yield on
AIMCO's outstanding C, D, G and H Preferred Shares approximates 10.1% as of
March 23, 1999. Stanger noted that, based upon the cash dividend yield on the
AIMCO Preferred Shares identified above as of March 23, 1999, investors would
receive Preferred Shares with a value of approximately $19.80 for each $25
Preferred OP Unit if such redemption occurred after the second year following
the closing of the transaction. Stanger further observed that the above analysis
does not take into consideration the present value of the earnings on the tax
deferral an investor may realize as the result of selecting Preferred OP Units
in lieu of cash in a taxable transaction.
In addition to the above analysis, Stanger prepared an independent estimate
of net asset value, going concern value and liquidation value per unit. Stanger
has advised AIMCO that Stanger's estimates of net asset value, liquidation value
and going concern value are based upon Stanger's independent estimate of
property income, a direct capitalization rate of 10.0%, transaction costs of
2.5% to 5.0%, growth rates of 3% and a terminal capitalization rate of 10.5%.
Stanger has advised us that the direct capitalization rate represents Stanger's
estimate of the capitalization rate applicable to its estimate of property
income and is based upon Stanger's independent estimate of the direct
capitalization rate for such property based upon such property's age, condition
and location. Stanger further advised us that the terminal capitalization rate
is the capitalization rate utilized in Stanger's going concern value estimate
which is applied to Stanger's estimate of property income in the eleventh year
to establish the value of the property at the end of the tenth year. Stanger has
advised us that Stanger estimated the terminal capitalization rate at a 50 basis
point premium to the direct capitalization rate estimate for the property.
Stanger utilized deferred maintenance estimates derived from the Adjusters
International, Inc. reports in the calculation of net asset value, liquidation
value and going concern value. With respect to the going concern value estimate
prepared by Stanger, Stanger advised
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<PAGE> 758
AIMCO that a ten-year projection period and a discount rate of 30% was utilized.
Such discount rate reflects the risk associated with real estate, leverage and a
limited partnership investment. The 30% discount rate was based upon the
property's estimated internal rate of return derived from the discounted cash
flow analysis, (12.5% as described above), plus a premium reflecting the
additional risk associated with mortgage debt equal to approximately 80% of
property value. Stanger's estimates were based in part upon information provided
by us. Stanger relied upon the deferred maintenance estimates, property
descriptions, unit configurations, allocation among partners, and other data
provided by us. Stanger's analyses were based on balance sheet data as of
September 30, 1998. Stanger's review also included a site visit, review of
rental rates and occupancy at the properties as well as competing properties.
Stanger's estimate of net asset value, going concern value and liquidation value
per unit were $5,810, $5,426, and $1,574 representing discounts to the offer
price of 48%, 51% and 86%. Stanger observed that these substantial discounts to
the offer price are indicative of the substantial leverage and risk of the units
in the partnership. See "Fairness of the Offer -- Comparison of Consideration to
Alternative Consideration."
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. Stanger has rendered similar fairness opinions with regard to certain
other exchange offers being made by the AIMCO Operating Partnership. Stanger
rendered the opinions only as to the individual fairness of the offer
consideration in each proposed exchange offer. The Fairness Opinion does not
address the fairness of all possible acquisitions of interests in your
partnership. In addition, the Fairness Opinion will not be revised to reflect
the actual participation in the offer.
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 your general partner (which is our subsidiary) and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's property, and the transaction costs and fees associated with a
sale of the property. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's property 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 property 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 property 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 property 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
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<PAGE> 759
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, nor did Stanger
address the fairness of all possible acquisitions of interests in the
partnership. The opinion will not be revised to reflect the actual results of
the offer. 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 or oral 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 $9,000 with
respect to your partnership. The estimated aggregate fee payable to Stanger in
connection with all affiliated partnerships is estimated at $1,510,000, plus
out-of-pocket expenses estimated at $61,000. 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 was
engaged by AIMCO during 1997 to represent AIMCO in negotiations to acquire
interests in a real estate limited partnership. Such transaction was never
consummated and no fee was ever paid to Stanger in connection with such proposed
transaction. AIMCO and its affiliates may retain the services of Stanger in the
future. Any such future services could relate to this offer, some or all of the
concurrent offers, or a completely separate transaction.
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<PAGE> 760
YOUR PARTNERSHIP
GENERAL
Catawba Club Associates, L.P., is a Delaware limited partnership which
completed a private placement of units in 1985. Insignia acquired the general
partner of your partnership in December 1991. AIMCO acquired Insignia in October
1998. There are currently a total of 45 limited partners of your partnership and
a total of 30.5 units of your partnership outstanding. Your partnership is in
the business of owning and managing residential housing. Currently, your
partnership owns and manages the property described below. Your partnership has
no employees. 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.
YOUR PARTNERSHIP AND ITS PROPERTY
Your partnership was formed on May 28, 1985 for the purpose of owning an
apartment property located in Columbus, Ohio, known as "Catawba Club
Apartments." Your partnership's property is owned by the partnership but is
subject to a mortgage. The property was built in 1975 and consists of 186
apartment units. There are 51 one-bedroom apartments, 119 two-bedroom apartments
and 16 three-bedroom apartments. Your partnership's property had an average
occupancy rate of approximately 89.52% in 1998, 87.63% in 1997 and 87.63% in
1996.
Your partnership's property provides residents with a number of amenities
and services, such as 24-hour desk service, exercise room and/or sauna, and
party or meeting rooms. Nearly all apartment units are wired for cable
television, and many apartment units also offer one or more additional features,
such as washer/ dryer, microwave, fireplace, and patio/balcony.
Budgeted renovations for 1999 total $515,785 and are intended to be paid
for out of cash flow or borrowings. Renovation items include roofing, gutters
and down spouts, heating, ventilation and air conditioning systems, siding trim
facia/soffets, exterior paint, balconies and patios, foundations, sidewalks,
drives and parking lots, landscaping and irrigation, and fences.
Set forth below are the average rents for the apartments for the last five
years:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$506 $476 $447 $457 $445
</TABLE>
The apartments are being depreciated for federal income tax purposes using
the accelerated cost recovery method. Depreciation is computed principally by
the straight-line and accelerated methods over estimated lives of 3 to 40 years.
Currently, the real estate taxes on the property are $99,297 of $1,769,990
of assessed valuation with a current yearly tax rate of 5.61%. When the proposed
improvements are made it is anticipated that the yearly tax rate may increase by
approximately 5.89% of such improvements.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a wholly 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.
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS
Under your partnership's agreement of limited partnership, your partnership
is not permitted to raise new equity and reinvest cash in new properties.
Consequently, your partnership is limited in its ability to expand its
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<PAGE> 761
investment portfolio. Your partnership will terminate on December 31, 2008
unless earlier dissolved. Your partnership has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
Generally, your partnership is authorized to acquire, develop, improve, own
and operate your partnership's property as an investment and for income
producing purposes. The investment portfolio of your partnership is limited to
the assets acquired with the initial equity raised through the sale of units to
the limited partners of your partnership or the assets initially contributed to
your partnership by the limited partners, as well as the debt financing obtained
by your partnership within the established borrowing restrictions.
An investment in your partnership is a finite life investment, with the
partners to receive regular cash distributions out of your partnership's
distributable cash flow, if available, and to receive cash distributions upon
liquidation of your partnership's real estate investments, if available.
In general, your general partner (which is our subsidiary) regularly
evaluates the partnership's property by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors the property's specific locale and sub-market
conditions (including stability of the surrounding neighborhood) 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 (including any prepayment penalties), tax implications,
availability of attractive mortgage financing to a purchaser, 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. If rental market conditions improve, 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 viable option than it is
currently. After taking into account the foregoing considerations, your general
partner is not currently seeking a sale of your partnership's property primarily
because it expects the property's operating performance to improve in the near
term. In making this assessment, your general partner noted that occupancy and
rental rates at the property were 90% and $487, respectively, at December 31,
1998, compared to 88% and $506, respectively, at December 31, 1997. Although
there can be no assurance as to future performance, the general partner expects
rental rates to improve in the near future because planned improvements
enhancing the appeal of the property. In addition, the general partner noted
that it expects to spend approximately $515,785 for capital improvements at the
property in 1999 to improve the property's roofing, gutters, heating,
ventilation and air conditioning, siding, exterior paint, balconies, foundation
repairs, parking lots, landscaping/irrigation and fences. These expenditures are
expected to improve the desirability of the property to tenants. The general
partner does not believe that a sale of the property at the present time would
adequately reflect the property's future prospects. Another significant factor
considered by your general partner is the likely tax consequences of a sale of
the property for cash. Such a transaction would likely result in tax liabilities
for many limited partners. The general partner has not received any recent
indication of interest or offer to purchase the property.
CAPITAL REPLACEMENT
Your partnership has an ongoing program of capital improvements,
replacements and renovations, including roof replacements, kitchen and bath
renovations, balcony repairs (where applicable), replacement of various building
systems and other replacements and renovations in the ordinary course of
business. All capital improvement and renovation costs are expected to be paid
from operating cash flows, cash reserves, or from short-term or long-term
borrowings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Your Partnership."
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<PAGE> 762
BORROWING POLICIES
Your partnership's agreement of limited partnership allows your partnership
to incur debt. As of December 31, 1998, your partnership had a current mortgage
note outstanding of $3,600,402, payable to Marine Midland, Bank of America and
FNMA, which bears interest at a rate of 7.60%. The mortgage debt is due on
November 2002. Your partnership also has a second mortgage note outstanding of
$130,106, on the same terms as the current mortgage note. Your partnership's
agreement of limited partnership also allows the general partner of your
partnership to lend funds to your partnership. Currently, the general partner of
your partnership has no loans outstanding to your partnership.
COMPETITION
There are other residential properties within the market area of your
partnership's property. The number and quality of competitive properties in such
an area could have a material effect on the rental market for the apartments at
your partnership's property and the rents that may be charged for such
apartments. While we are a significant factor in the United States in the
apartment industry, competition for apartments is local.
LEGAL PROCEEDINGS
Your partnership is party to a variety of legal proceedings related to its
ownership of the partnership's property and management and leasing business,
respectively, arising in the ordinary course of the business, which are not
expected to have a material adverse effect on your partnership.
HISTORY OF THE PARTNERSHIP
Your partnership sold $1,996,400 of limited partnership units in 1985. Your
partnership currently owns one apartment property.
Your partnership used the funds raised to purchase its property and it has
expended the funds so raised many years ago. Your partnership currently owns the
property described herein, which is subject to a substantial mortgage. Your
general partner (which is our subsidiary) has not experienced any material
adverse financial developments from January 1, 1997 through the present.
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2008, 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.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, your general partner (which is our subsidiary) is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partners of your partnership are
not liable to your partnership or any limited partner for any acts or failures
to do any act performed by any of them in the absence of their willful
malfeasance or gross negligence. 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 partnership's agreement of limited partnership does not provide for
indemnification of the general partners by your partnership for any acts or
omissions performed by them.
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 partners of your partnership.
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<PAGE> 763
DISTRIBUTIONS AND TRANSFERS OF UNITS
Distributions
From 1993 through 1998 your partnership has paid no distributions. The
original cost per unit was $39,928.
Transfers
The units are not listed on any national securities exchange or quoted on
the NASDAQ System, the Electronic Bulletin Board or the "pink sheets," and there
is no established public trading market for the units. Secondary sales activity
for the units has been limited and sporadic. The general partner of your
partnership monitors transfers of the units (a) because the admission of the
transferee as a substitute limited partner in your partnership require the
consent of the general partner of your partnership under your partnership's
agreement of limited partnership, and (b) in order to track compliance with safe
harbor provisions to avoid treatment as a "publicly traded partnership" for tax
purposes. However, the general partner of your partnership does not monitor or
regularly receive or maintain information regarding the prices at which
secondary sale transactions in the units have been effectuated. The general
partner of your partnership estimates, based solely on the transfer records of
your partnership (or your partnership's transfer agent), that the number of
units transferred in privately negotiated transactions or in transactions
believed to be between related parties, family members or the same beneficial
owner was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF UNITS TOTAL UNITS NUMBER OF
YEAR TRANSFERRED OUTSTANDING TRANSACTIONS
- ---- --------------- ------------- ------------
<S> <C> <C> <C>
1994.................................. 0.0 0.00% 0
1995.................................. 0.0 0.00% 0
1996.................................. 0.0 0.00% 0
1997.................................. 0.0 0.00% 0
1998.................................. 0.75 2.34% 2
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate, approximately
a .992% interest in your partnership, 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 two years, 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 following table shows, for each of the years indicated, compensation
paid to your general partner and its affiliates on a historical basis, and on a
pro forma basis assuming that all of the units sought in our offer had been
acquired at the beginning of each period:
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------------------ ------------------------------------------
PARTNERSHIP PROPERTY PARTNERSHIP PROPERTY
FEES AND MANAGEMENT FEES AND MANAGEMENT
YEAR EXPENSES FEES DISTRIBUTIONS EXPENSES FEES DISTRIBUTIONS
- ---- ----------- ---------- ------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Not Not
1994................. $28,044 Available $0 $28,044 Available $0
1995................. 38,456 $54,303 $0 38,456 $54,303 $0
1996................. 33,620 56,001 $0 33,620 56,001 $0
1997................. 33,815 60,499 $0 33,815 60,499 $0
1998................. 24,729 58,102 $0 24,729 58,102 $0
</TABLE>
S-51
<PAGE> 764
SELECTED FINANCIAL INFORMATION
OF CATAWBA CLUB ASSOCIATES, L.P.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and Cash Equivalents....... $ 61,000 $ 53,000 $ 16,000 $ 38,000 $ 71,000 $ 86,000 $ 86,000
Land & Building................. 5,271,000 5,173,000 5,211,000 5,043,000 4,955,000 4,820,000 4,789,000
Accumulated Depreciation........ (3,534,000) (3,416,000) (3,445,000) (3,328,000) (3,219,000) (3,021,000) (2,745,000)
Other Assets.................... 350,000 359,000 379,000 357,000 344,000 384,000 338,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Assets............ $ 2,148,000 $ 2,169,000 $ 2,161,000 $ 2,110,000 $ 2,151,000 $ 2,269,000 $ 2,468,000
=========== =========== =========== =========== =========== =========== ===========
Notes Payable................... $ 4,028,000 $ 4,117,000 $ 4,097,000 $ 4,179,000 $ 4,254,000 $ 4,323,000 $ 4,386,000
Other Liabilities............... 517,000 452,000 492,000 388,000 776,000 703,000 632,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Liabilities....... $ 4,545,000 $ 4,589,000 $ 4,589,000 $ 4,576,000 $ 4,618,000 $ 4,613,000 $ 4,605,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Partners' Capital
(Deficit)............. $(2,397,000) $(2,400,000) $(2,428,000) $(2,467,000) $(2,467,000) $(2,344,000) $(2,137,000)
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Revenue.................. $ 820,000 $ 848,000 $ 1,130,000 $ 1,062,000 $ 997,000 $ 1,021,000 $ 993,000
Other Income.................... 56,000 47,000 66,000 76,000 84,000 68,000 71,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Revenue........... $ 876,000 $ 895,000 $ 1,196,000 $ 1,138,000 $ 1,081,000 $ 1,089,000 $ 1,064,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating Expenses.............. $ 394,000 $ 378,000 $ 511,000 $ 491,000 $ 473,000 $ 475,000 $ 480,000
General & Administrative........ 36,000 29,000 42,000 43,000 41,000 36,000 57,000
Depreciation.................... 88,000 88,000 118,000 109,000 197,000 289,000 283,000
Interest Expense................ 251,000 257,000 390,000 398,000 404,000 410,000 424,000
Property Taxes.................. 76,000 76,000 96,000 97,000 88,000 87,000 88,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Expenses.......... $ 845,000 $ 828,000 $ 1,157,000 $ 1,138,000 $ 1,203,000 $ 1,297,000 $ 1,332,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Income (Loss) before
extraordinary items........... $ 31,000 $ 67,000 $ 39,000 $ -- $ (122,000) $ (209,000) $ (268,000)
Extraordinary Items............. -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Income (Loss)............... $ 31,000 $ 67,000 $ 39,000 $ -- $ (122,000) $ (209,000) $ (268,000)
=========== =========== =========== =========== =========== =========== ===========
Net Income per limited
partnership unit.............. $ 1,006 $ 2,175 $ 1,266 $ -- $ (3,960) $ (6,751) $ (8,699)
=========== =========== =========== =========== =========== =========== ===========
Distributions per limited
partnership unit.............. $ -- $ -- $ -- $ -- $ -- $ -- $ --
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
S-52
<PAGE> 765
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
The following discussion and analysis of the results of operations and
financial condition of Your Partnership should be read in conjunction with the
audited financial statements of Your Partnership included herein.
Results of Operations
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1998 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
Net Income
Your Partnership recognized net income of $31,000 for the nine months ended
September 30, 1998, compared to $67,000 for the nine months ended September 30,
1997. The decrease in net income of $36,000 was the result of a decrease in
revenues, coupled with an increase in operating and general and administrative
expenses. These factors are discussed in more detail in the following
paragraphs.
Revenues
Rental and other property revenues from the Partnership Property totaled
$876,000 for the nine months ended September 30, 1998, compared to $895,000 for
the nine months ended September 30, 1997, a decrease of $19,000, or 2.1%. The
Partnership increased rental rates by an average of 3.3%; however, occupancy
decreased 4% to 89%. The increase in Other Income of $9,000 was due primarily to
higher laundry income and late charges assessed.
Expenses
Partnership Property operating expenses, consisting of utilities (net of
reimbursements received from tenants), contract services, turnover costs,
repairs and maintenance, advertising and marketing, and insurance totaled
$394,000 for the nine months ended September 30, 1998, compared to $378,000 for
the nine months ended September 30, 1997, an increase of $16,000, due primarily
to higher advertising costs in efforts to increase occupancy. Partnership
Property management expenses totaled $43,000 for the nine months ended September
30, 1998, compared to $45,000 for the nine months ended September 30, 1997, a
decrease of $2,000. This increase was primarily the result of the decrease in
rental revenues, as management fees are calculated based on a percentage of
revenue.
General and Administrative Expense
General and administrative expenses increased $7,000 to $36,000 for the
nine months ended September 30, 1998, compared to the corresponding period for
1997. This increase is due primarily to higher partnership administrative
expenses and asset management fees.
Partnership administrative fees increased due to the partnership's attempt
to refinance debt in August of 1998.
As part of the ongoing plan of your partnership, the general partner
monitors the rental market environment of your partnership's investment property
to assess the feasibility of increasing rents, maintaining or increasing
occupancy levels and protecting your partnership from increases in expenses. As
part of this plan, the general partner attempts to protect your partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
general partner will be able to sustain such a plan.
S-53
<PAGE> 766
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1997 TO THE YEAR ENDED DECEMBER 31,
1996
Net Income
Your partnership recognized net income of $38,586 for the year ended
December 31, 1997, compared to $206 for the year ended December 31, 1996. The
increase in net income of $38,380, was primarily the result of an increase in
rental revenues offset by an increase in operating expenses. These factors are
discussed in more detail in the following paragraphs.
Revenues
Rental and other property revenues from the partnership's property totaled
$1,195,681 for the year ended December 31, 1997, compared to $1,137,701 for the
year ended December 31, 1996, an increase of $57,980, or 5.1%. The increase is
due to a 3% increase in market rent, and a 2% increase in the occupancy rate to
90% in 1997. This is offset by other income which decreased $13,000 as compared
to the year ended December 31, 1996 due to a decrease in cleaning and damage
fees.
Expenses
Operating expenses, consisting of utilities (net of reimbursements received
from tenants), contract services, turnover costs, repairs and maintenance,
advertising and marketing, property taxes and insurance, totaled $511,450 for
the year ended December 31, 1997, compared to $490,711 for the year ended
December 31, 1996, an increase of $20,739 or 4.2%. The increase is due to a 2%
increase in the occupancy rate to 90% in 1997. Management expenses totaled
$60,499 for the year ended December 31, 1997, compared to $56,001 for the year
ended December 31, 1996, an increase of $4,498, or 8.0%. The increase resulted
from an increase in rental revenues.
General and Administrative Expenses
General and administrative expenses totaled $41,726 for the year ended
December 31, 1997 compared to $42,772 for the year ended December 31, 1996, a
decrease of $1,046 or 2.5%. General and administrative expenses remained
relatively constant throughout the comparable periods.
Interest Expense
Interest expense, which includes the amortization of deferred financing
costs, totaled $389,906 for the year ended December 31, 1997, compared to
$398,035 for the year ended December 31, 1996, a decrease of $8,129, or 2.0%.
The decrease is due to a lower outstanding balance on the mortgage indebtedness
due to principal payments made during the year.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31,
1995
Net Income
Your partnership recognized net income of $206 for the year ended December
31, 1996, compared to a net loss of $122,166 for the year ended December 31,
1995. The increase in net income of $122,372 was primarily the result of
increased revenues. These factors are discussed in more detail in the following
paragraphs.
Revenues
Rental and other property revenues from the partnership's property totaled
$1,137,701 for the year ended December 31, 1996, compared to $1,081,245 for the
year ended December 31, 1995, an increase of $56,456, or 5.2%. The increase can
be attributed to an increase in rental rates of 6% as a result of offering
corporate apartments, offset by a lower occupancy rate (decrease of 3%), and a
decrease in cleaning and damage fees.
Expenses
Operating expenses, consisting of utilities (net of reimbursements received
from tenants), contract services, turnover costs, repairs and maintenance,
advertising and marketing, property taxes and insurance,
S-54
<PAGE> 767
totaled $490,711 for the year ended December 31, 1996, compared to $472,940 for
the year ended December 31, 1995, an increase of $17,771 or 3.8%. Operating
expenses increased due to higher electrical bills and higher maintenance
salaries while apartments were being repaired for flood damage. Other increases
were due to incentives and concessions to increase occupancy. Management
expenses totaled $56,001 for the year ended December 31, 1996, compared to
$54,303 for the year ended December 31, 1995, an increase of $1,698, or 3.1%.
General and Administrative Expenses
General and administrative expenses totaled $42,772 for the year ended
December 31,1996 compared to $41,487 for the year ended December 31, 1995, an
increase of $1,285 or 3.1%. General and administrative expenses remained
relatively constant throughout comparable periods.
Interest Expense
Interest expense, which includes the amortization of deferred financing
costs, totaled $398,035 for the year ended December 31, 1996, compared to
$403,893 for the year ended December 31, 1995, a decrease of $5,858, or 1.5%.
The decrease is due to a lower outstanding balance on the mortgage indebtedness
due to principal payments made during the year.
Depreciation Expense
Depreciation expense decreased from 1995 to 1996 by $88,756, primarily due
to a large asset becoming fully depreciated in 1995.
Liquidity and Capital Resources
As of September 30, 1998, Your Partnership had $61,000 in cash and cash
equivalents. Your Partnership's principal demands for liquidity include normal
operating activities, payments of principal and interest on outstanding debt,
capital improvements, and distributions paid to limited partners. At September
30, 1998, the outstanding balance on the mortgage indebtedness, excluding
discount of $146,000, was $3,761,000. The mortgages require monthly payments of
approximately $34,000 until November, 2002, at which time a balloon payment of
approximately $3,311,000 will be due. The notes are collateralized by pledge of
land and buildings and have a stated interest rate of 7.6%. In addition, the
Partnership has an unsecured promissory note to an affiliate of the General
Partner, which matured in November, 1997. Management is currently attempting to
refinance the note. Cash used in investing activities consisted of capital
improvements and deposits to escrow accounts maintained by the mortgage lender.
Cash used in financing activities consisted of payments of principal made on the
mortgages encumbering your partnership's property and partner distributions.
There are no commitments for material capital expenditures as of September
1998. The sufficiency of existing liquid assets to meet future liquidity and
capital expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and meet other operating needs of the partnership. Such assets are currently
thought to be sufficient for any near-term needs of the partnership. Management
believes that your partnership has adequate sources of cash to finance its
operations, both on a short-term and long-term basis. The General Partner is
attempting to refinance the existing debt. The General Partner believes that it
will be successful, however there can be no assurance that refinancing will be
obtained. The Partnership is not generating sufficient cash flows to meet its
maturing debt service requirements, which raises substantial doubt about its
ability to continue as a going concern. The financial statements have been
prepared assuming that the Partnership will continue as a going concern and do
not include any adjustments that might result from these uncertainties. Budgeted
renovations for 1999 total $515,785 and are intended to be paid out of cash flow
or borrowings. Renovation items include roofing, gutters and down spouts,
heating, ventilation and air conditioning systems, siding trim facia/soffets,
exterior paint, balconies and patios, foundations, sidewalks, drives and parking
lots, landscaping and irrigation, and fences.
S-55
<PAGE> 768
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to 25% of the outstanding 30.5 units of your
partnership (up to 7.63 units) for consideration per unit of (i) 446.25
Preferred OP Units, (ii) 296.50 Common OP Units, or (iii) $11,155 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 the commencement of our offer 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., New York City time, on June 4, 1999, 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 January 1, 1999 (subject to proration
as described below), although you will be entitled to retain any distributions
you may have received after such date and prior to our commencement of this
offer.
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 March 26, 1999.
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 the commencement and the
expiration of the offer. See "-- Procedure for Tendering Units." UNDER NO
S-56
<PAGE> 769
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. However, any tendered units may be
withdrawn at any time prior to our accepting them for payment. The AIMCO
Operating Partnership has an 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.
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.
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.
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.
S-57
<PAGE> 770
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 pays for your units.
You agree not to exercise any rights pertaining to the tendered units without
the prior consent of the AIMCO Operating Partnership. Upon such 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 your general
partner (which is our subsidiary) (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.
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
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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 may
have to provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal.
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 "Federal Income Tax Consequences."
Transfer Taxes
The amount of any transfer taxes (whether imposed on the registered holder
of units or any person) payable on account of the transfer to such person will
be deducted from the purchase price unless satisfactory evidence of the such
taxes or exemption therefrom is submitted.
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.
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WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to our acceptance of such units for payment.
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.
The offer may be extended or delayed indefinitely and no payment will be
made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
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 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
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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 25% 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 25% 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 25% 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 25%, 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 the general partner of your partnership and thereby
controls the management of your partnership. In addition, AIMCO owns 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.
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After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units.
However, the AIMCO Operating Partnership and its affiliates will not acquire any
additional units for a period of at least one year after expiration of the
offer. 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. In addition, we are not extending
appraisal rights in connection with the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
No provisions have been made with regard to the offer to allow you or other
limited partners to inspect the books and records of your partnership or to
obtain counsel or appraisal services at our expense or at the expense of your
partnership. However, as described under "Comparison of Your Partnership and the
AIMCO Operating Partnership -- Review of Investor Lists," you have the right
under your partnership's agreement of limited partnership to obtain a list of
the limited partners.
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 the date of this Prospectus Supplement and at or before the expiration
date of the offer, including any extension thereof, 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 reasonable
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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 which, in the reasonable 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 the date hereof, (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
the date hereof, (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 reasonable 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 reasonable judgment of the
AIMCO Operating Partnership, a material acceleration or worsening thereof
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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 your
general partner (which is our subsidiary) 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 reasonable 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
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(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 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 reasonable 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
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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;
or
(h) the offer to purchase may have an adverse effect on AIMCO's status
as a REIT.
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 reasonable 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.
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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. However,
we will not be able to control voting decisions unless we acquire more units in
another transaction, which cannot take place for at least one year after
expiration of this offer. 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 controls the company that manages your partnership's
property. In the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Effect on Trading Market
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.
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. Consummation of
the offer will not affect your partnership's agreement of limited partnership,
the financial condition or results of operations of your partnership, the
business and properties owned, the management compensation payable to your
general partner (which is our subsidiary) or its affiliates or any other matter
relating to your partnership, except it would result in the AIMCO Operating
Partnership substantially increasing its ownership of units of your partnership.
We will receive future distributions from your partnership for any units we
purchase.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by your general partner (which
is our subsidiary), 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
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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 (excluding 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 (which are requests to dismiss the action as a matter
of law) were heard on February 8, 1999, but no decision has been reached by the
Court. While no assurances can be given, we believe that the ultimate outcome of
this litigation will not have a material adverse effect on us.
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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, the accompanying Prospectus, the Letter of Transmittal,
and the legal and accounting fees in connection with this offer. 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 $50,000.
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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FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of the material Federal
income tax consequences of the offer 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
differing interpretations or change, possibly retroactively. This 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 you in light of your specific investment or tax
circumstances, or if you are subject to special tax rules (for example, if you
are a financial institution, broker-dealer, insurance company, or, except to the
extent discussed below, tax-exempt organization or foreign investor, 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 are 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. No clear precedent or authority
may be available on some questions. 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 of your specific tax situation.
TAX OPINIONS
Skadden, Arps, Slate, Meagher & Flom LLP ("Special Tax Counsel") has
delivered an opinion letter with regard to the material United States Federal
income tax consequences of the offer. The opinion letter of Special Tax Counsel
is filed as an exhibit to this Registration Statement. You may obtain a copy of
such opinion letter by sending a written request to the AIMCO Operating
Partnership.
The specific United States Federal income tax opinions that Special Tax
Counsel has provided are:
1. Commencing with AIMCO's initial taxable year ended December 31, 1994,
AIMCO was organized in conformity with the requirements for qualification
as a REIT under the Code, and its actual method of operation has enabled,
and its proposed method of operation will enable, AIMCO to meet the
requirements for qualification and taxation as a REIT. As noted in the
accompanying Prospectus, AIMCO's qualification and taxation as a REIT
depend upon its ability to meet, through actual annual operating results,
certain requirements, including requirements relating to distribution
levels and diversity of stock ownership, and the various qualification
tests imposed under the Code, the results of which have been represented by
the AIMCO's officers and will not be reviewed by Special Tax Counsel. No
assurance can be given that the actual results of AIMCO's future operations
for any one taxable year will satisfy the requirements for taxation as a
REIT under the Code.
2. The AIMCO Operating Partnership will be treated as a partnership and
not as an association taxable as a corporation for Federal income tax
purposes.
3. You will not recognize gain or loss for Federal income tax purposes
when you exchange your units solely for OP Units. If, immediately prior to
such exchange, the amount of your partnership's liabilities allocable to
the units you transfer to the AIMCO Operating Partnership exceeds the
amount of the AIMCO Operating Partnership's liabilities allocable to you
immediately after the exchange, you will receive a deemed distribution in
an amount equal to such liability relief and will recognize gain for
Federal income tax purposes to the extent that the amount of such deemed
distribution exceeds your aggregate adjusted tax basis in your OP Units.
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4. If you exchange your units for cash and OP Units, you will be treated
for Federal income tax purposes as selling some of your units for cash in a
taxable sale and contributing some of your units for OP Units in a tax-free
exchange. With respect to the units that you will be treated as selling for
cash, you will be taxed as described in paragraph number five below. With
respect to the units that you will be treated as exchanging for OP Units,
you will be taxed as described in paragraph number three above.
5. If you sell your units solely for cash, you will recognize gain or
loss for Federal income tax purposes in an amount equal to the difference
between (i) your amount realized on the sale and (ii) your adjusted tax
basis in the units you sold.
6. If you retain all or a portion of your units and your partnership
terminates for Federal income tax purposes, you will not recognize any gain
or loss as a result of such termination and your capital account in your
partnership will not be affected.
7. Because of the factual nature of the inquiry, no opinion is expressed
by Special Tax Counsel as to whether your exercise of a redemption right
with respect to an OP Unit would cause your contribution of units to the
AIMCO Operating Partnership to be a taxable transaction under the disguised
sale rules of the Code.
8. The discussion in the accompanying Prospectus under the captions
"FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS" and "FEDERAL
INCOME TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNIT HOLDERS" and
in this Prospectus Supplement under the caption "FEDERAL INCOME TAX
CONSEQUENCES" is a fair and accurate summary of the material United States
Federal income tax consequences of the offers and of the acquisition,
ownership and disposition of the OP Units and the AIMCO stock by a holder
who acquires the OP Units or AIMCO stock in connection with the offers,
subject to the qualifications set forth therein.
It must be emphasized that these opinions are based and conditioned upon
representations and covenants made by AIMCO and the AIMCO Operating Partnership
as to factual matters (including representations and covenants concerning
AIMCO's properties and the past, present and future conduct of its business and
your partnership's liabilities). These opinions are expressed as of the date of
the opinion letter and Special Tax Counsel has no obligation to advise AIMCO or
the AIMCO Operating Partnership of any subsequent change in the matters stated,
represented, or assumed or any subsequent change in the law. An opinion of
counsel is not binding on the IRS, and no assurance can be given that the IRS
will not challenge the above opinions of Special Tax Counsel.
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 when you exchange your units solely for OP Units. You may
recognize gain upon such exchange if, immediately prior to such exchange, the
amount of liabilities of your partnership allocable to the units you transferred
exceeds the amount of the AIMCO Operating Partnership liabilities allocable to
you immediately after such exchange. If this was true in your case, the excess
would be treated as a deemed distribution of cash to you from the AIMCO
Operating Partnership. This deemed cash distribution would be treated as a
nontaxable return of capital to the extent of your adjusted tax basis in your OP
Units 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 you exchange your units pursuant to the offer,
at least equal to the amount of liabilities of your partnership that were
allocable to your units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most persons who participate in the tender offer
would not recognize gain or loss as a result of an exchange of units solely for
OP Units pursuant to the offer.
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DISGUISED SALES
Under the Code, a transfer of property by a partner to a partnership
followed by a related transfer by the partnership of money or other property to
the partner is treated as a "disguised" sale if (1) the second transfer would
not have occurred but for the first transfer and (2) the second transfer "is not
dependent on the entrepreneurial risks of the partnership operations." In a
disguised sale, the partner is treated as if he or she sold the contributed
property to the partnership as of the date the property was contributed to the
partnership. In addition, unless a few technical exceptions apply, transfers of
money or other property between a partnership and a partner that are made within
two years of each other, including redemptions of OP Units made within two years
of a contribution of your units, must be reported to the IRS and are presumed to
be a "disguised" sale unless the facts and circumstances clearly establish that
the transfers do not constitute a sale.
While there is no authority applying the disguised sale rules to the
exercise of a redemption right by a partner with respect to a partnership
interest received in exchange for property, the exercise of a redemption right
with respect to OP Units within two years of the date of the contribution of
your units to the AIMCO Operating Partnership may be treated as a disguised
sale. If this treatment were to apply, you would be treated for Federal income
tax purposes as if, on the date of the contribution of your units, the AIMCO
Operating Partnership transferred to you an obligation to give you the
redemption proceeds. In that case, you would be required to recognize gain on
the disguised sale in such earlier year. Because of the factual nature of such
an inquiry, Special Tax Counsel is unable to opine whether your exercise of a
redemption right with respect to an OP Unit would cause your contribution of
units to the AIMCO Operating Partnership to be a taxable transaction under the
disguised sale rules of the Code.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Federal Income Taxation of the
AIMCO Operating Partnership and OP Unitholders -- 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
If you exchange your units for cash and OP Units, you will be treated as
selling some of your units for cash in a taxable sale and contributing some of
your units for OP Units in a tax-free exchange. Your adjusted tax basis in your
transferred units will be allocated between the units you will be deemed to have
sold and the units you will be deemed to have contributed to the AIMCO Operating
Partnership.
With respect to the units that you will be treated as selling, you will
recognize gain or loss in an amount equal to the difference between (i) your
"amount realized" on the sale and (ii) your adjusted tax basis in units you
sold. Your "amount realized" on such sale will be equal to the sum of the amount
of cash you received pursuant to the offer (that is, the offer consideration)
plus the amount of your partnership's liabilities attributed to the units you
sold. For purposes of these partial sale rules, the amount of your partnership's
liabilities attributed to the units you sold will be equal to the lesser of (i)
the excess of the amount of your partnership's liabilities allocable to you in
respect of the transferred units immediately prior to the exchange over the
amount of such liabilities allocable to you as determined immediately after the
exchange or (ii) the product of (A) the amount of your partnership's liabilities
allocable to you in respect of the units you are deemed to have sold immediately
prior to the exchange and (B) your "net equity percentage" with respect to those
units. Your "net equity percentage" will be equal to the percentage determined
by dividing (x) the cash you received in the exchange by (y) the excess of the
gross fair market value of the units in the exchange over the amount of your
partnership's liabilities allocable to you in respect of those units immediately
prior to the exchange. Thus, your tax liability could exceed the amount of cash
you receive in the sale.
With respect to the units that you will be treated as exchanging, rather
than selling, you will be taxed as described above under the heading "Tax
Consequences of Exchanging Units Solely for OP Units."
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TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
If you sell your units solely for cash, you will recognize gain or loss on
a sale of your units equal to the difference between (i) your "amount realized"
on the sale and (ii) your adjusted tax basis in the units you sold. The "amount
realized" with respect to a unit will be equal to the sum of the amount of cash
you received for your units (that is, the offer consideration) plus the amount
of the liabilities of your partnership allocable to such units (as determined
under Section 752 of the Code). Thus, your tax liability could exceed the amount
of cash you receive in the sale.
ADJUSTED TAX BASIS
If you acquired your units for cash:
- your initial tax basis in your units will be equal to such cash
investment in your partnership increased by your share of your
partnership's liabilities at the time such units were acquired;
- your initial tax basis generally has been increased by:
- your share of your partnership's income and gains and
- any increases in your share of your partnership's liabilities; and
- your initial tax basis generally has been decreased (but not below zero)
by:
- your share of cash distributions from your partnership,
- any decreases in your share of your partnership's liabilities,
- your share of your partnership's losses, and
- your share of nondeductible expenditures of your partnership that are
not chargeable to capital.
For purposes of determining your adjusted tax basis in your units
immediately prior to a disposition of such units, your adjusted tax basis will
include your 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), the gain you
would recognize pursuant to the offer will exceed the cash proceeds you would
realize upon the sale of your units. The adjusted tax basis of the OP Units you
receive in exchange for your units pursuant to the offer will be equal to (i)
the sum of your adjusted tax basis in the units you transferred plus any gain
recognized in the exchange and will be reduced by (ii) any cash you received or
you were deemed to receive 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 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 that is attributable to your share of "unrealized receivables" of your
partnership exceeds the tax basis attributable to those assets, such excess will
be treated as ordinary income. Among other things, "unrealized receivables"
include depreciation recapture for 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. You will not receive any future distributions
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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 the income or loss. 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 the passive 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 passive losses in the manner described below. If you receive
cash for 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 receive cash for all or a portion of your units
pursuant to the offer and recognize 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
receive cash for all of your units pursuant to the offer, the balance of any
"suspended" losses from your partnership 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.
TAX REPORTING
If you tender any units, you must report the transaction by filing a
statement with your Federal income tax return for the year of the tender which
provides certain required information to the IRS. To prevent the possible
application of back-up Federal income tax withholding of 31% with respect to
payment of the offer consideration, you may have to provide the AIMCO Operating
Partnership with your correct taxpayer identification number. See the
instructions to the Letter of Transmittal.
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"). If you are a foreign person, the AIMCO Operating Partnership will
be required, under the FIRPTA provisions of the Code, to deduct and withhold 10%
of the amount realized by you on the disposition. The amount withheld would be
creditable against your Federal income tax liability and, if the amount withheld
exceeds your actual tax liability you could obtain a refund from the IRS by
filing a U.S. income tax return. See the Instructions to the Letter of
Transmittal.
TAX CONSEQUENCES OF A TERMINATION OF YOUR PARTNERSHIP
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"). The AIMCO Operating Partnership's acquisition of units pursuant
to the offer may result in a Termination of your partnership. If an acquisition
of units results in a
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Termination, the following Federal income tax events will be deemed to occur:
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
interests 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 to the
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
to the New Partnership. A Termination will change (and possibly shorten) a
Remaining Offeree's holding period with respect to its units in your partnership
for Federal income tax purposes. Gains recognized by a Remaining Offeree on the
disposition of New Partnership interests with a holding period of 12 months or
less may be classified as short-term capital gains and subject to taxation at
ordinary income tax rates.
The New Partnership's adjusted tax basis in its assets will be the same as
the Old Partnership's basis in such assets immediately before the Termination. A
Termination will also cause the New Partnership to recalculate the depreciable
lives of its assets. This will cause the assets to be depreciated over a longer
period of time than if there had been no Termination. This would generally
decrease the annual average depreciation deductions allocable to the Remaining
Offerees for a number of years following consummation of the offer (thereby
increasing the taxable income allocable to their retained units in each such
year), but would have no effect on the total depreciation deductions available
over the useful lives of the assets of your partnership.
Elections as to 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.
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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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 The AIMCO Operating Partnership is organized
organized under Delaware law. as a 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 The term of the AIMCO Operating Partnership
partners as a finite life investment, with continues until December 31, 2093, unless
limited partners to receive regular cash the AIMCO Operating Partnership is dissolved
distributions out of your partnership's sooner pursuant to the terms of the AIMCO
Available Cash Flow (as defined in your Operating Partnership's agreement of limited
partnership's agreement of limited partnership (the "AIMCO Operating
partnership). The termination date of your Partnership Agreement") or as provided by
partnership is December 31, 2008. law. See "Description of 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 The purpose of the AIMCO Operating
purchase, hold, lease, manage and operate Partnership is to conduct any business that
your partnership's property. Subject to may be lawfully conducted by a limited
restrictions contained in your part- partnership organized pursuant to the
nership's agreement of limited partnership, Delaware Revised Uniform Limited Part-
your partnership may perform all acts nership Act (as amended from time to time,
necessary or appropriate in connection or any successor to such statute) (the
therewith and reasonably related thereto, "Delaware Limited Partnership Act"),
including borrowing money and creating provided that such business is to be
liens. conducted in a manner that permits AIMCO to
be qualified as a REIT, unless AIMCO ceases
to qualify as a REIT. The AIMCO Operating
Partner-
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship 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 ac-
tion, 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>
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is The general partner is authorized to issue
authorized to issue additional limited additional partnership interests in the
partnership interests in your partnership AIMCO Operating Partnership for any
and may admit additional limited partners by partnership purpose from time to time to the
selling not more than 30 units for cash and limited partners and to other persons, and
notes to selected persons who fulfill the to admit such other persons as additional
requirements set forth in your partnership's limited partners, on terms and conditions
agreement of limited partnership. The and for such capital contributions as may be
capital contribution need not be equal for established by the general partner in its
all limited partners and no action or sole discretion. The net capital
consent is required in connection with the contribution need not be equal for all OP
admission of any additional limited Unitholders. No action or consent by the OP
partners. 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,
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 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>
Your partnership's agreement of limited The AIMCO Operating Partnership may lend or
partnership specifies certain contracts to contribute funds or other assets to its
be entered into with the general partner and subsidiaries or other persons in which it
its affiliates and the compensa- has an equity investment,
</TABLE>
S-75
<PAGE> 788
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
tion to be paid under such contracts. In and such persons may borrow funds from the
addition, the general partner may loan your AIMCO Operating Partnership, on terms and
partnership such additional sums as the conditions established in the sole and
general partners deems appropriate and absolute discretion of the general partner.
necessary for the conduct of your To the extent consistent with the business
partnership's business. Such loans by the purpose of the AIMCO Operating Partnership
general partner or its affiliates will be and the permitted activities of the general
upon such terms and for such maturities as partner, the AIMCO Operating Partnership may
the general partner deems reasonable and transfer assets to joint ventures, limited
will bear interest at a rate the greater of liability companies, partnerships,
2 1/2% over the base rate then being charged corporations, business trusts or other
by Third National Bank in Nashville, business entities in which it is or thereby
Tennessee or the actual cost to such lender becomes a participant upon such terms and
to borrow such funds and the terms thereof subject to such conditions consistent with
as to security and other charges or fees the AIMCO Operating Partnership Agreement
will be at least as favorable to your and applicable law as the general partner,
partnership as those negotiated by in its sole and absolute discretion,
unaffiliated lenders on com- believes to be advisable. Except as
parable loans for the same purpose in the expressly permitted by the AIMCO Operating
same locale. Partnership Agreement, neither the general
partner nor any of its affiliates may sell,
transfer or convey any property to the AIMCO
Operating Partnership, directly or
indirectly, except pursuant to transactions
that are determined by the general partner
in good faith to be fair and reasonable.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is The AIMCO Operating Partnership Agreement
authorized to borrow money in the ordinary contains no restrictions on borrowings, and
course of business and in connection with the general partner has full power and
certain loans specified in your authority to borrow money on behalf of the
partnership's agreement of limited AIMCO Operating Partnership. The AIMCO
partnership, which includes loans secured by Operating Partnership has credit agreements
your partnership's property. However, except that restrict, among other things, its
for such loans specified in your ability to incur indebtedness.
partnership's agreement of limited
partnership, the limited partners owning 51%
of the outstanding units must approve the
mortgaging of all or substantially all of
the assets of your partnership and, in any
case, the general partners may not incur any
indebtedness pursuant to a non-recourse loan
if the creditor will have or acquire, at any
time, as a result of the making of 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 Each OP Unitholder has the right, upon
partnership entitles the limited partners to written demand with a statement of the
have access to the current list of the names purpose of such demand and at such OP
and addresses of all limited partner at the Unitholder's own expense, to obtain a
principal office of the general partner in current list of the name and last known
Tennessee at all reasonable times. business, residence or mailing address of
the general partner and each other OP
Unitholder.
</TABLE>
S-76
<PAGE> 789
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Management Control
<TABLE>
<S> <C>
The management and control of your All management powers over the business and
partnership and its business and affairs affairs of the AIMCO Operating Partnership
rests exclusively with the general partners, are vested in AIMCO-GP, Inc., which is the
which have all the rights and power which general partner. No OP Unitholder has any
may be possessed by general partners pursu- right to participate in or exercise control
ant to applicable law or are necessary, or management power over the business and
advisable or convenient to the discharge of affairs of the AIMCO Operating Partner-
its duties under your partnership's ship. The OP Unitholders have the right to
agreement of limited partnership. Limited vote on certain matters described under
partners may not take part in or interfere "Comparison of Your Units and AIMCO OP
with conduct or control of the business of Units -- Voting Rights" below. The general
your partnership and have no right or partner may not be removed by the OP
authority to act for or bind your Unitholders with or without cause.
partnership in any manner, except that
limited partners may exercise the voting and In addition to the powers granted a general
other rights provided in your partnership's partner of a limited partnership under
agreement of limited partnership and under applicable law or that are granted to the
applicable law. 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 Notwithstanding anything to the contrary set
limited partnership, the general partner of forth in the AIMCO Operating Partnership
your partnership is not liable to your Agreement, the general partner is not liable
partnership or any limited partner for any to the AIMCO Operating Partnership for
acts or failures to do any act performed by losses sustained, liabilities incurred or
it in the absence of its willful malfeasance benefits not derived as a result of errors
or gross negligence. Your partnership's in judgment or mistakes of fact or law of
agreement of limited partnership does not any act or omission if the general partner
provide for indemnification of the general acted in good faith. The AIMCO Operating
partner by your partnership for any acts or Partnership Agreement provides for
omissions performed by it. indemnification of AIMCO, or any director or
officer of AIMCO (in its capacity as the
previous
</TABLE>
S-77
<PAGE> 790
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
general partner of the AIMCO Operating
Partnership), the general partner, any
officer or director of general partner or
the AIMCO Operating Partnership and such
other persons as the general partner 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 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
and certain state securities administrations
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 and their
respective state securities laws.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of Except in limited circumstances, the general
limited partnership, the limited partners partner has exclusive management power over
may remove a general partner for cause after the business and affairs of the AIMCO
giving notice to such general partner upon a Operating Partnership. The general partner
vote of the limited partners owning at least may not be removed as general partner of the
67% of the outstanding units. A general AIMCO Operating Partnership by the OP
partner may resign with the approval of the Unitholders with or without cause. Under the
limited partners owning at least 51% of the AIMCO Operating Partnership Agreement, the
outstanding units upon the giving of notice general partner may, in its sole discretion,
to any remaining general partner and the prevent a transferee of an OP Unit from
limited partners. All the limited partners becoming a substituted limited partner
must approve the election of a substitute pursuant to the AIMCO Operating Partnership
general partner. A limited partner may not Agreement. The general partner may exercise
transfer his interests without the written this right of approval to deter, delay or
consent of the general partners which may be hamper attempts by persons to acquire a
withheld at the sole discretion of the controlling interest in the AIMCO Operating
general partner. Partnership. 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 With the exception of certain circumstances
partnership may be amended by the general set forth in the AIMCO Operating Partnership
partner to add Agreement,
</TABLE>
S-78
<PAGE> 791
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
representations, duties or obligations of whereby the general partner may, without the
the general partner or its affiliates or consent of the OP Unitholders, amend the
surrender any right or power granted to the AIMCO Operating Partnership Agreement,
general partners or their affiliates in your amendments to the AIMCO Operating
partnership's agreement of limited part- Partnership Agreement require the consent of
nership for the benefit of the limited the holders of a majority of the outstanding
partners; to cure any ambiguity; to correct Common OP Units, excluding AIMCO and certain
or supplement any provision which may be other limited exclusions (a "Majority in
inconsistent with any other provision Interest"). Amendments to the AIMCO
provided that the general partner receive an Operating Partnership Agreement may be
opinion of counsel that such amendment does proposed by the general partner or by
not adversely affect the rights of the holders of a Majority in Interest. Following
limited partners; and to admit additional or such proposal, the general partner will
substitute limited partners. Any other submit any proposed amendment to the OP
amendments to your partnership's agreement Unitholders. The general partner will seek
of limited partnership must be approved by the written consent of the OP Unitholders on
the limited partners owning 67% of the the proposed amendment or will call a
units. The general partner must submit a meeting to vote thereon. See "Description of
written statement of the proposed amendment OP Units -- Amendment of the AIMCO Operating
together with their recommendation as to Partnership Agreement" in the accompanying
such proposed amendment. For the purposes of Prospectus.
obtaining the consent of the limited
partners, the general partner may require
responses within a specified time, which may
not be less than 30 days, and failure to
respond in such time will constitute a vote
which is consistent with the general
partner's recommendation with respect to
such proposal.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
In addition to the right to distributions in The general partner does not receive
respect of its partnership interest and compensation for its services as general
reimbursement for all fees and expenses is partner of the AIMCO Operating Partnership.
set forth in your partnership's agreement of However, the general partner is entitled to
limited partnership, the general partner payments, allocations and distributions in
receives no fees for its services as general its capacity as general partner of the AIMCO
partner. However, the general partner or Operating Partnership. In addition, the
certain of its affiliates may be entitled to AIMCO Operating Partnership is responsible
compensation for services rendered outside for all expenses incurred relating to the
of its capacity as general partner. 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 Except for fraud, willful misconduct or
limited partnership, except as provided gross negligence, no OP Unitholder has
under applicable law, a limited partner is personal liability for the AIMCO Operating
not bound by or personally liable for the Partnership's debts and obligations, and
expenses, liabilities or obligations of your liability of the OP Unitholders for the
partnership in excess of such limited AIMCO Operating Partnership's debts and
partners' capital contribution, including obligations is generally limited to the
any deferred payment to be made by such amount of their investment in the AIMCO
limited partner for its units, and any Operating Partnership. However, the
mandatory assessments provided for in your limitations on the liability of limited
partnership's agreement of limited partners for the obligations of a limited
partnership which may partnership
</TABLE>
S-79
<PAGE> 792
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
be levied against those limited partners who have not been clearly established in some
do not pay for issued units entirely in cash states. If it were determined that the AIMCO
at the time of issuance. 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 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 Unless otherwise provided for in the
limited partnership, the general partner relevant partnership agreement, Delaware law
must manage and control your partnership, generally requires a general partner of a
and its business and affairs to the best of Delaware limited partnership to adhere to
its abilities and must use its best efforts fiduciary duty standards under which it owes
to carry out the business of your its limited partners the highest duties of
partnership. The general partner must devote good faith, fairness and loyalty and which
itself to the business of your partnership generally prohibit such general partner from
to the extent that it, in its discretion, taking any action or engaging in any
deems necessary for the efficient carrying transaction as to which it has a conflict of
on thereof. The general partner must act as interest. The AIMCO Operating Partnership
a fiduciaries with respect to the Agreement expressly authorizes the general
safekeeping and use of the funds and assets partner to enter into, on behalf of the
of your partnership. However, the general AIMCO Operating Partnership, a right of
partner may engage in whatever activities it first opportunity arrangement and other
chooses, whether or not it is competitive conflict avoidance agreements with various
with your partnership, without having or affiliates of the AIMCO Operating
incurring any obligation to offer any Partnership and the general partner, on such
interest in such activities to your partner- terms as the general partner, in its sole
ship or any limited partner. and absolute discretion, believes are
advisable. The AIMCO Operating Partnership
In general, your partnership's agreement of Agreement expressly limits the liability of
limited partnership and the AIMCO Operating the general partner by providing that the
Partnership Agreement have limitations on general partner, and its officers and
the liability of the general partner but directors will not be liable or accountable
such limitations differ and provide more in damages to the AIMCO Operating
protection for the general partner of the Partnership, the limited partners or as-
AIMCO Operating Partnership. signees 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 The AIMCO Operating Partnership is not
differences between the taxation of your subject to Federal income taxes. Instead,
partnership and the AIMCO Operating each holder of OP Units includes in income
Partnership. its allocable share of the AIMCO Operating
Partnership's taxable income
</TABLE>
S-80
<PAGE> 793
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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 nonre-
course 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>
<CAPTION>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity in- equity interests entitling each equity interests entitling each
</TABLE>
S-81
<PAGE> 794
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
terests entitling each partner to holder of Preferred OP Units, when OP Unitholder to such partner's
its pro rata share of and as declared by the board of pro rata share of cash distribu-
distributions to be made to the directors of the general partner tions made from Available Cash (as
partners of your partnership. of the AIMCO Operating Part- such term is defined in the AIMCO
nership, quarterly cash distribu- Operating Partnership Agreement)
tion at a rate of $0.50 per to the partners of the AIMCO
Preferred OP Unit, subject to ad- Operating Partnership. To the
justments from time to time on or extent the AIMCO Operating
after the fifth anniversary of the Partnership sells or refinances
issue date of the Preferred OP its assets, the net proceeds
Units. therefrom generally will be re-
tained 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 Except as otherwise required Under the AIMCO Operating
agreement of limited by applicable law or in the Partnership Agreement, the
partnership, the vote of the AIMCO Operating Partnership OP Unitholders have voting
limited partners owning 51% Agreement, the holders of rights only with respect to
of the outstanding units is the Preferred OP Units will certain limited matters such
necessary to change the have the same voting rights as certain amendments and
nature of your partnership's as holders of the Common OP termination of the AIMCO
business and approve or Units. See "Description of Operating Partnership
disapprove the sale of all OP Units" in the accompany- Agreement and certain
or substantially all of the ing Prospectus. So long as transactions such as the
assets of your partnership. any Preferred OP Units are institution of bankruptcy
The consent of the holders outstanding, in addition to proceedings, an assignment
of at least 67% of the any other vote or consent of for the benefit of creditors
outstanding units is re- partners required by law or and certain transfers by the
quired to remove a general by the AIMCO Operating general partner of its
partner, amend your Partnership Agreement, the interest in the AIMCO
partnership's agreement of affirmative vote or consent Operating Partnership or the
limited partnership and to of holders of at least 50% admission of a successor
dissolve your partnership of the outstanding Preferred general partner.
before its term expires. All OP Units will be necessary
limited partners must for effecting any amendment Under the AIMCO Operating
approve the election of a of any of the provisions of Partnership Agreement, the
substitute general partner. the Partnership Unit general partner has the
Designation of the Preferred power to effect the
A general partner may cause OP Units that materially and acquisition, sale, transfer,
the dissolution of the your adversely affects the rights exchange or other
partnership by retiring when or preferences of the disposition of any assets of
there are no remaining holders of the Preferred OP the AIMCO Operating
general partners unless, Units. The creation or Partnership (including, but
within ninety days, all of issuance of any class or not limited to, the exercise
the limited partners elect a series of partnership units, or grant of any conversion,
new general partner to including, without option, privilege or
continue the business of limitation, any partner- subscription right or any
your partnership, in ship units that may have other right available in
reconstituted form if rights senior or superior to connection with any assets
necessary. the Preferred OP Units, at any time held by the
shall not be deemed to AIMCO Operating Partnership)
In general, you have greater materially adversely affect or the merger,
voting rights in your the consolidation,
partnership than you will reorganization or
have as an
</TABLE>
S-82
<PAGE> 795
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
OP Unitholder. OP rights or preferences of the other combination of the
Unitholders can not remove holders of Preferred OP AIMCO Operating Partnership
the general partner of the Units. With respect to the with or into another entity,
AIMCO Operating Partnership. exercise of the above all without the consent of
described voting rights, the OP Unitholders.
each Preferred OP Units
shall have one (1) vote per The general partner may
Preferred OP Unit. cause the dissolution of the
AIMCO Operating Partnership
by an "event of withdrawal,"
as defined in the Delaware
Limited Partnership Act
(including, without limi-
tation, 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 "Descrip-
tion of OP
Units -- Dissolution and
Winding Up" in the accom-
panying Prospectus.
OP Unitholders cannot remove
the general partner of the
AIMCO Operating Partnership
with or without cause.
</TABLE>
S-83
<PAGE> 796
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement Holders of Preferred OP Subject to the rights of
of limited partnership Units will be entitled to holders of any outstanding
specifies how the cash receive, when and as Preferred OP Units, the
available for distribution, declared by the board of AIMCO Operating Partnership
whether arising from directors of the general Agreement requires the
operations or sales or partner of the AIMCO general partner to cause the
refinancing, is to be shared Operating Partnership, AIMCO Operating Partnership
among the partners. Dis- quarterly cash distributions to distribute quarterly all,
tributions of the Available at the rate of $0.50 per or such portion as the
Cash Flow will be made in Preferred OP Unit; provided, general partner may in its
quarterly installments however, that at any time sole and absolute discretion
within 45 days after the end and from time to time on or determine, of Available Cash
of such quarter or at such after the fifth anniversary (as defined in the AIMCO
time or times as the general of the issue date of the Operating Partnership
partner deems practical. The Preferred OP Units, the Agreement) generated by the
distributions payable to the AIMCO Operating Partnership AIMCO Operating Partnership
partners are not fixed in may adjust the annual during such quarter to the
amount and depend upon the distribution rate on the general partner, the special
operating results and net Preferred OP Units to the limited partner and the
sales or refinancing lower of (i) 2.00% plus the holders of Common OP Units
proceeds available from the annual interest rate then on the record date es-
disposition of your applicable to U.S. Treasury tablished by the general
partnership's assets. notes with a maturity of partner with respect to such
five years, and (ii) the quarter, in accordance with
annual dividend rate on the their respective interests
most recently issued AIMCO in the AIMCO Operating
non-convertible preferred Partnership on such record
stock which ranks on a date. Holders of any other
parity with its Class H Preferred OP Units issued in
Cumulative Preferred Stock. the future may have priority
Such distributions will be over the general partner,
cumulative from the date of the special limited partner
original issue. Holders of and holders of Common OP
Preferred OP Units will not Units with respect to
be entitled to receive any distributions of Available
distributions in excess of Cash, distributions upon
cumulative distributions on liquidation or other
the Preferred OP Units. No distributions. See "Per
interest, or sum of money in Share and Per Unit Data" in
lieu of interest, shall be the accompanying Prospectus.
payable in respect of any
distribution payment or pay- The general partner in its
ments on the Preferred OP sole and absolute discretion
Units that may be in may distribute to the OP
arrears. Unitholders Available Cash
on a more frequent basis and
When distributions are not provide for an appropriate
paid in full upon the record date.
Preferred OP Units or any
Parity Units (as defined The AIMCO Operating Partner-
below), all distributions ship Agreement requires the
declared upon the Preferred general partner to take such
OP Units and any Parity reasonable efforts, as
Units shall be declared determined by it in its sole
ratably in proportion to the and absolute discretion and
respective amounts of consistent with
distributions accumulated,
accrued and unpaid on the
Preferred OP Units and such
Parity
</TABLE>
S-84
<PAGE> 797
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
Units. Unless full AIMCO's qualification as a
cumulative distributions on REIT, to cause the AIMCO
the Preferred OP Units have Operating Partnership to
been declared and paid, distribute sufficient
except in limited circum- amounts to enable the
stances, no distributions general partner to transfer
may be declared or paid or funds to AIMCO and enable
set apart for payment by the AIMCO to pay stockholder
AIMCO Operating Partnership dividends that will (i)
and no other distribution of satisfy the requirements for
cash or other property may qualifying as a REIT under
be declared or made, the Code and the Treasury
directly or indirectly, by Regulations and (ii) avoid
the AIMCO Operating any Federal income or excise
Partnership with respect to tax liability of AIMCO. See
any Junior Units (as de- "Description of OP
fined below), nor shall any Units -- Distributions" in
Junior Units be redeemed, the accompanying Prospectus.
purchased or otherwise
acquired for considera-
tion, 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>
<CAPTION>
<S> <C> <C>
A limited partner may There is no public market There is no public market
transfer his units to any for the Preferred OP Units for the OP Units. The AIMCO
person and such transferee and the Preferred OP Units Operating Partnership
will become a substituted are not listed on any Agreement restricts the
limited partner if: (1) the securities exchange. The transferability of the OP
transfer is not in respect Preferred OP Units are Units. Until the expiration
of fractional units, except subject to restrictions on of one year from the date on
in limited circumstances, transfer as set forth in the which an OP Unitholder
(2) the assignor and AIMCO Operating Partnership acquired OP Units, subject
assignee execute, Agreement. to certain exceptions, such
acknowledge and deliver OP Unitholder may not
instruments of transfer Pursuant to the AIMCO transfer all or any por-
satisfactory to the general Operating Partnership tion of its OP Units to any
partner, (3) the transferor Agreement, until the transferee without the
pays a transfer fee, (4) the expiration of one year from consent of the general
general partner consents, the date on which a holder partner, which consent may
which consent will be of Preferred OP Units be withheld in its sole and
withheld if, among other acquired Preferred OP Units, absolute discretion. After
reasons, the transfer subject to certain the expiration of one year,
violates Federal or state exceptions, such holder of such OP Unitholder has the
securities laws or results Preferred OP Units may not right to transfer all or any
in the termination of your transfer all or any portion portion of its OP Units to
partnership for tax purposes of its Preferred OP Units to any person, subject to the
and (5) the assignor and any transferee without the satisfaction of certain con-
assignee have complied with consent of the general ditions specified in the
such other conditions as set partner, which consent may AIMCO Operating Partnership
forth in your partnership's be withheld in its sole and Agreement, including the
agreement of limited absolute discretion. After general partner's right of
partnership. the expiration of one year, first refusal. See
such holders of Preferred OP "Description of OP Units --
There are no redemption Units has the
rights associated with your
units.
</TABLE>
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<PAGE> 798
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
right to transfer all or any Transfers and Withdrawals"
portion of its Preferred OP in the accompanying
Units to any person, subject Prospectus.
to the satisfaction of
certain conditions specified After the first anniversary
in the AIMCO Operating of becoming a holder of
Partnership Agreement, Common OP Units, an OP
including the general Unitholder has the right,
partner's right of first subject to the terms and
refusal. conditions of the AIMCO
Operating Partnership
After a one-year holding Agreement, to require the
period, a holder may redeem AIMCO Operating Partnership
Preferred OP Units and to redeem all or a portion
receive in exchange of the Common OP Units held
therefor, at the AIMCO Oper- by such party in exchange
ating Partnership's option, for a cash amount based on
(i) subject to the terms of the value of shares of Class
any Senior Units (as defined A Common Stock. See
below), cash in an amount "Description of OP
equal to the Liquidation Units -- Redemption Rights"
Preference of the Preferred in the accompanying
OP Units tendered for Prospectus. Upon receipt of
redemption, (ii) a number of a notice of redemption, the
shares of Class A Common AIMCO Operating Partnership
Stock of AIMCO that is equal may, in its sole and
in Value to the Liquidation absolute discretion but
Preference of the Preferred subject to the restrictions
OP Units tendered for on the ownership of Class A
redemption, or (iii) for Common Stock imposed under
Preferred OP Units redeemed AIMCO's charter and the
after a two-year holding transfer restrictions and
period, a number of shares other limitations thereof,
of Class I Preferred Stock elect to cause AIMCO to
of AIMCO that pay an acquire some or all of the
aggregate amount of tendered Common OP Units in
dividends equivalent to the exchange for Class A Common
distributions on the Stock, based on an exchange
Preferred OP Units tendered ratio of one share of Class
for redemption; provided A Common Stock for each Com-
that such shares are part of mon OP Unit, subject to
a class or series of adjustment as provided in
preferred stock that is then the AIMCO Operating
listed on the NYSE or an- Partnership Agreement.
other national securities
exchange. See "Federal
Income Tax
Consequences -- Disguised
Sales." 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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DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are the Class Two 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 I High Performance 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, the
Class J Partnership Preferred Units, the Class K 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, the Class One 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 $0.50 per Preferred OP
Unit (equivalent to 8.0% per annum of the $25 stated liquidation preference);
provided, however, that at any time and from time to time on or after March 1,
2005, the AIMCO Operating Partnership may adjust the annual distribution rate on
the Preferred OP Units to the lower of (i) 2.0% 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. A reduction in the distribution rate will reduce your rate of return on
the Preferred OP Units and possibly encourage you to redeem such units. 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
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<PAGE> 800
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 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 $25 per Preferred OP
Unit, 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
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<PAGE> 801
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 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 A Common Stock of AIMCO that is equal in Value to the
Liquidation Preference of the Preferred OP Units tendered for redemption, or
(iii) for Preferred OP Units redeemed after a two-year holding period, 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 NYSE or another national securities exchange.
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. Before issuing any preferred
stock upon redemption of Preferred OP Units, AIMCO will register the issuance
and sale of such shares under the Securities Act of 1933. 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.
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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.
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, the Class J 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 8.0% per annum of the $25 liquidation preference (equivalent to
$2.00 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 July 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 March 1, 2005, 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,
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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 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> 804
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 The Class I Preferred Stock constitutes an
interests entitling each holder of Preferred equity interest entitling each holder of
OP Units to receive, when and as declared by Class I Preferred Stock to receive, when and
the board of directors of the general as declared by the AIMCO board of directors,
partner of the AIMCO Operating Partnership, cash distribution at a rate of $2.00 per
quarterly cash distribution at a rate of annum per share.
$0.50 per 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 Holders of Class I Preferred Stock do not
law or in the AIMCO Operating Partnership's have any voting rights, except as set forth
agreement of limited partnership, the below and except as otherwise required by
holders of the Preferred OP Units will have applicable law.
the same voting rights as holders of the
Common OP Units. See "Description of OP If and whenever dividends on any shares of
Units" in the accompanying Prospectus. So Class I Preferred Stock or any series or
long as any Preferred OP Units are class of Class I Parity Stock are in arrears
outstanding, in addition to any other vote for six or more quarterly periods (whether
or consent of partners required by law or by or not consecutive), the number of directors
the AIMCO Operating Partnership's agreement then constituting the AIMCO board of
of limited partnership, the affirmative vote directors shall be increased by two (if not
or consent of holders of at least 50% of the already increased by reason of similar types
outstanding Preferred OP Units will be of provisions with respect to shares of
necessary for effecting any amendment of any voting preferred stock), and the holders of
of the provisions of the Partnership Unit shares of Class I Preferred Stock, together
Designation of the Preferred OP Units that with the holders of shares of all other
materially and adversely affects the rights voting preferred stock then entitled to
or preferences of the holders of the exercise similar voting rights, voting as a
Preferred OP Units. The creation or issuance single class regardless of series, will be
of any class or series of AIMCO Operating entitled to vote for the election of two
Partnership units, including, without additional directors of AIMCO. Whenever
limitation, any AIMCO Operating Partnership dividends in arrears and dividends for the
units that may have rights senior or current quarterly dividend period have been
superior to the Preferred OP Units, will not paid or declared and set aside in respect of
be deemed to materially adversely affect the the outstanding shares of the Class I
rights or preferences of the holders of Preferred Stock and the voting preferred
Preferred OP Units. With respect to the stock, then the right of the holders of
exercise of the above described voting Class I Preferred Stock and the voting
rights, each Preferred OP Units will have preferred stock to elect such additional two
one (1) vote per Preferred 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
</TABLE>
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<PAGE> 805
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
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>
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled Holders of Class I Preferred Stock are
to receive, when and as declared by the entitled to receive, when and as declared by
board of directors of the general partner of the AIMCO board of directors, out of funds
the AIMCO Operating Partnership, quarterly legally available for payment, cash
cash distributions at the rate of $0.50 per dividends at the rate of $2.00 per annum per
Preferred OP Unit; provided, however, that share. Such dividends are cumulative from
at any time and from time to time on or the date of original issue. Holders of Class
after the fifth anniversary of the issue I Preferred Stock are not be entitled to
date of the Preferred OP Units, the AIMCO receive any dividends in excess of
Operating Partnership may adjust the annual cumulative dividends on the Class I
distribution rate on the Preferred OP Units Preferred Stock. No interest, or sum of
to the lower of (i) 2.00% plus the annual money in lieu of interest, shall be payable
interest rate then applicable to U.S. in respect of any dividend payment or
Treasury notes with a maturity of five payments on the Class I Preferred Stock that
years, and (ii) the annual dividend rate on may be in arrears.
the most recently issued AIMCO
non-convertible preferred stock which ranks When dividends are not paid in full upon the
on a parity with its Class H Cumulative Class I Preferred Stock or any other class
Preferred Stock. Such distributions will be or series of Class I Parity Stock, all
cumulative from the date of original issue. dividends declared upon the Class I
Holders of Preferred OP Units will not be Preferred Stock and any shares of Class I
entitled to receive any distributions in Parity Stock will be declared ratably in
excess of cumulative distributions on the proportion to the respective amounts of
Preferred OP Units. No interest, or sum of dividends accumulated, accrued and unpaid on
money in lieu of interest, shall be payable the Class I Preferred Stock and such Class I
in respect of any distribution payment or Parity Stock. Unless dividends equal to the
payments on the Preferred OP Units that may full amount of all accumulated, accrued and
be in arrears. unpaid dividends on the Class I Preferred
Stock have been paid, or declared and set
When distributions are not paid in full upon apart for payment, except in limited
the Preferred OP Units or any Parity Units, circumstances, no dividends may be declared
all or paid or set apart for
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
distributions declared upon the Preferred OP payment by AIMCO and no other distribution
Units and any Parity Units will be declared of cash or other property may be declared or
ratably in proportion to the respective made, directly or indirectly, by AIMCO with
amounts of distributions accumulated, respect to any shares of Class I Junior
accrued and unpaid on the Preferred OP Units Stock, nor shall any shares of Class I
and such Parity Units. Unless full Junior Stock be redeemed, purchased or
cumulative distributions on the Preferred OP otherwise acquired for any consideration,
Units have been declared and paid, except in nor shall any other cash or other property
limited circumstances, no distributions may be paid or distributed to or for the benefit
be declared or paid or set apart for payment of holders of shares of Class I Junior
by the AIMCO Operating Partnership and no Stock. See "Description of Class I Preferred
other distribution of cash or other property Stock -- Dividends."
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 Ownership of shares of Class I Preferred
OP Units and the Preferred OP Units are not Stock by any person will be limited such
listed on any securities exchange. The that the sum of the aggregate value of all
Preferred OP Units are subject to certain equity stock (including all shares of Class
restrictions on transferability set forth in 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)
Pursuant to the AIMCO Operating of the aggregate value of all outstanding
Partnership's agreement of limited shares of equity stock. Further, certain
partnership, until the expiration of one transfers which may have the effect of
year from the date on which a holder of causing AIMCO to lose its status as a REIT
Preferred OP Units acquired Preferred OP are void ab initio.
Units, subject to certain exceptions, such
holder of Preferred OP Units may not If any transfer of Class I Preferred Stock
transfer all or any portion of its Preferred occurs which, if effective, would result in
OP Units to any transferee without the any person beneficially or constructively
consent of the general partner, which owning Class I Preferred Stock in excess or
consent may be withheld in its sole and in violation of the Class I Preferred
absolute discretion. After the expiration of Ownership Limit, such shares of Class I
one year, such holders of Preferred OP Units Preferred Stock in excess of the Class I
has the right to transfer all or any portion Preferred Ownership Limit will be
of its Preferred OP Units to any person, automatically transferred to a trustee in
subject to the satisfaction of certain his capacity as trustee of a trust for the
conditions specified in the AIMCO Operating exclusive benefit of one or more charitable
Partnership's agreement of limited beneficiaries designated by AIMCO, and the
partnership, including the general partner's prohibited transferee will generally have no
right of first refusal. rights in such shares, except upon sale of
the shares by the trustee. The trustee will
After a one-year holding period, a holder have all voting rights and rights to
may redeem Preferred OP Units and receive in dividends with respect to shares of Class I
exchange therefor, at the AIMCO Operating Preferred Stock held in the trust, which
Partnership's option, (i) subject to the rights will be exercised for the benefit of
terms of any Senior Units, cash in an amount the charitable beneficiaries.
equal to the Liquidation Preference of the
Preferred OP Units tendered for The trustee may sell the Class I Preferred
Stock held
</TABLE>
S-94
<PAGE> 807
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
redemption, (ii) a number of shares of Class in the trust to AIMCO or a person,
A Common Stock of AIMCO that is equal in designated by the trustee, whose ownership
value to the Liquidation Preference of the of the Class I Preferred Stock will not
Preferred OP Units tendered for redemption, violate the Class I Preferred Ownership
or (iii) for Preferred OP Units redeemed Limit. Upon such sale, the interest of the
after a two-year holding period, a number of charitable beneficiaries in the shares sold
shares of Class I Preferred Stock of AIMCO will terminate and the trustee will
that pay an aggregate amount of dividends distribute to the prohibited transferee, the
equivalent to the distributions on the lesser of (i) the price paid by the
Preferred OP Units tendered for redemption; prohibited transferee for the shares or if
provided that such shares are part of a the prohibited transferee did not give value
class or series of preferred stock that is for the shares in connection with the event
then listed on the NYSE or another national causing the shares to be held in the trust,
securities exchange. See "Federal Income Tax the market price of such shares on the day
Consequences -- Disguised Sales." The of the event causing the shares to be held
Preferred OP Units may not be redeemed at in the trust and (ii) the price per share
the option of the AIMCO Operating received by the trustee from the sale or
Partnership. See "Description of Preferred other disposition of the shares held in the
OP Units -- Redemption." trust. Any proceeds in excess of the amount
payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after March 1, 2005, 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-95
<PAGE> 808
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. Your general
partner became a wholly owned subsidiary on February 26, 1999 of AIMCO when IPT
merged with AIMCO. Accordingly, the general partner of your partnership 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 Unitholders 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 own both the general partner of your partnership and the manager of your
partnership's property. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The property manager received management fees of
$56,001 in 1996, $60,499 in 1997 and $58,102 in 1998. The AIMCO Operating
Partnership has no current intention of changing the fee structure for the
general partner or for the manager of your partnership's 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." AIMCO's
Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is 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'
S-96
<PAGE> 809
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.
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. However, we will not acquire any
additional units for a period of at least one year after expiration of the
offer. Any such future offers that we might make could be for consideration that
is more or less than the consideration we are currently offering.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $85,057 will be
required to purchase all of the units sought in the offer, if such units are
tendered for cash excluding expenses as itemized below. The AIMCO Operating
Partnership will obtain all such funds from cash from operations, equity
issuances and short term borrowings. The AIMCO Operating Partnership will pay
all of the costs of the offer and not your partnership.
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...................................... $ 5,000
Accountant's Fees........................................... $ 5,000
Legal Fees.................................................. $10,000
Printing Fees............................................... $10,000
Stanger's Fees.............................................. $ 9,000
Other....................................................... $11,000
Total....................................................... $50,000
</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 of Bank of America's reference rate, at the
election of the Company, plus, 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 2.25% and 2.75%
in the case of LIBOR-based loans and between negative 0.75% and 1.25% 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 September 30, 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,
S-97
<PAGE> 810
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.
We may obtain funds pursuant to a credit agreement entered into by our
subsidiary, Insignia Properties, L.P. ("IPLP"), 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, 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). IPLP 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. The AIMCO Operating
Partnership intends to repay any funds borrowed out of working capital in the
ordinary course of business.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP has delivered 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 has delivered an opinion with regard to
the material Federal income tax consequences of the offer discussion of the tax
consequences described in this Prospectus Supplement and the attached
Prospectus. 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 two opinions of Skadden, Arps, Slate, Meagher & Flom LLP are 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 opinions will be sent by the Information Agent.
EXPERTS
The financial statements of Catawba Club Associates, Limited as of December
31, 1997 and 1996 and for each of the years in the three-year period ended
December 31, 1997, have been included herein and in the registration statement
in reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, appearing elsewhere herein, and upon the authority of said
firm as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP covering the December 31, 1997
financial statements contains an explanatory paragraph that states that the
Partnership is not generating sufficient cash flows to meet its maturing debt
service requirements, which raises substantial doubt about the Partnership's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of that uncertainty.
S-98
<PAGE> 811
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed Balance Sheet as of September 30, 1998
(unaudited)............................................... F-2
Condensed Statements of Operations for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-3
Condensed Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-4
Notes to Condensed Financial Statements..................... F-5
Independent Auditors' Report................................ F-7
Balance Sheets as of December 31, 1997 and 1996............. F-8
Statements of Operations and Changes in Partners' Deficit
for the years ended December 31, 1997 and 1996............ F-9
Statements of Cash Flows for the years ended December 31,
1997 and 1996............................................. F-10
Notes to Financial Statements............................... F-11
Independent Auditors' Report................................ F-15
Balance Sheets as of December 31, 1996 and 1995............. F-16
Statements of Operations and Changes in Partners' Deficit
for the years ended December 31, 1996 and 1995............ F-17
Statements of Cash Flows for the years ended December 31,
1996 and 1995............................................. F-18
Notes to Financial Statements............................... F-19
</TABLE>
F-1
<PAGE> 812
CATAWBA CLUB ASSOCIATES, LIMITED
CONDENSED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1998
ASSETS
<TABLE>
<S> <C> <C>
Cash and cash equivalents................................... $ 61,000
Receivables and Deposits.................................... 89,000
Restricted Escrows.......................................... 205,000
Other Assets................................................ 56,000
Investment Property
Land...................................................... $ 330,000
Building and related personal property.................... 4,941,000
-----------
5,271,000
Less: Accumulated Depreciation............................ (3,534,000) 1,737,000
----------- -----------
Total Assets:..................................... $ 2,148,000
===========
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable............................................ $ 92,000
Other Accrued Liabilities................................... 25,000
Property Taxes Payable...................................... 76,000
Accrued Interest Payable.................................... 305,000
Tenant Security Deposits.................................... 19,000
Notes Payable............................................... 4,028,000
Partners' Deficit........................................... (2,397,000)
-----------
Total Liabilities and Partners' Deficit........... $ 2,148,000
===========
</TABLE>
See notes to interim financial statements
F-2
<PAGE> 813
CATAWBA CLUB ASSOCIATES, LIMITED
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
<S> <C> <C>
Revenues:
Rental income............................................. $820,000 $848,000
Other income.............................................. 56,000 47,000
-------- --------
Total Revenues.................................... 876,000 895,000
Expenses:
Operating Expenses........................................ 394,000 378,000
General and administrative expenses....................... 36,000 29,000
Depreciation expense...................................... 88,000 88,000
Interest expense.......................................... 251,000 257,000
Property tax expense...................................... 76,000 76,000
-------- --------
Total Expenses:................................... 845,000 828,000
-------- --------
Net income........................................ $ 31,000 $ 67,000
======== ========
</TABLE>
See notes to interim financial statements
F-3
<PAGE> 814
CATAWBA CLUB ASSOCIATES, LIMITED
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
<S> <C> <C>
Operating Activities:
Net income................................................ $ 31,000 $ 67,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 122,000 121,000
Changes in accounts:
Receivables and deposits and other assets............ 24,000 (23,000)
Accounts payable and accrued expenses................ 24,000 54,000
-------- ---------
Net cash provided by operating activities......... 201,000 219,000
-------- ---------
Investing Activities:
Property improvements and replacements.................... (60,000) (130,000)
Net (increase)/decrease in restricted escrows............. (7,000) 8,000
-------- ---------
Net cash used in investing activities............. (67,000) (122,000)
-------- ---------
Financing Activities:
Payments on mortgage...................................... (89,000) (83,000)
-------- ---------
Net cash used in financing activities............. (89,000) (83,000)
-------- ---------
Net increase in cash and cash equivalents......... 45,000 15,000
Cash and cash equivalents at beginning of year.............. 16,000 38,000
-------- ---------
Cash and cash equivalents at end of period.................. $ 61,000 $ 53,000
======== =========
</TABLE>
See notes to interim financial statements
F-4
<PAGE> 815
CATAWBA CLUB ASSOCIATES, LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPT. 30, 1998 AND 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements of Catawba Club Associates,
Limited as of Sept. 30, 1998 and for the nine months ended Sept. 30, 1998 and
1997 have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not include
all the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included and
all such adjustments are of a recurring nature.
The financial statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31, 1997. It
should be understood that the accounting measurements at interim dates
inherently involve greater reliance on estimates than at year-end. The results
of operations for the interim periods are not necessarily indicative of the
results for the entire year.
NOTE B -- SUBSEQUENT EVENT
On March 17, 1998, Insignia Financial Group, Inc., an affiliate of the
corporate general partner of the Partnership, entered into an agreement to merge
its national residential property management operations and its controlling
interest in Insignia Properties Trust, with Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust. The merger
was completed effective October 1, 1998, and accordingly, as of that date AIMCO
acquired the corporate general partner and the company that manages the
Partnership.
F-5
<PAGE> 816
CATAWBA CLUB ASSOCIATES, LIMITED
FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
F-6
<PAGE> 817
INDEPENDENT AUDITORS' REPORT
General Partners
Catawba Club Associates, Limited:
We have audited the accompanying balance sheets of Catawba Club Associates,
Limited as of December 31, 1997 and 1996 and the related statements of
operations and changes in partners' deficit and cash flows for the years then
ended. These financial statements are the responsibility of the partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Catawba Club Associates,
Limited as of December 31, 1997 and 1996, and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note E to the
financial statements, the Partnership is not generating sufficient cash flows to
meet its maturing debt service requirements, which raises substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note E. The accompanying financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities that might result from the outcome of this uncertainty.
/s/ KPMG PEAT MARWICK LLP
Greenville, South Carolina
February 23, 1998
F-7
<PAGE> 818
CATAWBA CLUB ASSOCIATES, LIMITED
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash and cash equivalents................................... $ 15,545 $ 37,698
Receivables and deposits.................................... 109,356 74,817
Restricted escrows (Note B)................................. 198,024 204,220
Other assets................................................ 71,850 78,156
Investment properties (Note C):
Land...................................................... 300,000 300,000
Buildings and related personal property................... 4,911,293 4,743,062
----------- -----------
5,211,293 5,043,062
Less accumulated depreciation............................. (3,445,304) (3,327,626)
----------- -----------
1,765,989 1,715,436
----------- -----------
$ 2,160,764 $ 2,110,327
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 67,812 $ 14,070
Tenant security deposit liabilities....................... 22,759 27,395
Accrued taxes............................................. 96,198 96,276
Other liabilities (Note C)................................ 305,568 259,905
Notes payable (Note C).................................... 4,096,685 4,179,525
Partners' deficit........................................... (2,428,258) (2,466,844)
----------- -----------
$ 2,160,764 $ 2,110,327
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
F-8
<PAGE> 819
CATAWBA CLUB ASSOCIATES, LIMITED
STATEMENTS OF OPERATIONS AND CHANGES IN PARTNERS' DEFICIT
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Revenues:
Rental income............................................. $ 1,129,839 $ 1,061,661
Other income.............................................. 65,842 76,040
----------- -----------
Total revenues.................................... 1,195,681 1,137,701
----------- -----------
Expenses:
Operating (Note D)........................................ 511,450 490,711
General and administrative (Note D)....................... 41,726 42,772
Depreciation.............................................. 117,678 108,702
Interest.................................................. 389,906 398,035
Property taxes............................................ 96,335 97,275
----------- -----------
Total expenses.................................... 1,157,095 1,137,495
----------- -----------
Net income........................................ 38,586 206
Partners' deficit at beginning of year...................... (2,466,844) (2,467,050)
----------- -----------
Partners' deficit at end of year............................ $(2,428,258) $(2,466,844)
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
F-9
<PAGE> 820
CATAWBA CLUB ASSOCIATES, LIMITED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 38,586 $ 206
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 117,678 108,702
Amortization of discounts and loan costs............... 41,433 41,433
Change in accounts:
Receivables and deposits............................. (34,539) (3,596)
Other assets......................................... (6,904) --
Accounts payable..................................... 53,742 (32,408)
Tenant security deposit liabilities.................. (4,636) 3,884
Accrued taxes........................................ (78) 9,660
Other liabilities.................................... 45,663 52,861
--------- ---------
Net cash provided by operating activities......... 250,945 180,742
--------- ---------
Cash flows from investing activities:
Property improvements and replacements.................... (168,231) (88,054)
Deposits to restricted escrows............................ (8,139) (8,129)
Receipts from restricted escrows.......................... 14,335 8,367
--------- ---------
Net cash used in investing activities............. (162,035) (87,816)
--------- ---------
Cash flows from financing activities:
Payments on notes payable................................. (111,063) (102,959)
--------- ---------
Net cash used in financing activities............. (111,063) (102,959)
--------- ---------
Net decrease in cash and cash equivalents......... (22,153) (10,033)
Cash and cash equivalents at beginning of year.............. 37,698 47,731
--------- ---------
Cash and cash equivalents at end of year.................... $ 15,545 $ 37,698
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 297,249 $ 305,353
========= =========
</TABLE>
See Accompanying Notes to Financial Statements
F-10
<PAGE> 821
CATAWBA CLUB ASSOCIATES, LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE A -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Catawba Club Associates, Limited (the "Partnership") was organized as a
limited partnership under the laws of the State of Delaware pursuant to a
Limited Partnership Agreement and Certificate of Limited Partnership dated May
28, 1985. The Partnership owns and operates a 186 unit apartment complex,
Catawba Club Apartments, in Columbus, Ohio.
The Partnership's Managing General Partner is Jacques-Miller Associates, an
affiliate of Insignia Financial Group ("Insignia"). The property is managed by
Insignia Residential Group, an affiliate of Insignia.
Depreciation
Depreciation is computed principally by use of the declining balance and
straight-line methods based upon the estimated useful lives of various classes
of assets; buildings are depreciated over 25 years and the personal property
assets as depreciated over a 5 to 10 year period.
Other Assets
Other assets at December 31, 1997 and 1996 include deferred loan costs of
$64,946 and $78,156, respectively, which are amortized over the term of the
related borrowing. Deferred loan costs are shown net of accumulated
amortization.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Partnership considers
unrestricted cash and unrestricted highly liquid investments, with an original
maturity of three months or less when purchased, to be cash and cash
equivalents.
Income Taxes
On the basis of Treasury Regulations, the general partners believe that the
Partnership will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss and cash distributions of the
Partnership are allocated in accordance with the partnership agreement and the
Internal Revenue Code and are reportable in the income tax returns of its
partners.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Tenant Security Deposits
The Partnership requires security deposits from lessees for the duration of
the lease and such deposits are included in receivables and deposits. The
security deposits are refunded when the tenant vacates, provided the tenant has
not damaged its space and is current on its rental payments.
F-11
<PAGE> 822
CATAWBA CLUB ASSOCIATES, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Reclassifications
Certain 1996 amounts have been reclassified to conform to the 1997
presentation. These reclassifications had no impact on net income or partners'
deficit as previously reported.
NOTE B -- RESTRICTED ESCROWS
Restricted escrow deposits at December 31, 1997 and 1996 consist of the
following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Capital Improvement Escrow -- A portion of the proceeds of
the loan were placed into a capital improvement reserve
account to be used for certain capital improvements. The
capital improvements were completed in calendar year 1997
and any excess funds were returned for property
operations................................................ $ -- $ 14,335
Reserve Escrow -- Established with a portion of the proceeds
of the loan. The funds are used for certain repair work,
debt service, expenses and property taxes or insurance.
The funds in the reserve escrow exceed the minimum balance
required to be maintained by the lender during the term of
the loan.................................................. 198,024 189,885
-------- --------
$198,024 $204,220
======== ========
</TABLE>
NOTE C -- NOTES PAYABLE
Notes payable at December 31, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
First mortgage note payable in monthly installments of
$33,202, including interest at 7.60%, due November 2002;
collateralized by land and buildings...................... $3,720,207 $3,831,270
Second mortgage note payable in interest only monthly
installments of $824, at a rate of 7.60%, with principal
due November 2002; collateralized by land and buildings... 130,106 130,106
Unsecured 12.5% promissory note payable to the
Jacques-Miller Income Fund II, an affiliate, matured
November 1997; monthly payments of interest only and
payments of excess cash flows in February of each year as
defined in the note agreement............................. 412,606 412,606
---------- ----------
Principal balance at year end............................... 4,262,919 4,373,982
Less unamortized discount................................... (166,234) (194,457)
---------- ----------
$4,096,685 $4,179,525
========== ==========
</TABLE>
Accrued interest on the note payable to the Jacques-Miller Income Fund II
("JMIF II"), which is included in other liabilities, was $266,905 and $215,329
at December 31, 1997 and 1996, respectively. Management is currently attempting
to refinance the Partnership's unsecured note in order to obtain the funds
necessary to satisfy the note payable to Jacques-Miller Income Fund II. The
refinancing is expected to occur during the second quarter of 1998; however,
there is not assurance that such a refinancing will occur.
F-12
<PAGE> 823
CATAWBA CLUB ASSOCIATES, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Scheduled principal payments of the notes during the years subsequent to
December 31, 1997, including $412,606 in 1998 for the JMIF II debt, which
matured in 1997, are as follows:
<TABLE>
<S> <C>
1998..................................................... $ 532,410
1999..................................................... 129,234
2000..................................................... 139,405
2001..................................................... 150,376
2002..................................................... 3,311,494
----------
$4,262,919
==========
</TABLE>
The principal balance of the mortgage notes may be prepaid in whole upon
payment of a penalty of the greater of one percent of the unpaid principal
balance at the time of prepayment or the present value of the excess of interest
which would be incurred at the stated rate under the notes over the interest
which would be incurred at the Treasury constant maturity for U.S. Government
obligations.
NOTE D -- TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no administrative or management employees and is
dependent on the Managing General Partner and its affiliates for the management
and administration of all partnership activities. The Partnership is obligated
to pay a property management fee equal to 5% of gross monthly collections. In
addition to the management fee, the partnership agreement provides for payments
to affiliates of a partnership administration fee and reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
Transactions with the Managing General Partner and its affiliates, in
addition to those disclosed in Note C, are as follows:
<TABLE>
<CAPTION>
1997 1996
TYPE OF TRANSACTION AMOUNT AMOUNT
------------------- ------- -------
<S> <C> <C>
Management fee............................................ $60,499 $56,001
Partnership administration fee............................ $10,791 $10,791
Reimbursement for services of affiliates.................. $23,024 $22,829
Reimbursement for construction oversight costs............ $ -- $ 196
</TABLE>
NOTE E -- GOING CONCERN
The General Partner is attempting to refinance the existing debt. The
General Partner believes that it will be successful, however there can be no
assurance that refinancing will be obtained.
The Partnership is not generating sufficient cash flows to meet its
maturing debt service requirements, which raises substantial doubt about its
ability to continue as a going concern. The financial statements have been
prepared assuming that the Partnership will continue as a going concern and do
not include any adjustments that might result from these uncertainties.
F-13
<PAGE> 824
CATAWBA CLUB ASSOCIATES, LIMITED
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
F-14
<PAGE> 825
INDEPENDENT AUDITORS' REPORT
General Partners
Catawba Club Associates, Limited:
We have audited the accompanying balance sheets of Catawba Club Associates,
Limited as of December 31, 1996 and 1995 and the related statements of
operations and changes in partners' deficit, and cash flows for the years then
ended. These financial statements are the responsibility of the partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Catawba Club Associates,
Limited as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ KPMG PEAT MARWICK LLP
Greenville, South Carolina
March 1, 1997
F-15
<PAGE> 826
CATAWBA CLUB ASSOCIATES, LIMITED
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash and cash equivalents:
Unrestricted.............................................. $ 37,698 $ 47,731
Restricted -- tenant security deposits.................... 27,395 23,511
Accounts receivable......................................... 3,049 3,961
Escrow for taxes............................................ 44,373 43,749
Restricted escrows (Note B)................................. 204,220 204,458
Other assets................................................ 78,156 91,366
Investment properties (Note C):
Land...................................................... 300,000 300,000
Buildings and related personal property................... 4,743,062 4,655,008
----------- -----------
5,043,062 4,955,008
Less accumulated depreciation............................. (3,327,626) (3,218,924)
----------- -----------
1,715,436 1,736,084
----------- -----------
$ 2,110,327 $ 2,150,860
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 14,070 $ 46,478
Tenant security deposits.................................. 27,395 23,511
Accrued taxes............................................. 96,276 86,616
Other liabilities (Note C)................................ 259,905 207,044
Notes payable (Note C).................................... 4,179,525 4,254,261
Partners' deficit........................................... (2,466,844) (2,467,050)
----------- -----------
$ 2,110,327 $ 2,150,860
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
F-16
<PAGE> 827
CATAWBA CLUB ASSOCIATES, LIMITED
STATEMENTS OF OPERATIONS AND CHANGES IN PARTNERS' DEFICIT
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenues:
Rental income............................................. $ 1,061,661 $ 997,400
Other income.............................................. 76,040 83,845
----------- -----------
Total revenues.................................... 1,137,701 1,081,245
----------- -----------
Expenses:
Operating (Note D)........................................ 365,106 343,870
General and administrative (Note D)....................... 42,772 41,487
Maintenance............................................... 125,605 129,070
Depreciation.............................................. 108,702 197,458
Interest.................................................. 398,035 403,893
Property taxes............................................ 97,275 87,633
----------- -----------
Total expenses.................................... 1,137,495 1,203,411
----------- -----------
Net income (loss)................................. 206 (122,166)
Partners' deficit at beginning of year...................... (2,467,050) (2,344,884)
----------- -----------
Partners' deficit at end of year............................ $(2,466,844) $(2,467,050)
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
F-17
<PAGE> 828
CATAWBA CLUB ASSOCIATES, LIMITED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 206 $(122,166)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation........................................... 108,702 197,458
Amortization of discounts and loan costs............... 41,433 40,168
Change in accounts:
Restricted cash...................................... (3,884) 2,820
Accounts receivable.................................. 912 (438)
Escrow for taxes..................................... (624) 7,143
Accounts payable..................................... (32,408) 20,002
Tenant security deposit liabilities.................. 3,884 (2,426)
Accrued taxes........................................ 9,660 1,113
Other liabilities.................................... 52,861 54,500
--------- ---------
Net cash provided by operating activities......... 180,742 198,174
--------- ---------
Cash flows from investing activities:
Property improvements and replacements.................... (88,054) (134,608)
Deposits to restricted escrows............................ (8,129) (7,853)
Receipts from restricted escrows.......................... 8,367 28,073
--------- ---------
Net cash used in investing activities............. (87,816) (114,388)
--------- ---------
Cash flows from financing activities:
Payments on notes payable................................. (102,959) (95,488)
--------- ---------
Net cash used in financing activities............. (102,959) (95,448)
--------- ---------
Net decrease in cash and cash equivalents......... (10,033) (11,662)
Cash and cash equivalents at beginning of year.............. 47,731 59,393
--------- ---------
Cash and cash equivalents at end of year.................... $ 37,698 $ 47,731
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 305,353 $ 312,864
========= =========
</TABLE>
See Accompanying Notes to Financial Statements
F-18
<PAGE> 829
CATAWBA CLUB ASSOCIATES, LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE A -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Catawba Club Associates, Limited (the "Partnership") was organized as a
limited partnership under the laws of the State of Delaware pursuant to a
Limited Partnership Agreement and Certificate of Limited Partnership dated May
28, 1985. The Partnership owns and operates a 186 unit apartment complex,
Catawba Club Apartments, in Columbus, Ohio.
The Partnership's Managing General Partner is Jacques-Miller Associates, an
affiliate of Insignia Financial Group ("Insignia"). The property is managed by
Insignia Residential Group, an affiliate of Insignia.
Depreciation
Depreciation is computed principally by use of the declining balance and
straight-line methods based upon the estimated useful lives of various classes
of assets; buildings are depreciated over 25 years and the personal property
assets are depreciated over a 5 to 10 year period.
Other Assets
Other assets at December 31, 1996 and 1995 consist of deferred loan costs
which are amortized over the term of the related borrowing. Deferred loan costs
are shown net of accumulated amortization.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Partnership considers
unrestricted cash and unrestricted highly liquid investments, with an original
maturity of three months or less when purchased, to be cash and cash
equivalents.
Income Taxes
On the basis of legal counsel's opinion, the general partners believe that
the Partnership will be classified as a partnership for Federal income tax
purposes. Accordingly, no provision for income taxes is made in the financial
statements of the Partnership. Taxable income or loss and cash distributions of
the Partnership are allocated in accordance with the partnership agreement and
the Internal Revenue Code and are reportable in the income tax returns of its
partners.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain 1995 amounts have been reclassified to conform to the 1996
presentation. These reclassifications had no impact on net loss or partners'
deficit as previously reported.
F-19
<PAGE> 830
CATAWBA CLUB ASSOCIATES, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B -- RESTRICTED ESCROWS
Restricted escrow deposits at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Capital Improvement Escrow -- A portion of the proceeds of
the loan were placed into a capital improvement reserve
account to be used for certain capital improvements. The
capital improvements are anticipated to be completed in
calendar year 1997 and any excess funds will be returned
for property operations................................... $ 14,335 $ 14,159
Reserve Escrow -- Established with a portion of the proceeds
of the loan. The funds are used for certain repair work,
debt service, expenses and property taxes or insurance.
The funds in the reserve escrow exceed the minimum balance
required to be maintained by the lender during the term of
the loan.................................................. 189,885 190,299
-------- --------
$204,220 $204,458
======== ========
</TABLE>
NOTE C -- NOTES PAYABLE
Notes payable at December 31, 1996 and 1995 consist of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
First mortgage note payable in monthly installments of
$33,202, including interest at 7.60%, due November 2002;
collateralized by land and buildings...................... $3,831,270 $3,934,229
Second mortgage note payable in interest only monthly
installments of $824, at a rate of 7.60%, with principal
due November 2002; collateralized by land and buildings... 130,106 130,106
Unsecured 12.5% promissory note payable to the
Jacques-Miller Income Fund II, an affiliate, due November
1997; monthly payments of interest only and payments of
excess cash flows in February of each year as defined in
the note agreement........................................ 412,606 412,606
---------- ----------
Principal balance at year end............................... 4,373,982 4,476,941
Less unamortized discount................................... (194,457) (222,680)
---------- ----------
$4,179,525 $4,254,261
========== ==========
</TABLE>
Accrued interest on the note payable to the Jacques-Miller Income Fund II,
which is included in other liabilities, was $215,329 and $163,753 at December
31, 1996 and 1995, respectively.
Scheduled principal payments of the notes during the years subsequent to
December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997..................................................... $ 523,670
1998..................................................... 119,804
1999..................................................... 129,234
2000..................................................... 139,405
2001..................................................... 150,376
Thereafter............................................... 3,311,493
----------
$4,373,982
==========
</TABLE>
F-20
<PAGE> 831
CATAWBA CLUB ASSOCIATES, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The principal balance of the mortgage notes may not be prepaid, in whole or
in part, prior to November 15, 1997. Thereafter the principal may be prepaid in
whole upon payment of a penalty of the greater of one percent of the unpaid
principal balance at the time of prepayment or the present value of the excess
of interest which would be incurred at the stated rate under the notes over the
interest which would be incurred at the Treasury constant maturity for U.S.
Government obligations. The unsecured note may be prepaid at any time without
penalty.
NOTE D -- TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no administrative or management employees and is
dependent on the Managing General Partner and its affiliates for the management
and administration of all partnership activities. The Partnership is obligated
to pay a property management fee equal to 5% of gross monthly collections. In
addition to the management fee, the partnership agreement provides for payments
to affiliates of a partnership administration fee and reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
Transactions with the Managing General Partner and its affiliates, in
addition to those disclosed in Note C, are as follows:
<TABLE>
<CAPTION>
1996 1995
TYPE OF TRANSACTION AMOUNT AMOUNT
------------------- ------- -------
<S> <C> <C>
Management fee............................................ $56,001 $54,335
Partnership administration fee............................ $10,791 $10,817
Reimbursement for services of affiliates.................. $22,829 $21,751
Reimbursement for construction oversight costs............ $ 196 $ 5,888
</TABLE>
F-21
<PAGE> 832
PRO FORMA FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
AS OF SEPTEMBER 30, 1998 AND FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1998
INTRODUCTION
On October 1, 1998, Apartment Investment and Management Company ("AIMCO")
completed its merger with Insignia Financial Group ("IFG") ("the IFG Merger").
In the IFG Merger, IFG's common stock was converted into 8,423,751 shares of
Class E Cumulative Convertible Preferred Stock of AIMCO ("Class E Preferred
Stock") whose issue date market value approximately equaled $292 million. In
addition to receiving the same dividends as holders of AIMCO Common Stock,
holders of Class E Preferred Stock will be entitled to a special dividend of
approximately $50 million in the aggregate. When that special dividend is paid
in full, the Class E Preferred Stock will automatically convert into AIMCO
Common Stock on a one-for-one basis, subject to antidilution adjustments, if
any. In addition, AIMCO assumed approximately $411 million in indebtedness and
other liabilities of IFG and its subsidiaries and subsidiaries of AIMCO, assumed
approximately $149.5 million of convertible securities and purchased
approximately $5 million of IFG stock prior to the Merger. AIMCO and Insignia
Properties Trust ("IPT") have completed a merger in which IPT has merged into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). In the IPT Merger, shares of
IPT common stock not held by AIMCO were converted into 4,826,745 shares of AIMCO
Class A Common Stock whose market value approximately equaled $152 million.
AIMCO assumed approximately $68 million in indebtedness. In connection with the
IFG Merger and the IPT Merger, AIMCO incurred approximately $55 million in
transaction costs for a combined transactional value of approximately $1,183
million. AIMCO contributed substantially all the assets and liabilities of
Insignia acquired in the Insignia Merger to AIMCO Properties, L.P. (together
with its subsidiaries and other controlled entities, the "Partnership") (and
together with entities in which that Partnership has a controlling financial
interest, the "Company") in exchange for 8,423,751 Class E Preferred Units. The
Class E Preferred Units have terms substantially the same as the Class E
Preferred Stock. In addition, AIMCO contributed substantially all the assets and
liabilities of IPT acquired in the IPT Merger to the Partnership in exchange for
4,826,745 limited partnership units in the Partnership ("OP Units"). In
connection with the IFG Merger, the Partnership assumed property management of
approximately 192,000 multifamily units which consist of general and limited
partnership investments in 115,000 units and third party management of 77,000
units. Insignia Properties Trust ("IPT"), which prior to the IFG Merger was a
subsidiary of IFG, owns a 32% weighted average general and limited partnership
interest in approximately 51,000 units.
Immediately following the IFG Merger, in order to satisfy certain
requirements of the Internal Revenue Code of 1986 (the "Code") applicable to
AIMCO's status as a REIT, AIMCO engaged in a reorganization (the "IFG
Reorganization") of the assets and operations of IFG whereby IFG's operations
are being conducted through corporations (the "Unconsolidated Subsidiaries") in
which the Partnership holds non-voting preferred stock that represents a 95%
economic interest, and certain officers and/or directors of AIMCO hold, directly
or indirectly, all of the voting common stock, representing a 5% economic
interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
In May and September of 1997, AIMCO directly or indirectly through a
subsidiary, acquired (the "NHP Stock Purchase") an aggregate of 6,930,122 shares
of common stock ("NHP Common Stock") of NHP. On December 8, 1997, AIMCO acquired
the remaining shares of NHP Common Stock in a merger transaction accounted for
as a purchase (the "NHP Merger"). As a result of the NHP Merger, AIMCO issued
6,759,148 shares of AIMCO Common Stock, valued at $180.8 million, and paid $86.5
million in cash. The total cost of the purchase of NHP was $349.5 million.
Substantially all assets and liabilities of NHP were contributed by AIMCO to the
Partnership.
In June 1997, the Company purchased a group of companies (the "NHP Real
Estate Companies") affiliated with NHP that hold general and limited partnership
interests in partnerships (the "NHP
P-1
<PAGE> 833
Partnerships") that own 534 conventional and affordable multifamily apartment
properties (the "NHP Properties") containing 87,659 units, a captive insurance
subsidiary and certain related assets (the "NHP Real Estate Acquisition"). The
Company paid aggregate consideration of $54.8 million in cash and warrants that
entitle the holders to purchase 399,999 shares of AIMCO Common Stock at an
exercise price of $36.00 per share. The Company engaged in a reorganization (the
"NHP Real Estate Reorganization") of its interests in the NHP Real Estate
Companies, which resulted in certain of the assets of the NHP Real Estate
Companies being owned by a limited partnership (the "Unconsolidated
Partnership") in which the Partnership holds 99% limited partner interest and
certain directors and officers of AIMCO directly or indirectly, hold a 1%
general partner interest.
Immediately following the NHP Merger, in order to satisfy certain
requirements of the Code applicable to AIMCO's status as a REIT, AIMCO engaged
in a reorganization (the "NHP Reorganization") of the assets and operations of
NHP that resulted in the Master Property Management Agreement being terminated
and NHP's operations being conducted through Unconsolidated Subsidiaries in
which the AIMCO Operating Partnership holds non-voting preferred stock that
represents a 95% economic interest, and certain officers and/or directors of
AIMCO hold, directly or indirectly, all of the voting common stock, representing
a 5% economic interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
On May 8, 1998, AIMCO completed a merger with Ambassador Apartments, Inc.
("Ambassador"), pursuant to which Ambassador was merged into AIMCO (the
"Ambassador Merger"). Each outstanding share of stock ("Ambassador Common
Stock") of Ambassador, other than those shares held by AIMCO or Ambassador, were
converted into 0.553 (the "Conversion Ratio") shares of AIMCO Common Stock. Any
outstanding options to purchase Ambassador Common Stock were converted, at the
election of the option holder, into cash or options to purchase AIMCO Common
Stock at such options' then current exercise price divided by the Conversion
Ratio. In accordance with the Agreement and Plan of Merger, dated December 23,
1997 and supplemented by letter dated as of March 11, 1998 (the "Ambassador
Merger Agreement"), the outstanding shares of Class A Senior Cumulative
Convertible Preferred Stock of Ambassador, (the "Ambassador Preferred Stock")
were redeemed and converted into Ambassador Common Stock prior to the Ambassador
Merger. Following the consummation of the Ambassador Merger, a subsidiary of the
Partnership was merged with and into the Ambassador Operating Partnership (the
"Ambassador OP Merger"). Each outstanding unit of limited partnership interest
in the Ambassador Operating Partnership was converted into the right to receive
0.553 OP Units, and as a result, the Ambassador Operating Partnership became a
99.9% owned subsidiary partnership of the Partnership.
Also during 1997, the Partnership (i) (a) acquired 44 properties for
aggregate purchase consideration of $467.4 million, of which $56 million was
paid in the form of 1.9 million OP Units (b) paid $34.2 million in cash and
issued OP Units valued at $7.3 million in connection with the acquisition of
partnership interests through tender offers in certain partnerships ((a) and (b)
together are the "1997 Property Acquisitions") and (c) paid $19.9 million to
acquire 886,600 shares of Ambassador Common Stock (together with the 1997
Property Acquisitions, the "1997 Acquisitions"); (ii) sold (a) approximately
16,367,000 shares of AIMCO Common Stock for aggregate net proceeds of $513.4
million; (b) 750,000 shares of AIMCO Class B Cumulative Convertible Preferred
Stock for net proceeds of $75 million; and (c) 2,400,000 shares of AIMCO Class C
9% Cumulative Preferred Stock for net proceeds of $58.1 million; of which all
proceeds were contributed by AIMCO to the Partnership in exchange for 16,367,000
OP Units, 750,000 Class B Preferred Units, and 2,400,000 Class C Preferred Units
(collectively, the "1997 Stock Offerings"); and (iii) sold five real estate
properties (the "1997 Dispositions").
Also during 1998, AIMCO (i) (a) sold 4,200,000 shares of its Class D
Cumulative Preferred Stock for net proceeds of $101.5 million (the "Class D
Preferred Stock Offering"); (b) sold 4,050,000 shares of its Class G Cumulative
Preferred Stock for net proceeds of $98.0 million (the "Class G Preferred Stock
Offering"); (c) sold 2,000,000 shares of its Class H Cumulative Preferred Stock
for net proceeds of $48.1 million (the "Class H Preferred Stock Offering"); and
(d) sold 1,000,000 shares of its Class J Cumulative Convertible Preferred Stock
in a private placement for $100.0 million (the "Class J Preferred
P-2
<PAGE> 834
Stock Offering"); of which all proceeds were contributed by AIMCO to the
Partnership in exchange for 4,050,000 Class G Preferred Units, 2,000,000 Class H
Preferred Units and 1,000,000 shares of Class J Preferred Units (collectively,
the "1998 Stock Offerings"); (ii) purchased 29 properties for aggregate purchase
consideration of $312.7 million, of which $52.2 million was paid in the form of
OP Units (the "1998 Acquisitions"); (iii) sold two real estate properties (the
"1998 Dispositions"); (iv) contracted to purchase two properties for aggregate
purchase consideration of $62.1 million, of which $26.4 million will be paid in
the form of OP units (the "Probable Purchases") and (v) sold 1,400,000 Class B
Preferred Partnership Units of a subsidiary and warrants to purchase 875,000
shares of AIMCO Class A Common Stock for $35.0 million (the "Preferred
Partnership Unit Offering").
PRO FORMA FINANCIAL INFORMATION OF THE PARTNERSHIP (INSIGNIA MERGER)
The following Pro Forma Consolidated Balance Sheet (Insignia Merger) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) the purchase
of nine properties for an aggregate purchase price of $62.5 million; (ii) the
Class J Preferred Stock Offering; (iii) the Probable Purchases; (iv) the IFG
Merger; (v) the IPT Merger; (vi) the IFG Reorganization; and (vii) the Preferred
Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) the
1997 Acquisitions; (ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions;
(iv) the NHP Real Estate Acquisition; (v) the NHP Real Estate Reorganization;
(vi) the NHP Stock Purchase; (vii) the NHP Merger; (viii) the NHP
Reorganization; (ix) the 1998 Stock Offerings; (x) the 1998 Acquisitions; (xi)
the Probable Purchases; (xii) the 1998 Dispositions; (xiii) the Ambassador
Merger; (xiv) the IFG Merger; (xv) the merger between IPT and Angeles Mortgage
Investment Trust ("AMIT") ("the AMIT Merger"); (xvi) the IPT Merger; (xvii) the
IFG Reorganization; and (xviii) the Preferred Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1997: (i)
the 1998 Stock Offerings; (ii) the 1998 Acquisitions; (iii) the Probable
Purchases; (iv) the 1998 Dispositions; (v) the Ambassador Merger; (vi) the IFG
Merger; (vii) the AMIT Merger; (viii) the IPT Merger; (ix) the IFG
Reorganization; and (x) the Preferred Partnership Unit offering.
The following Pro Forma Financial Information (Insignia Merger) is based,
in part, on the following historical financial statements: (i) the audited
Consolidated Financial Statements of the Partnership for the year ended December
31, 1997; (ii) the unaudited Consolidated Financial Statements of the
Partnership for the nine months ended September 30, 1998; (iii) the audited
Consolidated Financial Statements of Ambassador for the year ended December 31,
1997; (iv) the unaudited Consolidated Financial Statements of Ambassador for the
four months ended April 30, 1998; (v) the audited Consolidated Financial
Statements of IFG for the year ended December 31, 1997; (vi) the audited
Consolidated Financial Statements of AMIT for the year ended December 31, 1997;
(vii) the unaudited Consolidated Financial Statements of IFG for the nine months
ended September 30, 1998; (viii) the unaudited Financial Statements of AMIT for
the period from January 1, 1998 to September 17, 1998; (ix) the unaudited
Consolidated Financial Statements of NHP for the nine months ended September 30,
1997; (x) the unaudited Combined Financial Statements of the NHP Real Estate
Companies for the three months ended March 31, 1997; (xi) the unaudited
Financial Statements of NHP Southwest Partners, L.P. for the three months ended
March 31, 1997; (xii) the unaudited Combined Financial Statements of the NHP New
LP Entities for the three months ended March 31, 1997; (xiii) the unaudited
Combined Financial Statements of the NHP Borrower Entities for the three months
ended March 31, 1997; (xiv) the unaudited Historical Summaries of Gross Income
and Certain Expenses of The Bay Club at Aventura for the three months ended
March 31, 1997; (xv) the unaudited Historical Summary of Gross Income and Direct
Operating Expenses of Morton Towers for the six months ended June 30, 1997;
(xvi) the unaudited Combined Statement of Revenues and Certain Expenses of the
Thirty-Five Acquisition Properties for the six months ended June 30, 1997;
(xvii) the unaudited Statement of
P-3
<PAGE> 835
Revenues and Certain Expenses of First Alexandria Associates, a Limited
Partnership for the nine months ended September 30, 1997; (xviii) the unaudited
Statement of Revenues and Certain Expenses of Country Lakes Associates Two, a
Limited Partnership for the nine months ended September 30, 1997; (xix) the
unaudited Statement of Revenues and Certain Expenses of Point West Limited
Partnership, A Limited Partnership for the nine months ended September 30, 1997;
(xx) the unaudited Statement of Revenues and Certain Expenses for The Oak Park
Partnership for the nine months ended September 30, 1997; (xxi) the audited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the year ended December 31, 1997,
(xxii) the audited Combined Historical Summary or Gross Income and Direct
Operating Expenses of the Cirque Apartment Communities for the year ended
December 31, 1997; (xxiii) the audited Combined Historical Summary of Gross
Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the year ended December 31, 1997; (xxiv) the audited
Historical Summary of Gross Income and Direct Operating Expenses of the Calhoun
Beach Club Apartments for the year ended December 31, 1997; (xxv) the unaudited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the nine months ended September
30, 1998; (xxvi) the unaudited Combined Historical Summary of Gross Income and
Direct Operating Expenses of the Cirque Apartment Communities for the three
months ended March 31, 1998; (xxvii) the unaudited Combined Historical Summary
of Gross Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the nine months ended September 30, 1998; and (xxviii) the
unaudited Historical Summary of Gross Income and Direct Operating Expenses of
Calhoun Beach Club Apartments for the nine months ended September 30, 1998. The
following Pro Forma Financial Information should be read in conjunction with
such financial statements and the notes thereto incorporated by reference
herein.
The unaudited Pro Forma Financial Information (Insignia Merger) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
1997 Acquisitions, the 1998 Acquisitions, and the Probable Purchases are
adjusted to estimated fair market value, based upon preliminary estimates, which
are subject to change as additional information is obtained. The allocations of
purchase costs are subject to final determination based upon estimates and other
evaluations of fair market value. Therefore, the allocations reflected in the
following unaudited Pro Forma Financial Information may differ from the amounts
ultimately determined.
The following unaudited Pro Forma Financial Information (Insignia Merger)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions or results of
operations. In the opinion of the Partnership's management, all material
adjustments necessary to reflect the effects of these transactions have been
made.
P-4
<PAGE> 836
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS IFG AIMCO BEFORE IFG
AND PROBABLE IFG MERGER IFG REORGANIZATION
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) REORGANIZATION(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Real estate.............. $2,355,122 $202,332 $ 44,488 $ 23,880(G) $2,625,822 $ --
Property held for sale... 42,212 -- -- -- 42,212 --
Investments in
securities............. -- -- -- 443,513(G)
(443,513)(H) -- --
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 127,082 -- -- -- 127,082 59,195(I)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 246,847 -- 232,892 444,570(G) 924,309 --
Mortgage notes
receivable............. -- -- 20,916 -- 20,916
Cash and cash
equivalents............ 43,681 6,107 73,064 -- 122,852 (17,897)(J)
Restricted cash.......... 83,187 -- 2,691 -- 85,878 (1,352)(J)
Accounts receivable...... 11,545 -- 54,060 (32,234)(G) 33,371 (5,471)(J)
Deferred financing
costs.................. 21,835 -- 7,020 (7,020)(G) 21,835 --
Goodwill................. 120,503 -- 19,503 111,018(G) 251,024 --
Property management
contracts.............. -- -- 86,419 31,147(G) 117,566 (79,195)(I)
Other assets............. 69,935 -- 20,128 (4,533)(G) 85,530 (2,860)(J)
---------- -------- -------- --------- ---------- --------
Total Assets..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
Secured notes payable.... $ 774,676 $122,568 $ 29,002 $ -- $ 926,246 $ --
Secured tax-exempt bond
financing.............. 399,925 -- -- -- 399,925 --
Secured short-term
financing.............. 50,000 (50,000) 332,691 (300,000)(G) 32,691 --
Unsecured short-term
financing.............. 50,800 (50,800) -- 300,000(G) 300,000 --
Accounts payable, accrued
and other
liabilities............ 131,799 -- 33,241 50,000(G)
53,333(G)
4,935(G)
2,525(G) 275,833 (27,580)(J)
Deferred tax liability... -- -- 18,802 1,198(G) 20,000 (20,000)(I)
Security deposits and
prepaid rents.......... 13,171 -- 3,533 (3,533) 13,171 --
---------- -------- -------- --------- ---------- --------
1,420,371 21,768 417,269 108,458 1,967,866 (47,580)
Minority interest........ 42,086 37,345 108,485 (108,485)(G) 79,431 --
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. -- -- 144,282 5,218 149,500 --
Redeemable Partnership
Units.................. 232,405 45,176 -- -- 277,581 --
Partners' capital and
shareholders' equity
Common stock........... -- -- 320 (320)(G) -- --
Additional paid-in
capital.............. -- -- (86,959) 86,959(G) -- --
Distributions in excess
of earnings.......... -- -- (22,216) 22,216(G) -- --
General and Special
Limited Partner...... 1,039,525 4,150 -- 443,513(H)
9,269(G) 1,496,457 --
Preferred Units........ 387,562 100,000 -- -- 487,562 --
---------- -------- -------- --------- ---------- --------
1,427,087 104,150 (108,855) 561,637 1,984,019 --
---------- -------- -------- --------- ---------- --------
Total Liabilities
and Equity..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
<CAPTION>
PRO FORMA
----------
<S> <C>
Real estate.............. $2,625,822
Property held for sale... 42,212
Investments in
securities.............
--
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 186,277(K)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 924,309
Mortgage notes
receivable............. 20,916
Cash and cash
equivalents............ 104,955
Restricted cash.......... 84,526
Accounts receivable...... 27,900
Deferred financing
costs.................. 21,835
Goodwill................. 251,024
Property management
contracts.............. 38,371
Other assets............. 82,670
----------
Total Assets..... $4,410,817
==========
Secured notes payable.... $ 926,246
Secured tax-exempt bond
financing.............. 399,925
Secured short-term
financing.............. 32,691
Unsecured short-term
financing.............. 300,000
Accounts payable, accrued
and other
liabilities............
248,253
Deferred tax liability... --
Security deposits and
prepaid rents.......... 13,171
----------
1,920,286
Minority interest........ 79,431
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. 149,500
Redeemable Partnership
Units.................. 277,581
Partners' capital and
shareholders' equity
Common stock........... --
Additional paid-in
capital.............. --
Distributions in excess
of earnings.......... --
General and Special
Limited Partner......
1,496,457
Preferred Units........ 487,562
----------
1,984,019
----------
Total Liabilities
and Equity..... $4,410,817
==========
</TABLE>
P-5
<PAGE> 837
- ---------------
(A) Represents the unaudited historical consolidated financial position of the
Partnership as of September 30, 1998.
(B) Represents adjustments to reflect the purchase of ten properties for an
aggregate purchase price of $140.2 million; the Class J Preferred Stock
Offering; the Probable Purchases; and the Preferred Partnership Unit
Offering.
(C) Represents the unaudited historical consolidated financial position of IFG
as of September 30, 1998.
(D) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the issuance of 8,423,751 shares of AIMCO Common Stock, based
on consideration to holders of IFG common stock outstanding as of the date
of the IFG Merger; (ii) the issuance of 4,826,745 shares of AIMCO Class A
Common Stock to holders of IPT common stock (other than AIMCO); (iii) the
payment of a special dividend of $50,000; (iv) the assumption of $149,500
of the convertible debentures of IFG; (v) the allocation of the combined
purchase price of IFG and IPT based on the preliminary estimates of
relative fair market value of the assets and liabilities of IFG and IPT;
and (vi) the contribution by AIMCO of substantially all the assets and
liabilities of Insignia and IPT to the Partnership in exchange for OP
Units.
(E) Represents the effects of AIMCO's acquisition of IFG immediately after the
IFG Merger. These amounts do not give effect to the IFG Reorganization,
which includes the transfers of certain assets and liabilities of IFG to
the combined Unconsolidated Subsidiaries. The IFG Reorganization occurred
immediately after the IFG Merger so that AIMCO could maintain its
qualification as a REIT. This column is included as an intermediate step to
assist the reader in understanding the entire nature of the IFG Merger and
related transactions.
(F) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party property management operations.
The adjustments reflect the transfer of assets valued at the Partnership's
new basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(G) In connection with the IFG Merger and the IPT Merger, AIMCO became
obligated to issue a total of 13,250,496 shares of AIMCO Common Stock
The total purchase price of IFG and IPT is $1,128,009, as follows:
<TABLE>
<S> <C>
Issuance of 8,423,751 shares of AIMCO Common Stock in the
IFG Merger, at $34.658 per share.......................... $ 291,949
Issuance of 4,826,745 shares of AIMCO Common Stock in the
IPT Merger, at $31.50 per share........................... 151,564
Assumption of Convertible Debentures........................ 149,500
Assumption of liabilities as indicated in the Merger
Agreement................................................. 397,459
Transaction costs........................................... 53,333
Generation of deferred tax liability........................ 20,000
Special dividend............................................ 50,000
Purchase of IFG Common Stock prior to merger................ 4,935
Consideration for options................................... 9,269
----------
Total............................................. $1,128,009
==========
</TABLE>
P-6
<PAGE> 838
The purchase price was allocated to the various assets of IFG acquired in
the IFG Merger, as follows:
<TABLE>
<S> <C>
Purchase price.............................................. $1,128,009
Historical basis of IFG's assets acquired................... (561,181)
----------
Step-up to record the fair value of IFG's assets
acquired............................................... $ 566,828
==========
</TABLE>
This step-up was applied to IFG's assets as follows:
<TABLE>
<S> <C>
Real estate................................................. $ 23,880
Investment in real estate partnerships...................... 444,570
Decrease in accounts receivable............................. (32,234)
Decrease in deferred loan costs............................. (7,020)
Management contracts........................................ 31,147
Increase in goodwill........................................ 111,018
Reduction in value of other assets.......................... (4,533)
--------
Total............................................. $566,828
========
</TABLE>
The fair value of IFG's assets, primarily the real estate and management
contracts, was calculated based on estimated future cash flows of the
underlying assets.
As of September 30, 1998, IFG's stockholder's equity was $(108,855), which
is detailed as follows:
<TABLE>
<S> <C>
Common stock................................................ $ 320
Additional paid-in capital.................................. (86,959)
Distributions in excess of earnings......................... (22,216)
---------
Total............................................. $(108,855)
=========
</TABLE>
Upon completion of the IFG Merger, the entire amount of the stockholder's
equity was eliminated.
In addition, the minority interest in other partnerships of IFG of $108,485
will be eliminated upon the IPT Merger.
At the time of the IFG Merger, AIMCO obtained unsecured short-term
financing of $300 million. The proceeds were used to repay secured
short-term financing of IFG that AIMCO assumed.
(H) Represents the issuance of a total of 13,250,496 OP Units to AIMCO and the
concurrent issuance of 13,250,496 shares of AIMCO Common Stock to IFG and
IPT stockholders, in exchange for all the shares of IFG and IPT common
stock.
In accordance with the IFG Merger Agreement, AIMCO became obligated to
issue 8,423,751 shares of Class E Preferred Stock, approximately equal to
$292 million. Each share of Class E Preferred Stock will automatically
convert to one share of AIMCO Common Stock upon the payment of the special
dividend thereon. As such, for the purpose of preparing the pro forma
financial statements, AIMCO's management believes that the Class E
Preferred Stock is substantially the same as AIMCO Common Stock, and that
the fair value of the Class E Preferred Stock approximates the fair value
of the AIMCO Common Stock. Upon the payment of the special dividend on the
Class E Preferred Stock and the conversion of the Class E Preferred Stock
to AIMCO Common Stock, the former IFG stockholders will own approximately
15.0% of the AIMCO Common Stock and the IPT stockholders will own
approximately 7.3% of AIMCO Common Stock. The special dividend on the Class
E Preferred Stock is intended to represent a distribution in an amount at
least equal to the earnings and profits of IFG at the time of the IFG
Merger, to which AIMCO succeeds.
Concurrent with the issuance of Class E Preferred Stock, the Partnership
will issue comparable Class E Preferred Units to AIMCO. The Class E
Preferred Units will have terms substantially the same as the Class E
Preferred Stock.
(I) Represents the increase in the Partnership's investment in Unconsolidated
Subsidiaries to reflect the contribution or sale of property management
contracts, including the related deferred tax liability, in exchange for
preferred stock and a note payable from the Unconsolidated Subsidiaries.
These assets and
P-7
<PAGE> 839
liabilities are valued at the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(J) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries,
(K) Represents notes receivable from the Unconsolidated Subsidiaries of
$95,000, advances to the Unconsolidated Subsidiaries of $42,792, and equity
in the Unconsolidated Subsidiaries of $48,485. The combined pro forma
balance sheet of the Unconsolidated Subsidiaries as of September 30, 1998
is presented below, which reflects the effects of the IFG Merger, the IPT
Merger, and the IFG Reorganization as if such transactions had occurred as
of September 30, 1998.
P-8
<PAGE> 840
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
IFG
HISTORICAL REORGANIZATION(i) PRO FORMA
---------- ----------------- ---------
<S> <C> <C> <C>
ASSETS
Real estate............................................ $ 22,376 $ -- $ 22,376
Cash and cash equivalents.............................. 16,919 17,897(ii) 34,816
Restricted cash........................................ 5,507 1,352(ii) 6,859
Management contracts................................... 47,846 79,195(iii) 127,041
Accounts receivable.................................... 13,109 5,471(ii) 18,580
Deferred financing costs............................... 3,117 -- 3,117
Goodwill............................................... 43,544 -- 43,544
Other assets........................................... 51,498 2,860(ii) 54,358
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable.................................. $114,302 $ 45,000(iii) $159,302
Accounts payable, accrued and other liabilities........ 56,773 27,580(ii) 84,353
Security deposits and deferred income.................. 334 --(ii) 334
Deferred tax liability................................. -- 20,000(iii) 20,000
-------- -------- --------
171,409 92,580 263,989
Common stock........................................... 2,061 747(iv) 2,808
Preferred stock........................................ 34,290 14,195(iii) 48,485
Retained earnings...................................... (3,844) -- (3,844)
Notes receivable on common stock purchases............. -- (747)(iv) (747)
-------- -------- --------
32,507 14,195 46,702
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
</TABLE>
- ---------------
(i) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the transfer of assets valued at the Partnership's new
basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(ii) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries, valued at the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(iii)Represents the transfer or sale of management contracts, the establishment
of an intercompany note, and the establishment of the related estimated net
deferred Federal and state tax liabilities at a combined rate of 40% for
the estimated difference between the book and tax basis of the net assets
of the Unconsolidated Subsidiaries. The primary component of the deferred
tax liability is the difference between the new basis of the property
management contracts, as a result of the allocation of the purchase price
of IFG, and the historical tax basis.
(iv) Represents the issuance of common stock to the common stockholders of the
Unconsolidated Subsidiaries in exchange for notes receivable, in order for
the common stockholders to maintain their respective ownership interest in
the Unconsolidated Subsidiaries.
P-9
<PAGE> 841
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE NHP AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rental and other property
revenues........................ $193,006 $120,337(I)
11,012(J) $ 6,660 $ 93,329 $ -- $ 6,912
Property operating expenses....... (76,168) (59,466)(I)
(4,860)(J) (2,941) (36,088) -- (3,307)
Owned property management
expense......................... (6,620) (4,327)(I)
(602)(J) (282) -- -- --
Depreciation...................... (37,741) (26,645)(I)
(2,172)(J) (1,414) (18,979) (5,997)(O) (966)
-------- -------- ------- -------- ------- --------
Income from property operations... 72,477 33,277 2,023 38,262 (5,997) 2,639
-------- -------- ------- -------- ------- --------
Management fees and other
income.......................... 13,937 -- 7,813 -- -- 94,330
Management and other expenses..... (9,910) -- (5,394) -- -- (57,615)
Corporate overhead allocation..... (588) -- -- -- -- --
Amortization...................... (1,401) -- (5,800) -- -- (16,768)
-------- -------- ------- -------- ------- --------
Income from service company
business........................ 2,038 -- (3,381) -- -- 19,947
Minority interest in service
company business................ (10) -- -- -- -- --
-------- -------- ------- -------- ------- --------
AIMCO's share of income from
service company business........ 2,028 -- (3,381) -- -- 19,947
-------- -------- ------- -------- ------- --------
General and administrative
expenses........................ (5,396) -- (1,025) (7,392) 7,392(P) (21,199)
Interest expense.................. (51,385) (3,451)(K)
(2,497)(L) (5,462) (26,987) (221)(Q) (9,035)
Interest income................... 8,676 -- 1,900 -- -- 10,967
Minority interest................. 1,008 458(M) 16 (851) 705(R) (12,871)
Equity in losses of unconsolidated
partnerships.................... (1,798) (122)(N) (8,542) 405 -- 12,515
Equity in earnings of
unconsolidated subsidiaries..... 4,636 -- 5,790 -- -- --
-------- -------- ------- -------- ------- --------
Income (loss) from operations..... 30,246 27,665 (8,681) 3,437 1,879 2,963
Income tax provision.............. -- -- -- -- -- 1,701
Gain on dispositions of
property........................ 2,720 (2,720) -- -- -- 80
-------- -------- ------- -------- ------- --------
Income (loss) before extraordinary
item............................ 32,966 24,945 (8,681) 3,437 1,879 4,744
Extraordinary item -- early
extinguishment of debt.......... (269) 269 -- -- -- --
-------- -------- ------- -------- ------- --------
Net income........................ 32,697 25,214 (8,681) 3,437 1,879 4,744
Income attributable to preferred
unitholders..................... 2,315 39,859 -- -- -- --
-------- -------- ------- -------- ------- --------
Income attributable to common
unitholders..................... $ 30,382 $(14,645) $(8,681) $ 3,437 $ 1,879 $ 4,744
======== ======== ======= ======== ======= ========
Basic earnings per OP unit........ $ 1.09
========
Diluted earnings per OP unit...... $ 1.08
========
Weighted average OP units
outstanding..................... 27,732
========
Weighted average OP units and
equivalents outstanding......... 28,113
========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(G) ADJUSTMENTS(H) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property
revenues........................
$ -- $ -- $ 431,256
Property operating expenses.......
-- -- (182,830)
Owned property management
expense.........................
-- -- (11,831)
Depreciation......................
(2,350)(S) -- (96,264)
-------- -------- ---------
Income from property operations... (2,350) -- 140,331
-------- -------- ---------
Management fees and other
income.......................... -- (74,404)(X) 41,676
Management and other expenses..... -- 49,236(X) (23,683)
Corporate overhead allocation..... -- -- (588)
Amortization...................... (32,699)(T) 30,188(Y) (26,480)
-------- -------- ---------
Income from service company
business........................ (32,699) 5,020 (9,075)
Minority interest in service
company business................ -- -- (10)
-------- -------- ---------
AIMCO's share of income from
service company business........ (32,699) 5,020 (9,085)
-------- -------- ---------
General and administrative
expenses........................ -- 6,249(X) (21,371)
Interest expense..................
(14,750) -- (113,788)
Interest income................... -- 191(Z) 21,734(BB)
Minority interest................. 1,552(U) -- (9,983)
Equity in losses of unconsolidated
partnerships.................... (29,995)(V) -- (27,537)
Equity in earnings of
unconsolidated subsidiaries..... -- (4,578)(AA) 5,848(DD)
-------- -------- ---------
Income (loss) from operations..... (78,242) 6,882 (13,851)
Income tax provision.............. (1,701)(W) -- --
Gain on dispositions of
property........................ (80) -- --
-------- -------- ---------
Income (loss) before extraordinary
item............................ (80,023) 6,882 (13,851)
Extraordinary item -- early
extinguishment of debt.......... -- -- --
-------- -------- ---------
Net income........................ (80,023) 6,882 (13,851)
Income attributable to preferred
unitholders..................... -- -- 42,174(CC)
-------- -------- ---------
Income attributable to common
unitholders..................... $(80,023) $ 6,882 $ (56,025)(BB)
======== ======== =========
Basic earnings per OP unit........ $ (0.83)(BB)
=========
Diluted earnings per OP unit...... $ (0.83)(BB)
=========
Weighted average OP units
outstanding..................... 67,522
=========
Weighted average OP units and
equivalents outstanding......... 68,366
=========
</TABLE>
P-10
<PAGE> 842
- ---------------
(A) Represents the Partnership's audited consolidated results of operations
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1997: (i) the 1997 Acquisitions; (ii) the 1997 Stock
Offerings; (iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings;
(v) the 1998 Acquisitions; (vi) the Probable Purchases; (vii) the 1998
Dispositions; and (v) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues................. $ 6,660(v) $ 16,842 $ -- $(16,842)(xvii) $ 6,660
Property operating
expenses................. (2,941)(v) (8,411) -- 8,411 (xvii) (2,941)
Owned property management
expense.................. (282)(v) (862) -- 862 (xvii) (282)
Depreciation............... (1,414)(vi) (2,527) (693)(xi) 3,220 (xvii) (1,414)
------- -------- ------- -------- -------
Income from property
operations............... 2,023 5,042 (693) (4,349) 2,023
------- -------- ------- -------- -------
Management fees and other
income................... 1,405(vii) 72,176 -- (65,768)(xviii) 7,813
Management and other
expenses................. (2,263)(viii) (35,267) -- 32,136 (xviii) (5,394)
Amortization............... -- (9,111) (4,432)(xii) 7,743 (xix) (5,800)
------- -------- ------- -------- -------
Income from service company
business................. (858) 27,798 (4,432) (25,889) (3,381)
------- -------- ------- -------- -------
General and administrative
expenses................. -- (16,266) 8,668 (xiii) 6,573 (xviii) (1,025)
Interest expense........... (5,082)(ix) (10,685) -- 10,305(xx) (5,462)
Interest income............ 540(v) 1,963 -- (603)(xxi) 1,900
Minority interest.......... 16(v) -- -- -- 16
Equity in losses of
unconsolidated
partnerships............. (3,905)(x) -- (4,631)(xiv) (6) (8,542)
Equity in earnings of
unconsolidated
subsidiaries............. -- -- (4,636)(xv) 10,426 (xxii) 5,790
------- -------- ------- -------- -------
Income (loss) from
operations............... (7,266) 7,852 (5,724) (3,543) (8,681)
Income tax provision....... -- (3,502) 3,502 (xvi) -- --
------- -------- ------- -------- -------
Net income (loss).......... $(7,266) $ 4,350 $(2,222) $ (3,543) $(8,681)
======= ======== ======= ======== =======
</TABLE>
- ---------------
(i) Represents the adjustment to record activity from January 1, 1997 to
the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. The historical
financial statements of the NHP Real Estate Companies consolidate
certain real estate partnerships in which they have an interest that
will be presented on the equity method by the Partnership as a
result of the NHP Real Estate Reorganization. In addition,
represents adjustments to record additional depreciation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest
expense incurred in connection with borrowings incurred by the
Partnership to consummate the NHP Real Estate Acquisition.
(ii)Represents the unaudited consolidated results of operations of NHP
for the period from January 1, 1997 through December 8, 1997 (date
of the NHP Merger).
P-11
<PAGE> 843
(iii)
Represents the following adjustments occurring as a result of the
NHP Merger: (i) the reduction in personnel costs, primarily
severance costs, pursuant to a restructuring plan; (ii) the
incremental depreciation of the purchase price adjustment related to
real estate; (iii) the incremental amortization of the purchase
price adjustment related to the management contracts, furniture,
fixtures and equipment, and goodwill; (iv) the reversal of equity in
earnings of NHP during the pre-merger period when the Partnership
held a 47.62% interest in NHP; and (v) the amortization of the
increased basis in investments in real estate partnerships based on
the purchase price adjustment related to real estate and an
estimated average life of 20 years.
(iv)Represents adjustments related to the NHP Reorganization, whereby
the Partnership contributed or sold to the Unconsolidated
Subsidiaries and the Unconsolidated Partnership: (i) certain assets
and liabilities of NHP, primarily related to the management
operations and other businesses owned by NHP and (ii) 12 real estate
properties containing 2,905 apartment units. The adjustments
represent (i) the related revenues and expenses primarily related to
the management operations and other businesses owned by NHP and (ii)
the historical results of operations of such real estate
partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis
resulting from the allocation of the combined purchase price of NHP
and the NHP Real Estate Companies.
(v) Represents adjustments to reflect the acquisition of the NHP Real
Estate Companies and the corresponding historical results of
operations as if they had occurred on January 1, 1997.
(vi)Represents incremental depreciation related to the consolidated real
estate assets purchased from the NHP Real Estate Companies.
Buildings and improvements are depreciated on the straight-line
method over a period of 30 years, and furniture and fixtures are
depreciated on the straight-line method over a period of 5 years.
(vii)
Represents the adjustment to record the revenues from ancillary
businesses purchased from the NHP Real Estate Companies as if the
acquisition had occurred on January 1, 1997.
(viii)
Represents $4,878 related to the adjustment to record the expenses
from ancillary businesses purchased from the NHP Real Estate
Companies as if the acquisition had occurred on January 1, 1997,
less $2,615 related to a reduction in personnel costs pursuant to a
restructuring plan, approved by the Company's senior management,
assuming that the acquisition of the NHP Real Estate Companies had
occurred on January 1, 1997 and that the restructuring plan was
completed on January 1, 1997. The restructuring plan specifically
identifies all significant actions to be taken to complete the
restructuring plan, including the reduction of personnel, job
functions, location and the date of completion.
(ix)Represents adjustments in the amount of $3,391 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as the increase in interest expense in the amount
of $1,691 related to borrowings on the Partnership's credit
facilities of $55,807 to finance the NHP Real Estate Acquisition.
(x) Represents adjustments in the amount of $2,432 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as amortization of $1,473 related to the increased
basis in investment in real estate partnerships, as a result of the
allocation of the purchase price of the NHP Real Estate Companies,
based on an estimated average life of 20 years.
(xi)Represents incremental depreciation related to the real estate
assets purchased from NHP. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years,
and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(xii)
Represents incremental depreciation and amortization of the tangible
and intangible assets related to the property management and other
business operated by the Unconsolidated
P-12
<PAGE> 844
Subsidiaries, based on the Partnership's new basis as adjusted by
the allocation of the combined purchase price of NHP including
amortization of management contracts of $3,782, depreciation of
furniture, fixtures and equipment of $2,018 and amortization of
goodwill of $7,743, less NHP's historical depreciation and
amortization of $9,111. Management contracts are amortized using the
straight-line method over the weighted average life of the contracts
estimated to be approximately 15 years. Furniture, fixtures and
equipment are depreciated using the straight-line method over the
estimated life of 3 years. Goodwill is amortized using the
straight-line method over 20 years.
(xiii)
Represents a reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan, approved by the Company's
senior management, specifically identifying all significant actions
to be taken to complete the restructuring plan, assuming that the
NHP Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997.
(xiv)
Represents adjustment for amortization of the increased basis in
investments in real estate partnerships, as a result of the
allocation of the combined purchase price of NHP and the NHP Real
Estate Companies, based on an estimated average life of 20 years.
(xv)Represents the reversal of equity in earnings in NHP during the
pre-merger period when the Partnership held a 47.62% interest in
NHP, as a result of the Partnership's acquisition of 100% of the NHP
Common Stock.
(xvi)
Represents the reversal of NHP's income tax provision due to the
restructuring of the management business to the Unconsolidated
Subsidiaries.
(xvii)
Represents the contribution of NHP's 12 real estate properties
containing 2,905 apartment units to the Unconsolidated Partnership
pursuant to the NHP Reorganization.
(xviii)
Represents the historical income and expenses associated with
certain assets and liabilities of NHP that were contributed or sold
to the Unconsolidated Subsidiaries, primarily related to the
management operations and other businesses owned by NHP.
(xix)
Represents the amortization and depreciation of certain management
contracts and other assets of NHP, based on the Partnership's new
basis resulting from the allocation of the purchase price of NHP,
that will be contributed or sold to the Unconsolidated Subsidiaries,
primarily related to the management operations and other businesses
owned by NHP.
(xx)Represents interest expense of $6,020 related to the contribution of
NHP's 12 real estate properties containing 2,905 apartment units to
the Unconsolidated Partnership and interest expense of $4,285
related to the certain assets and liabilities that will be
contributed or sold to the Unconsolidated Subsidiaries pursuant to
the NHP Reorganization.
(xxi)
Represents the interest income of $5,000 earned on notes payable of
$50,000 to the Partnership issued as consideration for certain
assets and liabilities sold to the Unconsolidated Subsidiaries by
the Partnership, net of the elimination of the Partnership's share
of the related interest expense of $4,750 reflected in the equity in
earnings of the Unconsolidated Subsidiaries operating results,
offset by $853 in interest income primarily related to the
management operations and other businesses owned by NHP contributed
or sold to the Unconsolidated Subsidiaries pursuant to the NHP
Reorganization.
(xxii)
Represents the Partnership's equity in earnings of the
Unconsolidated Subsidiaries.
(D) Represents the audited historical statement of operations of Ambassador
for the year ended December 31, 1997. Certain reclassifications have been
made to Ambassador's historical statement of operations to conform to the
Partnership's Statement of Operations presentation. The Ambassador
historical statement of operations excludes extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of
P-13
<PAGE> 845
interest expense resulting from the net reduction of debt; and (iv) the
elimination of the minority interest associated with Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger, and the spin-off of Holdings as if these transactions had
occurred on January 1, 1997. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
IFG AMIT HOLDINGS IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property
revenues....................... $ 6,646 $ 266 $ -- $ 6,912
Property operating expenses...... (3,251) (56) -- (3,307)
Depreciation..................... (966) -- -- (966)
--------- ------- --------- --------
Income from property
operations..................... 2,429 210 -- 2,639
--------- ------- --------- --------
Management fees and other
income......................... 389,626 -- (295,296) 94,330
Management and other expenses.... (315,653) -- 258,038 (57,615)
Amortization..................... (31,709) (303) 15,244 (16,768)
--------- ------- --------- --------
Income from service company
business....................... 42,264 (303) (22,014) 19,947
--------- ------- --------- --------
General and administrative
expenses....................... (20,435) (1,351) 587 (21,199)
Interest expense................. (9,353) -- 318 (9,035)
Interest income.................. 4,571 6,853 (457) 10,967
Minority interest................ (12,448) (382) (41) (12,871)
Equity in income (losses) of
unconsolidated partnership..... 10,027 2,639 (151) 12,515
--------- ------- --------- --------
Income (loss) from operations.... 17,055 7,666 (21,758) 2,963
Income tax provision............. (6,822) (180) 8,703 1,701
Gain on sale of property......... -- 80 -- 80
--------- ------- --------- --------
Net income (loss)................ 10,233 7,566 (13,055) 4,744
========= ======= ========= ========
</TABLE>
- ---------------
(i) Represents the audited consolidated results of operations of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report
on Form 10-K. Certain reclassifications have been made to IFG's
historical statement of operations to conform to the Partnership's
statement of operations presentation.
(ii)Represents the historical statement of operations of AMIT, as well
as pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger: (i) the incremental depreciation of the
purchase price adjustment related to consolidated real estate and
investments in real estate partnerships; (ii) the amortization of
goodwill and property management contracts resulting from the IFG Merger;
(iii) the increase in interest expense resulting from the net increase in
debt; and (iv) the elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
P-14
<PAGE> 846
(I) Represents adjustments to reflect the 1997 Property Acquisitions and the
1998 Acquisitions, less the 1997 Dispositions and the 1998 Dispositions
as if they had occurred on January 1, 1997. These pro forma operating
results are based on historical results of the properties, except for
depreciation, which is based on the Partnership's investment in the
properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1997 PROPERTY 1997 1998 1998
ACQUISITIONS DISPOSITIONS ACQUISITIONS DISPOSITIONS TOTAL
------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Rental and other
property
revenues........... $ 88,589 $(4,081) $ 39,132 $(3,303) $120,337
Property operating
expense............ (44,109) 1,944 (18,655) 1,354 (59,466)
Owned property
management
expense............ (3,233) 133 (1,349) 122 (4,327)
Depreciation......... (16,839) 452 (10,946) 688 (26,645)
</TABLE>
(J) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1997. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(K) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1997
Property Acquisitions..................................... $(29,490)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1997 Dispositions and
the 1997 Stock Offerings.................................. 19,568
Repayments on the Partnership's credit facilities with
proceeds from a dividend received from one of the
Unconsolidated Subsidiaries............................... 1,889
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1998
Acquisitions.............................................. (15,994)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1998 Dispositions and
the 1998 Stock Offerings.................................. 20,113
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred Partnership
Unit Offering............................................. 463
--------
$ (3,451)
========
</TABLE>
(L) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the Probable Purchases.
(M) Represents (i) loss of $181 related to limited partners in consolidated
partnerships acquired in connection with the 1997 Property Acquisitions
and the 1998 Property Acquisitions and (ii) income of $502 allocable to
the Partnership Preferred Units.
(N) Represents the reduction in the Partnership's earnings in unconsolidated
partnerships as a result of the consolidation of additional partnerships
resulting from additional ownership acquired through tender offers.
(O) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
P-15
<PAGE> 847
(P) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 724
Reduction in salaries and benefits.......................... 4,197
Merger related costs........................................ 524
Other....................................................... 1,947
------
$7,392
======
</TABLE>
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(Q) Represents the decrease in interest expense of $3,612 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$3,833 related to borrowings under the Partnership's credit facilities.
(R) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(S) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(T) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $38,885, amortization of goodwill of $6,526, and
depreciation of furniture, fixtures, and equipment of $3,753, less IFG's
historical depreciation and amortization of $16,465. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(U) Represents elimination of minority interest of IPT resulting from the IPT
merger.
(V) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(W) Represents the reversal of IFG's income tax provision.
(X) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(Y) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Z) Represents interest income of $3,825 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries by the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $3,634 reflected on the equity in earnings of the
Unconsolidated Subsidiaries.
(AA) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-16
<PAGE> 848
(BB) The following table presents the net impact to pro forma net loss
applicable to holders of OP Units and net loss per OP Units assuming the
interest rate per annum increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest expense................................ $ 938
========
Net income.................................................. $(14,789)
========
Net loss attributable to OP unitholders..................... $(56,963)
========
Basic loss per OP unit...................................... $ (0.84)
========
Diluted loss per OP unit.................................... $ (0.84)
========
</TABLE>
(CC) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred
Units, the Class G Preferred Units, the Class H Preferred Units and the
Class J Preferred Units as if these Preferred Units had been issued as of
January 1, 1997.
(DD) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(2,536), plus the elimination of intercompany interest
expense of $8,384. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the year ended December 31, 1997 is
presented below, which represents the effects of the Ambassador Merger,
the NHP Merger, the NHP Reorganization, the IFG Merger, and the IFG
Reorganization as if these transactions had occurred as of January 1,
1997.
P-17
<PAGE> 849
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZATION IFG
HISTORICAL(i) ADJUSTMENTS(ii) REORGANIZATION(iii) PRO FORMA
------------- --------------- ------------------- ---------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 6,194 $ 6,371(iv) $ -- $ 12,565
Property operating expenses............. (3,355) (3,531)(iv) -- (6,886)
Owned property management expense....... (147) (478)(iv) -- (625)
Depreciation expense.................... (1,038) (767)(iv) -- (1,805)
-------- -------- -------- --------
Income from property operations......... 1,654 1,595 -- 3,249
-------- -------- -------- --------
Management fees and other income........ 23,776 41,992(v) 74,404(x) 140,172
Management and other expenses........... (11,733) (20,403)(v) (49,236)(x) (81,372)
Amortization............................ (3,726) (4,017)(v) (30,188)(xi) (37,931)
-------- -------- -------- --------
Income from service company............. 8,317 17,572 (5,020) 20,869
General and administrative expense...... -- (6,573)(v) (6,249)(x) (12,822)
Interest expense........................ (6,058) (5,849)(vi) (3,825)(xii) (15,732)
Interest income......................... 1,001 (148)(v) -- 853
Minority interest....................... (2,819) 2,198(viii) -- (621)
Equity in losses of unconsolidated
partnerships.......................... (1,028) 1,028(iv) -- --
Equity in earnings of Unconsolidated
Subsidiaries.......................... 2,943 (2,943)(vii) -- --
-------- -------- -------- --------
Income (loss) from operations........... 4,010 6,880 (15,094) (4,204)
Income tax provision.................... (1,902) (3,013)(ix) 6,450(xiii) 1,535
-------- -------- -------- --------
Net income (loss)....................... $ 2,108 $ 3,867 $ (8,644) $ (2,669)
======== ======== ======== ========
Income attributable to preferred
unitholders........................... $ 2,198 $ 3,478 $ (8,212) $ (2,536)
======== ======== ======== ========
Income (loss) attributable to common
unitholders........................... $ (90) $ 389 $ (432) $ (133)
======== ======== ======== ========
</TABLE>
- ---------------
(i) Represents the historical results of operations of the Unconsolidated
Subsidiaries for the year ended December 31, 1997.
(ii) Represents adjustments related to the NHP Reorganization, which includes
the sale or contribution of 14 properties containing 2,725 apartment units
from the unconsolidated partnerships to the Unconsolidated Subsidiaries,
as well as the sale or contribution of 12 properties containing 2,905
apartment units from the Unconsolidated Subsidiaries to the Unconsolidated
Partnership.
(iii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iv) Represents adjustments for the historical results of operations of the 14
real estate properties contributed or sold to the Unconsolidated
Subsidiaries, offset by the historical results of operations of the 12
real estate properties contributed or sold to the Unconsolidated
Partnership, with additional depreciation recorded related to the
Partnership's new basis resulting from the allocation of purchase price of
NHP and the NHP Real Estate Companies.
P-18
<PAGE> 850
(v) Represents adjustments to reflect income and expenses associated with
certain assets and liabilities of NHP contributed or sold to the
Unconsolidated Subsidiaries.
(vi) Represents adjustments of $6,058 to reverse the historical interest
expense of the Unconsolidated Subsidiaries, which resulted from its
original purchase of NHP Common Stock, offset by $2,622 related to the
contribution or sale of the 14 real estate properties, $4,285 related to
assets and liabilities transferred from the Partnership to the
Unconsolidated Subsidiaries and $5,000 related to a note payable to the
Partnership.
(vii) Represents the reversal of the historical equity in earnings of NHP for
the period in which NHP was not consolidated by the Unconsolidated
Subsidiaries.
(viii)Represents the minority interest in the operations of the 14 real estate
properties.
(ix) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill which is not deductible
for tax purposes.
(x) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(xi) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(xii) Represents adjustment for interest expense related to a note payable to
the Partnership.
(xiii)Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-19
<PAGE> 851
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR
AND PROBABLE AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E)
------------- ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Rental and other property revenues............. $ 265,700 $ 19,603(H) $ $ $
8,398(I) 35,480 -- 8,126
Property operating expenses.................... (101,600) (9,009)(H)
(3,745)(I) (14,912) -- (2,585)
Owned property management expense.............. (7,746) (728)(H)
(459)(I) -- -- --
Depreciation................................... (59,792) (4,886)(H)
(2,624)(I) (7,270) (1,420)(M) (904)
--------- -------- -------- ------- --------
Income from property operations................ 96,562 6,550 13,298 (1,420) 4,637
--------- -------- -------- ------- --------
Management fees and other income............... 13,968 -- -- -- 71,155
Management and other expenses.................. (8,101) -- -- -- (41,477)
Corporate overhead allocation.................. (196) -- -- -- --
Amortization................................... (3) -- -- -- (13,986)
--------- -------- -------- ------- --------
Income from service company business........... 5,668 -- -- -- 15,692
--------- -------- -------- ------- --------
General and administrative expenses............ (7,444) -- (5,278) 5,278(N) (61,386)
Interest expense............................... (56,756) 1,975(J)
(2,469)(K) (10,079) 145(O) (24,871)
Interest income................................ 18,244 (1) -- -- 22,501
Minority interest.............................. (1,052) 160(L) (252) 252(P) (14,159)
Equity in losses of unconsolidated
partnerships................................. (5,078) -- (71) -- 13,492
Equity in earnings of unconsolidated
subsidiaries................................. 8,413 -- -- -- --
Amortization of goodwill....................... (5,071) -- -- -- --
--------- -------- -------- ------- --------
Income (loss) from operations.................. 53,486 6,215 (2,382) 4,255 (44,094)
Income tax provision........................... -- -- -- -- 1,180
Gain on dispositions of property............... 2,783 (2,783) -- -- 6,576
--------- -------- -------- ------- --------
Net income..................................... 56,269 3,432 (2,382) 4,255 (36,338)
Income attributable to preferred unitholders... 16,320 16,094 -- -- --
--------- -------- -------- ------- --------
Income (loss) attributable to common
unitholders.................................. $ 39,949 $(12,662) $ (2,382) $ 4,255 $(36,338)
========= ======== ======== ======= ========
Basic earnings (loss) per OP Unit.............. $ 0.80
=========
Diluted earnings (loss) per OP Unit............ $ 0.79
=========
Weighted average OP Units outstanding.......... 50,420
=========
Weighted average OP Unit and equivalents
outstanding.................................. 50,544
=========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(F) ADJUSTMENTS(G) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property revenues............. $ $ $
-- -- 337,307
Property operating expenses....................
-- -- (131,851)
Owned property management expense..............
-- -- (8,933)
Depreciation...................................
(1,583)(Q) -- (78,479)
-------- -------- ---------
Income from property operations................ (1,583) -- 118,044
-------- -------- ---------
Management fees and other income............... -- (56,211)(W) 28,912
Management and other expenses.................. -- 35,192(W) (14,386)
Corporate overhead allocation.................. -- -- (196)
Amortization................................... (23,895)(R) 22,641(X) (15,243)
-------- -------- ---------
Income from service company business........... (23,895) 1,622 (913)
-------- -------- ---------
General and administrative expenses............ 45,823(S) 14,375(W) (8,632)
Interest expense...............................
7,045 -- (85,010)(AA)
Interest income................................ -- 143(Y) 40,887
Minority interest.............................. 6,622(T) -- (8,429)
Equity in losses of unconsolidated
partnerships................................. (18,577)(U) -- (10,234)
Equity in earnings of unconsolidated
subsidiaries................................. -- (7,562)(Z) 851(CC)
Amortization of goodwill....................... -- -- (5,071)
-------- -------- ---------
Income (loss) from operations.................. 15,435 8,578 41,493
Income tax provision........................... (1,180)(V) -- --
Gain on dispositions of property............... (6,576) -- --
-------- -------- ---------
Net income..................................... 7,679 8,578 41,493
Income attributable to preferred unitholders... -- -- 32,414(BB)
-------- -------- ---------
Income (loss) attributable to common
unitholders.................................. $ 7,679 $ 8,578 $ 9,079(AA)
======== ======== =========
Basic earnings (loss) per OP Unit.............. $ 0.13(AA)
=========
Diluted earnings (loss) per OP Unit............ $ 0.13(AA)
=========
Weighted average OP Units outstanding.......... 68,554
=========
Weighted average OP Unit and equivalents
outstanding.................................. 69,218
=========
</TABLE>
P-20
<PAGE> 852
- ---------------
(A) Represents the Partnership's unaudited consolidated results of operations
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1998: (i) the 1998 Stock Offerings; (ii) the 1998
Acquisitions; (iii) the Probable Purchases; (iv) the 1998 Dispositions;
and (v) the Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of operations of Ambassador
for the four months ended April 30, 1998. Certain reclassifications have
been made to Ambassador's historical Statement of Operations to conform
to the Partnership's Statement of Operations presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger and the spin-off of the common stock of Holdings as if these
transactions had occurred on January 1, 1998. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
HOLDINGS
IFG AMIT SPIN- IFG
HISTORICAL(i) MERGER(ii) OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 7,566 $ 560 $ -- $ 8,126
Property operating expenses............. (2,585) -- -- (2,585)
Depreciation............................ (904) -- -- (904)
--------- ------ --------- --------
Income from property operations......... 4,077 560 -- 4,637
--------- ------ --------- --------
Management fees and other income........ 311,475 -- (240,320) 71,155
Management and other expenses........... (252,295) -- 210,818 (41,477)
Amortization............................ (26,781) (48) 12,843 (13,986)
--------- ------ --------- --------
Income from service company business.... 32,399 (48) (16,659) 15,692
--------- ------ --------- --------
General and administrative expenses..... (66,272) (675) 5,561 (61,386)
Interest expense........................ (24,164) -- (707) (24,871)
Interest income......................... 18,817 4,193 (509) 22,501
Minority interest....................... (14,159) -- -- (14,159)
Equity in losses of unconsolidated
partnerships.......................... 12,169 1,323 13,492
--------- ------ --------- --------
Income (loss) from operations........... (37,133) 4,030 (10,991) (44,094)
Income tax provision.................... (4,772) -- 5,952 1,180
Gain on disposition of property......... 5,888 688 -- 6,576
--------- ------ --------- --------
Item income (loss)...................... $ (36,017) $4,718 $ (5,039) $(36,338)
========= ====== ========= ========
</TABLE>
----------------------
(i)
Represents the unaudited consolidated results of operations of IFG for
the nine months ended September 30, 1998.
Certain reclassifications have been made to IFG's historical statement
of operations to conform to the Partnership's statement of operations
presentation.
(ii)
Represents the historical statement of operations of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock for
each three shares of IFG common stock to holders of IFG common stock.
(F) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the incremental depreciation of the purchase price adjustment
related to consolidated real estate and investments in real estate
partnerships; (ii) the amortization of goodwill and property management
contracts
P-21
<PAGE> 853
resulting from the IFG Merger; (iii) the increase in interest expense
resulting from the net increase in debt; and (iv) the elimination of the
income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of
IFG, primarily management contracts and related working capital assets
and liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(H) Represents adjustments to reflect the 1998 Acquisitions, less the 1998
Dispositions as if they had occurred on January 1, 1998. These pro forma
operating results are based on historical results of the properties,
except for depreciation, which is based on the Partnership's investment
in the properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1998 1998
ACQUISITIONS DISPOSITIONS TOTAL
------------ ------------ -------
<S> <C> <C> <C>
Rental and other property revenues......... $20,554 $(951) $19,603
Property operating expense................. (9,385) 376 (9,009)
Owned property management expense.......... (765) 37 (728)
Depreciation............................... (4,979) 93 (4,886)
</TABLE>
(I) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1998. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(J) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and
other loans and mortgages assumed in connection with
the 1998 Acquisitions.................................. $(8,698)
Repayments on the Partnership's credit facilities and
other indebtedness with proceeds from the 1998
Dispositions and the 1998 Stock
Offerings.............................................. 10,326
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred
Partnership Unit Offering.............................. 347
-------
$ 1,975
=======
</TABLE>
(K) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the probable purchases.
(L) Represents (i) loss of $537 related to limited partners in consolidated
partnerships acquired in connection with the 1998 Acquisitions and (ii)
income of $377 allocable to the Partnership Preferred Units.
(M) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(N) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses.................... $ 355
Reduction in salaries and benefits........................ 2,482
Merger related costs...................................... 1,212
Other..................................................... 1,229
------
$5,278
======
</TABLE>
P-22
<PAGE> 854
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1998 and that the
restructuring plan was completed on January 1, 1998. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(O) Represents the decrease in interest expense of $1,480 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$1,335 related to borrowings under the Partnership's line of credit.
(P) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(Q) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(R) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $30,096, amortization of goodwill of $4,895, and
depreciation of furniture, fixtures, and equipment of $2,842, less IFG's
historical depreciation and amortization of $13,938. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(S) Represents the elimination of merger related expenses recorded by IFG
during the nine months ended September 30, 1998. In connection with the
IFG Merger, certain IFG executives will receive one-time lump-sum
payments in connection with the termination of their employment and
option agreements. The total of these lump sum payments is estimated to
be approximately $50,000.
(T) Represents elimination of minority interest in IPT resulting from the IPT
merger.
(U) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(V) Represents the reversal of IFG's income tax provision.
(W) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(X) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Y) Represents interest income of $2,861 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries of the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $2,718 reflected in the equity in earnings of the
Unconsolidated Subsidiaries.
(Z) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-23
<PAGE> 855
(AA) The following table presents the net impact to pro forma net income
applicable to holders of shares of AIMCO Common Stock and net income per
share of AIMCO Common Stock assuming the interest rate per annum
increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest........................................ $ 702
=======
Net income.................................................. $40,791
=======
Net income attributable to OP Unitholders................... $ 8,377
=======
Basic loss per OP Unit...................................... $ 0.12
=======
Diluted loss per OP Unit.................................... $ 0.12
=======
</TABLE>
(BB) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred Units
the Class G Preferred Units, the Class H Preferred Units and the Class J
Preferred Units as if these stock offerings had occurred as of January 1,
1997.
(CC) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(1,867) plus the elimination of intercompany interest of
$2,718. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the nine months ended September 30, 1998
is presented below, which represents the effects of the Ambassador
Merger, the IFG Merger and the IFG Reorganization as if these
transactions had occurred as of January 1, 1997.
P-24
<PAGE> 856
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
IFG
HISTORICAL(i) REORGANIZATION(ii) PRO FORMA
------------- ------------------ ---------
<S> <C> <C> <C>
Rental and other property revenues................... $ 9,910 $ -- $ 9,910
Property operating expense........................... (5,139) -- (5,139)
Owned property management expense.................... (345) -- (345)
Depreciation expense................................. (1,026) -- (1,026)
-------- -------- --------
Income from property operations...................... 3,400 -- 3,400
-------- -------- --------
Management fees and other income..................... 57,665 56,211(iii) 113,876
Management and other expenses........................ (36,221) (35,192)(iii) (71,413)
Amortization......................................... (2,111) (22,641)(iv) (24,752)
-------- -------- --------
Income from service company.......................... 19,333 (1,622) 17,711
General and administrative expense................... -- (14,375)(iii) (14,375)
Interest expense..................................... (6,931) (2,861)(v) (9,792)
Interest income...................................... 617 -- 617
Minority interest.................................... (526) -- (526)
-------- -------- --------
Income (loss) from operations........................ 15,893 (18,858) (2,965)
Income tax provision................................. (7,037) 8,037(vi) 1,000
-------- -------- --------
Net income (loss).................................... $ 8,856 $(10,821) $ (1,965)
======== ======== ========
Income (loss) attributable to preferred
stockholders....................................... $ 8,413 $(10,280) $ (1,867)
======== ======== ========
Income (loss) attributable to common stockholders.... $ 443 $ (541) $ (98)
======== ======== ========
</TABLE>
- ---------------
(i) Represents the Unconsolidated Subsidiaries historical consolidated results
of operations.
(ii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iii)Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG.
(iv) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG, based on the Partnership's new basis resulting from the allocation
of the purchase price of IFG.
(v) Represents adjustment for interest expense related to a note payable to the
Partnership.
(vi) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-25
<PAGE> 857
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR IFG
AND PROBABLE NHP AMBASSADOR PURCHASE PRICE AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $ 32,697 $ 25,214 $ (8,681) $ 3,437 $ 1,879 $ 4,744
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 43,520 28,817 7,354 20,372 5,997 17,248
Gain on investments............ -- -- (12) -- -- --
(Gain) loss on disposition of
properties.................... (2,720) 2,720 (3,882) -- -- (80)
Minority interests............. (1,008) (458) (16) 851 (705) 12,871
Equity in earnings of
unconsolidated partnerships... 1,798 122 8,542 (405) -- (12,515)
Equity in earnings of
unconsolidated subsidiaries... (4,636) -- (5,790) -- -- --
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 269 (269) -- -- -- (5,366)
Changes in operating assets and
operating liabilities......... 3,112 -- 5,314 (3,523) -- (4,384)
--------- --------- --------- --------- -------- --------
Total adjustments........... 40,335 30,932 11,510 17,295 5,292 7,774
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) operating activities... 73,032 56,146 2,829 20,732 7,171 12,518
Net cash used in
discontinued operations.... -- -- (7,999) -- -- --
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) continuing
operations................. 73,032 56,146 (5,170) 20,732 7,171 12,518
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... 21,792 19,627(I) -- -- -- --
Purchase of real estate.......... (376,315) (220,995)(J) (4,114) (24,179) -- --
Additions to real estate,
investments and property held
for sale....................... (26,966) (5,217)(K) (522) (19,033) -- (4,154)
Proceeds from sale of property
held for sale.................. 303 -- -- -- -- --
Purchase of general and limited
partnership interests.......... (199,146) -- (1,208) -- -- (76,104)
Purchase of management
contracts...................... -- -- (11,686) -- -- (36,868)
Purchase of/additions to notes
receivable..................... (59,787) -- (4,236) -- -- (17,647)
Proceeds from repayments of notes
receivable..................... -- -- 214 1,000 -- 8,838
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... 45,791 -- 3,097 3,183 -- 42,615
Contribution to unconsolidated
subsidiaries................... (42,879) -- -- -- -- --
Proceeds from sale of
securities..................... -- -- 642 -- -- --
Purchase of investments held for
sale........................... -- -- (73) -- -- --
Purchase of NHP mortgage loans... (60,575) -- -- -- -- --
Purchase of Ambassador common
stock.......................... (19,881) -- -- -- -- --
--------- --------- --------- --------- -------- --------
Net cash used in investing
activities................. (717,663) (206,585) (17,886) (39,029) -- (83,320)
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. 225,436 122,568(L) 145,519 156,746 -- 111,001
Principal repayments on secured
notes payable.................. (12,512) -- (141,032) (141,676) -- (12,697)
Proceeds from secured short-term
financing...................... 19,050 -- -- -- -- --
Repayments on secured short-term
financing...................... -- (259,027)(M) (434) -- -- --
Principal repayments on unsecured
short-term notes payable....... (79) (50,800)(M) -- -- -- --
Proceeds (payoff) from unsecured
short-term financing........... (12,500) -- -- -- -- --
Principal repayments on secured
tax-exempt bond financing...... (1,487) -- -- -- -- --
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... (162,008) -- -- -- -- --
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... (6,387) -- (245) (8,095) -- (2,305)
Proceeds from issuance of common
and preferred stock, net....... 643,224 357,389(N) 6,286 28,946 -- 62,420
Proceeds from exercises of
employee stock options and
warrants....................... 871 -- -- 3,195 -- 7,487
Repurchase of common stock....... -- -- -- -- -- (3,283)
Principal repayments received on
notes due from Officers........ 25,957 -- -- 1,323 -- --
Investments made by minority
interests...................... -- -- -- -- -- 249
Receipt of contributions from
minority interests............. -- 37,345(O) -- -- -- --
Payments of distribution to
minority interests............. -- (2,713)(P) -- -- -- --
Payment of distributions......... (44,660) (19,396)(Q) (11,503)(T) (15,717) (12,173)(U) (2,695)
Payment of distributions to
limited partners............... -- (5,193)(R) -- -- (15)(U) --
Payment of preferred unit
distributions.................. (846) (39,859)(S) -- (2,279) -- --
Payment of distributions to
minority interests............. (5,510) -- -- (3,700) -- (12,578)
Net transactions with
Insignia/ESG................... -- -- -- -- -- (57,612)
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) financing activities... 668,549 140,314 (1,409) 18,743 (12,188) 89,987
--------- --------- --------- --------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. 23,918 (10,125) (24,465) 446 (5,017) 19,185
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. 13,170 -- 36,277 4,002 -- 64,447
--------- --------- --------- --------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $ 37,088 $ (10,125) $ 11,812 $ 4,448 $ (5,017) $ 83,632
========= ========= ========= ========= ======== ========
<CAPTION>
IFG IFG
MERGER REORGANIZATION PRO
ADJUSTMENTS(G) ADJUSTMENTS(H) FORMA
-------------- -------------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $(80,023) $ 6,882 $ (13,851)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 35,049 (30,188) 128,169
Gain on investments............ -- -- (12)
(Gain) loss on disposition of
properties.................... 80 -- (3,882)
Minority interests............. (1,552) -- 9,983
Equity in earnings of
unconsolidated partnerships... 29,995 -- 27,537
Equity in earnings of
unconsolidated subsidiaries... -- 4,578 (5,848)
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 5,366 --
Changes in operating assets and
operating liabilities......... -- -- 519
-------- -------- -----------
Total adjustments........... 68,938 (25,610) 156,466
-------- -------- -----------
Net cash provided by (used
in) operating activities... (11,085) (18,728) 142,615
Net cash used in
discontinued operations.... -- -- (7,999)
-------- -------- -----------
Net cash provided by (used
in) continuing
operations................. (11,085) (18,728) 134,616
-------- -------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... -- -- 41,419
Purchase of real estate.......... -- -- (625,603)
Additions to real estate,
investments and property held
for sale....................... -- -- (55,892)
Proceeds from sale of property
held for sale.................. -- -- 303
Purchase of general and limited
partnership interests.......... -- -- (276,458)
Purchase of management
contracts...................... -- -- (48,554)
Purchase of/additions to notes
receivable..................... -- -- (81,670)
Proceeds from repayments of notes
receivable..................... -- -- 10,052
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... -- -- 94,686
Contribution to unconsolidated
subsidiaries................... -- -- (42,879)
Proceeds from sale of
securities..................... -- -- 642
Purchase of investments held for
sale........................... -- -- (73)
Purchase of NHP mortgage loans... -- -- (60,575)
Purchase of Ambassador common
stock.......................... -- -- (19,881)
-------- -------- -----------
Net cash used in investing
activities................. -- -- (1,064,483)
-------- -------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. -- -- 761,270
Principal repayments on secured
notes payable.................. -- -- (307,917)
Proceeds from secured short-term
financing...................... -- -- 19,050
Repayments on secured short-term
financing...................... -- -- (259,461)
Principal repayments on unsecured
short-term notes payable....... -- -- (50,879)
Proceeds (payoff) from unsecured
short-term financing........... -- -- (12,500)
Principal repayments on secured
tax-exempt bond financing...... -- -- (1,487)
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... -- -- (162,008)
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... -- -- (17,032)
Proceeds from issuance of common
and preferred stock, net....... -- -- 1,098,265
Proceeds from exercises of
employee stock options and
warrants....................... -- -- 11,553
Repurchase of common stock....... -- -- (3,283)
Principal repayments received on
notes due from Officers........ -- -- 27,280
Investments made by minority
interests...................... -- -- 249
Receipt of contributions from
minority interests............. -- -- 37,345
Payments of distribution to
minority interests............. -- -- (2,713)
Payment of distributions......... (24,513)(V) -- (130,657)
Payment of distributions to
limited partners............... -- -- (5,208)
Payment of preferred unit
distributions.................. -- -- (42,984)
Payment of distributions to
minority interests............. -- -- (21,788)
Net transactions with
Insignia/ESG................... -- -- (57,612)
-------- -------- -----------
Net cash provided by (used
in) financing activities... (24,513) -- 879,483
-------- -------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. (35,598) (18,728) (50,384)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. -- -- 117,896
-------- -------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $(35,598) $(18,728) $ 67,512
======== ======== ===========
</TABLE>
P-26
<PAGE> 858
- ---------------
(A) Represents the Partnership's audited consolidated statement of cash flows
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1997 Acquisitions; (ii) the 1997 Stock Offerings;
(iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings; (v) the 1998
Acquisitions; (vi) the Probably Purchases; (vii) the 1998 Dispositions; and
(viii) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)................. $ (7,266) $ 4,350 $(2,222) $ (3,543) $ (8,681)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 4,058 9,134 5,125 (10,963) 7,354
Gain on investments............. (12) -- -- -- (12)
(Gain) loss on disposition of
properties.................... (3,882) -- -- -- (3,882)
Minority interests.............. (16) -- -- -- (16)
Equity in earnings of
unconsolidated partnerships... 3,905 -- 4,631 6 8,542
Equity in earnings of
unconsolidated subsidiaries... -- -- 4,636 (10,426) (5,790)
Changes in operating assets and
operating liabilities......... (1,036) 6,350 -- -- 5,314
-------- -------- ------- -------- ---------
Total adjustments........... 3,017 15,484 14,392 (21,383) 11,510
-------- -------- ------- -------- ---------
Net cash provided by (used
in) operating
activities................ (4,249) 19,834 12,170 (24,926) 2,829
Net cash used in
discontinued operations... -- (7,999) -- -- (7,999)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) continuing
operations................ (4,249) 11,835 12,170 (24,926) (5,170)
-------- -------- ------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate........... -- (4,114) -- -- (4,114)
Additions to real estate,
investments and property held
for sale........................ (522) -- -- -- (522)
Purchase of general and limited
partnership interests........... (1,208) -- -- -- (1,208)
Purchase of management
contracts....................... -- (11,686) -- -- (11,686)
Purchase of/additions to notes
receivable...................... -- (4,236) -- -- (4,236)
Proceeds from repayments of notes
receivable...................... 214 -- -- -- 214
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 3,097 -- -- -- 3,097
Proceeds from sale of
securities...................... 642 -- -- -- 642
Purchase of investments held for
sale............................ (73) -- -- -- (73)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) investing
activities................ 2,150 (20,036) -- -- (17,886)
-------- -------- ------- -------- ---------
</TABLE>
P-27
<PAGE> 859
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes
payable borrowings.............. $ 74,019 $ 71,500 $ -- $ -- $ 145,519
Principal repayments on secured
notes payable................... (71,256) (69,776) -- -- (141,032)
Repayments on secured short-term
financing....................... (434) -- -- -- (434)
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (245) -- -- (245)
Proceeds from issuances of common
and preferred stock, net........ -- 6,286 -- -- 6,286
Payment of distributions.......... (2,000) -- (9,503) -- (11,503)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) financing
activities................ 329 7,765 (9,503) -- (1,409)
-------- -------- ------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (1,770) (436) 2,667 (24,926) (24,465)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 25,795 10,482 -- -- 36,277
-------- -------- ------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 24,025 $ 10,046 $ 2,667 $(24,926) $ 11,812
======== ======== ======= ======== =========
</TABLE>
- ---------------
(i)Represents the adjustment to record cash flow activity from January 1,
1997 to the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. In addition,
represents adjustments to record additional deprecation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest expense
incurred in connection with borrowings incurred by the Partnership to
consummate the NHP Real Estate Acquisition.
(ii)
Represents the unaudited consolidated statement of cash flows of NHP
for the period from January 1, 1997 through December 8, 1997 (date of
the NHP Merger).
(iii)
Represents the following adjustments occurring as a result of the NHP
Merger: (i) the reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan; (ii) the incremental
depreciation of the purchase price adjustment related to real estate;
(iii) the incremental amortization of the purchase price adjustment
related to management contracts, furniture, fixtures and equipment, and
goodwill; (iv) the reversal of equity in earnings of NHP during the
pre-merger period when the Partnership held a 47.62% interest in NHP;
and (v) the amortization of the increased basis in investments in real
estate partnerships, based on the purchase price adjustment related to
real estate and an estimated average life of 20 years.
(iv)
Represents adjustments related to the NHP Reorganization, whereby the
Partnership contributed or sold to the Unconsolidated Subsidiaries and
the Unconsolidated Partnership; (i) certain assets and liabilities of
NHP, primarily related to the management operations and other
businesses owned by NHP and (ii) 12 real estate properties containing
2,905 apartment units. The adjustments represent (i) the related cash
flow activity primarily related to the management operations of such
real estate partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis resulting
from the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies.
(D) Represents the audited historical statement of cash flows of Ambassador for
the year ended December 31, 1997. Certain reclassifications have been made
to Ambassador's historical statement of cash flows to conform to the
Partnership's statement of cash flows presentation. The Ambassador
P-28
<PAGE> 860
historical statement of cash flows excludes an extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................... $ 10,233 $ 7,566 $(13,055) $ 4,744
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization...... 32,675 63 (15,490) 17,248
Gain on disposition of property.... -- (80) -- (80)
Minority interests................. 12,448 382 41 12,871
Equity in earnings of
unconsolidated partnerships...... (10,027) (2,639) 151 (12,515)
Extraordinary gain on early
extinguishment of debt........... (5,366) -- -- (5,366)
Changes in operating assets and
liabilities...................... -- (2,405) (1,979) (4,384)
--------- -------- -------- --------
Total adjustments............. 29,730 (4,679) (17,277) 7,774
--------- -------- -------- --------
Net cash provided by (used in) operating
activities............................ 39,963 2,887 (30,332) 12,518
--------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to real estate, investments
and property held for sale......... (7,695) 665 2,876 (4,154)
Purchase of general and limited
partnership interests.............. (93,118) -- 17,014 (76,104)
Purchase of management contracts...... (99,540) -- 62,672 (36,868)
Purchase of/additions to notes
receivable......................... (9,172) (14,251) 5,776 (17,647)
Proceeds from repayments of notes
receivable......................... 4,523 7,552 (3,237) 8,838
Distributions from investments in real
estate partnerships and
unconsolidated subsidiaries........ 44,823 -- (2,208) 42,615
--------- -------- -------- --------
Net cash provided by (used in)
investing activities........ (160,179) (6,034) 82,893 (83,320)
--------- -------- -------- --------
</TABLE>
P-29
<PAGE> 861
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable
borrowings......................... $ 118,141 $ -- $ (7,140) $111,001
Principal repayments on secured notes
payable............................ (15,682) -- 2,985 (12,697)
Payment of loan costs, net of proceeds
from interest rate hedge........... (2,305) -- -- (2,305)
Proceeds from issuance of common and
preferred stock, net............... 62,420 -- -- 62,420
Proceeds from exercises of employee
stock options and warrants......... 7,487 -- -- 7,487
Repurchase of common stock............ (3,283) -- -- (3,283)
Investment made by minority
interests.......................... 249 -- -- 249
Payment of distributions.............. -- (2,695) -- (2,695)
Payment of distributions to minority
interests.......................... (12,578) -- -- (12,578)
Net transactions with Insignia/ESG.... -- -- (57,612) (57,612)
--------- -------- -------- --------
Net cash provided by (used in)
financing activities........ 154,449 (2,695) (61,767) 89,987
--------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 34,233 (5,842) (9,206) 19,185
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD............................. 54,614 9,789 44 64,447
--------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................ $ 88,847 $ 3,947 $ (9,162) $ 83,632
========= ======== ======== ========
</TABLE>
- ---------------
(i)Represents the audited consolidated statement of cash flows of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report on
Form 10-K. Certain reclassifications have been made to IFG's historical
statement of cash flows to conform to the Partnership's statement of
cash flows presentation.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(I) Represents proceeds from the sale of the 1998 Dispositions, as if these
dispositions occurred on January 1, 1997.
P-30
<PAGE> 862
(J) Represents the use of cash to purchase the 1998 Acquisitions and the
Probable Purchases, as if these acquisitions occurred on January 1, 1997.
(K) Represents cash payments for capital improvements of $300 per unit on the
1997 Acquisitions, the 1998 Acquisitions and the Probable Purchases.
(L) Represents notes payable assumed in connection with the 1998 Acquisitions
and the Probable Purchases, assuming these transactions occurred January 1,
1997.
(M) Represents net principal repayments assuming the 1998 Acquisitions, the
1998 Dispositions, the Probable Purchases, the 1998 Stock Offerings and the
Preferred Partnership Unit Offering occurred January 1, 1997.
(N) Represents cash proceeds from the 1998 Stock Offerings, as if these
offerings occurred on January 1, 1997.
(O) Represents contributions from minority interests assuming the Preferred
Partnership Unit Offering occurred January 1, 1997.
(P) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(Q) Represents distributions paid on the 1997 Stock Offerings as if these
occurred on January 1, 1997.
(R) Represents distributions paid to limited partners on OP Units issued in
connection with the 1997 Acquisitions, the 1998 Acquisitions and the
Probable Purchases, as if the issuance of the OP Units occurred on January
1, 1997.
(S) Represents preferred unit distributions paid on the Class B Preferred
Stock, the Class C Preferred Stock and the 1998 Stock Offerings as if these
occurred on January 1, 1997.
(T) Represents historical distributions of $2,000 and pro forma distributions
on the shares issued in the NHP Merger as if these shares had been issued
on January 1, 1997.
(U) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(V) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-31
<PAGE> 863
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE AMBASSADOR PURCHASE PRICE IFG AS IFG MERGER
HISTORICAL(A) PURCHASE(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 56,269 $ 3,432 $ (2,382) $ 4,255 $ (36,338) $ 7,679
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 67,344 7,512 7,520 1,420 14,890 25,478
(Gain) loss on disposition of
properties..................... (2,783) 2,783 -- -- (6,576) 6,576
Minority interests.............. 1,052 (160) 252 (252) 14,159 (6,622)
Equity in earnings of
unconsolidated partnerships.... 5,078 -- 71 -- (13,492) 18,577
Equity in earnings of
unconsolidated subsidiaries.... (8,413) -- -- -- -- --
Non-cash compensation........... -- -- -- -- 796 --
Changes in operating assets and
operating liabilities.......... (67,722) -- 5,948 -- (7,775) --
--------- -------- -------- ------- --------- --------
Total adjustments............ (5,444) 10,135 13,791 1,168 2,002 44,009
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) operating activities... 50,825 13,567 11,409 5,423 (34,336) 51,688
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... (63,839) 63,839(H) -- -- 27,122 --
Additions to real estate.......... (47,878) (1,198)(I) (17,759) -- 9,309 --
Proceeds from sale of property and
investments held for sale....... 19,627 (19,627)(J) -- -- (35) --
Additions to property held for
sale............................ (1,986) -- -- -- -- --
Purchase of general and limited
partnership interests........... (27,016) -- -- -- 17,420 --
Purchase of/additions to notes
receivable...................... (72,445) -- -- -- (27,589) --
Proceeds from repayments/sale of
notes receivable................ 21,562 -- -- -- 21,185 --
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 513 -- 1,063 -- 22,053 --
Payment of trust based preferred
dividends....................... -- -- -- -- (7,415) --
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... 4,492 -- -- -- 13,423 --
Contribution to unconsolidated
subsidiaries.................... (13,032) -- -- -- -- --
Purchase of investments held for
sale............................ (4,935) -- -- -- -- --
Redemption of OP Units............ (516) -- -- -- -- --
Merger costs...................... -- -- -- -- (1,402) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) investing activities... (185,453) 43,014 (16,696) -- 74,071 --
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. 77,489 -- 37,162 -- 177,234 --
Principal repayments on secured
notes payable................... (56,262) -- -- -- 4,239 --
Principal advances on secured
tax-exempt bond financing....... -- -- 21,784 -- -- --
Principal repayments on secured
tax-exempt bond financing....... (1,436) -- -- -- -- --
Net borrowings/repayments on
secured short-term financing.... (30,693) 209,027(K) (43,002) -- -- --
Net borrowings (paydowns) on the
revolving credit facilities..... -- -- 2,513 -- -- --
Principal repayments on unsecured
short-term notes payable........ -- -- -- -- 2,644 --
Payment of loan costs, net of
proceeds from interest rate
hedge........................... (5,727) -- -- -- (83) --
Proceeds from issuance of common
stock and preferred stock,
net............................. 253,239 (253,239)(L) -- -- -- --
Repurchase of common stock........ (10,972) -- -- -- -- --
Proceeds from exercises of
employee stock options and
warrants........................ -- -- 9,761 -- 6,533 --
Principal repayments received on
notes due from Officers......... 8,084 -- -- -- -- --
Payments of distributions to
minority interests.............. -- (2,034)(M) -- -- -- --
Payment of distributions.......... (73,322) -- -- (3,701)(P) (8,606) (22,360)(Q)
Payment of distributions to
limited partners................ (10,251) (1,919)(N) -- (5)(P) (494) --
Payment of preferred unit
distributions................... (10,916) (16,094)(O) -- -- -- --
Proceeds from issuance of High
Performance Units............... 1,988 -- -- -- -- --
Net transactions with
Insignia/ESG.................... -- -- -- -- (241,003) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) financing activities... 141,221 (64,259) 28,218 (3,706) (59,536) (22,360)
--------- -------- -------- ------- --------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. 6,593 (7,678) 22,931 1,717 (19,801) 29,328
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 37,088 (10,125) 4,448 (5,017) 83,632 (35,598)
--------- -------- -------- ------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 43,681 $(17,803) $ 27,379 $(3,300) $ 63,831 $ (6,270)
========= ======== ======== ======= ========= ========
<CAPTION>
IFG
REORGANIZATION PRO
ADJUSTMENTS(G) FORMA
-------------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 8,578 $ 41,493
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... (22,641) 101,523
(Gain) loss on disposition of
properties..................... -- --
Minority interests.............. -- 8,429
Equity in earnings of
unconsolidated partnerships.... -- 10,234
Equity in earnings of
unconsolidated subsidiaries.... 7,562 (851)
Non-cash compensation........... -- 796
Changes in operating assets and
operating liabilities.......... -- (69,549)
-------- ---------
Total adjustments............ (15,079) 50,582
-------- ---------
Net cash provided by (used
in) operating activities... (6,501) 92,075
-------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... -- 27,122
Additions to real estate.......... -- (57,526)
Proceeds from sale of property and
investments held for sale....... -- (35)
Additions to property held for
sale............................ -- (1,986)
Purchase of general and limited
partnership interests........... -- (9,596)
Purchase of/additions to notes
receivable...................... -- (100,034)
Proceeds from repayments/sale of
notes receivable................ -- 42,747
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... -- 23,629
Payment of trust based preferred
dividends....................... -- (7,415)
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... -- 17,915
Contribution to unconsolidated
subsidiaries.................... -- (13,032)
Purchase of investments held for
sale............................ -- (4,935)
Redemption of OP Units............ -- (516)
Merger costs...................... -- (1,402)
-------- ---------
Net cash provided by (used
in) investing activities... -- (85,064)
-------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. -- 291,885
Principal repayments on secured
notes payable................... -- (52,023)
Principal advances on secured
tax-exempt bond financing....... -- 21,784
Principal repayments on secured
tax-exempt bond financing....... -- (1,436)
Net borrowings/repayments on
secured short-term financing.... -- 135,332
Net borrowings (paydowns) on the
revolving credit facilities..... -- 2,513
Principal repayments on unsecured
short-term notes payable........ -- 2,644
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (5,810)
Proceeds from issuance of common
stock and preferred stock,
net............................. -- --
Repurchase of common stock........ -- (10,972)
Proceeds from exercises of
employee stock options and
warrants........................ -- 16,294
Principal repayments received on
notes due from Officers......... -- 8,084
Payments of distributions to
minority interests.............. -- (2,034)
Payment of distributions.......... -- (107,989)
Payment of distributions to
limited partners................ -- (12,669)
Payment of preferred unit
distributions................... -- (27,010)
Proceeds from issuance of High
Performance Units............... -- 1,988
Net transactions with
Insignia/ESG.................... -- (241,003)
-------- ---------
Net cash provided by (used
in) financing activities... -- 19,578
-------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (6,501) 26,589
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... (18,728) 55,700
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $(25,229) $ 82,289
======== =========
</TABLE>
P-32
<PAGE> 864
- ---------------
(A) Represents the Partnership's unaudited consolidated statement of cash flows
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1998 Stock Offerings; (ii) the 1998 Acquisitions;
(iii) the Probably Purchases; (iv) the 1998 Dispositions and (v) the
Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of cash flows of Ambassador
for the four months ended April 20, 1998. Certain reclassifications have
been made to Ambassador's historical statement of cash flows to conform to
the Partnership's statement of cash flows presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ (36,017) $ 4,718 $ (5,039) $(36,338)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 27,685 48 (12,843) 14,890
Gain on disposition of property......................... (5,888) (688) -- (6,576)
Minority interests...................................... 14,159 -- -- 14,159
Equity in earnings of unconsolidated partnerships....... (12,169) -- (1,323) (13,492)
Non-cash compensation................................... 796 -- -- 796
Changes in operating assets and liabilities............. (18,853) (1,499) 12,577 (7,775)
--------- -------- --------- --------
Total adjustments................................... 5,730 (2,139) (1,589) 2,002
--------- -------- --------- --------
Net cash provided by (used in) operating
activities........................................ (30,287) 2,579 (6,628) (34,336)
--------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... (3,804) -- 30,926 27,122
Additions to real estate.................................. (2,252) (25) 11,586 9,309
Proceeds from sales of property and investments held for
sale.................................................... -- 161 (196) (35)
Purchase of general and limited partnership interests..... (44,270) -- 61,690 17,420
Purchases of / additions to notes receivable.............. (17,107) (15,407) 4,925 (27,589)
Proceeds from repayments/sale of notes receivable......... 151 23,672 (2,638) 21,185
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 21,360 -- 693 22,053
Payment of trust based preferred dividends................ (7,415) -- -- (7,415)
Cash received in connection with AMIT Merger.............. 13,423 -- -- 13,423
Merger costs.............................................. (1,402) -- -- (1,402)
--------- -------- --------- --------
Net cash provided by (used in) investing
activities........................................ (41,316) 8,401 106,986 74,071
--------- -------- --------- --------
</TABLE>
P-33
<PAGE> 865
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 186,000 -- (8,766) 177,234
Principal repayments on secured notes payable............. (1,874) -- 6,113 4,239
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (83) -- -- (83)
Proceeds from exercises of employee stock options and
warrants................................................ 6,533 -- -- 6,533
Payment of distributions.................................. (6,541) (2,065) -- (8,606)
Payment of distributions minority interests............... (494) -- -- (494)
Net transactions with Insignia/ESG........................ (118,424) -- (122,579) (241,003)
--------- -------- --------- --------
Net cash provided by (used in) financing
activities........................................ 67,761 (2,065) (125,232) (59,536)
--------- -------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (3,842) 8,915 (24,874) (19,801)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 88,847 3,947 (9,162) 83,632
--------- -------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 85,005 $ 12,862 $ (34,036) $ 63,831
========= ======== ========= ========
</TABLE>
- ---------------
(i)Represents the unaudited consolidated statement of cash flows of IFG
for the nine months ended September 30, 1998. Certain reclassifications
have been made to IFG's historical statement of cash flows to conform
to the Partnership's statement of cash flows presentation. In addition,
the cash and cash equivalents at the beginning of the period has been
adjusted.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock. In addition, the cash and cash equivalents at the beginning of
the period has been adjusted.
(F) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(H) Represents adjustment to remove the use of cash to purchase the 1998
Acquisitions, as if these acquisitions occurred on January 1, 1997;
therefore, the purchases are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(I) Represents cash payments for capital improvements of $300 per unit on the
1998 Acquisitions.
(J) Represents adjustment to remove the proceeds from the sale of the 1998
Dispositions, as if these dispositions occurred on January 1, 1997;
therefore, the proceeds are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(K) Represents adjustment to remove net principal repayments assuming the 1998
Acquisitions, the 1998 Dispositions and the 1998 Stock Offerings occurred
January 1, 1997; therefore, the repayments are included on the Pro Forma
Consolidated Statement of Cash Flows for the year ended December 31, 1997.
(L) Represents adjustment to remove cash proceeds from the 1998 Stock
Offerings, as if these offerings occurred on January 1, 1997; therefore,
the repayments are included on the Pro Forma Consolidated Statement of Cash
Flows for the year ended December 31, 1997.
P-34
<PAGE> 866
(M) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(N) Represents distributions paid to limited partners on OP Units issued in
connection with the 1998 Acquisitions and the Probable Purchases, as if the
issuance of the OP Units occurred on January 1, 1997.
(O) Represents preferred unit distributions paid on the 1998 Stock Offerings as
if these occurred on January 1, 1997.
(P) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(Q) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-35
<PAGE> 867
PRO FORMA FINANCIAL INFORMATION OF
AIMCO PROPERTIES, L.P.
(EXCHANGE OFFERS)
INTRODUCTION
AIMCO Properties L.P. (the "Partnership") intends to offer to purchase
limited partnership interests in syndicated real estate limited partnerships in
which AIMCO holds partnership interests. The Partnership, is subject to
applicable law, plans to offer to purchase certain of such limited partnership
interests in exchange for (i) equity securities of the Partnership; (ii) cash or
(iii) a combination of such equity securities and cash. Such offers are expected
to include terms that will allow limited partners to continue to hold their
limited partnership interests.
The following Pro Forma Consolidated Balance Sheet (Exchange Offers) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) all the
transactions discussed in the Pro Forma Financial Statements (Insignia Merger)
appearing elsewhere herein; and (ii) the acceptance of exchange offers by
limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) all
the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1998: (i)
all the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The Pro Forma Financial Information (Exchange Offers) is based, in part, on
the historical financial statements of the partnerships in which the Exchange
Offers are made. The Pro Forma Financial Information (Exchange Offers) is also
based, in part, on the Pro Forma Financial Information (Insignia Merger) of the
Partnership included elsewhere herein. Such pro forma information is based in
part upon: (i) the audited Consolidated Financial Statements of Insignia for the
year ended December 31, 1997; (ii) the audited Consolidated Financial Statements
of Angeles Mortgage Investment Trust ("AMIT") for the year ended December 31,
1997; (iii) the unaudited Consolidated Financial Statements of Insignia for the
nine months ended September 30, 1998; and (iv) the unaudited Consolidated
Financial Statements of AMIT for the period from January 1, 1998 to September
17, 1998. The Pro Forma Financial Information (Insignia Merger) is also based,
in part, upon: (i) the audited Consolidated Financial Statements of Ambassador
for the year ended December 31, 1997; (ii) the audited Consolidated Financial
Statements of the Partnership for the year ended December 31, 1997; (iii) the
unaudited Consolidated Financial Statements of Ambassador for the four months
ended April 30, 1998; (iv) the unaudited Consolidated Financial Statements of
the Partnership for the nine months ended September 30, 1998; and (v) the
historical financial statements of certain properties and companies acquired by
AIMCO filed in AIMCO's Current Reports on Form 8-K, dated April 16, 1997, May 5,
1997, June 3, 1997, September 19, 1997, October 15, 1997, December 1, 1997 and
November 2, 1998. The following Pro Forma Financial Information (Exchange
Offers) should be read in conjunction with such financial statements and notes
thereto.
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared under the assumption that after the exchange offers are accepted, AIMCO
will own varying ownership percentages of each partnership, and that the limited
partners will choose to elect to receive 35% of the consideration in the form of
equity securities of AIMCO Properties, L.P. and 65% of the consideration in the
form of cash. The
P-36
<PAGE> 868
interest to be acquired in each of the partnerships, the estimated purchase
price for each partnership, including cash, common units, or preferred units is
summarized below:
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Angeles Income Properties, Ltd. II.................... 26.70 $ 4,946 $ 3,215 $1,731
Angeles Income Properties, Ltd. III................... 30.63 2,156 1,401 755
Angeles Income Properties, Ltd. IV.................... 18.64 1,154 750 404
Angeles Income Properties, Ltd. 6..................... 37.29 4,523 2,940 1,583
Angeles Opportunity Properties, Ltd................... 37.94 1,729 1,124 605
Angeles Partners VII.................................. 24.86 610 397 213
Angeles Partners VIII................................. 24.80 0 0 0
Angeles Partners IX................................... 18.92 1,171 761 410
Angeles Partners X.................................... 22.97 709 461 248
Angeles Partners XI................................... 21.83 205 133 72
Angeles Partners XII.................................. 11.89 2,877 1,870 1,007
Angeles Partners XIV.................................. 24.93 0 0 0
Baywood Partners, Ltd................................. 25.00 347 226 121
Brampton Associates Partnership....................... 25.00 382 248 134
Buccaneer Trace Limited Partnership................... 25.00 2 1 1
Burgundy Court Associates, L.P........................ 25.00 1,074 698 376
Calmark/Fort Collins, Ltd............................. 25.00 192 125 67
Calmark Heritage Park II Ltd.......................... 25.00 47 31 16
Casa Del Mar Associates Limited Partnership........... 21.16 503 327 176
Catawba Club Associates, L.P.......................... 25.00 85 55 30
Cedar Tree Investors Limited Partnership.............. 25.00 1,037 674 363
Century Properties Fund XVI........................... 12.52 831 540 291
Century Properties Fund XVIII......................... 13.08 474 308 166
Century Properties Fund XIX........................... 15.30 1,765 1,147 618
Century Properties Growth Fund XXII................... 21.43 4,977 3,235 1,742
Chapel Hill, Limited.................................. 21.15 569 370 199
Chestnut Hill Associates Limited Partnership.......... 26.75 1,582 1,028 554
Coastal Commons Limited Partnership................... 25.00 566 368 198
Consolidated Capital Institutional Properties/2 &
Consolidated Capital Equity Properties/2............ 18.98 7,320 4,758 2,562
Consolidated Capital Institutional Properties/3....... 16.37 6,770 4,401 2,369
Consolidated Capital Properties III................... 13.02 1,134 737 397
Consolidated Capital Properties IV.................... 18.04 9,407 6,112 3,295
Consolidated Capital Properties V..................... 16.69 560 364 196
Consolidated Capital Properties VI.................... 25.82 556 361 195
DFW Apartment Investors Limited Partnership........... 35.65 2,719 1,767 952
DFW Residential Investors Limited Partnership......... 37.60 1,092 710 382
Davidson Diversified Real Estate I, L.P............... 34.78 627 408 219
Davidson Diversified Real Estate II, L.P.............. 35.11 1,318 857 461
Davidson Diversified Real Estate III, L.P............. 21.76 0 0 0
Davidson Growth Plus, L.P............................. 23.91 2,304 1,498 806
Davidson Income Real Estate, L.P...................... 30.81 2,691 1,749 942
Drexel Burnham Lambert Real Estate Associates II...... 19.58 994 646 348
Four Quarters Habitat Apartment Associates, Ltd....... 25.00 174 113 61
Fox Strategic Housing Income Partners................. 33.18 2,414 1,569 845
Georgetown of Columbus Associates, L.P................ 25.00 227 148 79
HCW Pension Real Estate Fund Limited Partnership...... 32.64 2,368 1,539 829
Investors First-Staged Equity......................... 49.00 306 199 107
Johnstown/Consolidated Income Partners................ 25.66 1,871 1,216 655
La Colina Partners, Ltd............................... 25.00 583 379 204
Lake Eden Associates, L.P............................. 25.00 632 411 221
Landmark Associates, L.P.............................. 25.00 48 31 17
</TABLE>
P-37
<PAGE> 869
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Minneapolis Associates II Limited Partnership......... 25.00 $ 2 $ 1 $ 1
Multi-Benefit Realty Fund "87-1-Class A & Class B..... 21.89 1,657 1,077 580
National Property Investors 8......................... 11.13 988 642 346
Northbrook Apartments, Ltd............................ 25.00 209 136 73
Olde Mill Investors Limited Partnership............... 8.75 170 111 59
Orchard Park Apartments Limited Partnership........... 25.00 1 1 0
Park Town Place Associates Limited Partnership........ 24.70 298 194 104
Quail Run Associates, L.P............................. 25.00 487 317 170
Ravensworth Associates Limited Partnership............ 25.00 1 1 0
Rivercreek Apartments Limited Partnership............. 25.00 180 117 63
Rivercrest Apartments, Limited........................ 25.00 1,687 1,097 590
Riverside Park Associates L.P......................... 13.69 590 384 206
Salem Arms of Augusta Limited Partnership............. 25.00 278 181 97
Shaker Square, L.P.................................... 23.75 631 410 221
Shannon Mannor Apartments, Limited Partnership........ 25.00 1,170 761 409
Sharon Woods, L.P..................................... 22.75 499 324 175
Shelter Properties III................................ 15.20 1,960 1,274 686
Shelter Properties IV................................. 50.52 12,764 8,295 4,469
Shelter Properties VI................................. 13.78 1,919 1,247 672
Shelter Properties VII Limited Partnership............ 26.65 1,975 1,284 691
Snowden Village Associates, L.P....................... 25.00 443 288 155
Springhill Lake Investors Limited Partnership......... 11.84 2,908 1,890 1,018
Sturbrook Investors, Ltd.............................. 25.00 377 245 132
Sycamore Creek Associates, L.P........................ 25.00 1 1 0
Texas Residential Investors Limited Partnership....... 18.45 1,147 746 401
Thurber Manor Associates, Limited Partnership......... 25.00 218 142 76
U.S. Realty Partners Limited Partnership.............. 25.00 1,441 937 504
United Investors Growth Properties.................... 39.01 165 107 58
United Investors Growth Properties II................. 25.00 351 228 123
United Investors Income Properties.................... 23.44 1,977 1,285 692
Villa Nova, Limited Partnership....................... 25.00 228 148 80
Walker Springs, Limited............................... 23.99 95 62 33
Wingfield Investors Limited Partnership............... 25.00 179 116 63
Winrock-Houston Limited Partnership................... 13.60 1,041 677 364
Winthrop Apartment Investors Limited Partnership...... 31.60 1,318 857 461
Winthrop Growth Investors 1 Limited Partnership....... 27.94 1,233 801 432
Winthrop Texas Investors Limited Partnership.......... 5.27 158 103 55
Woodmere Associates, L.P.............................. 25.00 280 182 98
Yorktown Towers Associates............................ 25.00 809 526 283
-------- ------- ------
Total (See adjustment C to the Pro Forma Consolidated
Balance Sheet)...................................... $122,463 $79,601 42,862
======== ======= ======
</TABLE>
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
Exchange Offers, the 1997 Acquisitions, the 1998 Acquisitions and the Probable
Purchases are adjusted to estimated fair market value, based on preliminary
estimates, which are subject to change as additional information is obtained.
The allocations of purchase costs are subject to final determination based upon
estimates and other evaluations of fair market value. Therefore, the allocations
reflected in the following unaudited Pro Forma Financial Information (Exchange
Offers) may differ from the amounts ultimately determined.
P-38
<PAGE> 870
The following unaudited Pro Forma Financial Information (Exchange Offers)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions, results of
operations or cash flows. In the opinion of the Partnership's management, all
material adjustments necessary to reflect the effects of these transactions have
been made.
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (EXCHANGE OFFERS)
AS OF SEPTEMBER 30, 1998
ASSETS
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C>
Real estate....................................... $2,625,822 $ 12,764(C)
26,954(D)
13,655(E) $2,679,195
Property held for sale............................ 42,212 -- 42,212
Investments in and notes receivable from
unconsolidated subsidiaries..................... 186,277 -- 186,277
Investments in and notes receivable from
unconsolidated partnerships..................... 924,309 109,699(C)
(13,655)(E)
(8,161)(F)
816(G) 1,013,008
Mortgage notes receivable......................... 20,916 -- 20,916
Cash and cash equivalents......................... 104,955 2,620(D) 107,575
Restricted cash................................... 84,526 1,807(D) 86,333
Accounts receivable............................... 27,900 1,081(D) 28,981
Deferred financing costs.......................... 21,835 -- 21,835
Goodwill.......................................... 251,024 -- 251,024
Property management contracts..................... 38,371 -- 38,371
Other assets...................................... 82,670 422(D) 83,092
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
LIABILITIES AND PARTNERS' CAPITAL
Secured notes payable............................. $ 926,246 $ 23,642(D) $ 949,888
Secured tax-exempt bond financing................. 399,925 -- 399,925
Secured short-term financing...................... 32,691 -- 32,691
Unsecured short-term financing.................... 300,000 79,601(C) 379,601
Accounts payable, accrued and other liabilities... 248,253 826(D) 249,079
Security deposits and deferred income............. 13,171 255(D) 13,426
---------- -------- ----------
1,920,286 104,324 2,024,610
Minority interests................................ 79,431 816(G) 80,247
Company obligated mandatorily redeemable
convertible securities of a subsidiary trust.... 149,500 -- 149,500
Redeemable common partnership units............... 277,581 8,161(D)
(8,161)(F)
30,616(C) 308,197
Redeemable preferred partnership units............ -- 12,246(C) 12,246
Partner's capital
General and Special Limited Partner............. 1,496,457 -- 1,496,457
Preferred Units................................. 487,562 -- 487,562
---------- -------- ----------
1,984,019 -- 1,984,019
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
P-39
<PAGE> 871
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical balance sheet data as of September 30, 1998 (unaudited) related
to the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Real estate................................................. $1,082,652
Cash........................................................ 151,024
Total assets................................................ 1,493,409
Mortgages payable........................................... 1,585,196
Partners' capital (deficit)................................. (171,740)
</TABLE>
(C) Represents the purchase price paid by the Partnership to the limited
partners in order to obtain additional ownership by AIMCO in 91 real estate
partnerships. For the purposes of the pro-forma presentation, it is
assumed: (i) 65% of the purchase price is funded with cash by drawing down
on the Partnership's unsecured short term credit facility; (ii) 25% of the
purchase price is funded by the issuance of 749,362 OP Units at $40 per OP
Unit; and (iii) 10% of the purchase price is funded by the issuance of 8%
Preferred OP Units.
(D) Represents historical balance sheet data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(E) Represent the adjustment to real estate recorded in the IFG Merger related
to the one real estate partnership that will be consolidated as a result of
the Partnership's purchase of additional partnership interests.
(F) Represents the elimination of the partners' capital in the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(G) Represents minority interest of the one real estate partnership that will
be consolidated as a result of the Partnership's purchase of additional
partnership interests.
P-40
<PAGE> 872
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations.............. $ 431,256 $ 11,270(C) $ 442,526
Property operating expenses....................... (182,830) (6,612)(C) (189,442)
Owned property management expense................. (11,831) -- (11,831)
Depreciation...................................... (96,264) (2,589)(C) (98,853)
--------- -------- ---------
Income from property operations................... 140,331 2,069 142,400
--------- -------- ---------
Management fees and other income.................. 41,676 -- 41,676
Management and other expenses..................... (23,683) -- (23,683)
Corporate overhead allocation..................... (588) -- (588)
Amortization...................................... (26,480) -- (26,480)
--------- -------- ---------
Income from service company business.............. (9,075) -- (9,075)
Minority interest in service company business..... (10) -- (10)
--------- -------- ---------
Partnership's share of income from service company
business........................................ (9,085) -- (9,085)
--------- -------- ---------
General and administrative expenses............... (21,371) -- (21,371)
Interest expense.................................. (113,788) (5,691)(D)
(2,220)(C) (121,699)(H)
Interest income................................... 21,734 21,734
Minority interests................................ (9,983) (51)(E) (10,034)
Equity in losses of unconsolidated partnerships... (27,537) (16,864)(F)
483(G) (43,918)(I)
Equity in earnings of Unconsolidated
Subsidiaries.................................... 5,848 -- 5,848
--------- -------- ---------
Net income (loss)................................. (13,851) (22,274) (36,125)(H)
Income attributable to Preferred Unitholders...... 42,174 980 43,154(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders...... (56,025) $(23,254) $ (79,279)(H)
========= ======== =========
Basic earnings (loss) per OP Unit................. (.83) $ (1.16)(H)
========= =========
Diluted earnings (loss) per OP Unit............... $ (.83) $ (1.16)(H)
========= =========
Weighted average OP Units outstanding............. 67,522 68,287
========= =========
Weighted average OP Units and equivalents
outstanding..................................... 68,366 69,131
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $456,968
Operating expense........................................... 249,097
Depreciation................................................ 87,344
Interest.................................................... 138,778
Net income.................................................. 15,005
</TABLE>
P-41
<PAGE> 873
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $10,740 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $6,124 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net loss,
preferred unit distributions, and net loss per OP Unit in the event that
the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- --------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense......... $(121,699) $(124,763) $(116,008) $(116,008)
Net loss................. (36,125) (39,189 (30,434) (30,434)
Preferred unit
distributions.......... 43,154 42,174 42,174 51,971
Net loss attributable to
OP Unitholders......... (79,279) (81,363) (72,608) (82,405)
Net loss per OP Unit..... (1.16) (1.20) (1.03) (1.22)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................. $ 1,137 $ 1,245 $ 938 $ 938
Net loss................... (37,262) (40,434) (31,372) (31,372)
Net loss attributable to OP
Unitholders.............. (80,416) (82,608) (73,546) (83,343)
Net loss per OP Unit....... (1.18) (1.22) (1.04) (1.23)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, the Partnership will own 49%
of certain 88 Partnerships, 25% of two Partnerships, and 100% of one
Partnership. The amount included in the pro forma financial statements
assume an acceptance rate of 100%. The following table shows the effect on
equity in earnings of unconsolidated partnerships, net loss, net loss
attributable to OP Unitholders, and net loss per OP Unit in the event that
the Partnership will have an acceptance rate of 50% of the interests
tendered and will own varying percentages of each partnership:
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(36,510)
Net loss.................................................... (26,084)
Net loss attributable to OP Unitholders..................... (68,784)
Net loss per OP Unit........................................ (1.01)
</TABLE>
P-42
<PAGE> 874
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-43
<PAGE> 875
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations............... $ 337,307 $ 8,654(C) $ 345,961
Property operating expenses........................ (131,851) (4,389)(C) (136,240)
Owned property management expense.................. (8,933) -- (8,933)
Depreciation....................................... (78,479) (1,941)(C) (80,420)
--------- -------- ---------
Income from property operations.................... 118,044 2,324 120,368
--------- -------- ---------
Management fees and other income................... 28,912 -- 28,912
Management and other expenses...................... (14,386) -- (14,386)
Corporate overhead allocation...................... (196) -- (196)
Amortization....................................... (15,243) -- (15,243)
--------- -------- ---------
Income from service company business............... (913) -- (913)
Minority interest in service company business...... -- -- --
--------- -------- ---------
Partnership's share of income from service company
business......................................... (913) -- (913)
--------- -------- ---------
General and administrative expenses................ (8,632) -- (8,632)
Interest expense................................... (85,010) (4,250)(D)
(1,630)(C) (90,890)(H)
Interest income.................................... 40,887 40,887
Minority interests................................. (8,429) (119)(E) (8,548)
Equity in losses of unconsolidated partnerships.... (10,234) (13,156)(F)
41(G) (23,349)(I)
Equity in earnings of Unconsolidated
Subsidiaries..................................... 851 -- 851
Amortization of goodwill........................... (5,071) -- (5,071)
--------- -------- ---------
Net income (loss).................................. 41,493 (16,790) 24,703(H)
Income attributable to Preferred Unitholders....... 32,414 735 33,149(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders....... $ 9,079 $(17,525) $ (8,446)(H)
========= ======== =========
Basic earnings (loss) per OP Unit.................. $ .13 $ (.12)(H)
========= =========
Diluted earnings (loss) per OP Unit................ $ .13 $ (.12)(H)
========= =========
Weighted average OP Units outstanding.............. 68,554 69,319
========= =========
Weighted average OP Units and equivalents
outstanding...................................... 69,218 69,983
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data (unaudited) for the nine months ended September
30, 1998 related to the 91 real estate partnerships is as follows (dollars
in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $338,937
Operating expense........................................... 182,529
Depreciation................................................ 64,127
Interest.................................................... 103,756
Net income.................................................. (9,329)
</TABLE>
P-44
<PAGE> 876
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $8,552 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $4,604 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net
income, preferred unit distributions, and net loss per OP Unit in the event
that the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense........... $(90,890) $(93,184) $(86,640) $(86,640)
Net income................. 24,703 22,409 28,953 28,953
Preferred unit
distributions............ 33,149 32,414 32,414 39,762
Net loss attributable to OP
Unitholders.............. (8,446) (10,005) (3,461) (10,809)
Net loss per OP Unit....... (.12) (.15) (.05) (.16)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- ------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................... $ 851 $ 931 $ 702 $ 702
Net income................... 24,703 21,478 28,251 28,251
Net loss attributable to OP
Unitholders................ (9,296) (10,936) (4,163) (11,511)
Net loss per OP Unit......... (.13) (.16) (.06) (.17)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, AIMCO will own 49% of certain
88 Partnerships, 25% of two Partnerships, and 100% of one Partnership. The
following table shows the effect on equity in earnings of unconsolidated
partnerships, net income, net income (loss) attributable to OP Unitholders,
and net loss per OP Unit in the event the Partnership will own varying
percentages of each partnership.
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(17,797)
Net income.................................................. 32,216
Net income (loss) attributable to OP Unitholders............ (593)
Net income (loss) per OP Unit............................... (.01)
</TABLE>
P-45
<PAGE> 877
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-46
<PAGE> 878
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ (13,851) $(22,274)(C) $ (36,125)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 128,169 2,589(D) 130,758
Gain on investments..................................... (12) -- (12)
(Gain) loss on disposition of properties................ (3,882) -- (3,882)
Minority interests...................................... 9,983 51 10,034
Equity in earnings of unconsolidated partnerships....... 27,537 16,864(E)
(483)(F) 43,918
Equity in earnings of unconsolidated subsidiaries....... (5,848) -- (5,848)
Extraordinary (gain) loss on early extinguishment of
debt.................................................. --
Changes in operating assets and operating liabilities... 519 (660)(G) (141)
---------- -------- ----------
Total adjustments................................... 156,466 18,361 174,827
---------- -------- ----------
Net cash provided by (used in) operating
activities........................................ 142,615 (3,913) 138,702
Net cash used in discontinued operations............ (7,999) -- (7,999)
---------- -------- ----------
Net cash provided by (used in) continuing
operations........................................ 134,616 (3,913) 130,703
---------- -------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate......................... 41,419 -- 41,419
Purchase of real estate................................... (625,603) -- (625,603)
Additions to real estate, investments and property held
for sale................................................ (55,892) (1,024)(G) (56,916)
Proceeds from sale of property held for sale.............. 303 -- 303
Purchase of general and limited partnership interests..... (276,458) (79,601)(H) (356,059)
Purchase of management contracts.......................... (48,554) -- (48,554)
Purchase of/additions to notes receivable................. (81,670) -- (81,670)
Proceeds from repayments of notes receivable.............. 10,052 -- 10,052
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 94,686 10,070(I) 104,756
Contribution to unconsolidated subsidiaries............... (42,879) -- (42,879)
Proceeds from sale of securities.......................... 642 -- 642
Purchase of investments held for sale..................... (73) -- (73)
Purchase of NHP........................................... (60,575) -- (60,575)
Purchase of Ambassador common stock....................... (19,881) -- (19,881)
---------- -------- ----------
Net cash used in investing activities............... (1,064,483) (70,555) (1,135,038)
---------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 761,270 -- 761,270
Principal repayments on secured notes payable............. (307,917) (713)(G) (308,630)
Proceeds from secured short-term financing................ 19,050 79,601(H) 98,651
Repayments on secured short-term financing................ (259,461) -- (259,461)
Principal repayments on unsecured short-term notes
payable................................................. (50,879) -- (50,879)
Proceeds (payoff) from unsecured short-term financing..... (12,500) -- (12,500)
Principal repayments on secured tax-exempt bond
financing............................................... (1,487) -- (1,487)
Net borrowings (paydowns) on the Company's revolving
credit facilities....................................... (162,008) -- (162,008)
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (17,032) -- (17,032)
Proceeds from issuance of common and preferred stock,
net..................................................... 1,098,265 -- 1,098,265
Proceeds from exercises of employee stock options and
warrants................................................ 11,553 -- 11,553
Repurchase of common stock................................ (3,283) -- (3,283)
Principal repayments received on notes due from
Officers................................................ 27,280 -- 27,280
Investments made by minority interests.................... 249 -- 249
Receipt of contributions from minority interests.......... 37,345 -- 37,345
Payments of distributions to minority interests........... (2,713) -- (2,713)
Payment of distributions.................................. (130,657) -- (130,657)
Payment of distributions to limited partners.............. (5,208) (1,415)(J) (6,623)
Payment of preferred unit distributions................... (42,984) (979)(K) (43,963)
Payment of distributions to minority interests............ (21,788) -- (21,788)
Net transactions with Insignia/ESG........................ (57,612) -- (57,612)
---------- -------- ----------
Net cash provided by financing activities........... 879,483 76,494 955,977
---------- -------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (50,384) 2,026 (48,358)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 117,896 2,291 120,187
---------- -------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 67,512 $ 4,317 $ 71,829
========== ======== ==========
</TABLE>
P-47
<PAGE> 879
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 65,372
Cash used in investing activities......................... (11,713)
Cash used in financing activities......................... (74,617)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the cash portion of the purchase price (and additional
borrowings by the Partnership) related to the acquisition by the
Partnership of additional limited partnership interests in 91 real estate
limited partnerships.
(I) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(J) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.85 per Common OP Unit.
(K) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-48
<PAGE> 880
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ 41,493 $(16,790)(C) $ 24,703
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 101,523 1,941(D) 103,464
(Gain) loss on disposition of properties................ -- -- --
Minority interests...................................... 8,429 119 8,548
Equity in earnings of unconsolidated partnerships....... 10,234 13,156(E)
(41)(F) 23,349
Equity in earnings of unconsolidated subsidiaries....... (851) -- (851)
Non-cash compensation................................... 796 -- 796
Changes in operating assets and operating liabilities... (69,549) (21)(G) (69,570)
--------- -------- ---------
Total adjustments................................... 50,582 15,154 65,736
--------- -------- ---------
Net cash provided by operating activities........... 92,075 (1,636) 90,439
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... 27,122 -- 27,122
Additions to real estate.................................. (57,526) (668)(G) (58,194)
Proceeds from sale of property and investments held for
sale.................................................... (35) -- (35)
Additions to property held for sale....................... (1,986) -- (1,986)
Purchase of general and limited partnership interests..... (9,596) -- (9,596)
Purchase of/additions to notes receivable................. (100,034) -- (100,034)
Proceeds from repayments/sale of notes receivable......... 42,747 -- 42,747
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 23,629 5,809(H) 29,438
Payment of trust based preferred dividends................ (7,415) -- (7,415)
Cash received in connection with Ambassador Merger and
AMIT Merger............................................. 17,915 -- 17,915
Contribution to unconsolidated subsidiaries............... (13,032) -- (13,032)
Purchase of investments held for sale..................... (4,935) -- (4,935)
Redemption of OP Units.................................... (516) -- (516)
Merger costs.............................................. (1,402) -- (1,402)
--------- -------- ---------
Net cash used in investing activities............... (85,064) 5,141 (79,923)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 291,885 -- 291,885
Principal repayments on secured notes payable............. (52,023) -- (52,023)
Principal advances on secured tax-exempt bond financing... 21,784 -- 21,784
Principal repayments on secured tax-exempt bond
financing............................................... (1,436) -- (1,436)
Net borrowings/ repayments on secured short-term
financing............................................... 135,332 -- 135,332
Net borrowings (paydowns) on the revolving credit
facilities.............................................. 2,513 (812)(G) 1,701
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (5,810) -- (5,810)
Proceeds from issuance of common stock and preferred
stock, net.............................................. -- -- --
Repurchase of common stock................................ (10,972) -- (10,972)
Proceeds from exercises of employee stock options and
warrants................................................ 16,294 -- 16,294
Principal repayments received on notes due from
Officers................................................ 8,084 -- 8,084
Receipt of contributions from minority interests.......... -- -- --
Payments of distributions to minority interests........... (2,034) (2,034)
Payment of distributions.................................. (107,989) -- (107,989)
Payment of distributions to limited partners.............. (12,669) (1,291)(I) (13,960)
Payment of preferred unit distributions................... (27,010) (735)(J) (27,745)
Proceeds from issuance of High Performance Units.......... 1,988 -- 1,988
Net transactions with Insignia/ESG........................ (241,003) -- (241,003)
--------- -------- ---------
Net cash provided by financing activities........... 19,578 (2,838) 16,740
--------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 26,589 667 27,256
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 55,700 4,316 60,016
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 82,289 $ 4,983 $ 87,272
========= ======== =========
</TABLE>
P-49
<PAGE> 881
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the nine months ended September 30, 1998
related to the 91 real estate partnerships is as follows (dollars in
thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 76,113
Cash used in investing activities......................... (22,616)
Cash used in financing activities......................... (42,273)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 30 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(I) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.6875 per Common OP Unit.
(J) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-50
<PAGE> 882
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: Catawba Club Associates, L.P.
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
Catawba Club Associates, L.P. (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 limited partnership interests in the Partnership (the "Units")
will be acquired by the Purchaser in exchange for an offer price per Unit of
$11,155 in cash, or 296.50 Common OP Units of the Purchaser, or 446.25 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 financial statements for the years ended
December 31, 1996 and 1997, and the quarterly report for the period ending
September 30, 1998, which the Partnership's management has indicated to be
the most current available financial statements;
3. Reviewed descriptive information concerning the real property owned
by the Partnership (the "Property"), including location, number of units
and unit mix, age, amenities and land acreage;
4. Reviewed summary historical operating statements for the Property,
for the years ended December 31, 1996 and 1997, and the nine months ending
September 30, 1998;
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<PAGE> 883
5. Reviewed the 1998 operating budget for the Property prepared by the
Partnership's management. Such budgets are summarized in the Prospectus
Supplement under the section "Stanger Analysis -- Summary of Materials
Considered";
6. Reviewed the estimate of liquidation value and going concern value
provided by the general partner to Stanger. Such estimates are described in
the Prospectus Supplement under the section "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration." In
addition, we reviewed the 1998 operating budgets for each property provided
by the Partnership;
7. Discussed with management market conditions for the Property;
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 Property and the Partnership; the physical condition
of the Property including any deferred maintenance; and other factors
influencing value of the Property and the Partnership;
8. Performed a site inspection of the Property;
9. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Property, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Property;
10. Reviewed information provided by the Company relating to debt
encumbering the Property; and
11. 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 Property, the allocation of net
Partnership values between the General Partner and Limited Partners, and the
transaction costs and fees associated with a sale of the Property. 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 Property 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 Property 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 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
A-2
<PAGE> 884
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
March , 1999
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<PAGE> 885
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 directors
of AIMCO are set forth below. The two directors of AIMCO-GP are Terry Considine
and Peter Kompaniez. The two directors of the general partner of your
partnership are Peter K. Kompaniez and Patrick J. Foye. The two executive
officers of the general partner of your partnership are Patrick J. Foye,
Executive Vice President, and Timothy R. Garrick, Vice President -- Accounting.
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
Paul J. McAuliffe............................ Executive Vice President -- Capital Markets
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
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
</TABLE>
B-1
<PAGE> 886
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
B.A. from Harvard College, a J.D. from Harvard Law School
and is admitted as a member of the Massachusetts Bar.
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.
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
</TABLE>
B-2
<PAGE> 887
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
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.
Paul J. McAuliffe.................... Mr. McAuliffe was appointed Executive Vice
President -- Capital Markets in February 1999. Prior to
joining AIMCO, Mr. McAuliffe was Senior Managing Director of
Secured Capital Corp and prior to that time had been a
Managing Director of Smith Barney, Inc. from 1993 to 1996,
where he was a key member of the underwriting team that led
AIMCO's initial public offering in 1994. Mr. McAuliffe was
also a Managing Director and head of the real estate group
at CS First Boston from 1990 to 1993 and he was a Principal
in the real estate group at Morgan Stanley & Co., Inc. from
1983 to 1990. Mr. McAuliffe received a B.A. from Columbia
College and an MBA from University of Virginia, Darden
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
</TABLE>
B-3
<PAGE> 888
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
and the Apartment Association of Metro Denver. Mr. Ira
received a B.S. from Metropolitan State College in 1975.
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.
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,
</TABLE>
B-4
<PAGE> 889
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Mr. Martin is a director of Dresser, which is engaged in the
petroleum services, hydrocarbon and engineering industries.
Timothy R. Garrick................... Mr. Garrick has been Vice President -- Accounting of the
general partner and AIMCO since October 1, 1998. Prior to
that date, Mr. Garrick served as Vice
President -- Accounting Services of Insignia Financial Group
from June 1997 until October 1998. From 1992 until June of
1997, Mr. Garrick served as Vice President of Partnership
Accounting for Insignia Financial Group. From 1987 to 1990,
Mr. Garrick served as Investment Advisor for U.S. Shelter
Corporation. From 1984 to 1987, Mr. Garrick served as
Partnership Investment Analyst for U.S. Shelter Corporation.
From 1979 to 1984, Mr. Garrick worked on the audit staff of
Ernst & Whinney. Mr. Garrick received his B.S. Degree from
the University of South Carolina in 1979 and is a certified
public accountant.
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> 890
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
By Fax:
(201) 896-0910
<PAGE> 891
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 26, 1999)
AIMCO Properties, L.P.
is offering to acquire units of limited partnership interest of
Cedar Tree Investors Limited Partnership
in exchange for your choice of:
2,211.75 of our 8.0% Class Two Partnership Preferred Units;
1,469.25 of our Partnership Common Units; or
$55,289 in cash.
Generally, you will not recognize any immediate taxable gain or loss if you
exchange your units solely for our securities. However, you will recognize
taxable gain or loss if you exchange your units for cash.
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 the offer
consideration from a financial point of view.
Our offer consideration will be reduced for any distributions subsequently
made by your partnership prior to the expiration of our offer.
We will only accept a maximum of 25% 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.
You will not pay any fees or commissions if you tender your units.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline. You may withdraw any tendered units at any time
before we have accepted them for payment.
SEE "RISK FACTORS" BEGINNING ON PAGE S-23 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF RISK FACTORS THAT
YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration of $55,289 per unit without any
arms-length negotiations. Accordingly, our offer consideration may not
reflect the fair market value of your units. Stanger, in rendering its
fairness opinion, determined that the net asset value of your partnership
units was $55,902 per unit.
- We cannot predict when the property owned by your partnership may be
sold.
- Your general partner is a subsidiary of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- We are making this offer with a view to making a profit and 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.
- Continuation of your partnership will result in our affiliates continuing
to receive management fees from your partnership, which would not be
payable if your partnership was liquidated.
- It is possible that we may conduct a subsequent offer at a higher price
more than one year after expiration of this offer.
- Unlike your partnership, our policy is to reinvest proceeds from the sale
of our properties or refinancing of our indebtedness.
- We may change our investment, acquisition or financing policies without a
vote of our securityholders.
- If you acquire our securities, your investment will change from holding
an interest in a single property to holding an interest in our large
portfolio of properties, thereby fundamentally changing the nature of
your investment.
- Recently, Moody's Investors Service revised its outlook for AIMCO's
ratings from stable to negative.
- There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
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.
March 26, 1999
<PAGE> 892
TABLE OF CONTENTS
<TABLE>
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<S> <C>
SUMMARY........................................ S-1
The Offer.................................... S-1
The AIMCO Operating Partnership.............. S-1
Affiliation with your General Partner........ S-1
Risk Factors................................. S-1
Background and Reasons for the Offer......... S-6
Valuation of Units........................... S-9
Fairness of the Offer........................ S-10
Stanger Analysis............................. S-10
Your Partnership............................. S-11
Terms of the Offer........................... S-12
Federal Income Tax Consequences.............. S-14
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-14
Comparison of Your Units and AIMCO OP Units.. S-14
Conflicts of Interest........................ S-15
Source and Amount of Funds and Transactional
Expenses................................... S-16
Summary Financial Information of AIMCO
Properties, L.P............................ S-17
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-19
Summary Financial Information of Cedar Tree
Investors Limited Partnership.............. S-21
Comparative Per Unit Data.................... S-21
THE AIMCO OPERATING PARTNERSHIP................ S-22
RISK FACTORS................................... S-23
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-23
Offer Consideration Not Based on Third
Party Appraisal or Arms-Length
Negotiation.............................. S-23
Offer Consideration May Not Represent Fair
Market Value............................. S-23
Offer Consideration Does Not Reflect Future
Prospects................................ S-23
Offer Consideration Based on Our Estimate
of Liquidation Proceeds.................. S-23
Offer Consideration May Be Less Than
Liquidation Value........................ S-23
Holding Units May Result in Greater Future
Value.................................... S-23
Conflicts of Interest with Respect to the
Offer.................................... S-23
Conflicts of Interest Relating to
Management Fees.......................... S-24
Possible Subsequent Offer at a Higher
Price.................................... S-24
Possible Recognition of Taxable Gain on a
Sale of Your Units....................... S-24
Fairness Opinion of Third Party Relied on
Information We Provided.................. S-24
Loss of Future Distributions from Your
Partnership.............................. S-24
Possible Effect of the Other Exchange
Offers on Us............................. S-25
Potential Delay in Payment................. S-25
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-25
Fundamental Change in Nature of
Investment............................... S-25
Fundamental Change in Number of Properties
Owned.................................... S-25
Lack of Trading Market for OP Units........ S-25
Uncertain Future Distributions............. S-25
Possible Reduction in Required
Distributions on Preferred OP Units...... S-26
Possible Lower Distributions............... S-26
Possible Redemption of Preferred Stock..... S-26
Possible Recognition of Taxable Gains on OP
Units.................................... S-26
Limitations on Effecting a Change of
Control.................................. S-26
Limitation on Transfer of OP Units......... S-26
Limited Voting Rights of Holders of OP
Units.................................... S-26
Market Prices for AIMCO's Securities May
Fluctuate................................ S-26
</TABLE>
<TABLE>
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<S> <C>
Litigation Associated with Partnership
Acquisitions............................. S-27
Dilution of Interests of Holders of OP
Units.................................... S-27
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-27
Possible Increase in Control of Your
Partnership by Us........................ S-27
Recognition of Gain Resulting from Possible
Future Reduction in Your Partnership
Liabilities.............................. S-27
Possible Termination of Your Partnership
for Federal Income Tax Purposes.......... S-27
Risk of Inability to Transfer Units for
12-Month Period.......................... S-27
Possible Change in Time Frame Regarding
Sale of Property......................... S-27
SPECIAL FACTORS TO CONSIDER.................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-28
Background of the Offer...................... S-28
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
Disadvantages of the Offer................... S-32
VALUATION OF UNITS............................. S-34
FAIRNESS OF THE OFFER.......................... S-36
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-36
Fairness to Unitholders who Tender their
Units...................................... S-37
Fairness to Unitholders who do not Tender
their Units................................ S-38
Comparison of Consideration to Alternative
Consideration.............................. S-38
Allocation of Consideration.................. S-41
STANGER ANALYSIS............................... S-41
Experience of Stanger........................ S-42
Summary of Materials Considered.............. S-42
Summary of Reviews........................... S-43
Conclusions.................................. S-46
Assumptions, Limitations and
Qualifications............................. S-46
Compensation and Material Relationships...... S-47
YOUR PARTNERSHIP............................... S-47
General...................................... S-47
Your Partnership and its Property............ S-47
Property Management.......................... S-48
Investment Objectives and Policies; Sale or
Financing of Investments................... S-48
Capital Replacement.......................... S-49
Borrowing Policies........................... S-49
Competition.................................. S-49
Legal Proceedings............................ S-49
History of the Partnership................... S-49
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-50
Distributions and Transfers of Units......... S-50
Beneficial Ownership of Interests in Your
Partnership................................ S-51
Compensation Paid to the General Partner and
its Affiliates............................. S-51
SELECTED FINANCIAL INFORMATION OF CEDAR TREE
INVESTORS LIMITED PARTNERSHIP................ S-52
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................... S-53
Overview..................................... S-53
Results of Operations........................ S-53
THE OFFER...................................... S-56
Terms of the Offer; Expiration Date.......... S-56
Acceptance for Payment and Payment for
Units...................................... S-56
Procedure for Tendering Units................ S-57
Withdrawal Rights............................ S-60
</TABLE>
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<PAGE> 893
<TABLE>
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<S> <C>
Extension of Tender Period; Termination;
Amendment.................................. S-60
Proration.................................... S-61
Fractional OP Units.......................... S-61
Future Plans of the AIMCO Operating
Partnership................................ S-61
Voting by the AIMCO Operating Partnership.... S-62
Dissenters' Rights........................... S-62
Conditions of the Offer...................... S-62
Effects of the Offer......................... S-65
Certain Legal Matters........................ S-65
Fees and Expenses............................ S-67
Accounting Treatment......................... S-67
FEDERAL INCOME TAX CONSEQUENCES................ S-68
Tax Opinions................................. S-68
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-69
Disguised Sales.............................. S-70
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-70
Tax Consequences of Exchanging Units Solely
for Cash................................... S-71
Adjusted Tax Basis........................... S-71
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-71
Passive Activity Losses...................... S-72
Tax Reporting................................ S-72
Foreign Offerees............................. S-72
Tax Consequences of a Termination of Your
Partnership................................ S-72
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-74
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-82
DESCRIPTION OF PREFERRED OP UNITS.............. S-87
General...................................... S-87
Ranking...................................... S-87
</TABLE>
<TABLE>
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<S> <C>
Distributions................................ S-87
Allocation................................... S-88
Liquidation Preference....................... S-88
Redemption................................... S-89
Voting Rights................................ S-89
Restrictions on Transfer..................... S-90
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-90
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-92
CONFLICTS OF INTEREST.......................... S-96
Conflicts of Interest with Respect to the
Offer...................................... S-96
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-96
Competition Among Properties................. S-96
Features Discouraging Potential Takeovers.... S-96
Future Exchange Offers....................... S-97
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-97
LEGAL MATTERS.................................. S-98
EXPERTS........................................ S-98
INDEX TO FINANCIAL STATEMENTS.................. F-1
PRO FORMA FINANCIAL INFORMATION OF AIMCO
PROPERTIES, L.P. ............................ P-1
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> 894
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- 2,211.75 of our Class Two Partnership Preferred Units;
- 1,469.25 of our Partnership Common Units; or
- $55,289 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 accept a maximum of 25% of the outstanding units in response to our
offer. Our offer is not subject to any minimum number of units being tendered.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline.
The original offer price per unit in 1991 was $83,607. For the five years
ended December 31, 1998, your partnership paid distributions of $43,135 per
unit.
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
its wholly owned subsidiary, AIMCO-GP, Inc. ("AIMCO GP"), AIMCO acts as the sole
general partner of the AIMCO Operating Partnership. As of December 31, 1998,
AIMCO-GP and another AIMCO subsidiary, AIMCO-LP, Inc., a limited partner of the
AIMCO Operating Partnership (the "Special Limited Partner"), owned approximately
an 83% interest in the AIMCO Operating Partnership. As of December 31, 1998, our
portfolio of owned or managed properties included 379,363 apartment units in
2,147 properties located in 49 states, the District of Columbia and Puerto Rico.
Based on apartment unit data compiled by the National Multi Housing Council, we
believe that we are one of the largest owners and managers of multifamily
apartment properties in the United States. As of December 31, 1998, we:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 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. and our February 26, 1999 merger with Insignia Properties Trust, we
acquired a 100% ownership interest in the general partner of your partnership,
United Investors Real Estate, Inc., and the company that manages the property
owned by your partnership.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-24 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the
S-1
<PAGE> 895
risks associated with our offer and the disadvantages of the offer to you and
should be considered when you review "Summary -- Background and Reasons for the
Offer -- Expected Benefits of the Offer":
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. We did not use any third-party appraisal or valuation to determine
the value of any property owned by your partnership. We established the terms of
our offer, including the exchange ratios and the cash consideration, without any
arms-length negotiations.
OFFER CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimated your property to be worth $10,000,000, less
approximately $151,100 of deferred maintenance and investment. It is possible
that a sale of the property could result in your receiving more per unit than in
our offer. Even if our cash offer consideration is equal to liquidation value,
if you accept OP Units, you may not ultimately receive an amount equal to the
cash offer consideration when you sell such OP Units or any AIMCO securities you
may receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
value if you retain your units until your partnership is liquidated.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of ours and, therefore, has substantial conflicts of interest with
respect to our offer. We are making this offer with a view to making a profit.
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. Since our subsidiaries
receive fees for managing your partnership and its property, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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
S-2
<PAGE> 896
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.
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. You
should review "Federal Income Tax Consequences" 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. 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.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is our subsidiary).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. For any units that we
acquire from you, you will not receive any future distributions from your
partnership's operating cash flow or upon a sale of property owned by your
partnership or a refinancing of any of its debt. If you tender your units in
exchange for OP Units, you will be entitled to future distributions from us from
our operating cash flow and upon a dissolution, liquidation or wind-up of the
AIMCO Operating Partnership.
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from a sale of a property or a refinancing of its indebtedness, to (ii)
a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of December 31, 2021 to a much larger
partnership with a partnership termination date of 2093.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you tender your units
for our OP Units, you will have changed your investment from an interest in a
partnership that owns and manages one property to an interest in a partnership
that invests in and manages a large portfolio of properties.
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<PAGE> 897
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE LOWER DISTRIBUTIONS. The Preferred OP Units provide for annual
distributions of $2.00 per unit and no more. Current annualized distributions
with respect to the Common OP Units are $2.50 per unit. This is equivalent to
distributions of $4,423.50 per year on the number of Preferred OP Units, or
distributions of $3,673.13 per year on the number of Common OP Units, that you
would receive in exchange for each of your partnership's units. During 1998,
your partnership paid cash distributions of $14,666 per unit. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units may be
substantially less, immediately following our offer, than the distributions with
respect to your units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus.
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions.
S-4
<PAGE> 898
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a result, we may incur costs associated with defending or settling such
litigation or paying any judgment if we lose. As of the present time, no limited
partners of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. As a result of the
offer, we may increase our ability to influence voting decisions with respect to
your partnership. However, we will not be able to control voting decisions
unless we acquire more units in another transaction, which cannot take place for
at least one year after expiration of this offer. Also, removal of your general
partner (which is our subsidiary) or the manager of any property owned by your
partnership may become more difficult or impossible without our consent or
approval.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
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.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investment in the
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partnership in the future until the property is sold and your partnership is
liquidated. You may continue to have to hold the units not exchanged in this
offer for an indefinite period of time. The partnership currently owns one
property. The general partner of your partnership continually considers whether
the property should be sold or otherwise disposed of after consideration of
relevant factors, including prevailing economic conditions, availability of
favorable financing and tax considerations, with a view to achieving maximum
capital appreciation for your partnership. We cannot predict when the property
will be sold or otherwise disposed of. However, there is no current plan or
intention to sell the property in the near future.
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 51% ownership interest in Insignia Properties Trust, which has
a 100% ownership interest in the general partner of your partnership and the
company that manages the property owned by your partnership. On February 26,
1999, we acquired the remaining 49% interest in Insignia Properties Trust in a
merger transaction. One of the consequences of the merger with Insignia is to
allow us to make the offer and, if successful, to increase our ownership in 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 August 28, 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
(which is our subsidiary):
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.
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. 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. Your partnership's mortgage notes are due in September 2008.
Your partnership currently has adequate sources of cash to finance its
operations on both a short term and long term basis. In addition,
continuation of your partnership without the offer would deny you and your
partners the benefits that your general partner (which is our
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subsidiary) 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. There is currently no market
for the Preferred OP Units or Common OP Units.
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 three principal advantages of exchanging your units for Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the NYSE.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are four principal advantages of exchanging your units for Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- 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 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.
Disadvantages of the Offer.
The principal disadvantages of the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the class of preferred stock you may receive. The terms of the offer and
the nature of the securities could differ if they were subject to
independent third party negotiations. We
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determined the offering price and asked Stanger to determine if the price
was fair. We did not ask Stanger to determine a fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and determining the offer consideration, no one separately represented
the interests of the limited partners. Although we have a fiduciary duty
to the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of such property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pretax cash proceeds to you than our
offer.
- OP Units. OP Units lack a public market, have transfer restrictions and
must be held for one year before they can be redeemed by a holder. The
ultimate return on the OP Units is directly tied to the future price of
AIMCO's Class A Common Stock or Class I Preferred Stock. You could
ultimately receive less for your OP Units than the cash price in our
offer. Further, on or after March 1, 2005, we may redeem the Class I
Preferred Stock for $25 per share.
- Lower Preferred Quarterly Distributions. Your partnership paid
distributions of $14,666 for the fiscal year ended December 31, 1998.
Holders of Preferred OP Units will be entitled to receive quarterly
distributions of $0.50 per unit (equivalent to $2.00 on an annualized
basis) before any distributions are paid to holders of Common OP Units.
This is equivalent to a distribution of $4,423.50 per year on the number
of Preferred OP Units you will receive in exchange for each of your
partnership units.
- Lower Common Quarterly Distributions. Your partnership paid distributions
of $14,666 for the fiscal year ended December 31, 1998. In 1998, we paid
quarterly distributions on the Common OP Units totalling $2.25 per unit.
In January 1999, we increased our distribution rate on each of the Common
OP Units to $2.50 on an annual basis. See "The AIMCO Operating
Partnership." Assuming no change in the level of our distributions, this
is equivalent to a distribution of $3,673.13 per year on the number of
Common OP Units you will receive in exchange for each of your partnership
units.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
a sale of the property would be advantageous given market conditions, the
condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of the property and the tax consequences to you
and your partners upon a sale of the property.
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
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VALUATION OF UNITS
We determined the offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower of the value produced. We used your partnership's
property income for the fiscal year ended December 31, 1997. However, in
determining the appropriate capitalization rate, we considered the partnership's
property income since December 31, 1997. Our method for selecting a
capitalization rate begins with each property being assigned a location and
condition rating (e.g., "A" for excellent, "B" for good, "C" for fair, and "D"
for poor). We have rated your property's location B (good) and its condition B
(good). Generally, we assign an initial capitalization rate of 10.25% to
properties in this category. We then adjust the capitalization rate based on
whether the mortgage debt that the property is subject to bears interest at a
rate above or below 7.5% per annum. Generally, for every 0.5% in excess of 7.5%,
the capitalization rate would be increased by 0.25%. Your property's mortgage
debt bears interest at 6.43% per annum, which resulted in a decrease from the
initial capitalization rate of 0.15%. We also considered any changes in your
partnership's property income from 1997 to 1998. Because your partnership's
property income in 1998 increased compared to 1997, we further revised the
capitalization rate downward by approximately 0.38%, resulting in a final
capitalization rate of 9.72%. The evaluation of a property's location and
condition, and the determination of an appropriate capitalization rate for a
property, is subjective in nature, and others evaluating the same property might
use a different capitalization rate and derive a different property value.
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. Further, in
applying the direct capitalization method, others may make different assumptions
and obtain different results. 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>
Property income (January 1, 1997 to December 31, 1997)...... $ 972,000
Capitalization rate......................................... 9.72%
Estimated total gross valuation of your partnership's
property.................................................. $10,000,000
Plus: Cash and cash equivalents............................. (500,054)
Plus: Other partnership assets, net of security deposits.... 353,530
Less: Mortgage debt......................................... (4,647,993)
Less: Accounts payable and accrued expenses................. (134,277)
Less: Other liabilities..................................... (74,723)
Partnership valuation before taxes and certain costs........ 4,996,483
Less: Disposition fees...................................... (300,000)
Less: Extraordinary capital expenditures for deferred
maintenance............................................... (151,100)
Less: Closing costs......................................... (250,000)
Estimated net valuation of your partnership................. 4,295,383
Percentage of estimated net valuation allocated to units.... 96.54%
Estimated net valuation of units............................ 4,146,680
Total number of units............................. 75.0
Estimated valuation per unit................................ 55,289
-----------
Cash consideration per unit................................. $ 55,289
-----------
</TABLE>
In order to determine the number of Preferred OP Units we are offering for
each of your units, we divided the cash offer consideration of $55,289 by the
$25 liquidation preference of each Preferred OP Unit to get 2,211.75 Preferred
OP Units per unit.
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In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $55,289 by a
price of $37.63 (the average closing price of AIMCO's Class A Common Stock on
the NYSE for the 30 trading days ending on March 23, 1999) to get 1,469.25
Common OP Units per unit.
FAIRNESS OF THE OFFER
Fairness to Unitholders. Your general partner is our subsidiary. 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. Your general partner did not participate in the structuring of the
offer. We and your general partner believe that the offer and all forms of
consideration offered is fair to you and the other limited partners of your
partnership. 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 (which is our subsidiary) 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 (which is our subsidiary) has compared our offer consideration
to:
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated;
- your general partner's estimate of the going concern value of your
partnership if it continued operating as an independent stand-alone
entity; and
- the net book value of your partnership.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C>
Cash offer consideration.................................... $55,289
Partnership Preferred Units................................. 55,289
Partnership Common Units.................................... 55,289
Alternatives:
Estimated liquidation proceeds............................ $55,289
Estimated going concern value............................. $44,866
Net book value............................................ $19,195
</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
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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. Stanger has rendered similar fairness
opinions with regard to the other tender offers being made by the AIMCO
Operating Partnership. Stanger rendered the opinions only as to the individual
fairness of the offer consideration in each proposed exchange offer.
YOUR PARTNERSHIP
Your Partnership and its Property. Cedar Tree Investors Limited Partnership
is a Kansas limited partnership which was formed on June 14, 1991 for the
purpose of owning and operating a single apartment property located in Shawnee,
Kansas, known as "Cedar Tree Apartments." Your Partnership's property consists
of 344 apartment units and was built in 1984. Your partnership has no employees.
As of September 30, 1998, there were 75 units of limited partnership interest
issued and outstanding, which were held of record by 67 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.
Your partnership sold 2,550,000 of limited partnership units in 1991.
Between January 1, 1993 and December 31, 1998 your partnership paid cash
distributions totalling $43,135 per unit. Your partnership currently owns one
property.
Property Management. Your partnership's property has been managed by an
affiliate of ours. 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.
Investment Objectives and Policies; Sale or Financing of Investments. Your
partnership will terminate on December 31, 2021, unless earlier dissolved. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership property within any specified time period. An
investment in your partnership is a finite life investment in which partners
receive regular cash distributions out of your partnership's distributable cash
flow, if any, and upon liquidation.
Borrowing Policies. Your partnership's agreement of limited partnership
allows your partnership to incur debt. As of December 31, 1998, your partnership
had a mortgage note outstanding of $5,883,677, payable to FNMA, which bears
interest at the rate of 6.43%. The mortgage debt is due in September, 2008. Your
partnership also has a second mortgage note outstanding of $142,290, on the same
terms as the current mortgage note. Your partnership's agreement of limited
partnership also allows your general partner to lend funds to your partnership.
Your general partner had no outstanding loans to your partnership.
Transfers. Your units are not listed on any national securities exchange or
quoted on NASDAQ, and there is no established public trading market for the
units. Secondary sales activity for the units has been limited and sporadic.
Your general partner monitors transfers of the units (i) because the admission
of the transferee as a substitute limited partner in your partnership requires
the consent of your general partner under your partnership agreement, and (ii)
in order to track compliance with applicable safe harbor provisions to avoid
treatment as a "publicly traded partnership" for tax purposes. However, your
general partner does not monitor or regularly receive or maintain information
regarding the prices at which secondary sale transactions in the units have been
effectuated.
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TERMS OF THE OFFER
General. We are offering to acquire up to 25% of the outstanding 75 units
of your partnership, which we do not directly or indirectly own, for
consideration per unit of 2,211.75 Preferred OP Units, 1,469.25 Common OP Units,
or $55,289 in cash. If you tender units pursuant to the offer, you may choose 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 Preferred OP Units, 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 January 1, 1999,
although you will be entitled to retain any distributions you may have received
after such date and prior to our commencement of this offer.
If you accept our offer and do not specify the consideration you desire on
the letter of transmittal, we will issue you Preferred OP Units.
Expiration Date. Our offer will expire at 5:00 P.M., New York City time, on
June 4, 1999, 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.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds 25% 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 their acceptance for payment as provided for herein.
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 Common OP Units or 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.
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.
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The offer may be extended or delayed indefinitely, during which time you
will not receive payment for any tendered units.
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 any property owned by
your partnership's because your general partner (which is our subsidiary) and
the property manager will remain unchanged. If we borrow funds for the cash
consideration for these offers, our interest costs would increase which could
adversely affect our future earnings. If all units in this and our other
contemplated offers were purchased for cash and we borrowed all the funds, at
current interest rates, our interest expense would increase by $3,064,000 per
year.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
number of units pursuant to our offer, we may be in a position to influence
voting decisions with respect to your partnership. However, we will not be able
to control voting decisions unless we acquire more units in another transaction,
which cannot take place for at least one year after expiration of this offer.
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 (which is our subsidiary),
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 Letter of Transmittal,
and the legal and accounting fees and expenses in connection with the offer. We
will also pay the fees of Stanger for providing the fairness opinion 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 $50,000.
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.
No Dissenters' Rights. You are not entitled to dissenters' (appraisal)
rights in connection with the offer.
Other Offers. The AIMCO Operating Partnership is also making similar
exchange offers to approximately 90 other limited partnerships in which it
controls the general partner, interests in substantially all of which were
acquired in the merger on October 1, 1998 with Insignia Financial Group, Inc.
and the February 26, 1999 merger with Insignia Properties Trust. Each of such
exchange offers is being made by a separate prospectus supplement which is
similar to this Prospectus Supplement. Copies of such prospectus supplements may
be obtained upon written request from the Information Agent at the address set
forth in "-- Information Agent" or on the back cover page of this Prospectus
Supplement. The exchange offers may be different for limited partners in each
partnership in terms of pricing and percentage of units sought, but the
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effects of the offers will essentially be the same. In general, we believe that
the risk factors (except for certain tax-related risk factors) described herein
for this offer will also be applicable to the other offers.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer. Its telephone numbers are (888)
349-2005 and (201) 896-1900. Its fax number is (201) 896-0910.
FEDERAL INCOME TAX CONSEQUENCES
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Preferred OP
Units or 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.
THE FOREGOING SUMMARY IS A GENERAL DISCUSSION OF THE MATERIAL 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 "FEDERAL INCOME TAX CONSEQUENCES" 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.
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, your general
partner (which is our subsidiary) 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, Preferred
OP Units and 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.
As of February 19, 1999, the AIMCO Operating Partnership had approximately
9,729,130 Common OP Units outstanding (excluding interests held by AIMCO) and no
Class Two Partnership Preferred Units outstanding. The number of OP Units you
may acquire from us in exchange for your units will represent a lower percentage
of the outstanding limited partnership interests in the AIMCO Operating
Partnership than that of your current ownership interest in your partnership. In
response to our offer, you could elect to receive $55,289 in cash, 2,211.75
Preferred OP Units or 1,469.25 Common OP Units. Both your units and the OP Units
are subject to transfer restrictions and it is unlikely that a real trading
market will ever develop for any of such securities. If you subsequently redeem
OP Units for AIMCO Class A Common Stock or Class I Preferred Stock, we can make
no assurance as to the value of such shares of AIMCO stock, at that time, which
may be less than the cash offer price of $55,289.
S-14
<PAGE> 908
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
our subsidiary 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
both the general partner of your partnership and the manager of your
partnership's property. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $23,588 for the fiscal year ended December 31,
1998. The property manager received management fees of $105,546.45 for the
fiscal year ended December 31, 1998. We have no current intention of changing
the fee structure for your general partner or the 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.
AIMCO's Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is 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.
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. We might pay a higher price for any future exchange offers we may make
for units of your partnership. In any event, we will not acquire any units for
at least one year after expiration of this offer.
S-15
<PAGE> 909
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $1,036,669 will be required to purchase all of
the units sought in our offer, if such units are tendered for cash excluding
expenses. We will obtain all such funds from cash from operations, equity
issuances and short term borrowings. For a detailed description of estimated
expenses to be incurred in the offer, see "Source and Amount of Funds and
Transactional Expenses."
S-16
<PAGE> 910
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
nine months ended September 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 period July 29, 1994 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 of the
AIMCO Operating Partnership" included in the accompanying Prospectus. All dollar
values are in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
AIMCO PROPERTIES, L.P. PREDECESSORS(A)
------------------------------------------------------------------------- -------------------------
FOR THE FOR THE
PERIOD PERIOD
JULY 29, JANUARY 1,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994 1994 FOR THE YEAR
ENDED SEPTEMBER 30, DECEMBER 31, THROUGH THROUGH ENDED
----------------------- -------------------------------- DECEMBER 31, JULY 28, DECEMBER 31,
1998 1997 1997 1996 1995 1994 1994(B) 1993
---------- ---------- ---------- -------- -------- ------------ ---------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
RENTAL PROPERTY
OPERATIONS:
Rental and other
income................ $ 265,700 $ 127,083 $ 193,006 $100,516 $ 74,947 $ 24,894 $ 5,805 $ 8,056
Property operating
expenses.............. (101,600) (50,737) (76,168) (38,400) (30,150) (10,330) (2,263) (3,200)
Owned property
management expenses... (7,746) (4,344) (6,620) (2,746) (2,276) (711) -- --
Depreciation............ (59,792) (23,848) (37,741) (19,556) (15,038) (4,727) (1,151) (1,702)
---------- ---------- ---------- -------- -------- --------- ------- --------
96,562 48,154 72,477 39,814 27,483 9,126 2,391 3,154
---------- ---------- ---------- -------- -------- --------- ------- --------
SERVICE COMPANY BUSINESS:
Management fees and
other income.......... 13,968 9,173 13,937 8,367 8,132 3,217 6,533 8,069
Management and other
expenses.............. (8,101) (5,029) (9,910) (5,352) (4,953) (2,047) (5,823) (6,414)
Corporate overhead
allocation............ (196) (441) (588) (590) (581) -- -- --
Other assets,
depreciation and
amortization.......... (3) (236) (453) (218) (168) (150) (146) (204)
Owner and seller
bonuses............... -- -- -- -- -- -- (204) (468)
Amortization of
management company
goodwill.............. -- -- (948) (500) (428) -- -- --
---------- ---------- ---------- -------- -------- --------- ------- --------
5,668 3,467 2,038 1,707 2,002 1,020 360 983
Minority interests in
service company
business.............. -- 48 (10) 10 (29) (14) -- --
---------- ---------- ---------- -------- -------- --------- ------- --------
Company's shares of
income from service
company business...... 5,668 3,515 2,028 1,717 1,973 1,006 360 983
---------- ---------- ---------- -------- -------- --------- ------- --------
General and
administrative
expenses.............. (7,444) (1,408) (5,396) (1,512) (1,804) (977) -- --
Interest income......... 18,244 4,458 8,676 523 658 123 -- --
Interest expense........ (56,756) (33,359) (51,385) (24,802) (13,322) (1,576) (4,214) (3,510)
Minority interest in
other partnerships.... (1,052) (777) 1,008 (111) -- -- -- --
Equity in losses of
unconsolidated
partnerships(c)....... (5,078) (463) (1,798) -- -- -- -- --
Equity in earnings of
unconsolidated
subsidiaries(d)....... 8,413 456 4,636 -- -- -- -- --
Amortization of
goodwill.............. (5,071) (711) -- -- -- -- -- --
---------- ---------- ---------- -------- -------- --------- ------- --------
Income from
operations............ 53,486 19,865 30,246 15,629 14,988 7,702 (1,463) 627
Gain on disposition of
properties............ 2,783 (169) 2,720 44 -- -- -- --
Provision for income
taxes................. -- -- -- -- -- -- (36) (336)
---------- ---------- ---------- -------- -------- --------- ------- --------
Income (loss) before
extraordinary item.... 56,269 19,696 32,966 15,673 14,988 7,702 (1,499) 291
Extraordinary
item -- early
extinguishment of
debt.................. -- (269) (269) -- -- -- -- --
---------- ---------- ---------- -------- -------- --------- ------- --------
Net income (loss)....... $ 56,269 $ 19,427 $ 32,697 $ 15,673 $ 14,988 $ 7,702 $(1,499) $ 291
========== ========== ========== ======== ======== ========= ======= ========
OTHER INFORMATION:
Total owned properties
(end of period)....... 241 109 147 94 56 48 4 4
Total owned apartment
units (end of
period)............... 62,955 28,773 40,039 23,764 14,453 12,513 1,711 1,711
Units under management
(end of period)....... 154,729 71,038 69,587 19,045 19,594 20,758 29,343 28,422
Basic earnings per
Common OP Unit........ $ 0.80 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42 N/A N/A
Diluted earnings per
Common OP Unit........ $ 0.79 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42 N/A N/A
Distributions paid per
Common OP Unit........ $ 1.6875 $ 1.3875 $ 1.85 $ 1.70 $ 1.66 $ 0.29 N/A N/A
Cash flows provided by
operating
activities............ 50,825 53,435 73,032 38,806 25,911 16,825 2,678 2,203
Cash flows used in
investing
activities............ (185,453) (314,814) (717,663) (88,144) (60,821) (186,481) (924) (16,352)
Cash flows provided by
(used in) financing
activities............ 141,221 293,984 668,549 60,129 30,145 176,800 (1,032) 14,114
</TABLE>
S-17
<PAGE> 911
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
AIMCO PROPERTIES, L.P. PREDECESSORS(A)
------------------------------------------------------------------------- -------------------------
FOR THE FOR THE
PERIOD PERIOD
JULY 29, JANUARY 1,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994 1994 FOR THE YEAR
ENDED SEPTEMBER 30, DECEMBER 31, THROUGH THROUGH ENDED
----------------------- -------------------------------- DECEMBER 31, JULY 28, DECEMBER 31,
1998 1997 1997 1996 1995 1994 1994(B) 1993
---------- ---------- ---------- -------- -------- ------------ ---------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Funds from
operations(e)........... $ 132,881 $ 49,692 $ 81,155 $ 35,185 $ 25,285 $ 9,391 N/A N/A
Weighted average number of
Common OP Units
outstanding............. 53,007 24,347 29,119 14,994 11,461 10,920 N/A N/A
BALANCE SHEET INFORMATION:
Real estate, before
accumulated
depreciation............ $2,685,487 $1,250,239 $1,657,207 $865,222 $477,162 $ 406,067 $47,500 $ 46,819
Real estate, net of
accumulated
depreciation............ 2,355,122 1,107,545 1,503,922 745,145 448,425 392,368 33,270 33,701
Total assets.............. 3,121,949 1,608,195 2,100,510 827,673 480,361 416,361 39,042 38,914
Total mortgages and notes
payable................. 1,275,401 661,715 808,530 522,146 268,692 141,315 40,873 41,893
Redeemable Partnership
Units................... 232,405 178,321 197,086 96,064 38,463 32,047 -- --
Mandatorily redeemable
1994 Cumulative Senior
Preferred Units......... -- -- -- -- -- 107,228 -- --
Partners' Capital......... 1,427,087 560,737 960,176 178,462 160,947 137,354 (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
based on the NAREIT definition, as adjusted for the 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 NINE PERIOD
MONTHS ENDED FOR THE YEAR ENDED JANUARY 10,
SEPTEMBER 30, DECEMBER 31, 1994
------------------ --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
-------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $ 56,269 $19,427 $32,697 $15,673 $14,988 $ 7,702
(Gain) loss on disposition of property...................... (2,783) 169 (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 56,900 21,052 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 7,077 711 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 2,689 3,584 -- -- --
Amortization of management contracts...................... 4,201 430 1,587 -- -- --
Deferred taxes............................................ 6,134 2,164 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 17,379 2,781 6,280 -- -- --
Preferred stock dividends................................. (12,296) -- (135) -- (5,169) (3,114)
-------- ------- ------- ------- ------- -------
Funds from operations....................................... $132,881 $49,692 $81,155 $35,185 $25,285 $ 9,391
======== ======= ======= ======= ======= =======
</TABLE>
S-18
<PAGE> 912
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. (the AIMCO Operating Partnership) for the
nine months ended September 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 NINE
MONTHS FOR THE
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 345,961 $ 442,526
Property operating expenses............................... (136,240) (189,442)
Owned property management expenses........................ (8,933) (11,831)
Depreciation.............................................. (80,420) (98,853)
--------- -----------
120,368 142,400
--------- -----------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 28,912 41,676
Management and other expenses............................. (14,386) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (15,243) (26,480)
--------- -----------
(913) (9,075)
Minority interests in service company business............ -- (10)
--------- -----------
Partnership's shares of income from service company
business............................................... (913) (9,085)
--------- -----------
General and administrative expenses....................... (8,632) (21,371)
Interest income........................................... (90,890) (121,699)
Interest expense.......................................... 40,887 21,734
Minority interest......................................... (8,548) (10,034)
Equity in losses of unconsolidated partnerships........... (23,349) (43,918)
Equity in earnings of unconsolidated subsidiaries......... 851 5,848
Amortization of Goodwill.................................. (5,071) --
--------- -----------
Net income........................................ $ 24,703 $ (36,125)
========= ===========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (.12) $ (1.16)
Diluted earnings (loss) per Common OP Unit.................. $ (.12) $ (1.16)
Distributions paid per Common OP Unit....................... $ 1.69 $ 1.85
Book value per Common OP Unit............................... $ 24.52 $ 26.96
CASH FLOW DATA:
Cash provided by operating activities....................... $ 90,439 $ 130,703
Cash used in investing activities........................... (79,923) (1,135,038)
Cash provided by (used in) financing activities............. 16,740 955,977
OTHER DATA:
Funds from operations(a).................................... $ 187,985 $ 172,733
Weighted average number of Common OP Units outstanding...... 74,946 74,094
</TABLE>
S-19
<PAGE> 913
<TABLE>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, net of accumulated depreciation................ $2,679,195
Total assets................................................ 4,558,819
Total mortgages and notes payable........................... 1,762,105
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 320,443
Partners' capital........................................... 1,984,019
</TABLE>
- ---------------
(a) 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
based upon the NAREIT definition, as adjusted for the 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.
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss)................................. $ 24,703 $(36,125)
HUD release fee and legal reserve................. -- 10,202
Real estate depreciation, net of minority
interests....................................... 76,521 93,050
Amortization of management contracts.............. 9,593 12,790
Amortization of management company goodwill....... 10,997 12,551
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation........................ -- 1,715
Amortization of management company goodwill..... 959 1,918
Amortization of management contracts............ 23,010 30,516
Deferred taxes.................................. (713) (1,356)
Equity in earnings of other partnerships:
Real estate depreciation........................ 79,559 95,285
Interest on convertible debentures................ (7,537) (10,003)
Preferred unit distributions...................... (29,107) (37,810)
-------- --------
Funds from operations............................. $187,985 $172,733
======== ========
</TABLE>
S-20
<PAGE> 914
SUMMARY FINANCIAL INFORMATION OF CEDAR TREE INVESTORS LIMITED PARTNERSHIP
The summary financial information of Cedar Tree Investors Limited
Partnership for the nine months ended September 30, 1998 and 1997 is unaudited.
The summary financial information for Cedar Tree Investors Limited Partnership
for the years ended December 31, 1997, 1996, 1995, 1994 and 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 of Your
Partnership" included herein. See "Index to Financial Statements."
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues................ $1,597,492 $1,411,623 $1,956,671 $1,900,467 $1,869,651 $1,771,627 $1,700,427
Net Income.................... 343,888 186,905 270,488 252,642 174,244 300,722 303,674
Net Income per limited
partnership unit............ 4,589.32 2,487.15 3,570.44 3,334.87 2,300.02 3,969.53 4,008.50
Distributions per limited
partnership unit............ 2,640.00 4,003.02 5,333.06 5,306.53 5,280.00 7,330.00 --
Distributions per limited
partnership unit (which
represent a return of
capital).................... -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents..... $1,737,430 $ 443,046 $ 499,946 $ 465,919 $ 558,661 $ 769,194 $ 786,518
Real Estate, Net of
Accumulated Depreciation.... 5,322,297 5,440,475 5,393,560 5,568,526 5,774,894 5,807,474 5,938,571
Total Assets.................. 7,692,993 6,353,104 6,301,510 6,463,360 6,774,275 6,967,984 7,210,155
Notes Payable................. 5,900,000 4,660,329 4,647,993 4,695,580 4,738,782 4,777,977 4,813,545
General Partners Capital/
(Deficit)..................... (5,274) (6,542) (6,713) (5,378) (3,894) (1,636) 910
Limited Partners' Capital....... 1,588,765 1,463,324 1,446,317 1,578,514 1,726,398 1,949,896 2,201,931
Partners' Capital............... 1,583,494 1,456,782 1,439,604 1,573,136 1,722,504 1,948,260 2,202,841
Total Distributions............. 200,000 303,259 404,020 402,010 400,000 555,303 373,968
Book value per limited
partnership unit.............. 21,183.57 19,510.99 19,264.23 21,048.65 29,018.64 25,998.61 29,389.08
Net increase (decrease) in cash
and cash equivalents.......... 1,237,484 (22,873) 34,027 (92,742) (210,533) (17,324) (114,745)
Net cash provided by operating
activities.................... 315,101 407,270 570,361 457,657 432,195 666,822 361,117
Ratio of earnings to fixed
charges....................... 2.12/1 1.53/1 1.58/1 1.53/1 1.98/1 1.64/1 1.68/1
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per unit of your
partnership for the year ended December 31, 1998, and the cash distributions
payable on the number of Common OP Units and Preferred OP Units issuable in
exchange therefor:
<TABLE>
<CAPTION>
ANNUAL
DISTRIBUTIONS
-------------
<S> <C>
Units of Cedar Tree Investors Limited Partnership........... $ 14,666
Equivalent cash distributions on Common OP Units(1)......... $3,673.13
Equivalent cash distributions on Preferred OP Units(2)...... $4,423.50
</TABLE>
- ---------------
(1) Calculated by multiplying the exchange ratio of 1,469.25 Common OP Units per
unit by the annualized distributions paid on the Common OP Units of $2.50
per unit.
(2) Calculated by multiplying the exchange ratio of 2,211.75 Preferred OP Units
per unit by the stated annual distribution rate on the Preferred OP Units of
$2.00 per unit.
S-21
<PAGE> 915
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of AIMCO. AIMCO is a real estate investment
trust that owns and manages multifamily apartment properties throughout the
United States. Through its wholly owned subsidiaries, AIMCO GP, the sole general
partner of the AIMCO Operating Partnership, and the Special Limited Partner, as
of December 31, 1998, AIMCO held approximately an 83% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled by the National
Multi Housing Council, we believe that AIMCO is one of the largest owner and
manager of multifamily apartment properties in the United States, with a total
portfolio of 379,363 apartment units in 2,147 properties located in 49 states,
the District of Columbia and Puerto Rico. As of December 31, 1998, AIMCO:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 apartment properties for third party
owners and affiliates.
AIMCO's Class A Common Stock is listed and traded on the NYSE under the
symbol "AIV." On March 23, 1999, the last reported sale price of AIMCO Class A
Common Stock on the NYSE was $35 3/16. 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 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>
1999
First Quarter (through March 23)........ $41 5/8 $35 3/16 $0.6250 $0.6250
1998
Fourth Quarter.......................... 37 3/8 30 0.5625 0.5625
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>
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.
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<PAGE> 916
RISK FACTORS
The following sets forth certain risks and disadvantages of the offer and
should be read and considered when reviewing the potential benefits of the offer
set forth in "Background and Reasons for the Offer -- Expected Benefits of the
Offer." In addition, you should review the other risks of investing in us
beginning on page 2 of our accompanying Prospectus.
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. 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. 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. 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 CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimate your property to be worth $10,000,000 less
approximately $151,100 of deferred maintenance and investment not considered by
the appraiser. It is possible, that a sale of the properties could result in you
receiving more pretax cash per unit than our offer. Even if our cash offer
consideration is equal to liquidation value, if you accept OP Units, you may not
ultimately receive an amount equal to the cash offer consideration when you sell
such OP Units or any AIMCO securities you may receive upon redemption of such OP
Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
pretax cash 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.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and the AIMCO Operating Partnership and, therefore, has
substantial conflicts of interest with respect to our offer. We are making this
offer with a view to making a profit. 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. Another conflict is 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
S-23
<PAGE> 917
partnership. 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.
CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its properties, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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 sold. If you exchange your units
for cash and our 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. 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 allocated to such units 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. If you exercise your redemption right with respect to the OP Units
within two years of the date that you transfer your units to the AIMCO Operating
Partnership, your exchange of units for OP Units or OP Units and cash could be
treated as a disguised sale of your units and you would be required to recognize
gain or loss in the year of the exchange on such disguised sale. See "Federal
Income Tax Consequences -- Disguised Sales." 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. 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 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.
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. You
should review "Federal Income Tax Consequences" 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. Because the income tax
consequences of tendering units will not be the same for everyone, you should
consult your own tax advisor before determining whether to tender your units
pursuant to our offer.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is controlled by us).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
S-24
<PAGE> 918
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all right 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, for any units that we acquire from you, you will not receive any
future distributions from operating cash flow of your partnership or upon a sale
of property owned by your partnership or a refinancing of any of its debt. If
you tender your units in exchange for OP Units, you will be entitled to future
distributions from the operating cash flow of the AIMCO Operating Partnership
and upon a dissolution, liquidation or winding-up of the AIMCO Operating
Partnership. See "Comparison of Your Units and AIMCO OP Units -- Distributions."
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from the sale of a property or a refinancing of its indebtedness to
(ii) a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of December 31, 2021 to a much larger
partnership with a partnership termination date of 2093.
Under the AIMCO Operating Partnership's agreement of limited partnership,
the general partner has the ability, without the concurrence of the limited
partners, to acquire and dispose of properties and to borrow funds. Further,
while it is the intent to distribute net income from operations, sales of
properties and refinancings of indebtedness, the general partner may not make
such distributions. Proceeds of future asset sales or refinancings by the AIMCO
Operating Partnership generally will be reinvested rather than distributed.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you exchange your
units for OP Units, you will have changed your investment from an interest in a
partnership which owns and manages a single property to an interest in the AIMCO
Operating Partnership which 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 and our portfolio of properties as compared to the value of your
units and your partnership.
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.
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.
S-25
<PAGE> 919
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE LOWER DISTRIBUTIONS. The Preferred OP Units provide for annual
distributions of $2.00 per unit and no more. Current annualized distributions
with respect to the Common OP Units are $2.50 per unit. This is equivalent to
distributions of $4,423.50 per year on the number of Preferred OP Units, or
distributions of $3,590.63 per year on the number of Common OP Units, that you
would receive in exchange for each of your partnership's units. During 1998,
your partnership paid cash distributions of $14,666 per unit. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units may be
substantially less, immediately following our offer, than the distributions with
respect to your units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus. If you
exercise your redemption right with respect to the OP Units within two years of
the date that you transfer your units to the AIMCO Operating Partnership, your
exchange of units for OP Units and cash could be treated as a disguised sale of
your units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
S-26
<PAGE> 920
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as for your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a result, we may incur costs associated with defending or settling such
litigation or paying any judgment if we lose. As of the present time, no limited
partners of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. 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. However, we will
not be able to control voting decisions unless we acquire more units in another
transaction, which cannot take place for at least one year after expiration of
this offer. Furthermore, in the event that we acquire a substantial number of
units pursuant to our offer, removal of your general partner (which is our
subsidiary) or the manager of any property owned by your partnership may become
more difficult or impossible without our consent.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
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.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investments in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to hold
the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns
S-27
<PAGE> 921
one property. The general partner of your partnership continually considers
whether the property should be sold or otherwise disposed of after consideration
of relevant factors, including prevailing economic conditions, availability of
favorable financing and tax considerations, with a view to achieving maximum
capital appreciation for your partnership. We cannot predict when the property
will be sold or otherwise disposed of. However, there is no current plan or
intention to sell the property in the near future.
SPECIAL FACTORS TO CONSIDER
In reviewing the offer, you should pay special attention to the information
in the Sections entitled "Background and Reasons for the Offer," "Valuation of
Units," "Fairness of the Offer" and "Stanger Analysis," which contain
information regarding the background and reasons for the offer, the method of
evaluating units in the offer and alternative valuation methods considered, our
view as to the fairness of the offer, and the fairness opinion rendered by
Stanger.
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 liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
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 1% interest, consisting of a 0% limited
partnership interest and a 1% general partnership interest, in your partnership.
On October 31, 1998, IPT and AIMCO entered into an agreement and plan of
merger, dated as of October 1, 1998 (the "IPT Merger Agreement"), pursuant to
which IPT merged with AIMCO on February 26, 1999 (the "IPT Merger"). Upon
consummation of the IPT Merger, each outstanding share of IPT not owned by AIMCO
was converted into the right to receive 0.3601 shares of AIMCO's Class A Common
Stock (approximately 4,180,000 shares in the aggregate).
One of the reasons we chose to acquire Insignia is that we would be able to
make the exchange 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, and would provide the AIMCO Operating Partnership
with a larger asset and capital base and increased diversification. As of the
date of this offering, the AIMCO Operating Partnership proposes to make offers
to approximately 90 of the Insignia Partnerships, including your partnership.
During our negotiations with Insignia in early 1998, we decided that if the
merger with Insignia were consummated, we could also benefit from making offers
for limited partnership interests in the Insignia Partnerships. While some of
the Insignia Partnerships are public partnerships and information is publicly
available on such partnerships for weighing the benefits of making an exchange
offer, many of the partnerships are private partnerships and information about
such partnerships comes principally from the general partner. Our control of the
general partner makes it possible to obtain access to such information. Further,
such control also means that we control the operations of the partnerships and
their properties. Insignia did not propose that we conduct such exchange offers,
rather we initiated the offers on our own. We determined in
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<PAGE> 922
June of 1998 that if the merger with Insignia were consummated, we would offer
to limited partners of the Insignia Partnerships limited partnership units of
the AIMCO Operating Partnership and/or cash.
In connection with the Insignia Merger we acquired general partnership
interests and certain limited partnership interests in a number of private and
public partnerships. Eight private partnerships out of the 90 partnerships
involved in the proposed exchange offers do not have audited financial
statements prepared in accordance with generally accepted accounting practices
("GAAP"). Certain of these partnerships have audited financial statements
prepared on the basis of federal income taxes and others have unaudited
financial statements which may or may not be prepared on the basis of GAAP or
federal income taxes. For the Insignia Partnerships for which exchange offers
are being made which do not have audited GAAP financial statements for at least
two years, we are making the offer on the basis of either one year of audited
GAAP financial statements and one year of unaudited GAAP financial statements or
just unaudited GAAP financial statements. We tried to obtain two years of
audited GAAP financial statements for all the partnerships for which offers are
being made, but because of the inability to locate records from inception of the
partnerships which would allow auditors to verify the original purchase price of
the properties, no audits were possible. In these cases, the entities which
controlled the general partners prior to Insignia are no longer in business or
have no current knowledge or records of such partnerships. For the same reasons,
we do not have all the records for past years of some of the partnerships.
Therefore, for the partnerships without an audit, we did not have invoices,
escrow statements, property closing statements or the like to support the
original costs of the real property to the satisfaction of independent auditors,
in order for them to render an unqualified audit report. Consequently, we have
no way to support the original cost of the properties. However, we have general
ledgers and related accounting records that enable us to prepare GAAP basis
financial statements. These records were taken from the entities that controlled
the general partners and were subsequently maintained by us. The amount of
capitalized property costs appearing in those books and records has, to our
knowledge, been appropriately rolled forward from year to year and used by the
general partners of the partnerships in question to prepare tax returns and
periodic reports to the investors in the partnerships. Therefore, we believe
that the unaudited financial statements included in the prospectus supplements
for such partnerships have been prepared in accordance with GAAP.
In acquiring Insignia and the interests in the Insignia Partnerships, we
conducted due diligence with regard to certain of the assets acquired including
the major properties held by the Insignia Partnerships. Our due diligence
focused on the condition of the major properties and the terms of the
partnership agreements. Since Insignia had audited GAAP financial statements and
since those partnerships without audited GAAP financial statements are generally
smaller, we did not focus on the issue of audited GAAP based financial
statements for the smaller partnerships at the time of the merger. Further, for
our internal due diligence use, audited tax based financial statements are also
used. The total number of Insignia Partnerships we acquired an interest in was
approximately 550 of which approximately 25 do not have audited GAAP statements.
We were not able to pick and choose the partnerships in which we would acquire
an interest. The Insignia Partnerships were part of the business of Insignia. As
a consequence, we acquired interests in certain small private partnerships which
do not have the ability to obtain audited GAAP financial statements. It is our
policy to acquire properties or partnerships with audited GAAP based financial
statements. However, in connection with large acquisitions of partnerships
interests, such as with the Insignia Merger, we may occasionally acquire a
partnership or property without audited GAAP financial statements.
Previous Tender Offers
Tender offers have been previously made with respect to certain of the
public Insignia Partnerships. However, there have not been any prior tender
offers to acquire units of your partnership. Except for such tender offers, we
are not aware of any merger, consolidation or other combination involving any of
the Insignia Partnerships, or any acquisitions of any of such partnerships or a
material amount of the assets of such partnerships.
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<PAGE> 923
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 August 28, 1998 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
(which is our subsidiary).
Liquidation
Benefits of 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 (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 your general partner (which is our subsidiary), 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 on the order of 1% of the principal amount of the mortgage.
Your general partner believes it currently is in the best interest of your
partnership to continue holding its real estate assets.
Continuation of the Partnership Without the Offer
Benefits of Continuation. Although our offer permits you to continue your
investment in your partnership, 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. Your
partnership's net income has increased from $186,905 for the nine months ended
September 30, 1997, to $343,888 for the nine months ended September 30, 1998. 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. The continuation of your partnership will allow you to continue to
participate in the net income and any increases of revenue of your partnership
and any net proceeds from the sale of any property owned by your partnership.
The General Partner continues to review operations and expects to complete
capital expenditures in 1999 and 2000 enabling it to possibly increase rents and
lower expenses. In addition, a sale of the property may cause a tax gain to each
investor.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. If your partnership continues operating as presently structured, your
partnership could be forced to borrow on terms that could result in net losses
from operations. Your partnership's mortgage notes are in September 2008. Your
partnership currently has adequate sources of cash to finance its operations on
both a short term and long term basis. Continuation of your partnership without
the offer would deny you and your partners the benefits that your general
partner (which is our subsidiary) expects to result from the 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
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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.
Alternative Structures Considered
Before we decided to make our offer, we considered a number of alternative
transactions, including purchasing some or all of your partnership's properties;
making an offer of only cash for your units; making an offer of only Common OP
Units for your units; and making an offer of only Preferred OP Units for your
units. A merger would require a vote of the limited partners of your
partnership. If the merger was approved, all limited partners, including those
who wish to retain their units and continue to participate in your partnership,
would be forced to participate in the merger transaction. If the merger was not
approved, all limited partners, including those who would like to liquidate
their investment in your partnership, would be forced to retain their units.
We also considered purchasing your partnership's properties from your
partnership. However, a sale of your partnership's property would require a vote
of a majority of the limited partners. If the sale was approved, all limited
partners, including those who wish to continue to participate in the ownership
of your partnership's properties, would be forced to participate in the sale
transaction, and possibly to recognize taxable income. If the sale was not
approved, all limited partners, including those who would like to dispose of
their investment in your partnership's properties, would be forced to retain
their investment.
In order to give all limited partners in your partnership an opportunity to
make their own investment decision, we elected to make an offer directly to you
and the other limited partners. We considered making an all cash offer in order
to satisfy some limited partners' desire for immediate liquidity. However, an
all cash offer would not be desirable for those limited partners who do not
desire immediate liquidity and do not want to immediately recognize any taxable
income, but might otherwise be interested in disposing of their investment in
your partnership and might want an opportunity to control the timing of any
realization of taxable income associated with liquidating such investment in the
future.
We considered making an offer of only OP Units, either all Common OP Units
or all Preferred OP Units. The primary disadvantage of an all OP Unit offer is
that those limited partners who want immediate liquidity would be forced to wait
at least one year before exchanging their OP Units for cash or AIMCO stock. We
decided to offer limited partners both Common OP Units and Preferred OP Units in
order to permit investors to make their own decision as to whether they
preferred the possibility of future capital appreciation (Common OP Units) or
preferred distribution rights (Preferred OP Units).
After considering these alternatives, we decided to offer limited partners
the possibility of all three forms of consideration: cash, Common OP Units and
Preferred OP Units. We think that such an offer will appeal to a large number of
limited partners in your partnership, while permitting each one to retain any or
all of his or her units and remain a limited partner in your partnership on the
same terms as before.
Sale of Assets
Your partnership could sell the property it owns. The general partner of
your partnership considers sale of your partnership's property from time to
time. However, any such sale would likely be a taxable transaction.
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:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
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<PAGE> 925
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, currently listed and traded on the NYSE.
- Preferred Quarterly Distributions. Your partnership paid distributions of
$14,640 for the fiscal year ended December 31, 1998. Holders of Preferred
OP Units will be entitled to receive quarterly distributions of $0.50 per
unit (equivalent to $2.00 on an annualized basis) before any
distributions are paid to holders of Common OP Units. This is equivalent
to a distribution of $4,423.50 per year on the number of Preferred OP
Units you will receive in exchange for each of your partnership 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:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- Quarterly Distributions. Your partnership paid distributions of $14,640
for the fiscal year ended December 31, 1998. In 1998, we paid quarterly
distributions on the Common OP Units totalling $2.25. In January 1999, we
increased our distribution rate on each of the Common OP Units to $2.50
on an annual basis. Assuming no change in the level of our distributions,
this is equivalent to a distribution of $3,673.13 per year on the number
of Common OP Units you will receive in exchange for each of your
partnership units. See "The AIMCO Operating Partnership."
- 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 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.
DISADVANTAGES OF THE OFFER
The principal disadvantages to the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
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<PAGE> 926
- No Separate Representation of Limited Partners. In structuring the offer
and the consideration, no one separately represented the interests of the
limited partners. Although we have a fiduciary duty to the limited
partners, we also have conflicting responsibilities to our equity
holders. We did not appoint, or ask the limited partners to appoint, a
party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of the property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pre-tax cash proceeds to you than our
offer.
- OP Units. Investing in OP Units has risks that include the lack of a
public market, transfer restrictions and a one year holding period before
they can be redeemed by a holder. The ultimate return on the OP Units is
directly tied to the future price of AIMCO's Class A Common Stock or
Class I Preferred Stock. You could ultimately receive less for your OP
Units than the cash price in our offer. Further, on or after March 1,
2005, we may redeem the Class I Preferred Stock for $25 per share.
- Lower Preferred Quarterly Distributions. Your partnership paid
distributions of $14,666 for the fiscal year ended December 31, 1998.
Holders of Preferred OP Units will be entitled to receive quarterly
distributions of $0.50 per unit (equivalent to $2.00 on an annualized
basis) before any distributions are paid to holders of Common OP Units.
This is equivalent to a distribution of $4,423.50 per year on the number
of Preferred OP Units you will receive in exchange for each of your
partnership units.
- Lower Common Quarterly Distributions. Your partnership paid distributions
of $14,666 for the fiscal year ended December 31, 1998. In 1998, we paid
quarterly distributions on the Common OP Units totalling $2.25 per unit.
In January 1999, we increased our distribution rate on each of the Common
OP Units to $2.50 on an annual basis. See "The AIMCO Operating
Partnership." Assuming no change in the level of our distributions, this
is equivalent to a distribution of $3,673.13 per year on the number of
Common OP Units you will receive in exchange for each of your partnership
units.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
the sale of the property would be advantageous given market conditions,
the condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of a property and the tax consequences to you
and your partners on a sale of a property. See also "Your
Partnership -- General Policy Regarding Sales and Refinancings of
Partnership Property."
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
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<PAGE> 927
VALUATION OF UNITS
We determined our cash offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower the value produced. We used your partnership's property
income for the fiscal year ended December 31, 1997. However, in determining the
appropriate capitalization rate, we considered the partnership's property income
since December 31, 1997. Our method for selecting a capitalization rate begins
with each property being assigned a location and condition rating (e.g., "A" for
excellent, "B" for good, "C" for fair, and "D" for poor). We have rated your
property's location B (good) and its condition B (good). Generally, we assign an
initial capitalization rate of 10.25% to properties in this category. We then
adjust the capitalization rate based on whether the mortgage debt that the
property is subject to bears interest at a rate above or below 7.5% per annum.
Generally, for every 0.5% in excess of 7.5%, the capitalization rate would be
increased by 0.25%. Your property's mortgage debt bears interest at 6.43% per
annum, which resulted in a decrease from the initial capitalization rate of
0.15%. We also considered any changes in your partnership's property income from
1997 to 1998. Because your partnership's property income in 1998 increased
compared to 1997, we further revised the capitalization rate downward by
approximately 0.38%, resulting in a final capitalization rate of 9.72%. The
evaluation of a property's location and condition, and the determination of an
appropriate capitalization rate for a property, is subjective in nature, and
others evaluating the same property might use a different capitalization rate
and derive a different property value.
Property income is the difference between the revenues from the property
and related costs and expenses, excluding income derived from sources other than
its regular activities and before income deductions. Income deductions include
interest, income taxes, prior-year adjustments, charges to reserves, write-offs
of intangibles, adjustments arising from major changes in accounting methods and
other material and nonrecurrent items. In this respect, property income differs
from net income disclosed in the partnership's financial statements, which does
not exclude these income sources and deductions. The following is a
reconciliation of your partnership's net income for the year ended December 31,
1997, to your partnership's property income for the same period.
<TABLE>
<S> <C>
Net Income (Loss)........................................... $270,488
Other Non-Operating Expenses................................ (45,526)
Depreciation................................................ 277,013
Interest.................................................... 470,025
--------
Property income............................................. $972,000
</TABLE>
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. Further,
in applying the direct capitalization method, others may make different
assumptions and obtain different results. 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 estimated 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 (property 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 divided
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<PAGE> 928
fiscal 1997 property income of $972,000 by the property's capitalization
rate of 9.72% to derive an estimated gross property value of $10,000,000.
- 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
certain other costs including required capital expenditures, deferred
maintenance, and closing costs to derive a net equity value for your
partnership of $4,295,383. Closing costs, which are estimated to be 2.5%
of the gross property value, include legal and accounting fees, real
property, transfer taxes, title and escrow costs and broker's fees.
- 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. Accordingly, 96.54% of the estimated liquidation
proceeds are assumed to be distributed to holders of units. Our cash
offer consideration represents the per unit liquidation proceeds
determined in this manner.
<TABLE>
<S> <C>
Property income (January 1, 1997 to December 31, 1997)...... $ 972,000
Capitalization Rate......................................... 9.72%
-----------
Estimated total gross valuation of your partnership's
property.................................................. 10,000,000
Plus: Cash and cash equivalents............................. (500,054)
Plus: Other partnership assets, net of security deposits.... 353,530
Less: Mortgage debt......................................... (4,647,993)
Less: Accounts payable and accrued expenses................. (134,277)
Less: Other liabilities..................................... (74,723)
Partnership valuation before taxes and certain costs........ 4,996,483
Less: Disposition fees...................................... (300,000)
Less: Extraordinary capital expenditures for deferred
maintenance............................................... (151,100)
Less: Closing costs......................................... (250,000)
Estimated net valuation of your partnership................. 4,295,383
Percentage of estimated net valuation allocated to units.... 96.54%
Estimated net valuation of units............................ 4,146,680
Total number of units............................. 75
Estimated valuation per unit................................ 55,289
-----------
Cash consideration per unit................................. 55,289
-----------
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration of $55,289 by the $25
liquidation preference of each Preferred OP Unit to get 2,211.75
Preferred OP Units per unit.
- In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $55,289 by
a price of $37.63 (the closing price of AIMCO's Class A Common Stock on
the NYSE for the 30 trading days ending on March 23, 1999) to get
1,469.25 Common OP Units per unit.
The total net valuation of all partnerships in which the AIMCO Operating
Partnership is making similar exchange offers, and which were valued using the
same methods as used for your partnership, is $568,751,183, of which, $4,295,383
or .76% is the net valuation of your partnership.
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<PAGE> 929
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
Your general partner is a subsidiary of the AIMCO Operating Partnership. 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. Your general partner has substantial conflicts of interest with
regard to the offer. However, for all of the reasons discussed herein, we and
your general partner believe that the offer and all forms of consideration
offered is fair to you and the limited partners of your partnership. We also
reasonably believe that the similar offers to the limited partners of the other
partnerships are fair to such limited partners. 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 us 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, your
general partner (which is our subsidiary) 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. The net
income of your partnership has increased from $186,905 for the nine months
ended September 30, 1997 to $343,888 for the nine months ended September
30, 1998. These factors are reflected in our valuation of your partnership.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are substantially the financial
equivalent to your interest in your partnership. 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
and Stanger's estimates of the net asset value ($55,902 per unit), going
concern value ($53,737 per unit) and liquidation value ($52,650 per unit)
of your partnership units. See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity. However, we did review whether trading information
was available.
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 by electing to accept Preferred OP Units or
Common OP Units.
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
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<PAGE> 930
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 $55,289, based on a total estimated
value of your partnership's property of $10,000,000. Your general partner
(which is our subsidiary) has no present intention to liquidate your
partnership or to sell or refinance your partnership's property. See
"Background and Reasons for the Offer". See "Valuation of Units" for a
detailed explanation of the methods we used to value your partnership.
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $2.00 and current annualized distributions with respect to the
Common OP Units are $2.50. This is equivalent to distributions of $4,423.50
per year on the number of Preferred OP Units, or distributions of $3,673.13
per year on the number of Common OP Units, that you would receive in
exchange for each of your partnership's units. Distributions with respect
to your units for the fiscal year ended December 31, 1998 were $14,640. See
"Comparison of Your Units and AIMCO OP Units -- Distributions."
13. The fact that if your partnership were liquidated as opposed to
continuing, the general partner (which is our subsidiary) would not receive
the substantial management fees it currently receives. As discussed in
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," we do not believe that
liquidation of the partnership is in the best interests of the unitholders.
Therefore, we believe the offer is fair in that the fees paid to the
general partner would continue even if the offer was not consummated. We
are not proposing to change the current management fee arrangement.
In evaluating these factors, your general partner (which is our subsidiary)
and the AIMCO Operating Partnership did not quantify or otherwise attach
particular weight to any of them.
Your general partner (which is our subsidiary) has not retained an
unaffiliated representative to act on behalf of the limited partners in
negotiating the terms of the offer since each individual limited partner can
make his own decision as to whether or not to tender and what consideration to
take. Unlike a merger or other form of partnership reorganization, a majority or
more of the holders of limited partnership interests in your partnership cannot
bind you. If an unaffiliated representative had been obtained, it is possible
that such representative could have negotiated a higher price for your units
than was unilaterally offered by the AIMCO Operating Partnership. We have
retained Stanger to conduct an analysis of our offer and to render an opinion as
to the fairness to you of the offer consideration from a financial point of
view. Although no representative has been retained to act solely on behalf of
the limited partners for purposes of negotiating the terms of the offer, we have
determined that the transaction is fair to you from a financial point of view.
We made this determination based, in part, on the fairness opinion from Stanger
and the fact that all limited partners may elect to retain their existing
security on the same terms as before our offer.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
Your general partner (which is our subsidiary) 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 and, although there are
other ways to value real estate, is a reasonably fair method to determine the
consideration offered. Although we believe our offer consideration represents
the amount you would receive if we currently liquidated your partnership, an
actual liquidation might generate a higher or lower price for holders of units.
A liquidation in the future might generate a higher or lower 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
S-37
<PAGE> 931
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
Your general partner (which is our subsidiary) 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
sell your partnership's property or refinance its indebtedness within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, your general partner
(which is our subsidiary) has attempted to compare the cash offer consideration
against: (a) estimates of the value of the units on a liquidation basis; (b)
estimates of the going concern value of your units based on continuation of your
partnership as a stand-alone entity; and (c) the net book value of your units.
The general partner of your partnership believes that analyzing the alternatives
in terms of estimated value, 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 us. These assumptions relate to, among other things: the operating
results since December 31, 1997 as to income and expenses of each property,
other projected amounts and the capitalization rates that may be used by
prospective buyers if your partnership assets were to be liquidated. The 1998
budget is discussed in "Stanger Analysis -- Summary of Materials Considered" and
other projected amounts are discussed in "Stanger Analysis -- Summary of
Reviews."
In addition, these estimates are based upon certain information available
to your general partner (which is our subsidiary) 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. 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.
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<PAGE> 932
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2021, 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.
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C> <C>
Cash offer price............................................ $55,289
Partnership preferred units................................. $55,289(1)
Partnership common units.................................... $55,289(1)
Alternatives:
Estimated liquidation proceeds............................ $55,289
Estimated going concern value............................. $44,866
Net book value............................................ $19,195
</TABLE>
- ---------------
(1) In our discussion of the offer price as being fair with regard to other
methods of valuing your partnership, we believe the number of Common OP
Units and Preferred OP Units to be issued per unit in the offer to be equal
to the cash price per unit. Therefore, the fairness discussion applies
equally to the cash and non-cash forms of consideration being effected. See
"Valuation of Units" for details of how the number of OP Units was
determined.
Prices on Secondary Market
There is no active market for your units. Your general partner (which is
our subsidiary) is unaware of any secondary market activity in the units.
Therefore any comparison to prices on the secondary market is not possible at
the present time. See "Your Partnership -- Distributions and Transfers of
Units -- Transfers."
Prior Tender Offers
There have been no previous tender offers for units of your partnership.
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. Your general
partner (which is our subsidiary) 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
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-39
<PAGE> 933
Estimated Going Concern Value
Going concern value is a measure of the value of your partnership if it
continued operating as an independent stand-alone entity. The estimated value of
the partnership on a going concern basis is not intended to reflect the
distributions payable to limited partners if its assets were to be sold at their
current fair market value. The general partner of your partnership estimated the
going-concern value of your partnership by analyzing projected cash flows and
performing a discounted cash flow analysis. The general partner of your
partnership assumed that your partnership will be operated in the same manner as
currently, as an independent stand-alone entity, and its assets sold in a
liquidation after a ten-year holding period. Distribution and sale proceeds per
partnership unit were discounted in the projections at a rate of 25%.
The general partner of your partnership assumed that real estate selling
costs will be incurred which will equal 2.5% of the sales price. This analysis
assumes that the partnership property will be sold in a liquidation, at the
expiration of the ten-year holding period, to an independent third-party buyer.
Upon such liquidation, other balance sheet assets (excluding amortizing assets)
and liabilities of your partnership will be sold at their book value, and the
net proceeds of sale will be allocated between the general partners and offerees
in accordance with your partnership's agreement of limited partnership. Should
the assets be liquidated over time, even at prices equal to those projected,
distributions to limited partners of your partnership's cash flow from
operations might be reduced because relatively fixed costs, such as general and
administrative expenses, are not proportionately reduced with the liquidation of
assets. However, for simplification purposes, the sales are assumed to occur
concurrently.
The going concern method relies on a number of assumptions, including among
other things, (i) rental rates for new leases and lease renewals; (ii)
improvements needed to prepare an apartment for a new lease or a renewal lease;
(iii) lease periods; (iv) capital expenditures; (v) broker's commissions; and
(vi) discount rates applied to future cash flows. The use of assumptions or
variables that differ from those described above could produce substantially
different results. Neither we nor the general partner of your partnership
solicited any offers or inquiries from prospective buyers of the property owned
by your partnership in connection with the preparation of the estimates of value
of the properties and the actual amounts for which the partnership's properties
or the partnership could be sold could be significantly higher or lower than any
of the estimates contained herein. The estimated going concern value of your
partnership is $44,866 per unit, which value is below our offer price per unit.
Therefore, we believe the offer price is fair in relation to the going concern
value.
The general partner determined going concern value based upon the
discounted present value of projected cash flows from the partnership over a
ten-year period of operation, which is a standard period for going concern
analyses for real property assets. Such discounted cash flows were based upon
year one property income from the real estate portfolio of $972,000, escalated
at a 3% per annum for the ten-year projection period. Property income was
reduced by: (i) partnership administrative expenses of $16,000 per annum; and
(ii) debt service on existing debt through maturity or the end of ten years,
whichever occurs first. For debt which matures during the ten-year period, a
refinancing at a 7% interest rate was assumed. At the end of the ten-year
projection period, the property was assumed to be sold at a price based upon
property income for the immediately following year capitalized at a
capitalization rate of 10.22%, less expenses of sale estimated at 3% of the
property value. The net cash flow to limited partners from the continued
operation of the property and the net proceeds of sale was then discounted at a
discount rate of 25% to achieve the going concern value of $44,866 per unit.
There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
Net Book Value
Net book value per unit is $19,195 and is substantially below the offer
price. Net book value would not be a fair price to offer since it does not
reflect market values for the apartments but original costs less depreciation.
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<PAGE> 934
Stanger's Estimate of Net Asset Value, Going Concern Value and Liquidation
Value
In rendering its opinion set forth as Appendix A, Stanger did its own
independent estimate of your partnership's net asset value of $55,902 per unit,
going concern value of $53,737 per unit and liquidation value of $52,650 per
unit. For an explanation of how Stanger determined such values see "Stanger
Opinion -- Summary of Reviews -- Comparison of Offer Price To Liquidation Value,
Going Concern Value and Secondary Market Prices." An estimate of your
partnership's net asset value per unit is based on a hypothetical sale of your
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 cash, proceeds from temporary investments, and all
other assets that are believed to have a liquidation value, after provisions in
full for all of the other known liabilities of your partnership. The net asset
value does not take into account (i) timing considerations discussed under
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," and (ii) costs associated with
winding up of your partnership. Therefore, the AIMCO Operating Partnership
believes that the estimate of net asset value per unit does not necessarily
represent the fair market value of a unit or the amount the limited partner
reasonably could expect to receive if the partnership's property was sold and
the partnership was liquidated. For this above reason, the AIMCO Operating
Partnership considers net asset value estimates to be less meaningful in
determining the offer consideration than the analysis described above under
"Valuation of Units."
Stanger's estimates of net asset value, going concern value and liquidation
value per unit represents premiums (discounts) to the offer price of $613,
($1,552) and ($2,639). In light of these premiums discounts and for all the
reasons set forth above, the AIMCO Operating Partnership believes the offer
price is fair to the limited partners. The AIMCO Operating Partnership believes
that the best and most commonly used method of determining the value of a
partnership which only owns an apartment is the capitalization of income
approach set forth in "Valuation of Units."
ALLOCATION OF CONSIDERATION
Your partnership's agreement of limited partnership provides that, in the
event of a liquidation, available proceeds are to be distributed 3.46% to the
general partner and 96.54% to the limited partners. Accordingly, in valuing your
units, we have assumed that 96.54% of the estimated liquidation proceeds are
distributed to holders of units. Since this allocation is in accordance with the
terms of the partnership agreement, we believe the allocation is fair. 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. Stanger has
advised us that the description of Stanger's analysis contained herein describes
the material portions of Stanger's review. 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
S-41
<PAGE> 935
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 any losses, claims,
damages, liabilities or expenses to which Stanger may be subject, under any
applicable federal or state law, including federal and state securities laws,
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 NYSE 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 audited financial statements for the years ended December 31, 1996
and 1997, and its unaudited financial statements for the period ended September
30, 1998, which your partnership's management has indicated to be the most
current available financial statements at the time; (iii) reviewed descriptive
information concerning your partnership's real estate assets (the "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, 1997 and 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 similar properties; (viii) reviewed
internal financial analyses prepared by your partnership of the estimated
current net liquidation value and going concern value of your partnership; (ix)
reviewed information provided by AIMCO concerning the AIMCO Operating
Partnership, the Common OP Units and the Preferred OP Units; and (x) conducted
other studies, analysis and inquiries as Stanger deemed appropriate.
S-42
<PAGE> 936
A summary of the operating budgets per property for the year ended December
31, 1998, which was supplied by your partnership to Stanger, is as follows:
FISCAL 1998 OPERATING BUDGETS
<TABLE>
<CAPTION>
CEDAR
TREE
----------
<S> <C>
Total Revenues.............................................. $2,041,673
Operating Expenses.......................................... (889,062)
Replacement Reserves -- Net................................. (149,583)
Debt Service................................................ (503,327)
Capital Expenditures........................................ (32,620)
----------
Net Cash Flow..................................... $ 467,101
==========
</TABLE>
The above budgets at the time they were made were forward-looking
information developed by the general partner of your partnership. Therefore, the
budgets were dependent upon future events with respect to the ability of your
partnership to meet such budget. The budgets incorporated various assumptions
including, but not limited to, lease revenue (including occupancy rates),
various operating expenses, general and administrative expenses, depreciation
expenses, capital expenditures, and working capital levels. While we deemed such
budgets to be reasonable and valid at the date made, there is no assurance that
the assumed facts will be validated or that the circumstances will actually
occur. Any estimate of the future performance of a business, such as your
partnership's business, is forward-looking and based on assumptions some of
which inevitably will prove to be incorrect.
The budget amounts provided above are figures that were not computed in
accordance with GAAP. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budget are often
re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budget
presented for fiscal 1998 should not necessarily be considered as indicative of
what the audited operating results for fiscal 1998 will be. For the year ended
December 31, 1998, the partnership expects to report revenues of $2,085,410.00,
operating expenses of $853,959.00 and replacement reserves and capital
expenditures of $205,300.00. Based on these estimates, the partnership's net
cash flow before debt service, which we believe provides a better indication of
the partnership's actual operating performance than net cash flow, was greater
than the budgeted amounts.
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 the third quarter of 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
S-43
<PAGE> 937
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 or
square footage; 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 nine month period ending
September 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 property.
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 property, 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 the
liquidation value calculation prepared by the management of your partnership.
Stanger observed that such liquidation value was based upon the gross property
valuation estimate prepared by management, which in turn is based upon fiscal
year 1997 property income capitalized at a capitalization rate of 9.72%. Stanger
further observed that the gross property valuation was adjusted for the
following additional items to achieve the liquidation value of your partnership:
(i) cash, other assets, mortgage indebtedness and other liabilities determined
as of December 31, 1997; (ii) estimated closing costs equal to approximately
2.5% of gross real estate value; and (iii) extraordinary capital expenditure
estimates in the amount of $151,180, a fee due the general partner of 3% of
sales price and a proposed cash distribution of $1,000,000. Stanger observed
that your partnership liquidation value of $4,295,383 was allocated 96.54% to
the limited partners and divided by the total units outstanding of 75 to provide
the liquidation value per unit of $55,289.
Review of Partnership Going Concern Analysis. Stanger reviewed the going
concern value calculation prepared by management of your partnership. Stanger
observed that such going concern value was based upon the discounted present
value of projected cash flows from the partnership over a ten-year period of
operation which is a standard period for going concern analysis for real
property assets. Such discounted cash flows were based upon year one property
income from the real estate portfolio of $972,000 escalated at 3% per annum for
the ten-year projection period. Property income was reduced by: (i) partnership
administrative expenses of $16,000 per annum; and (ii) debt service on existing
debt through maturity or the end of ten years, whichever occurs first. For debt
which matures during the ten-year period, a refinancing at a 7% interest rate
was assumed. At the end of the ten-year projection period, the properties were
assumed to be sold based upon: (i) property income for the immediately following
year capitalized at a capitalization rate of 10.22%; and (ii) expenses of sale
estimated at 3% of property value. Stanger observed that the proceeds of sale
were reduced by the estimated debt balance at the end of the tenth year to
provide net proceeds from the sale of your partnership's property.
The resulting cash flows for the ten-year period were discounted to present
value at a discount rate of 25%. Stanger observed that such discount rate was
based upon the portfolio real estate discount rate of 12.2%, adjusted for
leverage risk and illiquidity risk. Stanger observed that the resulting
partnership going concern value was divided by units outstanding of 75 to
achieve management's estimate of going concern value of $44,866 per unit.
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<PAGE> 938
Review of Secondary Market Prices. Stanger maintains a database of
secondary market information on limited partnership units. Stanger observed for
its data that no units were reported traded in the secondary market during 1998.
Comparison of Offer Price to Liquidation Value, Going Concern Value and
Secondary Market Price. Stanger observed that the offer price of $55,289 per
unit is equal to management's estimate of liquidation value, and reflects a 23%
premium to management's estimate of going concern value. Stanger further
observed that investors may select cash, Common OP Units or Preferred OP Units
in exchange for their partnership units or they may elect to continue to hold
their partnership units. Stanger further observed that the Common OP Units will
be priced at $37.625 per unit, an amount which equals the average of the closing
prices the common shares into which such Common OP Units are convertible for the
30-trading day period ended March 23, 1999. Furthermore, Stanger observed that
the Preferred OP Units to be issued in the transaction will be based upon the
liquidation preference of $25. Stanger noted that the Preferred OP Units are
redeemable for, at AIMCO's option, either: (i) $25 in cash per Preferred OP
Unit; (ii) common stock of AIMCO based upon a ten-day average price at the time
of the requested redemption; or (iii) commencing on the third year following the
closing of this transaction, preferred stock of AIMCO with a dividend equal to
the distribution on the Preferred OP Units. Stanger observed that the ten day
average closing price of the AIMCO common stock is $36.425, as of March 23, 1999
and therefore an investor receiving AIMCO common shares in redemption of the
Preferred OP Units would receive 0.6863 shares with a value approximating $25
for each $25 Preferred OP Unit redeemed, based upon AIMCO's average common share
price as of March 23, 1999. Stanger noted that commencing in the third year,
investors redeeming Preferred OP Units may receive from AIMCO Preferred Stock
with a dividend equal to the distribution on the AIMCO Preferred OP Units.
Stanger observed that the distribution on the Preferred OP Units is set at 8% of
$25 and that the average dividend yield on AIMCO's outstanding C, D, G and H
Preferred Shares approximates 10.1% as of March 23, 1999. Stanger noted that,
based upon the cash dividend yield on the AIMCO Preferred Shares identified
above as of March 23, 1999, investors would receive Preferred Shares with a
value of approximately $19.80 for each $25 Preferred OP Unit if such redemption
occurred after the second year following the closing of the transaction. Stanger
further observed that the above analysis does not take into consideration the
present value of the earnings on the tax deferral an investor may realize as the
result of selecting Preferred OP Units in lieu of cash in a taxable transaction.
In addition to the above analysis, Stanger prepared an independent estimate
of net asset value, going concern value and liquidation value per unit. Stanger
has advised AIMCO that Stanger's estimates of net asset value, liquidation value
and going concern value are based upon Stanger's independent estimate of
property income, a direct capitalization rate of 10.5%, transaction costs of
2.5% to 5.0%, growth rates of 3% and a terminal capitalization rate of 11.0%.
Stanger has advised us that the direct capitalization rate represents Stanger's
estimate of the capitalization rate applicable to its estimate of property
income and is based upon Stanger's independent estimate of the direct
capitalization rate for such property based upon such property's age, condition
and location. Stanger further advised us that the terminal capitalization rate
is the capitalization rate utilized in Stanger's going concern value estimate
which is applied to Stanger's estimate of property income in the eleventh year
to establish the value of the property at the end of the tenth year. Stanger has
advised us that Stanger estimated the terminal capitalization rate at a 50 basis
point premium to the direct capitalization rate estimate for the property.
Stanger utilized deferred maintenance estimates derived from the Adjusters
International, Inc. reports in the calculation of net asset value, liquidation
value and going concern value. Stanger advised us that Stanger adjusted its
estimate of net asset value and liquidation value for the cost of above market
debt using a 7% interest rate. Additionally, Stanger's net asset value,
liquidation value and going concern value calculations considered allocations to
the general partners for 10% of value in excess of $2,355,000. With respect to
the going concern value estimate prepared by Stanger, Stanger advised AIMCO that
a ten-year projection period and a discount rate of 25% was utilized. Such
discount rate reflects the risk associated with real estate, leverage and a
limited partnership investment. The 25% discount rate was based upon the
property's estimated internal rate of return derived from the discounted cash
flow analysis, (13% as described above), plus a premium reflecting the
additional risk associated with mortgage debt equal to approximately 60% of
property value. Stanger's estimates were based in part upon information provided
by us. Stanger relied upon the deferred maintenance estimates, property
descriptions, unit configurations,
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<PAGE> 939
allocation among partners, and other data provided by us. Stanger's analyses
were based on balance sheet data as of September 30, 1998, adjusted for a
$1,000,000 cash distribution, which we advised Stanger would be made after
September 30, 1998. Stanger's review also included a site visit, review of
rental rates and occupancy at the properties as well as competing properties.
Stanger's estimate of net asset value, going concern value and liquidation value
per unit were $55,902, $53,737 and $52,650 representing premiums (discounts) to
the offer price of 1.1%, (2.8)% and (4.89)%. See "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration."
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. Stanger has rendered similar fairness opinions with regard to certain
other exchange offers being made by the AIMCO Operating Partnership. Stanger
rendered the opinions only as to the individual fairness of the offer
consideration in each proposed exchange offer. The Fairness Opinion does not
address the fairness of all possible acquisitions of interests in your
partnership. In addition, the Fairness Opinion will not be revised to reflect
the actual participation in the offer.
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 your general partner (which is our subsidiary) and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's property, and the transaction costs and fees associated with a
sale of the property. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's property 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 property 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 property 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 property 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;
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<PAGE> 940
(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, nor did Stanger
address the fairness of all possible acquisitions of interests in the
partnership. The opinion will not be revised to reflect the actual results of
the offer. 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 or oral 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 $9,000 with
respect to your partnership. The estimated aggregate fee payable to Stanger in
connection with all affiliated partnerships is estimated at $1,510,000, plus
out-of-pocket expenses estimated at $61,000. 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 was
engaged by AIMCO during 1997 to represent AIMCO in negotiations to acquire
interests in a real estate limited partnership. Such transaction was never
consummated and no fee was ever paid to Stanger in connection with such proposed
transaction. AIMCO and its affiliates may retain the services of Stanger in the
future. Any such future services could relate to this offer, some or all of the
concurrent offers, or a completely separate transaction.
YOUR PARTNERSHIP
GENERAL
Cedar Tree Investors Limited Partnership, is a Kansas limited partnership
which completed a private placement of units, in 1991. Each unit was initially
sold at a price of $83,607. Insignia acquired the general partner of your
partnership in December, 1990. AIMCO acquired Insignia in October 1998. There
are currently a total of 67 limited partners of your partnership and a total of
75 units of your partnership outstanding. Your partnership is in the business of
owning and managing residential housing. Currently, your partnership owns and
manages the property described below. Your partnership has no employees. 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.
YOUR PARTNERSHIP AND ITS PROPERTY
Your partnership was formed on June 14, 1991 for the purpose of owning an
apartment property located in Shawnee, Kansas, known as "Cedar Tree Apartments."
Your partnership's property is owned by the partnership but is subject to a
mortgage. The property was built in 1984 and consists of 344 apartment units.
There are 199 one-bedroom apartments, 145 two-bedroom apartments. Your
partnership's property had an average occupancy rate of approximately 96.01% in
1998, 92.44% in 1997 and 92.44% in 1996.
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<PAGE> 941
Your partnership's property provides residents with a number of amenities
and services, such as 24-hour desk service, exercise room and/or sauna, and
party or meeting rooms. Nearly all apartment units are wired for cable
television, and many apartment units also offer one or more additional features,
such as washer/ dryer, microwave, fireplace, and patio/balcony.
Budgeted renovations or improvements for 1999 total $134,900 and are
intended to be paid for out of cash flow or borrowings. Major renovation items
include heating, ventilation and air conditioning systems,
siding/trim/facia/soffits, drives and parking lot, landscape and irrigation and
life support systems.
Set forth below are the average rents for the apartments for the last five
years:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$441 $430 $419 $391 $392
</TABLE>
The apartments are being depreciated for federal income tax purposes using
the accelerated cost recovery method. Depreciation is computed principally by
the straight-line and accelerated methods over estimated lives of 3 to 40 years.
Currently, the real estate taxes on the property are $112,993 of $1,139,317
of assessed valuation with a current yearly tax rate of 9.92%. When the proposed
improvements are made it is anticipated that the yearly tax rate may increase by
approximately 10.12% of such improvements.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a wholly 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.
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS
Under your partnership's agreement of limited partnership, your partnership
is not permitted to raise new equity and reinvest cash in new properties.
Consequently, your partnership is limited in its ability to expand its
investment portfolio. Your partnership will terminate on December 31, 2021
unless earlier dissolved. Your partnership has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
Generally, your partnership is authorized to acquire, develop, improve, own
and operate your partnership's property as an investment and for income
producing purposes. The investment portfolio of your partnership is limited to
the assets acquired with the initial equity raised through the sale of units to
the limited partners of your partnership or the assets initially contributed to
your partnership by the limited partners, as well as the debt financing obtained
by your partnership within the established borrowing restrictions.
An investment in your partnership is a finite life investment, with the
partners to receive regular cash distributions out of your partnership's
distributable cash flow, if available, and to receive cash distributions upon
liquidation of your partnership's real estate investments, if available.
In general, your general partner (which is our subsidiary) regularly
evaluates the partnership's property by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors the property's specific locale and sub-market
conditions (including stability of the surrounding neighborhood) 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 (including any prepayment penalties), tax implications,
availability of attractive mortgage financing to a purchaser, and the investment
climate are all considered. Any of these factors, and possibly others, could
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<PAGE> 942
potentially contribute to any decision by the general partner to sell,
refinance, upgrade with capital improvements or hold a particular partnership
property. If rental market conditions improve, 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 viable option than it is
currently. After taking into account the foregoing considerations, your general
partner is not currently seeking a sale of your partnership's property primarily
because it expects the property's operating performance to remain strong in the
near term. In making this assessment, your general partner noted that occupancy
and rental rates at the property were 96% and $478, respectively, at December
31, 1998, compared to 96% and $441, respectively, at December 31, 1997. Although
there can be no assurance as to future performance, the general partner expects
this trend to continue in the near future because the property is located in a
growing and improving downtown area. In addition, the general partner noted that
it expects to spend approximately $151,100 for initial capital expenditures at
the property in 1999 to repair the property's HVAC, siding, parking lot,
landscape and irrigation. These expenditures are expected to improve the
desirability of the property to tenants. The general partner does not believe
that a sale of the property at the present time would adequately reflect the
property's future prospects. Another significant factor considered by your
general partner is the likely tax consequences of a sale of the property for
cash. Such a transaction would likely result in tax liabilities for many limited
partners. The general partner has not received any recent indication of interest
or offer to purchase the property.
CAPITAL REPLACEMENT
Your partnership has an ongoing program of capital improvements,
replacements and renovations, including roof replacements, kitchen and bath
renovations, balcony repairs (where applicable), replacement of various building
systems and other replacements and renovations in the ordinary course of
business. All capital improvement and renovation costs are expected to be paid
from operating cash flows, cash reserves, or from short-term or long-term
borrowings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Your Partnership."
BORROWING POLICIES
Your partnership's agreement of limited partnership allows your partnership
to incur debt. As of December 31, 1998, your partnership had a current mortgage
note outstanding of $5,883,677, payable to FNMA, which bears interest at a rate
of 6.43%. The mortgage debt is due in September 2008. Your partnership also has
a second mortgage note outstanding of $142,290, on the same terms as the current
mortgage note. Your partnership's agreement of limited partnership also allows
the general partner of your partnership to lend funds to your partnership. As of
December 31, 1998, your general partner had no outstanding loans to your
partnership.
COMPETITION
There are other residential properties within the market area of your
partnership's property. The number and quality of competitive properties in such
an area could have a material effect on the rental market for the apartments at
your partnership's property and the rents that may be charged for such
apartments. While we are a significant factor in the United States in the
apartment industry, competition for apartments is local.
LEGAL PROCEEDINGS
Your partnership is party to a variety of legal proceedings related to its
ownership of the partnership's property and management and leasing business,
respectively, arising in the ordinary course of the business, which are not
expected to have a material adverse effect on your partnership.
HISTORY OF THE PARTNERSHIP
Your partnership sold $2,550,000 of limited partnership units in 1991 for
$83,607 per unit. Your partnership currently owns one apartment property.
S-49
<PAGE> 943
Your partnership used the funds raised to purchase its property and it has
expended the funds so raised many years ago. Your partnership currently owns the
property described herein, which is subject to a substantial mortgage. Your
general partner (which is our subsidiary) has not experienced any material
adverse financial developments from January 1, 1997 through the present.
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2021, 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.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, your general partner (which is our subsidiary) is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the doing of any act or the failure to do any
act by the general partner, which does not constitute fraud, gross negligence or
willful malfeasance as determined a court of competent jurisdiction, in
pursuance of the authority granted to promote the interests of your partnership,
the effect of which causes or results in loss or damage to your partnership, if
done in good faith, will not subject the general partner or its affiliates to
any liability. 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 partnership will indemnify and hold harmless the general partners and
their affiliates from any claim, loss, expense, liability, action or damage
resulting from any act or omission done in good faith which do not constitute
fraud, gross negligence or willful malfeasance as determined by a court of
competent jurisdiction, in pursuance of the authority granted to promote the
interests of your partnership, including, without limitation, reasonable fees
and expenses of attorneys engaged by the general partner in defense of such act
or omission and other reasonable costs and expenses of litigation and appeal.
All costs and expenses incurred in defending any proceeding or action or
otherwise will be advanced by your partnership.
Your partnership's agreement of limited partnership does not limit the
amount or type or insurance your partnership may purchase to cover the liability
of the general partners of your partnership.
DISTRIBUTIONS AND TRANSFERS OF UNITS
Distributions
The following table shows, for each of the years indicated, the
distributions paid per unit in such years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 AMOUNT
---------------------- -------
<S> <C>
1993........................................................ $ 4,986
1994........................................................ 7,404
1995........................................................ 5,333
1996........................................................ 5,360
1997........................................................ 5,386
1998........................................................ 14,666
-------
Total............................................. 43,135
</TABLE>
Transfers
The units are not listed on any national securities exchange or quoted on
the NASDAQ System, the Electronic Bulletin Board or the "pink sheets," and there
is no established public trading market for the units. Secondary sales activity
for the units has been limited and sporadic. The general partner of your
partnership monitors transfers of the units (a) because the admission of the
transferee as a substitute limited partner in your partnership require the
consent of the general partner of your partnership under your partnership's
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<PAGE> 944
agreement of limited partnership, and (b) in order to track compliance with safe
harbor provisions to avoid treatment as a "publicly traded partnership" for tax
purposes. However, the general partner of your partnership does not monitor or
regularly receive or maintain information regarding the prices at which
secondary sale transactions in the units have been effectuated. The general
partner of your partnership estimates, based solely on the transfer records of
your partnership (or your partnership's transfer agent), that no units have been
transferred in privately negotiated transactions or in transactions believed to
be between related parties, family members or the same beneficial owner since
1993.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate, approximately
a 1% interest in your partnership, 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 two years, 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 following table shows, for each of the years indicated, compensation
paid to your general partner and its affiliates on a historical basis, and on a
pro forma basis assuming that all of the units sought in our offer had been
acquired at the beginning of each period:
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------- ----------------------------------------
PARTNERSHIP PROPERTY PARTNERSHIP PROPERTY
FEES AND MANAGEMENT FEES AND MANAGEMENT
YEAR EXPENSES FEES DISTRIBUTIONS EXPENSES FEES DISTRIBUTIONS
---- ----------- ---------- ------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
1995 $15,000 $ 91,253 $ 5,333 $15,000 $ 91,253 $103,000
1996 15,756 94,152 5,360 15,756 94,152 103,510
1997 15,816 96,106 5,386 15,816 96,106 104,035
1998 23,588 105,546 14,666 23,588 105,546 276,500
</TABLE>
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<PAGE> 945
SELECTED FINANCIAL INFORMATION
OF CEDAR TREE INVESTORS LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------- ----------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and Cash Equivalents........ $ 1,737,430 $ 443,046 $ 499,946 $ 465,919 $ 558,661 $ 769,194 $ 786,518
Land & Building.................. 7,034,630 6,875,795 6,898,133 6,796,085 6,726,542 6,523,009 6,429,734
Accumulated Depreciation......... (1,712,333) (1,435,320) (1,504,573) (1,227,559) (961,648) (715,535) (491,163)
Other Assets..................... 633,266 469,583 408,004 428,915 420,720 391,316 485,066
----------- ----------- ----------- ----------- ---------- ---------- ----------
Total Assets............. $ 7,692,993 $ 6,353,104 $ 6,301,510 $ 6,463,360 $6,744,275 $6,967,984 $7,210,155
=========== =========== =========== =========== ========== ========== ==========
Notes Payable.................... $ 5,900,000 $ 4,660,329 $ 4,647,993 $ 4,695,590 $4,738,782 $4,777,977 $4,813,545
Other Liabilities................ 209,499 235,993 213,913 194,634 282,989 241,747 193,769
----------- ----------- ----------- ----------- ---------- ---------- ----------
Total Liabilities........ $ 6,109,499 $ 4,896,322 $ 4,861,906 $ 4,890,224 $5,021,771 $5,019,724 $5,007,314
----------- ----------- ----------- ----------- ---------- ---------- ----------
Partners' Capital........ $ 1,583,494 $ 1,456,782 $ 1,439,604 $ 1,573,138 $1,722,504 $1,948,260 $2,202,841
=========== =========== =========== =========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Revenue................. $1,484,072 $1,302,065 $1,815,531 $1,770,230 $1,723,740 $1,610,896 $1,614,882
Other Income................... 113,420 109,558 141,140 130,237 145,911 160,731 85,545
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Revenues......... $1,597,492 $1,411,623 $1,956,671 $1,900,467 $1,869,651 $1,771,627 $1,700,427
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating Expenses............. $ 607,447 $ 540,605 $ 777,678 $ 748,824 $ 796,744 $ 614,028 $ 558,951
General & Administrative....... 23,896 19,076 25,434 25,820 66,681 51,030 52,184
Depreciation................... 207,760 207,760 277,013 265,911 246,113 224,372 208,515
Interest Expense............... 307,375 353,748 470,025 475,804 463,814 467,470 470,788
Property Taxes................. 107,126 103,529 136,033 131,466 122,055 114,005 106,315
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Expenses......... $1,253,604 $1,224,718 $1,686,183 $1,647,825 $1,695,407 $1,470,905 $1,396,753
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income..................... $ 343,888 $ 186,905 $ 270,488 $ 252,642 $ 174,244 $ 300,722 $ 303,674
========== ========== ========== ========== ========== ========== ==========
Net Income per limited
partnership unit............. $ 4,539.32 $ 2,467.15 $ 3,570.44 $ 3,334.87 $ 2,300.02 $ 3,969.53 $ 4,008.50
========== ========== ========== ========== ========== ========== ==========
Distributions per limited
partnership unit............. $ 2,640.00 $ 4,003.02 $ 5,333.06 $ 5,306.53 $ 5,280.00 $ 7,330.00 $ 0
========== ========== ========== ========== ========== ========== ==========
</TABLE>
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<PAGE> 946
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion and analysis of the results of operations and
financial condition of Your Partnership should be read in conjunction with the
audited financial statements of Your Partnership included herein.
RESULTS OF OPERATIONS
Comparison of the Nine Months Ended September 30, 1998 to the Nine Months
Ended September 30, 1997
NET INCOME
Your Partnership recognized net income of $344,000 for the nine months
ended September 30, 1998, compared to $187,000 for the nine months ended
September 30, 1997. The increase in net income of $157,000 was the result of an
increase in revenues, partially off-set by an increase in operating expenses.
These factors are discussed in more detail in the following paragraphs.
REVENUES
Rental and other property revenues from the Partnership Property totaled
$1,597,000 for the nine months ended September 30, 1998, compared to $1,412,000
for the nine months ended September 30, 1997, an increase of $185,000 , or 13%.
The Partnership increased rental rates by an average of 6%; in addition,
occupancy increased 6% to 97%.
EXPENSES
Partnership Property operating expenses, consisting of utilities (net of
reimbursements received from tenants), contract services, turnover costs,
repairs and maintenance, advertising and marketing, and insurance totaled
$607,000 for the nine months ended September 30, 1998, compared to $541,000 for
the nine months ended September 30, 1997, an increase of $68,000, due primarily
to higher advertising charges and general increases in property costs.
Partnership Property management expenses totaled $79,000 for the nine months
ended September 30, 1998, compared to $71,000 for the nine months ended
September 30, 1997, an increase of $8,000. This increase was primarily the
result of the increase in rental revenues, as management fees are calculated
based on a percentage of revenue.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses increased $4,000 to $24,000 for the
nine months ended September 30, 1998, compared to the corresponding period for
1997. This increase is due primarily to higher partnership administrative
expenses and asset management fees.
INTEREST EXPENSE
Interest expense decreased $47,000 to $307,000 for the nine months ended
September 30, 1998, compared to the corresponding period for 1997. This decrease
is due to the refinancing of the debt during the first quarter of 1998. The new
indebtedness has a lower stated interest rate.
As part of the ongoing business plan of your partnership, the general
partner monitors the rental market environment of your partnership's investment
property to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting your partnership from increases in
expenses. As part of this plan, the general partner attempts to protect your
partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the general partner will be able to sustain such a plan.
S-53
<PAGE> 947
Comparison of the Year Ended December 31, 1997 to the Year Ended December 31,
1996
NET INCOME
Your partnership recognized net income of $270,488 for the year ended
December 31, 1997, compared to $252,642 for the year ended December 31, 1996.
The increase in net income of $17,846, or 7.06% was primarily the result of an
increase in rental revenues offset by an increase in operating expenses.
REVENUES
Rental and other property revenues from the partnership's property totaled
$1,956,671 for the year ended December 31, 1997, compared to $1,900,467 for the
year ended December 31, 1996, an increase of $56,204, or 2.96%.
EXPENSES
Operating expenses, consisting of, utilities (net of reimbursements
received from tenants), contract services, turnover costs, repairs and
maintenance, advertising and marketing, and insurance, totaled $777,678 for the
year ended December 31, 1997, compared to $748,824 for the year ended December
31, 1996, an increase of $28,854 or 3.85%. Management expenses totaled $96,106
for the year ended December 31, 1997, compared to $94,152 for the year ended
December 31, 1996, an increase of $1,954, or 2.08%.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $25,434 for the year ended
December 31, 1997 compared to $25,820 for the year ended December 31, 1996, a
decrease of $386 or 1.49%.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $470,025 for the year ended December 31, 1997, compared to
$475,804 for the year ended December 31, 1996, a decrease of $5,779, or 1.21%.
Comparison of the Year Ended December 31, 1996 to the Year Ended December 31,
1995
NET INCOME
Your partnership recognized net income of $252,642 for the year ended
December 31, 1996, compared to $174,244 for the year ended December 31, 1995.
The increase in net income of $78,398, or 44.99% was primarily the result of a
decrease in operating expenses and an increase in revenues. These factors are
discussed in more detail in the following paragraphs.
REVENUES
Rental and other property revenues from the partnership's property totaled
$1,900,467 for the year ended December 31, 1996, compared to $1,869,651 for the
year ended December 31, 1995, an increase of $30,816, or 1.65%.
EXPENSES
Operating expenses, consisting of, utilities (net of reimbursements
received from tenants), contract services, turnover costs, repairs and
maintenance, advertising and marketing, and insurance, totaled $748,824 for the
year ended December 31, 1996, compared to $796,744 for the year ended December
31, 1995, a decrease of $47,920 or 6.01%. The decrease is primarily due to a
decrease in maintenance expenses due to an extensive exterior painting project
at the property in the fourth quarter of 1995. Management expenses totaled
$94,152 for the year ended December 31, 1996, compared to $91,253 for the year
ended December 31, 1995, an increase of $2,899, or 3.18%.
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GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $25,820 for the year ended
December 31, 1996 compared to $66,681 for the year ended December 31, 1995, a
decrease of $40,861 or 61.28%. The decrease is primarily due to reclassing on
the financial statements of certain accounts from General and Administrative to
Operating. Grouped the same way as in 1995, 1996 General and Administrative
expense would be $65,555.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $475,804 for the year ended December 31, 1996, compared to
$463,814 for the year ended December 31, 1995, an increase of $11,990 or 2.59%.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, Your Partnership had $1,737,000 in cash and cash
equivalents. Your Partnership's principal demands for liquidity include normal
operating activities, payments of principal and interest on outstanding debt,
capital improvements, and distributions paid to limited partners. At September
30, 1998, the outstanding balance on the mortgage indebtedness was $5,900,000.
There are no commitments for material capital expenditures as of September 1998.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and meet other operating needs of the partnership. Such assets are currently
thought to be sufficient for any near-term needs of the partnership. Management
believes that your partnership has adequate sources of cash to finance its
operations, both on a short-term and long-term basis.
Budgeted renovations or improvements for 1999 total $134,900 and are
intended to be paid for out of cash flow or borrowings. Major renovation items
include heating, ventilation and air conditioning systems/siding/
trim/facia/soffits, drives and parking lot, landscape and irrigation and life
support systems.
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THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to 25% of the outstanding 75 units of your
partnership (up to 18.75 units) for consideration per unit of (i) 2,211.75
Preferred OP Units, (ii) 1,469.25 Common OP Units, or (iii) $55,289 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 the commencement of our offer 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., New York City time, on June 4, 1999, 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 January 1, 1999 (subject to proration
as described below), although you will be entitled to retain any distributions
you may have received after such date and prior to our commencement of this
offer.
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 March 26, 1999.
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 the commencement and the
expiration of the offer. See "-- Procedure for Tendering Units." UNDER NO
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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. However, any tendered units may be
withdrawn at any time prior to our accepting them for payment. The AIMCO
Operating Partnership has an 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.
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.
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.
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.
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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 pays for your units.
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 your
general partner (which is our subsidiary) (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.
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
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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 may
have to provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal.
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 "Federal Income Tax Consequences."
Transfer Taxes
The amount of any transfer taxes (whether imposed on the registered holder
of units or any person) payable on account of the transfer to such person will
be deducted from the purchase price unless satisfactory evidence of the such
taxes or exemption therefrom is submitted.
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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 our acceptance of such units have been accepted for payment.
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.
The offer may be extended or delayed indefinitely and no payment will be
made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment. 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 pay for units pursuant to the offer for
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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 25% 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 25% 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 25% 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 25%, 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 the general partner of your partnership and thereby
controls the management of your partnership. In
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addition, AIMCO owns 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.
However, the AIMCO Operating Partnership and its affiliates will not acquire any
additional units for a period of at least one year after expiration of the
offer. 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. In addition, we are not extending
appraisal rights in connection with the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
No provisions have been made with regard to the offer to allow you or other
limited partners to inspect the books and records of your partnership or to
obtain counsel or appraisal services at our expense or at the expense of your
partnership. However, as described under "Comparison of Your Partnership and the
AIMCO Operating Partnership -- Review of Investor Lists," you have the right
under your partnership's agreement of limited partnership to obtain a list of
the limited partners.
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
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after the date of this Prospectus Supplement and at or before the expiration
date of the offer, including any extension thereof, 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 reasonable 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 which, in the reasonable 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 the date hereof, (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
the date hereof, (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 reasonable 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 reasonable judgment of the
AIMCO Operating Partnership, a material acceleration or worsening thereof
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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 your
general partner (which is our subsidiary) 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
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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 reasonable 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 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 reasonable 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
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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;
or
(h) the offer to purchase may have an adverse effect on AIMCO's status
as a REIT.
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
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in its reasonable 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. However,
we will not be able to control voting decisions unless we acquire more units in
another transaction, which cannot take place for at least one year after
expiration of this offer. 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 controls the company that manages your partnership's
property. In the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Effect on Trading Market
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.
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. Consummation of
the offer will not affect your partnership's agreement of limited partnership,
the financial condition or results of operations of your partnership, the
business and properties owned, the management compensation payable to your
general partner (which is our subsidiary) or its affiliates or any other matter
relating to your partnership, except it would result in the AIMCO Operating
Partnership substantially increasing its ownership of units of your partnership.
We will receive future distributions from your partnership for any units we
purchase.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by your general partner (which
is our subsidiary), 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
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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 (excluding 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 (which are requests to dismiss the action as a matter
of law) were
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heard on February 8, 1999, but no decision has been reached by the Court. While
no assurances can be given, we believe that the ultimate outcome of this
litigation will not have a material adverse effect on us.
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, the accompanying Prospectus, the Letter of Transmittal,
and the legal and accounting fees in connection with this offer. 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 $50,000.
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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FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of the material Federal
income tax consequences of the offer 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
differing interpretations or change, possibly retroactively. This 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 you in light of your specific investment or tax
circumstances, or if you are subject to special tax rules (for example, if you
are a financial institution, broker-dealer, insurance company, or, except to the
extent discussed below, tax-exempt organization or foreign investor, 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 are 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. No clear precedent or authority
may be available on some questions. 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 of your specific tax situation.
TAX OPINIONS
Skadden, Arps, Slate, Meagher & Flom LLP ("Special Tax Counsel") has
delivered an opinion letter with regard to the material United States Federal
income tax consequences of the offer. The opinion letter of Special Tax Counsel
is filed as an exhibit to this Registration Statement. You may obtain a copy of
such opinion letter by sending a written request to the AIMCO Operating
Partnership.
The specific United States Federal income tax opinions that Special Tax
Counsel has provided are:
1. Commencing with AIMCO's initial taxable year ended December 31, 1994,
AIMCO was organized in conformity with the requirements for qualification
as a REIT under the Code, and its actual method of operation has enabled,
and its proposed method of operation will enable, AIMCO to meet the
requirements for qualification and taxation as a REIT. As noted in the
accompanying Prospectus, AIMCO's qualification and taxation as a REIT
depend upon its ability to meet, through actual annual operating results,
certain requirements, including requirements relating to distribution
levels and diversity of stock ownership, and the various qualification
tests imposed under the Code, the results of which have been represented by
the AIMCO's officers and will not be reviewed by Special Tax Counsel. No
assurance can be given that the actual results of AIMCO's future operations
for any one taxable year will satisfy the requirements for taxation as a
REIT under the Code.
2. The AIMCO Operating Partnership will be treated as a partnership and
not as an association taxable as a corporation for Federal income tax
purposes.
3. You will not recognize gain or loss for Federal income tax purposes
when you exchange your units solely for OP Units. If, immediately prior to
such exchange, the amount of your partnership's liabilities allocable to
the units you transfer to the AIMCO Operating Partnership exceeds the
amount of the AIMCO Operating Partnership's liabilities allocable to you
immediately after the exchange, you will receive a deemed distribution in
an amount equal to such liability relief and will recognize gain for
Federal income tax purposes to the extent that the amount of such deemed
distribution exceeds your aggregate adjusted tax basis in your OP Units.
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4. If you exchange your units for cash and OP Units, you will be treated
for Federal income tax purposes as selling some of your units for cash in a
taxable sale and contributing some of your units for OP Units in a tax-free
exchange. With respect to the units that you will be treated as selling for
cash, you will be taxed as described in paragraph number five below. With
respect to the units that you will be treated as exchanging for OP Units,
you will be taxed as described in paragraph number three above.
5. If you sell your units solely for cash, you will recognize gain or
loss for Federal income tax purposes in an amount equal to the difference
between (i) your amount realized on the sale and (ii) your adjusted tax
basis in the units you sold.
6. If you retain all or a portion of your units and your partnership
terminates for Federal income tax purposes, you will not recognize any gain
or loss as a result of such termination and your capital account in your
partnership will not be affected.
7. Because of the factual nature of the inquiry, no opinion is expressed
by Special Tax Counsel as to whether your exercise of a redemption right
with respect to an OP Unit would cause your contribution of units to the
AIMCO Operating Partnership to be a taxable transaction under the disguised
sale rules of the Code.
8. The discussion in the accompanying Prospectus under the captions
"FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS" and "FEDERAL
INCOME TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNIT HOLDERS" and
in this Prospectus Supplement under the caption "FEDERAL INCOME TAX
CONSEQUENCES" is a fair and accurate summary of the material United States
Federal income tax consequences of the offers and of the acquisition,
ownership and disposition of the OP Units and the AIMCO stock by a holder
who acquires the OP Units or AIMCO stock in connection with the offers,
subject to the qualifications set forth therein.
It must be emphasized that these opinions are based and conditioned upon
representations and covenants made by AIMCO and the AIMCO Operating Partnership
as to factual matters (including representations and covenants concerning
AIMCO's properties and the past, present and future conduct of its business and
your partnership's liabilities). These opinions are expressed as of the date of
the opinion letter and Special Tax Counsel has no obligation to advise AIMCO or
the AIMCO Operating Partnership of any subsequent change in the matters stated,
represented, or assumed or any subsequent change in the law. An opinion of
counsel is not binding on the IRS, and no assurance can be given that the IRS
will not challenge the above opinions of Special Tax Counsel.
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 when you exchange your units solely for OP Units. You may
recognize gain upon such exchange if, immediately prior to such exchange, the
amount of liabilities of your partnership allocable to the units you transferred
exceeds the amount of the AIMCO Operating Partnership liabilities allocable to
you immediately after such exchange. If this was true in your case, the excess
would be treated as a deemed distribution of cash to you from the AIMCO
Operating Partnership. This deemed cash distribution would be treated as a
nontaxable return of capital to the extent of your adjusted tax basis in your OP
Units 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 you exchange your units pursuant to the offer,
at least equal to the amount of liabilities of your partnership that were
allocable to your units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most persons who participate in the tender offer
would not recognize gain or loss as a result of an exchange of units solely for
OP Units pursuant to the offer.
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DISGUISED SALES
Under the Code, a transfer of property by a partner to a partnership
followed by a related transfer by the partnership of money or other property to
the partner is treated as a "disguised" sale if (1) the second transfer would
not have occurred but for the first transfer and (2) the second transfer "is not
dependent on the entrepreneurial risks of the partnership operations." In a
disguised sale, the partner is treated as if he or she sold the contributed
property to the partnership as of the date the property was contributed to the
partnership. In addition, unless a few technical exceptions apply, transfers of
money or other property between a partnership and a partner that are made within
two years of each other, including redemptions of OP Units made within two years
of a contribution of your units, must be reported to the IRS and are presumed to
be a "disguised" sale unless the facts and circumstances clearly establish that
the transfers do not constitute a sale.
While there is no authority applying the disguised sale rules to the
exercise of a redemption right by a partner with respect to a partnership
interest received in exchange for property, the exercise of a redemption right
with respect to OP Units within two years of the date of the contribution of
your units to the AIMCO Operating Partnership may be treated as a disguised
sale. If this treatment were to apply, you would be treated for Federal income
tax purposes as if, on the date of the contribution of your units, the AIMCO
Operating Partnership transferred to you an obligation to give you the
redemption proceeds. In that case, you would be required to recognize gain on
the disguised sale in such earlier year. Because of the factual nature of such
an inquiry, Special Tax Counsel is unable to opine whether your exercise of a
redemption right with respect to an OP Unit would cause your contribution of
units to the AIMCO Operating Partnership to be a taxable transaction under the
disguised sale rules of the Code.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Federal Income Taxation of the
AIMCO Operating Partnership and OP Unitholders -- 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
If you exchange your units for cash and OP Units, you will be treated as
selling some of your units for cash in a taxable sale and contributing some of
your units for OP Units in a tax-free exchange. Your adjusted tax basis in your
transferred units will be allocated between the units you will be deemed to have
sold and the units you will be deemed to have contributed to the AIMCO Operating
Partnership.
With respect to the units that you will be treated as selling, you will
recognize gain or loss in an amount equal to the difference between (i) your
"amount realized" on the sale and (ii) your adjusted tax basis in units you
sold. Your "amount realized" on such sale will be equal to the sum of the amount
of cash you received pursuant to the offer (that is, the offer consideration)
plus the amount of your partnership's liabilities attributed to the units you
sold. For purposes of these partial sale rules, the amount of your partnership's
liabilities attributed to the units you sold will be equal to the lesser of (i)
the excess of the amount of your partnership's liabilities allocable to you in
respect of the transferred units immediately prior to the exchange over the
amount of such liabilities allocable to you as determined immediately after the
exchange or (ii) the product of (A) the amount of your partnership's liabilities
allocable to you in respect of the units you are deemed to have sold immediately
prior to the exchange and (B) your "net equity percentage" with respect to those
units. Your "net equity percentage" will be equal to the percentage determined
by dividing (x) the cash you received in the exchange by (y) the excess of the
gross fair market value of the units in the exchange over the amount of your
partnership's liabilities allocable to you in respect of those units immediately
prior to the exchange. Thus, your tax liability could exceed the amount of cash
you receive in the sale.
With respect to the units that you will be treated as exchanging, rather
than selling, you will be taxed as described above under the heading "Tax
Consequences of Exchanging Units Solely for OP Units."
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TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
If you sell your units solely for cash, you will recognize gain or loss on
a sale of your units equal to the difference between (i) your "amount realized"
on the sale and (ii) your adjusted tax basis in the units you sold. The "amount
realized" with respect to a unit will be equal to the sum of the amount of cash
you received for your units (that is, the offer consideration) plus the amount
of the liabilities of your partnership allocable to such units (as determined
under Section 752 of the Code). Thus, your tax liability could exceed the amount
of cash you receive in the sale.
ADJUSTED TAX BASIS
If you acquired your units for cash:
- your initial tax basis in your units will be equal to such cash
investment in your partnership increased by your share of your
partnership's liabilities at the time such units were acquired;
- your initial tax basis generally has been increased by:
- your share of your partnership's income and gains and
- any increases in your share of your partnership's liabilities; and
- your initial tax basis generally has been decreased (but not below zero)
by:
- your share of cash distributions from your partnership,
- any decreases in your share of your partnership's liabilities,
- your share of your partnership's losses, and
- your share of nondeductible expenditures of your partnership that are
not chargeable to capital.
For purposes of determining your adjusted tax basis in your units
immediately prior to a disposition of such units, your adjusted tax basis will
include your 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), the gain you
would recognize pursuant to the offer will exceed the cash proceeds you would
realize upon the sale of your units. The adjusted tax basis of the OP Units you
receive in exchange for your units pursuant to the offer will be equal to (i)
the sum of your adjusted tax basis in the units you transferred plus any gain
recognized in the exchange and will be reduced by (ii) any cash you received or
you were deemed to receive 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 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 that is attributable to your share of "unrealized receivables" of your
partnership exceeds the tax basis attributable to those assets, such excess will
be treated as ordinary income. Among other things, "unrealized receivables"
include depreciation recapture for 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. You will not receive any future distributions
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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 the income or loss. 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 the passive 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 passive losses in the manner described below. If you receive
cash for 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 receive cash for all or a portion of your units
pursuant to the offer and recognize 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
receive cash for all of your units pursuant to the offer, the balance of any
"suspended" losses from your partnership 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.
TAX REPORTING
If you tender any units, you must report the transaction by filing a
statement with your Federal income tax return for the year of the tender which
provides certain required information to the IRS. To prevent the possible
application of back-up Federal income tax withholding of 31% with respect to
payment of the offer consideration, you may have to provide the AIMCO Operating
Partnership with your correct taxpayer identification number. See the
instructions to the Letter of Transmittal.
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"). If you are a foreign person, the AIMCO Operating Partnership will
be required, under the FIRPTA provisions of the Code, to deduct and withhold 10%
of the amount realized by you on the disposition. The amount withheld would be
creditable against your Federal income tax liability and, if the amount withheld
exceeds your actual tax liability you could obtain a refund from the IRS by
filing a U.S. income tax return. See the Instructions to the Letter of
Transmittal.
TAX CONSEQUENCES OF A TERMINATION OF YOUR PARTNERSHIP
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"). The AIMCO Operating Partnership's acquisition of units pursuant
to the offer may result in a Termination of your partnership. If an acquisition
of units results in a
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Termination, the following Federal income tax events will be deemed to occur:
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
interests 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 to the
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
to the New Partnership. A Termination will change (and possibly shorten) a
Remaining Offeree's holding period with respect to its units in your partnership
for Federal income tax purposes. Gains recognized by a Remaining Offeree on the
disposition of New Partnership interests with a holding period of 12 months or
less may be classified as short-term capital gains and subject to taxation at
ordinary income tax rates.
The New Partnership's adjusted tax basis in its assets will be the same as
the Old Partnership's basis in such assets immediately before the Termination. A
Termination will also cause the New Partnership to recalculate the depreciable
lives of its assets. This will cause the assets to be depreciated over a longer
period of time than if there had been no Termination. This would generally
decrease the annual average depreciation deductions allocable to the Remaining
Offerees for a number of years following consummation of the offer (thereby
increasing the taxable income allocable to their retained units in each such
year), but would have no effect on the total depreciation deductions available
over the useful lives of the assets of your partnership.
Elections as to 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.
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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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 The AIMCO Operating Partnership is organized
organized under Kansas law. as a 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 The term of the AIMCO Operating Partnership
partners as a finite life investment, with continues until December 31, 2093, unless
limited partners to receive regular cash the AIMCO Operating Partnership is dissolved
distributions out of your partnership's Net sooner pursuant to the terms of the AIMCO
Cash From Operations (as defined in your Operating Partnership's agreement of limited
partnership's agreement of limited partner- partnership (the "AIMCO Operating
ship). The termination date of your Partnership Agreement") or as provided by
partnership is December 31, 2021. law. See "Description of 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 The purpose of the AIMCO Operating
and operate your partnership's property for Partnership is to conduct any business that
investment. Subject to restrictions may be lawfully conducted by a limited
contained in your partnership's agreement of partnership organized pursuant to the
limited partnership, your partnership may do Delaware Revised Uniform Limited Part-
all things necessary for or incidental to nership Act (as amended from time to time,
the protection and benefit of your or any successor to such statute) (the
partnership, including, borrowing funds and "Delaware Limited Partnership Act"),
creating liens. provided that such business is to be
conducted in a manner that permits AIMCO to
be qualified as a REIT, unless AIMCO ceases
to qualify as a REIT. The AIMCO Operating
Partner-
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship 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 ac-
tion, 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>
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is The general partner is authorized to issue
authorized to issue additional limited additional partnership interests in the
partnership interests in your partnership AIMCO Operating Partnership for any
and may admit additional limited partners by partnership purpose from time to time to the
selling not more than 75 units for cash and limited partners and to other persons, and
notes to selected persons who fulfill the to admit such other persons as additional
requirements set forth in your partnership's limited partners, on terms and conditions
agreement of limited partnership. The and for such capital contributions as may be
capital contribution need not be equal for established by the general partner in its
all limited partners and no action or sole discretion. The net capital
consent is required in connection with the contribution need not be equal for all OP
admission of any additional limited Unitholders. No action or consent by the OP
partners. 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,
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 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>
The general partner of your partnership may The AIMCO Operating Partnership may lend or
not enter into agreements with itself or any contribute funds or other assets to its
of its affiliates for services, except as subsidiaries or other persons in which it
otherwise specifically has an equity investment,
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
provided in your partnership's agreement of and such persons may borrow funds from the
limited partnership or on a basis no less AIMCO Operating Partnership, on terms and
favorable to your partnership than that conditions established in the sole and
which could have been arranged with absolute discretion of the general partner.
unaffiliated third parties for comparable To the extent consistent with the business
goods or services. Your partnership may not purpose of the AIMCO Operating Partnership
lend money to the general partner or its and the permitted activities of the general
affiliates, but the general partner may lend partner, the AIMCO Operating Partnership may
such money to your partnership as the transfer assets to joint ventures, limited
general partner, in its sole discretion, liability companies, partnerships,
deems necessary for the payment of any corporations, business trusts or other
partnership obligations and expenses. Such business entities in which it is or thereby
loans will be repaid with interest at rate becomes a participant upon such terms and
of 1% per annum over the then prevailing subject to such conditions consistent with
prime rate of United Missouri Bank of Kansas the AIMCO Operating Partnership Agreement
City, N.A., but in no event to exceed the and applicable law as the general partner,
maximum rate, from the first available funds in its sole and absolute discretion,
of your partnership and prior to believes to be advisable. Except as
distributions to the limited partners, only expressly permitted by the AIMCO Operating
from available funds, provided, however, Partnership Agreement, neither the general
that the general partner must first make partner nor any of its affiliates may sell,
reasonable efforts to obtain loans at the transfer or convey any property to the AIMCO
most favorable rates from unaffiliated Operating Partnership, directly or
persons. indirectly, except pursuant to transactions
that are determined by the general partner
in good faith to be fair and reasonable.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is The AIMCO Operating Partnership Agreement
authorized to enter into and execute, on contains no restrictions on borrowings, and
behalf of your partnership, all agreements, the general partner has full power and
contracts, instruments and related documents authority to borrow money on behalf of the
in connection with the acquisition, AIMCO Operating Partnership. The AIMCO
ownership, financing, management, Operating Partnership has credit agreements
maintenance, operation and sale of your that restrict, among other things, its
partnership's property by your partnership, ability to incur indebtedness.
on such terms as the general partner, in its
reasonable discretion, deems to be in the
bests interests of your partnership.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited Each OP Unitholder has the right, upon
partnership entitles the limited partners or written demand with a statement of the
their duly authorized representative to purpose of such demand and at such OP
inspect and copy the books and records of Unitholder's own expense, to obtain a
your partnership, including a current list current list of the name and last known
of the full name and last known business business, residence or mailing address of
address of each partner set forth in the general partner and each other OP
alphabetical order, upon reasonable notice Unitholder.
during business hours at the principal place
of business of your partnership or such
other place or places as may be determined
by the general partner from time to time. In
addition, a limited partner or its duly
authorized representative has the right to
receive by mail, upon written required to
your partnership at such limited partner's
sole cost and expense, a copy of a list of
names and addresses of the limited partners
and the number of
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
units owned by each of them. However, no
limited partner has the right to sell or
disclose such list to any other person or to
use such list for commercial purposes of any
purpose unrelated to the business of your
partnership.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has All management powers over the business and
full, exclusive and complete discretion in affairs of the AIMCO Operating Partnership
the management of your partnership's are vested in AIMCO-GP, Inc., which is the
business and has all rights and powers general partner. No OP Unitholder has any
generally conferred by law or necessary, right to participate in or exercise control
advisable or consistent in connection or management power over the business and
therewith. The general partner must perform affairs of the AIMCO Operating Partner-
such reasonable acts as may be consistent ship. The OP Unitholders have the right to
with good business practices in its vote on certain matters described under
performance as general partner. No limited "Comparison of Your Units and AIMCO OP
partner may take part in or interfere in any Units -- Voting Rights" below. The general
manner with the conduct or control of the partner may not be removed by the OP
business of your partnership and no limited Unitholders with or without cause.
partner has the right or authority to act
for or bind your partnership. 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 Notwithstanding anything to the contrary set
limited partnership, the doing of any act or forth in the AIMCO Operating Partnership
the failure to do any act by the general Agreement, the general partner is not liable
partner, which does not constitute fraud, to the AIMCO Operating Partnership for
gross negligence or willful malfeasance as losses sustained, liabilities in-
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
determined by a court of competent curred or benefits not derived as a result
jurisdiction, in pursuance of the authority of errors in judgment or mistakes of fact or
granted to promote the interests of your law of any act or omission if the general
partnership, the effect of which causes or partner acted in good faith. The AIMCO
results in loss or damage to your partner- Operating Partnership Agreement provides for
ship, if done in good faith, will not indemnification of AIMCO, or any director or
subject the general partner or its officer of AIMCO (in its capacity as the
affiliates to any liability. In addition, previous general partner of the AIMCO
your partnership will also indemnify and Operating Partnership), the general partner,
hold harmless the general partners and their any officer or director of general partner
affiliates from any claim, loss, expense, or the AIMCO Operating Partnership and such
liability, action or damage resulting from other persons as the general partner may
any act or omission done in good faith which designate from and against all losses,
does not constitute fraud, gross negligence claims, damages, liabilities, joint or
or willful malfeasance as determined by a several, expenses (including legal fees),
court of competent jurisdiction, in fines, settlements and other amounts
pursuance of the authority granted to incurred in connection with any actions
promote the interests of your partnership, relating to the operations of the AIMCO
including, without limitation, reasonable Operating Partnership, as set forth in the
fees and expenses of attorneys engaged by AIMCO Operating Partnership Agreement. The
the general partner in defense of such act Delaware Limited Partnership Act provides
or omission and other reasonable costs and that subject to the standards and
expenses of litigation and appeal. 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
and certain state securities administrations
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 and their
respective state securities laws.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of Except in limited circumstances, the general
limited partnership, after notice to the partner has exclusive management power over
general partner, the limited partners may the business and affairs of the AIMCO
remove such general partner upon a vote of Operating Partnership. The general partner
the limited partners holding a majority of may not be removed as general partner of the
the outstanding units. A general partner may AIMCO Operating Partnership by the OP
resign at any time provided that such Unitholders with or without cause. Under the
resignation is accepted by the limited AIMCO Operating Partnership Agreement, the
partners owning more than 50% of the general partner may, in its sole discretion,
outstanding units and sixty days prior to prevent a transferee of an OP Unit from
the effective date of such resignation such becoming a substituted limited partner
general partner nominates as a substitute pursuant to the AIMCO Operating Partnership
general partner a willing person or entity Agreement. The general partner may exercise
who meets the requirements of the tax laws. this right of approval to deter, delay or
A general partner may be admitted only with hamper attempts by persons to acquire a
the consent of the general partners, if any, controlling interest in the AIMCO Operating
and a majority-in-interest of the limited Partnership. Additionally, the AIMCO
partners. A limited partner may not transfer Operating Partnership Agreement contains
its units without the consent of the general restrictions on the ability of OP
partner. Unitholders to transfer their OP Units. See
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
"Description of OP Units -- Transfers and
Withdrawals" in the accompanying Prospectus.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Approval by a majority of the then With the exception of certain circumstances
outstanding limited partnership interests is set forth in the AIMCO Operating Partnership
necessary to effect an amendment to your Agreement, whereby the general partner may,
partnership's agreement of limited without the consent of the OP Unitholders,
partnership. Amendments may be proposed by amend the AIMCO Operating Partnership
the general partner or by limited partners Agreement, amendments to the AIMCO Operating
holding 10% or more of the then outstanding Partnership Agreement require the consent of
units. However, the general partner may the holders of a majority of the outstanding
amend your partnership's agreement of Common OP Units, excluding AIMCO and certain
limited partnership from time to time to other limited exclusions (a "Majority in
effect changes of a ministerial nature which Interest"). Amendments to the AIMCO
do not materially and adversely affect the Operating Partnership Agreement may be
rights of the limited partners, as required proposed by the general partner or by
by law, to add to the representations, holders of a Majority in Interest. Following
duties or obligations of the general partner such proposal, the general partner will
or surrender any right or power granted to submit any proposed amendment to the OP
the general partner under your partnership's Unitholders. The general partner will seek
agreement of limited partnership for the the written consent of the OP Unitholders on
benefit of the limited partners, to cure any the proposed amendment or will call a
ambiguity and to correct or supplement any meeting to vote thereon. See "Description of
provision in your partnership's agreement of OP Units -- Amendment of the AIMCO Operating
limited partnership which may be Partnership Agreement" in the accompanying
inconsistent with any other provision. Prospectus.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
In addition to the right to distributions in The general partner does not receive
respect of its partnership interest and compensation for its services as general
reimbursement for all fees and expenses as partner of the AIMCO Operating Partnership.
set forth in your partnership's agreement of However, the general partner is entitled to
limited partnership, the general partner payments, allocations and distributions in
receives no fee for its services as general its capacity as general partner of the AIMCO
partner. Moreover, the general partner or Operating Partnership. In addition, the
certain affiliates may be entitled to AIMCO Operating Partnership is responsible
compensation for additional services for all expenses incurred relating to the
rendered. 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>
No limited partner, unless it is deemed to Except for fraud, willful misconduct or
be taking part in the control of the gross negligence, no OP Unitholder has
business of your partnership, is bound by or personal liability for the AIMCO Operating
personally liable for the expenses, Partnership's debts and obligations, and
liabilities or obligation of your liability of the OP Unitholders for the
partnership. The liability of a limited AIMCO Operating Partnership's debts and
partner is limited solely to the amount of obligations is generally limited to the
its contribution to the capital of your amount of their investment in the AIMCO
partnership, whether or not returned to it, Operating Partnership. However, the
together with the undistributed share of the limitations on the liability of limited
profits of your
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
partnership from time to time credited to partners for the obligations of a limited
such limited partner's capital account and partnership have not been clearly
any money or other property wrongfully paid established in some states. If it were
or conveyed to such limited partner on determined that the AIMCO Operating Part-
account of its contribution, including but nership had been conducting business in any
not limited to money or property to which state without compliance with the applicable
creditors were legally entitled, paid or limited partnership statute, or that the
conveyed to such limited partner, and under right or the exercise of the right by the
certain circumstances, interest on returned holders of OP Units as a group to make
capital. 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>
The general partner of your partnership is Unless otherwise provided for in the
not required to devote all of its time or relevant partnership agreement, Delaware law
business efforts to the affairs of your generally requires a general partner of a
partnership, but must devote so much of its Delaware limited partnership to adhere to
time and attention to your partnership as is fiduciary duty standards under which it owes
necessary and advisable to successfully its limited partners the highest duties of
manage the affairs of your partnership. The good faith, fairness and loyalty and which
general partner is not required to manage generally prohibit such general partner from
your partnership as its sole and exclusive taking any action or engaging in any
function and it may have other business transaction as to which it has a conflict of
interests and may engage in other activities interest. The AIMCO Operating Partnership
in addition to those relating to your Agreement expressly authorizes the general
partnership, including the rendering of partner to enter into, on behalf of the
advice or services of any kind to other AIMCO Operating Partnership, a right of
investors and the making or management of first opportunity arrangement and other
other investors. Neither your partnership conflict avoidance agreements with various
nor any partner has rights in or to such affiliates of the AIMCO Operating
ventures or activities or to the income or Partnership and the general partner, on such
proceeds derived therefrom, and the pursuit terms as the general partner, in its sole
of such ventures, even if competitive with and absolute discretion, believes are
the business of your partnership, shall not advisable. The AIMCO Operating Partnership
be deemed wrongful or improper. In addition, Agreement expressly limits the liability of
any partner or its affiliates may engage in the general partner by providing that the
or possess an interest in other business general partner, and its officers and
ventures of every nature and description, directors will not be liable or accountable
whether such ventures are competitive with in damages to the AIMCO Operating
your partnership or otherwise, including but Partnership, the limited partners or as-
not limited to, the acquisition, ownership, signees for errors in judgment or mistakes
financing, leasing, operation, management, of fact or law or of any act or omission if
syndication, brokerage, sale, construction the general partner or such director or
and development of real property, which may officer acted in good faith. See
be located in the market area or vicinity of "Description of OP Units -- Fiduciary
your partnership's property, and neither Responsibilities" in the accompanying
your partnership nor any partners shall have Prospectus.
any right in or to such independent ventures
or to the income or profits derived
therefrom.
In general, your partnership's agreement of
limited partnership and the AIMCO Operating
Partnership
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
Agreement have limitations on the liability
of the general partner but such limitations
differ and provide more protection for the
general partner of the AIMCO Operating
Partnership.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material The AIMCO Operating Partnership is not
differences between the taxation of your subject to Federal income taxes. Instead,
partnership and the AIMCO Operating each holder of OP Units includes in income
Partnership. 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 nonre-
course 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>
<CAPTION>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity in- equity interests entitling each equity interests entitling each OP
terests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of and as declared by the board of rata share of cash distributions
distributions to be made to the directors of the general partner made from Available Cash (as such
partners of your partnership. of the AIMCO Operating Part- term is defined in the AIMCO
nership, quarterly cash distribu- Operating Partnership Agreement)
tion at a rate of $0.50 per to the partners of the AIMCO
Preferred OP Unit, subject to ad- Operating Partnership. To the
justments from time to time on or extent the AIMCO Operating
after the fifth anniversary of the Partnership sells or refinances
issue date of the Preferred OP its assets, the net proceeds
Units. therefrom generally will be re-
tained 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 Except as otherwise required Under the AIMCO Operating
agreement of limited by applicable law or in the Partnership Agreement, the
partnership, the approval of AIMCO Operating Partnership OP Unitholders have voting
holders of a majority of the Agreement, the holders of rights only with respect to
outstanding units is re- the Preferred OP Units will certain limited matters such
quired to amend your have the same voting rights as certain amendments and
partnership's agreement of as holders of the Common OP termination of the AIMCO
limited partnership subject Units. See "Description of Operating Partnership
to certain limitations, to OP Units" in the accompany- Agreement and certain
terminate your partnership, ing Prospectus. So long as transactions such as the
to remove a general partner any Preferred OP Units are institution of bankruptcy
and elect a replacement outstanding, in addition to proceedings, an assignment
therefore and to approve or any other vote or consent of for the benefit of creditors
disapprove the sale at one partners required by law or and certain transfers by the
time (or in a series of by the AIMCO Operating general partner of its
sales pursuant to a single Partnership Agreement, the interest in the AIMCO
plan) of all or affirmative vote or consent Operating Partnership or the
substantially all of your of holders of at least 50% admission of a successor
partnership's assets except of the outstanding Preferred general partner.
sales made in the ordinary OP Units will be necessary
course of your partnership's for effecting any amendment Under the AIMCO Operating
continuing business. All of any of the provisions of Partnership Agreement, the
such actions, except the the Partnership Unit general partner has the
removal of a general partner power to ef-
requires the concurrence of
the
</TABLE>
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<PAGE> 976
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
general partner. Designation of the Preferred fect the acquisition, sale,
OP Units that materially and transfer, exchange or other
A general partner may cause adversely affects the rights disposition of any assets of
the dissolution of your or preferences of the the AIMCO Operating
partnership by retiring holders of the Preferred OP Partnership (including, but
unless, within ninety days, Units. The creation or not limited to, the exercise
the remaining general part- issuance of any class or or grant of any conversion,
ner agrees to continue the series of partnership units, option, privilege or
business of your including, without subscription right or any
partnership. If there are no limitation, any partner- other right available in
remaining general part- ship units that may have connection with any assets
ners, all of the limited rights senior or superior to at any time held by the
partners may agree to the Preferred OP Units, AIMCO Operating Partnership)
continue the business and shall not be deemed to or the merger,
elect a successor general materially adversely affect consolidation,
partner by a the rights or preferences of reorganization or other
majority-in-interest vote the holders of Preferred OP combination of the AIMCO
within 90 days of the Units. With respect to the Operating Partnership with
resignation. exercise of the above or into another entity, all
described voting rights, without the consent of the
In general, you have greater each Preferred OP Units OP Unitholders.
voting rights in your shall have one (1) vote per
partnership than you will Preferred OP Unit. The general partner may
have as an OP Unitholder. OP cause the dissolution of the
Unitholders can not remove AIMCO Operating Partnership
the general partner of the by an "event of withdrawal,"
AIMCO Operating Partnership. as defined in the Delaware
Limited Partnership Act
(including, without limi-
tation, 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 "Descrip-
tion of OP
Units -- Dissolution and
Winding Up" in the accom-
panying Prospectus.
OP Unitholders cannot remove
the general partner of the
AIMCO Operating Partnership
with or without cause.
</TABLE>
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<PAGE> 977
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement Holders of Preferred OP Subject to the rights of
of limited partnership Units will be entitled to holders of any outstanding
specifies how the cash receive, when and as Preferred OP Units, the
available for distribution, declared by the board of AIMCO Operating Partnership
whether arising from directors of the general Agreement requires the
operations or sales or partner of the AIMCO general partner to cause the
refinancing, is to be shared Operating Partnership, AIMCO Operating Partnership
among the partners. The quarterly cash distributions to distribute quarterly all,
distributions payable to the at the rate of $0.50 per or such portion as the
partners are not fixed in Preferred OP Unit; provided, general partner may in its
amount and depend upon the however, that at any time sole and absolute discretion
operating results and net and from time to time on or determine, of Available Cash
sales or refinancing pro- after the fifth anniversary (as defined in the AIMCO
ceeds available from the of the issue date of the Operating Partnership
disposition of your Preferred OP Units, the Agreement) generated by the
partnership's assets. AIMCO Operating Partnership AIMCO Operating Partnership
may adjust the annual during such quarter to the
distribution rate on the general partner, the special
Preferred OP Units to the limited partner and the
lower of (i) 2.00% plus the holders of Common OP Units
annual interest rate then on the record date es-
applicable to U.S. Treasury tablished by the general
notes with a maturity of partner with respect to such
five years, and (ii) the quarter, in accordance with
annual dividend rate on the their respective interests
most recently issued AIMCO in the AIMCO Operating
non-convertible preferred Partnership on such record
stock which ranks on a date. Holders of any other
parity with its Class H Preferred OP Units issued in
Cumulative Preferred Stock. the future may have priority
Such distributions will be over the general partner,
cumulative from the date of the special limited partner
original issue. Holders of and holders of Common OP
Preferred OP Units will not Units with respect to
be entitled to receive any distributions of Available
distributions in excess of Cash, distributions upon
cumulative distributions on liquidation or other
the Preferred OP Units. No distributions. See "Per
interest, or sum of money in Share and Per Unit Data" in
lieu of interest, shall be the accompanying Prospectus.
payable in respect of any
distribution payment or pay- The general partner in its
ments on the Preferred OP sole and absolute discretion
Units that may be in may distribute to the OP
arrears. Unitholders Available Cash
on a more frequent basis and
When distributions are not provide for an appropriate
paid in full upon the record date.
Preferred OP Units or any
Parity Units (as defined The AIMCO Operating Partner-
below), all distributions ship Agreement requires the
declared upon the Preferred general partner to take such
OP Units and any Parity reasonable efforts, as
Units shall be declared determined by it in its sole
ratably in proportion to the and absolute discretion and
respective amounts of consistent with AIMCO's
distributions accumulated, qualification as a
accrued and unpaid on the
Preferred OP Units and such
Parity Units. Unless full
cumulative dis-
</TABLE>
S-84
<PAGE> 978
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
tributions on the Preferred REIT, to cause the AIMCO
OP Units have been declared Operating Partnership to
and paid, except in limited distribute sufficient
circumstances, no amounts to enable the
distributions may be general partner to transfer
declared or paid or set funds to AIMCO and enable
apart for payment by the AIMCO to pay stockholder
AIMCO Operating Partnership dividends that will (i)
and no other distribution of satisfy the requirements for
cash or other property may qualifying as a REIT under
be declared or made, the Code and the Treasury
directly or indirectly, by Regulations and (ii) avoid
the AIMCO Operating any Federal income or excise
Partnership with respect to tax liability of AIMCO. See
any Junior Units (as de- "Description of OP
fined below), nor shall any Units -- Distributions" in
Junior Units be redeemed, the accompanying Prospectus.
purchased or otherwise
acquired for considera-
tion, 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>
<CAPTION>
<S> <C> <C>
Subject to the restrictions There is no public market There is no public market
on transferability required for the Preferred OP Units for the OP Units. The AIMCO
by Federal or state law, and the Preferred OP Units Operating Partnership
limited partner may transfer are not listed on any Agreement restricts the
his limited partnership securities exchange. The transferability of the OP
interest to any person pro- Preferred OP Units are Units. Until the expiration
vided that: (i) such subject to restrictions on of one year from the date on
transfer is not in transfer as set forth in the which an OP Unitholder
contravention of your AIMCO Operating Partnership acquired OP Units, subject
partnership's agreement of Agreement. to certain exceptions, such
limited partnership, (ii) a OP Unitholder may not
duly executed and Pursuant to the AIMCO transfer all or any por-
acknowledged assignment has Operating Partnership tion of its OP Units to any
been approved by the general Agreement, until the transferee without the
partner, which approval expiration of one year from consent of the general
shall be in its sole the date on which a holder partner, which consent may
discretion and absolute of Preferred OP Units be withheld in its sole and
power, and (iii) the acquired Preferred OP Units, absolute discretion. After
transferee represents in subject to certain the expiration of one year,
writing that it satisfies exceptions, such holder of such OP Unitholder has the
the suitability requirements Preferred OP Units may not right to transfer all or any
for limited partners. transfer all or any portion portion of its OP Units to
However, no transfer may of its Preferred OP Units to any person, subject to the
occur if in light of the any transferee without the satisfaction of certain con-
total of all transfers sold consent of the general ditions specified in the
or exchanged within the partner, which consent may AIMCO Operating Partnership
period of twelve consecutive be withheld in its sole and Agreement, including the
months prior there, there absolute discretion. After general partner's right of
might result a termination the expiration of one year, first refusal. See
of your partnership for tax such holders of Preferred OP "Description of OP Units --
purposes in the opinion of Units has the right to Transfers and Withdrawals"
counsel. In order for a transfer all or any portion in the accompanying
transferee to be substituted of its Preferred OP Units to Prospectus.
as a limited partner, in any
addition to the above
require-
</TABLE>
S-85
<PAGE> 979
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
ments: (1) the assignee must person, subject to the
execute an irrevocable power satisfaction of certain After the first anniversary
of attorney appointing the conditions specified in the of becoming a holder of
general partner as the AIMCO Operating Partner- Common OP Units, an OP
assignee's attorney- ship Agreement, including Unitholder has the right,
in-fact, (2) an opinion of the general partner's right subject to the terms and
counsel must be received by of first refusal. conditions of the AIMCO
the general partner that Operating Partnership
such transfer does not After a one-year holding Agreement, to require the
violate applicable period, a holder may redeem AIMCO Operating Partnership
securities laws, (3) a Preferred OP Units and to redeem all or a portion
transfer fee must be paid, receive in exchange of the Common OP Units held
(4) the interest transferred therefor, at the AIMCO Oper- by such party in exchange
must not be less than one ating Partnership's option, for a cash amount based on
Unit or such lesser amount (i) subject to the terms of the value of shares of Class
as the assignor owned and any Senior Units (as defined A Common Stock. See
(5) such other conditions as below), cash in an amount "Description of OP
are set forth in your equal to the Liquidation Units -- Redemption Rights"
partnership's agreement of Preference of the Preferred in the accompanying
limited partnership must be OP Units tendered for Prospectus. Upon receipt of
fulfilled. redemption, (ii) a number of a notice of redemption, the
shares of Class A Common AIMCO Operating Partnership
Stock of AIMCO that is equal may, in its sole and
in Value to the Liquidation absolute discretion but
Preference of the Preferred subject to the restrictions
OP Units tendered for on the ownership of Class A
redemption, or (iii) for Common Stock imposed under
Preferred OP Units redeemed AIMCO's charter and the
after a two-year holding transfer restrictions and
period, a number of shares other limitations thereof,
of Class I Preferred Stock elect to cause AIMCO to
of AIMCO that pay an acquire some or all of the
aggregate amount of tendered Common OP Units in
dividends equivalent to the exchange for Class A Common
distributions on the Stock, based on an exchange
Preferred OP Units tendered ratio of one share of Class
for redemption; provided A Common Stock for each Com-
that such shares are part of mon OP Unit, subject to
a class or series of adjustment as provided in
preferred stock that is then the AIMCO Operating
listed on the NYSE or an- Partnership Agreement.
other national securities
exchange. See "Federal
Income Tax
Consequences -- Disguised
Sales." 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-86
<PAGE> 980
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are the Class Two 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 I High Performance 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, the
Class J Partnership Preferred Units, the Class K 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, the Class One 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 $0.50 per Preferred OP
Unit (equivalent to 8.0% per annum of the $25 stated liquidation preference);
provided, however, that at any time and from time to time on or after March 1,
2005, the AIMCO Operating Partnership may adjust the annual distribution rate on
the Preferred OP Units to the lower of (i) 2.0% 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. A reduction in the distribution rate will reduce your rate of return on
the Preferred OP Units and possibly encourage you to redeem such units. 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
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<PAGE> 981
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 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 $25 per Preferred OP
Unit, 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
S-88
<PAGE> 982
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 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 A Common Stock of AIMCO that is equal in Value to the
Liquidation Preference of the Preferred OP Units tendered for redemption, or
(iii) for Preferred OP Units redeemed after a two-year holding period, 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 NYSE or another national securities exchange.
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. Before issuing any preferred
stock upon redemption of Preferred OP Units, AIMCO will register the issuance
and sale of such shares under the Securities Act of 1933. 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.
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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.
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, the Class J 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 8.0% per annum of the $25 liquidation preference (equivalent to
$2.00 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 July 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 March 1, 2005, 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,
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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 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 The Class I Preferred Stock constitutes an
interests entitling each holder of Preferred equity interest entitling each holder of
OP Units to receive, when and as declared by Class I Preferred Stock to receive, when and
the board of directors of the general as declared by the AIMCO board of directors,
partner of the AIMCO Operating Partnership, cash distribution at a rate of $2.00 per
quarterly cash distribution at a rate of annum per share.
$0.50 per 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 Holders of Class I Preferred Stock do not
law or in the AIMCO Operating Partnership's have any voting rights, except as set forth
agreement of limited partnership, the below and except as otherwise required by
holders of the Preferred OP Units will have applicable law.
the same voting rights as holders of the
Common OP Units. See "Description of OP If and whenever dividends on any shares of
Units" in the accompanying Prospectus. So Class I Preferred Stock or any series or
long as any Preferred OP Units are class of Class I Parity Stock are in arrears
outstanding, in addition to any other vote for six or more quarterly periods (whether
or consent of partners required by law or by or not consecutive), the number of directors
the AIMCO Operating Partnership's agreement then constituting the AIMCO board of
of limited partnership, the affirmative vote directors shall be increased by two (if not
or consent of holders of at least 50% of the already increased by reason of similar types
outstanding Preferred OP Units will be of provisions with respect to shares of
necessary for effecting any amendment of any voting preferred stock), and the holders of
of the provisions of the Partnership Unit shares of Class I Preferred Stock, together
Designation of the Preferred OP Units that with the holders of shares of all other
materially and adversely affects the rights voting preferred stock then entitled to
or preferences of the holders of the exercise similar voting rights, voting as a
Preferred OP Units. The creation or issuance single class regardless of series, will be
of any class or series of AIMCO Operating entitled to vote for the election of two
Partnership units, including, without additional directors of AIMCO. Whenever
limitation, any AIMCO Operating Partnership dividends in arrears and dividends for the
units that may have rights senior or current quarterly dividend period have been
superior to the Preferred OP Units, will not paid or declared and set aside in respect of
be deemed to materially adversely affect the the outstanding shares of the Class I
rights or preferences of the holders of Preferred Stock and the voting preferred
Preferred OP Units. With respect to the stock, then the right of the holders of
exercise of the above described voting Class I Preferred Stock and the voting
rights, each Preferred OP Units will have preferred stock to elect such additional two
one (1) vote per Preferred 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
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
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>
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled Holders of Class I Preferred Stock are
to receive, when and as declared by the entitled to receive, when and as declared by
board of directors of the general partner of the AIMCO board of directors, out of funds
the AIMCO Operating Partnership, quarterly legally available for payment, cash
cash distributions at the rate of $0.50 per dividends at the rate of $2.00 per annum per
Preferred OP Unit; provided, however, that share. Such dividends are cumulative from
at any time and from time to time on or the date of original issue. Holders of Class
after the fifth anniversary of the issue I Preferred Stock are not be entitled to
date of the Preferred OP Units, the AIMCO receive any dividends in excess of
Operating Partnership may adjust the annual cumulative dividends on the Class I
distribution rate on the Preferred OP Units Preferred Stock. No interest, or sum of
to the lower of (i) 2.00% plus the annual money in lieu of interest, shall be payable
interest rate then applicable to U.S. in respect of any dividend payment or
Treasury notes with a maturity of five payments on the Class I Preferred Stock that
years, and (ii) the annual dividend rate on may be in arrears.
the most recently issued AIMCO
non-convertible preferred stock which ranks When dividends are not paid in full upon the
on a parity with its Class H Cumulative Class I Preferred Stock or any other class
Preferred Stock. Such distributions will be or series of Class I Parity Stock, all
cumulative from the date of original issue. dividends declared upon the Class I
Holders of Preferred OP Units will not be Preferred Stock and any shares of Class I
entitled to receive any distributions in Parity Stock will be declared ratably in
excess of cumulative distributions on the proportion to the respective amounts of
Preferred OP Units. No interest, or sum of dividends accumulated, accrued and unpaid on
money in lieu of interest, shall be payable the Class I Preferred Stock and such Class I
in respect of any distribution payment or Parity Stock. Unless dividends equal to the
payments on the Preferred OP Units that may full amount of all accumulated, accrued and
be in arrears. unpaid dividends on the Class I Preferred
Stock have been paid, or declared and set
When distributions are not paid in full upon apart for payment, except in limited
the Preferred OP Units or any Parity Units, circumstances, no dividends may be declared
all or paid or set apart for
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
distributions declared upon the Preferred OP payment by AIMCO and no other distribution
Units and any Parity Units will be declared of cash or other property may be declared or
ratably in proportion to the respective made, directly or indirectly, by AIMCO with
amounts of distributions accumulated, respect to any shares of Class I Junior
accrued and unpaid on the Preferred OP Units Stock, nor shall any shares of Class I
and such Parity Units. Unless full Junior Stock be redeemed, purchased or
cumulative distributions on the Preferred OP otherwise acquired for any consideration,
Units have been declared and paid, except in nor shall any other cash or other property
limited circumstances, no distributions may be paid or distributed to or for the benefit
be declared or paid or set apart for payment of holders of shares of Class I Junior
by the AIMCO Operating Partnership and no Stock. See "Description of Class I Preferred
other distribution of cash or other property Stock -- Dividends."
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 Ownership of shares of Class I Preferred
OP Units and the Preferred OP Units are not Stock by any person will be limited such
listed on any securities exchange. The that the sum of the aggregate value of all
Preferred OP Units are subject to certain equity stock (including all shares of Class
restrictions on transferability set forth in 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)
Pursuant to the AIMCO Operating of the aggregate value of all outstanding
Partnership's agreement of limited shares of equity stock. Further, certain
partnership, until the expiration of one transfers which may have the effect of
year from the date on which a holder of causing AIMCO to lose its status as a REIT
Preferred OP Units acquired Preferred OP are void ab initio.
Units, subject to certain exceptions, such
holder of Preferred OP Units may not If any transfer of Class I Preferred Stock
transfer all or any portion of its Preferred occurs which, if effective, would result in
OP Units to any transferee without the any person beneficially or constructively
consent of the general partner, which owning Class I Preferred Stock in excess or
consent may be withheld in its sole and in violation of the Class I Preferred
absolute discretion. After the expiration of Ownership Limit, such shares of Class I
one year, such holders of Preferred OP Units Preferred Stock in excess of the Class I
has the right to transfer all or any portion Preferred Ownership Limit will be
of its Preferred OP Units to any person, automatically transferred to a trustee in
subject to the satisfaction of certain his capacity as trustee of a trust for the
conditions specified in the AIMCO Operating exclusive benefit of one or more charitable
Partnership's agreement of limited beneficiaries designated by AIMCO, and the
partnership, including the general partner's prohibited transferee will generally have no
right of first refusal. rights in such shares, except upon sale of
the shares by the trustee. The trustee will
After a one-year holding period, a holder have all voting rights and rights to
may redeem Preferred OP Units and receive in dividends with respect to shares of Class I
exchange therefor, at the AIMCO Operating Preferred Stock held in the trust, which
Partnership's option, (i) subject to the rights will be exercised for the benefit of
terms of any Senior Units, cash in an amount the charitable beneficiaries.
equal to the Liquidation
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
Preference of the Preferred OP Units The trustee may sell the Class I Preferred
tendered for redemption, (ii) a number of Stock held in the trust to AIMCO or a
shares of Class A Common Stock of AIMCO that person, designated by the trustee, whose
is equal in value to the Liquidation ownership of the Class I Preferred Stock
Preference of the Preferred OP Units will not violate the Class I Preferred
tendered for redemption, or (iii) for Ownership Limit. Upon such sale, the
Preferred OP Units redeemed after a two-year interest of the charitable beneficiaries in
holding period, a number of shares of Class the shares sold will terminate and the
I Preferred Stock of AIMCO that pay an trustee will distribute to the prohibited
aggregate amount of dividends equivalent to transferee, the lesser of (i) the price paid
the distributions on the Preferred OP Units by the prohibited transferee for the shares
tendered for redemption; provided that such or if the prohibited transferee did not give
shares are part of a class or series of value for the shares in connection with the
preferred stock that is then listed on the event causing the shares to be held in the
NYSE or another national securities trust, the market price of such shares on
exchange. See "Federal Income Tax the day of the event causing the shares to
Consequences -- Disguised Sales." The be held in the trust and (ii) the price per
Preferred OP Units may not be redeemed at share received by the trustee from the sale
the option of the AIMCO Operating or other disposition of the shares held in
Partnership. See "Description of Preferred the trust. Any proceeds in excess of the
OP Units -- Redemption." amount payable to the prohibited transferee
will be payable to the charitable
beneficiaries.
On and after March 1, 2005, 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. Your general
partner became a wholly owned subsidiary on February 26, 1999 of AIMCO when IPT
merged with AIMCO. Accordingly, the general partner of your partnership 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 Unitholders 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 own both the general partner of your partnership and the manager of your
partnership's property. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $15,756 in 1996, $15,816 in 1997 and $23,588 in
1998. The property manager received management fees of $94,152 in 1996, $96,106
in 1997 and $105,546 in 1998. The AIMCO Operating Partnership has no current
intention of changing the fee structure for the general partner or for the
manager of your partnership's 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." AIMCO's
Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is
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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.
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. However, we will not acquire any
additional units for a period of at least one year after expiration of the
offer. Any such future offers that we might make could be for consideration that
is more or less than the consideration we are currently offering.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $1,036,669 will
be required to purchase all of the units sought in the offer, if such units are
tendered for cash excluding expenses as itemized below. The AIMCO Operating
Partnership will obtain all such funds from cash from operations, equity
issuances and short term borrowings. The AIMCO Operating Partnership will pay
all of the costs of the offer and not your partnership.
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...................................... $ 5,000
Accountant's Fees........................................... $ 5,000
Legal Fees.................................................. $10,000
Printing Fees............................................... $10,000
Stanger's Fees.............................................. $ 9,000
Other....................................................... $11,000
-------
Total....................................................... $50,000
=======
</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 Bank of America's reference rate, at the election of
the company, plus 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 2.25% and 2.75% in the case of LIBOR-based
loans and between negative 0.75% and 1.25% 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 September 30, 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
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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.
We may obtain funds pursuant to a credit agreement entered into by our
subsidiary, Insignia Properties, L.P. ("IPLP"), 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, 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). IPLP 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. The AIMCO Operating
Partnership intends to repay any funds borrowed out of working capital in the
ordinary course of business.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP has delivered 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 has delivered an opinion with regard to
the material Federal income tax consequences of the offer. 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 two opinions of Skadden, Arps, Slate, Meagher & Flom LLP are 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 opinions will be sent by the Information Agent.
EXPERTS
The financial statements of Cedar Tree Investors Limited Partnership at
December 31, 1997 and 1996 and for each of the three years in the period ended
December 31, 1997, appearing in this Prospectus Supplement have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports
appearing herein and elsewhere in this prospectus supplement, and have been so
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
S-98
<PAGE> 992
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed Balance Sheet as of September 30, 1998
(unaudited)............................................... F-2
Condensed Statements of Operations for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-3
Condensed Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-4
Notes to Condensed Financial Statements..................... F-5
Independent Auditors' Report................................ F-8
Balance Sheet as of December 31, 1997....................... F-9
Statements of Operations for the years ended December 31,
1997 and 1996............................................. F-10
Statements of Changes in Partners' Capital (Deficit) for the
years ended December 31, 1997 and 1996.................... F-11
Statements of Cash Flows for the years ended December 31,
1997 and 1996............................................. F-12
Notes to Financial Statements............................... F-13
Independent Auditors' Report................................ F-18
Balance Sheet as of December 31, 1996....................... F-19
Statements of Operations for the years ended December 31,
1996 and 1995............................................. F-20
Statements of Changes in Partners' Capital (Deficit) for the
years ended December 31, 1996 and 1995.................... F-21
Statements of Cash Flows for the years ended December 31,
1996 and 1995............................................. F-22
Notes to Financial Statements............................... F-23
</TABLE>
F-1
<PAGE> 993
CEDAR TREE INVESTORS LP
CONDENSED BALANCE SHEET -- UNAUDITED
SEPTEMBER 30, 1998
<TABLE>
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $1,737,430
Receivables and deposits.................................... 89,510
Restricted escrows.......................................... 230,458
Other assets................................................ 313,298
Investment property:
Land...................................................... $ 1,032,000
Building and related personal property.................... 6,002,630
-----------
7,034,630
-----------
Less: Accumulated depreciation............................ (1,712,333) 5,322,297
----------- ----------
Total assets...................................... $7,692,993
==========
LIABILITIES AND PARTNERS' CAPITAL
Accrued liabilities......................................... $ 19,253
Property taxes payable...................................... 107,126
Tenant security deposits.................................... 83,120
Notes payable............................................... 5,900,000
Partners' capital................................. 1,583,494
----------
Total liabilities and partners' capital........... $7,692,993
----------
----------
</TABLE>
F-2
<PAGE> 994
CEDAR TREE INVESTORS LP
CONDENSED STATEMENTS OF OPERATIONS -- UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenues:
Rental income............................................. $1,484,072 $1,302,065
Other income.............................................. 113,420 109,558
---------- ----------
Total revenues.................................... 1,597,492 1,411,623
Expenses:
Operating expenses........................................ 607,447 540,605
General and administrative expenses....................... 23,896 19,076
Depreciation expense...................................... 207,760 207,760
Interest expense.......................................... 307,375 353,748
Property tax expense...................................... 107,126 103,529
---------- ----------
Total expenses.................................... 1,253,604 1,224,718
---------- ----------
Net income........................................ $ 343,888 $ 186,905
========== ==========
</TABLE>
F-3
<PAGE> 995
CEDAR TREE INVESTORS LP
CONDENSED STATEMENTS OF CASH FLOWS -- UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1998 1997
----------- ---------
<S> <C> <C>
Operating activities:
Net income................................................ $ 343,888 $ 186,905
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................. 218,010 219,273
Changes in accounts:
Receivables and deposits and other assets.............. (242,383) (40,267)
Accounts payable and accrued expenses.................. (4,414) 41,359
----------- ---------
Net cash provided by operating activities......... 315,101 407,270
----------- ---------
Investing activities:
Property improvements and replacements.................... (136,497) (79,709)
Net decrease (increase) in restricted escrow.............. 6,873 (11,914)
----------- ---------
Net cash used in investing activities..................... (129,624) (91,623)
----------- ---------
Financing activities:
Payments on mortgage...................................... (4,647,993) (35,261)
----------- ---------
Proceeds from refinancing of mortgage..................... 5,900,000 --
Partners' distributions................................... (200,000) (303,259)
----------- ---------
Net cash provided by (used in) financing activities....... 1,052,007 (338,520)
----------- ---------
Net increase (decrease) in cash and cash equivalents...... 1,237,484 (22,873)
Cash and cash equivalents at beginning of year............ 499,946 465,919
----------- ---------
Cash and cash equivalents at end of period................ $ 1,737,430 $ 443,046
=========== =========
</TABLE>
F-4
<PAGE> 996
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements of Cedar Tree Investors
Limited Partnership (a Kansas Limited Partnership) as of September 30, 1998 and
for the nine months ended September 30, 1998 and 1997 have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included and all such adjustments are of a
recurring nature.
The financial statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31, 1997. It
should be understood that the accounting measurements at interim dates
inherently involve greater reliance on estimates than at year-end. The results
of operations for the interim periods are not necessarily indicative of the
results for the entire year.
F-5
<PAGE> 997
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996 AND INDEPENDENT AUDITORS' REPORT
F-6
<PAGE> 998
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE(S)
---------
<S> <C>
Independent Auditors' Report................................ F-8
Financial Statements as of December 31, 1997 and for the
Years Ended December 31, 1997 and 1996:
Balance Sheet............................................. F-9
Statements of Operations.................................. F-10
Statements of Changes in Partners' Capital (Deficit)...... F-11
Statements of Cash Flows.................................. F-12
Notes to Financial Statements............................. F-13 - 15
</TABLE>
F-7
<PAGE> 999
INDEPENDENT AUDITORS' REPORT
To the Partners of
Cedar Tree Investors Limited Partnership
(A Kansas Limited Partnership):
We have audited the accompanying balance sheet of Cedar Tree Investors
Limited Partnership (a Kansas Limited Partnership) (the "Partnership") as of
December 31, 1997, and the related statements of operations, changes in
partners' capital (deficit), and cash flows for each of the two years in the
period ended December 31, 1997. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership as of December 31, 1997, and
the results of its operations and its cash flows for each of the two years in
the period ended December 31, 1997 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Greenville, SC
February 17, 1998
(except for Note 6, as to which the date is March 17, 1998)
F-8
<PAGE> 1000
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
<TABLE>
<S> <C> <C>
Cash and cash equivalents................................... $ 499,946
Receivables and deposits.................................... 102,427
Restricted escrows.......................................... 237,329
Other assets (Note 1)....................................... 68,248
Investment properties -- at cost (Notes 1 and 2):
Land...................................................... $ 1,032,000
Building and related personal property.................... 5,866,133
-----------
6,898,133
Less accumulated depreciation............................... (1,504,573) 5,393,560
----------- ----------
Total Assets...................................... $6,301,510
==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable.......................................... $ 14,977
Tenant security deposits payable.......................... 74,723
Accrued property taxes.................................... 68,017
Other liabilities......................................... 56,196
Mortgage note payable (Note 2)............................ 4,647,993
Partners' Capital (Deficit) (Note 3):
General partner........................................... $ (6,713)
Limited partners (75 units issued and outstanding)........ 1,446,317 1,439,604
----------- ----------
Total Liabilities and Partners' Capital........... $6,301,510
==========
</TABLE>
See notes to financial statements.
F-9
<PAGE> 1001
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Revenues:
Rental income............................................. $1,815,531 $1,770,230
Other income.............................................. 141,140 130,237
---------- ----------
Total revenues......................................... 1,956,671 1,900,467
---------- ----------
Expenses:
Operating................................................. 777,678 748,824
General and administrative................................ 25,434 25,820
Depreciation.............................................. 277,013 265,911
Interest.................................................. 470,025 475,804
Property taxes............................................ 136,033 131,466
---------- ----------
Total expenses......................................... 1,686,183 1,647,825
---------- ----------
Net Income (Note 5)......................................... $ 270,488 $ 252,642
========== ==========
Net Income Allocated to General Partner (1%)................ $ 2,705 $ 2,526
Net Income Allocated to Limited Partners (99%).............. 267,783 250,116
---------- ----------
Total............................................. $ 270,488 $ 252,642
========== ==========
Net Income Per Limited Partnership Unit -- Based on 75
weighted average limited partnership units during the
years ended December 31, 1997 and 1996.................... $ 3,570 $ 3,335
========== ==========
</TABLE>
See notes to financial statements.
F-10
<PAGE> 1002
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
LIMITED
PARTNERSHIP GENERAL LIMITED
UNITS PARTNER PARTNERS TOTAL
----------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Partners' Capital (Deficit), December 31,
1995....................................... 75 $(3,894) $1,726,398 $1,722,504
Partners' distributions.................... -- (4,010) (398,000) (402,010)
Net income for the year ended
December 31, 1996....................... -- 2,526 250,116 252,642
------- ------- ---------- ----------
Partners' Capital (Deficit), December 31,
1996....................................... 75 (5,378) 1,578,514 1,573,136
Partners' distributions.................... -- (4,040) (399,980) (404,020)
Net income for the year ended
December 31, 1997....................... -- 2,705 267,783 270,488
------- ------- ---------- ----------
Partners' Capital (Deficit), December 31,
1997....................................... 75 $(6,713) $1,446,317 $1,439,604
======= ======= ========== ==========
</TABLE>
See notes to financial statements.
F-11
<PAGE> 1003
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income................................................ $ 270,488 $ 252,642
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 277,013 265,911
Amortization of loan costs............................. 15,351 15,351
Change in operating assets and liabilities:
Receivables and deposits............................. (11,905) 13,599
Other assets......................................... 135 (1,491)
Accounts payable..................................... 4,401 (50,798)
Accrued property taxes............................... 2,284 4,706
Tenant security deposits payable..................... 11,545 (731)
Other liabilities.................................... 1,049 (41,532)
--------- ---------
Net cash provided by operating activities......... 570,361 457,657
--------- ---------
Cash Flows From Investing Activities:
Property improvements and replacements.................... (102,048) (69,543)
Net receipts from (deposits to) restricted escrows........ 17,331 (35,654)
--------- ---------
Net cash used in investing activities............. (84,717) (105,197)
--------- ---------
Cash Flows From Financing Activities:
Principal payments on mortgage note payable............... (47,597) (43,192)
Partners' distributions................................... (404,020) (402,010)
--------- ---------
Net cash used in financing activities............. (451,617) (445,202)
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents........ 34,027 (92,742)
Cash and Cash Equivalents, Beginning of Year................ 465,919 558,661
--------- ---------
Cash and Cash Equivalents, End of Year...................... $ 499,946 $ 465,919
========= =========
Supplemental Disclosure of Cash Flow Information -- Cash
paid during the year for interest......................... $ 455,730 $ 459,816
========= =========
</TABLE>
See notes to financial statements.
F-12
<PAGE> 1004
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Cedar Tree Investors Limited Partnership (a Kansas Limited Partnership)
(the "Partnership") was formed to acquire, own and operate Cedar Tree
Apartments, a 344-unit multifamily residential complex located in Shawnee,
Kansas. The general partner of the Partnership is United Investors Real Estate,
Inc., a Delaware corporation.
Basis of Accounting
The accompanying financial statements of the Partnership are prepared on
the accrual basis and, therefore, revenue is recorded as earned and costs and
expenses are recorded as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash
Cash and cash equivalents includes cash on hand and in banks, money market
funds and certificates of deposit with original maturities of less than three
months.
Tenant Security Deposits
The Partnership requires security deposits from lessees for the duration of
the leases and such deposits are included in receivables and deposits. The
security deposits are refunded when the tenant vacates, provided the tenant has
not damaged its space and is current on its rental payments.
Income Taxes
For income tax purposes, the Partnership reports revenue and costs and
expenses on the accrual method. No income tax provisions have been shown in the
accompanying statements of operations since the partners are taxed individually.
Investment Properties
Investment properties are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over estimated useful
lives of 15 to 40 years for buildings and improvements and 5 to 12 years for
furniture and fixtures.
The Partnership records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets.
Other Assets
Included in other assets are deferred charges which consist of loan costs
totaling $153,506 which are amortized over the term of the related note.
Accumulated amortization as of December 31, 1997 was $98,532.
F-13
<PAGE> 1005
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Advertising
The Partnership expenses the cost of advertising as incurred. Advertising
expense, included in operating expenses, was $48,608 and $25,589 for the years
ended December 31, 1997 and 1996, respectively.
Reclassifications
Certain reclassifications of prior year balances have been made to conform
to the current year's presentation.
2. MORTGAGE NOTE PAYABLE
The mortgage note payable consists of a 10-year nonrecourse note
collateralized by Cedar Tree Apartments, payable in monthly installments of
$41,944, including interest. The interest rate is fixed at 9.75% per year. The
mortgage note payable matures on September 1, 2001. Scheduled maturities of
principal are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ----------
<S> <C>
1998..................................................... $ 52,450
1999..................................................... 57,799
2000..................................................... 63,693
2001..................................................... 4,474,051
----------
Total.................................................... $4,647,993
==========
</TABLE>
3. PARTNERS' EQUITY
Allocations of Profits and Losses
In accordance with the partnership agreement, all profits and losses are to
be allocated 1% to the general partner and 99% to the limited partners.
Distributions
The Partnership allocates distributions 1% to the general partner and 99%
to the limited partners. On February 15, 1998, the Partnership paid a
distribution to the partners of $100,000.
4. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1997 and 1996, the Partnership paid the
following amounts to affiliates of the general partner:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Property management fees................................. $96,106 $94,152
Reimbursement of expenses................................ 15,816 15,756
</TABLE>
In addition, affiliates of the general partner were paid $6,844 and $6,537
during 1997 and 1996, respectively, for construction oversight costs incurred in
conjunction with the Partnership's capital improvement and major repair
projects.
For the period from January 1, 1996 to August 31, 1997, the Partnership
insured Cedar Tree Apartments under a master policy through an agency and
insurer unaffiliated with the general partner. An affiliate of the general
partner acquired, in the acquisition of a business, certain financial
obligations from an insurance
F-14
<PAGE> 1006
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
agency which was later acquired by the agent who placed the master policy. The
agent assumed the financial obligations to the affiliate of the general partner,
who received payments on these obligations from the agent. The amount of the
Partnership's insurance premiums that accrued to the benefit of the affiliate of
the general partner by virtue of the agent's obligations as not significant.
5. PARTNER TAX INFORMATION
The following is a reconciliation between net income as reported in the
financial statements and Federal taxable income allocated to the partners in the
Partnership's information returns for the years ended December 31, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net income as reported................................. $270,488 $252,642
Add (deduct):
Deferred revenue..................................... 1,905 (39,988)
Depreciation differences............................. 11,077 5,102
Other................................................ 200 300
-------- --------
Federal taxable income................................. $283,670 $218,056
======== ========
Federal taxable income per limited partnership unit.... $ 3,744 $ 2,878
======== ========
</TABLE>
The following is a reconciliation between the Partnership's reported
amounts and Federal tax basis of net assets at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Net assets as reported.............................. $1,439,604 $1,573,136
Differences in basis of assets and liabilities:
Deferred revenue.................................. 4,911 3,006
Accumulated depreciation.......................... (9,377) (20,454)
Syndication costs................................. 213,094 213,094
Other............................................. 500 300
---------- ----------
Net assets -- tax basis............................. $1,648,732 $1,769,082
========== ==========
</TABLE>
6. SUBSEQUENT EVENTS
On March 17, 1998, Insignia Financial Group, Inc. ("Insignia") entered into
an agreement to merge its national residential property management operations,
and its controlling interest in Insignia Properties Trust, with Apartment
Investment and Management Company ("AIMCO"), a publicly traded real estate
investment trust. The closing, which is anticipated to happen in the third
quarter of 1998, is subject to customary conditions, including government
approvals and the approval of Insignia's shareholders. If the closing occurs,
AIMCO will then control the general partner of the Partnership.
F-15
<PAGE> 1007
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND INDEPENDENT AUDITORS' REPORT
F-16
<PAGE> 1008
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Independent Auditors' Report................................ F-18
Financial Statements as of December 31, 1996 and for the
Years Ended December 31, 1996 and 1995:
Balance Sheet............................................. F-19
Statements of Operations.................................. F-20
Statements of Changes in Partners' Capital (Deficit)...... F-21
Statements of Cash Flows.................................. F-22
Notes to Financial Statements............................. F-23 - F-25
</TABLE>
F-17
<PAGE> 1009
INDEPENDENT AUDITORS' REPORT
To the Partners of
Cedar Tree Investors Limited Partnership
(A Kansas Limited Partnership):
We have audited the accompanying balance sheet of Cedar Tree Investors
Limited Partnership (a Kansas Limited Partnership) (the "Partnership") as of
December 31, 1996, and the related statements of operations, changes in
partners' capital (deficit), and cash flows for each of the two years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership as of December 31, 1996, and
the results of its operations and its cash flows for each of the two years in
the period ended December 31, 1996 in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Greenville, South Carolina
February 21, 1997
F-18
<PAGE> 1010
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<TABLE>
<S> <C> <C>
Cash and cash equivalents................................... $ 465,919
Restricted cash -- tenant security deposits................. 63,178
Accounts receivable......................................... 3,347
Prepaid expenses............................................ 13,408
Escrows for taxes and insurance............................. 23,997
Restricted escrows.......................................... 254,660
Deferred charges -- net of accumulated amortization of
$83,181................................................... 70,325
Apartment properties -- at cost (Notes 1 and 2):
Land...................................................... $ 1,032,000
Buildings, improvements and related personal property..... 5,764,085
-----------
6,796,085
Less accumulated depreciation............................... (1,227,559) 5,568,526
----------- ----------
Total Assets...................................... $6,463,360
==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable............................................ $ 10,576
Accrued and other liabilities:
Property taxes............................................ $ 65,733
Tenant security deposits.................................. 63,178
Interest.................................................. 38,821
Unearned rental collections............................... 3,006
Other..................................................... 13,320 184,058
-----------
Mortgage note payable (Note 2).............................. 4,695,590
Partners' Capital (Deficit) (Note 3):
General partner............................................. (5,378)
Limited partners (75 units issued and outstanding).......... 1,578,514 1,573,136
----------- ----------
Total Liabilities and Partners' Capital........... $6,463,360
==========
</TABLE>
See notes to financial statements.
F-19
<PAGE> 1011
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Revenues:
Rentals................................................... $1,770,230 $1,723,740
Other income.............................................. 111,766 100,696
---------- ----------
Total revenues......................................... 1,881,996 1,824,436
---------- ----------
Expenses:
Operating................................................. 317,257 294,010
Administrative............................................ 65,555 66,681
Property management fees (Note 4)......................... 94,152 91,253
Advertising and rental incentives......................... 58,773 80,013
Maintenance............................................... 198,565 277,823
Depreciation.............................................. 265,911 246,113
Amortization of deferred charges.......................... 15,351 15,350
Interest.................................................. 460,453 463,814
Property taxes............................................ 131,466 122,055
Insurance................................................. 40,342 38,295
---------- ----------
Total expenses......................................... 1,647,825 1,695,407
---------- ----------
Income From Property Operations............................. 234,171 129,029
Interest Income............................................. 18,471 45,215
---------- ----------
Net Income (Note 5)......................................... $ 252,642 $ 174,244
========== ==========
Net Income Allocated to General Partner (1%)................ $ 2,526 $ 1,742
Net Income Allocated to Limited Partners (99%).............. 250,116 172,502
---------- ----------
Total............................................. $ 252,642 $ 174,244
========== ==========
Net Income Per Limited Partnership Unit -- Based on 75
weighted average limited partnership units during the
years ended December 31, 1996 and 1995.................... $ 3,335 $ 2,300
========== ==========
</TABLE>
See notes to financial statements.
F-20
<PAGE> 1012
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
LIMITED
PARTNERSHIP GENERAL LIMITED
UNITS PARTNER PARTNERS TOTAL
----------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Partners' Capital (Deficit), December 31,
1994....................................... 75 $(1,636) $1,949,896 $1,948,260
Partners' distributions.................... -- (4,000) (396,000) (400,000)
Net income for the year ended December 31,
1995.................................... -- 1,742 172,502 174,244
---- ------- ---------- ----------
Partners' Capital (Deficit), December 31,
1995....................................... 75 (3,894) 1,726,398 1,722,504
Partners' distributions.................... -- (4,010) (398,000) (402,010)
Net income for the year ended December 31,
1996.................................... -- 2,526 250,116 252,642
---- ------- ---------- ----------
Partners' Capital (Deficit), December 31,
1996....................................... 75 $(5,378) $1,578,514 $1,573,136
==== ======= ========== ==========
</TABLE>
See notes to financial statements.
F-21
<PAGE> 1013
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income................................................ $252,642 $174,244
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 265,911 246,113
Amortization of deferred charges....................... 15,351 15,350
Change in operating assets and liabilities:
Restricted cash...................................... 731 (13,329)
Accounts receivable.................................. (1,357) 1,712
Prepaid expenses..................................... (1,491) (327)
Escrow deposits for taxes and insurance.............. 14,225 (2,134)
Accounts payable..................................... (50,798) 31,775
Accrued property taxes............................... 4,706 4,717
Tenant security deposits liability................... (731) 8,724
Accrued interest..................................... 318 (318)
Unearned rental collections.......................... (39,989) (9,967)
Other liabilities.................................... (1,861) 6,311
-------- --------
Net cash provided by operating activities......... 457,657 462,871
-------- --------
Cash Flows From Investing Activities:
Property improvements and replacements.................... (69,543) (203,533)
Deposits to restricted escrows............................ (68,800) (78,850)
Receipts from restricted escrows.......................... 33,146 48,174
-------- --------
Net cash used in investing activities............. (105,197) (234,209)
-------- --------
Cash Flows From Financing Activities:
Principal payments on mortgage note payable............... (43,192) (39,195)
Partners' distributions................................... (402,010) (400,000)
-------- --------
Net cash used in financing activities............. (445,202) (439,195)
-------- --------
Net Decrease in Cash and Cash Equivalents................... (92,742) (210,533)
Cash and Cash Equivalents, Beginning of Year................ 558,661 769,194
-------- --------
Cash and Cash Equivalents, End of Year...................... $465,919 $558,661
======== ========
Supplemental Disclosure of Cash Flow Information -- Cash
paid during the year for interest......................... $459,816 $464,132
======== ========
</TABLE>
See notes to financial statements.
F-22
<PAGE> 1014
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Cedar Tree Investors Limited Partnership (A Kansas Limited Partnership)
(the "Partnership") was formed to acquire, own and operate Cedar Tree
Apartments, a 344-unit multifamily residential complex located in Shawnee,
Kansas. The general partner of the Partnership is United Investors Real Estate,
Inc., a Delaware corporation.
Basis of Accounting
The accompanying financial statements of the Partnership are prepared on
the accrual basis and, therefore, revenue is recorded as earned and costs and
expenses are recorded as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash
Cash and cash equivalents includes cash on hand and in banks, money market
funds and certificates of deposit with original maturities of less than three
months.
Restricted Cash -- Tenant Security Deposits
The Partnership requires security deposits from lessees for the duration of
the lease and such deposits are considered restricted cash. Deposits are
refunded when the tenant vacates, provided the tenant has not damaged its space
and is current on its rental payments.
Income Taxes
For income tax purposes, the Partnership reports revenue and costs and
expenses on the accrual method. No income tax provisions have been shown in the
accompanying statements of operations since the partners are taxed individually.
Apartment Properties
Apartment properties are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over estimated useful
lives of 15 to 40 years for buildings and improvements and 5 to 12 years for
furniture and fixtures.
During 1995, the Partnership adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of, which requires impairment losses to
be recognized for long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows are not sufficient to
recover the assets' carrying amounts. The impairment loss is measured by
comparing the fair value of the asset to its carrying amount. The adoption of
SFAS No. 121 had no effect on the Partnership's financial statements.
F-23
<PAGE> 1015
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Deferred Charges
Deferred charges consist of loan costs which are amortized over the term of
the related note.
Advertising
The Partnership expenses the cost of advertising as incurred. Advertising
expense, included in operating expenses, was $25,589 and $18,647 for the years
ended December 31, 1996 and 1995, respectively.
Reclassifications
Certain reclassifications of prior year balances have been made to conform
to the current year's presentation.
2. MORTGAGE NOTE PAYABLE
The mortgage note payable consists of a 30-year nonrecourse note
collateralized by Cedar Tree Apartments, payable in monthly installments of
$41,944, including interest. The interest rate is fixed at 9.75% per year.
Scheduled maturities of principal are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
------------ ----------
<S> <C>
1997..................................................... $ 47,597
1998..................................................... 52,450
1999..................................................... 57,799
2000..................................................... 63,693
2001..................................................... 70,189
Thereafter............................................... 4,403,862
----------
Total.......................................... $4,695,590
==========
</TABLE>
3. PARTNERS' EQUITY
Allocations of Profits and Losses
In accordance with the partnership agreement, all profits and losses are to
be allocated 1% to the general partner and 99% to the limited partners.
Distributions
The Partnership allocates distributions 1% to the general partner and 99%
to the limited partners. Subsequent to December 31, 1996, the Partnership paid a
distribution to the partners of $101,000 on February 18, 1997.
4. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1996 and 1995, the Partnership paid the
following amounts to affiliates of the general partner:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Property management fees................................. $94,152 $91,253
Reimbursement of expenses................................ 15,756 15,000
</TABLE>
F-24
<PAGE> 1016
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In addition, affiliates of the general partner were paid $6,537 and $20,256
during 1996 and 1995, respectively, for construction oversight costs incurred in
conjunction with the Partnership's capital improvement and major repair
projects.
The Partnership insures Cedar Tree Apartments under a master policy through
an agency and insurer unaffiliated with the general partner. An affiliate of the
general partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the financial
obligations to the affiliate of the general partner, who receives payments on
these obligations from the agent. The amount of the Partnership's insurance
premiums accruing to the benefit of the affiliate of the general partner by
virtue of the agent's obligations is not significant.
5. PARTNER TAX INFORMATION
The following is a reconciliation between net income as reported in the
financial statements and Federal taxable income allocated to the partners in the
Partnership's information returns for the years ended December 31, 1996 and
1995:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net income as reported.............................. $ 252,642 $ 174,244
Add (deduct):
Deferred revenue.................................. (39,988) (9,968)
Depreciation differences.......................... 5,102 (4,330)
Other............................................. 300 --
---------- ----------
Federal taxable income.............................. $ 218,056 $ 159,946
========== ==========
Federal taxable income per limited partnership
unit.............................................. $ 2,878 $ 2,111
========== ==========
</TABLE>
The following is a reconciliation between the Partnership's reported
amounts and Federal tax basis of net assets at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net assets as reported.............................. $1,573,136 $1,722,504
Differences in basis of assets and liabilities:
Deferred revenue.................................. 3,006 42,994
Accumulated depreciation.......................... (20,454) (25,556)
Syndication costs................................. 213,094 213,094
Other............................................. 300 --
---------- ----------
Net assets -- tax basis............................. $1,769,082 $1,953,036
========== ==========
</TABLE>
4. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1995 and 1994, the Partnership paid the
following amounts to affiliates of the general partner:
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Property management fees................................. $91,253 $87,451
Reimbursement of expenses................................ 15,000 10,000
</TABLE>
F-25
<PAGE> 1017
CEDAR TREE INVESTORS LIMITED PARTNERSHIP
(A KANSAS LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Partnership insures Cedar Tree Apartments under a master policy through
an agency and insurer unaffiliated with the general partner. An affiliate of the
general partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the financial
obligations to the affiliate of the general partner, who receives payments on
these obligations from the agent. The amount of the Partnership's insurance
premiums accruing to the benefit of the affiliate of the general partner by
virtue of the agent's obligations is not significant.
5. PARTNER TAX INFORMATION
The following is a reconciliation between net income as reported in the
financial statements and Federal taxable income allocated to the partners in the
Partnership's information returns for the years ended December 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Net income as reported................................. $174,244 $300,722
Add (deduct):
Deferred revenue..................................... (9,968) 34,081
Depreciation differences............................. (4,330) (9,118)
-------- --------
Federal taxable income................................. $159,946 $325,685
======== ========
Federal taxable income per limited partnership unit.... $ 2,111 $ 4,299
======== ========
</TABLE>
The following is a reconciliation between the Partnership's reported
amounts and Federal tax basis of net assets at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Net assets as reported.............................. $1,722,504 $1,948,260
Differences in basis of assets and liabilities:
Deferred revenue.................................. 42,994 52,962
Accumulated depreciation.......................... (25,556) (21,226)
Syndication costs................................. 213,094 213,094
---------- ----------
Net assets -- tax basis............................. $1,953,036 $2,193,090
========== ==========
</TABLE>
F-26
<PAGE> 1018
PRO FORMA FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
AS OF SEPTEMBER 30, 1998 AND FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1998
INTRODUCTION
On October 1, 1998, Apartment Investment and Management Company ("AIMCO")
completed its merger with Insignia Financial Group ("IFG") ("the IFG Merger").
In the IFG Merger, IFG's common stock was converted into 8,423,751 shares of
Class E Cumulative Convertible Preferred Stock of AIMCO ("Class E Preferred
Stock") whose issue date market value approximately equaled $292 million. In
addition to receiving the same dividends as holders of AIMCO Common Stock,
holders of Class E Preferred Stock will be entitled to a special dividend of
approximately $50 million in the aggregate. When that special dividend is paid
in full, the Class E Preferred Stock will automatically convert into AIMCO
Common Stock on a one-for-one basis, subject to antidilution adjustments, if
any. In addition, AIMCO assumed approximately $411 million in indebtedness and
other liabilities of IFG and its subsidiaries and subsidiaries of AIMCO, assumed
approximately $149.5 million of convertible securities and purchased
approximately $5 million of IFG stock prior to the Merger. AIMCO and Insignia
Properties Trust ("IPT") have completed a merger in which IPT has merged into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). In the IPT Merger, shares of
IPT common stock not held by AIMCO were converted into 4,826,745 shares of AIMCO
Class A Common Stock whose market value approximately equaled $152 million.
AIMCO assumed approximately $68 million in indebtedness. In connection with the
IFG Merger and the IPT Merger, AIMCO incurred approximately $55 million in
transaction costs for a combined transactional value of approximately $1,183
million. AIMCO contributed substantially all the assets and liabilities of
Insignia acquired in the Insignia Merger to AIMCO Properties, L.P. (together
with its subsidiaries and other controlled entities, the "Partnership") (and
together with entities in which that Partnership has a controlling financial
interest, the "Company") in exchange for 8,423,751 Class E Preferred Units. The
Class E Preferred Units have terms substantially the same as the Class E
Preferred Stock. In addition, AIMCO contributed substantially all the assets and
liabilities of IPT acquired in the IPT Merger to the Partnership in exchange for
4,826,745 limited partnership units in the Partnership ("OP Units"). In
connection with the IFG Merger, the Partnership assumed property management of
approximately 192,000 multifamily units which consist of general and limited
partnership investments in 115,000 units and third party management of 77,000
units. Insignia Properties Trust ("IPT"), which prior to the IFG Merger was a
subsidiary of IFG, owns a 32% weighted average general and limited partnership
interest in approximately 51,000 units.
Immediately following the IFG Merger, in order to satisfy certain
requirements of the Internal Revenue Code of 1986 (the "Code") applicable to
AIMCO's status as a REIT, AIMCO engaged in a reorganization (the "IFG
Reorganization") of the assets and operations of IFG whereby IFG's operations
are being conducted through corporations (the "Unconsolidated Subsidiaries") in
which the Partnership holds non-voting preferred stock that represents a 95%
economic interest, and certain officers and/or directors of AIMCO hold, directly
or indirectly, all of the voting common stock, representing a 5% economic
interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
In May and September of 1997, AIMCO directly or indirectly through a
subsidiary, acquired (the "NHP Stock Purchase") an aggregate of 6,930,122 shares
of common stock ("NHP Common Stock") of NHP. On December 8, 1997, AIMCO acquired
the remaining shares of NHP Common Stock in a merger transaction accounted for
as a purchase (the "NHP Merger"). As a result of the NHP Merger, AIMCO issued
6,759,148 shares of AIMCO Common Stock, valued at $180.8 million, and paid $86.5
million in cash. The total cost of the purchase of NHP was $349.5 million.
Substantially all assets and liabilities of NHP were contributed by AIMCO to the
Partnership.
In June 1997, the Company purchased a group of companies (the "NHP Real
Estate Companies") affiliated with NHP that hold general and limited partnership
interests in partnerships (the "NHP
P-1
<PAGE> 1019
Partnerships") that own 534 conventional and affordable multifamily apartment
properties (the "NHP Properties") containing 87,659 units, a captive insurance
subsidiary and certain related assets (the "NHP Real Estate Acquisition"). The
Company paid aggregate consideration of $54.8 million in cash and warrants that
entitle the holders to purchase 399,999 shares of AIMCO Common Stock at an
exercise price of $36.00 per share. The Company engaged in a reorganization (the
"NHP Real Estate Reorganization") of its interests in the NHP Real Estate
Companies, which resulted in certain of the assets of the NHP Real Estate
Companies being owned by a limited partnership (the "Unconsolidated
Partnership") in which the Partnership holds 99% limited partner interest and
certain directors and officers of AIMCO directly or indirectly, hold a 1%
general partner interest.
Immediately following the NHP Merger, in order to satisfy certain
requirements of the Code applicable to AIMCO's status as a REIT, AIMCO engaged
in a reorganization (the "NHP Reorganization") of the assets and operations of
NHP that resulted in the Master Property Management Agreement being terminated
and NHP's operations being conducted through Unconsolidated Subsidiaries in
which the AIMCO Operating Partnership holds non-voting preferred stock that
represents a 95% economic interest, and certain officers and/or directors of
AIMCO hold, directly or indirectly, all of the voting common stock, representing
a 5% economic interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
On May 8, 1998, AIMCO completed a merger with Ambassador Apartments, Inc.
("Ambassador"), pursuant to which Ambassador was merged into AIMCO (the
"Ambassador Merger"). Each outstanding share of stock ("Ambassador Common
Stock") of Ambassador, other than those shares held by AIMCO or Ambassador, were
converted into 0.553 (the "Conversion Ratio") shares of AIMCO Common Stock. Any
outstanding options to purchase Ambassador Common Stock were converted, at the
election of the option holder, into cash or options to purchase AIMCO Common
Stock at such options' then current exercise price divided by the Conversion
Ratio. In accordance with the Agreement and Plan of Merger, dated December 23,
1997 and supplemented by letter dated as of March 11, 1998 (the "Ambassador
Merger Agreement"), the outstanding shares of Class A Senior Cumulative
Convertible Preferred Stock of Ambassador, (the "Ambassador Preferred Stock")
were redeemed and converted into Ambassador Common Stock prior to the Ambassador
Merger. Following the consummation of the Ambassador Merger, a subsidiary of the
Partnership was merged with and into the Ambassador Operating Partnership (the
"Ambassador OP Merger"). Each outstanding unit of limited partnership interest
in the Ambassador Operating Partnership was converted into the right to receive
0.553 OP Units, and as a result, the Ambassador Operating Partnership became a
99.9% owned subsidiary partnership of the Partnership.
Also during 1997, the Partnership (i) (a) acquired 44 properties for
aggregate purchase consideration of $467.4 million, of which $56 million was
paid in the form of 1.9 million OP Units (b) paid $34.2 million in cash and
issued OP Units valued at $7.3 million in connection with the acquisition of
partnership interests through tender offers in certain partnerships ((a) and (b)
together are the "1997 Property Acquisitions") and (c) paid $19.9 million to
acquire 886,600 shares of Ambassador Common Stock (together with the 1997
Property Acquisitions, the "1997 Acquisitions"); (ii) sold (a) approximately
16,367,000 shares of AIMCO Common Stock for aggregate net proceeds of $513.4
million; (b) 750,000 shares of AIMCO Class B Cumulative Convertible Preferred
Stock for net proceeds of $75 million; and (c) 2,400,000 shares of AIMCO Class C
9% Cumulative Preferred Stock for net proceeds of $58.1 million; of which all
proceeds were contributed by AIMCO to the Partnership in exchange for 16,367,000
OP Units, 750,000 Class B Preferred Units, and 2,400,000 Class C Preferred Units
(collectively, the "1997 Stock Offerings"); and (iii) sold five real estate
properties (the "1997 Dispositions").
Also during 1998, AIMCO (i) (a) sold 4,200,000 shares of its Class D
Cumulative Preferred Stock for net proceeds of $101.5 million (the "Class D
Preferred Stock Offering"); (b) sold 4,050,000 shares of its Class G Cumulative
Preferred Stock for net proceeds of $98.0 million (the "Class G Preferred Stock
Offering"); (c) sold 2,000,000 shares of its Class H Cumulative Preferred Stock
for net proceeds of $48.1 million (the "Class H Preferred Stock Offering"); and
(d) sold 1,000,000 shares of its Class J Cumulative Convertible Preferred Stock
in a private placement for $100.0 million (the "Class J Preferred
P-2
<PAGE> 1020
Stock Offering"); of which all proceeds were contributed by AIMCO to the
Partnership in exchange for 4,050,000 Class G Preferred Units, 2,000,000 Class H
Preferred Units and 1,000,000 shares of Class J Preferred Units (collectively,
the "1998 Stock Offerings"); (ii) purchased 29 properties for aggregate purchase
consideration of $312.7 million, of which $52.2 million was paid in the form of
OP Units (the "1998 Acquisitions"); (iii) sold two real estate properties (the
"1998 Dispositions"); (iv) contracted to purchase two properties for aggregate
purchase consideration of $62.1 million, of which $26.4 million will be paid in
the form of OP units (the "Probable Purchases") and (v) sold 1,400,000 Class B
Preferred Partnership Units of a subsidiary and warrants to purchase 875,000
shares of AIMCO Class A Common Stock for $35.0 million (the "Preferred
Partnership Unit Offering").
PRO FORMA FINANCIAL INFORMATION OF THE PARTNERSHIP (INSIGNIA MERGER)
The following Pro Forma Consolidated Balance Sheet (Insignia Merger) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) the purchase
of nine properties for an aggregate purchase price of $62.5 million; (ii) the
Class J Preferred Stock Offering; (iii) the Probable Purchases; (iv) the IFG
Merger; (v) the IPT Merger; (vi) the IFG Reorganization; and (vii) the Preferred
Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) the
1997 Acquisitions; (ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions;
(iv) the NHP Real Estate Acquisition; (v) the NHP Real Estate Reorganization;
(vi) the NHP Stock Purchase; (vii) the NHP Merger; (viii) the NHP
Reorganization; (ix) the 1998 Stock Offerings; (x) the 1998 Acquisitions; (xi)
the Probable Purchases; (xii) the 1998 Dispositions; (xiii) the Ambassador
Merger; (xiv) the IFG Merger; (xv) the merger between IPT and Angeles Mortgage
Investment Trust ("AMIT") ("the AMIT Merger"); (xvi) the IPT Merger; (xvii) the
IFG Reorganization; and (xviii) the Preferred Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1997: (i)
the 1998 Stock Offerings; (ii) the 1998 Acquisitions; (iii) the Probable
Purchases; (iv) the 1998 Dispositions; (v) the Ambassador Merger; (vi) the IFG
Merger; (vii) the AMIT Merger; (viii) the IPT Merger; (ix) the IFG
Reorganization; and (x) the Preferred Partnership Unit offering.
The following Pro Forma Financial Information (Insignia Merger) is based,
in part, on the following historical financial statements: (i) the audited
Consolidated Financial Statements of the Partnership for the year ended December
31, 1997; (ii) the unaudited Consolidated Financial Statements of the
Partnership for the nine months ended September 30, 1998; (iii) the audited
Consolidated Financial Statements of Ambassador for the year ended December 31,
1997; (iv) the unaudited Consolidated Financial Statements of Ambassador for the
four months ended April 30, 1998; (v) the audited Consolidated Financial
Statements of IFG for the year ended December 31, 1997; (vi) the audited
Consolidated Financial Statements of AMIT for the year ended December 31, 1997;
(vii) the unaudited Consolidated Financial Statements of IFG for the nine months
ended September 30, 1998; (viii) the unaudited Financial Statements of AMIT for
the period from January 1, 1998 to September 17, 1998; (ix) the unaudited
Consolidated Financial Statements of NHP for the nine months ended September 30,
1997; (x) the unaudited Combined Financial Statements of the NHP Real Estate
Companies for the three months ended March 31, 1997; (xi) the unaudited
Financial Statements of NHP Southwest Partners, L.P. for the three months ended
March 31, 1997; (xii) the unaudited Combined Financial Statements of the NHP New
LP Entities for the three months ended March 31, 1997; (xiii) the unaudited
Combined Financial Statements of the NHP Borrower Entities for the three months
ended March 31, 1997; (xiv) the unaudited Historical Summaries of Gross Income
and Certain Expenses of The Bay Club at Aventura for the three months ended
March 31, 1997; (xv) the unaudited Historical Summary of Gross Income and Direct
Operating Expenses of Morton Towers for the six months ended June 30, 1997;
(xvi) the unaudited Combined Statement of Revenues and Certain Expenses of the
Thirty-Five Acquisition Properties for the six months ended June 30, 1997;
(xvii) the unaudited Statement of
P-3
<PAGE> 1021
Revenues and Certain Expenses of First Alexandria Associates, a Limited
Partnership for the nine months ended September 30, 1997; (xviii) the unaudited
Statement of Revenues and Certain Expenses of Country Lakes Associates Two, a
Limited Partnership for the nine months ended September 30, 1997; (xix) the
unaudited Statement of Revenues and Certain Expenses of Point West Limited
Partnership, A Limited Partnership for the nine months ended September 30, 1997;
(xx) the unaudited Statement of Revenues and Certain Expenses for The Oak Park
Partnership for the nine months ended September 30, 1997; (xxi) the audited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the year ended December 31, 1997,
(xxii) the audited Combined Historical Summary or Gross Income and Direct
Operating Expenses of the Cirque Apartment Communities for the year ended
December 31, 1997; (xxiii) the audited Combined Historical Summary of Gross
Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the year ended December 31, 1997; (xxiv) the audited
Historical Summary of Gross Income and Direct Operating Expenses of the Calhoun
Beach Club Apartments for the year ended December 31, 1997; (xxv) the unaudited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the nine months ended September
30, 1998; (xxvi) the unaudited Combined Historical Summary of Gross Income and
Direct Operating Expenses of the Cirque Apartment Communities for the three
months ended March 31, 1998; (xxvii) the unaudited Combined Historical Summary
of Gross Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the nine months ended September 30, 1998; and (xxviii) the
unaudited Historical Summary of Gross Income and Direct Operating Expenses of
Calhoun Beach Club Apartments for the nine months ended September 30, 1998. The
following Pro Forma Financial Information should be read in conjunction with
such financial statements and the notes thereto incorporated by reference
herein.
The unaudited Pro Forma Financial Information (Insignia Merger) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
1997 Acquisitions, the 1998 Acquisitions, and the Probable Purchases are
adjusted to estimated fair market value, based upon preliminary estimates, which
are subject to change as additional information is obtained. The allocations of
purchase costs are subject to final determination based upon estimates and other
evaluations of fair market value. Therefore, the allocations reflected in the
following unaudited Pro Forma Financial Information may differ from the amounts
ultimately determined.
The following unaudited Pro Forma Financial Information (Insignia Merger)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions or results of
operations. In the opinion of the Partnership's management, all material
adjustments necessary to reflect the effects of these transactions have been
made.
P-4
<PAGE> 1022
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS IFG AIMCO BEFORE IFG
AND PROBABLE IFG MERGER IFG REORGANIZATION
HISTORICAL(a) PURCHASES(b) HISTORICAL(c) ADJUSTMENTS(d) REORGANIZATION(e) ADJUSTMENTS(f)
------------- ------------ ------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Real estate.............. $2,355,122 $202,332 $ 44,488 $ 23,880(G) $2,625,822 $ --
Property held for sale... 42,212 -- -- -- 42,212 --
Investments in
securities............. -- -- -- 443,513(G)
(443,513)(H) -- --
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 127,082 -- -- -- 127,082 59,195(I)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 246,847 -- 232,892 444,570(G) 924,309 --
Mortgage notes
receivable............. -- -- 20,916 -- 20,916
Cash and cash
equivalents............ 43,681 6,107 73,064 -- 122,852 (17,897)(J)
Restricted cash.......... 83,187 -- 2,691 -- 85,878 (1,352)(J)
Accounts receivable...... 11,545 -- 54,060 (32,234)(G) 33,371 (5,471)(J)
Deferred financing
costs.................. 21,835 -- 7,020 (7,020)(G) 21,835 --
Goodwill................. 120,503 -- 19,503 111,018(G) 251,024 --
Property management
contracts.............. -- -- 86,419 31,147(G) 117,566 (79,195)(I)
Other assets............. 69,935 -- 20,128 (4,533)(G) 85,530 (2,860)(J)
---------- -------- -------- --------- ---------- --------
Total Assets..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
Secured notes payable.... $ 774,676 $122,568 $ 29,002 $ -- $ 926,246 $ --
Secured tax-exempt bond
financing.............. 399,925 -- -- -- 399,925 --
Secured short-term
financing.............. 50,000 (50,000) 332,691 (300,000)(G) 32,691 --
Unsecured short-term
financing.............. 50,800 (50,800) -- 300,000(G) 300,000 --
Accounts payable, accrued
and other
liabilities............ 131,799 -- 33,241 50,000(G)
53,333(G)
4,935(G)
2,525(G) 275,833 (27,580)(J)
Deferred tax liability... -- -- 18,802 1,198(G) 20,000 (20,000)(I)
Security deposits and
prepaid rents.......... 13,171 -- 3,533 (3,533) 13,171 --
---------- -------- -------- --------- ---------- --------
1,420,371 21,768 417,269 108,458 1,967,866 (47,580)
Minority interest........ 42,086 37,345 108,485 (108,485)(G) 79,431 --
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. -- -- 144,282 5,218 149,500 --
Redeemable Partnership
Units.................. 232,405 45,176 -- -- 277,581 --
Partners' capital and
shareholders' equity
Common stock........... -- -- 320 (320)(G) -- --
Additional paid-in
capital.............. -- -- (86,959) 86,959(G) -- --
Distributions in excess
of earnings.......... -- -- (22,216) 22,216(G) -- --
General and Special
Limited Partner...... 1,039,525 4,150 -- 443,513(H)
9,269(G) 1,496,457 --
Preferred Units........ 387,562 100,000 -- -- 487,562 --
---------- -------- -------- --------- ---------- --------
1,427,087 104,150 (108,855) 561,637 1,984,019 --
---------- -------- -------- --------- ---------- --------
Total Liabilities
and Equity..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
<CAPTION>
PRO FORMA
----------
<S> <C>
Real estate.............. $2,625,822
Property held for sale... 42,212
Investments in
securities.............
--
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 186,277(K)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 924,309
Mortgage notes
receivable............. 20,916
Cash and cash
equivalents............ 104,955
Restricted cash.......... 84,526
Accounts receivable...... 27,900
Deferred financing
costs.................. 21,835
Goodwill................. 251,024
Property management
contracts.............. 38,371
Other assets............. 82,670
----------
Total Assets..... $4,410,817
==========
Secured notes payable.... $ 926,246
Secured tax-exempt bond
financing.............. 399,925
Secured short-term
financing.............. 32,691
Unsecured short-term
financing.............. 300,000
Accounts payable, accrued
and other
liabilities............
248,253
Deferred tax liability... --
Security deposits and
prepaid rents.......... 13,171
----------
1,920,286
Minority interest........ 79,431
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. 149,500
Redeemable Partnership
Units.................. 277,581
Partners' capital and
shareholders' equity
Common stock........... --
Additional paid-in
capital.............. --
Distributions in excess
of earnings.......... --
General and Special
Limited Partner......
1,496,457
Preferred Units........ 487,562
----------
1,984,019
----------
Total Liabilities
and Equity..... $4,410,817
==========
</TABLE>
P-5
<PAGE> 1023
- ---------------
(A) Represents the unaudited historical consolidated financial position of the
Partnership as of September 30, 1998.
(B) Represents adjustments to reflect the purchase of ten properties for an
aggregate purchase price of $140.2 million; the Class J Preferred Stock
Offering; the Probable Purchases; and the Preferred Partnership Unit
Offering.
(C) Represents the unaudited historical consolidated financial position of IFG
as of September 30, 1998.
(D) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the issuance of 8,423,751 shares of AIMCO Common Stock, based
on consideration to holders of IFG common stock outstanding as of the date
of the IFG Merger; (ii) the issuance of 4,826,745 shares of AIMCO Class A
Common Stock to holders of IPT common stock (other than AIMCO); (iii) the
payment of a special dividend of $50,000; (iv) the assumption of $149,500
of the convertible debentures of IFG; (v) the allocation of the combined
purchase price of IFG and IPT based on the preliminary estimates of
relative fair market value of the assets and liabilities of IFG and IPT;
and (vi) the contribution by AIMCO of substantially all the assets and
liabilities of Insignia and IPT to the Partnership in exchange for OP
Units.
(E) Represents the effects of AIMCO's acquisition of IFG immediately after the
IFG Merger. These amounts do not give effect to the IFG Reorganization,
which includes the transfers of certain assets and liabilities of IFG to
the combined Unconsolidated Subsidiaries. The IFG Reorganization occurred
immediately after the IFG Merger so that AIMCO could maintain its
qualification as a REIT. This column is included as an intermediate step to
assist the reader in understanding the entire nature of the IFG Merger and
related transactions.
(F) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party property management operations.
The adjustments reflect the transfer of assets valued at the Partnership's
new basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(G) In connection with the IFG Merger and the IPT Merger, AIMCO became
obligated to issue a total of 13,250,496 shares of AIMCO Common Stock
The total purchase price of IFG and IPT is $1,128,009, as follows:
<TABLE>
<S> <C>
Issuance of 8,423,751 shares of AIMCO Common Stock in the
IFG Merger, at $34.658 per share.......................... $ 291,949
Issuance of 4,826,745 shares of AIMCO Common Stock in the
IPT Merger, at $31.50 per share........................... 151,564
Assumption of Convertible Debentures........................ 149,500
Assumption of liabilities as indicated in the Merger
Agreement................................................. 397,459
Transaction costs........................................... 53,333
Generation of deferred tax liability........................ 20,000
Special dividend............................................ 50,000
Purchase of IFG Common Stock prior to merger................ 4,935
Consideration for options................................... 9,269
----------
Total............................................. $1,128,009
==========
</TABLE>
P-6
<PAGE> 1024
The purchase price was allocated to the various assets of IFG acquired in
the IFG Merger, as follows:
<TABLE>
<S> <C>
Purchase price.............................................. $1,128,009
Historical basis of IFG's assets acquired................... (561,181)
----------
Step-up to record the fair value of IFG's assets
acquired............................................... $ 566,828
==========
</TABLE>
This step-up was applied to IFG's assets as follows:
<TABLE>
<S> <C>
Real estate................................................. $ 23,880
Investment in real estate partnerships...................... 444,570
Decrease in accounts receivable............................. (32,234)
Decrease in deferred loan costs............................. (7,020)
Management contracts........................................ 31,147
Increase in goodwill........................................ 111,018
Reduction in value of other assets.......................... (4,533)
--------
Total............................................. $566,828
========
</TABLE>
The fair value of IFG's assets, primarily the real estate and management
contracts, was calculated based on estimated future cash flows of the
underlying assets.
As of September 30, 1998, IFG's stockholder's equity was $(108,855), which
is detailed as follows:
<TABLE>
<S> <C>
Common stock................................................ $ 320
Additional paid-in capital.................................. (86,959)
Distributions in excess of earnings......................... (22,216)
---------
Total............................................. $(108,855)
=========
</TABLE>
Upon completion of the IFG Merger, the entire amount of the stockholder's
equity was eliminated.
In addition, the minority interest in other partnerships of IFG of $108,485
will be eliminated upon the IPT Merger.
At the time of the IFG Merger, AIMCO obtained unsecured short-term
financing of $300 million. The proceeds were used to repay secured
short-term financing of IFG that AIMCO assumed.
(H) Represents the issuance of a total of 13,250,496 OP Units to AIMCO and the
concurrent issuance of 13,250,496 shares of AIMCO Common Stock to IFG and
IPT stockholders, in exchange for all the shares of IFG and IPT common
stock.
In accordance with the IFG Merger Agreement, AIMCO became obligated to
issue 8,423,751 shares of Class E Preferred Stock, approximately equal to
$292 million. Each share of Class E Preferred Stock will automatically
convert to one share of AIMCO Common Stock upon the payment of the special
dividend thereon. As such, for the purpose of preparing the pro forma
financial statements, AIMCO's management believes that the Class E
Preferred Stock is substantially the same as AIMCO Common Stock, and that
the fair value of the Class E Preferred Stock approximates the fair value
of the AIMCO Common Stock. Upon the payment of the special dividend on the
Class E Preferred Stock and the conversion of the Class E Preferred Stock
to AIMCO Common Stock, the former IFG stockholders will own approximately
15.0% of the AIMCO Common Stock and the IPT stockholders will own
approximately 7.3% of AIMCO Common Stock. The special dividend on the Class
E Preferred Stock is intended to represent a distribution in an amount at
least equal to the earnings and profits of IFG at the time of the IFG
Merger, to which AIMCO succeeds.
Concurrent with the issuance of Class E Preferred Stock, the Partnership
will issue comparable Class E Preferred Units to AIMCO. The Class E
Preferred Units will have terms substantially the same as the Class E
Preferred Stock.
(I) Represents the increase in the Partnership's investment in Unconsolidated
Subsidiaries to reflect the contribution or sale of property management
contracts, including the related deferred tax liability, in exchange for
preferred stock and a note payable from the Unconsolidated Subsidiaries.
These assets and
P-7
<PAGE> 1025
liabilities are valued at the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(J) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries,
(K) Represents notes receivable from the Unconsolidated Subsidiaries of
$95,000, advances to the Unconsolidated Subsidiaries of $42,792, and equity
in the Unconsolidated Subsidiaries of $48,485. The combined pro forma
balance sheet of the Unconsolidated Subsidiaries as of September 30, 1998
is presented below, which reflects the effects of the IFG Merger, the IPT
Merger, and the IFG Reorganization as if such transactions had occurred as
of September 30, 1998.
P-8
<PAGE> 1026
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
IFG
HISTORICAL REORGANIZATION(i) PRO FORMA
---------- ----------------- ---------
<S> <C> <C> <C>
ASSETS
Real estate............................................ $ 22,376 $ -- $ 22,376
Cash and cash equivalents.............................. 16,919 17,897(ii) 34,816
Restricted cash........................................ 5,507 1,352(ii) 6,859
Management contracts................................... 47,846 79,195(iii) 127,041
Accounts receivable.................................... 13,109 5,471(ii) 18,580
Deferred financing costs............................... 3,117 -- 3,117
Goodwill............................................... 43,544 -- 43,544
Other assets........................................... 51,498 2,860(ii) 54,358
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable.................................. $114,302 $ 45,000(iii) $159,302
Accounts payable, accrued and other liabilities........ 56,773 27,580(ii) 84,353
Security deposits and deferred income.................. 334 --(ii) 334
Deferred tax liability................................. -- 20,000(iii) 20,000
-------- -------- --------
171,409 92,580 263,989
Common stock........................................... 2,061 747(iv) 2,808
Preferred stock........................................ 34,290 14,195(iii) 48,485
Retained earnings...................................... (3,844) -- (3,844)
Notes receivable on common stock purchases............. -- (747)(iv) (747)
-------- -------- --------
32,507 14,195 46,702
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
</TABLE>
- ---------------
(i) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the transfer of assets valued at the Partnership's new
basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(ii) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries, valued at the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(iii)Represents the transfer or sale of management contracts, the establishment
of an intercompany note, and the establishment of the related estimated net
deferred Federal and state tax liabilities at a combined rate of 40% for
the estimated difference between the book and tax basis of the net assets
of the Unconsolidated Subsidiaries. The primary component of the deferred
tax liability is the difference between the new basis of the property
management contracts, as a result of the allocation of the purchase price
of IFG, and the historical tax basis.
(iv) Represents the issuance of common stock to the common stockholders of the
Unconsolidated Subsidiaries in exchange for notes receivable, in order for
the common stockholders to maintain their respective ownership interest in
the Unconsolidated Subsidiaries.
P-9
<PAGE> 1027
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE NHP AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(a) PURCHASES(b) TRANSACTIONS(c) HISTORICAL(d) ADJUSTMENTS(e) ADJUSTED(f)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rental and other property
revenues........................ $193,006 $120,337(I)
11,012(J) $ 6,660 $ 93,329 $ -- $ 6,912
Property operating expenses....... (76,168) (59,466)(I)
(4,860)(J) (2,941) (36,088) -- (3,307)
Owned property management
expense......................... (6,620) (4,327)(I)
(602)(J) (282) -- -- --
Depreciation...................... (37,741) (26,645)(I)
(2,172)(J) (1,414) (18,979) (5,997)(O) (966)
-------- -------- ------- -------- ------- --------
Income from property operations... 72,477 33,277 2,023 38,262 (5,997) 2,639
-------- -------- ------- -------- ------- --------
Management fees and other
income.......................... 13,937 -- 7,813 -- -- 94,330
Management and other expenses..... (9,910) -- (5,394) -- -- (57,615)
Corporate overhead allocation..... (588) -- -- -- -- --
Amortization...................... (1,401) -- (5,800) -- -- (16,768)
-------- -------- ------- -------- ------- --------
Income from service company
business........................ 2,038 -- (3,381) -- -- 19,947
Minority interest in service
company business................ (10) -- -- -- -- --
-------- -------- ------- -------- ------- --------
AIMCO's share of income from
service company business........ 2,028 -- (3,381) -- -- 19,947
-------- -------- ------- -------- ------- --------
General and administrative
expenses........................ (5,396) -- (1,025) (7,392) 7,392(P) (21,199)
Interest expense.................. (51,385) (3,451)(K)
(2,497)(L) (5,462) (26,987) (221)(Q) (9,035)
Interest income................... 8,676 -- 1,900 -- -- 10,967
Minority interest................. 1,008 458(M) 16 (851) 705(R) (12,871)
Equity in losses of unconsolidated
partnerships.................... (1,798) (122)(N) (8,542) 405 -- 12,515
Equity in earnings of
unconsolidated subsidiaries..... 4,636 -- 5,790 -- -- --
-------- -------- ------- -------- ------- --------
Income (loss) from operations..... 30,246 27,665 (8,681) 3,437 1,879 2,963
Income tax provision.............. -- -- -- -- -- 1,701
Gain on dispositions of
property........................ 2,720 (2,720) -- -- -- 80
-------- -------- ------- -------- ------- --------
Income (loss) before extraordinary
item............................ 32,966 24,945 (8,681) 3,437 1,879 4,744
Extraordinary item -- early
extinguishment of debt.......... (269) 269 -- -- -- --
-------- -------- ------- -------- ------- --------
Net income........................ 32,697 25,214 (8,681) 3,437 1,879 4,744
Income attributable to preferred
unitholders..................... 2,315 39,859 -- -- -- --
-------- -------- ------- -------- ------- --------
Income attributable to common
unitholders..................... $ 30,382 $(14,645) $(8,681) $ 3,437 $ 1,879 $ 4,744
======== ======== ======= ======== ======= ========
Basic earnings per OP unit........ $ 1.09
========
Diluted earnings per OP unit...... $ 1.08
========
Weighted average OP units
outstanding..................... 27,732
========
Weighted average OP units and
equivalents outstanding......... 28,113
========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(g) ADJUSTMENTS(h) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property
revenues........................
$ -- $ -- $ 431,256
Property operating expenses.......
-- -- (182,830)
Owned property management
expense.........................
-- -- (11,831)
Depreciation......................
(2,350)(S) -- (96,264)
-------- -------- ---------
Income from property operations... (2,350) -- 140,331
-------- -------- ---------
Management fees and other
income.......................... -- (74,404)(X) 41,676
Management and other expenses..... -- 49,236(X) (23,683)
Corporate overhead allocation..... -- -- (588)
Amortization...................... (32,699)(T) 30,188(Y) (26,480)
-------- -------- ---------
Income from service company
business........................ (32,699) 5,020 (9,075)
Minority interest in service
company business................ -- -- (10)
-------- -------- ---------
AIMCO's share of income from
service company business........ (32,699) 5,020 (9,085)
-------- -------- ---------
General and administrative
expenses........................ -- 6,249(X) (21,371)
Interest expense..................
(14,750) -- (113,788)
Interest income................... -- 191(Z) 21,734(BB)
Minority interest................. 1,552(U) -- (9,983)
Equity in losses of unconsolidated
partnerships.................... (29,995)(V) -- (27,537)
Equity in earnings of
unconsolidated subsidiaries..... -- (4,578)(AA) 5,848(DD)
-------- -------- ---------
Income (loss) from operations..... (78,242) 6,882 (13,851)
Income tax provision.............. (1,701)(W) -- --
Gain on dispositions of
property........................ (80) -- --
-------- -------- ---------
Income (loss) before extraordinary
item............................ (80,023) 6,882 (13,851)
Extraordinary item -- early
extinguishment of debt.......... -- -- --
-------- -------- ---------
Net income........................ (80,023) 6,882 (13,851)
Income attributable to preferred
unitholders..................... -- -- 42,174(CC)
-------- -------- ---------
Income attributable to common
unitholders..................... $(80,023) $ 6,882 $ (56,025)(BB)
======== ======== =========
Basic earnings per OP unit........ $ (0.83)(BB)
=========
Diluted earnings per OP unit...... $ (0.83)(BB)
=========
Weighted average OP units
outstanding..................... 67,522
=========
Weighted average OP units and
equivalents outstanding......... 68,366
=========
</TABLE>
P-10
<PAGE> 1028
- ---------------
(A) Represents the Partnership's audited consolidated results of operations
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1997: (i) the 1997 Acquisitions; (ii) the 1997 Stock
Offerings; (iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings;
(v) the 1998 Acquisitions; (vi) the Probable Purchases; (vii) the 1998
Dispositions; and (v) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues................. $ 6,660(v) $ 16,842 $ -- $(16,842)(xvii) $ 6,660
Property operating
expenses................. (2,941)(v) (8,411) -- 8,411 (xvii (2,941)
Owned property management
expense.................. (282)(v) (862) -- 862 (xvii (282)
Depreciation............... (1,414)(vi) (2,527) (693)(xi) 3,220 (xvii (1,414)
------- -------- ------- -------- -------
Income from property
operations............... 2,023 5,042 (693) (4,349) 2,023
------- -------- ------- -------- -------
Management fees and other
income................... 1,405(vii) 72,176 -- (65,768)(xviii) 7,813
Management and other
expenses................. (2,263)(viii) (35,267) -- 32,136 (xviii (5,394)
Amortization............... -- (9,111) (4,432)(xii) 7,743 (xix (5,800)
------- -------- ------- -------- -------
Income from service company
business................. (858) 27,798 (4,432) (25,889) (3,381)
------- -------- ------- -------- -------
General and administrative
expenses................. -- (16,266) 8,668 (xiii 6,573 (xviii (1,025)
Interest expense........... (5,082)(ix) (10,685) -- 10,305(xx) (5,462)
Interest income............ 540(v) 1,963 -- (603)(xxi) 1,900
Minority interest.......... 16(v) -- -- -- 16
Equity in losses of
unconsolidated
partnerships............. (3,905)(x) -- (4,631)(xiv) (6) (8,542)
Equity in earnings of
unconsolidated
subsidiaries............. -- -- (4,636)(xv) 10,426 (xxii 5,790
------- -------- ------- -------- -------
Income (loss) from
operations............... (7,266) 7,852 (5,724) (3,543) (8,681)
Income tax provision....... -- (3,502) 3,502 (xvi -- --
------- -------- ------- -------- -------
Net income (loss).......... $(7,266) $ 4,350 $(2,222) $ (3,543) $(8,681)
======= ======== ======= ======== =======
</TABLE>
- ---------------
(i) Represents the adjustment to record activity from January 1, 1997 to
the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. The historical
financial statements of the NHP Real Estate Companies consolidate
certain real estate partnerships in which they have an interest that
will be presented on the equity method by the Partnership as a
result of the NHP Real Estate Reorganization. In addition,
represents adjustments to record additional depreciation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest
expense incurred in connection with borrowings incurred by the
Partnership to consummate the NHP Real Estate Acquisition.
(ii)Represents the unaudited consolidated results of operations of NHP
for the period from January 1, 1997 through December 8, 1997 (date
of the NHP Merger).
P-11
<PAGE> 1029
(iii)
Represents the following adjustments occurring as a result of the
NHP Merger: (i) the reduction in personnel costs, primarily
severance costs, pursuant to a restructuring plan; (ii) the
incremental depreciation of the purchase price adjustment related to
real estate; (iii) the incremental amortization of the purchase
price adjustment related to the management contracts, furniture,
fixtures and equipment, and goodwill; (iv) the reversal of equity in
earnings of NHP during the pre-merger period when the Partnership
held a 47.62% interest in NHP; and (v) the amortization of the
increased basis in investments in real estate partnerships based on
the purchase price adjustment related to real estate and an
estimated average life of 20 years.
(iv)Represents adjustments related to the NHP Reorganization, whereby
the Partnership contributed or sold to the Unconsolidated
Subsidiaries and the Unconsolidated Partnership: (i) certain assets
and liabilities of NHP, primarily related to the management
operations and other businesses owned by NHP and (ii) 12 real estate
properties containing 2,905 apartment units. The adjustments
represent (i) the related revenues and expenses primarily related to
the management operations and other businesses owned by NHP and (ii)
the historical results of operations of such real estate
partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis
resulting from the allocation of the combined purchase price of NHP
and the NHP Real Estate Companies.
(v) Represents adjustments to reflect the acquisition of the NHP Real
Estate Companies and the corresponding historical results of
operations as if they had occurred on January 1, 1997.
(vi)Represents incremental depreciation related to the consolidated real
estate assets purchased from the NHP Real Estate Companies.
Buildings and improvements are depreciated on the straight-line
method over a period of 30 years, and furniture and fixtures are
depreciated on the straight-line method over a period of 5 years.
(vii)
Represents the adjustment to record the revenues from ancillary
businesses purchased from the NHP Real Estate Companies as if the
acquisition had occurred on January 1, 1997.
(viii)
Represents $4,878 related to the adjustment to record the expenses
from ancillary businesses purchased from the NHP Real Estate
Companies as if the acquisition had occurred on January 1, 1997,
less $2,615 related to a reduction in personnel costs pursuant to a
restructuring plan, approved by the Company's senior management,
assuming that the acquisition of the NHP Real Estate Companies had
occurred on January 1, 1997 and that the restructuring plan was
completed on January 1, 1997. The restructuring plan specifically
identifies all significant actions to be taken to complete the
restructuring plan, including the reduction of personnel, job
functions, location and the date of completion.
(ix)Represents adjustments in the amount of $3,391 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as the increase in interest expense in the amount
of $1,691 related to borrowings on the Partnership's credit
facilities of $55,807 to finance the NHP Real Estate Acquisition.
(x) Represents adjustments in the amount of $2,432 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as amortization of $1,473 related to the increased
basis in investment in real estate partnerships, as a result of the
allocation of the purchase price of the NHP Real Estate Companies,
based on an estimated average life of 20 years.
(xi)Represents incremental depreciation related to the real estate
assets purchased from NHP. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years,
and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(xii)
Represents incremental depreciation and amortization of the tangible
and intangible assets related to the property management and other
business operated by the Unconsolidated
P-12
<PAGE> 1030
Subsidiaries, based on the Partnership's new basis as adjusted by
the allocation of the combined purchase price of NHP including
amortization of management contracts of $3,782, depreciation of
furniture, fixtures and equipment of $2,018 and amortization of
goodwill of $7,743, less NHP's historical depreciation and
amortization of $9,111. Management contracts are amortized using the
straight-line method over the weighted average life of the contracts
estimated to be approximately 15 years. Furniture, fixtures and
equipment are depreciated using the straight-line method over the
estimated life of 3 years. Goodwill is amortized using the
straight-line method over 20 years.
(xiii)
Represents a reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan, approved by the Company's
senior management, specifically identifying all significant actions
to be taken to complete the restructuring plan, assuming that the
NHP Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997.
(xiv)
Represents adjustment for amortization of the increased basis in
investments in real estate partnerships, as a result of the
allocation of the combined purchase price of NHP and the NHP Real
Estate Companies, based on an estimated average life of 20 years.
(xv)Represents the reversal of equity in earnings in NHP during the
pre-merger period when the Partnership held a 47.62% interest in
NHP, as a result of the Partnership's acquisition of 100% of the NHP
Common Stock.
(xvi)
Represents the reversal of NHP's income tax provision due to the
restructuring of the management business to the Unconsolidated
Subsidiaries.
(xvii)
Represents the contribution of NHP's 12 real estate properties
containing 2,905 apartment units to the Unconsolidated Partnership
pursuant to the NHP Reorganization.
(xviii)
Represents the historical income and expenses associated with
certain assets and liabilities of NHP that were contributed or sold
to the Unconsolidated Subsidiaries, primarily related to the
management operations and other businesses owned by NHP.
(xix)
Represents the amortization and depreciation of certain management
contracts and other assets of NHP, based on the Partnership's new
basis resulting from the allocation of the purchase price of NHP,
that will be contributed or sold to the Unconsolidated Subsidiaries,
primarily related to the management operations and other businesses
owned by NHP.
(xx)Represents interest expense of $6,020 related to the contribution of
NHP's 12 real estate properties containing 2,905 apartment units to
the Unconsolidated Partnership and interest expense of $4,285
related to the certain assets and liabilities that will be
contributed or sold to the Unconsolidated Subsidiaries pursuant to
the NHP Reorganization.
(xxi)
Represents the interest income of $5,000 earned on notes payable of
$50,000 to the Partnership issued as consideration for certain
assets and liabilities sold to the Unconsolidated Subsidiaries by
the Partnership, net of the elimination of the Partnership's share
of the related interest expense of $4,750 reflected in the equity in
earnings of the Unconsolidated Subsidiaries operating results,
offset by $853 in interest income primarily related to the
management operations and other businesses owned by NHP contributed
or sold to the Unconsolidated Subsidiaries pursuant to the NHP
Reorganization.
(xxii)
Represents the Partnership's equity in earnings of the
Unconsolidated Subsidiaries.
(D) Represents the audited historical statement of operations of Ambassador
for the year ended December 31, 1997. Certain reclassifications have been
made to Ambassador's historical statement of operations to conform to the
Partnership's Statement of Operations presentation. The Ambassador
historical statement of operations excludes extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of
P-13
<PAGE> 1031
interest expense resulting from the net reduction of debt; and (iv) the
elimination of the minority interest associated with Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger, and the spin-off of Holdings as if these transactions had
occurred on January 1, 1997. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
IFG AMIT HOLDINGS IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property
revenues....................... $ 6,646 $ 266 $ -- $ 6,912
Property operating expenses...... (3,251) (56) -- (3,307)
Depreciation..................... (966) -- -- (966)
--------- ------- --------- --------
Income from property
operations..................... 2,429 210 -- 2,639
--------- ------- --------- --------
Management fees and other
income......................... 389,626 -- (295,296) 94,330
Management and other expenses.... (315,653) -- 258,038 (57,615)
Amortization..................... (31,709) (303) 15,244 (16,768)
--------- ------- --------- --------
Income from service company
business....................... 42,264 (303) (22,014) 19,947
--------- ------- --------- --------
General and administrative
expenses....................... (20,435) (1,351) 587 (21,199)
Interest expense................. (9,353) -- 318 (9,035)
Interest income.................. 4,571 6,853 (457) 10,967
Minority interest................ (12,448) (382) (41) (12,871)
Equity in income (losses) of
unconsolidated partnership..... 10,027 2,639 (151) 12,515
--------- ------- --------- --------
Income (loss) from operations.... 17,055 7,666 (21,758) 2,963
Income tax provision............. (6,822) (180) 8,703 1,701
Gain on sale of property......... -- 80 -- 80
--------- ------- --------- --------
Net income (loss)................ 10,233 7,566 (13,055) 4,744
========= ======= ========= ========
</TABLE>
- ---------------
(i) Represents the audited consolidated results of operations of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report
on Form 10-K. Certain reclassifications have been made to IFG's
historical statement of operations to conform to the Partnership's
statement of operations presentation.
(ii)Represents the historical statement of operations of AMIT, as well
as pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger: (i) the incremental depreciation of the
purchase price adjustment related to consolidated real estate and
investments in real estate partnerships; (ii) the amortization of
goodwill and property management contracts resulting from the IFG Merger;
(iii) the increase in interest expense resulting from the net increase in
debt; and (iv) the elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
P-14
<PAGE> 1032
(I) Represents adjustments to reflect the 1997 Property Acquisitions and the
1998 Acquisitions, less the 1997 Dispositions and the 1998 Dispositions
as if they had occurred on January 1, 1997. These pro forma operating
results are based on historical results of the properties, except for
depreciation, which is based on the Partnership's investment in the
properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1997 PROPERTY 1997 1998 1998
ACQUISITIONS DISPOSITIONS ACQUISITIONS DISPOSITIONS TOTAL
------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Rental and other
property
revenues........... $ 88,589 $(4,081) $ 39,132 $(3,303) $120,337
Property operating
expense............ (44,109) 1,944 (18,655) 1,354 (59,466)
Owned property
management
expense............ (3,233) 133 (1,349) 122 (4,327)
Depreciation......... (16,839) 452 (10,946) 688 (26,645)
</TABLE>
(J) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1997. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(K) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1997
Property Acquisitions..................................... $(29,490)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1997 Dispositions and
the 1997 Stock Offerings.................................. 19,568
Repayments on the Partnership's credit facilities with
proceeds from a dividend received from one of the
Unconsolidated Subsidiaries............................... 1,889
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1998
Acquisitions.............................................. (15,994)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1998 Dispositions and
the 1998 Stock Offerings.................................. 20,113
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred Partnership
Unit Offering............................................. 463
--------
$ (3,451)
========
</TABLE>
(L) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the Probable Purchases.
(M) Represents (i) loss of $181 related to limited partners in consolidated
partnerships acquired in connection with the 1997 Property Acquisitions
and the 1998 Property Acquisitions and (ii) income of $502 allocable to
the Partnership Preferred Units.
(N) Represents the reduction in the Partnership's earnings in unconsolidated
partnerships as a result of the consolidation of additional partnerships
resulting from additional ownership acquired through tender offers.
(O) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
P-15
<PAGE> 1033
(P) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 724
Reduction in salaries and benefits.......................... 4,197
Merger related costs........................................ 524
Other....................................................... 1,947
------
$7,392
======
</TABLE>
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(Q) Represents the decrease in interest expense of $3,612 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$3,833 related to borrowings under the Partnership's credit facilities.
(R) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(S) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(T) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $38,885, amortization of goodwill of $6,526, and
depreciation of furniture, fixtures, and equipment of $3,753, less IFG's
historical depreciation and amortization of $16,465. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(U) Represents elimination of minority interest of IPT resulting from the IPT
merger.
(V) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(W) Represents the reversal of IFG's income tax provision.
(X) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(Y) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Z) Represents interest income of $3,825 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries by the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $3,634 reflected on the equity in earnings of the
Unconsolidated Subsidiaries.
(AA) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-16
<PAGE> 1034
(BB) The following table presents the net impact to pro forma net loss
applicable to holders of OP Units and net loss per OP Units assuming the
interest rate per annum increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest expense................................ $ 938
========
Net income.................................................. $(14,789)
========
Net loss attributable to OP unitholders..................... $(56,963)
========
Basic loss per OP unit...................................... $ (0.84)
========
Diluted loss per OP unit.................................... $ (0.84)
========
</TABLE>
(CC) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred
Units, the Class G Preferred Units, the Class H Preferred Units and the
Class J Preferred Units as if these Preferred Units had been issued as of
January 1, 1997.
(DD) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(2,536), plus the elimination of intercompany interest
expense of $8,384. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the year ended December 31, 1997 is
presented below, which represents the effects of the Ambassador Merger,
the NHP Merger, the NHP Reorganization, the IFG Merger, and the IFG
Reorganization as if these transactions had occurred as of January 1,
1997.
P-17
<PAGE> 1035
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZATION IFG
HISTORICAL(i) ADJUSTMENTS(ii) REORGANIZATION(iii) PRO FORMA
------------- --------------- ------------------- ---------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 6,194 $ 6,371(iv) $ -- $ 12,565
Property operating expenses............. (3,355) (3,531)(iv) -- (6,886)
Owned property management expense....... (147) (478)(iv) -- (625)
Depreciation expense.................... (1,038) (767)(iv) -- (1,805)
-------- -------- -------- --------
Income from property operations......... 1,654 1,595 -- 3,249
-------- -------- -------- --------
Management fees and other income........ 23,776 41,992(v) 74,404(x) 140,172
Management and other expenses........... (11,733) (20,403)(v) (49,236)(x) (81,372)
Amortization............................ (3,726) (4,017)(v) (30,188)(xi) (37,931)
-------- -------- -------- --------
Income from service company............. 8,317 17,572 (5,020) 20,869
General and administrative expense...... -- (6,573)(v) (6,249)(x) (12,822)
Interest expense........................ (6,058) (5,849)(vi) (3,825)(xii) (15,732)
Interest income......................... 1,001 (148)(v) -- 853
Minority interest....................... (2,819) 2,198(viii) -- (621)
Equity in losses of unconsolidated
partnerships.......................... (1,028) 1,028(iv) -- --
Equity in earnings of Unconsolidated
Subsidiaries.......................... 2,943 (2,943)(vii) -- --
-------- -------- -------- --------
Income (loss) from operations........... 4,010 6,880 (15,094) (4,204)
Income tax provision.................... (1,902) (3,013)(ix) 6,450(xiii) 1,535
-------- -------- -------- --------
Net income (loss)....................... $ 2,108 $ 3,867 $ (8,644) $ (2,669)
======== ======== ======== ========
Income attributable to preferred
unitholders........................... $ 2,198 $ 3,478 $ (8,212) $ (2,536)
======== ======== ======== ========
Income (loss) attributable to common
unitholders........................... $ (90) $ 389 $ (432) $ (133)
======== ======== ======== ========
</TABLE>
- ---------------
(i) Represents the historical results of operations of the Unconsolidated
Subsidiaries for the year ended December 31, 1997.
(ii) Represents adjustments related to the NHP Reorganization, which includes
the sale or contribution of 14 properties containing 2,725 apartment units
from the unconsolidated partnerships to the Unconsolidated Subsidiaries,
as well as the sale or contribution of 12 properties containing 2,905
apartment units from the Unconsolidated Subsidiaries to the Unconsolidated
Partnership.
(iii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iv) Represents adjustments for the historical results of operations of the 14
real estate properties contributed or sold to the Unconsolidated
Subsidiaries, offset by the historical results of operations of the 12
real estate properties contributed or sold to the Unconsolidated
Partnership, with additional depreciation recorded related to the
Partnership's new basis resulting from the allocation of purchase price of
NHP and the NHP Real Estate Companies.
P-18
<PAGE> 1036
(v) Represents adjustments to reflect income and expenses associated with
certain assets and liabilities of NHP contributed or sold to the
Unconsolidated Subsidiaries.
(vi) Represents adjustments of $6,058 to reverse the historical interest
expense of the Unconsolidated Subsidiaries, which resulted from its
original purchase of NHP Common Stock, offset by $2,622 related to the
contribution or sale of the 14 real estate properties, $4,285 related to
assets and liabilities transferred from the Partnership to the
Unconsolidated Subsidiaries and $5,000 related to a note payable to the
Partnership.
(vii) Represents the reversal of the historical equity in earnings of NHP for
the period in which NHP was not consolidated by the Unconsolidated
Subsidiaries.
(viii)Represents the minority interest in the operations of the 14 real estate
properties.
(ix) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill which is not deductible
for tax purposes.
(x) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(xi) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(xii) Represents adjustment for interest expense related to a note payable to
the Partnership.
(xiii)Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-19
<PAGE> 1037
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR
AND PROBABLE AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(a) PURCHASES(b) HISTORICAL(c) ADJUSTMENTS(d) ADJUSTED(e)
------------- ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Rental and other property revenues............. $ 265,700 $ 19,603(H) $ $ $
8,398(I) 35,480 -- 8,126
Property operating expenses.................... (101,600) (9,009)(H)
(3,745)(I) (14,912) -- (2,585)
Owned property management expense.............. (7,746) (728)(H)
(459)(I) -- -- --
Depreciation................................... (59,792) (4,886)(H)
(2,624)(I) (7,270) (1,420)(M) (904)
--------- -------- -------- ------- --------
Income from property operations................ 96,562 6,550 13,298 (1,420) 4,637
--------- -------- -------- ------- --------
Management fees and other income............... 13,968 -- -- -- 71,155
Management and other expenses.................. (8,101) -- -- -- (41,477)
Corporate overhead allocation.................. (196) -- -- -- --
Amortization................................... (3) -- -- -- (13,986)
--------- -------- -------- ------- --------
Income from service company business........... 5,668 -- -- -- 15,692
--------- -------- -------- ------- --------
General and administrative expenses............ (7,444) -- (5,278) 5,278(N) (61,386)
Interest expense............................... (56,756) 1,975(J)
(2,469)(K) (10,079) 145(O) (24,871)
Interest income................................ 18,244 (1) -- -- 22,501
Minority interest.............................. (1,052) 160(L) (252) 252(P) (14,159)
Equity in losses of unconsolidated
partnerships................................. (5,078) -- (71) -- 13,492
Equity in earnings of unconsolidated
subsidiaries................................. 8,413 -- -- -- --
Amortization of goodwill....................... (5,071) -- -- -- --
--------- -------- -------- ------- --------
Income (loss) from operations.................. 53,486 6,215 (2,382) 4,255 (44,094)
Income tax provision........................... -- -- -- -- 1,180
Gain on dispositions of property............... 2,783 (2,783) -- -- 6,576
--------- -------- -------- ------- --------
Net income..................................... 56,269 3,432 (2,382) 4,255 (36,338)
Income attributable to preferred unitholders... 16,320 16,094 -- -- --
--------- -------- -------- ------- --------
Income (loss) attributable to common
unitholders.................................. $ 39,949 $(12,662) $ (2,382) $ 4,255 $(36,338)
========= ======== ======== ======= ========
Basic earnings (loss) per OP Unit.............. $ 0.80
=========
Diluted earnings (loss) per OP Unit............ $ 0.79
=========
Weighted average OP Units outstanding.......... 50,420
=========
Weighted average OP Unit and equivalents
outstanding.................................. 50,544
=========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(f) ADJUSTMENTS(g) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property revenues............. $ $ $
-- -- 337,307
Property operating expenses....................
-- -- (131,851)
Owned property management expense..............
-- -- (8,933)
Depreciation...................................
(1,583)(Q) -- (78,479)
-------- -------- ---------
Income from property operations................ (1,583) -- 118,044
-------- -------- ---------
Management fees and other income............... -- (56,211)(W) 28,912
Management and other expenses.................. -- 35,192(W) (14,386)
Corporate overhead allocation.................. -- -- (196)
Amortization................................... (23,895)(R) 22,641(X) (15,243)
-------- -------- ---------
Income from service company business........... (23,895) 1,622 (913)
-------- -------- ---------
General and administrative expenses............ 45,823(S) 14,375(W) (8,632)
Interest expense...............................
7,045 -- (85,010)(AA)
Interest income................................ -- 143(Y) 40,887
Minority interest.............................. 6,622(T) -- (8,429)
Equity in losses of unconsolidated
partnerships................................. (18,577)(U) -- (10,234)
Equity in earnings of unconsolidated
subsidiaries................................. -- (7,562)(Z) 851(CC)
Amortization of goodwill....................... -- -- (5,071)
-------- -------- ---------
Income (loss) from operations.................. 15,435 8,578 41,493
Income tax provision........................... (1,180)(V) -- --
Gain on dispositions of property............... (6,576) -- --
-------- -------- ---------
Net income..................................... 7,679 8,578 41,493
Income attributable to preferred unitholders... -- -- 32,414(BB)
-------- -------- ---------
Income (loss) attributable to common
unitholders.................................. $ 7,679 $ 8,578 $ 9,079(AA)
======== ======== =========
Basic earnings (loss) per OP Unit.............. $ 0.13(AA)
=========
Diluted earnings (loss) per OP Unit............ $ 0.13(AA)
=========
Weighted average OP Units outstanding.......... 68,554
=========
Weighted average OP Unit and equivalents
outstanding.................................. 69,218
=========
</TABLE>
P-20
<PAGE> 1038
- ---------------
(A) Represents the Partnership's unaudited consolidated results of operations
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1998: (i) the 1998 Stock Offerings; (ii) the 1998
Acquisitions; (iii) the Probable Purchases; (iv) the 1998 Dispositions;
and (v) the Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of operations of Ambassador
for the four months ended April 30, 1998. Certain reclassifications have
been made to Ambassador's historical Statement of Operations to conform
to the Partnership's Statement of Operations presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger and the spin-off of the common stock of Holdings as if these
transactions had occurred on January 1, 1998. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
HOLDINGS
IFG AMIT SPIN- IFG
HISTORICAL(i) MERGER(ii) OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 7,566 $ 560 $ -- $ 8,126
Property operating expenses............. (2,585) -- -- (2,585)
Depreciation............................ (904) -- -- (904)
--------- ------ --------- --------
Income from property operations......... 4,077 560 -- 4,637
--------- ------ --------- --------
Management fees and other income........ 311,475 -- (240,320) 71,155
Management and other expenses........... (252,295) -- 210,818 (41,477)
Amortization............................ (26,781) (48) 12,843 (13,986)
--------- ------ --------- --------
Income from service company business.... 32,399 (48) (16,659) 15,692
--------- ------ --------- --------
General and administrative expenses..... (66,272) (675) 5,561 (61,386)
Interest expense........................ (24,164) -- (707) (24,871)
Interest income......................... 18,817 4,193 (509) 22,501
Minority interest....................... (14,159) -- -- (14,159)
Equity in losses of unconsolidated
partnerships.......................... 12,169 1,323 13,492
--------- ------ --------- --------
Income (loss) from operations........... (37,133) 4,030 (10,991) (44,094)
Income tax provision.................... (4,772) -- 5,952 1,180
Gain on disposition of property......... 5,888 688 -- 6,576
--------- ------ --------- --------
Item income (loss)...................... $ (36,017) $4,718 $ (5,039) $(36,338)
========= ====== ========= ========
</TABLE>
----------------------
(i)
Represents the unaudited consolidated results of operations of IFG for
the nine months ended September 30, 1998.
Certain reclassifications have been made to IFG's historical statement
of operations to conform to the Partnership's statement of operations
presentation.
(ii)
Represents the historical statement of operations of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock for
each three shares of IFG common stock to holders of IFG common stock.
(F) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the incremental depreciation of the purchase price adjustment
related to consolidated real estate and investments in real estate
partnerships; (ii) the amortization of goodwill and property management
contracts
P-21
<PAGE> 1039
resulting from the IFG Merger; (iii) the increase in interest expense
resulting from the net increase in debt; and (iv) the elimination of the
income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of
IFG, primarily management contracts and related working capital assets
and liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(H) Represents adjustments to reflect the 1998 Acquisitions, less the 1998
Dispositions as if they had occurred on January 1, 1998. These pro forma
operating results are based on historical results of the properties,
except for depreciation, which is based on the Partnership's investment
in the properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1998 1998
ACQUISITIONS DISPOSITIONS TOTAL
------------ ------------ -------
<S> <C> <C> <C>
Rental and other property revenues......... $20,554 $(951) $19,603
Property operating expense................. (9,385) 376 (9,009)
Owned property management expense.......... (765) 37 (728)
Depreciation............................... (4,979) 93 (4,886)
</TABLE>
(I) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1998. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(J) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and
other loans and mortgages assumed in connection with
the 1998 Acquisitions.................................. $(8,698)
Repayments on the Partnership's credit facilities and
other indebtedness with proceeds from the 1998
Dispositions and the 1998 Stock
Offerings.............................................. 10,326
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred
Partnership Unit Offering.............................. 347
-------
$ 1,975
=======
</TABLE>
(K) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the probable purchases.
(L) Represents (i) loss of $537 related to limited partners in consolidated
partnerships acquired in connection with the 1998 Acquisitions and (ii)
income of $377 allocable to the Partnership Preferred Units.
(M) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(N) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses.................... $ 355
Reduction in salaries and benefits........................ 2,482
Merger related costs...................................... 1,212
Other..................................................... 1,229
------
$5,278
======
</TABLE>
P-22
<PAGE> 1040
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1998 and that the
restructuring plan was completed on January 1, 1998. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(O) Represents the decrease in interest expense of $1,480 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$1,335 related to borrowings under the Partnership's line of credit.
(P) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(Q) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(R) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $30,096, amortization of goodwill of $4,895, and
depreciation of furniture, fixtures, and equipment of $2,842, less IFG's
historical depreciation and amortization of $13,938. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(S) Represents the elimination of merger related expenses recorded by IFG
during the nine months ended September 30, 1998. In connection with the
IFG Merger, certain IFG executives will receive one-time lump-sum
payments in connection with the termination of their employment and
option agreements. The total of these lump sum payments is estimated to
be approximately $50,000.
(T) Represents elimination of minority interest in IPT resulting from the IPT
merger.
(U) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(V) Represents the reversal of IFG's income tax provision.
(W) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(X) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Y) Represents interest income of $2,861 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries of the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $2,718 reflected in the equity in earnings of the
Unconsolidated Subsidiaries.
(Z) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-23
<PAGE> 1041
(AA) The following table presents the net impact to pro forma net income
applicable to holders of shares of AIMCO Common Stock and net income per
share of AIMCO Common Stock assuming the interest rate per annum
increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest........................................ $ 702
=======
Net income.................................................. $40,791
=======
Net income attributable to OP Unitholders................... $ 8,377
=======
Basic loss per OP Unit...................................... $ 0.12
=======
Diluted loss per OP Unit.................................... $ 0.12
=======
</TABLE>
(BB) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred Units
the Class G Preferred Units, the Class H Preferred Units and the Class J
Preferred Units as if these stock offerings had occurred as of January 1,
1997.
(CC) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(1,867) plus the elimination of intercompany interest of
$2,718. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the nine months ended September 30, 1998
is presented below, which represents the effects of the Ambassador
Merger, the IFG Merger and the IFG Reorganization as if these
transactions had occurred as of January 1, 1997.
P-24
<PAGE> 1042
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
IFG
HISTORICAL(i) REORGANIZATION(ii) PRO FORMA
------------- ------------------ ---------
<S> <C> <C> <C>
Rental and other property revenues................... $ 9,910 $ -- $ 9,910
Property operating expense........................... (5,139) -- (5,139)
Owned property management expense.................... (345) -- (345)
Depreciation expense................................. (1,026) -- (1,026)
-------- -------- --------
Income from property operations...................... 3,400 -- 3,400
-------- -------- --------
Management fees and other income..................... 57,665 56,211(iii) 113,876
Management and other expenses........................ (36,221) (35,192)(iii) (71,413)
Amortization......................................... (2,111) (22,641)(iv) (24,752)
-------- -------- --------
Income from service company.......................... 19,333 (1,622) 17,711
General and administrative expense................... -- (14,375)(iii) (14,375)
Interest expense..................................... (6,931) (2,861)(v) (9,792)
Interest income...................................... 617 -- 617
Minority interest.................................... (526) -- (526)
-------- -------- --------
Income (loss) from operations........................ 15,893 (18,858) (2,965)
Income tax provision................................. (7,037) 8,037(vi) 1,000
-------- -------- --------
Net income (loss).................................... $ 8,856 $(10,821) $ (1,965)
======== ======== ========
Income (loss) attributable to preferred
stockholders....................................... $ 8,413 $(10,280) $ (1,867)
======== ======== ========
Income (loss) attributable to common stockholders.... $ 443 $ (541) $ (98)
======== ======== ========
</TABLE>
- ---------------
(i) Represents the Unconsolidated Subsidiaries historical consolidated results
of operations.
(ii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iii)Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG.
(iv) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG, based on the Partnership's new basis resulting from the allocation
of the purchase price of IFG.
(v) Represents adjustment for interest expense related to a note payable to the
Partnership.
(vi) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-25
<PAGE> 1043
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR IFG
AND PROBABLE NHP AMBASSADOR PURCHASE PRICE AS
HISTORICAL(a) PURCHASES(b) TRANSACTIONS(c) HISTORICAL(d) ADJUSTMENTS(e) ADJUSTED(f)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $ 32,697 $ 25,214 $ (8,681) $ 3,437 $ 1,879 $ 4,744
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 43,520 28,817 7,354 20,372 5,997 17,248
Gain on investments............ -- -- (12) -- -- --
(Gain) loss on disposition of
properties.................... (2,720) 2,720 (3,882) -- -- (80)
Minority interests............. (1,008) (458) (16) 851 (705) 12,871
Equity in earnings of
unconsolidated partnerships... 1,798 122 8,542 (405) -- (12,515)
Equity in earnings of
unconsolidated subsidiaries... (4,636) -- (5,790) -- -- --
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 269 (269) -- -- -- (5,366)
Changes in operating assets and
operating liabilities......... 3,112 -- 5,314 (3,523) -- (4,384)
--------- --------- --------- --------- -------- --------
Total adjustments........... 40,335 30,932 11,510 17,295 5,292 7,774
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) operating activities... 73,032 56,146 2,829 20,732 7,171 12,518
Net cash used in
discontinued operations.... -- -- (7,999) -- -- --
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) continuing
operations................. 73,032 56,146 (5,170) 20,732 7,171 12,518
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... 21,792 19,627(I) -- -- -- --
Purchase of real estate.......... (376,315) (220,995)(J) (4,114) (24,179) -- --
Additions to real estate,
investments and property held
for sale....................... (26,966) (5,217)(K) (522) (19,033) -- (4,154)
Proceeds from sale of property
held for sale.................. 303 -- -- -- -- --
Purchase of general and limited
partnership interests.......... (199,146) -- (1,208) -- -- (76,104)
Purchase of management
contracts...................... -- -- (11,686) -- -- (36,868)
Purchase of/additions to notes
receivable..................... (59,787) -- (4,236) -- -- (17,647)
Proceeds from repayments of notes
receivable..................... -- -- 214 1,000 -- 8,838
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... 45,791 -- 3,097 3,183 -- 42,615
Contribution to unconsolidated
subsidiaries................... (42,879) -- -- -- -- --
Proceeds from sale of
securities..................... -- -- 642 -- -- --
Purchase of investments held for
sale........................... -- -- (73) -- -- --
Purchase of NHP mortgage loans... (60,575) -- -- -- -- --
Purchase of Ambassador common
stock.......................... (19,881) -- -- -- -- --
--------- --------- --------- --------- -------- --------
Net cash used in investing
activities................. (717,663) (206,585) (17,886) (39,029) -- (83,320)
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. 225,436 122,568(L) 145,519 156,746 -- 111,001
Principal repayments on secured
notes payable.................. (12,512) -- (141,032) (141,676) -- (12,697)
Proceeds from secured short-term
financing...................... 19,050 -- -- -- -- --
Repayments on secured short-term
financing...................... -- (259,027)(M) (434) -- -- --
Principal repayments on unsecured
short-term notes payable....... (79) (50,800)(M) -- -- -- --
Proceeds (payoff) from unsecured
short-term financing........... (12,500) -- -- -- -- --
Principal repayments on secured
tax-exempt bond financing...... (1,487) -- -- -- -- --
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... (162,008) -- -- -- -- --
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... (6,387) -- (245) (8,095) -- (2,305)
Proceeds from issuance of common
and preferred stock, net....... 643,224 357,389(N) 6,286 28,946 -- 62,420
Proceeds from exercises of
employee stock options and
warrants....................... 871 -- -- 3,195 -- 7,487
Repurchase of common stock....... -- -- -- -- -- (3,283)
Principal repayments received on
notes due from Officers........ 25,957 -- -- 1,323 -- --
Investments made by minority
interests...................... -- -- -- -- -- 249
Receipt of contributions from
minority interests............. -- 37,345(O) -- -- -- --
Payments of distribution to
minority interests............. -- (2,713)(P) -- -- -- --
Payment of distributions......... (44,660) (19,396)(Q) (11,503)(T) (15,717) (12,173)(U) (2,695)
Payment of distributions to
limited partners............... -- (5,193)(R) -- -- (15)(U) --
Payment of preferred unit
distributions.................. (846) (39,859)(S) -- (2,279) -- --
Payment of distributions to
minority interests............. (5,510) -- -- (3,700) -- (12,578)
Net transactions with
Insignia/ESG................... -- -- -- -- -- (57,612)
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) financing activities... 668,549 140,314 (1,409) 18,743 (12,188) 89,987
--------- --------- --------- --------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. 23,918 (10,125) (24,465) 446 (5,017) 19,185
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. 13,170 -- 36,277 4,002 -- 64,447
--------- --------- --------- --------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $ 37,088 $ (10,125) $ 11,812 $ 4,448 $ (5,017) $ 83,632
========= ========= ========= ========= ======== ========
<CAPTION>
IFG IFG
MERGER REORGANIZATION PRO
ADJUSTMENTS(g) ADJUSTMENTS(h) FORMA
-------------- -------------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $(80,023) $ 6,882 $ (13,851)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 35,049 (30,188) 128,169
Gain on investments............ -- -- (12)
(Gain) loss on disposition of
properties.................... 80 -- (3,882)
Minority interests............. (1,552) -- 9,983
Equity in earnings of
unconsolidated partnerships... 29,995 -- 27,537
Equity in earnings of
unconsolidated subsidiaries... -- 4,578 (5,848)
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 5,366 --
Changes in operating assets and
operating liabilities......... -- -- 519
-------- -------- -----------
Total adjustments........... 68,938 (25,610) 156,466
-------- -------- -----------
Net cash provided by (used
in) operating activities... (11,085) (18,728) 142,615
Net cash used in
discontinued operations.... -- -- (7,999)
-------- -------- -----------
Net cash provided by (used
in) continuing
operations................. (11,085) (18,728) 134,616
-------- -------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... -- -- 41,419
Purchase of real estate.......... -- -- (625,603)
Additions to real estate,
investments and property held
for sale....................... -- -- (55,892)
Proceeds from sale of property
held for sale.................. -- -- 303
Purchase of general and limited
partnership interests.......... -- -- (276,458)
Purchase of management
contracts...................... -- -- (48,554)
Purchase of/additions to notes
receivable..................... -- -- (81,670)
Proceeds from repayments of notes
receivable..................... -- -- 10,052
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... -- -- 94,686
Contribution to unconsolidated
subsidiaries................... -- -- (42,879)
Proceeds from sale of
securities..................... -- -- 642
Purchase of investments held for
sale........................... -- -- (73)
Purchase of NHP mortgage loans... -- -- (60,575)
Purchase of Ambassador common
stock.......................... -- -- (19,881)
-------- -------- -----------
Net cash used in investing
activities................. -- -- (1,064,483)
-------- -------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. -- -- 761,270
Principal repayments on secured
notes payable.................. -- -- (307,917)
Proceeds from secured short-term
financing...................... -- -- 19,050
Repayments on secured short-term
financing...................... -- -- (259,461)
Principal repayments on unsecured
short-term notes payable....... -- -- (50,879)
Proceeds (payoff) from unsecured
short-term financing........... -- -- (12,500)
Principal repayments on secured
tax-exempt bond financing...... -- -- (1,487)
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... -- -- (162,008)
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... -- -- (17,032)
Proceeds from issuance of common
and preferred stock, net....... -- -- 1,098,265
Proceeds from exercises of
employee stock options and
warrants....................... -- -- 11,553
Repurchase of common stock....... -- -- (3,283)
Principal repayments received on
notes due from Officers........ -- -- 27,280
Investments made by minority
interests...................... -- -- 249
Receipt of contributions from
minority interests............. -- -- 37,345
Payments of distribution to
minority interests............. -- -- (2,713)
Payment of distributions......... (24,513)(V) -- (130,657)
Payment of distributions to
limited partners............... -- -- (5,208)
Payment of preferred unit
distributions.................. -- -- (42,984)
Payment of distributions to
minority interests............. -- -- (21,788)
Net transactions with
Insignia/ESG................... -- -- (57,612)
-------- -------- -----------
Net cash provided by (used
in) financing activities... (24,513) -- 879,483
-------- -------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. (35,598) (18,728) (50,384)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. -- -- 117,896
-------- -------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $(35,598) $(18,728) $ 67,512
======== ======== ===========
</TABLE>
P-26
<PAGE> 1044
- ---------------
(A) Represents the Partnership's audited consolidated statement of cash flows
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1997 Acquisitions; (ii) the 1997 Stock Offerings;
(iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings; (v) the 1998
Acquisitions; (vi) the Probably Purchases; (vii) the 1998 Dispositions; and
(viii) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)................. $ (7,266) $ 4,350 $(2,222) $ (3,543) $ (8,681)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 4,058 9,134 5,125 (10,963) 7,354
Gain on investments............. (12) -- -- -- (12)
(Gain) loss on disposition of
properties.................... (3,882) -- -- -- (3,882)
Minority interests.............. (16) -- -- -- (16)
Equity in earnings of
unconsolidated partnerships... 3,905 -- 4,631 6 8,542
Equity in earnings of
unconsolidated subsidiaries... -- -- 4,636 (10,426) (5,790)
Changes in operating assets and
operating liabilities......... (1,036) 6,350 -- -- 5,314
-------- -------- ------- -------- ---------
Total adjustments........... 3,017 15,484 14,392 (21,383) 11,510
-------- -------- ------- -------- ---------
Net cash provided by (used
in) operating
activities................ (4,249) 19,834 12,170 (24,926) 2,829
Net cash used in
discontinued operations... -- (7,999) -- -- (7,999)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) continuing
operations................ (4,249) 11,835 12,170 (24,926) (5,170)
-------- -------- ------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate........... -- (4,114) -- -- (4,114)
Additions to real estate,
investments and property held
for sale........................ (522) -- -- -- (522)
Purchase of general and limited
partnership interests........... (1,208) -- -- -- (1,208)
Purchase of management
contracts....................... -- (11,686) -- -- (11,686)
Purchase of/additions to notes
receivable...................... -- (4,236) -- -- (4,236)
Proceeds from repayments of notes
receivable...................... 214 -- -- -- 214
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 3,097 -- -- -- 3,097
Proceeds from sale of
securities...................... 642 -- -- -- 642
Purchase of investments held for
sale............................ (73) -- -- -- (73)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) investing
activities................ 2,150 (20,036) -- -- (17,886)
-------- -------- ------- -------- ---------
</TABLE>
P-27
<PAGE> 1045
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes
payable borrowings.............. $ 74,019 $ 71,500 $ -- $ -- $ 145,519
Principal repayments on secured
notes payable................... (71,256) (69,776) -- -- (141,032)
Repayments on secured short-term
financing....................... (434) -- -- -- (434)
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (245) -- -- (245)
Proceeds from issuances of common
and preferred stock, net........ -- 6,286 -- -- 6,286
Payment of distributions.......... (2,000) -- (9,503) -- (11,503)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) financing
activities................ 329 7,765 (9,503) -- (1,409)
-------- -------- ------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (1,770) (436) 2,667 (24,926) (24,465)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 25,795 10,482 -- -- 36,277
-------- -------- ------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 24,025 $ 10,046 $ 2,667 $(24,926) $ 11,812
======== ======== ======= ======== =========
</TABLE>
- ---------------
(i)Represents the adjustment to record cash flow activity from January 1,
1997 to the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. In addition,
represents adjustments to record additional deprecation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest expense
incurred in connection with borrowings incurred by the Partnership to
consummate the NHP Real Estate Acquisition.
(ii)
Represents the unaudited consolidated statement of cash flows of NHP
for the period from January 1, 1997 through December 8, 1997 (date of
the NHP Merger).
(iii)
Represents the following adjustments occurring as a result of the NHP
Merger: (i) the reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan; (ii) the incremental
depreciation of the purchase price adjustment related to real estate;
(iii) the incremental amortization of the purchase price adjustment
related to management contracts, furniture, fixtures and equipment, and
goodwill; (iv) the reversal of equity in earnings of NHP during the
pre-merger period when the Partnership held a 47.62% interest in NHP;
and (v) the amortization of the increased basis in investments in real
estate partnerships, based on the purchase price adjustment related to
real estate and an estimated average life of 20 years.
(iv)
Represents adjustments related to the NHP Reorganization, whereby the
Partnership contributed or sold to the Unconsolidated Subsidiaries and
the Unconsolidated Partnership; (i) certain assets and liabilities of
NHP, primarily related to the management operations and other
businesses owned by NHP and (ii) 12 real estate properties containing
2,905 apartment units. The adjustments represent (i) the related cash
flow activity primarily related to the management operations of such
real estate partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis resulting
from the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies.
(D) Represents the audited historical statement of cash flows of Ambassador for
the year ended December 31, 1997. Certain reclassifications have been made
to Ambassador's historical statement of cash flows to conform to the
Partnership's statement of cash flows presentation. The Ambassador
P-28
<PAGE> 1046
historical statement of cash flows excludes an extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................... $ 10,233 $ 7,566 $(13,055) $ 4,744
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization...... 32,675 63 (15,490) 17,248
Gain on disposition of property.... -- (80) -- (80)
Minority interests................. 12,448 382 41 12,871
Equity in earnings of
unconsolidated partnerships...... (10,027) (2,639) 151 (12,515)
Extraordinary gain on early
extinguishment of debt........... (5,366) -- -- (5,366)
Changes in operating assets and
liabilities...................... -- (2,405) (1,979) (4,384)
--------- -------- -------- --------
Total adjustments............. 29,730 (4,679) (17,277) 7,774
--------- -------- -------- --------
Net cash provided by (used in) operating
activities............................ 39,963 2,887 (30,332) 12,518
--------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to real estate, investments
and property held for sale......... (7,695) 665 2,876 (4,154)
Purchase of general and limited
partnership interests.............. (93,118) -- 17,014 (76,104)
Purchase of management contracts...... (99,540) -- 62,672 (36,868)
Purchase of/additions to notes
receivable......................... (9,172) (14,251) 5,776 (17,647)
Proceeds from repayments of notes
receivable......................... 4,523 7,552 (3,237) 8,838
Distributions from investments in real
estate partnerships and
unconsolidated subsidiaries........ 44,823 -- (2,208) 42,615
--------- -------- -------- --------
Net cash provided by (used in)
investing activities........ (160,179) (6,034) 82,893 (83,320)
--------- -------- -------- --------
</TABLE>
P-29
<PAGE> 1047
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable
borrowings......................... $ 118,141 $ -- $ (7,140) $111,001
Principal repayments on secured notes
payable............................ (15,682) -- 2,985 (12,697)
Payment of loan costs, net of proceeds
from interest rate hedge........... (2,305) -- -- (2,305)
Proceeds from issuance of common and
preferred stock, net............... 62,420 -- -- 62,420
Proceeds from exercises of employee
stock options and warrants......... 7,487 -- -- 7,487
Repurchase of common stock............ (3,283) -- -- (3,283)
Investment made by minority
interests.......................... 249 -- -- 249
Payment of distributions.............. -- (2,695) -- (2,695)
Payment of distributions to minority
interests.......................... (12,578) -- -- (12,578)
Net transactions with Insignia/ESG.... -- -- (57,612) (57,612)
--------- -------- -------- --------
Net cash provided by (used in)
financing activities........ 154,449 (2,695) (61,767) 89,987
--------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 34,233 (5,842) (9,206) 19,185
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD............................. 54,614 9,789 44 64,447
--------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................ $ 88,847 $ 3,947 $ (9,162) $ 83,632
========= ======== ======== ========
</TABLE>
- ---------------
(i)Represents the audited consolidated statement of cash flows of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report on
Form 10-K. Certain reclassifications have been made to IFG's historical
statement of cash flows to conform to the Partnership's statement of
cash flows presentation.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(I) Represents proceeds from the sale of the 1998 Dispositions, as if these
dispositions occurred on January 1, 1997.
P-30
<PAGE> 1048
(J) Represents the use of cash to purchase the 1998 Acquisitions and the
Probable Purchases, as if these acquisitions occurred on January 1, 1997.
(K) Represents cash payments for capital improvements of $300 per unit on the
1997 Acquisitions, the 1998 Acquisitions and the Probable Purchases.
(L) Represents notes payable assumed in connection with the 1998 Acquisitions
and the Probable Purchases, assuming these transactions occurred January 1,
1997.
(M) Represents net principal repayments assuming the 1998 Acquisitions, the
1998 Dispositions, the Probable Purchases, the 1998 Stock Offerings and the
Preferred Partnership Unit Offering occurred January 1, 1997.
(N) Represents cash proceeds from the 1998 Stock Offerings, as if these
offerings occurred on January 1, 1997.
(O) Represents contributions from minority interests assuming the Preferred
Partnership Unit Offering occurred January 1, 1997.
(P) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(Q) Represents distributions paid on the 1997 Stock Offerings as if these
occurred on January 1, 1997.
(R) Represents distributions paid to limited partners on OP Units issued in
connection with the 1997 Acquisitions, the 1998 Acquisitions and the
Probable Purchases, as if the issuance of the OP Units occurred on January
1, 1997.
(S) Represents preferred unit distributions paid on the Class B Preferred
Stock, the Class C Preferred Stock and the 1998 Stock Offerings as if these
occurred on January 1, 1997.
(T) Represents historical distributions of $2,000 and pro forma distributions
on the shares issued in the NHP Merger as if these shares had been issued
on January 1, 1997.
(U) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(V) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-31
<PAGE> 1049
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE AMBASSADOR PURCHASE PRICE IFG AS IFG MERGER
HISTORICAL(a) PURCHASE(b) HISTORICAL(c) ADJUSTMENTS(d) ADJUSTED(e) ADJUSTMENTS(f)
------------- ------------ ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 56,269 $ 3,432 $ (2,382) $ 4,255 $ (36,338) $ 7,679
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 67,344 7,512 7,520 1,420 14,890 25,478
(Gain) loss on disposition of
properties..................... (2,783) 2,783 -- -- (6,576) 6,576
Minority interests.............. 1,052 (160) 252 (252) 14,159 (6,622)
Equity in earnings of
unconsolidated partnerships.... 5,078 -- 71 -- (13,492) 18,577
Equity in earnings of
unconsolidated subsidiaries.... (8,413) -- -- -- -- --
Non-cash compensation........... -- -- -- -- 796 --
Changes in operating assets and
operating liabilities.......... (67,722) -- 5,948 -- (7,775) --
--------- -------- -------- ------- --------- --------
Total adjustments............ (5,444) 10,135 13,791 1,168 2,002 44,009
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) operating activities... 50,825 13,567 11,409 5,423 (34,336) 51,688
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... (63,839) 63,839(H) -- -- 27,122 --
Additions to real estate.......... (47,878) (1,198)(I) (17,759) -- 9,309 --
Proceeds from sale of property and
investments held for sale....... 19,627 (19,627)(J) -- -- (35) --
Additions to property held for
sale............................ (1,986) -- -- -- -- --
Purchase of general and limited
partnership interests........... (27,016) -- -- -- 17,420 --
Purchase of/additions to notes
receivable...................... (72,445) -- -- -- (27,589) --
Proceeds from repayments/sale of
notes receivable................ 21,562 -- -- -- 21,185 --
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 513 -- 1,063 -- 22,053 --
Payment of trust based preferred
dividends....................... -- -- -- -- (7,415) --
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... 4,492 -- -- -- 13,423 --
Contribution to unconsolidated
subsidiaries.................... (13,032) -- -- -- -- --
Purchase of investments held for
sale............................ (4,935) -- -- -- -- --
Redemption of OP Units............ (516) -- -- -- -- --
Merger costs...................... -- -- -- -- (1,402) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) investing activities... (185,453) 43,014 (16,696) -- 74,071 --
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. 77,489 -- 37,162 -- 177,234 --
Principal repayments on secured
notes payable................... (56,262) -- -- -- 4,239 --
Principal advances on secured
tax-exempt bond financing....... -- -- 21,784 -- -- --
Principal repayments on secured
tax-exempt bond financing....... (1,436) -- -- -- -- --
Net borrowings/repayments on
secured short-term financing.... (30,693) 209,027(K) (43,002) -- -- --
Net borrowings (paydowns) on the
revolving credit facilities..... -- -- 2,513 -- -- --
Principal repayments on unsecured
short-term notes payable........ -- -- -- -- 2,644 --
Payment of loan costs, net of
proceeds from interest rate
hedge........................... (5,727) -- -- -- (83) --
Proceeds from issuance of common
stock and preferred stock,
net............................. 253,239 (253,239)(L) -- -- -- --
Repurchase of common stock........ (10,972) -- -- -- -- --
Proceeds from exercises of
employee stock options and
warrants........................ -- -- 9,761 -- 6,533 --
Principal repayments received on
notes due from Officers......... 8,084 -- -- -- -- --
Payments of distributions to
minority interests.............. -- (2,034)(M) -- -- -- --
Payment of distributions.......... (73,322) -- -- (3,701)(P) (8,606) (22,360)(Q)
Payment of distributions to
limited partners................ (10,251) (1,919)(N) -- (5)(P) (494) --
Payment of preferred unit
distributions................... (10,916) (16,094)(O) -- -- -- --
Proceeds from issuance of High
Performance Units............... 1,988 -- -- -- -- --
Net transactions with
Insignia/ESG.................... -- -- -- -- (241,003) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) financing activities... 141,221 (64,259) 28,218 (3,706) (59,536) (22,360)
--------- -------- -------- ------- --------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. 6,593 (7,678) 22,931 1,717 (19,801) 29,328
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 37,088 (10,125) 4,448 (5,017) 83,632 (35,598)
--------- -------- -------- ------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 43,681 $(17,803) $ 27,379 $(3,300) $ 63,831 $ (6,270)
========= ======== ======== ======= ========= ========
<CAPTION>
IFG
REORGANIZATION PRO
ADJUSTMENTS(g) FORMA
-------------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 8,578 $ 41,493
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... (22,641) 101,523
(Gain) loss on disposition of
properties..................... -- --
Minority interests.............. -- 8,429
Equity in earnings of
unconsolidated partnerships.... -- 10,234
Equity in earnings of
unconsolidated subsidiaries.... 7,562 (851)
Non-cash compensation........... -- 796
Changes in operating assets and
operating liabilities.......... -- (69,549)
-------- ---------
Total adjustments............ (15,079) 50,582
-------- ---------
Net cash provided by (used
in) operating activities... (6,501) 92,075
-------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... -- 27,122
Additions to real estate.......... -- (57,526)
Proceeds from sale of property and
investments held for sale....... -- (35)
Additions to property held for
sale............................ -- (1,986)
Purchase of general and limited
partnership interests........... -- (9,596)
Purchase of/additions to notes
receivable...................... -- (100,034)
Proceeds from repayments/sale of
notes receivable................ -- 42,747
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... -- 23,629
Payment of trust based preferred
dividends....................... -- (7,415)
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... -- 17,915
Contribution to unconsolidated
subsidiaries.................... -- (13,032)
Purchase of investments held for
sale............................ -- (4,935)
Redemption of OP Units............ -- (516)
Merger costs...................... -- (1,402)
-------- ---------
Net cash provided by (used
in) investing activities... -- (85,064)
-------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. -- 291,885
Principal repayments on secured
notes payable................... -- (52,023)
Principal advances on secured
tax-exempt bond financing....... -- 21,784
Principal repayments on secured
tax-exempt bond financing....... -- (1,436)
Net borrowings/repayments on
secured short-term financing.... -- 135,332
Net borrowings (paydowns) on the
revolving credit facilities..... -- 2,513
Principal repayments on unsecured
short-term notes payable........ -- 2,644
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (5,810)
Proceeds from issuance of common
stock and preferred stock,
net............................. -- --
Repurchase of common stock........ -- (10,972)
Proceeds from exercises of
employee stock options and
warrants........................ -- 16,294
Principal repayments received on
notes due from Officers......... -- 8,084
Payments of distributions to
minority interests.............. -- (2,034)
Payment of distributions.......... -- (107,989)
Payment of distributions to
limited partners................ -- (12,669)
Payment of preferred unit
distributions................... -- (27,010)
Proceeds from issuance of High
Performance Units............... -- 1,988
Net transactions with
Insignia/ESG.................... -- (241,003)
-------- ---------
Net cash provided by (used
in) financing activities... -- 19,578
-------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (6,501) 26,589
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... (18,728) 55,700
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $(25,229) $ 82,289
======== =========
</TABLE>
P-32
<PAGE> 1050
- ---------------
(A) Represents the Partnership's unaudited consolidated statement of cash flows
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1998 Stock Offerings; (ii) the 1998 Acquisitions;
(iii) the Probably Purchases; (iv) the 1998 Dispositions and (v) the
Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of cash flows of Ambassador
for the four months ended April 20, 1998. Certain reclassifications have
been made to Ambassador's historical statement of cash flows to conform to
the Partnership's statement of cash flows presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ (36,017) $ 4,718 $ (5,039) $(36,338)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 27,685 48 (12,843) 14,890
Gain on disposition of property......................... (5,888) (688) -- (6,576)
Minority interests...................................... 14,159 -- -- 14,159
Equity in earnings of unconsolidated partnerships....... (12,169) -- (1,323) (13,492)
Non-cash compensation................................... 796 -- -- 796
Changes in operating assets and liabilities............. (18,853) (1,499) 12,577 (7,775)
--------- -------- --------- --------
Total adjustments................................... 5,730 (2,139) (1,589) 2,002
--------- -------- --------- --------
Net cash provided by (used in) operating
activities........................................ (30,287) 2,579 (6,628) (34,336)
--------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... (3,804) -- 30,926 27,122
Additions to real estate.................................. (2,252) (25) 11,586 9,309
Proceeds from sales of property and investments held for
sale.................................................... -- 161 (196) (35)
Purchase of general and limited partnership interests..... (44,270) -- 61,690 17,420
Purchases of / additions to notes receivable.............. (17,107) (15,407) 4,925 (27,589)
Proceeds from repayments/sale of notes receivable......... 151 23,672 (2,638) 21,185
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 21,360 -- 693 22,053
Payment of trust based preferred dividends................ (7,415) -- -- (7,415)
Cash received in connection with AMIT Merger.............. 13,423 -- -- 13,423
Merger costs.............................................. (1,402) -- -- (1,402)
--------- -------- --------- --------
Net cash provided by (used in) investing
activities........................................ (41,316) 8,401 106,986 74,071
--------- -------- --------- --------
</TABLE>
P-33
<PAGE> 1051
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 186,000 -- (8,766) 177,234
Principal repayments on secured notes payable............. (1,874) -- 6,113 4,239
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (83) -- -- (83)
Proceeds from exercises of employee stock options and
warrants................................................ 6,533 -- -- 6,533
Payment of distributions.................................. (6,541) (2,065) -- (8,606)
Payment of distributions minority interests............... (494) -- -- (494)
Net transactions with Insignia/ESG........................ (118,424) -- (122,579) (241,003)
--------- -------- --------- --------
Net cash provided by (used in) financing
activities........................................ 67,761 (2,065) (125,232) (59,536)
--------- -------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (3,842) 8,915 (24,874) (19,801)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 88,847 3,947 (9,162) 83,632
--------- -------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 85,005 $ 12,862 $ (34,036) $ 63,831
========= ======== ========= ========
</TABLE>
- ---------------
(i)Represents the unaudited consolidated statement of cash flows of IFG
for the nine months ended September 30, 1998. Certain reclassifications
have been made to IFG's historical statement of cash flows to conform
to the Partnership's statement of cash flows presentation. In addition,
the cash and cash equivalents at the beginning of the period has been
adjusted.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock. In addition, the cash and cash equivalents at the beginning of
the period has been adjusted.
(F) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(H) Represents adjustment to remove the use of cash to purchase the 1998
Acquisitions, as if these acquisitions occurred on January 1, 1997;
therefore, the purchases are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(I) Represents cash payments for capital improvements of $300 per unit on the
1998 Acquisitions.
(J) Represents adjustment to remove the proceeds from the sale of the 1998
Dispositions, as if these dispositions occurred on January 1, 1997;
therefore, the proceeds are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(K) Represents adjustment to remove net principal repayments assuming the 1998
Acquisitions, the 1998 Dispositions and the 1998 Stock Offerings occurred
January 1, 1997; therefore, the repayments are included on the Pro Forma
Consolidated Statement of Cash Flows for the year ended December 31, 1997.
(L) Represents adjustment to remove cash proceeds from the 1998 Stock
Offerings, as if these offerings occurred on January 1, 1997; therefore,
the repayments are included on the Pro Forma Consolidated Statement of Cash
Flows for the year ended December 31, 1997.
P-34
<PAGE> 1052
(M) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(N) Represents distributions paid to limited partners on OP Units issued in
connection with the 1998 Acquisitions and the Probable Purchases, as if the
issuance of the OP Units occurred on January 1, 1997.
(O) Represents preferred unit distributions paid on the 1998 Stock Offerings as
if these occurred on January 1, 1997.
(P) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(Q) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-35
<PAGE> 1053
PRO FORMA FINANCIAL INFORMATION OF
AIMCO PROPERTIES, L.P.
(EXCHANGE OFFERS)
INTRODUCTION
AIMCO Properties L.P. (the "Partnership") intends to offer to purchase
limited partnership interests in syndicated real estate limited partnerships in
which AIMCO holds partnership interests. The Partnership, is subject to
applicable law, plans to offer to purchase certain of such limited partnership
interests in exchange for (i) equity securities of the Partnership; (ii) cash or
(iii) a combination of such equity securities and cash. Such offers are expected
to include terms that will allow limited partners to continue to hold their
limited partnership interests.
The following Pro Forma Consolidated Balance Sheet (Exchange Offers) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) all the
transactions discussed in the Pro Forma Financial Statements (Insignia Merger)
appearing elsewhere herein; and (ii) the acceptance of exchange offers by
limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) all
the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1998: (i)
all the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The Pro Forma Financial Information (Exchange Offers) is based, in part, on
the historical financial statements of the partnerships in which the Exchange
Offers are made. The Pro Forma Financial Information (Exchange Offers) is also
based, in part, on the Pro Forma Financial Information (Insignia Merger) of the
Partnership included elsewhere herein. Such pro forma information is based in
part upon: (i) the audited Consolidated Financial Statements of Insignia for the
year ended December 31, 1997; (ii) the audited Consolidated Financial Statements
of Angeles Mortgage Investment Trust ("AMIT") for the year ended December 31,
1997; (iii) the unaudited Consolidated Financial Statements of Insignia for the
nine months ended September 30, 1998; and (iv) the unaudited Consolidated
Financial Statements of AMIT for the period from January 1, 1998 to September
17, 1998. The Pro Forma Financial Information (Insignia Merger) is also based,
in part, upon: (i) the audited Consolidated Financial Statements of Ambassador
for the year ended December 31, 1997; (ii) the audited Consolidated Financial
Statements of the Partnership for the year ended December 31, 1997; (iii) the
unaudited Consolidated Financial Statements of Ambassador for the four months
ended April 30, 1998; (iv) the unaudited Consolidated Financial Statements of
the Partnership for the nine months ended September 30, 1998; and (v) the
historical financial statements of certain properties and companies acquired by
AIMCO filed in AIMCO's Current Reports on Form 8-K, dated April 16, 1997, May 5,
1997, June 3, 1997, September 19, 1997, October 15, 1997, December 1, 1997 and
November 2, 1998. The following Pro Forma Financial Information (Exchange
Offers) should be read in conjunction with such financial statements and notes
thereto.
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared under the assumption that after the exchange offers are accepted, AIMCO
will own varying ownership percentages of each partnership, and that the limited
partners will choose to elect to receive 35% of the consideration in the form of
equity securities of AIMCO Properties, L.P. and 65% of the consideration in the
form of cash. The
P-36
<PAGE> 1054
interest to be acquired in each of the partnerships, the estimated purchase
price for each partnership, including cash, common units, or preferred units is
summarized below:
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Angeles Income Properties, Ltd. II.................... 26.70 $ 4,946 $ 3,215 $1,731
Angeles Income Properties, Ltd. III................... 30.63 2,156 1,401 755
Angeles Income Properties, Ltd. IV.................... 18.64 1,154 750 404
Angeles Income Properties, Ltd. 6..................... 37.29 4,523 2,940 1,583
Angeles Opportunity Properties, Ltd................... 37.94 1,729 1,124 605
Angeles Partners VII.................................. 24.86 610 397 213
Angeles Partners VIII................................. 24.80 0 0 0
Angeles Partners IX................................... 18.92 1,171 761 410
Angeles Partners X.................................... 22.97 709 461 248
Angeles Partners XI................................... 21.83 205 133 72
Angeles Partners XII.................................. 11.89 2,877 1,870 1,007
Angeles Partners XIV.................................. 24.93 0 0 0
Baywood Partners, Ltd................................. 25.00 347 226 121
Brampton Associates Partnership....................... 25.00 382 248 134
Buccaneer Trace Limited Partnership................... 25.00 2 1 1
Burgundy Court Associates, L.P........................ 25.00 1,074 698 376
Calmark/Fort Collins, Ltd............................. 25.00 192 125 67
Calmark Heritage Park II Ltd.......................... 25.00 47 31 16
Casa Del Mar Associates Limited Partnership........... 21.16 503 327 176
Catawba Club Associates, L.P.......................... 25.00 85 55 30
Cedar Tree Investors Limited Partnership.............. 25.00 1,037 674 363
Century Properties Fund XVI........................... 12.52 831 540 291
Century Properties Fund XVIII......................... 13.08 474 308 166
Century Properties Fund XIX........................... 15.30 1,765 1,147 618
Century Properties Growth Fund XXII................... 21.43 4,977 3,235 1,742
Chapel Hill, Limited.................................. 21.15 569 370 199
Chestnut Hill Associates Limited Partnership.......... 26.75 1,582 1,028 554
Coastal Commons Limited Partnership................... 25.00 566 368 198
Consolidated Capital Institutional Properties/2 &
Consolidated Capital Equity Properties/2............ 18.98 7,320 4,758 2,562
Consolidated Capital Institutional Properties/3....... 16.37 6,770 4,401 2,369
Consolidated Capital Properties III................... 13.02 1,134 737 397
Consolidated Capital Properties IV.................... 18.04 9,407 6,112 3,295
Consolidated Capital Properties V..................... 16.69 560 364 196
Consolidated Capital Properties VI.................... 25.82 556 361 195
DFW Apartment Investors Limited Partnership........... 35.65 2,719 1,767 952
DFW Residential Investors Limited Partnership......... 37.60 1,092 710 382
Davidson Diversified Real Estate I, L.P............... 34.78 627 408 219
Davidson Diversified Real Estate II, L.P.............. 35.11 1,318 857 461
Davidson Diversified Real Estate III, L.P............. 21.76 0 0 0
Davidson Growth Plus, L.P............................. 23.91 2,304 1,498 806
Davidson Income Real Estate, L.P...................... 30.81 2,691 1,749 942
Drexel Burnham Lambert Real Estate Associates II...... 19.58 994 646 348
Four Quarters Habitat Apartment Associates, Ltd....... 25.00 174 113 61
Fox Strategic Housing Income Partners................. 33.18 2,414 1,569 845
Georgetown of Columbus Associates, L.P................ 25.00 227 148 79
HCW Pension Real Estate Fund Limited Partnership...... 32.64 2,368 1,539 829
Investors First-Staged Equity......................... 49.00 306 199 107
Johnstown/Consolidated Income Partners................ 25.66 1,871 1,216 655
La Colina Partners, Ltd............................... 25.00 583 379 204
Lake Eden Associates, L.P............................. 25.00 632 411 221
Landmark Associates, L.P.............................. 25.00 48 31 17
</TABLE>
P-37
<PAGE> 1055
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Minneapolis Associates II Limited Partnership......... 25.00 $ 2 $ 1 $ 1
Multi-Benefit Realty Fund "87-1-Class A & Class B..... 21.89 1,657 1,077 580
National Property Investors 8......................... 11.13 988 642 346
Northbrook Apartments, Ltd............................ 25.00 209 136 73
Olde Mill Investors Limited Partnership............... 8.75 170 111 59
Orchard Park Apartments Limited Partnership........... 25.00 1 1 0
Park Town Place Associates Limited Partnership........ 24.70 298 194 104
Quail Run Associates, L.P............................. 25.00 487 317 170
Ravensworth Associates Limited Partnership............ 25.00 1 1 0
Rivercreek Apartments Limited Partnership............. 25.00 180 117 63
Rivercrest Apartments, Limited........................ 25.00 1,687 1,097 590
Riverside Park Associates L.P......................... 13.69 590 384 206
Salem Arms of Augusta Limited Partnership............. 25.00 278 181 97
Shaker Square, L.P.................................... 23.75 631 410 221
Shannon Mannor Apartments, Limited Partnership........ 25.00 1,170 761 409
Sharon Woods, L.P..................................... 22.75 499 324 175
Shelter Properties III................................ 15.20 1,960 1,274 686
Shelter Properties IV................................. 50.52 12,764 8,295 4,469
Shelter Properties VI................................. 13.78 1,919 1,247 672
Shelter Properties VII Limited Partnership............ 26.65 1,975 1,284 691
Snowden Village Associates, L.P....................... 25.00 443 288 155
Springhill Lake Investors Limited Partnership......... 11.84 2,908 1,890 1,018
Sturbrook Investors, Ltd.............................. 25.00 377 245 132
Sycamore Creek Associates, L.P........................ 25.00 1 1 0
Texas Residential Investors Limited Partnership....... 18.45 1,147 746 401
Thurber Manor Associates, Limited Partnership......... 25.00 218 142 76
U.S. Realty Partners Limited Partnership.............. 25.00 1,441 937 504
United Investors Growth Properties.................... 39.01 165 107 58
United Investors Growth Properties II................. 25.00 351 228 123
United Investors Income Properties.................... 23.44 1,977 1,285 692
Villa Nova, Limited Partnership....................... 25.00 228 148 80
Walker Springs, Limited............................... 23.99 95 62 33
Wingfield Investors Limited Partnership............... 25.00 179 116 63
Winrock-Houston Limited Partnership................... 13.60 1,041 677 364
Winthrop Apartment Investors Limited Partnership...... 31.60 1,318 857 461
Winthrop Growth Investors 1 Limited Partnership....... 27.94 1,233 801 432
Winthrop Texas Investors Limited Partnership.......... 5.27 158 103 55
Woodmere Associates, L.P.............................. 25.00 280 182 98
Yorktown Towers Associates............................ 25.00 809 526 283
-------- ------- ------
Total (See adjustment C to the Pro Forma Consolidated
Balance Sheet)...................................... $122,463 $79,601 42,862
======== ======= ======
</TABLE>
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
Exchange Offers, the 1997 Acquisitions, the 1998 Acquisitions and the Probable
Purchases are adjusted to estimated fair market value, based on preliminary
estimates, which are subject to change as additional information is obtained.
The allocations of purchase costs are subject to final determination based upon
estimates and other evaluations of fair market value. Therefore, the allocations
reflected in the following unaudited Pro Forma Financial Information (Exchange
Offers) may differ from the amounts ultimately determined.
P-38
<PAGE> 1056
The following unaudited Pro Forma Financial Information (Exchange Offers)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions, results of
operations or cash flows. In the opinion of the Partnership's management, all
material adjustments necessary to reflect the effects of these transactions have
been made.
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (EXCHANGE OFFERS)
AS OF SEPTEMBER 30, 1998
ASSETS
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(a) ADJUSTMENTS(b) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C>
Real estate....................................... $2,625,822 $ 12,764(C)
26,954(D)
13,655(E) $2,679,195
Property held for sale............................ 42,212 -- 42,212
Investments in and notes receivable from
unconsolidated subsidiaries..................... 186,277 -- 186,277
Investments in and notes receivable from
unconsolidated partnerships..................... 924,309 109,699(C)
(13,655)(E)
(8,161)(F)
816(G) 1,013,008
Mortgage notes receivable......................... 20,916 -- 20,916
Cash and cash equivalents......................... 104,955 2,620(D) 107,575
Restricted cash................................... 84,526 1,807(D) 86,333
Accounts receivable............................... 27,900 1,081(D) 28,981
Deferred financing costs.......................... 21,835 -- 21,835
Goodwill.......................................... 251,024 -- 251,024
Property management contracts..................... 38,371 -- 38,371
Other assets...................................... 82,670 422(D) 83,092
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
LIABILITIES AND PARTNERS' CAPITAL
Secured notes payable............................. $ 926,246 $ 23,642(D) $ 949,888
Secured tax-exempt bond financing................. 399,925 -- 399,925
Secured short-term financing...................... 32,691 -- 32,691
Unsecured short-term financing.................... 300,000 79,601(C) 379,601
Accounts payable, accrued and other liabilities... 248,253 826(D) 249,079
Security deposits and deferred income............. 13,171 255(D) 13,426
---------- -------- ----------
1,920,286 104,324 2,024,610
Minority interests................................ 79,431 816(G) 80,247
Company obligated mandatorily redeemable
convertible securities of a subsidiary trust.... 149,500 -- 149,500
Redeemable common partnership units............... 277,581 8,161(D)
(8,161)(F)
30,616(C) 308,197
Redeemable preferred partnership units............ -- 12,246(C) 12,246
Partner's capital
General and Special Limited Partner............. 1,496,457 -- 1,496,457
Preferred Units................................. 487,562 -- 487,562
---------- -------- ----------
1,984,019 -- 1,984,019
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
P-39
<PAGE> 1057
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical balance sheet data as of September 30, 1998 (unaudited) related
to the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Real estate................................................. $1,082,652
Cash........................................................ 151,024
Total assets................................................ 1,493,409
Mortgages payable........................................... 1,585,196
Partners' capital (deficit)................................. (171,740)
</TABLE>
(C) Represents the purchase price paid by the Partnership to the limited
partners in order to obtain additional ownership by AIMCO in 91 real estate
partnerships. For the purposes of the pro-forma presentation, it is
assumed: (i) 65% of the purchase price is funded with cash by drawing down
on the Partnership's unsecured short term credit facility; (ii) 25% of the
purchase price is funded by the issuance of 749,362 OP Units at $40 per OP
Unit; and (iii) 10% of the purchase price is funded by the issuance of 8%
Preferred OP Units.
(D) Represents historical balance sheet data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(E) Represent the adjustment to real estate recorded in the IFG Merger related
to the one real estate partnership that will be consolidated as a result of
the Partnership's purchase of additional partnership interests.
(F) Represents the elimination of the partners' capital in the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(G) Represents minority interest of the one real estate partnership that will
be consolidated as a result of the Partnership's purchase of additional
partnership interests.
P-40
<PAGE> 1058
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(a) ADJUSTMENTS(b) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations.............. $ 431,256 $ 11,270(C) $ 442,526
Property operating expenses....................... (182,830) (6,612)(C) (189,442)
Owned property management expense................. (11,831) -- (11,831)
Depreciation...................................... (96,264) (2,589)(C) (98,853)
--------- -------- ---------
Income from property operations................... 140,331 2,069 142,400
--------- -------- ---------
Management fees and other income.................. 41,676 -- 41,676
Management and other expenses..................... (23,683) -- (23,683)
Corporate overhead allocation..................... (588) -- (588)
Amortization...................................... (26,480) -- (26,480)
--------- -------- ---------
Income from service company business.............. (9,075) -- (9,075)
Minority interest in service company business..... (10) -- (10)
--------- -------- ---------
Partnership's share of income from service company
business........................................ (9,085) -- (9,085)
--------- -------- ---------
General and administrative expenses............... (21,371) -- (21,371)
Interest expense.................................. (113,788) (5,691)(D)
(2,220)(C) (121,699)(H)
Interest income................................... 21,734 21,734
Minority interests................................ (9,983) (51)(E) (10,034)
Equity in losses of unconsolidated partnerships... (27,537) (16,864)(F)
483(G) (43,918)(I)
Equity in earnings of Unconsolidated
Subsidiaries.................................... 5,848 -- 5,848
--------- -------- ---------
Net income (loss)................................. (13,851) (22,274) (36,125)(H)
Income attributable to Preferred Unitholders...... 42,174 980 43,154(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders...... (56,025) $(23,254) $ (79,279)(H)
========= ======== =========
Basic earnings (loss) per OP Unit................. (.83) $ (1.16)(H)
========= =========
Diluted earnings (loss) per OP Unit............... $ (.83) $ (1.16)(H)
========= =========
Weighted average OP Units outstanding............. 67,522 68,287
========= =========
Weighted average OP Units and equivalents
outstanding..................................... 68,366 69,131
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $456,968
Operating expense........................................... 249,097
Depreciation................................................ 87,344
Interest.................................................... 138,778
Net income.................................................. 15,005
</TABLE>
P-41
<PAGE> 1059
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $10,740 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $6,124 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net loss,
preferred unit distributions, and net loss per OP Unit in the event that
the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- --------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense......... $(121,699) $(124,763) $(116,008) $(116,008)
Net loss................. (36,125) (39,189 (30,434) (30,434)
Preferred unit
distributions.......... 43,154 42,174 42,174 51,971
Net loss attributable to
OP Unitholders......... (79,279) (81,363) (72,608) (82,405)
Net loss per OP Unit..... (1.16) (1.20) (1.03) (1.22)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................. $ 1,137 $ 1,245 $ 938 $ 938
Net loss................... (37,262) (40,434) (31,372) (31,372)
Net loss attributable to OP
Unitholders.............. (80,416) (82,608) (73,546) (83,343)
Net loss per OP Unit....... (1.18) (1.22) (1.04) (1.23)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, the Partnership will own 49%
of certain 88 Partnerships, 25% of two Partnerships, and 100% of one
Partnership. The amount included in the pro forma financial statements
assume an acceptance rate of 100%. The following table shows the effect on
equity in earnings of unconsolidated partnerships, net loss, net loss
attributable to OP Unitholders, and net loss per OP Unit in the event that
the Partnership will have an acceptance rate of 50% of the interests
tendered and will own varying percentages of each partnership:
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(36,510)
Net loss.................................................... (26,084)
Net loss attributable to OP Unitholders..................... (68,784)
Net loss per OP Unit........................................ (1.01)
</TABLE>
P-42
<PAGE> 1060
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-43
<PAGE> 1061
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(a) ADJUSTMENTS(b) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations............... $ 337,307 $ 8,654(C) $ 345,961
Property operating expenses........................ (131,851) (4,389)(C) (136,240)
Owned property management expense.................. (8,933) -- (8,933)
Depreciation....................................... (78,479) (1,941)(C) (80,420)
--------- -------- ---------
Income from property operations.................... 118,044 2,324 120,368
--------- -------- ---------
Management fees and other income................... 28,912 -- 28,912
Management and other expenses...................... (14,386) -- (14,386)
Corporate overhead allocation...................... (196) -- (196)
Amortization....................................... (15,243) -- (15,243)
--------- -------- ---------
Income from service company business............... (913) -- (913)
Minority interest in service company business...... -- -- --
--------- -------- ---------
Partnership's share of income from service company
business......................................... (913) -- (913)
--------- -------- ---------
General and administrative expenses................ (8,632) -- (8,632)
Interest expense................................... (85,010) (4,250)(D)
(1,630)(C) (90,890)(H)
Interest income.................................... 40,887 40,887
Minority interests................................. (8,429) (119)(E) (8,548)
Equity in losses of unconsolidated partnerships.... (10,234) (13,156)(F)
41(G) (23,349)(I)
Equity in earnings of Unconsolidated
Subsidiaries..................................... 851 -- 851
Amortization of goodwill........................... (5,071) -- (5,071)
--------- -------- ---------
Net income (loss).................................. 41,493 (16,790) 24,703(H)
Income attributable to Preferred Unitholders....... 32,414 735 33,149(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders....... $ 9,079 $(17,525) $ (8,446)(H)
========= ======== =========
Basic earnings (loss) per OP Unit.................. $ .13 $ (.12)(H)
========= =========
Diluted earnings (loss) per OP Unit................ $ .13 $ (.12)(H)
========= =========
Weighted average OP Units outstanding.............. 68,554 69,319
========= =========
Weighted average OP Units and equivalents
outstanding...................................... 69,218 69,983
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data (unaudited) for the nine months ended September
30, 1998 related to the 91 real estate partnerships is as follows (dollars
in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $338,937
Operating expense........................................... 182,529
Depreciation................................................ 64,127
Interest.................................................... 103,756
Net income.................................................. (9,329)
</TABLE>
P-44
<PAGE> 1062
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $8,552 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $4,604 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net
income, preferred unit distributions, and net loss per OP Unit in the event
that the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense........... $(90,890) $(93,184) $(86,640) $(86,640)
Net income................. 24,703 22,409 28,953 28,953
Preferred unit
distributions............ 33,149 32,414 32,414 39,762
Net loss attributable to OP
Unitholders.............. (8,446) (10,005) (3,461) (10,809)
Net loss per OP Unit....... (.12) (.15) (.05) (.16)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- ------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................... $ 851 $ 931 $ 702 $ 702
Net income................... 24,703 21,478 28,251 28,251
Net loss attributable to OP
Unitholders................ (9,296) (10,936) (4,163) (11,511)
Net loss per OP Unit......... (.13) (.16) (.06) (.17)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, AIMCO will own 49% of certain
88 Partnerships, 25% of two Partnerships, and 100% of one Partnership. The
following table shows the effect on equity in earnings of unconsolidated
partnerships, net income, net income (loss) attributable to OP Unitholders,
and net loss per OP Unit in the event the Partnership will own varying
percentages of each partnership.
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(17,797)
Net income.................................................. 32,216
Net income (loss) attributable to OP Unitholders............ (593)
Net income (loss) per OP Unit............................... (.01)
</TABLE>
P-45
<PAGE> 1063
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-46
<PAGE> 1064
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(a) ADJUSTMENTS(b) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ (13,851) $(22,274)(C) $ (36,125)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 128,169 2,589(D) 130,758
Gain on investments..................................... (12) -- (12)
(Gain) loss on disposition of properties................ (3,882) -- (3,882)
Minority interests...................................... 9,983 51 10,034
Equity in earnings of unconsolidated partnerships....... 27,537 16,864(E)
(483)(F) 43,918
Equity in earnings of unconsolidated subsidiaries....... (5,848) -- (5,848)
Extraordinary (gain) loss on early extinguishment of
debt.................................................. --
Changes in operating assets and operating liabilities... 519 (660)(G) (141)
---------- -------- ----------
Total adjustments................................... 156,466 18,361 174,827
---------- -------- ----------
Net cash provided by (used in) operating
activities........................................ 142,615 (3,913) 138,702
Net cash used in discontinued operations............ (7,999) -- (7,999)
---------- -------- ----------
Net cash provided by (used in) continuing
operations........................................ 134,616 (3,913) 130,703
---------- -------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate......................... 41,419 -- 41,419
Purchase of real estate................................... (625,603) -- (625,603)
Additions to real estate, investments and property held
for sale................................................ (55,892) (1,024)(G) (56,916)
Proceeds from sale of property held for sale.............. 303 -- 303
Purchase of general and limited partnership interests..... (276,458) (79,601)(H) (356,059)
Purchase of management contracts.......................... (48,554) -- (48,554)
Purchase of/additions to notes receivable................. (81,670) -- (81,670)
Proceeds from repayments of notes receivable.............. 10,052 -- 10,052
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 94,686 10,070(I) 104,756
Contribution to unconsolidated subsidiaries............... (42,879) -- (42,879)
Proceeds from sale of securities.......................... 642 -- 642
Purchase of investments held for sale..................... (73) -- (73)
Purchase of NHP........................................... (60,575) -- (60,575)
Purchase of Ambassador common stock....................... (19,881) -- (19,881)
---------- -------- ----------
Net cash used in investing activities............... (1,064,483) (70,555) (1,135,038)
---------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 761,270 -- 761,270
Principal repayments on secured notes payable............. (307,917) (713)(G) (308,630)
Proceeds from secured short-term financing................ 19,050 79,601(H) 98,651
Repayments on secured short-term financing................ (259,461) -- (259,461)
Principal repayments on unsecured short-term notes
payable................................................. (50,879) -- (50,879)
Proceeds (payoff) from unsecured short-term financing..... (12,500) -- (12,500)
Principal repayments on secured tax-exempt bond
financing............................................... (1,487) -- (1,487)
Net borrowings (paydowns) on the Company's revolving
credit facilities....................................... (162,008) -- (162,008)
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (17,032) -- (17,032)
Proceeds from issuance of common and preferred stock,
net..................................................... 1,098,265 -- 1,098,265
Proceeds from exercises of employee stock options and
warrants................................................ 11,553 -- 11,553
Repurchase of common stock................................ (3,283) -- (3,283)
Principal repayments received on notes due from
Officers................................................ 27,280 -- 27,280
Investments made by minority interests.................... 249 -- 249
Receipt of contributions from minority interests.......... 37,345 -- 37,345
Payments of distributions to minority interests........... (2,713) -- (2,713)
Payment of distributions.................................. (130,657) -- (130,657)
Payment of distributions to limited partners.............. (5,208) (1,415)(J) (6,623)
Payment of preferred unit distributions................... (42,984) (979)(K) (43,963)
Payment of distributions to minority interests............ (21,788) -- (21,788)
Net transactions with Insignia/ESG........................ (57,612) -- (57,612)
---------- -------- ----------
Net cash provided by financing activities........... 879,483 76,494 955,977
---------- -------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (50,384) 2,026 (48,358)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 117,896 2,291 120,187
---------- -------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 67,512 $ 4,317 $ 71,829
========== ======== ==========
</TABLE>
P-47
<PAGE> 1065
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 65,372
Cash used in investing activities......................... (11,713)
Cash used in financing activities......................... (74,617)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the cash portion of the purchase price (and additional
borrowings by the Partnership) related to the acquisition by the
Partnership of additional limited partnership interests in 91 real estate
limited partnerships.
(I) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(J) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.85 per Common OP Unit.
(K) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-48
<PAGE> 1066
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(a) ADJUSTMENTS(b) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ 41,493 $(16,790)(C) $ 24,703
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 101,523 1,941(D) 103,464
(Gain) loss on disposition of properties................ -- -- --
Minority interests...................................... 8,429 119 8,548
Equity in earnings of unconsolidated partnerships....... 10,234 13,156(E)
(41)(F) 23,349
Equity in earnings of unconsolidated subsidiaries....... (851) -- (851)
Non-cash compensation................................... 796 -- 796
Changes in operating assets and operating liabilities... (69,549) (21)(G) (69,570)
--------- -------- ---------
Total adjustments................................... 50,582 15,154 65,736
--------- -------- ---------
Net cash provided by operating activities........... 92,075 (1,636) 90,439
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... 27,122 -- 27,122
Additions to real estate.................................. (57,526) (668)(G) (58,194)
Proceeds from sale of property and investments held for
sale.................................................... (35) -- (35)
Additions to property held for sale....................... (1,986) -- (1,986)
Purchase of general and limited partnership interests..... (9,596) -- (9,596)
Purchase of/additions to notes receivable................. (100,034) -- (100,034)
Proceeds from repayments/sale of notes receivable......... 42,747 -- 42,747
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 23,629 5,809(H) 29,438
Payment of trust based preferred dividends................ (7,415) -- (7,415)
Cash received in connection with Ambassador Merger and
AMIT Merger............................................. 17,915 -- 17,915
Contribution to unconsolidated subsidiaries............... (13,032) -- (13,032)
Purchase of investments held for sale..................... (4,935) -- (4,935)
Redemption of OP Units.................................... (516) -- (516)
Merger costs.............................................. (1,402) -- (1,402)
--------- -------- ---------
Net cash used in investing activities............... (85,064) 5,141 (79,923)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 291,885 -- 291,885
Principal repayments on secured notes payable............. (52,023) -- (52,023)
Principal advances on secured tax-exempt bond financing... 21,784 -- 21,784
Principal repayments on secured tax-exempt bond
financing............................................... (1,436) -- (1,436)
Net borrowings/ repayments on secured short-term
financing............................................... 135,332 -- 135,332
Net borrowings (paydowns) on the revolving credit
facilities.............................................. 2,513 (812)(G) 1,701
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (5,810) -- (5,810)
Proceeds from issuance of common stock and preferred
stock, net.............................................. -- -- --
Repurchase of common stock................................ (10,972) -- (10,972)
Proceeds from exercises of employee stock options and
warrants................................................ 16,294 -- 16,294
Principal repayments received on notes due from
Officers................................................ 8,084 -- 8,084
Receipt of contributions from minority interests.......... -- -- --
Payments of distributions to minority interests........... (2,034) (2,034)
Payment of distributions.................................. (107,989) -- (107,989)
Payment of distributions to limited partners.............. (12,669) (1,291)(I) (13,960)
Payment of preferred unit distributions................... (27,010) (735)(J) (27,745)
Proceeds from issuance of High Performance Units.......... 1,988 -- 1,988
Net transactions with Insignia/ESG........................ (241,003) -- (241,003)
--------- -------- ---------
Net cash provided by financing activities........... 19,578 (2,838) 16,740
--------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 26,589 667 27,256
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 55,700 4,316 60,016
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 82,289 $ 4,983 $ 87,272
========= ======== =========
</TABLE>
P-49
<PAGE> 1067
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the nine months ended September 30, 1998
related to the 91 real estate partnerships is as follows (dollars in
thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 76,113
Cash used in investing activities......................... (22,616)
Cash used in financing activities......................... (42,273)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 30 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(I) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.6875 per Common OP Unit.
(J) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-50
<PAGE> 1068
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: CEDAR TREE INVESTORS LIMITED PARTNERSHIP
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 CEDAR
TREE INVESTORS LIMITED PARTNERSHIP (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 limited partnership interests in the Partnership (the "Units")
will be acquired by the Purchaser in exchange for an offer price per Unit of
$55,289 in cash, or 1,469.25 Common OP Units of the Purchaser, or 2,211.75
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 financial statements for the years ended
December 31, 1996, and 1997, and the quarterly report for the period ending
September 30, 1998, which the Partnership's management has indicated to be
the most current available financial statements;
3. Reviewed descriptive information concerning the real property owned
by the Partnership (the "Property"), including location, number of units
and unit mix, age, amenities and land acreage;
4. Reviewed summary historical operating statements for the Property,
for the years ended December 31, 1996 and 1997, and the nine months ending
September 30, 1998;
A-1
<PAGE> 1069
5. Reviewed the 1998 operating budget for the Property prepared by the
Partnership's management. Such budgets are summarized in the Prospectus
Supplement under the section "Stanger Analysis -- Summary of Materials
Considered";
6. Reviewed the estimate of liquidation value and going concern value
provided by the general partner to Stanger. Such estimates are described in
the Prospectus Supplement under the section "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration." In
addition, we reviewed the 1998 operating budgets for each property provided
by the Partnership;
7. Discussed with management market conditions for the Property;
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 Property and the Partnership; the physical condition
of the Property including any deferred maintenance; and other factors
influencing value of the Property and the Partnership;
8. Performed a site inspection of the Property;
9. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Property, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Property;
10. Reviewed information provided by the Company relating to debt
encumbering the Property; and
11. 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 Property, the allocation of net
Partnership values between the General Partner and Limited Partners, and the
transaction costs and fees associated with a sale of the Property. 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 Property 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 Property 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 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
A-2
<PAGE> 1070
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
March , 1999
A-3
<PAGE> 1071
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 directors
of AIMCO are set forth below. The two directors of AIMCO-GP are Terry Considine
and Peter Kompaniez. The two directors of the general partner of your
partnership are Peter K. Kompaniez and Patrick J. Foye. The two executive
officers of the general partner of your partnership are Patrick J. Foye,
Executive Vice President, and Timothy R. Garrick, Vice President -- Accounting.
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
Paul J. McAuliffe............................ Executive Vice President -- Capital Markets
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
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
</TABLE>
B-1
<PAGE> 1072
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
B.A. from Harvard College, a J.D. from Harvard Law School
and is admitted as a member of the Massachusetts Bar.
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.
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
</TABLE>
B-2
<PAGE> 1073
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
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.
Paul J. McAuliffe.................... Mr. McAuliffe was appointed Executive Vice
President -- Capital Markets in February 1999. Prior to
joining AIMCO, Mr. McAuliffe was Senior Managing Director of
Secured Capital Corp and prior to that time had been a
Managing Director of Smith Barney, Inc. from 1993 to 1996,
where he was a key member of the underwriting team that led
AIMCO's initial public offering in 1994. Mr. McAuliffe was
also a Managing Director and head of the real estate group
at CS First Boston from 1990 to 1993 and he was a Principal
in the real estate group at Morgan Stanley & Co., Inc. from
1983 to 1990. Mr. McAuliffe received a B.A. from Columbia
College and an MBA from University of Virginia, Darden
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
</TABLE>
B-3
<PAGE> 1074
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
and the Apartment Association of Metro Denver. Mr. Ira
received a B.S. from Metropolitan State College in 1975.
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.
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,
</TABLE>
B-4
<PAGE> 1075
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Mr. Martin is a director of Dresser, which is engaged in the
petroleum services, hydrocarbon and engineering industries.
Timothy R. Garrick................... Mr. Garrick has been Vice President -- Accounting of the
general partner and AIMCO since October 1, 1998. Prior to
that date, Mr. Garrick served as Vice
President -- Accounting Services of Insignia Financial Group
from June 1997 until October 1998. From 1992 until June of
1997, Mr. Garrick served as Vice President of Partnership
Accounting for Insignia Financial Group. From 1987 to 1990,
Mr. Garrick served as Investment Advisor for U.S. Shelter
Corporation. From 1984 to 1987, Mr. Garrick served as
Partnership Investment Analyst for U.S. Shelter Corporation.
From 1979 to 1984, Mr. Garrick worked on the audit staff of
Ernst & Whinney. Mr. Garrick received his B.S. Degree from
the University of South Carolina in 1979 and is a certified
public accountant.
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> 1076
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
By Fax:
(201) 896-0910
<PAGE> 1077
PROSPECTUS SUPPLEMENT
(To Prospectus dated March 26, 1999)
AIMCO Properties, L.P.
is offering to acquire units of limited partnership interest of
Chapel Hill, Limited
in exchange for your choice of:
1,654.50 of our 8.0% Class Two Partnership Preferred Units;
1,099.25 of our Partnership Common Units; or
$41,361 in cash.
Generally, you will not recognize any immediate taxable gain or loss if you
exchange your units solely for our securities. However, you will recognize
taxable gain or loss if you exchange your units for cash.
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 the offer
consideration from a financial point of view.
Our offer consideration will be reduced for any distributions subsequently
made by your partnership prior to the expiration of our offer.
We will only accept a maximum of 21% 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.
You will not pay any fees or commissions if you tender your units.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline. You may withdraw any tendered units at any time
before we have accepted them for payment.
SEE "RISK FACTORS" BEGINNING ON PAGE S-23 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF RISK FACTORS THAT
YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration of $41,361 per unit without any
arms-length negotiations. Accordingly, our offer consideration may not
reflect the fair market value of your units.
- We cannot predict when the properties owned by your partnership may be
sold.
- Your general partner is a subsidiary of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- We are making this offer with a view to making a profit and 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.
- Continuation of your partnership will result in our affiliates continuing
to receive management fees from your partnership which would not be
payable if your partnership was liquidated.
- It is possible that we may conduct a subsequent offer at a higher price
more than one year after expiration of this offer.
- Unlike your partnership, our policy is to reinvest proceeds from the sale
of our properties or refinancing of our indebtedness.
- We may change our investment, acquisition or financing policies without a
vote of our securityholders.
- If you acquire our securities, your investment will change from holding
an interest in two properties to holding an interest in our large
portfolio of properties, thereby fundamentally changing the nature of
your investment.
- Recently, Moody's Investors Service revised its outlook for AIMCO's
ratings from stable to negative.
- There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
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.
March 26, 1999
<PAGE> 1078
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY........................................ S-1
The Offer.................................... S-1
The AIMCO Operating Partnership.............. S-1
Affiliation with your General Partner........ S-1
Risk Factors................................. S-2
Background and Reasons for the Offer......... S-6
Valuation of Units........................... S-9
Fairness of the Offer........................ S-10
Stanger Analysis............................. S-11
Your Partnership............................. S-11
Terms of the Offer........................... S-12
Federal Income Tax Consequences.............. S-14
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-14
Comparison of Your Units and AIMCO OP Units.. S-15
Conflicts of Interest........................ S-15
Source and Amount of Funds and Transactional
Expenses................................... S-16
Summary Financial Information of AIMCO
Properties, L.P............................ S-17
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-19
Summary Financial Information of Chapel Hill,
Limited.................................... S-21
Comparative Per Unit Data.................... S-21
THE AIMCO OPERATING PARTNERSHIP................ S-22
RISK FACTORS................................... S-23
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-23
Offer Consideration Not Based on Third
Party Appraisal or Arms-Length
Negotiation.............................. S-23
Offer Consideration May Not Represent Fair
Market Value............................. S-23
Offer Consideration Does Not Reflect Future
Prospects................................ S-23
Offer Consideration Based on Our Estimate
of Liquidation Proceeds.................. S-23
Offer Consideration May Be Less Than
Liquidation Value........................ S-23
Holding Units May Result in Greater Future
Value.................................... S-23
Conflicts of Interest with Respect to the
Offer.................................... S-23
Conflicts of Interest Relating to
Management Fees.......................... S-24
Possible Subsequent Offer at a Higher
Price.................................... S-24
Possible Recognition of Taxable Gain on a
Sale of Your Units....................... S-24
Offer Consideration May be Less than
Liquidation Value........................ S-24
Fairness Opinion of Third Party Relied on
Information We Provided.................. S-25
Loss of Future Distributions from Your
Partnership.............................. S-25
Possible Effect of the Other Exchange
Offers on Us............................. S-25
Lack of Availability of Audited Financial
Statements............................... S-25
Potential Delay in Payment................. S-25
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-25
Fundamental Change in Nature of
Investment............................... S-25
Fundamental Change in Number of Properties
Owned.................................... S-26
Lack of Trading Market for OP Units........ S-26
Uncertain Future Distributions............. S-26
Possible Reduction in Required
Distributions on Preferred OP Units...... S-26
Possible Redemption of Preferred Stock..... S-26
Possible Recognition of Taxable Gains on OP
Units.................................... S-26
Limitations on Effecting a Change of
Control.................................. S-26
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Limitation on Transfer of OP Units......... S-26
Limited Voting Rights of Holders of OP
Units.................................... S-26
Market Prices for AIMCO's Securities May
Fluctuate................................ S-27
Litigation Associated with Partnership
Acquisitions............................. S-27
Dilution of Interests of Holders of OP
Units.................................... S-27
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-27
Possible Increase in Control of Your
Partnership by Us........................ S-27
Recognition of Gain Resulting from Possible
Future Reduction in Your Partnership
Liabilities.............................. S-27
Possible Termination of Your Partnership
for Federal Income Tax Purposes.......... S-27
Risk of Inability to Transfer Units for
12-Month Period.......................... S-27
Possible Change in Time Frame Regarding
Sale of Properties....................... S-28
Balloon Payments........................... S-28
SPECIAL FACTORS TO CONSIDER.................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-28
Background of the Offer...................... S-28
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-32
Disadvantages of the Offer................... S-33
VALUATION OF UNITS............................. S-34
FAIRNESS OF THE OFFER.......................... S-36
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-36
Fairness to Unitholders who Tender their
Units...................................... S-37
Fairness to Unitholders who do not Tender
their Units................................ S-38
Comparison of Consideration to Alternative
Consideration.............................. S-38
Allocation of Consideration.................. S-41
STANGER ANALYSIS............................... S-42
Experience of Stanger........................ S-42
Summary of Materials Considered.............. S-42
Summary of Reviews........................... S-44
Conclusions.................................. S-46
Assumptions, Limitations and
Qualifications............................. S-46
Compensation and Material Relationships...... S-47
YOUR PARTNERSHIP............................... S-48
General...................................... S-48
Your Partnership and its Property............ S-48
Property Management.......................... S-48
Investment Objectives and Policies; Sale or
Financing of Investments................... S-49
Capital Replacement.......................... S-49
Borrowing Policies........................... S-50
Competition.................................. S-50
Legal Proceedings............................ S-50
History of the Partnership................... S-50
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-50
Distributions and Transfers of Units......... S-51
Beneficial Ownership of Interests in Your
Partnership................................ S-52
Compensation Paid to the General Partner and
its Affiliates............................. S-52
SELECTED FINANCIAL INFORMATION OF YOUR
PARTNERSHIP.................................. S-53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP.......................... S-54
</TABLE>
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<PAGE> 1079
<TABLE>
<CAPTION>
PAGE
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<S> <C>
THE OFFER...................................... S-57
Terms of the Offer; Expiration Date.......... S-57
Acceptance for Payment and Payment for
Units...................................... S-57
Procedure for Tendering Units................ S-58
Withdrawal Rights............................ S-61
Extension of Tender Period; Termination;
Amendment.................................. S-61
Proration.................................... S-62
Fractional OP Units.......................... S-62
Future Plans of the AIMCO Operating
Partnership................................ S-62
Voting by the AIMCO Operating Partnership.... S-63
Dissenters' Rights........................... S-63
Conditions of the Offer...................... S-63
Effects of the Offer......................... S-66
Certain Legal Matters........................ S-66
Fees and Expenses............................ S-68
Accounting Treatment......................... S-68
FEDERAL INCOME TAX CONSEQUENCES................ S-69
Tax Opinions................................. S-69
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-70
Disguised Sales.............................. S-71
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-71
Tax Consequences of Exchanging Units Solely
for Cash................................... S-72
Adjusted Tax Basis........................... S-72
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-72
Passive Activity Losses...................... S-73
Tax Reporting................................ S-73
Foreign Offerees............................. S-73
Tax Consequences of a Termination of Your
Partnership................................ S-73
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-75
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-82
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
DESCRIPTION OF PREFERRED OP UNITS.............. S-88
General...................................... S-88
Ranking...................................... S-88
Distributions................................ S-88
Allocation................................... S-89
Liquidation Preference....................... S-89
Redemption................................... S-90
Voting Rights................................ S-90
Restrictions on Transfer..................... S-91
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-91
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-93
CONFLICTS OF INTEREST.......................... S-97
Conflicts of Interest with Respect to the
Offer...................................... S-97
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-97
Competition Among Properties................. S-97
Features Discouraging Potential Takeovers.... S-97
Future Exchange Offers....................... S-98
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-98
LEGAL MATTERS.................................. S-99
INDEX TO FINANCIAL STATEMENTS.................. F-1
PRO FORMA FINANCIAL INFORMATION OF AIMCO
PROPERTIES, L.P. ............................ P-1
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> 1080
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- 1,654.50 of our Class Two Partnership Preferred Units;
- 1,099.25 of our Partnership Common Units; or
- $41,361 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 accept a maximum of 21% of the outstanding units in response to our
offer. Our offer is not subject to any minimum number of units being tendered.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline.
The original offer price per unit in 1984 was $75,200. For the five years
ended December 31, 1998, your partnership paid distributions of $118.22 per
unit.
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
its wholly owned subsidiary, AIMCO-GP, Inc. ("AIMCO GP"), AIMCO acts as the sole
general partner of the AIMCO Operating Partnership. As of December 31, 1998,
AIMCO-GP and another AIMCO subsidiary, AIMCO-LP, Inc., a limited partner of the
AIMCO Operating Partnership (the "Special Limited Partner"), owned approximately
an 83% interest in the AIMCO Operating Partnership. As of December 31, 1998, our
portfolio of owned or managed properties included 379,363 apartment units in
2,147 properties located in 49 states, the District of Columbia and Puerto Rico.
Based on apartment unit data compiled by the National Multi Housing Council, we
believe that we are one of the largest owners and managers of multifamily
apartment properties in the United States. As of December 31, 1998, we:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 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. and our February 26, 1999 merger with Insignia Properties Trust, we
acquired a 100% ownership interest in the general partner of your partnership,
Davidson Properties, Inc. and Residual Equities, and the company that manages
each property owned by your partnership.
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<PAGE> 1081
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-23 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the risks associated
with our offer and the disadvantages of the offer to you and should be
considered when you review "Summary -- Background and Reasons for the
Offer -- Expected Benefits of the Offer":
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. We did not use any third-party appraisal or valuation to determine
the value of any property owned by your partnership. We established the terms of
our offer, including the exchange ratios and the cash consideration, without any
arms-length negotiations.
OFFER CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property. It does not
ascribe any value to potential future improvements in the operating performance
of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
properties because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimated Chapel Hill Apartments to be worth $4,840,000,
less approximately $148,905 of deferred maintenance and investment. We estimate
Chapelwood Apartments to be worth $5,174,000, less approximately $19,080 of
deferred maintenance and investment. It is possible that a sale of the
properties could result in your receiving more per unit than in our offer. Even
if our cash offer consideration is equal to liquidation value, if you accept OP
Units, you may not ultimately receive an amount equal to the cash offer
consideration when you sell such OP Units or any AIMCO securities you may
receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
value if you retain your units until your partnership is liquidated.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of ours and, therefore, has substantial conflicts of interest with
respect to our offer. We are making this offer with a view to making a profit.
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 RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its properties, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
S-2
<PAGE> 1082
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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.
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. You
should review "Federal Income Tax Consequences" 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. 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.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is our subsidiary).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. For any units that we
acquire from you, you will not receive any future distributions from your
partnership's operating cash flow or upon a sale of property owned by your
partnership or a refinancing of any of its debt. If you tender your units in
exchange for OP Units, you will be entitled to future distributions from us from
our operating cash flow and upon a dissolution, liquidation or wind-up of the
AIMCO Operating Partnership.
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000 based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from a sale of a property or a refinancing of its indebtedness, to (ii)
a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of 2015 to a much larger partnership with a
partnership termination date of 2093.
S-3
<PAGE> 1083
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you tender your units
for our OP Units, you will have changed 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.
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAIN ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus.
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions.
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as your partnership), we have acquired the general
S-4
<PAGE> 1084
partner of a partnership and then made an offer to acquire the limited partners'
interests in the partnership. There is a risk that we will be 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. As a result, we may incur costs associated with defending
or settling such litigation or paying any judgment if we lose. As of the present
time, no limited partners of your partnership have initiated lawsuits on such
grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. As a result of the
offer, we may increase our ability to influence voting decisions with respect to
your partnership. However, we will not be able to control voting decisions
unless we acquire more units in another transaction, which cannot take place for
at least one year after expiration of this offer. Also, removal of your general
partner (which is our subsidiary) or the manager of any property owned by your
partnership may become more difficult or impossible without our consent or
approval.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
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.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTIES. It is not known
when the properties owned by your partnership may be sold. Therefore, there may
be no way to liquidate your investment in the partnership in the future until
the properties are sold and your partnership is liquidated. You may continue to
have to hold the units not exchanged in this offer for an indefinite period of
time. The partnership currently owns two properties. The general partner of your
partnership continually considers whether the properties should be sold or
otherwise disposed of after consideration of relevant factors, including
prevailing economic conditions, availability of favorable financing and tax
considerations, with a view to achieving maximum
S-5
<PAGE> 1085
capital appreciation for your partnership. We cannot predict when the properties
will be sold or otherwise disposed of. However, there is no current plan or
intention to sell the properties in the near future.
BALLOON PAYMENTS. Your partnership has two balloon payments. Chapel Hill
Apartments has approximately $3,033,973 of balloon payments due on its mortgage
debt in November 2002. Chapelwood Apartments has approximately $3,143,726 of
balloon payments due on its mortgage debt in November 2002. Your partnership
will have to refinance such debt or sell its properties prior to the balloon
payment dates, or it will be in default and could lose the properties to
foreclosure.
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 properties owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in your
partnership's properties 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 51% ownership interest in Insignia Properties Trust, which has
a 100% ownership interest in the general partner of your partnership and the
company that manages the property owned by your partnership. On February 26,
1999, we acquired the remaining 49% interest in Insignia Properties Trust in a
merger transaction. One of the consequences of the merger with Insignia is to
allow us to make the offer and, if successful, to increase our ownership in 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 August 28, 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
(which is our subsidiary):
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 properties would be a taxable event for you and your
partners and could result in significant amounts of taxable income to you
and your partners.
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 properties 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. 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. Chapel Hill Apartments' mortgages are due in November 2002 and
require balloon payments of $3,033,973. Chapelwood Apartments' mortgages
are due in November 2002 and require balloon payments of $3,143,726. Your
partnership currently has adequate sources of cash to finance its
operations on both a short term and long
S-6
<PAGE> 1086
term basis but will have to sell its properties or refinance its
indebtedness to pay such balloon payments. In addition, continuation of
your partnership without the offer would deny you and your partners the
benefits that your general partner (which is our subsidiary) 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 properties. There is currently no market for the Preferred OP
Units or Common OP Units.
Expected Benefits of the Offer
We are in the business of acquiring direct and indirect interests in
apartment properties such as the properties owned by your partnership. The offer
provides us with an opportunity to increase our ownership interest in your
partnership's properties 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 Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the NYSE.
- Preferred Quarterly Distributions. Your partnership did not pay any
distributions for the fiscal year ended December 31, 1998. Holders of
Preferred OP Units will be entitled to receive quarterly distributions of
$0.50 per unit (equivalent to $2.00 on an annualized basis) before any
distributions are paid to holders of Common OP Units. This is equivalent
to a distribution of $3,309 per year on the number of Preferred OP Units
you will receive in exchange for each of your partnership 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 Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- Quarterly Distributions. Your partnership did not pay any distributions
for the fiscal year ended December 31, 1998. In 1998, we paid quarterly
distributions on the Common OP Units totalling $2.25 per unit. In January
1999, we increased our distribution rate on each of the Common OP Units
to $2.50 on an annual basis. See "The AIMCO Operating Partnership."
Assuming no change in the level of our distributions, this is equivalent
to a distribution of $2,748.13 per year on the number of Common OP Units
you will receive in exchange for each of your partnership units.
- 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
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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.
Disadvantages of the Offer
The principal disadvantages of the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and determining the offer consideration, no one separately represented
the interests of the limited partners. Although we have a fiduciary duty
to the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Properties. We are not proposing to try to
liquidate the partnership and sell the partnership's properties and
distribute the net proceeds. An arms-length sale of such properties after
offering each for sale through licensed real estate brokers might be a
better way to determine the true value of the properties rather than the
method we chose. The sale of the properties and the liquidation of the
partnership might result in greater pretax cash proceeds to you than our
offer.
- OP Units. OP Units lack a public market, have transfer restrictions and
must be held for one year before they can be redeemed by a holder. The
ultimate return on the OP Units is directly tied to the future price of
AIMCO's Class A Common Stock or Class I Preferred Stock. You could
ultimately receive less for your OP Units than the cash price in our
offer. Further, on or after March 1, 2005, we may redeem the Class I
Preferred Stock for $25 per share.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
properties at the present time. At the current time we do not believe
that a sale of the properties would be advantageous given market
conditions, the condition of the properties and tax considerations. In
particular, we considered the changes in the local rental market, the
potential for appreciation in the value of the properties and the tax
consequences to you and your partners upon a sale of the properties.
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
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VALUATION OF UNITS
We determined the offer consideration by estimating the value of each
property owned by your partnership using the direct capitalization method. This
method involves applying a capitalization rate to your partnership's annual
property income. A capitalized rate is a percentage (rate of return), commonly
applied by purchasers of residential real estate to property income to determine
the present value of income property. The lower the capitalization rate utilized
the higher the value produced, and the higher the capitalization rate utilized
the lower the value produced. We used your partnership's property income for the
fiscal year ended December 31, 1997. However, in determining the appropriate
capitalization rate, we considered the partnership's property income since
December 31, 1997. Our method for selecting a capitalization rate begins with
each property being assigned a location and condition rating (e.g., "A" for
excellent, "B" for good, "C" for fair, and "D" for poor). We have rated each of
your property's location C (fair) and its condition C (fair). Generally, we
assign an initial capitalization rate of 11.00% to properties in this category.
We then adjust the capitalization rate based on whether the mortgage debt that
the property is subject to bears interest at a rate above or below 7.5% per
annum. Generally, for every 0.5% in excess of 7.5%, the capitalization rate
would be increased by 0.25%. Your property's mortgage debt bears interest at
7.60% per annum, which resulted in an increase from the initial capitalization
rate of 0.25%. We also considered any changes in your partnership's property
income from 1997 to 1998. Because your partnership's property income in 1998
remained relatively unchanged compared to 1997, we made no further revision of
the capitalization rate, resulting in a final capitalization rate of 11.25%. The
evaluation of a property's location and condition, and the determination of an
appropriate capitalization rate for a property, is subjective in nature, and
others evaluating the same property might use a different capitalization rate
and derive a different property value. 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. Further, in applying the direct capitalization method,
others may make different assumptions and obtain different results. 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>
CHAPEL HILL
Property income............................................. $ 544,460
Capitalization rate......................................... 11.25%
CHAPELWOOD
Property income............................................. $ 582,087
Capitalization rate......................................... 11.25%
-----------
Gross valuation of your partnership properties.............. $10,014,000
Plus: Cash and cash equivalents............................. 292,551
Plus: Other partnership assets, net of security deposits.... 434,338
Less: Mortgage debt, including accrued interest............. (7,519,364)
Less: Accounts payable and accrued expenses................. (22,897)
Less: Other liabilities..................................... (91,860)
-----------
Partnership valuation before taxes and certain costs........ 3,106,768
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures for deferred
maintenance............................................... (167,985)
Less: Closing costs......................................... (250,350)
-----------
Estimated net valuation of your partnership................. 2,688,433
Percentage of estimated net valuation allocated to units.... 100%
-----------
Estimated net valuation of units............................ 2,688,433
Total number of units............................. 65.0
-----------
Estimated valuation per unit................................ 41,361
===========
Cash consideration per unit................................. $ 41,361
===========
</TABLE>
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In order to determine the number of Preferred OP Units we are offering for
each of your units, we divided the cash offer consideration of $41,361 by the
$25 liquidation preference of each Preferred OP Unit to get 1,654.50 Preferred
OP Units per unit.
In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $41,361 by a
price of $37.63 the closing price of AIMCO's Class A Common Stock on the NYSE
for the 30 trading days ending on March 23, 1999 to get 1,099.25 Common OP Units
per unit.
FAIRNESS OF THE OFFER
Fairness to Unitholders. Your general partner is our subsidiary. 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. Your general partner did not participate in the structuring of the
offer. We and your general partner believe that the offer and all forms of
consideration offered is fair to you and the other limited partners of your
partnership. 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 (which is our subsidiary) has no present intention to liquidate,
sell, finance or refinance your partnership's properties within any specified
time period.
Comparison of Offer Price to Other Values. In evaluating the offer, your
general partner (which is our subsidiary) has compared our offer consideration
to:
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated;
- your general partner's estimate of the going concern value of your
partnership if it continued operating as an independent stand-alone
entity; and
- the net book value of your partnership.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C>
Cash offer consideration.................................... $ 41,361
Partnership Preferred Units................................. $ 41,361
Partnership Common Units.................................... $ 41,361
Alternatives:
Estimated liquidation proceeds............................ $ 41,361
Estimated going concern value(1).......................... $ 34,400
Estimated alternative going concern value(2).............. $ 38,836
Net book value (deficit).................................. $(64,677)
</TABLE>
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- ---------------
(1) Assumes a refinancing of the partnership properties' indebtedness when the
balloon payment is due.
(2) Assumes a sale of the partnership properties when the mortgages are due,
rather than a refinancing of the mortgages.
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. Stanger has
rendered similar fairness opinions with regard to the other tender offers being
made by the AIMCO Operating Partnership. Stanger rendered the opinions only as
to the individual fairness of the offer consideration in each proposed exchange
offer.
YOUR PARTNERSHIP
Your Partnership and its Property. Chapel Hill, Limited is a Tennessee
limited partnership which was formed on April 20, 1984 for the purpose of owning
and operating two properties located in Indianapolis, Indiana, known as "Chapel
Hill Apartments," and "Chapelwood Apartments." Chapel Hill Apartments consists
of 148 apartments units. Chapelwood Apartments consists of 140 apartment units.
Your partnership has no employees. As of September 30, 1998, there were 65 units
of limited partnership interest issued and outstanding, which were held of
record by 74 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.
Your partnership sold 65 limited partnership units in 1984. Between January
1, 1993 and December 31, 1998 your partnership paid $118.22 in cash
distributions. Your partnership currently owns two properties.
Property Management. Your partnership's property has been managed by an
affiliate of ours. 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.
Investment Objectives and Policies; Sale or Financing of Investments. Under
your partnership's agreement of limited partnership, your partnership is not
permitted to raise new capital or reinvest cash in new properties. Your
partnership will terminate in July 2015, unless earlier dissolved. Your general
partner has no present intention to liquidate, sell, finance or refinance your
partnership's properties within any specified time period. An investment in your
partnership is a finite life investment in which partners receive regular cash
distributions out of your partnership's distributable cash flow, if any, and
upon liquidation.
Borrowing Policies. Your partnership's agreement of limited partnership
allows your partnership to incur debt. As of December 31, 1998, Chapel Hill
Apartments had a mortgage note outstanding of $3,453,201, payable to Marine
Midland Bank, Bank of America, and FNMA, which bears interest at the rate of
7.60%. The mortgage debt is due in November 2002. Your partnership also has a
second mortgage note outstanding on the property of $124,780, on the same terms
as the current mortgage note. As of December 31, 1998, Chapelwood Apartments had
a mortgage note outstanding of $3,578,121 payable to Marine Midland Bank, Bank
of America, and FNMA which bears interest at the rate of 7.60%. The mortgage
debt is due on
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<PAGE> 1091
November 2002. Chapelwood also has a second mortgage note outstanding of
$129,300, on the same terms as the current mortgage note. Your partnership's
agreement of limited partnership also allows your general partner to lend funds
to your partnership. As of December 31, 1998, your general partner had no
outstanding loans to your partnership.
Transfers. Your units are not listed on any national securities exchange or
quoted on NASDAQ, and there is no established public trading market for the
units. Secondary sales activity for the units has been limited and sporadic.
Your general partner monitors transfers of the units (i) because the admission
of the transferee as a substitute limited partner in your partnership requires
the consent of your general partner under your partnership agreement, and (ii)
in order to track compliance with applicable safe harbor provisions to avoid
treatment as a "publicly traded partnership" for tax purposes. However, your
general partner does not monitor or regularly receive or maintain information
regarding the prices at which secondary sale transactions in the units have been
effectuated.
TERMS OF THE OFFER
General. We are offering to acquire up to 21% of the outstanding 65 units
of your partnership, which we do not directly or indirectly own, for
consideration per unit of 1,654.50 Preferred OP Units, 1,099.25 Common OP Units,
or $41,361 in cash. If you tender units pursuant to the offer, you may choose 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 Preferred OP Units, 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 January 1, 1999,
although you will be entitled to retain any distributions you may have received
after such date and prior to our commencement of this offer.
If you accept our offer and do not specify the consideration you desire on
the letter of transmittal, we will issue you Preferred OP Units.
Expiration Date. Our offer will expire at 5:00 P.M., New York City time, on
June 4, 1999, 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.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds 21% 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 their acceptance for payment as provided for herein.
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 Common OP Units or 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.
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.
The offer may be extended or delayed indefinitely, during which time you
will not receive payment for any tendered units.
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 any property owned by
your partnership's because your general partner (which is our subsidiary) and
the property manager will remain unchanged. If we borrow funds for the cash
consideration for these offers, our interest costs would increase which could
adversely affect our future earnings. If all units in this and our other
contemplated offers were purchased for cash and we borrowed all the funds, at
current interest rates, our interest expense would increase by $3,064,000 per
year.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
number of units pursuant to our offer, we may be in a position to influence
voting decisions with respect to your partnership. However, we will not be able
to control voting decisions unless we acquire more units in another transaction,
which cannot take place for at least one year after expiration of this offer.
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 (which is our subsidiary),
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
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<PAGE> 1093
mailing this Prospectus Supplement and the accompanying Prospectus and Letter of
Transmittal, and the legal and accounting fees and expenses in connection with
the offer. We will also pay the fees of Stanger for providing the fairness
opinion 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 $50,000.
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.
No Dissenters' Rights. You are not entitled to dissenters' (appraisal)
rights in connection with the offer.
Other Offers. The AIMCO Operating Partnership is also making similar
exchange offers to approximately 90 other limited partnerships in which it
controls the general partner, interests in substantially all of which were
acquired in the merger on October 1, 1998 with Insignia Financial Group, Inc.
and the February 26, 1999 merger with Insignia Properties Trust. Each of such
exchange offers is being made by a separate prospectus supplement which is
similar to this Prospectus Supplement. Copies of such prospectus supplements may
be obtained upon written request from the Information Agent at the address set
forth in "-- Information Agent" or on the back cover page of this Prospectus
Supplement. The exchange offers may be different for limited partners in each
partnership in terms of pricing and percentage of units sought, but the effects
of the offers will essentially be the same. In general, we believe that the risk
factors (except for certain tax-related risk factors) described herein for this
offer will also be applicable to the other offers.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer. Its telephone numbers are (888)
349-2005 and (201) 896-1900. Its fax number is (201) 896-0910.
FEDERAL INCOME TAX CONSEQUENCES
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Preferred OP
Units or 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.
THE FOREGOING SUMMARY IS A GENERAL DISCUSSION OF THE MATERIAL 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 "FEDERAL INCOME TAX CONSEQUENCES" 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.
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, your general
partner (which is our subsidiary) 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.
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COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units, Preferred
OP Units and 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.
As of February 19, 1999, the AIMCO Operating Partnership had approximately
9,729,130 Common OP Units outstanding (excluding interests held by AIMCO) and no
Class Two Partnership Preferred Units outstanding. The number of OP Units you
may acquire from us in exchange for your units will represent a lower percentage
of the outstanding limited partnership interests in the AIMCO Operating
Partnership than that of your current ownership interest in your partnership. In
response to our offer, you could elect to receive $41,361 in cash, 1,654.50
Preferred OP Units or 1,099.25 Common OP Units. Both your units and the OP Units
are subject to transfer restrictions and it is unlikely that a real trading
market will ever develop for any of such securities. If you subsequently redeem
OP Units for AIMCO Class A Common Stock or Class I Preferred Stock, we can make
no assurance as to the value of such shares of AIMCO stock, at that time, which
may be less than the cash offer price of $41,361.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
our subsidiary 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 properties 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
both the general partner of your partnership and the manager of your
partnership's properties. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $39,809 for the fiscal year ended December 31,
1998. The property manager of Chapel Hill Apartments received management fees of
$58,484 for the fiscal year ended December 31, 1998. The property manager of
Chapelwood Apartments received management fees of $64,707 for the fiscal year
ended December 31, 1998. We have no current intention of changing the fee
structure for your general partner or the 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 properties 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.
AIMCO's Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its unissued shares of capital stock into shares of preferred stock with such
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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. As a Maryland
corporation, AIMCO is 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.
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. We might pay a higher price for any future exchange offers we may make
for units of your partnership. In any event, we will not acquire any units for
at least one year after expiration of this offer.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $568,714 will be required to purchase all of
the units sought in our offer, if such units are tendered for cash excluding
expenses. We will obtain all such funds from cash from operations, equity
issuances and short term borrowings. For a detailed description of estimated
expenses to be incurred in the offer, see "Source and Amount of Funds and
Transactional Expenses."
S-16
<PAGE> 1096
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
nine months ended September 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 of the AIMCO Operating Partnership" included in the accompanying
Prospectus. All dollar values are in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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............... $ 265,700 $ 127,083 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses........... (101,600) (50,737) (76,168) (38,400) (30,150) (10,330)
Owned property management expenses.... (7,746) (4,344) (6,620) (2,746) (2,276) (711)
Depreciation.......................... (59,792) (23,848) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
96,562 48,154 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income...... 13,968 9,173 13,937 8,367 8,132 3,217
Management and other expenses......... (8,101) (5,029) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation......... (196) (441) (588) (590) (581) --
Other assets, depreciation and
amortization........................ (3) (236) (453) (218) (168) (150)
Owner and seller bonuses.............. -- -- -- -- -- --
Amortization of management company
goodwill............................ -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
5,668 3,467 2,038 1,707 2,002 1,020
Minority interests in service company
business............................ -- 48 (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business............ 5,668 3,515 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative expenses... (7,444) (1,408) (5,396) (1,512) (1,804) (977)
Interest income....................... 18,244 4,458 8,676 523 658 123
Interest expense...................... (56,756) (33,359) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships........................ (1,052) (777) 1,008 (111) -- --
Equity in losses of unconsolidated
partnerships(c)..................... (5,078) (463) (1,798) -- -- --
Equity in earnings of unconsolidated
subsidiaries(d)..................... 8,413 456 4,636 -- -- --
Amortization of goodwill.............. (5,071) (711) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations................ 53,486 19,865 30,246 15,629 14,988 7,702
Gain on disposition of properties..... 2,783 (169) 2,720 44 -- --
Provision for income taxes............ -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before extraordinary
item................................ 56,269 19,696 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt.............. -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)..................... $ 56,269 $ 19,427 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)............................. 241 109 147 94 56 48
Total owned apartment units (end of
period)............................. 62,955 28,773 40,039 23,764 14,453 12,513
Units under management (end of
period)............................. 154,729 71,038 69,587 19,045 19,594 20,758
Basic earnings per Common OP Unit..... $ 0.80 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP Unit... $ 0.79 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit................................ $ 1.6875 $ 1.3875 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities.......................... 50,825 53,435 73,032 38,806 25,911 16,825
Cash flows used in investing
activities.......................... (185,453) (314,814) (717,663) (88,144) (60,821) (186,481)
Cash flows provided by (used in)
financing activities................ 141,221 293,984 668,549 60,129 30,145 176,800
<CAPTION>
AIMCO PROPERTIES, L.P.
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)
Cash flows provided by (used in)
financing activities................ (1,032) 14,114
</TABLE>
S-17
<PAGE> 1097
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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>
Funds from operations(e)................ $ 132,881 $ 49,692 $ 81,155 $ 35,185 $ 25,285 $ 9,391
Weighted average number of Common OP
Units outstanding..................... 53,007 24,347 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation.......................... $2,685,487 $1,250,239 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation.......................... 2,355,122 1,107,545 1,503,922 745,145 448,425 392,368
Total assets............................ 3,121,949 1,608,195 2,100,510 827,673 480,361 416,361
Total mortgages and notes payable....... 1,275,401 661,715 808,530 522,146 268,692 141,315
Redeemable Partnership Units............ 232,405 178,321 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994 Cumulative
Senior Preferred Units................ -- -- -- -- -- 107,228
Partners' Capital....................... 1,427,087 560,737 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.
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) ) $ 291
<S> <C> <C>
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 10, 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
based on the NAREIT definition, as adjusted for the 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 NINE PERIOD
MONTHS ENDED FOR THE YEAR ENDED JANUARY 10,
SEPTEMBER 30, DECEMBER 31, 1994
------------------ --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
-------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $ 56,269 $19,427 $32,697 $15,673 $14,988 $ 7,702
(Gain) loss on disposition of property...................... (2,783) 169 (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 56,900 21,052 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 7,077 711 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 2,689 3,584 -- -- --
Amortization of management contracts...................... 4,201 430 1,587 -- -- --
Deferred taxes............................................ 6,134 2,164 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 17,379 2,781 6,280 -- -- --
Preferred stock dividends................................. (12,296) -- (135) -- (5,169) (3,114)
-------- ------- ------- ------- ------- -------
Funds from operations....................................... $132,881 $49,692 $81,155 $35,185 $25,285 $ 9,391
======== ======= ======= ======= ======= =======
</TABLE>
S-18
<PAGE> 1098
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. (the AIMCO Operating Partnership) for the
nine months ended September 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 NINE
MONTHS FOR THE
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 345,961 $ 442,526
Property operating expenses............................... (136,240) (189,442)
Owned property management expenses........................ (8,933) (11,831)
Depreciation.............................................. (80,420) (98,853)
--------- -----------
120,368 142,400
--------- -----------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 28,912 41,676
Management and other expenses............................. (14,386) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (15,243) (26,480)
--------- -----------
(913) (9,075)
Minority interests in service company business............ -- (10)
--------- -----------
Partnership's shares of income from service company
business............................................... (913) (9,085)
--------- -----------
General and administrative expenses....................... (8,632) (21,371)
Interest expense.......................................... (90,890) (121,699)
Interest income........................................... 40,887 21,734
Minority interest......................................... (8,548) (10,034)
Equity in losses of unconsolidated partnerships........... (23,349) (43,918)
Equity in earnings of unconsolidated subsidiaries......... 851 5,848
Amortization of Goodwill.................................. (5,071) --
--------- -----------
Net income........................................ $ 24,703 $ (36,125)
========= ===========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (.12) $ (1.16)
Diluted earnings (loss) per Common OP Unit.................. $ (.12) $ (1.16)
Distributions paid per Common OP Unit....................... $ 1.69 $ 1.85
Book value per Common OP Unit............................... $ 24.52 $ 26.96
CASH FLOW DATA:
Cash provided by operating activities....................... $ 90,439 $ 130,703
Cash used in investing activities........................... (79,923) (1,135,038)
Cash provided by (used in) financing activities............. 16,740 955,977
OTHER DATA:
Funds from operations(a).................................... $ 187,985 $ 172,733
Weighted average number of Common OP Units outstanding...... 74,946 74,094
</TABLE>
S-19
<PAGE> 1099
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, net of accumulated depreciation................ $2,679,195
Total assets................................................ 4,558,819
Total mortgages and notes payable........................... 1,762,105
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 320,443
Partners' capital........................................... 1,984,019
</TABLE>
- ---------------
(a) 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
based upon the NAREIT definition, as adjusted for the 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.
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss)................................. $ 24,703 $(36,125)
HUD release fee and legal reserve................. -- 10,202
Real estate depreciation, net of minority
interests....................................... 76,521 93,050
Amortization of management contracts.............. 9,593 12,790
Amortization of management company goodwill....... 10,997 12,551
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation........................ -- 1,715
Amortization of management company goodwill..... 959 1,918
Amortization of management contracts............ 23,010 30,516
Deferred taxes.................................. (713) (1,356)
Equity in earnings of other partnerships:
Real estate depreciation........................ 79,559 95,285
Interest on convertible debentures................ (7,537) (10,003)
Preferred unit distributions...................... (29,107) (37,810)
-------- --------
Funds from operations............................. $187,985 $172,733
======== ========
</TABLE>
S-20
<PAGE> 1100
SUMMARY FINANCIAL INFORMATION OF CHAPEL HILL, LIMITED
The summary financial information of Chapel Hill, Limited for the nine
months ended September 30, 1998 and 1997 is unaudited. The summary financial
information for Chapel Hill, Limited for the years ended December 31, 1997 and
1996 is based on unaudited financial statements. The December 31, 1995, 1994,
and 1993 information is based on unaudited financial information. 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 of Your Partnership" included
herein. See "Index to Financial Statements."
CHAPEL HILL, LIMITED
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Total Revenues............... $ 1,842,971 $ 1,778,622 $ 2,415,688 $ 2,295,793 $ 2,326,215 $ 2,237,699 $ 2,139,393
Net Income/(Loss)............ (278,502) (15,590) (26,750) (99,791) (243,111) (130,730) (99,677)
Net Income per limited
partnership unit........... (4,242) (237) (407) (1,520) (3,703) (1,991) (1,518)
Distributions per limited
partnership unit........... -- -- 48 38 31 -- --
Distributions per limited
partnership unit (which
represent a return of
capital)...................
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and Cash Equivalents.... $ 251,165 $ 291,041 $ 292,551 $ 224,194 $ 209,734 $ 348,683 $ 239,621
Real Estate, Net of
Accumulated Depreciation... 4,277,854 4,524,743 4,468,855 4,747,535 5,038,849 5,200,203 5,548,474
Total Assets................. 5,124,099 5,429,576 5,319,976 5,511,627 5,783,248 6,141,827 6,431,163
Notes Payable................ 7,085,956 7,246,151 7,208,979 7,356,494 7,502,438 7,636,184 7,758,752
General Partners' Capital/
(Deficit).................... (22,857) (19,929) (20,072) (19,773) (18,750) (16,299) (14,991)
Limited Partners' Capital/
(Deficit).................... (2,262,832) (1,972,927) (1,987,115) (1,957,493) (1,856,257) (1,613,552) (1,484,129)
Partners' Capital/(Deficit).... (2,285,689) (1,992,856) (2,007,187) (1,977,266) (1,875,007) (1,629,850) (1,499,120)
Total Distributions............ -- -- 3,171 2,468 2,046 -- --
Book value per limited
partnership unit............. (35,164) (30,659) (30,880) (30,419) (28,846) (25,075) (23,063)
Net increase (decrease) in cash
and cash equivalents......... (41,386) 66,847 68,357 58,954 (138,949) 109,062 239,621
Net cash provided by operating
activities................... 241,944 306,986 492,888 404,604 252,939 274,925 (209,978)
Ratio of earnings to fixed
charges...................... 0.44/1 0.97/1 0.96/1 0.85/1 0.65/1 0.81/1 0.85/1
0.44 0.97 0.96 0.85 0.65 0.81 0.85
LP Units Outstanding........... 65
LP%............................ 99%
GP%............................ 1%
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per unit of your
partnership for the year ended December 31, 1998, and the cash distributions
payable on the number of Common OP Units and Preferred OP Units issuable in
exchange therefor:
<TABLE>
<CAPTION>
ANNUAL
DISTRIBUTIONS
-------------
<S> <C>
Units of Chapel Hill, Limited............................... $ 0
Equivalent cash distributions on Common OP Units(1)......... $2,766.88
Equivalent cash distributions on Preferred OP Units(2)...... $3,309.00
</TABLE>
- ---------------
(1) Calculated by multiplying the exchange ratio of 1,099.25 Common OP Units per
unit by the annualized distributions paid on the Common OP Units of $2.50
per unit.
(2) Calculated by multiplying the exchange ratio of 1,654.50 Preferred OP Units
per unit by the stated annual distribution rate on the Preferred OP Units of
$2.00 per unit.
S-21
<PAGE> 1101
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of AIMCO. AIMCO is a real estate investment
trust that owns and manages multifamily apartment properties throughout the
United States. Through its wholly owned subsidiaries, AIMCO GP, the sole general
partner of the AIMCO Operating Partnership, and the Special Limited Partner, as
of December 31, 1998, AIMCO held approximately an 83% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled by the National
Multi Housing Council, we believe that AIMCO is one of the largest owner and
manager of multifamily apartment properties in the United States, with a total
portfolio of 379,363 apartment units in 2,147 properties located in 49 states,
the District of Columbia and Puerto Rico. As of December 31, 1998, AIMCO:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 apartment properties for third party
owners and affiliates.
AIMCO's Class A Common Stock is listed and traded on the NYSE under the
symbol "AIV." On March 23, 1999, the last reported sale price of AIMCO Class A
Common Stock on the NYSE was $35 3/16. 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 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>
1999
First Quarter (through March 23)........ $41 5/8 $35 3/16 $0.6250 $0.6250
1998
Fourth Quarter.......................... 37 3/8 30 0.5625 0.5625
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>
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.
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RISK FACTORS
The following sets forth certain risks and disadvantages of the offer and
should be read and considered when reviewing the potential benefits of the offer
set forth in "Background and Reasons for the Offer -- Expected Benefits of the
Offer." In addition, you should review the other risks of investing in us
beginning on page 2 of our accompanying Prospectus.
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. We did not use any third-party appraisal or valuation to determine
the value of your partnership's properties. We established the terms of our
offer, including the exchange ratios and the cash consideration without any
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. 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 CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the opening
performance of your partnership's properties.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
properties. In doing so, we applied a capitalization rate to your partnership's
property income for the year ended December 31, 1997. In determining the
appropriate capitalization rate, we considered your partnership's results of
operations since December 31, 1997. If property income for a different period or
a different capitalization rate was used, a higher valuation could result. Other
methods of valuing your units could also result in a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimated Chapel Hill Apartments to be worth $4,840,000,
less approximately $148,905 of deferred maintenance and investment. We estimate
Chapelwood Apartments to be worth $5,174,000, less approximately $19,080 of
deferred maintenance and investment. It is possible that a sale of the
properties could result in your receiving more per unit than in our offer. Even
if our cash offer consideration is equal to liquidation value, if you accept OP
Units, you may not ultimately receive an amount equal to the cash offer
consideration when you sell such OP Units or any AIMCO securities you may
receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
pretax cash 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.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and the AIMCO Operating Partnership and, therefore, has
substantial conflicts of interest with respect to our offer. We are making this
offer with a view to making a profit. 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. Another conflict is 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 properties 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
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<PAGE> 1103
partnership. 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.
CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES, Since our subsidiaries
receive fees for managing your partnership and its properties, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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 sold. If you exchange your units
for cash and our 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. 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 allocated to such units 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. If you exercise your redemption right with respect to the OP Units
within two years of the date that you transfer your units to the AIMCO Operating
Partnership, your exchange of units for OP Units or OP Units and cash could be
treated as a disguised sale of your units and you would be required to recognize
gain or loss in the year of the exchange on such disguised sale. See "Federal
Income Tax Consequences -- Disguised Sales." 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. 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 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.
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. You
should review "Federal Income Tax Consequences" 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. Because the income tax
consequences of tendering units will not be the same for everyone, you should
consult your own tax advisor before determining whether to tender your units
pursuant to our offer.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimated Chapel Hill Apartments to be worth $4,840,000,
less approximately $148,905 of deferred maintenance and investment. We estimate
Chapelwood Apartments to be worth $5,174,000, less approximately $19,080 of
deferred maintenance and investment. It is possible that a sale of the
properties could result in your receiving more per unit than in our offer.
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<PAGE> 1104
The actual proceeds obtained from a liquidation are highly uncertain and
could be more or less than our estimate. Accordingly, our offer consideration
could be less than the net proceeds that you would realize upon an actual
liquidation of your partnership.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is controlled by us).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all right 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, for any units that we acquire from you, you will not receive any
future distributions from operating cash flow of your partnership or upon a sale
of property owned by your partnership or a refinancing of any of its debt. If
you tender your units in exchange for OP Units, you will be entitled to future
distributions from the operating cash flow of the AIMCO Operating Partnership
and upon a dissolution, liquidation or winding-up of the AIMCO Operating
Partnership. See "Comparison of Your Units and AIMCO OP Units -- Distributions."
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,100 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
LACK OF AVAILABILITY OF AUDITED FINANCIAL STATEMENTS. The unaudited
financial statements of Chapel Hill, Limited have been prepared from the books
and records of the Partnership in accordance with generally accepted accounting
principles. An audit of the Partnership's financial statements could not be
completed because the General Partner does not have sufficient audit evidence to
support the historical capitalized costs of the Partnership's properties,
including the initial construction, which occurred in 1984. Nevertheless, the
General Partner believes that such financial statements appropriately reflect
the financial condition and results of operations of the Partnership for the
periods presented in accordance with generally accepted accounting principles.
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from the sale of a property or a refinancing of its indebtedness to
(ii) a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of 2015 to a much larger partnership with a
partnership termination date of 2093.
Under the AIMCO Operating Partnership's agreement of limited partnership,
the general partner has the ability, without the concurrence of the limited
partners, to acquire and dispose of properties and to borrow funds. Further,
while it is the intent to distribute net income from operations, sales of
properties and refinancings of indebtedness, the general partner may not make
such distributions. Proceeds of future asset
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sales or refinancings by the AIMCO Operating Partnership generally will be
reinvested rather than distributed.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you exchange your
units for OP Units, you will have changed your investment from an interest in a
partnership which owns and manages a two properties to an interest in the AIMCO
Operating Partnership which 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 and our portfolio of properties as compared to the value of your
units and your partnership.
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAIN ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus. If you
exercise your redemption right with respect to the OP Units within two years of
the date that you transfer your units to the AIMCO Operating Partnership, your
exchange of units for OP Units and cash could be treated as a disguised sale of
your units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax Consequences --
Disguised Sales."
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. As a result, holders of OP Units have limited
influence on matters affecting the operation of the AIMCO Operating Partnership
and third parties
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may find it difficult to attempt to gain control or influence the activities of
our operating partnership. Such matters affecting the operation of the AIMCO
Operating Partnership include liquidation and distribution policies, property
purchases, and potential mergers or acquisitions. See "Comparison of Your Units
and AIMCO OP Units -- Voting Rights."
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as for your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a result, we may incur costs associated with defending or settling such
litigation or paying any judgment if we lose. As of the present time, no limited
partners of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. 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. However, we will
not be able to control voting decisions unless we acquire more units in another
transaction, which cannot take place for at least one year after expiration of
this offer. Furthermore, in the event that we acquire a substantial number of
units pursuant to our offer, removal of your general partner (which is our
subsidiary) or the manager of any property owned by your partnership may become
more difficult or impossible without our consent.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
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
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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.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTIES. It is not known
when the properties owned by your partnership may be sold. Therefore, there may
be no way to liquidate your investments in the partnership in the future until
the properties are sold and your partnership is liquidated. You may continue to
hold the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns two properties. The general partner of your
partnership continually considers whether the properties should be sold or
otherwise disposed of after consideration of relevant factors, including
prevailing economic conditions, availability of favorable financing and tax
considerations, with a view to achieving maximum capital appreciation for your
partnership. We cannot predict when the properties will be sold or otherwise
disposed of. However, there is no current plan or intention to sell the
properties in the near future.
BALLOON PAYMENTS. Your partnership has two balloon payments. Chapel Hill
Apartments has approximately $3,033,973 of balloon payments due on its mortgage
debt in November 2002. Chapelwood has approximately $3,143,726 of balloon
payments due on its mortgage debt in November 2002. Your partnership will have
to refinance such debt or sell its properties prior to the balloon payment
dates, or it will be in default and could lose the properties to foreclosure.
SPECIAL FACTORS TO CONSIDER
In reviewing the offer, you should pay special attention to the information
in the Sections entitled "Background and Reasons for the Offer," "Valuation of
Units," "Fairness of the Offer" and "Stanger Analysis," which contain
information regarding the background and reasons for the offer, the method of
evaluating units in the offer and alternative valuation methods considered, our
view as to the fairness of the offer, and the fairness opinion rendered by
Stanger.
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 liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
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 5.269% interest, consisting of a 3.769%
limited partnership interest and a 1.5% general partnership interest, in your
partnership.
On October 31, 1998, IPT and AIMCO entered into an agreement and plan of
merger, dated as of October 1, 1998 (the "IPT Merger Agreement"), pursuant to
which IPT merged with AIMCO on February 26, 1999 (the "IPT Merger"). Upon
consummation of the IPT Merger, each outstanding share of IPT not owned by AIMCO
was converted into the right to receive 0.3601 shares of AIMCO's Class A Common
Stock (approximately 4,180,000 shares in the aggregate).
One of the reasons we chose to acquire Insignia is that we would be able to
make the exchange 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
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Insignia Partnerships, and would provide the AIMCO Operating Partnership with a
larger asset and capital base and increased diversification. As of the date of
this offering, the AIMCO Operating Partnership proposes to make offers to
approximately 90 of the Insignia Partnerships, including your partnership.
During our negotiations with Insignia in early 1998, we decided that if the
merger with Insignia were consummated, we could also benefit from making offers
for limited partnership interests in the Insignia Partnerships. While some of
the Insignia Partnerships are public partnerships and information is publicly
available on such partnerships for weighing the benefits of making an exchange
offer, many of the partnerships are private partnerships and information about
such partnerships comes principally from the general partner. Our control of the
general partner makes it possible to obtain access to such information. Further,
such control also means that we control the operations of the partnerships and
their properties. Insignia did not propose that we conduct such exchange offers,
rather we initiated the offers on our own. We determined in June of 1998 that if
the merger with Insignia were consummated, we would offer to limited partners of
the Insignia Partnerships limited partnership units of the AIMCO Operating
Partnership and/or cash.
In connection with the Insignia Merger we acquired general partnership
interests and certain limited partnership interests in a number of private and
public partnerships. Eight private partnerships out of the 90 partnerships
involved in the proposed exchange offers do not have audited financial
statements prepared in accordance with generally accepted accounting practices
("GAAP"). Certain of these partnerships have audited financial statements
prepared on the basis of federal income taxes and others have unaudited
financial statements which may or may not be prepared on the basis of GAAP or
federal income taxes. For the Insignia Partnerships for which exchange offers
are being made which do not have audited GAAP financial statements for at least
two years, we are making the offer on the basis of either one year of audited
GAAP financial statements and one year of unaudited GAAP financial statements or
just unaudited GAAP financial statements. We tried to obtain two years of
audited GAAP financial statements for all the partnerships for which offers are
being made, but because of the inability to locate records from inception of the
partnerships which would allow auditors to verify the original purchase price of
the properties, no audits were possible. In these cases, the entities which
controlled the general partners prior to Insignia are no longer in business or
have no current knowledge or records of such partnerships. For the same reasons,
we do not have all the records for past years of some of the partnerships.
Therefore, for the partnerships without an audit, we did not have invoices,
escrow statements, property closing statements or the like to support the
original costs of the real property to the satisfaction of independent auditors,
in order for them to render an unqualified audit report. Consequently, we have
no way to support the original cost of the properties. However, we have general
ledgers and related accounting records that enable us to prepare GAAP basis
financial statements. These records were taken from the entities that controlled
the general partners and were subsequently maintained by us. The amount of
capitalized property costs appearing in those books and records has, to our
knowledge, been appropriately rolled forward from year to year and used by the
general partners of the partnerships in question to prepare tax returns and
periodic reports to the investors in the partnerships. Therefore, we believe
that the unaudited financial statements included in the prospectus supplements
for such partnerships have been prepared in accordance with GAAP.
In acquiring Insignia and the interests in the Insignia Partnerships, we
conducted due diligence with regard to certain of the assets acquired including
the major properties held by the Insignia Partnerships. Our due diligence
focused on the condition of the major properties and the terms of the
partnership agreements. Since Insignia had audited GAAP financial statements and
since those partnerships without audited GAAP financial statements are generally
smaller, we did not focus on the issue of audited GAAP based financial
statements for the smaller partnerships at the time of the merger. Further, for
our internal due diligence use, audited tax based financial statements are also
used. The total number of Insignia Partnerships we acquired an interest in was
approximately 550 of which approximately 25 do not have audited GAAP statements.
We were not able to pick and choose the partnerships in which we would acquire
an interest. The Insignia Partnerships were part of the business of Insignia. As
a consequence, we acquired interests in certain small private partnerships which
do not have the ability to obtain audited GAAP financial statements. It is our
policy to acquire properties or partnerships with audited GAAP based financial
statements. However, in
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connection with large acquisitions of partnerships interests, such as with the
Insignia Merger, we may occasionally acquire a partnership or property without
audited GAAP financial statements.
Previous Tender Offers
Tender offers have been previously made with respect to certain of the
public Insignia Partnerships. However, there have not been any prior tender
offers to acquire units of your partnership. Except for such tender offers, we
are not aware of any merger, consolidation or other combination involving any of
the Insignia Partnerships, or any acquisitions of any of such partnerships or a
material amount of the assets of such partnerships.
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 August 28, 1998 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
(which is our subsidiary).
Liquidation
Benefits of 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 (in many cases unrelated third parties).
Disadvantages of Liquidation. A liquidating sale of part or all of your
partnership's properties 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 your general partner (which is our subsidiary), 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 on the order of 1% of the principal amount of the mortgage.
Your general partner believes it currently is in the best interest of your
partnership to continue holding its real estate assets.
Continuation of the Partnership Without the Offer
Benefits of Continuation. Although our offer permits you to continue your
investment in your partnership, 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 apartment and retail properties could improve
over time, making a sale of your partnership's properties in a private
transaction at some point in the future a more viable option than it is
currently. The continuation of your partnership will allow you to continue to
participate in the net income and any increases of revenue of your partnership
and any net proceeds from the sale of any property owned by your partnership.
The General Partner continues to review operations and expects to complete
capital expenditures in 1999 and 2000 enabling it to possibly increase rents and
lower expenses. In addition, a sale of the property may cause a tax gain to each
investor.
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<PAGE> 1110
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. If your partnership continues operating as presently structured, your
partnership could be forced to borrow on terms that could result in net losses
from operations. Chapel Hill Apartments' mortgage notes are due on November 2002
and require balloon payments totaling $3,033,973. Chapelwood Apartments'
mortgage notes are due on November 2002 and require balloon payments totaling
$3,143,726. Your partnership currently has adequate sources of cash to finance
its operations on both a short term and long term basis but will have to sell
the properties or refinance its indebtedness in 2002 to pay such balloon
payments. Continuation of your partnership without the offer would deny you and
your partners the benefits that your general partner (which is our subsidiary)
expects to result from the 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.
Alternative Structures Considered
Before we decided to make our offer, we considered a number of alternative
transactions, including purchasing some or all of your partnership's properties;
making an offer of only cash for your units; making an offer of only Common OP
Units for your units; and making an offer of only Preferred OP Units for your
units. A merger would require a vote of the limited partners of your
partnership. If the merger was approved, all limited partners, including those
who wish to retain their units and continue to participate in your partnership,
would be forced to participate in the merger transaction. If the merger was not
approved, all limited partners, including those who would like to liquidate
their investment in your partnership, would be forced to retain their units.
We also considered purchasing your partnership's properties from your
partnership. However, a sale of your partnership's properties would require a
vote of a majority of the limited partners. If the sale was approved, all
limited partners, including those who wish to continue to participate in the
ownership of your partnership's properties, would be forced to participate in
the sale transaction, and possibly to recognize taxable income. If the sale was
not approved, all limited partners, including those who would like to dispose of
their investment in your partnership's properties, would be forced to retain
their investment.
In order to give all limited partners in your partnership an opportunity to
make their own investment decision, we elected to make an offer directly to you
and the other limited partners. We considered making an all cash offer in order
to satisfy some limited partners' desire for immediate liquidity. However, an
all cash offer would not be desirable for those limited partners who do not
desire immediate liquidity and do not want to immediately recognize any taxable
income, but might otherwise be interested in disposing of their investment in
your partnership and might want an opportunity to control the timing of any
realization of taxable income associated with liquidating such investment in the
future.
We considered making an offer of only OP Units, either all Common OP Units
or all Preferred OP Units. The primary disadvantage of an all OP Unit offer is
that those limited partners who want immediate liquidity would be forced to wait
at least one year before exchanging their OP Units for cash or AIMCO stock. We
decided to offer limited partners both Common OP Units and Preferred OP Units in
order to permit investors to make their own decision as to whether they
preferred the possibility of future capital appreciation (Common OP Units) or
preferred distribution rights (Preferred OP Units).
After considering these alternatives, we decided to offer limited partners
the possibility of all three forms of consideration: cash, Common OP Units and
Preferred OP Units. We think that such an offer will appeal to a large number of
limited partners in your partnership, while permitting each one to retain any or
all of his or her units and remain a limited partner in your partnership on the
same terms as before.
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<PAGE> 1111
Sale of Assets
Your partnership could sell the properties it owns. The general partner of
your partnership considers sale of your partnership's properties from time to
time. However, any such sale would likely be a taxable transaction.
EXPECTED BENEFITS OF THE OFFER
We are in the business of acquiring direct and indirect interests in
apartment properties such as the properties owned by your partnership. Our offer
provides us with an opportunity to increase our ownership interest in the
properties 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:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, currently listed and traded on the NYSE.
- Preferred Quarterly Distributions. Your partnership did not pay any
distributions for the fiscal year ended December 31, 1998. Holders of
Preferred OP Units will be entitled to receive quarterly distributions of
$0.50 per unit (equivalent to $2.00 on an annualized basis) before any
distributions are paid to holders of Common OP Units. This is equivalent
to a distribution of $3,309 per year on the number of Preferred OP Units
you will receive in exchange for each of your partnership 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:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- Quarterly Distributions. Your partnership did not pay any distributions
for the fiscal year ended December 31, 1998. In 1998, we paid quarterly
distributions on the Common OP Units totalling $2.25. In January 1999, we
increased our distribution rate on each of the Common OP Units to $2.50
on an annual basis. Assuming no change in the level of our distributions,
this is equivalent to a distribution of $2,748.13 per year on the number
of Common OP Units you will receive in exchange for each of your
partnership units. See "The AIMCO Operating Partnership."
- 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 Common OP Units.
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<PAGE> 1112
- 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.
DISADVANTAGES OF THE OFFER
The principal disadvantages to the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and the consideration, no one separately represented the interests of the
limited partners. Although we have a fiduciary duty to the limited
partners, we also have conflicting responsibilities to our equity
holders. We did not appoint, or ask the limited partners to appoint, a
party to represent only their interests.
- No Proposal to Sell the Properties. We are not proposing to try to
liquidate the partnership and sell the partnership's properties and
distribute the net proceeds. An arms-length sale of the properties after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the properties rather than the
method we chose. The sale of the properties and the liquidation of the
partnership might result in greater pre-tax cash proceeds to you than our
offer.
- OP Units. Investing in OP Units has risks that include the lack of a
public market, transfer restrictions and a one year holding period before
they can be redeemed by a holder. The ultimate return on the OP Units is
directly tied to the future price of AIMCO's Class A Common Stock or
Class I Preferred Stock. You could ultimately receive less for your OP
Units than the cash price in our offer. Further, on or after March 1,
2005, we may redeem the Class I Preferred Stock for $25 per share.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
the sale of the properties would be advantageous given market conditions,
the condition of the properties and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of a property and the tax consequences to you
and your partners on a sale of a property. See also "Your
Partnership -- General Policy Regarding Sales and Refinancings of
Partnership Property."
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax Consequences
-- Distinguished Sales."
For a description of certain risks of our offer, see "Risk Factors."
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<PAGE> 1113
VALUATION OF UNITS
We determined our cash offer consideration by estimating the value of the
properties owned by your partnership using the direct capitalization method.
This method involves applying a capitalization rate to your partnership's annual
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower the value produced. We used your partnership's property
income for the fiscal year ended December 31, 1997. However, in determining the
appropriate capitalization rate, we considered the partnership's property income
since December 31, 1997. Our method for selecting a capitalization rate begins
with each property being assigned a location and condition rating (e.g., "A" for
excellent, "B" for good, "C" for fair, and "D" for poor). We have rated each of
your property's location C (fair) and its condition C (fair). Generally, we
assign an initial capitalization rate of 11.00% to properties in this category.
We then adjust the capitalization rate based on whether the mortgage debt that
the property is subject to bears interest at a rate above or below 7.5% per
annum. Generally, for every 0.5% in excess of 7.5%, the capitalization rate
would be increased by 0.25%. Your property's mortgage debt bears interest at
7.60% per annum, which resulted in an increase from the initial capitalization
rate of 0.25%. We also considered any changes in your partnership's property
income from 1997 to 1998. Because your partnership's property income in 1998
remained relatively unchanged compared to 1997, we made no further revision of
the capitalization rate, resulting in a final capitalization rate of 11.25%. The
evaluation of a property's location and condition, and the determination of an
appropriate capitalization rate for a property, is subjective in nature, and
others evaluating the same property might use a different capitalization rate
and derive a different property value.
Property income of the property is the difference between the revenues from
the property and related costs and expenses, excluding income derived from
sources other than its regular activities and before income deductions. Income
deductions include interest, income taxes, prior-year adjustments, charges to
reserves, write-offs of intangibles, adjustments arising from major changes in
accounting methods and other material and nonrecurrent items. In this respect,
property income differs from net income disclosed in the partnership's financial
statements, which does not exclude these income sources and deductions.
The following is a reconciliation of your partnerships net income for the
year ended December 31, 1997, to your partnership's property income for the same
period.
<TABLE>
<S> <C>
Net Income (Loss)........................................... $ (26,750)
Other Non-Operating Expenses................................ 7,675
Depreciation................................................ 470,549
Interest.................................................... 674,526
Property income:
Chapel Hill............................................... 544,000
Chapelwood................................................ 582,000
----------
$1,126,000
</TABLE>
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. Further,
in applying the direct capitalization method, others may make different
assumptions and obtain different results. 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 estimated 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 (property income less capital
reserves divided by sales price) and then evaluated each property in
light of its
S-34
<PAGE> 1114
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 divided the combined fiscal 1997
property income of $1,126,547 by the properties' capitalization rate of
11.25% to derive an estimated combined gross property value of
approximately $10,014,000.
<TABLE>
<CAPTION>
ESTIMATED
FISCAL 1997 NET CAPITALIZATION GROSS PROPERTY
PROPERTY OPERATING INCOME(1) RATE VALUE
-------- ------------------- -------------- --------------
<S> <C> <C> <C>
Chapel Hill Apartments $544,460 11.25% $ 4,839,644
Chapelwood Apartments 582,087 11.25% 5,174,107
-----------
Estimated Total Gross Property Value $10,013,751
</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
certain other costs including required capital expenditures, deferred
maintenance, and closing costs to derive a net equity value for your
partnership of $2,688,433. Closing costs, which are estimated to be 2.5%
of the gross property value, include legal and accounting fees, real
property, transfer taxes, title and escrow costs and broker's fees.
- 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. Accordingly, 100% of the estimated liquidation
proceeds are assumed to be distributed to holders of units. Our cash
offer consideration represents the per unit liquidation proceeds
determined in this manner.
<TABLE>
<S> <C>
CHAPEL HILL
Property income............................................. $ 544,460
Capitalization rate......................................... 11.25%
CHAPELWOOD
Property income............................................. 582,087
Capitalization rate......................................... 11.25%
-----------
Gross valuation of partnership properties................... 10,014,000
Plus: Cash and cash equivalents............................. 292,551
Plus: Other partnership assets, net of security deposits.... 434,338
Less: Mortgage debt, including accrued interest............. (7,519,364)
Less: Accounts payable and accrued expenses................. (22,897)
Less: Other liabilities..................................... (91,860)
-----------
Partnership valuation before taxes and certain costs........ 3,106,768
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures and deferred
maintenance............................................... (167,985)
Less: Closing costs......................................... (250,350)
-----------
Estimated net valuation of your partnership................. 2,688,433
Percentage of estimated net valuation allocated to holders
of units.................................................. 100.00%
-----------
Estimated net valuation of units............................ 2,688,433
Total number of units............................. 65.0
-----------
Estimated valuation per unit................................ 41,361
===========
Cash consideration per unit................................. $ 41,361
===========
</TABLE>
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<PAGE> 1115
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration of $41,361 by the $25
liquidation preference of each Preferred OP Unit to get 1,654.50
Preferred OP Units per unit.
- In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $41,361 by
a price of $37.63 (the closing price of AIMCO's Class A Common Stock for
the 30 trading days ending on the NYSE on March 23, 1999) to get 1,099.25
Common OP Units per unit.
The total net valuation of all partnerships in which the AIMCO Operating
Partnership is making similar exchange offers, and which were valued using the
same methods as used for your partnership, is $568,761,183, of which, $2,688,433
or .47% is the net valuation of your partnership.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
Your general partner is a subsidiary of the AIMCO Operating Partnership. 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. Your general partner did not participate in the structuring of the
offer and has substantial conflicts of interest with regard to the offer.
However, for all of the reasons discussed herein, we and your general partner
believe that the offer and all forms of consideration offered is fair to you and
the limited partners of your partnership. We also reasonably believe that the
similar offers to the limited partners of the other partnerships are fair to
such limited partners. 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 us 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, your
general partner (which is our subsidiary) 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 properties 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. The net
income of your partnership has decreased from a loss of $15,590 for the
nine months ended September 30, 1997 to a loss of $278,502 for the nine
months ended September 30, 1998. These factors are reflected in our
valuation of your partnership.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are substantially the financial
equivalent to your interest in your partnership. See "Valuation of Units."
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<PAGE> 1116
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. However, we did review whether trading information
was available.
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 by electing to accept Preferred OP Units or
Common OP Units.
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 $41,361, based on a total estimated
value of your partnership's properties of $10,013,751. Your general partner
(which is our subsidiary) has no present intention to liquidate your
partnership or to sell or refinance your partnership's properties. See
"Background and Reasons for the Offer". See "Valuation of Units" for a
detailed explanation of the methods we used to value your partnership.
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $2.00 and current annualized distributions with respect to the
Common OP Units are $2.50. This is equivalent to distributions of $3,309
per year on the number of Preferred OP Units, or distributions of $2,748.13
per year on the number of Common OP Units, that you would receive in
exchange for each of your partnership's units. There were no distributions
with respect to your units for the fiscal year ended December 31, 1998. See
"Comparison of Your Units and AIMCO OP Units -- Distributions."
13. The fact that if your partnership were liquidated as opposed to
continuing, the general partner (which is our subsidiary) would not receive
the substantial management fees it currently receives. As discussed in
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," we do not believe that
liquidation of the partnership is in the best interests of the unitholders.
Therefore, we believe the offer is fair in that the fees paid to the
general partner would continue even if the offer was not consummated. We
are not proposing to change the current management fee arrangement.
In evaluating these factors, your general partner (which is our subsidiary)
and the AIMCO Operating Partnership did not quantify or otherwise attach
particular weight to any of them.
Your general partner (which is our subsidiary) has not retained an
unaffiliated representative to act on behalf of the limited partners in
negotiating the terms of the offer since each individual limited partner can
make his own decision as to whether or not to tender and what consideration to
take. Unlike a merger or other form of partnership reorganization, a majority or
more of the holders of limited partnership interests in your partnership cannot
bind you. If an unaffiliated representative had been obtained, it is possible
that such representative could have negotiated a higher price for your units
than was unilaterally offered by the AIMCO Operating Partnership. We have
retained Stanger to conduct an analysis of our offer and to render an opinion as
to the fairness to you of the offer consideration from a financial point of
view. Although no representative has been retained to act solely on behalf of
the limited partners for purposes of negotiating the terms of the offer, we have
determined that the transaction is fair to you from a financial point of view.
We made this determination based, in part, on the fairness opinion from Stanger
and the fact that all limited partners may elect to retain their existing
security on the same terms as before our offer.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
Your general partner (which is our subsidiary) 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
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<PAGE> 1117
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 and, although there are other ways to value real estate, is a
reasonably fair method to determine the consideration offered. Although we
believe our offer consideration represents the amount you would receive if we
currently liquidated your partnership, an actual liquidation might generate a
higher or lower price for holders of units. A liquidation in the future might
generate a higher or lower 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
Your general partner (which is our subsidiary) 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
sell your partnership's property or refinance its indebtedness within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, your general partner
(which is our subsidiary) has attempted to compare the cash offer consideration
against: (a) estimates of the value of the units on a liquidation basis; (b)
estimates of the going concern value of your units based on continuation of your
partnership as a stand-alone entity; and (c) the net book value of your units.
The general partner of your partnership believes that analyzing the alternatives
in terms of estimated value, 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 us. These assumptions relate to, among other things: the operating
results since December 31, 1997 as to income and expenses of each property,
other projected amounts and the capitalization rates that may be used by
prospective buyers if your partnership assets were to be liquidated. The 1998
budget is discussed in "Stanger Analysis -- Summary of Materials Considered" and
other projected amounts are discussed in "Stanger Analysis -- Summary of
Reviews."
In addition, these estimates are based upon certain information available
to your general partner (which is our subsidiary) 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. 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.
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Under your partnership's agreement of limited partnership, the term of the
partnership will continue until July 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.
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C>
Cash offer price............................................ $ 41,361
Partnership preferred units................................. $ 41,361(1)
Partnership common units.................................... $ 41,361(1)
Alternatives:
Estimated liquidation proceeds............................ $ 41,361
Estimated going concern value............................. $ 34,400(2)
Estimated alternative going concern value................. $ 38,836(3)
Net book value (deficit).................................. $(64,677)
</TABLE>
- ---------------
(1) In our discussion of the offer price as being fair with regard to other
methods of valuing your partnership, we believe the number of Common OP
Units and Preferred OP Units to be issued per unit in the offer to be equal
to the cash price per unit. Therefore, the fairness discussion applies
equally to the cash and non-cash forms of consideration being effected. See
"Valuation of Units" for details of how the number of OP Units was
determined.
(2) Assumes a refinancing of the partnership properties' indebtedness when
balloon payment is due.
(3) Assumes sale of the partnership properties when the mortgages are due,
rather than a refinancing of the mortgages.
Prices on Secondary Market
There is no active market for your units. Your general partner (which is
our subsidiary) is unaware of any secondary market activity in the units.
Therefore any comparison to prices on the secondary market is not possible at
the present time. See "Your Partnership -- Distributions and Transfers of
Units -- Transfers."
Prior Tender Offers
There have been no previous tender offers for units of your partnership.
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. Your general
partner (which is our subsidiary) 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
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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<PAGE> 1119
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.
Estimated Going Concern Value And Alternative Going Concern Value
Going concern value is a measure of the value of your partnership if it
continued operating as an independent stand-alone entity. The estimated value of
the partnership on a going concern basis is not intended to reflect the
distributions payable to limited partners if its assets were to be sold at their
current fair market value. The general partner of your partnership estimated the
going-concern value of your partnership by analyzing projected cash flows and
performing a discounted cash flow analysis. The general partner of your
partnership assumed that your partnership will be operated in the same manner as
currently, as an independent stand-alone entity, and its assets sold in a
liquidation after a ten-year holding period. Distribution and sale proceeds per
partnership unit were discounted in the projections at a rate of 30% reflecting
real estate risk and the relatively high leverage of approximately 75% of real
estate value.
The general partner of your partnership assumed that real estate selling
costs will be incurred which will equal 2.5% of the sales price. This analysis
assumes that the partnership property will be sold in a liquidation, at the
expiration of the ten-year holding period, to an independent third-party buyer.
Upon such liquidation, other balance sheet assets (excluding amortizing assets)
and liabilities of your partnership will be sold at their book value, and the
net proceeds of sale will be allocated between the general partners and offerees
in accordance with your partnership's agreement of limited partnership. Should
the assets be liquidated over time, even at prices equal to those projected,
distributions to limited partners of your partnership's cash flow from
operations might be reduced because relatively fixed costs, such as general and
administrative expenses, are not proportionately reduced with the liquidation of
assets. However, for simplification purposes, the sales are assumed to occur
concurrently.
The going concern method relies on a number of assumptions, including among
other things, (i) rental rates for new leases and lease renewals; (ii)
improvements needed to prepare an apartment for a new lease or a renewal lease;
(iii) lease periods; (iv) capital expenditures; (v) broker's commissions; and
(vi) discount rates applied to future cash flows. The use of assumptions or
variables that differ from those described above could produce substantially
different results. Neither we nor the general partner of your partnership
solicited any offers or inquiries from prospective buyers of the property owned
by your partnership in connection with the preparation of the estimates of value
of the properties and the actual amounts for which the partnership's properties
or the partnership could be sold could be significantly higher or lower than any
of the estimates contained herein. The estimated going concern value of your
partnership is $34,400 per unit, which value is below our offer price per unit.
Therefore, we believe the offer price is fair in relation to the going concern
value.
The general partner determined going concern value based upon the
discounted present value of projected cash flows from the partnership over a
ten-year period of operation, which is a standard period for going concern
analyses for real property assets. Such discounted cash flows were based upon
year one property income from the real estate portfolio of $1,125,547, escalated
at 3% per annum for the ten-year projection period. Property income was reduced
by: (i) partnership administrative expenses of $90,000 per annum; and (ii) debt
service on existing debt through maturity or the end of ten years, whichever
occurs first. For debt which matures during the ten-year period, a refinancing
at a 7% interest rate was assumed. At the end of the ten-year projection period,
the property was assumed to be sold at a price based upon property income for
the immediately following year, capitalized at a capitalization rate of 11.75%,
less expenses of sale estimated at 3% of the property value. The net cash flow
to limited partners from the continued operation of the property and the net
proceeds of sale were then discounted at a discount rate of 25% to achieve the
going concern value of $34,400 per unit.
Your partnerships property currently has a balloon payment due in November
2002. While the going concern value was based on your partnership refinancing
its indebtedness and continuing to own its property; the alternative going
concern value of $38,836 is based on selling the property when the balloon
payment is
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<PAGE> 1120
due and otherwise includes the same assumptions as the going concern value
described above. For the reason set forth above, we believe the offer
consideration is fair in relation to the alternative going concern value.
There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
Net Book Value
Net book value per unit is a deficit of $64,677 and therefore a comparison
with the offering price would not be meaningful in determining the fairness of
the offering price.
Stanger's Estimate of Net Asset Value, Going Concern Value and Liquidation
Value
In rendering its opinion set forth as Appendix A, Stanger did its own
independent estimate of your partnership's net asset value of $36,463 per unit,
going concern value of $28,558 per unit and liquidation value of $32,609 per
unit. For an explanation of how Stanger determined such values see "Stanger
Opinion -- Summary of Reviews -- Comparison of Offer Price To Liquidation Value,
Going Concern Value and Secondary Market Prices." An estimate of your
partnership's net asset value per unit is based on a hypothetical sale of your
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 a liquidation value, after provisions
in full for all of the other known liabilities of your partnership. The net
asset value does not take into account (i) timing considerations discussed under
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," and (ii) costs associated with
winding up of your partnership. Therefore, the AIMCO Operating Partnership
believes that the estimate of net asset value per unit does not necessarily
represent the fair market value of a unit or the amount the limited partner
reasonably could expect to receive if the partnership's property was sold and
the partnership was liquidated. For this above reason, the AIMCO Operating
Partnership considers net asset value estimates to be less meaningful in
determining the offer consideration than the analysis described above under
"Valuation of Units."
Stanger's estimates of net asset value, going concern value and liquidation
value per unit represents discounts to the offer price of $4,898, $12,803 and
$8,752. In light of these discounts and for all the reasons set forth above, the
AIMCO Operating Partnership believes the offer price is fair to the limited
partners. The AIMCO Operating Partnership believes that the best and most
commonly used method of determining the value of a partnership which only owns
an apartment is the capitalization of income approach set forth in "Valuation of
Units."
ALLOCATION OF CONSIDERATION
Your partnership's agreement of limited partnership provides that, in the
event of a liquidation, available proceeds are to be distributed 0% to the
general partner and 100% to the limited partners. Accordingly, in valuing your
units, we have assumed that 100% of the estimated liquidation proceeds are
distributed to holders of units. Since this allocation is in accordance with the
terms of the partnership agreement, we believe the allocation is fair. See
"Valuation of Units."
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<PAGE> 1121
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. Stanger has
advised us that the description of Stanger's analysis contained herein describes
the material portions of Stanger's review. 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 any losses, claims,
damages, liabilities or expenses to which Stanger may be subject, under any
applicable federal or state law, including federal and state securities laws,
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 NYSE 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 audited financial statements for the years ended December 31, 1996
and 1997, and its unaudited financial statements for the period ended September
30, 1998, which your partnership's management has indicated to be the most
current available financial statements at the time; (iii) reviewed descriptive
information concerning your partnership's real estate assets (the "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, 1997 and 1998; (v) reviewed
operating budgets for your partnership's property for 1998, as prepared by your
partnership; (vi) reviewed
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<PAGE> 1122
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 similar properties; (viii) reviewed internal financial analyses prepared by
your partnership of the estimated current net liquidation value and going
concern value of your partnership; (ix) reviewed information provided by AIMCO
concerning the AIMCO Operating Partnership, the Common OP Units and the
Preferred OP Units; and (x) conducted other studies, analysis and inquiries as
Stanger deemed appropriate.
A summary of the operating budgets per property for the year ended December
31, 1998, which was supplied by your partnership to Stanger, is as follows:
FISCAL 1998 OPERATING BUDGETS
<TABLE>
<CAPTION>
CHAPEL HILL CHAPELWOOD
MANAGEMENTS TOWNHOMES
----------- ----------
<S> <C> <C>
Total Revenues.............................................. $1,172,941 $1,316,592
Operating Expenses.......................................... (549,447) (605,898)
Replacement Reserves -- Net................................. (92,762) (88,915)
Debt Service................................................ (391,612) (405,779)
Capital Expenditures........................................ (133,200) (13,360)
---------- ----------
Net Cash Flow..................................... $ 5,920 $ 202,640
========== ==========
</TABLE>
The above budgets at the time they were made were forward-looking
information developed by the general partner of your partnership. Therefore, the
budgets were dependent upon future events with respect to the ability of your
partnership to meet such budget. The budgets incorporated various assumptions
including, but not limited to, lease revenue (including occupancy rates),
various operating expenses, general and administrative expenses, depreciation
expenses, capital expenditures, and working capital levels. While we deemed such
budgets to be reasonable and valid at the date made, there is no assurance that
the assumed facts will be validated or that the circumstances will actually
occur. Any estimate of the future performance of a business, such as your
partnership's business, is forward-looking and based on assumptions some of
which inevitably will prove to be incorrect.
The budget amounts provided above are figures that were not computed in
accordance with GAAP. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budget are often
re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budget
presented for fiscal 1998 should not necessarily be considered as indicative of
what the audited operating results for fiscal 1998 will be. For the year ended
December 31, 1998, the partnership expects to report revenues of $2,426,860,
operating expenses of $1,324,714 and replacement reserves and capital
expenditures of $446,624. Based on these estimates, the partnership's net cash
flow before debt service, which we believe provides a better indication of the
partnership's actual operating performance than net cash flow, was less than the
budgeted amounts.
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.
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<PAGE> 1123
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 the third quarter of 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 or
square footage; 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 nine month period ending
September 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 property.
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 property, 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 the
liquidation value calculation prepared by the management of your partnership.
Stanger observed that such liquidation value was based upon the gross property
valuation estimate prepared by management, which in turn is based upon fiscal
year 1997 property income capitalized at a capitalization rate of 11.25%.
Stanger further observed that the gross property valuation was adjusted for the
following additional items to achieve the liquidation value of your partnership:
(i) cash, other assets, mortgage indebtedness and other liabilities determined
as of December 31, 1997; (ii) estimated closing costs equal to approximately
2.5% of gross real estate value; and (iii) extraordinary capital expenditure
estimates in the amount of $167,985. Stanger observed that your partnership
liquidation value of $2,688,433 was divided by the total units outstanding of 65
to provide the liquidation value per unit of $41,361.
Review of Partnership Going Concern Analysis. Stanger reviewed the going
concern value calculation prepared by management of your partnership. Stanger
observed that such going concern value was based upon the discounted present
value of projected cash flows from the partnership over a ten-year period of
operation which is a standard period for going concern analysis for real
property assets. Such discounted cash flows were based upon year one property
income from the real estate portfolio of $1,125,547 escalated at 3% per annum
for the ten-year projection period. Property income was reduced by: (i)
partnership administrative expenses of $90,000 per annum; and (ii) debt service
on existing debt through maturity or the end of ten years, whichever occurs
first. For debt which matures during the ten-year period, a refinancing at a 7%
interest rate was assumed. At the end of the ten-year projection period, the
properties were assumed to be sold based upon: (i) property income for the
immediately following year capitalized at a capitalization rate of
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<PAGE> 1124
11.75%; and (ii) expenses of sale estimated at 3% of property value. Stanger
observed that the proceeds of sale were reduced by the estimated debt balance at
the end of the tenth year to provide net proceeds from the sale of your
partnership's property.
The resulting cash flows for the ten-year period were discounted to present
value at a discount rate of 30%. Stanger observed that such discount rate was
based upon the portfolio real estate discount rate of 13.8%, adjusted for
leverage risk and illiquidity risk. Stanger observed that the resulting
partnership going concern value was divided by units outstanding of 65 to
achieve management's estimate of going concern value of $34,400 per unit.
Review of Secondary Market Prices. Stanger maintains a database of
secondary market information on limited partnership units. Stanger observed for
its data that no units were reported traded in the secondary market during 1998.
Comparison of Offer Price to Liquidation Value, Going Concern Value and
Secondary Market Price. Stanger observed that the offer price of $41,361 per
unit is equal to management's estimate of liquidation value, and reflects a 20%
premium to management's estimate of going concern value. Stanger further
observed that investors may select cash, Common OP Units or Preferred OP Units
in exchange for their partnership units or they may elect to continue to hold
their partnership units. Stanger further observed that the Common OP Units will
be priced at $37.625 per unit, an amount which equals the average of the closing
prices common shares into which such Common OP Units are convertible for the
30-trading day period ended March 23, 1999. Furthermore, Stanger observed that
the Preferred OP Units to be issued in the transaction will be based upon the
liquidation preference of $25. Stanger noted that the Preferred OP Units are
redeemable for, at AIMCO's option, either: (i) $25 in cash per Preferred OP
Unit; (ii) common stock of AIMCO based upon a ten-day average price at the time
of the requested redemption; or (iii) commencing in the third year preferred
stock of AIMCO with a dividend equal to the dividend on the Preferred OP Units.
Stanger observed that the ten day price of the AIMCO common stock is $36.425, as
of March 23, 1999 and therefore an investor receiving AIMCO common shares in
redemption of the Preferred OP Units would receive 0.6863% shares with a value
approximating $25 for each $25 Preferred OP Unit redeemed, based upon AIMCO's
average common share price as of March 23, 1999.
Stanger noted that commencing in the third year, investors redeeming
Preferred OP Units may receive from AIMCO Preferred Stock with a dividend equal
to the distribution on the AIMCO Preferred OP Units. Stanger observed that the
distribution on the Preferred OP Units is set at 8% of $25 and that the average
dividend yield on AIMCO's outstanding C, D, G and H Preferred Shares
approximates 10.1% as of March 5, 1999. Stanger noted that, based upon the cash
dividend yield on the AIMCO Preferred Shares identified above as of March 23,
1999, investors would receive Preferred Shares with a value of approximately
$19.80 for each $25 Preferred OP Unit if such redemption occurred after the
second year following the closing of the transaction. Stanger further observed
that the above analysis does not take into consideration the present value of
the earnings on the tax deferral an investor may realize as the result of
selecting Preferred OP Units in lieu of cash in a taxable transaction.
In addition to the above analysis, Stanger prepared an independent estimate
of net asset value, going concern value and liquidation value per unit. Stanger
has advised AIMCO that Stanger's estimates of net asset value, liquidation value
and going concern value are based upon Stanger's independent estimate of
property income, direct capitalization rates of 10.5% to 10.75%, transaction
costs of 2.5% to 5.0%, growth rates of 3% and a terminal capitalization rate
ranging from 11.0% to 11.25%. Stanger has advised us that the direct
capitalization rate represents Stanger's estimate of the capitalization rate
applicable to its estimate of property income and is based upon Stanger's
independent estimate of the direct capitalization rate for such property based
upon such property's age, condition and location. Stanger further advised us
that the terminal capitalization rate is the capitalization rate utilized in
Stanger's going concern value estimate which is applied to Stanger's estimate of
property income in the eleventh year to establish the value of the property at
the end of the tenth year. Stanger has advised us that Stanger estimated the
terminal capitalization rate at a 50 basis point premium to the direct
capitalization rate estimate for the property. Stanger utilized deferred
maintenance estimates derived from the Adjusters International, Inc. reports in
the calculation of net asset
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<PAGE> 1125
value, liquidation value and going concern value. Stanger advised us that
Stanger adjusted the estimate of net asset value and liquidation value for the
cost of above market debt using a 7% interest rate. With respect to the going
concern value estimate prepared by Stanger, Stanger advised AIMCO that a
ten-year projection period and a discount rate of 30% was utilized. Such
discount rate reflects the risk associated with real estate, leverage and a
limited partnership investment. The 30% discount rate was based upon the
property's estimated internal rate of return derived from the discounted cash
flow analysis, (13.1% as described above), plus adjustments reflecting the
additional risk associated with mortgage debt equal to approximately 75% of
property value. Stanger's estimates were based in part upon information provided
by us. Stanger relied upon the deferred maintenance estimates, property
descriptions, unit configurations, allocation among partners, and other data
provided by us. Stanger's analyses were based on balance sheet data as of
September 30, 1998. Stanger's review also included a site visit, review of
rental rates and occupancy at the properties as well as competing properties.
Stanger's estimate of net asset value, going concern value and liquidation value
per unit were $36,362, $28,558 and $32,609 representing discounts to the offer
price of 12%, 31% and 21%. See "Fairness of the Offer -- Comparison of
Consideration to Alternative Consideration."
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. Stanger has rendered similar fairness opinions with regard to certain
other exchange offers being made by the AIMCO Operating Partnership. Stanger
rendered the opinions only as to the individual fairness of the offer
consideration in each proposed exchange offer. The Fairness Opinion does not
address the fairness of all possible acquisitions of interests in your
partnership. In addition, the Fairness Opinion will not be revised to reflect
the actual participation in the offer.
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 your general partner (which is our subsidiary) and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's property, and the transaction costs and fees associated with a
sale of the property. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's property 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 property 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 property 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 property 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
S-46
<PAGE> 1126
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, nor did Stanger
address the fairness of all possible acquisitions of interests in the
partnership. The opinion will not be revised to reflect the actual results of
the offer. 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 or oral 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 $12,000 with
respect to your partnership. The estimated aggregate fee payable to Stanger in
connection with all affiliated partnerships is estimated at $1,510,000, plus
out-of-pocket expenses estimated at $61,000. 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 was
engaged by AIMCO during 1997 to represent AIMCO in negotiations to acquire
interests in a real estate limited partnership. Such transaction was never
consummated and no fee was ever paid to Stanger in connection with such proposed
transaction. AIMCO and its affiliates may retain the services of Stanger in the
future. Any such future services could relate to this offer, some or all of the
concurrent offers, or a completely separate transaction.
S-47
<PAGE> 1127
YOUR PARTNERSHIP
GENERAL
Chapel Hill, Limited, is a Tennessee limited partnership which completed a
private placement of units in 1984. Each unit was initially sold at a price of
$75,200. Insignia acquired the general partner of your partnership in December
1991. AIMCO acquired Insignia in October 1998. There are currently a total of 74
limited partners of your partnership and a total of 65 units of your partnership
outstanding. Your partnership is in the business of owning and managing
residential housing. Currently, your partnership owns and manages the properties
described below. Your partnership has no employees. 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.
YOUR PARTNERSHIP AND ITS PROPERTY
Your partnership was formed on April 20, 1984 for the purpose of owning an
apartment properties located in Indianapolis, Indiana, known as "Chapel Hill
Apartments," and "Chapelwood Apartments." Chapel Hill Apartments is owned by the
partnership but is subject to a mortgage. Chapel Hill Apartments consists of 148
apartment units. There are 28 one-bedroom apartments, 80 two-bedroom apartments
and 40 three-bedroom apartments. Chapel Hill Apartments property had an average
occupancy rate of approximately 93.03% in 1998, 95.27% in 1997 and 95.27% in
1996. Chapelwood Apartments is owned by the partnership but is subject to a
mortgage. Chapelwood Apartments consists of 140 apartment units. There are 24
one-bedroom apartments, 32 two-bedroom apartments and 68 three-bedroom
apartments. Chapelwood Apartments had an average occupancy rate of approximately
91.36% in 1998, 90.71% in 1997 and 90.71% in 1996.
Your partnership's properties provides residents with a number of amenities
and services, such as 24-hour desk service, exercise room and/or sauna, and
party or meeting rooms. Nearly all apartment units are wired for cable
television, and many apartment units also offer one or more additional features,
such as washer/ dryer, microwave, fireplace, and patio/balcony.
Budgeted renovations or improvements for 1999 total $167,985 and are
intended to be paid for out of cash flow or borrowings. Renovation items include
drives and parking lot, exterior lighting, and landscaping and irrigation.
Set forth below are the average rents for the apartments for the last five
years:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
$654 $621 $628 $604 $600
</TABLE>
The apartments are being depreciated for federal income tax purposes using
the accelerated cost recovery method. Depreciation is computed principally by
the straight-line and accelerated methods over estimated lives of 3 to 40 years.
Currently, the real estate taxes on the property are as follows:
<TABLE>
<CAPTION>
1998
1998 TOTAL TAX
REAL ESTATE 1998 ASSESSED AVERAGE 1999 PROJECTED
TAXES PROPERTY VALUE TAX RATE TAX RATE
----------- -------------- -------- --------------
<S> <C> <C> <C> <C>
Chapel Hill................................... 112,793 1,270,200 8.88% 9.32%
Chapelwood.................................... 133,948 1,508,440 8.88% 9.32%
</TABLE>
PROPERTY MANAGEMENT
Your partnership's properties are managed by an entity which is a wholly
owned subsidiary of AIMCO. Pursuant to the management agreement between the
property manager and your partnership, the property manager operates your
partnership's properties, establishes rental policies and rates and directs
marketing
S-48
<PAGE> 1128
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.
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS
Under your partnership's agreement of limited partnership, your partnership
is not permitted to raise new equity and reinvest cash in new properties.
Consequently, your partnership is limited in its ability to expand its
investment portfolio. Your partnership will terminate on July 1, 2015 unless
earlier dissolved. Your partnership has no present intention to liquidate, sell,
finance or refinance your partnership's property within any specified time
period.
Generally, your partnership is authorized to acquire, develop, improve, own
and operate your partnership's property as an investment and for income
producing purposes. The investment portfolio of your partnership is limited to
the assets acquired with the initial equity raised through the sale of units to
the limited partners of your partnership or the assets initially contributed to
your partnership by the limited partners, as well as the debt financing obtained
by your partnership within the established borrowing restrictions.
In general, your general partner (which is our subsidiary) 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 the properties specific locale and
sub-market conditions (including stability of the surrounding neighborhood)
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 (including any prepayment penalties), tax
implications, availability of attractive mortgage financing to a purchaser, 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. If rental market conditions improve, 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 properties in a private transaction at some point in the future a
more viable option than it is currently. After taking into account the foregoing
considerations, your general partner is not currently seeking a sale of your
partnership's properties primarily because it expects the propertys' operating
performance to remain strong in the near term. In making this assessment, your
general partner noted that occupancy at Chapel Hill was 93% and Chapelwood was
91% and the weighted average rental rate was $660 at December 31, 1998, compared
to 91% and $654, respectively, at December 31, 1997. Although there can be no
assurance as to future performance, the general partner expects occupancy to
remain strong in the near future. In addition, the general partner noted that it
expects to spend approximately $167,985 for capital expenditures and
improvements at the property in 1999 to enhance the properties through
renovations at the pool area, improvements at the entrances, and upgrades in
landscaping. These expenditures are expected to improve the desirability of the
properties to tenants. The general partner does not believe that a sale either
of the properties at the present time would adequately reflect either of the
property's future prospects. Another significant factor considered by your
general partner is the likely tax consequences of a sale of the properties for
cash. Such a transaction would likely result in tax liabilities for many limited
partners. The general partner has not received any recent indication of interest
or offer to purchase either of the property.
CAPITAL REPLACEMENT
Your partnership has an ongoing program of capital improvements,
replacements and renovations, including roof replacements, kitchen and bath
renovations, balcony repairs (where applicable), replacement of various building
systems and other replacements and renovations in the ordinary course of
business. All capital improvement and renovation costs are expected to be paid
from operating cash flows, cash reserves, or from short-term or long-term
borrowings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Your Partnership."
S-49
<PAGE> 1129
BORROWING POLICIES
Your partnership's agreement of limited partnership allows your partnership
to incur debt. As of December 31, 1998, Chapel Hill Apartments had a current
mortgage note outstanding of $3,453,201, payable to Marine Midland Bank, Bank of
America and FMHA, which bears interest at a rate of 7.60%. The mortgage debt is
due on November 2002. Chapel Hill Apartments also has a second mortgage note
outstanding of $124,785, on the same terms as the current mortgage note. As of
December 31, 1998, Chapelwood Apartments had a current mortgage note outstanding
of $3,578,121, payable to Marine Midland Bank, Bank of America and FMHA, which
bears interest at a rate of 7.60%. The mortgage debt is due on November 2002.
Chapelwood Apartments also has a second mortgage note outstanding of $129,300,
on the same terms as the current mortgage note. Your partnership's agreement of
limited partnership also allows the general partner of your partnership to lend
funds to your partnership. As of December 31, 1998, your general partner had no
outstanding loans to your partnership.
COMPETITION
There are other residential properties within the market area of your
partnership's property. The number and quality of competitive properties in such
an area could have a material effect on the rental market for the apartments at
your partnership's property and the rents that may be charged for such
apartments. While we are a significant factor in the United States in the
apartment industry, competition for apartments is local.
LEGAL PROCEEDINGS
Your partnership is party to a variety of legal proceedings related to its
ownership of the partnership's property and management and leasing business,
respectively, arising in the ordinary course of the business, which are not
expected to have a material adverse effect on your partnership.
HISTORY OF THE PARTNERSHIP
Your partnership sold $4,888,000 of limited partnership units in 1984 for
$75,200 per unit. Your partnership currently owns two apartment properties.
Your partnership used the funds raised to purchase its properties and it
has expended the funds so raised many years ago. Your partnership currently owns
the properties described herein, which is subject to a substantial mortgage.
Your general partner (which is our subsidiary) has not experienced any material
adverse financial developments from January 1, 1997 through the present.
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2019, 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.
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, responsible or accountable, in damages or
otherwise to your partnership or any limited partner for any acts performed by
any of them which are reasonably believed by them to be within the scope of the
authority conferred on them by your partnership's agreement of limited
partnership, excepting only acts of malfeasance, gross negligence or actual
misrepresentation. 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 owned by AIMCO. See "Conflicts of Interest."
The general partner and its affiliates are entitled to indemnification by
your partnership for any and all acts performed by them in the good faith belief
that the act or omission was in the best interests of your
S-50
<PAGE> 1130
partnership and which are reasonably within the scope of the authority conferred
upon them by your partnership's agreement of limited partnership or by your
partnership, excepting only acts of malfeasance, gross negligence or actual
misrepresentation; provided, however, that such indemnity will be paid out of
and only to the extent of partnership assets. As part of its assumption of
liabilities in the consolidation, AIMCO will indemnify the general partner of
your partnership and their affiliates for periods prior to and following the
consolidation to the extent of the indemnity under the terms of your
partnership's agreement of limited partnership and applicable law.
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 partners of your partnership.
DISTRIBUTIONS AND TRANSFERS OF UNITS
Distributions
The following table shows, for each of the years indicated the
distributions paid per unit in such years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 AMOUNT
---------------------- -------
<S> <C>
1993........................................................ $ 0
1994........................................................ 0
1995........................................................ 31.48
1996........................................................ 37.96
1997........................................................ 48.78
1998........................................................ 0
-------
Total............................................. 118.22
=======
</TABLE>
Transfers
The units are not listed on any national securities exchange or quoted on
the NASDAQ System, the Electronic Bulletin Board or the "pink sheets," and there
is no established public trading market for the units. Secondary sales activity
for the units has been limited and sporadic. The general partner of your
partnership monitors transfers of the units (a) because the admission of the
transferee as a substitute limited partner in your partnership require the
consent of the general partner of your partnership under your partnership's
agreement of limited partnership, and (b) in order to track compliance with safe
harbor provisions to avoid treatment as a "publicly traded partnership" for tax
purposes. However, the general partner of your partnership does not monitor or
regularly receive or maintain information regarding the prices at which
secondary sale transactions in the units have been effectuated. The general
partner of your partnership estimates, based solely on the transfer records of
your partnership (or your partnership's transfer agent), that the number of
units transferred in privately negotiated transactions or in transactions
believed to be between related parties, family members or the same beneficial
owner was as follows:
<TABLE>
<CAPTION>
NUMBER OF UNITS PERCENTAGE OF TOTAL UNITS NUMBER OF
YEAR TRANSFERRED OUTSTANDING TRANSACTIONS
- ---- --------------- ------------------------- ------------
<S> <C> <C> <C>
1994......................... 0 0 0
1995......................... 0 0 0
1996......................... 0 0 0
1997......................... 1 1.86% 1
1998......................... 1 1.86% 1
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate, approximately
a 6.81% interest in your partnership, including 5.0 units held by us and the
interest held by us, 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
two years, or (iii) have any contract, arrangement, understanding or
relationship with
S-51
<PAGE> 1131
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 following table shows, for each of the years indicated, compensation
paid to your general partner and its affiliates on a historical basis, and on a
pro forma basis assuming that all of the units sought in our offer had been
acquired at the beginning of each period:
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------------------------ ------------------------------------------
PARTNERSHIP PROPERTY PARTNERSHIP PROPERTY
FEES AND MANAGEMENT FEES AND MANAGEMENT
YEAR EXPENSES FEES DISTRIBUTIONS EXPENSES FEES DISTRIBUTIONS
---- ----------- ------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1994................... $ 78,527 Not available $ 0 $ 78,527 Not available $ 0
1995................... 107,445 Not available 77.12 107,445 Not available 501.25
1996................... 81,048 116,896 93.03 81,048 116,896 604.75
1997................... 84,896 119,469 119.54 84,896 119,469 777.00
1998................... 39,808 123,191 0 39,808 123,191 0
</TABLE>
S-52
<PAGE> 1132
SELECTED FINANCIAL INFORMATION
OF YOUR PARTNERSHIP
<TABLE>
<CAPTION>
CHAPEL HILL, LIMITED
-----------------------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
--------------------------- -----------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and Cash
Equivalents........... $ 251,165 $ 291,041 $ 292,551 $ 224,194 $ 209,734 $ 348,683 $ 239,621
Land & Building......... 10,048,755 9,826,375 9,888,448 9,696,579 9,533,433 9,277,337 9,292,270
Accumulated
Depreciation.......... (5,770,901) (5,301,632) (5,419,593) (4,949,044) (4,494,584) (4,077,134) (3,743,796)
Other Assets............ 795,000 613,792 558,370 539,898 534,665 592,941 643,068
------------ ------------ ------------ ------------ ------------ ------------ -----------
Total Assets.... 5,174,099 5,429,576 5,319,976 5,511,627 5,783,248 6,141,827 6,431,163
============ ============ ============ ============ ============ ============ ===========
Notes Payable........... 7,085,956 7,246,151 7,208,979 7,356,494 7,502,438 7,636,184 7,758,752
Other Liabilities....... 323,832 176,281 118,184 132,399 155,817 135,493 171,531
------------ ------------ ------------ ------------ ------------ ------------ -----------
Total
Liabilities... 7,409,788 7,422,432 7,327,163 7,488,893 7,658,255 7,771,677 7,930,283
------------ ------------ ------------ ------------ ------------ ------------ -----------
Partners Deficit........ (2,285,689) (1,992,856) (2,007,187) (1,977,266) (1,875,007) (1,629,850) (1,499,120)
============ ============ ============ ============ ============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
CHAPEL HILL, LIMITED
----------------------------------------------------------------------------------------
FOR THE NINE MONTHS
ENDED FOR THE YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Revenue................. $1,731,680 $1,663,682 $2,261,007 $2,147,082 $2,170,553 $2,086,094 $2,074,155
Other Income................... 111,291 114,940 154,681 148,711 155,662 151,605 65,238
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Revenue.......... 1,842,971 1,778,622 2,415,688 2,295,793 2,326,215 2,237,699 2,139,393
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating Expenses............. 1,031,659 736,166 1,052,313 960,268 1,139,355 942,290 893,395
General & Administrative....... 75,227 62,583 86,403 91,477 89,073 116,713 71,129
Depreciation................... 351,308 352,588 470,549 454,430 417,450 391,566 361,236
Interest Expense............... 494,764 507,445 674,526 675,042 688,361 674,266 685,064
Property Taxes................. 168,515 135,430 158,647 214,367 235,067 243,594 228,042
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Expenses......... 2,121,473 1,794,212 2,442,438 2,395,384 2,569,326 2,368,429 2,239,070
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income (loss) before
extraordinary items.......... (278,502) (15,590) (26,750) (99,791) (243,111) (130,730) (99,677)
Extraordinary Items............ -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income (loss).............. (278,502) (15,590) (26,750) (99,791) (243,111) (130,730) (99,677)
========== ========== ========== ========== ========== ========== ==========
Net Income per limited
partnership unit............. (4,242) (237) (407) (1,520) (3,703) (1,991) (1,518)
========== ========== ========== ========== ========== ========== ==========
Distributions per limited
partnership unit............. -- -- 48 38 31 -- --
========== ========== ========== ========== ========== ========== ==========
</TABLE>
S-53
<PAGE> 1133
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP
Comparison of the Nine Months Ended September 30, 1998 to the Nine Months
Ended September 30, 1997
NET INCOME
Your partnership recognized a net loss of $278,502 for the nine months
ended September 30, 1998, compared to a net loss of $15,590 for the nine months
ended September 30, 1997. The decrease in net income of $262,912 was primarily
the result of an increase in operating expenses during 1998. These factors are
discussed in more detail in the following paragraphs.
REVENUES
Rental and other property revenues from the partnership's property totaled
$1,842,971 for the nine months ended September 30, 1998, compared to $1,778,622
for the nine months ended September 30, 1997, an increase of $64,349 or 3.62%.
The partnership increased rental rates by an average of 3.9% during the period.
This increase is offset by a decrease in other income of $3,649 due to fewer
lease cancellation and pet fees.
EXPENSES
Operating expenses, consisting of, utilities (net of reimbursements
received from tenants), contract services, turnover costs, repairs and
maintenance, advertising and marketing, property taxes and insurance, totaled
$1,200,174 for the nine months ended September 30, 1998, compared to $871,596
for the nine months ended September 30, 1997, an increase of $328,578 or 37.70%.
The increase is primarily due to an increase in accrued expenses for the interim
period and an increase in repairs and maintenance at both properties. Management
expenses totaled $38,640 for the nine months ended September 30, 1998, compared
to $41,012 for the nine months ended September 30, 1997, a decrease of $2,372 or
6.14% as management fees are calculated as a percentage of revenue.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $62,583 for the nine months
ended September 30, 1998 compared to $75,227 for the nine months ended September
30, 1997, a decrease of $12,644 or 16.81%.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $494,764 for the nine months ended September 30, 1998, compared
to $507,445 for the nine months ended September 30, 1997, for a decrease of
$12,681, or 2.50%. This decrease is due to a lower outstanding balance on the
mortgage indebtedness due to principal payments made during the period.
As part of the ongoing business plan of your partnership, the general
partner monitors the rental market environment of your partnership's investment
property to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting your partnership from increases in
expenses. As part of this plan, the general partner attempts to protect your
partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the general partner will be able to sustain such a plan.
S-54
<PAGE> 1134
Comparison of the Year Ended December 31, 1997 to the Year Ended December 31,
1996
NET INCOME
Your partnership recognized a net loss of $26,750 for the year ended
December 31, 1997, compared to a net loss of $99,791 for the year ended December
31, 1996. The increase in net income of $73,041, or 73.20% was primarily the
result of an increase in rental revenues and a decrease in property taxes offset
by an increase in other operating expenses. These factors are discussed in more
detail in the following paragraphs.
REVENUES
Rental and other property revenues from the partnership's property totaled
$2,415,688 for the year ended December 31, 1997, compared to $2,295,793 for the
year December 31, 1996, an increase of $119,895, or 5.22%. The increase is
primarily due to increases in the average occupancy levels and the rental rates
at both properties. The partnership increased rental rates by 1.7% and occupancy
increased by .5% to 91.8%. Other income also increased 4% due to increased
income from legal suits to collect outstanding rent.
EXPENSES
Operating expenses, consisting of, utilities (net of reimbursements
received from tenants), contract services, turnover costs, repairs and
maintenance, advertising and marketing, property taxes and insurance, totaled
$1,210,960 for the year ended December 31, 1997, compared to $1,174,635 for the
year ended December 31, 1996, an increase of $36,325 or 3.09%. The increase is
due to increases in periodical and newspaper advertising to help increase
occupancy rates and personnel expenses. Management expenses totaled $119,469 for
the year ended December 31, 1997, compared to $116,896 for the year ended
December 31, 1996, an increase of $2,573, or 2.20%, as management fees are
calculated as a percentage of revenue.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $86,403 for the year ended
December 31, 1997 compared to $91,477 for the year ended December 31, 1996, a
decrease of $5,074 or 5.55%.
General and administrative expenses remained relatively constant throughout
comparable periods.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $674,526 for the year ended December 31, 1997, compared to
$675,042 for the year ended December 31, 1996, a decrease of $516 or 0.08%. This
decrease is due to a lower outstanding balance on the mortgage indebtedness due
to principal payments during the period.
Comparison of the Year Ended December 31, 1996 to the Year Ended December 31,
1995
NET INCOME
Your partnership recognized net loss of $99,791 for the year ended December
31, 1996, compared to net loss of $243,111 for the year ended December 31, 1995.
The increase in net income of $143,320 or 58.95% was primarily the result of a
decrease in operating expenses. These factors are discussed in more detail in
the following paragraphs.
REVENUES
Rental and other property revenues from the partnership's property totaled
$2,295,793 for the year ended December 31, 1996, compared to $2,326,215 for the
year ended December 31, 1995, a decrease of $30,422, or 1.31%.
S-55
<PAGE> 1135
EXPENSES
Operating expenses, consisting of, utilities (net of reimbursements
received from tenants), contract services, turnover costs, repairs and
maintenance, advertising and marketing, property taxes and insurance, totaled
$1,174,635 for the year ended December 31, 1996, compared to $1,374,422 for the
year ended December 31, 1995, a decrease of $199,787 or 15.72%. The decrease is
primarily due to a decrease in maintenance expense as an exterior painting
project was completed at one of the properties in 1995.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $91,477 for the year ended
December 31, 1996 compared to $89,073 for the year ended December 31, 1995, an
increase of $2,404 or 2.70%.
General and administrative expenses remained relatively constant throughout
comparable periods.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $675,042 for the year ended December 31, 1996, compared to
$688,381 for the year ended December 31, 1995, a decrease of $13,339, or 1.94%.
The decrease is due to a lower outstanding balance on the mortgage indebtedness
due to principal payments made during 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, your Partnership had $251,165 in cash and cash
equivalents. Your Partnership's principal demands for liquidity include normal
operating activities, payments of principal and interest on outstanding debt,
capital improvements, and distributions paid to limited partners. At September
30, 1998, the outstanding balance on the mortgage indebtedness, excluding
discount of $310,384 was $7,085,956. The mortgages require monthly payments of
approximately $66,449 until November 2002. The notes are collateralized by
pledge of land and buildings and have a stated interest rate of 7.60%. Cash used
in investing activities consisted of capital improvements and deposits to escrow
accounts maintained by the mortgage lender. Cash used in financing activities
consisted of payments of principal made on the mortgages encumbering your
partnership's properties and partner distributions.
There are no commitments for material capital expenditures as of September
1998. The sufficiency of existing liquid assets to meet future liquidity and
capital expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and meet other operating needs of the partnership. Such assets are currently
thought to be sufficient for any near-term needs of the partnership. Management
believes that your partnership has adequate sources of cash to finance its
operations, both on a short-term and long-term basis. Budgeted renovations or
improvements for 1999 total $167,985 and are intended to be paid for out of cash
flow or borrowings. Renovation items include drives and parking lot, exterior
lighting, and landscaping and irrigation.
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THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to 21% of the outstanding 65 units of your
partnership (up to 13.65 units) for consideration per unit of (i) 1,654.50
Preferred OP Units, (ii) 1,099.25 Common OP Units, or (iii) $41,361 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 the commencement of our offer 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., New York City time, on June 4, 1999, 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 January 1, 1999 (subject to proration
as described below),although you will be entitled to retain any distribution you
may have received after such date and prior to our commencement of this offer.
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 March 26, 1999.
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
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offer consideration shall be reduced by any interim distributions made by your
partnership between the commencement 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. However, any tendered units may be
withdrawn at any time prior to our accepting them for payment. The AIMCO
Operating Partnership has an 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.
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.
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.
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.
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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 pays for your units.
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 your
general partner (which is our subsidiary) (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.
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
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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 may
have to provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal.
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 "Federal Income Tax Consequences."
Transfer Taxes
The amount of any transfer taxes (whether imposed on the registered holder
of units or any person) payable on account of the transfer to such person will
be deducted from the purchase price unless satisfactory evidence of the such
taxes or exemption therefrom is submitted.
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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 our acceptance of such units for payment.
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.
The offer may be extended or delayed indefinitely and no payment will be
made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment. 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 pay for units pursuant to the offer for
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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 21% 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 21% 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 21% 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 21%, 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 the general partner of your partnership and thereby
controls the management of your partnership. In
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addition, AIMCO owns 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.
However, the AIMCO Operating Partnership and its affiliates will not acquire any
additional units for a period of at least one year after expiration of the
offer. 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. In addition, we are not extending
appraisal rights in connection with the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
No provisions have been made with regard to the offer to allow you or other
limited partners to inspect the books and records of your partnership or to
obtain counsel or appraisal services at our expense or at the expense of your
partnership. However, as described under "Comparison of Your Partnership and the
AIMCO Operating Partnership -- Review of Investor Lists," you have the right
under your partnership's agreement of limited partnership to obtain a list of
the limited partners.
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
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after the date of this Prospectus Supplement and at or before the expiration
date of the offer, including any extension thereof, 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 reasonable 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 which, in the reasonable 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 the date hereof, (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
the date hereof, (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 reasonable 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 reasonable judgment of the
AIMCO Operating Partnership, a material acceleration or worsening thereof
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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 your
general partner (which is our subsidiary) 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
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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 reasonable 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 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 reasonable 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
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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;
or
(h) the offer to purchase may have an adverse effect on AIMCO's status
as a REIT.
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
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in its reasonable 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 or may
control such voting decisions. However, we will not be able to control voting
decisions unless we acquire more units in another transaction, which cannot take
place for at least one year after expiration of this offer. 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 controls the company that
manages your partnership's property. In the event that the AIMCO Operating
Partnership acquires a substantial number of units pursuant to the offer,
removal of the property manager may become more difficult or impossible.
Effect on Trading Market
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.
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. Consummation of
the offer will not affect your partnership's agreement of limited partnership,
the financial condition or results of operations of your partnership, the
business and properties owned, the management compensation payable to your
general partner (which is our subsidiary) or its affiliates or any other matter
relating to your partnership, except it would result in the AIMCO Operating
Partnership substantially increasing its ownership of units of your partnership.
We will receive future distributions from your partnership for any units we
purchase.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by your general partner (which
is our subsidiary), 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
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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 (excluding 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
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the amended complaint. The demurrers (which are requests to dismiss the action
as a matter of law) were heard on February 8, 1999, but no decision has been
reached by the Court. While no assurances can be given, we believe that the
ultimate outcome of this litigation will not have a material adverse effect on
us.
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, the accompanying Prospectus, the Letter of Transmittal,
and the legal and accounting fees in connection with this offer. 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 $50,000.
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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FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of the material Federal
income tax consequences of the offer 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
differing interpretations or change, possibly retroactively. This 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 you in light of your specific investment or tax
circumstances, or if you are subject to special tax rules (for example, if you
are a financial institution, broker-dealer, insurance company, or, except to the
extent discussed below, tax-exempt organization or foreign investor, 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 are 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. No clear precedent or authority
may be available on some questions. 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 of your specific tax situation.
TAX OPINIONS
Skadden, Arps, Slate, Meagher & Flom LLP ("Special Tax Counsel") has
delivered an opinion letter with regard to the material United States Federal
income tax consequences of the offer. The opinion letter of Special Tax Counsel
is filed as an exhibit to this Registration Statement. You may obtain a copy of
such opinion letter by sending a written request to the AIMCO Operating
Partnership.
The specific United States Federal income tax opinions that Special Tax
Counsel has provided are:
1. Commencing with AIMCO's initial taxable year ended December 31, 1994,
AIMCO was organized in conformity with the requirements for qualification
as a REIT under the Code, and its actual method of operation has enabled,
and its proposed method of operation will enable, AIMCO to meet the
requirements for qualification and taxation as a REIT. As noted in the
accompanying Prospectus, AIMCO's qualification and taxation as a REIT
depend upon its ability to meet, through actual annual operating results,
certain requirements, including requirements relating to distribution
levels and diversity of stock ownership, and the various qualification
tests imposed under the Code, the results of which have been represented by
the AIMCO's officers and will not be reviewed by Special Tax Counsel. No
assurance can be given that the actual results of AIMCO's future operations
for any one taxable year will satisfy the requirements for taxation as a
REIT under the Code.
2. The AIMCO Operating Partnership will be treated as a partnership and
not as an association taxable as a corporation for Federal income tax
purposes.
3. You will not recognize gain or loss for Federal income tax purposes
when you exchange your units solely for OP Units. If, immediately prior to
such exchange, the amount of your partnership's liabilities allocable to
the units you transfer to the AIMCO Operating Partnership exceeds the
amount of the AIMCO Operating Partnership's liabilities allocable to you
immediately after the exchange, you will receive a deemed distribution in
an amount equal to such liability relief and will recognize gain for
Federal income tax purposes to the extent that the amount of such deemed
distribution exceeds your aggregate adjusted tax basis in your OP Units.
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4. If you exchange your units for cash and OP Units, you will be treated
for Federal income tax purposes as selling some of your units for cash in a
taxable sale and contributing some of your units for OP Units in a tax-free
exchange. With respect to the units that you will be treated as selling for
cash, you will be taxed as described in paragraph number five below. With
respect to the units that you will be treated as exchanging for OP Units,
you will be taxed as described in paragraph number three above.
5. If you sell your units solely for cash, you will recognize gain or
loss for Federal income tax purposes in an amount equal to the difference
between (i) your amount realized on the sale and (ii) your adjusted tax
basis in the units you sold.
6. If you retain all or a portion of your units and your partnership
terminates for Federal income tax purposes, you will not recognize any gain
or loss as a result of such termination and your capital account in your
partnership will not be affected.
7. Because of the factual nature of the inquiry, no opinion is expressed
by Special Tax Counsel as to whether your exercise of a redemption right
with respect to an OP Unit would cause your contribution of units to the
AIMCO Operating Partnership to be a taxable transaction under the disguised
sale rules of the Code.
8. The discussion in the accompanying Prospectus under the captions
"FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS" and "FEDERAL
INCOME TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNIT HOLDERS" and
in this Prospectus Supplement under the caption "FEDERAL INCOME TAX
CONSEQUENCES" is a fair and accurate summary of the material United States
Federal income tax consequences of the offers and of the acquisition,
ownership and disposition of the OP Units and the AIMCO stock by a holder
who acquires the OP Units or AIMCO stock in connection with the offers,
subject to the qualifications set forth therein.
It must be emphasized that these opinions are based and conditioned upon
representations and covenants made by AIMCO and the AIMCO Operating Partnership
as to factual matters (including representations and covenants concerning
AIMCO's properties and the past, present and future conduct of its business and
your partnership's liabilities). These opinions are expressed as of the date of
the opinion letter and Special Tax Counsel has no obligation to advise AIMCO or
the AIMCO Operating Partnership of any subsequent change in the matters stated,
represented, or assumed or any subsequent change in the law. An opinion of
counsel is not binding on the IRS, and no assurance can be given that the IRS
will not challenge the above opinions of Special Tax Counsel.
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 when you exchange your units solely for OP Units. You may
recognize gain upon such exchange if, immediately prior to such exchange, the
amount of liabilities of your partnership allocable to the units you transferred
exceeds the amount of the AIMCO Operating Partnership liabilities allocable to
you immediately after such exchange. If this was true in your case, the excess
would be treated as a deemed distribution of cash to you from the AIMCO
Operating Partnership. This deemed cash distribution would be treated as a
nontaxable return of capital to the extent of your adjusted tax basis in your OP
Units 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 you exchange your units pursuant to the offer,
at least equal to the amount of liabilities of your partnership that were
allocable to your units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most persons who participate in the tender offer
would not recognize gain or loss as a result of an exchange of units solely for
OP Units pursuant to the offer.
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DISGUISED SALES
Under the Code, a transfer of property by a partner to a partnership
followed by a related transfer by the partnership of money or other property to
the partner is treated as a "disguised" sale if (1) the second transfer would
not have occurred but for the first transfer and (2) the second transfer "is not
dependent on the entrepreneurial risks of the partnership operations." In a
disguised sale, the partner is treated as if he or she sold the contributed
property to the partnership as of the date the property was contributed to the
partnership. In addition, unless a few technical exceptions apply, transfers of
money or other property between a partnership and a partner that are made within
two years of each other, including redemptions of OP Units made within two years
of a contribution of your units, must be reported to the IRS and are presumed to
be a "disguised" sale unless the facts and circumstances clearly establish that
the transfers do not constitute a sale.
While there is no authority applying the disguised sale rules to the
exercise of a redemption right by a partner with respect to a partnership
interest received in exchange for property, the exercise of a redemption right
with respect to OP Units within two years of the date of the contribution of
your units to the AIMCO Operating Partnership may be treated as a disguised
sale. If this treatment were to apply, you would be treated for Federal income
tax purposes as if, on the date of the contribution of your units, the AIMCO
Operating Partnership transferred to you an obligation to give you the
redemption proceeds. In that case, you would be required to recognize gain on
the disguised sale in such earlier year. Because of the factual nature of such
an inquiry, Special Tax Counsel is unable to opine whether your exercise of a
redemption right with respect to an OP Unit would cause your contribution of
units to the AIMCO Operating Partnership to be a taxable transaction under the
disguised sale rules of the Code.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Federal Income Taxation of the
AIMCO Operating Partnership and OP Unitholders -- 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
If you exchange your units for cash and OP Units, you will be treated as
selling some of your units for cash in a taxable sale and contributing some of
your units for OP Units in a tax-free exchange. Your adjusted tax basis in your
transferred units will be allocated between the units you will be deemed to have
sold and the units you will be deemed to have contributed to the AIMCO Operating
Partnership.
With respect to the units that you will be treated as selling, you will
recognize gain or loss in an amount equal to the difference between (i) your
"amount realized" on the sale and (ii) your adjusted tax basis in units you
sold. Your "amount realized" on such sale will be equal to the sum of the amount
of cash you received pursuant to the offer (that is, the offer consideration)
plus the amount of your partnership's liabilities attributed to the units you
sold. For purposes of these partial sale rules, the amount of your partnership's
liabilities attributed to the units you sold will be equal to the lesser of (i)
the excess of the amount of your partnership's liabilities allocable to you in
respect of the transferred units immediately prior to the exchange over the
amount of such liabilities allocable to you as determined immediately after the
exchange or (ii) the product of (A) the amount of your partnership's liabilities
allocable to you in respect of the units you are deemed to have sold immediately
prior to the exchange and (B) your "net equity percentage" with respect to those
units. Your "net equity percentage" will be equal to the percentage determined
by dividing (x) the cash you received in the exchange by (y) the excess of the
gross fair market value of the units in the exchange over the amount of your
partnership's liabilities allocable to you in respect of those units immediately
prior to the exchange. Thus, your tax liability could exceed the amount of cash
you receive in the sale.
With respect to the units that you will be treated as exchanging, rather
than selling, you will be taxed as described above under the heading "Tax
Consequences of Exchanging Units Solely for OP Units."
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TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
If you sell your units solely for cash, you will recognize gain or loss on
a sale of your units equal to the difference between (i) your "amount realized"
on the sale and (ii) your adjusted tax basis in the units you sold. The "amount
realized" with respect to a unit will be equal to the sum of the amount of cash
you received for your units (that is, the offer consideration) plus the amount
of the liabilities of your partnership allocable to such units (as determined
under Section 752 of the Code). Thus, your tax liability could exceed the amount
of cash you receive in the sale.
ADJUSTED TAX BASIS
If you acquired your units for cash:
- your initial tax basis in your units will be equal to such cash
investment in your partnership increased by your share of your
partnership's liabilities at the time such units were acquired;
- your initial tax basis generally has been increased by:
- your share of your partnership's income and gains and
- any increases in your share of your partnership's liabilities; and
- your initial tax basis generally has been decreased (but not below zero)
by:
- your share of cash distributions from your partnership,
- any decreases in your share of your partnership's liabilities,
- your share of your partnership's losses, and
- your share of nondeductible expenditures of your partnership that are
not chargeable to capital.
For purposes of determining your adjusted tax basis in your units
immediately prior to a disposition of such units, your adjusted tax basis will
include your 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), the gain you
would recognize pursuant to the offer will exceed the cash proceeds you would
realize upon the sale of your units. The adjusted tax basis of the OP Units you
receive in exchange for your units pursuant to the offer will be equal to (i)
the sum of your adjusted tax basis in the units you transferred plus any gain
recognized in the exchange and will be reduced by (ii) any cash you received or
you were deemed to receive 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 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 that is attributable to your share of "unrealized receivables" of your
partnership exceeds the tax basis attributable to those assets, such excess will
be treated as ordinary income. Among other things, "unrealized receivables"
include depreciation recapture for 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. You will not receive any future distributions
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<PAGE> 1152
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 the income or loss. 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 the passive 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 passive losses in the manner described below. If you receive
cash for 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 receive cash for all or a portion of your units
pursuant to the offer and recognize 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
receive cash for all of your units pursuant to the offer, the balance of any
"suspended" losses from your partnership 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.
TAX REPORTING
If you tender any units, you must report the transaction by filing a
statement with your Federal income tax return for the year of the tender which
provides certain required information to the IRS. To prevent the possible
application of back-up Federal income tax withholding of 31% with respect to
payment of the offer consideration, you may have to provide the AIMCO Operating
Partnership with your correct taxpayer identification number. See the
instructions to the Letter of Transmittal.
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"). If you are a foreign person, the AIMCO Operating Partnership will
be required, under the FIRPTA provisions of the Code, to deduct and withhold 10%
of the amount realized by you on the disposition. The amount withheld would be
creditable against your Federal income tax liability and, if the amount withheld
exceeds your actual tax liability you could obtain a refund from the IRS by
filing a U.S. income tax return. See the Instructions to the Letter of
Transmittal.
TAX CONSEQUENCES OF A TERMINATION OF YOUR PARTNERSHIP
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"). The AIMCO Operating Partnership's acquisition of units pursuant
to the offer may result in a Termination of your partnership. If an acquisition
of units results in a
S-73
<PAGE> 1153
Termination, the following Federal income tax events will be deemed to occur:
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
interests 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 to the
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
to the New Partnership. A Termination will change (and possibly shorten) a
Remaining Offeree's holding period with respect to its units in your partnership
for Federal income tax purposes. Gains recognized by a Remaining Offeree on the
disposition of New Partnership interests with a holding period of 12 months or
less may be classified as short-term capital gains and subject to taxation at
ordinary income tax rates.
The New Partnership's adjusted tax basis in its assets will be the same as
the Old Partnership's basis in such assets immediately before the Termination. A
Termination will also cause the New Partnership to recalculate the depreciable
lives of its assets. This will cause the assets to be depreciated over a longer
period of time than if there had been no Termination. This would generally
decrease the annual average depreciation deductions allocable to the Remaining
Offerees for a number of years following consummation of the offer (thereby
increasing the taxable income allocable to their retained units in each such
year), but would have no effect on the total depreciation deductions available
over the useful lives of the assets of your partnership.
Elections as to 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.
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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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 The AIMCO Operating Partnership is organized
organized under Tennessee law for the as a Delaware limited partnership. The AIMCO
purpose of owning and managing Chapel Hill Operating Partnership owns interests (either
Apartments and Chapelwood Apartments. 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 The term of the AIMCO Operating Partnership
partners as a finite life investment, with continues until December 31, 2093, unless
limited partners to receive regular cash the AIMCO Operating Partnership is dissolved
distributions out of your partnership's Cash sooner pursuant to the terms of the AIMCO
Flow (as defined in your partnership's Operating Partnership's agreement of limited
agreement of limited partnership). The partnership (the "AIMCO Operating
termination date of your partnership is July Partnership Agreement") or as provided by
1, 2015. law. See "Description of 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 The purpose of the AIMCO Operating
and operate your partnership's properties. Partnership is to conduct any business that
Subject to restrictions contained in your may be lawfully conducted by a limited
partnership's agreement of limited partnership organized pursuant to the
partnership, your partnership may perform Delaware Revised Uniform Limited Part-
all act necessary or appropriate in nership Act (as amended from time to time,
connection therewith and reasonably related or any successor to such statute) (the
thereto, including acquiring additional real "Delaware Limited Partnership Act"),
or personal property, borrowing money and provided that such business is to be
creating liens. conducted in a manner that permits AIMCO to
be qualified as a REIT, unless AIMCO ceases
to qualify as a REIT. The AIMCO Operating
Partner-
</TABLE>
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<PAGE> 1155
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship 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 ac-
tion, 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>
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is The general partner is authorized to issue
authorized to issue additional limited additional partnership interests in the
partnership interests in your partnership AIMCO Operating Partnership for any
and may admit additional limited partners by partnership purpose from time to time to the
selling not more than 65 units for cash and limited partners and to other persons, and
notes to selected persons who fulfill the to admit such other persons as additional
requirements set forth in your partnership's limited partners, on terms and conditions
agreement of limited partnership. The and for such capital contributions as may be
capital contribution need not be equal for established by the general partner in its
all limited partners and no action or sole discretion. The net capital
consent is required in connection with the contribution need not be equal for all OP
admission of any additional limited Unitholders. No action or consent by the OP
partners. 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,
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 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 The AIMCO Operating Partnership may lend or
limited partnership, your partnership may contribute funds or other assets to its
acquire property or services from, and have subsidiaries or other persons in which it
other transactions with per- has an equity investment,
</TABLE>
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<PAGE> 1156
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
sons who are partners or who are affiliates and such persons may borrow funds from the
of partners. Any and all compensation paid AIMCO Operating Partnership, on terms and
to such persons in connection with services conditions established in the sole and
performed for your partnership must be absolute discretion of the general partner.
commensurate with that which would be paid To the extent consistent with the business
to an independent person for similar purpose of the AIMCO Operating Partnership
services and all agreements must be in and the permitted activities of the general
writing. The partnership may not make loans partner, the AIMCO Operating Partnership may
to any partners but the general partners may transfer assets to joint ventures, limited
make loans to your partnership; provided liability companies, partnerships,
that the interest and fees received by the corporations, business trusts or other
general partners in connection with such business entities in which it is or thereby
loans are not in excess of the amounts which becomes a participant upon such terms and
would be charged by an unrelated bank and subject to such conditions consistent with
the general partners do not receive a the AIMCO Operating Partnership Agreement
finder's or placement fee or commission. and applicable law as the general partner,
in its sole and absolute discretion,
believes to be advisable. Except as
expressly permitted by the AIMCO Operating
Partnership Agreement, neither the general
partner nor any of its affiliates may sell,
transfer or convey any property to the AIMCO
Operating Partnership, directly or
indirectly, except pursuant to transactions
that are determined by the general partner
in good faith to be fair and reasonable.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is The AIMCO Operating Partnership Agreement
authorized to borrow money and issue contains no restrictions on borrowings, and
evidences of indebtedness in furtherance of the general partner has full power and
your partnership business, whether secured authority to borrow money on behalf of the
or unsecured. AIMCO Operating Partnership. The AIMCO
Operating Partnership has credit agreements
that restrict, among other things, its
ability to incur indebtedness.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited Each OP Unitholder has the right, upon
partnership entitles the limited partners to written demand with a statement of the
receive, for any proper purpose, the name purpose of such demand and at such OP
and address of each limited partner and the Unitholder's own expense, to obtain a
number of units owned by each limited current list of the name and last known
partners. Your partnership furnishes such business, residence or mailing address of
information to any limited partner the general partner and each other OP
requesting the same in writing, upon payment Unitholder.
of all costs and expenses of your
partnership in connection with the
preparation and forwarding of such
information.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership All management powers over the business and
manages and controls your partnership and affairs of the AIMCO Operating Partnership
all aspects of its business. The general are vested in AIMCO-GP, Inc., which is the
partner has full, exclusive and complete general partner. No OP Unitholder has any
authority and discretion in the management right to participate in or exercise control
and control of the business and the or management power over the busi-
activities
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
and operations of your partnership. In the ness and affairs of the AIMCO Operating
exercise of its authority, it makes all Partnership. The OP Unitholders have the
decisions affecting the conduct of the right to vote on certain matters described
business of your partnership. Limited under "Comparison of Your Units and AIMCO OP
partners may not take part in the management Units -- Voting Rights" below. The general
of the business, affairs and operations of partner may not be removed by the OP
your partnership, transact any business for Unitholders with or without cause.
your partnership, have any power, right or
authority to enter into any agreement, In addition to the powers granted a general
execute or sign documents for, make partner of a limited partnership under
representation on behalf of nor to otherwise applicable law or that are granted to the
act so as to bind your partnership in any general partner under any other provision of
manner. 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 Notwithstanding anything to the contrary set
limited partnership, the general partner of forth in the AIMCO Operating Partnership
your partnership and its affiliates are not Agreement, the general partner is not liable
liable, responsible or accountable, in to the AIMCO Operating Partnership for
damages or otherwise to your partnership or losses sustained, liabilities incurred or
any limited partner for any acts performed benefits not derived as a result of errors
by any of them which are reasonably believed in judgment or mistakes of fact or law of
by them to be within the scope of the any act or omission if the general partner
authority conferred on them by your acted in good faith. The AIMCO Operating
partnership's agreement of limited partner- Partnership Agreement provides for
ship, excepting only acts of malfeasance, indemnification of AIMCO, or any director or
gross negligence or actual officer of AIMCO (in its capacity as the
misrepresentation. In addition, the general previous general partner of the AIMCO
partner and its affiliates are entitled to Operating Partnership), the general partner,
indemnification by your partnership for any any officer or director of general partner
and all acts performed by them in the good or the AIMCO Operating Partnership and such
faith belief that the act or omission was in other persons as the general partner may
the best interests of your partnership and designate from and against all losses,
which are reasonably within the scope of the claims, damages, liabilities, joint or
authority conferred upon them by your several, expenses (in-
</TABLE>
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<PAGE> 1158
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
partnership's agreement of limited cluding legal fees), fines, settlements and
partnership or by your partnership, other amounts incurred in connection with
excepting only acts of malfeasance, gross any actions relating to the operations of
negligence or actual misrepresentation; pro- the AIMCO Operating Partnership, as set
vided, however, that such indemnity will be forth in the AIMCO Operating Partnership
paid out of, and only to the extent of, Agreement. The Delaware Limited Partnership
partnership assets. 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
and certain state securities administrations
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 and their
respective state securities laws.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of Except in limited circumstances, the general
limited partnership, the limited partners partner has exclusive management power over
may remove a general partner for cause and the business and affairs of the AIMCO
elect a successor general partner upon a Operating Partnership. The general partner
vote of the limited partners owning a may not be removed as general partner of the
majority of the outstanding units. A general AIMCO Operating Partnership by the OP
partner may not transfer, assign, sell, Unitholders with or without cause. Under the
withdraw or otherwise dispose of its AIMCO Operating Partnership Agreement, the
interest unless it obtains the prior written general partner may, in its sole discretion,
consent of those persons owning more than prevent a transferee of an OP Unit from
50% of the units and satisfies other becoming a substituted limited partner
conditions set forth in your partnership's pursuant to the AIMCO Operating Partnership
agreement of limited partnership. Such Agreement. The general partner may exercise
consent is also necessary for the approval this right of approval to deter, delay or
of a new general partner. A limited partner hamper attempts by persons to acquire a
may not transfer his interests without the controlling interest in the AIMCO Operating
written consent of the general partner which Partnership. Additionally, the AIMCO
may be withheld at the sole discretion of Operating Partnership Agreement contains
the general partner. 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 With the exception of certain circumstances
partnership may be amended by the general set forth in the AIMCO Operating Partnership
partner to change the name and location of Agreement, whereby the general partner may,
the principal place of business of your without the consent of the OP Unitholders,
partnership, change the name or the amend the AIMCO Operating Partnership
residence of a partner, substitute a limited Agreement, amendments to the AIMCO Operating
partner, correct an error in your Partnership Agreement require the consent of
partnership's agreement of limited the holders of a majority of the outstanding
partnership and as required by law. Amend- Common OP Units, excluding AIMCO
ments of specified provisions of your
partnership's
</TABLE>
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<PAGE> 1159
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
agreement of limited partnership may be made and certain other limited exclusions (a
only with the prior written consent of all "Majority in Interest"). Amendments to the
partners. Other amendments must be approved AIMCO Operating Partnership Agreement may be
by the limited partners owning more than 50% proposed by the general partner or by
of the units. holders of a Majority in Interest. Following
such proposal, the general partner will
submit any proposed amendment to the OP
Unitholders. The general partner will seek
the written consent of the OP Unitholders on
the proposed amendment or will call a
meeting to vote thereon. See "Description of
OP Units -- Amendment of the AIMCO Operating
Partnership Agreement" in the accompanying
Prospectus.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
In addition to the right to distributions in The general partner does not receive
respect of its partnership interest and compensation for its services as general
reimbursement for all fees and expenses as partner of the AIMCO Operating Partnership.
set forth in your partnership's agreement of However, the general partner is entitled to
limited partnership, the general partner payments, allocations and distributions in
receives $48,000 annually. Moreover, the its capacity as general partner of the AIMCO
general partner or certain affiliates may be Operating Partnership. In addition, the
entitled to compensation for additional AIMCO Operating Partnership is responsible
services rendered. 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 Except for fraud, willful misconduct or
limited partnership, limited partners are gross negligence, no OP Unitholder has
not subject to assessment nor personally personal liability for the AIMCO Operating
liable for any of the debts or obligations Partnership's debts and obligations, and
of your partnership or any of losses of your liability of the OP Unitholders for the
partnership beyond its obligations to AIMCO Operating Partnership's debts and
contribute to the capital of your obligations is generally limited to the
partnership as specified in your amount of their investment in the AIMCO
partnership's agreement of limited Operating Partnership. However, the
partnership and as otherwise provided by limitations on the liability of limited
law. partners for the obligations of a limited
partnership have not been clearly
established in some states. If it were
determined that the AIMCO Operating Part-
nership 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
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
</TABLE>
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<PAGE> 1160
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
circumstances for the AIMCO Operating
Partnership's obligations to the same extent
as the general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
In general, your partnership's agreement of Unless otherwise provided for in the
limited partnership and the AIMCO Operating relevant partnership agreement, Delaware law
Partnership Agreement have limitations on generally requires a general partner of a
the liability of the general partner but Delaware limited partnership to adhere to
such limitations differ in terms and provide fiduciary duty standards under which it owes
more protection for the general partner of its limited partners the highest duties of
the AIMCO Operating Partnership. Under your good faith, fairness and loyalty and which
partnership's agreement of limited generally prohibit such general partner from
partnership, the general partner has taking any action or engaging in any
fiduciary responsibilities to your transaction as to which it has a conflict of
partnership in respect of the funds and interest. The AIMCO Operating Partnership
assets of your partnership and will take all Agreement expressly authorizes the general
actions which may be necessary or partner to enter into, on behalf of the
appropriate for the proper maintenance and AIMCO Operating Partnership, a right of
operation of your partnership's property in first opportunity arrangement and other
accordance with the provisions of your conflict avoidance agreements with various
partnership's agreement of limited affiliates of the AIMCO Operating
partnership and in accordance with Partnership and the general partner, on such
applicable laws and regulations. The general terms as the general partner, in its sole
partner will manage and control the affairs and absolute discretion, believes are
of your partnership to the best of its advisable. The AIMCO Operating Partnership
abilities and use its best efforts to carry Agreement expressly limits the liability of
out the business of your partnership as set the general partner by providing that the
forth in your partnership's agreement of general partner, and its officers and
limited partnership. However, the general directors will not be liable or accountable
partner may engage in or hold interests in in damages to the AIMCO Operating
other business ventures of every kind and Partnership, the limited partners or as-
description for its own account including, signees for errors in judgment or mistakes
without limitation, ventures such as those of fact or law or of any act or omission if
undertaken by your partnership and the the general partner or such director or
partners shall have no rights in and to such officer acted in good faith. See
independent business venture or the income "Description of OP Units -- Fiduciary
and profits derived therefrom. Responsibilities" in the accompanying
Prospectus.
</TABLE>
Federal Income Taxation
<TABLE>
<S> <C>
In general, there are no material The AIMCO Operating Partnership is not
differences between the taxation of your subject to Federal income taxes. Instead,
partnership and the AIMCO Operating each holder of OP Units includes in income
Partnership. 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
</TABLE>
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<PAGE> 1161
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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 nonre-
course 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>
<CAPTION>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity in- equity interests entitling each equity interests entitling each OP
terests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of and as declared by the board of rata share of cash distributions
distributions to be made to the directors of the general partner made from Available Cash (as such
partners of your partnership. of the AIMCO Operating Part- term is defined in the AIMCO
nership, quarterly cash distribu- Operating Partnership Agreement)
tion at a rate of $0.50 per to the partners of the AIMCO
Preferred OP Unit, subject to ad- Operating Partnership. To the
justments from time to time on or extent the AIMCO Operating
after the fifth anniversary of the Partnership sells or refinances
issue date of the Preferred OP its assets, the net proceeds
Units. therefrom generally will be re-
tained by the AIMCO Operating
</TABLE>
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<PAGE> 1162
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
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 Except as otherwise required Under the AIMCO Operating
agreement of limited by applicable law or in the Partnership Agreement, the
partnership, AIMCO Operating Partnership OP Unitholders have voting
upon the vote of the limited Agreement, the holders of rights only with respect to
partners owning a majority the Preferred OP Units will certain limited matters such
of the outstanding units, have the same voting rights as certain amendments and
the limited partners may as holders of the Common OP termination of the AIMCO
amend your partnership's Units. See "Description of Operating Partnership
agreement of limited OP Units" in the accompany- Agreement and certain
partnership, subject to ing Prospectus. So long as transactions such as the
certain limitations; any Preferred OP Units are institution of bankruptcy
dissolve and terminate your outstanding, in addition to proceedings, an assignment
partnership; remove a any other vote or consent of for the benefit of creditors
general partner for cause; partners required by law or and certain transfers by the
and approve or disapprove by the AIMCO Operating general partner of its
the sale of all or Partnership Agreement, the interest in the AIMCO
substantially all of the affirmative vote or consent Operating Partnership or the
assets of your partnership. of holders of at least 50% admission of a successor
of the outstanding Preferred general partner.
A general partner may cause OP Units will be necessary
the dissolution of the your for effecting any amendment Under the AIMCO Operating
partnership by retiring when of any of the provisions of Partnership Agreement, the
there are no remaining the Partnership Unit general partner has the
general partners unless, the Designation of the Preferred power to effect the
limited partners owning more OP Units that materially and acquisition, sale, transfer,
the 50% of the then out- adversely affects the rights exchange or other
standing units elect a new or preferences of the disposition of any assets of
general partner who decides holders of the Preferred OP the AIMCO Operating
to continue your partnership Units. The creation or Partnership (including, but
with the approval of the issuance of any class or not limited to, the exercise
limited partners owning more series of partnership units, or grant of any conversion,
than 50% of the then including, without option, privilege or
outstanding units. limitation, any partner- subscription right or any
ship units that may have other right available in
In general, you have greater rights senior or superior to connection with any assets
voting rights in your the Preferred OP Units, at any time held by the
partnership than you will shall not be deemed to AIMCO Operating Partnership)
have as an OP Unitholder. OP materially adversely affect or the merger,
Unitholders cannot remove the rights or preferences of consolidation,
the general partner of the the holders of Preferred OP reorganization or other
AIMCO Operating Partnership. Units. With respect to the combination of the AIMCO
exercise of the above Operating Partnership with
described voting rights, or into another entity, all
each Preferred OP Units without the consent of the
shall have one (1) vote per OP Unitholders.
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 limi-
</TABLE>
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<PAGE> 1163
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
tation, 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 "Descrip-
tion of OP
Units -- Dissolution and
Winding Up" in the accom-
panying Prospectus.
OP Unitholders cannot remove
the general partner of the
AIMCO Operating Partnership
with or without cause.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement Holders of Preferred OP Subject to the rights of
of limited partnership Units will be entitled to holders of any outstanding
specifies how the cash receive, when and as Preferred OP Units, the
available for distribution, declared by the board of AIMCO Operating Partnership
whether arising from directors of the general Agreement requires the
operations or sales or partner of the AIMCO general partner to cause the
refinancing, is to be shared Operating Partnership, AIMCO Operating Partnership
among the partners. Your quarterly cash distributions to distribute quarterly all,
partnership may, but is not at the rate of $0.50 per or such portion as the
obligated to, make current Preferred OP Unit; provided, general partner may in its
distributions out of its however, that at any time sole and absolute discretion
cash funds as the general and from time to time on or determine, of Available Cash
partner may, in its discre- after the fifth anniversary (as defined in the AIMCO
tion, determine. The of the issue date of the Operating Partnership
distributions payable to the Preferred OP Units, the Agreement) generated by the
partners are not fixed in AIMCO Operating Partnership AIMCO Operating Partnership
amount and depend upon the may adjust the annual during such quarter to the
operating results and net distribution rate on the general partner, the special
sales or refinancing Preferred OP Units to the limited partner and the
proceeds available from the lower of (i) 2.00% plus the holders of Common OP Units
disposition of your part- annual interest rate then on the record date es-
nership's assets. applicable to U.S. Treasury tablished by the general
notes with a maturity of partner with respect to such
five years, and (ii) the quarter, in accordance with
annual dividend rate on the their respective interests
most recently issued AIMCO in the AIMCO Operating
non-convertible preferred Partnership on such record
stock which ranks on a date. Holders of any other
parity with its Class H Pre-
Cumulative Preferred
</TABLE>
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<PAGE> 1164
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
Stock. Such distributions ferred OP Units issued in
will be cumulative from the the future may have priority
date of original issue. over the general partner,
Holders of Preferred OP the special limited partner
Units will not be entitled and holders of Common OP
to receive any distributions Units with respect to
in excess of cumulative distributions of Available
distributions on the Cash, distributions upon
Preferred OP Units. No liquidation or other
interest, or sum of money in distributions. See "Per
lieu of interest, shall be Share and Per Unit Data" in
payable in respect of any the accompanying Prospectus.
distribution payment or pay-
ments on the Preferred OP The general partner in its
Units that may be in sole and absolute discretion
arrears. may distribute to the OP
Unitholders Available Cash
When distributions are not on a more frequent basis and
paid in full upon the provide for an appropriate
Preferred OP Units or any record date.
Parity Units (as defined
below), all distributions The AIMCO Operating Partner-
declared upon the Preferred ship Agreement requires the
OP Units and any Parity general partner to take such
Units shall be declared reasonable efforts, as
ratably in proportion to the determined by it in its sole
respective amounts of and absolute discretion and
distributions accumulated, consistent with AIMCO's
accrued and unpaid on the qualification as a REIT, to
Preferred OP Units and such cause the AIMCO Operating
Parity Units. Unless full Partnership to distribute
cumulative distributions on sufficient amounts to en-
the Preferred OP Units have able the general partner to
been declared and paid, transfer funds to AIMCO and
except in limited circum- enable AIMCO to pay stock-
stances, no distributions holder dividends that will
may be declared or paid or (i) satisfy the requirements
set apart for payment by the for qualifying as a REIT
AIMCO Operating Partnership under the Code and the
and no other distribution of Treasury Regulations and
cash or other property may (ii) avoid any Federal
be declared or made, income or excise tax
directly or indirectly, by liability of AIMCO. See
the AIMCO Operating "Description of OP
Partnership with respect to Units -- Distributions" in
any Junior Units (as de- the accompanying Prospectus.
fined below), nor shall any
Junior Units be redeemed,
purchased or otherwise
acquired for considera-
tion, 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>
<CAPTION>
<S> <C> <C>
A limited partner may There is no public market There is no public market
transfer his units to any for the Preferred OP Units for the OP Units. The AIMCO
person and be and the Pre- Oper-
</TABLE>
S-85
<PAGE> 1165
<TABLE>
<CAPTION>
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<S> <C> <C>
substituted as a limited ferred OP Units are not ating Partnership Agreement
partner by such person if: listed on any securities restricts the
(1) the interest being exchange. The Preferred OP transferability of the OP
acquired by the assignee Units are subject to Units. Until the expiration
consists of an integral restrictions on transfer as of one year from the date on
multiple of half units, (2) set forth in the AIMCO which an OP Unitholder
a written assignment has Operating Partnership acquired OP Units, subject
been duly executed and Agreement. to certain exceptions, such
acknowledged by the assignor OP Unitholder may not
and assignee, (3) the Pursuant to the AIMCO transfer all or any por-
written approval of the Operating Partnership tion of its OP Units to any
general partner which may be Agreement, until the transferee without the
withheld in the sole and expiration of one year from consent of the general
absolute discretion of the the date on which a holder partner, which consent may
general partner has been of Preferred OP Units be withheld in its sole and
granted, (4) the assignor or acquired Preferred OP Units, absolute discretion. After
the assignee pays a transfer subject to certain the expiration of one year,
fee, (5) the transfer will exceptions, such holder of such OP Unitholder has the
not result in a termination Preferred OP Units may not right to transfer all or any
of your partnership for tax transfer all or any portion portion of its OP Units to
purposes and (6) the of its Preferred OP Units to any person, subject to the
assignor and assignee have any transferee without the satisfaction of certain con-
complied with such other consent of the general ditions specified in the
conditions as set forth in partner, which consent may AIMCO Operating Partnership
your partnership's agreement be withheld in its sole and Agreement, including the
of limited partnership. absolute discretion. After general partner's right of
There are no redemption the expiration of one year, first refusal. See
rights associated with your such holders of Preferred OP "Description of OP Units --
units. Units has the right to Transfers and Withdrawals"
transfer all or any portion in the accompanying
of its Preferred OP Units to Prospectus.
any person, subject to the
satisfaction of certain After the first anniversary
conditions specified in the of becoming a holder of
AIMCO Operating Partner- Common OP Units, an OP
ship Agreement, including Unitholder has the right,
the general partner's right subject to the terms and
of first refusal. conditions of the AIMCO
Operating Partnership
After a one-year holding Agreement, to require the
period, a holder may redeem AIMCO Operating Partnership
Preferred OP Units and to redeem all or a portion
receive in exchange of the Common OP Units held
therefor, at the AIMCO Oper- by such party in exchange
ating Partnership's option, for a cash amount based on
(i) subject to the terms of the value of shares of Class
any Senior Units (as defined A Common Stock. See
below), cash in an amount "Description of OP
equal to the Liquidation Units -- Redemption Rights"
Preference of the Preferred in the accompanying
OP Units tendered for Prospectus. Upon receipt of
redemption, (ii) a number of a notice of redemption, the
shares of Class A Common AIMCO Operating Partnership
Stock of AIMCO that is equal may, in its sole and
in Value to the Liquidation absolute discretion but
Preference of the Preferred subject to the restrictions
OP Units tendered for on the ownership of Class A
redemption, or (iii) for Common Stock imposed under
Preferred OP Units redeemed AIMCO's charter and the
after a two-year holding transfer restrictions and
period, a number of shares other limitations thereof,
of Class I Preferred elect to cause AIMCO to
</TABLE>
S-86
<PAGE> 1166
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
Stock of AIMCO that pay an acquire some or all of the
aggregate amount of tendered Common OP Units in
dividends equivalent to the exchange for Class A Common
distributions on the Stock, based on an exchange
Preferred OP Units tendered ratio of one share of Class
for redemption; provided A Common Stock for each Com-
that such shares are part of mon OP Unit, subject to
a class or series of adjustment as provided in
preferred stock that is then the AIMCO Operating
listed on the NYSE or an- Partnership Agreement.
other national securities
exchange. See "Federal
Income Tax
Consequences -- Disguised
Sales." 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-87
<PAGE> 1167
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are the Class Two 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 I High Performance 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, the
Class J Partnership Preferred Units, the Class K 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, the Class One 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 $0.50 per Preferred OP
Unit (equivalent to 8.0% per annum of the $25 stated liquidation preference);
provided, however, that at any time and from time to time on or after March 1,
2005, the AIMCO Operating Partnership may adjust the annual distribution rate on
the Preferred OP Units to the lower of (i) 2.0% 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. A reduction in the distribution rate will reduce your rate of return on
the Preferred OP Units and possibly encourage you to redeem such units. 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
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<PAGE> 1168
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 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 $25 per Preferred OP
Unit, 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
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<PAGE> 1169
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 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 A Common Stock of AIMCO that is equal in Value to the
Liquidation Preference of the Preferred OP Units tendered for redemption, or
(iii) for Preferred OP Units redeemed after a two-year holding period, 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 NYSE or another national securities exchange.
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. Before issuing any preferred
stock upon redemption of Preferred OP Units, AIMCO will register the issuance
and sale of such shares under the Securities Act of 1933. 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.
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<PAGE> 1170
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.
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, the Class J 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 8.0% per annum of the $25 liquidation preference (equivalent to
$2.00 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 July 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 March 1, 2005, 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,
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<PAGE> 1171
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 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> 1172
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 The Class I Preferred Stock constitutes an
interests entitling each holder of Preferred equity interest entitling each holder of
OP Units to receive, when and as declared by Class I Preferred Stock to receive, when and
the board of directors of the general as declared by the AIMCO board of directors,
partner of the AIMCO Operating Partnership, cash distribution at a rate of $2.00 per
quarterly cash distribution at a rate of annum per share.
$0.50 per 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 Holders of Class I Preferred Stock do not
law or in the AIMCO Operating Partnership's have any voting rights, except as set forth
agreement of limited partnership, the below and except as otherwise required by
holders of the Preferred OP Units will have applicable law.
the same voting rights as holders of the
Common OP Units. See "Description of OP If and whenever dividends on any shares of
Units" in the accompanying Prospectus. So Class I Preferred Stock or any series or
long as any Preferred OP Units are class of Class I Parity Stock are in arrears
outstanding, in addition to any other vote for six or more quarterly periods (whether
or consent of partners required by law or by or not consecutive), the number of directors
the AIMCO Operating Partnership's agreement then constituting the AIMCO board of
of limited partnership, the affirmative vote directors shall be increased by two (if not
or consent of holders of at least 50% of the already increased by reason of similar types
outstanding Preferred OP Units will be of provisions with respect to shares of
necessary for effecting any amendment of any voting preferred stock), and the holders of
of the provisions of the Partnership Unit shares of Class I Preferred Stock, together
Designation of the Preferred OP Units that with the holders of shares of all other
materially and adversely affects the rights voting preferred stock then entitled to
or preferences of the holders of the exercise similar voting rights, voting as a
Preferred OP Units. The creation or issuance single class regardless of series, will be
of any class or series of AIMCO Operating entitled to vote for the election of two
Partnership units, including, without additional directors of AIMCO. Whenever
limitation, any AIMCO Operating Partnership dividends in arrears and dividends for the
units that may have rights senior or current quarterly dividend period have been
superior to the Preferred OP Units, will not paid or declared and set aside in respect of
be deemed to materially adversely affect the the outstanding shares of the Class I
rights or preferences of the holders of Preferred Stock and the voting preferred
Preferred OP Units. With respect to the stock, then the right of the holders of
exercise of the above described voting Class I Preferred Stock and the voting
rights, each Preferred OP Units will have preferred stock to elect such additional two
one (1) vote per Preferred 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
</TABLE>
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<PAGE> 1173
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
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>
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled Holders of Class I Preferred Stock are
to receive, when and as declared by the entitled to receive, when and as declared by
board of directors of the general partner of the AIMCO board of directors, out of funds
the AIMCO Operating Partnership, quarterly legally available for payment, cash
cash distributions at the rate of $0.50 per dividends at the rate of $2.00 per annum per
Preferred OP Unit; provided, however, that share. Such dividends are cumulative from
at any time and from time to time on or the date of original issue. Holders of Class
after the fifth anniversary of the issue I Preferred Stock are not be entitled to
date of the Preferred OP Units, the AIMCO receive any dividends in excess of
Operating Partnership may adjust the annual cumulative dividends on the Class I
distribution rate on the Preferred OP Units Preferred Stock. No interest, or sum of
to the lower of (i) 2.00% plus the annual money in lieu of interest, shall be payable
interest rate then applicable to U.S. in respect of any dividend payment or
Treasury notes with a maturity of five payments on the Class I Preferred Stock that
years, and (ii) the annual dividend rate on may be in arrears.
the most recently issued AIMCO
non-convertible preferred stock which ranks When dividends are not paid in full upon the
on a parity with its Class H Cumulative Class I Preferred Stock or any other class
Preferred Stock. Such distributions will be or series of Class I Parity Stock, all
cumulative from the date of original issue. dividends declared upon the Class I
Holders of Preferred OP Units will not be Preferred Stock and any shares of Class I
entitled to receive any distributions in Parity Stock will be declared ratably in
excess of cumulative distributions on the proportion to the respective amounts of
Preferred OP Units. No interest, or sum of dividends accumulated, accrued and unpaid on
money in lieu of interest, shall be payable the Class I Preferred Stock and such Class I
in respect of any distribution payment or Parity Stock. Unless dividends equal to the
payments on the Preferred OP Units that may full amount of all accumulated, accrued and
be in arrears. unpaid dividends on the Class I Preferred
Stock have been paid, or declared and set
When distributions are not paid in full upon apart for payment, except in limited
the Preferred OP Units or any Parity Units, circumstances, no dividends may be declared
all or paid or set apart for
</TABLE>
S-94
<PAGE> 1174
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
distributions declared upon the Preferred OP payment by AIMCO and no other distribution
Units and any Parity Units will be declared of cash or other property may be declared or
ratably in proportion to the respective made, directly or indirectly, by AIMCO with
amounts of distributions accumulated, respect to any shares of Class I Junior
accrued and unpaid on the Preferred OP Units Stock, nor shall any shares of Class I
and such Parity Units. Unless full Junior Stock be redeemed, purchased or
cumulative distributions on the Preferred OP otherwise acquired for any consideration,
Units have been declared and paid, except in nor shall any other cash or other property
limited circumstances, no distributions may be paid or distributed to or for the benefit
be declared or paid or set apart for payment of holders of shares of Class I Junior
by the AIMCO Operating Partnership and no Stock. See "Description of Class I Preferred
other distribution of cash or other property Stock -- Dividends."
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 Ownership of shares of Class I Preferred
OP Units and the Preferred OP Units are not Stock by any person will be limited such
listed on any securities exchange. The that the sum of the aggregate value of all
Preferred OP Units are subject to certain equity stock (including all shares of Class
restrictions on transferability set forth in 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)
Pursuant to the AIMCO Operating of the aggregate value of all outstanding
Partnership's agreement of limited shares of equity stock. Further, certain
partnership, until the expiration of one transfers which may have the effect of
year from the date on which a holder of causing AIMCO to lose its status as a REIT
Preferred OP Units acquired Preferred OP are void ab initio.
Units, subject to certain exceptions, such
holder of Preferred OP Units may not If any transfer of Class I Preferred Stock
transfer all or any portion of its Preferred occurs which, if effective, would result in
OP Units to any transferee without the any person beneficially or constructively
consent of the general partner, which owning Class I Preferred Stock in excess or
consent may be withheld in its sole and in violation of the Class I Preferred
absolute discretion. After the expiration of Ownership Limit, such shares of Class I
one year, such holders of Preferred OP Units Preferred Stock in excess of the Class I
has the right to transfer all or any portion Preferred Ownership Limit will be
of its Preferred OP Units to any person, automatically transferred to a trustee in
subject to the satisfaction of certain his capacity as trustee of a trust for the
conditions specified in the AIMCO Operating exclusive benefit of one or more charitable
Partnership's agreement of limited beneficiaries designated by AIMCO, and the
partnership, including the general partner's prohibited transferee will generally have no
right of first refusal. rights in such shares, except upon sale of
the shares by the trustee. The trustee will
After a one-year holding period, a holder have all voting rights and rights to
may redeem Preferred OP Units and receive in dividends with respect to shares of Class I
exchange therefor, at the AIMCO Operating Preferred Stock held in the trust, which
Partnership's option, (i) subject to the rights will be exercised for the benefit of
terms of any Senior Units, cash in an amount the charitable beneficiaries.
equal to the Liquidation Preference of the
Preferred OP Units tendered for The trustee may sell the Class I Preferred
Stock held
</TABLE>
S-95
<PAGE> 1175
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
redemption, (ii) a number of shares of Class in the trust to AIMCO or a person,
A Common Stock of AIMCO that is equal in designated by the trustee, whose ownership
value to the Liquidation Preference of the of the Class I Preferred Stock will not
Preferred OP Units tendered for redemption, violate the Class I Preferred Ownership
or (iii) for Preferred OP Units redeemed Limit. Upon such sale, the interest of the
after a two-year holding period, a number of charitable beneficiaries in the shares sold
shares of Class I Preferred Stock of AIMCO will terminate and the trustee will
that pay an aggregate amount of dividends distribute to the prohibited transferee, the
equivalent to the distributions on the lesser of (i) the price paid by the
Preferred OP Units tendered for redemption; prohibited transferee for the shares or if
provided that such shares are part of a the prohibited transferee did not give value
class or series of preferred stock that is for the shares in connection with the event
then listed on the NYSE or another national causing the shares to be held in the trust,
securities exchange. See "Federal Income Tax the market price of such shares on the day
Consequences -- Disguised Sales." The of the event causing the shares to be held
Preferred OP Units may not be redeemed at in the trust and (ii) the price per share
the option of the AIMCO Operating received by the trustee from the sale or
Partnership. See "Description of Preferred other disposition of the shares held in the
OP Units -- Redemption." trust. Any proceeds in excess of the amount
payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after March 1, 2005, 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> 1176
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. Your general
partner became a wholly owned subsidiary on February 26, 1999 of AIMCO when IPT
merged with AIMCO. Accordingly, the general partner of your partnership 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 Unitholders 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 own both the general partner of your partnership and the manager of your
partnership's property. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $81,048 in 1996, $84,896 in 1997 and $39,808 in
1998. The property manager received management fees of $116,896 in 1996,
$119,469 in 1997 and $123,190 in 1998. The AIMCO Operating Partnership has no
current intention of changing the fee structure for the general partner or for
the manager of your partnership's 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." AIMCO's
Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is
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<PAGE> 1177
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.
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. However, we will not acquire any
additional units for a period of at least one year after expiration of the
offer. Any such future offers that we might make could be for consideration that
is more or less than the consideration we are currently offering.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $568,714 will be
required to purchase all of the units sought in the offer, if such units are
tendered for cash excluding expenses as itemized below. The AIMCO Operating
Partnership will obtain all such funds from cash from operations, equity
issuances and short term borrowings. The AIMCO Operating Partnership will pay
all of the costs of the offer and not your partnership.
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...................................... $ 5,000
Accountant's Fees........................................... $ 5,000
Legal Fees.................................................. $10,000
Printing Fees............................................... $10,000
Stanger's Fees.............................................. $12,000
Other....................................................... $ 8,000
-------
Total....................................................... $50,000
=======
</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 Bank of America's reference rates, at the election
of the company, plus 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 2.25% and 2.75% in the case of
LIBOR-based loans and between 0.75% and 1.25% 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 September 30, 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
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<PAGE> 1178
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.
We may obtain funds pursuant to a credit agreement entered into by our
subsidiary, Insignia Properties, L.P. ("IPLP"), 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, 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). IPLP 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. The AIMCO Operating
Partnership intends to repay any funds borrowed out of working capital in the
ordinary course of business.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP has delivered 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 has delivered an opinion with regard to
the material Federal income tax consequences of the offer. 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 two opinions of Skadden, Arps, Slate, Meagher & Flom LLP are 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 opinions will be sent by the Information Agent.
S-99
<PAGE> 1179
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed Balance Sheet as of September 30, 1998
(unaudited)............................................... F-2
Condensed Statements of Operations for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-3
Condensed Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-4
Notes to Condensed Financial Statements..................... F-5
Balance Sheet as of December 31, 1997 and 1996
(unaudited)............................................... F-7
Statements of Operations and Changes in Partners' Deficit
for the years ended December 31, 1997 and 1996
(unaudited)............................................... F-8
Statements of Cash Flows for the years ended December 31,
1997 and 1996 (unaudited)................................. F-9
Notes to Financial Statements............................... F-10
</TABLE>
F-1
<PAGE> 1180
CHAPEL HILL, LIMITED
CONDENSED BALANCE SHEET -- UNAUDITED
SEPTEMBER 30, 1998
<TABLE>
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 251,165
Other assets................................................ 595,080
Investment property
Land...................................................... $ 375,000
Building and related personal property.................... 9,673,755
-----------
10,048,755
-----------
Less: Accumulated depreciation............................ (5,770,901) 4,277,854
----------- -----------
Total assets...................................... $ 5,124,099
===========
LIABILITIES AND PARTNERS' DEFICIT
Other accrued liabilities................................... $ 323,832
Notes payable............................................... 7,085,956
Partners' deficit................................. (2,285,689)
-----------
Total liabilities and partners' deficit........... $ 5,124,099
-----------
-----------
</TABLE>
See Accompanying Note to the Financial Statements.
F-2
<PAGE> 1181
CHAPEL HILL, LIMITED
CONDENSED STATEMENT OF OPERATIONS -- UNAUDITED
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Revenues:
Rental income............................................. $1,731,680 $1,663,682
Other income.............................................. 111,291 114,940
---------- ----------
Total revenues.................................... 1,842,971 1,778,622
Expenses:
Operating expenses........................................ 1,106,886 798,749
Depreciation expense...................................... 351,308 352,588
Interest expense.......................................... 494,764 507,445
Property tax expense...................................... 168,515 135,430
---------- ----------
Total expenses.................................... 2,121,473 1,794,212
Net income........................................ $ (278,502) $ (15,590)
========== ==========
</TABLE>
See Accompanying Note to the Financial Statements.
F-3
<PAGE> 1182
CHAPEL HILL, LIMITED
CONDENSED STATEMENT OF CASH FLOWS -- UNAUDITED
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Operating activities:
Net income................................................ $(278,502) $ (15,590)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities.......................
Depreciation and amortization............................. 351,308 352,588
Changes in accounts:
Receivables and deposits and other assets.............. (36,510) (73,894)
Accounts payable and accrued expenses.................. 205,648 43,882
--------- ---------
Net cash provided by (used in) operating
activities...................................... 241,944 306,986
--------- ---------
Investing activities:
Property improvements and replacements.................... (160,307) (129,796)
--------- ---------
Net cash provided by (used in) investing activities....... (160,307) (129,796)
--------- ---------
Financing activities:
Payments on mortgage...................................... (123,023) (110,343)
Partners' distributions................................... -- --
--------- ---------
Net cash provided by (used in) financing activities....... (123,023) (110,343)
--------- ---------
Net increase (decrease) in cash and cash equivalents...... (41,386) 66,847
Cash and cash equivalents at beginning of year............ 292,551 224,194
--------- ---------
Cash and cash equivalents at end of period................ $ 251,165 $ 291,041
========= =========
</TABLE>
See Accompanying Note to the Financial Statements.
F-4
<PAGE> 1183
CHAPEL HILL LIMITED
NOTE TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements of Chapel Hill Limited as
of September 30, 1998 and for the nine months ended September 30, 1998 and 1997
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included and all such
adjustments are of a recurring nature.
The financial statements should be read in conjunction with the financial
statements and notes thereto for the year ended December 31, 1997. It should be
understood that the accounting measurements at interim dates inherently involve
greater reliance on estimates than at year-end. The results of operations for
the interim periods are not necessarily indicative of the results for the entire
year.
F-5
<PAGE> 1184
CHAPEL HILL, LIMITED
FINANCIAL STATEMENTS -- UNAUDITED
DECEMBER 31, 1997 AND 1996
F-6
<PAGE> 1185
CHAPEL HILL, LIMITED
BALANCE SHEET -- UNAUDITED
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash and cash equivalents................................... $ 292,551 $ 224,194
Receivables and deposits.................................... 109,714 91,126
Restricted escrows (Note B)................................. 306,639 294,035
Other assets................................................ 142,217 154,737
Investment properties (Note C):
Land...................................................... 375,000 375,000
Buildings and related personal property................... 9,513,448 9,321,579
----------- -----------
9,888,448 9,696,579
Less accumulated depreciation............................. (5,419,593) (4,949,044)
----------- -----------
4,468,855 4,747,535
----------- -----------
$ 5,319,976 $ 5,511,627
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 22,897 $ 33,228
Tenant security deposit liabilities....................... 44,439 47,698
Other liabilities......................................... 50,848 51,473
Mortgage notes payable (Note C)........................... 7,208,979 7,356,494
Partners' deficit........................................... (2,007,187) (1,977,266)
----------- -----------
$ 5,319,976 $ 5,511,627
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE> 1186
CHAPEL HILL, LIMITED
STATEMENT OF OPERATIONS AND CHANGES IN PARTNERS' DEFICIT -- UNAUDITED
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Revenues:
Rental income............................................. $ 2,261,007 $ 2,147,082
Other income.............................................. 154,681 148,711
----------- -----------
Total revenues.................................... 2,415,688 2,295,793
----------- -----------
Expenses:
Operating (Note D)........................................ 1,052,313 960,268
General and administrative (Note D)....................... 86,403 91,477
Depreciation.............................................. 470,549 454,430
Interest.................................................. 674,526 675,042
Property taxes............................................ 158,647 214,367
----------- -----------
Total expenses.................................... 2,442,438 2,395,584
----------- -----------
Net loss.................................................... (26,750) (99,791)
Distributions to partners................................... (3,171) (2,468)
Partners' deficit at beginning of year...................... (1,977,266) (1,875,007)
----------- -----------
Partners' deficit at end of year............................ $(2,007,187) $(1,977,266)
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-8
<PAGE> 1187
CHAPEL HILL, LIMITED
STATEMENT OF CASH FLOWS -- UNAUDITED
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (26,750) $ (99,791)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation........................................... 470,549 454,430
Amortization of discounts and loan costs............... 94,022 79,854
Change in accounts:
Receivables and deposits............................. (18,588) (5,147)
Other assets......................................... (12,130) (1,324)
Accounts payable..................................... (10,331) (35,585)
Tenant security deposit liabilities.................. (3,259) 2,997
Other liabilities.................................... (625) 9,170
--------- ---------
Net cash provided by operating activities......... 492,888 404,604
--------- ---------
Cash flows from investing activities:
Property improvements and replacements.................... (191,869) (163,146)
Net receipts to restricted escrows........................ (12,604) 21,026
--------- ---------
Net cash used in investing activities............. (204,473) (142,120)
--------- ---------
Cash flows from financing activities:
Payments on mortgage notes payable........................ (216,887) (201,062)
Distributions to partners................................. (3,171) (2,468)
--------- ---------
Net cash used in financing activities............. (220,058) (203,530)
--------- ---------
Net increase in cash and cash equivalents................... 68,357 58,954
Cash and cash equivalents at beginning of year.............. 224,194 165,240
--------- ---------
Cash and cash equivalents at end of year.................... $ 292,551 $ 224,194
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 580,503 $ 596,327
========= =========
</TABLE>
See accompanying notes to financial statements.
F-9
<PAGE> 1188
CHAPEL HILL, LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996 -- UNAUDITED
NOTE A -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Chapel Hill, Limited (the "Partnership") was organized as a limited
partnership under the laws of the State of Tennessee pursuant to a Limited
Partnership Agreement and Certificate of Limited Partnership dated January 24,
1975. The Partnership owns and operates Chapel Woods Townhouses a 140 townhouse
complex, and Chapel Hill Apartments, a 148 unit apartment complex, both located
in Indianapolis, Indiana.
The Partnership's Managing General Partner is Davidson Properties, Inc., an
affiliate of Insignia Financial Group, Inc. ("Insignia"). The property is
managed by Insignia Residential Group, an affiliate of Insignia.
On March 17, 1998, Insignia Financial Group, Inc., an affiliate of the
corporate general partner of the Partnership, entered into an agreement to merge
its national residential property management operations and its controlling
interest in Insignia Properties Trust, with Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust. The merger
was completed effective October 1, 1998, and accordingly, as of that date AIMCO
acquired the corporate general partner and the company that manages the
Partnership.
Income Taxes
On the basis of Treasury Regulations, the general partners believe that the
Partnership will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss and cash distributions of the
Partnership are allocated in accordance with the partnership agreement and the
Internal Revenue Code and are reportable in the income tax returns of its
partners.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Depreciation
Depreciation is computed principally by use of the straight-line method
based upon the estimated useful lives of various classes of assets; buildings
are depreciated over 25 years and personal property assets are depreciated over
a 5 to 15 year period.
Other Assets
Other assets at December 31, 1997 and 1996 include deferred loan costs of
$121,706 and $146,355, respectively, which are amortized over the term of the
related borrowing. They are shown net of accumulated amortization.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Partnership considers
unrestricted cash and unrestricted highly liquid investments, with an original
maturity of three months or less when purchased, to be cash and cash
equivalents.
F-10
<PAGE> 1189
CHAPEL HILL, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996 -- UNAUDITED
Tenant Security Deposits
The Partnership requires security deposits from lessees for the duration of
the lease and such deposits are included in receivables and deposits. The
security deposits are refunded when the tenant vacates, provided the tenant has
not damaged its space and is current on its rental payments.
NOTE B -- RESTRICTED ESCROWS
Restricted escrow deposits at December 31, 1997 and 1996 were $306,639 and
$294,035, respectively, and consist of a reserve escrow established with a
portion of the proceeds of the loan. The funds are used for certain repair work,
debt service, expenses and property taxes or insurance. The funds in the reserve
escrow exceed the minimum balance required to be maintained by the lender during
the term of the loan.
NOTE C -- MORTGAGE NOTES PAYABLE
Mortgage notes payable at December 31, 1997 and 1996 consist of the
following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
First mortgage note payable in monthly installments of
$64,840, including interest at 7.60%, due November 2002;
collateralized by land and buildings...................... $7,265,278 $7,482,165
Second mortgage note payable in interest only monthly
installments of $1,609, at a rate of 7.60% with principal
due November 2002; collateralized by land and buildings... 254,085 254,085
---------- ----------
Principal balance at year end............................... 7,519,363 7,736,250
Less unamortized discount................................... (310,384) (379,756)
$7,208,979 $7,356,494
========== ==========
</TABLE>
Scheduled principal payments of the mortgage notes during the years
subsequent to December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998.................................................... $ 233,957
1999.................................................... 252,370
2000.................................................... 272,232
2001.................................................... 293,659
2002.................................................... 6,467,145
----------
$7,519,363
==========
</TABLE>
The principal balance of the mortgage notes may be prepaid in whole upon
payment of a penalty of the greater of one percent of the unpaid principal
balance at the time of prepayment or the present value of the excess of interest
which would be incurred at the stated rate under the notes over the interest
which would be incurred at the Treasury constant maturity for U.S. Government
obligations.
NOTE D -- TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no administrative or management employees and is
dependent on the Managing General Partner and its affiliates for the management
and administration of all partnership activities. The Partnership is obligated
to pay a property management fee equal to 5% of gross monthly collections. In
F-11
<PAGE> 1190
CHAPEL HILL, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996 -- UNAUDITED
addition to the management fee, the partnership agreement provides for payments
to affiliates of a partnership administration fee and reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
Transactions with the Managing General Partner and its affiliates are as
follows:
<TABLE>
<CAPTION>
1997 1996
TYPE OF TRANSACTION AMOUNT AMOUNT
------------------- -------- --------
<S> <C> <C>
Management fee.................................. $119,469 $116,896
Partnership administration fee.................. $ 48,000 $ 48,000
Reimbursement for services to affiliates........ $ 36,247 $ 33,048
Construction oversight fee...................... $ 649 $ --
</TABLE>
F-12
<PAGE> 1191
PRO FORMA FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
AS OF SEPTEMBER 30, 1998 AND FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1998
INTRODUCTION
On October 1, 1998, Apartment Investment and Management Company ("AIMCO")
completed its merger with Insignia Financial Group ("IFG") ("the IFG Merger").
In the IFG Merger, IFG's common stock was converted into 8,423,751 shares of
Class E Cumulative Convertible Preferred Stock of AIMCO ("Class E Preferred
Stock") whose issue date market value approximately equaled $292 million. In
addition to receiving the same dividends as holders of AIMCO Common Stock,
holders of Class E Preferred Stock will be entitled to a special dividend of
approximately $50 million in the aggregate. When that special dividend is paid
in full, the Class E Preferred Stock will automatically convert into AIMCO
Common Stock on a one-for-one basis, subject to antidilution adjustments, if
any. In addition, AIMCO assumed approximately $411 million in indebtedness and
other liabilities of IFG and its subsidiaries and subsidiaries of AIMCO, assumed
approximately $149.5 million of convertible securities and purchased
approximately $5 million of IFG stock prior to the Merger. AIMCO and Insignia
Properties Trust ("IPT") have completed a merger in which IPT has merged into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). In the IPT Merger, shares of
IPT common stock not held by AIMCO were converted into 4,826,745 shares of AIMCO
Class A Common Stock whose market value approximately equaled $152 million.
AIMCO assumed approximately $68 million in indebtedness. In connection with the
IFG Merger and the IPT Merger, AIMCO incurred approximately $55 million in
transaction costs for a combined transactional value of approximately $1,183
million. AIMCO contributed substantially all the assets and liabilities of
Insignia acquired in the Insignia Merger to AIMCO Properties, L.P. (together
with its subsidiaries and other controlled entities, the "Partnership") (and
together with entities in which that Partnership has a controlling financial
interest, the "Company") in exchange for 8,423,751 Class E Preferred Units. The
Class E Preferred Units have terms substantially the same as the Class E
Preferred Stock. In addition, AIMCO has contributed substantially all the assets
and liabilities of IPT acquired in the IPT Merger to the Partnership in exchange
for 4,826,745 limited partnership units in the Partnership ("OP Units"). In
connection with the IFG Merger, the Partnership assumed property management of
approximately 192,000 multifamily units which consist of general and limited
partnership investments in 115,000 units and third party management of 77,000
units. Insignia Properties Trust ("IPT"), which prior to the IFG Merger was a
subsidiary of IFG, owns a 32% weighted average general and limited partnership
interest in approximately 51,000 units.
Immediately following the IFG Merger, in order to satisfy certain
requirements of the Internal Revenue Code of 1986 (the "Code") applicable to
AIMCO's status as a REIT, AIMCO engaged in a reorganization (the "IFG
Reorganization") of the assets and operations of IFG whereby IFG's operations
are being conducted through corporations (the "Unconsolidated Subsidiaries") in
which the Partnership holds non-voting preferred stock that represents a 95%
economic interest, and certain officers and/or directors of AIMCO hold, directly
or indirectly, all of the voting common stock, representing a 5% economic
interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
In May and September of 1997, AIMCO directly or indirectly through a
subsidiary, acquired (the "NHP Stock Purchase") an aggregate of 6,930,122 shares
of common stock ("NHP Common Stock") of NHP. On December 8, 1997, AIMCO acquired
the remaining shares of NHP Common Stock in a merger transaction accounted for
as a purchase (the "NHP Merger"). As a result of the NHP Merger, AIMCO issued
6,759,148 shares of AIMCO Common Stock, valued at $180.8 million, and paid $86.5
million in cash. The total cost of the purchase of NHP was $349.5 million.
Substantially all assets and liabilities of NHP were contributed by AIMCO to the
Partnership.
In June 1997, the Company purchased a group of companies (the "NHP Real
Estate Companies") affiliated with NHP that hold general and limited partnership
interests in partnerships (the "NHP
P-1
<PAGE> 1192
Partnerships") that own 534 conventional and affordable multifamily apartment
properties (the "NHP Properties") containing 87,659 units, a captive insurance
subsidiary and certain related assets (the "NHP Real Estate Acquisition"). The
Company paid aggregate consideration of $54.8 million in cash and warrants that
entitle the holders to purchase 399,999 shares of AIMCO Common Stock at an
exercise price of $36.00 per share. The Company engaged in a reorganization (the
"NHP Real Estate Reorganization") of its interests in the NHP Real Estate
Companies, which resulted in certain of the assets of the NHP Real Estate
Companies being owned by a limited partnership (the "Unconsolidated
Partnership") in which the Partnership holds 99% limited partner interest and
certain directors and officers of AIMCO directly or indirectly, hold a 1%
general partner interest.
Immediately following the NHP Merger, in order to satisfy certain
requirements of the Code applicable to AIMCO's status as a REIT, AIMCO engaged
in a reorganization (the "NHP Reorganization") of the assets and operations of
NHP that resulted in the Master Property Management Agreement being terminated
and NHP's operations being conducted through Unconsolidated Subsidiaries in
which the AIMCO Operating Partnership holds non-voting preferred stock that
represents a 95% economic interest, and certain officers and/or directors of
AIMCO hold, directly or indirectly, all of the voting common stock, representing
a 5% economic interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
On May 8, 1998, AIMCO completed a merger with Ambassador Apartments, Inc.
("Ambassador"), pursuant to which Ambassador was merged into AIMCO (the
"Ambassador Merger"). Each outstanding share of stock ("Ambassador Common
Stock") of Ambassador, other than those shares held by AIMCO or Ambassador, were
converted into 0.553 (the "Conversion Ratio") shares of AIMCO Common Stock. Any
outstanding options to purchase Ambassador Common Stock were converted, at the
election of the option holder, into cash or options to purchase AIMCO Common
Stock at such options' then current exercise price divided by the Conversion
Ratio. In accordance with the Agreement and Plan of Merger, dated December 23,
1997 and supplemented by letter dated as of March 11, 1998 (the "Ambassador
Merger Agreement"), the outstanding shares of Class A Senior Cumulative
Convertible Preferred Stock of Ambassador, (the "Ambassador Preferred Stock")
were redeemed and converted into Ambassador Common Stock prior to the Ambassador
Merger. Following the consummation of the Ambassador Merger, a subsidiary of the
Partnership was merged with and into the Ambassador Operating Partnership (the
"Ambassador OP Merger"). Each outstanding unit of limited partnership interest
in the Ambassador Operating Partnership was converted into the right to receive
0.553 OP Units, and as a result, the Ambassador Operating Partnership became a
99.9% owned subsidiary partnership of the Partnership.
Also during 1997, the Partnership (i) (a) acquired 44 properties for
aggregate purchase consideration of $467.4 million, of which $56 million was
paid in the form of 1.9 million OP Units (b) paid $34.2 million in cash and
issued OP Units valued at $7.3 million in connection with the acquisition of
partnership interests through tender offers in certain partnerships ((a) and (b)
together are the "1997 Property Acquisitions") and (c) paid $19.9 million to
acquire 886,600 shares of Ambassador Common Stock (together with the 1997
Property Acquisitions, the "1997 Acquisitions"); (ii) sold (a) approximately
16,367,000 shares of AIMCO Common Stock for aggregate net proceeds of $513.4
million; (b) 750,000 shares of AIMCO Class B Cumulative Convertible Preferred
Stock for net proceeds of $75 million; and (c) 2,400,000 shares of AIMCO Class C
9% Cumulative Preferred Stock for net proceeds of $58.1 million; of which all
proceeds were contributed by AIMCO to the Partnership in exchange for 16,367,000
OP Units, 750,000 Class B Preferred Units, and 2,400,000 Class C Preferred Units
(collectively, the "1997 Stock Offerings"); and (iii) sold five real estate
properties (the "1997 Dispositions").
Also during 1998, AIMCO (i) (a) sold 4,200,000 shares of its Class D
Cumulative Preferred Stock for net proceeds of $101.5 million (the "Class D
Preferred Stock Offering"); (b) sold 4,050,000 shares of its Class G Cumulative
Preferred Stock for net proceeds of $98.0 million (the "Class G Preferred Stock
Offering"); (c) sold 2,000,000 shares of its Class H Cumulative Preferred Stock
for net proceeds of $48.1 million (the "Class H Preferred Stock Offering"); and
(d) sold 1,000,000 shares of its Class J Cumulative Convertible Preferred Stock
in a private placement for $100.0 million (the "Class J Preferred
P-2
<PAGE> 1193
Stock Offering"); of which all proceeds were contributed by AIMCO to the
Partnership in exchange for 4,050,000 Class G Preferred Units, 2,000,000 Class H
Preferred Units and 1,000,000 shares of Class J Preferred Units (collectively,
the "1998 Stock Offerings"); (ii) purchased 29 properties for aggregate purchase
consideration of $312.7 million, of which $52.2 million was paid in the form of
OP Units (the "1998 Acquisitions"); (iii) sold two real estate properties (the
"1998 Dispositions"); (iv) contracted to purchase two properties for aggregate
purchase consideration of $62.1 million, of which $26.4 million will be paid in
the form of OP units (the "Probable Purchases") and (v) sold 1,400,000 Class B
Preferred Partnership Units of a subsidiary and warrants to purchase 875,000
shares of AIMCO Class A Common Stock for $35.0 million (the "Preferred
Partnership Unit Offering").
PRO FORMA FINANCIAL INFORMATION OF THE PARTNERSHIP (INSIGNIA MERGER)
The following Pro Forma Consolidated Balance Sheet (Insignia Merger) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) the purchase
of nine properties for an aggregate purchase price of $62.5 million; (ii) the
Class J Preferred Stock Offering; (iii) the Probable Purchases; (iv) the IFG
Merger; (v) the IPT Merger; (vi) the IFG Reorganization; and (vii) the Preferred
Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) the
1997 Acquisitions; (ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions;
(iv) the NHP Real Estate Acquisition; (v) the NHP Real Estate Reorganization;
(vi) the NHP Stock Purchase; (vii) the NHP Merger; (viii) the NHP
Reorganization; (ix) the 1998 Stock Offerings; (x) the 1998 Acquisitions; (xi)
the Probable Purchases; (xii) the 1998 Dispositions; (xiii) the Ambassador
Merger; (xiv) the IFG Merger; (xv) the merger between IPT and Angeles Mortgage
Investment Trust ("AMIT") ("the AMIT Merger"); (xvi) the IPT Merger; (xvii) the
IFG Reorganization; and (xviii) the Preferred Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1997: (i)
the 1998 Stock Offerings; (ii) the 1998 Acquisitions; (iii) the Probable
Purchases; (iv) the 1998 Dispositions; (v) the Ambassador Merger; (vi) the IFG
Merger; (vii) the AMIT Merger; (viii) the IPT Merger; (ix) the IFG
Reorganization; and (x) the Preferred Partnership Unit offering.
The following Pro Forma Financial Information (Insignia Merger) is based,
in part, on the following historical financial statements: (i) the audited
Consolidated Financial Statements of the Partnership for the year ended December
31, 1997; (ii) the unaudited Consolidated Financial Statements of the
Partnership for the nine months ended September 30, 1998; (iii) the audited
Consolidated Financial Statements of Ambassador for the year ended December 31,
1997; (iv) the unaudited Consolidated Financial Statements of Ambassador for the
four months ended April 30, 1998; (v) the audited Consolidated Financial
Statements of IFG for the year ended December 31, 1997; (vi) the audited
Consolidated Financial Statements of AMIT for the year ended December 31, 1997;
(vii) the unaudited Consolidated Financial Statements of IFG for the nine months
ended September 30, 1998; (viii) the unaudited Financial Statements of AMIT for
the period from January 1, 1998 to September 17, 1998; (ix) the unaudited
Consolidated Financial Statements of NHP for the nine months ended September 30,
1997; (x) the unaudited Combined Financial Statements of the NHP Real Estate
Companies for the three months ended March 31, 1997; (xi) the unaudited
Financial Statements of NHP Southwest Partners, L.P. for the three months ended
March 31, 1997; (xii) the unaudited Combined Financial Statements of the NHP New
LP Entities for the three months ended March 31, 1997; (xiii) the unaudited
Combined Financial Statements of the NHP Borrower Entities for the three months
ended March 31, 1997; (xiv) the unaudited Historical Summaries of Gross Income
and Certain Expenses of The Bay Club at Aventura for the three months ended
March 31, 1997; (xv) the unaudited Historical Summary of Gross Income and Direct
Operating Expenses of Morton Towers for the six months ended June 30, 1997;
(xvi) the unaudited Combined Statement of Revenues and Certain Expenses of the
Thirty-Five Acquisition Properties for the six months ended June 30, 1997;
(xvii) the unaudited Statement of
P-3
<PAGE> 1194
Revenues and Certain Expenses of First Alexandria Associates, a Limited
Partnership for the nine months ended September 30, 1997; (xviii) the unaudited
Statement of Revenues and Certain Expenses of Country Lakes Associates Two, a
Limited Partnership for the nine months ended September 30, 1997; (xix) the
unaudited Statement of Revenues and Certain Expenses of Point West Limited
Partnership, A Limited Partnership for the nine months ended September 30, 1997;
(xx) the unaudited Statement of Revenues and Certain Expenses for The Oak Park
Partnership for the nine months ended September 30, 1997; (xxi) the audited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the year ended December 31, 1997,
(xxii) the audited Combined Historical Summary or Gross Income and Direct
Operating Expenses of the Cirque Apartment Communities for the year ended
December 31, 1997; (xxiii) the audited Combined Historical Summary of Gross
Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the year ended December 31, 1997; (xxiv) the audited
Historical Summary of Gross Income and Direct Operating Expenses of the Calhoun
Beach Club Apartments for the year ended December 31, 1997; (xxv) the unaudited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the nine months ended September
30, 1998; (xxvi) the unaudited Combined Historical Summary of Gross Income and
Direct Operating Expenses of the Cirque Apartment Communities for the three
months ended March 31, 1998; (xxvii) the unaudited Combined Historical Summary
of Gross Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the nine months ended September 30, 1998; and (xxviii) the
unaudited Historical Summary of Gross Income and Direct Operating Expenses of
Calhoun Beach Club Apartments for the nine months ended September 30, 1998. The
following Pro Forma Financial Information should be read in conjunction with
such financial statements and the notes thereto incorporated by reference
herein.
The unaudited Pro Forma Financial Information (Insignia Merger) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
1997 Acquisitions, the 1998 Acquisitions, and the Probable Purchases are
adjusted to estimated fair market value, based upon preliminary estimates, which
are subject to change as additional information is obtained. The allocations of
purchase costs are subject to final determination based upon estimates and other
evaluations of fair market value. Therefore, the allocations reflected in the
following unaudited Pro Forma Financial Information may differ from the amounts
ultimately determined.
The following unaudited Pro Forma Financial Information (Insignia Merger)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions or results of
operations. In the opinion of the Partnership's management, all material
adjustments necessary to reflect the effects of these transactions have been
made.
P-4
<PAGE> 1195
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS IFG AIMCO BEFORE IFG
AND PROBABLE IFG MERGER IFG REORGANIZATION
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) REORGANIZATION(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Real estate.............. $2,355,122 $202,332 $ 44,488 $ 23,880(G) $2,625,822 $ --
Property held for sale... 42,212 -- -- -- 42,212 --
Investments in
securities............. -- -- -- 443,513(G)
(443,513)(H) -- --
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 127,082 -- -- -- 127,082 59,195(I)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 246,847 -- 232,892 444,570(G) 924,309 --
Mortgage notes
receivable............. -- -- 20,916 -- 20,916
Cash and cash
equivalents............ 43,681 6,107 73,064 -- 122,852 (17,897)(J)
Restricted cash.......... 83,187 -- 2,691 -- 85,878 (1,352)(J)
Accounts receivable...... 11,545 -- 54,060 (32,234)(G) 33,371 (5,471)(J)
Deferred financing
costs.................. 21,835 -- 7,020 (7,020)(G) 21,835 --
Goodwill................. 120,503 -- 19,503 111,018(G) 251,024 --
Property management
contracts.............. -- -- 86,419 31,147(G) 117,566 (79,195)(I)
Other assets............. 69,935 -- 20,128 (4,533)(G) 85,530 (2,860)(J)
---------- -------- -------- --------- ---------- --------
Total Assets..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
Secured notes payable.... $ 774,676 $122,568 $ 29,002 $ -- $ 926,246 $ --
Secured tax-exempt bond
financing.............. 399,925 -- -- -- 399,925 --
Secured short-term
financing.............. 50,000 (50,000) 332,691 (300,000)(G) 32,691 --
Unsecured short-term
financing.............. 50,800 (50,800) -- 300,000(G) 300,000 --
Accounts payable, accrued
and other
liabilities............ 131,799 -- 33,241 50,000(G)
53,333(G)
4,935(G)
2,525(G) 275,833 (27,580)(J)
Deferred tax liability... -- -- 18,802 1,198(G) 20,000 (20,000)(I)
Security deposits and
prepaid rents.......... 13,171 -- 3,533 (3,533) 13,171 --
---------- -------- -------- --------- ---------- --------
1,420,371 21,768 417,269 108,458 1,967,866 (47,580)
Minority interest........ 42,086 37,345 108,485 (108,485)(G) 79,431 --
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. -- -- 144,282 5,218 149,500 --
Redeemable Partnership
Units.................. 232,405 45,176 -- -- 277,581 --
Partners' capital and
shareholders' equity
Common stock........... -- -- 320 (320)(G) -- --
Additional paid-in
capital.............. -- -- (86,959) 86,959(G) -- --
Distributions in excess
of earnings.......... -- -- (22,216) 22,216(G) -- --
General and Special
Limited Partner...... 1,039,525 4,150 -- 443,513(H)
9,269(G) 1,496,457 --
Preferred Units........ 387,562 100,000 -- -- 487,562 --
---------- -------- -------- --------- ---------- --------
1,427,087 104,150 (108,855) 561,637 1,984,019 --
---------- -------- -------- --------- ---------- --------
Total Liabilities
and Equity..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
<CAPTION>
PRO FORMA
----------
<S> <C>
Real estate.............. $2,625,822
Property held for sale... 42,212
Investments in
securities.............
--
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 186,277(K)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 924,309
Mortgage notes
receivable............. 20,916
Cash and cash
equivalents............ 104,955
Restricted cash.......... 84,526
Accounts receivable...... 27,900
Deferred financing
costs.................. 21,835
Goodwill................. 251,024
Property management
contracts.............. 38,371
Other assets............. 82,670
----------
Total Assets..... $4,410,817
==========
Secured notes payable.... $ 926,246
Secured tax-exempt bond
financing.............. 399,925
Secured short-term
financing.............. 32,691
Unsecured short-term
financing.............. 300,000
Accounts payable, accrued
and other
liabilities............
248,253
Deferred tax liability... --
Security deposits and
prepaid rents.......... 13,171
----------
1,920,286
Minority interest........ 79,431
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. 149,500
Redeemable Partnership
Units.................. 277,581
Partners' capital and
shareholders' equity
Common stock........... --
Additional paid-in
capital.............. --
Distributions in excess
of earnings.......... --
General and Special
Limited Partner......
1,496,457
Preferred Units........ 487,562
----------
1,984,019
----------
Total Liabilities
and Equity..... $4,410,817
==========
</TABLE>
P-5
<PAGE> 1196
- ---------------
(A) Represents the unaudited historical consolidated financial position of the
Partnership as of September 30, 1998.
(B) Represents adjustments to reflect the purchase of ten properties for an
aggregate purchase price of $140.2 million; the Class J Preferred Stock
Offering; the Probable Purchases; and the Preferred Partnership Unit
Offering.
(C) Represents the unaudited historical consolidated financial position of IFG
as of September 30, 1998.
(D) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the issuance of 8,423,751 shares of AIMCO Common Stock, based
on consideration to holders of IFG common stock outstanding as of the date
of the IFG Merger; (ii) the issuance of 4,826,745 shares of AIMCO Class A
Common Stock to holders of IPT common stock (other than AIMCO); (iii) the
payment of a special dividend of $50,000; (iv) the assumption of $149,500
of the convertible debentures of IFG; (v) the allocation of the combined
purchase price of IFG and IPT based on the preliminary estimates of
relative fair market value of the assets and liabilities of IFG and IPT;
and (vi) the contribution by AIMCO of substantially all the assets and
liabilities of Insignia and IPT to the Partnership in exchange for OP
Units.
(E) Represents the effects of AIMCO's acquisition of IFG immediately after the
IFG Merger. These amounts do not give effect to the IFG Reorganization,
which includes the transfers of certain assets and liabilities of IFG to
the combined Unconsolidated Subsidiaries. The IFG Reorganization occurred
immediately after the IFG Merger so that AIMCO could maintain its
qualification as a REIT. This column is included as an intermediate step to
assist the reader in understanding the entire nature of the IFG Merger and
related transactions.
(F) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party property management operations.
The adjustments reflect the transfer of assets valued at the Partnership's
new basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(G) In connection with the IFG Merger and the IPT Merger, AIMCO became
obligated to issue a total of 13,250,496 shares of AIMCO Common Stock
The total purchase price of IFG and IPT is $1,128,009, as follows:
<TABLE>
<S> <C>
Issuance of 8,423,751 shares of AIMCO Common Stock in the
IFG Merger, at $34.658 per share.......................... $ 291,949
Issuance of 4,826,745 shares of AIMCO Common Stock in the
IPT Merger, at $31.50 per share........................... 151,564
Assumption of Convertible Debentures........................ 149,500
Assumption of liabilities as indicated in the Merger
Agreement................................................. 397,459
Transaction costs........................................... 53,333
Generation of deferred tax liability........................ 20,000
Special dividend............................................ 50,000
Purchase of IFG Common Stock prior to merger................ 4,935
Consideration for options................................... 9,269
----------
Total............................................. $1,128,009
==========
</TABLE>
P-6
<PAGE> 1197
The purchase price was allocated to the various assets of IFG acquired in
the IFG Merger, as follows:
<TABLE>
<S> <C>
Purchase price.............................................. $1,128,009
Historical basis of IFG's assets acquired................... (561,181)
----------
Step-up to record the fair value of IFG's assets
acquired............................................... $ 566,828
==========
</TABLE>
This step-up was applied to IFG's assets as follows:
<TABLE>
<S> <C>
Real estate................................................. $ 23,880
Investment in real estate partnerships...................... 444,570
Decrease in accounts receivable............................. (32,234)
Decrease in deferred loan costs............................. (7,020)
Management contracts........................................ 31,147
Increase in goodwill........................................ 111,018
Reduction in value of other assets.......................... (4,533)
--------
Total............................................. $566,828
========
</TABLE>
The fair value of IFG's assets, primarily the real estate and management
contracts, was calculated based on estimated future cash flows of the
underlying assets.
As of September 30, 1998, IFG's stockholder's equity was $(108,855), which
is detailed as follows:
<TABLE>
<S> <C>
Common stock................................................ $ 320
Additional paid-in capital.................................. (86,959)
Distributions in excess of earnings......................... (22,216)
---------
Total............................................. $(108,855)
=========
</TABLE>
Upon completion of the IFG Merger, the entire amount of the stockholder's
equity was eliminated.
In addition, the minority interest in other partnerships of IFG of $108,485
will be eliminated upon the IPT Merger.
At the time of the IFG Merger, AIMCO obtained unsecured short-term
financing of $300 million. The proceeds were used to repay secured
short-term financing of IFG that AIMCO assumed.
(H) Represents the issuance of a total of 13,250,496 OP Units to AIMCO and the
concurrent issuance of 13,250,496 shares of AIMCO Common Stock to IFG and
IPT stockholders, in exchange for all the shares of IFG and IPT common
stock.
In accordance with the IFG Merger Agreement, AIMCO became obligated to
issue 8,423,751 shares of Class E Preferred Stock, approximately equal to
$292 million. Each share of Class E Preferred Stock will automatically
convert to one share of AIMCO Common Stock upon the payment of the special
dividend thereon. As such, for the purpose of preparing the pro forma
financial statements, AIMCO's management believes that the Class E
Preferred Stock is substantially the same as AIMCO Common Stock, and that
the fair value of the Class E Preferred Stock approximates the fair value
of the AIMCO Common Stock. Upon the payment of the special dividend on the
Class E Preferred Stock and the conversion of the Class E Preferred Stock
to AIMCO Common Stock, the former IFG stockholders will own approximately
15.0% of the AIMCO Common Stock and the IPT stockholders will own
approximately 7.3% of AIMCO Common Stock. The special dividend on the Class
E Preferred Stock is intended to represent a distribution in an amount at
least equal to the earnings and profits of IFG at the time of the IFG
Merger, to which AIMCO succeeds.
Concurrent with the issuance of Class E Preferred Stock, the Partnership
will issue comparable Class E Preferred Units to AIMCO. The Class E
Preferred Units will have terms substantially the same as the Class E
Preferred Stock.
(I) Represents the increase in the Partnership's investment in Unconsolidated
Subsidiaries to reflect the contribution or sale of property management
contracts, including the related deferred tax liability, in exchange for
preferred stock and a note payable from the Unconsolidated Subsidiaries.
These assets and
P-7
<PAGE> 1198
liabilities are valued at the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(J) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries,
(K) Represents notes receivable from the Unconsolidated Subsidiaries of
$95,000, advances to the Unconsolidated Subsidiaries of $42,792, and equity
in the Unconsolidated Subsidiaries of $48,485. The combined pro forma
balance sheet of the Unconsolidated Subsidiaries as of September 30, 1998
is presented below, which reflects the effects of the IFG Merger, the IPT
Merger, and the IFG Reorganization as if such transactions had occurred as
of September 30, 1998.
P-8
<PAGE> 1199
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
IFG
HISTORICAL REORGANIZATION(I) PRO FORMA
---------- ----------------- ---------
<S> <C> <C> <C>
ASSETS
Real estate............................................ $ 22,376 $ -- $ 22,376
Cash and cash equivalents.............................. 16,919 17,897(ii) 34,816
Restricted cash........................................ 5,507 1,352(ii) 6,859
Management contracts................................... 47,846 79,195(iii) 127,041
Accounts receivable.................................... 13,109 5,471(ii) 18,580
Deferred financing costs............................... 3,117 -- 3,117
Goodwill............................................... 43,544 -- 43,544
Other assets........................................... 51,498 2,860(ii) 54,358
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable.................................. $114,302 $ 45,000(iii) $159,302
Accounts payable, accrued and other liabilities........ 56,773 27,580(ii) 84,353
Security deposits and deferred income.................. 334 --(ii) 334
Deferred tax liability................................. -- 20,000(iii) 20,000
-------- -------- --------
171,409 92,580 263,989
Common stock........................................... 2,061 747(iv) 2,808
Preferred stock........................................ 34,290 14,195(iii) 48,485
Retained earnings...................................... (3,844) -- (3,844)
Notes receivable on common stock purchases............. -- (747)(iv) (747)
-------- -------- --------
32,507 14,195 46,702
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
</TABLE>
- ---------------
(i) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the transfer of assets valued at the Partnership's new
basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(ii) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries, valued at the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(iii)Represents the transfer or sale of management contracts, the establishment
of an intercompany note, and the establishment of the related estimated net
deferred Federal and state tax liabilities at a combined rate of 40% for
the estimated difference between the book and tax basis of the net assets
of the Unconsolidated Subsidiaries. The primary component of the deferred
tax liability is the difference between the new basis of the property
management contracts, as a result of the allocation of the purchase price
of IFG, and the historical tax basis.
(iv) Represents the issuance of common stock to the common stockholders of the
Unconsolidated Subsidiaries in exchange for notes receivable, in order for
the common stockholders to maintain their respective ownership interest in
the Unconsolidated Subsidiaries.
P-9
<PAGE> 1200
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE NHP AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rental and other property
revenues........................ $193,006 $120,337(I)
11,012(J) $ 6,660 $ 93,329 $ -- $ 6,912
Property operating expenses....... (76,168) (59,466)(I)
(4,860)(J) (2,941) (36,088) -- (3,307)
Owned property management
expense......................... (6,620) (4,327)(I)
(602)(J) (282) -- -- --
Depreciation...................... (37,741) (26,645)(I)
(2,172)(J) (1,414) (18,979) (5,997)(O) (966)
-------- -------- ------- -------- ------- --------
Income from property operations... 72,477 33,277 2,023 38,262 (5,997) 2,639
-------- -------- ------- -------- ------- --------
Management fees and other
income.......................... 13,937 -- 7,813 -- -- 94,330
Management and other expenses..... (9,910) -- (5,394) -- -- (57,615)
Corporate overhead allocation..... (588) -- -- -- -- --
Amortization...................... (1,401) -- (5,800) -- -- (16,768)
-------- -------- ------- -------- ------- --------
Income from service company
business........................ 2,038 -- (3,381) -- -- 19,947
Minority interest in service
company business................ (10) -- -- -- -- --
-------- -------- ------- -------- ------- --------
AIMCO's share of income from
service company business........ 2,028 -- (3,381) -- -- 19,947
-------- -------- ------- -------- ------- --------
General and administrative
expenses........................ (5,396) -- (1,025) (7,392) 7,392(P) (21,199)
Interest expense.................. (51,385) (3,451)(K)
(2,497)(L) (5,462) (26,987) (221)(Q) (9,035)
Interest income................... 8,676 -- 1,900 -- -- 10,967
Minority interest................. 1,008 458(M) 16 (851) 705(R) (12,871)
Equity in losses of unconsolidated
partnerships.................... (1,798) (122)(N) (8,542) 405 -- 12,515
Equity in earnings of
unconsolidated subsidiaries..... 4,636 -- 5,790 -- -- --
-------- -------- ------- -------- ------- --------
Income (loss) from operations..... 30,246 27,665 (8,681) 3,437 1,879 2,963
Income tax provision.............. -- -- -- -- -- 1,701
Gain on dispositions of
property........................ 2,720 (2,720) -- -- -- 80
-------- -------- ------- -------- ------- --------
Income (loss) before extraordinary
item............................ 32,966 24,945 (8,681) 3,437 1,879 4,744
Extraordinary item -- early
extinguishment of debt.......... (269) 269 -- -- -- --
-------- -------- ------- -------- ------- --------
Net income........................ 32,697 25,214 (8,681) 3,437 1,879 4,744
Income attributable to preferred
unitholders..................... 2,315 39,859 -- -- -- --
-------- -------- ------- -------- ------- --------
Income attributable to common
unitholders..................... $ 30,382 $(14,645) $(8,681) $ 3,437 $ 1,879 $ 4,744
======== ======== ======= ======== ======= ========
Basic earnings per OP unit........ $ 1.09
========
Diluted earnings per OP unit...... $ 1.08
========
Weighted average OP units
outstanding..................... 27,732
========
Weighted average OP units and
equivalents outstanding......... 28,113
========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(G) ADJUSTMENTS(H) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property
revenues........................
$ -- $ -- $ 431,256
Property operating expenses.......
-- -- (182,830)
Owned property management
expense.........................
-- -- (11,831)
Depreciation......................
(2,350)(S) -- (96,264)
-------- -------- ---------
Income from property operations... (2,350) -- 140,331
-------- -------- ---------
Management fees and other
income.......................... -- (74,404)(X) 41,676
Management and other expenses..... -- 49,236(X) (23,683)
Corporate overhead allocation..... -- -- (588)
Amortization...................... (32,699)(T) 30,188(Y) (26,480)
-------- -------- ---------
Income from service company
business........................ (32,699) 5,020 (9,075)
Minority interest in service
company business................ -- -- (10)
-------- -------- ---------
AIMCO's share of income from
service company business........ (32,699) 5,020 (9,085)
-------- -------- ---------
General and administrative
expenses........................ -- 6,249(X) (21,371)
Interest expense..................
(14,750) -- (113,788)
Interest income................... -- 191(Z) 21,734(BB)
Minority interest................. 1,552(U) -- (9,983)
Equity in losses of unconsolidated
partnerships.................... (29,995)(V) -- (27,537)
Equity in earnings of
unconsolidated subsidiaries..... -- (4,578)(AA) 5,848(DD)
-------- -------- ---------
Income (loss) from operations..... (78,242) 6,882 (13,851)
Income tax provision.............. (1,701)(W) -- --
Gain on dispositions of
property........................ (80) -- --
-------- -------- ---------
Income (loss) before extraordinary
item............................ (80,023) 6,882 (13,851)
Extraordinary item -- early
extinguishment of debt.......... -- -- --
-------- -------- ---------
Net income........................ (80,023) 6,882 (13,851)
Income attributable to preferred
unitholders..................... -- -- 42,174(CC)
-------- -------- ---------
Income attributable to common
unitholders..................... $(80,023) $ 6,882 $ (56,025)(BB)
======== ======== =========
Basic earnings per OP unit........ $ (0.83)(BB)
=========
Diluted earnings per OP unit...... $ (0.83)(BB)
=========
Weighted average OP units
outstanding..................... 67,522
=========
Weighted average OP units and
equivalents outstanding......... 68,366
=========
</TABLE>
P-10
<PAGE> 1201
- ---------------
(A) Represents the Partnership's audited consolidated results of operations
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1997: (i) the 1997 Acquisitions; (ii) the 1997 Stock
Offerings; (iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings;
(v) the 1998 Acquisitions; (vi) the Probable Purchases; (vii) the 1998
Dispositions; and (v) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues................. $ 6,660(v) $ 16,842 $ -- $(16,842)(xvii) $ 6,660
Property operating
expenses................. (2,941)(v) (8,411) -- 8,411 (xvii) (2,941)
Owned property management
expense.................. (282)(v) (862) -- 862 (xvii) (282)
Depreciation............... (1,414)(vi) (2,527) (693)(xi) 3,220 (xvii) (1,414)
------- -------- ------- -------- -------
Income from property
operations............... 2,023 5,042 (693) (4,349) 2,023
------- -------- ------- -------- -------
Management fees and other
income................... 1,405(vii) 72,176 -- (65,768)(xviii) 7,813
Management and other
expenses................. (2,263)(viii) (35,267) -- 32,136 (xviii) (5,394)
Amortization............... -- (9,111) (4,432)(xii) 7,743 (xix) (5,800)
------- -------- ------- -------- -------
Income from service company
business................. (858) 27,798 (4,432) (25,889) (3,381)
------- -------- ------- -------- -------
General and administrative
expenses................. -- (16,266) 8,668 (xiii) 6,573 (xviii) (1,025)
Interest expense........... (5,082)(ix) (10,685) -- 10,305 (xx) (5,462)
Interest income............ 540(v) 1,963 -- (603)(xxi) 1,900
Minority interest.......... 16(v) -- -- -- 16
Equity in losses of
unconsolidated
partnerships............. (3,905)(x) -- (4,631)(xiv) (6) (8,542)
Equity in earnings of
unconsolidated
subsidiaries............. -- -- (4,636)(xv) 10,426 (xxii) 5,790
------- -------- ------- -------- -------
Income (loss) from
operations............... (7,266) 7,852 (5,724) (3,543) (8,681)
Income tax provision....... -- (3,502) 3,502 (xvi) -- --
------- -------- ------- -------- -------
Net income (loss).......... $(7,266) $ 4,350 $(2,222) $ (3,543) $(8,681)
======= ======== ======= ======== =======
</TABLE>
- ---------------
(i) Represents the adjustment to record activity from January 1, 1997 to
the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. The historical
financial statements of the NHP Real Estate Companies consolidate
certain real estate partnerships in which they have an interest that
will be presented on the equity method by the Partnership as a
result of the NHP Real Estate Reorganization. In addition,
represents adjustments to record additional depreciation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest
expense incurred in connection with borrowings incurred by the
Partnership to consummate the NHP Real Estate Acquisition.
(ii)Represents the unaudited consolidated results of operations of NHP
for the period from January 1, 1997 through December 8, 1997 (date
of the NHP Merger).
P-11
<PAGE> 1202
(iii)
Represents the following adjustments occurring as a result of the
NHP Merger: (i) the reduction in personnel costs, primarily
severance costs, pursuant to a restructuring plan; (ii) the
incremental depreciation of the purchase price adjustment related to
real estate; (iii) the incremental amortization of the purchase
price adjustment related to the management contracts, furniture,
fixtures and equipment, and goodwill; (iv) the reversal of equity in
earnings of NHP during the pre-merger period when the Partnership
held a 47.62% interest in NHP; and (v) the amortization of the
increased basis in investments in real estate partnerships based on
the purchase price adjustment related to real estate and an
estimated average life of 20 years.
(iv)Represents adjustments related to the NHP Reorganization, whereby
the Partnership contributed or sold to the Unconsolidated
Subsidiaries and the Unconsolidated Partnership: (i) certain assets
and liabilities of NHP, primarily related to the management
operations and other businesses owned by NHP and (ii) 12 real estate
properties containing 2,905 apartment units. The adjustments
represent (i) the related revenues and expenses primarily related to
the management operations and other businesses owned by NHP and (ii)
the historical results of operations of such real estate
partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis
resulting from the allocation of the combined purchase price of NHP
and the NHP Real Estate Companies.
(v) Represents adjustments to reflect the acquisition of the NHP Real
Estate Companies and the corresponding historical results of
operations as if they had occurred on January 1, 1997.
(vi)Represents incremental depreciation related to the consolidated real
estate assets purchased from the NHP Real Estate Companies.
Buildings and improvements are depreciated on the straight-line
method over a period of 30 years, and furniture and fixtures are
depreciated on the straight-line method over a period of 5 years.
(vii)
Represents the adjustment to record the revenues from ancillary
businesses purchased from the NHP Real Estate Companies as if the
acquisition had occurred on January 1, 1997.
(viii)
Represents $4,878 related to the adjustment to record the expenses
from ancillary businesses purchased from the NHP Real Estate
Companies as if the acquisition had occurred on January 1, 1997,
less $2,615 related to a reduction in personnel costs pursuant to a
restructuring plan, approved by the Company's senior management,
assuming that the acquisition of the NHP Real Estate Companies had
occurred on January 1, 1997 and that the restructuring plan was
completed on January 1, 1997. The restructuring plan specifically
identifies all significant actions to be taken to complete the
restructuring plan, including the reduction of personnel, job
functions, location and the date of completion.
(ix)Represents adjustments in the amount of $3,391 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as the increase in interest expense in the amount
of $1,691 related to borrowings on the Partnership's credit
facilities of $55,807 to finance the NHP Real Estate Acquisition.
(x) Represents adjustments in the amount of $2,432 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as amortization of $1,473 related to the increased
basis in investment in real estate partnerships, as a result of the
allocation of the purchase price of the NHP Real Estate Companies,
based on an estimated average life of 20 years.
(xi)Represents incremental depreciation related to the real estate
assets purchased from NHP. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years,
and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(xii)
Represents incremental depreciation and amortization of the tangible
and intangible assets related to the property management and other
business operated by the Unconsolidated
P-12
<PAGE> 1203
Subsidiaries, based on the Partnership's new basis as adjusted by
the allocation of the combined purchase price of NHP including
amortization of management contracts of $3,782, depreciation of
furniture, fixtures and equipment of $2,018 and amortization of
goodwill of $7,743, less NHP's historical depreciation and
amortization of $9,111. Management contracts are amortized using the
straight-line method over the weighted average life of the contracts
estimated to be approximately 15 years. Furniture, fixtures and
equipment are depreciated using the straight-line method over the
estimated life of 3 years. Goodwill is amortized using the
straight-line method over 20 years.
(xiii)
Represents a reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan, approved by the Company's
senior management, specifically identifying all significant actions
to be taken to complete the restructuring plan, assuming that the
NHP Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997.
(xiv)
Represents adjustment for amortization of the increased basis in
investments in real estate partnerships, as a result of the
allocation of the combined purchase price of NHP and the NHP Real
Estate Companies, based on an estimated average life of 20 years.
(xv)Represents the reversal of equity in earnings in NHP during the
pre-merger period when the Partnership held a 47.62% interest in
NHP, as a result of the Partnership's acquisition of 100% of the NHP
Common Stock.
(xvi)
Represents the reversal of NHP's income tax provision due to the
restructuring of the management business to the Unconsolidated
Subsidiaries.
(xvii)
Represents the contribution of NHP's 12 real estate properties
containing 2,905 apartment units to the Unconsolidated Partnership
pursuant to the NHP Reorganization.
(xviii)
Represents the historical income and expenses associated with
certain assets and liabilities of NHP that were contributed or sold
to the Unconsolidated Subsidiaries, primarily related to the
management operations and other businesses owned by NHP.
(xix)
Represents the amortization and depreciation of certain management
contracts and other assets of NHP, based on the Partnership's new
basis resulting from the allocation of the purchase price of NHP,
that will be contributed or sold to the Unconsolidated Subsidiaries,
primarily related to the management operations and other businesses
owned by NHP.
(xx)Represents interest expense of $6,020 related to the contribution of
NHP's 12 real estate properties containing 2,905 apartment units to
the Unconsolidated Partnership and interest expense of $4,285
related to the certain assets and liabilities that will be
contributed or sold to the Unconsolidated Subsidiaries pursuant to
the NHP Reorganization.
(xxi)
Represents the interest income of $5,000 earned on notes payable of
$50,000 to the Partnership issued as consideration for certain
assets and liabilities sold to the Unconsolidated Subsidiaries by
the Partnership, net of the elimination of the Partnership's share
of the related interest expense of $4,750 reflected in the equity in
earnings of the Unconsolidated Subsidiaries operating results,
offset by $853 in interest income primarily related to the
management operations and other businesses owned by NHP contributed
or sold to the Unconsolidated Subsidiaries pursuant to the NHP
Reorganization.
(xxii)
Represents the Partnership's equity in earnings of the
Unconsolidated Subsidiaries.
(D) Represents the audited historical statement of operations of Ambassador
for the year ended December 31, 1997. Certain reclassifications have been
made to Ambassador's historical statement of operations to conform to the
Partnership's Statement of Operations presentation. The Ambassador
historical statement of operations excludes extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of
P-13
<PAGE> 1204
interest expense resulting from the net reduction of debt; and (iv) the
elimination of the minority interest associated with Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger, and the spin-off of Holdings as if these transactions had
occurred on January 1, 1997. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
IFG AMIT HOLDINGS IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property
revenues....................... $ 6,646 $ 266 $ -- $ 6,912
Property operating expenses...... (3,251) (56) -- (3,307)
Depreciation..................... (966) -- -- (966)
--------- ------- --------- --------
Income from property
operations..................... 2,429 210 -- 2,639
--------- ------- --------- --------
Management fees and other
income......................... 389,626 -- (295,296) 94,330
Management and other expenses.... (315,653) -- 258,038 (57,615)
Amortization..................... (31,709) (303) 15,244 (16,768)
--------- ------- --------- --------
Income from service company
business....................... 42,264 (303) (22,014) 19,947
--------- ------- --------- --------
General and administrative
expenses....................... (20,435) (1,351) 587 (21,199)
Interest expense................. (9,353) -- 318 (9,035)
Interest income.................. 4,571 6,853 (457) 10,967
Minority interest................ (12,448) (382) (41) (12,871)
Equity in income (losses) of
unconsolidated partnership..... 10,027 2,639 (151) 12,515
--------- ------- --------- --------
Income (loss) from operations.... 17,055 7,666 (21,758) 2,963
Income tax provision............. (6,822) (180) 8,703 1,701
Gain on sale of property......... -- 80 -- 80
--------- ------- --------- --------
Net income (loss)................ 10,233 7,566 (13,055) 4,744
========= ======= ========= ========
</TABLE>
- ---------------
(i) Represents the audited consolidated results of operations of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report
on Form 10-K. Certain reclassifications have been made to IFG's
historical statement of operations to conform to the Partnership's
statement of operations presentation.
(ii)Represents the historical statement of operations of AMIT, as well
as pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger: (i) the incremental depreciation of the
purchase price adjustment related to consolidated real estate and
investments in real estate partnerships; (ii) the amortization of
goodwill and property management contracts resulting from the IFG Merger;
(iii) the increase in interest expense resulting from the net increase in
debt; and (iv) the elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
P-14
<PAGE> 1205
(I) Represents adjustments to reflect the 1997 Property Acquisitions and the
1998 Acquisitions, less the 1997 Dispositions and the 1998 Dispositions
as if they had occurred on January 1, 1997. These pro forma operating
results are based on historical results of the properties, except for
depreciation, which is based on the Partnership's investment in the
properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1997 PROPERTY 1997 1998 1998
ACQUISITIONS DISPOSITIONS ACQUISITIONS DISPOSITIONS TOTAL
------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Rental and other
property
revenues........... $ 88,589 $(4,081) $ 39,132 $(3,303) $120,337
Property operating
expense............ (44,109) 1,944 (18,655) 1,354 (59,466)
Owned property
management
expense............ (3,233) 133 (1,349) 122 (4,327)
Depreciation......... (16,839) 452 (10,946) 688 (26,645)
</TABLE>
(J) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1997. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(K) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1997
Property Acquisitions..................................... $(29,490)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1997 Dispositions and
the 1997 Stock Offerings.................................. 19,568
Repayments on the Partnership's credit facilities with
proceeds from a dividend received from one of the
Unconsolidated Subsidiaries............................... 1,889
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1998
Acquisitions.............................................. (15,994)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1998 Dispositions and
the 1998 Stock Offerings.................................. 20,113
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred Partnership
Unit Offering............................................. 463
--------
$ (3,451)
========
</TABLE>
(L) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the Probable Purchases.
(M) Represents (i) loss of $181 related to limited partners in consolidated
partnerships acquired in connection with the 1997 Property Acquisitions
and the 1998 Property Acquisitions and (ii) income of $502 allocable to
the Partnership Preferred Units.
(N) Represents the reduction in the Partnership's earnings in unconsolidated
partnerships as a result of the consolidation of additional partnerships
resulting from additional ownership acquired through tender offers.
(O) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
P-15
<PAGE> 1206
(P) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 724
Reduction in salaries and benefits.......................... 4,197
Merger related costs........................................ 524
Other....................................................... 1,947
------
$7,392
======
</TABLE>
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(Q) Represents the decrease in interest expense of $3,612 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$3,833 related to borrowings under the Partnership's credit facilities.
(R) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(S) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(T) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $38,885, amortization of goodwill of $6,526, and
depreciation of furniture, fixtures, and equipment of $3,753, less IFG's
historical depreciation and amortization of $16,465. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(U) Represents elimination of minority interest of IPT resulting from the IPT
merger.
(V) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(W) Represents the reversal of IFG's income tax provision.
(X) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(Y) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Z) Represents interest income of $3,825 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries by the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $3,634 reflected on the equity in earnings of the
Unconsolidated Subsidiaries.
(AA) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-16
<PAGE> 1207
(BB) The following table presents the net impact to pro forma net loss
applicable to holders of OP Units and net loss per OP Units assuming the
interest rate per annum increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest expense................................ $ 938
========
Net income.................................................. $(14,789)
========
Net loss attributable to OP unitholders..................... $(56,963)
========
Basic loss per OP unit...................................... $ (0.84)
========
Diluted loss per OP unit.................................... $ (0.84)
========
</TABLE>
(CC) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred
Units, the Class G Preferred Units, the Class H Preferred Units and the
Class J Preferred Units as if these Preferred Units had been issued as of
January 1, 1997.
(DD) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(2,536), plus the elimination of intercompany interest
expense of $8,384. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the year ended December 31, 1997 is
presented below, which represents the effects of the Ambassador Merger,
the NHP Merger, the NHP Reorganization, the IFG Merger, and the IFG
Reorganization as if these transactions had occurred as of January 1,
1997.
P-17
<PAGE> 1208
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZATION IFG
HISTORICAL(I) ADJUSTMENTS(II) REORGANIZATION(III) PRO FORMA
------------- --------------- ------------------- ---------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 6,194 $ 6,371(iv) $ -- $ 12,565
Property operating expenses............. (3,355) (3,531)(iv) -- (6,886)
Owned property management expense....... (147) (478)(iv) -- (625)
Depreciation expense.................... (1,038) (767)(iv) -- (1,805)
-------- -------- -------- --------
Income from property operations......... 1,654 1,595 -- 3,249
-------- -------- -------- --------
Management fees and other income........ 23,776 41,992(v) 74,404(x) 140,172
Management and other expenses........... (11,733) (20,403)(v) (49,236)(x) (81,372)
Amortization............................ (3,726) (4,017)(v) (30,188)(xi) (37,931)
-------- -------- -------- --------
Income from service company............. 8,317 17,572 (5,020) 20,869
General and administrative expense...... -- (6,573)(v) (6,249)(x) (12,822)
Interest expense........................ (6,058) (5,849)(vi) (3,825)(xii) (15,732)
Interest income......................... 1,001 (148)(v) -- 853
Minority interest....................... (2,819) 2,198(viii) -- (621)
Equity in losses of unconsolidated
partnerships.......................... (1,028) 1,028(iv) -- --
Equity in earnings of Unconsolidated
Subsidiaries.......................... 2,943 (2,943)(vii) -- --
-------- -------- -------- --------
Income (loss) from operations........... 4,010 6,880 (15,094) (4,204)
Income tax provision.................... (1,902) (3,013)(ix) 6,450(xiii) 1,535
-------- -------- -------- --------
Net income (loss)....................... $ 2,108 $ 3,867 $ (8,644) $ (2,669)
======== ======== ======== ========
Income attributable to preferred
unitholders........................... $ 2,198 $ 3,478 $ (8,212) $ (2,536)
======== ======== ======== ========
Income (loss) attributable to common
unitholders........................... $ (90) $ 389 $ (432) $ (133)
======== ======== ======== ========
</TABLE>
- ---------------
(i) Represents the historical results of operations of the Unconsolidated
Subsidiaries for the year ended December 31, 1997.
(ii) Represents adjustments related to the NHP Reorganization, which includes
the sale or contribution of 14 properties containing 2,725 apartment units
from the unconsolidated partnerships to the Unconsolidated Subsidiaries,
as well as the sale or contribution of 12 properties containing 2,905
apartment units from the Unconsolidated Subsidiaries to the Unconsolidated
Partnership.
(iii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iv) Represents adjustments for the historical results of operations of the 14
real estate properties contributed or sold to the Unconsolidated
Subsidiaries, offset by the historical results of operations of the 12
real estate properties contributed or sold to the Unconsolidated
Partnership, with additional depreciation recorded related to the
Partnership's new basis resulting from the allocation of purchase price of
NHP and the NHP Real Estate Companies.
P-18
<PAGE> 1209
(v) Represents adjustments to reflect income and expenses associated with
certain assets and liabilities of NHP contributed or sold to the
Unconsolidated Subsidiaries.
(vi) Represents adjustments of $6,058 to reverse the historical interest
expense of the Unconsolidated Subsidiaries, which resulted from its
original purchase of NHP Common Stock, offset by $2,622 related to the
contribution or sale of the 14 real estate properties, $4,285 related to
assets and liabilities transferred from the Partnership to the
Unconsolidated Subsidiaries and $5,000 related to a note payable to the
Partnership.
(vii) Represents the reversal of the historical equity in earnings of NHP for
the period in which NHP was not consolidated by the Unconsolidated
Subsidiaries.
(viii)Represents the minority interest in the operations of the 14 real estate
properties.
(ix) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill which is not deductible
for tax purposes.
(x) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(xi) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(xii) Represents adjustment for interest expense related to a note payable to
the Partnership.
(xiii)Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-19
<PAGE> 1210
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR
AND PROBABLE AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E)
------------- ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Rental and other property revenues............. $ 265,700 $ 19,603(H) $ $ $
8,398(I) 35,480 -- 8,126
Property operating expenses.................... (101,600) (9,009)(H)
(3,745)(I) (14,912) -- (2,585)
Owned property management expense.............. (7,746) (728)(H)
(459)(I) -- -- --
Depreciation................................... (59,792) (4,886)(H)
(2,624)(I) (7,270) (1,420)(M) (904)
--------- -------- -------- ------- --------
Income from property operations................ 96,562 6,550 13,298 (1,420) 4,637
--------- -------- -------- ------- --------
Management fees and other income............... 13,968 -- -- -- 71,155
Management and other expenses.................. (8,101) -- -- -- (41,477)
Corporate overhead allocation.................. (196) -- -- -- --
Amortization................................... (3) -- -- -- (13,986)
--------- -------- -------- ------- --------
Income from service company business........... 5,668 -- -- -- 15,692
--------- -------- -------- ------- --------
General and administrative expenses............ (7,444) -- (5,278) 5,278(N) (61,386)
Interest expense............................... (56,756) 1,975(J)
(2,469)(K) (10,079) 145(O) (24,871)
Interest income................................ 18,244 (1) -- -- 22,501
Minority interest.............................. (1,052) 160(L) (252) 252(P) (14,159)
Equity in losses of unconsolidated
partnerships................................. (5,078) -- (71) -- 13,492
Equity in earnings of unconsolidated
subsidiaries................................. 8,413 -- -- -- --
Amortization of goodwill....................... (5,071) -- -- -- --
--------- -------- -------- ------- --------
Income (loss) from operations.................. 53,486 6,215 (2,382) 4,255 (44,094)
Income tax provision........................... -- -- -- -- 1,180
Gain on dispositions of property............... 2,783 (2,783) -- -- 6,576
--------- -------- -------- ------- --------
Net income..................................... 56,269 3,432 (2,382) 4,255 (36,338)
Income attributable to preferred unitholders... 16,320 16,094 -- -- --
--------- -------- -------- ------- --------
Income (loss) attributable to common
unitholders.................................. $ 39,949 $(12,662) $ (2,382) $ 4,255 $(36,338)
========= ======== ======== ======= ========
Basic earnings (loss) per OP Unit.............. $ 0.80
=========
Diluted earnings (loss) per OP Unit............ $ 0.79
=========
Weighted average OP Units outstanding.......... 50,420
=========
Weighted average OP Unit and equivalents
outstanding.................................. 50,544
=========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(F) ADJUSTMENTS(G) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property revenues............. $ $ $
-- -- 337,307
Property operating expenses....................
-- -- (131,851)
Owned property management expense..............
-- -- (8,933)
Depreciation...................................
(1,583)(Q) -- (78,479)
-------- -------- ---------
Income from property operations................ (1,583) -- 118,044
-------- -------- ---------
Management fees and other income............... -- (56,211)(W) 28,912
Management and other expenses.................. -- 35,192(W) (14,386)
Corporate overhead allocation.................. -- -- (196)
Amortization................................... (23,895)(R) 22,641(X) (15,243)
-------- -------- ---------
Income from service company business........... (23,895) 1,622 (913)
-------- -------- ---------
General and administrative expenses............ 45,823(S) 14,375(W) (8,632)
Interest expense...............................
7,045 -- (85,010)(AA)
Interest income................................ -- 143(Y) 40,887
Minority interest.............................. 6,622(T) -- (8,429)
Equity in losses of unconsolidated
partnerships................................. (18,577)(U) -- (10,234)
Equity in earnings of unconsolidated
subsidiaries................................. -- (7,562)(Z) 851(CC)
Amortization of goodwill....................... -- -- (5,071)
-------- -------- ---------
Income (loss) from operations.................. 15,435 8,578 41,493
Income tax provision........................... (1,180)(V) -- --
Gain on dispositions of property............... (6,576) -- --
-------- -------- ---------
Net income..................................... 7,679 8,578 41,493
Income attributable to preferred unitholders... -- -- 32,414(BB)
-------- -------- ---------
Income (loss) attributable to common
unitholders.................................. $ 7,679 $ 8,578 $ 9,079(AA)
======== ======== =========
Basic earnings (loss) per OP Unit.............. $ 0.13(AA)
=========
Diluted earnings (loss) per OP Unit............ $ 0.13(AA)
=========
Weighted average OP Units outstanding.......... 68,554
=========
Weighted average OP Unit and equivalents
outstanding.................................. 69,218
=========
</TABLE>
P-20
<PAGE> 1211
- ---------------
(A) Represents the Partnership's unaudited consolidated results of operations
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1998: (i) the 1998 Stock Offerings; (ii) the 1998
Acquisitions; (iii) the Probable Purchases; (iv) the 1998 Dispositions;
and (v) the Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of operations of Ambassador
for the four months ended April 30, 1998. Certain reclassifications have
been made to Ambassador's historical Statement of Operations to conform
to the Partnership's Statement of Operations presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger and the spin-off of the common stock of Holdings as if these
transactions had occurred on January 1, 1998. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
HOLDINGS
IFG AMIT SPIN- IFG
HISTORICAL(I) MERGER(II) OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 7,566 $ 560 $ -- $ 8,126
Property operating expenses............. (2,585) -- -- (2,585)
Depreciation............................ (904) -- -- (904)
--------- ------ --------- --------
Income from property operations......... 4,077 560 -- 4,637
--------- ------ --------- --------
Management fees and other income........ 311,475 -- (240,320) 71,155
Management and other expenses........... (252,295) -- 210,818 (41,477)
Amortization............................ (26,781) (48) 12,843 (13,986)
--------- ------ --------- --------
Income from service company business.... 32,399 (48) (16,659) 15,692
--------- ------ --------- --------
General and administrative expenses..... (66,272) (675) 5,561 (61,386)
Interest expense........................ (24,164) -- (707) (24,871)
Interest income......................... 18,817 4,193 (509) 22,501
Minority interest....................... (14,159) -- -- (14,159)
Equity in losses of unconsolidated
partnerships.......................... 12,169 1,323 13,492
--------- ------ --------- --------
Income (loss) from operations........... (37,133) 4,030 (10,991) (44,094)
Income tax provision.................... (4,772) -- 5,952 1,180
Gain on disposition of property......... 5,888 688 -- 6,576
--------- ------ --------- --------
Item income (loss)...................... $ (36,017) $4,718 $ (5,039) $(36,338)
========= ====== ========= ========
</TABLE>
----------------------
(i)
Represents the unaudited consolidated results of operations of IFG for
the nine months ended September 30, 1998.
Certain reclassifications have been made to IFG's historical statement
of operations to conform to the Partnership's statement of operations
presentation.
(ii)
Represents the historical statement of operations of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock for
each three shares of IFG common stock to holders of IFG common stock.
(F) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the incremental depreciation of the purchase price adjustment
related to consolidated real estate and investments in real estate
partnerships; (ii) the amortization of goodwill and property management
contracts
P-21
<PAGE> 1212
resulting from the IFG Merger; (iii) the increase in interest expense
resulting from the net increase in debt; and (iv) the elimination of the
income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of
IFG, primarily management contracts and related working capital assets
and liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(H) Represents adjustments to reflect the 1998 Acquisitions, less the 1998
Dispositions as if they had occurred on January 1, 1998. These pro forma
operating results are based on historical results of the properties,
except for depreciation, which is based on the Partnership's investment
in the properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1998 1998
ACQUISITIONS DISPOSITIONS TOTAL
------------ ------------ -------
<S> <C> <C> <C>
Rental and other property revenues......... $20,554 $(951) $19,603
Property operating expense................. (9,385) 376 (9,009)
Owned property management expense.......... (765) 37 (728)
Depreciation............................... (4,979) 93 (4,886)
</TABLE>
(I) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1998. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(J) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and
other loans and mortgages assumed in connection with
the 1998 Acquisitions.................................. $(8,698)
Repayments on the Partnership's credit facilities and
other indebtedness with proceeds from the 1998
Dispositions and the 1998 Stock
Offerings.............................................. 10,326
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred
Partnership Unit Offering.............................. 347
-------
$ 1,975
=======
</TABLE>
(K) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the probable purchases.
(L) Represents (i) loss of $537 related to limited partners in consolidated
partnerships acquired in connection with the 1998 Acquisitions and (ii)
income of $377 allocable to the Partnership Preferred Units.
(M) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(N) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses.................... $ 355
Reduction in salaries and benefits........................ 2,482
Merger related costs...................................... 1,212
Other..................................................... 1,229
------
$5,278
======
</TABLE>
P-22
<PAGE> 1213
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1998 and that the
restructuring plan was completed on January 1, 1998. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(O) Represents the decrease in interest expense of $1,480 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$1,335 related to borrowings under the Partnership's line of credit.
(P) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(Q) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(R) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $30,096, amortization of goodwill of $4,895, and
depreciation of furniture, fixtures, and equipment of $2,842, less IFG's
historical depreciation and amortization of $13,938. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(S) Represents the elimination of merger related expenses recorded by IFG
during the nine months ended September 30, 1998. In connection with the
IFG Merger, certain IFG executives will receive one-time lump-sum
payments in connection with the termination of their employment and
option agreements. The total of these lump sum payments is estimated to
be approximately $50,000.
(T) Represents elimination of minority interest in IPT resulting from the IPT
merger.
(U) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(V) Represents the reversal of IFG's income tax provision.
(W) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(X) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Y) Represents interest income of $2,861 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries of the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $2,718 reflected in the equity in earnings of the
Unconsolidated Subsidiaries.
(Z) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-23
<PAGE> 1214
(AA) The following table presents the net impact to pro forma net income
applicable to holders of shares of AIMCO Common Stock and net income per
share of AIMCO Common Stock assuming the interest rate per annum
increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest........................................ $ 702
=======
Net income.................................................. $40,791
=======
Net income attributable to OP Unitholders................... $ 8,377
=======
Basic loss per OP Unit...................................... $ 0.12
=======
Diluted loss per OP Unit.................................... $ 0.12
=======
</TABLE>
(BB) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred Units
the Class G Preferred Units, the Class H Preferred Units and the Class J
Preferred Units as if these stock offerings had occurred as of January 1,
1997.
(CC) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(1,867) plus the elimination of intercompany interest of
$2,718. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the nine months ended September 30, 1998
is presented below, which represents the effects of the Ambassador
Merger, the IFG Merger and the IFG Reorganization as if these
transactions had occurred as of January 1, 1997.
P-24
<PAGE> 1215
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
IFG
HISTORICAL(I) REORGANIZATION(II) PRO FORMA
------------- ------------------ ---------
<S> <C> <C> <C>
Rental and other property revenues................... $ 9,910 $ -- $ 9,910
Property operating expense........................... (5,139) -- (5,139)
Owned property management expense.................... (345) -- (345)
Depreciation expense................................. (1,026) -- (1,026)
-------- -------- --------
Income from property operations...................... 3,400 -- 3,400
-------- -------- --------
Management fees and other income..................... 57,665 56,211(iii) 113,876
Management and other expenses........................ (36,221) (35,192)(iii) (71,413)
Amortization......................................... (2,111) (22,641)(iv) (24,752)
-------- -------- --------
Income from service company.......................... 19,333 (1,622) 17,711
General and administrative expense................... -- (14,375)(iii) (14,375)
Interest expense..................................... (6,931) (2,861)(v) (9,792)
Interest income...................................... 617 -- 617
Minority interest.................................... (526) -- (526)
-------- -------- --------
Income (loss) from operations........................ 15,893 (18,858) (2,965)
Income tax provision................................. (7,037) 8,037(vi) 1,000
-------- -------- --------
Net income (loss).................................... $ 8,856 $(10,821) $ (1,965)
======== ======== ========
Income (loss) attributable to preferred
stockholders....................................... $ 8,413 $(10,280) $ (1,867)
======== ======== ========
Income (loss) attributable to common stockholders.... $ 443 $ (541) $ (98)
======== ======== ========
</TABLE>
- ---------------
(i) Represents the Unconsolidated Subsidiaries historical consolidated results
of operations.
(ii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iii)Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG.
(iv) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG, based on the Partnership's new basis resulting from the allocation
of the purchase price of IFG.
(v) Represents adjustment for interest expense related to a note payable to the
Partnership.
(vi) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-25
<PAGE> 1216
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR IFG
AND PROBABLE NHP AMBASSADOR PURCHASE PRICE AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $ 32,697 $ 25,214 $ (8,681) $ 3,437 $ 1,879 $ 4,744
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 43,520 28,817 7,354 20,372 5,997 17,248
Gain on investments............ -- -- (12) -- -- --
(Gain) loss on disposition of
properties.................... (2,720) 2,720 (3,882) -- -- (80)
Minority interests............. (1,008) (458) (16) 851 (705) 12,871
Equity in earnings of
unconsolidated partnerships... 1,798 122 8,542 (405) -- (12,515)
Equity in earnings of
unconsolidated subsidiaries... (4,636) -- (5,790) -- -- --
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 269 (269) -- -- -- (5,366)
Changes in operating assets and
operating liabilities......... 3,112 -- 5,314 (3,523) -- (4,384)
--------- --------- --------- --------- -------- --------
Total adjustments........... 40,335 30,932 11,510 17,295 5,292 7,774
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) operating activities... 73,032 56,146 2,829 20,732 7,171 12,518
Net cash used in
discontinued operations.... -- -- (7,999) -- -- --
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) continuing
operations................. 73,032 56,146 (5,170) 20,732 7,171 12,518
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... 21,792 19,627(I) -- -- -- --
Purchase of real estate.......... (376,315) (220,995)(J) (4,114) (24,179) -- --
Additions to real estate,
investments and property held
for sale....................... (26,966) (5,217)(K) (522) (19,033) -- (4,154)
Proceeds from sale of property
held for sale.................. 303 -- -- -- -- --
Purchase of general and limited
partnership interests.......... (199,146) -- (1,208) -- -- (76,104)
Purchase of management
contracts...................... -- -- (11,686) -- -- (36,868)
Purchase of/additions to notes
receivable..................... (59,787) -- (4,236) -- -- (17,647)
Proceeds from repayments of notes
receivable..................... -- -- 214 1,000 -- 8,838
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... 45,791 -- 3,097 3,183 -- 42,615
Contribution to unconsolidated
subsidiaries................... (42,879) -- -- -- -- --
Proceeds from sale of
securities..................... -- -- 642 -- -- --
Purchase of investments held for
sale........................... -- -- (73) -- -- --
Purchase of NHP mortgage loans... (60,575) -- -- -- -- --
Purchase of Ambassador common
stock.......................... (19,881) -- -- -- -- --
--------- --------- --------- --------- -------- --------
Net cash used in investing
activities................. (717,663) (206,585) (17,886) (39,029) -- (83,320)
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. 225,436 122,568(L) 145,519 156,746 -- 111,001
Principal repayments on secured
notes payable.................. (12,512) -- (141,032) (141,676) -- (12,697)
Proceeds from secured short-term
financing...................... 19,050 -- -- -- -- --
Repayments on secured short-term
financing...................... -- (259,027)(M) (434) -- -- --
Principal repayments on unsecured
short-term notes payable....... (79) (50,800)(M) -- -- -- --
Proceeds (payoff) from unsecured
short-term financing........... (12,500) -- -- -- -- --
Principal repayments on secured
tax-exempt bond financing...... (1,487) -- -- -- -- --
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... (162,008) -- -- -- -- --
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... (6,387) -- (245) (8,095) -- (2,305)
Proceeds from issuance of common
and preferred stock, net....... 643,224 357,389(N) 6,286 28,946 -- 62,420
Proceeds from exercises of
employee stock options and
warrants....................... 871 -- -- 3,195 -- 7,487
Repurchase of common stock....... -- -- -- -- -- (3,283)
Principal repayments received on
notes due from Officers........ 25,957 -- -- 1,323 -- --
Investments made by minority
interests...................... -- -- -- -- -- 249
Receipt of contributions from
minority interests............. -- 37,345(O) -- -- -- --
Payments of distribution to
minority interests............. -- (2,713)(P) -- -- -- --
Payment of distributions......... (44,660) (19,396)(Q) (11,503)(T) (15,717) (12,173)(U) (2,695)
Payment of distributions to
limited partners............... -- (5,193)(R) -- -- (15)(U) --
Payment of preferred unit
distributions.................. (846) (39,859)(S) -- (2,279) -- --
Payment of distributions to
minority interests............. (5,510) -- -- (3,700) -- (12,578)
Net transactions with
Insignia/ESG................... -- -- -- -- -- (57,612)
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) financing activities... 668,549 140,314 (1,409) 18,743 (12,188) 89,987
--------- --------- --------- --------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. 23,918 (10,125) (24,465) 446 (5,017) 19,185
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. 13,170 -- 36,277 4,002 -- 64,447
--------- --------- --------- --------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $ 37,088 $ (10,125) $ 11,812 $ 4,448 $ (5,017) $ 83,632
========= ========= ========= ========= ======== ========
<CAPTION>
IFG IFG
MERGER REORGANIZATION PRO
ADJUSTMENTS(G) ADJUSTMENTS(H) FORMA
-------------- -------------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $(80,023) $ 6,882 $ (13,851)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 35,049 (30,188) 128,169
Gain on investments............ -- -- (12)
(Gain) loss on disposition of
properties.................... 80 -- (3,882)
Minority interests............. (1,552) -- 9,983
Equity in earnings of
unconsolidated partnerships... 29,995 -- 27,537
Equity in earnings of
unconsolidated subsidiaries... -- 4,578 (5,848)
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 5,366 --
Changes in operating assets and
operating liabilities......... -- -- 519
-------- -------- -----------
Total adjustments........... 68,938 (25,610) 156,466
-------- -------- -----------
Net cash provided by (used
in) operating activities... (11,085) (18,728) 142,615
Net cash used in
discontinued operations.... -- -- (7,999)
-------- -------- -----------
Net cash provided by (used
in) continuing
operations................. (11,085) (18,728) 134,616
-------- -------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... -- -- 41,419
Purchase of real estate.......... -- -- (625,603)
Additions to real estate,
investments and property held
for sale....................... -- -- (55,892)
Proceeds from sale of property
held for sale.................. -- -- 303
Purchase of general and limited
partnership interests.......... -- -- (276,458)
Purchase of management
contracts...................... -- -- (48,554)
Purchase of/additions to notes
receivable..................... -- -- (81,670)
Proceeds from repayments of notes
receivable..................... -- -- 10,052
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... -- -- 94,686
Contribution to unconsolidated
subsidiaries................... -- -- (42,879)
Proceeds from sale of
securities..................... -- -- 642
Purchase of investments held for
sale........................... -- -- (73)
Purchase of NHP mortgage loans... -- -- (60,575)
Purchase of Ambassador common
stock.......................... -- -- (19,881)
-------- -------- -----------
Net cash used in investing
activities................. -- -- (1,064,483)
-------- -------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. -- -- 761,270
Principal repayments on secured
notes payable.................. -- -- (307,917)
Proceeds from secured short-term
financing...................... -- -- 19,050
Repayments on secured short-term
financing...................... -- -- (259,461)
Principal repayments on unsecured
short-term notes payable....... -- -- (50,879)
Proceeds (payoff) from unsecured
short-term financing........... -- -- (12,500)
Principal repayments on secured
tax-exempt bond financing...... -- -- (1,487)
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... -- -- (162,008)
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... -- -- (17,032)
Proceeds from issuance of common
and preferred stock, net....... -- -- 1,098,265
Proceeds from exercises of
employee stock options and
warrants....................... -- -- 11,553
Repurchase of common stock....... -- -- (3,283)
Principal repayments received on
notes due from Officers........ -- -- 27,280
Investments made by minority
interests...................... -- -- 249
Receipt of contributions from
minority interests............. -- -- 37,345
Payments of distribution to
minority interests............. -- -- (2,713)
Payment of distributions......... (24,513)(V) -- (130,657)
Payment of distributions to
limited partners............... -- -- (5,208)
Payment of preferred unit
distributions.................. -- -- (42,984)
Payment of distributions to
minority interests............. -- -- (21,788)
Net transactions with
Insignia/ESG................... -- -- (57,612)
-------- -------- -----------
Net cash provided by (used
in) financing activities... (24,513) -- 879,483
-------- -------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. (35,598) (18,728) (50,384)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. -- -- 117,896
-------- -------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $(35,598) $(18,728) $ 67,512
======== ======== ===========
</TABLE>
P-26
<PAGE> 1217
- ---------------
(A) Represents the Partnership's audited consolidated statement of cash flows
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1997 Acquisitions; (ii) the 1997 Stock Offerings;
(iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings; (v) the 1998
Acquisitions; (vi) the Probably Purchases; (vii) the 1998 Dispositions; and
(viii) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(I) HISTORICAL(II) ADJUSTMENTS(III) REORGANIZATION(IV) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)................. $ (7,266) $ 4,350 $(2,222) $ (3,543) $ (8,681)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 4,058 9,134 5,125 (10,963) 7,354
Gain on investments............. (12) -- -- -- (12)
(Gain) loss on disposition of
properties.................... (3,882) -- -- -- (3,882)
Minority interests.............. (16) -- -- -- (16)
Equity in earnings of
unconsolidated partnerships... 3,905 -- 4,631 6 8,542
Equity in earnings of
unconsolidated subsidiaries... -- -- 4,636 (10,426) (5,790)
Changes in operating assets and
operating liabilities......... (1,036) 6,350 -- -- 5,314
-------- -------- ------- -------- ---------
Total adjustments........... 3,017 15,484 14,392 (21,383) 11,510
-------- -------- ------- -------- ---------
Net cash provided by (used
in) operating
activities................ (4,249) 19,834 12,170 (24,926) 2,829
Net cash used in
discontinued operations... -- (7,999) -- -- (7,999)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) continuing
operations................ (4,249) 11,835 12,170 (24,926) (5,170)
-------- -------- ------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate........... -- (4,114) -- -- (4,114)
Additions to real estate,
investments and property held
for sale........................ (522) -- -- -- (522)
Purchase of general and limited
partnership interests........... (1,208) -- -- -- (1,208)
Purchase of management
contracts....................... -- (11,686) -- -- (11,686)
Purchase of/additions to notes
receivable...................... -- (4,236) -- -- (4,236)
Proceeds from repayments of notes
receivable...................... 214 -- -- -- 214
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 3,097 -- -- -- 3,097
Proceeds from sale of
securities...................... 642 -- -- -- 642
Purchase of investments held for
sale............................ (73) -- -- -- (73)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) investing
activities................ 2,150 (20,036) -- -- (17,886)
-------- -------- ------- -------- ---------
</TABLE>
P-27
<PAGE> 1218
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(I) HISTORICAL(II) ADJUSTMENTS(III) REORGANIZATION(IV) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes
payable borrowings.............. $ 74,019 $ 71,500 $ -- $ -- $ 145,519
Principal repayments on secured
notes payable................... (71,256) (69,776) -- -- (141,032)
Repayments on secured short-term
financing....................... (434) -- -- -- (434)
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (245) -- -- (245)
Proceeds from issuances of common
and preferred stock, net........ -- 6,286 -- -- 6,286
Payment of distributions.......... (2,000) -- (9,503) -- (11,503)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) financing
activities................ 329 7,765 (9,503) -- (1,409)
-------- -------- ------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (1,770) (436) 2,667 (24,926) (24,465)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 25,795 10,482 -- -- 36,277
-------- -------- ------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 24,025 $ 10,046 $ 2,667 $(24,926) $ 11,812
======== ======== ======= ======== =========
</TABLE>
- ---------------
(i)Represents the adjustment to record cash flow activity from January 1,
1997 to the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. In addition,
represents adjustments to record additional deprecation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest expense
incurred in connection with borrowings incurred by the Partnership to
consummate the NHP Real Estate Acquisition.
(ii)
Represents the unaudited consolidated statement of cash flows of NHP
for the period from January 1, 1997 through December 8, 1997 (date of
the NHP Merger).
(iii)
Represents the following adjustments occurring as a result of the NHP
Merger: (i) the reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan; (ii) the incremental
depreciation of the purchase price adjustment related to real estate;
(iii) the incremental amortization of the purchase price adjustment
related to management contracts, furniture, fixtures and equipment, and
goodwill; (iv) the reversal of equity in earnings of NHP during the
pre-merger period when the Partnership held a 47.62% interest in NHP;
and (v) the amortization of the increased basis in investments in real
estate partnerships, based on the purchase price adjustment related to
real estate and an estimated average life of 20 years.
(iv)
Represents adjustments related to the NHP Reorganization, whereby the
Partnership contributed or sold to the Unconsolidated Subsidiaries and
the Unconsolidated Partnership; (i) certain assets and liabilities of
NHP, primarily related to the management operations and other
businesses owned by NHP and (ii) 12 real estate properties containing
2,905 apartment units. The adjustments represent (i) the related cash
flow activity primarily related to the management operations of such
real estate partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis resulting
from the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies.
(D) Represents the audited historical statement of cash flows of Ambassador for
the year ended December 31, 1997. Certain reclassifications have been made
to Ambassador's historical statement of cash flows to conform to the
Partnership's statement of cash flows presentation. The Ambassador
P-28
<PAGE> 1219
historical statement of cash flows excludes an extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................... $ 10,233 $ 7,566 $(13,055) $ 4,744
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization...... 32,675 63 (15,490) 17,248
Gain on disposition of property.... -- (80) -- (80)
Minority interests................. 12,448 382 41 12,871
Equity in earnings of
unconsolidated partnerships...... (10,027) (2,639) 151 (12,515)
Extraordinary gain on early
extinguishment of debt........... (5,366) -- -- (5,366)
Changes in operating assets and
liabilities...................... -- (2,405) (1,979) (4,384)
--------- -------- -------- --------
Total adjustments............. 29,730 (4,679) (17,277) 7,774
--------- -------- -------- --------
Net cash provided by (used in) operating
activities............................ 39,963 2,887 (30,332) 12,518
--------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to real estate, investments
and property held for sale......... (7,695) 665 2,876 (4,154)
Purchase of general and limited
partnership interests.............. (93,118) -- 17,014 (76,104)
Purchase of management contracts...... (99,540) -- 62,672 (36,868)
Purchase of/additions to notes
receivable......................... (9,172) (14,251) 5,776 (17,647)
Proceeds from repayments of notes
receivable......................... 4,523 7,552 (3,237) 8,838
Distributions from investments in real
estate partnerships and
unconsolidated subsidiaries........ 44,823 -- (2,208) 42,615
--------- -------- -------- --------
Net cash provided by (used in)
investing activities........ (160,179) (6,034) 82,893 (83,320)
--------- -------- -------- --------
</TABLE>
P-29
<PAGE> 1220
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable
borrowings......................... $ 118,141 $ -- $ (7,140) $111,001
Principal repayments on secured notes
payable............................ (15,682) -- 2,985 (12,697)
Payment of loan costs, net of proceeds
from interest rate hedge........... (2,305) -- -- (2,305)
Proceeds from issuance of common and
preferred stock, net............... 62,420 -- -- 62,420
Proceeds from exercises of employee
stock options and warrants......... 7,487 -- -- 7,487
Repurchase of common stock............ (3,283) -- -- (3,283)
Investment made by minority
interests.......................... 249 -- -- 249
Payment of distributions.............. -- (2,695) -- (2,695)
Payment of distributions to minority
interests.......................... (12,578) -- -- (12,578)
Net transactions with Insignia/ESG.... -- -- (57,612) (57,612)
--------- -------- -------- --------
Net cash provided by (used in)
financing activities........ 154,449 (2,695) (61,767) 89,987
--------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 34,233 (5,842) (9,206) 19,185
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD............................. 54,614 9,789 44 64,447
--------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................ $ 88,847 $ 3,947 $ (9,162) $ 83,632
========= ======== ======== ========
</TABLE>
- ---------------
(i)Represents the audited consolidated statement of cash flows of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report on
Form 10-K. Certain reclassifications have been made to IFG's historical
statement of cash flows to conform to the Partnership's statement of
cash flows presentation.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(I) Represents proceeds from the sale of the 1998 Dispositions, as if these
dispositions occurred on January 1, 1997.
P-30
<PAGE> 1221
(J) Represents the use of cash to purchase the 1998 Acquisitions and the
Probable Purchases, as if these acquisitions occurred on January 1, 1997.
(K) Represents cash payments for capital improvements of $300 per unit on the
1997 Acquisitions, the 1998 Acquisitions and the Probable Purchases.
(L) Represents notes payable assumed in connection with the 1998 Acquisitions
and the Probable Purchases, assuming these transactions occurred January 1,
1997.
(M) Represents net principal repayments assuming the 1998 Acquisitions, the
1998 Dispositions, the Probable Purchases, the 1998 Stock Offerings and the
Preferred Partnership Unit Offering occurred January 1, 1997.
(N) Represents cash proceeds from the 1998 Stock Offerings, as if these
offerings occurred on January 1, 1997.
(O) Represents contributions from minority interests assuming the Preferred
Partnership Unit Offering occurred January 1, 1997.
(P) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(Q) Represents distributions paid on the 1997 Stock Offerings as if these
occurred on January 1, 1997.
(R) Represents distributions paid to limited partners on OP Units issued in
connection with the 1997 Acquisitions, the 1998 Acquisitions and the
Probable Purchases, as if the issuance of the OP Units occurred on January
1, 1997.
(S) Represents preferred unit distributions paid on the Class B Preferred
Stock, the Class C Preferred Stock and the 1998 Stock Offerings as if these
occurred on January 1, 1997.
(T) Represents historical distributions of $2,000 and pro forma distributions
on the shares issued in the NHP Merger as if these shares had been issued
on January 1, 1997.
(U) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(V) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-31
<PAGE> 1222
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE AMBASSADOR PURCHASE PRICE IFG AS IFG MERGER
HISTORICAL(A) PURCHASE(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 56,269 $ 3,432 $ (2,382) $ 4,255 $ (36,338) $ 7,679
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 67,344 7,512 7,520 1,420 14,890 25,478
(Gain) loss on disposition of
properties..................... (2,783) 2,783 -- -- (6,576) 6,576
Minority interests.............. 1,052 (160) 252 (252) 14,159 (6,622)
Equity in earnings of
unconsolidated partnerships.... 5,078 -- 71 -- (13,492) 18,577
Equity in earnings of
unconsolidated subsidiaries.... (8,413) -- -- -- -- --
Non-cash compensation........... -- -- -- -- 796 --
Changes in operating assets and
operating liabilities.......... (67,722) -- 5,948 -- (7,775) --
--------- -------- -------- ------- --------- --------
Total adjustments............ (5,444) 10,135 13,791 1,168 2,002 44,009
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) operating activities... 50,825 13,567 11,409 5,423 (34,336) 51,688
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... (63,839) 63,839(H) -- -- 27,122 --
Additions to real estate.......... (47,878) (1,198)(I) (17,759) -- 9,309 --
Proceeds from sale of property and
investments held for sale....... 19,627 (19,627)(J) -- -- (35) --
Additions to property held for
sale............................ (1,986) -- -- -- -- --
Purchase of general and limited
partnership interests........... (27,016) -- -- -- 17,420 --
Purchase of/additions to notes
receivable...................... (72,445) -- -- -- (27,589) --
Proceeds from repayments/sale of
notes receivable................ 21,562 -- -- -- 21,185 --
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 513 -- 1,063 -- 22,053 --
Payment of trust based preferred
dividends....................... -- -- -- -- (7,415) --
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... 4,492 -- -- -- 13,423 --
Contribution to unconsolidated
subsidiaries.................... (13,032) -- -- -- -- --
Purchase of investments held for
sale............................ (4,935) -- -- -- -- --
Redemption of OP Units............ (516) -- -- -- -- --
Merger costs...................... -- -- -- -- (1,402) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) investing activities... (185,453) 43,014 (16,696) -- 74,071 --
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. 77,489 -- 37,162 -- 177,234 --
Principal repayments on secured
notes payable................... (56,262) -- -- -- 4,239 --
Principal advances on secured
tax-exempt bond financing....... -- -- 21,784 -- -- --
Principal repayments on secured
tax-exempt bond financing....... (1,436) -- -- -- -- --
Net borrowings/repayments on
secured short-term financing.... (30,693) 209,027(K) (43,002) -- -- --
Net borrowings (paydowns) on the
revolving credit facilities..... -- -- 2,513 -- -- --
Principal repayments on unsecured
short-term notes payable........ -- -- -- -- 2,644 --
Payment of loan costs, net of
proceeds from interest rate
hedge........................... (5,727) -- -- -- (83) --
Proceeds from issuance of common
stock and preferred stock,
net............................. 253,239 (253,239)(L) -- -- -- --
Repurchase of common stock........ (10,972) -- -- -- -- --
Proceeds from exercises of
employee stock options and
warrants........................ -- -- 9,761 -- 6,533 --
Principal repayments received on
notes due from Officers......... 8,084 -- -- -- -- --
Payments of distributions to
minority interests.............. -- (2,034)(M) -- -- -- --
Payment of distributions.......... (73,322) -- -- (3,701)(P) (8,606) (22,360)(Q)
Payment of distributions to
limited partners................ (10,251) (1,919)(N) -- (5)(P) (494) --
Payment of preferred unit
distributions................... (10,916) (16,094)(O) -- -- -- --
Proceeds from issuance of High
Performance Units............... 1,988 -- -- -- -- --
Net transactions with
Insignia/ESG.................... -- -- -- -- (241,003) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) financing activities... 141,221 (64,259) 28,218 (3,706) (59,536) (22,360)
--------- -------- -------- ------- --------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. 6,593 (7,678) 22,931 1,717 (19,801) 29,328
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 37,088 (10,125) 4,448 (5,017) 83,632 (35,598)
--------- -------- -------- ------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 43,681 $(17,803) $ 27,379 $(3,300) $ 63,831 $ (6,270)
========= ======== ======== ======= ========= ========
<CAPTION>
IFG
REORGANIZATION PRO
ADJUSTMENTS(G) FORMA
-------------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 8,578 $ 41,493
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... (22,641) 101,523
(Gain) loss on disposition of
properties..................... -- --
Minority interests.............. -- 8,429
Equity in earnings of
unconsolidated partnerships.... -- 10,234
Equity in earnings of
unconsolidated subsidiaries.... 7,562 (851)
Non-cash compensation........... -- 796
Changes in operating assets and
operating liabilities.......... -- (69,549)
-------- ---------
Total adjustments............ (15,079) 50,582
-------- ---------
Net cash provided by (used
in) operating activities... (6,501) 92,075
-------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... -- 27,122
Additions to real estate.......... -- (57,526)
Proceeds from sale of property and
investments held for sale....... -- (35)
Additions to property held for
sale............................ -- (1,986)
Purchase of general and limited
partnership interests........... -- (9,596)
Purchase of/additions to notes
receivable...................... -- (100,034)
Proceeds from repayments/sale of
notes receivable................ -- 42,747
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... -- 23,629
Payment of trust based preferred
dividends....................... -- (7,415)
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... -- 17,915
Contribution to unconsolidated
subsidiaries.................... -- (13,032)
Purchase of investments held for
sale............................ -- (4,935)
Redemption of OP Units............ -- (516)
Merger costs...................... -- (1,402)
-------- ---------
Net cash provided by (used
in) investing activities... -- (85,064)
-------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. -- 291,885
Principal repayments on secured
notes payable................... -- (52,023)
Principal advances on secured
tax-exempt bond financing....... -- 21,784
Principal repayments on secured
tax-exempt bond financing....... -- (1,436)
Net borrowings/repayments on
secured short-term financing.... -- 135,332
Net borrowings (paydowns) on the
revolving credit facilities..... -- 2,513
Principal repayments on unsecured
short-term notes payable........ -- 2,644
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (5,810)
Proceeds from issuance of common
stock and preferred stock,
net............................. -- --
Repurchase of common stock........ -- (10,972)
Proceeds from exercises of
employee stock options and
warrants........................ -- 16,294
Principal repayments received on
notes due from Officers......... -- 8,084
Payments of distributions to
minority interests.............. -- (2,034)
Payment of distributions.......... -- (107,989)
Payment of distributions to
limited partners................ -- (12,669)
Payment of preferred unit
distributions................... -- (27,010)
Proceeds from issuance of High
Performance Units............... -- 1,988
Net transactions with
Insignia/ESG.................... -- (241,003)
-------- ---------
Net cash provided by (used
in) financing activities... -- 19,578
-------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (6,501) 26,589
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... (18,728) 55,700
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $(25,229) $ 82,289
======== =========
</TABLE>
P-32
<PAGE> 1223
- ---------------
(A) Represents the Partnership's unaudited consolidated statement of cash flows
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1998 Stock Offerings; (ii) the 1998 Acquisitions;
(iii) the Probably Purchases; (iv) the 1998 Dispositions and (v) the
Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of cash flows of Ambassador
for the four months ended April 20, 1998. Certain reclassifications have
been made to Ambassador's historical statement of cash flows to conform to
the Partnership's statement of cash flows presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ (36,017) $ 4,718 $ (5,039) $(36,338)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 27,685 48 (12,843) 14,890
Gain on disposition of property......................... (5,888) (688) -- (6,576)
Minority interests...................................... 14,159 -- -- 14,159
Equity in earnings of unconsolidated partnerships....... (12,169) -- (1,323) (13,492)
Non-cash compensation................................... 796 -- -- 796
Changes in operating assets and liabilities............. (18,853) (1,499) 12,577 (7,775)
--------- -------- --------- --------
Total adjustments................................... 5,730 (2,139) (1,589) 2,002
--------- -------- --------- --------
Net cash provided by (used in) operating
activities........................................ (30,287) 2,579 (6,628) (34,336)
--------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... (3,804) -- 30,926 27,122
Additions to real estate.................................. (2,252) (25) 11,586 9,309
Proceeds from sales of property and investments held for
sale.................................................... -- 161 (196) (35)
Purchase of general and limited partnership interests..... (44,270) -- 61,690 17,420
Purchases of / additions to notes receivable.............. (17,107) (15,407) 4,925 (27,589)
Proceeds from repayments/sale of notes receivable......... 151 23,672 (2,638) 21,185
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 21,360 -- 693 22,053
Payment of trust based preferred dividends................ (7,415) -- -- (7,415)
Cash received in connection with AMIT Merger.............. 13,423 -- -- 13,423
Merger costs.............................................. (1,402) -- -- (1,402)
--------- -------- --------- --------
Net cash provided by (used in) investing
activities........................................ (41,316) 8,401 106,986 74,071
--------- -------- --------- --------
</TABLE>
P-33
<PAGE> 1224
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 186,000 -- (8,766) 177,234
Principal repayments on secured notes payable............. (1,874) -- 6,113 4,239
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (83) -- -- (83)
Proceeds from exercises of employee stock options and
warrants................................................ 6,533 -- -- 6,533
Payment of distributions.................................. (6,541) (2,065) -- (8,606)
Payment of distributions minority interests............... (494) -- -- (494)
Net transactions with Insignia/ESG........................ (118,424) -- (122,579) (241,003)
--------- -------- --------- --------
Net cash provided by (used in) financing
activities........................................ 67,761 (2,065) (125,232) (59,536)
--------- -------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (3,842) 8,915 (24,874) (19,801)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 88,847 3,947 (9,162) 83,632
--------- -------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 85,005 $ 12,862 $ (34,036) $ 63,831
========= ======== ========= ========
</TABLE>
- ---------------
(i)Represents the unaudited consolidated statement of cash flows of IFG
for the nine months ended September 30, 1998. Certain reclassifications
have been made to IFG's historical statement of cash flows to conform
to the Partnership's statement of cash flows presentation. In addition,
the cash and cash equivalents at the beginning of the period has been
adjusted.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock. In addition, the cash and cash equivalents at the beginning of
the period has been adjusted.
(F) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(H) Represents adjustment to remove the use of cash to purchase the 1998
Acquisitions, as if these acquisitions occurred on January 1, 1997;
therefore, the purchases are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(I) Represents cash payments for capital improvements of $300 per unit on the
1998 Acquisitions.
(J) Represents adjustment to remove the proceeds from the sale of the 1998
Dispositions, as if these dispositions occurred on January 1, 1997;
therefore, the proceeds are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(K) Represents adjustment to remove net principal repayments assuming the 1998
Acquisitions, the 1998 Dispositions and the 1998 Stock Offerings occurred
January 1, 1997; therefore, the repayments are included on the Pro Forma
Consolidated Statement of Cash Flows for the year ended December 31, 1997.
(L) Represents adjustment to remove cash proceeds from the 1998 Stock
Offerings, as if these offerings occurred on January 1, 1997; therefore,
the repayments are included on the Pro Forma Consolidated Statement of Cash
Flows for the year ended December 31, 1997.
P-34
<PAGE> 1225
(M) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(N) Represents distributions paid to limited partners on OP Units issued in
connection with the 1998 Acquisitions and the Probable Purchases, as if the
issuance of the OP Units occurred on January 1, 1997.
(O) Represents preferred unit distributions paid on the 1998 Stock Offerings as
if these occurred on January 1, 1997.
(P) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(Q) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-35
<PAGE> 1226
PRO FORMA FINANCIAL INFORMATION OF
AIMCO PROPERTIES, L.P.
(EXCHANGE OFFERS)
INTRODUCTION
AIMCO Properties L.P. (the "Partnership") intends to offer to purchase
limited partnership interests in syndicated real estate limited partnerships in
which AIMCO holds partnership interests. The Partnership, is subject to
applicable law, plans to offer to purchase certain of such limited partnership
interests in exchange for (i) equity securities of the Partnership; (ii) cash or
(iii) a combination of such equity securities and cash. Such offers are expected
to include terms that will allow limited partners to continue to hold their
limited partnership interests.
The following Pro Forma Consolidated Balance Sheet (Exchange Offers) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) all the
transactions discussed in the Pro Forma Financial Statements (Insignia Merger)
appearing elsewhere herein; and (ii) the acceptance of exchange offers by
limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) all
the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1998: (i)
all the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The Pro Forma Financial Information (Exchange Offers) is based, in part, on
the historical financial statements of the partnerships in which the Exchange
Offers are made. The Pro Forma Financial Information (Exchange Offers) is also
based, in part, on the Pro Forma Financial Information (Insignia Merger) of the
Partnership included elsewhere herein. Such pro forma information is based in
part upon: (i) the audited Consolidated Financial Statements of Insignia for the
year ended December 31, 1997; (ii) the audited Consolidated Financial Statements
of Angeles Mortgage Investment Trust ("AMIT") for the year ended December 31,
1997; (iii) the unaudited Consolidated Financial Statements of Insignia for the
nine months ended September 30, 1998; and (iv) the unaudited Consolidated
Financial Statements of AMIT for the period from January 1, 1998 to September
17, 1998. The Pro Forma Financial Information (Insignia Merger) is also based,
in part, upon: (i) the audited Consolidated Financial Statements of Ambassador
for the year ended December 31, 1997; (ii) the audited Consolidated Financial
Statements of the Partnership for the year ended December 31, 1997; (iii) the
unaudited Consolidated Financial Statements of Ambassador for the four months
ended April 30, 1998; (iv) the unaudited Consolidated Financial Statements of
the Partnership for the nine months ended September 30, 1998; and (v) the
historical financial statements of certain properties and companies acquired by
AIMCO filed in AIMCO's Current Reports on Form 8-K, dated April 16, 1997, May 5,
1997, June 3, 1997, September 19, 1997, October 15, 1997, December 1, 1997 and
November 2, 1998. The following Pro Forma Financial Information (Exchange
Offers) should be read in conjunction with such financial statements and notes
thereto.
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared under the assumption that after the exchange offers are accepted, AIMCO
will own varying ownership percentages of each partnership, and that the limited
partners will choose to elect to receive 35% of the consideration in the form of
equity securities of AIMCO Properties, L.P. and 65% of the consideration in the
form of cash. The
P-36
<PAGE> 1227
interest to be acquired in each of the partnerships, the estimated purchase
price for each partnership, including cash, common units, or preferred units is
summarized below:
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Angeles Income Properties, Ltd. II.................... 26.70 $ 4,946 $ 3,215 $1,731
Angeles Income Properties, Ltd. III................... 30.63 2,156 1,401 755
Angeles Income Properties, Ltd. IV.................... 18.64 1,154 750 404
Angeles Income Properties, Ltd. 6..................... 37.29 4,523 2,940 1,583
Angeles Opportunity Properties, Ltd................... 37.94 1,729 1,124 605
Angeles Partners VII.................................. 24.86 610 397 213
Angeles Partners VIII................................. 24.80 0 0 0
Angeles Partners IX................................... 18.92 1,171 761 410
Angeles Partners X.................................... 22.97 709 461 248
Angeles Partners XI................................... 21.83 205 133 72
Angeles Partners XII.................................. 11.89 2,877 1,870 1,007
Angeles Partners XIV.................................. 24.93 0 0 0
Baywood Partners, Ltd................................. 25.00 347 226 121
Brampton Associates Partnership....................... 25.00 382 248 134
Buccaneer Trace Limited Partnership................... 25.00 2 1 1
Burgundy Court Associates, L.P........................ 25.00 1,074 698 376
Calmark/Fort Collins, Ltd............................. 25.00 192 125 67
Calmark Heritage Park II Ltd.......................... 25.00 47 31 16
Casa Del Mar Associates Limited Partnership........... 21.16 503 327 176
Catawba Club Associates, L.P.......................... 25.00 85 55 30
Cedar Tree Investors Limited Partnership.............. 25.00 1,037 674 363
Century Properties Fund XVI........................... 12.52 831 540 291
Century Properties Fund XVIII......................... 13.08 474 308 166
Century Properties Fund XIX........................... 15.30 1,765 1,147 618
Century Properties Growth Fund XXII................... 21.43 4,977 3,235 1,742
Chapel Hill, Limited.................................. 21.15 569 370 199
Chestnut Hill Associates Limited Partnership.......... 26.75 1,582 1,028 554
Coastal Commons Limited Partnership................... 25.00 566 368 198
Consolidated Capital Institutional Properties/2 &
Consolidated Capital Equity Properties/2............ 18.98 7,320 4,758 2,562
Consolidated Capital Institutional Properties/3....... 16.37 6,770 4,401 2,369
Consolidated Capital Properties III................... 13.02 1,134 737 397
Consolidated Capital Properties IV.................... 18.04 9,407 6,112 3,295
Consolidated Capital Properties V..................... 16.69 560 364 196
Consolidated Capital Properties VI.................... 25.82 556 361 195
DFW Apartment Investors Limited Partnership........... 35.65 2,719 1,767 952
DFW Residential Investors Limited Partnership......... 37.60 1,092 710 382
Davidson Diversified Real Estate I, L.P............... 34.78 627 408 219
Davidson Diversified Real Estate II, L.P.............. 35.11 1,318 857 461
Davidson Diversified Real Estate III, L.P............. 21.76 0 0 0
Davidson Growth Plus, L.P............................. 23.91 2,304 1,498 806
Davidson Income Real Estate, L.P...................... 30.81 2,691 1,749 942
Drexel Burnham Lambert Real Estate Associates II...... 19.58 994 646 348
Four Quarters Habitat Apartment Associates, Ltd....... 25.00 174 113 61
Fox Strategic Housing Income Partners................. 33.18 2,414 1,569 845
Georgetown of Columbus Associates, L.P................ 25.00 227 148 79
HCW Pension Real Estate Fund Limited Partnership...... 32.64 2,368 1,539 829
Investors First-Staged Equity......................... 49.00 306 199 107
Johnstown/Consolidated Income Partners................ 25.66 1,871 1,216 655
La Colina Partners, Ltd............................... 25.00 583 379 204
Lake Eden Associates, L.P............................. 25.00 632 411 221
Landmark Associates, L.P.............................. 25.00 48 31 17
</TABLE>
P-37
<PAGE> 1228
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Minneapolis Associates II Limited Partnership......... 25.00 $ 2 $ 1 $ 1
Multi-Benefit Realty Fund "87-1-Class A & Class B..... 21.89 1,657 1,077 580
National Property Investors 8......................... 11.13 988 642 346
Northbrook Apartments, Ltd............................ 25.00 209 136 73
Olde Mill Investors Limited Partnership............... 8.75 170 111 59
Orchard Park Apartments Limited Partnership........... 25.00 1 1 0
Park Town Place Associates Limited Partnership........ 24.70 298 194 104
Quail Run Associates, L.P............................. 25.00 487 317 170
Ravensworth Associates Limited Partnership............ 25.00 1 1 0
Rivercreek Apartments Limited Partnership............. 25.00 180 117 63
Rivercrest Apartments, Limited........................ 25.00 1,687 1,097 590
Riverside Park Associates L.P......................... 13.69 590 384 206
Salem Arms of Augusta Limited Partnership............. 25.00 278 181 97
Shaker Square, L.P.................................... 23.75 631 410 221
Shannon Mannor Apartments, Limited Partnership........ 25.00 1,170 761 409
Sharon Woods, L.P..................................... 22.75 499 324 175
Shelter Properties III................................ 15.20 1,960 1,274 686
Shelter Properties IV................................. 50.52 12,764 8,295 4,469
Shelter Properties VI................................. 13.78 1,919 1,247 672
Shelter Properties VII Limited Partnership............ 26.65 1,975 1,284 691
Snowden Village Associates, L.P....................... 25.00 443 288 155
Springhill Lake Investors Limited Partnership......... 11.84 2,908 1,890 1,018
Sturbrook Investors, Ltd.............................. 25.00 377 245 132
Sycamore Creek Associates, L.P........................ 25.00 1 1 0
Texas Residential Investors Limited Partnership....... 18.45 1,147 746 401
Thurber Manor Associates, Limited Partnership......... 25.00 218 142 76
U.S. Realty Partners Limited Partnership.............. 25.00 1,441 937 504
United Investors Growth Properties.................... 39.01 165 107 58
United Investors Growth Properties II................. 25.00 351 228 123
United Investors Income Properties.................... 23.44 1,977 1,285 692
Villa Nova, Limited Partnership....................... 25.00 228 148 80
Walker Springs, Limited............................... 23.99 95 62 33
Wingfield Investors Limited Partnership............... 25.00 179 116 63
Winrock-Houston Limited Partnership................... 13.60 1,041 677 364
Winthrop Apartment Investors Limited Partnership...... 31.60 1,318 857 461
Winthrop Growth Investors 1 Limited Partnership....... 27.94 1,233 801 432
Winthrop Texas Investors Limited Partnership.......... 5.27 158 103 55
Woodmere Associates, L.P.............................. 25.00 280 182 98
Yorktown Towers Associates............................ 25.00 809 526 283
-------- ------- ------
Total (See adjustment C to the Pro Forma Consolidated
Balance Sheet)...................................... $122,463 $79,601 42,862
======== ======= ======
</TABLE>
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
Exchange Offers, the 1997 Acquisitions, the 1998 Acquisitions and the Probable
Purchases are adjusted to estimated fair market value, based on preliminary
estimates, which are subject to change as additional information is obtained.
The allocations of purchase costs are subject to final determination based upon
estimates and other evaluations of fair market value. Therefore, the allocations
reflected in the following unaudited Pro Forma Financial Information (Exchange
Offers) may differ from the amounts ultimately determined.
P-38
<PAGE> 1229
The following unaudited Pro Forma Financial Information (Exchange Offers)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions, results of
operations or cash flows. In the opinion of the Partnership's management, all
material adjustments necessary to reflect the effects of these transactions have
been made.
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (EXCHANGE OFFERS)
AS OF SEPTEMBER 30, 1998
ASSETS
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C>
Real estate....................................... $2,625,822 $ 12,764(C)
26,954(D)
13,655(E) $2,679,195
Property held for sale............................ 42,212 -- 42,212
Investments in and notes receivable from
unconsolidated subsidiaries..................... 186,277 -- 186,277
Investments in and notes receivable from
unconsolidated partnerships..................... 924,309 109,699(C)
(13,655)(E)
(8,161)(F)
816(G) 1,013,008
Mortgage notes receivable......................... 20,916 -- 20,916
Cash and cash equivalents......................... 104,955 2,620(D) 107,575
Restricted cash................................... 84,526 1,807(D) 86,333
Accounts receivable............................... 27,900 1,081(D) 28,981
Deferred financing costs.......................... 21,835 -- 21,835
Goodwill.......................................... 251,024 -- 251,024
Property management contracts..................... 38,371 -- 38,371
Other assets...................................... 82,670 422(D) 83,092
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
LIABILITIES AND PARTNERS' CAPITAL
Secured notes payable............................. $ 926,246 $ 23,642(D) $ 949,888
Secured tax-exempt bond financing................. 399,925 -- 399,925
Secured short-term financing...................... 32,691 -- 32,691
Unsecured short-term financing.................... 300,000 79,601(C) 379,601
Accounts payable, accrued and other liabilities... 248,253 826(D) 249,079
Security deposits and deferred income............. 13,171 255(D) 13,426
---------- -------- ----------
1,920,286 104,324 2,024,610
Minority interests................................ 79,431 816(G) 80,247
Company obligated mandatorily redeemable
convertible securities of a subsidiary trust.... 149,500 -- 149,500
Redeemable common partnership units............... 277,581 8,161(D)
(8,161)(F)
30,616(C) 308,197
Redeemable preferred partnership units............ -- 12,246(C) 12,246
Partner's capital
General and Special Limited Partner............. 1,496,457 -- 1,496,457
Preferred Units................................. 487,562 -- 487,562
---------- -------- ----------
1,984,019 -- 1,984,019
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
P-39
<PAGE> 1230
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical balance sheet data as of September 30, 1998 (unaudited) related
to the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Real estate................................................. $1,082,652
Cash........................................................ 151,024
Total assets................................................ 1,493,409
Mortgages payable........................................... 1,585,196
Partners' capital (deficit)................................. (171,740)
</TABLE>
(C) Represents the purchase price paid by the Partnership to the limited
partners in order to obtain additional ownership by AIMCO in 91 real estate
partnerships. For the purposes of the pro-forma presentation, it is
assumed: (i) 65% of the purchase price is funded with cash by drawing down
on the Partnership's unsecured short term credit facility; (ii) 25% of the
purchase price is funded by the issuance of 749,362 OP Units at $40 per OP
Unit; and (iii) 10% of the purchase price is funded by the issuance of 8%
Preferred OP Units.
(D) Represents historical balance sheet data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(E) Represent the adjustment to real estate recorded in the IFG Merger related
to the one real estate partnership that will be consolidated as a result of
the Partnership's purchase of additional partnership interests.
(F) Represents the elimination of the partners' capital in the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(G) Represents minority interest of the one real estate partnership that will
be consolidated as a result of the Partnership's purchase of additional
partnership interests.
P-40
<PAGE> 1231
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations.............. $ 431,256 $ 11,270(C) $ 442,526
Property operating expenses....................... (182,830) (6,612)(C) (189,442)
Owned property management expense................. (11,831) -- (11,831)
Depreciation...................................... (96,264) (2,589)(C) (98,853)
--------- -------- ---------
Income from property operations................... 140,331 2,069 142,400
--------- -------- ---------
Management fees and other income.................. 41,676 -- 41,676
Management and other expenses..................... (23,683) -- (23,683)
Corporate overhead allocation..................... (588) -- (588)
Amortization...................................... (26,480) -- (26,480)
--------- -------- ---------
Income from service company business.............. (9,075) -- (9,075)
Minority interest in service company business..... (10) -- (10)
--------- -------- ---------
Partnership's share of income from service company
business........................................ (9,085) -- (9,085)
--------- -------- ---------
General and administrative expenses............... (21,371) -- (21,371)
Interest expense.................................. (113,788) (5,691)(D)
(2,220)(C) (121,699)(H)
Interest income................................... 21,734 21,734
Minority interests................................ (9,983) (51)(E) (10,034)
Equity in losses of unconsolidated partnerships... (27,537) (16,864)(F)
483(G) (43,918)(I)
Equity in earnings of Unconsolidated
Subsidiaries.................................... 5,848 -- 5,848
--------- -------- ---------
Net income (loss)................................. (13,851) (22,274) (36,125)(H)
Income attributable to Preferred Unitholders...... 42,174 980 43,154(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders...... (56,025) $(23,254) $ (79,279)(H)
========= ======== =========
Basic earnings (loss) per OP Unit................. (.83) $ (1.16)(H)
========= =========
Diluted earnings (loss) per OP Unit............... $ (.83) $ (1.16)(H)
========= =========
Weighted average OP Units outstanding............. 67,522 68,287
========= =========
Weighted average OP Units and equivalents
outstanding..................................... 68,366 69,131
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $456,968
Operating expense........................................... 249,097
Depreciation................................................ 87,344
Interest.................................................... 138,778
Net income.................................................. 15,005
</TABLE>
P-41
<PAGE> 1232
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $10,740 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $6,124 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net loss,
preferred unit distributions, and net loss per OP Unit in the event that
the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- --------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense......... $(121,699) $(124,763) $(116,008) $(116,008)
Net loss................. (36,125) (39,189 (30,434) (30,434)
Preferred unit
distributions.......... 43,154 42,174 42,174 51,971
Net loss attributable to
OP Unitholders......... (79,279) (81,363) (72,608) (82,405)
Net loss per OP Unit..... (1.16) (1.20) (1.03) (1.22)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................. $ 1,137 $ 1,245 $ 938 $ 938
Net loss................... (37,262) (40,434) (31,372) (31,372)
Net loss attributable to OP
Unitholders.............. (80,416) (82,608) (73,546) (83,343)
Net loss per OP Unit....... (1.18) (1.22) (1.04) (1.23)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, the Partnership will own 49%
of certain 88 Partnerships, 25% of two Partnerships, and 100% of one
Partnership. The amount included in the pro forma financial statements
assume an acceptance rate of 100%. The following table shows the effect on
equity in earnings of unconsolidated partnerships, net loss, net loss
attributable to OP Unitholders, and net loss per OP Unit in the event that
the Partnership will have an acceptance rate of 50% of the interests
tendered and will own varying percentages of each partnership:
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(36,510)
Net loss.................................................... (26,084)
Net loss attributable to OP Unitholders..................... (68,784)
Net loss per OP Unit........................................ (1.01)
</TABLE>
P-42
<PAGE> 1233
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-43
<PAGE> 1234
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations............... $ 337,307 $ 8,654(C) $ 345,961
Property operating expenses........................ (131,851) (4,389)(C) (136,240)
Owned property management expense.................. (8,933) -- (8,933)
Depreciation....................................... (78,479) (1,941)(C) (80,420)
--------- -------- ---------
Income from property operations.................... 118,044 2,324 120,368
--------- -------- ---------
Management fees and other income................... 28,912 -- 28,912
Management and other expenses...................... (14,386) -- (14,386)
Corporate overhead allocation...................... (196) -- (196)
Amortization....................................... (15,243) -- (15,243)
--------- -------- ---------
Income from service company business............... (913) -- (913)
Minority interest in service company business...... -- -- --
--------- -------- ---------
Partnership's share of income from service company
business......................................... (913) -- (913)
--------- -------- ---------
General and administrative expenses................ (8,632) -- (8,632)
Interest expense................................... (85,010) (4,250)(D)
(1,630)(C) (90,890)(H)
Interest income.................................... 40,887 40,887
Minority interests................................. (8,429) (119)(E) (8,548)
Equity in losses of unconsolidated partnerships.... (10,234) (13,156)(F)
41(G) (23,349)(I)
Equity in earnings of Unconsolidated
Subsidiaries..................................... 851 -- 851
Amortization of goodwill........................... (5,071) -- (5,071)
--------- -------- ---------
Net income (loss).................................. 41,493 (16,790) 24,703(H)
Income attributable to Preferred Unitholders....... 32,414 735 33,149(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders....... $ 9,079 $(17,525) $ (8,446)(H)
========= ======== =========
Basic earnings (loss) per OP Unit.................. $ .13 $ (.12)(H)
========= =========
Diluted earnings (loss) per OP Unit................ $ .13 $ (.12)(H)
========= =========
Weighted average OP Units outstanding.............. 68,554 69,319
========= =========
Weighted average OP Units and equivalents
outstanding...................................... 69,218 69,983
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data (unaudited) for the nine months ended September
30, 1998 related to the 91 real estate partnerships is as follows (dollars
in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $338,937
Operating expense........................................... 182,529
Depreciation................................................ 64,127
Interest.................................................... 103,756
Net income.................................................. (9,329)
</TABLE>
P-44
<PAGE> 1235
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $8,552 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $4,604 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net
income, preferred unit distributions, and net loss per OP Unit in the event
that the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense........... $(90,890) $(93,184) $(86,640) $(86,640)
Net income................. 24,703 22,409 28,953 28,953
Preferred unit
distributions............ 33,149 32,414 32,414 39,762
Net loss attributable to OP
Unitholders.............. (8,446) (10,005) (3,461) (10,809)
Net loss per OP Unit....... (.12) (.15) (.05) (.16)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- ------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................... $ 851 $ 931 $ 702 $ 702
Net income................... 24,703 21,478 28,251 28,251
Net loss attributable to OP
Unitholders................ (9,296) (10,936) (4,163) (11,511)
Net loss per OP Unit......... (.13) (.16) (.06) (.17)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, AIMCO will own 49% of certain
88 Partnerships, 25% of two Partnerships, and 100% of one Partnership. The
following table shows the effect on equity in earnings of unconsolidated
partnerships, net income, net income (loss) attributable to OP Unitholders,
and net loss per OP Unit in the event the Partnership will own varying
percentages of each partnership.
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(17,797)
Net income.................................................. 32,216
Net income (loss) attributable to OP Unitholders............ (593)
Net income (loss) per OP Unit............................... (.01)
</TABLE>
P-45
<PAGE> 1236
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-46
<PAGE> 1237
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ (13,851) $(22,274)(C) $ (36,125)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 128,169 2,589(D) 130,758
Gain on investments..................................... (12) -- (12)
(Gain) loss on disposition of properties................ (3,882) -- (3,882)
Minority interests...................................... 9,983 51 10,034
Equity in earnings of unconsolidated partnerships....... 27,537 16,864(E)
(483)(F) 43,918
Equity in earnings of unconsolidated subsidiaries....... (5,848) -- (5,848)
Extraordinary (gain) loss on early extinguishment of
debt.................................................. --
Changes in operating assets and operating liabilities... 519 (660)(G) (141)
---------- -------- ----------
Total adjustments................................... 156,466 18,361 174,827
---------- -------- ----------
Net cash provided by (used in) operating
activities........................................ 142,615 (3,913) 138,702
Net cash used in discontinued operations............ (7,999) -- (7,999)
---------- -------- ----------
Net cash provided by (used in) continuing
operations........................................ 134,616 (3,913) 130,703
---------- -------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate......................... 41,419 -- 41,419
Purchase of real estate................................... (625,603) -- (625,603)
Additions to real estate, investments and property held
for sale................................................ (55,892) (1,024)(G) (56,916)
Proceeds from sale of property held for sale.............. 303 -- 303
Purchase of general and limited partnership interests..... (276,458) (79,601)(H) (356,059)
Purchase of management contracts.......................... (48,554) -- (48,554)
Purchase of/additions to notes receivable................. (81,670) -- (81,670)
Proceeds from repayments of notes receivable.............. 10,052 -- 10,052
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 94,686 10,070(I) 104,756
Contribution to unconsolidated subsidiaries............... (42,879) -- (42,879)
Proceeds from sale of securities.......................... 642 -- 642
Purchase of investments held for sale..................... (73) -- (73)
Purchase of NHP........................................... (60,575) -- (60,575)
Purchase of Ambassador common stock....................... (19,881) -- (19,881)
---------- -------- ----------
Net cash used in investing activities............... (1,064,483) (70,555) (1,135,038)
---------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 761,270 -- 761,270
Principal repayments on secured notes payable............. (307,917) (713)(G) (308,630)
Proceeds from secured short-term financing................ 19,050 79,601(H) 98,651
Repayments on secured short-term financing................ (259,461) -- (259,461)
Principal repayments on unsecured short-term notes
payable................................................. (50,879) -- (50,879)
Proceeds (payoff) from unsecured short-term financing..... (12,500) -- (12,500)
Principal repayments on secured tax-exempt bond
financing............................................... (1,487) -- (1,487)
Net borrowings (paydowns) on the Company's revolving
credit facilities....................................... (162,008) -- (162,008)
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (17,032) -- (17,032)
Proceeds from issuance of common and preferred stock,
net..................................................... 1,098,265 -- 1,098,265
Proceeds from exercises of employee stock options and
warrants................................................ 11,553 -- 11,553
Repurchase of common stock................................ (3,283) -- (3,283)
Principal repayments received on notes due from
Officers................................................ 27,280 -- 27,280
Investments made by minority interests.................... 249 -- 249
Receipt of contributions from minority interests.......... 37,345 -- 37,345
Payments of distributions to minority interests........... (2,713) -- (2,713)
Payment of distributions.................................. (130,657) -- (130,657)
Payment of distributions to limited partners.............. (5,208) (1,415)(J) (6,623)
Payment of preferred unit distributions................... (42,984) (979)(K) (43,963)
Payment of distributions to minority interests............ (21,788) -- (21,788)
Net transactions with Insignia/ESG........................ (57,612) -- (57,612)
---------- -------- ----------
Net cash provided by financing activities........... 879,483 76,494 955,977
---------- -------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (50,384) 2,026 (48,358)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 117,896 2,291 120,187
---------- -------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 67,512 $ 4,317 $ 71,829
========== ======== ==========
</TABLE>
P-47
<PAGE> 1238
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 65,372
Cash used in investing activities......................... (11,713)
Cash used in financing activities......................... (74,617)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the cash portion of the purchase price (and additional
borrowings by the Partnership) related to the acquisition by the
Partnership of additional limited partnership interests in 91 real estate
limited partnerships.
(I) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(J) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.85 per Common OP Unit.
(K) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-48
<PAGE> 1239
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ 41,493 $(16,790)(C) $ 24,703
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 101,523 1,941(D) 103,464
(Gain) loss on disposition of properties................ -- -- --
Minority interests...................................... 8,429 119 8,548
Equity in earnings of unconsolidated partnerships....... 10,234 13,156(E)
(41)(F) 23,349
Equity in earnings of unconsolidated subsidiaries....... (851) -- (851)
Non-cash compensation................................... 796 -- 796
Changes in operating assets and operating liabilities... (69,549) (21)(G) (69,570)
--------- -------- ---------
Total adjustments................................... 50,582 15,154 65,736
--------- -------- ---------
Net cash provided by operating activities........... 92,075 (1,636) 90,439
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... 27,122 -- 27,122
Additions to real estate.................................. (57,526) (668)(G) (58,194)
Proceeds from sale of property and investments held for
sale.................................................... (35) -- (35)
Additions to property held for sale....................... (1,986) -- (1,986)
Purchase of general and limited partnership interests..... (9,596) -- (9,596)
Purchase of/additions to notes receivable................. (100,034) -- (100,034)
Proceeds from repayments/sale of notes receivable......... 42,747 -- 42,747
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 23,629 5,809(H) 29,438
Payment of trust based preferred dividends................ (7,415) -- (7,415)
Cash received in connection with Ambassador Merger and
AMIT Merger............................................. 17,915 -- 17,915
Contribution to unconsolidated subsidiaries............... (13,032) -- (13,032)
Purchase of investments held for sale..................... (4,935) -- (4,935)
Redemption of OP Units.................................... (516) -- (516)
Merger costs.............................................. (1,402) -- (1,402)
--------- -------- ---------
Net cash used in investing activities............... (85,064) 5,141 (79,923)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 291,885 -- 291,885
Principal repayments on secured notes payable............. (52,023) -- (52,023)
Principal advances on secured tax-exempt bond financing... 21,784 -- 21,784
Principal repayments on secured tax-exempt bond
financing............................................... (1,436) -- (1,436)
Net borrowings/ repayments on secured short-term
financing............................................... 135,332 -- 135,332
Net borrowings (paydowns) on the revolving credit
facilities.............................................. 2,513 (812)(G) 1,701
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (5,810) -- (5,810)
Proceeds from issuance of common stock and preferred
stock, net.............................................. -- -- --
Repurchase of common stock................................ (10,972) -- (10,972)
Proceeds from exercises of employee stock options and
warrants................................................ 16,294 -- 16,294
Principal repayments received on notes due from
Officers................................................ 8,084 -- 8,084
Receipt of contributions from minority interests.......... -- -- --
Payments of distributions to minority interests........... (2,034) (2,034)
Payment of distributions.................................. (107,989) -- (107,989)
Payment of distributions to limited partners.............. (12,669) (1,291)(I) (13,960)
Payment of preferred unit distributions................... (27,010) (735)(J) (27,745)
Proceeds from issuance of High Performance Units.......... 1,988 -- 1,988
Net transactions with Insignia/ESG........................ (241,003) -- (241,003)
--------- -------- ---------
Net cash provided by financing activities........... 19,578 (2,838) 16,740
--------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 26,589 667 27,256
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 55,700 4,316 60,016
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 82,289 $ 4,983 $ 87,272
========= ======== =========
</TABLE>
P-49
<PAGE> 1240
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the nine months ended September 30, 1998
related to the 91 real estate partnerships is as follows (dollars in
thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 76,113
Cash used in investing activities......................... (22,616)
Cash used in financing activities......................... (42,273)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 30 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(I) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.6875 per Common OP Unit.
(J) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-50
<PAGE> 1241
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: CHAPEL HILL LIMITED
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
CHAPEL HILL LIMITED (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 limited partnership interests in the Partnership (the "Units") will be
acquired by the Purchaser in exchange for an offer price per Unit of $41,361 in
cash, or 1,099.25 Common OP Units of the Purchaser, or 1,654.50 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 financial statements for the years ended
December 31, 1996 and 1997, and the quarterly report for the period ending
September 30, 1998, which the Partnership's management has indicated to be
the most current available financial statements;
3. Reviewed descriptive information concerning the real property owned
by the Partnership (the "Property"), including location, number of units
and unit mix, age, amenities and land acreage;
4. Reviewed summary historical operating statements for the Property,
for the years ended December 31, 1996 and 1997, and the nine months ending
September 30, 1998;
A-1
<PAGE> 1242
5. Reviewed the 1998 operating budget for the Property prepared by the
Partnership's management. Such budgets are summarized in the Prospectus
Supplement under the section "Stanger Analysis -- Summary of Materials
Considered";
6. Reviewed the estimate of liquidation value and going concern value
provided by the general partner to Stanger. Such estimates are described in
the Prospectus Supplement under the section "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration." In
addition, we reviewed the 1998 operating budgets for each property provided
by the Partnership;
7. Discussed with management market conditions for the Property;
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 Property and the Partnership; the physical condition
of the Property including any deferred maintenance; and other factors
influencing value of the Property and the Partnership;
8. Performed a site inspection of the Property;
9. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Property, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Property;
10. Reviewed information provided by the Company relating to debt
encumbering the Property; and
11. 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 Property, the allocation of net
Partnership values between the General Partner, and Limited Partners, and the
transaction costs and fees associated with a sale of the Property. 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 Property 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 Property 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 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
A-2
<PAGE> 1243
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
March , 1999
A-3
<PAGE> 1244
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 directors
of AIMCO are set forth below. The two directors of AIMCO-GP are Terry Considine
and Peter Kompaniez. The two directors of the general partner of your
partnership are Peter K. Kompaniez and Patrick J. Foye. The two executive
officers of the general partner of your partnership are Patrick J. Foye,
Executive Vice President, and Timothy R. Garrick, Vice President -- Accounting.
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
Paul J. McAuliffe............................ Executive Vice President -- Capital Markets
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
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
</TABLE>
B-1
<PAGE> 1245
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
B.A. from Harvard College, a J.D. from Harvard Law School
and is admitted as a member of the Massachusetts Bar.
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.
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
</TABLE>
B-2
<PAGE> 1246
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
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.
Paul J. McAuliffe.................... Mr. McAuliffe was appointed Executive Vice
President -- Capital Markets in February 1999. Prior to
joining AIMCO, Mr. McAuliffe was Senior Managing Director of
Secured Capital Corp and prior to that time had been a
Managing Director of Smith Barney, Inc. from 1993 to 1996,
where he was a key member of the underwriting team that led
AIMCO's initial public offering in 1994. Mr. McAuliffe was
also a Managing Director and head of the real estate group
at CS First Boston from 1990 to 1993 and he was a Principal
in the real estate group at Morgan Stanley & Co., Inc. from
1983 to 1990. Mr. McAuliffe received a B.A. from Columbia
College and an MBA from University of Virginia, Darden
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
</TABLE>
B-3
<PAGE> 1247
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
and the Apartment Association of Metro Denver. Mr. Ira
received a B.S. from Metropolitan State College in 1975.
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.
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,
</TABLE>
B-4
<PAGE> 1248
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Mr. Martin is a director of Dresser, which is engaged in the
petroleum services, hydrocarbon and engineering industries.
Timothy R. Garrick................... Mr. Garrick has been Vice President -- Accounting of the
general partner and AIMCO since October 1, 1998. Prior to
that date, Mr. Garrick served as Vice
President -- Accounting Services of Insignia Financial Group
from June 1997 until October 1998. From 1992 until June of
1997, Mr. Garrick served as Vice President of Partnership
Accounting for Insignia Financial Group. From 1987 to 1990,
Mr. Garrick served as Investment Advisor for U.S. Shelter
Corporation. From 1984 to 1987, Mr. Garrick served as
Partnership Investment Analyst for U.S. Shelter Corporation.
From 1979 to 1984, Mr. Garrick worked on the audit staff of
Ernst & Whinney. Mr. Garrick received his B.S. Degree from
the University of South Carolina in 1979 and is a certified
public accountant.
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> 1249
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
By Fax:
(201) 896-0910
<PAGE> 1250
PROSPECTUS SUPPLEMENT
(To Prospectus dated March 26, 1999)
AIMCO Properties, L.P.
is offering to acquire units of limited partnership interest of
Coastal Commons Limited Partnership
in exchange for your choice of:
452.50 of our 8.0% Class Two Partnership Preferred Units;
300.50 of our Partnership Common Units; or
$11,312 in cash.
Generally, you will not recognize any immediate taxable gain or loss if you
exchange your units solely for our securities. However, you will recognize
taxable gain or loss if you exchange your units for cash.
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 the offer
consideration from a financial point of view.
Our offer consideration will be reduced for any distributions subsequently
made by your partnership prior to the expiration of our offer.
We will only accept a maximum of 25% 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.
You will not pay any fees or commissions if you tender your units.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline. You may withdraw any tendered units at any time
before we have accepted them for payment.
SEE "RISK FACTORS" BEGINNING ON PAGE S-23 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF RISK FACTORS THAT
YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration of $11,312 per unit without any
arms-length negotiations. Accordingly, our offer consideration may not
reflect the fair market value of your units. Stanger, in rendering its
fairness opinion, determined that the net asset value of your partnership
units was $11,691 per unit.
- We cannot predict when the property owned by your partnership may be
sold.
- Your general partner is a subsidiary of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- We are making this offer with a view to making a profit and 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.
- Continuation of your partnership will result in our affiliates continuing
to receive management fees from your partnership which would not be
payable if your partnership was liquidated.
- It is possible that we may conduct a subsequent offer at a higher price
more than one year after expiration this offer.
- Unlike your partnership, our policy is to reinvest proceeds from the sale
of our properties or refinancing of our indebtedness.
- We may change our investment, acquisition or financing policies without a
vote of our securityholders.
- If you acquire our securities, your investment will change from holding
an interest in a single property to holding an interest in our large
portfolio of properties, thereby fundamentally changing the nature of
your investment.
- Recently, Moody's Investors Service revised its outlook for AIMCO's
ratings from stable to negative.
- There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
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.
March 26, 1999
<PAGE> 1251
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY........................................ S-1
The Offer.................................... S-1
The AIMCO Operating Partnership.............. S-1
Affiliation with your General Partner........ S-1
Risk Factors................................. S-1
Background and Reasons for the Offer......... S-6
Valuation of Units........................... S-9
Fairness of the Offer........................ S-10
Stanger Analysis............................. S-11
Your Partnership............................. S-11
Terms of the Offer........................... S-12
Federal Income Tax Consequences.............. S-14
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-14
Comparison of Your Units and AIMCO OP Units.. S-14
Conflicts of Interest........................ S-15
Source and Amount of Funds and Transactional
Expenses................................... S-16
Summary Financial Information of AIMCO
Properties, L.P............................ S-17
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-19
Summary Financial Information of Coastal
Commons Limited Partnership................ S-21
Comparative Per Unit Data.................... S-21
THE AIMCO OPERATING PARTNERSHIP................ S-22
RISK FACTORS................................... S-23
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-23
Offer Consideration Not Based on Third
Party Appraisal or Arms-Length
Negotiation.............................. S-23
Offer Consideration May Not Represent Fair
Market Value............................. S-23
Offer Consideration Does Not Reflect Future
Prospects................................ S-23
Offer Consideration Based on Our Estimate
of Liquidation Proceeds.................. S-23
Offer Consideration May Be Less Than
Liquidation Value........................ S-23
Holding Units May Result in Greater Future
Value.................................... S-23
Conflicts of Interest with Respect to the
Offer.................................... S-23
Conflicts of Interest Relating to
Management Fees.......................... S-24
Possible Subsequent Offer at a Higher
Price.................................... S-24
Possible Recognition of Taxable Gain on a
Sale of Your Units....................... S-24
Fairness Opinion of Third Party Relied on
Information We Provided.................. S-24
Loss of Future Distributions from Your
Partnership.............................. S-24
Potential Effect of the Other Exchange
Offers on Us............................. S-25
Potential Delay in Payment................. S-25
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-25
Fundamental Change in Nature of
Investment............................... S-25
Fundamental Change in Number of Properties
Owned.................................... S-25
Lack of Trading Market for OP Units........ S-25
Uncertain Future Distributions............. S-25
Possible Reduction in Required
Distributions on Preferred OP Units...... S-25
Possible Lower Distributions............... S-26
Possible Redemption of Preferred Stock..... S-26
Possible Recognition of Taxable Gains on OP
Units.................................... S-26
Limitations on Effecting a Change of
Control.................................. S-26
Limitation on Transfer of OP Units......... S-26
Limited Voting Rights of Holders of OP
Units.................................... S-26
Market Prices for AIMCO's Securities May
Fluctuate................................ S-26
Litigation Associated with Partnership
Acquisitions............................. S-26
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Dilution of Interests of Holders of OP
Units.................................... S-27
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-27
Possible Increase in Control of Your
Partnership by Us........................ S-27
Recognition of Gain Resulting from Possible
Future Reduction in Your Partnership
Liabilities.............................. S-27
Possible Termination of Your Partnership
for Federal Income Tax Purposes.......... S-27
Possible Change in Time Frame Regarding
Sale of Property......................... S-27
Balloon Payments........................... S-27
SPECIAL FACTORS TO CONSIDER.................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-28
Background of the Offer...................... S-28
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
Disadvantages of the Offer................... S-32
VALUATION OF UNITS............................. S-33
FAIRNESS OF THE OFFER.......................... S-36
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-36
Fairness to Unitholders who Tender their
Units...................................... S-37
Fairness to Unitholders who do not Tender
their Units................................ S-38
Comparison of Consideration to Alternative
Consideration.............................. S-38
Allocation of Consideration.................. S-41
STANGER ANALYSIS............................... S-42
Experience of Stanger........................ S-42
Summary of Materials Considered.............. S-42
Summary of Reviews........................... S-44
Conclusions.................................. S-46
Assumptions, Limitations and
Qualifications............................. S-46
Compensation and Material Relationships...... S-47
YOUR PARTNERSHIP............................... S-47
General...................................... S-47
Your Partnership and its Property............ S-48
Property Management.......................... S-48
Investment Objectives and Policies; Sale or
Financing of Investments................... S-48
Capital Replacement.......................... S-49
Borrowing Policies........................... S-49
Competition.................................. S-49
Legal Proceedings............................ S-50
History of the Partnership................... S-50
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-50
Distributions and Transfers of Units......... S-50
Beneficial Ownership of Interests in Your
Partnership................................ S-51
Compensation Paid to the General Partner and
its Affiliates............................. S-51
SELECTED FINANCIAL INFORMATION OF COASTAL
COMMONS LIMITED PARTNERSHIP.................. S-52
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP.......................... S-53
Overview..................................... S-53
Results of Operations........................ S-53
THE OFFER...................................... S-56
Terms of the Offer; Expiration Date.......... S-56
Acceptance for Payment and Payment for
Units...................................... S-56
Procedure for Tendering Units................ S-57
</TABLE>
i
<PAGE> 1252
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Withdrawal Rights............................ S-60
Extension of Tender Period; Termination;
Amendment.................................. S-60
Proration.................................... S-61
Fractional OP Units.......................... S-61
Future Plans of the AIMCO Operating
Partnership................................ S-61
Voting by the AIMCO Operating Partnership.... S-62
Dissenters' Rights........................... S-62
Conditions of the Offer...................... S-62
Effects of the Offer......................... S-65
Certain Legal Matters........................ S-65
Fees and Expenses............................ S-67
Accounting Treatment......................... S-67
FEDERAL INCOME TAX CONSEQUENCES................ S-68
Tax Opinions................................. S-68
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-69
Disguised Sales.............................. S-70
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-70
Tax Consequences of Exchanging Units Solely
for Cash................................... S-71
Adjusted Tax Basis........................... S-71
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-71
Passive Activity Losses...................... S-72
Tax Reporting................................ S-72
Foreign Offerees............................. S-72
Tax Consequences of a Termination of Your
Partnership................................ S-72
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-74
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-81
DESCRIPTION OF PREFERRED OP UNITS.............. S-87
General...................................... S-87
Ranking...................................... S-87
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Distributions................................ S-87
Allocation................................... S-88
Liquidation Preference....................... S-88
Redemption................................... S-89
Voting Rights................................ S-89
Restrictions on Transfer..................... S-90
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-90
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-92
CONFLICTS OF INTEREST.......................... S-96
Conflicts of Interest with Respect to the
Offer...................................... S-96
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-96
Competition Among Properties................. S-96
Features Discouraging Potential Takeovers.... S-96
Future Exchange Offers....................... S-97
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-97
LEGAL MATTERS.................................. S-98
EXPERTS........................................ S-98
INDEX TO FINANCIAL STATEMENTS.................. F-1
PRO FORMA FINANCIAL INFORMATION OF AIMCO
PROPERTIES, L.P. ............................ P-1
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> 1253
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- 452.50 of our Class Two Partnership Preferred Units;
- 300.50 of our Partnership Common Units; or
- $11,312 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 accept a maximum of 25% of the outstanding units in response to our
offer. Our offer is not subject to any minimum number of units being tendered.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline.
The original offer price per unit in 1984 was $22,200. For the five years
ended December 31, 1998, your partnership paid distributions of $1,625 per unit.
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
its wholly owned subsidiary, AIMCO-GP, Inc. ("AIMCO GP"), AIMCO acts as the sole
general partner of the AIMCO Operating Partnership. As of December 31, 1998,
AIMCO-GP and another AIMCO subsidiary, AIMCO-LP, Inc., a limited partner of the
AIMCO Operating Partnership (the "Special Limited Partner"), owned approximately
an 83% interest in the AIMCO Operating Partnership. As of December 31, 1998, our
portfolio of owned or managed properties included 379,363 apartment units in
2,147 properties located in 49 states, the District of Columbia and Puerto Rico.
Based on apartment unit data compiled by the National Multi Housing Council, we
believe that we are one of the largest owners and managers of multifamily
apartment properties in the United States. As of December 31, 1998, we:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 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. and our February 26, 1999 merger with Insignia Properties Trust, we
acquired a 100% ownership interest in the general partner of your partnership,
AmReal Realty & GP Real Estate Services II, Inc., and the company that manages
the property owned by your partnership.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-23 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the
S-1
<PAGE> 1254
risks associated with our offer and the disadvantages of the offer to you and
should be considered when you review "Summary -- Background and Reasons for the
Offer -- Expected Benefits of the Offer":
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. We did not use any third-party appraisal or valuation to determine
the value of any property owned by your partnership. We established the terms of
our offer, including the exchange ratios and the cash consideration, without any
arms-length negotiations.
OFFER CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimated your property to be worth $9,200,000, less
approximately $472,263 of deferred maintenance and investment. It is possible,
that a sale of the property could result in your receiving more per unit than in
our offer. Even if our cash offer consideration is equal to liquidation value,
if you accept OP units, you may not ultimately receive an amount equal to the
cash offer consideration when you sell such OP units or any AIMCO securities you
may receive upon redemption of such OP units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
value if you retain your units until your partnership is liquidated.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of ours and, therefore, has substantial conflicts of interest with
respect to our offer. We are making this offer with a view to making a profit.
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 REGARDING MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its property, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
the expiration this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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
S-2
<PAGE> 1255
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.
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. You
should review "Federal Income Tax Consequences" 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. 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.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is our subsidiary).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. For any units that we
acquire from you, you will not receive any future distributions from your
partnership's operating cash flow or upon a sale of property owned by your
partnership or a refinancing of any of its debt. If you tender your units in
exchange for OP Units, you will be entitled to future distributions from us from
our operating cash flow and upon a dissolution, liquidation or wind-up of the
AIMCO Operating Partnership.
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from a sale of a property or a refinancing of its indebtedness, to (ii)
a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of December 31, 2014 to a much larger
partnership with a partnership termination date of 2093.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you tender your units
for our OP Units, you will have changed your investment from an interest in a
partnership that owns and manages one property to an interest in a partnership
that invests in and manages a large portfolio of properties.
S-3
<PAGE> 1256
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE LOWER DISTRIBUTIONS. The Preferred OP Units provide for annual
distributions of $2.00 per unit and no more. Current annualized distributions
with respect to the Common OP Units are $2.50 per unit. This is equivalent to
distributions of $905 per year on the number of Preferred OP Units, or
distributions of $751.25 per year on the number of Common OP Units, that you
would receive in exchange for each of your partnership's units. During 1998,
your partnership paid cash distributions of $1,125 per unit. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units may be
substantially less, immediately following our offer, than the distributions with
respect to your units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus.
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions.
S-4
<PAGE> 1257
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a result, we may incur costs associated with defending or settling such
litigation or paying any judgment if we lose. As of the present time, no limited
partners of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. As a result of the
offer, we may increase our ability to influence voting decisions with respect to
your partnership. However, we will not be able to control voting decisions
unless we acquire more units in another transaction, which cannot take place for
at least one year after expiration of this offer. Also, removal of your general
partner (which is our subsidiary) or the manager of any property owned by your
partnership may become more difficult or impossible without our consent or
approval.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investment in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to have to
hold the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns one property. The general partner of your partnership
continually considers whether the property should be sold or otherwise disposed
of after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum
S-5
<PAGE> 1258
capital appreciation for your partnership. We cannot predict when the property
will be sold or otherwise disposed of. However, there is no current plan or
intention to sell the property in the near future.
BALLOON PAYMENTS. Your partnership has approximately $5,909,000 of balloon
payments due on its mortgage debt in July 2002. Your partnership will have to
refinance such debt or sell its property prior to the balloon payment dates, or
it will be in default and could lose the property to foreclosure.
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 51% ownership interest in Insignia Properties Trust, which has
a 100% ownership interest in the general partner of your partnership and the
company that manages the property owned by your partnership. On February 26,
1999, we acquired the remaining 49% interest in Insignia Properties Trust in a
merger transaction. One of the consequences of the merger with Insignia is to
allow us to make the offer and, if successful, to increase our ownership in 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 August 28, 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
(which is our subsidiary):
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.
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. 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. Your partnership's mortgage note is due in July 2002 and
require a balloon payment of $5,909,000. In addition, continuation of your
partnership without the offer would deny you and your partners the benefits
that your general partner (which is our subsidiary) 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
S-6
<PAGE> 1259
value of your partnership's property. There is currently no market for the
Preferred OP Units or Common OP Units.
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 three principal advantages of exchanging your units for Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the NYSE.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are four principal advantages of exchanging your units for Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- 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 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.
Disadvantages of the Offer.
The principal disadvantages of the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
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- No Separate Representation of Limited Partners. In structuring the offer
and determining the offer consideration, no one separately represented
the interests of the limited partners. Although we have a fiduciary duty
to the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of such property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pretax cash proceeds to you than our
offer.
- OP Units. OP Units lack a public market, have transfer restrictions and
must be held for one year before they can be redeemed by a holder. The
ultimate return on the OP Units is directly tied to the future price of
AIMCO's Class A Common Stock or Class I Preferred Stock. You could
ultimately receive less for your OP Units than the cash price in our
offer. Further, on or after March 1, 2005, we may redeem the Class I
Preferred Stock for $25 per share.
- Lower Preferred Quarterly Distributions. Your partnership paid
distributions of $1,125 per unit for the fiscal year ended December 31,
1998. Holders of Preferred OP Units will be entitled to receive quarterly
distributions of $0.50 per unit (equivalent to $2.00 on an annualized
basis) before any distributions are paid to holders of Common OP Units.
This is equivalent to a distribution of $905 per year on the number of
Preferred OP Units you will receive in exchange for each of your
partnership units.
- Lower Common Quarterly Distributions. Your partnership paid distributions
of $1,125 per unit for the fiscal year ended December 31, 1998. In 1998,
we paid quarterly distributions on the Common OP Units totalling $2.25
per unit. In January 1999, we increased our distribution rate on each of
the Common OP Units to $2.50 on an annual basis. See "The AIMCO Operating
Partnership." Assuming no change in the level of our distributions, this
is equivalent to a distribution of $751.25 per year on the number of
Common OP Units you will receive in exchange for each of your partnership
units.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
a sale of the property would be advantageous given market conditions, the
condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of the property and the tax consequences to you
and your partners upon a sale of the property.
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
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VALUATION OF UNITS
We determined the offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower of the value produced. We used your property income
since December 31, 1997. However, in determining the appropriate capitalization
rate, we considered the partnership's property income since December 31, 1997.
Our method for selecting a capitalization rate begins with each property being
assigned a location and condition rating (e.g., "A" for excellent, "B" for good,
"C" for fair, and "D" for poor). We have rated your property's location A
(excellent) and its condition B (good). Generally, we assign an initial
capitalization rate of 10.00% to properties in this category. We then adjust the
capitalization rate based on whether the mortgage debt that the property is
subject to bears interest at a rate above or below 7.5% per annum. Generally,
for every 0.5% in excess of 7.5%, the capitalization rate would be increased by
0.25%. Your property's mortgage debt bears interest at 8.10% per annum, which
resulted in an increase from the initial capitalization rate of 0.50%. We also
considered any changes in your partnership's property income from 1997 to 1998.
Because your partnership's property income in 1998 increased compared to 1997,
we further revised the capitalization rate downward by approximately 0.32%,
resulting in a final capitalization rate of 10.18%. The evaluation of a
property's location and condition, and the determination of an appropriate
capitalization rate for a property, is subjective in nature, and others
evaluating the same property might use a different capitalization rate and
derive a different property value. 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. Further, in applying the direct capitalization method,
others may make different assumptions and obtain different results. 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>
Property income............................................. $ 937,000
Capitalization rate......................................... 10.18%
-----------
Gross valuation of partnership's property................... $ 9,200,000
Plus: Cash and cash equivalents............................. 226,675
Plus: Other partnership assets, net of security deposits.... 191,835
Less: Mortgage debt, including accrued interest............. (6,283,500)
Less: Accounts payable and accrued expenses................. (21,568)
Less: Other liabilities..................................... (49,902)
-----------
Partnership valuation before taxes and certain costs........ 3,263,540
Less: Disposition fees...................................... (276,000)
Less: Extraordinary capital expenditures and deferred
maintenance............................................... (472,263)
Less: Closing costs......................................... (230,000)
-----------
Estimated net valuation of your partnership................. 2,285,277
Percentage of estimated net valuation allocated to holders
of units.................................................. 99.00%
-----------
Estimated net valuation of units............................ 2,262,424
Total number of units............................. 200.0
-----------
Estimated valuation per unit................................ 11,312
===========
Cash consideration per unit................................. $ 11,312
===========
</TABLE>
In order to determine the number of Preferred OP Units we are offering for
each of your units, we divided the cash offer consideration of $11,312 by the
$25 liquidation preference of each Preferred OP Unit to get 452.50 Preferred OP
Units per unit.
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In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $11,312 by a
price of $37.63 (the average closing price of AIMCO's Class A Common Stock on
the NYSE for the 30 trading days ended March 23, 1999) to get 300.50 Common OP
Units per unit.
FAIRNESS OF THE OFFER
Fairness to Unitholders. Your general partner is our subsidiary. 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. Your general partner did not participate in the structuring of the
offer. We and your general partner believe that the offer and all forms of
consideration offered is fair to you and the other limited partners of your
partnership. 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 (which is our subsidiary) 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 (which is our subsidiary) has compared our offer consideration
to:
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated;
- your general partner's estimate of the going concern value of your
partnership if it continued operating as an independent stand-alone
entity; and
- the net book value of your partnership.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C> <C>
Cash offer consideration.................................... $11,312
Partnership Preferred Units................................. $11,312
Partnership Common Units.................................... $11,312
Alternatives:
Estimated liquidation proceeds............................ $11,312
Estimated going concern value(1).......................... $11,174
Estimated alternative going concern value(2).............. $11,178
Net book value (deficit).................................. $(8,925)
</TABLE>
- ---------------
(1) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(2) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
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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. Stanger has
rendered similar fairness opinions with regard to the other tender offers being
made by the AIMCO Operating Partnership. Stanger rendered the opinions only as
to the individual fairness of the offer consideration in each proposed exchange
offer.
YOUR PARTNERSHIP
Your Partnership and its Property. Coastal Commons Limited Partnership is a
South Carolina limited partnership which was formed on June 29, 1984 for the
purpose of owning and operating a single apartment property located in Mt.
Pleasant, South Carolina, known as "Hibben Ferry Apartments." Hibben Ferry
Apartments consists of 240 apartment units and was built in 1983. Your
partnership has no employees. As of September 30, 1998, there were 200 units of
limited partnership interest issued and outstanding, which were held of record
by 229 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.
Your partnership sold $15,300,000 of limited partnership units in 1984.
Between January 1, 1993 and December 31, 1998 your partnership paid cash
distributions totalling $1,625 per unit. Your partnership currently owns one
property.
Property Management. Your partnership's property has been managed by an
affiliate of ours. 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.
Investment Objectives and Policies; Sale or Financing of Investments. Under
your partnership's agreement of limited partnership, your partnership is not
permitted to raise new capital or reinvest cash in new properties. Your
partnership will terminate on December 31, 2014, unless earlier dissolved. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership property within any specified time period. An
investment in your partnership is a finite life investment in which partners
receive regular cash distributions out of your partnership's distributable cash
flow, if any, and upon liquidation.
Borrowing Policies. Your partnership's agreement of limited partnership
allows your partnership to incur debt. As of December 31, 1998, your partnership
had a mortgage note outstanding of $6,177,044, payable to First Union National
Bank, which bears interest at the rate of 8.08%. The mortgage debt is due on
July 2002. Your partnership's agreement of limited partnership also allows the
general partner of your partnership to lend funds to your partnership. As of
December 31, 1998, your general partner had no loans outstanding to your
partnership.
Transfers. Your units are not listed on any national securities exchange or
quoted on NASDAQ, and there is no established public trading market for the
units. Secondary sales activity for the units has been limited and sporadic.
Your general partner monitors transfers of the units (i) because the admission
of the transferee as a substitute limited partner in your partnership requires
the consent of your general partner under your partnership agreement, and (ii)
in order to track compliance with applicable safe harbor provisions to avoid
treatment as a "publicly traded partnership" for tax purposes. However, your
general partner does not
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monitor or regularly receive or maintain information regarding the prices at
which secondary sale transactions in the units have been effectuated.
TERMS OF THE OFFER
General. We are offering to acquire up to 25% of the outstanding 200 units
of your partnership, which we do not directly or indirectly own, for
consideration per unit of 452.50 Preferred OP Units, 300.50 Common OP Units, or
$11,312 in cash. If you tender units pursuant to the offer, you may choose 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 Preferred OP Units, 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 January 1, 1999,
although you will be entitled to retain any distributions you may have received
after such date and prior to our commencement of this offer.
If you accept our offer and do not specify the consideration you desire on
the letter of transmittal, we will issue you Preferred OP Units.
Expiration Date. Our offer will expire at 5:00 P.M., New York City time, on
June 4, 1999, 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.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds 25% 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 their acceptance for payment as provided for herein.
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 Common OP Units or 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.
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
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- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
The offer may be extended or delayed indefinitely, during which time you
will not receive payment for any tendered units.
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 any property owned by
your partnership's because your general partner (which is our subsidiary) and
the property manager will remain unchanged. If we borrow funds for the cash
consideration for these offers, our interest costs would increase which could
adversely affect our future earnings. If all units in this and the other
contemplated offers were purchased for cash and we borrowed all the funds, at
current interest rates, our interest expense would increase by $3,064,000 per
year.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
number of units pursuant to our offer, we may be in a position to influence
voting decisions with respect to your partnership. However, we will not be able
to control voting decisions unless we acquire more units in another transaction,
which cannot take place for at least one year after expiration of this offer.
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 (which is our subsidiary),
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 Letter of Transmittal,
and the legal and accounting fees and expenses in connection with the offer. We
will also pay the fees of Stanger for providing the fairness opinion 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 $50,000.
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.
No Dissenters' Rights. You are not entitled to dissenters' (appraisal)
rights in connection with the offer.
Other Offers. The AIMCO Operating Partnership is also making similar
exchange offers to approximately 90 other limited partnerships in which it
controls the general partner, interests in substantially all of which were
acquired in the merger on October 1, 1998 with Insignia Financial Group, Inc.
and the February 26, 1999 merger with Insignia Properties Trust. Each of such
exchange offers is being made by a separate prospectus supplement which is
similar to this Prospectus Supplement. Copies of such prospectus supplements may
be obtained upon written request from the Information Agent at the address set
forth in
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<PAGE> 1266
"-- Information Agent" or on the back cover page of this Prospectus Supplement.
The exchange offers may be different for limited partners in each partnership in
terms of pricing and percentage of units sought, but the effects of the offers
will essentially be the same. In general, we believe that the risk factors
(except for certain tax-related risk factors) described herein for this offer
will also be applicable to the other offers.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer. Its telephone numbers are (888)
349-2005 and (201) 896-1900. Its fax number is (201) 896-0910.
FEDERAL INCOME TAX CONSEQUENCES
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Preferred OP
Units or 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.
THE FOREGOING SUMMARY IS A GENERAL DISCUSSION OF THE MATERIAL 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 "FEDERAL INCOME TAX CONSEQUENCES" 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.
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, your general
partner (which is our subsidiary) 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, Preferred
OP Units and 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.
As of February 19, 1999, the AIMCO Operating Partnership had approximately
9,729,130 Common OP Units outstanding (excluding interests held by AIMCO) and no
Class Two Partnership Preferred Units outstanding. The number of OP Units you
may acquire from us in exchange for your units will represent a lower percentage
of the outstanding limited partnership interests in the AIMCO Operating
Partnership than that of your current ownership interest in your partnership. In
response to our offer, you could elect to receive $11,312 in cash, 452.50
Preferred OP Units or 300.50 Common OP Units. Both your units and the OP Units
are subject to transfer restrictions and it is unlikely that a real trading
market will ever develop for any of such securities. If you subsequently redeem
OP Units for AIMCO Class A Common Stock or Class I Preferred Stock, we can make
no assurance as to the value of such shares of AIMCO stock, at that time, which
may be less than the cash offer price of $11,312.
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CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
our subsidiary 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
both the general partner of your partnership and the manager of your
partnership's property. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $12,000 for the fiscal year ended December 31,
1998. The property manager received management fees of $92,212 for the fiscal
year ended December 31, 1998. We have no current intention of changing the fee
structure for your general partner or the 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.
AIMCO's Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is 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.
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. We might pay a higher price for any future exchange offers we may make
for units of your partnership. In any event, we will not acquire any units for
at least one year after expiration of this offer.
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SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $565,600 will be required to purchase all of
the units sought in our offer, if such units are tendered for cash excluding
expenses. We will obtain all such funds from cash from operations, equity
issuances and short term borrowings. For a detailed description of estimated
expenses to be incurred in the offer, see "Source and Amount of Funds and
Transactional Expenses."
S-16
<PAGE> 1269
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
nine months ended September 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 of the AIMCO Operating Partnership" included in the accompanying
Prospectus. All dollar values are in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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............... $ 265,700 $ 127,083 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses........... (101,600) (50,737) (76,168) (38,400) (30,150) (10,330)
Owned property management expenses.... (7,746) (4,344) (6,620) (2,746) (2,276) (711)
Depreciation.......................... (59,792) (23,848) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
96,562 48,154 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income...... 13,968 9,173 13,937 8,367 8,132 3,217
Management and other expenses......... (8,101) (5,029) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation......... (196) (441) (588) (590) (581) --
Other assets, depreciation and
amortization........................ (3) (236) (453) (218) (168) (150)
Owner and seller bonuses.............. -- -- -- -- -- --
Amortization of management company
goodwill............................ -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
5,668 3,467 2,038 1,707 2,002 1,020
Minority interests in service company
business............................ -- 48 (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business............ 5,668 3,515 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative expenses... (7,444) (1,408) (5,396) (1,512) (1,804) (977)
Interest income....................... 18,244 4,458 8,676 523 658 123
Interest expense...................... (56,756) (33,359) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships........................ (1,052) (777) 1,008 (111) -- --
Equity in losses of unconsolidated
partnerships(c)..................... (5,078) (463) (1,798) -- -- --
Equity in earnings of unconsolidated
subsidiaries(d)..................... 8,413 456 4,636 -- -- --
Amortization of goodwill.............. (5,071) (711) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations................ 53,486 19,865 30,246 15,629 14,988 7,702
Gain on disposition of properties..... 2,783 (169) 2,720 44 -- --
Provision for income taxes............ -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before extraordinary
item................................ 56,269 19,696 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt.............. -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)..................... $ 56,269 $ 19,427 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)............................. 241 109 147 94 56 48
Total owned apartment units (end of
period)............................. 62,955 28,773 40,039 23,764 14,453 12,513
Units under management (end of
period)............................. 154,729 71,038 69,587 19,045 19,594 20,758
Basic earnings per Common OP Unit..... $ 0.80 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP Unit... $ 0.79 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit................................ $ 1.6875 $ 1.3875 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities.......................... 50,825 53,435 73,032 38,806 25,911 16,825
Cash flows used in investing
activities.......................... (185,453) (314,814) (717,663) (88,144) (60,821) (186,481)
Cash flows provided by (used in)
financing activities................ 141,221 293,984 668,549 60,129 30,145 176,800
<CAPTION>
AIMCO PROPERTIES, L.P.
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)
Cash flows provided by (used in)
financing activities................ (1,032) 14,114
</TABLE>
S-17
<PAGE> 1270
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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>
Funds from operations(e)................ $ 132,881 $ 49,692 $ 81,155 $ 35,185 $ 25,285 $ 9,391
Weighted average number of Common OP
Units outstanding..................... 53,007 24,347 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation.......................... $2,685,487 $1,250,239 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation.......................... 2,355,122 1,107,545 1,503,922 745,145 448,425 392,368
Total assets............................ 3,121,949 1,608,195 2,100,510 827,673 480,361 416,361
Total mortgages and notes payable....... 1,275,401 661,715 808,530 522,146 268,692 141,315
Redeemable Partnership Units............ 232,405 178,321 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994 Cumulative
Senior Preferred Units................ -- -- -- -- -- 107,228
Partners' Capital....................... 1,427,087 560,737 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.
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>
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 10, 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
based on the NAREIT definition, as adjusted for the 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 NINE PERIOD
MONTHS ENDED FOR THE YEAR ENDED JANUARY 10,
SEPTEMBER 30, DECEMBER 31, 1994
------------------ --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
-------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $ 56,269 $19,427 $32,697 $15,673 $14,988 $ 7,702
(Gain) loss on disposition of property...................... (2,783) 169 (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 56,900 21,052 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 7,077 711 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 2,689 3,584 -- -- --
Amortization of management contracts...................... 4,201 430 1,587 -- -- --
Deferred taxes............................................ 6,134 2,164 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 17,379 2,781 6,280 -- -- --
Preferred stock dividends................................. (12,296) -- (135) -- (5,169) (3,114)
-------- ------- ------- ------- ------- -------
Funds from operations....................................... $132,881 $49,692 $81,155 $35,185 $25,285 $ 9,391
======== ======= ======= ======= ======= =======
</TABLE>
S-18
<PAGE> 1271
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. (the AIMCO Operating Partnership) for the
nine months ended September 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 NINE
MONTHS FOR THE
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 345,961 $ 442,526
Property operating expenses............................... (136,240) (189,442)
Owned property management expenses........................ (8,933) (11,831)
Depreciation.............................................. (80,420) (98,853)
--------- ---------
120,368 142,400
--------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 28,912 41,676
Management and other expenses............................. (14,386) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (15,243) (26,480)
--------- ---------
(913) (9,075)
Minority interests in service company business............ -- (10)
--------- ---------
Partnership's shares of income from service company
business............................................... (913) (9,085)
--------- ---------
General and administrative expenses....................... (8,632) (21,371)
Interest expense.......................................... (90,890) (121,699)
Interest income........................................... 40,887 21,734
Minority interest......................................... (8,548) (10,034)
Equity in losses of unconsolidated partnerships........... (23,349) (43,918)
Equity in earnings of unconsolidated subsidiaries......... 851 5,848
Amortization of Goodwill.................................. (5,071) --
--------- ---------
Net income........................................ $ 24,703 $ (36,125)
========= =========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (.12) $ (1.16)
Diluted earnings (loss) per Common OP Unit.................. $ (.12) $ (1.16)
Distributions paid per Common OP Unit....................... $ 1.69 $ 1.85
Book value per Common OP Unit............................... $ 24.52 $ 26.96
CASH FLOW DATA:
Cash provided by operating activities....................... $ 90,439 $ 130,703
Cash used in investing activities........................... (79,923) (1,135,038)
Cash provided by (used in) financing activities............. 16,740 955,977
OTHER DATA:
Funds from operations(a).................................... $ 187,985 $ 172,733
Weighted average number of Common OP Units outstanding...... 74,946 74,094
</TABLE>
S-19
<PAGE> 1272
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, net of accumulated depreciation................ $2,679,195
Total assets................................................ 4,558,819
Total mortgages and notes payable........................... 1,762,105
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 320,443
Partners' capital........................................... 1,984,019
</TABLE>
- ---------------
(a) 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
based upon the NAREIT definition, as adjusted for the 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.
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss)................................. $ 24,703 $(36,125)
HUD release fee and legal reserve................. -- 10,202
Real estate depreciation, net of minority
interests....................................... 76,521 93,050
Amortization of management contracts.............. 9,593 12,790
Amortization of management company goodwill....... 10,997 12,551
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation........................ -- 1,715
Amortization of management company goodwill..... 959 1,918
Amortization of management contracts............ 23,010 30,516
Deferred taxes.................................. (713) (1,356)
Equity in earnings of other partnerships:
Real estate depreciation........................ 79,559 95,285
Interest on convertible debentures................ (7,537) (10,003)
Preferred unit distributions...................... (29,107) (37,810)
-------- --------
Funds from operations............................. $187,985 $172,733
======== ========
</TABLE>
S-20
<PAGE> 1273
SUMMARY FINANCIAL INFORMATION OF COASTAL COMMONS LIMITED PARTNERSHIP
The summary financial information of Coastal Commons Limited Partnership
for the nine months ended September 30, 1998 and 1997 is unaudited. The summary
financial information for Coastal Commons Limited Partnership for the year ended
December 31, 1997 is based on audited financial statements and for the year
ended December 31, 1996 is based on unaudited financial statements. The amounts
for 1995, 1994 and 1993 have been derived from unaudited financial statements
which are not included in this Prospectus Supplement. 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 of Your Partnership" included herein. See "Index to Financial
Statements."
COASTAL COMMONS LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues....................... $ 1,363 $ 1,327 $ 1,787 $ 1,708 $ 1,580 $ 1,566 $ 1,679
Net Income/(Loss).................... 131 87 143 (146) (158) (204) (147)
Net Income per limited partnership
unit............................... 648.45 430.65 707.85 725.00 (782.10) (1,009.80) (727.65)
Distributions per limited partnership
unit............................... 1,143.45 495.00 495.00 -- -- -- --
Distributions per limited partnership
unit (which represent a return of
capital)........................... -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
--------------------- ---------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents............ $ 557 $ 443 $ 459 $ 319 $ 201 $ 199 $ 289
Real Estate, Net of Accumulated
Depreciation....................... 4,811 5,051 4,994 5,226 5,451 5,640 5,870
Total Assets......................... 5,746 5,843 5,804 5,849 6,031 5,852 6,176
Notes Payable........................ 6,193 6,256 6,240 6,299 6,354 6,068 6,143
General Partners' Capital/(Deficit).... (8) (7) (7) (7) (6) (4) (2)
Limited Partners' Capital/(Deficit).... (720) (677) (621) (664) (519) (363) (161)
Partners' Deficit...................... (728) (684) (628) (671) (525) (367) (163)
Total Distributions.................... 231 100 100 -- -- -- --
Book value per limited partnership
unit................................. 3,600.00 3,385.00 3,105.00 3,320.00 2,595.00 1,815.00 805.00
Net increase (decrease) in cash and
cash equivalents..................... 98 124 140 118 2 (90) 109
Net cash provided by operating
activities........................... 460 358 423 181 121 68 191
Ratio of earnings to fixed charges..... 1.33/1 1.22/1 1.27/1 0.73/1 0.73/1 0.68/1 0.88/1
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per unit of your
partnership for the year ended December 31, 1998, and the cash distributions
payable on the number of Common OP Units and Preferred OP Units issuable in
exchange therefor:
<TABLE>
<CAPTION>
ANNUAL
DISTRIBUTIONS
-------------
<S> <C>
Units of Coastal Commons Limited Partnership................ $1,125
Equivalent cash distributions on Common OP Units(1)......... $ 751
Equivalent cash distributions on Preferred OP Units(2)...... $ 905
</TABLE>
- ---------------
(1) Calculated by multiplying the exchange ratio of 300.50 Common OP Units per
unit by the annualized distributions paid on the Common OP Units of $2.50
per unit.
(2) Calculated by multiplying the exchange ratio of 452.50 Preferred OP Units
per unit by the stated annual distribution rate on the Preferred OP Units of
$2.00 per unit.
S-21
<PAGE> 1274
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of AIMCO. AIMCO is a real estate investment
trust that owns and manages multifamily apartment properties throughout the
United States. Through its wholly owned subsidiaries, AIMCO GP, the sole general
partner of the AIMCO Operating Partnership, and the Special Limited Partner, as
of December 31, 1998, AIMCO held approximately an 83% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled by the National
Multi Housing Council, we believe that AIMCO is one of the largest owner and
manager of multifamily apartment properties in the United States, with a total
portfolio of 379,363 apartment units in 2,147 properties located in 49 states,
the District of Columbia and Puerto Rico. As of December 31, 1998, AIMCO:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 apartment properties for third party
owners and affiliates.
AIMCO's Class A Common Stock is listed and traded on the NYSE under the
symbol "AIV." On March 23, 1999, the last reported sale price of AIMCO Class A
Common Stock on the NYSE was $35 3/16. 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 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>
1999
First Quarter (through March 23)........ $41 5/8 $35 3/16 $0.6250 $0.6250
1998
Fourth Quarter.......................... 37 3/8 30 0.5625 0.5625
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>
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.
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RISK FACTORS
The following sets forth certain risks and disadvantages of the offer and
should be read and considered when reviewing the potential benefits of the offer
set forth in "Background and Reasons for the Offer -- Expected Benefits of the
Offer." In addition, you should review the other risks of investing in us
beginning on page 2 of our accompanying Prospectus.
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. 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. 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. 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 CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your property income for the year ended December 31, 1997. In determining the
appropriate capitalization rate, we considered your partnership's results of
operations since December 31, 1997. If property income for a different period or
a different capitalization rate was used, a higher valuation could result. Other
methods of valuing your units could also result in a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimate your property to be worth $9,200,000 less
approximately $472,263 of deferred maintenance and investment. It is possible
that a sale of the properties could result in you receiving more pretax cash per
unit than our offer.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
pretax cash 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.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and the AIMCO Operating Partnership and, therefore, has
substantial conflicts of interest with respect to our offer. We are making this
offer with a view to making a profit. 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. Another conflict is 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. 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.
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CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its property, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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 sold. If you exchange your units
for cash and our 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. 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 allocated to such units 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. If you exercise your redemption right with respect to the OP Units
within two years of the date that you transfer your units to the AIMCO Operating
Partnership, your exchange of units for OP Units or OP Units and cash could be
treated as a disguised sale of your units and you would be required to recognize
gain or loss in the year of the exchange on such disguised sale. See "Federal
Income Tax Consequences -- Disguised Sales." 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. 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 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.
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. You
should review "Federal Income Tax Consequences" 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. Because the income tax
consequences of tendering units will not be the same for everyone, you should
consult your own tax advisor before determining whether to tender your units
pursuant to our offer.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is controlled by us).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all right title and interest
in and to all of the units that we accept, and all distributions in
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respect of such units on or after the date on which we accept such units for
purchase. Accordingly, for any units that we acquire from you, you will not
receive any future distributions from operating cash flow of your partnership or
upon a sale of property owned by your partnership or a refinancing of any of its
debt. If you tender your units in exchange for OP Units, you will be entitled to
future distributions from the operating cash flow of the AIMCO Operating
Partnership and upon a dissolution, liquidation or winding-up of the AIMCO
Operating Partnership. See "Comparison of Your Units and AIMCO OP
Units -- Distributions."
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from the sale of a property or a refinancing of its indebtedness to
(ii) a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of December 31, 2014 to a much larger
partnership with a partnership termination date of 2093.
Under the AIMCO Operating Partnership's agreement of limited partnership,
the general partner has the ability, without the concurrence of the limited
partners, to acquire and dispose of properties and to borrow funds. Further,
while it is the intent to distribute net income from operations, sales of
properties and refinancings of indebtedness, the general partner may not make
such distributions. Proceeds of future asset sales or refinancings by the AIMCO
Operating Partnership generally will be reinvested rather than distributed.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you exchange your
units for OP Units, you will have changed your investment from an interest in a
partnership which owns and manages a single property to an interest in the AIMCO
Operating Partnership which 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 and our portfolio of properties as compared to the value of your
units and your partnership.
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
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POSSIBLE LOWER DISTRIBUTIONS. The Preferred OP Units provide for annual
distributions of $2.00 per unit and no more. Current annualized distributions
with respect to the Common OP Units are $2.50 per unit. This is equivalent to
distributions of $905 per year on the number of Preferred OP Units, or
distributions of $751.25 per year on the number of Common OP Units, that you
would receive in exchange for each of your partnership's units. During 1998,
your partnership paid cash distributions of $1,125 per unit. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units may be
substantially less, immediately following our offer, than the distributions with
respect to your units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus. If you
exercise your redemption right with respect to the OP Units within two years of
the date that you transfer your units to the AIMCO Operating Partnership, your
exchange of units for OP Units and cash could be treated as a disguised sale of
your units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as for your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be subject to litigation based on
claims that the general partner has breached its
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fiduciary duties to its limited partners or that the transaction violates the
relevant partnership agreement. As a result, we may incur costs associated with
defending or settling such litigation or paying any judgment if we lose. As of
the present time, no limited partners of your partnership have initiated
lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. 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. However, we will
not be able to control voting decisions unless we acquire more units in another
transaction, which cannot take place for at least one year after expiration of
this offer. Furthermore, in the event that we acquire a substantial number of
units pursuant to our offer, removal of your general partner (which is our
subsidiary) or the manager of any property owned by your partnership may become
more difficult or impossible without our consent.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investments in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to hold
the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns one property. The general partner of your partnership
continually considers whether the property should be sold or otherwise disposed
of after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for your partnership. We cannot
predict when the property will be sold or otherwise disposed of. However, there
is no current plan or intention to sell the property in the near future.
BALLOON PAYMENTS. Your partnership has approximately $5,909,000 of balloon
payments due on its mortgage debt in July 2002. Your partnership will have to
refinance such debt or sell its property prior to the balloon payment dates, or
it will be in default and could lose the property to foreclosure.
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SPECIAL FACTORS TO CONSIDER
In reviewing the offer, you should pay special attention to the information
in the Sections entitled "Background and Reasons for the Offer," "Valuation of
Units," "Fairness of the Offer" and "Stanger Analysis," which contain
information regarding the background and reasons for the offer, the method of
evaluating units in the offer and alternative valuation methods considered, our
view as to the fairness of the offer, and the fairness opinion rendered by
Stanger.
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 liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
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 0.830% interest, consisting of a 0%
limited partnership interest and a 0.830% general partnership interest, in your
partnership.
On October 31, 1998, IPT and AIMCO entered into an agreement and plan of
merger, dated as of October 1, 1998 (the "IPT Merger Agreement"), pursuant to
which IPT merged with AIMCO on February 26, 1999 (the "IPT Merger"). Upon
consummation of the IPT Merger, each outstanding share of IPT not owned by AIMCO
was converted into the right to receive 0.3601 shares of AIMCO's Class A Common
Stock (approximately 4,180,000 shares in the aggregate).
One of the reasons we chose to acquire Insignia is that we would be able to
make the exchange 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, and would provide the AIMCO Operating Partnership
with a larger asset and capital base and increased diversification. As of the
date of this offering, the AIMCO Operating Partnership proposes to make offers
to approximately 90 of the Insignia Partnerships, including your partnership.
During our negotiations with Insignia in early 1998, we decided that if the
merger with Insignia were consummated, we could also benefit from making offers
for limited partnership interests in the Insignia Partnerships. While some of
the Insignia Partnerships are public partnerships and information is publicly
available on such partnerships for weighing the benefits of making an exchange
offer, many of the partnerships are private partnerships and information about
such partnerships comes principally from the general partner. Our control of the
general partner makes it possible to obtain access to such information. Further,
such control also means that we control the operations of the partnerships and
their properties. Insignia did not propose that we conduct such exchange offers,
rather we initiated the offers on our own. We determined in June of 1998 that if
the merger with Insignia were consummated, we would offer to limited partners of
the Insignia Partnerships limited partnership units of the AIMCO Operating
Partnership and/or cash.
In connection with the Insignia Merger we acquired general partnership
interests and certain limited partnership interests in a number of private and
public partnerships. Eight private partnerships out of the 90 partnerships
involved in the proposed exchange offers do not have audited financial
statements prepared in accordance with generally accepted accounting practices
("GAAP"). Certain of these partnerships have audited financial statements
prepared on the basis of federal income taxes and others have unaudited
financial
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statements which may or may not be prepared on the basis of GAAP or federal
income taxes. For the Insignia Partnerships for which exchange offers are being
made which do not have audited GAAP financial statements for at least two years,
we are making the offer on the basis of either one year of audited GAAP
financial statements and one year of unaudited GAAP financial statements or just
unaudited GAAP financial statements. We tried to obtain two years of audited
GAAP financial statements for all the partnerships for which offers are being
made, but because of the inability to locate records from inception of the
partnerships which would allow auditors to verify the original purchase price of
the properties, no audits were possible. In these cases, the entities which
controlled the general partners prior to Insignia are no longer in business or
have no current knowledge or records of such partnerships. For the same reasons,
we do not have all the records for past years of some of the partnerships.
Therefore, for the partnerships without an audit, we did not have invoices,
escrow statements, property closing statements or the like to support the
original costs of the real property to the satisfaction of independent auditors,
in order for them to render an unqualified audit report. Consequently, we have
no way to support the original cost of the properties. However, we have general
ledgers and related accounting records that enable us to prepare GAAP basis
financial statements. These records were taken from the entities that controlled
the general partners and were subsequently maintained by us. The amount of
capitalized property costs appearing in those books and records has, to our
knowledge, been appropriately rolled forward from year to year and used by the
general partners of the partnerships in question to prepare tax returns and
periodic reports to the investors in the partnerships. Therefore, we believe
that the unaudited financial statements included in the prospectus supplements
for such partnerships have been prepared in accordance with GAAP.
In acquiring Insignia and the interests in the Insignia Partnerships, we
conducted due diligence with regard to certain of the assets acquired including
the major properties held by the Insignia Partnerships. Our due diligence
focused on the condition of the major properties and the terms of the
partnership agreements. Since Insignia had audited GAAP financial statements and
since those partnerships without audited GAAP financial statements are generally
smaller, we did not focus on the issue of audited GAAP based financial
statements for the smaller partnerships at the time of the merger. Further, for
our internal due diligence use, audited tax based financial statements are also
used. The total number of Insignia Partnerships we acquired an interest in was
approximately 550 of which approximately 25 do not have audited GAAP statements.
We were not able to pick and choose the partnerships in which we would acquire
an interest. The Insignia Partnerships were part of the business of Insignia. As
a consequence, we acquired interests in certain small private partnerships which
do not have the ability to obtain audited GAAP financial statements. It is our
policy to acquire properties or partnerships with audited GAAP based financial
statements. However, in connection with large acquisitions of partnerships
interests, such as with the Insignia Merger, we may occasionally acquire a
partnership or property without audited GAAP financial statements.
Previous Tender Offers
Tender offers have been previously made with respect to certain of the
public Insignia Partnerships. However, there have not been any prior tender
offers to acquire units of your partnership. Except for such tender offers, we
are not aware of any merger, consolidation or other combination involving any of
the Insignia Partnerships, or any acquisitions of any of such partnerships or a
material amount of the assets of such partnerships.
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 August 28, 1998 with Stanger to provide such a 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 your general partner
(which is our subsidiary).
Liquidation
Benefits of 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 (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 your general partner (which is our subsidiary), 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 on the order of 1% of the principal amount of the mortgage.
Your general partner believes it currently is in the best interest of your
partnership to continue holding its real estate assets.
Continuation of the Partnership Without the Offer
Benefits of Continuation. Although our offer permits you to continue your
investment in your partnership, 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. Your
partnership's net income has increased from $87,000 for the nine months ended
September 30, 1997, to $131,000 for the nine months ended September 30, 1998. 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. The continuation of your partnership will allow you to continue to
participate in the net income and any increases of revenue of your partnership
and any net proceeds from the sale of any property owned by your partnership.
The General Partner continues to review operations and expects to complete
capital expenditures in 1999 and 2000 enabling it to possibly increase rents and
lower expenses. In addition, a sale of the property may cause a tax gain to each
investor.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. If your partnership continues operating as presently structured, your
partnership could be forced to borrow on terms that could result in net losses
from operations. Your partnership's mortgage note are due on October 2019 and
requires a balloon payment of $5,909,000. Your partnership currently has
adequate sources of cash to finance its operations on both a short term and long
term basis. Continuation of your partnership without the offer would deny you
and your partners the benefits that your general partner (which is our
subsidiary) expects to result from the 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.
Alternative Structures Considered
Before we decided to make our offer, we considered a number of alternative
transactions, including purchasing some or all of your partnership's properties;
making an offer of only cash for your units; making an offer of only Common OP
Units for your units; and making an offer of only Preferred OP Units for your
units.
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<PAGE> 1283
A merger would require a vote of the limited partners of your partnership. If
the merger was approved, all limited partners, including those who wish to
retain their units and continue to participate in your partnership, would be
forced to participate in the merger transaction. If the merger was not approved,
all limited partners, including those who would like to liquidate their
investment in your partnership, would be forced to retain their units.
We also considered purchasing your partnership's properties from your
partnership. However, a sale of your partnership's properties would require a
vote of the limited partners. If the sale was approved, all limited partners,
including those who wish to continue to participate in the ownership of your
partnership's properties, would be forced to participate in the sale
transaction, and possibly to recognize taxable income. If the sale was not
approved, all limited partners, including those who would like to dispose of
their investment in your partnership's properties, would be forced to retain
their investment.
In order to give all limited partners in your partnership an opportunity to
make their own investment decision, we elected to make an offer directly to you
and the other limited partners. We considered making an all cash offer in order
to satisfy some limited partners' desire for immediate liquidity. However, an
all cash offer would not be desirable for those limited partners who do not
desire immediate liquidity and do not want to immediately recognize any taxable
income, but might otherwise be interested in disposing of their investment in
your partnership and might want an opportunity to control the timing of any
realization of taxable income associated with liquidating such investment in the
future.
We considered making an offer of only OP Units, either all Common OP Units
or all Preferred OP Units. The primary disadvantage of an all OP Unit offer is
that those limited partners who want immediate liquidity would be forced to wait
at least one year before exchanging their OP Units for cash or AIMCO stock. We
decided to offer limited partners both Common OP Units and Preferred OP Units in
order to permit investors to make their own decision as to whether they
preferred the possibility of future capital appreciation (Common OP Units) or
preferred distribution rights (Preferred OP Units).
After considering these alternatives, we decided to offer limited partners
the possibility of all three forms of consideration: cash, Common OP Units and
Preferred OP Units. We think that such an offer will appeal to a large number of
limited partners in your partnership, while permitting each one to retain any or
all of his or her units and remain a limited partner in your partnership on the
same terms as before.
Sale of Assets
Your partnership could sell the property it owns. The general partner of
your partnership considers sale of your partnership's property from time to
time. However, any such sale would likely be a taxable transaction.
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 three principal advantages of tendering your units for Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, currently listed and traded on the NYSE.
S-31
<PAGE> 1284
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are four principal advantages of tendering your units for Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- 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 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.
DISADVANTAGES OF THE OFFER
The principal disadvantages to the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and the consideration, no one separately represented the interests of the
limited partners. Although we have a fiduciary duty to the limited
partners, we also have conflicting responsibilities to our equity
holders. We did not appoint, or ask the limited partners to appoint, a
party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of the property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pre-tax cash proceeds to you than our
offer.
- OP Units. Investing in OP Units has risks that include the lack of a
public market, transfer restrictions and a one year holding period before
they can be redeemed by a holder. The ultimate return on the OP Units is
directly tied to the future price of AIMCO's Class A Common Stock or
Class I Preferred Stock. You could ultimately receive less for your OP
Units than the cash price in our offer. Further, on or after March 1,
2005, we may redeem the Class I Preferred Stock for $25 per share.
- Lower Preferred Quarterly Distributions. Your partnership paid
distributions of $1,125 per unit for the fiscal year ended December 31,
1998. Holders of Preferred OP Units will be entitled to receive quarterly
distributions of $0.50 per unit (equivalent to $2.00 on an annualized
basis) before any distributions are paid to holders of Common OP Units.
This is equivalent to a distribution of $905 per
S-32
<PAGE> 1285
year on the number of Preferred OP Units you will receive in exchange for
each of your partnership units.
- Lower Common Quarterly Distributions. Your partnership paid distributions
of $1,125 per unit for the fiscal year ended December 31, 1998. In 1998,
we paid quarterly distributions on the Common OP Units totalling $2.25.
In January 1999, we increased our distribution rate on each of the Common
OP Units to $2.50 on an annual basis. Assuming no change in the level of
our distributions, this is equivalent to a distribution of $751.25 per
year on the number of Common OP Units you will receive in exchange for
each of your partnership units. See "The AIMCO Operating Partnership."
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
the sale of the property would be advantageous given market conditions,
the condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of a property and the tax consequences to you
and your partners on a sale of a property. See also "Your
Partnership -- General Policy Regarding Sales and Refinancings of
Partnership Property."
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
VALUATION OF UNITS
We determined our cash offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower of the value produced. We used your partnership's
property income for the fiscal year ended December 31, 1997. However, in
determining the appropriate capitalization rate, we considered your
partnership's property income since December 31, 1997. Our method for selecting
a capitalization rate begins with each property being assigned a location and
condition rating (e.g., "A" for excellent, "B" for good, "C" for fair, and "D"
for poor). We have rated your property's location A (excellent) and its
condition B (good). Generally, we assign an initial capitalization rate of
10.00% to properties in this category. We then adjust the capitalization rate
based on whether the mortgage debt that the property is subject to bears
interest at a rate above or below 7.5% per annum. Generally, for every 0.5% in
excess of 7.5%, the capitalization rate would be increased by 0.25%. Your
property's mortgage debt bears interest at 8.10% per annum, which resulted in an
increase from the initial capitalization rate of 0.50%. We also considered any
changes in your partnership's property income from 1997 to 1998. Because your
partnership's property income in 1998 increased compared to 1997, we further
revised the capitalization rate downward by approximately 0.32%, resulting in a
final capitalization rate of 10.18%. The evaluation of a property's location and
condition, and the determination of an appropriate capitalization rate for a
property, is subjective in nature, and others evaluating the same property might
use a different capitalization rate and derive a different property value.
Property income of the property is the difference between the revenues from
the property and related costs and expenses, excluding income derived from
sources other than its regular activities and before income deductions. Income
deductions include interest, income taxes, prior-year adjustments, charges to
reserves, write-offs of intangibles, adjustments arising from major changes in
accounting methods and other material
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<PAGE> 1286
and nonrecurrent items. In this respect, property income differs from net income
disclosed in the partnership's financial statements, which does not exclude
these income sources and deductions.
The following is a reconciliation of your partnerships net income for the
year ended December 31, 1997, to your partnership's property income for the same
period.
<TABLE>
<S> <C>
Net Income (Loss)........................................... $143,000
Other Non-Operating Expenses................................ (36,000)
Depreciation................................................ 296,000
Interest.................................................... 534,000
--------
Property income............................................. $937,000
========
</TABLE>
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. Further,
in applying the direct capitalization method, others may make different
assumptions and obtain different results. 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 estimated 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 (property 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 divided
fiscal 1997 property income of $937,000 by the properties capitalization
rate of 10.18% to derive an estimated gross property value of $9,200,000.
- 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
certain other costs including required capital expenditures, deferred
maintenance, and closing costs to derive a net equity value for your
partnership of $2,285,277. Closing costs, which are estimated to be 2.5%
of the gross property value, include legal and accounting fees, real
property, transfer taxes, title and escrow costs and broker's fees.
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<PAGE> 1287
- 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. Accordingly, 99% of the estimated liquidation
proceeds are assumed to be distributed to holders of units. Our cash
offer consideration represents the per unit liquidation proceeds
determined in this manner.
<TABLE>
<S> <C>
Property income............................................. $ 937,000
Capitalization rate......................................... 10.18%
-----------
Gross valuation of partnership's property................... $ 9,200,000
Plus: Cash and cash equivalents............................. 226,675
Plus: Other partnership assets, net of security deposits.... 191,835
Less: Mortgage debt, including accrued interest............. (6,283,500)
Less: Accounts payable and accrued expenses................. (21,568)
Less: Other liabilities..................................... (49,902)
-----------
Partnership valuation before taxes and certain costs........ 3,263,540
Less: Disposition fees...................................... (276,000)
Less: Extraordinary capital expenditures and deferred
maintenance............................................... (472,263)
Less: Closing costs......................................... (230,000)
-----------
Estimates net valuation of your partnership................. 2,285,277
Percentage of estimated net valuation allocated to holders
of units.................................................. 99.00%
-----------
Estimated net valuation of units............................ 2,262,424
Total number of units............................. 200.0
Estimated valuation per unit................................ 11,312
===========
Cash consideration per unit................................. $ 11,312
===========
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration of $11,312 by the $25
liquidation preference of each Preferred OP Unit to get 452.50 Preferred
OP Units per unit.
- In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $11,312 by
a price of $37.63 to get 300.50 Common OP Units per unit (the average
closing price of AIMCO's Class A Common Stock on the NYSE for the 30
trading days ended March 23, 1999).
The total net valuation of all partnerships in which the AIMCO Operating
Partnership is making similar exchange offers, and which were valued using the
same methods as used for your partnership, is $568,751,183, of which, $2,285,277
or 0.40% is the net valuation of your partnership.
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<PAGE> 1288
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
Your general partner is a subsidiary of the AIMCO Operating Partnership. 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. Your general partner has substantial conflicts of interest with
regard to the offer. However, for all of the reasons discussed herein, we and
your general partner believe that the offer and all forms of consideration
offered is fair to you and the limited partners of your partnership. We also
reasonably believe that the similar offers to the limited partners of the other
partnerships are fair to such limited partners. 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 us 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, your
general partner (which is our subsidiary) 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. The net
income of your partnership has increased from $87,000 for the nine months
ended September 30, 1997 to $131,000 for the nine months ended September
30, 1998. These factors are reflected in our valuation of your partnership.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are substantially the financial
equivalent to your interest in your partnership. 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
and Stanger's estimates of the net asset value ($11,691 per unit), going
concern value ($9,822 per unit) and liquidation value ($10,497 per unit) of
your partnership units. See "Stanger Analysis."
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity. However, we did review whether trading information
was available.
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 by electing to accept Preferred OP Units or
Common OP Units.
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
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<PAGE> 1289
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 $11,312, based on a total estimated
value of your partnership's property of $9,200,000. Your general partner
(which is our subsidiary) has no present intention to liquidate your
partnership or to sell or refinance your partnership's property. See
"Background and Reasons for the Offer". See "Valuation of Units" for a
detailed explanation of the methods we used to value your partnership.
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $2.00 and current annualized distributions with respect to the
Common OP Units are $2.50. This is equivalent to distributions of $905 per
year on the number of Preferred OP Units, or distributions of $751.25 per
year on the number of Common OP Units, that you would receive in exchange
for each of your partnership's units. Distributions with respect to your
units for the fiscal year ended December 31, 1998 were $1,113.75. See
"Comparison of Your Units and AIMCO OP Units -- Distributions."
13. The fact that if your partnership were liquidated as opposed to
continuing, the general partner (which is our subsidiary) would not receive
the substantial management fees it currently receives. As discussed in
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," we do not believe that
liquidation of the partnership is in the best interests of the unitholders.
Therefore, we believe the offer is fair in that the fees paid to the
general partner would continue even if the offer was not consummated. We
are not proposing to change the current management fee arrangement.
In evaluating these factors, your general partner (which is our subsidiary)
and the AIMCO Operating Partnership did not quantify or otherwise attach
particular weight to any of them.
Your general partner (which is our subsidiary) has not retained an
unaffiliated representative to act on behalf of the limited partners in
negotiating the terms of the offer since each individual limited partner can
make his own decision as to whether or not to tender and what consideration to
take. Unlike a merger or other form of partnership reorganization, a majority or
more of the holders of limited partnership interests in your partnership cannot
bind you. If an unaffiliated representative had been obtained, it is possible
that such representative could have negotiated a higher price for your units
than was unilaterally offered by the AIMCO Operating Partnership. We have
retained Stanger to conduct an analysis of our offer and to render an opinion as
to the fairness to you of the offer consideration from a financial point of
view. Although no representative has been retained to act solely on behalf of
the limited partners for purposes of negotiating the terms of the offer, we have
determined that the transaction is fair to you from a financial point of view.
We made this determination based, in part, on the fairness opinion from Stanger
and the fact that all limited partners may elect to retain their existing
security on the same terms as before our offer.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
Your general partner (which is our subsidiary) 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 and, although there are
other ways to value real estate, is a reasonably fair method to determine the
consideration offered. Although we believe our offer consideration represents
the amount you would receive if we currently liquidated your partnership, an
actual liquidation might generate a higher or lower price for holders of units.
A liquidation in the future might generate a higher or lower 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
S-37
<PAGE> 1290
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
Your general partner (which is our subsidiary) 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
sell your partnership's property or refinance its indebtedness within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, your general partner
(which is our subsidiary) has attempted to compare the cash offer consideration
against: (a) estimates of the value of the units on a liquidation basis; (b)
estimates of the going concern value of your units based on continuation of your
partnership as a stand-alone entity; and (c) the net book value of your units.
The general partner of your partnership believes that analyzing the alternatives
in terms of estimated value, 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 us. These assumptions relate to, among other things: the operating
results since December 31, 1997 as to income and expenses of each property,
other projected amounts and the capitalization rates that may be used by
prospective buyers if your partnership assets were to be liquidated. The 1998
budget is discussed in "Stanger Analysis -- Summary of Materials Considered" and
other projected amounts are discussed in "Stanger Analysis -- Summary of
Reviews."
In addition, these estimates are based upon certain information available
to your general partner (which is our subsidiary) 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. 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.
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<PAGE> 1291
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2014, 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.
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C>
Cash offer price............................................ $11,312
Partnership preferred units................................. $11,312(1)
Partnership common units.................................... $11,312(1)
Alternatives:
Estimated liquidation proceeds............................ $11,312
Estimated going concern value(2).......................... $11,174
Estimated alternative going concern value(3).............. $11,178
Net book value(deficit)................................... $(8,925)
</TABLE>
- ---------------
(1) In our discussion of the offer price as being fair with regard to other
methods of valuing your partnership, we believe the number of Common OP
Units and Preferred OP Units to be issued per unit in the offer to be equal
to the cash price per unit. Therefore, the fairness discussion applies
equally to the cash and non-cash forms of consideration being effected. See
"Valuation of Units" for details of how the number of OP Units was
determined.
(2) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(3) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
Prices on Secondary Market
There is no active market for your units. Your general partner (which is
our subsidiary) is unaware of any secondary market activity in the units.
Therefore any comparison to prices on the secondary market is not possible at
the present time. See "Your Partnership -- Distributions and Transfers of
Units -- Transfers."
Prior Tender Offers
There have been no previous tender offers for units of your partnership.
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. Your general
partner (which is our subsidiary) 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
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.
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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.
Estimated Going Concern Value and Alternative Going Concern Value
Going concern value is a measure of the value of your partnership if it
continued operating as an independent stand-alone entity. The estimated value of
the partnership on a going concern basis is not intended to reflect the
distributions payable to limited partners if its assets were to be sold at their
current fair market value. The general partner of your partnership estimated the
going-concern value of your partnership by analyzing projected cash flows and
performing a discounted cash flow analysis. The general partner of your
partnership assumed that your partnership will be operated in the same manner as
currently, as an independent stand-alone entity, and its assets sold in a
liquidation after a ten-year holding period. Distribution and sale proceeds per
partnership unit were discounted in the projections at a rate of 25%.
The general partner of your partnership assumed that real estate selling
costs will be incurred which will equal 2.5% of the sales price. This analysis
assumes that the partnership property will be sold in a liquidation, at the
expiration of the ten-year holding period, to an independent third-party buyer.
Upon such liquidation, other balance sheet assets (excluding amortizing assets)
and liabilities of your partnership will be sold at their book value, and the
net proceeds of sale will be allocated between the general partners and offerees
in accordance with your partnership's agreement of limited partnership. Should
the assets be liquidated over time, even at prices equal to those projected,
distributions to limited partners of your partnership's cash flow from
operations might be reduced because relatively fixed costs, such as general and
administrative expenses, are not proportionately reduced with the liquidation of
assets. However, for simplification purposes, the sales are assumed to occur
concurrently.
The going concern method relies on a number of assumptions, including among
other things, (i) rental rates for new leases and lease renewals; (ii)
improvements needed to prepare an apartment for a new lease or a renewal lease;
(iii) lease periods; (iv) capital expenditures; (v) broker's commissions; and
(vi) discount rates applied to future cash flows. The use of assumptions or
variables that differ from those described above could produce substantially
different results. Neither we nor the general partner of your partnership
solicited any offers or inquiries from prospective buyers of the property owned
by your partnership in connection with the preparation of the estimates of value
of the properties and the actual amounts for which the partnership's properties
or the partnership could be sold could be significantly higher or lower than any
of the estimates contained herein. The estimated going concern value of your
partnership is $11,174 per unit, which value is below our offer price per unit.
Therefore, we believe the offer price is fair in relation to the going concern
value.
The general partner determined going concern value based upon the
discounted present value of projected cash flows from the partnership over a
ten-year period of operation, which is a standard period for going concern
analyses for real property assets. Such discounted cash flows were based upon
year one property income from the real estate portfolio of $937,000, escalated
at 3% per annum for the ten-year projection period. Property income was reduced
by: (i) partnership administrative expenses of $16,000 per annum; and (ii) debt
service on existing debt through maturity or the end of ten years, whichever
occurs first. For debt which matures during the ten-year period, a refinancing
at a 7% interest rate was assumed. At the end of the ten-year projection period,
the property was assumed to be sold at a price based upon property income for
the immediately following year, capitalized at a capitalization rate of 10.58%,
less expenses of sale estimated at 3% of the property value. The net cash flow
to limited partners from the continued operation of the property and the net
proceeds of sale were then discounted at a discount rate of 25% to achieve the
going concern value of $11,174 per unit.
Your partnerships property currently has a balloon payment due in July
2002. While the going concern value was based on your partnership refinancing
its indebtedness and continuing to own its property; the alternative going
concern value of $11,178 is based on selling the property when the balloon
payment is due
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and otherwise includes the same assumptions as the going concern value described
above. For the reason set forth above, we believe the offer consideration is
fair in relation to the alternative going concern value.
There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
Net Book Value
Net book value per unit is a deficit of $8,925 and therefore a comparison
with the offering price would not be meaningful in determining the fairness of
the offering price.
Stanger's Estimate of Net Asset Value, Going Concern Value and Liquidation
Value
In rendering its opinion set forth as Appendix A, Stanger did its own
independent estimate of your partnership's net asset value of $11,691 per unit,
going concern value of $9,822 per unit and liquidation value of $10,497 per
unit. For an explanation of how Stanger determined such values see "Stanger
Opinion -- Summary of Reviews -- Comparison of Offer Price To Liquidation Value,
Going Concern Value and Secondary Market Prices." An estimate of your
partnership's net asset value per unit is based on a hypothetical sale of your
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 a liquidation value, after provisions
in full for all of the other known liabilities of your partnership. The net
asset value does not take into account (i) timing considerations discussed under
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," and (ii) costs associated with
winding up of your partnership. Therefore, the AIMCO Operating Partnership
believes that the estimate of net asset value per unit does not necessarily
represent the fair market value of a unit or the amount the limited partner
reasonably could expect to receive if the partnership's property was sold and
the partnership was liquidated. For this above reason, the AIMCO Operating
Partnership considers net asset value estimates to be less meaningful in
determining the offer consideration than the analysis described above under
"Valuation of Units."
Stanger's estimates of net asset value, going concern value and liquidation
value per unit represents premiums (discounts) to the offer price of $379,
$(1,490) and $(815). In light of these premiums (discounts) and for all the
reasons set forth above, the AIMCO Operating Partnership believes the offer
price is fair to the limited partners. The AIMCO Operating Partnership believes
that the best and most commonly used method of determining the value of a
partnership which only owns an apartment is the capitalization of income
approach set forth in "Valuation of Units."
ALLOCATION OF CONSIDERATION
Your partnership's agreement of limited partnership provides that, in the
event of a liquidation, available proceeds are to be distributed 1% to the
general partner and 99% to the limited partners. Accordingly, in valuing your
units, we have assumed that 99% of the estimated liquidation proceeds are
distributed to holders of units. Since this allocation is in accordance with the
terms of the partnership agreement, we believe the allocation is fair. 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. Stanger has
advised us that the description of Stanger's analysis contained herein describes
the material portions of Stanger's review. 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 any losses, claims,
damages, liabilities or expenses to which Stanger may be subject, under any
applicable federal or state law, including federal and state securities laws,
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 NYSE 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 audited financial statements for the years ended December 31, 1996
and 1997, and its unaudited financial statements for the period ended September
30, 1998, which your partnership's management has indicated to be the most
current available financial statements at the time; (iii) reviewed descriptive
information concerning your partnership's real estate assets (the "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, 1997 and 1998; (v) reviewed
operating budgets for your partnership's property for 1998, as prepared by your
partnership; (vi) reviewed
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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 similar properties; (viii) reviewed internal financial analyses prepared by
your partnership of the estimated current net liquidation value and going
concern value of your partnership; (ix) reviewed information provided by AIMCO
concerning the AIMCO Operating Partnership, the Common OP Units and the
Preferred OP Units; and (x) conducted other studies, analysis and inquiries as
Stanger deemed appropriate.
A summary of the operating budgets per property for the year ended December
31, 1998, which was supplied by your partnership to Stanger, is as follows:
FISCAL 1998 OPERATING BUDGETS
<TABLE>
<S> <C>
Total Revenues.............................................. $1,822,808
Operating Expenses.......................................... (839,247)
Replacement Reserves -- Net................................. (59,425)
Debt Service................................................ (565,605)
Capital Expenditures........................................ (34,300)
----------
Net Cash Flow..................................... $ 324,231
==========
</TABLE>
The above budgets at the time they were made were forward-looking
information developed by the general partner of your partnership. Therefore, the
budgets were dependent upon future events with respect to the ability of your
partnership to meet such budget. The budgets incorporated various assumptions
including, but not limited to, lease revenue (including occupancy rates),
various operating expenses, general and administrative expenses, depreciation
expenses, capital expenditures, and working capital levels. While we deemed such
budgets to be reasonable and valid at the date made, there is no assurance that
the assumed facts will be validated or that the circumstances will actually
occur. Any estimate of the future performance of a business, such as your
partnership's business, is forward-looking and based on assumptions some of
which inevitably will prove to be incorrect.
The budget amounts provided above are figures that were not computed in
accordance with GAAP. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budget are often
re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budget
presented for fiscal 1998 should not necessarily be considered as indicative of
what the audited operating results for fiscal 1998 will be. For the year ended
December 31, 1998, the partnership expects to report revenues of $2,680,525,
operating expenses of $753,004 and replacement reserves and capital expenditures
of $89,016. Based on these estimates, the partnership's net cash flow before
debt service, which we believe provides a better indication of the partnership's
actual operating performance than net cash flow, was greater than the budgeted
amounts.
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.
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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 property during the third quarter of 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 or
square footage; 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 nine month period ending
September 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 property.
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 property, 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 the
liquidation value calculation prepared by the management of your partnership.
Stanger observed that such liquidation value was based upon the gross property
valuation estimate prepared by management, which in turn is based upon fiscal
year 1997 property income capitalized at a capitalization rate of 10.18%.
Stanger further observed that the gross property valuation was adjusted for the
following additional items to achieve the liquidation value of your partnership:
(i) cash, other assets, mortgage indebtedness and other liabilities determined
as of December 31, 1997; (ii) estimated closing costs equal to approximately
2.5% of gross real estate value; and (iii) extraordinary capital expenditure
estimates in the amount of $472,263. Stanger observed that your partnership
liquidation value of $2,285,277 was allocated 99% to the limited partners and
divided by the total units outstanding of 200 to provide the liquidation value
per unit of $11,312.
Review of Partnership Going Concern Analysis. Stanger reviewed the going
concern value calculation prepared by management of your partnership. Stanger
observed that such going concern value was based upon the discounted present
value of projected cash flows from the partnership over a ten-year period of
operation which is a standard period for going concern analysis for real
property assets. Such discounted cash flows were based upon year one property
income from the real estate portfolio of $937,000 escalated at 3% per annum for
the ten-year projection period. Property income was reduced by: (i) partnership
administrative expenses of $16,000 per annum; and (ii) debt service on existing
debt through maturity or the end of ten years, whichever occurs first. For debt
which matures during the ten-year period, a refinancing at a 7% interest rate
was assumed. At the end of the ten-year projection period, the properties were
assumed to be sold based upon: (i) property income for the immediately following
year capitalized at a capitalization rate of
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<PAGE> 1297
10.58%; and (ii) expenses of sale estimated at 3% of property value. Stanger
observed that the proceeds of sale were reduced by the estimated debt balance at
the end of the tenth year to provide net proceeds from the sale of your
partnership's property.
The resulting cash flows for the ten-year period were discounted to present
value at a discount rate of 25%. Stanger observed that such discount rate was
based upon the portfolio real estate discount rate of 12.75%, adjusted for
leverage risk and illiquidity risk. Stanger observed that the resulting
partnership going concern value was divided by units outstanding of 200 to
achieve management's estimate of going concern value of $11,174 per unit.
Review of Secondary Market Prices. Stanger maintains a database of
secondary market information. Stanger observed for its data that no units were
reported traded in the secondary market during 1998.
Comparison of Offer Price to Liquidation Value, Going Concern Value and
Secondary Market Price. Stanger observed that the offer price of $11,312 per
unit is equal to management's estimate of liquidation value, and reflects a 1.2%
premium to management's estimate of going concern value of $11,174. Stanger
further observed that investors may select cash, Common OP Units or Preferred OP
Units in exchange for their partnership units or they may elect to continue to
hold their partnership units. Stanger further observed that the Common OP Units
will be priced at $37.625 per unit, an amount which equals the average closing
price for the common shares into which such Common OP Units are convertible for
the 30 trading day period ended March 23, 1999. Furthermore, Stanger observed
that the Preferred OP Units to be issued in the transaction will be based upon
the liquidation preference of $25. Stanger noted that the Preferred OP Units are
redeemable for, at AIMCO's option, either: (i) $25 in cash per Preferred OP
Unit; (ii) common stock of AIMCO based upon a ten-day average price at the time
of the requested redemption; or (iii) commencing on the third year following the
closing of this transaction preferred stock of AIMCO with a dividend equal to
the distribution on the Preferred OP Units. Stanger observed that the ten day
average closing price of the AIMCO common stock is $36.425, as of March 23, 1999
and therefore an investor receiving AIMCO common shares in redemption of the
Preferred OP Units would receive 0.6863 shares with a value approximating $25
for each $25 Preferred OP Unit redeemed, based upon AIMCO's common share price
as of March 23, 1999. Stanger noted that commencing in the third year, investors
redeeming Preferred OP Units may receive from AIMCO Preferred Stock with a
dividend equal to the distribution on the AIMCO Preferred OP Units. Stanger
observed that the distribution on the Preferred OP Units is set at 8% of $25 and
that the average dividend yield on AIMCO's outstanding C, D, G and H Preferred
Shares approximates 10.1% as of March 23, 1999. Stanger noted that, based upon
the cash dividend yield on the AIMCO Preferred Shares identified above as of
March 23, 1999, investors would receive Preferred Shares with a value of
approximately $19.80 for each $25 Preferred OP Unit if such redemption occurred
after the second year following the closing of the transaction. Stanger further
observed that the above analysis does not take into consideration the present
value of the earnings on the tax deferral an investor may realize as the result
of selecting Preferred OP Units in lieu of cash in a taxable transaction.
In addition to the above analysis, Stanger prepared an independent estimate
of net asset value, going concern value and liquidation value per unit. Stanger
has advised AIMCO that Stanger's estimates of net asset value, liquidation value
and going concern value are based upon Stanger's independent estimate of
property income, a direct capitalization rate of 10.25%, transaction costs of
2.5% to 5.0%, growth rates of 3% and a terminal capitalization rate of 10.75%.
Stanger has advised us that the direct capitalization rate represents Stanger's
estimate of the capitalization rate applicable to its estimate of property
income and is based upon Stanger's independent estimate of the direct
capitalization rate for such property based upon such property's age, condition
and location. Stanger further advised us that the terminal capitalization rate
is the capitalization rate utilized in Stanger's going concern value estimate
which is applied to Stanger's estimate of property income in the eleventh year
to establish the value of the property at the end of the tenth year. Stanger has
advised us that Stanger estimated the terminal capitalization rate at a 50 basis
point premium to the direct capitalization rate estimate for the property.
Stanger utilized deferred maintenance estimates derived from the Adjusters
International, Inc. reports in the calculation of net asset value, liquidation
value and going concern value. With respect to the going concern value estimate
prepared by Stanger, Stanger advised AIMCO that a ten-year projection period and
a discount rate of 25% was utilized. Such discount rate reflects
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<PAGE> 1298
the risk associated with real estate, leverage and a limited partnership
investment. The 25% discount rate was based upon the property's estimated
internal rate of return derived from the discounted cash flow analysis (12.75%
as described above), plus a premium reflecting the additional risk associated
with mortgage debt equal to more than 60% of property value. Stanger's estimates
were based in part upon information provided by us. Stanger relied upon the
deferred maintenance estimates, property descriptions, unit configurations,
allocation among partners, and other data provided by us. Stanger's analyses
were based on balance sheet data as of September 30, 1998, adjusted for a
$725,000 cash distribution, which we advised Stanger would be made after
September 30, 1998. Stanger's review also included a site visit, review of
rental rates and occupancy at the properties as well as competing properties.
Stanger's estimate of net asset value, going concern value and liquidation value
per unit were $11,691, $9,822 and $10,497 representing premiums (discounts) to
the offer price of 3.3%, (13.1)% and (7.2)%. See "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration."
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. Stanger has rendered similar fairness opinions with regard to certain
other exchange offers being made by the AIMCO Operating Partnership. Stanger
rendered the opinions only as to the individual fairness of the offer
consideration in each proposed exchange offer. The Fairness Opinion does not
address the fairness of all possible acquisitions of interests in your
partnership. In addition, the Fairness Opinion will not be revised to reflect
the actual participation in the offer.
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 your general partner (which is our subsidiary) and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's property, and the transaction costs and fees associated with a
sale of the property. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's property 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 property 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 property 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 property 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
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<PAGE> 1299
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, nor did Stanger
address the fairness of all possible acquisitions of interests in the
partnership. The opinion will not be revised to reflect the actual results of
the offer. 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 or oral 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 $9,000 with
respect to your partnership. The estimated aggregate fee payable to Stanger in
connection with all affiliated partnerships is estimated at $1,510,000, plus
out-of-pocket expenses estimated at $61,000. 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 was
engaged by AIMCO during 1997 to represent AIMCO in negotiations to acquire
interests in a real estate limited partnership. Such transaction was never
consummated and no fee was ever paid to Stanger in connection with such proposed
transaction. AIMCO and its affiliates may retain the services of Stanger in the
future. Any such future services could relate to this offer, some or all of the
concurrent offers, or a completely separate transaction.
YOUR PARTNERSHIP
GENERAL
Coastal Commons Limited Partnership, is a South Carolina limited
partnership which completed a private placement of units in 1984. Each unit was
initially sold at a price of $22,200. Insignia acquired the general partner of
your partnership in December 1990. AIMCO acquired Insignia in October 1998.
There are currently a total of 229 limited partners of your partnership and a
total of 200 units of your partnership outstanding. Your partnership is in the
business of owning and managing residential housing. Currently, your partnership
owns and manages the property described below. Your partnership has no
employees. 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.
S-47
<PAGE> 1300
YOUR PARTNERSHIP AND ITS PROPERTY
Your partnership was formed on June 29, 1984 for the purpose of owning an
apartment property located in Mt. Pleasant, South Carolina, known as "Hibben
Ferry Apartments." Your partnership's property is owned by the partnership but
is subject to a mortgage. The property was built in 1984 and consists of 240
apartment units. There are 48 one-bedroom apartments and 192 two-bedroom
apartments. Your partnership's property had an average occupancy rate of
approximately 94.58% in 1998, 92.92% in 1997 and 92.92% in 1996.
Your partnership's property provides residents with a number of amenities
and services, such as 24-hour desk service, exercise room and/or sauna, and
party or meeting rooms. Nearly all apartment units are wired for cable
television, and many apartment units also offer one or more additional features,
such as washer/ dryer, microwave, fireplace, and patio/balcony.
Presently, there are no plans for any major renovations or improvements for
the property. Budgeted renovations or improvements for 1999 total $443,463 and
are intended to be paid for out of cash flow or borrowings. Renovation items
include roofing, gutters and downspouts, hot water, siding & trim, exterior
paint, drives and parking lot, landscaping and irrigation, drainage, and life
support systems.
Set forth below are the average rents for the apartments for the last five
years:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
----- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$577 $534 $506 $514 $525
</TABLE>
The apartments are being depreciated for federal income tax purposes using
the accelerated cost recovery method. Depreciation is computed principally by
the straight-line and accelerated methods over estimated lives of 3 to 40 years.
Currently, the real estate taxes on the property are $122,666 of $471,430
of assessed valuation with a current yearly tax rate of 26.02%. When the
proposed improvements are made it is anticipated that the yearly tax rate may
increase by approximately 26.54% of such improvements.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a wholly 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.
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS
Under your partnership's agreement of limited partnership, your partnership
is not permitted to raise new equity and reinvest cash in new properties.
Consequently, your partnership is limited in its ability to expand its
investment portfolio. Your partnership will terminate on December 31, 2014
unless earlier dissolved. Your partnership has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
Generally, your partnership is authorized to acquire, develop, improve, own
and operate your partnership's property as an investment and for income
producing purposes. The investment portfolio of your partnership is limited to
the assets acquired with the initial equity raised through the sale of units to
the limited partners of your partnership or the assets initially contributed to
your partnership by the limited partners, as well as the debt financing obtained
by your partnership within the established borrowing restrictions.
An investment in your partnership is a finite life investment, with the
partners to receive regular cash distributions out of your partnership's
distributable cash flow, if available, and to receive cash distributions upon
liquidation of your partnership's real estate investments, if available.
S-48
<PAGE> 1301
In general, your general partner (which is our subsidiary) regularly
evaluates the partnership's property by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors the property's specific locale and sub-market
conditions (including stability of the surrounding neighborhood) 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 (including any prepayment penalties), tax implications,
availability of attractive mortgage financing to a purchaser, 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. If rental market conditions improve, 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 viable option than it is
currently. After taking into account the foregoing considerations, your general
partner is not currently seeking a sale of your partnership's property primarily
because it expects the property's operating performance to remain strong in the
near term. In making this assessment, your general partner noted that occupancy
and rental rates at the property were 95% and $602, respectively, at December
31, 1998, compared to 93% and $577, respectively, at December 31, 1997. Although
there can be no assurance as to future performance, the general partner expects
this trend to continue in the near future because of its location and pending
improvements. In addition, the general partner noted that it expects to spend
approximately $472,263 for capital improvements at the property in 1999 to
repair and improve the property's roofing, down spouts, hot water heaters,
siding, exterior paint, parking lot, irrigation and life support systems. These
expenditures are expected to improve the desirability of the property to
tenants. The general partner does not believe that a sale of the property at the
present time would adequately reflect the property's future prospects. Another
significant factor considered by your general partner is the likely tax
consequences of a sale of the property for cash. Such a transaction would likely
result in tax liabilities for many limited partners. The general partner has not
received any recent indication of interest or offer to purchase the property.
CAPITAL REPLACEMENT
Your partnership has an ongoing program of capital improvements,
replacements and renovations, including roof replacements, kitchen and bath
renovations, balcony repairs (where applicable), replacement of various building
systems and other replacements and renovations in the ordinary course of
business. All capital improvement and renovation costs are expected to be paid
from operating cash flows, cash reserves, or from short-term or long-term
borrowings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Your Partnership."
BORROWING POLICIES
Your partnership's agreement of limited partnership allows your partnership
to incur debt. As of December 31, 1998, your partnership had a current mortgage
note outstanding of $6,177,044, payable to First Union National Bank, which
bears interest at a rate of 8.08%. The mortgage debt is due on July 2002. Your
partnership's agreement of limited partnership also allows the general partner
of your partnership to lend funds to your partnership. As of December 31, 1998,
your general partner had no loans outstanding to your partnership.
COMPETITION
There are other residential properties within the market area of your
partnership's property. The number and quality of competitive properties in such
an area could have a material effect on the rental market for the apartments at
your partnership's property and the rents that may be charged for such
apartments. While we are a significant factor in the United States in the
apartment industry, competition for apartments is local.
S-49
<PAGE> 1302
LEGAL PROCEEDINGS
Your partnership is party to a variety of legal proceedings related to its
ownership of the partnership's property and management and leasing business,
respectively, arising in the ordinary course of the business, which are not
expected to have a material adverse effect on your partnership.
HISTORY OF THE PARTNERSHIP
Your partnership sold $15,300,000 of limited partnership units in 1984 for
$22,200 per unit. Your partnership currently owns one apartment property.
Your partnership used the funds raised to purchase its property and it has
expended the funds so raised many years ago. Your partnership currently owns the
property described herein, which is subject to a substantial mortgage. Your
general partner (which is our subsidiary) has not experienced any material
adverse financial developments from January 1, 1997 through the present.
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2014, 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.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, your general partner (which is our subsidiary) is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partners of your partnership and
its affiliates are not liable to your partnership or any limited partner for any
acts performed or any failure to act by any of them performed or omitted in good
faith, provided that such course of conduct did not constitute fraud, gross
negligence or willful misconduct. 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 partners and their affiliates are entitled to indemnification
by your partnership against any loss or damage resulting from any act or
omission performed or omitted in good faith, which does not constitute fraud,
gross negligence or willful misconduct. Moreover, the general partners are not
liable to your partnership of the limited partners because any taxing
authorities disallowed or adjusted any deductions or credits in your partnership
income tax returns.
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 partners of your partnership.
DISTRIBUTIONS AND TRANSFERS OF UNITS
Distributions
The following table shows, for each of the years indicated, the
distributions paid per unit in such years. The original cost per unit was
$22,200.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 AMOUNT
---------------------- ------
<S> <C>
1993........................................................ $ 0
1994........................................................ 0
1995........................................................ 0
1996........................................................ 0
1997........................................................ 500
1998........................................................ 1,125
------
Total............................................. $1,625
======
</TABLE>
S-50
<PAGE> 1303
Transfers
The units are not listed on any national securities exchange or quoted on
the NASDAQ System, the Electronic Bulletin Board or the "pink sheets," and there
is no established public trading market for the units. Secondary sales activity
for the units has been limited and sporadic. The general partner of your
partnership monitors transfers of the units (a) because the admission of the
transferee as a substitute limited partner in your partnership require the
consent of the general partner of your partnership under your partnership's
agreement of limited partnership, and (b) in order to track compliance with safe
harbor provisions to avoid treatment as a "publicly traded partnership" for tax
purposes. However, the general partner of your partnership does not monitor or
regularly receive or maintain information regarding the prices at which
secondary sale transactions in the units have been effectuated. The general
partner of your partnership estimates, based solely on the transfer records of
your partnership (or your partnership's transfer agent), that the number of
units transferred in privately negotiated transactions or in transactions
believed to be between related parties, family members or the same beneficial
owner was as follows:
<TABLE>
<CAPTION>
NUMBER OF UNITS PERCENTAGE OF TOTAL UNITS NUMBER OF
YEAR TRANSFERRED OUTSTANDING TRANSACTIONS
- ---- --------------- ------------------------- ------------
<S> <C> <C> <C>
1994......................... 0 0.0% 0
1995......................... 0 0.0% 0
1996......................... 0 0.0% 0
1997......................... 1 .5% 1
1998......................... 0 0.0% 0
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate, approximately
a 0.830% interest in your partnership, including no units held by us and the
interest held by us, 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
two years, 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 following table shows, for each of the years indicated, compensation
paid to your general partner and its affiliates on a historical basis, and on a
pro forma basis assuming that all of the units sought in our offer had been
acquired at the beginning of each period:
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------- ----------------------------------------
PARTNERSHIP PROPERTY PARTNERSHIP PROPERTY
FEES AND MANAGEMENT FEES AND MANAGEMENT
YEAR EXPENSES FEES DISTRIBUTIONS EXPENSES FEES DISTRIBUTIONS
---- ----------- ---------- ------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
1994 $13,020 $77,155 $ 0 $13,020 $77,155 $ 0
1995 18,245 77,155 0 18,245 77,155 0
1996 16,000 82,000 0 16,000 82,000 0
1997 16,000 87,000 500 16,000 87,000 25,750
1998 12,000 92,212 1,125 12,000 92,212 57,938
</TABLE>
S-51
<PAGE> 1304
SELECTED FINANCIAL INFORMATION
OF COASTAL COMMONS LIMITED PARTNERSHIP
Set forth on page F-1 of this Prospectus Supplement is the Index to the
Financial Statements of Your Partnership. You are urged to read the Financial
Statements carefully before making any decision whether to tender your units in
the offer.
Below is selected financial information for Coastal Commons Limited
Partnership taken from the financial statements described above. The amounts for
1995, 1994 and 1993 have been derived from financial statements which are not
included in this Prospectus Supplement. See "Index to Financial Statements."
<TABLE>
<CAPTION>
COASTAL COMMONS LIMITED PARTNERSHIP
-------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
------------------ ---------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
(in thousands, except per unit data)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and Cash Equivalents...................... $ 557 $ 443 $ 459 $ 319 $ 201 $ 199 $ 289
Land & Building................................ 9,375 9,319 9,332 9,268 9,205 9,116 9,074
Accumulated Depreciation....................... (4,564) (4,268) (4,338) (4,042) (3,754) (3,476) (3,204)
Other Assets................................... 378 349 351 304 379 13 17
------- ------- ------- ------- ------- ------- -------
Total Assets........................... $ 5,746 $ 5,843 $ 5,804 $ 5,849 $ 6,031 $ 5,852 $ 6,176
======= ======= ======= ======= ======= ======= =======
Notes Payable.................................. $ 6,193 $ 6,256 $ 6,240 $ 6,299 $ 6,354 $ 6,068 $ 6,143
Other Liabilities.............................. 281 271 192 221 202 151 196
------- ------- ------- ------- ------- ------- -------
Total Liabilities...................... $ 6,474 $ 6,527 $ 6,432 $ 6,520 $ 6,556 $ 6,219 $ 6,339
------- ------- ------- ------- ------- ------- -------
Partners Deficit....................... $ (728) $ (684) $ (628) $ (671) $ (525) $ (367) $ (163)
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
COASTAL COMMONS LIMITED PARTNERSHIP
---------------------------------------------------------------------------
FOR THE NINE
MONTHS
ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
--------- ------- ------- -------- -------- ---------- --------
(in thousands, except per unit data)
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Revenue............................. $ 1,271 $ 1,227 $ 1,663 $ 1,539 $ 1,457 $ 1,481 $ 1,512
Other Income............................... 92 100 124 169 123 85 167
--------- ------- ------- -------- -------- ---------- --------
Total Revenue...................... $ 1,363 $ 1,327 $ 1,787 $ 1,708 $ 1,580 $ 1,566 $ 1,679
--------- ------- ------- -------- -------- ---------- --------
Operating Expenses......................... $ 480 $ 499 $ 648 $ 859 $ 689 $ 648 $ 656
General & Administrative................... 35 20 48 51 74 88 102
Depreciation............................... 226 226 296 288 279 272 267
Interest Expense........................... 397 401 534 538 578 634 641
Property Taxes............................. 94 94 118 118 118 128 89
--------- ------- ------- -------- -------- ---------- --------
Total Expenses..................... $ 1,232 $ 1,240 $ 1,644 $ 1,854 $ 1,738 $ 1,770 $ 1,755
--------- ------- ------- -------- -------- ---------- --------
Net Income before extraordinary items...... $ 131 $ 87 $ 143 $ (146) $ (158) $ (204) $ (76)
Extraordinary Items........................ -- -- -- -- -- -- (71)
--------- ------- ------- -------- -------- ---------- --------
Net Income (Loss).......................... $ 131 $ 87 $ 143 $ (146) $ (158) $ (204) $ (147)
========= ======= ======= ======== ======== ========== ========
Net Income per limited partnership unit.... $ 648.45 $430.65 $707.85 $(725.00) $(782.10) $(1,009.80) $(727.65)
========= ======= ======= ======== ======== ========== ========
Distributions per limited partnership
unit..................................... $1,143.45 $495.00 $495.00 $ -- $ -- $ -- $ --
========= ======= ======= ======== ======== ========== ========
</TABLE>
S-52
<PAGE> 1305
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP
OVERVIEW
The following discussion and analysis of the results of operations and
financial condition of Your Partnership should be read in conjunction with the
audited financial statements of Your Partnership included herein.
RESULTS OF OPERATIONS
Comparison of the Nine Months Ended September 30, 1998 to the Nine Months Ended
September 30, 1997
NET INCOME
Your Partnership recognized net income of $131,000 for the nine months
ended September 30, 1998, compared to $87,000 for the nine months ended
September 30, 1997. The increase in net income of $44,000 was primarily the
result of an increase in revenues, coupled with a decrease in operating
expenses. These factors are discussed in more detail in the following
paragraphs.
REVENUES
Rental and other property revenues from the Partnership Property totaled
$1,363,000 for the nine months ended September 30, 1998, compared to $1,327,000
for the nine months ended September 30, 1997, an increase of $36,000, or 2.7%.
The Partnership increased rental rates by an average of 3.9%, while occupancy
remained constant at 92%. However, bad debt expense increased $21,000. The
decrease in Other Income of $8,000 was due to lower corporate units and lease
cancellation fees.
EXPENSES
Partnership Property operating expenses, consisting of utilities (net of
reimbursements received from tenants), contract services, turnover costs,
repairs and maintenance, advertising and marketing, and insurance totaled
$480,000 for the nine months ended September 30, 1998, compared to $499,000 for
the nine months ended September 30, 1997, a decrease of $19,000, or 3.8%. The
decrease is due to lower property insurance and maintenance expenses. The
Partnership repaired its gutters during 1997, with no such project for the
corresponding period in 1998. Partnership Property management expenses totaled
$68,000 for the nine months ended September 30, 1998, compared to $65,000 for
the nine months ended September 30, 1997, an increase of $3,000. This increase
was the result of the increase in rental revenues, as management fees are
calculated based on a percentage of revenue.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses increased $15,000 for the nine months
ended September 30, 1998, compared to the corresponding period for 1997. This
increase is due primarily to higher partnership administrative expenses and
asset management fees.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $397,000 for the nine months ended September 30, 1998, compared
to $401,000 for the nine months ended September 30, 1997, a decrease of $4,000,
or 1%. This decrease is due to a lower outstanding balance on the mortgage
indebtedness due to principal payments made during the period.
As part of the ongoing business plan of your partnership, the General
Partner monitors the rental market environment of your partnership's investment
property to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting your partnership from increases in
expenses. As part of this plan, the General Partner attempts to protect your
partnership from the burden of inflation-related increases
S-53
<PAGE> 1306
in expenses by increasing rents and maintaining a high overall occupancy level.
However, due to changing market conditions, which can result in the use of
rental concessions and rental reductions to offset softening market conditions,
there is no guarantee that the General Partner will be able to sustain such a
plan.
Comparison of the Year Ended December 31, 1997 to the Year Ended December 31,
1996
NET INCOME
Your Partnership recognized net income of $143,000 for the year ended
December 31, 1997, compared to a net loss of $146,000 for the year ended
December 31, 1996. The increase in net income of $289,000 was primarily the
result of an increase in revenues and a decrease in operating expenses. These
factors are discussed in more detail in the following paragraphs.
REVENUES
Rental and other property revenues from the partnership's property totaled
$1,787,000 for the year ended December 31, 1997, compared to $1,708,000 for the
year ended December 31, 1996, an increase of $79,000, or 4.6%. This increase is
due to an increase in rental rates by an average of 8%. Partially off-setting
the increase in rental revenues was a decrease in other income due to lower
revenues for corporate units.
EXPENSES
Operating expenses, consisting of utilities (net of reimbursements received
from tenants), contract services, turnover costs, repairs and maintenance,
advertising and marketing, and insurance totaled $648,000 for the year ended
December 31, 1997, compared to $859,000 for the year ended December 31, 1996, a
decrease of $211,000 or 25%. The decrease is primarily due to lower maintenance
costs as the property incurred gutter repairs and exterior painting expenses
during 1996, with no similar projects during 1997. Management expenses totaled
$87,000 for the year ended December 31, 1997, compared to $82,000 for the year
ended December 31, 1996, an increase of $5,000, or 6%, which corresponds to the
increase in rental revenues.
DEPRECIATION EXPENSE
Depreciation expense increased $8,000 to $296,000 due primarily to
capitalized additions to the investment property during the year ended December
31, 1997.
INTEREST EXPENSE
Interest expense totaled $534,000 for the year ended December 31, 1997,
compared to $538,000 for the year ended December 31, 1996, a decrease of $4,000,
or 0.7%. The decrease is due to a lower outstanding balance on the mortgage
indebtedness due to principal payments made during 1997.
Comparison of the Year Ended December 31, 1996 to the Year Ended December 31,
1995
NET INCOME
Your Partnership incurred a net loss of $146,000 for the year ended
December 31, 1996, compared to a net loss of $158,000 for the year ended
December 31, 1995. The decrease in net loss of $12,000 was primarily the result
of an increase in revenues, off-set by an increase in operating expenses. These
factors are discussed in more detail in the following paragraphs.
REVENUES
Rental and other property revenues from the partnership's property totaled
$1,708,000 for the year ended December 31, 1996, compared to $1,580,000 for the
year ended December 31, 1995, an increase of $128,000, or 8%. This increase is
due primarily to a 6% increase in rental rates, as occupancy remained stable at
93%. In addition, the Partnership experienced an increase in other income due to
higher revenues for corporate units.
S-54
<PAGE> 1307
EXPENSES
Operating expenses, consisting of utilities (net of reimbursements received
from tenants), contract services, turnover costs, repairs and maintenance,
advertising and marketing, and insurance totaled $859,000 for the year ended
December 31, 1996, compared to $689,000 for the year ended December 31, 1995, an
increase of $170,000 or 25%. This increase is primarily due to higher
maintenance costs as the property incurred gutter repairs and exterior painting
expenses during 1996, with no similar projects during 1995. Management expenses
totaled $82,000 for the year ended December 31, 1996, compared to $77,000 for
the year ended December 31, 1995, an increase of $5,000 or 6%, which corresponds
to the increase in rental revenues.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses decreased $23,000 to $51,000 due
primarily to lower legal and professional costs for 1996.
DEPRECIATION EXPENSE
Depreciation expense increased $9,000 to $288,000 due primarily to
capitalized additions to the investment property during the year ended December
31, 1996.
INTEREST EXPENSE
Interest expense totaled $538,000 for the year ended December 31, 1996,
compared to $578,000 for the year ended December 31, 1995, a decrease of
$40,000. The decrease is due to a lower rate on the partnership indebtedness
that was refinanced in June 1995, resulting in lower expense for all of 1996,
compared to only six months for the lower expense in 1995.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, your partnership had $557,000 in cash and cash
equivalents. Your Partnership's principal demands for liquidity include normal
operating activities, payments of principal and interest on outstanding debt,
capital improvements, and distributions paid to limited partners. At September
30, 1998, the outstanding balance on the mortgage indebtedness was $6,193,000.
The mortgage requires monthly payments of approximately $47,000 until July,
2002, at which time a balloon payment of approximately $5,909,000 will be due.
The note is collateralized by pledge of land and buildings and has a stated
interest rate of 8.08% There are no commitments for material capital
expenditures as of September 1998. The sufficiency of existing liquid assets to
meet future liquidity and capital expenditure requirements is directly related
to the level of capital expenditures required at the property to adequately
maintain the physical assets and meet other operating needs of the partnership.
Such assets are currently thought to be sufficient for any near-term needs of
the partnership. Management believes that your partnership has adequate sources
of cash to finance its operations, both on a short-term and long-term basis.
Presently, there are no plans for any major renovations or improvements for
the property. Budgeted renovations or improvements for 1999 total $443,463 and
are intended to be paid for out of cash flow or borrowings. Renovation items
include roofing, gutters and downspouts, hot water, siding & trim, exterior
paint, drives and parking lot, landscaping and irrigation, drainage, and life
support systems.
S-55
<PAGE> 1308
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to 25% of the outstanding 200 units of your
partnership (up to 50 units) for consideration per unit of (i) 452.50 Preferred
OP Units, (ii) 300.50 Common OP Units, or (iii) $11,312 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 the commencement of our offer 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., New York City time, on June 4, 1999, 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 January 1, 1999 (subject to proration
as described below), although you will be entitled to retain any distributions
you may have received after such date and prior to our commencement of this
offer.
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 March 26, 1999.
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
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offer consideration shall be reduced by any interim distributions made by your
partnership between the commencement 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. However, any tendered units may be
withdrawn at any time prior to our accepting them for payment. The AIMCO
Operating Partnership has an 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.
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.
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.
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.
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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 pays for your units.
You agree not to exercise any rights pertaining to the tendered units without
the prior consent of the AIMCO Operating Partnership. Upon such 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 your general
partner (which is our subsidiary) (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.
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
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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 may
have to provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal.
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 "Federal Income Tax Consequences."
Transfer Taxes
The amount of any transfer taxes (whether imposed on the registered holder
of units or any person) payable on account of the transfer to such person will
be deducted from the purchase price unless satisfactory evidence of the such
taxes or exemption therefrom is submitted.
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.
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WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to our acceptance of such units for payment.
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.
The offer may be extended or delayed indefinitely and no payment will be
made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
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 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
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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 25% 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 25% 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 25% 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 25%, 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 the general partner of your partnership and thereby
controls the management of your partnership. In addition, AIMCO owns 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.
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After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units.
However, the AIMCO Operating Partnership and its affiliates will not acquire any
additional units for a period of at least one year after expiration of the
offer. 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. In addition, we are not extending
appraisal rights in connection with the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
No provisions have been made with regard to the offer to allow you or other
limited partners to inspect the books and records of your partnership or to
obtain counsel or appraisal services at our expense or at the expense of your
partnership. However, as described under "Comparison of Your Partnership and the
AIMCO Operating Partnership -- Review of Investor Lists," you have the right
under your partnership's agreement of limited partnership to obtain a list of
the limited partners.
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 the date of this Prospectus Supplement and at or before the expiration
date of the offer, including any extension thereof, 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 reasonable
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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 which, in the reasonable 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 the date hereof, (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
the date hereof, (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 reasonable 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 reasonable judgment of the
AIMCO Operating Partnership, a material acceleration or worsening thereof
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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 your
general partner (which is our subsidiary) 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 reasonable 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
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(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 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 reasonable 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
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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;
or
(h) the offer to purchase may have an adverse effect on AIMCO's status
as a REIT.
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 reasonable 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.
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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 or may
control such voting decisions. However, we will not be able to control voting
decisions unless we acquire more units in another transaction, which cannot take
place for at least one year after expiration of this offer. 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 controls the company that
manages your partnership's property. In the event that the AIMCO Operating
Partnership acquires a substantial number of units pursuant to the offer,
removal of the property manager may become more difficult or impossible.
Effect on Trading Market
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.
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. Consummation of
the offer will not affect your partnership's agreement of limited partnership,
the financial condition or results of operations of your partnership, the
business and properties owned, the management compensation payable to your
general partner (which is our subsidiary) or its affiliates or any other matter
relating to your partnership, except it would result in the AIMCO Operating
Partnership substantially increasing its ownership of units of your partnership.
We will receive future distributions from your partnership for any units we
purchase.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by your general partner (which
is our subsidiary), 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
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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 (excluding 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 (which are requests to dismiss the action as a matter
of law) were heard on February 8, 1999, but no decision has been reached by the
Court. While no assurances can be given, we believe that the ultimate outcome of
this litigation will not have a material adverse effect on us.
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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, the accompanying Prospectus, the Letter of Transmittal,
and the legal and accounting fees in connection with this offer. 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 $50,000.
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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FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of the material Federal
income tax consequences of the offer 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
differing interpretations or change, possibly retroactively. This 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 you in light of your specific investment or tax
circumstances, or if you are subject to special tax rules (for example, if you
are a financial institution, broker-dealer, insurance company, or, except to the
extent discussed below, tax-exempt organization or foreign investor, 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 are 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. No clear precedent or authority
may be available on some questions. 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 of your specific tax situation.
TAX OPINIONS
Skadden, Arps, Slate, Meagher & Flom LLP ("Special Tax Counsel") has
delivered an opinion letter with regard to the material United States Federal
income tax consequences of the offer. The opinion letter of Special Tax Counsel
is filed as an exhibit to this Registration Statement. You may obtain a copy of
such opinion letter by sending a written request to the AIMCO Operating
Partnership.
The specific United States Federal income tax opinions that Special Tax
Counsel has provided are:
1. Commencing with AIMCO's initial taxable year ended December 31, 1994,
AIMCO was organized in conformity with the requirements for qualification
as a REIT under the Code, and its actual method of operation has enabled,
and its proposed method of operation will enable, AIMCO to meet the
requirements for qualification and taxation as a REIT. As noted in the
accompanying Prospectus, AIMCO's qualification and taxation as a REIT
depend upon its ability to meet, through actual annual operating results,
certain requirements, including requirements relating to distribution
levels and diversity of stock ownership, and the various qualification
tests imposed under the Code, the results of which have been represented by
the AIMCO's officers and will not be reviewed by Special Tax Counsel. No
assurance can be given that the actual results of AIMCO's future operations
for any one taxable year will satisfy the requirements for taxation as a
REIT under the Code.
2. The AIMCO Operating Partnership will be treated as a partnership and
not as an association taxable as a corporation for Federal income tax
purposes.
3. You will not recognize gain or loss for Federal income tax purposes
when you exchange your units solely for OP Units. If, immediately prior to
such exchange, the amount of your partnership's liabilities allocable to
the units you transfer to the AIMCO Operating Partnership exceeds the
amount of the AIMCO Operating Partnership's liabilities allocable to you
immediately after the exchange, you will receive a deemed distribution in
an amount equal to such liability relief and will recognize gain for
Federal income tax purposes to the extent that the amount of such deemed
distribution exceeds your aggregate adjusted tax basis in your OP Units.
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4. If you exchange your units for cash and OP Units, you will be treated
for Federal income tax purposes as selling some of your units for cash in a
taxable sale and contributing some of your units for OP Units in a tax-free
exchange. With respect to the units that you will be treated as selling for
cash, you will be taxed as described in paragraph number five below. With
respect to the units that you will be treated as exchanging for OP Units,
you will be taxed as described in paragraph number three above.
5. If you sell your units solely for cash, you will recognize gain or
loss for Federal income tax purposes in an amount equal to the difference
between (i) your amount realized on the sale and (ii) your adjusted tax
basis in the units you sold.
6. If you retain all or a portion of your units and your partnership
terminates for Federal income tax purposes, you will not recognize any gain
or loss as a result of such termination and your capital account in your
partnership will not be affected.
7. Because of the factual nature of the inquiry, no opinion is expressed
by Special Tax Counsel as to whether your exercise of a redemption right
with respect to an OP Unit would cause your contribution of units to the
AIMCO Operating Partnership to be a taxable transaction under the disguised
sale rules of the Code.
8. The discussion in the accompanying Prospectus under the captions
"FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS" and "FEDERAL
INCOME TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNIT HOLDERS" and
in this Prospectus Supplement under the caption "FEDERAL INCOME TAX
CONSEQUENCES" is a fair and accurate summary of the material United States
Federal income tax consequences of the offers and of the acquisition,
ownership and disposition of the OP Units and the AIMCO stock by a holder
who acquires the OP Units or AIMCO stock in connection with the offers,
subject to the qualifications set forth therein.
It must be emphasized that these opinions are based and conditioned upon
representations and covenants made by AIMCO and the AIMCO Operating Partnership
as to factual matters (including representations and covenants concerning
AIMCO's properties and the past, present and future conduct of its business and
your partnership's liabilities). These opinions are expressed as of the date of
the opinion letter and Special Tax Counsel has no obligation to advise AIMCO or
the AIMCO Operating Partnership of any subsequent change in the matters stated,
represented, or assumed or any subsequent change in the law. An opinion of
counsel is not binding on the IRS, and no assurance can be given that the IRS
will not challenge the above opinions of Special Tax Counsel.
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 when you exchange your units solely for OP Units. You may
recognize gain upon such exchange if, immediately prior to such exchange, the
amount of liabilities of your partnership allocable to the units you transferred
exceeds the amount of the AIMCO Operating Partnership liabilities allocable to
you immediately after such exchange. If this was true in your case, the excess
would be treated as a deemed distribution of cash to you from the AIMCO
Operating Partnership. This deemed cash distribution would be treated as a
nontaxable return of capital to the extent of your adjusted tax basis in your OP
Units 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 you exchange your units pursuant to the offer,
at least equal to the amount of liabilities of your partnership that were
allocable to your units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most persons who participate in the tender offer
would not recognize gain or loss as a result of an exchange of units solely for
OP Units pursuant to the offer.
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DISGUISED SALES
Under the Code, a transfer of property by a partner to a partnership
followed by a related transfer by the partnership of money or other property to
the partner is treated as a "disguised" sale if (1) the second transfer would
not have occurred but for the first transfer and (2) the second transfer "is not
dependent on the entrepreneurial risks of the partnership operations." In a
disguised sale, the partner is treated as if he or she sold the contributed
property to the partnership as of the date the property was contributed to the
partnership. In addition, unless a few technical exceptions apply, transfers of
money or other property between a partnership and a partner that are made within
two years of each other, including redemptions of OP Units made within two years
of a contribution of your units, must be reported to the IRS and are presumed to
be a "disguised" sale unless the facts and circumstances clearly establish that
the transfers do not constitute a sale.
While there is no authority applying the disguised sale rules to the
exercise of a redemption right by a partner with respect to a partnership
interest received in exchange for property, the exercise of a redemption right
with respect to OP Units within two years of the date of the contribution of
your units to the AIMCO Operating Partnership may be treated as a disguised
sale. If this treatment were to apply, you would be treated for Federal income
tax purposes as if, on the date of the contribution of your units, the AIMCO
Operating Partnership transferred to you an obligation to give you the
redemption proceeds. In that case, you would be required to recognize gain on
the disguised sale in such earlier year. Because of the factual nature of such
an inquiry, Special Tax Counsel is unable to opine whether your exercise of a
redemption right with respect to an OP Unit would cause your contribution of
units to the AIMCO Operating Partnership to be a taxable transaction under the
disguised sale rules of the Code.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Federal Income Taxation of the
AIMCO Operating Partnership and OP Unitholders -- 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
If you exchange your units for cash and OP Units, you will be treated as
selling some of your units for cash in a taxable sale and contributing some of
your units for OP Units in a tax-free exchange. Your adjusted tax basis in your
transferred units will be allocated between the units you will be deemed to have
sold and the units you will be deemed to have contributed to the AIMCO Operating
Partnership.
With respect to the units that you will be treated as selling, you will
recognize gain or loss in an amount equal to the difference between (i) your
"amount realized" on the sale and (ii) your adjusted tax basis in units you
sold. Your "amount realized" on such sale will be equal to the sum of the amount
of cash you received pursuant to the offer (that is, the offer consideration)
plus the amount of your partnership's liabilities attributed to the units you
sold. For purposes of these partial sale rules, the amount of your partnership's
liabilities attributed to the units you sold will be equal to the lesser of (i)
the excess of the amount of your partnership's liabilities allocable to you in
respect of the transferred units immediately prior to the exchange over the
amount of such liabilities allocable to you as determined immediately after the
exchange or (ii) the product of (A) the amount of your partnership's liabilities
allocable to you in respect of the units you are deemed to have sold immediately
prior to the exchange and (B) your "net equity percentage" with respect to those
units. Your "net equity percentage" will be equal to the percentage determined
by dividing (x) the cash you received in the exchange by (y) the excess of the
gross fair market value of the units in the exchange over the amount of your
partnership's liabilities allocable to you in respect of those units immediately
prior to the exchange. Thus, your tax liability could exceed the amount of cash
you receive in the sale.
With respect to the units that you will be treated as exchanging, rather
than selling, you will be taxed as described above under the heading "Tax
Consequences of Exchanging Units Solely for OP Units."
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TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
If you sell your units solely for cash, you will recognize gain or loss on
a sale of your units equal to the difference between (i) your "amount realized"
on the sale and (ii) your adjusted tax basis in the units you sold. The "amount
realized" with respect to a unit will be equal to the sum of the amount of cash
you received for your units (that is, the offer consideration) plus the amount
of the liabilities of your partnership allocable to such units (as determined
under Section 752 of the Code). Thus, your tax liability could exceed the amount
of cash you receive in the sale.
ADJUSTED TAX BASIS
If you acquired your units for cash:
- your initial tax basis in your units will be equal to such cash
investment in your partnership increased by your share of your
partnership's liabilities at the time such units were acquired;
- your initial tax basis generally has been increased by:
- your share of your partnership's income and gains and
- any increases in your share of your partnership's liabilities; and
- your initial tax basis generally has been decreased (but not below zero)
by:
- your share of cash distributions from your partnership,
- any decreases in your share of your partnership's liabilities,
- your share of your partnership's losses, and
- your share of nondeductible expenditures of your partnership that are
not chargeable to capital.
For purposes of determining your adjusted tax basis in your units
immediately prior to a disposition of such units, your adjusted tax basis will
include your 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), the gain you
would recognize pursuant to the offer will exceed the cash proceeds you would
realize upon the sale of your units. The adjusted tax basis of the OP Units you
receive in exchange for your units pursuant to the offer will be equal to (i)
the sum of your adjusted tax basis in the units you transferred plus any gain
recognized in the exchange and will be reduced by (ii) any cash you received or
you were deemed to receive 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 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 that is attributable to your share of "unrealized receivables" of your
partnership exceeds the tax basis attributable to those assets, such excess will
be treated as ordinary income. Among other things, "unrealized receivables"
include depreciation recapture for 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. You will not receive any future distributions
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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 the income or loss. 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 the passive 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 passive losses in the manner described below. If you receive
cash for 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 receive cash for all or a portion of your units
pursuant to the offer and recognize 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
receive cash for all of your units pursuant to the offer, the balance of any
"suspended" losses from your partnership 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.
TAX REPORTING
If you tender any units, you must report the transaction by filing a
statement with your Federal income tax return for the year of the tender which
provides certain required information to the IRS. To prevent the possible
application of back-up Federal income tax withholding of 31% with respect to
payment of the offer consideration, you may have to provide the AIMCO Operating
Partnership with your correct taxpayer identification number. See the
instructions to the Letter of Transmittal.
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"). If you are a foreign person, the AIMCO Operating Partnership will
be required, under the FIRPTA provisions of the Code, to deduct and withhold 10%
of the amount realized by you on the disposition. The amount withheld would be
creditable against your Federal income tax liability and, if the amount withheld
exceeds your actual tax liability you could obtain a refund from the IRS by
filing a U.S. income tax return. See the Instructions to the Letter of
Transmittal.
TAX CONSEQUENCES OF A TERMINATION OF YOUR PARTNERSHIP
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"). The AIMCO Operating Partnership's acquisition of units pursuant
to the offer may result in a Termination of your partnership. If an acquisition
of units results in a
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Termination, the following Federal income tax events will be deemed to occur:
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
interests 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 to the
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
to the New Partnership. A Termination will change (and possibly shorten) a
Remaining Offeree's holding period with respect to its units in your partnership
for Federal income tax purposes. Gains recognized by a Remaining Offeree on the
disposition of New Partnership interests with a holding period of 12 months or
less may be classified as short-term capital gains and subject to taxation at
ordinary income tax rates.
The New Partnership's adjusted tax basis in its assets will be the same as
the Old Partnership's basis in such assets immediately before the Termination. A
Termination will also cause the New Partnership to recalculate the depreciable
lives of its assets. This will cause the assets to be depreciated over a longer
period of time than if there had been no Termination. This would generally
decrease the annual average depreciation deductions allocable to the Remaining
Offerees for a number of years following consummation of the offer (thereby
increasing the taxable income allocable to their retained units in each such
year), but would have no effect on the total depreciation deductions available
over the useful lives of the assets of your partnership.
Elections as to 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.
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-73
<PAGE> 1326
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 The AIMCO Operating Partnership is organized
organized under South Carolina law. as a 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 The term of the AIMCO Operating Partnership
partners as a finite life investment, with continues until December 31, 2093, unless
limited partners to receive regular cash the AIMCO Operating Partnership is dissolved
distributions out of your partnership's Net sooner pursuant to the terms of the AIMCO
Cash From Operations (as defined in your Operating Partnership's agreement of limited
partnership's agreement of limited partner- partnership (the "AIMCO Operating
ship). The termination date of your Partnership Agreement") or as provided by
partnership is December 31, 2014. law. See "Description of 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, The purpose of the AIMCO Operating
operate, lease and manage your partnership's Partnership is to conduct any business that
property. Subject to restrictions contained may be lawfully conducted by a limited
in your partnership's agreement of limited partnership organized pursuant to the
partnership, your partnership may perform Delaware Revised Uniform Limited Part-
all act necessary, advisable or convenient nership Act (as amended from time to time,
to the business of your partnership in- or any successor to such statute) (the
cluding borrowing money and creating liens. "Delaware Limited Partnership Act"),
provided that such business is to be
conducted in a manner that permits AIMCO to
be qualified as a REIT, unless AIMCO ceases
to qualify as a REIT. The AIMCO Operating
Partner-
</TABLE>
S-74
<PAGE> 1327
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship 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 ac-
tion, 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>
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership The general partner is authorized to issue
authorized to issue additional limited additional partnership interests in the
partnership interests in your partnership AIMCO Operating Partnership for any
and may admit additional limited partners by partnership purpose from time to time to the
selling not more than 200 units for cash and limited partners and to other persons, and
notes to selected persons who fulfill the to admit such other persons as additional
requirements set forth in your partnership's limited partners, on terms and conditions
agreement of limited partnership. The and for such capital contributions as may be
capital contribution need not be equal for established by the general partner in its
all limited partners and no action or sole discretion. The net capital
consent is required in connection with the contribution need not be equal for all OP
admission of any additional limited Unitholders. No action or consent by the OP
partners. 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,
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 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 The AIMCO Operating Partnership may lend or
limited partnership, the general partners contribute funds or other assets to its
may not enter into contracts with themselves subsidiaries or other persons in which it
or their affiliates, except has an equity investment,
</TABLE>
S-75
<PAGE> 1328
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
for the agreement specified in your and such persons may borrow funds from the
partnership's agreement of limited AIMCO Operating Partnership, on terms and
partnership in connection with the conditions established in the sole and
acquisition, operation, management and absolute discretion of the general partner.
ownership of your partnership's property. To the extent consistent with the business
Your partnership may not make loans to any purpose of the AIMCO Operating Partnership
of the general partners but the general and the permitted activities of the general
partners may make loans to your partnership partner, the AIMCO Operating Partnership may
in such amounts as the general partners deem transfer assets to joint ventures, limited
necessary for the payment of any partnership liability companies, partnerships,
obligations and expenses; provided that the corporations, business trusts or other
interest is 1% over the then prevailing business entities in which it is or thereby
prime rate of The Citizens and Southern becomes a participant upon such terms and
National Bank of South Carolina for subject to such conditions consistent with
short-term, unsecured loans (but not in any the AIMCO Operating Partnership Agreement
case higher than the legal rate) and the and applicable law as the general partner,
general partners first make a reasonable in its sole and absolute discretion,
effort to obtain loans at the most favorable believes to be advisable. Except as
rate from unaffiliated parties. expressly permitted by the AIMCO Operating
Partnership Agreement, neither the general
partner nor any of its affiliates may sell,
transfer or convey any property to the AIMCO
Operating Partnership, directly or
indirectly, except pursuant to transactions
that are determined by the general partner
in good faith to be fair and reasonable.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is The AIMCO Operating Partnership Agreement
authorized to borrow money in such amounts contains no restrictions on borrowings, and
as the general partner deems, in its the general partner has full power and
reasonable discretion, to be in the best authority to borrow money on behalf of the
interests of your partnership, on the credit AIMCO Operating Partnership. The AIMCO
of and enter into obligations, recourse and Operating Partnership has credit agreements
nonrecourse, on behalf of your partnership that restrict, among other things, its
and to give as security therefor any of your ability to incur indebtedness.
partnership's property. However, a
refinancing of your partnership's property
must be approved by the general partner.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited Each OP Unitholder has the right, upon
partnership entitles a limited partner or written demand with a statement of the
its duly authorized representative to purpose of such demand and at such OP
receive by mail, upon written request to Unitholder's own expense, to obtain a
your partnership and at such limited part- current list of the name and last known
ner's sole cost and expense, a list of names business, residence or mailing address of
and addresses of the limited partners. the general partner and each other OP
Unitholder.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has All management powers over the business and
the responsibility to direct the management affairs of the AIMCO Operating Partnership
of your partnership's business and assets are vested in AIMCO-GP, Inc., which is the
and has all rights and powers generally general partner. No OP Unitholder has any
conferred by law or which are necessary, right to participate in or exercise control
advisable or consistent in connection or management power over the business and
therewith. The general partner of your affairs of the AIMCO Operating Partner-
partnership
</TABLE>
S-76
<PAGE> 1329
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
has the power and authority to execute ship. The OP Unitholders have the right to
documents and instruments in its sole name vote on certain matters described under
on behalf of your partnership. No limited "Comparison of Your Units and AIMCO OP
partner may take part in or interfere in any Units -- Voting Rights" below. The general
manner with the conduct or control of the partner may not be removed by the OP
business of your partnership. Limited Unitholders with or without cause.
partners have no right or authority to act
for or bind the corporation. 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 Notwithstanding anything to the contrary set
limited partnership, the general partner of forth in the AIMCO Operating Partnership
your partnership and its affiliates are not Agreement, the general partner is not liable
liable to your partnership or any limited to the AIMCO Operating Partnership for
partner for any acts performed or any losses sustained, liabilities incurred or
failure to act by any of them performed or benefits not derived as a result of errors
omitted in good faith, provided that such in judgment or mistakes of fact or law of
course of conduct did not constitute fraud, any act or omission if the general partner
gross negligence or willful misconduct. In acted in good faith. The AIMCO Operating
addition, the general partner and its Partnership Agreement provides for
affiliates are entitled to indemnification indemnification of AIMCO, or any director or
by your partnership against any loss or officer of AIMCO (in its capacity as the
damage resulting from any act or omission previous general partner of the AIMCO
performed or omitted in good faith, which Operating Partnership), the general partner,
does not constitute fraud, gross negligence any officer or director of general partner
or willful misconduct. Moreover, the general or the AIMCO Operating Partnership and such
partner is not liable to your partnership or other persons as the general partner may
the limited partners because any taxing designate from and against all losses,
authorities disallowed or adjusted any claims, damages, liabilities, joint or
deductions or credits in your partnership several, expenses (including legal fees),
income tax returns. fines, settlements and other
</TABLE>
S-77
<PAGE> 1330
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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 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
and certain state securities administrations
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 and their
respective state securities laws.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of Except in limited circumstances, the general
limited partnership, the limited partners partner has exclusive management power over
may remove the general partner and elect a the business and affairs of the AIMCO
successor general partner upon a vote of the Operating Partnership. The general partner
limited partners owning a majority of the may not be removed as general partner of the
outstanding units. The general partner may AIMCO Operating Partnership by the OP
resign at any time; provided, however that Unitholders with or without cause. Under the
such resignation does not cause the default AIMCO Operating Partnership Agreement, the
under or result in the acceleration of the general partner may, in its sole discretion,
payment of any loan secured by your prevent a transferee of an OP Unit from
partnership's property. A limited partner becoming a substituted limited partner
may not transfer his interests without the pursuant to the AIMCO Operating Partnership
consent of the general partner which may be Agreement. The general partner may exercise
withheld at the sole discretion of the this right of approval to deter, delay or
general partner. hamper attempts by persons to acquire a
controlling interest in the AIMCO Operating
Partnership. 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 With the exception of certain circumstances
partnership may be amended by the general set forth in the AIMCO Operating Partnership
partner to comply with applicable laws, make Agreement, whereby the general partner may,
changes of a ministerial nature which do not without the consent of the OP Unitholders,
materially and adversely affect the rights amend the AIMCO Operating Partnership
of the limited partners and admit substi- Agreement, amendments to the AIMCO Operating
tute or additional limited partners. Any Partnership Agreement require the consent of
other amendments must be approved by the the holders of a majority of the outstanding
limited partners owning more than 50% of the Common OP Units, excluding AIMCO and certain
units and the general partner. Limited other limited exclusions (a "Majority in
partners owning at least
</TABLE>
S-78
<PAGE> 1331
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
20% of the units have the power to propose Interest"). Amendments to the AIMCO
amendments to your partnership's agreement Operating Partnership Agreement may be
of limited partnership. proposed by the general partner or by
holders of a Majority in Interest. Following
such proposal, the general partner will
submit any proposed amendment to the OP
Unitholders. The general partner will seek
the written consent of the OP Unitholders on
the proposed amendment or will call a
meeting to vote thereon. See "Description of
OP Units -- Amendment of the AIMCO Operating
Partnership Agreement" in the accompanying
Prospectus.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
In addition to the right to distributions in The general partner does not receive
respect of its partnership interest and compensation for its services as general
reimbursement for all fees and expenses as partner of the AIMCO Operating Partnership.
set forth in your partnership's agreement of However, the general partner is entitled to
limited partnership, the general partner payments, allocations and distributions in
receives 1/4 of 1% of gross operating its capacity as general partner of the AIMCO
revenues of your partnership's property, Operating Partnership. In addition, the
payable monthly. Moreover, the general AIMCO Operating Partnership is responsible
partner or certain affiliates may be enti- for all expenses incurred relating to the
tled to compensation for additional services AIMCO Operating Partnership's ownership of
rendered. 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 Except for fraud, willful misconduct or
limited partnership, a limited partner, gross negligence, no OP Unitholder has
unless it is deemed to be taking part in the personal liability for the AIMCO Operating
control of the business, is not bound by or Partnership's debts and obligations, and
personally liable for the expenses, liabil- liability of the OP Unitholders for the
ities or obligations of your partnership. A AIMCO Operating Partnership's debts and
limited partner's liability is limited obligations is generally limited to the
solely to the amount of its capital amount of their investment in the AIMCO
contribution to your partnership, together Operating Partnership. However, the
with the undistributed share of the profits limitations on the liability of limited
of your partnership from time to time partners for the obligations of a limited
credited to its capital account and any partnership have not been clearly
money or other property wrongfully paid or established in some states. If it were
conveyed to him on account of his determined that the AIMCO Operating Part-
contribution. nership 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
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 Partner-
</TABLE>
S-79
<PAGE> 1332
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship's obligations to the same extent as the
general partner.
</TABLE>
Fiduciary Duties
<TABLE>
<S> <C>
Under your partnership's agreement of Unless otherwise provided for in the
limited partnership, the general partner has relevant partnership agreement, Delaware law
an overriding fiduciary obligation to your generally requires a general partner of a
partnership. The general partner is not Delaware limited partnership to adhere to
required to devote all of its time or fiduciary duty standards under which it owes
business efforts to the affairs of your its limited partners the highest duties of
partnership, but shall devote so much of its good faith, fairness and loyalty and which
time and attention to your partnership as is generally prohibit such general partner from
necessary and advisable to successfully taking any action or engaging in any
manage the affairs of your partnership. In transaction as to which it has a conflict of
addition, any partner or affiliate may interest. The AIMCO Operating Partnership
engage in or possess an interest in other Agreement expressly authorizes the general
business ventures of every nature and partner to enter into, on behalf of the
description, whether such ventures are AIMCO Operating Partnership, a right of
competitive with your partnership or first opportunity arrangement and other
otherwise, which may be located in the conflict avoidance agreements with various
market area or vicinity of your affiliates of the AIMCO Operating
partnership's property and neither your Partnership and the general partner, on such
partnership nor the partners shall have any terms as the general partner, in its sole
right in or to such independent ventures or and absolute discretion, believes are
to the income or profits derived therefrom. advisable. The AIMCO Operating Partnership
Agreement expressly limits the liability of
In general, your partnership's agreement of the general partner by providing that the
limited partnership and the AIMCO Operating general partner, and its officers and
Partnership Agreement have limitations on directors will not be liable or accountable
the liability of the general partner but in damages to the AIMCO Operating
such limitations differ and provide more Partnership, the limited partners or as-
protection for the general partner of the signees for errors in judgment or mistakes
AIMCO Operating Partnership. 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 The AIMCO Operating Partnership is not
differences between the taxation of your subject to Federal income taxes. Instead,
partnership and the AIMCO Operating each holder of OP Units includes in income
Partnership. 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
</TABLE>
S-80
<PAGE> 1333
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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 nonre-
course 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>
<CAPTION>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity in- equity interests entitling each equity interests entitling each OP
terests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of and as declared by the board of rata share of cash distributions
distributions to be made to the directors of the general partner made from Available Cash (as such
partners of your partnership. of the AIMCO Operating Part- term is defined in the AIMCO
nership, quarterly cash distribu- Operating Partnership Agreement)
tion at a rate of $0.50 per to the partners of the AIMCO
Preferred OP Unit, subject to ad- Operating Partnership. To the
justments from time to time on or extent the AIMCO Operating
after the fifth anniversary of the Partnership sells or refinances
issue date of the Preferred OP its assets, the net proceeds
Units. therefrom generally will be re-
tained by the AIMCO Operating
Partnership for working capital
</TABLE>
S-81
<PAGE> 1334
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
and new investments rather than
being distributed to the OP
Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's Except as otherwise required Under the AIMCO Operating
agreement of limited by applicable law or in the Partnership Agreement, the
partnership, upon the vote AIMCO Operating Partnership OP Unitholders have voting
of the limited partners Agreement, the holders of rights only with respect to
owning a majority of the the Preferred OP Units will certain limited matters such
outstanding units and the have the same voting rights as certain amendments and
approval of the general as holders of the Common OP termination of the AIMCO
partner, the limited Units. See "Description of Operating Partnership
partners may amend your OP Units" in the accompany- Agreement and certain
partnership's agreement of ing Prospectus. So long as transactions such as the
limited partnership, any Preferred OP Units are institution of bankruptcy
terminate your partnership outstanding, in addition to proceedings, an assignment
and approve or disapprove any other vote or consent of for the benefit of creditors
the sale of all or partners required by law or and certain transfers by the
substantially all of the by the AIMCO Operating general partner of its
assets of your partnership. Partnership Agreement, the interest in the AIMCO
The removal of the general affirmative vote or consent Operating Partnership or the
partner and the election a of holders of at least 50% admission of a successor
trustee to liquidate and of the outstanding Preferred general partner.
distribute your OP Units will be necessary
partnership's assets upon a for effecting any amendment Under the AIMCO Operating
dissolution caused by the of any of the provisions of Partnership Agreement, the
retirement of the general the Partnership Unit general partner has the
partner both require the Designation of the Preferred power to effect the
vote of a majority of the OP Units that materially and acquisition, sale, transfer,
outstanding units. The adversely affects the rights exchange or other
affirmative vote of all or preferences of the disposition of any assets of
limited partners and the holders of the Preferred OP the AIMCO Operating
approval of the general Units. The creation or Partnership (including, but
partner is required to elect issuance of any class or not limited to, the exercise
a substitute general series of partnership units, or grant of any conversion,
partner. including, without option, privilege or
limitation, any partner- subscription right or any
The general partner may ship units that may have other right available in
cause the dissolution of the rights senior or superior to connection with any assets
your partnership by the Preferred OP Units, at any time held by the
retiring. Your partnership shall not be deemed to AIMCO Operating Partnership)
may be continued by the materially adversely affect or the merger,
remaining general partner the rights or preferences of consolidation,
or, if none, all of the the holders of Preferred OP reorganization or other
limited partners may agree Units. With respect to the combination of the AIMCO
to continue your part- exercise of the above Operating Partnership with
nership and elect a described voting rights, or into another entity, all
successor to the general each Preferred OP Units without the consent of the
partner. shall have one (1) vote per OP Unitholders.
Preferred OP Unit.
In general, you have greater The general partner may
voting rights in your cause the dissolution of the
partnership than you will AIMCO Operating Partnership
have as an OP Unitholder. OP by an "event of withdrawal,"
Unitholders cannot remove as defined in the Delaware
the general partner of the Limited Partnership Act
AIMCO Operating Partnership. (including, without limi-
tation, bankruptcy), unless,
</TABLE>
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<PAGE> 1335
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
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 "Descrip-
tion of OP
Units -- Dissolution and
Winding Up" in the accom-
panying Prospectus.
OP Unitholders cannot remove
the general partner of the
AIMCO Operating Partnership
with or without cause.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement Holders of Preferred OP Subject to the rights of
of limited partnership Units will be entitled to holders of any outstanding
specifies how the cash receive, when and as Preferred OP Units, the
available for distribution, declared by the board of AIMCO Operating Partnership
whether arising from directors of the general Agreement requires the
operations or sales or partner of the AIMCO general partner to cause the
refinancing, is to be shared Operating Partnership, AIMCO Operating Partnership
among the partners. Dis- quarterly cash distributions to distribute quarterly all,
tributions of Net Cash from at the rate of $0.50 per or such portion as the
Operation as defined in your Preferred OP Unit; provided, general partner may in its
partnership's agreement of however, that at any time sole and absolute discretion
limited partnership are made and from time to time on or determine, of Available Cash
not less often than after the fifth anniversary (as defined in the AIMCO
semi-annually. The of the issue date of the Operating Partnership
distributions payable to the Preferred OP Units, the Agreement) generated by the
partners are not fixed in AIMCO Operating Partnership AIMCO Operating Partnership
amount and depend upon the may adjust the annual during such quarter to the
operating results and net distribution rate on the general partner, the special
sales or refinancing pro- Preferred OP Units to the limited partner and the
ceeds available from the lower of (i) 2.00% plus the holders of Common OP Units
disposition of your annual interest rate then on the record date es-
partnership's assets. applicable to U.S. Treasury tablished by the general
notes with a maturity of partner with respect to such
five years, and (ii) the quarter, in accordance with
annual dividend rate on the their respective interests
most recently issued AIMCO in the AIMCO Operating
non-convertible preferred Partnership on such record
stock which ranks on a date. Holders of any other
parity with its Class H Preferred OP Units issued in
Cumulative Preferred Stock. the
Such distributions will be
</TABLE>
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<PAGE> 1336
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
cumulative from the date of future may have priority
original issue. Holders of over the general partner,
Preferred OP Units will not the special limited partner
be entitled to receive any and holders of Common OP
distributions in excess of Units with respect to
cumulative distributions on distributions of Available
the Preferred OP Units. No Cash, distributions upon
interest, or sum of money in liquidation or other
lieu of interest, shall be distributions. See "Per
payable in respect of any Share and Per Unit Data" in
distribution payment or pay- the accompanying Prospectus.
ments on the Preferred OP
Units that may be in The general partner in its
arrears. sole and absolute discretion
may distribute to the OP
When distributions are not Unitholders Available Cash
paid in full upon the on a more frequent basis and
Preferred OP Units or any provide for an appropriate
Parity Units (as defined record date.
below), all distributions
declared upon the Preferred The AIMCO Operating Partner-
OP Units and any Parity ship Agreement requires the
Units shall be declared general partner to take such
ratably in proportion to the reasonable efforts, as
respective amounts of determined by it in its sole
distributions accumulated, and absolute discretion and
accrued and unpaid on the consistent with AIMCO's
Preferred OP Units and such qualification as a REIT, to
Parity Units. Unless full cause the AIMCO Operating
cumulative distributions on Partnership to distribute
the Preferred OP Units have sufficient amounts to en-
been declared and paid, able the general partner to
except in limited circum- transfer funds to AIMCO and
stances, no distributions enable AIMCO to pay stock-
may be declared or paid or holder dividends that will
set apart for payment by the (i) satisfy the requirements
AIMCO Operating Partnership for qualifying as a REIT
and no other distribution of under the Code and the
cash or other property may Treasury Regulations and
be declared or made, (ii) avoid any Federal
directly or indirectly, by income or excise tax
the AIMCO Operating liability of AIMCO. See
Partnership with respect to "Description of OP
any Junior Units (as de- Units -- Distributions" in
fined below), nor shall any the accompanying Prospectus.
Junior Units be redeemed,
purchased or otherwise
acquired for considera-
tion, 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>
<CAPTION>
<S> <C> <C>
A limited partner may There is no public market There is no public market
transfer his units to any for the Preferred OP Units for the OP Units. The AIMCO
person and be substituted as and the Preferred OP Units Operating Partnership
a limited partner are not listed Agreement re-
</TABLE>
S-84
<PAGE> 1337
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
by such person if: (1) the on any securities exchange. stricts the transferability
transfer complies with the The Preferred OP Units are of the OP Units. Until the
then-applicable rules and subject to restrictions on expiration of one year from
regulations of any gov- transfer as set forth in the the date on which an OP
ernmental authority with AIMCO Operating Partnership Unitholder acquired OP
jurisdiction over the Agreement. Units, subject to certain
disposition, (2) except in exceptions, such OP
specified circumstances, the Pursuant to the AIMCO Unitholder may not transfer
interest transferred is not Operating Partnership all or any portion of its OP
less than 1 unit, (3) a Agreement, until the Units to any transferee
written assignment has been expiration of one year from without the consent of the
duly executed and the date on which a holder general partner, which
acknowledged by the assignor of Preferred OP Units consent may be withheld in
and assignee, (4) the ap- acquired Preferred OP Units, its sole and absolute
proval of the general subject to certain discretion. After the
partner which may be exceptions, such holder of expiration of one year, such
withheld in the sole and Preferred OP Units may not OP Unitholder has the right
absolute discretion of the transfer all or any portion to transfer all or any
general partner has been of its Preferred OP Units to portion of its OP Units to
granted and (5) the assignor any transferee without the any person, subject to the
and assignee have complied consent of the general satisfaction of certain con-
with such other conditions partner, which consent may ditions specified in the
as set forth in your be withheld in its sole and AIMCO Operating Partnership
partnership's agreement of absolute discretion. After Agreement, including the
limited partnership. the expiration of one year, general partner's right of
such holders of Preferred OP first refusal. See
There are no redemption Units has the right to "Description of OP Units --
rights associated with your transfer all or any portion Transfers and Withdrawals"
units. of its Preferred OP Units to in the accompanying
any person, subject to the Prospectus.
satisfaction of certain
conditions specified in the After the first anniversary
AIMCO Operating Partner- of becoming a holder of
ship Agreement, including Common OP Units, an OP
the general partner's right Unitholder has the right,
of first refusal. subject to the terms and
conditions of the AIMCO
After a one-year holding Operating Partnership
period, a holder may redeem Agreement, to require the
Preferred OP Units and AIMCO Operating Partnership
receive in exchange to redeem all or a portion
therefor, at the AIMCO Oper- of the Common OP Units held
ating Partnership's option, by such party in exchange
(i) subject to the terms of for a cash amount based on
any Senior Units (as defined the value of shares of Class
below), cash in an amount A Common Stock. See
equal to the Liquidation "Description of OP
Preference of the Preferred Units -- Redemption Rights"
OP Units tendered for in the accompanying
redemption, (ii) a number of Prospectus. Upon receipt of
shares of Class A Common a notice of redemption, the
Stock of AIMCO that is equal AIMCO Operating Partnership
in Value to the Liquidation may, in its sole and
Preference of the Preferred absolute discretion but
OP Units tendered for subject to the restrictions
redemption, or (iii) for on the ownership of Class A
Preferred OP Units redeemed Common Stock imposed under
after a two-year holding AIMCO's charter and the
period, a number of shares transfer restrictions and
of Class I Preferred Stock other limitations thereof,
of AIMCO that pay an elect to cause AIMCO to
acquire some or all of the
ten-
</TABLE>
S-85
<PAGE> 1338
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
aggregate amount of dered Common OP Units in
dividends equivalent to the exchange for Class A Common
distributions on the Stock, based on an exchange
Preferred OP Units tendered ratio of one share of Class
for redemption; provided A Common Stock for each Com-
that such shares are part of mon OP Unit, subject to
a class or series of adjustment as provided in
preferred stock that is then the AIMCO Operating
listed on the NYSE or an- Partnership Agreement.
other national securities
exchange. See "Federal
Income Tax
Consequences -- Disguised
Sales." 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-86
<PAGE> 1339
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are the Class Two 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 I High Performance 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, the
Class J Partnership Preferred Units, the Class K 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, the Class One 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 $0.50 per Preferred OP
Unit (equivalent to 8.0% per annum of the $25 stated liquidation preference);
provided, however, that at any time and from time to time on or after March 1,
2005, the AIMCO Operating Partnership may adjust the annual distribution rate on
the Preferred OP Units to the lower of (i) 2.0% 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. A reduction in the distribution rate will reduce your rate of return on
the Preferred OP Units and possibly encourage you to redeem such units. 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
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<PAGE> 1340
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 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 $25 per Preferred OP
Unit, 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
S-88
<PAGE> 1341
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 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 A Common Stock of AIMCO that is equal in Value to the
Liquidation Preference of the Preferred OP Units tendered for redemption, or
(iii) for Preferred OP Units redeemed after a two-year holding period, 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 NYSE or another national securities exchange.
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. Before issuing any preferred
stock upon redemption of Preferred OP Units, AIMCO will register the issuance
and sale of such shares under the Securities Act of 1933. 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.
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<PAGE> 1342
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.
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, the Class J 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 8.0% per annum of the $25 liquidation preference (equivalent to
$2.00 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 July 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 March 1, 2005, 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,
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<PAGE> 1343
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 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> 1344
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 The Class I Preferred Stock constitutes an
interests entitling each holder of Preferred equity interest entitling each holder of
OP Units to receive, when and as declared by Class I Preferred Stock to receive, when and
the board of directors of the general as declared by the AIMCO board of directors,
partner of the AIMCO Operating Partnership, cash distribution at a rate of $2.00 per
quarterly cash distribution at a rate of annum per share.
$0.50 per 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 Holders of Class I Preferred Stock do not
law or in the AIMCO Operating Partnership's have any voting rights, except as set forth
agreement of limited partnership, the below and except as otherwise required by
holders of the Preferred OP Units will have applicable law.
the same voting rights as holders of the
Common OP Units. See "Description of OP If and whenever dividends on any shares of
Units" in the accompanying Prospectus. So Class I Preferred Stock or any series or
long as any Preferred OP Units are class of Class I Parity Stock are in arrears
outstanding, in addition to any other vote for six or more quarterly periods (whether
or consent of partners required by law or by or not consecutive), the number of directors
the AIMCO Operating Partnership's agreement then constituting the AIMCO board of
of limited partnership, the affirmative vote directors shall be increased by two (if not
or consent of holders of at least 50% of the already increased by reason of similar types
outstanding Preferred OP Units will be of provisions with respect to shares of
necessary for effecting any amendment of any voting preferred stock), and the holders of
of the provisions of the Partnership Unit shares of Class I Preferred Stock, together
Designation of the Preferred OP Units that with the holders of shares of all other
materially and adversely affects the rights voting preferred stock then entitled to
or preferences of the holders of the exercise similar voting rights, voting as a
Preferred OP Units. The creation or issuance single class regardless of series, will be
of any class or series of AIMCO Operating entitled to vote for the election of two
Partnership units, including, without additional directors of AIMCO. Whenever
limitation, any AIMCO Operating Partnership dividends in arrears and dividends for the
units that may have rights senior or current quarterly dividend period have been
superior to the Preferred OP Units, will not paid or declared and set aside in respect of
be deemed to materially adversely affect the the outstanding shares of the Class I
rights or preferences of the holders of Preferred Stock and the voting preferred
Preferred OP Units. With respect to the stock, then the right of the holders of
exercise of the above described voting Class I Preferred Stock and the voting
rights, each Preferred OP Units will have preferred stock to elect such additional two
one (1) vote per Preferred 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
</TABLE>
S-92
<PAGE> 1345
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
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>
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled Holders of Class I Preferred Stock are
to receive, when and as declared by the entitled to receive, when and as declared by
board of directors of the general partner of the AIMCO board of directors, out of funds
the AIMCO Operating Partnership, quarterly legally available for payment, cash
cash distributions at the rate of $0.50 per dividends at the rate of $2.00 per annum per
Preferred OP Unit; provided, however, that share. Such dividends are cumulative from
at any time and from time to time on or the date of original issue. Holders of Class
after the fifth anniversary of the issue I Preferred Stock are not be entitled to
date of the Preferred OP Units, the AIMCO receive any dividends in excess of
Operating Partnership may adjust the annual cumulative dividends on the Class I
distribution rate on the Preferred OP Units Preferred Stock. No interest, or sum of
to the lower of (i) 2.00% plus the annual money in lieu of interest, shall be payable
interest rate then applicable to U.S. in respect of any dividend payment or
Treasury notes with a maturity of five payments on the Class I Preferred Stock that
years, and (ii) the annual dividend rate on may be in arrears.
the most recently issued AIMCO
non-convertible preferred stock which ranks When dividends are not paid in full upon the
on a parity with its Class H Cumulative Class I Preferred Stock or any other class
Preferred Stock. Such distributions will be or series of Class I Parity Stock, all
cumulative from the date of original issue. dividends declared upon the Class I
Holders of Preferred OP Units will not be Preferred Stock and any shares of Class I
entitled to receive any distributions in Parity Stock will be declared ratably in
excess of cumulative distributions on the proportion to the respective amounts of
Preferred OP Units. No interest, or sum of dividends accumulated, accrued and unpaid on
money in lieu of interest, shall be payable the Class I Preferred Stock and such Class I
in respect of any distribution payment or Parity Stock. Unless dividends equal to the
payments on the Preferred OP Units that may full amount of all accumulated, accrued and
be in arrears. unpaid dividends on the Class I Preferred
Stock have been paid, or declared and set
When distributions are not paid in full upon apart for payment, except in limited
the Preferred OP Units or any Parity Units, circumstances, no dividends may be declared
all or paid or set apart for
</TABLE>
S-93
<PAGE> 1346
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
distributions declared upon the Preferred OP payment by AIMCO and no other distribution
Units and any Parity Units will be declared of cash or other property may be declared or
ratably in proportion to the respective made, directly or indirectly, by AIMCO with
amounts of distributions accumulated, respect to any shares of Class I Junior
accrued and unpaid on the Preferred OP Units Stock, nor shall any shares of Class I
and such Parity Units. Unless full Junior Stock be redeemed, purchased or
cumulative distributions on the Preferred OP otherwise acquired for any consideration,
Units have been declared and paid, except in nor shall any other cash or other property
limited circumstances, no distributions may be paid or distributed to or for the benefit
be declared or paid or set apart for payment of holders of shares of Class I Junior
by the AIMCO Operating Partnership and no Stock. See "Description of Class I Preferred
other distribution of cash or other property Stock -- Dividends."
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 Ownership of shares of Class I Preferred
OP Units and the Preferred OP Units are not Stock by any person will be limited such
listed on any securities exchange. The that the sum of the aggregate value of all
Preferred OP Units are subject to certain equity stock (including all shares of Class
restrictions on transferability set forth in 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)
Pursuant to the AIMCO Operating of the aggregate value of all outstanding
Partnership's agreement of limited shares of equity stock. Further, certain
partnership, until the expiration of one transfers which may have the effect of
year from the date on which a holder of causing AIMCO to lose its status as a REIT
Preferred OP Units acquired Preferred OP are void ab initio.
Units, subject to certain exceptions, such
holder of Preferred OP Units may not If any transfer of Class I Preferred Stock
transfer all or any portion of its Preferred occurs which, if effective, would result in
OP Units to any transferee without the any person beneficially or constructively
consent of the general partner, which owning Class I Preferred Stock in excess or
consent may be withheld in its sole and in violation of the Class I Preferred
absolute discretion. After the expiration of Ownership Limit, such shares of Class I
one year, such holders of Preferred OP Units Preferred Stock in excess of the Class I
has the right to transfer all or any portion Preferred Ownership Limit will be
of its Preferred OP Units to any person, automatically transferred to a trustee in
subject to the satisfaction of certain his capacity as trustee of a trust for the
conditions specified in the AIMCO Operating exclusive benefit of one or more charitable
Partnership's agreement of limited beneficiaries designated by AIMCO, and the
partnership, including the general partner's prohibited transferee will generally have no
right of first refusal. rights in such shares, except upon sale of
the shares by the trustee. The trustee will
After a one-year holding period, a holder have all voting rights and rights to
may redeem Preferred OP Units and receive in dividends with respect to shares of Class I
exchange therefor, at the AIMCO Operating Preferred Stock held in the trust, which
Partnership's option, (i) subject to the rights will be exercised for the benefit of
terms of any Senior Units, cash in an amount the charitable beneficiaries.
equal to the Liquidation Preference of the
Preferred OP Units tendered for The trustee may sell the Class I Preferred
Stock held
</TABLE>
S-94
<PAGE> 1347
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
redemption, (ii) a number of shares of Class in the trust to AIMCO or a person,
A Common Stock of AIMCO that is equal in designated by the trustee, whose ownership
value to the Liquidation Preference of the of the Class I Preferred Stock will not
Preferred OP Units tendered for redemption, violate the Class I Preferred Ownership
or (iii) for Preferred OP Units redeemed Limit. Upon such sale, the interest of the
after a two-year holding period, a number of charitable beneficiaries in the shares sold
shares of Class I Preferred Stock of AIMCO will terminate and the trustee will
that pay an aggregate amount of dividends distribute to the prohibited transferee, the
equivalent to the distributions on the lesser of (i) the price paid by the
Preferred OP Units tendered for redemption; prohibited transferee for the shares or if
provided that such shares are part of a the prohibited transferee did not give value
class or series of preferred stock that is for the shares in connection with the event
then listed on the NYSE or another national causing the shares to be held in the trust,
securities exchange. See "Federal Income Tax the market price of such shares on the day
Consequences -- Disguised Sales." The of the event causing the shares to be held
Preferred OP Units may not be redeemed at in the trust and (ii) the price per share
the option of the AIMCO Operating received by the trustee from the sale or
Partnership. See "Description of Preferred other disposition of the shares held in the
OP Units -- Redemption." trust. Any proceeds in excess of the amount
payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after March 1, 2005, 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-95
<PAGE> 1348
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. Your general
partner became a wholly owned subsidiary on February 26, 1999 of AIMCO when IPT
merged with AIMCO. Accordingly, the general partner of your partnership 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 Unitholders 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 own both the general partner of your partnership and the manager of your
partnership's property. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $16,000 in 1996, $16,000 in 1997 and $12,000 in
1998. The property manager received management fees of $82,000 in 1996, $87,000,
in 1997 and $99,212 in 1998. The AIMCO Operating Partnership has no current
intention of changing the fee structure for the general partner or for the
manager of your partnership's 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." AIMCO's
Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is
S-96
<PAGE> 1349
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.
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. However, we will not acquire any
additional units for a period of at least one year after expiration of the
offer. Any such future offers that we might make could be for consideration that
is more or less than the consideration we are currently offering.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $565,600 will be
required to purchase all of the units sought in the offer, if such units are
tendered for cash excluding expenses as itemized below. The AIMCO Operating
Partnership will obtain all such funds from cash from operations, equity
issuances and short term borrowings. The AIMCO Operating Partnership will pay
all of the costs of the offer and not your partnership.
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...................................... $ 5,000
Accountant's Fees........................................... $ 5,000
Legal Fees.................................................. $10,000
Printing Fees............................................... $10,000
Stanger's Fees.............................................. $ 9,000
Other....................................................... $11,000
-------
Total....................................................... $50,000
=======
</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 Bank of America's reference rate, at the election of
the Company, plus 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 2.25% and 2.75% in the case of LIBOR-based
loans and between 0.75% and 1.25% 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
September 30, 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
S-97
<PAGE> 1350
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.
We may obtain funds pursuant to a credit agreement entered into by our
subsidiary, Insignia Properties, L.P. ("IPLP"), 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, 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). IPLP 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. The AIMCO Operating
Partnership intends to repay any funds borrowed out of working capital in the
ordinary course of business.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP has delivered 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 has delivered an opinion with regard to
the material Federal income tax consequences of the offer. 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 two opinions of Skadden, Arps, Slate, Meagher & Flom LLP are 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 opinions will be sent by the Information Agent.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of Coastal Commons Limited Partnership at December 31,
1997, and for the year then ended, as set forth in their report. We've included
the consolidated financial statements of Coastal Commons Limited Partnership in
the prospectus supplement in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
S-98
<PAGE> 1351
COASTAL COMMONS LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed Consolidated Balance Sheet as of September 30,
1998 (Unaudited).......................................... F-2
Condensed Consolidated Statements of Operations for the nine
months ended September 30, 1998 and 1997 (Unaudited)...... F-3
Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 1998 and 1997 (Unaudited)...... F-4
Note A -- Basis of Presentation (Unaudited)................. F-4
Report of Independent Auditors.............................. F-5
Consolidated Balance Sheet as of December 31, 1997.......... F-6
Consolidated Statement of Operations for the year ended
December 31, 1997......................................... F-7
Consolidated Statement of Changes in Partners' Deficit for
the year ended December 31, 1997.......................... F-8
Consolidated Statement of Cash Flows for the year ended
December 31, 1997......................................... F-9
Notes to Consolidated Financial Statements.................. F-10
Consolidated Balance Sheet as of December 31, 1996
(Unaudited)............................................... F-15
Consolidated Statement of Operations for the year ended
December 31, 1996 (Unaudited)............................. F-16
Consolidated Statement of Partners' Deficit for the year
ended December 31, 1996 (Unaudited)....................... F-17
Consolidated Statement of Cash Flows for the year ended
December 31, 1996 (Unaudited)............................. F-18
Notes to Consolidated Financial Statements (Unaudited)...... F-19
</TABLE>
F-1
<PAGE> 1352
COASTAL COMMONS LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED BALANCE SHEET -- (UNAUDITED)
SEPTEMBER 30, 1998
<TABLE>
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 557,000
Receivables and deposits.................................... 66,000
Restricted escrows.......................................... 201,000
Other assets................................................ 111,000
Investment property
Land...................................................... $ 684,000
Building and related personal property.................... 8,691,000
-----------
9,375,000
Less: Accumulated depreciation............................ (4,564,000) 4,811,000
----------- ----------
Total assets...................................... $5,746,000
==========
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable and accrued liabilities.................... $ 212,000
Tenant security deposits.................................... 51,000
Mortgage note payable....................................... 6,193,000
Minority interest........................................... 18,000
Partners' deficit........................................... (728,000)
----------
Total Liabilities and Partners' Deficit........... $5,746,000
----------
----------
</TABLE>
See accompanying note.
F-2
<PAGE> 1353
COASTAL COMMONS LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -- (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenues:
Rental Income............................................. $1,271,000 $1,227,000
Other Income.............................................. 92,000 100,000
---------- ----------
Total Revenues.................................... 1,363,000 1,327,000
Expenses:
Operating Expenses........................................ 480,000 499,000
General and Administrative Expenses....................... 35,000 20,000
Depreciation Expense...................................... 226,000 226,000
Interest Expense.......................................... 397,000 401,000
Property Tax Expense...................................... 94,000 94,000
---------- ----------
Total Expenses.................................... 1,232,000 1,240,000
Net Income........................................ $ 131,000 $ 87,000
========== ==========
</TABLE>
See accompanying note.
F-3
<PAGE> 1354
COASTAL COMMONS LIMITED PARTNERSHIP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1998 1997
--------- ---------
<S> <C> <C>
Operating Activities:
Net income................................................ $ 131,000 $ 87,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and Amortization.......................... 246,000 246,000
Changes in accounts:
Receivables and deposits and other assets............ (6,000) (25,000)
Accounts payable and accrued expenses................ 89,000 50,000
--------- ---------
Net cash provided by (used in) operating
activities...................................... 460,000 358,000
--------- ---------
Investing Activities:
Property improvements and replacements.................... (43,000) (51,000)
Net (increase)/decrease in restricted escrows............. (41,000) (40,000)
--------- ---------
Net cash provided by (used in) investing
activities...................................... (84,000) (91,000)
Financing Activities:
Payments on mortgage...................................... (47,000) (43,000)
Partners' Distributions................................... (231,000) (100,000)
--------- ---------
Net cash provided by (used in) financing
activities...................................... (278,000) (143,000)
--------- ---------
Net increase (decrease) in cash and cash
equivalents..................................... 98,000 124,000
Cash and cash equivalents at beginning of year............ 459,000 319,000
--------- ---------
Cash and cash equivalents at end of period................ $ 557,000 $ 443,000
========= =========
</TABLE>
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements of Coastal Commons Limited
Partnership as of September 30, 1998 and for the nine months ended September 30,
1998 and 1997 have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included and all such adjustments are of a recurring nature.
The financial statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31, 1997. It
should be understood that accounting measurements at interim dates inherently
involve greater reliance on estimates than at year-end. The results of
operations for the interim periods presented are not necessarily indicative of
the results for the entire year.
F-4
<PAGE> 1355
REPORT OF INDEPENDENT AUDITORS
The Partners
Coastal Commons Limited Partnership
We have audited the accompanying consolidated balance sheet of Coastal
Commons Limited Partnership as of December 31, 1997 and the related consolidated
statements of operations, changes in partners' deficit and cash flows for the
year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Coastal Commons
Limited Partnership at December 31, 1997 and the consolidated results of its
operations and cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
August 31, 1998
Greenville, South Carolina
F-5
<PAGE> 1356
COASTAL COMMONS LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS)
ASSETS
<TABLE>
<S> <C> <C>
Cash and cash equivalents................................... $ 459
Receivables and deposits.................................... 57
Restricted escrows.......................................... 160
Loan costs, net of $65 amortization......................... 125
Other assets................................................ 9
Investment property, at cost (Notes B and D):
Land...................................................... $ 684
Buildings and related personal property................... 8,648
-------
9,332
Less accumulated depreciation............................. (4,338) 4,994
------- ------
$5,804
======
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 23
Security deposits and other tenant liabilities............ 41
Other liabilities......................................... 110
Mortgage note payable (Note B)............................ 6,240
------
6,414
Minority interest (Note A).................................. 18
Partners' deficit:
General partners.......................................... $ (7)
Limited partners (200 units issued and outstanding)....... (621) (628)
------- ------
$5,804
======
</TABLE>
See accompanying notes.
F-6
<PAGE> 1357
COASTAL COMMONS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT UNIT DATA)
<TABLE>
<S> <C> <C>
Revenues:
Rental income............................................. $ 1,663
Other income.............................................. 124
-------
1,787
Expenses:
Operating................................................. $648
General and administrative................................ 48
Depreciation.............................................. 296
Interest.................................................. 534
Property taxes............................................ 118 1,644
---- -------
Net income.................................................. $ 143
=======
Net income allocated to general partners (1%)............... $ 1
Net income allocated to limited partners (99%).............. 142
-------
$ 143
=======
Net income per limited partnership unit..................... $707.85
=======
</TABLE>
See accompanying notes.
F-7
<PAGE> 1358
COASTAL COMMONS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- -------- -----
<S> <C> <C> <C>
Deficit at December 31, 1996................................ $(7) $(664) $(671)
Net income.................................................. 1 142 143
Distributions to partners................................... (1) (99) (100)
--- ----- -----
Deficit at December 31, 1997................................ $(7) $(621) $(628)
=== ===== =====
</TABLE>
See accompanying notes.
F-8
<PAGE> 1359
COASTAL COMMONS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Cash flows from operating activities
Net income................................................ $ 143
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 296
Amortization of loan costs and mortgage discount....... 29
Change in accounts:
Receivables and deposits............................. (7)
Other assets......................................... (9)
Accounts payable..................................... (55)
Tenant security deposit liabilities.................. 5
Other liabilities.................................... 21
-----
Net cash provided by operating activities................. 423
Cash flows from investing activities
Property improvements and replacements.................... (64)
Deposits to restricted escrows............................ (60)
-----
Net cash used in investing activities..................... (124)
Cash flows from financing activities
Principal payments on mortgage notes payable.............. (59)
Distributions to partners................................. (100)
-----
Net cash used in financing activities..................... (159)
-----
Net increase in cash and cash equivalents................. 140
Cash and cash equivalents at December 31, 1996............ 319
-----
Cash and cash equivalents at December 31, 1997............ $ 459
=====
Supplemental disclosure of cash flow information
Cash paid for interest.................................... $ 507
=====
</TABLE>
See accompanying notes.
F-9
<PAGE> 1360
COASTAL COMMONS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE A -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Coastal Commons Limited Partnership (the "Partnership") was organized as a
limited partnership under the laws of the State of South Carolina pursuant to a
Certificate and Agreement of Limited Partnership dated June 29, 1984 and
extending to December 31, 2014, unless terminated sooner. Two hundred units of
limited partnership interests, an individual general partner interest and two
corporate general partner interests were issued. The Partnership owns and
operates a 240-unit apartment complex, Hibben Ferry Apartments, in Mt. Pleasant,
South Carolina.
Principles of Consolidation
The consolidated financial statements include all of the accounts of the
Partnership's 79%-owned and controlled subsidiary Hibben Ferry Recreation
Center, a corporation which owns recreational property used jointly by Hibben
Ferry Apartments and a condominium complex owned and operated by an unaffiliated
party. All significant intercompany accounts have been eliminated in
consolidation. Minority interest represents the 21% non-affiliated ownership
interest in Hibben Ferry Recreation Center.
Investment Property
Investment property is stated at cost. Acquisition fees are capitalized as
a cost of real estate. The Partnership records impairment losses on long-lived
assets used in operations when events and circumstances indicated that the
assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets. No
adjustments for impairment of value were necessary for the year ended December
31, 1997.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Risks and Uncertainties
The real estate business is highly competitive. The Partnership's real
property investments are subject to competition from similar types of properties
in the vicinities in which they are located and the Partnership is not a
significant factor in its industry. In addition, various limited partnerships
have been formed by related parties to engage in business which may be
competitive with the Partnership.
Cash and Cash Equivalents
Cash on hand and in banks, and money market funds and certificates of
deposit with original maturities of three months or less are considered to be
unrestricted cash. At certain times, the amount of cash deposited at a bank may
exceed the limit on insured deposits.
Fair Value of Financial Instruments
The Partnership believes that the carrying amount of its financial
instruments (except for long term debt) approximates their fair value due to the
short term maturity of these instruments. The fair value of the Partnership's
long-term debt, after discounting the scheduled loan payments at an estimated
borrowing rate currently available to the Partnership, approximates its carrying
value.
F-10
<PAGE> 1361
COASTAL COMMONS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Loan Costs
Loan costs are being amortized on a straight-line basis over the life of
the loan.
Tenant Security Deposits
The Partnership requires security deposits from all lessees for the
duration of the lease and such deposits are included in "Receivables and
deposits." Deposits are refunded when the tenant vacates the apartment if there
has been no damage to the unit and the tenant is current on its rental payments.
Restricted Escrows
A Replacement Reserve was established at the time of the refinancing of the
mortgage note payable encumbering the apartment property to cover necessary
costs and expenses incurred for capital improvements. The Partnership is
required to make a monthly deposit of $4,000 to the reserve. At December 31,
1997, the account balance was approximately $125,000. There is also
approximately $35,000 in replacement reserves for the Hibben Ferry Recreation
Center.
Partnership Allocations
Net earnings or loss, distributions to partners, and taxable income or loss
are allocated to the partners in accordance with the partnership agreement.
Leases
The Partnership generally leases apartment units for twelve-month terms or
less. Rental revenue is recognized as earned.
Advertising Costs
The Partnership expenses the costs of advertising as incurred.
Depreciation
Building and improvements are depreciated using the straight-line method
over the estimated useful lives of the assets, ranging from 5 to 30 years.
NOTE B -- MORTGAGE NOTE PAYABLE
The mortgage note of approximately $6,240,000 bears interest at 8.08% and
is payable in monthly principal and interest installments of approximately
$47,000 with a balloon payment of approximately $5,909,000 at maturity on July
1, 2002.
The mortgage note payable is non-recourse and requires prepayment penalties
if repaid prior to maturity and prohibits resale of the property subject to the
existing indebtedness. The mortgage note payable is secured by pledge of the
apartment property and by pledge of revenues from the apartment property.
F-11
<PAGE> 1362
COASTAL COMMONS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Scheduled principal payments of the mortgage note payable subsequent to
December 31, are as follows (in thousands):
<TABLE>
<S> <C>
1998....................................................... $ 64
1999....................................................... 69
2000....................................................... 75
2001....................................................... 81
2002....................................................... 5,951
------
$6,240
======
</TABLE>
NOTE C -- TRANSACTIONS WITH AFFILIATED PARTIES
Affiliates of Insignia Financial Group, Inc. ("Insignia") own the
controlling ownership interest in the Partnership's Managing General Partner,
with certain affiliates of Insignia providing property management and asset
management services to the Partnership.
The following payments were made to Insignia and its affiliates in 1997 (in
thousands):
<TABLE>
<S> <C>
Property management fees.................................... $87
General partner expenses.................................... 12
Asset management fees....................................... 4
</TABLE>
For the period of January 1, 1997, to August 31, 1997, the Partnership
insured its property under a master policy through an agency and insurer
unaffiliated with the Managing General Partner. An affiliate of the Managing
General Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the master policy. The agent assumed the financial obligations to the
affiliate of the Managing General Partner who received payments on these
obligations from the agent. The amount of the Partnership's insurance premiums
that accrued to the benefit of the affiliate of the Managing General Partner by
virtue of the agent's obligations was not significant.
NOTE D -- INVESTMENT PROPERTY AND ACCUMULATED DEPRECIATION
INITIAL COST TO PARTNERSHIP
(IN THOUSANDS)
<TABLE>
<CAPTION>
BUILDINGS COST
AND RELATED CAPITALIZED
PERSONAL SUBSEQUENT TO
DESCRIPTION ENCUMBRANCES LAND PROPERTY ACQUISITION
----------- ------------ ---- ----------- -------------
<S> <C> <C> <C> <C>
Hibben Ferry Apartments
Mount Pleasant, South Carolina................. $6,240 $684 $8,027 $490
Hibben Ferry Recreation.......................... -- -- 121 10
------ ---- ------ ----
Totals........................................... $6,240 $684 $8,148 $500
====== ==== ====== ====
</TABLE>
F-12
<PAGE> 1363
COASTAL COMMONS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
GROSS AMOUNT AT WHICH CARRIED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BUILDINGS
AND
RELATED DEPRECIABLE
PERSONAL ACCUMULATED DATE LIFE --
DESCRIPTION LAND PROPERTY TOTAL DEPRECIATION ACQUIRED YEARS
----------- ---- ----------- ------ ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Hibben Ferry Apartments.................... $684 $8,517 $9,201 $4,277 1984 5-30
Hibben Ferry Recreation.................... -- 131 131 61 1984 5-30
---- ------ ------ ------
Totals..................................... $684 $8,648 $9,332 $4,338
==== ====== ====== ======
</TABLE>
The depreciable lives included above are for the buildings and components.
The depreciable live for related personal property are for 5 to 7 years.
Reconciliation of "Investment Property and Accumulated Depreciation" (in
thousands):
<TABLE>
<S> <C>
Investment Property
Balance at beginning of year.............................. $9,268
Property improvements..................................... 64
------
Balance at end of year.................................... $9,332
======
Accumulated Depreciation
Balance at beginning of year.............................. $4,042
Additions charged to expense.............................. 296
------
Balance at end of year.................................... $4,338
======
</TABLE>
The aggregate cost of the investment property for Federal income tax
purposes at December 31, 1997 is $9,241,000. The accumulated depreciation taken
for Federal income tax purposes at December 31, 1997 is $7,044,000.
NOTE E -- INCOME TAXES
Taxable income or loss of the Partnership is reported in the income tax
returns of its partners. Accordingly, no provision for income taxes is made in
the financial statements of the Partnership.
The following is a reconciliation of reported net income and Federal
taxable loss (in thousands, except per unit data):
<TABLE>
<S> <C>
Net income as reported...................................... $ 143
Add (deduct):
Depreciation differences.................................. (54)
Rental Income............................................. 21
Other..................................................... 3
-------
Net income -- Federal income tax basis...................... $ 113
-------
Federal taxable income per limited partnership unit......... $559.35
=======
</TABLE>
F-13
<PAGE> 1364
COASTAL COMMONS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a reconciliation between the Partnership's reported
amounts and Federal tax basis of net assets and liabilities (in thousands):
<TABLE>
<S> <C>
Net liabilities as reported................................. $ (628)
Investment property......................................... (2,713)
Syndication fees............................................ 1,605
Other....................................................... 47
-------
Net liabilities -- tax basis................................ $(1,689)
=======
</TABLE>
NOTE F -- YEAR 2000 (UNAUDITED)
The Partnership is dependent upon the General Partner and Insignia for
management and administrative services. Insignia has completed an assessment and
will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue"). The project is estimated to be completed not
later than December 31, 1998, which is prior to any anticipated impact on its
operating systems. The General partner believes that with modifications to
existing software and conversions to new software, the Year 2000 Issue will not
pose significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the
Partnership.
NOTE G -- EVENT (UNAUDITED) SUBSEQUENT TO DATE OF INDEPENDENT AUDITORS REPORT
On March 17, 1998, Insignia Financial Group, Inc., an affiliate of the
corporate general partner of the Partnership, entered into an agreement to merge
its national residential property management operations and its controlling
interest in Insignia Properties Trust, with Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust. The merger
was completed effective October 1, 1998, and accordingly, as of that date AIMCO
acquired the corporate general partner and the company that manages the
Partnership.
F-14
<PAGE> 1365
COASTAL COMMONS LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT UNIT DATA)
ASSETS
<TABLE>
<S> <C> <C>
Cash and cash equivalents................................... $ 319
Receivables and deposits.................................... 50
Restricted escrows.......................................... 100
Loan costs, net of $38 amortization......................... 154
Investment property, at cost (Notes B and D):
Land...................................................... $ 684
Buildings and related personal property................... 8,584
-------
9,268
Less accumulated depreciation............................. (4,042) 5,226
------- ------
$5,849
======
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 78
Security deposits and other tenant liabilities............ 36
Other liabilities......................................... 89
Mortgage note payable (Note B)............................ 6,299
------
6,502
Minority interest (Note A).................................. 18
Partners' deficit:
General partners.......................................... (7)
Limited partners (200 units issued and outstanding)....... (664) (671)
------- ------
$5,849
======
</TABLE>
See accompanying notes.
F-15
<PAGE> 1366
COASTAL COMMONS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT UNIT DATA)
<TABLE>
<S> <C> <C>
Revenues:
Rental income............................................. $ 1,539
Other income.............................................. 169
--------
1,708
Expenses:
Operating................................................. $859
General and administrative................................ 51
Depreciation.............................................. 288
Interest.................................................. 538
Property taxes............................................ 118 1,854
---- --------
Net loss.................................................... (146)
Net loss allocated to general partners (1%)................. (1)
Net loss allocated to limited partners(99%)................. (145)
--------
$ (146)
========
Net loss per limited partnership unit....................... $(725.00)
========
</TABLE>
See accompanying notes.
F-16
<PAGE> 1367
COASTAL COMMONS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF PARTNERS' DEFICIT (UNAUDITED)
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- -------- -----
<S> <C> <C> <C>
Deficit at December 31, 1995................................ $(6) $(519) $(525)
Net loss.................................................. (1) (145) (146)
--- ----- -----
Deficit at December 31, 1996................................ $(7) $(664) $(671)
=== ===== =====
</TABLE>
See accompanying notes
F-17
<PAGE> 1368
COASTAL COMMONS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................... $(146)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation.............................................. 288
Amortization of loan costs................................ 27
Change in accounts
Receivables and deposits and other assets.............. (7)
Accounts payable and other liabilities................. 19
-----
Net cash provided by operating activities................... 181
CASH FLOWS FROM INVESTING ACTIVITIES
Property improvements and replacements...................... (63)
Net withdrawals from restricted escrows..................... 55
-----
Net cash used in investing activities....................... (8)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage notes payable................ (55)
-----
Net cash used in financing activities....................... (55)
-----
Net increase in cash and cash equivalents................... 118
Cash and cash equivalents at December 31, 1995.............. 201
-----
Cash and cash equivalents at December 31, 1996.............. $ 319
=====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest...................................... $ 511
=====
</TABLE>
See accompanying notes.
F-18
<PAGE> 1369
COASTAL COMMONS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1996
NOTE A -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Coastal Commons Limited Partnership (the "Partnership") was organized as a
limited partnership under the laws of the State of South Carolina pursuant to a
Certificate and Agreement of Limited Partnership dated June 29, 1984 and
extending to December 31, 2014, unless terminated sooner. Two hundred units of
limited partnership interests, an individual general partner interest and two
corporate general partner interests were issued. The Partnership owns and
operates a 240-unit apartment complex, Hibben Ferry Apartments, in Mt. Pleasant,
South Carolina.
Principles of Consolidation
The consolidated financial statements include all of the accounts of the
Partnership's 79%-owned and controlled subsidiary Hibben Ferry Recreation
Center, a corporation which owns recreational property used jointly by Hibben
Ferry Apartments and a condominium complex owned and operated by an unaffiliated
party. All significant intercompany accounts have been eliminated in
consolidation. Minority interest represents the 21% non-affiliated ownership
interest in Hibben Ferry Recreation Center.
Investment Property
Investment property is stated at cost. Acquisition fees are capitalized as
a cost of real estate. The Partnership records impairment losses on long-lived
assets used in operations when events and circumstances indicated that the
assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets. No
adjustments for impairment of value were necessary for the year ended December
31, 1996.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Risks and Uncertainties
The real estate business is highly competitive. The Partnership's real
property investments are subject to competition from similar types of properties
in the vicinities, in which they are located and the Partnership is not a
significant factor in its industry. In addition, various limited partnerships
have been formed by related parties to engage in business which may be
competitive with the Partnership.
Cash and Cash Equivalents
Cash on hand and in banks, and money market funds and certificates of
deposit with original maturities of three months or less are considered to be
unrestricted cash. At certain times, the amount of cash deposited at a bank may
exceed the limit on insured deposits.
Fair Value of Financial Instruments
The Partnership believes that the carrying amount of its financial
instruments (except for long term debt) approximates their fair value due to the
short term maturity of these instruments. The fair value of the Partnership's
long-term debt, after discounting the scheduled loan payments at an estimated
borrowing rate currently available to the Partnership, approximates its carrying
value.
F-19
<PAGE> 1370
COASTAL COMMONS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Loan Costs
Loan costs are being amortized on a straight-line basis over the life of
the loan.
Tenant Security Deposits
The Partnership requires security deposits from all lessees for the
duration of the lease and such deposits are included in "Receivables and
deposits." Deposits are refunded when the tenant vacates the apartment if there
has been no damage to the unit and the tenant is current on its rental payments.
Restricted Escrows
A Replacement Reserve was established at the time of the refinancing of the
mortgage note payable in 1995 to cover necessary costs and expenses incurred for
capital improvements. The Partnership is required to make a monthly deposit of
$4,000 to the reserve. At December 31, 1996, the account balance was
approximately $71,000. There is also approximately $29,000 in replacement
reserves for the Hibben Ferry Recreation Center.
Partnership Allocations
Net earnings or loss, distributions to partners, and taxable income or loss
are allocated to the partners in accordance with the partnership agreement.
Leases
The Partnership generally leases apartment units for twelve-month terms or
less. Rental revenue is recognized as earned.
Advertising Costs
The Partnership expenses the costs of advertising as incurred.
Depreciation
Building and improvements are depreciated using the straight-line method
over the estimated useful lives of the assets, ranging from 5 to 30 years
NOTE B -- MORTGAGE NOTE PAYABLE
The mortgage note of approximately $6,299,000 bears interest at 8.08% and
is payable in monthly principal and interest installments of approximately
$47,000 with a balloon payment of approximately $5,909,000 at maturity on July
1, 2002.
The mortgage note payable is non-recourse and requires prepayment penalties
if repaid prior to maturity and prohibits resale of the property subject to the
existing indebtedness. The mortgage note payable is secured by pledge of the
apartment property and by pledge of revenues from the apartment property.
F-20
<PAGE> 1371
COASTAL COMMONS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Scheduled principal payments of the mortgage note payable subsequent to
December 31, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
1997........................................................ $ 59
1998........................................................ 64
1999........................................................ 69
2000........................................................ 75
2001........................................................ 81
Thereafter.................................................. 5,951
------
$6,299
======
</TABLE>
NOTE C -- TRANSACTIONS WITH AFFILIATED PARTIES
Affiliates of Insignia Financial Group, Inc. ("Insignia") own the
controlling ownership interest in the Partnership's Managing General Partner,
with certain affiliates of Insignia providing property management and asset
management services to the Partnership.
The following payments were made to Insignia and its affiliates in 1997 (in
thousands):
<TABLE>
<S> <C>
Property management fees.................................... $82
General partner expenses.................................... 16
</TABLE>
The Partnership insures its property under a master policy through an
agency and insurer unaffiliated with the Managing General Partner. An affiliate
of the Managing General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the master policy. The agent assumed the financial
obligations to the affiliate of the Managing General Partner who received
payments on these obligations from the agent. The amount of the Partnership's
insurance premiums that accrued to the benefit of the affiliate of the Managing
General Partner by virtue of the agent's obligations was not significant.
NOTE D -- INVESTMENT PROPERTY AND ACCUMULATED DEPRECIATION
INITIAL COST TO PARTNERSHIP
(IN THOUSANDS)
<TABLE>
<CAPTION>
BUILDINGS COST
AND RELATED CAPITALIZED
PERSONAL SUBSEQUENT TO
DESCRIPTION ENCUMBRANCES LAND PROPERTY ACQUISITION
- ----------- ------------ ---- ----------- -------------
<S> <C> <C> <C> <C>
Hibben Ferry Apartments.......................... $6,299 $684 $8,027 $426
Mount Pleasant, South Carolina
Hibben Ferry Recreation.......................... 0 0 121 10
------ ---- ------ ----
Totals................................. $6,299 $684 $8,148 $436
====== ==== ====== ====
</TABLE>
F-21
<PAGE> 1372
COASTAL COMMONS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
GROSS AMOUNT AT WHICH CARRIED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BUILDINGS
AND RELATED
PERSONAL ACCUMULATED DATE DEPRECIABLE
DESCRIPTION LAND PROPERTY TOTAL DEPRECIATION ACQUIRED LIFE-YEARS
- ----------- ---- ----------- ------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Hibben Ferry Apartments........... $684 $8,453 $9,137 $3,986 1984 5-30
Hibben Ferry Recreation........... 0 131 131 56 1984 5-30
---- ------ ------ ------
Totals.................. $684 $8,584 $9,268 $4,042
==== ====== ====== ======
</TABLE>
The depreciable lives included above are for the buildings and components.
The depreciable lives for related personal property are for 5 to 7 years.
Reconciliation of "Investment Property and Accumulated Depreciation" (in
thousands).
<TABLE>
<S> <C>
Investment Property
Balance at beginning of year.............................. $9,205
Property improvements..................................... 63
------
Balance at end of year.................................... $9,268
======
Accumulated Depreciation
Balance at beginning of year.............................. $3,754
Additions charged to expense.............................. 288
------
Balance at end of year.................................... $4,042
======
</TABLE>
The aggregate cost of the investment property for Federal income tax
purposes at December 31, 1996 is $9,178,000. The accumulated depreciation taken
for Federal income tax purposes at December 31, 1996 is $6,699,000.
NOTE E -- INCOME TAXES
Taxable income or loss of the Partnership is reported in the income tax
returns of its partners. Accordingly, no provision for income taxes is made in
the financial statements of the Partnership.
The following is a reconciliation of reported net loss and Federal taxable
loss (in thousands, except per unit data):
<TABLE>
<S> <C>
Net loss as reported........................................ $ (146)
Add (deduct)
Depreciation differences.................................. (64)
Other..................................................... (9)
----------
Net loss -- Federal income tax basis........................ (219)
----------
Federal taxable loss per limited partnership unit........... $(1,084.05)
==========
</TABLE>
F-22
<PAGE> 1373
COASTAL COMMONS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
The following is a reconciliation between the Partnership's reported
amounts and Federal tax basis of net assets and liabilities (in thousands):
<TABLE>
<S> <C>
Net liabilities as reported................................. $ (671)
Accumulated depreciation.................................... (2,657)
Syndication fees............................................ 1,605
Other....................................................... 21
-------
Net liabilities -- tax basis................................ $(1,702)
=======
</TABLE>
NOTE F -- SUBSEQUENT EVENT
On March 17, 1998, Insignia Financial Group, Inc., an affiliate of the
Managing General Partner of the Partnership, entered into an agreement to merge
its national residential property management operations and its controlling
interest in Insignia Properties Trust, with Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust. The merger
was completed effective October 1, 1998, and accordingly, as of that date AIMCO
acquired the Managing General Partner and the company that manages the
Partnership.
F-23
<PAGE> 1374
PRO FORMA FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
AS OF SEPTEMBER 30, 1998 AND FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1998
INTRODUCTION
On October 1, 1998, Apartment Investment and Management Company ("AIMCO")
completed its merger with Insignia Financial Group ("IFG") ("the IFG Merger").
In the IFG Merger, IFG's common stock was converted into 8,423,751 shares of
Class E Cumulative Convertible Preferred Stock of AIMCO ("Class E Preferred
Stock") whose issue date market value approximately equaled $292 million. In
addition to receiving the same dividends as holders of AIMCO Common Stock,
holders of Class E Preferred Stock will be entitled to a special dividend of
approximately $50 million in the aggregate. When that special dividend is paid
in full, the Class E Preferred Stock will automatically convert into AIMCO
Common Stock on a one-for-one basis, subject to antidilution adjustments, if
any. In addition, AIMCO assumed approximately $411 million in indebtedness and
other liabilities of IFG and its subsidiaries and subsidiaries of AIMCO, assumed
approximately $149.5 million of convertible securities and purchased
approximately $5 million of IFG stock prior to the Merger. AIMCO and Insignia
Properties Trust ("IPT") have completed a merger in which IPT has merged into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). In the IPT Merger, shares of
IPT common stock not held by AIMCO were converted into 4,826,745 shares of AIMCO
Class A Common Stock whose market value approximately equaled $152 million.
AIMCO assumed approximately $68 million in indebtedness. In connection with the
IFG Merger and the IPT Merger, AIMCO incurred approximately $55 million in
transaction costs for a combined transactional value of approximately $1,183
million. AIMCO contributed substantially all the assets and liabilities of
Insignia acquired in the Insignia Merger to AIMCO Properties, L.P. (together
with its subsidiaries and other controlled entities, the "Partnership") (and
together with entities in which that Partnership has a controlling financial
interest, the "Company") in exchange for 8,423,751 Class E Preferred Units. The
Class E Preferred Units have terms substantially the same as the Class E
Preferred Stock. In addition, AIMCO contributed substantially all the assets and
liabilities of IPT acquired in the IPT Merger to the Partnership in exchange for
4,826,745 limited partnership units in the Partnership ("OP Units"). In
connection with the IFG Merger, the Partnership assumed property management of
approximately 192,000 multifamily units which consist of general and limited
partnership investments in 115,000 units and third party management of 77,000
units. Insignia Properties Trust ("IPT"), which prior to the IFG Merger was a
subsidiary of IFG, owns a 32% weighted average general and limited partnership
interest in approximately 51,000 units.
Immediately following the IFG Merger, in order to satisfy certain
requirements of the Internal Revenue Code of 1986 (the "Code") applicable to
AIMCO's status as a REIT, AIMCO engaged in a reorganization (the "IFG
Reorganization") of the assets and operations of IFG whereby IFG's operations
are being conducted through corporations (the "Unconsolidated Subsidiaries") in
which the Partnership holds non-voting preferred stock that represents a 95%
economic interest, and certain officers and/or directors of AIMCO hold, directly
or indirectly, all of the voting common stock, representing a 5% economic
interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
In May and September of 1997, AIMCO directly or indirectly through a
subsidiary, acquired (the "NHP Stock Purchase") an aggregate of 6,930,122 shares
of common stock ("NHP Common Stock") of NHP. On December 8, 1997, AIMCO acquired
the remaining shares of NHP Common Stock in a merger transaction accounted for
as a purchase (the "NHP Merger"). As a result of the NHP Merger, AIMCO issued
6,759,148 shares of AIMCO Common Stock, valued at $180.8 million, and paid $86.5
million in cash. The total cost of the purchase of NHP was $349.5 million.
Substantially all assets and liabilities of NHP were contributed by AIMCO to the
Partnership.
In June 1997, the Company purchased a group of companies (the "NHP Real
Estate Companies") affiliated with NHP that hold general and limited partnership
interests in partnerships (the "NHP
P-1
<PAGE> 1375
Partnerships") that own 534 conventional and affordable multifamily apartment
properties (the "NHP Properties") containing 87,659 units, a captive insurance
subsidiary and certain related assets (the "NHP Real Estate Acquisition"). The
Company paid aggregate consideration of $54.8 million in cash and warrants that
entitle the holders to purchase 399,999 shares of AIMCO Common Stock at an
exercise price of $36.00 per share. The Company engaged in a reorganization (the
"NHP Real Estate Reorganization") of its interests in the NHP Real Estate
Companies, which resulted in certain of the assets of the NHP Real Estate
Companies being owned by a limited partnership (the "Unconsolidated
Partnership") in which the Partnership holds 99% limited partner interest and
certain directors and officers of AIMCO directly or indirectly, hold a 1%
general partner interest.
Immediately following the NHP Merger, in order to satisfy certain
requirements of the Code applicable to AIMCO's status as a REIT, AIMCO engaged
in a reorganization (the "NHP Reorganization") of the assets and operations of
NHP that resulted in the Master Property Management Agreement being terminated
and NHP's operations being conducted through Unconsolidated Subsidiaries in
which the AIMCO Operating Partnership holds non-voting preferred stock that
represents a 95% economic interest, and certain officers and/or directors of
AIMCO hold, directly or indirectly, all of the voting common stock, representing
a 5% economic interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
On May 8, 1998, AIMCO completed a merger with Ambassador Apartments, Inc.
("Ambassador"), pursuant to which Ambassador was merged into AIMCO (the
"Ambassador Merger"). Each outstanding share of stock ("Ambassador Common
Stock") of Ambassador, other than those shares held by AIMCO or Ambassador, were
converted into 0.553 (the "Conversion Ratio") shares of AIMCO Common Stock. Any
outstanding options to purchase Ambassador Common Stock were converted, at the
election of the option holder, into cash or options to purchase AIMCO Common
Stock at such options' then current exercise price divided by the Conversion
Ratio. In accordance with the Agreement and Plan of Merger, dated December 23,
1997 and supplemented by letter dated as of March 11, 1998 (the "Ambassador
Merger Agreement"), the outstanding shares of Class A Senior Cumulative
Convertible Preferred Stock of Ambassador, (the "Ambassador Preferred Stock")
were redeemed and converted into Ambassador Common Stock prior to the Ambassador
Merger. Following the consummation of the Ambassador Merger, a subsidiary of the
Partnership was merged with and into the Ambassador Operating Partnership (the
"Ambassador OP Merger"). Each outstanding unit of limited partnership interest
in the Ambassador Operating Partnership was converted into the right to receive
0.553 OP Units, and as a result, the Ambassador Operating Partnership became a
99.9% owned subsidiary partnership of the Partnership.
Also during 1997, the Partnership (i) (a) acquired 44 properties for
aggregate purchase consideration of $467.4 million, of which $56 million was
paid in the form of 1.9 million OP Units (b) paid $34.2 million in cash and
issued OP Units valued at $7.3 million in connection with the acquisition of
partnership interests through tender offers in certain partnerships ((a) and (b)
together are the "1997 Property Acquisitions") and (c) paid $19.9 million to
acquire 886,600 shares of Ambassador Common Stock (together with the 1997
Property Acquisitions, the "1997 Acquisitions"); (ii) sold (a) approximately
16,367,000 shares of AIMCO Common Stock for aggregate net proceeds of $513.4
million; (b) 750,000 shares of AIMCO Class B Cumulative Convertible Preferred
Stock for net proceeds of $75 million; and (c) 2,400,000 shares of AIMCO Class C
9% Cumulative Preferred Stock for net proceeds of $58.1 million; of which all
proceeds were contributed by AIMCO to the Partnership in exchange for 16,367,000
OP Units, 750,000 Class B Preferred Units, and 2,400,000 Class C Preferred Units
(collectively, the "1997 Stock Offerings"); and (iii) sold five real estate
properties (the "1997 Dispositions").
Also during 1998, AIMCO (i) (a) sold 4,200,000 shares of its Class D
Cumulative Preferred Stock for net proceeds of $101.5 million (the "Class D
Preferred Stock Offering"); (b) sold 4,050,000 shares of its Class G Cumulative
Preferred Stock for net proceeds of $98.0 million (the "Class G Preferred Stock
Offering"); (c) sold 2,000,000 shares of its Class H Cumulative Preferred Stock
for net proceeds of $48.1 million (the "Class H Preferred Stock Offering"); and
(d) sold 1,000,000 shares of its Class J Cumulative Convertible Preferred Stock
in a private placement for $100.0 million (the "Class J Preferred
P-2
<PAGE> 1376
Stock Offering"); of which all proceeds were contributed by AIMCO to the
Partnership in exchange for 4,050,000 Class G Preferred Units, 2,000,000 Class H
Preferred Units and 1,000,000 shares of Class J Preferred Units (collectively,
the "1998 Stock Offerings"); (ii) purchased 29 properties for aggregate purchase
consideration of $312.7 million, of which $52.2 million was paid in the form of
OP Units (the "1998 Acquisitions"); (iii) sold two real estate properties (the
"1998 Dispositions"); (iv) contracted to purchase two properties for aggregate
purchase consideration of $62.1 million, of which $26.4 million will be paid in
the form of OP units (the "Probable Purchases") and (v) sold 1,400,000 Class B
Preferred Partnership Units of a subsidiary and warrants to purchase 875,000
shares of AIMCO Class A Common Stock for $35.0 million (the "Preferred
Partnership Unit Offering").
PRO FORMA FINANCIAL INFORMATION OF THE PARTNERSHIP (INSIGNIA MERGER)
The following Pro Forma Consolidated Balance Sheet (Insignia Merger) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) the purchase
of nine properties for an aggregate purchase price of $62.5 million; (ii) the
Class J Preferred Stock Offering; (iii) the Probable Purchases; (iv) the IFG
Merger; (v) the IPT Merger; (vi) the IFG Reorganization; and (vii) the Preferred
Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) the
1997 Acquisitions; (ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions;
(iv) the NHP Real Estate Acquisition; (v) the NHP Real Estate Reorganization;
(vi) the NHP Stock Purchase; (vii) the NHP Merger; (viii) the NHP
Reorganization; (ix) the 1998 Stock Offerings; (x) the 1998 Acquisitions; (xi)
the Probable Purchases; (xii) the 1998 Dispositions; (xiii) the Ambassador
Merger; (xiv) the IFG Merger; (xv) the merger between IPT and Angeles Mortgage
Investment Trust ("AMIT") ("the AMIT Merger"); (xvi) the IPT Merger; (xvii) the
IFG Reorganization; and (xviii) the Preferred Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1997: (i)
the 1998 Stock Offerings; (ii) the 1998 Acquisitions; (iii) the Probable
Purchases; (iv) the 1998 Dispositions; (v) the Ambassador Merger; (vi) the IFG
Merger; (vii) the AMIT Merger; (viii) the IPT Merger; (ix) the IFG
Reorganization; and (x) the Preferred Partnership Unit offering.
The following Pro Forma Financial Information (Insignia Merger) is based,
in part, on the following historical financial statements: (i) the audited
Consolidated Financial Statements of the Partnership for the year ended December
31, 1997; (ii) the unaudited Consolidated Financial Statements of the
Partnership for the nine months ended September 30, 1998; (iii) the audited
Consolidated Financial Statements of Ambassador for the year ended December 31,
1997; (iv) the unaudited Consolidated Financial Statements of Ambassador for the
four months ended April 30, 1998; (v) the audited Consolidated Financial
Statements of IFG for the year ended December 31, 1997; (vi) the audited
Consolidated Financial Statements of AMIT for the year ended December 31, 1997;
(vii) the unaudited Consolidated Financial Statements of IFG for the nine months
ended September 30, 1998; (viii) the unaudited Financial Statements of AMIT for
the period from January 1, 1998 to September 17, 1998; (ix) the unaudited
Consolidated Financial Statements of NHP for the nine months ended September 30,
1997; (x) the unaudited Combined Financial Statements of the NHP Real Estate
Companies for the three months ended March 31, 1997; (xi) the unaudited
Financial Statements of NHP Southwest Partners, L.P. for the three months ended
March 31, 1997; (xii) the unaudited Combined Financial Statements of the NHP New
LP Entities for the three months ended March 31, 1997; (xiii) the unaudited
Combined Financial Statements of the NHP Borrower Entities for the three months
ended March 31, 1997; (xiv) the unaudited Historical Summaries of Gross Income
and Certain Expenses of The Bay Club at Aventura for the three months ended
March 31, 1997; (xv) the unaudited Historical Summary of Gross Income and Direct
Operating Expenses of Morton Towers for the six months ended June 30, 1997;
(xvi) the unaudited Combined Statement of Revenues and Certain Expenses of the
Thirty-Five Acquisition Properties for the six months ended June 30, 1997;
(xvii) the unaudited Statement of
P-3
<PAGE> 1377
Revenues and Certain Expenses of First Alexandria Associates, a Limited
Partnership for the nine months ended September 30, 1997; (xviii) the unaudited
Statement of Revenues and Certain Expenses of Country Lakes Associates Two, a
Limited Partnership for the nine months ended September 30, 1997; (xix) the
unaudited Statement of Revenues and Certain Expenses of Point West Limited
Partnership, A Limited Partnership for the nine months ended September 30, 1997;
(xx) the unaudited Statement of Revenues and Certain Expenses for The Oak Park
Partnership for the nine months ended September 30, 1997; (xxi) the audited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the year ended December 31, 1997,
(xxii) the audited Combined Historical Summary or Gross Income and Direct
Operating Expenses of the Cirque Apartment Communities for the year ended
December 31, 1997; (xxiii) the audited Combined Historical Summary of Gross
Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the year ended December 31, 1997; (xxiv) the audited
Historical Summary of Gross Income and Direct Operating Expenses of the Calhoun
Beach Club Apartments for the year ended December 31, 1997; (xxv) the unaudited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the nine months ended September
30, 1998; (xxvi) the unaudited Combined Historical Summary of Gross Income and
Direct Operating Expenses of the Cirque Apartment Communities for the three
months ended March 31, 1998; (xxvii) the unaudited Combined Historical Summary
of Gross Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the nine months ended September 30, 1998; and (xxviii) the
unaudited Historical Summary of Gross Income and Direct Operating Expenses of
Calhoun Beach Club Apartments for the nine months ended September 30, 1998. The
following Pro Forma Financial Information should be read in conjunction with
such financial statements and the notes thereto incorporated by reference
herein.
The unaudited Pro Forma Financial Information (Insignia Merger) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
1997 Acquisitions, the 1998 Acquisitions, and the Probable Purchases are
adjusted to estimated fair market value, based upon preliminary estimates, which
are subject to change as additional information is obtained. The allocations of
purchase costs are subject to final determination based upon estimates and other
evaluations of fair market value. Therefore, the allocations reflected in the
following unaudited Pro Forma Financial Information may differ from the amounts
ultimately determined.
The following unaudited Pro Forma Financial Information (Insignia Merger)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions or results of
operations. In the opinion of the Partnership's management, all material
adjustments necessary to reflect the effects of these transactions have been
made.
P-4
<PAGE> 1378
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS IFG AIMCO BEFORE IFG
AND PROBABLE IFG MERGER IFG REORGANIZATION
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) REORGANIZATION(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Real estate.............. $2,355,122 $202,332 $ 44,488 $ 23,880(G) $2,625,822 $ --
Property held for sale... 42,212 -- -- -- 42,212 --
Investments in
securities............. -- -- -- 443,513(G)
(443,513)(H) -- --
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 127,082 -- -- -- 127,082 59,195(I)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 246,847 -- 232,892 444,570(G) 924,309 --
Mortgage notes
receivable............. -- -- 20,916 -- 20,916
Cash and cash
equivalents............ 43,681 6,107 73,064 -- 122,852 (17,897)(J)
Restricted cash.......... 83,187 -- 2,691 -- 85,878 (1,352)(J)
Accounts receivable...... 11,545 -- 54,060 (32,234)(G) 33,371 (5,471)(J)
Deferred financing
costs.................. 21,835 -- 7,020 (7,020)(G) 21,835 --
Goodwill................. 120,503 -- 19,503 111,018(G) 251,024 --
Property management
contracts.............. -- -- 86,419 31,147(G) 117,566 (79,195)(I)
Other assets............. 69,935 -- 20,128 (4,533)(G) 85,530 (2,860)(J)
---------- -------- -------- --------- ---------- --------
Total Assets..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
Secured notes payable.... $ 774,676 $122,568 $ 29,002 $ -- $ 926,246 $ --
Secured tax-exempt bond
financing.............. 399,925 -- -- -- 399,925 --
Secured short-term
financing.............. 50,000 (50,000) 332,691 (300,000)(G) 32,691 --
Unsecured short-term
financing.............. 50,800 (50,800) -- 300,000(G) 300,000 --
Accounts payable, accrued
and other
liabilities............ 131,799 -- 33,241 50,000(G)
53,333(G)
4,935(G)
2,525(G) 275,833 (27,580)(J)
Deferred tax liability... -- -- 18,802 1,198(G) 20,000 (20,000)(I)
Security deposits and
prepaid rents.......... 13,171 -- 3,533 (3,533) 13,171 --
---------- -------- -------- --------- ---------- --------
1,420,371 21,768 417,269 108,458 1,967,866 (47,580)
Minority interest........ 42,086 37,345 108,485 (108,485)(G) 79,431 --
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. -- -- 144,282 5,218 149,500 --
Redeemable Partnership
Units.................. 232,405 45,176 -- -- 277,581 --
Partners' capital and
shareholders' equity
Common stock........... -- -- 320 (320)(G) -- --
Additional paid-in
capital.............. -- -- (86,959) 86,959(G) -- --
Distributions in excess
of earnings.......... -- -- (22,216) 22,216(G) -- --
General and Special
Limited Partner...... 1,039,525 4,150 -- 443,513(H)
9,269(G) 1,496,457 --
Preferred Units........ 387,562 100,000 -- -- 487,562 --
---------- -------- -------- --------- ---------- --------
1,427,087 104,150 (108,855) 561,637 1,984,019 --
---------- -------- -------- --------- ---------- --------
Total Liabilities
and Equity..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
<CAPTION>
PRO FORMA
----------
<S> <C>
Real estate.............. $2,625,822
Property held for sale... 42,212
Investments in
securities.............
--
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 186,277(K)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 924,309
Mortgage notes
receivable............. 20,916
Cash and cash
equivalents............ 104,955
Restricted cash.......... 84,526
Accounts receivable...... 27,900
Deferred financing
costs.................. 21,835
Goodwill................. 251,024
Property management
contracts.............. 38,371
Other assets............. 82,670
----------
Total Assets..... $4,410,817
==========
Secured notes payable.... $ 926,246
Secured tax-exempt bond
financing.............. 399,925
Secured short-term
financing.............. 32,691
Unsecured short-term
financing.............. 300,000
Accounts payable, accrued
and other
liabilities............
248,253
Deferred tax liability... --
Security deposits and
prepaid rents.......... 13,171
----------
1,920,286
Minority interest........ 79,431
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. 149,500
Redeemable Partnership
Units.................. 277,581
Partners' capital and
shareholders' equity
Common stock........... --
Additional paid-in
capital.............. --
Distributions in excess
of earnings.......... --
General and Special
Limited Partner......
1,496,457
Preferred Units........ 487,562
----------
1,984,019
----------
Total Liabilities
and Equity..... $4,410,817
==========
</TABLE>
P-5
<PAGE> 1379
- ---------------
(A) Represents the unaudited historical consolidated financial position of the
Partnership as of September 30, 1998.
(B) Represents adjustments to reflect the purchase of ten properties for an
aggregate purchase price of $140.2 million; the Class J Preferred Stock
Offering; the Probable Purchases; and the Preferred Partnership Unit
Offering.
(C) Represents the unaudited historical consolidated financial position of IFG
as of September 30, 1998.
(D) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the issuance of 8,423,751 shares of AIMCO Common Stock, based
on consideration to holders of IFG common stock outstanding as of the date
of the IFG Merger; (ii) the issuance of 4,826,745 shares of AIMCO Class A
Common Stock to holders of IPT common stock (other than AIMCO); (iii) the
payment of a special dividend of $50,000; (iv) the assumption of $149,500
of the convertible debentures of IFG; (v) the allocation of the combined
purchase price of IFG and IPT based on the preliminary estimates of
relative fair market value of the assets and liabilities of IFG and IPT;
and (vi) the contribution by AIMCO of substantially all the assets and
liabilities of Insignia and IPT to the Partnership in exchange for OP
Units.
(E) Represents the effects of AIMCO's acquisition of IFG immediately after the
IFG Merger. These amounts do not give effect to the IFG Reorganization,
which includes the transfers of certain assets and liabilities of IFG to
the combined Unconsolidated Subsidiaries. The IFG Reorganization occurred
immediately after the IFG Merger so that AIMCO could maintain its
qualification as a REIT. This column is included as an intermediate step to
assist the reader in understanding the entire nature of the IFG Merger and
related transactions.
(F) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party property management operations.
The adjustments reflect the transfer of assets valued at the Partnership's
new basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(G) In connection with the IFG Merger and the IPT Merger, AIMCO became
obligated to issue a total of 13,250,496 shares of AIMCO Common Stock
The total purchase price of IFG and IPT is $1,128,009, as follows:
<TABLE>
<S> <C>
Issuance of 8,423,751 shares of AIMCO Common Stock in the
IFG Merger, at $34.658 per share.......................... $ 291,949
Issuance of 4,826,745 shares of AIMCO Common Stock in the
IPT Merger, at $31.50 per share........................... 151,564
Assumption of Convertible Debentures........................ 149,500
Assumption of liabilities as indicated in the Merger
Agreement................................................. 397,459
Transaction costs........................................... 53,333
Generation of deferred tax liability........................ 20,000
Special dividend............................................ 50,000
Purchase of IFG Common Stock prior to merger................ 4,935
Consideration for options................................... 9,269
----------
Total............................................. $1,128,009
==========
</TABLE>
P-6
<PAGE> 1380
The purchase price was allocated to the various assets of IFG acquired in
the IFG Merger, as follows:
<TABLE>
<S> <C>
Purchase price.............................................. $1,128,009
Historical basis of IFG's assets acquired................... (561,181)
----------
Step-up to record the fair value of IFG's assets
acquired............................................... $ 566,828
==========
</TABLE>
This step-up was applied to IFG's assets as follows:
<TABLE>
<S> <C>
Real estate................................................. $ 23,880
Investment in real estate partnerships...................... 444,570
Decrease in accounts receivable............................. (32,234)
Decrease in deferred loan costs............................. (7,020)
Management contracts........................................ 31,147
Increase in goodwill........................................ 111,018
Reduction in value of other assets.......................... (4,533)
--------
Total............................................. $566,828
========
</TABLE>
The fair value of IFG's assets, primarily the real estate and management
contracts, was calculated based on estimated future cash flows of the
underlying assets.
As of September 30, 1998, IFG's stockholder's equity was $(108,855), which
is detailed as follows:
<TABLE>
<S> <C>
Common stock................................................ $ 320
Additional paid-in capital.................................. (86,959)
Distributions in excess of earnings......................... (22,216)
---------
Total............................................. $(108,855)
=========
</TABLE>
Upon completion of the IFG Merger, the entire amount of the stockholder's
equity was eliminated.
In addition, the minority interest in other partnerships of IFG of $108,485
will be eliminated upon the IPT Merger.
At the time of the IFG Merger, AIMCO obtained unsecured short-term
financing of $300 million. The proceeds were used to repay secured
short-term financing of IFG that AIMCO assumed.
(H) Represents the issuance of a total of 13,250,496 OP Units to AIMCO and the
concurrent issuance of 13,250,496 shares of AIMCO Common Stock to IFG and
IPT stockholders, in exchange for all the shares of IFG and IPT common
stock.
In accordance with the IFG Merger Agreement, AIMCO became obligated to
issue 8,423,751 shares of Class E Preferred Stock, approximately equal to
$292 million. Each share of Class E Preferred Stock will automatically
convert to one share of AIMCO Common Stock upon the payment of the special
dividend thereon. As such, for the purpose of preparing the pro forma
financial statements, AIMCO's management believes that the Class E
Preferred Stock is substantially the same as AIMCO Common Stock, and that
the fair value of the Class E Preferred Stock approximates the fair value
of the AIMCO Common Stock. Upon the payment of the special dividend on the
Class E Preferred Stock and the conversion of the Class E Preferred Stock
to AIMCO Common Stock, the former IFG stockholders will own approximately
15.0% of the AIMCO Common Stock and the IPT stockholders will own
approximately 7.3% of AIMCO Common Stock. The special dividend on the Class
E Preferred Stock is intended to represent a distribution in an amount at
least equal to the earnings and profits of IFG at the time of the IFG
Merger, to which AIMCO succeeds.
Concurrent with the issuance of Class E Preferred Stock, the Partnership
will issue comparable Class E Preferred Units to AIMCO. The Class E
Preferred Units will have terms substantially the same as the Class E
Preferred Stock.
(I) Represents the increase in the Partnership's investment in Unconsolidated
Subsidiaries to reflect the contribution or sale of property management
contracts, including the related deferred tax liability, in exchange for
preferred stock and a note payable from the Unconsolidated Subsidiaries.
These assets and
P-7
<PAGE> 1381
liabilities are valued at the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(J) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries,
(K) Represents notes receivable from the Unconsolidated Subsidiaries of
$95,000, advances to the Unconsolidated Subsidiaries of $42,792, and equity
in the Unconsolidated Subsidiaries of $48,485. The combined pro forma
balance sheet of the Unconsolidated Subsidiaries as of September 30, 1998
is presented below, which reflects the effects of the IFG Merger, the IPT
Merger, and the IFG Reorganization as if such transactions had occurred as
of September 30, 1998.
P-8
<PAGE> 1382
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
IFG
HISTORICAL REORGANIZATION(I) PRO FORMA
---------- ----------------- ---------
<S> <C> <C> <C>
ASSETS
Real estate............................................ $ 22,376 $ -- $ 22,376
Cash and cash equivalents.............................. 16,919 17,897(ii) 34,816
Restricted cash........................................ 5,507 1,352(ii) 6,859
Management contracts................................... 47,846 79,195(iii) 127,041
Accounts receivable.................................... 13,109 5,471(ii) 18,580
Deferred financing costs............................... 3,117 -- 3,117
Goodwill............................................... 43,544 -- 43,544
Other assets........................................... 51,498 2,860(ii) 54,358
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable.................................. $114,302 $ 45,000(iii) $159,302
Accounts payable, accrued and other liabilities........ 56,773 27,580(ii) 84,353
Security deposits and deferred income.................. 334 --(ii) 334
Deferred tax liability................................. -- 20,000(iii) 20,000
-------- -------- --------
171,409 92,580 263,989
Common stock........................................... 2,061 747(iv) 2,808
Preferred stock........................................ 34,290 14,195(iii) 48,485
Retained earnings...................................... (3,844) -- (3,844)
Notes receivable on common stock purchases............. -- (747)(iv) (747)
-------- -------- --------
32,507 14,195 46,702
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
</TABLE>
- ---------------
(i) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the transfer of assets valued at the Partnership's new
basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(ii) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries, valued at the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(iii)Represents the transfer or sale of management contracts, the establishment
of an intercompany note, and the establishment of the related estimated net
deferred Federal and state tax liabilities at a combined rate of 40% for
the estimated difference between the book and tax basis of the net assets
of the Unconsolidated Subsidiaries. The primary component of the deferred
tax liability is the difference between the new basis of the property
management contracts, as a result of the allocation of the purchase price
of IFG, and the historical tax basis.
(iv) Represents the issuance of common stock to the common stockholders of the
Unconsolidated Subsidiaries in exchange for notes receivable, in order for
the common stockholders to maintain their respective ownership interest in
the Unconsolidated Subsidiaries.
P-9
<PAGE> 1383
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE NHP AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rental and other property
revenues........................ $193,006 $120,337(I)
11,012(J) $ 6,660 $ 93,329 $ -- $ 6,912
Property operating expenses....... (76,168) (59,466)(I)
(4,860)(J) (2,941) (36,088) -- (3,307)
Owned property management
expense......................... (6,620) (4,327)(I)
(602)(J) (282) -- -- --
Depreciation...................... (37,741) (26,645)(I)
(2,172)(J) (1,414) (18,979) (5,997)(O) (966)
-------- -------- ------- -------- ------- --------
Income from property operations... 72,477 33,277 2,023 38,262 (5,997) 2,639
-------- -------- ------- -------- ------- --------
Management fees and other
income.......................... 13,937 -- 7,813 -- -- 94,330
Management and other expenses..... (9,910) -- (5,394) -- -- (57,615)
Corporate overhead allocation..... (588) -- -- -- -- --
Amortization...................... (1,401) -- (5,800) -- -- (16,768)
-------- -------- ------- -------- ------- --------
Income from service company
business........................ 2,038 -- (3,381) -- -- 19,947
Minority interest in service
company business................ (10) -- -- -- -- --
-------- -------- ------- -------- ------- --------
AIMCO's share of income from
service company business........ 2,028 -- (3,381) -- -- 19,947
-------- -------- ------- -------- ------- --------
General and administrative
expenses........................ (5,396) -- (1,025) (7,392) 7,392(P) (21,199)
Interest expense.................. (51,385) (3,451)(K)
(2,497)(L) (5,462) (26,987) (221)(Q) (9,035)
Interest income................... 8,676 -- 1,900 -- -- 10,967
Minority interest................. 1,008 458(M) 16 (851) 705(R) (12,871)
Equity in losses of unconsolidated
partnerships.................... (1,798) (122)(N) (8,542) 405 -- 12,515
Equity in earnings of
unconsolidated subsidiaries..... 4,636 -- 5,790 -- -- --
-------- -------- ------- -------- ------- --------
Income (loss) from operations..... 30,246 27,665 (8,681) 3,437 1,879 2,963
Income tax provision.............. -- -- -- -- -- 1,701
Gain on dispositions of
property........................ 2,720 (2,720) -- -- -- 80
-------- -------- ------- -------- ------- --------
Income (loss) before extraordinary
item............................ 32,966 24,945 (8,681) 3,437 1,879 4,744
Extraordinary item -- early
extinguishment of debt.......... (269) 269 -- -- -- --
-------- -------- ------- -------- ------- --------
Net income........................ 32,697 25,214 (8,681) 3,437 1,879 4,744
Income attributable to preferred
unitholders..................... 2,315 39,859 -- -- -- --
-------- -------- ------- -------- ------- --------
Income attributable to common
unitholders..................... $ 30,382 $(14,645) $(8,681) $ 3,437 $ 1,879 $ 4,744
======== ======== ======= ======== ======= ========
Basic earnings per OP unit........ $ 1.09
========
Diluted earnings per OP unit...... $ 1.08
========
Weighted average OP units
outstanding..................... 27,732
========
Weighted average OP units and
equivalents outstanding......... 28,113
========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(G) ADJUSTMENTS(H) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property
revenues........................
$ -- $ -- $ 431,256
Property operating expenses.......
-- -- (182,830)
Owned property management
expense.........................
-- -- (11,831)
Depreciation......................
(2,350)(S) -- (96,264)
-------- -------- ---------
Income from property operations... (2,350) -- 140,331
-------- -------- ---------
Management fees and other
income.......................... -- (74,404)(X) 41,676
Management and other expenses..... -- 49,236(X) (23,683)
Corporate overhead allocation..... -- -- (588)
Amortization...................... (32,699)(T) 30,188(Y) (26,480)
-------- -------- ---------
Income from service company
business........................ (32,699) 5,020 (9,075)
Minority interest in service
company business................ -- -- (10)
-------- -------- ---------
AIMCO's share of income from
service company business........ (32,699) 5,020 (9,085)
-------- -------- ---------
General and administrative
expenses........................ -- 6,249(X) (21,371)
Interest expense..................
(14,750) -- (113,788)
Interest income................... -- 191(Z) 21,734(BB)
Minority interest................. 1,552(U) -- (9,983)
Equity in losses of unconsolidated
partnerships.................... (29,995)(V) -- (27,537)
Equity in earnings of
unconsolidated subsidiaries..... -- (4,578)(AA) 5,848(DD)
-------- -------- ---------
Income (loss) from operations..... (78,242) 6,882 (13,851)
Income tax provision.............. (1,701)(W) -- --
Gain on dispositions of
property........................ (80) -- --
-------- -------- ---------
Income (loss) before extraordinary
item............................ (80,023) 6,882 (13,851)
Extraordinary item -- early
extinguishment of debt.......... -- -- --
-------- -------- ---------
Net income........................ (80,023) 6,882 (13,851)
Income attributable to preferred
unitholders..................... -- -- 42,174(CC)
-------- -------- ---------
Income attributable to common
unitholders..................... $(80,023) $ 6,882 $ (56,025)(BB)
======== ======== =========
Basic earnings per OP unit........ $ (0.83)(BB)
=========
Diluted earnings per OP unit...... $ (0.83)(BB)
=========
Weighted average OP units
outstanding..................... 67,522
=========
Weighted average OP units and
equivalents outstanding......... 68,366
=========
</TABLE>
P-10
<PAGE> 1384
- ---------------
(A) Represents the Partnership's audited consolidated results of operations
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1997: (i) the 1997 Acquisitions; (ii) the 1997 Stock
Offerings; (iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings;
(v) the 1998 Acquisitions; (vi) the Probable Purchases; (vii) the 1998
Dispositions; and (v) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(I) HISTORICAL(II) ADJUSTMENTS(III) REORGANIZATION(IV) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues................. $ 6,660(v) $ 16,842 $ -- $(16,842)(xvii) $ 6,660
Property operating
expenses................. (2,941)(v) (8,411) -- 8,411 (xvii (2,941)
Owned property management
expense.................. (282)(v) (862) -- 862 (xvii (282)
Depreciation............... (1,414)(vi) (2,527) (693)(xi) 3,220 (xvii (1,414)
------- -------- ------- -------- -------
Income from property
operations............... 2,023 5,042 (693) (4,349) 2,023
------- -------- ------- -------- -------
Management fees and other
income................... 1,405(vii) 72,176 -- (65,768)(xviii) 7,813
Management and other
expenses................. (2,263)(viii) (35,267) -- 32,136 (xviii (5,394)
Amortization............... -- (9,111) (4,432)(xii) 7,743 (xix (5,800)
------- -------- ------- -------- -------
Income from service company
business................. (858) 27,798 (4,432) (25,889) (3,381)
------- -------- ------- -------- -------
General and administrative
expenses................. -- (16,266) 8,668 (xiii 6,573 (xviii (1,025)
Interest expense........... (5,082)(ix) (10,685) -- 10,305(xx) (5,462)
Interest income............ 540(v) 1,963 -- (603)(xxi) 1,900
Minority interest.......... 16(v) -- -- -- 16
Equity in losses of
unconsolidated
partnerships............. (3,905)(x) -- (4,631)(xiv) (6) (8,542)
Equity in earnings of
unconsolidated
subsidiaries............. -- -- (4,636)(xv) 10,426 (xxii 5,790
------- -------- ------- -------- -------
Income (loss) from
operations............... (7,266) 7,852 (5,724) (3,543) (8,681)
Income tax provision....... -- (3,502) 3,502 (xvi -- --
------- -------- ------- -------- -------
Net income (loss).......... $(7,266) $ 4,350 $(2,222) $ (3,543) $(8,681)
======= ======== ======= ======== =======
</TABLE>
- ---------------
(i) Represents the adjustment to record activity from January 1, 1997 to
the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. The historical
financial statements of the NHP Real Estate Companies consolidate
certain real estate partnerships in which they have an interest that
will be presented on the equity method by the Partnership as a
result of the NHP Real Estate Reorganization. In addition,
represents adjustments to record additional depreciation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest
expense incurred in connection with borrowings incurred by the
Partnership to consummate the NHP Real Estate Acquisition.
(ii)Represents the unaudited consolidated results of operations of NHP
for the period from January 1, 1997 through December 8, 1997 (date
of the NHP Merger).
P-11
<PAGE> 1385
(iii)
Represents the following adjustments occurring as a result of the
NHP Merger: (i) the reduction in personnel costs, primarily
severance costs, pursuant to a restructuring plan; (ii) the
incremental depreciation of the purchase price adjustment related to
real estate; (iii) the incremental amortization of the purchase
price adjustment related to the management contracts, furniture,
fixtures and equipment, and goodwill; (iv) the reversal of equity in
earnings of NHP during the pre-merger period when the Partnership
held a 47.62% interest in NHP; and (v) the amortization of the
increased basis in investments in real estate partnerships based on
the purchase price adjustment related to real estate and an
estimated average life of 20 years.
(iv)Represents adjustments related to the NHP Reorganization, whereby
the Partnership contributed or sold to the Unconsolidated
Subsidiaries and the Unconsolidated Partnership: (i) certain assets
and liabilities of NHP, primarily related to the management
operations and other businesses owned by NHP and (ii) 12 real estate
properties containing 2,905 apartment units. The adjustments
represent (i) the related revenues and expenses primarily related to
the management operations and other businesses owned by NHP and (ii)
the historical results of operations of such real estate
partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis
resulting from the allocation of the combined purchase price of NHP
and the NHP Real Estate Companies.
(v) Represents adjustments to reflect the acquisition of the NHP Real
Estate Companies and the corresponding historical results of
operations as if they had occurred on January 1, 1997.
(vi)Represents incremental depreciation related to the consolidated real
estate assets purchased from the NHP Real Estate Companies.
Buildings and improvements are depreciated on the straight-line
method over a period of 30 years, and furniture and fixtures are
depreciated on the straight-line method over a period of 5 years.
(vii)
Represents the adjustment to record the revenues from ancillary
businesses purchased from the NHP Real Estate Companies as if the
acquisition had occurred on January 1, 1997.
(viii)
Represents $4,878 related to the adjustment to record the expenses
from ancillary businesses purchased from the NHP Real Estate
Companies as if the acquisition had occurred on January 1, 1997,
less $2,615 related to a reduction in personnel costs pursuant to a
restructuring plan, approved by the Company's senior management,
assuming that the acquisition of the NHP Real Estate Companies had
occurred on January 1, 1997 and that the restructuring plan was
completed on January 1, 1997. The restructuring plan specifically
identifies all significant actions to be taken to complete the
restructuring plan, including the reduction of personnel, job
functions, location and the date of completion.
(ix)Represents adjustments in the amount of $3,391 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as the increase in interest expense in the amount
of $1,691 related to borrowings on the Partnership's credit
facilities of $55,807 to finance the NHP Real Estate Acquisition.
(x) Represents adjustments in the amount of $2,432 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as amortization of $1,473 related to the increased
basis in investment in real estate partnerships, as a result of the
allocation of the purchase price of the NHP Real Estate Companies,
based on an estimated average life of 20 years.
(xi)Represents incremental depreciation related to the real estate
assets purchased from NHP. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years,
and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(xii)
Represents incremental depreciation and amortization of the tangible
and intangible assets related to the property management and other
business operated by the Unconsolidated
P-12
<PAGE> 1386
Subsidiaries, based on the Partnership's new basis as adjusted by
the allocation of the combined purchase price of NHP including
amortization of management contracts of $3,782, depreciation of
furniture, fixtures and equipment of $2,018 and amortization of
goodwill of $7,743, less NHP's historical depreciation and
amortization of $9,111. Management contracts are amortized using the
straight-line method over the weighted average life of the contracts
estimated to be approximately 15 years. Furniture, fixtures and
equipment are depreciated using the straight-line method over the
estimated life of 3 years. Goodwill is amortized using the
straight-line method over 20 years.
(xiii)
Represents a reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan, approved by the Company's
senior management, specifically identifying all significant actions
to be taken to complete the restructuring plan, assuming that the
NHP Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997.
(xiv)
Represents adjustment for amortization of the increased basis in
investments in real estate partnerships, as a result of the
allocation of the combined purchase price of NHP and the NHP Real
Estate Companies, based on an estimated average life of 20 years.
(xv)Represents the reversal of equity in earnings in NHP during the
pre-merger period when the Partnership held a 47.62% interest in
NHP, as a result of the Partnership's acquisition of 100% of the NHP
Common Stock.
(xvi)
Represents the reversal of NHP's income tax provision due to the
restructuring of the management business to the Unconsolidated
Subsidiaries.
(xvii)
Represents the contribution of NHP's 12 real estate properties
containing 2,905 apartment units to the Unconsolidated Partnership
pursuant to the NHP Reorganization.
(xviii)
Represents the historical income and expenses associated with
certain assets and liabilities of NHP that were contributed or sold
to the Unconsolidated Subsidiaries, primarily related to the
management operations and other businesses owned by NHP.
(xix)
Represents the amortization and depreciation of certain management
contracts and other assets of NHP, based on the Partnership's new
basis resulting from the allocation of the purchase price of NHP,
that will be contributed or sold to the Unconsolidated Subsidiaries,
primarily related to the management operations and other businesses
owned by NHP.
(xx)Represents interest expense of $6,020 related to the contribution of
NHP's 12 real estate properties containing 2,905 apartment units to
the Unconsolidated Partnership and interest expense of $4,285
related to the certain assets and liabilities that will be
contributed or sold to the Unconsolidated Subsidiaries pursuant to
the NHP Reorganization.
(xxi)
Represents the interest income of $5,000 earned on notes payable of
$50,000 to the Partnership issued as consideration for certain
assets and liabilities sold to the Unconsolidated Subsidiaries by
the Partnership, net of the elimination of the Partnership's share
of the related interest expense of $4,750 reflected in the equity in
earnings of the Unconsolidated Subsidiaries operating results,
offset by $853 in interest income primarily related to the
management operations and other businesses owned by NHP contributed
or sold to the Unconsolidated Subsidiaries pursuant to the NHP
Reorganization.
(xxii)
Represents the Partnership's equity in earnings of the
Unconsolidated Subsidiaries.
(D) Represents the audited historical statement of operations of Ambassador
for the year ended December 31, 1997. Certain reclassifications have been
made to Ambassador's historical statement of operations to conform to the
Partnership's Statement of Operations presentation. The Ambassador
historical statement of operations excludes extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of
P-13
<PAGE> 1387
interest expense resulting from the net reduction of debt; and (iv) the
elimination of the minority interest associated with Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger, and the spin-off of Holdings as if these transactions had
occurred on January 1, 1997. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
IFG AMIT HOLDINGS IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property
revenues....................... $ 6,646 $ 266 $ -- $ 6,912
Property operating expenses...... (3,251) (56) -- (3,307)
Depreciation..................... (966) -- -- (966)
--------- ------- --------- --------
Income from property
operations..................... 2,429 210 -- 2,639
--------- ------- --------- --------
Management fees and other
income......................... 389,626 -- (295,296) 94,330
Management and other expenses.... (315,653) -- 258,038 (57,615)
Amortization..................... (31,709) (303) 15,244 (16,768)
--------- ------- --------- --------
Income from service company
business....................... 42,264 (303) (22,014) 19,947
--------- ------- --------- --------
General and administrative
expenses....................... (20,435) (1,351) 587 (21,199)
Interest expense................. (9,353) -- 318 (9,035)
Interest income.................. 4,571 6,853 (457) 10,967
Minority interest................ (12,448) (382) (41) (12,871)
Equity in income (losses) of
unconsolidated partnership..... 10,027 2,639 (151) 12,515
--------- ------- --------- --------
Income (loss) from operations.... 17,055 7,666 (21,758) 2,963
Income tax provision............. (6,822) (180) 8,703 1,701
Gain on sale of property......... -- 80 -- 80
--------- ------- --------- --------
Net income (loss)................ 10,233 7,566 (13,055) 4,744
========= ======= ========= ========
</TABLE>
- ---------------
(i) Represents the audited consolidated results of operations of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report
on Form 10-K. Certain reclassifications have been made to IFG's
historical statement of operations to conform to the Partnership's
statement of operations presentation.
(ii)Represents the historical statement of operations of AMIT, as well
as pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger: (i) the incremental depreciation of the
purchase price adjustment related to consolidated real estate and
investments in real estate partnerships; (ii) the amortization of
goodwill and property management contracts resulting from the IFG Merger;
(iii) the increase in interest expense resulting from the net increase in
debt; and (iv) the elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
P-14
<PAGE> 1388
(I) Represents adjustments to reflect the 1997 Property Acquisitions and the
1998 Acquisitions, less the 1997 Dispositions and the 1998 Dispositions
as if they had occurred on January 1, 1997. These pro forma operating
results are based on historical results of the properties, except for
depreciation, which is based on the Partnership's investment in the
properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1997 PROPERTY 1997 1998 1998
ACQUISITIONS DISPOSITIONS ACQUISITIONS DISPOSITIONS TOTAL
------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Rental and other
property
revenues........... $ 88,589 $(4,081) $ 39,132 $(3,303) $120,337
Property operating
expense............ (44,109) 1,944 (18,655) 1,354 (59,466)
Owned property
management
expense............ (3,233) 133 (1,349) 122 (4,327)
Depreciation......... (16,839) 452 (10,946) 688 (26,645)
</TABLE>
(J) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1997. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(K) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1997
Property Acquisitions..................................... $(29,490)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1997 Dispositions and
the 1997 Stock Offerings.................................. 19,568
Repayments on the Partnership's credit facilities with
proceeds from a dividend received from one of the
Unconsolidated Subsidiaries............................... 1,889
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1998
Acquisitions.............................................. (15,994)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1998 Dispositions and
the 1998 Stock Offerings.................................. 20,113
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred Partnership
Unit Offering............................................. 463
--------
$ (3,451)
========
</TABLE>
(L) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the Probable Purchases.
(M) Represents (i) loss of $181 related to limited partners in consolidated
partnerships acquired in connection with the 1997 Property Acquisitions
and the 1998 Property Acquisitions and (ii) income of $502 allocable to
the Partnership Preferred Units.
(N) Represents the reduction in the Partnership's earnings in unconsolidated
partnerships as a result of the consolidation of additional partnerships
resulting from additional ownership acquired through tender offers.
(O) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
P-15
<PAGE> 1389
(P) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 724
Reduction in salaries and benefits.......................... 4,197
Merger related costs........................................ 524
Other....................................................... 1,947
------
$7,392
======
</TABLE>
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(Q) Represents the decrease in interest expense of $3,612 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$3,833 related to borrowings under the Partnership's credit facilities.
(R) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(S) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(T) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $38,885, amortization of goodwill of $6,526, and
depreciation of furniture, fixtures, and equipment of $3,753, less IFG's
historical depreciation and amortization of $16,465. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(U) Represents elimination of minority interest of IPT resulting from the IPT
merger.
(V) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(W) Represents the reversal of IFG's income tax provision.
(X) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(Y) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Z) Represents interest income of $3,825 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries by the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $3,634 reflected on the equity in earnings of the
Unconsolidated Subsidiaries.
(AA) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-16
<PAGE> 1390
(BB) The following table presents the net impact to pro forma net loss
applicable to holders of OP Units and net loss per OP Units assuming the
interest rate per annum increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest expense................................ $ 938
========
Net income.................................................. $(14,789)
========
Net loss attributable to OP unitholders..................... $(56,963)
========
Basic loss per OP unit...................................... $ (0.84)
========
Diluted loss per OP unit.................................... $ (0.84)
========
</TABLE>
(CC) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred
Units, the Class G Preferred Units, the Class H Preferred Units and the
Class J Preferred Units as if these Preferred Units had been issued as of
January 1, 1997.
(DD) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(2,536), plus the elimination of intercompany interest
expense of $8,384. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the year ended December 31, 1997 is
presented below, which represents the effects of the Ambassador Merger,
the NHP Merger, the NHP Reorganization, the IFG Merger, and the IFG
Reorganization as if these transactions had occurred as of January 1,
1997.
P-17
<PAGE> 1391
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZATION IFG
HISTORICAL(I) ADJUSTMENTS(II) REORGANIZATION(III) PRO FORMA
------------- --------------- ------------------- ---------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 6,194 $ 6,371(iv) $ -- $ 12,565
Property operating expenses............. (3,355) (3,531)(iv) -- (6,886)
Owned property management expense....... (147) (478)(iv) -- (625)
Depreciation expense.................... (1,038) (767)(iv) -- (1,805)
-------- -------- -------- --------
Income from property operations......... 1,654 1,595 -- 3,249
-------- -------- -------- --------
Management fees and other income........ 23,776 41,992(v) 74,404(x) 140,172
Management and other expenses........... (11,733) (20,403)(v) (49,236)(x) (81,372)
Amortization............................ (3,726) (4,017)(v) (30,188)(xi) (37,931)
-------- -------- -------- --------
Income from service company............. 8,317 17,572 (5,020) 20,869
General and administrative expense...... -- (6,573)(v) (6,249)(x) (12,822)
Interest expense........................ (6,058) (5,849)(vi) (3,825)(xii) (15,732)
Interest income......................... 1,001 (148)(v) -- 853
Minority interest....................... (2,819) 2,198(viii) -- (621)
Equity in losses of unconsolidated
partnerships.......................... (1,028) 1,028(iv) -- --
Equity in earnings of Unconsolidated
Subsidiaries.......................... 2,943 (2,943)(vii) -- --
-------- -------- -------- --------
Income (loss) from operations........... 4,010 6,880 (15,094) (4,204)
Income tax provision.................... (1,902) (3,013)(ix) 6,450(xiii) 1,535
-------- -------- -------- --------
Net income (loss)....................... $ 2,108 $ 3,867 $ (8,644) $ (2,669)
======== ======== ======== ========
Income attributable to preferred
unitholders........................... $ 2,198 $ 3,478 $ (8,212) $ (2,536)
======== ======== ======== ========
Income (loss) attributable to common
unitholders........................... $ (90) $ 389 $ (432) $ (133)
======== ======== ======== ========
</TABLE>
- ---------------
(i) Represents the historical results of operations of the Unconsolidated
Subsidiaries for the year ended December 31, 1997.
(ii) Represents adjustments related to the NHP Reorganization, which includes
the sale or contribution of 14 properties containing 2,725 apartment units
from the unconsolidated partnerships to the Unconsolidated Subsidiaries,
as well as the sale or contribution of 12 properties containing 2,905
apartment units from the Unconsolidated Subsidiaries to the Unconsolidated
Partnership.
(iii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iv) Represents adjustments for the historical results of operations of the 14
real estate properties contributed or sold to the Unconsolidated
Subsidiaries, offset by the historical results of operations of the 12
real estate properties contributed or sold to the Unconsolidated
Partnership, with additional depreciation recorded related to the
Partnership's new basis resulting from the allocation of purchase price of
NHP and the NHP Real Estate Companies.
P-18
<PAGE> 1392
(v) Represents adjustments to reflect income and expenses associated with
certain assets and liabilities of NHP contributed or sold to the
Unconsolidated Subsidiaries.
(vi) Represents adjustments of $6,058 to reverse the historical interest
expense of the Unconsolidated Subsidiaries, which resulted from its
original purchase of NHP Common Stock, offset by $2,622 related to the
contribution or sale of the 14 real estate properties, $4,285 related to
assets and liabilities transferred from the Partnership to the
Unconsolidated Subsidiaries and $5,000 related to a note payable to the
Partnership.
(vii) Represents the reversal of the historical equity in earnings of NHP for
the period in which NHP was not consolidated by the Unconsolidated
Subsidiaries.
(viii)Represents the minority interest in the operations of the 14 real estate
properties.
(ix) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill which is not deductible
for tax purposes.
(x) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(xi) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(xii) Represents adjustment for interest expense related to a note payable to
the Partnership.
(xiii)Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-19
<PAGE> 1393
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR
AND PROBABLE AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E)
------------- ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Rental and other property revenues............. $ 265,700 $ 19,603(H) $ $ $
8,398(I) 35,480 -- 8,126
Property operating expenses.................... (101,600) (9,009)(H)
(3,745)(I) (14,912) -- (2,585)
Owned property management expense.............. (7,746) (728)(H)
(459)(I) -- -- --
Depreciation................................... (59,792) (4,886)(H)
(2,624)(I) (7,270) (1,420)(M) (904)
--------- -------- -------- ------- --------
Income from property operations................ 96,562 6,550 13,298 (1,420) 4,637
--------- -------- -------- ------- --------
Management fees and other income............... 13,968 -- -- -- 71,155
Management and other expenses.................. (8,101) -- -- -- (41,477)
Corporate overhead allocation.................. (196) -- -- -- --
Amortization................................... (3) -- -- -- (13,986)
--------- -------- -------- ------- --------
Income from service company business........... 5,668 -- -- -- 15,692
--------- -------- -------- ------- --------
General and administrative expenses............ (7,444) -- (5,278) 5,278(N) (61,386)
Interest expense............................... (56,756) 1,975(J)
(2,469)(K) (10,079) 145(O) (24,871)
Interest income................................ 18,244 (1) -- -- 22,501
Minority interest.............................. (1,052) 160(L) (252) 252(P) (14,159)
Equity in losses of unconsolidated
partnerships................................. (5,078) -- (71) -- 13,492
Equity in earnings of unconsolidated
subsidiaries................................. 8,413 -- -- -- --
Amortization of goodwill....................... (5,071) -- -- -- --
--------- -------- -------- ------- --------
Income (loss) from operations.................. 53,486 6,215 (2,382) 4,255 (44,094)
Income tax provision........................... -- -- -- -- 1,180
Gain on dispositions of property............... 2,783 (2,783) -- -- 6,576
--------- -------- -------- ------- --------
Net income..................................... 56,269 3,432 (2,382) 4,255 (36,338)
Income attributable to preferred unitholders... 16,320 16,094 -- -- --
--------- -------- -------- ------- --------
Income (loss) attributable to common
unitholders.................................. $ 39,949 $(12,662) $ (2,382) $ 4,255 $(36,338)
========= ======== ======== ======= ========
Basic earnings (loss) per OP Unit.............. $ 0.80
=========
Diluted earnings (loss) per OP Unit............ $ 0.79
=========
Weighted average OP Units outstanding.......... 50,420
=========
Weighted average OP Unit and equivalents
outstanding.................................. 50,544
=========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(F) ADJUSTMENTS(G) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property revenues............. $ $ $
-- -- 337,307
Property operating expenses....................
-- -- (131,851)
Owned property management expense..............
-- -- (8,933)
Depreciation...................................
(1,583)(Q) -- (78,479)
-------- -------- ---------
Income from property operations................ (1,583) -- 118,044
-------- -------- ---------
Management fees and other income............... -- (56,211)(W) 28,912
Management and other expenses.................. -- 35,192(W) (14,386)
Corporate overhead allocation.................. -- -- (196)
Amortization................................... (23,895)(R) 22,641(X) (15,243)
-------- -------- ---------
Income from service company business........... (23,895) 1,622 (913)
-------- -------- ---------
General and administrative expenses............ 45,823(S) 14,375(W) (8,632)
Interest expense...............................
7,045 -- (85,010)(AA)
Interest income................................ -- 143(Y) 40,887
Minority interest.............................. 6,622(T) -- (8,429)
Equity in losses of unconsolidated
partnerships................................. (18,577)(U) -- (10,234)
Equity in earnings of unconsolidated
subsidiaries................................. -- (7,562)(Z) 851(CC)
Amortization of goodwill....................... -- -- (5,071)
-------- -------- ---------
Income (loss) from operations.................. 15,435 8,578 41,493
Income tax provision........................... (1,180)(V) -- --
Gain on dispositions of property............... (6,576) -- --
-------- -------- ---------
Net income..................................... 7,679 8,578 41,493
Income attributable to preferred unitholders... -- -- 32,414(BB)
-------- -------- ---------
Income (loss) attributable to common
unitholders.................................. $ 7,679 $ 8,578 $ 9,079(AA)
======== ======== =========
Basic earnings (loss) per OP Unit.............. $ 0.13(AA)
=========
Diluted earnings (loss) per OP Unit............ $ 0.13(AA)
=========
Weighted average OP Units outstanding.......... 68,554
=========
Weighted average OP Unit and equivalents
outstanding.................................. 69,218
=========
</TABLE>
P-20
<PAGE> 1394
- ---------------
(A) Represents the Partnership's unaudited consolidated results of operations
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1998: (i) the 1998 Stock Offerings; (ii) the 1998
Acquisitions; (iii) the Probable Purchases; (iv) the 1998 Dispositions;
and (v) the Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of operations of Ambassador
for the four months ended April 30, 1998. Certain reclassifications have
been made to Ambassador's historical Statement of Operations to conform
to the Partnership's Statement of Operations presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger and the spin-off of the common stock of Holdings as if these
transactions had occurred on January 1, 1998. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
HOLDINGS
IFG AMIT SPIN- IFG
HISTORICAL(I) MERGER(II) OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 7,566 $ 560 $ -- $ 8,126
Property operating expenses............. (2,585) -- -- (2,585)
Depreciation............................ (904) -- -- (904)
--------- ------ --------- --------
Income from property operations......... 4,077 560 -- 4,637
--------- ------ --------- --------
Management fees and other income........ 311,475 -- (240,320) 71,155
Management and other expenses........... (252,295) -- 210,818 (41,477)
Amortization............................ (26,781) (48) 12,843 (13,986)
--------- ------ --------- --------
Income from service company business.... 32,399 (48) (16,659) 15,692
--------- ------ --------- --------
General and administrative expenses..... (66,272) (675) 5,561 (61,386)
Interest expense........................ (24,164) -- (707) (24,871)
Interest income......................... 18,817 4,193 (509) 22,501
Minority interest....................... (14,159) -- -- (14,159)
Equity in losses of unconsolidated
partnerships.......................... 12,169 1,323 13,492
--------- ------ --------- --------
Income (loss) from operations........... (37,133) 4,030 (10,991) (44,094)
Income tax provision.................... (4,772) -- 5,952 1,180
Gain on disposition of property......... 5,888 688 -- 6,576
--------- ------ --------- --------
Item income (loss)...................... $ (36,017) $4,718 $ (5,039) $(36,338)
========= ====== ========= ========
</TABLE>
----------------------
(i)
Represents the unaudited consolidated results of operations of IFG for
the nine months ended September 30, 1998.
Certain reclassifications have been made to IFG's historical statement
of operations to conform to the Partnership's statement of operations
presentation.
(ii)
Represents the historical statement of operations of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock for
each three shares of IFG common stock to holders of IFG common stock.
(F) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the incremental depreciation of the purchase price adjustment
related to consolidated real estate and investments in real estate
partnerships; (ii) the amortization of goodwill and property management
contracts
P-21
<PAGE> 1395
resulting from the IFG Merger; (iii) the increase in interest expense
resulting from the net increase in debt; and (iv) the elimination of the
income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of
IFG, primarily management contracts and related working capital assets
and liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(H) Represents adjustments to reflect the 1998 Acquisitions, less the 1998
Dispositions as if they had occurred on January 1, 1998. These pro forma
operating results are based on historical results of the properties,
except for depreciation, which is based on the Partnership's investment
in the properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1998 1998
ACQUISITIONS DISPOSITIONS TOTAL
------------ ------------ -------
<S> <C> <C> <C>
Rental and other property revenues......... $20,554 $(951) $19,603
Property operating expense................. (9,385) 376 (9,009)
Owned property management expense.......... (765) 37 (728)
Depreciation............................... (4,979) 93 (4,886)
</TABLE>
(I) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1998. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(J) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and
other loans and mortgages assumed in connection with
the 1998 Acquisitions.................................. $(8,698)
Repayments on the Partnership's credit facilities and
other indebtedness with proceeds from the 1998
Dispositions and the 1998 Stock
Offerings.............................................. 10,326
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred
Partnership Unit Offering.............................. 347
-------
$ 1,975
=======
</TABLE>
(K) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the probable purchases.
(L) Represents (i) loss of $537 related to limited partners in consolidated
partnerships acquired in connection with the 1998 Acquisitions and (ii)
income of $377 allocable to the Partnership Preferred Units.
(M) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(N) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses.................... $ 355
Reduction in salaries and benefits........................ 2,482
Merger related costs...................................... 1,212
Other..................................................... 1,229
------
$5,278
======
</TABLE>
P-22
<PAGE> 1396
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1998 and that the
restructuring plan was completed on January 1, 1998. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(O) Represents the decrease in interest expense of $1,480 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$1,335 related to borrowings under the Partnership's line of credit.
(P) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(Q) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(R) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $30,096, amortization of goodwill of $4,895, and
depreciation of furniture, fixtures, and equipment of $2,842, less IFG's
historical depreciation and amortization of $13,938. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(S) Represents the elimination of merger related expenses recorded by IFG
during the nine months ended September 30, 1998. In connection with the
IFG Merger, certain IFG executives will receive one-time lump-sum
payments in connection with the termination of their employment and
option agreements. The total of these lump sum payments is estimated to
be approximately $50,000.
(T) Represents elimination of minority interest in IPT resulting from the IPT
merger.
(U) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(V) Represents the reversal of IFG's income tax provision.
(W) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(X) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Y) Represents interest income of $2,861 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries of the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $2,718 reflected in the equity in earnings of the
Unconsolidated Subsidiaries.
(Z) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-23
<PAGE> 1397
(AA) The following table presents the net impact to pro forma net income
applicable to holders of shares of AIMCO Common Stock and net income per
share of AIMCO Common Stock assuming the interest rate per annum
increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest........................................ $ 702
=======
Net income.................................................. $40,791
=======
Net income attributable to OP Unitholders................... $ 8,377
=======
Basic loss per OP Unit...................................... $ 0.12
=======
Diluted loss per OP Unit.................................... $ 0.12
=======
</TABLE>
(BB) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred Units
the Class G Preferred Units, the Class H Preferred Units and the Class J
Preferred Units as if these stock offerings had occurred as of January 1,
1997.
(CC) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(1,867) plus the elimination of intercompany interest of
$2,718. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the nine months ended September 30, 1998
is presented below, which represents the effects of the Ambassador
Merger, the IFG Merger and the IFG Reorganization as if these
transactions had occurred as of January 1, 1997.
P-24
<PAGE> 1398
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
IFG
HISTORICAL(I) REORGANIZATION(II) PRO FORMA
------------- ------------------ ---------
<S> <C> <C> <C>
Rental and other property revenues................... $ 9,910 $ -- $ 9,910
Property operating expense........................... (5,139) -- (5,139)
Owned property management expense.................... (345) -- (345)
Depreciation expense................................. (1,026) -- (1,026)
-------- -------- --------
Income from property operations...................... 3,400 -- 3,400
-------- -------- --------
Management fees and other income..................... 57,665 56,211(iii) 113,876
Management and other expenses........................ (36,221) (35,192)(iii) (71,413)
Amortization......................................... (2,111) (22,641)(iv) (24,752)
-------- -------- --------
Income from service company.......................... 19,333 (1,622) 17,711
General and administrative expense................... -- (14,375)(iii) (14,375)
Interest expense..................................... (6,931) (2,861)(v) (9,792)
Interest income...................................... 617 -- 617
Minority interest.................................... (526) -- (526)
-------- -------- --------
Income (loss) from operations........................ 15,893 (18,858) (2,965)
Income tax provision................................. (7,037) 8,037(vi) 1,000
-------- -------- --------
Net income (loss).................................... $ 8,856 $(10,821) $ (1,965)
======== ======== ========
Income (loss) attributable to preferred
stockholders....................................... $ 8,413 $(10,280) $ (1,867)
======== ======== ========
Income (loss) attributable to common stockholders.... $ 443 $ (541) $ (98)
======== ======== ========
</TABLE>
- ---------------
(i) Represents the Unconsolidated Subsidiaries historical consolidated results
of operations.
(ii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iii)Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG.
(iv) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG, based on the Partnership's new basis resulting from the allocation
of the purchase price of IFG.
(v) Represents adjustment for interest expense related to a note payable to the
Partnership.
(vi) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-25
<PAGE> 1399
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR IFG
AND PROBABLE NHP AMBASSADOR PURCHASE PRICE AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $ 32,697 $ 25,214 $ (8,681) $ 3,437 $ 1,879 $ 4,744
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 43,520 28,817 7,354 20,372 5,997 17,248
Gain on investments............ -- -- (12) -- -- --
(Gain) loss on disposition of
properties.................... (2,720) 2,720 (3,882) -- -- (80)
Minority interests............. (1,008) (458) (16) 851 (705) 12,871
Equity in earnings of
unconsolidated partnerships... 1,798 122 8,542 (405) -- (12,515)
Equity in earnings of
unconsolidated subsidiaries... (4,636) -- (5,790) -- -- --
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 269 (269) -- -- -- (5,366)
Changes in operating assets and
operating liabilities......... 3,112 -- 5,314 (3,523) -- (4,384)
--------- --------- --------- --------- -------- --------
Total adjustments........... 40,335 30,932 11,510 17,295 5,292 7,774
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) operating activities... 73,032 56,146 2,829 20,732 7,171 12,518
Net cash used in
discontinued operations.... -- -- (7,999) -- -- --
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) continuing
operations................. 73,032 56,146 (5,170) 20,732 7,171 12,518
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... 21,792 19,627(I) -- -- -- --
Purchase of real estate.......... (376,315) (220,995)(J) (4,114) (24,179) -- --
Additions to real estate,
investments and property held
for sale....................... (26,966) (5,217)(K) (522) (19,033) -- (4,154)
Proceeds from sale of property
held for sale.................. 303 -- -- -- -- --
Purchase of general and limited
partnership interests.......... (199,146) -- (1,208) -- -- (76,104)
Purchase of management
contracts...................... -- -- (11,686) -- -- (36,868)
Purchase of/additions to notes
receivable..................... (59,787) -- (4,236) -- -- (17,647)
Proceeds from repayments of notes
receivable..................... -- -- 214 1,000 -- 8,838
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... 45,791 -- 3,097 3,183 -- 42,615
Contribution to unconsolidated
subsidiaries................... (42,879) -- -- -- -- --
Proceeds from sale of
securities..................... -- -- 642 -- -- --
Purchase of investments held for
sale........................... -- -- (73) -- -- --
Purchase of NHP mortgage loans... (60,575) -- -- -- -- --
Purchase of Ambassador common
stock.......................... (19,881) -- -- -- -- --
--------- --------- --------- --------- -------- --------
Net cash used in investing
activities................. (717,663) (206,585) (17,886) (39,029) -- (83,320)
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. 225,436 122,568(L) 145,519 156,746 -- 111,001
Principal repayments on secured
notes payable.................. (12,512) -- (141,032) (141,676) -- (12,697)
Proceeds from secured short-term
financing...................... 19,050 -- -- -- -- --
Repayments on secured short-term
financing...................... -- (259,027)(M) (434) -- -- --
Principal repayments on unsecured
short-term notes payable....... (79) (50,800)(M) -- -- -- --
Proceeds (payoff) from unsecured
short-term financing........... (12,500) -- -- -- -- --
Principal repayments on secured
tax-exempt bond financing...... (1,487) -- -- -- -- --
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... (162,008) -- -- -- -- --
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... (6,387) -- (245) (8,095) -- (2,305)
Proceeds from issuance of common
and preferred stock, net....... 643,224 357,389(N) 6,286 28,946 -- 62,420
Proceeds from exercises of
employee stock options and
warrants....................... 871 -- -- 3,195 -- 7,487
Repurchase of common stock....... -- -- -- -- -- (3,283)
Principal repayments received on
notes due from Officers........ 25,957 -- -- 1,323 -- --
Investments made by minority
interests...................... -- -- -- -- -- 249
Receipt of contributions from
minority interests............. -- 37,345(O) -- -- -- --
Payments of distribution to
minority interests............. -- (2,713)(P) -- -- -- --
Payment of distributions......... (44,660) (19,396)(Q) (11,503)(T) (15,717) (12,173)(U) (2,695)
Payment of distributions to
limited partners............... -- (5,193)(R) -- -- (15)(U) --
Payment of preferred unit
distributions.................. (846) (39,859)(S) -- (2,279) -- --
Payment of distributions to
minority interests............. (5,510) -- -- (3,700) -- (12,578)
Net transactions with
Insignia/ESG................... -- -- -- -- -- (57,612)
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) financing activities... 668,549 140,314 (1,409) 18,743 (12,188) 89,987
--------- --------- --------- --------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. 23,918 (10,125) (24,465) 446 (5,017) 19,185
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. 13,170 -- 36,277 4,002 -- 64,447
--------- --------- --------- --------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $ 37,088 $ (10,125) $ 11,812 $ 4,448 $ (5,017) $ 83,632
========= ========= ========= ========= ======== ========
<CAPTION>
IFG IFG
MERGER REORGANIZATION PRO
ADJUSTMENTS(G) ADJUSTMENTS(H) FORMA
-------------- -------------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $(80,023) $ 6,882 $ (13,851)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 35,049 (30,188) 128,169
Gain on investments............ -- -- (12)
(Gain) loss on disposition of
properties.................... 80 -- (3,882)
Minority interests............. (1,552) -- 9,983
Equity in earnings of
unconsolidated partnerships... 29,995 -- 27,537
Equity in earnings of
unconsolidated subsidiaries... -- 4,578 (5,848)
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 5,366 --
Changes in operating assets and
operating liabilities......... -- -- 519
-------- -------- -----------
Total adjustments........... 68,938 (25,610) 156,466
-------- -------- -----------
Net cash provided by (used
in) operating activities... (11,085) (18,728) 142,615
Net cash used in
discontinued operations.... -- -- (7,999)
-------- -------- -----------
Net cash provided by (used
in) continuing
operations................. (11,085) (18,728) 134,616
-------- -------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... -- -- 41,419
Purchase of real estate.......... -- -- (625,603)
Additions to real estate,
investments and property held
for sale....................... -- -- (55,892)
Proceeds from sale of property
held for sale.................. -- -- 303
Purchase of general and limited
partnership interests.......... -- -- (276,458)
Purchase of management
contracts...................... -- -- (48,554)
Purchase of/additions to notes
receivable..................... -- -- (81,670)
Proceeds from repayments of notes
receivable..................... -- -- 10,052
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... -- -- 94,686
Contribution to unconsolidated
subsidiaries................... -- -- (42,879)
Proceeds from sale of
securities..................... -- -- 642
Purchase of investments held for
sale........................... -- -- (73)
Purchase of NHP mortgage loans... -- -- (60,575)
Purchase of Ambassador common
stock.......................... -- -- (19,881)
-------- -------- -----------
Net cash used in investing
activities................. -- -- (1,064,483)
-------- -------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. -- -- 761,270
Principal repayments on secured
notes payable.................. -- -- (307,917)
Proceeds from secured short-term
financing...................... -- -- 19,050
Repayments on secured short-term
financing...................... -- -- (259,461)
Principal repayments on unsecured
short-term notes payable....... -- -- (50,879)
Proceeds (payoff) from unsecured
short-term financing........... -- -- (12,500)
Principal repayments on secured
tax-exempt bond financing...... -- -- (1,487)
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... -- -- (162,008)
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... -- -- (17,032)
Proceeds from issuance of common
and preferred stock, net....... -- -- 1,098,265
Proceeds from exercises of
employee stock options and
warrants....................... -- -- 11,553
Repurchase of common stock....... -- -- (3,283)
Principal repayments received on
notes due from Officers........ -- -- 27,280
Investments made by minority
interests...................... -- -- 249
Receipt of contributions from
minority interests............. -- -- 37,345
Payments of distribution to
minority interests............. -- -- (2,713)
Payment of distributions......... (24,513)(V) -- (130,657)
Payment of distributions to
limited partners............... -- -- (5,208)
Payment of preferred unit
distributions.................. -- -- (42,984)
Payment of distributions to
minority interests............. -- -- (21,788)
Net transactions with
Insignia/ESG................... -- -- (57,612)
-------- -------- -----------
Net cash provided by (used
in) financing activities... (24,513) -- 879,483
-------- -------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. (35,598) (18,728) (50,384)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. -- -- 117,896
-------- -------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $(35,598) $(18,728) $ 67,512
======== ======== ===========
</TABLE>
P-26
<PAGE> 1400
- ---------------
(A) Represents the Partnership's audited consolidated statement of cash flows
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1997 Acquisitions; (ii) the 1997 Stock Offerings;
(iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings; (v) the 1998
Acquisitions; (vi) the Probably Purchases; (vii) the 1998 Dispositions; and
(viii) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(I) HISTORICAL(II) ADJUSTMENTS(III) REORGANIZATION(IV) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)................. $ (7,266) $ 4,350 $(2,222) $ (3,543) $ (8,681)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 4,058 9,134 5,125 (10,963) 7,354
Gain on investments............. (12) -- -- -- (12)
(Gain) loss on disposition of
properties.................... (3,882) -- -- -- (3,882)
Minority interests.............. (16) -- -- -- (16)
Equity in earnings of
unconsolidated partnerships... 3,905 -- 4,631 6 8,542
Equity in earnings of
unconsolidated subsidiaries... -- -- 4,636 (10,426) (5,790)
Changes in operating assets and
operating liabilities......... (1,036) 6,350 -- -- 5,314
-------- -------- ------- -------- ---------
Total adjustments........... 3,017 15,484 14,392 (21,383) 11,510
-------- -------- ------- -------- ---------
Net cash provided by (used
in) operating
activities................ (4,249) 19,834 12,170 (24,926) 2,829
Net cash used in
discontinued operations... -- (7,999) -- -- (7,999)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) continuing
operations................ (4,249) 11,835 12,170 (24,926) (5,170)
-------- -------- ------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate........... -- (4,114) -- -- (4,114)
Additions to real estate,
investments and property held
for sale........................ (522) -- -- -- (522)
Purchase of general and limited
partnership interests........... (1,208) -- -- -- (1,208)
Purchase of management
contracts....................... -- (11,686) -- -- (11,686)
Purchase of/additions to notes
receivable...................... -- (4,236) -- -- (4,236)
Proceeds from repayments of notes
receivable...................... 214 -- -- -- 214
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 3,097 -- -- -- 3,097
Proceeds from sale of
securities...................... 642 -- -- -- 642
Purchase of investments held for
sale............................ (73) -- -- -- (73)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) investing
activities................ 2,150 (20,036) -- -- (17,886)
-------- -------- ------- -------- ---------
</TABLE>
P-27
<PAGE> 1401
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(I) HISTORICAL(II) ADJUSTMENTS(III) REORGANIZATION(IV) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes
payable borrowings.............. $ 74,019 $ 71,500 $ -- $ -- $ 145,519
Principal repayments on secured
notes payable................... (71,256) (69,776) -- -- (141,032)
Repayments on secured short-term
financing....................... (434) -- -- -- (434)
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (245) -- -- (245)
Proceeds from issuances of common
and preferred stock, net........ -- 6,286 -- -- 6,286
Payment of distributions.......... (2,000) -- (9,503) -- (11,503)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) financing
activities................ 329 7,765 (9,503) -- (1,409)
-------- -------- ------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (1,770) (436) 2,667 (24,926) (24,465)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 25,795 10,482 -- -- 36,277
-------- -------- ------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 24,025 $ 10,046 $ 2,667 $(24,926) $ 11,812
======== ======== ======= ======== =========
</TABLE>
- ---------------
(i)Represents the adjustment to record cash flow activity from January 1,
1997 to the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. In addition,
represents adjustments to record additional deprecation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest expense
incurred in connection with borrowings incurred by the Partnership to
consummate the NHP Real Estate Acquisition.
(ii)
Represents the unaudited consolidated statement of cash flows of NHP
for the period from January 1, 1997 through December 8, 1997 (date of
the NHP Merger).
(iii)
Represents the following adjustments occurring as a result of the NHP
Merger: (i) the reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan; (ii) the incremental
depreciation of the purchase price adjustment related to real estate;
(iii) the incremental amortization of the purchase price adjustment
related to management contracts, furniture, fixtures and equipment, and
goodwill; (iv) the reversal of equity in earnings of NHP during the
pre-merger period when the Partnership held a 47.62% interest in NHP;
and (v) the amortization of the increased basis in investments in real
estate partnerships, based on the purchase price adjustment related to
real estate and an estimated average life of 20 years.
(iv)
Represents adjustments related to the NHP Reorganization, whereby the
Partnership contributed or sold to the Unconsolidated Subsidiaries and
the Unconsolidated Partnership; (i) certain assets and liabilities of
NHP, primarily related to the management operations and other
businesses owned by NHP and (ii) 12 real estate properties containing
2,905 apartment units. The adjustments represent (i) the related cash
flow activity primarily related to the management operations of such
real estate partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis resulting
from the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies.
(D) Represents the audited historical statement of cash flows of Ambassador for
the year ended December 31, 1997. Certain reclassifications have been made
to Ambassador's historical statement of cash flows to conform to the
Partnership's statement of cash flows presentation. The Ambassador
P-28
<PAGE> 1402
historical statement of cash flows excludes an extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................... $ 10,233 $ 7,566 $(13,055) $ 4,744
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization...... 32,675 63 (15,490) 17,248
Gain on disposition of property.... -- (80) -- (80)
Minority interests................. 12,448 382 41 12,871
Equity in earnings of
unconsolidated partnerships...... (10,027) (2,639) 151 (12,515)
Extraordinary gain on early
extinguishment of debt........... (5,366) -- -- (5,366)
Changes in operating assets and
liabilities...................... -- (2,405) (1,979) (4,384)
--------- -------- -------- --------
Total adjustments............. 29,730 (4,679) (17,277) 7,774
--------- -------- -------- --------
Net cash provided by (used in) operating
activities............................ 39,963 2,887 (30,332) 12,518
--------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to real estate, investments
and property held for sale......... (7,695) 665 2,876 (4,154)
Purchase of general and limited
partnership interests.............. (93,118) -- 17,014 (76,104)
Purchase of management contracts...... (99,540) -- 62,672 (36,868)
Purchase of/additions to notes
receivable......................... (9,172) (14,251) 5,776 (17,647)
Proceeds from repayments of notes
receivable......................... 4,523 7,552 (3,237) 8,838
Distributions from investments in real
estate partnerships and
unconsolidated subsidiaries........ 44,823 -- (2,208) 42,615
--------- -------- -------- --------
Net cash provided by (used in)
investing activities........ (160,179) (6,034) 82,893 (83,320)
--------- -------- -------- --------
</TABLE>
P-29
<PAGE> 1403
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable
borrowings......................... $ 118,141 $ -- $ (7,140) $111,001
Principal repayments on secured notes
payable............................ (15,682) -- 2,985 (12,697)
Payment of loan costs, net of proceeds
from interest rate hedge........... (2,305) -- -- (2,305)
Proceeds from issuance of common and
preferred stock, net............... 62,420 -- -- 62,420
Proceeds from exercises of employee
stock options and warrants......... 7,487 -- -- 7,487
Repurchase of common stock............ (3,283) -- -- (3,283)
Investment made by minority
interests.......................... 249 -- -- 249
Payment of distributions.............. -- (2,695) -- (2,695)
Payment of distributions to minority
interests.......................... (12,578) -- -- (12,578)
Net transactions with Insignia/ESG.... -- -- (57,612) (57,612)
--------- -------- -------- --------
Net cash provided by (used in)
financing activities........ 154,449 (2,695) (61,767) 89,987
--------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 34,233 (5,842) (9,206) 19,185
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD............................. 54,614 9,789 44 64,447
--------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................ $ 88,847 $ 3,947 $ (9,162) $ 83,632
========= ======== ======== ========
</TABLE>
- ---------------
(i)Represents the audited consolidated statement of cash flows of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report on
Form 10-K. Certain reclassifications have been made to IFG's historical
statement of cash flows to conform to the Partnership's statement of
cash flows presentation.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(I) Represents proceeds from the sale of the 1998 Dispositions, as if these
dispositions occurred on January 1, 1997.
P-30
<PAGE> 1404
(J) Represents the use of cash to purchase the 1998 Acquisitions and the
Probable Purchases, as if these acquisitions occurred on January 1, 1997.
(K) Represents cash payments for capital improvements of $300 per unit on the
1997 Acquisitions, the 1998 Acquisitions and the Probable Purchases.
(L) Represents notes payable assumed in connection with the 1998 Acquisitions
and the Probable Purchases, assuming these transactions occurred January 1,
1997.
(M) Represents net principal repayments assuming the 1998 Acquisitions, the
1998 Dispositions, the Probable Purchases, the 1998 Stock Offerings and the
Preferred Partnership Unit Offering occurred January 1, 1997.
(N) Represents cash proceeds from the 1998 Stock Offerings, as if these
offerings occurred on January 1, 1997.
(O) Represents contributions from minority interests assuming the Preferred
Partnership Unit Offering occurred January 1, 1997.
(P) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(Q) Represents distributions paid on the 1997 Stock Offerings as if these
occurred on January 1, 1997.
(R) Represents distributions paid to limited partners on OP Units issued in
connection with the 1997 Acquisitions, the 1998 Acquisitions and the
Probable Purchases, as if the issuance of the OP Units occurred on January
1, 1997.
(S) Represents preferred unit distributions paid on the Class B Preferred
Stock, the Class C Preferred Stock and the 1998 Stock Offerings as if these
occurred on January 1, 1997.
(T) Represents historical distributions of $2,000 and pro forma distributions
on the shares issued in the NHP Merger as if these shares had been issued
on January 1, 1997.
(U) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(V) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-31
<PAGE> 1405
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE AMBASSADOR PURCHASE PRICE IFG AS IFG MERGER
HISTORICAL(A) PURCHASE(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 56,269 $ 3,432 $ (2,382) $ 4,255 $ (36,338) $ 7,679
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 67,344 7,512 7,520 1,420 14,890 25,478
(Gain) loss on disposition of
properties..................... (2,783) 2,783 -- -- (6,576) 6,576
Minority interests.............. 1,052 (160) 252 (252) 14,159 (6,622)
Equity in earnings of
unconsolidated partnerships.... 5,078 -- 71 -- (13,492) 18,577
Equity in earnings of
unconsolidated subsidiaries.... (8,413) -- -- -- -- --
Non-cash compensation........... -- -- -- -- 796 --
Changes in operating assets and
operating liabilities.......... (67,722) -- 5,948 -- (7,775) --
--------- -------- -------- ------- --------- --------
Total adjustments............ (5,444) 10,135 13,791 1,168 2,002 44,009
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) operating activities... 50,825 13,567 11,409 5,423 (34,336) 51,688
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... (63,839) 63,839(H) -- -- 27,122 --
Additions to real estate.......... (47,878) (1,198)(I) (17,759) -- 9,309 --
Proceeds from sale of property and
investments held for sale....... 19,627 (19,627)(J) -- -- (35) --
Additions to property held for
sale............................ (1,986) -- -- -- -- --
Purchase of general and limited
partnership interests........... (27,016) -- -- -- 17,420 --
Purchase of/additions to notes
receivable...................... (72,445) -- -- -- (27,589) --
Proceeds from repayments/sale of
notes receivable................ 21,562 -- -- -- 21,185 --
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 513 -- 1,063 -- 22,053 --
Payment of trust based preferred
dividends....................... -- -- -- -- (7,415) --
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... 4,492 -- -- -- 13,423 --
Contribution to unconsolidated
subsidiaries.................... (13,032) -- -- -- -- --
Purchase of investments held for
sale............................ (4,935) -- -- -- -- --
Redemption of OP Units............ (516) -- -- -- -- --
Merger costs...................... -- -- -- -- (1,402) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) investing activities... (185,453) 43,014 (16,696) -- 74,071 --
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. 77,489 -- 37,162 -- 177,234 --
Principal repayments on secured
notes payable................... (56,262) -- -- -- 4,239 --
Principal advances on secured
tax-exempt bond financing....... -- -- 21,784 -- -- --
Principal repayments on secured
tax-exempt bond financing....... (1,436) -- -- -- -- --
Net borrowings/repayments on
secured short-term financing.... (30,693) 209,027(K) (43,002) -- -- --
Net borrowings (paydowns) on the
revolving credit facilities..... -- -- 2,513 -- -- --
Principal repayments on unsecured
short-term notes payable........ -- -- -- -- 2,644 --
Payment of loan costs, net of
proceeds from interest rate
hedge........................... (5,727) -- -- -- (83) --
Proceeds from issuance of common
stock and preferred stock,
net............................. 253,239 (253,239)(L) -- -- -- --
Repurchase of common stock........ (10,972) -- -- -- -- --
Proceeds from exercises of
employee stock options and
warrants........................ -- -- 9,761 -- 6,533 --
Principal repayments received on
notes due from Officers......... 8,084 -- -- -- -- --
Payments of distributions to
minority interests.............. -- (2,034)(M) -- -- -- --
Payment of distributions.......... (73,322) -- -- (3,701)(P) (8,606) (22,360)(Q)
Payment of distributions to
limited partners................ (10,251) (1,919)(N) -- (5)(P) (494) --
Payment of preferred unit
distributions................... (10,916) (16,094)(O) -- -- -- --
Proceeds from issuance of High
Performance Units............... 1,988 -- -- -- -- --
Net transactions with
Insignia/ESG.................... -- -- -- -- (241,003) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) financing activities... 141,221 (64,259) 28,218 (3,706) (59,536) (22,360)
--------- -------- -------- ------- --------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. 6,593 (7,678) 22,931 1,717 (19,801) 29,328
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 37,088 (10,125) 4,448 (5,017) 83,632 (35,598)
--------- -------- -------- ------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 43,681 $(17,803) $ 27,379 $(3,300) $ 63,831 $ (6,270)
========= ======== ======== ======= ========= ========
<CAPTION>
IFG
REORGANIZATION PRO
ADJUSTMENTS(G) FORMA
-------------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 8,578 $ 41,493
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... (22,641) 101,523
(Gain) loss on disposition of
properties..................... -- --
Minority interests.............. -- 8,429
Equity in earnings of
unconsolidated partnerships.... -- 10,234
Equity in earnings of
unconsolidated subsidiaries.... 7,562 (851)
Non-cash compensation........... -- 796
Changes in operating assets and
operating liabilities.......... -- (69,549)
-------- ---------
Total adjustments............ (15,079) 50,582
-------- ---------
Net cash provided by (used
in) operating activities... (6,501) 92,075
-------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... -- 27,122
Additions to real estate.......... -- (57,526)
Proceeds from sale of property and
investments held for sale....... -- (35)
Additions to property held for
sale............................ -- (1,986)
Purchase of general and limited
partnership interests........... -- (9,596)
Purchase of/additions to notes
receivable...................... -- (100,034)
Proceeds from repayments/sale of
notes receivable................ -- 42,747
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... -- 23,629
Payment of trust based preferred
dividends....................... -- (7,415)
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... -- 17,915
Contribution to unconsolidated
subsidiaries.................... -- (13,032)
Purchase of investments held for
sale............................ -- (4,935)
Redemption of OP Units............ -- (516)
Merger costs...................... -- (1,402)
-------- ---------
Net cash provided by (used
in) investing activities... -- (85,064)
-------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. -- 291,885
Principal repayments on secured
notes payable................... -- (52,023)
Principal advances on secured
tax-exempt bond financing....... -- 21,784
Principal repayments on secured
tax-exempt bond financing....... -- (1,436)
Net borrowings/repayments on
secured short-term financing.... -- 135,332
Net borrowings (paydowns) on the
revolving credit facilities..... -- 2,513
Principal repayments on unsecured
short-term notes payable........ -- 2,644
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (5,810)
Proceeds from issuance of common
stock and preferred stock,
net............................. -- --
Repurchase of common stock........ -- (10,972)
Proceeds from exercises of
employee stock options and
warrants........................ -- 16,294
Principal repayments received on
notes due from Officers......... -- 8,084
Payments of distributions to
minority interests.............. -- (2,034)
Payment of distributions.......... -- (107,989)
Payment of distributions to
limited partners................ -- (12,669)
Payment of preferred unit
distributions................... -- (27,010)
Proceeds from issuance of High
Performance Units............... -- 1,988
Net transactions with
Insignia/ESG.................... -- (241,003)
-------- ---------
Net cash provided by (used
in) financing activities... -- 19,578
-------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (6,501) 26,589
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... (18,728) 55,700
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $(25,229) $ 82,289
======== =========
</TABLE>
P-32
<PAGE> 1406
- ---------------
(A) Represents the Partnership's unaudited consolidated statement of cash flows
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1998 Stock Offerings; (ii) the 1998 Acquisitions;
(iii) the Probably Purchases; (iv) the 1998 Dispositions and (v) the
Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of cash flows of Ambassador
for the four months ended April 20, 1998. Certain reclassifications have
been made to Ambassador's historical statement of cash flows to conform to
the Partnership's statement of cash flows presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ (36,017) $ 4,718 $ (5,039) $(36,338)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 27,685 48 (12,843) 14,890
Gain on disposition of property......................... (5,888) (688) -- (6,576)
Minority interests...................................... 14,159 -- -- 14,159
Equity in earnings of unconsolidated partnerships....... (12,169) -- (1,323) (13,492)
Non-cash compensation................................... 796 -- -- 796
Changes in operating assets and liabilities............. (18,853) (1,499) 12,577 (7,775)
--------- -------- --------- --------
Total adjustments................................... 5,730 (2,139) (1,589) 2,002
--------- -------- --------- --------
Net cash provided by (used in) operating
activities........................................ (30,287) 2,579 (6,628) (34,336)
--------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... (3,804) -- 30,926 27,122
Additions to real estate.................................. (2,252) (25) 11,586 9,309
Proceeds from sales of property and investments held for
sale.................................................... -- 161 (196) (35)
Purchase of general and limited partnership interests..... (44,270) -- 61,690 17,420
Purchases of / additions to notes receivable.............. (17,107) (15,407) 4,925 (27,589)
Proceeds from repayments/sale of notes receivable......... 151 23,672 (2,638) 21,185
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 21,360 -- 693 22,053
Payment of trust based preferred dividends................ (7,415) -- -- (7,415)
Cash received in connection with AMIT Merger.............. 13,423 -- -- 13,423
Merger costs.............................................. (1,402) -- -- (1,402)
--------- -------- --------- --------
Net cash provided by (used in) investing
activities........................................ (41,316) 8,401 106,986 74,071
--------- -------- --------- --------
</TABLE>
P-33
<PAGE> 1407
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(I) MERGER(II) SPIN-OFF(III) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 186,000 -- (8,766) 177,234
Principal repayments on secured notes payable............. (1,874) -- 6,113 4,239
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (83) -- -- (83)
Proceeds from exercises of employee stock options and
warrants................................................ 6,533 -- -- 6,533
Payment of distributions.................................. (6,541) (2,065) -- (8,606)
Payment of distributions minority interests............... (494) -- -- (494)
Net transactions with Insignia/ESG........................ (118,424) -- (122,579) (241,003)
--------- -------- --------- --------
Net cash provided by (used in) financing
activities........................................ 67,761 (2,065) (125,232) (59,536)
--------- -------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (3,842) 8,915 (24,874) (19,801)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 88,847 3,947 (9,162) 83,632
--------- -------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 85,005 $ 12,862 $ (34,036) $ 63,831
========= ======== ========= ========
</TABLE>
- ---------------
(i)Represents the unaudited consolidated statement of cash flows of IFG
for the nine months ended September 30, 1998. Certain reclassifications
have been made to IFG's historical statement of cash flows to conform
to the Partnership's statement of cash flows presentation. In addition,
the cash and cash equivalents at the beginning of the period has been
adjusted.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock. In addition, the cash and cash equivalents at the beginning of
the period has been adjusted.
(F) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(H) Represents adjustment to remove the use of cash to purchase the 1998
Acquisitions, as if these acquisitions occurred on January 1, 1997;
therefore, the purchases are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(I) Represents cash payments for capital improvements of $300 per unit on the
1998 Acquisitions.
(J) Represents adjustment to remove the proceeds from the sale of the 1998
Dispositions, as if these dispositions occurred on January 1, 1997;
therefore, the proceeds are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(K) Represents adjustment to remove net principal repayments assuming the 1998
Acquisitions, the 1998 Dispositions and the 1998 Stock Offerings occurred
January 1, 1997; therefore, the repayments are included on the Pro Forma
Consolidated Statement of Cash Flows for the year ended December 31, 1997.
(L) Represents adjustment to remove cash proceeds from the 1998 Stock
Offerings, as if these offerings occurred on January 1, 1997; therefore,
the repayments are included on the Pro Forma Consolidated Statement of Cash
Flows for the year ended December 31, 1997.
P-34
<PAGE> 1408
(M) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(N) Represents distributions paid to limited partners on OP Units issued in
connection with the 1998 Acquisitions and the Probable Purchases, as if the
issuance of the OP Units occurred on January 1, 1997.
(O) Represents preferred unit distributions paid on the 1998 Stock Offerings as
if these occurred on January 1, 1997.
(P) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(Q) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-35
<PAGE> 1409
PRO FORMA FINANCIAL INFORMATION OF
AIMCO PROPERTIES, L.P.
(EXCHANGE OFFERS)
INTRODUCTION
AIMCO Properties L.P. (the "Partnership") intends to offer to purchase
limited partnership interests in syndicated real estate limited partnerships in
which AIMCO holds partnership interests. The Partnership, is subject to
applicable law, plans to offer to purchase certain of such limited partnership
interests in exchange for (i) equity securities of the Partnership; (ii) cash or
(iii) a combination of such equity securities and cash. Such offers are expected
to include terms that will allow limited partners to continue to hold their
limited partnership interests.
The following Pro Forma Consolidated Balance Sheet (Exchange Offers) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) all the
transactions discussed in the Pro Forma Financial Statements (Insignia Merger)
appearing elsewhere herein; and (ii) the acceptance of exchange offers by
limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) all
the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1998: (i)
all the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The Pro Forma Financial Information (Exchange Offers) is based, in part, on
the historical financial statements of the partnerships in which the Exchange
Offers are made. The Pro Forma Financial Information (Exchange Offers) is also
based, in part, on the Pro Forma Financial Information (Insignia Merger) of the
Partnership included elsewhere herein. Such pro forma information is based in
part upon: (i) the audited Consolidated Financial Statements of Insignia for the
year ended December 31, 1997; (ii) the audited Consolidated Financial Statements
of Angeles Mortgage Investment Trust ("AMIT") for the year ended December 31,
1997; (iii) the unaudited Consolidated Financial Statements of Insignia for the
nine months ended September 30, 1998; and (iv) the unaudited Consolidated
Financial Statements of AMIT for the period from January 1, 1998 to September
17, 1998. The Pro Forma Financial Information (Insignia Merger) is also based,
in part, upon: (i) the audited Consolidated Financial Statements of Ambassador
for the year ended December 31, 1997; (ii) the audited Consolidated Financial
Statements of the Partnership for the year ended December 31, 1997; (iii) the
unaudited Consolidated Financial Statements of Ambassador for the four months
ended April 30, 1998; (iv) the unaudited Consolidated Financial Statements of
the Partnership for the nine months ended September 30, 1998; and (v) the
historical financial statements of certain properties and companies acquired by
AIMCO filed in AIMCO's Current Reports on Form 8-K, dated April 16, 1997, May 5,
1997, June 3, 1997, September 19, 1997, October 15, 1997, December 1, 1997 and
November 2, 1998. The following Pro Forma Financial Information (Exchange
Offers) should be read in conjunction with such financial statements and notes
thereto.
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared under the assumption that after the exchange offers are accepted, AIMCO
will own varying ownership percentages of each partnership, and that the limited
partners will choose to elect to receive 35% of the consideration in the form of
equity securities of AIMCO Properties, L.P. and 65% of the consideration in the
form of cash. The
P-36
<PAGE> 1410
interest to be acquired in each of the partnerships, the estimated purchase
price for each partnership, including cash, common units, or preferred units is
summarized below:
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Angeles Income Properties, Ltd. II.................... 26.70 $ 4,946 $ 3,215 $1,731
Angeles Income Properties, Ltd. III................... 30.63 2,156 1,401 755
Angeles Income Properties, Ltd. IV.................... 18.64 1,154 750 404
Angeles Income Properties, Ltd. 6..................... 37.29 4,523 2,940 1,583
Angeles Opportunity Properties, Ltd................... 37.94 1,729 1,124 605
Angeles Partners VII.................................. 24.86 610 397 213
Angeles Partners VIII................................. 24.80 0 0 0
Angeles Partners IX................................... 18.92 1,171 761 410
Angeles Partners X.................................... 22.97 709 461 248
Angeles Partners XI................................... 21.83 205 133 72
Angeles Partners XII.................................. 11.89 2,877 1,870 1,007
Angeles Partners XIV.................................. 24.93 0 0 0
Baywood Partners, Ltd................................. 25.00 347 226 121
Brampton Associates Partnership....................... 25.00 382 248 134
Buccaneer Trace Limited Partnership................... 25.00 2 1 1
Burgundy Court Associates, L.P........................ 25.00 1,074 698 376
Calmark/Fort Collins, Ltd............................. 25.00 192 125 67
Calmark Heritage Park II Ltd.......................... 25.00 47 31 16
Casa Del Mar Associates Limited Partnership........... 21.16 503 327 176
Catawba Club Associates, L.P.......................... 25.00 85 55 30
Cedar Tree Investors Limited Partnership.............. 25.00 1,037 674 363
Century Properties Fund XVI........................... 12.52 831 540 291
Century Properties Fund XVIII......................... 13.08 474 308 166
Century Properties Fund XIX........................... 15.30 1,765 1,147 618
Century Properties Growth Fund XXII................... 21.43 4,977 3,235 1,742
Chapel Hill, Limited.................................. 21.15 569 370 199
Chestnut Hill Associates Limited Partnership.......... 26.75 1,582 1,028 554
Coastal Commons Limited Partnership................... 25.00 566 368 198
Consolidated Capital Institutional Properties/2 &
Consolidated Capital Equity Properties/2............ 18.98 7,320 4,758 2,562
Consolidated Capital Institutional Properties/3....... 16.37 6,770 4,401 2,369
Consolidated Capital Properties III................... 13.02 1,134 737 397
Consolidated Capital Properties IV.................... 18.04 9,407 6,112 3,295
Consolidated Capital Properties V..................... 16.69 560 364 196
Consolidated Capital Properties VI.................... 25.82 556 361 195
DFW Apartment Investors Limited Partnership........... 35.65 2,719 1,767 952
DFW Residential Investors Limited Partnership......... 37.60 1,092 710 382
Davidson Diversified Real Estate I, L.P............... 34.78 627 408 219
Davidson Diversified Real Estate II, L.P.............. 35.11 1,318 857 461
Davidson Diversified Real Estate III, L.P............. 21.76 0 0 0
Davidson Growth Plus, L.P............................. 23.91 2,304 1,498 806
Davidson Income Real Estate, L.P...................... 30.81 2,691 1,749 942
Drexel Burnham Lambert Real Estate Associates II...... 19.58 994 646 348
Four Quarters Habitat Apartment Associates, Ltd....... 25.00 174 113 61
Fox Strategic Housing Income Partners................. 33.18 2,414 1,569 845
Georgetown of Columbus Associates, L.P................ 25.00 227 148 79
HCW Pension Real Estate Fund Limited Partnership...... 32.64 2,368 1,539 829
Investors First-Staged Equity......................... 49.00 306 199 107
Johnstown/Consolidated Income Partners................ 25.66 1,871 1,216 655
La Colina Partners, Ltd............................... 25.00 583 379 204
Lake Eden Associates, L.P............................. 25.00 632 411 221
Landmark Associates, L.P.............................. 25.00 48 31 17
</TABLE>
P-37
<PAGE> 1411
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Minneapolis Associates II Limited Partnership......... 25.00 $ 2 $ 1 $ 1
Multi-Benefit Realty Fund "87-1-Class A & Class B..... 21.89 1,657 1,077 580
National Property Investors 8......................... 11.13 988 642 346
Northbrook Apartments, Ltd............................ 25.00 209 136 73
Olde Mill Investors Limited Partnership............... 8.75 170 111 59
Orchard Park Apartments Limited Partnership........... 25.00 1 1 0
Park Town Place Associates Limited Partnership........ 24.70 298 194 104
Quail Run Associates, L.P............................. 25.00 487 317 170
Ravensworth Associates Limited Partnership............ 25.00 1 1 0
Rivercreek Apartments Limited Partnership............. 25.00 180 117 63
Rivercrest Apartments, Limited........................ 25.00 1,687 1,097 590
Riverside Park Associates L.P......................... 13.69 590 384 206
Salem Arms of Augusta Limited Partnership............. 25.00 278 181 97
Shaker Square, L.P.................................... 23.75 631 410 221
Shannon Mannor Apartments, Limited Partnership........ 25.00 1,170 761 409
Sharon Woods, L.P..................................... 22.75 499 324 175
Shelter Properties III................................ 15.20 1,960 1,274 686
Shelter Properties IV................................. 50.52 12,764 8,295 4,469
Shelter Properties VI................................. 13.78 1,919 1,247 672
Shelter Properties VII Limited Partnership............ 26.65 1,975 1,284 691
Snowden Village Associates, L.P....................... 25.00 443 288 155
Springhill Lake Investors Limited Partnership......... 11.84 2,908 1,890 1,018
Sturbrook Investors, Ltd.............................. 25.00 377 245 132
Sycamore Creek Associates, L.P........................ 25.00 1 1 0
Texas Residential Investors Limited Partnership....... 18.45 1,147 746 401
Thurber Manor Associates, Limited Partnership......... 25.00 218 142 76
U.S. Realty Partners Limited Partnership.............. 25.00 1,441 937 504
United Investors Growth Properties.................... 39.01 165 107 58
United Investors Growth Properties II................. 25.00 351 228 123
United Investors Income Properties.................... 23.44 1,977 1,285 692
Villa Nova, Limited Partnership....................... 25.00 228 148 80
Walker Springs, Limited............................... 23.99 95 62 33
Wingfield Investors Limited Partnership............... 25.00 179 116 63
Winrock-Houston Limited Partnership................... 13.60 1,041 677 364
Winthrop Apartment Investors Limited Partnership...... 31.60 1,318 857 461
Winthrop Growth Investors 1 Limited Partnership....... 27.94 1,233 801 432
Winthrop Texas Investors Limited Partnership.......... 5.27 158 103 55
Woodmere Associates, L.P.............................. 25.00 280 182 98
Yorktown Towers Associates............................ 25.00 809 526 283
-------- ------- ------
Total (See adjustment C to the Pro Forma Consolidated
Balance Sheet)...................................... $122,463 $79,601 42,862
======== ======= ======
</TABLE>
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
Exchange Offers, the 1997 Acquisitions, the 1998 Acquisitions and the Probable
Purchases are adjusted to estimated fair market value, based on preliminary
estimates, which are subject to change as additional information is obtained.
The allocations of purchase costs are subject to final determination based upon
estimates and other evaluations of fair market value. Therefore, the allocations
reflected in the following unaudited Pro Forma Financial Information (Exchange
Offers) may differ from the amounts ultimately determined.
P-38
<PAGE> 1412
The following unaudited Pro Forma Financial Information (Exchange Offers)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions, results of
operations or cash flows. In the opinion of the Partnership's management, all
material adjustments necessary to reflect the effects of these transactions have
been made.
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (EXCHANGE OFFERS)
AS OF SEPTEMBER 30, 1998
ASSETS
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C>
Real estate....................................... $2,625,822 $ 12,764(C)
26,954(D)
13,655(E) $2,679,195
Property held for sale............................ 42,212 -- 42,212
Investments in and notes receivable from
unconsolidated subsidiaries..................... 186,277 -- 186,277
Investments in and notes receivable from
unconsolidated partnerships..................... 924,309 109,699(C)
(13,655)(E)
(8,161)(F)
816(G) 1,013,008
Mortgage notes receivable......................... 20,916 -- 20,916
Cash and cash equivalents......................... 104,955 2,620(D) 107,575
Restricted cash................................... 84,526 1,807(D) 86,333
Accounts receivable............................... 27,900 1,081(D) 28,981
Deferred financing costs.......................... 21,835 -- 21,835
Goodwill.......................................... 251,024 -- 251,024
Property management contracts..................... 38,371 -- 38,371
Other assets...................................... 82,670 422(D) 83,092
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
LIABILITIES AND PARTNERS' CAPITAL
Secured notes payable............................. $ 926,246 $ 23,642(D) $ 949,888
Secured tax-exempt bond financing................. 399,925 -- 399,925
Secured short-term financing...................... 32,691 -- 32,691
Unsecured short-term financing.................... 300,000 79,601(C) 379,601
Accounts payable, accrued and other liabilities... 248,253 826(D) 249,079
Security deposits and deferred income............. 13,171 255(D) 13,426
---------- -------- ----------
1,920,286 104,324 2,024,610
Minority interests................................ 79,431 816(G) 80,247
Company obligated mandatorily redeemable
convertible securities of a subsidiary trust.... 149,500 -- 149,500
Redeemable common partnership units............... 277,581 8,161(D)
(8,161)(F)
30,616(C) 308,197
Redeemable preferred partnership units............ -- 12,246(C) 12,246
Partner's capital
General and Special Limited Partner............. 1,496,457 -- 1,496,457
Preferred Units................................. 487,562 -- 487,562
---------- -------- ----------
1,984,019 -- 1,984,019
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
P-39
<PAGE> 1413
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical balance sheet data as of September 30, 1998 (unaudited) related
to the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Real estate................................................. $1,082,652
Cash........................................................ 151,024
Total assets................................................ 1,493,409
Mortgages payable........................................... 1,585,196
Partners' capital (deficit)................................. (171,740)
</TABLE>
(C) Represents the purchase price paid by the Partnership to the limited
partners in order to obtain additional ownership by AIMCO in 91 real estate
partnerships. For the purposes of the pro-forma presentation, it is
assumed: (i) 65% of the purchase price is funded with cash by drawing down
on the Partnership's unsecured short term credit facility; (ii) 25% of the
purchase price is funded by the issuance of 749,362 OP Units at $40 per OP
Unit; and (iii) 10% of the purchase price is funded by the issuance of 8%
Preferred OP Units.
(D) Represents historical balance sheet data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(E) Represent the adjustment to real estate recorded in the IFG Merger related
to the one real estate partnership that will be consolidated as a result of
the Partnership's purchase of additional partnership interests.
(F) Represents the elimination of the partners' capital in the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(G) Represents minority interest of the one real estate partnership that will
be consolidated as a result of the Partnership's purchase of additional
partnership interests.
P-40
<PAGE> 1414
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations.............. $ 431,256 $ 11,270(C) $ 442,526
Property operating expenses....................... (182,830) (6,612)(C) (189,442)
Owned property management expense................. (11,831) -- (11,831)
Depreciation...................................... (96,264) (2,589)(C) (98,853)
--------- -------- ---------
Income from property operations................... 140,331 2,069 142,400
--------- -------- ---------
Management fees and other income.................. 41,676 -- 41,676
Management and other expenses..................... (23,683) -- (23,683)
Corporate overhead allocation..................... (588) -- (588)
Amortization...................................... (26,480) -- (26,480)
--------- -------- ---------
Income from service company business.............. (9,075) -- (9,075)
Minority interest in service company business..... (10) -- (10)
--------- -------- ---------
Partnership's share of income from service company
business........................................ (9,085) -- (9,085)
--------- -------- ---------
General and administrative expenses............... (21,371) -- (21,371)
Interest expense.................................. (113,788) (5,691)(D)
(2,220)(C) (121,699)(H)
Interest income................................... 21,734 21,734
Minority interests................................ (9,983) (51)(E) (10,034)
Equity in losses of unconsolidated partnerships... (27,537) (16,864)(F)
483(G) (43,918)(I)
Equity in earnings of Unconsolidated
Subsidiaries.................................... 5,848 -- 5,848
--------- -------- ---------
Net income (loss)................................. (13,851) (22,274) (36,125)(H)
Income attributable to Preferred Unitholders...... 42,174 980 43,154(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders...... (56,025) $(23,254) $ (79,279)(H)
========= ======== =========
Basic earnings (loss) per OP Unit................. (.83) $ (1.16)(H)
========= =========
Diluted earnings (loss) per OP Unit............... $ (.83) $ (1.16)(H)
========= =========
Weighted average OP Units outstanding............. 67,522 68,287
========= =========
Weighted average OP Units and equivalents
outstanding..................................... 68,366 69,131
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $456,968
Operating expense........................................... 249,097
Depreciation................................................ 87,344
Interest.................................................... 138,778
Net income.................................................. 15,005
</TABLE>
P-41
<PAGE> 1415
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $10,740 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $6,124 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net loss,
preferred unit distributions, and net loss per OP Unit in the event that
the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- --------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense......... $(121,699) $(124,763) $(116,008) $(116,008)
Net loss................. (36,125) (39,189 (30,434) (30,434)
Preferred unit
distributions.......... 43,154 42,174 42,174 51,971
Net loss attributable to
OP Unitholders......... (79,279) (81,363) (72,608) (82,405)
Net loss per OP Unit..... (1.16) (1.20) (1.03) (1.22)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................. $ 1,137 $ 1,245 $ 938 $ 938
Net loss................... (37,262) (40,434) (31,372) (31,372)
Net loss attributable to OP
Unitholders.............. (80,416) (82,608) (73,546) (83,343)
Net loss per OP Unit....... (1.18) (1.22) (1.04) (1.23)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, the Partnership will own 49%
of certain 88 Partnerships, 25% of two Partnerships, and 100% of one
Partnership. The amount included in the pro forma financial statements
assume an acceptance rate of 100%. The following table shows the effect on
equity in earnings of unconsolidated partnerships, net loss, net loss
attributable to OP Unitholders, and net loss per OP Unit in the event that
the Partnership will have an acceptance rate of 50% of the interests
tendered and will own varying percentages of each partnership:
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(36,510)
Net loss.................................................... (26,084)
Net loss attributable to OP Unitholders..................... (68,784)
Net loss per OP Unit........................................ (1.01)
</TABLE>
P-42
<PAGE> 1416
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-43
<PAGE> 1417
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations............... $ 337,307 $ 8,654(C) $ 345,961
Property operating expenses........................ (131,851) (4,389)(C) (136,240)
Owned property management expense.................. (8,933) -- (8,933)
Depreciation....................................... (78,479) (1,941)(C) (80,420)
--------- -------- ---------
Income from property operations.................... 118,044 2,324 120,368
--------- -------- ---------
Management fees and other income................... 28,912 -- 28,912
Management and other expenses...................... (14,386) -- (14,386)
Corporate overhead allocation...................... (196) -- (196)
Amortization....................................... (15,243) -- (15,243)
--------- -------- ---------
Income from service company business............... (913) -- (913)
Minority interest in service company business...... -- -- --
--------- -------- ---------
Partnership's share of income from service company
business......................................... (913) -- (913)
--------- -------- ---------
General and administrative expenses................ (8,632) -- (8,632)
Interest expense................................... (85,010) (4,250)(D)
(1,630)(C) (90,890)(H)
Interest income.................................... 40,887 40,887
Minority interests................................. (8,429) (119)(E) (8,548)
Equity in losses of unconsolidated partnerships.... (10,234) (13,156)(F)
41(G) (23,349)(I)
Equity in earnings of Unconsolidated
Subsidiaries..................................... 851 -- 851
Amortization of goodwill........................... (5,071) -- (5,071)
--------- -------- ---------
Net income (loss).................................. 41,493 (16,790) 24,703(H)
Income attributable to Preferred Unitholders....... 32,414 735 33,149(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders....... $ 9,079 $(17,525) $ (8,446)(H)
========= ======== =========
Basic earnings (loss) per OP Unit.................. $ .13 $ (.12)(H)
========= =========
Diluted earnings (loss) per OP Unit................ $ .13 $ (.12)(H)
========= =========
Weighted average OP Units outstanding.............. 68,554 69,319
========= =========
Weighted average OP Units and equivalents
outstanding...................................... 69,218 69,983
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data (unaudited) for the nine months ended September
30, 1998 related to the 91 real estate partnerships is as follows (dollars
in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $338,937
Operating expense........................................... 182,529
Depreciation................................................ 64,127
Interest.................................................... 103,756
Net income.................................................. (9,329)
</TABLE>
P-44
<PAGE> 1418
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $8,552 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $4,604 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net
income, preferred unit distributions, and net loss per OP Unit in the event
that the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense........... $(90,890) $(93,184) $(86,640) $(86,640)
Net income................. 24,703 22,409 28,953 28,953
Preferred unit
distributions............ 33,149 32,414 32,414 39,762
Net loss attributable to OP
Unitholders.............. (8,446) (10,005) (3,461) (10,809)
Net loss per OP Unit....... (.12) (.15) (.05) (.16)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- ------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................... $ 851 $ 931 $ 702 $ 702
Net income................... 24,703 21,478 28,251 28,251
Net loss attributable to OP
Unitholders................ (9,296) (10,936) (4,163) (11,511)
Net loss per OP Unit......... (.13) (.16) (.06) (.17)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, AIMCO will own 49% of certain
88 Partnerships, 25% of two Partnerships, and 100% of one Partnership. The
following table shows the effect on equity in earnings of unconsolidated
partnerships, net income, net income (loss) attributable to OP Unitholders,
and net loss per OP Unit in the event the Partnership will own varying
percentages of each partnership.
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(17,797)
Net income.................................................. 32,216
Net income (loss) attributable to OP Unitholders............ (593)
Net income (loss) per OP Unit............................... (.01)
</TABLE>
P-45
<PAGE> 1419
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-46
<PAGE> 1420
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ (13,851) $(22,274)(C) $ (36,125)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 128,169 2,589(D) 130,758
Gain on investments..................................... (12) -- (12)
(Gain) loss on disposition of properties................ (3,882) -- (3,882)
Minority interests...................................... 9,983 51 10,034
Equity in earnings of unconsolidated partnerships....... 27,537 16,864(E)
(483)(F) 43,918
Equity in earnings of unconsolidated subsidiaries....... (5,848) -- (5,848)
Extraordinary (gain) loss on early extinguishment of
debt.................................................. --
Changes in operating assets and operating liabilities... 519 (660)(G) (141)
---------- -------- ----------
Total adjustments................................... 156,466 18,361 174,827
---------- -------- ----------
Net cash provided by (used in) operating
activities........................................ 142,615 (3,913) 138,702
Net cash used in discontinued operations............ (7,999) -- (7,999)
---------- -------- ----------
Net cash provided by (used in) continuing
operations........................................ 134,616 (3,913) 130,703
---------- -------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate......................... 41,419 -- 41,419
Purchase of real estate................................... (625,603) -- (625,603)
Additions to real estate, investments and property held
for sale................................................ (55,892) (1,024)(G) (56,916)
Proceeds from sale of property held for sale.............. 303 -- 303
Purchase of general and limited partnership interests..... (276,458) (79,601)(H) (356,059)
Purchase of management contracts.......................... (48,554) -- (48,554)
Purchase of/additions to notes receivable................. (81,670) -- (81,670)
Proceeds from repayments of notes receivable.............. 10,052 -- 10,052
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 94,686 10,070(I) 104,756
Contribution to unconsolidated subsidiaries............... (42,879) -- (42,879)
Proceeds from sale of securities.......................... 642 -- 642
Purchase of investments held for sale..................... (73) -- (73)
Purchase of NHP........................................... (60,575) -- (60,575)
Purchase of Ambassador common stock....................... (19,881) -- (19,881)
---------- -------- ----------
Net cash used in investing activities............... (1,064,483) (70,555) (1,135,038)
---------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 761,270 -- 761,270
Principal repayments on secured notes payable............. (307,917) (713)(G) (308,630)
Proceeds from secured short-term financing................ 19,050 79,601(H) 98,651
Repayments on secured short-term financing................ (259,461) -- (259,461)
Principal repayments on unsecured short-term notes
payable................................................. (50,879) -- (50,879)
Proceeds (payoff) from unsecured short-term financing..... (12,500) -- (12,500)
Principal repayments on secured tax-exempt bond
financing............................................... (1,487) -- (1,487)
Net borrowings (paydowns) on the Company's revolving
credit facilities....................................... (162,008) -- (162,008)
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (17,032) -- (17,032)
Proceeds from issuance of common and preferred stock,
net..................................................... 1,098,265 -- 1,098,265
Proceeds from exercises of employee stock options and
warrants................................................ 11,553 -- 11,553
Repurchase of common stock................................ (3,283) -- (3,283)
Principal repayments received on notes due from
Officers................................................ 27,280 -- 27,280
Investments made by minority interests.................... 249 -- 249
Receipt of contributions from minority interests.......... 37,345 -- 37,345
Payments of distributions to minority interests........... (2,713) -- (2,713)
Payment of distributions.................................. (130,657) -- (130,657)
Payment of distributions to limited partners.............. (5,208) (1,415)(J) (6,623)
Payment of preferred unit distributions................... (42,984) (979)(K) (43,963)
Payment of distributions to minority interests............ (21,788) -- (21,788)
Net transactions with Insignia/ESG........................ (57,612) -- (57,612)
---------- -------- ----------
Net cash provided by financing activities........... 879,483 76,494 955,977
---------- -------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (50,384) 2,026 (48,358)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 117,896 2,291 120,187
---------- -------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 67,512 $ 4,317 $ 71,829
========== ======== ==========
</TABLE>
P-47
<PAGE> 1421
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 65,372
Cash used in investing activities......................... (11,713)
Cash used in financing activities......................... (74,617)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the cash portion of the purchase price (and additional
borrowings by the Partnership) related to the acquisition by the
Partnership of additional limited partnership interests in 91 real estate
limited partnerships.
(I) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(J) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.85 per Common OP Unit.
(K) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-48
<PAGE> 1422
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ 41,493 $(16,790)(C) $ 24,703
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 101,523 1,941(D) 103,464
(Gain) loss on disposition of properties................ -- -- --
Minority interests...................................... 8,429 119 8,548
Equity in earnings of unconsolidated partnerships....... 10,234 13,156(E)
(41)(F) 23,349
Equity in earnings of unconsolidated subsidiaries....... (851) -- (851)
Non-cash compensation................................... 796 -- 796
Changes in operating assets and operating liabilities... (69,549) (21)(G) (69,570)
--------- -------- ---------
Total adjustments................................... 50,582 15,154 65,736
--------- -------- ---------
Net cash provided by operating activities........... 92,075 (1,636) 90,439
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... 27,122 -- 27,122
Additions to real estate.................................. (57,526) (668)(G) (58,194)
Proceeds from sale of property and investments held for
sale.................................................... (35) -- (35)
Additions to property held for sale....................... (1,986) -- (1,986)
Purchase of general and limited partnership interests..... (9,596) -- (9,596)
Purchase of/additions to notes receivable................. (100,034) -- (100,034)
Proceeds from repayments/sale of notes receivable......... 42,747 -- 42,747
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 23,629 5,809(H) 29,438
Payment of trust based preferred dividends................ (7,415) -- (7,415)
Cash received in connection with Ambassador Merger and
AMIT Merger............................................. 17,915 -- 17,915
Contribution to unconsolidated subsidiaries............... (13,032) -- (13,032)
Purchase of investments held for sale..................... (4,935) -- (4,935)
Redemption of OP Units.................................... (516) -- (516)
Merger costs.............................................. (1,402) -- (1,402)
--------- -------- ---------
Net cash used in investing activities............... (85,064) 5,141 (79,923)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 291,885 -- 291,885
Principal repayments on secured notes payable............. (52,023) -- (52,023)
Principal advances on secured tax-exempt bond financing... 21,784 -- 21,784
Principal repayments on secured tax-exempt bond
financing............................................... (1,436) -- (1,436)
Net borrowings/ repayments on secured short-term
financing............................................... 135,332 -- 135,332
Net borrowings (paydowns) on the revolving credit
facilities.............................................. 2,513 (812)(G) 1,701
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (5,810) -- (5,810)
Proceeds from issuance of common stock and preferred
stock, net.............................................. -- -- --
Repurchase of common stock................................ (10,972) -- (10,972)
Proceeds from exercises of employee stock options and
warrants................................................ 16,294 -- 16,294
Principal repayments received on notes due from
Officers................................................ 8,084 -- 8,084
Receipt of contributions from minority interests.......... -- -- --
Payments of distributions to minority interests........... (2,034) (2,034)
Payment of distributions.................................. (107,989) -- (107,989)
Payment of distributions to limited partners.............. (12,669) (1,291)(I) (13,960)
Payment of preferred unit distributions................... (27,010) (735)(J) (27,745)
Proceeds from issuance of High Performance Units.......... 1,988 -- 1,988
Net transactions with Insignia/ESG........................ (241,003) -- (241,003)
--------- -------- ---------
Net cash provided by financing activities........... 19,578 (2,838) 16,740
--------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 26,589 667 27,256
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 55,700 4,316 60,016
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 82,289 $ 4,983 $ 87,272
========= ======== =========
</TABLE>
P-49
<PAGE> 1423
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the nine months ended September 30, 1998
related to the 91 real estate partnerships is as follows (dollars in
thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 76,113
Cash used in investing activities......................... (22,616)
Cash used in financing activities......................... (42,273)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 30 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(I) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.6875 per Common OP Unit.
(J) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-50
<PAGE> 1424
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: Coastal Commons L.P.
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
Coastal Commons L.P. (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 limited partnership interests in the Partnership (the "Units") will be
acquired by the Purchaser in exchange for an offer price per Unit of $11,312 in
cash, or 300.50 Common OP Units of the Purchaser, of 452.50 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 financial statements for the years ended
December 31, 1996 and 1997, and the quarterly report for the period ending
September 30, 1998, which the Partnership's management has indicated to be
the most current available financial statements;
3. Reviewed descriptive information concerning the real property owned
by the Partnership (the "Property"), including location, number of units
and unit mix, age, amenities and land acreage;
4. Reviewed summary historical operating statements for the Property,
for the years ended December 31, 1996 and 1997, and the nine months ending
September 30, 1998;
A-1
<PAGE> 1425
5. Reviewed the 1998 operating budget for the Property prepared by the
Partnership's management. Such budgets are summarized in the Prospectus
Supplement under the section "Stanger Analysis -- Summary of Materials
Considered";
6. Reviewed the estimate of liquidation value and going concern value
provided by the general partner to Stanger. Such estimates are described in
the Prospectus Supplement under the section "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration." In
addition, we reviewed the 1998 operating budgets for each property provided
by the Partnership;
7. Discussed with management market conditions for the Property;
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 Property and the Partnership; the physical condition
of the Property including any deferred maintenance; and other factors
influencing value of the Property and the Partnership;
8. Performed a site inspection of the Property;
9. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Property, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Property;
10. Reviewed information provided by the Company relating to debt
encumbering the Property; and
11. 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 Property, the allocation of net
Partnership values between the General Partner and Limited Partners, and the
transaction costs and fees associated with a sale of the Property. 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 Property 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 Property 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 Partnership's present capitalization or distribution policy; or
any other material changes in the Partnership's structure or business.
A-2
<PAGE> 1426
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
March , 1999
A-3
<PAGE> 1427
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 directors
of AIMCO are set forth below. The two directors of AIMCO-GP are Terry Considine
and Peter Kompaniez. The two directors of the general partner of your
partnership are Peter K. Kompaniez and Patrick J. Foye. The two executive
officers of the general partner of your partnership are Patrick J. Foye,
Executive Vice President, and Timothy R. Garrick, Vice President -- Accounting.
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
Paul J. McAuliffe............................ Executive Vice President -- Capital Markets
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
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
</TABLE>
B-1
<PAGE> 1428
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
B.A. from Harvard College, a J.D. from Harvard Law School
and is admitted as a member of the Massachusetts Bar.
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.
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
</TABLE>
B-2
<PAGE> 1429
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
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.
Paul J. McAuliffe.................... Mr. McAuliffe was appointed Executive Vice
President -- Capital Markets in February 1999. Prior to
joining AIMCO, Mr. McAuliffe was Senior Managing Director of
Secured Capital Corp and prior to that time had been a
Managing Director of Smith Barney, Inc. from 1993 to 1996,
where he was a key member of the underwriting team that led
AIMCO's initial public offering in 1994. Mr. McAuliffe was
also a Managing Director and head of the real estate group
at CS First Boston from 1990 to 1993 and he was a Principal
in the real estate group at Morgan Stanley & Co., Inc. from
1983 to 1990. Mr. McAuliffe received a B.A. from Columbia
College and an MBA from University of Virginia, Darden
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
</TABLE>
B-3
<PAGE> 1430
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
and the Apartment Association of Metro Denver. Mr. Ira
received a B.S. from Metropolitan State College in 1975.
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.
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,
</TABLE>
B-4
<PAGE> 1431
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Mr. Martin is a director of Dresser, which is engaged in the
petroleum services, hydrocarbon and engineering industries.
Timothy R. Garrick................... Mr. Garrick has been Vice President -- Accounting of the
general partner and AIMCO since October 1, 1998. Prior to
that date, Mr. Garrick served as Vice
President -- Accounting Services of Insignia Financial Group
from June 1997 until October 1998. From 1992 until June of
1997, Mr. Garrick served as Vice President of Partnership
Accounting for Insignia Financial Group. From 1987 to 1990,
Mr. Garrick served as Investment Advisor for U.S. Shelter
Corporation. From 1984 to 1987, Mr. Garrick served as
Partnership Investment Analyst for U.S. Shelter Corporation.
From 1979 to 1984, Mr. Garrick worked on the audit staff of
Ernst & Whinney. Mr. Garrick received his B.S. Degree from
the University of South Carolina in 1979 and is a certified
public accountant.
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> 1432
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
By Fax:
(201) 896-0910
<PAGE> 1433
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 26, 1999)
AIMCO Properties, L.P.
is offering to acquire units of limited partnership interest of
Four Quarters Habitat Apartments Associates, Ltd.
in exchange for your choice of:
603.75 of our 8.0% Class Two Partnership Preferred Units;
185.50 of our Partnership Common Units; or
$15,090 in cash.
Generally, you will not recognize any immediate taxable gain or loss if you
exchange your units solely for our securities. However, you will recognize
taxable gain or loss if you exchange your units for cash.
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 the offer
consideration from a financial point of view.
Our offer consideration will be reduced for any distributions subsequently
made by your partnership prior to the expiration of our offer.
We will only accept a maximum of 25% 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.
You will not pay any fees or commissions if you tender your units.
Our offer and your withdrawal rights will expire at 5:00 p.m., New York
City time, on June 4, 1999, unless we extend the deadline. You may withdraw any
tendered units at any time before we have accepted them for payment.
SEE "RISK FACTORS" BEGINNING ON PAGE S-23 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF RISK FACTORS THAT
YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration of $15,090 per unit without any
arms-length negotiations. Accordingly, our offer consideration may not
reflect the fair market value of your units. Stanger, in rendering its
fairness opinion, determined that the going concern value of your
partnership units was $16,272 per unit.
- We cannot predict when the property owned by your partnership may be
sold.
- Your general partner is a subsidiary of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- We are making this offer with a view to making a profit and 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.
- Continuation of your partnership will result in our affiliates continuing
to receive management fees from your partnership, which would not be
payable if your partnership was liquidated.
- It is possible that we may conduct a subsequent offer at a higher price
more than one year after expiration of this offer.
- Unlike your partnership, our policy is to reinvest proceeds from the sale
of our properties or refinancing of our indebtedness.
- We may change our investment, acquisition or financing policies without a
vote of our securityholders.
- If you acquire our securities, your investment will change from holding an
interest in a single property to holding an interest in our large
portfolio of properties, thereby fundamentally changing the nature of your
investment.
- Recently, Moody's Investors Service revised its outlook for AIMCO's
ratings from stable to negative.
- There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
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.
March 26, 1999
<PAGE> 1434
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY........................................ S-1
The Offer.................................... S-1
The AIMCO Operating Partnership.............. S-1
Affiliation with your General Partner........ S-1
Risk Factors................................. S-1
Background and Reasons for the Offer......... S-6
Valuation of Units........................... S-9
Fairness of the Offer........................ S-10
Stanger Analysis............................. S-11
Your Partnership............................. S-11
Terms of the Offer........................... S-12
Federal Income Tax Consequences.............. S-14
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-14
Comparison of Your Units and AIMCO OP Units.. S-14
Conflicts of Interest........................ S-15
Source and Amount of Funds and Transactional
Expenses................................... S-16
Summary Financial Information of AIMCO
Properties, L.P............................ S-17
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-19
Summary Financial Information of Four
Quarters Habitat Apartment Associates
Ltd........................................ S-21
Comparative Per Unit Data.................... S-21
THE AIMCO OPERATING PARTNERSHIP................ S-22
RISK FACTORS................................... S-23
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-23
Offer Consideration Not Based on Third
Party Appraisal or Arms-Length
Negotiation.............................. S-23
Offer Consideration May Not Represent Fair
Market Value............................. S-23
Offer Consideration Does Note Reflect
Future Prospects......................... S-23
Offer Consideration Based on Our Estimate
of Liquidation Proceeds.................. S-23
Offer Consideration May Be Less Than
Liquidation Value........................ S-23
Holding Units May Result in Greater Future
Value.................................... S-23
Conflicts of Interest with Respect to the
Offer.................................... S-23
Conflicts of Interest Relating to
Management Fees.......................... S-24
Possible Subsequent Offer at a Higher
Price.................................... S-24
Possible Recognition of Taxable Gain on a
Sale of Your Units....................... S-24
Fairness Opinion of Third Party Relied on
Information We Provided.................. S-24
Loss of Future Distributions from Your
Partnership.............................. S-24
Possible Effect of the Other Exchange
Offers on Us............................. S-25
Lack of Availability of Audited Financial
Statements............................... S-25
Potential Delay in Payment................. S-25
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-25
Fundamental Change in Nature of
Investment............................... S-25
Fundamental Change in Number of Properties
Owned.................................... S-25
Lack of Trading Market for OP Units........ S-25
Uncertain Future Distributions............. S-26
Possible Reduction in Required
Distributions on Preferred OP Units...... S-26
Possible Redemption Price of Preferred
Stock.................................... S-26
Possible Recognition of Taxable Gains on OP
Units.................................... S-26
Limitations on Effecting a Change of
Control.................................. S-26
Limitation on Transfer of OP Units......... S-26
Limited Voting Rights of Holders of OP
Units.................................... S-26
Market Prices for AIMCO's Securities May
Fluctuate................................ S-26
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Litigation Associated with Partnership
Acquisitions............................. S-26
Dilution of Interests of Holders of OP
Units.................................... S-27
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-27
Possible Increase in Control of Your
Partnership by Us........................ S-27
Recognition of Gain Resulting from Possible
Future Reduction in Your Partnership
Liabilities.............................. S-27
Possible Termination of Your Partnership
for Federal Income Tax Purposes.......... S-27
Risk of Inability to Transfer Units for
12-Month Period.......................... S-27
Possible Change in Time Frame Regarding
Sale of Property......................... S-27
Balloon Payments........................... S-28
SPECIAL FACTORS TO CONSIDER.................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-28
Background of the Offer...................... S-28
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
Disadvantages of the Offer................... S-32
VALUATION OF UNITS............................. S-34
FAIRNESS OF THE OFFER.......................... S-36
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-36
Fairness to Unitholders who Tender their
Units...................................... S-37
Fairness to Unitholders who do not Tender
their Units................................ S-38
Comparison of Consideration to Alternative
Consideration.............................. S-38
Allocation of Consideration.................. S-41
STANGER ANALYSIS............................... S-42
Experience of Stanger........................ S-42
Summary of Materials Considered.............. S-42
Summary of Reviews........................... S-44
Conclusions.................................. S-46
Assumptions, Limitations and
Qualifications............................. S-46
Compensation and Material Relationships...... S-47
YOUR PARTNERSHIP............................... S-48
General...................................... S-48
Your Partnership and its Property............ S-48
Property Management.......................... S-48
Investment Objectives and Policies; Sale or
Financing of Investments................... S-48
Capital Replacement.......................... S-49
Borrowing Policies........................... S-49
Competition.................................. S-50
Legal Proceedings............................ S-50
History of the Partnership................... S-50
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-50
Distributions and Transfers of Units......... S-50
Beneficial Ownership of Interests in Your
Partnership................................ S-51
Compensation Paid to the General Partner and
its Affiliates............................. S-51
SELECTED FINANCIAL INFORMATION OF YOUR
PARTNERSHIP.................................. S-52
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP.......................... S-53
THE OFFER...................................... S-56
Terms of the Offer; Expiration Date.......... S-56
Acceptance for Payment and Payment for
Units...................................... S-56
</TABLE>
i
<PAGE> 1435
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Procedure for Tendering Units................ S-57
Withdrawal Rights............................ S-60
Extension of Tender Period; Termination;
Amendment.................................. S-60
Proration.................................... S-61
Fractional OP Units.......................... S-61
Future Plans of the AIMCO Operating
Partnership................................ S-61
Voting by the AIMCO Operating Partnership.... S-62
Dissenters' Rights........................... S-62
Conditions of the Offer...................... S-62
Effects of the Offer......................... S-64
Certain Legal Matters........................ S-65
Fees and Expenses............................ S-66
Accounting Treatment......................... S-67
FEDERAL INCOME TAX CONSEQUENCES................ S-68
Tax Opinions................................. S-68
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-69
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-70
Disguised Sales.............................. S-70
Tax Consequences of Exchanging Units Solely
for Cash................................... S-71
Adjusted Tax Basis........................... S-71
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-71
Passive Activity Losses...................... S-72
Tax Reporting................................ S-72
Foreign Offerees............................. S-72
Tax Consequences to Non-Tendering and
Partially-Tendering Offerees............... S-72
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-74
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-81
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
DESCRIPTION OF PREFERRED OP UNITS.............. S-87
General...................................... S-87
Ranking...................................... S-87
Distributions................................ S-87
Allocation................................... S-88
Liquidation Preference....................... S-88
Redemption................................... S-89
Voting Rights................................ S-89
Restrictions on Transfer..................... S-90
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-90
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-92
CONFLICTS OF INTEREST.......................... S-96
Conflicts of Interest with Respect to the
Offer...................................... S-96
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-96
Competition Among Properties................. S-96
Features Discouraging Potential Takeovers.... S-96
Future Exchange Offers....................... S-97
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-97
LEGAL MATTERS.................................. S-98
INDEX TO FINANCIAL STATEMENTS.................. F-1
PRO FORMA FINANCIAL INFORMATION OF AIMCO
PROPERTIES, L.P. ............................ P-1
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> 1436
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- 603.75 of our Class Two Partnership Preferred Units;
- 185.50 of our Partnership Common Units; or
- $15,090 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 accept a maximum of 25% of the outstanding units in response to our
offer. Our offer is not subject to any minimum number of units being tendered.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline.
The original offer price per unit in 1983 was $85,500. For the five years
ended December 31, 1998, your partnership paid no distributions.
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-GP, Inc. ("AIMCO GP") acts as the sole general
partner of the AIMCO Operating Partnership. As of December 31, 1998, AIMCO-GP
and AIMCO-LP, Inc., a limited partner of the AIMCO Operating Partnership (the
"Special Limited Partner"), owned approximately an 83% interest in the AIMCO
Operating Partnership. As of December 31, 1998, our portfolio of owned or
managed properties included 379,363 apartment units in 2,147 properties located
in 49 states, the District of Columbia and Puerto Rico. Based on apartment unit
data compiled by the National Multi Housing Council, we believe that we are one
of the largest owners and managers of multifamily apartment properties in the
United States. As of December 31, 1998, we:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 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. and our February 26, 1999 merger with Insignia Properties Trust, we
acquired a 100% ownership interest in the general partner of your partnership,
MAERIL, Inc., and the company that manages the property owned by your
partnership.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-25 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the
S-1
<PAGE> 1437
risks associated with our offer and the disadvantages of the offer to you and
should be considered when you review "Summary -- Background and Reasons for the
Offer -- Expected Benefits of the Offer":
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. We did not use any third-party appraisal or valuation to determine
the value of any property owned by your partnership. We established the terms of
our offer, including the exchange ratios and the cash consideration, without any
arms-length negotiations.
OFFER CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimated your property to be worth $14,048,000, less
approximately $730,932 of deferred maintenance and investment. It is possible,
that a sale of the property could result in your receiving more per unit than in
our offer. Even if our cash offer consideration is equal to liquidation value,
if you accept OP Units, you may not ultimately receive an amount equal to the
cash offer consideration when you sell such OP Units or any AIMCO Securities you
may receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
value if you retain your units until your partnership is liquidated.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of ours and, therefore, has substantial conflicts of interest with
respect to our offer. We are making this offer with a view to making a profit.
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 RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its property, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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
S-2
<PAGE> 1438
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.
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. You
should review "Federal Income Tax Consequences" 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. 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.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is our subsidiary).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. For any units that we
acquire from you, you will not receive any future distributions from your
partnership's operating cash flow or upon a sale of property owned by your
partnership or a refinancing of any of its debt. If you tender your units in
exchange for OP Units, you will be entitled to future distributions from us from
our operating cash flow and upon a dissolution, liquidation or wind-up of the
AIMCO Operating Partnership.
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from a sale of a property or a refinancing of its indebtedness, to (ii)
a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of 2030 to a much larger partnership with a
partnership termination date of 2093.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you tender your units
for our OP Units, you will have changed your investment from an interest in a
partnership that owns and manages one property to an interest in a partnership
that invests in and manages a large portfolio of properties.
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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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE LOWER DISTRIBUTIONS. The Preferred OP Units provide for annual
distributions of $2.00 per unit and no more. Current annualized distributions
with respect to the Common OP Units are $2.50 per unit. This is equivalent to
distributions of $1,207.50 per year on the number of Preferred OP Units, or
distributions of $463.75 per year on the number of Common OP Units, that you
would receive in exchange for each of your partnership's units. During 1998,
your partnership paid no cash distributions per unit. Therefore, distributions
with respect to the Preferred OP Units and Common OP Units may be substantially
less, immediately following our offer, than the distributions with respect to
your units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus.
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions.
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MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a result, we may incur costs associated with defending or settling such
litigation or paying any judgment if we lose. As of the present time, no limited
partners of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. As a result of the
offer, we may increase our ability to influence voting decisions with respect to
your partnership. However, we will not be able to control voting decisions
unless we acquire more units in another transaction, which cannot take place for
at least one year after expiration of this offer. Also, removal of your general
partner (which is our subsidiary) or the manager of any property owned by your
partnership may become more difficult or impossible without our consent or
approval.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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 Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of units without the
consent of your general partner (which is our subsidiary). Such consent may be
withheld by your general partner in its sole discretion. Your general partner
may withhold its consent if such transfer would result in the termination of
your partnership for tax purposes which would occur if 50% or more of the total
interest in your partnership is transferred within a 12-month period. If we
acquire a significant percentage of the interest in your partnership, your
general partner may not consent to a transfer for a 12-month period following
our offer.
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<PAGE> 1441
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investment in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to have to
hold the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns one property. The general partner of your partnership
continually considers whether the property should be sold or otherwise disposed
of after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for your partnership. We cannot
predict when the property will be sold or otherwise disposed of. However, there
is no current plan or intention to sell the property in the near future.
BALLOON PAYMENTS. Your partnership has approximately $10,650,252 of balloon
payments due on its mortgage debt in October, 2001. Your partnership will have
to refinance such debt or sell its property prior to the balloon payment dates,
or it will be in default and could lose the property to foreclosure.
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 51% ownership interest in Insignia Properties Trust, which has
a 100% ownership interest in the general partner of your partnership and the
company that manages the property owned by your partnership. On February 26,
1999, we acquired the remaining 49% interest in Insignia Properties Trust in a
merger transaction. One of the consequences of the merger with Insignia is to
allow us to make the offer and, if successful, to increase our ownership in 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 August 28, 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
(which is our subsidiary):
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.
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
S-6
<PAGE> 1442
without the offer. 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. Your partnership's mortgage notes are
due in October, 2001 and require balloon payments of $10,650,252. Your
partnership currently has adequate sources of cash to finance its
operations on both a short term and long term basis but will have to sell
its property or refinance its indebtedness to pay such balloon payments. In
addition, continuation of your partnership without the offer would deny you
and your partners the benefits that your general partner (which is our
subsidiary) 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. There is currently no market
for the Preferred OP Units or Common OP Units.
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 Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the NYSE.
- Preferred Quarterly Distributions. Your partnership paid no distributions
for the fiscal year ended December 31, 1998. Holders of Preferred OP
Units will be entitled to receive quarterly distributions of $0.50 per
unit (equivalent to $2.00 on an annualized basis) before any
distributions are paid to holders of Common OP Units. This is equivalent
to a distribution of $1,207.50 per year on the number of Preferred OP
Units you will receive in exchange for each of your partnership 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 Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- Quarterly Distributions. Your partnership paid no distributions for the
fiscal year ended December 31, 1998. In 1998, we paid quarterly
distributions on the Common OP Units totalling $2.25 per unit. In January
1999, we increased our distribution rate on each of the Common OP Units
to $2.50 on an annual basis. See "The AIMCO Operating Partnership."
Assuming no change in the level of our
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<PAGE> 1443
distributions, this is equivalent to a distribution of $463.75 per year
on the number of Common OP Units you will receive in exchange for each of
your partnership units.
- 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 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.
Disadvantages of the Offer.
The principal disadvantages of the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and determining the offer consideration, no one separately represented
the interests of the limited partners. Although we have a fiduciary duty
to the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of such property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pretax cash proceeds to you than our
offer.
- OP Units. OP Units lack a public market, have transfer restrictions and
must be held for one year before they can be redeemed by a holder. The
ultimate return on the OP Units is directly tied to the future price of
AIMCO's Class A Common Stock or Class I Preferred Stock. You could
ultimately receive less for your OP Units than the cash price in our
offer. Further, on or after March 1, 2005, we may redeem the Class I
Preferred Stock for $25 per share.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
a sale of the property would be advantageous given market conditions, the
condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of the property and the tax consequences to you
and your partners upon a sale of the property.
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
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<PAGE> 1444
VALUATION OF UNITS
We determined the offer consideration by estimating the value the property
owned by your partnership using the direct capitalization method. This method
involves applying a capitalization rate to your partnership's annual property
income. A capitalization rate is a percentage (rate of return), commonly applied
by purchasers of residential real estate to property income to determine the
present value of income property. The lower the capitalization rate utilized the
higher the value produced, and the higher the capitalization rate utilized the
lower the value produced. We used your partnership's property income for the
fiscal year ended December 31, 1997. However, in determining the appropriate
capitalization rate, we considered the property's net operating income since
December 31, 1997. Our method for selecting a capitalization rate begins with
each property being assigned a location and condition rating (e.g., "A" for
excellent, "B" for good, "C" for fair, and "D" for poor). We have rated your
property's location B (good) and its condition B (good). Generally, we assign an
initial capitalization rate of 10.25% to properties in this category. We then
adjust the capitalization rate based on whether the mortgage debt that the
property is subject to bears interest at a rate above or below 7.5% per annum.
Generally, for every 0.5% in excess of 7.5%, the capitalization rate would be
increased by 0.25%. Your property's mortgage debt bears interest at 9.80% per
annum, which resulted in an increase from the initial capitalization rate of
1.25%. We also considered any changes in your partnership's property income from
1997 to 1998. Because your partnership's property income in 1998 increased
compared to 1997, we further revised the capitalization rate downward by
approximately 0.87%, resulting in a final capitalization rate of 10.63%. The
evaluation of a property's location and condition, and the determination of an
appropriate capitalization rate for a property, is subjective in nature, and
others evaluating the same property might use a different capitalization rate
and derive a different property value. 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. Further, in applying the direct capitalization method,
others may make different assumptions and obtain different results. 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>
Property income............................................. $ 1,493,000
Capitalization rate......................................... 10.63%
------------
Gross valuation of partnership property..................... $ 14,048,000
Plus: Cash and cash equivalents............................. 145,164
Plus: Other partnership assets, net of security deposits.... 316,899
Less: Mortgage debt, including accrued interest............. (10,722,392)
Less: Accounts payable and accrued expenses................. (125,302)
Less: Other liabilities..................................... (574,650)
------------
Partnership valuation before taxes and certain costs........ 3,087,719
Less: Disposition fees...................................... 526,800
Less: Extraordinary capital expenditures for deferred
maintenance............................................... (730,932)
Less: Closing costs......................................... 351,200
------------
Estimates net valuation of your partnership................. 1,478,787
Percentage of estimated net valuation allocated to holders
of units.................................................. 100%
------------
Estimated net valuation of units............................ 1,478,787
Total number of units............................. 98.0
------------
Estimated valuation per unit................................ $ 15,090
============
Cash consideration per unit................................. $ 15,090
============
</TABLE>
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<PAGE> 1445
In order to determine the number of Preferred OP Units we are offering for
each of your units, we divided the cash offer consideration of $15,090 by the
$25 liquidation preference of each Preferred OP Unit to get 432.25 Preferred OP
Units per unit.
In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $15,090 by a
price of $37.63 (the average closing price of AIMCO's Class A Common Stock on
the NYSE for the 30 trading days ended March 23, 1999) to get 185.50 Common OP
Units per unit.
FAIRNESS OF THE OFFER
Fairness to Unitholders. Your general partner is our subsidiary. 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. Your general partner did not participate in the structuring of the
offer. We and your general partner believe that the offer and all forms of
consideration offered is fair to you and the other limited partners of your
partnership. 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 (which is our subsidiary) 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 (which is our subsidiary) has compared our offer consideration
to:
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated;
- your general partner's estimate of the going concern value of your
partnership if it continued operating as an independent stand-alone
entity and
- the net book value of your partnership.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C> <C>
Cash offer consideration.................................... $ 15,090
Partnership Preferred Units................................. 15,090
Partnership Common Units.................................... 15,090
Alternatives:
Estimated liquidation proceeds............................ $ 15,090
Estimated going concern value(1).......................... $ 13,597
Estimated alternative going concern value(2).............. 11,344
Net book value (deficit).................................. $(62,098)
</TABLE>
- ---------------
(1) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(2) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
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<PAGE> 1446
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 a single apartment 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. Stanger has
rendered similar fairness opinions with regard to the other tender offers being
made by the AIMCO Operating Partnership. Stanger rendered the opinions only as
to the individual fairness of the offer consideration in each proposed exchange
offer.
YOUR PARTNERSHIP
Your Partnership and its Property. Four Quarters Habitat Apartment
Associates, Ltd. is a Florida limited partnership which was formed on May 11,
1983 for the purpose of owning and operating a single apartment property located
in Miami, Florida, known as "Four Quarters Habitat." Four Quarters Habitat
consists of 336 apartment units. Your partnership has no employees. As of
September 30, 1998, there were 100 units of limited partnership interest issued
and outstanding, which were held of record by 98 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.
Your partnership sold 8,550,080 limited partnership units in 1983. Between
January 1, 1993 and December 31, 1998 your partnership paid no cash
distributions. Your partnership currently owns one property.
Property Management. Your partnership's property has been managed by an
affiliate of ours. 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.
Investment Objectives and Policies; Sale or Financing of Investments. Under
your partnership's agreement of limited partnership, your partnership is not
permitted to raise new capital or reinvest cash in new properties. Your
partnership will terminate on December 31, 2030, unless earlier dissolved. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership property within any specified time period. An
investment in your partnership is a finite life investment in which partners
receive regular cash distributions out of your partnership's distributable cash
flow, if any, and upon liquidation.
Borrowing Policies. Your partnership's agreement of limited partnership
allows your partnership to incur debt. As of December 31, 1998, your partnership
had a mortgage note outstanding of $10,593,171, payable to LP Commercial Conduct
Mfg. Trust, which bears interest at the rate of 9.84%. The mortgage debt is due
on October, 2001. Your partnership also has a second mortgage note outstanding
of 350,000, on the same terms as the current mortgage note. Your partnership's
agreement of limited partnership also allows your general partner to lend funds
to your partnership. As of December 31, 1998, the general partner of your
partnership has no loan outstanding to your partnership.
Transfers. Your units are not listed on any national securities exchange or
quoted on NASDAQ, and there is no established public trading market for the
units. Secondary sales activity for the units has been limited and sporadic.
Your general partner monitors transfers of the units (i) because the admission
of the transferee as a substitute limited partner in your partnership requires
the consent of your general partner under your partnership agreement, and (ii)
in order to track compliance with applicable safe harbor provisions to avoid
treatment as a "publicly traded partnership" for tax purposes. However, your
general partner does not
S-11
<PAGE> 1447
monitor or regularly receive or maintain information regarding the prices at
which secondary sale transactions in the units have been effectuated.
TERMS OF THE OFFER
General. We are offering to acquire up to 25% of the outstanding 98 units
of your partnership, which we do not directly or indirectly own, for
consideration per unit of 603.75 Preferred OP Units, 185.50 Common OP Units, or
$15,090 in cash. If you tender units pursuant to the offer, you may choose 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 Preferred OP Units, 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 January 1, 1999,
although you will be entitled to retain any distributions you may have received
after such date and prior to our commencement of this offer.
If you accept our offer and do not specify the consideration you desire on
the letter of transmittal, we will issue you Preferred OP Units.
Expiration Date. Our offer will expire at 5:00 P.M., New York City time, on
June 4, 1999, 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.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds 25% 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 their acceptance for payment as provided for herein.
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 Common OP Units or 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.
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
S-12
<PAGE> 1448
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
The offer may be extended or delayed indefinitely, during which time you
will not receive payment for any tendered units.
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 any property owned by
your partnership's because your general partner (which is our subsidiary) and
the property manager will remain unchanged. If we borrow funds for the cash
consideration for these offers, our interest costs would increase which could
adversely affect our future earnings. If all units in this and our other
contemplated offers were purchased for cash and we borrowed all the funds, at
current interest rates, our interest expense would increase by $3,064,000 per
year.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
number of units pursuant to our offer, we may be in a position to influence or
control voting decisions with respect to your partnership. However, we will not
be able to control voting decisions unless we acquire more units in another
transaction, which cannot take place for at least one year after expiration of
this offer.
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 (which is our subsidiary),
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 Letter of Transmittal,
and the legal and accounting fees and expenses in connection with the offer. We
will also pay the fees of Stanger for providing the fairness opinion 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 $50,000.
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.
No Dissenters' Rights. You are not entitled to dissenters' (appraisal)
rights in connection with the offer.
Other Offers. The AIMCO Operating Partnership is also making similar
exchange offers to approximately 90 other limited partnerships in which it
controls the general partner, interests in substantially all of which were
acquired in the merger on October 1, 1998 with Insignia Financial Group, Inc.
and the February 26, 1999 merger with Insignia Properties Trust. Each of such
exchange offers is being made by a separate prospectus supplement which is
similar to this Prospectus Supplement. Copies of such prospectus supplements may
be obtained upon written request from the Information Agent at the address set
forth in
S-13
<PAGE> 1449
"-- Information Agent" or on the back cover page of this Prospectus Supplement.
The exchange offers may be different for limited partners in each partnership in
terms of pricing and percentage of units sought, but the effects of the offers
will essentially be the same. In general, we believe that the risk factors
(except for certain tax-related risk factors) described herein for this offer
will also be applicable to the other offers.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer. Its telephone numbers are (888)
349-2005 and (201) 896-1900. Its fax number is (201) 896-0910.
FEDERAL INCOME TAX CONSEQUENCES
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Preferred OP
Units or 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.
THE FOREGOING SUMMARY IS A GENERAL DISCUSSION OF THE MATERIAL 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 "FEDERAL INCOME TAX CONSEQUENCES" 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.
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, your general
partner (which is our subsidiary) 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, Preferred
OP Units and 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.
As of February 19, 1999, the AIMCO Operating Partnership had approximately
9,729,130 Common OP Units outstanding (excluding interests held by AIMCO) and no
Class Two Partnership Preferred Units outstanding. The number of OP Units you
may acquire from us in exchange for your units will represent a lower percentage
of the outstanding limited partnership interests in the AIMCO Operating
Partnership than that of your current ownership interest in your partnership. In
response to our offer, you could elect to receive $15,090 in cash, 603.75
Preferred OP Units or 185.50 Common OP Units. Both your units and the OP Units
are subject to transfer restrictions and it is unlikely that a real trading
market will ever develop for any of such securities. If you subsequently redeem
OP Units for AIMCO Class A Common Stock or Class I Preferred Stock, we can make
no assurance as to the value of such shares of AIMCO stock, at that time, which
may be less than the cash offer price of $15,090.
S-14
<PAGE> 1450
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
our subsidiary 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
both the general partner of your partnership and the manager of your
partnership's property. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $43,107 for the fiscal year ended December 31,
1998. The property manager received management fees of $118,437 for the fiscal
year ended December 31, 1998. We have no current intention of changing the fee
structure for your general partner or the 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.
AIMCO's Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is 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.
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. We might pay a higher price for any future exchange offers we may make
for units of your partnership. In any event, we will not acquire any units for
at least one year after expiration of this offer.
S-15
<PAGE> 1451
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $369,705 will be required to purchase all of
the units sought in our offer, if such units are tendered for cash excluding
expenses. We will obtain all such funds from cash from operations, equity
issuances and short term borrowings. For a detailed description of estimated
expenses to be incurred in the offer, see "Source and Amount of Funds and
Transactional Expenses."
S-16
<PAGE> 1452
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
nine months ended September 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 of the AIMCO Operating Partnership" included in the accompanying
Prospectus. All dollar values are in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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............... $ 265,700 $ 127,083 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses........... (101,600) (50,737) (76,168) (38,400) (30,150) (10,330)
Owned property management expenses.... (7,746) (4,344) (6,620) (2,746) (2,276) (711)
Depreciation.......................... (59,792) (23,848) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
96,562 48,154 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income...... 13,968 9,173 13,937 8,367 8,132 3,217
Management and other expenses......... (8,101) (5,029) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation......... (196) (441) (588) (590) (581) --
Other assets, depreciation and
amortization........................ (3) (236) (453) (218) (168) (150)
Owner and seller bonuses.............. -- -- -- -- -- --
Amortization of management company
goodwill............................ -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
5,668 3,467 2,038 1,707 2,002 1,020
Minority interests in service company
business............................ -- 48 (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business............ 5,668 3,515 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative expenses... (7,444) (1,408) (5,396) (1,512) (1,804) (977)
Interest income....................... 18,244 4,458 8,676 523 658 123
Interest expense...................... (56,756) (33,359) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships........................ (1,052) (777) 1,008 (111) -- --
Equity in losses of unconsolidated
partnerships(c)..................... (5,078) (463) (1,798) -- -- --
Equity in earnings of unconsolidated
subsidiaries(d)..................... 8,413 456 4,636 -- -- --
Amortization of goodwill.............. (5,071) (711) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations................ 53,486 19,865 30,246 15,629 14,988 7,702
Gain on disposition of properties..... 2,783 (169) 2,720 44 -- --
Provision for income taxes............ -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before extraordinary
item................................ 56,269 19,696 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt.............. -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)..................... $ 56,269 $ 19,427 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)............................. 241 109 147 94 56 48
Total owned apartment units (end of
period)............................. 62,955 28,773 40,039 23,764 14,453 12,513
Units under management (end of
period)............................. 154,729 71,038 69,587 19,045 19,594 20,758
Basic earnings per Common OP Unit..... $ 0.80 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP Unit... $ 0.79 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit................................ $ 1.6875 $ 1.3875 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities.......................... 50,825 53,435 73,032 38,806 25,911 16,825
Cash flows used in investing
activities.......................... (185,453) (314,814) (717,663) (88,144) (60,821) (186,481)
Cash flows provided by (used in)
financing activities................ 141,221 293,984 668,549 60,129 30,145 176,800
<CAPTION>
AIMCO PROPERTIES, L.P.
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)
Cash flows provided by (used in)
financing activities................ (1,032) 14,114
</TABLE>
S-17
<PAGE> 1453
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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>
Funds from operations(e)................ $ 132,881 $ 49,692 $ 81,155 $ 35,185 $ 25,285 $ 9,391
Weighted average number of Common OP
Units outstanding..................... 53,007 24,347 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation.......................... $2,685,487 $1,250,239 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation.......................... 2,355,122 1,107,545 1,503,922 745,145 448,425 392,368
Total assets............................ 3,121,949 1,608,195 2,100,510 827,673 480,361 416,361
Total mortgages and notes payable....... 1,275,401 661,715 808,530 522,146 268,692 141,315
Redeemable Partnership Units............ 232,405 178,321 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994 Cumulative
Senior Preferred Units................ -- -- -- -- -- 107,228
Partners' Capital....................... 1,427,087 560,737 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.
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>
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 10, 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
based on the NAREIT definition, as adjusted for the 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 NINE PERIOD
MONTHS ENDED FOR THE YEAR ENDED JANUARY 10,
SEPTEMBER 30, DECEMBER 31, 1994
------------------ --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
-------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $ 56,269 $19,427 $32,697 $15,673 $14,988 $ 7,702
(Gain) loss on disposition of property...................... (2,783) 169 (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 56,900 21,052 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 7,077 711 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 2,689 3,584 -- -- --
Amortization of management contracts...................... 4,201 430 1,587 -- -- --
Deferred taxes............................................ 6,134 2,164 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 17,379 2,781 6,280 -- -- --
Preferred stock dividends................................. (12,296) -- (135) -- (5,169) (3,114)
-------- ------- ------- ------- ------- -------
Funds from operations....................................... $132,881 $49,692 $81,155 $35,185 $25,285 $ 9,391
======== ======= ======= ======= ======= =======
</TABLE>
S-18
<PAGE> 1454
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. (the AIMCO Operating Partnership) for the
nine months ended September 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 NINE
MONTHS FOR THE
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 345,961 $ 442,526
Property operating expenses............................... (136,240) (189,442)
Owned property management expenses........................ (8,933) (11,831)
Depreciation.............................................. (80,420) (98,853)
--------- -----------
120,368 142,400
--------- -----------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 28,912 41,676
Management and other expenses............................. (14,386) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (15,243) (26,480)
--------- -----------
(913) (9,075)
Minority interests in service company business............ -- (10)
--------- -----------
Partnership's shares of income from service company
business............................................... (913) (9,085)
--------- -----------
General and administrative expenses....................... (8,632) (21,371)
Interest expense.......................................... (90,890) (121,699)
Interest income........................................... 40,887 21,734
Minority interest......................................... (8,548) (10,034)
Equity in losses of unconsolidated partnerships........... (23,349) (43,918)
Equity in earnings of unconsolidated subsidiaries......... 851 5,848
Amortization of Goodwill.................................. (5,071) --
--------- -----------
Net income........................................ $ 24,703 $ (36,125)
========= ===========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (.12) $ (1.16)
Diluted earnings (loss) per Common OP Unit.................. $ (.12) $ (1.16)
Distributions paid per Common OP Unit....................... $ 1.69 $ 1.85
Book value per Common OP Unit............................... $ 24.52 $ 26.96
CASH FLOW DATA:
Cash provided by operating activities....................... $ 90,439 $ 130,703
Cash used in investing activities........................... (79,923) (1,135,038)
Cash provided by (used in) financing activities............. 16,740 955,977
OTHER DATA:
Funds from operations(a).................................... $ 187,985 $ 172,733
Weighted average number of Common OP Units outstanding...... 74,946 74,094
</TABLE>
S-19
<PAGE> 1455
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, net of accumulated depreciation................ $2,679,195
Total assets................................................ 4,558,819
Total mortgages and notes payable........................... 1,762,105
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 320,443
Partners' capital........................................... 1,984,019
</TABLE>
- ---------------
(a) 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
based upon the NAREIT definition, as adjusted for the 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.
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss)................................. $ 24,703 $(36,125)
HUD release fee and legal reserve................. -- 10,202
Real estate depreciation, net of minority
interests....................................... 76,521 93,050
Amortization of management contracts.............. 9,593 12,790
Amortization of management company goodwill....... 10,997 12,551
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation........................ -- 1,715
Amortization of management company goodwill..... 959 1,918
Amortization of management contracts............ 23,010 30,516
Deferred taxes.................................. (713) (1,356)
Equity in earnings of other partnerships:
Real estate depreciation........................ 79,559 95,285
Interest on convertible debentures................ (7,537) (10,003)
Preferred unit distributions...................... (29,107) (37,810)
-------- --------
Funds from operations............................. $187,985 $172,733
======== ========
</TABLE>
S-20
<PAGE> 1456
SUMMARY FINANCIAL INFORMATION OF FOUR QUARTERS HABITAT APARTMENTS ASSOCIATES
LTD.
The summary financial information of Four Quarters Habitat Apartments
Associates, Ltd. for the nine months ended September 30, 1998 and 1997 is
unaudited. The summary financial information for Four Quarters Habitat
Apartments Associates, Ltd. for the years ended December 31, 1997 and, 1996 is
based on unaudited financial statements. The December 31, 1995, 1994 and 1993
information is based on unaudited financial information which is not included in
this Prospectus Supplement. This information should be read in conjunction with
such unaudited financial statements, including the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Your Partnership" included herein. See "Index to Financial
Statements."
FOUR QUARTERS HABITAT APARTMENTS ASSOCIATES LTD.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
----------------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- -------- ----------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Total Revenues.................. $ 2,177 $ 2,115 $ 2,920 $ 2,903 $ 2,868 $ 3,045 $ 1,639
Net Income/(Loss)............... $ (233) $ (354) $ (461) $ (514) $ (334) $ (91) $ (432)
Net Income per limited
partnership unit.............. $(2,326.53) $(3,540.82) $(4,612.24) $(5,142.86) $(3,336.73) $(908.16) $(4,316.33)
Distributions per limited
partnership unit.............. -- -- -- -- -- -- --
Distributions per limited
partnership unit (which
represent a return of
capital)...................... -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
---------------------- ----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- --------- ------- --------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and Cash Equivalents................ $ 223 $ 130 $ 145 $ 185 $ 285 $ 405 $ 148
Real Estate, Net of Accumulated
Depreciation........................... $ 8,696 $ 9,171 $ 9,002 $ 9,404 $ 9,826 $ 9,834 $ 10,450
Total Assets............................. $ 9,852 $ 10,346 $ 9,948 $ 10,442 $ 11,056 $ 11,588 $ 12,266
Notes Payable............................ $ 10,615 $ 10,699 $10,678 $ 10,756 $ 10,826 $ 10,890 $ 9,832
General Partners' Capital/ (Deficit)....... $ (1,543) $ (1,536) $(1,538) $ (1,529) $ (1,519) $ (1,512) $ (1,510)
Limited Partners' Capital/ (Deficit)....... $ (163) $ 170 $ 65 $ 517 $ 1,021 $ 1,348 $ 1,437
Partners' Deficit.......................... $ (1,706) $ (1,366) $(1,473) $ (1,012) $ (498) $ (164) $ (73)
Total Distributions........................ $ -- $ -- $ -- $ -- $ -- $ -- $ --
Book value per limited partnership unit.... $(1,663.27) $1,734.69 $663.27 $5,275.51 $10,418.37 $13,755.10 $14,663.27
Net increase (decrease) in cash and cash
equivalents.............................. $ 78 $ (55) $ (40) $ (100) $ (120) $ 257 $ (67)
Net cash provided by operating
activities............................... $ 349 $ 275 $ 318 $ 143 $ 574 $ 510 $ 295
Ratio of earnings to fixed charges......... 0.73/1 0.60/1 0.60/1 0.56/1 0.72/1 0.92/1 0.33/1
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per unit of your
partnership for the year ended December 31, 1998, and the cash distributions
payable on the number of Common OP Units and Preferred OP Units issuable in
exchange therefor:
<TABLE>
<CAPTION>
ANNUAL
DISTRIBUTIONS
-------------
<S> <C>
Units of Four Quarters Habitat Associates .................. $ 0
Equivalent cash distributions on Common OP Units(1)......... $ 463.75
Equivalent cash distributions on Preferred OP Units(2)...... $1,207.50
</TABLE>
- ---------------
(1) Calculated by multiplying the exchange ratio of 185.50 Common OP Units per
unit by the annualized distributions paid on the Common OP Units of $2.50
per unit.
(2) Calculated by multiplying the exchange ratio of 603.75 Preferred OP Units
per unit by the stated annual distribution rate on the Preferred OP Units of
$2.00 per unit.
S-21
<PAGE> 1457
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of AIMCO. AIMCO is a real estate investment
trust that owns and manages multifamily apartment properties throughout the
United States. Through its wholly owned subsidiaries, AIMCO GP, the sole general
partner of the AIMCO Operating Partnership, and the Special Limited Partner, as
of December 31, 1998, AIMCO held approximately an 83% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled by the National
Multi Housing Council, we believe that AIMCO is one of the largest owner and
manager of multifamily apartment properties in the United States, with a total
portfolio of 379,363 apartment units in 2,147 properties located in 49 states,
the District of Columbia and Puerto Rico. As of December 31, 1998, AIMCO:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 apartment properties for third party
owners and affiliates.
AIMCO's Class A Common Stock is listed and traded on the NYSE under the
symbol "AIV." On March 23, 1999, the last reported sale price of AIMCO Class A
Common Stock on the NYSE was $35 3/16. 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 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>
1999
First Quarter (through March 5)......... $41 5/8 $35 3/16 $0.6250 $0.6250
1998
Fourth Quarter.......................... 37 3/8 30 0.5625 0.5625
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>
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.
S-22
<PAGE> 1458
RISK FACTORS
The following sets forth certain risks and disadvantages of the offer and
should be read and considered when reviewing the potential benefits of the offer
set forth in "Background and Reasons for the Offer -- Expected Benefits of the
Offer." In addition, you should review the other risks of investing in us
beginning on page 2 of our accompanying Prospectus.
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. 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. 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. 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 CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimate your property to be worth $14,048,000 less
approximately $730,932 of deferred maintenance. It is possible, that a sale of
the properties could result in you receiving more pretax cash per unit than our
offer. Even if our cash offer consideration is equal to liquidation value, if
you accept OP Units, you may not ultimately receive an amount equal to the cash
offer consideration when you sell such OP Units or any AIMCO securities you may
receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
pretax cash 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.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and the AIMCO Operating Partnership and, therefore, has
substantial conflicts of interest with respect to our offer. We are making this
offer with a view to making a profit. 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. Another conflict is 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. 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.
S-23
<PAGE> 1459
CONFLICTS OF INTERESTS RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its properties, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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 sold. If you exchange your units
for cash and our 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. 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 allocated to such units 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. If you exercise your redemption right with respect to the OP Units
within two years of the date that you transfer your units to the AIMCO Operating
Partnership, your exchange of units for OP Units or OP Units and cash could be
treated as a disguised sale of your units and you would be required to recognize
gain or loss in the year of the exchange on such disguised sale. See "Federal
Income Tax Consequences -- Disguised Sales." 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. 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 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.
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. You
should review "Federal Income Tax Consequences" 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. Because the income tax
consequences of tendering units will not be the same for everyone, you should
consult your own tax advisor before determining whether to tender your units
pursuant to our offer.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is controlled by us).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all right title and interest
in and to all of the units that we accept, and all distributions in
S-24
<PAGE> 1460
respect of such units on or after the date on which we accept such units for
purchase. Accordingly, for any units that we acquire from you, you will not
receive any future distributions from operating cash flow of your partnership or
upon a sale of property owned by your partnership or a refinancing of any of its
debt. If you tender your units in exchange for OP Units, you will be entitled to
future distributions from the operating cash flow of the AIMCO Operating
Partnership and upon a dissolution, liquidation or winding-up of the AIMCO
Operating Partnership. See "Comparison of Your Units and AIMCO OP
Units -- Distributions."
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net loss for the nine months ended September
30, 1998 would have been $24,703,000 instead of $41,493,000, based on the
assumptions included in the Pro Forma Financial Statements. If we borrow funds
for the cash consideration for these offers, our interest costs would increase
which could adversely affect our future earnings. If all units in all the offers
were purchased for cash and we borrowed all the funds, at current interest
rates, our interest expense would increase by $3,064,000 per year. See "Pro
Forma Financial Information of AIMCO Properties, L.P."
LACK OF AVAILABILITY OF AUDITED FINANCIAL STATEMENTS. The unaudited
financial statements of Four Quarters Habitat Apartment Associates, Ltd. have
been prepared from the books and records of the Partnership in accordance with
generally accepted accounting principles. An audit of the Partnership's
financial statements could not be completed because the General Partner does not
have sufficient audit evidence to support the historical capitalized costs of
the Partnership's properties, including the initial purchase, which occurred in
1983. Nevertheless, the General Partner believes that such financial statements
appropriately reflect the financial condition and results of operations of the
Partnership for the periods presented in accordance with generally accepted
accounting principles.
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from the sale of a property or a refinancing of its indebtedness to
(ii) a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of 2030 to a much larger partnership with a
partnership termination date of 2093.
Under the AIMCO Operating Partnership's agreement of limited partnership,
the general partner has the ability, without the concurrence of the limited
partners, to acquire and dispose of properties and to borrow funds. Further,
while it is the intent to distribute net income from operations, sales of
properties and refinancings of indebtedness, the general partner may not make
such distributions. Proceeds of future asset sales or refinancings by the AIMCO
Operating Partnership generally will be reinvested rather than distributed.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you exchange your
units for OP Units, you will have changed your investment from an interest in a
partnership which owns and manages a single property to an interest in the AIMCO
Operating Partnership which 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 and our portfolio of properties as compared to the value of your
units and your partnership.
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.
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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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus. If you
exercise your redemption right with respect to the OP Units within two years of
the date that you transfer your units to the AIMCO Operating Partnership, your
exchange of units for OP Units and cash could be treated as a disguised sale of
your units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as for your partnership), we have acquired the general
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partner of a partnership and then made an offer to acquire the limited partners'
interests in the partnership. There is a risk that we will be 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. As a result, we may incur costs associated with defending
or settling such litigation or paying any judgment if we lose. As of the present
time, no limited partners of your partnership have initiated lawsuits on such
grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. 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. However, we will
not be able to control voting decisions unless we acquire more units in another
transaction, which cannot take place for at least one year after expiration of
this offer. Furthermore, in the event that we acquire a substantial number of
units pursuant to our offer, removal of your general partner (which is our
subsidiary) or the manager of any property owned by your partnership may become
more difficult or impossible without our consent.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of units without the
consent of your general partner (which is our subsidiary). Such consent may be
withheld by your general partner in its sole discretion. Your general partner
may withhold its consent if such transfer would result in the termination of
your partnership for tax purposes which would occur if 50% or more of the total
interest in your partnership is transferred within a 12-month period. If we
acquire a significant percentage of the interest in your partnership, your
general partner may not consent to a transfer for a 12-month period following
our offer.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investments in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to hold
the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns
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one property. The general partner of your partnership continually considers
whether the property should be sold or otherwise disposed of after consideration
of relevant factors, including prevailing economic conditions, availability of
favorable financing and tax considerations, with a view to achieving maximum
capital appreciation for your partnership. We cannot predict when the property
will be sold or otherwise disposed of. However, there is no current plan or
intention to sell the property in the near future.
BALLOON PAYMENTS. Your partnership has approximately $10,650,252 of balloon
payments due on its mortgage debt in October 2001. Your partnership will have to
refinance such debt or sell its property prior to the balloon payment dates, or
it will be in default and could lose the property to foreclosure.
SPECIAL FACTORS TO CONSIDER
In reviewing the offer, you should pay special attention to the information
in the Sections entitled "Background and Reasons for the Offer," "Valuation of
Units," "Fairness of the Offer" and "Stanger Analysis," which contain
information regarding the background and reasons for the offer, the method of
evaluating units in the offer and alternative valuation methods considered, our
view as to the fairness of the offer, and the fairness opinion rendered by
Stanger.
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 liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
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 2% interest, consisting of a 0% limited
partnership interest and a 2% general partnership interest, in your partnership.
On October 31, 1998, IPT and AIMCO entered into an agreement and plan of
merger, dated as of October 1, 1998 (the "IPT Merger Agreement"), pursuant to
which IPT merged with AIMCO on February 26, 1999 (the "IPT Merger"). Upon
consummation of the IPT Merger, each outstanding share of IPT not owned by AIMCO
was converted into the right to receive 0.3601 shares of AIMCO's Class A Common
Stock (approximately 4,180,000 shares in the aggregate).
One of the reasons we chose to acquire Insignia is that we would be able to
make the exchange 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, and would provide the AIMCO Operating Partnership
with a larger asset and capital base and increased diversification. As of the
date of this offering, the AIMCO Operating Partnership proposes to make offers
to approximately 90 of the Insignia Partnerships, including your partnership.
During our negotiations with Insignia in early 1998, we decided that if the
merger with Insignia were consummated, we could also benefit from making offers
for limited partnership interests in the Insignia Partnerships. While some of
the Insignia Partnerships are public partnerships and information is publicly
available on such partnerships for weighing the benefits of making an exchange
offer, many of the partnerships are private partnerships and information about
such partnerships comes principally from the general partner. Our control of the
general partner makes it possible to obtain access to such information. Further,
such
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control also means that we control the operations of the partnerships and their
properties. Insignia did not propose that we conduct such exchange offers,
rather we initiated the offers on our own. We determined in June of 1998 that if
the merger with Insignia were consummated, we would offer to limited partners of
the Insignia Partnerships limited partnership units of the AIMCO Operating
Partnership and/or cash.
In connection with the Insignia Merger we acquired general partnership
interests and certain limited partnership interests in a number of private and
public partnerships. Eight private partnerships out of the 90 partnerships
involved in the proposed exchange offers do not have audited financial
statements prepared in accordance with generally accepted accounting practices
("GAAP"). Certain of these partnerships have audited financial statements
prepared on the basis of federal income taxes and others have unaudited
financial statements which may or may not be prepared on the basis of GAAP or
federal income taxes. For the Insignia Partnerships for which exchange offers
are being made which do not have audited GAAP financial statements for at least
two years, we are making the offer on the basis of either one year of audited
GAAP financial statements and one year of unaudited GAAP financial statements or
just unaudited GAAP financial statements. We tried to obtain two years of
audited GAAP financial statements for all the partnerships for which offers are
being made, but because of the inability to locate records from inception of the
partnerships which would allow auditors to verify the original purchase price of
the properties, no audits were possible. In these cases, the entities which
controlled the general partners prior to Insignia are no longer in business or
have no current knowledge or records of such partnerships. For the same reasons,
we do not have all the records for past years of some of the partnerships.
Therefore, for the partnerships without an audit, we did not have invoices,
escrow statements, property closing statements or the like to support the
original costs of the real property to the satisfaction of independent auditors,
in order for them to render an unqualified audit report. Consequently, we have
no way to support the original cost of the properties. However, we have general
ledgers and related accounting records that enable us to prepare GAAP basis
financial statements. These records were taken from the entities that controlled
the general partners and were subsequently maintained by us. The amount of
capitalized property costs appearing in those books and records has, to our
knowledge, been appropriately rolled forward from year to year and used by the
general partners of the partnerships in question to prepare tax returns and
periodic reports to the investors in the partnerships. Therefore, we believe
that the unaudited financial statements included in the prospectus supplements
for such partnerships have been prepared in accordance with GAAP.
In acquiring Insignia and the interests in the Insignia Partnerships, we
conducted due diligence with regard to certain of the assets acquired including
the major properties held by the Insignia Partnerships. Our due diligence
focused on the condition of the major properties and the terms of the
partnership agreements. Since Insignia had audited GAAP financial statements and
since those partnerships without audited GAAP financial statements are generally
smaller, we did not focus on the issue of audited GAAP based financial
statements for the smaller partnerships at the time of the merger. Further, for
our internal due diligence use, audited tax based financial statements are also
used. The total number of Insignia Partnerships we acquired an interest in was
approximately 550 of which approximately 25 do not have audited GAAP statements.
We were not able to pick and choose the partnerships in which we would acquire
an interest. The Insignia Partnerships were part of the business of Insignia. As
a consequence, we acquired interests in certain small private partnerships which
do not have the ability to obtain audited GAAP financial statements. It is our
policy to acquire properties or partnerships with audited GAAP based financial
statements. However, in connection with large acquisitions of partnerships
interests, such as with the Insignia Merger, we may occasionally acquire a
partnership or property without audited GAAP financial statements.
Previous Tender Offers
Tender offers have been previously made with respect to certain of the
public Insignia Partnerships. However, there have not been any prior tender
offers to acquire units of your partnership. Except for such tender offers, we
are not aware of any merger, consolidation or other combination involving any of
the Insignia Partnerships, or any acquisitions of any of such partnerships or a
material amount of the assets of such partnerships.
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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 August 28, 1998 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
(which is our subsidiary).
Liquidation
Benefits of 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 (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 your general partner (which is our subsidiary), 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 on the order of 1% of the principal amount of the mortgage.
Your general partner believes it currently is in the best interest of your
partnership to continue holding its real estate assets.
Continuation of the Partnership Without the Offer
Benefits of Continuation. Although our offer permits you to continue your
investment in your partnership, 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. Your
partnership's net loss decreased from $354,000 for the nine months ended
September 30, 1997, to $233,000 for the nine months ended September 30, 1998. 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. The continuation of your partnership will allow you to continue to
participate in the net income and any increases of revenue of your partnership
and any net proceeds from the sale of any property owned by your partnership.
The General Partner continues to review operations and expects to complete
capital expenditures in 1999 and 2000 enabling it to possibly increase rents and
lower expenses. In addition, a sale of the property may cause a tax gain to each
investor.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. If your partnership continues operating as presently structured, your
partnership could be forced to borrow on terms that could result in net losses
from operations. Your partnership's mortgage notes are due in October 2001 and
require balloon payments totaling $10,650,252. Your partnership currently has
adequate sources of cash to finance its operations on both a short term and long
term basis but will have to sell the properties or refinance its indebtedness in
2001 to pay such balloon payments. Continuation of your partnership without the
offer would deny you and your partners the benefits that your general partner
(which is our subsidiary) expects to result from the offer. For example, you
would have no opportunity for liquidity unless you were to sell your units in a
private transaction. Any such
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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.
Alternative Structures Considered
Before we decided to make our offer, we considered a number of alternative
transactions, including purchasing some or all of your partnership's properties;
making an offer of only cash for your units; making an offer of only Common OP
Units for your units; and making an offer of only Preferred OP Units for your
units. A merger would require a vote of the limited partners of your
partnership. If the merger was approved, all limited partners, including those
who wish to retain their units and continue to participate in your partnership,
would be forced to participate in the merger transaction. If the merger was not
approved, all limited partners, including those who would like to liquidate
their investment in your partnership, would be forced to retain their units.
We also considered purchasing your partnership's properties from your
partnership. If the sale was approved, all limited partners, including those who
wish to continue to participate in the ownership of your partnership's
properties, would be forced to participate in the sale transaction, and possibly
to recognize taxable income. If the sale was not approved, all limited partners,
including those who would like to dispose of their investment in your
partnership's properties, would be forced to retain their investment.
In order to give all limited partners in your partnership an opportunity to
make their own investment decision, we elected to make an offer directly to you
and the other limited partners. We considered making an all cash offer in order
to satisfy some limited partners' desire for immediate liquidity. However, an
all cash offer would not be desirable for those limited partners who do not
desire immediate liquidity and do not want to immediately recognize any taxable
income, but might otherwise be interested in disposing of their investment in
your partnership and might want an opportunity to control the timing of any
realization of taxable income associated with liquidating such investment in the
future.
We considered making an offer of only OP Units, either all Common OP Units
or all Preferred OP Units. The primary disadvantage of an all OP Unit offer is
that those limited partners who want immediate liquidity would be forced to wait
at least one year before exchanging their OP Units for cash or AIMCO stock. We
decided to offer limited partners both Common OP Units and Preferred OP Units in
order to permit investors to make their own decision as to whether they
preferred the possibility of future capital appreciation (Common OP Units) or
preferred distribution rights (Preferred OP Units).
After considering these alternatives, we decided to offer limited partners
the possibility of all three forms of consideration: cash, Common OP Units and
Preferred OP Units. We think that such an offer will appeal to a large number of
limited partners in your partnership, while permitting each one to retain any or
all of his or her units and remain a limited partner in your partnership on the
same terms as before.
Sale of Assets
Your partnership could sell the property it owns. The general partner of
your partnership considers sale of your partnership's property from time to
time. However, any such sale would likely be a taxable transaction.
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:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
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- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, currently listed and traded on the NYSE.
- Preferred Quarterly Distributions. Your partnership paid no distributions
for the fiscal year ended December 31, 1998. Holders of Preferred OP
Units will be entitled to receive quarterly distributions of $0.50 per
unit (equivalent to $2.00 on an annualized basis) before any
distributions are paid to holders of Common OP Units. This is equivalent
to a distribution of $1,207.50 per year on the number of Preferred OP
Units you will receive in exchange for each of your partnership 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:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- Quarterly Distributions. Your partnership paid no distributions for the
fiscal year ended December 31, 1998. In 1998, we paid quarterly
distributions on the Common OP Units totalling $2.25. In January 1999, we
increased our distribution rate on each of the Common OP Units to $2.50
on an annual basis. Assuming no change in the level of our distributions,
this is equivalent to a distribution of $463.75 per year on the number of
Common OP Units you will receive in exchange for each of your partnership
units. See "The AIMCO Operating Partnership."
- 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 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.
DISADVANTAGES OF THE OFFER
The principal disadvantages to the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
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- No Separate Representation of Limited Partners. In structuring the offer
and the consideration, no one separately represented the interests of the
limited partners. Although we have a fiduciary duty to the limited
partners, we also have conflicting responsibilities to our equity
holders. We did not appoint, or ask the limited partners to appoint, a
party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of the property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pre-tax cash proceeds to you than our
offer.
- OP Units. Investing in OP Units has risks that include the lack of a
public market, transfer restrictions and a one year holding period before
they can be redeemed by a holder. The ultimate return on the OP Units is
directly tied to the future price of AIMCO's Class A Common Stock or
Class I Preferred Stock. You could ultimately receive less for your OP
Units than the cash price in our offer. Further, on or after March 1,
2005, we may redeem the Class I Preferred Stock for $25 per share.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
the sale of the property would be advantageous given market conditions,
the condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of a property and the tax consequences to you
and your partners on a sale of a property. See also "Your
Partnership -- General Policy Regarding Sales and Refinancings of
Partnership Property."
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
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VALUATION OF UNITS
We determined our cash offer consideration by estimating the value of each
property owned by your partnership using the direct capitalization method. This
method involves applying a capitalization rate to your partnership's annual
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower of the value produced. We used your partnership's
property income for the fiscal year ended December 31, 1997. However, in
determining the appropriate capitalization rate, we considered the partnership's
property income since December 31, 1997. Our method for selecting a
capitalization rate begins with each property being assigned a location and
condition rating (e.g., "A" for excellent, "B" for good, "C" for fair, and "D"
for poor). We have rated your property's location B (good) and its condition B
(good). Generally, we assign an initial capitalization rate of 10.25% to
properties in this category. We then adjust the capitalization rate based on
whether the mortgage debt that the property is subject to bears interest at a
rate above or below 7.5% per annum. Generally, for every 0.5% in excess of 7.5%,
the capitalization rate would be increased by 0.25%. Your property's mortgage
debt bears interest at 9.80% per annum, which resulted in an increase from the
initial capitalization rate of 1.25%. We also considered any changes in your
partnership's property income from 1997 to 1998. Because your partnership's
property income in 1998 increased compared to 1997, we further revised the
capitalization rate downward by approximately 0.87%, resulting in a final
capitalization rate of 10.63%. The evaluation of a property's location and
condition, and the determination of an appropriate capitalization rate for a
property, is subjective in nature, and others evaluating the same property might
use a different capitalization rate and derive a different property value.
Property income is the difference between the revenues from the property and
related costs and expenses, excluding income derived from sources other than its
regular activities and before income deductions. Income deductions include
interest, income taxes, prior-year adjustments, charges to reserves, write-offs
of intangibles, adjustments arising from major changes in accounting methods and
other material and nonrecurrent items. In this respect, property income differs
from net income disclosed in the partnership's financial statements, which does
not exclude these income sources and deductions.
The following is a reconciliation of your partnership's net income for the
year ended December 31, 1997, to your partnership's property income for the same
period.
<TABLE>
<S> <C>
Net Income (Loss)........................................... $ (461,00)
Other Non-Operating Expenses................................ 135,000
Depreciation................................................ 676,000
Interest.................................................... 1,143,000
----------
Property income............................................. $1,493,000
</TABLE>
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. Further,
in applying the direct capitalization method, others may make different
assumptions and obtain different results. 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 estimated 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 (property 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 divided
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<PAGE> 1470
fiscal 1997 property income of $803,625 by the property's capitalization
rate of 10.63% to derive an estimated gross property value of
$14,048,000.
(1) The total net operating income is equal to total revenues of
$2,880,563, less total expenses of $1,286,475 and recurring replacement
costs of $100,800.
- 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
certain other costs including required capital expenditures, deferred
maintenance, and closing costs to derive a net equity value for your
partnership of $1,082,132. Closing costs, which are estimated to be 2.5%
of the gross property value, include legal and accounting fees, real
property, transfer taxes, title and escrow costs and broker's fees.
- 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. Accordingly, 100% of the estimated liquidation
proceeds are assumed to be distributed to holders of units. Our cash
offer consideration represents the per unit liquidation proceeds
determined in this manner.
<TABLE>
<S> <C>
Property income............................................. $ 1,493,000
Capitalization rate......................................... 10.63%
------------
Gross valuation of your partnership property................ $ 14,048,000
Plus: Cash and cash equivalents............................. 145,164
Plus: Other partnership assets, net of security deposits.... 316,899
Less: Mortgage debt, including accrued interest............. (10,722,392)
Less: Accounts payable and accrued expenses................. (125,302)
Less: Other liabilities..................................... (574,650)
------------
Partnership valuation before taxes and certain costs........ $ 3,087,719
Less: Disposition fees...................................... $ (526,800)
Less: Extraordinary capital expenditures for deferred
maintenance............................................... (730,932)
Less: Closing costs......................................... (351,200)
------------
Estimates net valuation of your partnership................. 1,478,787
Percentage of estimated net valuation allocated to holders
of units.................................................. 100.00%
------------
Estimated net valuation of units............................ 1,478,787
Total number of units............................. 98.0
------------
Estimated valuation per unit................................ $ 15,090
============
Cash consideration per unit................................. $ 15,090
============
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration of $15,090 by the $25
liquidation preference of each Preferred OP Unit to get 603.75 Preferred
OP Units per unit.
- In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $15,090 by
a price of $37.63 (the average closing price of AIMCO's Class A Common
Stock on the NYSE for the 30 trading days ended on March 23, 1999) to get
185.50 Common OP Units per unit.
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<PAGE> 1471
The total net valuation of all partnerships in which the AIMCO Operating
Partnership is making similar exchange offers, and which were valued using the
same methods as used for your partnership, is $568,751,183, of which, $1,478,787
or .26% is the net valuation of your partnership.
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
Your general partner is a subsidiary of the AIMCO Operating Partnership. 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. Your general partner did not participate in the structuring of the
offer and has substantial conflicts of interest with regard to the offer.
However, for all of the reasons discussed herein, we and your general partner
believe that the offer and all forms of consideration offered is fair to you and
the limited partners of your partnership. We also reasonably believe that the
similar offers to the limited partners of the other partnerships are fair to
such limited partners. 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 us 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, your
general partner (which is our subsidiary) 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. The net
loss of your partnership has decreased from $354,000 for the nine months
ended September 30, 1997 to $233,000 for the nine months ended September
30, 1998. These factors are reflected in our valuation of your partnership.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are substantially the financial
equivalent to your interest in your partnership. 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
and Stanger's estimates of the net asset value ($14,905 per unit), going
concern value ($16,272 per unit) and liquidation value ($11,259 per unit)
of your partnership units. See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity. However, we did review whether trading information
was available.
8. The fact that the offer generally provides holders of units with the
opportunity to receive both cash and OP Units together.
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<PAGE> 1472
9. The fact that the offer provides holders of units with the
opportunity to defer taxes by electing to accept Preferred OP Units or
Common OP Units.
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 $15,090, based on a total estimated
value of your partnership's property of $14,048,000. Your general partner
(which is our subsidiary) has no present intention to liquidate your
partnership or to sell or refinance your partnership's property. See
"Background and Reasons for the Offer". See "Valuation of Units" for a
detailed explanation of the methods we used to value your partnership.
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $2.00 and current annualized distributions with respect to the
Common OP Units are $2.50. This is equivalent to distributions of $1,207.50
per year on the number of Preferred OP Units, or distributions of $463.75
per year on the number of Common OP Units, that you would receive in
exchange for each of your partnership's units. Distributions with respect
to your units for the fiscal year ended December 31, 1998 were $0. See
"Comparison of Your Units and AIMCO OP Units -- Distributions."
13. The fact that if your partnership were liquidated as opposed to
continuing, the general partner (which is our subsidiary) would not receive
the substantial management fees it currently receives. As discussed in
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," we do not believe that
liquidation of the partnership is in the best interests of the unitholders.
Therefore, we believe the offer is fair in that the fees paid to the
general partner would continue even if the offer was not consummated. We
are not proposing to change the current management fee arrangement.
In evaluating these factors, your general partner (which is our subsidiary)
and the AIMCO Operating Partnership did not quantify or otherwise attach
particular weight to any of them.
Your general partner (which is our subsidiary) has not retained an
unaffiliated representative to act on behalf of the limited partners in
negotiating the terms of the offer since each individual limited partner can
make his own decision as to whether or not to tender and what consideration to
take. Unlike a merger or other form of partnership reorganization, a majority or
more of the holders of limited partnership interests in your partnership cannot
bind you. If an unaffiliated representative had been obtained, it is possible
that such representative could have negotiated a higher price for your units
than was unilaterally offered by the AIMCO Operating Partnership. We have
retained Stanger to conduct an analysis of our offer and to render an opinion as
to the fairness to you of the offer consideration from a financial point of
view. Although no representative has been retained to act solely on behalf of
the limited partners for purposes of negotiating the terms of the offer, we have
determined that the transaction is fair to you from a financial point of view.
We made this determination based, in part, on the fairness opinion from Stanger
and the fact that all limited partners may elect to retain their existing
security on the same terms as before our offer.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
Your general partner (which is our subsidiary) 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 and, although there are
other ways to value real estate, is a reasonably fair method to determine the
consideration offered. Although we believe our offer consideration represents
the amount you would receive if we currently liquidated your partnership, an
actual liquidation might generate a higher or lower price for holders of units.
A liquidation in the future might generate a higher or lower price for holders
of units.
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<PAGE> 1473
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
Your general partner (which is our subsidiary) 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
sell your partnership's property or refinance its indebtedness within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, your general partner
(which is our subsidiary) has attempted to compare the cash offer consideration
against: (a) estimates of the value of the units on a liquidation basis; (b)
estimates of the going concern value of your units based on continuation of your
partnership as a stand-alone entity; and (c) the net book value of your units.
The general partner of your partnership believes that analyzing the alternatives
in terms of estimated value, 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 us. These assumptions relate to, among other things: the operating
results since December 31, 1997 as to income and expenses of each property,
other projected amounts and the capitalization rates that may be used by
prospective buyers if your partnership assets were to be liquidated. The 1998
budget is discussed in "Stanger Analysis -- Summary of Materials Considered" and
other projected amounts are discussed in "Stanger Analysis -- Summary of
Reviews."
In addition, these estimates are based upon certain information available
to your general partner (which is our subsidiary) 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. 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.
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<PAGE> 1474
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2030, 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.
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C> <C>
Cash offer price............................................ $ 15,090
Partnership preferred units................................. 15,090(1)
Partnership common units.................................... 15,090(1)
Alternatives:
Estimated liquidation proceeds............................ $ 15,090
Estimated going concern value(2).......................... $ 13,597
Estimated alternative going concern value(3).............. $ 11,344
Net book value (deficit).................................. $(62,098)
</TABLE>
- ---------------
(1) In our discussion of the offer price as being fair with regard to other
methods of valuing your partnership, we believe the number of Common OP
Units and Preferred OP Units to be issued per unit in the offer to be equal
to the cash price per unit. Therefore, the fairness discussion applies
equally to the cash and non-cash forms of consideration being effected. See
"Valuation of Units" for details of how the number of OP Units was
determined.
(2) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(3) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
Prices on Secondary Market
There is no active market for your units. Your general partner (which is
our subsidiary) is unaware of any secondary market activity in the units.
Therefore any comparison to prices on the secondary market is not possible at
the present time. See "Your Partnership -- Distributions and Transfers of
Units -- Transfers."
Prior Tender Offers
There have been no previous tender offers for units of your partnership.
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. Your general
partner (which is our subsidiary) 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
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
S-39
<PAGE> 1475
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.
Estimated Going Concern Value and Alternative Going Concern Value
Going concern value is a measure of the value of your partnership if it
continued operating as an independent stand-alone entity. The estimated value of
the partnership on a going concern basis is not intended to reflect the
distributions payable to limited partners if its assets were to be sold at their
current fair market value. The general partner of your partnership estimated the
going-concern value of your partnership by analyzing projected cash flows and
performing a discounted cash flow analysis. The general partner of your
partnership assumed that your partnership will be operated in the same manner as
currently, as an independent stand-alone entity, and its assets sold in a
liquidation after a ten-year holding period. Distribution and sale proceeds per
partnership unit were discounted in the projections at a rate of 30%.
The general partner of your partnership assumed that real estate selling
costs will be incurred which will equal 2.5% of the sales price. This analysis
assumes that the partnership property will be sold in a liquidation, at the
expiration of the ten-year holding period, to an independent third-party buyer.
Upon such liquidation, other balance sheet assets (excluding amortizing assets)
and liabilities of your partnership will be sold at their book value, and the
net proceeds of sale will be allocated between the general partners and offerees
in accordance with your partnership's agreement of limited partnership. Should
the assets be liquidated over time, even at prices equal to those projected,
distributions to limited partners of your partnership's cash flow from
operations might be reduced because relatively fixed costs, such as general and
administrative expenses, are not proportionately reduced with the liquidation of
assets. However, for simplification purposes, the sales are assumed to occur
concurrently.
The going concern method relies on a number of assumptions, including among
other things, (i) rental rates for new leases and lease renewals; (ii)
improvements needed to prepare an apartment for a new lease or a renewal lease;
(iii) lease periods; (iv) capital expenditures; (v) broker's commissions; and
(vi) discount rates applied to future cash flows. The use of assumptions or
variables that differ from those described above could produce substantially
different results. Neither we nor the general partner of your partnership
solicited any offers or inquiries from prospective buyers of the property owned
by your partnership in connection with the preparation of the estimates of value
of the properties and the actual amounts for which the partnership's properties
or the partnership could be sold could be significantly higher or lower than any
of the estimates contained herein. The estimated going concern value of your
partnership is $13,597 per unit, which value is below our offer price per unit.
Therefore, we believe the offer price is fair in relation to the going concern
value.
Your partnership's property currently has balloon payments due in 2001.
While the going concern value was based on your partnership refinancing its
indebtedness and continuing to own its property, the alternative going concern
value of $11,344 is based on selling the property when the balloon payment is
due. For the reasons set forth above, we believe the offer consideration is fair
in relationship to the alternative going concern value.
The general partner determined going concern value based upon the
discounted present value of projected cash flows from the partnership over a
ten-year period of operation, which is a standard period for going concern
analyses for real property assets. Such discounted cash flows were based upon
year one property income from the real estate portfolio of $1,493,000, escalated
at 3% per annum for the ten-year projection period. Property income was reduced
by: (i) partnership administrative expenses of $98,000 per annum; and (ii) debt
service on existing debt through maturity or the end of ten years, whichever
occurs first. For debt which matures during the ten-year period, a refinancing
at a 7% interest rate was assumed. At the end of the ten-year projection period,
the property was assumed to be sold at a price based upon property income for
the immediately following year, capitalized at a capitalization rate of 11.13%,
less expenses of sale estimated at 3% of the property value. The net cash flow
to limited partners from the continued operation of the property
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<PAGE> 1476
and the net proceeds of sale were then discounted at a discount rate of 25% to
achieve the going concern value of $13,597 per unit.
Your partnership's property currently has a balloon payment due in October
2001. While the going concern value was based on your partnership refinancing
its indebtedness and continuing to own its property; the alternative going
concern value of $10,650,252 is based on selling the property when the balloon
payment is due and otherwise includes the same assumptions as the going concern
value described above. For the reason set forth above, we believe the offer
consideration is fair in relation to the alternative going concern value.
There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
Net Book Value
Net book value per unit is a deficit of $62,098 and therefore a comparison
with the offering price would not be meaningful in determining the fairness of
the offering price.
Stanger's Estimate of Net Asset Value, Going Concern Value and Liquidation Value
In rendering its opinion set forth as Appendix A, Stanger did its own
independent estimate of your partnership's net asset value of $14,905 per unit,
going concern value of $16,272 per unit and liquidation value of $11,259 per
unit. For an explanation of how Stanger determined such values see "Stanger
Opinion -- Summary of Reviews -- Comparison of Offer Price To Liquidation Value,
Going Concern Value and Secondary Market Prices." An estimate of your
partnership's net asset value per unit is based on a hypothetical sale of your
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 a liquidation value, after provisions
in full for all of the other known liabilities of your partnership. The net
asset value does not take into account (i) timing considerations discussed under
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," and (ii) costs associated with
winding up of your partnership. Therefore, the AIMCO Operating Partnership
believes that the estimate of net asset value per unit does not necessarily
represent the fair market value of a unit or the amount the limited partner
reasonably could expect to receive if the partnership's property was sold and
the partnership was liquidated. For this above reason, the AIMCO Operating
Partnership considers net asset value estimates to be less meaningful in
determining the offer consideration than the analysis described above under
"Valuation of Units."
Stanger's estimates of net asset value, going concern value and liquidation
value per unit represents premiums (discounts) to the offer price of $185,
$(1,182) and $3,831. In light of these premiums (discounts) and for all the
reasons set forth above, the AIMCO Operating Partnership believes the offer
price is fair to the limited partners. The AIMCO Operating Partnerships believes
that the best and most commonly used method of determining the value of a
partnership which only owns an apartment is the capitalization of income
approach set forth in "Valuation of Units."
ALLOCATION OF CONSIDERATION
Your partnership's agreement of limited partnership provides that, in the
event of a liquidation, available proceeds are to be distributed 0% to the
general partner and 100% to the limited partners. Accordingly, in valuing your
units, we have assumed that 100% of the estimated liquidation proceeds are
distributed to holders of units. Since this allocation is in accordance with the
terms of the partnership agreement, we believe the allocation is fair. See
"Valuation of Units."
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<PAGE> 1477
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. Stanger has
advised us that the description of Stanger's analysis contained herein describes
the material portions of Stanger's review. 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 any losses, claims,
damages, liabilities or expenses to which Stanger may be subject, under any
applicable federal or state law, including federal and state securities laws,
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 NYSE 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 audited financial statements for the years ended December 31, 1996
and 1997, and its unaudited financial statements for the period ended September
30, 1998, which your partnership's management has indicated to be the most
current available financial statements at the time; (iii) reviewed descriptive
information concerning your partnership's real estate assets (the "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, 1997 and 1998; (v) reviewed
operating budgets for your partnership's property for 1998, as prepared by your
partnership; (vi) reviewed
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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 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; and (x) conducted other studies, analysis and inquiries as
Stanger deemed appropriate.
A summary of the operating budgets per property for the year ended December
31, 1998, which was supplied by your partnership to Stanger, is as follows:
FISCAL 1998 OPERATING BUDGETS
<TABLE>
<CAPTION>
<S> <C>
Total Revenues.............................................. $ 3,025,950
Operating Expenses.......................................... (1,349,870)
Replacement Reserves -- Net................................. (282,042)
Debt Service................................................ (1,168,429)
Capital Expenditures........................................ (66,800)
-----------
Net Cash Flow..................................... $ 158,809
===========
</TABLE>
The above budgets at the time they were made were forward-looking
information developed by the general partner of your partnership. Therefore, the
budgets were dependent upon future events with respect to the ability of your
partnership to meet such budget. The budgets incorporated various assumptions
including, but not limited to, lease revenue (including occupancy rates),
various operating expenses, general and administrative expenses, depreciation
expenses, capital expenditures, and working capital levels. While we deemed such
budgets to be reasonable and valid at the date made, there is no assurance that
the assumed facts will be validated or that the circumstances will actually
occur. Any estimate of the future performance of a business, such as your
partnership's business, is forward-looking and based on assumptions some of
which inevitably will prove to be incorrect.
The budget amounts provided above are figures that were not computed in
accordance with GAAP. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budget are often
re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budget
presented for fiscal 1998 should not necessarily be considered as indicative of
what the audited operating results for fiscal 1998 will be. For the year ended
December 31, 1998, the partnership expects to report revenues of $2,905,263,
operating expenses of $1,193,975 and replacement reserves and capital
expenditures of $320,915. Based on these estimates, the partnership's net cash
flow before debt service, which we believe provides a better indication of the
partnership's actual operating performance than net cash flow, was greater than
the budgeted amounts.
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.
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<PAGE> 1479
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 the third quarter of 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 or
square footage; 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 nine month period ending
September 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 property.
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 property, 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 the
liquidation value calculation prepared by the management of your partnership.
Stanger observed that such liquidation value was based upon the gross property
valuation estimate prepared by management, which in turn is based upon fiscal
year 1997 property income capitalized at a capitalization rate of 10.63%.
Stanger further observed that the gross property valuation was adjusted for the
following additional items to achieve the liquidation value of your partnership:
(i) cash, other assets, mortgage indebtedness and other liabilities determined
as of December 31, 1997; (ii) estimated closing costs equal to approximately
2.5% of gross real estate value; (iii) extraordinary capital expenditure
estimates in the amount of $730,932; and (iv) a real estate advisory fee equal
to 3.75% of real estate value. Stanger observed that your partnership
liquidation value of $1,478,787 was divided by the total units outstanding of 98
to provide the liquidation value per unit of $15,090.
Review of Partnership Going Concern Analysis. Stanger reviewed the going
concern value calculation prepared by management of your partnership. Stanger
observed that such going concern value was based upon the discounted present
value of projected cash flows from the partnership over a ten-year period of
operation which is a standard period for going concern analysis for real
property assets. Such discounted cash flows were based upon year one property
income from the real estate portfolio of $1,493,000 escalated at 3% per annum
for the ten-year projection period. Property income was reduced by: (i)
partnership administrative expenses of $98,000 per annum; and (ii) debt service
on existing debt through maturity or the end of ten years, whichever occurs
first. For debt which matures during the ten-year period, a refinancing at a 7%
interest rate was assumed. At the end of the ten-year projection period, the
properties were assumed to be sold based upon: (i) property income for the
immediately following year capitalized at a capitalization rate of
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<PAGE> 1480
11.13%; (ii) expenses of sale estimated at 3% of property value and (iii) a real
estate advisory fee equal to 3.75% of real estate value. Stanger observed that
the proceeds of sale were reduced by the estimated debt balance at the end of
the tenth year to provide net proceeds from the sale of your partnership's
property.
The resulting cash flows for the ten-year period were discounted to present
value at a discount rate of 30%. Stanger observed that such discount rate was
based upon the portfolio real estate discount rate of 13%, adjusted for leverage
risk and illiquidity risk. Stanger observed that the resulting partnership going
concern value was divided by units outstanding of 98 to achieve management's
estimate of going concern value of $13,597 per unit.
Review of Secondary Market Prices. Stanger maintains a database of
secondary market information. Stanger observed for its data that no units were
reported traded in the secondary market during 1998.
Comparison of Offer Price to Liquidation Value, Going Concern Value and
Secondary Market Price. Stanger observed that the offer price of $15,090 per
unit is equal to management's estimate of liquidation value, and reflects an 11%
premium to management's estimate of going concern value of $13,597 . Stanger
further observed that investors may select cash, Common OP Units or Preferred OP
Units in exchange for their partnership units or they may elect to continue to
hold their partnership units. Stanger further observed that the Common OP Units
will be priced at $37.625 per unit, an amount which equals the average of the
closing prices for the common shares into which such Common OP Units are
convertible for the 30-trading day period ended March 23, 1999. Furthermore,
Stanger observed that the Preferred OP Units to be issued in the transaction
will be based upon the liquidation preference of $25. Stanger noted that the
Preferred OP Units are redeemable for, at AIMCO's option, either: (i) $25 in
cash per Preferred OP Unit; (ii) common stock of AIMCO based upon a ten-day
average price at the time of the requested redemption; or (iii) preferred stock
of AIMCO with a value equal to $25. Stanger observed that the ten-day average
price of the AIMCO common stock is $36.425, as of March 23, 1999 and therefore
an investor receiving AIMCO common shares in redemption of the Preferred OP
Units would receive 0.6863 shares with a value approximating $25 for each $25
Preferred OP Unit redeemed, based upon AIMCO's average common share price as of
March 23, 1999. Stanger noted that commencing in the third year, investors
redeeming Preferred OP Units may receive from AIMCO Preferred Stock with a
dividend equal to the distribution on the AIMCO Preferred OP Units. Stanger
observed that the distribution on the Preferred OP Units is set at 8% of $25 and
that the average dividend yield on AIMCO's outstanding C, D, G and H Preferred
Shares approximates 10.1% as of March 23, 1999. Stanger noted that, based upon
the cash dividend yield on the AIMCO Preferred Shares identified above as of
March 23, 1999, investors would receive Preferred Shares with a value of
approximately $19.80 for each $25 Preferred OP Unit if such redemption occurred
after the second year following the closing of the transaction. Stanger further
observed that the above analysis does not take into consideration the present
value of the earnings on the tax deferral an investor may realize as the result
of selecting Preferred OP Units in lieu of cash in a taxable transaction.
In addition to the above analysis, Stanger prepared an independent estimate
of net asset value, going concern value and liquidation value per unit. Stanger
has advised AIMCO that Stanger's estimates of net asset value, liquidation value
and going concern value are based upon Stanger's independent estimate of
property income, direct capitalization rate of 10.5%, transaction costs of 2.5%
to 5.0%, a realty advisory fee equal to 3.75% of asset value, growth rates of 3%
and terminal capitalization rate of 11%. Stanger has advised us that the direct
capitalization rate represents Stanger's estimate of the capitalization rate
applicable to its estimate of property income, and is based upon Stanger's
independent estimate of the direct capitalization rate for such property based
upon such property's age, condition and location. Stanger further advised us
that the terminal capitalization rate is the capitalization rate utilized in
Stanger's going concern value estimate which is applied to Stanger's estimate of
property income in the eleventh year to establish the value of the property at
the end of the tenth year. Stanger has advised us that Stanger estimated the
terminal capitalization rate at a 50 basis point premium to the direct
capitalization rate estimate for the property. Stanger utilized deferred
maintenance estimates derived from the Adjusters International, Inc. reports in
the calculation of net asset value, liquidation value and going concern value.
Stanger advised us that Stanger adjusted its estimate of net asset value and
liquidation value for the cost of above market debt using a 7% interest rate.
With respect to the going concern value estimate prepared by Stanger, Stanger
advised AIMCO that a ten-year projection
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<PAGE> 1481
period and a discount rate of 30% was utilized. Such discount rate reflects the
risk associated with real estate, leverage and a limited partnership investment.
The 30% discount rate was based upon the property's estimated internal rate of
return of the portfolio derived from the discounted cash flow analysis, (13.15%
as described above), plus a premium reflecting the additional risk associated
with mortgage debt equal to more than 70% of property value. Stanger's estimates
were based in part upon information provided by us. Stanger relied upon the
deferred maintenance estimates, property descriptions, unit configurations,
allocation among partners, and other data provided by us. Stanger's analyses
were based on balance sheet data as of September 30, 1998. Stanger's review also
included a site visit, review of rental rates and occupancy at the properties as
well as competing properties. Stanger's estimate of net asset value, going
concern value and liquidation value per unit were $14,905, $16,272, and $11,259
representing premiums (discounts) to the offer price of (1.2%), 7.8% and
(25.4)%. See "Fairness of the Offer -- Comparison of Consideration to
Alternative Consideration."
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. Stanger has rendered similar fairness opinions with regard to certain
other exchange offers being made by the AIMCO Operating Partnership. Stanger
rendered the opinions only as to the individual fairness of the offer
consideration in each proposed exchange offer. The Fairness Opinion does not
address the fairness of all possible acquisitions of interests in your
partnership. In addition, the Fairness Opinion will not be revised to reflect
the actual participation in the offer.
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 your general partner (which is our subsidiary), special limited partner
and limited partners of your partnership, the terms and conditions of any debt
encumbering the partnership's property, and the transaction costs and fees
associated with a sale of the property. Stanger also relied upon the assurance
of your partnership, AIMCO, and the management of the partnership's property
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 property 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 property 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 property 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
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<PAGE> 1482
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, nor did Stanger
address the fairness of all possible acquisitions of interests in the
partnership. The opinion will not be revised to reflect the actual results of
the offer. 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 or oral 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 $9,000 with
respect to your partnership. The estimated aggregate fee payable to Stanger in
connection with all affiliated partnerships is estimated at $1,510,000, plus
out-of-pocket expenses estimated at $61,000. 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 was
engaged by AIMCO during 1997 to represent AIMCO in negotiations to acquire
interests in a real estate limited partnership. Such transaction was never
consummated and no fee was ever paid to Stanger in connection with such proposed
transaction. AIMCO and its affiliates may retain the services of Stanger in the
future. Any such future services could relate to this offer, some or all of the
concurrent offers, or a completely separate transaction.
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<PAGE> 1483
YOUR PARTNERSHIP
GENERAL
Four Quarters Habitat Apartments, Ltd., is a Florida limited partnership
which completed a private placement of units in 1983. Each unit was initially
sold at a price of $85,500. Insignia acquired the general partner of your
partnership in December 1993. AIMCO acquired Insignia in October 1998. There are
currently a total of 100 limited partners of your partnership and a total of 98
units of your partnership outstanding. Your partnership is in the business of
owning and managing residential housing. Currently, your partnership owns and
manages the property described below. Your partnership has no employees. 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.
YOUR PARTNERSHIP AND ITS PROPERTY
Your partnership was formed on May 11, 1983 for the purpose of owning an
apartment property located in Miami, Florida, known as "Four Quarters Habitat."
Your partnership's property is owned by the partnership but is subject to a
mortgage. The property consists of 336 apartment units. There are 80 one-
bedroom apartments, 256 two-bedroom apartments. Your partnership's property had
an average occupancy rate of approximately 93.32% in 1998, 95.54% in 1997 and
95.54% in 1996.
Your partnership's property provides residents with a number of amenities
and services, such as 24-hour desk service, exercise room and/or sauna, and
party or meeting rooms. Nearly all apartment units are wired for cable
television, and many apartment units also offer one or more additional features,
such as washer/ dryer, microwave, fireplace, and patio/balcony.
Presently, there are no plans for any major renovations or improvements for
the property. Budgeted renovations for 1999 total $730,932 and are intended to
be paid for out of cash flow or borrowings. Renovation items include roofing,
electrical, siding trim facia, exterior painting, sidewalks, drives and parking
lots, exterior lighting, landscape and irrigation, drainage, termite treatment,
and pool resurfacing.
Set forth below are the average rents for the apartments for the last five
years:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$704 $701 $689 $675 $370
</TABLE>
The apartments are being depreciated for federal income tax purposes using
the accelerated cost recovery method. Depreciation is computed principally by
the straight-line and accelerated methods over estimated lives of 3 to 40 years.
Currently, the real estate taxes on the property are $90,202 of $14,784,000
of assessed valuation with a current yearly tax rate of 2.3479%. When the
proposed improvements are made it is anticipated that the yearly tax rate may
increase by approximately 2.3949% of such improvements.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a wholly 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.
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS
Under your partnership's agreement of limited partnership, your partnership
is not permitted to raise new equity and reinvest cash in new properties.
Consequently, your partnership is limited in its ability to expand its
investment portfolio. Your partnership will terminate on December 31, 2030
unless earlier dissolved. Your
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<PAGE> 1484
partnership has no present intention to liquidate, sell, finance or refinance
your partnership's property within any specified time period.
Generally, your partnership is authorized to acquire, develop, improve, own
and operate your partnership's property as an investment and for income
producing purposes. The investment portfolio of your partnership is limited to
the assets acquired with the initial equity raised through the sale of units to
the limited partners of your partnership or the assets initially contributed to
your partnership by the limited partners, as well as the debt financing obtained
by your partnership within the established borrowing restrictions.
An investment in your partnership is a finite life investment, with the
partners to receive regular cash distributions out of your partnership's
distributable cash flow, if available, and to receive cash distributions upon
liquidation of your partnership's real estate investments, if available.
In general, your general partner (which is our subsidiary) regularly
evaluates the partnership's property by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors the property's specific locale and sub-market
conditions (including stability of the surrounding neighborhood) 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 (including any prepayment penalties), tax implications,
availability of attractive mortgage financing to a purchaser, 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. If rental market conditions improve, 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 viable option than it is
currently. After taking into account the foregoing considerations, your general
partner is not currently seeking a sale of your partnership's property primarily
because it expects the property's operating performance to remain strong in the
near term. In making this assessment, your general partner noted that occupancy
and rental rates at the property were 93% and $699, respectively, at December
31, 1998, compared to 95% and $704, respectively, at December 31, 1997. Although
there can be no assurance as to the future performance, the general partner
expects occupancy to remain strong in the near future. In addition, the general
partner noted that it expects to spend approximately $730,932 for capital
replacements and improvements at the property in 1999 to update and improve the
property's roofing, siding, paving, lighting, and appearance. These expenditures
are expected to improve the desirability of the property to tenants. The general
partner does not believe that a sale of the property at the present time would
adequately reflect the property's future prospects. Another significant factor
considered by your general partner is the likely tax consequences of a sale of
the property for cash. Such a transaction would likely result in tax liabilities
for many limited partners. The general partner has not received any recent
indication of interest or offer to purchase the property.
CAPITAL REPLACEMENT
Your partnership has an ongoing program of capital improvements,
replacements and renovations, including roof replacements, kitchen and bath
renovations, balcony repairs (where applicable), replacement of various building
systems and other replacements and renovations in the ordinary course of
business. All capital improvement and renovation costs are expected to be paid
from operating cash flows, cash reserves, or from short-term or long-term
borrowings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Your Partnership."
BORROWING POLICIES
Your partnership's agreement of limited partnership allows your partnership
to incur debt. As of December 31, 1998, your partnership had a current mortgage
note outstanding of $10,593,171, payable to LP Commercial Conduct Mfg. Trust,
which bears interest at a rate of 9.84%. The mortgage debt is due on
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<PAGE> 1485
October, 2001. Your partnership also has a second mortgage note outstanding of
$350,000, on the same terms as the current mortgage note. Your partnership's
agreement of limited partnership also allows the general partner of your
partnership to lend funds to your partnership. As of December 31, 1998, your
general partner had outstanding loans to your partnership.
COMPETITION
There are other residential properties within the market area of your
partnership's property. The number and quality of competitive properties in such
an area could have a material effect on the rental market for the apartments at
your partnership's property and the rents that may be charged for such
apartments. While we are a significant factor in the United States in the
apartment industry, competition for apartments is local.
LEGAL PROCEEDINGS
Your partnership is party to a variety of legal proceedings related to its
ownership of the partnership's property and management and leasing business,
respectively, arising in the ordinary course of the business, which are not
expected to have a material adverse effect on your partnership.
HISTORY OF THE PARTNERSHIP
Your partnership sold $8,550,000 of limited partnership units in 1983 for
$85,500 per unit. Your partnership currently owns one apartment property.
Your partnership used the funds raised to purchase its property and it has
expended the funds so raised many years ago. Your partnership currently owns the
property described herein, which is subject to a substantial mortgage. Your
general partner (which is our subsidiary) has not experienced any material
adverse financial developments from January 1, 1997 through the present.
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December, 2030, 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.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, your general partner (which is our subsidiary) is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partners of your partnership are
not liable to your partnership or any limited partner for loss or damage that
may be caused by any acts performed or any failure to act by any of them if such
acts were done in good faith and in accordance with sound business practices and
in accordance with the terms of your partnership's agreement of limited
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 partners and their affiliates are entitled to indemnification
by your partnership against any claim, loss, damage, liability, action or
expense sustained by it or them as a result of any act or omission done in good
faith and in accordance with sound business practices and in accordance with the
terms of your partnership's agreement of limited partnership, provided that such
acts do not constitute fraud, bad faith, breach of fiduciary duty, gross
negligence or intentional misconduct.
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 partners of your partnership.
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<PAGE> 1486
DISTRIBUTIONS AND TRANSFERS OF UNITS
Distributions
The original cost per unit was $85,500. From 1993 through 1998 your
partnership has paid no distributions.
Transfers
The units are not listed on any national securities exchange or quoted on
the NASDAQ System, the Electronic Bulletin Board or the "pink sheets," and there
is no established public trading market for the units. Secondary sales activity
for the units has been limited and sporadic. The general partner of your
partnership monitors transfers of the units (a) because the admission of the
transferee as a substitute limited partner in your partnership require the
consent of the general partner of your partnership under your partnership's
agreement of limited partnership, and (b) in order to track compliance with safe
harbor provisions to avoid treatment as a "publicly traded partnership" for tax
purposes. However, the general partner of your partnership does not monitor or
regularly receive or maintain information regarding the prices at which
secondary sale transactions in the units have been effectuated. The general
partner of your partnership estimates, based solely on the transfer records of
your partnership (or your partnership's transfer agent), that the number of
units transferred in privately negotiated transactions or in transactions
believed to be between related parties, family members or the same beneficial
owner was as follows:
<TABLE>
<CAPTION>
NUMBER UNITS % OF TOTAL NUMBER
YEAR TRANSFERRED UNITS TRANSACTIONS
- ---- ------------ ---------- ------------
<S> <C> <C> <C>
1995.............................................. 0 0 0
1996.............................................. 0 0 0
1997.............................................. 0.5 0.51020% 1
1998.............................................. 0 0 0
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate, approximately
a 2.00% interest in 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 two years, 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 following table shows, for each of the years indicated, compensation
paid to your general partner and its affiliates on a historical basis, and on a
pro forma basis assuming that all of the units sought in our offer had been
acquired at the beginning of each period:
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------- ----------------------------------------
PARTNERSHIP PROPERTY PARTNERSHIP PROPERTY
FEES AND MANAGEMENT FEES AND MANAGEMENT
YEAR EXPENSES FEES DISTRIBUTIONS EXPENSES FEES DISTRIBUTIONS
---- ----------- ---------- ------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
1996................. $40,143 $ 57,825 0 $40,143 $ 57,825 0
1997................. $40,872 $ 57,535 0 40,872 57,535 0
1998................. $43,107 $118,437 0 43,107 118,437 0
</TABLE>
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<PAGE> 1487
SELECTED FINANCIAL INFORMATION
OF YOUR PARTNERSHIP
Set forth on page F-1 of this Prospectus Supplement is the Index to the
Financial Statements of Your Partnership. You are urged to read the Financial
Statements carefully before making any decision whether to tender your units in
the offer.
Below is selected financial information for Four Quarters Habitat Apartment
Associates taken from the financial statements described above. The amounts for
1995, 1994 and 1993 have been derived from financial information which are not
included in this Prospectus Supplement. See "Index to Financial Statements."
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- -------- ----------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and Cash Equivalents.............. $ 223 $ 130 $ 145 $ 185 $ 285 $ 405 $ 148
Land & Building........................ 19,646 19,445 19,445 19,171 18,937 18,307 18,307
Accumulated Depreciation............... (10,950) (10,274) (10,443) (9,767) (9,111) (8,473) (7,857)
Other Assets........................... 933 1,045 801 853 945 1,349 1,668
---------- ---------- ---------- ---------- ---------- -------- ----------
Total Assets................... $ 9,852 $ 10,346 $ 9,948 $ 10,442 $ 11,056 $ 11,588 $ 12,266
========== ========== ========== ========== ========== ======== ==========
Notes Payable.......................... $ 10,615 $ 10,699 $ 10,678 $ 10,756 $ 10,826 $ 10,890 $ 9,832
Other Liabilities...................... 943 1,013 743 698 728 862 2,507
---------- ---------- ---------- ---------- ---------- -------- ----------
Total Liabilities.............. $ 11,558 $ 11,712 $ 11,421 $ 11,454 $ 11,554 $ 11,752 $ 12,339
---------- ---------- ---------- ---------- ---------- -------- ----------
Partners Deficit............... $ (1,706) $ (1,366) $ (1,473) $ (1,012) $ (498) $ (164) $ (73)
========== ========== ========== ========== ========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED FOR THE YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
----------------------- ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- -------- ----------
(IN THOUSANDS, EXCEPT PER UNIT DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Revenue......................... $ 2,106 $ 2,054 $ 2,840 $ 2,828 $ 2,778 $ 2,720 $ 1,493
Other Income........................... 71 61 80 75 90 325 146
---------- ---------- ---------- ---------- ---------- -------- ----------
Total Revenue.................. $ 2,177 $ 2,115 $ 2,920 $ 2,903 $ 2,868 $ 3,045 $ 1,639
---------- ---------- ---------- ---------- ---------- -------- ----------
Operating Expenses..................... $ 685 $ 738 $ 1,116 $ 1,143 $ 937 $ 969 $ 624
General & Administrative............... 79 80 106 104 99 95 102
Depreciation........................... 507 507 676 656 638 616 615
Interest Expense....................... 872 879 1,143 1,177 1,191 1,129 641
Property Taxes......................... 267 265 340 337 337 327 89
---------- ---------- ---------- ---------- ---------- -------- ----------
Total Expenses................. $ 2,410 $ 2,469 $ 3,381 $ 3,417 $ 3,202 $ 3,136 $ 2,071
---------- ---------- ---------- ---------- ---------- -------- ----------
Net income before extraordinary
items................................ $ (233) $ (354) $ (461) $ (514) $ (334) $ (91) $ (432)
Extraordinary Items.................... -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- -------- ----------
Net Loss).............................. $ (233) $ (354) $ (461) $ (514) $ (334) $ (91) $ (432)
========== ========== ========== ========== ========== ======== ==========
Net Income per limited partnership
unit................................. $(2,326.53) $(3,540.82) $(4,612.24) $(5,142.86) $(3,336.73) $(908.16) $ 4,316.33)
========== ========== ========== ========== ========== ======== ==========
Distributions per limited partnership
unit................................. $ -- $ -- $ -- $ -- $ -- $ -- $ --
========== ========== ========== ========== ========== ======== ==========
</TABLE>
S-52
<PAGE> 1488
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP
OVERVIEW
The following discussion and analysis of the results of operations and
financial condition of Your Partnership should be read in conjunction with the
financial statements of Your Partnership included herein.
RESULTS OF OPERATIONS
Comparison of the Nine Months Ended September 30, 1998 to the Nine Months Ended
September 30, 1997
NET INCOME
Your Partnership incurred a net loss of $233,000 for the nine months ended
September 30, 1998, compared to $354,000 for the nine months ended September 30,
1997. The decrease in net loss of $121,000 was primarily the result of an
increase in revenues, coupled with a decrease in operating expenses. These
factors are discussed in more detail in the following paragraphs.
REVENUES
Rental and other property revenues from the Partnership Property totaled
$2,177,000 for the nine months ended September 30, 1998, compared to $2,115,000
for the nine months ended September 30, 1997, an increase of $62,000, or 2.93%.
The Partnership increased average rental rates by an average of 3.6%. However,
this was offset by a slight decrease in occupancy of 2.0% to 93.32%. There was
also slight increases in late charges and deposit forfeitures.
EXPENSES
Partnership Property operating expenses, consisting of utilities (net of
reimbursements received from tenants), contract services, turnover costs,
repairs and maintenance, advertising and marketing, and insurance totaled
$685,000 for the nine months ended September 30, 1998, compared to $738,000 for
the nine months ended September 30, 1997, an increase of $53,000, or 7.18%. This
decrease is due to exterior painting projects and parking lot repairs incurred
during 1997 with no corresponding projects performed during the current year.
Partnership Property management expenses totaled $88,000 for the nine months
ended September 30, 1998, compared to $86,000 for the nine months ended
September 30, 1997, an increase of $2,000, or 2.33%. General and administrative
expenses, depreciation, interest and property taxes for the nine months ended
September 30, 1998 were comparable to those expenses incurred during the
corresponding period for 1997.
As part of the ongoing business plan of Your Partnership, the General
Partner monitors the rental market environment of Your Partnership's investment
property to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting Your Partnership from increases in
expenses. As part of this plan, the General Partner attempts to protect Your
Partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the General Partner will be able to sustain such a plan.
Comparison of the Year Ended December 31, 1997 to the Year Ended December 31,
1996
NET INCOME
Your Partnership incurred a net loss of $461,000 for the year ended
December 31, 1997, compared to a net loss of $514,000 for the year ended
December 31, 1996. The decrease in net loss of $53,000 was primarily the result
of a slight increase in revenues, coupled with a slight decrease in expenses.
These factors are discussed in more detail in the following paragraphs.
S-53
<PAGE> 1489
REVENUES
Rental and other property revenues from the partnership's property totaled
$2,920,000 for the year ended December 31, 1997, compared to $2,903,000 for the
year ended December 31, 1996, an increase of $17,000, or 0.59%. The Partnership
was able to raise rental rates an average of 2.4%; however, this was partially
offset by a 1.8% decrease in occupancy. The Partnership also experienced a
$29,000 increase in bad debts during 1997 due to an increase in delinquent
tenants and the move-out of tenants with outstanding past due rent.
EXPENSES
Operating expenses, consisting of utilities (net of reimbursements received
from tenants), contract services, turnover costs, repairs and maintenance,
advertising and marketing, and insurance totaled $1,116,000 for the year ended
December 31, 1997, compared to $1,143,000 for the year ended December 31, 1996,
a decrease of $27,000 or 2.36%. This decrease is due to lower maintenance
expenses as less expensive projects were undertaken at the property during 1997,
as compared to 1996. Management expenses totaled $115,000 for the year ended
December 31, 1997, compared to $116,000 for the year ended December 31, 1996, a
decrease of $1,000, or 0.86%.
DEPRECIATION EXPENSE
Depreciation expense increased $20,000 (3.05%) to $676,000 due primarily to
capitalized additions to the investment property during the year ended December
31, 1997.
INTEREST EXPENSE
Interest expense totaled $1,143,000 for the year ended December 31, 1997,
compared to $1,177,000 for the year ended December 31, 1996, a decrease of
$34,000, or 2.89%. The decrease is due to a lower outstanding balance on the
mortgage indebtedness due to principal payments made during 1997.
Comparison of the Year Ended December 31, 1996 to the Year Ended December 31,
1995
NET INCOME
Your Partnership incurred a net loss of $514,000 for the year ended
December 31, 1996, compared to a net loss of $334,000 for the year ended
December 31, 1995. The increase in net loss of $180,000 was primarily the result
of an increase in operating and other expenses, partially offset by a slight
increase in revenues. These factors are discussed in more detail in the
following paragraphs.
REVENUES
Rental and other property revenues from the partnership's property totaled
$2,903 ,000 for the year ended December 31, 1996, compared to $2,868,000 for the
year ended December 31, 1995, an increase of $35,000, or 1.22%. This increase is
due primarily to a 2.2% increase in rental rates, offset by a $12,000 decrease
in deposit forfeitures.
EXPENSES
Operating expenses, consisting of utilities (net of reimbursements received
from tenants), contract services, turnover costs, repairs and maintenance,
advertising and marketing, and insurance totaled $1,143,000 for the year ended
December 31,1996, compared to $937,000 for the year ended December 31, 1995, an
increase of $206,000 or 22%. This increase is due to extensive interior and
exterior maintenance projects undertaken at the property during 1996, with no
similar projects during 1995. Management expenses totaled $116,000 for the year
ended December 31, 1996, compared to $115,000 for the year ended December 31,
1995, an increase of $1,000, or 0.87%..
S-54
<PAGE> 1490
DEPRECIATION EXPENSE
Depreciation expense increased $18,000 (2.82%) to $656,000 due primarily to
capitalized additions to the investment property during the year ended December
31, 1996.
INTEREST EXPENSE
Interest expense totaled $1,177,000 for the year ended December 31, 1996,
compared to $1,191,000 for the year ended December 31, 1995, a decrease of
$14,000, or 1.18%. The decrease is due to a lower outstanding balance on the
mortgage indebtedness due to principal payments made during 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, Your Partnership had $223,000 in cash and cash
equivalents. Your Partnership's principal demands for liquidity include normal
operating activities, payments of principal and interest on outstanding debt,
capital improvements, and distributions paid to limited partners. At September
30, 1998, the outstanding balance on the mortgage indebtedness was $10,615,000.
The mortgage requires monthly payments of approximately $94,000 until October,
2001, at which time a balloon payment of approximately $10,300,000 will be due.
The note is collateralized by pledge of land and buildings and has a stated
interest rate of 9.84%. There are no commitments for material capital
expenditures as of September 1998. The sufficiency of existing liquid assets to
meet future liquidity and capital expenditure requirements is directly related
to the level of capital expenditures required at the property to adequately
maintain the physical assets and meet other operating needs of the partnership.
Such assets are currently thought to be sufficient for any near-term needs of
the partnership. Management believes that your partnership has adequate sources
of cash to finance its operations, both on a short-term and long-term basis.
Presently, there are no plans for any major renovations or improvements for
the property. Budgeted renovations for 1999 total $730,932 and are intended to
be paid for out of cash flow or borrowings. Renovation items include roofing,
electrical, siding trim facia, exterior painting, sidewalks, drives and parking
lots, exterior lighting, landscape and irrigation, drainage, termite treatment,
and pool resurfacing.
S-55
<PAGE> 1491
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to 25% of the outstanding 98 units of your
partnership (up to 24.5 units) for consideration per unit of (i) 603.75
Preferred OP Units, (ii) 185.50 Common OP Units, or (iii) $15,090 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 the commencement of our offer 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., New York City time, on June 4, 1999, 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 January 1, 1999 (subject to proration
as described below), although you will be entitled to retain any distributions
you may have received after such date and prior to our commencement of this
offer.
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 March 26, 1999.
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
S-56
<PAGE> 1492
offer consideration shall be reduced by any interim distributions made by your
partnership between the commencement 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. However, any tendered units may be
withdrawn at any time prior to our accepting them for payment. The AIMCO
Operating Partnership has an 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.
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.
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.
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.
S-57
<PAGE> 1493
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 pays for your units.
You agree not to exercise any rights pertaining to the tendered units without
the prior consent of the AIMCO Operating Partnership. Upon such 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 your general
partner (which is our subsidiary) (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.
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
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<PAGE> 1494
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 may
have to provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal.
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 "Federal Income Tax Consequences."
Transfer Taxes
The amount of any transfer taxes (whether imposed on the registered holder
of units or any person) payable on account of the transfer to such person will
be deducted from the purchase price unless satisfactory evidence of the such
taxes or exemption therefrom is submitted.
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.
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WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to our acceptance of such units for payment.
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.
The offer may be extended or delayed indefinitely and no payment will be
made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment. 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 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
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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 25% 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 25% 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 25% 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 25%, 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 the general partner of your partnership and thereby
controls the management of your partnership. In addition, AIMCO owns 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.
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After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units.
However, the AIMCO Operating Partnership and its affiliates will not acquire any
additional units for a period of at least one year after expiration of the
offer. 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. 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. In addition, we are not extending
appraisal rights in connection with the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
No provisions have been made with regard to the offer to allow you or other
limited partners to inspect the books and records of your partnership or to
obtain counsel or appraisal services at our expense or at the expense of your
partnership. However, as described under "Comparison of Your Partnership and the
AIMCO Operating Partnership -- Review of Investor Lists," you have the right
under your partnership's agreement of limited partnership to obtain a list of
the limited partners.
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 the date of this Prospectus Supplement and at or before the expiration
date of the offer, including any extension thereof, 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 reasonable 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 reasonable 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 the date hereof, (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
the date hereof, (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 reasonable 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 reasonable judgment of the
AIMCO Operating Partnership, a material acceleration or worsening thereof
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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 your
general partner (which is our subsidiary) 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 reasonable 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
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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 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 reasonable 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
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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;
or
(h) the offer to purchase may have an adverse effect on AIMCO's status
as a REIT.
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 reasonable 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 or may
control such
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voting decisions. 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 controls the company that manages your partnership's property. In the event
that the AIMCO Operating Partnership acquires a substantial number of units
pursuant to the offer, removal of the property manager may become more difficult
or impossible.
Effect on Trading Market
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.
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. Consummation of
the offer will not affect your partnership's agreement of limited partnership,
the financial condition or results of operations of your partnership, the
business and properties owned, the management compensation payable to your
general partner (which is our subsidiary) or its affiliates or any other matter
relating to your partnership, except it would result in the AIMCO Operating
Partnership substantially increasing its ownership of units of your partnership.
We will receive future distributions from your partnership for any units we
purchase.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by your general partner (which
is our subsidiary), 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 (excluding 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 (which are requests to dismiss the action as a matter
of law) were heard on February 8, 1999, but no decision has been reached by the
Court. While no assurances can be given, we believe that the ultimate outcome of
this litigation will not have a material adverse effect on us.
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
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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, the accompanying Prospectus, the Letter of
Transmittal, and the legal and accounting fees in connection with this offer.
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 $50,000.
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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FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of the material Federal
income tax consequences of the offer 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
differing interpretations or change, possibly retroactively. This 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 you in light of your specific investment or tax
circumstances, or if you are subject to special tax rules (for example, if you
are a financial institution, broker-dealer, insurance company, or, except to the
extent discussed below, tax-exempt organization or foreign investor, 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 are 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. No clear precedent or authority
may be available on some questions. 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 of your specific tax situation.
TAX OPINIONS
Skadden, Arps, Slate, Meagher & Flom LLP ("Special Tax Counsel") has
delivered an opinion letter with regard to the material United States Federal
income tax consequences of the offer. The opinion letter of Special Tax Counsel
is filed as an exhibit to this Registration Statement. You may obtain a copy of
such opinion letter by sending a written request to the AIMCO Operating
Partnership.
The specific United States Federal income tax opinions that Special Tax
Counsel has provided are:
1. Commencing with AIMCO's initial taxable year ended December 31, 1994,
AIMCO was organized in conformity with the requirements for qualification
as a REIT under the Code, and its actual method of operation has enabled,
and its proposed method of operation will enable, AIMCO to meet the
requirements for qualification and taxation as a REIT. As noted in the
accompanying Prospectus, AIMCO's qualification and taxation as a REIT
depend upon its ability to meet, through actual annual operating results,
certain requirements, including requirements relating to distribution
levels and diversity of stock ownership, and the various qualification
tests imposed under the Code, the results of which have been represented by
the AIMCO's officers and will not be reviewed by Special Tax Counsel. No
assurance can be given that the actual results of AIMCO's future operations
for any one taxable year will satisfy the requirements for taxation as a
REIT under the Code.
2. The AIMCO Operating Partnership will be treated as a partnership and
not as an association taxable as a corporation for Federal income tax
purposes.
3. You will not recognize gain or loss for Federal income tax purposes
when you exchange your units solely for OP Units. If, immediately prior to
such exchange, the amount of your partnership's liabilities allocable to
the units you transfer to the AIMCO Operating Partnership exceeds the
amount of the AIMCO Operating Partnership's liabilities allocable to you
immediately after the exchange, you will receive a deemed distribution in
an amount equal to such liability relief and will recognize gain for
Federal income tax purposes to the extent that the amount of such deemed
distribution exceeds your aggregate adjusted tax basis in your OP Units.
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4. If you exchange your units for cash and OP Units, you will be treated
for Federal income tax purposes as selling some of your units for cash in a
taxable sale and contributing some of your units for OP Units in a tax-free
exchange. With respect to the units that you will be treated as selling for
cash, you will be taxed as described in paragraph number five below. With
respect to the units that you will be treated as exchanging for OP Units,
you will be taxed as described in paragraph number three above.
5. If you sell your units solely for cash, you will recognize gain or
loss for Federal income tax purposes in an amount equal to the difference
between (i) your amount realized on the sale and (ii) your adjusted tax
basis in the units you sold.
6. If you retain all or a portion of your units and your partnership
terminates for Federal income tax purposes, you will not recognize any gain
or loss as a result of such termination and your capital account in your
partnership will not be affected.
7. Because of the factual nature of the inquiry, no opinion is expressed
by Special Tax Counsel as to whether your exercise of a redemption right
with respect to an OP Unit would cause your contribution of units to the
AIMCO Operating Partnership to be a taxable transaction under the disguised
sale rules of the Code.
8. The discussion in the accompanying Prospectus under the captions
"FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS" and "FEDERAL
INCOME TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNIT HOLDERS" and
in this Prospectus Supplement under the caption "FEDERAL INCOME TAX
CONSEQUENCES" is a fair and accurate summary of the material United States
Federal income tax consequences of the offers and of the acquisition,
ownership and disposition of the OP Units and the AIMCO stock by a holder
who acquires the OP Units or AIMCO stock in connection with the offers,
subject to the qualifications set forth therein.
It must be emphasized that these opinions are based and conditioned upon
representations and covenants made by AIMCO and the AIMCO Operating Partnership
as to factual matters (including representations and covenants concerning
AIMCO's properties and the past, present and future conduct of its business and
your partnership's liabilities). These opinions are expressed as of the date of
the opinion letter and Special Tax Counsel has no obligation to advise AIMCO or
the AIMCO Operating Partnership of any subsequent change in the matters stated,
represented, or assumed or any subsequent change in the law. An opinion of
counsel is not binding on the IRS, and no assurance can be given that the IRS
will not challenge the above opinions of Special Tax Counsel.
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 when you exchange your units solely for OP Units. You may
recognize gain upon such exchange if, immediately prior to such exchange, the
amount of liabilities of your partnership allocable to the units you transferred
exceeds the amount of the AIMCO Operating Partnership liabilities allocable to
you immediately after such exchange. If this was true in your case, the excess
would be treated as a deemed distribution of cash to you from the AIMCO
Operating Partnership. This deemed cash distribution would be treated as a
nontaxable return of capital to the extent of your adjusted tax basis in your OP
Units 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 you exchange your units pursuant to the offer,
at least equal to the amount of liabilities of your partnership that were
allocable to your units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most persons who participate in the tender offer
would not recognize gain or loss as a result of an exchange of units solely for
OP Units pursuant to the offer.
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DISGUISED SALES
Under the Code, a transfer of property by a partner to a partnership
followed by a related transfer by the partnership of money or other property to
the partner is treated as a "disguised" sale if (1) the second transfer would
not have occurred but for the first transfer and (2) the second transfer "is not
dependent on the entrepreneurial risks of the partnership operations." In a
disguised sale, the partner is treated as if he or she sold the contributed
property to the partnership as of the date the property was contributed to the
partnership. In addition, unless a few technical exceptions apply, transfers of
money or other property between a partnership and a partner that are made within
two years of each other, including redemptions of OP Units made within two years
of a contribution of your units, must be reported to the IRS and are presumed to
be a "disguised" sale unless the facts and circumstances clearly establish that
the transfers do not constitute a sale.
While there is no authority applying the disguised sale rules to the
exercise of a redemption right by a partner with respect to a partnership
interest received in exchange for property, the exercise of a redemption right
with respect to OP Units within two years of the date of the contribution of
your units to the AIMCO Operating Partnership may be treated as a disguised
sale. If this treatment were to apply, you would be treated for Federal income
tax purposes as if, on the date of the contribution of your units, the AIMCO
Operating Partnership transferred to you an obligation to give you the
redemption proceeds. In that case, you would be required to recognize gain on
the disguised sale in such earlier year. Because of the factual nature of such
an inquiry, Special Tax Counsel is unable to opine whether your exercise of a
redemption right with respect to an OP Unit would cause your contribution of
units to the AIMCO Operating Partnership to be a taxable transaction under the
disguised sale rules of the Code.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Federal Income Taxation of the
AIMCO Operating Partnership and OP Unitholders -- 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
If you exchange your units for cash and OP Units, you will be treated as
selling some of your units for cash in a taxable sale and contributing some of
your units for OP Units in a tax-free exchange. Your adjusted tax basis in your
transferred units will be allocated between the units you will be deemed to have
sold and the units you will be deemed to have contributed to the AIMCO Operating
Partnership.
With respect to the units that you will be treated as selling, you will
recognize gain or loss in an amount equal to the difference between (i) your
"amount realized" on the sale and (ii) your adjusted tax basis in units you
sold. Your "amount realized" on such sale will be equal to the sum of the amount
of cash you received pursuant to the offer (that is, the offer consideration)
plus the amount of your partnership's liabilities attributed to the units you
sold. For purposes of these partial sale rules, the amount of your partnership's
liabilities attributed to the units you sold will be equal to the lesser of (i)
the excess of the amount of your partnership's liabilities allocable to you in
respect of the transferred units immediately prior to the exchange over the
amount of such liabilities allocable to you as determined immediately after the
exchange or (ii) the product of (A) the amount of your partnership's liabilities
allocable to you in respect of the units you are deemed to have sold immediately
prior to the exchange and (B) your "net equity percentage" with respect to those
units. Your "net equity percentage" will be equal to the percentage determined
by dividing (x) the cash you received in the exchange by (y) the excess of the
gross fair market value of the units in the exchange over the amount of your
partnership's liabilities allocable to you in respect of those units immediately
prior to the exchange. Thus, your tax liability could exceed the amount of cash
you receive in the sale.
With respect to the units that you will be treated as exchanging, rather
than selling, you will be taxed as described above under the heading "Tax
Consequences of Exchanging Units Solely for OP Units."
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TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
If you sell your units solely for cash, you will recognize gain or loss on
a sale of your units equal to the difference between (i) your "amount realized"
on the sale and (ii) your adjusted tax basis in the units you sold. The "amount
realized" with respect to a unit will be equal to the sum of the amount of cash
you received for your units (that is, the offer consideration) plus the amount
of the liabilities of your partnership allocable to such units (as determined
under Section 752 of the Code). Thus, your tax liability could exceed the amount
of cash you receive in the sale.
ADJUSTED TAX BASIS
If you acquired your units for cash:
- your initial tax basis in your units will be equal to such cash
investment in your partnership increased by your share of your
partnership's liabilities at the time such units were acquired;
- your initial tax basis generally has been increased by:
- your share of your partnership's income and gains and
- any increases in your share of your partnership's liabilities; and
- your initial tax basis generally has been decreased (but not below zero)
by:
- your share of cash distributions from your partnership,
- any decreases in your share of your partnership's liabilities,
- your share of your partnership's losses, and
- your share of nondeductible expenditures of your partnership that are
not chargeable to capital.
For purposes of determining your adjusted tax basis in your units
immediately prior to a disposition of such units, your adjusted tax basis will
include your 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), the gain you
would recognize pursuant to the offer will exceed the cash proceeds you would
realize upon the sale of your units. The adjusted tax basis of the OP Units you
receive in exchange for your units pursuant to the offer will be equal to (i)
the sum of your adjusted tax basis in the units you transferred plus any gain
recognized in the exchange and will be reduced by (ii) any cash you received or
you were deemed to receive 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 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 that is attributable to your share of "unrealized receivables" of your
partnership exceeds the tax basis attributable to those assets, such excess will
be treated as ordinary income. Among other things, "unrealized receivables"
include depreciation recapture for 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. You will not receive any future distributions
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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 the income or loss. 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 the passive 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 passive losses in the manner described below. If you receive
cash for 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 receive cash for all or a portion of your units
pursuant to the offer and recognize 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
receive cash for all of your units pursuant to the offer, the balance of any
"suspended" losses from your partnership 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.
TAX REPORTING
If you tender any units, you must report the transaction by filing a
statement with your Federal income tax return for the year of the tender which
provides certain required information to the IRS. To prevent the possible
application of back-up Federal income tax withholding of 31% with respect to
payment of the offer consideration, you may have to provide the AIMCO Operating
Partnership with your correct taxpayer identification number. See the
instructions to the Letter of Transmittal.
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"). If you are a foreign person, the AIMCO Operating Partnership will
be required, under the FIRPTA provisions of the Code, to deduct and withhold 10%
of the amount realized by you on the disposition. The amount withheld would be
creditable against your Federal income tax liability and, if the amount withheld
exceeds your actual tax liability you could obtain a refund from the IRS by
filing a U.S. income tax return. See the Instructions to the Letter of
Transmittal.
TAX CONSEQUENCES OF A TERMINATION OF YOUR PARTNERSHIP
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"). The AIMCO Operating Partnership's acquisition of units pursuant
to the offer may result in a Termination of your partnership. If an acquisition
of units results in a
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Termination, the following Federal income tax events will be deemed to occur:
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
interests 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 to the
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
to the New Partnership. A Termination will change (and possibly shorten) a
Remaining Offeree's holding period with respect to its units in your partnership
for Federal income tax purposes. Gains recognized by a Remaining Offeree on the
disposition of New Partnership interests with a holding period of 12 months or
less may be classified as short-term capital gains and subject to taxation at
ordinary income tax rates.
The New Partnership's adjusted tax basis in its assets will be the same as
the Old Partnership's basis in such assets immediately before the Termination. A
Termination will also cause the New Partnership to recalculate the depreciable
lives of its assets. This will cause the assets to be depreciated over a longer
period of time than if there had been no Termination. This would generally
decrease the annual average depreciation deductions allocable to the Remaining
Offerees for a number of years following consummation of the offer (thereby
increasing the taxable income allocable to their retained units in each such
year), but would have no effect on the total depreciation deductions available
over the useful lives of the assets of your partnership.
Elections as to 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.
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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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 The AIMCO Operating Partnership is organized
organized under Florida law for the purpose as a Delaware limited partnership. The AIMCO
of owning and managing Four Quarters Operating Partnership owns interests (either
Habitat. 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 The term of the AIMCO Operating Partnership
partners as a finite life investment, with continues until December 31, 2093, unless
limited partners to receive regular cash the AIMCO Operating Partnership is dissolved
distributions out of your partnership's Cash sooner pursuant to the terms of the AIMCO
Flow (as defined in your partnership's Operating Partnership's agreement of limited
agreement of limited partnership). The partnership (the "AIMCO Operating
termination date of your partnership is Partnership Agreement") or as provided by
December 31, 2030. law. See "Description of 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, The purpose of the AIMCO Operating
own, manage, operate, rent lease and repair Partnership is to conduct any business that
your partnership's property. Subject to may be lawfully conducted by a limited
restrictions contained in your partnership's partnership organized pursuant to the
agreement of limited partnership, your Delaware Revised Uniform Limited Part-
partnership may perform any acts to accom- nership Act (as amended from time to time,
plish the foregoing including, without or any successor to such statute) (the
limitation, borrowing funds and creating "Delaware Limited Partnership Act"),
liens. provided that such business is to be
conducted in a manner that permits AIMCO to
be qualified as a REIT, unless AIMCO ceases
to qualify as a REIT. The AIMCO Operating
Partner-
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship 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 ac-
tion, 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>
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is The general partner is authorized to issue
authorized to issue additional limited additional partnership interests in the
partnership interests in your partnership by AIMCO Operating Partnership for any
selling not more than 100 units for cash and partnership purpose from time to time to the
notes to selected persons who fulfill the limited partners and to other persons, and
requirements set for your partnership's to admit such other persons as additional
agreement of limited partnership. The limited partners, on terms and conditions
capital contribution need not be equal for and for such capital contributions as may be
all limited partners and no action or established by the general partner in its
consent is required in connection with the sole discretion. The net capital
admission of any additional limited contribution need not be equal for all OP
partners. Unitholders. 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,
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 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>
The general partner of your partnership and The AIMCO Operating Partnership may lend or
any of its affiliates may make loans to your contribute funds or other assets to its
partnership in such amounts as the general subsidiaries or other persons in which it
partner deems appropri- has an equity investment,
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ate and necessary for the conduct of your and such persons may borrow funds from the
partnership's business. Such loans will be AIMCO Operating Partnership, on terms and
upon such terms and for such maturities as conditions established in the sole and
the managing general partner deems absolute discretion of the general partner.
reasonable and the interest charged will be To the extent consistent with the business
three percentage points above the interest purpose of the AIMCO Operating Partnership
rate being charged to the prime customers of and the permitted activities of the general
Harris Trust & Savings Bank of Chicago. The partner, the AIMCO Operating Partnership may
partnership may contract with the general transfer assets to joint ventures, limited
partners and their affiliates provided that liability companies, partnerships,
the required payments to be made by your corporations, business trusts or other
partnership are at competitive rates. business entities in which it is or thereby
becomes a participant upon such terms and
subject to such conditions consistent with
the AIMCO Operating Partnership Agreement
and applicable law as the general partner,
in its sole and absolute discretion,
believes to be advisable. Except as
expressly permitted by the AIMCO Operating
Partnership Agreement, neither the general
partner nor any of its affiliates may sell,
transfer or convey any property to the AIMCO
Operating Partnership, directly or
indirectly, except pursuant to transactions
that are determined by the general partner
in good faith to be fair and reasonable.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is The AIMCO Operating Partnership Agreement
authorized to borrow money for partnership contains no restrictions on borrowings, and
purposes and if security is required the general partner has full power and
therefor, to pledge, mortgage or subject to authority to borrow money on behalf of the
any other security device any portion of AIMCO Operating Partnership. The AIMCO
your partnership assets and to enter into Operating Partnership has credit agreements
any surety arrangements with respect that restrict, among other things, its
thereto. ability to incur indebtedness.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited Each OP Unitholder has the right, upon
partnership entitles limited partners and written demand with a statement of the
their representatives to inspect and copy purpose of such demand and at such OP
from the books of account and your agreement Unitholder's own expense, to obtain a
and any amendments thereto at the prin- current list of the name and last known
cipal place of business of your partnership business, residence or mailing address of
during normal business hours upon reasonable the general partner and each other OP
notice. Unitholder.
</TABLE>
Management Control
<TABLE>
<S> <C>
The managing general partner of your All management powers over the business and
partnership is solely responsible for the affairs of the AIMCO Operating Partnership
management of your partnership's business are vested in AIMCO-GP, Inc., which is the
with all rights and powers generally general partner. No OP Unitholder has any
conferred by law or necessary, advisable or right to participate in or exercise control
consistent in connection therewith. The or management power over the business and
exercise of any power conferred by this affairs of the AIMCO Operating Partner-
agreement on the managing general partner ship. The OP Unitholders have the right to
serves to bind your partnership. No limited vote on certain matters described under
partner may take part in the manage- "Comparison of
</TABLE>
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<PAGE> 1512
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ment, conduct or control of the business of Your Units and AIMCO OP Units -- Voting
your partnership or have the power to sign Rights" below. The general partner may not
for or bind your partnership to any be removed by the OP Unitholders with or
agreement or document. without 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>
Under your partnership's agreement of Notwithstanding anything to the contrary set
limited partnership, the general partner of forth in the AIMCO Operating Partnership
your partnership is not liable to your Agreement, the general partner is not liable
partnership or any limited partner for loss to the AIMCO Operating Partnership for
or damage that may be caused by any act losses sustained, liabilities incurred or
performed by it or any failure to act if benefits not derived as a result of errors
such acts were done in good faith and in in judgment or mistakes of fact or law of
accordance with sound business practices and any act or omission if the general partner
in accordance with the terms of your acted in good faith. The AIMCO Operating
partnership's agreement of limited partner- Partnership Agreement provides for
ship. In addition, the general partner and indemnification of AIMCO, or any director or
its affiliates are entitled to officer of AIMCO (in its capacity as the
indemnification by your partnership against previous general partner of the AIMCO
any claim, loss, damage, liability, action Operating Partnership), the general partner,
or expense sustained by it or them as a any officer or director of general partner
result of any act or omission done in good or the AIMCO Operating Partnership and such
faith and in accordance with sound business other persons as the general partner may
practices and in accordance with the terms designate from and against all losses,
of your partnership's agreement of limited claims, damages, liabilities, joint or
partnership, provided that such acts do not several, expenses (including legal fees),
constitute fraud, bad faith, breach of fines, settlements and other amounts
fiduciary duty, gross negligence or incurred in connection with any actions
intentional misconduct. relating to the operations of the AIMCO
Operating
</TABLE>
S-77
<PAGE> 1513
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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
and certain state securities administrations
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 and their
respective state securities laws.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of Except in limited circumstances, the general
limited partnership, a general partner of partner has exclusive management power over
your partnership may be removed for cause, the business and affairs of the AIMCO
exercisable upon written notice upon the Operating Partnership. The general partner
written consent or affirmative vote of all may not be removed as general partner of the
of the limited partners or, under certain AIMCO Operating Partnership by the OP
circumstances, the limited partners owning Unitholders with or without cause. Under the
75% or more of the limited partnership units AIMCO Operating Partnership Agreement, the
outstanding. If there are no remaining general partner may, in its sole discretion,
general partners, all of the limited part- prevent a transferee of an OP Unit from
ners or holders of 75% of more the limited becoming a substituted limited partner
partnership units, under certain pursuant to the AIMCO Operating Partnership
circumstances, may elect a substitute Agreement. The general partner may exercise
general partner. A general partner may sell this right of approval to deter, delay or
up to 50% of its interest owned at the time hamper attempts by persons to acquire a
of formation with the consent of at least controlling interest in the AIMCO Operating
51% of the limited partners. A limited Partnership. Additionally, the AIMCO
partner may not transfer his interests in Operating Partnership Agreement contains
your partnership without the consent of the restrictions on the ability of OP
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>
Amendments to your partnership's agreement With the exception of certain circumstances
of limited partnership may be proposed by set forth in the AIMCO Operating Partnership
the general partner of your partnership or Agreement, whereby the general partner may,
by limited partners owning at least 10% of without the consent of the OP Unitholders,
the then outstanding limited partnership amend the AIMCO Operating Partnership
interests. Such amendments will be passed if Agreement, amendments to the AIMCO Operating
within ninety days of submission to the Partnership Agreement require the consent of
limited partners, the limited partners the holders of a majority of the outstanding
owning 51% of the outstanding units consent. Common OP Units, excluding AIMCO and certain
However, no amendment may reduce the rights other limited exclusions (a "Majority in
or interests or enlarge the obligations of Interest"). Amendments to the AIMCO
the limited partners. The general partner Operating Partnership Agreement may be
may amend your partnership's agreement of proposed by the
</TABLE>
S-78
<PAGE> 1514
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
limited partnership as required by law, general partner or by holders of a Majority
admit limited partners or is necessary to in Interest. Following such proposal, the
effect changes which do not adversely affect general partner will submit any proposed
the rights or increase the obligations of amendment to the OP Unitholders. The general
limited partners. partner will seek the written consent of the
OP Unitholders on the proposed amendment or
will call a meeting to vote thereon. See
"Description of OP Units -- Amendment of the
AIMCO Operating Partnership Agreement" in
the accompanying Prospectus.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
In addition to the right to distributions in The general partner does not receive
respect of its partnership interest and compensation for its services as general
reimbursement for all fees and expenses as partner of the AIMCO Operating Partnership.
set forth in your partnership's agreement of However, the general partner is entitled to
limited partnership, the general partner payments, allocations and distributions in
receives 28.58% of the remaining Cash Flow its capacity as general partner of the AIMCO
after distributions of 12% per annum of each Operating Partnership. In addition, the
limited partner's capital contribution has AIMCO Operating Partnership is responsible
been made to each limited partner. Moreover, for all expenses incurred relating to the
the general partner or certain affiliates AIMCO Operating Partnership's ownership of
may be entitled to compensation for its assets and the operation of the AIMCO
additional services rendered. 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 Except for fraud, willful misconduct or
limited partnership, no limited partner is gross negligence, no OP Unitholder has
bound by or personally liable for any of the personal liability for the AIMCO Operating
expenses, liabilities or obligation of your Partnership's debts and obligations, and
partnership beyond the amount contributed by liability of the OP Unitholders for the
the limited partner to the capital of your AIMCO Operating Partnership's debts and
partnership, its notes for capital obligations is generally limited to the
contributions to your partnership and the amount of their investment in the AIMCO
limited partner's share of undistributed Operating Partnership. However, the
profits of your partnership. 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 Part-
nership 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
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-79
<PAGE> 1515
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
Fiduciary Duties
<TABLE>
<S> <C>
Your partnership's agreement of limited Unless otherwise provided for in the
partnership provides that any partner or relevant partnership agreement, Delaware law
affiliate may engage in or possess an generally requires a general partner of a
interest in other business ventures of any Delaware limited partnership to adhere to
nature and description, including the fiduciary duty standards under which it owes
acquisition, ownership, financing, leasing, its limited partners the highest duties of
operation, management, syndication, good faith, fairness and loyalty and which
brokerage, sale, construction and generally prohibit such general partner from
development of real property, and neither taking any action or engaging in any
your partnership nor any other partners transaction as to which it has a conflict of
shall have any rights in or to such interest. The AIMCO Operating Partnership
independent venture or the income or profits Agreement expressly authorizes the general
derived therefrom. Moreover, the general partner to enter into, on behalf of the
partner is not required to devote all of AIMCO Operating Partnership, a right of
their time or business efforts to the first opportunity arrangement and other
affairs of your partnership, but they are conflict avoidance agreements with various
required to devote so much time and atten- affiliates of the AIMCO Operating
tion to your partnership as is reasonably Partnership and the general partner, on such
necessary and advisable to manage the terms as the general partner, in its sole
affairs of your partnership to be the best and absolute discretion, believes are
advantage of your partnership. advisable. The AIMCO Operating Partnership
Agreement expressly limits the liability of
In general, your partnership's agreement of the general partner by providing that the
limited partnership and the AIMCO Operating general partner, and its officers and
Partnership Agreement have limitations on directors will not be liable or accountable
the liability of the general partner but in damages to the AIMCO Operating
such limitations differ and provide more Partnership, the limited partners or as-
protection for the general partner of the signees for errors in judgment or mistakes
AIMCO Operating Partnership. 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 The AIMCO Operating Partnership is not
differences between the taxation of your subject to Federal income taxes. Instead,
partnership and the AIMCO Operating each holder of OP Units includes in income
Partnership. 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
</TABLE>
S-80
<PAGE> 1516
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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 nonre-
course 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>
<CAPTION>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity in- equity interests entitling each equity interests entitling each OP
terests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of and as declared by the board of rata share of cash distributions
distributions to be made to the directors of the general partner made from Available Cash (as such
partners of your partnership. of the AIMCO Operating Part- term is defined in the AIMCO
nership, quarterly cash distribu- Operating Partnership Agreement)
tion at a rate of $0.50 per to the partners of the AIMCO
Preferred OP Unit, subject to ad- Operating Partnership. To the
justments from time to time on or extent the AIMCO Operating
after the fifth anniversary of the Partnership sells or refinances
issue date of the Preferred OP its assets, the net proceeds
Units. therefrom generally will be re-
tained by the AIMCO Operating
Partnership for working capital
and new investments rather than
being distributed to the
</TABLE>
S-81
<PAGE> 1517
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
OP Unitholders (including AIMCO).
</TABLE>
Voting Rights
<TABLE>
<S> <C> <C>
Under your partnership's Except as otherwise required Under the AIMCO Operating
agreement of limited by applicable law or in the Partnership Agreement, the
partnership, limited AIMCO Operating Partnership OP Unitholders have voting
partners have voting rights Agreement, the holders of rights only with respect to
in certain circumstances and the Preferred OP Units will certain limited matters such
are not deemed to take part have the same voting rights as certain amendments and
in the control of your as holders of the Common OP termination of the AIMCO
partnership by virtue of Units. See "Description of Operating Partnership
their voting rights. If a OP Units" in the accompany- Agreement and certain
court of competent ing Prospectus. So long as transactions such as the
jurisdiction determines or any Preferred OP Units are institution of bankruptcy
the opinion of counsel which outstanding, in addition to proceedings, an assignment
is reasonably satisfactory any other vote or consent of for the benefit of creditors
to the holders of 51% of the partners required by law or and certain transfers by the
outstanding units is by the AIMCO Operating general partner of its
obtained that the approval Partnership Agreement, the interest in the AIMCO
of the following transac- affirmative vote or consent Operating Partnership or the
tions by less than all of of holders of at least 50% admission of a successor
the limited partners will of the outstanding Preferred general partner.
not be deemed to be control OP Units will be necessary
of your partnership by the for effecting any amendment Under the AIMCO Operating
limited partners, the hold- of any of the provisions of Partnership Agreement, the
ers of a majority of the the Partnership Unit general partner has the
then outstanding units may Designation of the Preferred power to effect the
amend your partnership's OP Units that materially and acquisition, sale, transfer,
agreement of limited adversely affects the rights exchange or other
partnership and dissolve of or preferences of the disposition of any assets of
your partnership. If the holders of the Preferred OP the AIMCO Operating
foregoing conditions are Units. The creation or Partnership (including, but
satisfied, the limited issuance of any class or not limited to, the exercise
partners owning at least 75% series of partnership units, or grant of any conversion,
of the outstanding units may including, without option, privilege or
also remove a general limitation, any partner- subscription right or any
partner and elect a ship units that may have other right available in
substitute general partner rights senior or superior to connection with any assets
in the event there is no the Preferred OP Units, at any time held by the
remaining general partner. shall not be deemed to AIMCO Operating Partnership)
However, if such showing is materially adversely affect or the merger,
not made, all of the above the rights or preferences of consolidation,
issues will require the ap- the holders of Preferred OP reorganization or other
proval of all of the limited Units. With respect to the combination of the AIMCO
partners. The holders of a exercise of the above Operating Partnership with
majority of the then described voting rights, or into another entity, all
outstanding must approve the each Preferred OP Units without the consent of the
sale of your partnership's shall have one (1) vote per OP Unitholders.
property and the sale by the Preferred OP Unit.
general partner of its The general partner may
general partner interests. cause the dissolution of the
AIMCO Operating Partnership
The last remaining general by an "event of withdrawal,"
partner may cause the as defined in the Delaware
dissolution of the your Limited Partnership Act
partnership by retiring, (including, without limi-
unless the limited partners tation, bankruptcy), unless,
owning more the 75% of the within 90 days after the
then outstanding units elect with-
to continue your partnership
and elect a
</TABLE>
S-82
<PAGE> 1518
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
new general partner within drawal, holders of a
sixty days of the "majority in interest," as
retirement. defined in the Delaware
Limited Partnership Act,
In general, you have greater agree in writing, in their
voting rights in your sole and absolute
partnership than you will discretion, to continue the
have as an OP Unitholder. OP business of the AIMCO
Unitholders can not remove Operating Partnership and to
the general partner of the the appointment of a
AIMCO Operating Partnership. 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 "Descrip-
tion of OP
Units -- Dissolution and
Winding Up" in the accom-
panying Prospectus.
OP Unitholders cannot remove
the general partner of the
AIMCO Operating Partnership
with or without cause.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement Holders of Preferred OP Subject to the rights of
of limited partnership Units will be entitled to holders of any outstanding
specifies how the cash receive, when and as Preferred OP Units, the
available for distribution, declared by the board of AIMCO Operating Partnership
whether arising from directors of the general Agreement requires the
operations or sales or partner of the AIMCO general partner to cause the
refinancing, is to be shared Operating Partnership, AIMCO Operating Partnership
among the partners. The quarterly cash distributions to distribute quarterly all,
general partner of your at the rate of $0.50 per or such portion as the
partnership annually Preferred OP Unit; provided, general partner may in its
distributes substantially however, that at any time sole and absolute discretion
all of your partnership's and from time to time on or determine, of Available Cash
Cash Flow (as defined in after the fifth anniversary (as defined in the AIMCO
your partnership's agreement of the issue date of the Operating Partnership
of limited partnership) with Preferred OP Units, the Agreement) generated by the
each partner receiving their AIMCO Operating Partnership AIMCO Operating Partnership
pro rata share in accordance may adjust the annual during such quarter to the
with their ownership of distribution rate on the general partner, the special
units. Such distributions Preferred OP Units to the limited partner and the
are made at convenient lower of (i) 2.00% plus the holders of Common OP Units
period intervals, not less annual interest rate then on the record date es-
than quarterly, within sixty applicable to U.S. Treasury tablished by the general
days after the close of the notes with a maturity of partner with respect to such
quarter. Any proceeds re- five years, and (ii) the quarter, in accordance with
ceived from the sale or annual dividend rate on the their respective interests
refinancing of your most recently issued AIMCO in the AIMCO Operating
partnership's property is non-convertible preferred Partnership on such record
distributed in accordance stock which ranks on a date. Holders of any other
with your partnership's parity with its Class H Preferred OP Units issued in
agreement of limited Cumulative Preferred Stock. the future may have priority
partnership. The distribu- Such distributions will be over the
tions payable to the cumulative from the date of
partners are not fixed in origi-
amount and depend
</TABLE>
S-83
<PAGE> 1519
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
upon the operating results nal issue. Holders of general partner, the special
and net sales or refinancing Preferred OP Units will not limited partner and holders
proceeds available from the be entitled to receive any of Common OP Units with
disposition of your distributions in excess of respect to distributions of
partnership's assets. Your cumulative distributions on Available Cash,
partnership has not made the Preferred OP Units. No distributions upon
distributions in the past interest, or sum of money in liquidation or other
and is not projected to make lieu of interest, shall be distributions. See "Per
distributions in 1999. payable in respect of any Share and Per Unit Data" in
distribution payment or pay- the accompanying Prospectus.
ments on the Preferred OP
Units that may be in The general partner in its
arrears. sole and absolute discretion
may distribute to the OP
When distributions are not Unitholders Available Cash
paid in full upon the on a more frequent basis and
Preferred OP Units or any provide for an appropriate
Parity Units (as defined record date.
below), all distributions
declared upon the Preferred The AIMCO Operating Partner-
OP Units and any Parity ship Agreement requires the
Units shall be declared general partner to take such
ratably in proportion to the reasonable efforts, as
respective amounts of determined by it in its sole
distributions accumulated, and absolute discretion and
accrued and unpaid on the consistent with AIMCO's
Preferred OP Units and such qualification as a REIT, to
Parity Units. Unless full cause the AIMCO Operating
cumulative distributions on Partnership to distribute
the Preferred OP Units have sufficient amounts to en-
been declared and paid, able the general partner to
except in limited circum- transfer funds to AIMCO and
stances, no distributions enable AIMCO to pay stock-
may be declared or paid or holder dividends that will
set apart for payment by the (i) satisfy the requirements
AIMCO Operating Partnership for qualifying as a REIT
and no other distribution of under the Code and the
cash or other property may Treasury Regulations and
be declared or made, (ii) avoid any Federal
directly or indirectly, by income or excise tax
the AIMCO Operating liability of AIMCO. See
Partnership with respect to "Description of OP
any Junior Units (as de- Units -- Distributions" in
fined below), nor shall any the accompanying Prospectus.
Junior Units be redeemed,
purchased or otherwise
acquired for considera-
tion, 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>
<CAPTION>
<S> <C> <C>
A limited partner may There is no public market There is no public market
transfer his interests if for the Preferred OP Units for the OP Units. The AIMCO
the transferee is a citizen and the Preferred OP Units Operating Partnership
and resident of the U.S., are not listed on any Agreement restricts the
the transferor provides an securities exchange. The transferability of the
opinion
</TABLE>
S-84
<PAGE> 1520
<TABLE>
<CAPTION>
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<S> <C> <C>
that such transfer is made Preferred OP Units are OP Units. Until the
in compliance with the subject to restrictions on expiration of one year from
securities law, the transfer as set forth in the the date on which an OP
transferee makes the rep- AIMCO Operating Partnership Unitholder acquired OP
resentations required by Agreement. Units, subject to certain
your partnership's agreement exceptions, such OP
of limited partnership and Pursuant to the AIMCO Unitholder may not transfer
the managing general partner Operating Partnership all or any portion of its OP
consents, which consent may Agreement, until the Units to any transferee
be withheld in its sole expiration of one year from without the consent of the
discretion and will be the date on which a holder general partner, which
withheld if in the opinion of Preferred OP Units consent may be withheld in
of counsel, such transfer acquired Preferred OP Units, its sole and absolute
would result in the subject to certain discretion. After the
termination of your exceptions, such holder of expiration of one year, such
partnership for tax Preferred OP Units may not OP Unitholder has the right
purposes. However, in order transfer all or any portion to transfer all or any
for such transferee to be of its Preferred OP Units to portion of its OP Units to
substituted for the any transferee without the any person, subject to the
transferor, in addition to consent of the general satisfaction of certain con-
the foregoing requirements, partner, which consent may ditions specified in the
a written instrument be withheld in its sole and AIMCO Operating Partnership
evidencing the transfer must absolute discretion. After Agreement, including the
be duly executed and ac- the expiration of one year, general partner's right of
knowledged, the transfer fee such holders of Preferred OP first refusal. See
must be paid, the general Units has the right to "Description of OP Units --
partner must consent, which transfer all or any portion Transfers and Withdrawals"
may be withheld in its sole of its Preferred OP Units to in the accompanying
discretion and such other any person, subject to the Prospectus.
requirements as are set satisfaction of certain
forth in your partnership's conditions specified in the After the first anniversary
agreement of limited AIMCO Operating Partner- of becoming a holder of
partnership must be ship Agreement, including Common OP Units, an OP
satisfied. the general partner's right Unitholder has the right,
There are no redemption of first refusal. subject to the terms and
rights associated with your conditions of the AIMCO
units. After a one-year holding Operating Partnership
period, a holder may redeem Agreement, to require the
Preferred OP Units and AIMCO Operating Partnership
receive in exchange to redeem all or a portion
therefor, at the AIMCO Oper- of the Common OP Units held
ating Partnership's option, by such party in exchange
(i) subject to the terms of for a cash amount based on
any Senior Units (as defined the value of shares of Class
below), cash in an amount A Common Stock. See
equal to the Liquidation "Description of OP
Preference of the Preferred Units -- Redemption Rights"
OP Units tendered for in the accompanying
redemption, (ii) a number of Prospectus. Upon receipt of
shares of Class A Common a notice of redemption, the
Stock of AIMCO that is equal AIMCO Operating Partnership
in Value to the Liquidation may, in its sole and
Preference of the Preferred absolute discretion but
OP Units tendered for subject to the restrictions
redemption, or (iii) for on the ownership of Class A
Preferred OP Units redeemed Common Stock imposed under
after a two-year holding AIMCO's charter and the
period, a number of shares transfer restrictions and
of Class I Preferred Stock other limitations thereof,
of AIMCO that pay an elect to cause AIMCO to
aggregate amount of acquire some or all of the
dividends tendered Common OP Units in
</TABLE>
S-85
<PAGE> 1521
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
equivalent to the exchange for Class A Common
distributions on the Stock, based on an exchange
Preferred OP Units tendered ratio of one share of Class
for redemption; provided A Common Stock for each Com-
that such shares are part of mon OP Unit, subject to
a class or series of adjustment as provided in
preferred stock that is then the AIMCO Operating
listed on the NYSE or an- Partnership Agreement.
other national securities
exchange. See "Federal
Income Tax
Consequences -- Disguised
Sales." 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-86
<PAGE> 1522
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are the Class Two 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 I High Performance 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, the
Class J Partnership Preferred Units, the Class K 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, the Class One 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 $0.50 per Preferred OP
Unit (equivalent to 8.0% per annum of the $25 stated liquidation preference);
provided, however, that at any time and from time to time on or after March 1,
2005, the AIMCO Operating Partnership may adjust the annual distribution rate on
the Preferred OP Units to the lower of (i) 2.0% 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. A reduction in the distribution rate will reduce your rate of return on
the Preferred OP Units and possibly encourage you to redeem such units. 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
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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 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 $25 per Preferred OP
Unit, 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
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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 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 A Common Stock of AIMCO that is equal in Value to the
Liquidation Preference of the Preferred OP Units tendered for redemption, or
(iii) for Preferred OP Units redeemed after a two-year holding period, 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 NYSE or another national securities exchange.
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. Before issuing any preferred
stock upon redemption of Preferred OP Units, AIMCO will register the issuance
and sale of such shares under the Securities Act of 1933. 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.
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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.
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, the Class J 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 8.0% per annum of the $25 liquidation preference (equivalent to
$2.00 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 July 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 March 1, 2005, 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,
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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 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> 1527
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 The Class I Preferred Stock constitutes an
interests entitling each holder of Preferred equity interest entitling each holder of
OP Units to receive, when and as declared by Class I Preferred Stock to receive, when and
the board of directors of the general as declared by the AIMCO board of directors,
partner of the AIMCO Operating Partnership, cash distribution at a rate of $2.00 per
quarterly cash distribution at a rate of annum per share.
$0.50 per 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 Holders of Class I Preferred Stock do not
law or in the AIMCO Operating Partnership's have any voting rights, except as set forth
agreement of limited partnership, the below and except as otherwise required by
holders of the Preferred OP Units will have applicable law.
the same voting rights as holders of the
Common OP Units. See "Description of OP If and whenever dividends on any shares of
Units" in the accompanying Prospectus. So Class I Preferred Stock or any series or
long as any Preferred OP Units are class of Class I Parity Stock are in arrears
outstanding, in addition to any other vote for six or more quarterly periods (whether
or consent of partners required by law or by or not consecutive), the number of directors
the AIMCO Operating Partnership's agreement then constituting the AIMCO board of
of limited partnership, the affirmative vote directors shall be increased by two (if not
or consent of holders of at least 50% of the already increased by reason of similar types
outstanding Preferred OP Units will be of provisions with respect to shares of
necessary for effecting any amendment of any voting preferred stock), and the holders of
of the provisions of the Partnership Unit shares of Class I Preferred Stock, together
Designation of the Preferred OP Units that with the holders of shares of all other
materially and adversely affects the rights voting preferred stock then entitled to
or preferences of the holders of the exercise similar voting rights, voting as a
Preferred OP Units. The creation or issuance single class regardless of series, will be
of any class or series of AIMCO Operating entitled to vote for the election of two
Partnership units, including, without additional directors of AIMCO. Whenever
limitation, any AIMCO Operating Partnership dividends in arrears and dividends for the
units that may have rights senior or current quarterly dividend period have been
superior to the Preferred OP Units, will not paid or declared and set aside in respect of
be deemed to materially adversely affect the the outstanding shares of the Class I
rights or preferences of the holders of Preferred Stock and the voting preferred
Preferred OP Units. With respect to the stock, then the right of the holders of
exercise of the above described voting Class I Preferred Stock and the voting
rights, each Preferred OP Units will have preferred stock to elect such additional two
one (1) vote per Preferred 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
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
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>
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled Holders of Class I Preferred Stock are
to receive, when and as declared by the entitled to receive, when and as declared by
board of directors of the general partner of the AIMCO board of directors, out of funds
the AIMCO Operating Partnership, quarterly legally available for payment, cash
cash distributions at the rate of $0.50 per dividends at the rate of $2.00 per annum per
Preferred OP Unit; provided, however, that share. Such dividends are cumulative from
at any time and from time to time on or the date of original issue. Holders of Class
after the fifth anniversary of the issue I Preferred Stock are not be entitled to
date of the Preferred OP Units, the AIMCO receive any dividends in excess of
Operating Partnership may adjust the annual cumulative dividends on the Class I
distribution rate on the Preferred OP Units Preferred Stock. No interest, or sum of
to the lower of (i) 2.00% plus the annual money in lieu of interest, shall be payable
interest rate then applicable to U.S. in respect of any dividend payment or
Treasury notes with a maturity of five payments on the Class I Preferred Stock that
years, and (ii) the annual dividend rate on may be in arrears.
the most recently issued AIMCO
non-convertible preferred stock which ranks When dividends are not paid in full upon the
on a parity with its Class H Cumulative Class I Preferred Stock or any other class
Preferred Stock. Such distributions will be or series of Class I Parity Stock, all
cumulative from the date of original issue. dividends declared upon the Class I
Holders of Preferred OP Units will not be Preferred Stock and any shares of Class I
entitled to receive any distributions in Parity Stock will be declared ratably in
excess of cumulative distributions on the proportion to the respective amounts of
Preferred OP Units. No interest, or sum of dividends accumulated, accrued and unpaid on
money in lieu of interest, shall be payable the Class I Preferred Stock and such Class I
in respect of any distribution payment or Parity Stock. Unless dividends equal to the
payments on the Preferred OP Units that may full amount of all accumulated, accrued and
be in arrears. unpaid dividends on the Class I Preferred
Stock have been paid, or declared and set
When distributions are not paid in full upon apart for payment, except in limited
the Preferred OP Units or any Parity Units, circumstances, no dividends may be declared
all or paid or set apart for
</TABLE>
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<PAGE> 1529
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
distributions declared upon the Preferred OP payment by AIMCO and no other distribution
Units and any Parity Units will be declared of cash or other property may be declared or
ratably in proportion to the respective made, directly or indirectly, by AIMCO with
amounts of distributions accumulated, respect to any shares of Class I Junior
accrued and unpaid on the Preferred OP Units Stock, nor shall any shares of Class I
and such Parity Units. Unless full Junior Stock be redeemed, purchased or
cumulative distributions on the Preferred OP otherwise acquired for any consideration,
Units have been declared and paid, except in nor shall any other cash or other property
limited circumstances, no distributions may be paid or distributed to or for the benefit
be declared or paid or set apart for payment of holders of shares of Class I Junior
by the AIMCO Operating Partnership and no Stock. See "Description of Class I Preferred
other distribution of cash or other property Stock -- Dividends."
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 Ownership of shares of Class I Preferred
OP Units and the Preferred OP Units are not Stock by any person will be limited such
listed on any securities exchange. The that the sum of the aggregate value of all
Preferred OP Units are subject to certain equity stock (including all shares of Class
restrictions on transferability set forth in 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)
Pursuant to the AIMCO Operating of the aggregate value of all outstanding
Partnership's agreement of limited shares of equity stock. Further, certain
partnership, until the expiration of one transfers which may have the effect of
year from the date on which a holder of causing AIMCO to lose its status as a REIT
Preferred OP Units acquired Preferred OP are void ab initio.
Units, subject to certain exceptions, such
holder of Preferred OP Units may not If any transfer of Class I Preferred Stock
transfer all or any portion of its Preferred occurs which, if effective, would result in
OP Units to any transferee without the any person beneficially or constructively
consent of the general partner, which owning Class I Preferred Stock in excess or
consent may be withheld in its sole and in violation of the Class I Preferred
absolute discretion. After the expiration of Ownership Limit, such shares of Class I
one year, such holders of Preferred OP Units Preferred Stock in excess of the Class I
has the right to transfer all or any portion Preferred Ownership Limit will be
of its Preferred OP Units to any person, automatically transferred to a trustee in
subject to the satisfaction of certain his capacity as trustee of a trust for the
conditions specified in the AIMCO Operating exclusive benefit of one or more charitable
Partnership's agreement of limited beneficiaries designated by AIMCO, and the
partnership, including the general partner's prohibited transferee will generally have no
right of first refusal. rights in such shares, except upon sale of
the shares by the trustee. The trustee will
After a one-year holding period, a holder have all voting rights and rights to
may redeem Preferred OP Units and receive in dividends with respect to shares of Class I
exchange therefor, at the AIMCO Operating Preferred Stock held in the trust, which
Partnership's option, (i) subject to the rights will be exercised for the benefit of
terms of any Senior Units, cash in an amount the charitable beneficiaries.
equal to the Liquidation Preference of the
Preferred OP Units tendered for The trustee may sell the Class I Preferred
Stock held
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
redemption, (ii) a number of shares of Class in the trust to AIMCO or a person,
A Common Stock of AIMCO that is equal in designated by the trustee, whose ownership
value to the Liquidation Preference of the of the Class I Preferred Stock will not
Preferred OP Units tendered for redemption, violate the Class I Preferred Ownership
or (iii) for Preferred OP Units redeemed Limit. Upon such sale, the interest of the
after a two-year holding period, a number of charitable beneficiaries in the shares sold
shares of Class I Preferred Stock of AIMCO will terminate and the trustee will
that pay an aggregate amount of dividends distribute to the prohibited transferee, the
equivalent to the distributions on the lesser of (i) the price paid by the
Preferred OP Units tendered for redemption; prohibited transferee for the shares or if
provided that such shares are part of a the prohibited transferee did not give value
class or series of preferred stock that is for the shares in connection with the event
then listed on the NYSE or another national causing the shares to be held in the trust,
securities exchange. See "Federal Income Tax the market price of such shares on the day
Consequences -- Disguised Sales." The of the event causing the shares to be held
Preferred OP Units may not be redeemed at in the trust and (ii) the price per share
the option of the AIMCO Operating received by the trustee from the sale or
Partnership. See "Description of Preferred other disposition of the shares held in the
OP Units -- Redemption." trust. Any proceeds in excess of the amount
payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after March 1, 2005, 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-95
<PAGE> 1531
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. Your general
partner became a wholly owned subsidiary on February 26, 1999 of AIMCO when IPT
merged with AIMCO. Accordingly, the general partner of your partnership 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 Unitholders 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 own the general partner of your partnership and the manager of your
partnership's property. The general partner of your partnership receives 28.58%
of the remaining Cash Flow after distributions of 12% per annum of each limited
partner's capital contribution has been made to each limited partner and may
receive reimbursement for expenses generated in its capacity as general partner
from your partnership. The property manager received management fees of $57,825
in 1996, $57,535 in 1997 and $118,437 in 1998. The AIMCO Operating Partnership
has no current intention of changing the fee structure for the manager of your
partnership's 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." AIMCO's
Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is
S-96
<PAGE> 1532
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.
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. However, we will not acquire any
additional units for a period of at least one year after expiration of the
offer. Any such future offers that we might make could be for consideration that
is more or less than the consideration we are currently offering.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $369,705 will be
required to purchase all of the units sought in the offer, if such units are
tendered for cash excluding expenses as itemized below. The AIMCO Operating
Partnership will obtain all such funds from cash from operations, equity
issuances and short term borrowings. The AIMCO Operating Partnership will pay
all of the costs of the offer and not your partnership.
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...................................... $ 5,000
Accountant's Fees........................................... $ 5,000
Legal Fees.................................................. $10,000
Printing Fees............................................... $10,000
Stanger's Fees.............................................. $ 9,000
Other....................................................... $11,000
-------
Total....................................................... $50,000
=======
</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 Bank of America's reference rate, at the election of
the Company, plus, 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 0.75% and 1.25% 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
September 30, 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
S-97
<PAGE> 1533
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.
We may obtain funds pursuant to a credit agreement entered into by our
subsidiary, Insignia Properties, L.P. ("IPLP"), 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, 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). IPLP 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. The AIMCO Operating
Partnership intends to repay any funds borrowed out of working capital in the
ordinary course of business.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP has delivered 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 has delivered an opinion with regard to
the material Federal income tax consequences of the offer. 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 two opinions of Skadden, Arps, Slate, Meagher & Flom LLP are 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 opinions will be sent by the Information Agent.
S-98
<PAGE> 1534
INDEX TO THE FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed Balance Sheet as of September 30, 1998
(unaudited)............................................... F-2
Condensed Statements of Operations for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-3
Condensed Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-4
Note A -- Basis of Presentation (unaudited)................. F-5
Balance Sheets as of December 31, 1997 and 1996
(unaudited)............................................... F-6
Statements of Operations for the year ended December 31,
1997 and 1996 (unaudited)................................. F-7
Statements of Changes in Partners' Deficit for the year
ended December 31, 1997 and 1996 (unaudited).............. F-8
Statements of Cash Flows for the year ended December 31,
1997 and 1996 (unaudited)................................. F-9
Notes to the Financial Statements (unaudited)............... F-10
</TABLE>
F-1
<PAGE> 1535
FOUR QUARTERS HABITAT APARTMENT ASSOCIATES
CONDENSED BALANCE SHEET-(UNAUDITED)
(IN THOUSANDS)
SEPTEMBER 30, 1998
ASSETS
<TABLE>
<S> <C> <C>
Cash and cash equivalents................................... $ 223
Receivables and deposits.................................... 500
Restricted escrows.......................................... 185
Other assets................................................ 248
Investment Property:
Land...................................................... $ 1,776
Building and related personal property.................... 17,870
--------
19,646
Less: Accumulated depreciation............................ (10,950) 8,696
-------- -------
Total Assets...................................... $ 9,852
=======
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable and accrued liabilities.................... $ 943
Notes payable............................................... 10,615
Partners' Deficit........................................... (1,706)
-------
Total Liabilities and Partners' Deficit........... $ 9,852
=======
</TABLE>
See accompanying note.
F-2
<PAGE> 1536
FOUR QUARTERS HABITAT APARTMENT ASSOCIATES
CONDENSED STATEMENTS OF OPERATIONS -- UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1998 1997
------- -------
<S> <C> <C>
Revenues:
Rental income............................................. $2,106 $2,054
Other income.............................................. 71 61
------ ------
Total Revenues.................................... 2,177 2,115
Expenses:
Operating expenses........................................ 685 738
General and administrative expenses....................... 79 80
Depreciation expense...................................... 507 507
Interest expense.......................................... 872 879
Property tax expense...................................... 267 265
------ ------
Total Expenses.................................... 2,410 2,469
Net Loss.......................................... $ (233) $ (354)
====== ======
</TABLE>
See accompanying note.
F-3
<PAGE> 1537
FOUR QUARTERS HABITAT APARTMENT ASSOCIATES
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1998 1997
------ ------
<S> <C> <C>
Operating Activities:
Net loss.................................................. $(233) $(354)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................. 566 567
Changes in accounts:
Receivables and deposits and other assets.............. (183) (248)
Accounts payable and accrued expenses.................. 199 310
----- -----
Net cash provided by operating activities......... 349 275
Investing Activities
Property improvements and replacements.................... (201) (274)
Net increase in restricted escrows........................ (7) (5)
----- -----
Net cash used in investing activities............. (208) (279)
Financing Activities
Payments on mortgage...................................... (63) (51)
----- -----
Net cash used in financing activities..................... (63) (51)
----- -----
Net increase (decrease) in cash and cash equivalents...... 78 (55)
Cash and cash equivalents at beginning of year............ 145 185
----- -----
Cash and cash equivalents at end of period................ $ 223 $ 130
===== =====
</TABLE>
See accompanying note.
F-4
<PAGE> 1538
FOUR QUARTERS HABITAT APARTMENT ASSOCIATES
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements of Four Quarters Habitat
Apartment Associates, Ltd. as of September 30, 1998 and for the nine months
ended September 30, 1998 and 1997 have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included and all such adjustments are of a recurring
nature.
The financial statements should be read in conjunction with the unaudited
financial statements and notes thereto for the year ended December 31, 1997. It
should be understood that accounting measurements at interim dates inherently
involve greater reliance on estimates than at year-end. The results of
operations for the interim periods presented are not necessarily indicative of
the results for the entire year.
F-5
<PAGE> 1539
FOUR QUARTERS HABITAT APARTMENT ASSOCIATES
BALANCE SHEET (UNAUDITED)
DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT UNIT DATA)
ASSETS
<TABLE>
<S> <C> <C>
Cash and cash equivalents................................... $ 145
Receivables and deposits.................................... 306
Restricted escrows.......................................... 178
Other assets................................................ 317
Investment property (Notes B and D):
Land...................................................... $ 1,776
Buildings and related personal property................... 17,669
--------
19,445
Less accumulated depreciation............................... (10,443) 9,002
-------- -------
$ 9,948
=======
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable and other accrued liabilities............ $ 578
Tenant security deposit liability......................... 165
Mortgage note payable (Notes B and D)..................... 10,678
-------
5,588
Partners' deficit:
General partner........................................... $ (1,538)
Limited partners (98 units issued and outstanding)........ 65 (1,473)
-------- -------
$ 6,747
=======
</TABLE>
See accompanying notes.
F-6
<PAGE> 1540
FOUR QUARTERS HABITAT APARTMENT ASSOCIATES
STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT UNIT DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Revenues:
Rental income............................................. $ 2,840 $ 2,828
Other income.............................................. 80 75
---------- ----------
2,920 2,903
Expenses:
Operating................................................. $ 1,116 $ 1,143
General and administrative................................ 106 104
Depreciation.............................................. 676 656
Interest.................................................. 1,143 1,177
Property taxes............................................ 340 337
---------- ----------
3,381 3,417
---------- ----------
Net loss.................................................... $ (461) $ (514)
========== ==========
Net loss allocated to general partner (2%).................. (9) (10)
Net loss allocated to limited partners (98%)................ (452) (504)
---------- ----------
$ (461) $ (514)
========== ==========
Net loss per limited partnership unit....................... $(4,612.24) $(5,142.86)
========== ==========
</TABLE>
See accompanying notes.
F-7
<PAGE> 1541
FOUR QUARTERS HABITAT APARTMENT ASSOCIATES
STATEMENT OF CHANGES IN PARTNERS' DEFICIT (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------- -------- -------
<S> <C> <C> <C>
Deficit at December 31, 1995................................ $(1,519) $1,021 $ (498)
Net loss for the year ended December 31, 1996............. (10) (504) (514)
------- ------ -------
Deficit at December 31, 1996................................ (1,529) 517 (1,012)
Net loss for the year ended December 31, 1997............. (9) (452) (461)
------- ------ -------
Deficit at December 31, 1997................................ $(1,538) $ 65 $(1,473)
======= ====== =======
</TABLE>
See accompanying notes.
F-8
<PAGE> 1542
FOUR QUARTERS HABITAT APARTMENT ASSOCIATES
STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------
1997 1996
------ ------
<S> <C> <C>
Cash flows from operating activities
Net loss.................................................. $ (461) $ (514)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation........................................... 676 656
Amortization of loan costs............................. 80 80
Change in accounts:
Receivables and deposits and other assets............ (22) (49)
Accounts payable and other liabilities............... 45 (30)
------ ------
Net cash provided by operating activities......... 318 143
Cash flows from investing activities
Property improvements and replacements.................... (274) (234)
Net deposits to restricted escrows........................ (6) 61
------ ------
Net cash used in investing activities..................... (280) (173)
Cash flows from financing activities
Principal payments on mortgage notes payable.............. (78) (70)
------ ------
Net cash used in financing activities..................... (78) (70)
------ ------
Net decrease in cash and cash equivalents................... (40) (100)
Cash and cash equivalents at beginning of year.............. 185 285
------ ------
Cash and cash equivalents at end of year.................... $ 145 $ 185
====== ======
Supplemental disclosure of cash flow information
Cash paid for interest.................................... $1,063 $1,097
====== ======
</TABLE>
See accompanying notes.
F-9
<PAGE> 1543
FOUR QUARTERS HABITAT APARTMENT ASSOCIATES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1997
NOTE A -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The limited partnership was organized for the purpose of acquiring, owning
and operating the Four Quarters Habitat Apartments in Miami, Florida.
Ninety-eight units of limited partnership interests and a general partner
interest were issued. The Partnership shall terminate on December 31, 2030,
unless terminated sooner, pursuant to the agreement.
Investment Property
Investment property is stated at cost. Acquisition fees are capitalized as
a cost of real estate. The Partnership records impairment losses on long-lived
assets used in operations when events and circumstances indicated that the
assets might be impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of those assets. No
adjustments for impairment of value were necessary for the years ended December
31, 1997 or 1996.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Risks and Uncertainties
The real estate business is highly competitive. The Partnership's real
property investments are subject to competition from similar types of properties
in the vicinities in which they are located and the Partnership is not a
significant factor in its industry. In addition, various limited partnerships
have been formed by related parties to engage in business which may be
competitive with the Partnership.
Cash and Cash Equivalents
Cash on hand and in banks, and money market funds and certificates of
deposit with original maturities of three months or less are considered to be
unrestricted cash. At certain times, the amount of cash deposited at a bank may
exceed the limit on insured deposits.
Fair Value of Financial Instruments
The Partnership believes that the carrying amount of its financial
instruments (except for long term debt) approximates their fair value due to the
short term maturity of these instruments. The fair value of the Partnership's
long-term debt, after discounting the scheduled loan payments at an estimated
borrowing rate currently available to the Partnership, approximates its carrying
value.
Loan Costs
Loan costs incurred with the financing of long-term debt are amortized on a
straight-line basis over the life of the debt.
F-10
<PAGE> 1544
FOUR QUARTERS HABITAT APARTMENT ASSOCIATES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
Tenant Security Deposits
The Partnership requires security deposits from all lessees for the
duration of the lease and such deposits are included in "Receivables and
deposits." Deposits are refunded when the tenant vacates the apartment if there
has been no damage to the unit and the tenant is current on its rental payments.
Partnership Allocations
Net income or losses are allocated 98% to the limited partners and 2% to
the general partner in accordance with the partnership agreement. Distributions
of available cash (cash-flow) or proceeds from financing or sale of the property
are allocated among the general and limited partners in accordance with the
partnership agreement.
Leases
The Partnership generally leases apartment units for twelve-month terms or
less. Rental revenue is recognized as earned.
Advertising Costs
The Partnership expenses the costs of advertising as incurred.
Depreciation
Building and improvements are depreciated using the straight-line method
over the estimated useful lives of the assets, ranging from 5 to 30 years.
Restricted Escrows
Restricted escrows consist of funds established to cover necessary repairs
and replacements of existing improvements at the property.
NOTE B -- MORTGAGE NOTE PAYABLE
Mortgage note payable consists of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Mortgage note payable to Lexington Mortgage Company bearing
interest of 9.84% per annum. Monthly payments of principal
and interest of approximately $94,000 are due through
September 2001, with a balloon payment of approximately
$10,300,000 due in October 2001........................... $10,678
=======
</TABLE>
Principal maturities of the mortgage note payable at December 31, 1997 are
as follows (in thousands):
<TABLE>
<S> <C>
1998...................................................... $ 85
1999...................................................... 94
2000...................................................... 104
2001...................................................... 10,395
-------
$10,678
=======
</TABLE>
The apartment property is pledged as collateral on the mortgage notes.
F-11
<PAGE> 1545
FOUR QUARTERS HABITAT APARTMENT ASSOCIATES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE C -- TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the general partner
and its affiliates for the administration and management of all partnership
activities. Affiliates of Insignia Financial Group, Inc. ("Insignia"), who is an
affiliate of the general partner of Four Quarters Habitat Apartment Associates,
provide property management and asset management services to the Partnership.
The following items were incurred with Insignia and its affiliates (in
thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Property management fees.................................... $115 $116
Reimbursement for investor services, asset management and
partnership accounting.................................... 98 98
</TABLE>
NOTE D -- INVESTMENT PROPERTY AND ACCUMULATED DEPRECIATION
INITIAL COST TO PARTNERSHIP
(IN THOUSANDS)
<TABLE>
<CAPTION>
BUILDINGS AND
RELATED COST CAPITALIZED
PERSONAL SUBSEQUENT TO
DESCRIPTION ENCUMBRANCES LAND PROPERTY ACQUISITION
----------- ------------ ------ ------------- ----------------
<S> <C> <C> <C> <C>
Four Quarters Habitat
Miami, Florida.............................. $10,678 $1,776 $13,107 $4,562
======= ====== ======= ======
</TABLE>
GROSS AMOUNT AT WHICH CARRIED
(IN THOUSANDS)
<TABLE>
<CAPTION>
BUILDINGS AND
RELATED PERSONAL ACCUMULATED DATE DEPRECIABLE
DESCRIPTION LAND PROPERTY TOTAL DEPRECIATION ACQUIRED LIFE-YEARS
- ----------- ------ ---------------- ------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Four Quarters............... $1,776 $17,669 $19,445 $10,443 05/83 5-30
====== ======= ======= =======
</TABLE>
The depreciable lives included above are for the buildings and components.
The depreciable lives for related personal property are for 5 to 7 years.
Reconciliation of "Investment Property and Accumulated Depreciation" (in
thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Investment Property
Balance at beginning of year.............................. $19,171 $18,937
Property improvements..................................... 274 234
------- -------
Balance at end of year............................ $19,445 $19,171
======= =======
Accumulated Depreciation
Balance at beginning of year.............................. $ 9,767 $ 9,111
Additions charged to expense.............................. 676 656
------- -------
Balance at end of year............................ $10,443 $ 9,767
======= =======
</TABLE>
The aggregate cost of the investment property for Federal income tax
purposes at December 31, 1997 and 1996 is $19,445,000 and $19,171,000,
respectively. The accumulated depreciation taken for Federal income tax purposes
at December 31, 1997 and 1996 is $15,936,000 and $15,102,000, respectively.
F-12
<PAGE> 1546
FOUR QUARTERS HABITAT APARTMENT ASSOCIATES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -- (CONTINUED)
NOTE E -- INCOME TAXES
Taxable income or loss of the Partnership is reported in the income tax
returns of its partners. Accordingly, no provision for income taxes is made in
the financial statements of the Partnership.
The following is a reconciliation of reported net loss and Federal taxable
loss (in thousands, except per unit data):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Net loss as reported........................................ $ (461) $ (514)
Deduct:
Depreciation differences.................................. (159) (157)
Other..................................................... -- 58
------- -------
Federal taxable loss........................................ $ (620) $ (613)
======= =======
Federal taxable loss per limited partnership unit
$(6,200) $(6,130)
======= =======
</TABLE>
The following is a reconciliation between the Partnership's reported
amounts and Federal tax basis of net assets and liabilities at December 31, 1997
(in thousands):
<TABLE>
<S> <C>
Net deficit as reported..................................... $(1,473)
Accumulated depreciation.................................... (5,493)
Other....................................................... (1)
Syndication fees............................................ 757
-------
Net deficit -- tax basis.................................... $(6,210)
=======
</TABLE>
NOTE F -- SUBSEQUENT EVENT
On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations and its controlling interest in
Insignia Properties Trust, with Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. The merger was
completed effective October 1, 1998, and accordingly, as of that date AIMCO
acquired the general partner of the Partnership and the company that manages the
Partnership.
F-13
<PAGE> 1547
PRO FORMA FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
AS OF SEPTEMBER 30, 1998 AND FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1998
INTRODUCTION
On October 1, 1998, Apartment Investment and Management Company ("AIMCO")
completed its merger with Insignia Financial Group ("IFG") ("the IFG Merger").
In the IFG Merger, IFG's common stock was converted into 8,423,751 shares of
Class E Cumulative Convertible Preferred Stock of AIMCO ("Class E Preferred
Stock") whose issue date market value approximately equaled $292 million. In
addition to receiving the same dividends as holders of AIMCO Common Stock,
holders of Class E Preferred Stock will be entitled to a special dividend of
approximately $50 million in the aggregate. When that special dividend is paid
in full, the Class E Preferred Stock will automatically convert into AIMCO
Common Stock on a one-for-one basis, subject to antidilution adjustments, if
any. In addition, AIMCO assumed approximately $411 million in indebtedness and
other liabilities of IFG and its subsidiaries and subsidiaries of AIMCO, assumed
approximately $149.5 million of convertible securities and purchased
approximately $5 million of IFG stock prior to the Merger. AIMCO and Insignia
Properties Trust ("IPT") have completed a merger in which IPT has merged into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). In the IPT Merger, shares of
IPT common stock not held by AIMCO were converted into 4,826,745 shares of AIMCO
Class A Common Stock whose market value approximately equaled $152 million.
AIMCO assumed approximately $68 million in indebtedness. In connection with the
IFG Merger and the IPT Merger, AIMCO incurred approximately $55 million in
transaction costs for a combined transactional value of approximately $1,183
million. AIMCO contributed substantially all the assets and liabilities of
Insignia acquired in the Insignia Merger to AIMCO Properties, L.P. (together
with its subsidiaries and other controlled entities, the "Partnership") (and
together with entities in which that Partnership has a controlling financial
interest, the "Company") in exchange for 8,423,751 Class E Preferred Units. The
Class E Preferred Units have terms substantially the same as the Class E
Preferred Stock. In addition, AIMCO contributed substantially all the assets and
liabilities of IPT acquired in the IPT Merger to the Partnership in exchange for
4,826,745 limited partnership units in the Partnership ("OP Units"). In
connection with the IFG Merger, the Partnership assumed property management of
approximately 192,000 multifamily units which consist of general and limited
partnership investments in 115,000 units and third party management of 77,000
units. Insignia Properties Trust ("IPT"), which prior to the IFG Merger was a
subsidiary of IFG, owns a 32% weighted average general and limited partnership
interest in approximately 51,000 units.
Immediately following the IFG Merger, in order to satisfy certain
requirements of the Internal Revenue Code of 1986 (the "Code") applicable to
AIMCO's status as a REIT, AIMCO engaged in a reorganization (the "IFG
Reorganization") of the assets and operations of IFG whereby IFG's operations
are being conducted through corporations (the "Unconsolidated Subsidiaries") in
which the Partnership holds non-voting preferred stock that represents a 95%
economic interest, and certain officers and/or directors of AIMCO hold, directly
or indirectly, all of the voting common stock, representing a 5% economic
interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
In May and September of 1997, AIMCO directly or indirectly through a
subsidiary, acquired (the "NHP Stock Purchase") an aggregate of 6,930,122 shares
of common stock ("NHP Common Stock") of NHP. On December 8, 1997, AIMCO acquired
the remaining shares of NHP Common Stock in a merger transaction accounted for
as a purchase (the "NHP Merger"). As a result of the NHP Merger, AIMCO issued
6,759,148 shares of AIMCO Common Stock, valued at $180.8 million, and paid $86.5
million in cash. The total cost of the purchase of NHP was $349.5 million.
Substantially all assets and liabilities of NHP were contributed by AIMCO to the
Partnership.
In June 1997, the Company purchased a group of companies (the "NHP Real
Estate Companies") affiliated with NHP that hold general and limited partnership
interests in partnerships (the "NHP
P-1
<PAGE> 1548
Partnerships") that own 534 conventional and affordable multifamily apartment
properties (the "NHP Properties") containing 87,659 units, a captive insurance
subsidiary and certain related assets (the "NHP Real Estate Acquisition"). The
Company paid aggregate consideration of $54.8 million in cash and warrants that
entitle the holders to purchase 399,999 shares of AIMCO Common Stock at an
exercise price of $36.00 per share. The Company engaged in a reorganization (the
"NHP Real Estate Reorganization") of its interests in the NHP Real Estate
Companies, which resulted in certain of the assets of the NHP Real Estate
Companies being owned by a limited partnership (the "Unconsolidated
Partnership") in which the Partnership holds 99% limited partner interest and
certain directors and officers of AIMCO directly or indirectly, hold a 1%
general partner interest.
Immediately following the NHP Merger, in order to satisfy certain
requirements of the Code applicable to AIMCO's status as a REIT, AIMCO engaged
in a reorganization (the "NHP Reorganization") of the assets and operations of
NHP that resulted in the Master Property Management Agreement being terminated
and NHP's operations being conducted through Unconsolidated Subsidiaries in
which the AIMCO Operating Partnership holds non-voting preferred stock that
represents a 95% economic interest, and certain officers and/or directors of
AIMCO hold, directly or indirectly, all of the voting common stock, representing
a 5% economic interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
On May 8, 1998, AIMCO completed a merger with Ambassador Apartments, Inc.
("Ambassador"), pursuant to which Ambassador was merged into AIMCO (the
"Ambassador Merger"). Each outstanding share of stock ("Ambassador Common
Stock") of Ambassador, other than those shares held by AIMCO or Ambassador, were
converted into 0.553 (the "Conversion Ratio") shares of AIMCO Common Stock. Any
outstanding options to purchase Ambassador Common Stock were converted, at the
election of the option holder, into cash or options to purchase AIMCO Common
Stock at such options' then current exercise price divided by the Conversion
Ratio. In accordance with the Agreement and Plan of Merger, dated December 23,
1997 and supplemented by letter dated as of March 11, 1998 (the "Ambassador
Merger Agreement"), the outstanding shares of Class A Senior Cumulative
Convertible Preferred Stock of Ambassador, (the "Ambassador Preferred Stock")
were redeemed and converted into Ambassador Common Stock prior to the Ambassador
Merger. Following the consummation of the Ambassador Merger, a subsidiary of the
Partnership was merged with and into the Ambassador Operating Partnership (the
"Ambassador OP Merger"). Each outstanding unit of limited partnership interest
in the Ambassador Operating Partnership was converted into the right to receive
0.553 OP Units, and as a result, the Ambassador Operating Partnership became a
99.9% owned subsidiary partnership of the Partnership.
Also during 1997, the Partnership (i) (a) acquired 44 properties for
aggregate purchase consideration of $467.4 million, of which $56 million was
paid in the form of 1.9 million OP Units (b) paid $34.2 million in cash and
issued OP Units valued at $7.3 million in connection with the acquisition of
partnership interests through tender offers in certain partnerships ((a) and (b)
together are the "1997 Property Acquisitions") and (c) paid $19.9 million to
acquire 886,600 shares of Ambassador Common Stock (together with the 1997
Property Acquisitions, the "1997 Acquisitions"); (ii) sold (a) approximately
16,367,000 shares of AIMCO Common Stock for aggregate net proceeds of $513.4
million; (b) 750,000 shares of AIMCO Class B Cumulative Convertible Preferred
Stock for net proceeds of $75 million; and (c) 2,400,000 shares of AIMCO Class C
9% Cumulative Preferred Stock for net proceeds of $58.1 million; of which all
proceeds were contributed by AIMCO to the Partnership in exchange for 16,367,000
OP Units, 750,000 Class B Preferred Units, and 2,400,000 Class C Preferred Units
(collectively, the "1997 Stock Offerings"); and (iii) sold five real estate
properties (the "1997 Dispositions").
Also during 1998, AIMCO (i) (a) sold 4,200,000 shares of its Class D
Cumulative Preferred Stock for net proceeds of $101.5 million (the "Class D
Preferred Stock Offering"); (b) sold 4,050,000 shares of its Class G Cumulative
Preferred Stock for net proceeds of $98.0 million (the "Class G Preferred Stock
Offering"); (c) sold 2,000,000 shares of its Class H Cumulative Preferred Stock
for net proceeds of $48.1 million (the "Class H Preferred Stock Offering"); and
(d) sold 1,000,000 shares of its Class J Cumulative Convertible Preferred Stock
in a private placement for $100.0 million (the "Class J Preferred
P-2
<PAGE> 1549
Stock Offering"); of which all proceeds were contributed by AIMCO to the
Partnership in exchange for 4,050,000 Class G Preferred Units, 2,000,000 Class H
Preferred Units and 1,000,000 shares of Class J Preferred Units (collectively,
the "1998 Stock Offerings"); (ii) purchased 29 properties for aggregate purchase
consideration of $312.7 million, of which $52.2 million was paid in the form of
OP Units (the "1998 Acquisitions"); (iii) sold two real estate properties (the
"1998 Dispositions"); (iv) contracted to purchase two properties for aggregate
purchase consideration of $62.1 million, of which $26.4 million will be paid in
the form of OP units (the "Probable Purchases") and (v) sold 1,400,000 Class B
Preferred Partnership Units of a subsidiary and warrants to purchase 875,000
shares of AIMCO Class A Common Stock for $35.0 million (the "Preferred
Partnership Unit Offering").
PRO FORMA FINANCIAL INFORMATION OF THE PARTNERSHIP (INSIGNIA MERGER)
The following Pro Forma Consolidated Balance Sheet (Insignia Merger) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) the purchase
of nine properties for an aggregate purchase price of $62.5 million; (ii) the
Class J Preferred Stock Offering; (iii) the Probable Purchases; (iv) the IFG
Merger; (v) the IPT Merger; (vi) the IFG Reorganization; and (vii) the Preferred
Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) the
1997 Acquisitions; (ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions;
(iv) the NHP Real Estate Acquisition; (v) the NHP Real Estate Reorganization;
(vi) the NHP Stock Purchase; (vii) the NHP Merger; (viii) the NHP
Reorganization; (ix) the 1998 Stock Offerings; (x) the 1998 Acquisitions; (xi)
the Probable Purchases; (xii) the 1998 Dispositions; (xiii) the Ambassador
Merger; (xiv) the IFG Merger; (xv) the merger between IPT and Angeles Mortgage
Investment Trust ("AMIT") ("the AMIT Merger"); (xvi) the IPT Merger; (xvii) the
IFG Reorganization; and (xviii) the Preferred Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1997: (i)
the 1998 Stock Offerings; (ii) the 1998 Acquisitions; (iii) the Probable
Purchases; (iv) the 1998 Dispositions; (v) the Ambassador Merger; (vi) the IFG
Merger; (vii) the AMIT Merger; (viii) the IPT Merger; (ix) the IFG
Reorganization; and (x) the Preferred Partnership Unit offering.
The following Pro Forma Financial Information (Insignia Merger) is based,
in part, on the following historical financial statements: (i) the audited
Consolidated Financial Statements of the Partnership for the year ended December
31, 1997; (ii) the unaudited Consolidated Financial Statements of the
Partnership for the nine months ended September 30, 1998; (iii) the audited
Consolidated Financial Statements of Ambassador for the year ended December 31,
1997; (iv) the unaudited Consolidated Financial Statements of Ambassador for the
four months ended April 30, 1998; (v) the audited Consolidated Financial
Statements of IFG for the year ended December 31, 1997; (vi) the audited
Consolidated Financial Statements of AMIT for the year ended December 31, 1997;
(vii) the unaudited Consolidated Financial Statements of IFG for the nine months
ended September 30, 1998; (viii) the unaudited Financial Statements of AMIT for
the period from January 1, 1998 to September 17, 1998; (ix) the unaudited
Consolidated Financial Statements of NHP for the nine months ended September 30,
1997; (x) the unaudited Combined Financial Statements of the NHP Real Estate
Companies for the three months ended March 31, 1997; (xi) the unaudited
Financial Statements of NHP Southwest Partners, L.P. for the three months ended
March 31, 1997; (xii) the unaudited Combined Financial Statements of the NHP New
LP Entities for the three months ended March 31, 1997; (xiii) the unaudited
Combined Financial Statements of the NHP Borrower Entities for the three months
ended March 31, 1997; (xiv) the unaudited Historical Summaries of Gross Income
and Certain Expenses of The Bay Club at Aventura for the three months ended
March 31, 1997; (xv) the unaudited Historical Summary of Gross Income and Direct
Operating Expenses of Morton Towers for the six months ended June 30, 1997;
(xvi) the unaudited Combined Statement of Revenues and Certain Expenses of the
Thirty-Five Acquisition Properties for the six months ended June 30, 1997;
(xvii) the unaudited Statement of
P-3
<PAGE> 1550
Revenues and Certain Expenses of First Alexandria Associates, a Limited
Partnership for the nine months ended September 30, 1997; (xviii) the unaudited
Statement of Revenues and Certain Expenses of Country Lakes Associates Two, a
Limited Partnership for the nine months ended September 30, 1997; (xix) the
unaudited Statement of Revenues and Certain Expenses of Point West Limited
Partnership, A Limited Partnership for the nine months ended September 30, 1997;
(xx) the unaudited Statement of Revenues and Certain Expenses for The Oak Park
Partnership for the nine months ended September 30, 1997; (xxi) the audited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the year ended December 31, 1997,
(xxii) the audited Combined Historical Summary or Gross Income and Direct
Operating Expenses of the Cirque Apartment Communities for the year ended
December 31, 1997; (xxiii) the audited Combined Historical Summary of Gross
Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the year ended December 31, 1997; (xxiv) the audited
Historical Summary of Gross Income and Direct Operating Expenses of the Calhoun
Beach Club Apartments for the year ended December 31, 1997; (xxv) the unaudited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the nine months ended September
30, 1998; (xxvi) the unaudited Combined Historical Summary of Gross Income and
Direct Operating Expenses of the Cirque Apartment Communities for the three
months ended March 31, 1998; (xxvii) the unaudited Combined Historical Summary
of Gross Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the nine months ended September 30, 1998; and (xxviii) the
unaudited Historical Summary of Gross Income and Direct Operating Expenses of
Calhoun Beach Club Apartments for the nine months ended September 30, 1998. The
following Pro Forma Financial Information should be read in conjunction with
such financial statements and the notes thereto incorporated by reference
herein.
The unaudited Pro Forma Financial Information (Insignia Merger) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
1997 Acquisitions, the 1998 Acquisitions, and the Probable Purchases are
adjusted to estimated fair market value, based upon preliminary estimates, which
are subject to change as additional information is obtained. The allocations of
purchase costs are subject to final determination based upon estimates and other
evaluations of fair market value. Therefore, the allocations reflected in the
following unaudited Pro Forma Financial Information may differ from the amounts
ultimately determined.
The following unaudited Pro Forma Financial Information (Insignia Merger)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions or results of
operations. In the opinion of the Partnership's management, all material
adjustments necessary to reflect the effects of these transactions have been
made.
P-4
<PAGE> 1551
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS IFG AIMCO BEFORE IFG
AND PROBABLE IFG MERGER IFG REORGANIZATION
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) REORGANIZATION(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Real estate.............. $2,355,122 $202,332 $ 44,488 $ 23,880(G) $2,625,822 $ --
Property held for sale... 42,212 -- -- -- 42,212 --
Investments in
securities............. -- -- -- 443,513(G)
(443,513)(H) -- --
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 127,082 -- -- -- 127,082 59,195(I)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 246,847 -- 232,892 444,570(G) 924,309 --
Mortgage notes
receivable............. -- -- 20,916 -- 20,916
Cash and cash
equivalents............ 43,681 6,107 73,064 -- 122,852 (17,897)(J)
Restricted cash.......... 83,187 -- 2,691 -- 85,878 (1,352)(J)
Accounts receivable...... 11,545 -- 54,060 (32,234)(G) 33,371 (5,471)(J)
Deferred financing
costs.................. 21,835 -- 7,020 (7,020)(G) 21,835 --
Goodwill................. 120,503 -- 19,503 111,018(G) 251,024 --
Property management
contracts.............. -- -- 86,419 31,147(G) 117,566 (79,195)(I)
Other assets............. 69,935 -- 20,128 (4,533)(G) 85,530 (2,860)(J)
---------- -------- -------- --------- ---------- --------
Total Assets..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
Secured notes payable.... $ 774,676 $122,568 $ 29,002 $ -- $ 926,246 $ --
Secured tax-exempt bond
financing.............. 399,925 -- -- -- 399,925 --
Secured short-term
financing.............. 50,000 (50,000) 332,691 (300,000)(G) 32,691 --
Unsecured short-term
financing.............. 50,800 (50,800) -- 300,000(G) 300,000 --
Accounts payable, accrued
and other
liabilities............ 131,799 -- 33,241 50,000(G)
53,333(G)
4,935(G)
2,525(G) 275,833 (27,580)(J)
Deferred tax liability... -- -- 18,802 1,198(G) 20,000 (20,000)(I)
Security deposits and
prepaid rents.......... 13,171 -- 3,533 (3,533) 13,171 --
---------- -------- -------- --------- ---------- --------
1,420,371 21,768 417,269 108,458 1,967,866 (47,580)
Minority interest........ 42,086 37,345 108,485 (108,485)(G) 79,431 --
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. -- -- 144,282 5,218 149,500 --
Redeemable Partnership
Units.................. 232,405 45,176 -- -- 277,581 --
Partners' capital and
shareholders' equity
Common stock........... -- -- 320 (320)(G) -- --
Additional paid-in
capital.............. -- -- (86,959) 86,959(G) -- --
Distributions in excess
of earnings.......... -- -- (22,216) 22,216(G) -- --
General and Special
Limited Partner...... 1,039,525 4,150 -- 443,513(H)
9,269(G) 1,496,457 --
Preferred Units........ 387,562 100,000 -- -- 487,562 --
---------- -------- -------- --------- ---------- --------
1,427,087 104,150 (108,855) 561,637 1,984,019 --
---------- -------- -------- --------- ---------- --------
Total Liabilities
and Equity..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
<CAPTION>
PRO FORMA
----------
<S> <C>
Real estate.............. $2,625,822
Property held for sale... 42,212
Investments in
securities.............
--
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 186,277(K)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 924,309
Mortgage notes
receivable............. 20,916
Cash and cash
equivalents............ 104,955
Restricted cash.......... 84,526
Accounts receivable...... 27,900
Deferred financing
costs.................. 21,835
Goodwill................. 251,024
Property management
contracts.............. 38,371
Other assets............. 82,670
----------
Total Assets..... $4,410,817
==========
Secured notes payable.... $ 926,246
Secured tax-exempt bond
financing.............. 399,925
Secured short-term
financing.............. 32,691
Unsecured short-term
financing.............. 300,000
Accounts payable, accrued
and other
liabilities............
248,253
Deferred tax liability... --
Security deposits and
prepaid rents.......... 13,171
----------
1,920,286
Minority interest........ 79,431
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. 149,500
Redeemable Partnership
Units.................. 277,581
Partners' capital and
shareholders' equity
Common stock........... --
Additional paid-in
capital.............. --
Distributions in excess
of earnings.......... --
General and Special
Limited Partner......
1,496,457
Preferred Units........ 487,562
----------
1,984,019
----------
Total Liabilities
and Equity..... $4,410,817
==========
</TABLE>
P-5
<PAGE> 1552
- ---------------
(A) Represents the unaudited historical consolidated financial position of the
Partnership as of September 30, 1998.
(B) Represents adjustments to reflect the purchase of ten properties for an
aggregate purchase price of $140.2 million; the Class J Preferred Stock
Offering; the Probable Purchases; and the Preferred Partnership Unit
Offering.
(C) Represents the unaudited historical consolidated financial position of IFG
as of September 30, 1998.
(D) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the issuance of 8,423,751 shares of AIMCO Common Stock, based
on consideration to holders of IFG common stock outstanding as of the date
of the IFG Merger; (ii) the issuance of 4,826,745 shares of AIMCO Class A
Common Stock to holders of IPT common stock (other than AIMCO); (iii) the
payment of a special dividend of $50,000; (iv) the assumption of $149,500
of the convertible debentures of IFG; (v) the allocation of the combined
purchase price of IFG and IPT based on the preliminary estimates of
relative fair market value of the assets and liabilities of IFG and IPT;
and (vi) the contribution by AIMCO of substantially all the assets and
liabilities of Insignia and IPT to the Partnership in exchange for OP
Units.
(E) Represents the effects of AIMCO's acquisition of IFG immediately after the
IFG Merger. These amounts do not give effect to the IFG Reorganization,
which includes the transfers of certain assets and liabilities of IFG to
the combined Unconsolidated Subsidiaries. The IFG Reorganization occurred
immediately after the IFG Merger so that AIMCO could maintain its
qualification as a REIT. This column is included as an intermediate step to
assist the reader in understanding the entire nature of the IFG Merger and
related transactions.
(F) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party property management operations.
The adjustments reflect the transfer of assets valued at the Partnership's
new basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(G) In connection with the IFG Merger and the IPT Merger, AIMCO became
obligated to issue a total of 13,250,496 shares of AIMCO Common Stock
The total purchase price of IFG and IPT is $1,128,009, as follows:
<TABLE>
<S> <C>
Issuance of 8,423,751 shares of AIMCO Common Stock in the
IFG Merger, at $34.658 per share.......................... $ 291,949
Issuance of 4,826,745 shares of AIMCO Common Stock in the
IPT Merger, at $31.50 per share........................... 151,564
Assumption of Convertible Debentures........................ 149,500
Assumption of liabilities as indicated in the Merger
Agreement................................................. 397,459
Transaction costs........................................... 53,333
Generation of deferred tax liability........................ 20,000
Special dividend............................................ 50,000
Purchase of IFG Common Stock prior to merger................ 4,935
Consideration for options................................... 9,269
----------
Total............................................. $1,128,009
==========
</TABLE>
P-6
<PAGE> 1553
The purchase price was allocated to the various assets of IFG acquired in
the IFG Merger, as follows:
<TABLE>
<S> <C>
Purchase price.............................................. $1,128,009
Historical basis of IFG's assets acquired................... (561,181)
----------
Step-up to record the fair value of IFG's assets
acquired............................................... $ 566,828
==========
</TABLE>
This step-up was applied to IFG's assets as follows:
<TABLE>
<S> <C>
Real estate................................................. $ 23,880
Investment in real estate partnerships...................... 444,570
Decrease in accounts receivable............................. (32,234)
Decrease in deferred loan costs............................. (7,020)
Management contracts........................................ 31,147
Increase in goodwill........................................ 111,018
Reduction in value of other assets.......................... (4,533)
--------
Total............................................. $566,828
========
</TABLE>
The fair value of IFG's assets, primarily the real estate and management
contracts, was calculated based on estimated future cash flows of the
underlying assets.
As of September 30, 1998, IFG's stockholder's equity was $(108,855), which
is detailed as follows:
<TABLE>
<S> <C>
Common stock................................................ $ 320
Additional paid-in capital.................................. (86,959)
Distributions in excess of earnings......................... (22,216)
---------
Total............................................. $(108,855)
=========
</TABLE>
Upon completion of the IFG Merger, the entire amount of the stockholder's
equity was eliminated.
In addition, the minority interest in other partnerships of IFG of $108,485
will be eliminated upon the IPT Merger.
At the time of the IFG Merger, AIMCO obtained unsecured short-term
financing of $300 million. The proceeds were used to repay secured
short-term financing of IFG that AIMCO assumed.
(H) Represents the issuance of a total of 13,250,496 OP Units to AIMCO and the
concurrent issuance of 13,250,496 shares of AIMCO Common Stock to IFG and
IPT stockholders, in exchange for all the shares of IFG and IPT common
stock.
In accordance with the IFG Merger Agreement, AIMCO became obligated to
issue 8,423,751 shares of Class E Preferred Stock, approximately equal to
$292 million. Each share of Class E Preferred Stock will automatically
convert to one share of AIMCO Common Stock upon the payment of the special
dividend thereon. As such, for the purpose of preparing the pro forma
financial statements, AIMCO's management believes that the Class E
Preferred Stock is substantially the same as AIMCO Common Stock, and that
the fair value of the Class E Preferred Stock approximates the fair value
of the AIMCO Common Stock. Upon the payment of the special dividend on the
Class E Preferred Stock and the conversion of the Class E Preferred Stock
to AIMCO Common Stock, the former IFG stockholders will own approximately
15.0% of the AIMCO Common Stock and the IPT stockholders will own
approximately 7.3% of AIMCO Common Stock. The special dividend on the Class
E Preferred Stock is intended to represent a distribution in an amount at
least equal to the earnings and profits of IFG at the time of the IFG
Merger, to which AIMCO succeeds.
Concurrent with the issuance of Class E Preferred Stock, the Partnership
will issue comparable Class E Preferred Units to AIMCO. The Class E
Preferred Units will have terms substantially the same as the Class E
Preferred Stock.
(I) Represents the increase in the Partnership's investment in Unconsolidated
Subsidiaries to reflect the contribution or sale of property management
contracts, including the related deferred tax liability, in exchange for
preferred stock and a note payable from the Unconsolidated Subsidiaries.
These assets and
P-7
<PAGE> 1554
liabilities are valued at the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(J) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries,
(K) Represents notes receivable from the Unconsolidated Subsidiaries of
$95,000, advances to the Unconsolidated Subsidiaries of $42,792, and equity
in the Unconsolidated Subsidiaries of $48,485. The combined pro forma
balance sheet of the Unconsolidated Subsidiaries as of September 30, 1998
is presented below, which reflects the effects of the IFG Merger, the IPT
Merger, and the IFG Reorganization as if such transactions had occurred as
of September 30, 1998.
P-8
<PAGE> 1555
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
IFG
HISTORICAL REORGANIZATION(i) PRO FORMA
---------- ----------------- ---------
<S> <C> <C> <C>
ASSETS
Real estate............................................ $ 22,376 $ -- $ 22,376
Cash and cash equivalents.............................. 16,919 17,897(ii) 34,816
Restricted cash........................................ 5,507 1,352(ii) 6,859
Management contracts................................... 47,846 79,195(iii) 127,041
Accounts receivable.................................... 13,109 5,471(ii) 18,580
Deferred financing costs............................... 3,117 -- 3,117
Goodwill............................................... 43,544 -- 43,544
Other assets........................................... 51,498 2,860(ii) 54,358
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable.................................. $114,302 $ 45,000(iii) $159,302
Accounts payable, accrued and other liabilities........ 56,773 27,580(ii) 84,353
Security deposits and deferred income.................. 334 --(ii) 334
Deferred tax liability................................. -- 20,000(iii) 20,000
-------- -------- --------
171,409 92,580 263,989
Common stock........................................... 2,061 747(iv) 2,808
Preferred stock........................................ 34,290 14,195(iii) 48,485
Retained earnings...................................... (3,844) -- (3,844)
Notes receivable on common stock purchases............. -- (747)(iv) (747)
-------- -------- --------
32,507 14,195 46,702
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
</TABLE>
- ---------------
(i) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the transfer of assets valued at the Partnership's new
basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(ii) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries, valued at the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(iii)Represents the transfer or sale of management contracts, the establishment
of an intercompany note, and the establishment of the related estimated net
deferred Federal and state tax liabilities at a combined rate of 40% for
the estimated difference between the book and tax basis of the net assets
of the Unconsolidated Subsidiaries. The primary component of the deferred
tax liability is the difference between the new basis of the property
management contracts, as a result of the allocation of the purchase price
of IFG, and the historical tax basis.
(iv) Represents the issuance of common stock to the common stockholders of the
Unconsolidated Subsidiaries in exchange for notes receivable, in order for
the common stockholders to maintain their respective ownership interest in
the Unconsolidated Subsidiaries.
P-9
<PAGE> 1556
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE NHP AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rental and other property
revenues........................ $193,006 $120,337(I)
11,012(J) $ 6,660 $ 93,329 $ -- $ 6,912
Property operating expenses....... (76,168) (59,466)(I)
(4,860)(J) (2,941) (36,088) -- (3,307)
Owned property management
expense......................... (6,620) (4,327)(I)
(602)(J) (282) -- -- --
Depreciation...................... (37,741) (26,645)(I)
(2,172)(J) (1,414) (18,979) (5,997)(O) (966)
-------- -------- ------- -------- ------- --------
Income from property operations... 72,477 33,277 2,023 38,262 (5,997) 2,639
-------- -------- ------- -------- ------- --------
Management fees and other
income.......................... 13,937 -- 7,813 -- -- 94,330
Management and other expenses..... (9,910) -- (5,394) -- -- (57,615)
Corporate overhead allocation..... (588) -- -- -- -- --
Amortization...................... (1,401) -- (5,800) -- -- (16,768)
-------- -------- ------- -------- ------- --------
Income from service company
business........................ 2,038 -- (3,381) -- -- 19,947
Minority interest in service
company business................ (10) -- -- -- -- --
-------- -------- ------- -------- ------- --------
AIMCO's share of income from
service company business........ 2,028 -- (3,381) -- -- 19,947
-------- -------- ------- -------- ------- --------
General and administrative
expenses........................ (5,396) -- (1,025) (7,392) 7,392(P) (21,199)
Interest expense.................. (51,385) (3,451)(K)
(2,497)(L) (5,462) (26,987) (221)(Q) (9,035)
Interest income................... 8,676 -- 1,900 -- -- 10,967
Minority interest................. 1,008 458(M) 16 (851) 705(R) (12,871)
Equity in losses of unconsolidated
partnerships.................... (1,798) (122)(N) (8,542) 405 -- 12,515
Equity in earnings of
unconsolidated subsidiaries..... 4,636 -- 5,790 -- -- --
-------- -------- ------- -------- ------- --------
Income (loss) from operations..... 30,246 27,665 (8,681) 3,437 1,879 2,963
Income tax provision.............. -- -- -- -- -- 1,701
Gain on dispositions of
property........................ 2,720 (2,720) -- -- -- 80
-------- -------- ------- -------- ------- --------
Income (loss) before extraordinary
item............................ 32,966 24,945 (8,681) 3,437 1,879 4,744
Extraordinary item -- early
extinguishment of debt.......... (269) 269 -- -- -- --
-------- -------- ------- -------- ------- --------
Net income........................ 32,697 25,214 (8,681) 3,437 1,879 4,744
Income attributable to preferred
unitholders..................... 2,315 39,859 -- -- -- --
-------- -------- ------- -------- ------- --------
Income attributable to common
unitholders..................... $ 30,382 $(14,645) $(8,681) $ 3,437 $ 1,879 $ 4,744
======== ======== ======= ======== ======= ========
Basic earnings per OP unit........ $ 1.09
========
Diluted earnings per OP unit...... $ 1.08
========
Weighted average OP units
outstanding..................... 27,732
========
Weighted average OP units and
equivalents outstanding......... 28,113
========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(G) ADJUSTMENTS(H) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property
revenues........................
$ -- $ -- $ 431,256
Property operating expenses.......
-- -- (182,830)
Owned property management
expense.........................
-- -- (11,831)
Depreciation......................
(2,350)(S) -- (96,264)
-------- -------- ---------
Income from property operations... (2,350) -- 140,331
-------- -------- ---------
Management fees and other
income.......................... -- (74,404)(X) 41,676
Management and other expenses..... -- 49,236(X) (23,683)
Corporate overhead allocation..... -- -- (588)
Amortization...................... (32,699)(T) 30,188(Y) (26,480)
-------- -------- ---------
Income from service company
business........................ (32,699) 5,020 (9,075)
Minority interest in service
company business................ -- -- (10)
-------- -------- ---------
AIMCO's share of income from
service company business........ (32,699) 5,020 (9,085)
-------- -------- ---------
General and administrative
expenses........................ -- 6,249(X) (21,371)
Interest expense..................
(14,750) -- (113,788)
Interest income................... -- 191(Z) 21,734(BB)
Minority interest................. 1,552(U) -- (9,983)
Equity in losses of unconsolidated
partnerships.................... (29,995)(V) -- (27,537)
Equity in earnings of
unconsolidated subsidiaries..... -- (4,578)(AA) 5,848(DD)
-------- -------- ---------
Income (loss) from operations..... (78,242) 6,882 (13,851)
Income tax provision.............. (1,701)(W) -- --
Gain on dispositions of
property........................ (80) -- --
-------- -------- ---------
Income (loss) before extraordinary
item............................ (80,023) 6,882 (13,851)
Extraordinary item -- early
extinguishment of debt.......... -- -- --
-------- -------- ---------
Net income........................ (80,023) 6,882 (13,851)
Income attributable to preferred
unitholders..................... -- -- 42,174(CC)
-------- -------- ---------
Income attributable to common
unitholders..................... $(80,023) $ 6,882 $ (56,025)(BB)
======== ======== =========
Basic earnings per OP unit........ $ (0.83)(BB)
=========
Diluted earnings per OP unit...... $ (0.83)(BB)
=========
Weighted average OP units
outstanding..................... 67,522
=========
Weighted average OP units and
equivalents outstanding......... 68,366
=========
</TABLE>
P-10
<PAGE> 1557
- ---------------
(A) Represents the Partnership's audited consolidated results of operations
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1997: (i) the 1997 Acquisitions; (ii) the 1997 Stock
Offerings; (iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings;
(v) the 1998 Acquisitions; (vi) the Probable Purchases; (vii) the 1998
Dispositions; and (v) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues................. $ 6,660(v) $ 16,842 $ -- $(16,842)(xvii) $ 6,660
Property operating
expenses................. (2,941)(v) (8,411) -- 8,411 (xvii) (2,941)
Owned property management
expense.................. (282)(v) (862) -- 862 (xvii) (282)
Depreciation............... (1,414)(vi) (2,527) (693)(xi) 3,220 (xvii) (1,414)
------- -------- ------- -------- -------
Income from property
operations............... 2,023 5,042 (693) (4,349) 2,023
------- -------- ------- -------- -------
Management fees and other
income................... 1,405(vii) 72,176 -- (65,768)(xviii) 7,813
Management and other
expenses................. (2,263)(viii) (35,267) -- 32,136 (xviii) (5,394)
Amortization............... -- (9,111) (4,432)(xii) 7,743 (xix) (5,800)
------- -------- ------- -------- -------
Income from service company
business................. (858) 27,798 (4,432) (25,889) (3,381)
------- -------- ------- -------- -------
General and administrative
expenses................. -- (16,266) 8,668 (xiii) 6,573 (xviii) (1,025)
Interest expense........... (5,082)(ix) (10,685) -- 10,305 (xx) (5,462)
Interest income............ 540(v) 1,963 -- (603)(xxi) 1,900
Minority interest.......... 16(v) -- -- -- 16
Equity in losses of
unconsolidated
partnerships............. (3,905)(x) -- (4,631)(xiv) (6) (8,542)
Equity in earnings of
unconsolidated
subsidiaries............. -- -- (4,636)(xv) 10,426 (xxii) 5,790
------- -------- ------- -------- -------
Income (loss) from
operations............... (7,266) 7,852 (5,724) (3,543) (8,681)
Income tax provision....... -- (3,502) 3,502 (xvi) -- --
------- -------- ------- -------- -------
Net income (loss).......... $(7,266) $ 4,350 $(2,222) $ (3,543) $(8,681)
======= ======== ======= ======== =======
</TABLE>
- ---------------
(i) Represents the adjustment to record activity from January 1, 1997 to
the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. The historical
financial statements of the NHP Real Estate Companies consolidate
certain real estate partnerships in which they have an interest that
will be presented on the equity method by the Partnership as a
result of the NHP Real Estate Reorganization. In addition,
represents adjustments to record additional depreciation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest
expense incurred in connection with borrowings incurred by the
Partnership to consummate the NHP Real Estate Acquisition.
(ii)Represents the unaudited consolidated results of operations of NHP
for the period from January 1, 1997 through December 8, 1997 (date
of the NHP Merger).
P-11
<PAGE> 1558
(iii)
Represents the following adjustments occurring as a result of the
NHP Merger: (i) the reduction in personnel costs, primarily
severance costs, pursuant to a restructuring plan; (ii) the
incremental depreciation of the purchase price adjustment related to
real estate; (iii) the incremental amortization of the purchase
price adjustment related to the management contracts, furniture,
fixtures and equipment, and goodwill; (iv) the reversal of equity in
earnings of NHP during the pre-merger period when the Partnership
held a 47.62% interest in NHP; and (v) the amortization of the
increased basis in investments in real estate partnerships based on
the purchase price adjustment related to real estate and an
estimated average life of 20 years.
(iv)Represents adjustments related to the NHP Reorganization, whereby
the Partnership contributed or sold to the Unconsolidated
Subsidiaries and the Unconsolidated Partnership: (i) certain assets
and liabilities of NHP, primarily related to the management
operations and other businesses owned by NHP and (ii) 12 real estate
properties containing 2,905 apartment units. The adjustments
represent (i) the related revenues and expenses primarily related to
the management operations and other businesses owned by NHP and (ii)
the historical results of operations of such real estate
partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis
resulting from the allocation of the combined purchase price of NHP
and the NHP Real Estate Companies.
(v) Represents adjustments to reflect the acquisition of the NHP Real
Estate Companies and the corresponding historical results of
operations as if they had occurred on January 1, 1997.
(vi)Represents incremental depreciation related to the consolidated real
estate assets purchased from the NHP Real Estate Companies.
Buildings and improvements are depreciated on the straight-line
method over a period of 30 years, and furniture and fixtures are
depreciated on the straight-line method over a period of 5 years.
(vii)
Represents the adjustment to record the revenues from ancillary
businesses purchased from the NHP Real Estate Companies as if the
acquisition had occurred on January 1, 1997.
(viii)
Represents $4,878 related to the adjustment to record the expenses
from ancillary businesses purchased from the NHP Real Estate
Companies as if the acquisition had occurred on January 1, 1997,
less $2,615 related to a reduction in personnel costs pursuant to a
restructuring plan, approved by the Company's senior management,
assuming that the acquisition of the NHP Real Estate Companies had
occurred on January 1, 1997 and that the restructuring plan was
completed on January 1, 1997. The restructuring plan specifically
identifies all significant actions to be taken to complete the
restructuring plan, including the reduction of personnel, job
functions, location and the date of completion.
(ix)Represents adjustments in the amount of $3,391 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as the increase in interest expense in the amount
of $1,691 related to borrowings on the Partnership's credit
facilities of $55,807 to finance the NHP Real Estate Acquisition.
(x) Represents adjustments in the amount of $2,432 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as amortization of $1,473 related to the increased
basis in investment in real estate partnerships, as a result of the
allocation of the purchase price of the NHP Real Estate Companies,
based on an estimated average life of 20 years.
(xi)Represents incremental depreciation related to the real estate
assets purchased from NHP. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years,
and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(xii)
Represents incremental depreciation and amortization of the tangible
and intangible assets related to the property management and other
business operated by the Unconsolidated
P-12
<PAGE> 1559
Subsidiaries, based on the Partnership's new basis as adjusted by
the allocation of the combined purchase price of NHP including
amortization of management contracts of $3,782, depreciation of
furniture, fixtures and equipment of $2,018 and amortization of
goodwill of $7,743, less NHP's historical depreciation and
amortization of $9,111. Management contracts are amortized using the
straight-line method over the weighted average life of the contracts
estimated to be approximately 15 years. Furniture, fixtures and
equipment are depreciated using the straight-line method over the
estimated life of 3 years. Goodwill is amortized using the
straight-line method over 20 years.
(xiii)
Represents a reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan, approved by the Company's
senior management, specifically identifying all significant actions
to be taken to complete the restructuring plan, assuming that the
NHP Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997.
(xiv)
Represents adjustment for amortization of the increased basis in
investments in real estate partnerships, as a result of the
allocation of the combined purchase price of NHP and the NHP Real
Estate Companies, based on an estimated average life of 20 years.
(xv)Represents the reversal of equity in earnings in NHP during the
pre-merger period when the Partnership held a 47.62% interest in
NHP, as a result of the Partnership's acquisition of 100% of the NHP
Common Stock.
(xvi)
Represents the reversal of NHP's income tax provision due to the
restructuring of the management business to the Unconsolidated
Subsidiaries.
(xvii)
Represents the contribution of NHP's 12 real estate properties
containing 2,905 apartment units to the Unconsolidated Partnership
pursuant to the NHP Reorganization.
(xviii)
Represents the historical income and expenses associated with
certain assets and liabilities of NHP that were contributed or sold
to the Unconsolidated Subsidiaries, primarily related to the
management operations and other businesses owned by NHP.
(xix)
Represents the amortization and depreciation of certain management
contracts and other assets of NHP, based on the Partnership's new
basis resulting from the allocation of the purchase price of NHP,
that will be contributed or sold to the Unconsolidated Subsidiaries,
primarily related to the management operations and other businesses
owned by NHP.
(xx)Represents interest expense of $6,020 related to the contribution of
NHP's 12 real estate properties containing 2,905 apartment units to
the Unconsolidated Partnership and interest expense of $4,285
related to the certain assets and liabilities that will be
contributed or sold to the Unconsolidated Subsidiaries pursuant to
the NHP Reorganization.
(xxi)
Represents the interest income of $5,000 earned on notes payable of
$50,000 to the Partnership issued as consideration for certain
assets and liabilities sold to the Unconsolidated Subsidiaries by
the Partnership, net of the elimination of the Partnership's share
of the related interest expense of $4,750 reflected in the equity in
earnings of the Unconsolidated Subsidiaries operating results,
offset by $853 in interest income primarily related to the
management operations and other businesses owned by NHP contributed
or sold to the Unconsolidated Subsidiaries pursuant to the NHP
Reorganization.
(xxii)
Represents the Partnership's equity in earnings of the
Unconsolidated Subsidiaries.
(D) Represents the audited historical statement of operations of Ambassador
for the year ended December 31, 1997. Certain reclassifications have been
made to Ambassador's historical statement of operations to conform to the
Partnership's Statement of Operations presentation. The Ambassador
historical statement of operations excludes extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of
P-13
<PAGE> 1560
interest expense resulting from the net reduction of debt; and (iv) the
elimination of the minority interest associated with Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger, and the spin-off of Holdings as if these transactions had
occurred on January 1, 1997. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
IFG AMIT HOLDINGS IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property
revenues....................... $ 6,646 $ 266 $ -- $ 6,912
Property operating expenses...... (3,251) (56) -- (3,307)
Depreciation..................... (966) -- -- (966)
--------- ------- --------- --------
Income from property
operations..................... 2,429 210 -- 2,639
--------- ------- --------- --------
Management fees and other
income......................... 389,626 -- (295,296) 94,330
Management and other expenses.... (315,653) -- 258,038 (57,615)
Amortization..................... (31,709) (303) 15,244 (16,768)
--------- ------- --------- --------
Income from service company
business....................... 42,264 (303) (22,014) 19,947
--------- ------- --------- --------
General and administrative
expenses....................... (20,435) (1,351) 587 (21,199)
Interest expense................. (9,353) -- 318 (9,035)
Interest income.................. 4,571 6,853 (457) 10,967
Minority interest................ (12,448) (382) (41) (12,871)
Equity in income (losses) of
unconsolidated partnership..... 10,027 2,639 (151) 12,515
--------- ------- --------- --------
Income (loss) from operations.... 17,055 7,666 (21,758) 2,963
Income tax provision............. (6,822) (180) 8,703 1,701
Gain on sale of property......... -- 80 -- 80
--------- ------- --------- --------
Net income (loss)................ 10,233 7,566 (13,055) 4,744
========= ======= ========= ========
</TABLE>
- ---------------
(i) Represents the audited consolidated results of operations of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report
on Form 10-K. Certain reclassifications have been made to IFG's
historical statement of operations to conform to the Partnership's
statement of operations presentation.
(ii)Represents the historical statement of operations of AMIT, as well
as pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger: (i) the incremental depreciation of the
purchase price adjustment related to consolidated real estate and
investments in real estate partnerships; (ii) the amortization of
goodwill and property management contracts resulting from the IFG Merger;
(iii) the increase in interest expense resulting from the net increase in
debt; and (iv) the elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
P-14
<PAGE> 1561
(I) Represents adjustments to reflect the 1997 Property Acquisitions and the
1998 Acquisitions, less the 1997 Dispositions and the 1998 Dispositions
as if they had occurred on January 1, 1997. These pro forma operating
results are based on historical results of the properties, except for
depreciation, which is based on the Partnership's investment in the
properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1997 PROPERTY 1997 1998 1998
ACQUISITIONS DISPOSITIONS ACQUISITIONS DISPOSITIONS TOTAL
------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Rental and other
property
revenues........... $ 88,589 $(4,081) $ 39,132 $(3,303) $120,337
Property operating
expense............ (44,109) 1,944 (18,655) 1,354 (59,466)
Owned property
management
expense............ (3,233) 133 (1,349) 122 (4,327)
Depreciation......... (16,839) 452 (10,946) 688 (26,645)
</TABLE>
(J) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1997. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(K) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1997
Property Acquisitions..................................... $(29,490)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1997 Dispositions and
the 1997 Stock Offerings.................................. 19,568
Repayments on the Partnership's credit facilities with
proceeds from a dividend received from one of the
Unconsolidated Subsidiaries............................... 1,889
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1998
Acquisitions.............................................. (15,994)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1998 Dispositions and
the 1998 Stock Offerings.................................. 20,113
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred Partnership
Unit Offering............................................. 463
--------
$ (3,451)
========
</TABLE>
(L) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the Probable Purchases.
(M) Represents (i) loss of $181 related to limited partners in consolidated
partnerships acquired in connection with the 1997 Property Acquisitions
and the 1998 Property Acquisitions and (ii) income of $502 allocable to
the Partnership Preferred Units.
(N) Represents the reduction in the Partnership's earnings in unconsolidated
partnerships as a result of the consolidation of additional partnerships
resulting from additional ownership acquired through tender offers.
(O) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
P-15
<PAGE> 1562
(P) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 724
Reduction in salaries and benefits.......................... 4,197
Merger related costs........................................ 524
Other....................................................... 1,947
------
$7,392
======
</TABLE>
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(Q) Represents the decrease in interest expense of $3,612 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$3,833 related to borrowings under the Partnership's credit facilities.
(R) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(S) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(T) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $38,885, amortization of goodwill of $6,526, and
depreciation of furniture, fixtures, and equipment of $3,753, less IFG's
historical depreciation and amortization of $16,465. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(U) Represents elimination of minority interest of IPT resulting from the IPT
merger.
(V) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(W) Represents the reversal of IFG's income tax provision.
(X) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(Y) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Z) Represents interest income of $3,825 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries by the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $3,634 reflected on the equity in earnings of the
Unconsolidated Subsidiaries.
(AA) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-16
<PAGE> 1563
(BB) The following table presents the net impact to pro forma net loss
applicable to holders of OP Units and net loss per OP Units assuming the
interest rate per annum increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest expense................................ $ 938
========
Net income.................................................. $(14,789)
========
Net loss attributable to OP unitholders..................... $(56,963)
========
Basic loss per OP unit...................................... $ (0.84)
========
Diluted loss per OP unit.................................... $ (0.84)
========
</TABLE>
(CC) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred
Units, the Class G Preferred Units, the Class H Preferred Units and the
Class J Preferred Units as if these Preferred Units had been issued as of
January 1, 1997.
(DD) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(2,536), plus the elimination of intercompany interest
expense of $8,384. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the year ended December 31, 1997 is
presented below, which represents the effects of the Ambassador Merger,
the NHP Merger, the NHP Reorganization, the IFG Merger, and the IFG
Reorganization as if these transactions had occurred as of January 1,
1997.
P-17
<PAGE> 1564
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZATION IFG
HISTORICAL(i) ADJUSTMENTS(ii) REORGANIZATION(iii) PRO FORMA
------------- --------------- ------------------- ---------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 6,194 $ 6,371(iv) $ -- $ 12,565
Property operating expenses............. (3,355) (3,531)(iv) -- (6,886)
Owned property management expense....... (147) (478)(iv) -- (625)
Depreciation expense.................... (1,038) (767)(iv) -- (1,805)
-------- -------- -------- --------
Income from property operations......... 1,654 1,595 -- 3,249
-------- -------- -------- --------
Management fees and other income........ 23,776 41,992(v) 74,404(x) 140,172
Management and other expenses........... (11,733) (20,403)(v) (49,236)(x) (81,372)
Amortization............................ (3,726) (4,017)(v) (30,188)(xi) (37,931)
-------- -------- -------- --------
Income from service company............. 8,317 17,572 (5,020) 20,869
General and administrative expense...... -- (6,573)(v) (6,249)(x) (12,822)
Interest expense........................ (6,058) (5,849)(vi) (3,825)(xii) (15,732)
Interest income......................... 1,001 (148)(v) -- 853
Minority interest....................... (2,819) 2,198(viii) -- (621)
Equity in losses of unconsolidated
partnerships.......................... (1,028) 1,028(iv) -- --
Equity in earnings of Unconsolidated
Subsidiaries.......................... 2,943 (2,943)(vii) -- --
-------- -------- -------- --------
Income (loss) from operations........... 4,010 6,880 (15,094) (4,204)
Income tax provision.................... (1,902) (3,013)(ix) 6,450(xiii) 1,535
-------- -------- -------- --------
Net income (loss)....................... $ 2,108 $ 3,867 $ (8,644) $ (2,669)
======== ======== ======== ========
Income attributable to preferred
unitholders........................... $ 2,198 $ 3,478 $ (8,212) $ (2,536)
======== ======== ======== ========
Income (loss) attributable to common
unitholders........................... $ (90) $ 389 $ (432) $ (133)
======== ======== ======== ========
</TABLE>
- ---------------
(i) Represents the historical results of operations of the Unconsolidated
Subsidiaries for the year ended December 31, 1997.
(ii) Represents adjustments related to the NHP Reorganization, which includes
the sale or contribution of 14 properties containing 2,725 apartment units
from the unconsolidated partnerships to the Unconsolidated Subsidiaries,
as well as the sale or contribution of 12 properties containing 2,905
apartment units from the Unconsolidated Subsidiaries to the Unconsolidated
Partnership.
(iii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iv) Represents adjustments for the historical results of operations of the 14
real estate properties contributed or sold to the Unconsolidated
Subsidiaries, offset by the historical results of operations of the 12
real estate properties contributed or sold to the Unconsolidated
Partnership, with additional depreciation recorded related to the
Partnership's new basis resulting from the allocation of purchase price of
NHP and the NHP Real Estate Companies.
P-18
<PAGE> 1565
(v) Represents adjustments to reflect income and expenses associated with
certain assets and liabilities of NHP contributed or sold to the
Unconsolidated Subsidiaries.
(vi) Represents adjustments of $6,058 to reverse the historical interest
expense of the Unconsolidated Subsidiaries, which resulted from its
original purchase of NHP Common Stock, offset by $2,622 related to the
contribution or sale of the 14 real estate properties, $4,285 related to
assets and liabilities transferred from the Partnership to the
Unconsolidated Subsidiaries and $5,000 related to a note payable to the
Partnership.
(vii) Represents the reversal of the historical equity in earnings of NHP for
the period in which NHP was not consolidated by the Unconsolidated
Subsidiaries.
(viii)Represents the minority interest in the operations of the 14 real estate
properties.
(ix) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill which is not deductible
for tax purposes.
(x) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(xi) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(xii) Represents adjustment for interest expense related to a note payable to
the Partnership.
(xiii)Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-19
<PAGE> 1566
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR
AND PROBABLE AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E)
------------- ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Rental and other property revenues............. $ 265,700 $ 19,603(H) $ $ $
8,398(I) 35,480 -- 8,126
Property operating expenses.................... (101,600) (9,009)(H)
(3,745)(I) (14,912) -- (2,585)
Owned property management expense.............. (7,746) (728)(H)
(459)(I) -- -- --
Depreciation................................... (59,792) (4,886)(H)
(2,624)(I) (7,270) (1,420)(M) (904)
--------- -------- -------- ------- --------
Income from property operations................ 96,562 6,550 13,298 (1,420) 4,637
--------- -------- -------- ------- --------
Management fees and other income............... 13,968 -- -- -- 71,155
Management and other expenses.................. (8,101) -- -- -- (41,477)
Corporate overhead allocation.................. (196) -- -- -- --
Amortization................................... (3) -- -- -- (13,986)
--------- -------- -------- ------- --------
Income from service company business........... 5,668 -- -- -- 15,692
--------- -------- -------- ------- --------
General and administrative expenses............ (7,444) -- (5,278) 5,278(N) (61,386)
Interest expense............................... (56,756) 1,975(J)
(2,469)(K) (10,079) 145(O) (24,871)
Interest income................................ 18,244 (1) -- -- 22,501
Minority interest.............................. (1,052) 160(L) (252) 252(P) (14,159)
Equity in losses of unconsolidated
partnerships................................. (5,078) -- (71) -- 13,492
Equity in earnings of unconsolidated
subsidiaries................................. 8,413 -- -- -- --
Amortization of goodwill....................... (5,071) -- -- -- --
--------- -------- -------- ------- --------
Income (loss) from operations.................. 53,486 6,215 (2,382) 4,255 (44,094)
Income tax provision........................... -- -- -- -- 1,180
Gain on dispositions of property............... 2,783 (2,783) -- -- 6,576
--------- -------- -------- ------- --------
Net income..................................... 56,269 3,432 (2,382) 4,255 (36,338)
Income attributable to preferred unitholders... 16,320 16,094 -- -- --
--------- -------- -------- ------- --------
Income (loss) attributable to common
unitholders.................................. $ 39,949 $(12,662) $ (2,382) $ 4,255 $(36,338)
========= ======== ======== ======= ========
Basic earnings (loss) per OP Unit.............. $ 0.80
=========
Diluted earnings (loss) per OP Unit............ $ 0.79
=========
Weighted average OP Units outstanding.......... 50,420
=========
Weighted average OP Unit and equivalents
outstanding.................................. 50,544
=========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(F) ADJUSTMENTS(G) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property revenues............. $ $ $
-- -- 337,307
Property operating expenses....................
-- -- (131,851)
Owned property management expense..............
-- -- (8,933)
Depreciation...................................
(1,583)(Q) -- (78,479)
-------- -------- ---------
Income from property operations................ (1,583) -- 118,044
-------- -------- ---------
Management fees and other income............... -- (56,211)(W) 28,912
Management and other expenses.................. -- 35,192(W) (14,386)
Corporate overhead allocation.................. -- -- (196)
Amortization................................... (23,895)(R) 22,641(X) (15,243)
-------- -------- ---------
Income from service company business........... (23,895) 1,622 (913)
-------- -------- ---------
General and administrative expenses............ 45,823(S) 14,375(W) (8,632)
Interest expense...............................
7,045 -- (85,010)(AA)
Interest income................................ -- 143(Y) 40,887
Minority interest.............................. 6,622(T) -- (8,429)
Equity in losses of unconsolidated
partnerships................................. (18,577)(U) -- (10,234)
Equity in earnings of unconsolidated
subsidiaries................................. -- (7,562)(Z) 851(CC)
Amortization of goodwill....................... -- -- (5,071)
-------- -------- ---------
Income (loss) from operations.................. 15,435 8,578 41,493
Income tax provision........................... (1,180)(V) -- --
Gain on dispositions of property............... (6,576) -- --
-------- -------- ---------
Net income..................................... 7,679 8,578 41,493
Income attributable to preferred unitholders... -- -- 32,414(BB)
-------- -------- ---------
Income (loss) attributable to common
unitholders.................................. $ 7,679 $ 8,578 $ 9,079(AA)
======== ======== =========
Basic earnings (loss) per OP Unit.............. $ 0.13(AA)
=========
Diluted earnings (loss) per OP Unit............ $ 0.13(AA)
=========
Weighted average OP Units outstanding.......... 68,554
=========
Weighted average OP Unit and equivalents
outstanding.................................. 69,218
=========
</TABLE>
P-20
<PAGE> 1567
- ---------------
(A) Represents the Partnership's unaudited consolidated results of operations
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1998: (i) the 1998 Stock Offerings; (ii) the 1998
Acquisitions; (iii) the Probable Purchases; (iv) the 1998 Dispositions;
and (v) the Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of operations of Ambassador
for the four months ended April 30, 1998. Certain reclassifications have
been made to Ambassador's historical Statement of Operations to conform
to the Partnership's Statement of Operations presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger and the spin-off of the common stock of Holdings as if these
transactions had occurred on January 1, 1998. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
HOLDINGS
IFG AMIT SPIN- IFG
HISTORICAL(i) MERGER(ii) OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 7,566 $ 560 $ -- $ 8,126
Property operating expenses............. (2,585) -- -- (2,585)
Depreciation............................ (904) -- -- (904)
--------- ------ --------- --------
Income from property operations......... 4,077 560 -- 4,637
--------- ------ --------- --------
Management fees and other income........ 311,475 -- (240,320) 71,155
Management and other expenses........... (252,295) -- 210,818 (41,477)
Amortization............................ (26,781) (48) 12,843 (13,986)
--------- ------ --------- --------
Income from service company business.... 32,399 (48) (16,659) 15,692
--------- ------ --------- --------
General and administrative expenses..... (66,272) (675) 5,561 (61,386)
Interest expense........................ (24,164) -- (707) (24,871)
Interest income......................... 18,817 4,193 (509) 22,501
Minority interest....................... (14,159) -- -- (14,159)
Equity in losses of unconsolidated
partnerships.......................... 12,169 1,323 13,492
--------- ------ --------- --------
Income (loss) from operations........... (37,133) 4,030 (10,991) (44,094)
Income tax provision.................... (4,772) -- 5,952 1,180
Gain on disposition of property......... 5,888 688 -- 6,576
--------- ------ --------- --------
Item income (loss)...................... $ (36,017) $4,718 $ (5,039) $(36,338)
========= ====== ========= ========
</TABLE>
----------------------
(i)
Represents the unaudited consolidated results of operations of IFG for
the nine months ended September 30, 1998.
Certain reclassifications have been made to IFG's historical statement
of operations to conform to the Partnership's statement of operations
presentation.
(ii)
Represents the historical statement of operations of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock for
each three shares of IFG common stock to holders of IFG common stock.
(F) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the incremental depreciation of the purchase price adjustment
related to consolidated real estate and investments in real estate
partnerships; (ii) the amortization of goodwill and property management
contracts
P-21
<PAGE> 1568
resulting from the IFG Merger; (iii) the increase in interest expense
resulting from the net increase in debt; and (iv) the elimination of the
income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of
IFG, primarily management contracts and related working capital assets
and liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(H) Represents adjustments to reflect the 1998 Acquisitions, less the 1998
Dispositions as if they had occurred on January 1, 1998. These pro forma
operating results are based on historical results of the properties,
except for depreciation, which is based on the Partnership's investment
in the properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1998 1998
ACQUISITIONS DISPOSITIONS TOTAL
------------ ------------ -------
<S> <C> <C> <C>
Rental and other property revenues......... $20,554 $(951) $19,603
Property operating expense................. (9,385) 376 (9,009)
Owned property management expense.......... (765) 37 (728)
Depreciation............................... (4,979) 93 (4,886)
</TABLE>
(I) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1998. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(J) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and
other loans and mortgages assumed in connection with
the 1998 Acquisitions.................................. $(8,698)
Repayments on the Partnership's credit facilities and
other indebtedness with proceeds from the 1998
Dispositions and the 1998 Stock
Offerings.............................................. 10,326
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred
Partnership Unit Offering.............................. 347
-------
$ 1,975
=======
</TABLE>
(K) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the probable purchases.
(L) Represents (i) loss of $537 related to limited partners in consolidated
partnerships acquired in connection with the 1998 Acquisitions and (ii)
income of $377 allocable to the Partnership Preferred Units.
(M) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(N) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses.................... $ 355
Reduction in salaries and benefits........................ 2,482
Merger related costs...................................... 1,212
Other..................................................... 1,229
------
$5,278
======
</TABLE>
P-22
<PAGE> 1569
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1998 and that the
restructuring plan was completed on January 1, 1998. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(O) Represents the decrease in interest expense of $1,480 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$1,335 related to borrowings under the Partnership's line of credit.
(P) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(Q) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(R) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $30,096, amortization of goodwill of $4,895, and
depreciation of furniture, fixtures, and equipment of $2,842, less IFG's
historical depreciation and amortization of $13,938. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(S) Represents the elimination of merger related expenses recorded by IFG
during the nine months ended September 30, 1998. In connection with the
IFG Merger, certain IFG executives will receive one-time lump-sum
payments in connection with the termination of their employment and
option agreements. The total of these lump sum payments is estimated to
be approximately $50,000.
(T) Represents elimination of minority interest in IPT resulting from the IPT
merger.
(U) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(V) Represents the reversal of IFG's income tax provision.
(W) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(X) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Y) Represents interest income of $2,861 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries of the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $2,718 reflected in the equity in earnings of the
Unconsolidated Subsidiaries.
(Z) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-23
<PAGE> 1570
(AA) The following table presents the net impact to pro forma net income
applicable to holders of shares of AIMCO Common Stock and net income per
share of AIMCO Common Stock assuming the interest rate per annum
increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest........................................ $ 702
=======
Net income.................................................. $40,791
=======
Net income attributable to OP Unitholders................... $ 8,377
=======
Basic loss per OP Unit...................................... $ 0.12
=======
Diluted loss per OP Unit.................................... $ 0.12
=======
</TABLE>
(BB) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred Units
the Class G Preferred Units, the Class H Preferred Units and the Class J
Preferred Units as if these stock offerings had occurred as of January 1,
1997.
(CC) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(1,867) plus the elimination of intercompany interest of
$2,718. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the nine months ended September 30, 1998
is presented below, which represents the effects of the Ambassador
Merger, the IFG Merger and the IFG Reorganization as if these
transactions had occurred as of January 1, 1997.
P-24
<PAGE> 1571
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
IFG
HISTORICAL(i) REORGANIZATION(ii) PRO FORMA
------------- ------------------ ---------
<S> <C> <C> <C>
Rental and other property revenues................... $ 9,910 $ -- $ 9,910
Property operating expense........................... (5,139) -- (5,139)
Owned property management expense.................... (345) -- (345)
Depreciation expense................................. (1,026) -- (1,026)
-------- -------- --------
Income from property operations...................... 3,400 -- 3,400
-------- -------- --------
Management fees and other income..................... 57,665 56,211(iii) 113,876
Management and other expenses........................ (36,221) (35,192)(iii) (71,413)
Amortization......................................... (2,111) (22,641)(iv) (24,752)
-------- -------- --------
Income from service company.......................... 19,333 (1,622) 17,711
General and administrative expense................... -- (14,375)(iii) (14,375)
Interest expense..................................... (6,931) (2,861)(v) (9,792)
Interest income...................................... 617 -- 617
Minority interest.................................... (526) -- (526)
-------- -------- --------
Income (loss) from operations........................ 15,893 (18,858) (2,965)
Income tax provision................................. (7,037) 8,037(vi) 1,000
-------- -------- --------
Net income (loss).................................... $ 8,856 $(10,821) $ (1,965)
======== ======== ========
Income (loss) attributable to preferred
stockholders....................................... $ 8,413 $(10,280) $ (1,867)
======== ======== ========
Income (loss) attributable to common stockholders.... $ 443 $ (541) $ (98)
======== ======== ========
</TABLE>
- ---------------
(i) Represents the Unconsolidated Subsidiaries historical consolidated results
of operations.
(ii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iii)Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG.
(iv) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG, based on the Partnership's new basis resulting from the allocation
of the purchase price of IFG.
(v) Represents adjustment for interest expense related to a note payable to the
Partnership.
(vi) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-25
<PAGE> 1572
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR IFG
AND PROBABLE NHP AMBASSADOR PURCHASE PRICE AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $ 32,697 $ 25,214 $ (8,681) $ 3,437 $ 1,879 $ 4,744
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 43,520 28,817 7,354 20,372 5,997 17,248
Gain on investments............ -- -- (12) -- -- --
(Gain) loss on disposition of
properties.................... (2,720) 2,720 (3,882) -- -- (80)
Minority interests............. (1,008) (458) (16) 851 (705) 12,871
Equity in earnings of
unconsolidated partnerships... 1,798 122 8,542 (405) -- (12,515)
Equity in earnings of
unconsolidated subsidiaries... (4,636) -- (5,790) -- -- --
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 269 (269) -- -- -- (5,366)
Changes in operating assets and
operating liabilities......... 3,112 -- 5,314 (3,523) -- (4,384)
--------- --------- --------- --------- -------- --------
Total adjustments........... 40,335 30,932 11,510 17,295 5,292 7,774
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) operating activities... 73,032 56,146 2,829 20,732 7,171 12,518
Net cash used in
discontinued operations.... -- -- (7,999) -- -- --
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) continuing
operations................. 73,032 56,146 (5,170) 20,732 7,171 12,518
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... 21,792 19,627(I) -- -- -- --
Purchase of real estate.......... (376,315) (220,995)(J) (4,114) (24,179) -- --
Additions to real estate,
investments and property held
for sale....................... (26,966) (5,217)(K) (522) (19,033) -- (4,154)
Proceeds from sale of property
held for sale.................. 303 -- -- -- -- --
Purchase of general and limited
partnership interests.......... (199,146) -- (1,208) -- -- (76,104)
Purchase of management
contracts...................... -- -- (11,686) -- -- (36,868)
Purchase of/additions to notes
receivable..................... (59,787) -- (4,236) -- -- (17,647)
Proceeds from repayments of notes
receivable..................... -- -- 214 1,000 -- 8,838
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... 45,791 -- 3,097 3,183 -- 42,615
Contribution to unconsolidated
subsidiaries................... (42,879) -- -- -- -- --
Proceeds from sale of
securities..................... -- -- 642 -- -- --
Purchase of investments held for
sale........................... -- -- (73) -- -- --
Purchase of NHP mortgage loans... (60,575) -- -- -- -- --
Purchase of Ambassador common
stock.......................... (19,881) -- -- -- -- --
--------- --------- --------- --------- -------- --------
Net cash used in investing
activities................. (717,663) (206,585) (17,886) (39,029) -- (83,320)
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. 225,436 122,568(L) 145,519 156,746 -- 111,001
Principal repayments on secured
notes payable.................. (12,512) -- (141,032) (141,676) -- (12,697)
Proceeds from secured short-term
financing...................... 19,050 -- -- -- -- --
Repayments on secured short-term
financing...................... -- (259,027)(M) (434) -- -- --
Principal repayments on unsecured
short-term notes payable....... (79) (50,800)(M) -- -- -- --
Proceeds (payoff) from unsecured
short-term financing........... (12,500) -- -- -- -- --
Principal repayments on secured
tax-exempt bond financing...... (1,487) -- -- -- -- --
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... (162,008) -- -- -- -- --
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... (6,387) -- (245) (8,095) -- (2,305)
Proceeds from issuance of common
and preferred stock, net....... 643,224 357,389(N) 6,286 28,946 -- 62,420
Proceeds from exercises of
employee stock options and
warrants....................... 871 -- -- 3,195 -- 7,487
Repurchase of common stock....... -- -- -- -- -- (3,283)
Principal repayments received on
notes due from Officers........ 25,957 -- -- 1,323 -- --
Investments made by minority
interests...................... -- -- -- -- -- 249
Receipt of contributions from
minority interests............. -- 37,345(O) -- -- -- --
Payments of distribution to
minority interests............. -- (2,713)(P) -- -- -- --
Payment of distributions......... (44,660) (19,396)(Q) (11,503)(T) (15,717) (12,173)(U) (2,695)
Payment of distributions to
limited partners............... -- (5,193)(R) -- -- (15)(U) --
Payment of preferred unit
distributions.................. (846) (39,859)(S) -- (2,279) -- --
Payment of distributions to
minority interests............. (5,510) -- -- (3,700) -- (12,578)
Net transactions with
Insignia/ESG................... -- -- -- -- -- (57,612)
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) financing activities... 668,549 140,314 (1,409) 18,743 (12,188) 89,987
--------- --------- --------- --------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. 23,918 (10,125) (24,465) 446 (5,017) 19,185
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. 13,170 -- 36,277 4,002 -- 64,447
--------- --------- --------- --------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $ 37,088 $ (10,125) $ 11,812 $ 4,448 $ (5,017) $ 83,632
========= ========= ========= ========= ======== ========
<CAPTION>
IFG IFG
MERGER REORGANIZATION PRO
ADJUSTMENTS(G) ADJUSTMENTS(H) FORMA
-------------- -------------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $(80,023) $ 6,882 $ (13,851)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 35,049 (30,188) 128,169
Gain on investments............ -- -- (12)
(Gain) loss on disposition of
properties.................... 80 -- (3,882)
Minority interests............. (1,552) -- 9,983
Equity in earnings of
unconsolidated partnerships... 29,995 -- 27,537
Equity in earnings of
unconsolidated subsidiaries... -- 4,578 (5,848)
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 5,366 --
Changes in operating assets and
operating liabilities......... -- -- 519
-------- -------- -----------
Total adjustments........... 68,938 (25,610) 156,466
-------- -------- -----------
Net cash provided by (used
in) operating activities... (11,085) (18,728) 142,615
Net cash used in
discontinued operations.... -- -- (7,999)
-------- -------- -----------
Net cash provided by (used
in) continuing
operations................. (11,085) (18,728) 134,616
-------- -------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... -- -- 41,419
Purchase of real estate.......... -- -- (625,603)
Additions to real estate,
investments and property held
for sale....................... -- -- (55,892)
Proceeds from sale of property
held for sale.................. -- -- 303
Purchase of general and limited
partnership interests.......... -- -- (276,458)
Purchase of management
contracts...................... -- -- (48,554)
Purchase of/additions to notes
receivable..................... -- -- (81,670)
Proceeds from repayments of notes
receivable..................... -- -- 10,052
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... -- -- 94,686
Contribution to unconsolidated
subsidiaries................... -- -- (42,879)
Proceeds from sale of
securities..................... -- -- 642
Purchase of investments held for
sale........................... -- -- (73)
Purchase of NHP mortgage loans... -- -- (60,575)
Purchase of Ambassador common
stock.......................... -- -- (19,881)
-------- -------- -----------
Net cash used in investing
activities................. -- -- (1,064,483)
-------- -------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. -- -- 761,270
Principal repayments on secured
notes payable.................. -- -- (307,917)
Proceeds from secured short-term
financing...................... -- -- 19,050
Repayments on secured short-term
financing...................... -- -- (259,461)
Principal repayments on unsecured
short-term notes payable....... -- -- (50,879)
Proceeds (payoff) from unsecured
short-term financing........... -- -- (12,500)
Principal repayments on secured
tax-exempt bond financing...... -- -- (1,487)
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... -- -- (162,008)
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... -- -- (17,032)
Proceeds from issuance of common
and preferred stock, net....... -- -- 1,098,265
Proceeds from exercises of
employee stock options and
warrants....................... -- -- 11,553
Repurchase of common stock....... -- -- (3,283)
Principal repayments received on
notes due from Officers........ -- -- 27,280
Investments made by minority
interests...................... -- -- 249
Receipt of contributions from
minority interests............. -- -- 37,345
Payments of distribution to
minority interests............. -- -- (2,713)
Payment of distributions......... (24,513)(V) -- (130,657)
Payment of distributions to
limited partners............... -- -- (5,208)
Payment of preferred unit
distributions.................. -- -- (42,984)
Payment of distributions to
minority interests............. -- -- (21,788)
Net transactions with
Insignia/ESG................... -- -- (57,612)
-------- -------- -----------
Net cash provided by (used
in) financing activities... (24,513) -- 879,483
-------- -------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. (35,598) (18,728) (50,384)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. -- -- 117,896
-------- -------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $(35,598) $(18,728) $ 67,512
======== ======== ===========
</TABLE>
P-26
<PAGE> 1573
- ---------------
(A) Represents the Partnership's audited consolidated statement of cash flows
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1997 Acquisitions; (ii) the 1997 Stock Offerings;
(iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings; (v) the 1998
Acquisitions; (vi) the Probably Purchases; (vii) the 1998 Dispositions; and
(viii) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)................. $ (7,266) $ 4,350 $(2,222) $ (3,543) $ (8,681)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 4,058 9,134 5,125 (10,963) 7,354
Gain on investments............. (12) -- -- -- (12)
(Gain) loss on disposition of
properties.................... (3,882) -- -- -- (3,882)
Minority interests.............. (16) -- -- -- (16)
Equity in earnings of
unconsolidated partnerships... 3,905 -- 4,631 6 8,542
Equity in earnings of
unconsolidated subsidiaries... -- -- 4,636 (10,426) (5,790)
Changes in operating assets and
operating liabilities......... (1,036) 6,350 -- -- 5,314
-------- -------- ------- -------- ---------
Total adjustments........... 3,017 15,484 14,392 (21,383) 11,510
-------- -------- ------- -------- ---------
Net cash provided by (used
in) operating
activities................ (4,249) 19,834 12,170 (24,926) 2,829
Net cash used in
discontinued operations... -- (7,999) -- -- (7,999)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) continuing
operations................ (4,249) 11,835 12,170 (24,926) (5,170)
-------- -------- ------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate........... -- (4,114) -- -- (4,114)
Additions to real estate,
investments and property held
for sale........................ (522) -- -- -- (522)
Purchase of general and limited
partnership interests........... (1,208) -- -- -- (1,208)
Purchase of management
contracts....................... -- (11,686) -- -- (11,686)
Purchase of/additions to notes
receivable...................... -- (4,236) -- -- (4,236)
Proceeds from repayments of notes
receivable...................... 214 -- -- -- 214
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 3,097 -- -- -- 3,097
Proceeds from sale of
securities...................... 642 -- -- -- 642
Purchase of investments held for
sale............................ (73) -- -- -- (73)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) investing
activities................ 2,150 (20,036) -- -- (17,886)
-------- -------- ------- -------- ---------
</TABLE>
P-27
<PAGE> 1574
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes
payable borrowings.............. $ 74,019 $ 71,500 $ -- $ -- $ 145,519
Principal repayments on secured
notes payable................... (71,256) (69,776) -- -- (141,032)
Repayments on secured short-term
financing....................... (434) -- -- -- (434)
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (245) -- -- (245)
Proceeds from issuances of common
and preferred stock, net........ -- 6,286 -- -- 6,286
Payment of distributions.......... (2,000) -- (9,503) -- (11,503)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) financing
activities................ 329 7,765 (9,503) -- (1,409)
-------- -------- ------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (1,770) (436) 2,667 (24,926) (24,465)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 25,795 10,482 -- -- 36,277
-------- -------- ------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 24,025 $ 10,046 $ 2,667 $(24,926) $ 11,812
======== ======== ======= ======== =========
</TABLE>
- ---------------
(i)Represents the adjustment to record cash flow activity from January 1,
1997 to the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. In addition,
represents adjustments to record additional deprecation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest expense
incurred in connection with borrowings incurred by the Partnership to
consummate the NHP Real Estate Acquisition.
(ii)
Represents the unaudited consolidated statement of cash flows of NHP
for the period from January 1, 1997 through December 8, 1997 (date of
the NHP Merger).
(iii)
Represents the following adjustments occurring as a result of the NHP
Merger: (i) the reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan; (ii) the incremental
depreciation of the purchase price adjustment related to real estate;
(iii) the incremental amortization of the purchase price adjustment
related to management contracts, furniture, fixtures and equipment, and
goodwill; (iv) the reversal of equity in earnings of NHP during the
pre-merger period when the Partnership held a 47.62% interest in NHP;
and (v) the amortization of the increased basis in investments in real
estate partnerships, based on the purchase price adjustment related to
real estate and an estimated average life of 20 years.
(iv)
Represents adjustments related to the NHP Reorganization, whereby the
Partnership contributed or sold to the Unconsolidated Subsidiaries and
the Unconsolidated Partnership; (i) certain assets and liabilities of
NHP, primarily related to the management operations and other
businesses owned by NHP and (ii) 12 real estate properties containing
2,905 apartment units. The adjustments represent (i) the related cash
flow activity primarily related to the management operations of such
real estate partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis resulting
from the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies.
(D) Represents the audited historical statement of cash flows of Ambassador for
the year ended December 31, 1997. Certain reclassifications have been made
to Ambassador's historical statement of cash flows to conform to the
Partnership's statement of cash flows presentation. The Ambassador
P-28
<PAGE> 1575
historical statement of cash flows excludes an extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................... $ 10,233 $ 7,566 $(13,055) $ 4,744
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization...... 32,675 63 (15,490) 17,248
Gain on disposition of property.... -- (80) -- (80)
Minority interests................. 12,448 382 41 12,871
Equity in earnings of
unconsolidated partnerships...... (10,027) (2,639) 151 (12,515)
Extraordinary gain on early
extinguishment of debt........... (5,366) -- -- (5,366)
Changes in operating assets and
liabilities...................... -- (2,405) (1,979) (4,384)
--------- -------- -------- --------
Total adjustments............. 29,730 (4,679) (17,277) 7,774
--------- -------- -------- --------
Net cash provided by (used in) operating
activities............................ 39,963 2,887 (30,332) 12,518
--------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to real estate, investments
and property held for sale......... (7,695) 665 2,876 (4,154)
Purchase of general and limited
partnership interests.............. (93,118) -- 17,014 (76,104)
Purchase of management contracts...... (99,540) -- 62,672 (36,868)
Purchase of/additions to notes
receivable......................... (9,172) (14,251) 5,776 (17,647)
Proceeds from repayments of notes
receivable......................... 4,523 7,552 (3,237) 8,838
Distributions from investments in real
estate partnerships and
unconsolidated subsidiaries........ 44,823 -- (2,208) 42,615
--------- -------- -------- --------
Net cash provided by (used in)
investing activities........ (160,179) (6,034) 82,893 (83,320)
--------- -------- -------- --------
</TABLE>
P-29
<PAGE> 1576
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable
borrowings......................... $ 118,141 $ -- $ (7,140) $111,001
Principal repayments on secured notes
payable............................ (15,682) -- 2,985 (12,697)
Payment of loan costs, net of proceeds
from interest rate hedge........... (2,305) -- -- (2,305)
Proceeds from issuance of common and
preferred stock, net............... 62,420 -- -- 62,420
Proceeds from exercises of employee
stock options and warrants......... 7,487 -- -- 7,487
Repurchase of common stock............ (3,283) -- -- (3,283)
Investment made by minority
interests.......................... 249 -- -- 249
Payment of distributions.............. -- (2,695) -- (2,695)
Payment of distributions to minority
interests.......................... (12,578) -- -- (12,578)
Net transactions with Insignia/ESG.... -- -- (57,612) (57,612)
--------- -------- -------- --------
Net cash provided by (used in)
financing activities........ 154,449 (2,695) (61,767) 89,987
--------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 34,233 (5,842) (9,206) 19,185
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD............................. 54,614 9,789 44 64,447
--------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................ $ 88,847 $ 3,947 $ (9,162) $ 83,632
========= ======== ======== ========
</TABLE>
- ---------------
(i)Represents the audited consolidated statement of cash flows of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report on
Form 10-K. Certain reclassifications have been made to IFG's historical
statement of cash flows to conform to the Partnership's statement of
cash flows presentation.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(I) Represents proceeds from the sale of the 1998 Dispositions, as if these
dispositions occurred on January 1, 1997.
P-30
<PAGE> 1577
(J) Represents the use of cash to purchase the 1998 Acquisitions and the
Probable Purchases, as if these acquisitions occurred on January 1, 1997.
(K) Represents cash payments for capital improvements of $300 per unit on the
1997 Acquisitions, the 1998 Acquisitions and the Probable Purchases.
(L) Represents notes payable assumed in connection with the 1998 Acquisitions
and the Probable Purchases, assuming these transactions occurred January 1,
1997.
(M) Represents net principal repayments assuming the 1998 Acquisitions, the
1998 Dispositions, the Probable Purchases, the 1998 Stock Offerings and the
Preferred Partnership Unit Offering occurred January 1, 1997.
(N) Represents cash proceeds from the 1998 Stock Offerings, as if these
offerings occurred on January 1, 1997.
(O) Represents contributions from minority interests assuming the Preferred
Partnership Unit Offering occurred January 1, 1997.
(P) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(Q) Represents distributions paid on the 1997 Stock Offerings as if these
occurred on January 1, 1997.
(R) Represents distributions paid to limited partners on OP Units issued in
connection with the 1997 Acquisitions, the 1998 Acquisitions and the
Probable Purchases, as if the issuance of the OP Units occurred on January
1, 1997.
(S) Represents preferred unit distributions paid on the Class B Preferred
Stock, the Class C Preferred Stock and the 1998 Stock Offerings as if these
occurred on January 1, 1997.
(T) Represents historical distributions of $2,000 and pro forma distributions
on the shares issued in the NHP Merger as if these shares had been issued
on January 1, 1997.
(U) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(V) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-31
<PAGE> 1578
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE AMBASSADOR PURCHASE PRICE IFG AS IFG MERGER
HISTORICAL(A) PURCHASE(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 56,269 $ 3,432 $ (2,382) $ 4,255 $ (36,338) $ 7,679
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 67,344 7,512 7,520 1,420 14,890 25,478
(Gain) loss on disposition of
properties..................... (2,783) 2,783 -- -- (6,576) 6,576
Minority interests.............. 1,052 (160) 252 (252) 14,159 (6,622)
Equity in earnings of
unconsolidated partnerships.... 5,078 -- 71 -- (13,492) 18,577
Equity in earnings of
unconsolidated subsidiaries.... (8,413) -- -- -- -- --
Non-cash compensation........... -- -- -- -- 796 --
Changes in operating assets and
operating liabilities.......... (67,722) -- 5,948 -- (7,775) --
--------- -------- -------- ------- --------- --------
Total adjustments............ (5,444) 10,135 13,791 1,168 2,002 44,009
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) operating activities... 50,825 13,567 11,409 5,423 (34,336) 51,688
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... (63,839) 63,839(H) -- -- 27,122 --
Additions to real estate.......... (47,878) (1,198)(I) (17,759) -- 9,309 --
Proceeds from sale of property and
investments held for sale....... 19,627 (19,627)(J) -- -- (35) --
Additions to property held for
sale............................ (1,986) -- -- -- -- --
Purchase of general and limited
partnership interests........... (27,016) -- -- -- 17,420 --
Purchase of/additions to notes
receivable...................... (72,445) -- -- -- (27,589) --
Proceeds from repayments/sale of
notes receivable................ 21,562 -- -- -- 21,185 --
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 513 -- 1,063 -- 22,053 --
Payment of trust based preferred
dividends....................... -- -- -- -- (7,415) --
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... 4,492 -- -- -- 13,423 --
Contribution to unconsolidated
subsidiaries.................... (13,032) -- -- -- -- --
Purchase of investments held for
sale............................ (4,935) -- -- -- -- --
Redemption of OP Units............ (516) -- -- -- -- --
Merger costs...................... -- -- -- -- (1,402) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) investing activities... (185,453) 43,014 (16,696) -- 74,071 --
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. 77,489 -- 37,162 -- 177,234 --
Principal repayments on secured
notes payable................... (56,262) -- -- -- 4,239 --
Principal advances on secured
tax-exempt bond financing....... -- -- 21,784 -- -- --
Principal repayments on secured
tax-exempt bond financing....... (1,436) -- -- -- -- --
Net borrowings/repayments on
secured short-term financing.... (30,693) 209,027(K) (43,002) -- -- --
Net borrowings (paydowns) on the
revolving credit facilities..... -- -- 2,513 -- -- --
Principal repayments on unsecured
short-term notes payable........ -- -- -- -- 2,644 --
Payment of loan costs, net of
proceeds from interest rate
hedge........................... (5,727) -- -- -- (83) --
Proceeds from issuance of common
stock and preferred stock,
net............................. 253,239 (253,239)(L) -- -- -- --
Repurchase of common stock........ (10,972) -- -- -- -- --
Proceeds from exercises of
employee stock options and
warrants........................ -- -- 9,761 -- 6,533 --
Principal repayments received on
notes due from Officers......... 8,084 -- -- -- -- --
Payments of distributions to
minority interests.............. -- (2,034)(M) -- -- -- --
Payment of distributions.......... (73,322) -- -- (3,701)(P) (8,606) (22,360)(Q)
Payment of distributions to
limited partners................ (10,251) (1,919)(N) -- (5)(P) (494) --
Payment of preferred unit
distributions................... (10,916) (16,094)(O) -- -- -- --
Proceeds from issuance of High
Performance Units............... 1,988 -- -- -- -- --
Net transactions with
Insignia/ESG.................... -- -- -- -- (241,003) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) financing activities... 141,221 (64,259) 28,218 (3,706) (59,536) (22,360)
--------- -------- -------- ------- --------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. 6,593 (7,678) 22,931 1,717 (19,801) 29,328
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 37,088 (10,125) 4,448 (5,017) 83,632 (35,598)
--------- -------- -------- ------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 43,681 $(17,803) $ 27,379 $(3,300) $ 63,831 $ (6,270)
========= ======== ======== ======= ========= ========
<CAPTION>
IFG
REORGANIZATION PRO
ADJUSTMENTS(G) FORMA
-------------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 8,578 $ 41,493
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... (22,641) 101,523
(Gain) loss on disposition of
properties..................... -- --
Minority interests.............. -- 8,429
Equity in earnings of
unconsolidated partnerships.... -- 10,234
Equity in earnings of
unconsolidated subsidiaries.... 7,562 (851)
Non-cash compensation........... -- 796
Changes in operating assets and
operating liabilities.......... -- (69,549)
-------- ---------
Total adjustments............ (15,079) 50,582
-------- ---------
Net cash provided by (used
in) operating activities... (6,501) 92,075
-------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... -- 27,122
Additions to real estate.......... -- (57,526)
Proceeds from sale of property and
investments held for sale....... -- (35)
Additions to property held for
sale............................ -- (1,986)
Purchase of general and limited
partnership interests........... -- (9,596)
Purchase of/additions to notes
receivable...................... -- (100,034)
Proceeds from repayments/sale of
notes receivable................ -- 42,747
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... -- 23,629
Payment of trust based preferred
dividends....................... -- (7,415)
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... -- 17,915
Contribution to unconsolidated
subsidiaries.................... -- (13,032)
Purchase of investments held for
sale............................ -- (4,935)
Redemption of OP Units............ -- (516)
Merger costs...................... -- (1,402)
-------- ---------
Net cash provided by (used
in) investing activities... -- (85,064)
-------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. -- 291,885
Principal repayments on secured
notes payable................... -- (52,023)
Principal advances on secured
tax-exempt bond financing....... -- 21,784
Principal repayments on secured
tax-exempt bond financing....... -- (1,436)
Net borrowings/repayments on
secured short-term financing.... -- 135,332
Net borrowings (paydowns) on the
revolving credit facilities..... -- 2,513
Principal repayments on unsecured
short-term notes payable........ -- 2,644
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (5,810)
Proceeds from issuance of common
stock and preferred stock,
net............................. -- --
Repurchase of common stock........ -- (10,972)
Proceeds from exercises of
employee stock options and
warrants........................ -- 16,294
Principal repayments received on
notes due from Officers......... -- 8,084
Payments of distributions to
minority interests.............. -- (2,034)
Payment of distributions.......... -- (107,989)
Payment of distributions to
limited partners................ -- (12,669)
Payment of preferred unit
distributions................... -- (27,010)
Proceeds from issuance of High
Performance Units............... -- 1,988
Net transactions with
Insignia/ESG.................... -- (241,003)
-------- ---------
Net cash provided by (used
in) financing activities... -- 19,578
-------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (6,501) 26,589
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... (18,728) 55,700
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $(25,229) $ 82,289
======== =========
</TABLE>
P-32
<PAGE> 1579
- ---------------
(A) Represents the Partnership's unaudited consolidated statement of cash flows
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1998 Stock Offerings; (ii) the 1998 Acquisitions;
(iii) the Probably Purchases; (iv) the 1998 Dispositions and (v) the
Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of cash flows of Ambassador
for the four months ended April 20, 1998. Certain reclassifications have
been made to Ambassador's historical statement of cash flows to conform to
the Partnership's statement of cash flows presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ (36,017) $ 4,718 $ (5,039) $(36,338)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 27,685 48 (12,843) 14,890
Gain on disposition of property......................... (5,888) (688) -- (6,576)
Minority interests...................................... 14,159 -- -- 14,159
Equity in earnings of unconsolidated partnerships....... (12,169) -- (1,323) (13,492)
Non-cash compensation................................... 796 -- -- 796
Changes in operating assets and liabilities............. (18,853) (1,499) 12,577 (7,775)
--------- -------- --------- --------
Total adjustments................................... 5,730 (2,139) (1,589) 2,002
--------- -------- --------- --------
Net cash provided by (used in) operating
activities........................................ (30,287) 2,579 (6,628) (34,336)
--------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... (3,804) -- 30,926 27,122
Additions to real estate.................................. (2,252) (25) 11,586 9,309
Proceeds from sales of property and investments held for
sale.................................................... -- 161 (196) (35)
Purchase of general and limited partnership interests..... (44,270) -- 61,690 17,420
Purchases of / additions to notes receivable.............. (17,107) (15,407) 4,925 (27,589)
Proceeds from repayments/sale of notes receivable......... 151 23,672 (2,638) 21,185
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 21,360 -- 693 22,053
Payment of trust based preferred dividends................ (7,415) -- -- (7,415)
Cash received in connection with AMIT Merger.............. 13,423 -- -- 13,423
Merger costs.............................................. (1,402) -- -- (1,402)
--------- -------- --------- --------
Net cash provided by (used in) investing
activities........................................ (41,316) 8,401 106,986 74,071
--------- -------- --------- --------
</TABLE>
P-33
<PAGE> 1580
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 186,000 -- (8,766) 177,234
Principal repayments on secured notes payable............. (1,874) -- 6,113 4,239
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (83) -- -- (83)
Proceeds from exercises of employee stock options and
warrants................................................ 6,533 -- -- 6,533
Payment of distributions.................................. (6,541) (2,065) -- (8,606)
Payment of distributions minority interests............... (494) -- -- (494)
Net transactions with Insignia/ESG........................ (118,424) -- (122,579) (241,003)
--------- -------- --------- --------
Net cash provided by (used in) financing
activities........................................ 67,761 (2,065) (125,232) (59,536)
--------- -------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (3,842) 8,915 (24,874) (19,801)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 88,847 3,947 (9,162) 83,632
--------- -------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 85,005 $ 12,862 $ (34,036) $ 63,831
========= ======== ========= ========
</TABLE>
- ---------------
(i)Represents the unaudited consolidated statement of cash flows of IFG
for the nine months ended September 30, 1998. Certain reclassifications
have been made to IFG's historical statement of cash flows to conform
to the Partnership's statement of cash flows presentation. In addition,
the cash and cash equivalents at the beginning of the period has been
adjusted.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock. In addition, the cash and cash equivalents at the beginning of
the period has been adjusted.
(F) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(H) Represents adjustment to remove the use of cash to purchase the 1998
Acquisitions, as if these acquisitions occurred on January 1, 1997;
therefore, the purchases are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(I) Represents cash payments for capital improvements of $300 per unit on the
1998 Acquisitions.
(J) Represents adjustment to remove the proceeds from the sale of the 1998
Dispositions, as if these dispositions occurred on January 1, 1997;
therefore, the proceeds are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(K) Represents adjustment to remove net principal repayments assuming the 1998
Acquisitions, the 1998 Dispositions and the 1998 Stock Offerings occurred
January 1, 1997; therefore, the repayments are included on the Pro Forma
Consolidated Statement of Cash Flows for the year ended December 31, 1997.
(L) Represents adjustment to remove cash proceeds from the 1998 Stock
Offerings, as if these offerings occurred on January 1, 1997; therefore,
the repayments are included on the Pro Forma Consolidated Statement of Cash
Flows for the year ended December 31, 1997.
P-34
<PAGE> 1581
(M) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(N) Represents distributions paid to limited partners on OP Units issued in
connection with the 1998 Acquisitions and the Probable Purchases, as if the
issuance of the OP Units occurred on January 1, 1997.
(O) Represents preferred unit distributions paid on the 1998 Stock Offerings as
if these occurred on January 1, 1997.
(P) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(Q) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-35
<PAGE> 1582
PRO FORMA FINANCIAL INFORMATION OF
AIMCO PROPERTIES, L.P.
(EXCHANGE OFFERS)
INTRODUCTION
AIMCO Properties L.P. (the "Partnership") intends to offer to purchase
limited partnership interests in syndicated real estate limited partnerships in
which AIMCO holds partnership interests. The Partnership, is subject to
applicable law, plans to offer to purchase certain of such limited partnership
interests in exchange for (i) equity securities of the Partnership; (ii) cash or
(iii) a combination of such equity securities and cash. Such offers are expected
to include terms that will allow limited partners to continue to hold their
limited partnership interests.
The following Pro Forma Consolidated Balance Sheet (Exchange Offers) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) all the
transactions discussed in the Pro Forma Financial Statements (Insignia Merger)
appearing elsewhere herein; and (ii) the acceptance of exchange offers by
limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) all
the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1998: (i)
all the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The Pro Forma Financial Information (Exchange Offers) is based, in part, on
the historical financial statements of the partnerships in which the Exchange
Offers are made. The Pro Forma Financial Information (Exchange Offers) is also
based, in part, on the Pro Forma Financial Information (Insignia Merger) of the
Partnership included elsewhere herein. Such pro forma information is based in
part upon: (i) the audited Consolidated Financial Statements of Insignia for the
year ended December 31, 1997; (ii) the audited Consolidated Financial Statements
of Angeles Mortgage Investment Trust ("AMIT") for the year ended December 31,
1997; (iii) the unaudited Consolidated Financial Statements of Insignia for the
nine months ended September 30, 1998; and (iv) the unaudited Consolidated
Financial Statements of AMIT for the period from January 1, 1998 to September
17, 1998. The Pro Forma Financial Information (Insignia Merger) is also based,
in part, upon: (i) the audited Consolidated Financial Statements of Ambassador
for the year ended December 31, 1997; (ii) the audited Consolidated Financial
Statements of the Partnership for the year ended December 31, 1997; (iii) the
unaudited Consolidated Financial Statements of Ambassador for the four months
ended April 30, 1998; (iv) the unaudited Consolidated Financial Statements of
the Partnership for the nine months ended September 30, 1998; and (v) the
historical financial statements of certain properties and companies acquired by
AIMCO filed in AIMCO's Current Reports on Form 8-K, dated April 16, 1997, May 5,
1997, June 3, 1997, September 19, 1997, October 15, 1997, December 1, 1997 and
November 2, 1998. The following Pro Forma Financial Information (Exchange
Offers) should be read in conjunction with such financial statements and notes
thereto.
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared under the assumption that after the exchange offers are accepted, AIMCO
will own varying ownership percentages of each partnership, and that the limited
partners will choose to elect to receive 35% of the consideration in the form of
equity securities of AIMCO Properties, L.P. and 65% of the consideration in the
form of cash. The
P-36
<PAGE> 1583
interest to be acquired in each of the partnerships, the estimated purchase
price for each partnership, including cash, common units, or preferred units is
summarized below:
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Angeles Income Properties, Ltd. II.................... 26.70 $ 4,946 $ 3,215 $1,731
Angeles Income Properties, Ltd. III................... 30.63 2,156 1,401 755
Angeles Income Properties, Ltd. IV.................... 18.64 1,154 750 404
Angeles Income Properties, Ltd. 6..................... 37.29 4,523 2,940 1,583
Angeles Opportunity Properties, Ltd................... 37.94 1,729 1,124 605
Angeles Partners VII.................................. 24.86 610 397 213
Angeles Partners VIII................................. 24.80 0 0 0
Angeles Partners IX................................... 18.92 1,171 761 410
Angeles Partners X.................................... 22.97 709 461 248
Angeles Partners XI................................... 21.83 205 133 72
Angeles Partners XII.................................. 11.89 2,877 1,870 1,007
Angeles Partners XIV.................................. 24.93 0 0 0
Baywood Partners, Ltd................................. 25.00 347 226 121
Brampton Associates Partnership....................... 25.00 382 248 134
Buccaneer Trace Limited Partnership................... 25.00 2 1 1
Burgundy Court Associates, L.P........................ 25.00 1,074 698 376
Calmark/Fort Collins, Ltd............................. 25.00 192 125 67
Calmark Heritage Park II Ltd.......................... 25.00 47 31 16
Casa Del Mar Associates Limited Partnership........... 21.16 503 327 176
Catawba Club Associates, L.P.......................... 25.00 85 55 30
Cedar Tree Investors Limited Partnership.............. 25.00 1,037 674 363
Century Properties Fund XVI........................... 12.52 831 540 291
Century Properties Fund XVIII......................... 13.08 474 308 166
Century Properties Fund XIX........................... 15.30 1,765 1,147 618
Century Properties Growth Fund XXII................... 21.43 4,977 3,235 1,742
Chapel Hill, Limited.................................. 21.15 569 370 199
Chestnut Hill Associates Limited Partnership.......... 26.75 1,582 1,028 554
Coastal Commons Limited Partnership................... 25.00 566 368 198
Consolidated Capital Institutional Properties/2 &
Consolidated Capital Equity Properties/2............ 18.98 7,320 4,758 2,562
Consolidated Capital Institutional Properties/3....... 16.37 6,770 4,401 2,369
Consolidated Capital Properties III................... 13.02 1,134 737 397
Consolidated Capital Properties IV.................... 18.04 9,407 6,112 3,295
Consolidated Capital Properties V..................... 16.69 560 364 196
Consolidated Capital Properties VI.................... 25.82 556 361 195
DFW Apartment Investors Limited Partnership........... 35.65 2,719 1,767 952
DFW Residential Investors Limited Partnership......... 37.60 1,092 710 382
Davidson Diversified Real Estate I, L.P............... 34.78 627 408 219
Davidson Diversified Real Estate II, L.P.............. 35.11 1,318 857 461
Davidson Diversified Real Estate III, L.P............. 21.76 0 0 0
Davidson Growth Plus, L.P............................. 23.91 2,304 1,498 806
Davidson Income Real Estate, L.P...................... 30.81 2,691 1,749 942
Drexel Burnham Lambert Real Estate Associates II...... 19.58 994 646 348
Four Quarters Habitat Apartment Associates, Ltd....... 25.00 174 113 61
Fox Strategic Housing Income Partners................. 33.18 2,414 1,569 845
Georgetown of Columbus Associates, L.P................ 25.00 227 148 79
HCW Pension Real Estate Fund Limited Partnership...... 32.64 2,368 1,539 829
Investors First-Staged Equity......................... 49.00 306 199 107
Johnstown/Consolidated Income Partners................ 25.66 1,871 1,216 655
La Colina Partners, Ltd............................... 25.00 583 379 204
Lake Eden Associates, L.P............................. 25.00 632 411 221
Landmark Associates, L.P.............................. 25.00 48 31 17
</TABLE>
P-37
<PAGE> 1584
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Minneapolis Associates II Limited Partnership......... 25.00 $ 2 $ 1 $ 1
Multi-Benefit Realty Fund "87-1-Class A & Class B..... 21.89 1,657 1,077 580
National Property Investors 8......................... 11.13 988 642 346
Northbrook Apartments, Ltd............................ 25.00 209 136 73
Olde Mill Investors Limited Partnership............... 8.75 170 111 59
Orchard Park Apartments Limited Partnership........... 25.00 1 1 0
Park Town Place Associates Limited Partnership........ 24.70 298 194 104
Quail Run Associates, L.P............................. 25.00 487 317 170
Ravensworth Associates Limited Partnership............ 25.00 1 1 0
Rivercreek Apartments Limited Partnership............. 25.00 180 117 63
Rivercrest Apartments, Limited........................ 25.00 1,687 1,097 590
Riverside Park Associates L.P......................... 13.69 590 384 206
Salem Arms of Augusta Limited Partnership............. 25.00 278 181 97
Shaker Square, L.P.................................... 23.75 631 410 221
Shannon Manor Apartments, Limited Partnership......... 25.00 1,170 761 409
Sharon Woods, L.P..................................... 22.75 499 324 175
Shelter Properties III................................ 15.20 1,960 1,274 686
Shelter Properties IV................................. 50.52 12,764 8,295 4,469
Shelter Properties VI................................. 13.78 1,919 1,247 672
Shelter Properties VII Limited Partnership............ 26.65 1,975 1,284 691
Snowden Village Associates, L.P....................... 25.00 443 288 155
Springhill Lake Investors Limited Partnership......... 11.84 2,908 1,890 1,018
Sturbrook Investors, Ltd.............................. 25.00 377 245 132
Sycamore Creek Associates, L.P........................ 25.00 1 1 0
Texas Residential Investors Limited Partnership....... 18.45 1,147 746 401
Thurber Manor Associates, Limited Partnership......... 25.00 218 142 76
U.S. Realty Partners Limited Partnership.............. 25.00 1,441 937 504
United Investors Growth Properties.................... 39.01 165 107 58
United Investors Growth Properties II................. 25.00 351 228 123
United Investors Income Properties.................... 23.44 1,977 1,285 692
Villa Nova, Limited Partnership....................... 25.00 228 148 80
Walker Springs, Limited............................... 23.99 95 62 33
Wingfield Investors Limited Partnership............... 25.00 179 116 63
Winrock-Houston Limited Partnership................... 13.60 1,041 677 364
Winthrop Apartment Investors Limited Partnership...... 31.60 1,318 857 461
Winthrop Growth Investors 1 Limited Partnership....... 27.94 1,233 801 432
Winthrop Texas Investors Limited Partnership.......... 5.27 158 103 55
Woodmere Associates, L.P.............................. 25.00 280 182 98
Yorktown Towers Associates............................ 25.00 809 526 283
-------- ------- ------
Total (See adjustment C to the Pro Forma Consolidated
Balance Sheet)...................................... $122,463 $79,601 42,862
======== ======= ======
</TABLE>
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
Exchange Offers, the 1997 Acquisitions, the 1998 Acquisitions and the Probable
Purchases are adjusted to estimated fair market value, based on preliminary
estimates, which are subject to change as additional information is obtained.
The allocations of purchase costs are subject to final determination based upon
estimates and other evaluations of fair market value. Therefore, the allocations
reflected in the following unaudited Pro Forma Financial Information (Exchange
Offers) may differ from the amounts ultimately determined.
P-38
<PAGE> 1585
The following unaudited Pro Forma Financial Information (Exchange Offers)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions, results of
operations or cash flows. In the opinion of the Partnership's management, all
material adjustments necessary to reflect the effects of these transactions have
been made.
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (EXCHANGE OFFERS)
AS OF SEPTEMBER 30, 1998
ASSETS
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C>
Real estate....................................... $2,625,822 $ 12,764(C)
26,954(D)
13,655(E) $2,679,195
Property held for sale............................ 42,212 -- 42,212
Investments in and notes receivable from
unconsolidated subsidiaries..................... 186,277 -- 186,277
Investments in and notes receivable from
unconsolidated partnerships..................... 924,309 109,699(C)
(13,655)(E)
(8,161)(F)
816(G) 1,013,008
Mortgage notes receivable......................... 20,916 -- 20,916
Cash and cash equivalents......................... 104,955 2,620(D) 107,575
Restricted cash................................... 84,526 1,807(D) 86,333
Accounts receivable............................... 27,900 1,081(D) 28,981
Deferred financing costs.......................... 21,835 -- 21,835
Goodwill.......................................... 251,024 -- 251,024
Property management contracts..................... 38,371 -- 38,371
Other assets...................................... 82,670 422(D) 83,092
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
LIABILITIES AND PARTNERS' CAPITAL
Secured notes payable............................. $ 926,246 $ 23,642(D) $ 949,888
Secured tax-exempt bond financing................. 399,925 -- 399,925
Secured short-term financing...................... 32,691 -- 32,691
Unsecured short-term financing.................... 300,000 79,601(C) 379,601
Accounts payable, accrued and other liabilities... 248,253 826(D) 249,079
Security deposits and deferred income............. 13,171 255(D) 13,426
---------- -------- ----------
1,920,286 104,324 2,024,610
Minority interests................................ 79,431 816(G) 80,247
Company obligated mandatorily redeemable
convertible securities of a subsidiary trust.... 149,500 -- 149,500
Redeemable common partnership units............... 277,581 8,161(D)
(8,161)(F)
30,616(C) 308,197
Redeemable preferred partnership units............ -- 12,246(C) 12,246
Partner's capital
General and Special Limited Partner............. 1,496,457 -- 1,496,457
Preferred Units................................. 487,562 -- 487,562
---------- -------- ----------
1,984,019 -- 1,984,019
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
P-39
<PAGE> 1586
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical balance sheet data as of September 30, 1998 (unaudited) related
to the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Real estate................................................. $1,082,652
Cash........................................................ 151,024
Total assets................................................ 1,493,409
Mortgages payable........................................... 1,585,196
Partners' capital (deficit)................................. (171,740)
</TABLE>
(C) Represents the purchase price paid by the Partnership to the limited
partners in order to obtain additional ownership by AIMCO in 91 real estate
partnerships. For the purposes of the pro-forma presentation, it is
assumed: (i) 65% of the purchase price is funded with cash by drawing down
on the Partnership's unsecured short term credit facility; (ii) 25% of the
purchase price is funded by the issuance of 749,362 OP Units at $40 per OP
Unit; and (iii) 10% of the purchase price is funded by the issuance of 8%
Preferred OP Units.
(D) Represents historical balance sheet data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(E) Represent the adjustment to real estate recorded in the IFG Merger related
to the one real estate partnership that will be consolidated as a result of
the Partnership's purchase of additional partnership interests.
(F) Represents the elimination of the partners' capital in the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(G) Represents minority interest of the one real estate partnership that will
be consolidated as a result of the Partnership's purchase of additional
partnership interests.
P-40
<PAGE> 1587
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations.............. $ 431,256 $ 11,270(C) $ 442,526
Property operating expenses....................... (182,830) (6,612)(C) (189,442)
Owned property management expense................. (11,831) -- (11,831)
Depreciation...................................... (96,264) (2,589)(C) (98,853)
--------- -------- ---------
Income from property operations................... 140,331 2,069 142,400
--------- -------- ---------
Management fees and other income.................. 41,676 -- 41,676
Management and other expenses..................... (23,683) -- (23,683)
Corporate overhead allocation..................... (588) -- (588)
Amortization...................................... (26,480) -- (26,480)
--------- -------- ---------
Income from service company business.............. (9,075) -- (9,075)
Minority interest in service company business..... (10) -- (10)
--------- -------- ---------
Partnership's share of income from service company
business........................................ (9,085) -- (9,085)
--------- -------- ---------
General and administrative expenses............... (21,371) -- (21,371)
Interest expense.................................. (113,788) (5,691)(D)
(2,220)(C) (121,699)(H)
Interest income................................... 21,734 21,734
Minority interests................................ (9,983) (51)(E) (10,034)
Equity in losses of unconsolidated partnerships... (27,537) (16,864)(F)
483(G) (43,918)(I)
Equity in earnings of Unconsolidated
Subsidiaries.................................... 5,848 -- 5,848
--------- -------- ---------
Net income (loss)................................. (13,851) (22,274) (36,125)(H)
Income attributable to Preferred Unitholders...... 42,174 980 43,154(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders...... (56,025) $(23,254) $ (79,279)(H)
========= ======== =========
Basic earnings (loss) per OP Unit................. (.83) $ (1.16)(H)
========= =========
Diluted earnings (loss) per OP Unit............... $ (.83) $ (1.16)(H)
========= =========
Weighted average OP Units outstanding............. 67,522 68,287
========= =========
Weighted average OP Units and equivalents
outstanding..................................... 68,366 69,131
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $456,968
Operating expense........................................... 249,097
Depreciation................................................ 87,344
Interest.................................................... 138,778
Net income.................................................. 15,005
</TABLE>
P-41
<PAGE> 1588
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $10,740 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $6,124 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net loss,
preferred unit distributions, and net loss per OP Unit in the event that
the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- --------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense......... $(121,699) $(124,763) $(116,008) $(116,008)
Net loss................. (36,125) (39,189 (30,434) (30,434)
Preferred unit
distributions.......... 43,154 42,174 42,174 51,971
Net loss attributable to
OP Unitholders......... (79,279) (81,363) (72,608) (82,405)
Net loss per OP Unit..... (1.16) (1.20) (1.03) (1.22)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................. $ 1,137 $ 1,245 $ 938 $ 938
Net loss................... (37,262) (40,434) (31,372) (31,372)
Net loss attributable to OP
Unitholders.............. (80,416) (82,608) (73,546) (83,343)
Net loss per OP Unit....... (1.18) (1.22) (1.04) (1.23)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, the Partnership will own 49%
of certain 88 Partnerships, 25% of two Partnerships, and 100% of one
Partnership. The amount included in the pro forma financial statements
assume an acceptance rate of 100%. The following table shows the effect on
equity in earnings of unconsolidated partnerships, net loss, net loss
attributable to OP Unitholders, and net loss per OP Unit in the event that
the Partnership will have an acceptance rate of 50% of the interests
tendered and will own varying percentages of each partnership:
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(36,510)
Net loss.................................................... (26,084)
Net loss attributable to OP Unitholders..................... (68,784)
Net loss per OP Unit........................................ (1.01)
</TABLE>
P-42
<PAGE> 1589
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-43
<PAGE> 1590
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations............... $ 337,307 $ 8,654(C) $ 345,961
Property operating expenses........................ (131,851) (4,389)(C) (136,240)
Owned property management expense.................. (8,933) -- (8,933)
Depreciation....................................... (78,479) (1,941)(C) (80,420)
--------- -------- ---------
Income from property operations.................... 118,044 2,324 120,368
--------- -------- ---------
Management fees and other income................... 28,912 -- 28,912
Management and other expenses...................... (14,386) -- (14,386)
Corporate overhead allocation...................... (196) -- (196)
Amortization....................................... (15,243) -- (15,243)
--------- -------- ---------
Income from service company business............... (913) -- (913)
Minority interest in service company business...... -- -- --
--------- -------- ---------
Partnership's share of income from service company
business......................................... (913) -- (913)
--------- -------- ---------
General and administrative expenses................ (8,632) -- (8,632)
Interest expense................................... (85,010) (4,250)(D)
(1,630)(C) (90,890)(H)
Interest income.................................... 40,887 40,887
Minority interests................................. (8,429) (119)(E) (8,548)
Equity in losses of unconsolidated partnerships.... (10,234) (13,156)(F)
41(G) (23,349)(I)
Equity in earnings of Unconsolidated
Subsidiaries..................................... 851 -- 851
Amortization of goodwill........................... (5,071) -- (5,071)
--------- -------- ---------
Net income (loss).................................. 41,493 (16,790) 24,703(H)
Income attributable to Preferred Unitholders....... 32,414 735 33,149(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders....... $ 9,079 $(17,525) $ (8,446)(H)
========= ======== =========
Basic earnings (loss) per OP Unit.................. $ .13 $ (.12)(H)
========= =========
Diluted earnings (loss) per OP Unit................ $ .13 $ (.12)(H)
========= =========
Weighted average OP Units outstanding.............. 68,554 69,319
========= =========
Weighted average OP Units and equivalents
outstanding...................................... 69,218 69,983
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data (unaudited) for the nine months ended September
30, 1998 related to the 91 real estate partnerships is as follows (dollars
in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $338,937
Operating expense........................................... 182,529
Depreciation................................................ 64,127
Interest.................................................... 103,756
Net income.................................................. (9,329)
</TABLE>
P-44
<PAGE> 1591
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $8,552 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $4,604 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net
income, preferred unit distributions, and net loss per OP Unit in the event
that the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense........... $(90,890) $(93,184) $(86,640) $(86,640)
Net income................. 24,703 22,409 28,953 28,953
Preferred unit
distributions............ 33,149 32,414 32,414 39,762
Net loss attributable to OP
Unitholders.............. (8,446) (10,005) (3,461) (10,809)
Net loss per OP Unit....... (.12) (.15) (.05) (.16)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- ------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................... $ 851 $ 931 $ 702 $ 702
Net income................... 24,703 21,478 28,251 28,251
Net loss attributable to OP
Unitholders................ (9,296) (10,936) (4,163) (11,511)
Net loss per OP Unit......... (.13) (.16) (.06) (.17)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, AIMCO will own 49% of certain
88 Partnerships, 25% of two Partnerships, and 100% of one Partnership. The
following table shows the effect on equity in earnings of unconsolidated
partnerships, net income, net income (loss) attributable to OP Unitholders,
and net loss per OP Unit in the event the Partnership will own varying
percentages of each partnership.
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(17,797)
Net income.................................................. 32,216
Net income (loss) attributable to OP Unitholders............ (593)
Net income (loss) per OP Unit............................... (.01)
</TABLE>
P-45
<PAGE> 1592
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-46
<PAGE> 1593
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ (13,851) $(22,274)(C) $ (36,125)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 128,169 2,589(D) 130,758
Gain on investments..................................... (12) -- (12)
(Gain) loss on disposition of properties................ (3,882) -- (3,882)
Minority interests...................................... 9,983 51 10,034
Equity in earnings of unconsolidated partnerships....... 27,537 16,864(E)
(483)(F) 43,918
Equity in earnings of unconsolidated subsidiaries....... (5,848) -- (5,848)
Extraordinary (gain) loss on early extinguishment of
debt.................................................. --
Changes in operating assets and operating liabilities... 519 (660)(G) (141)
---------- -------- ----------
Total adjustments................................... 156,466 18,361 174,827
---------- -------- ----------
Net cash provided by (used in) operating
activities........................................ 142,615 (3,913) 138,702
Net cash used in discontinued operations............ (7,999) -- (7,999)
---------- -------- ----------
Net cash provided by (used in) continuing
operations........................................ 134,616 (3,913) 130,703
---------- -------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate......................... 41,419 -- 41,419
Purchase of real estate................................... (625,603) -- (625,603)
Additions to real estate, investments and property held
for sale................................................ (55,892) (1,024)(G) (56,916)
Proceeds from sale of property held for sale.............. 303 -- 303
Purchase of general and limited partnership interests..... (276,458) (79,601)(H) (356,059)
Purchase of management contracts.......................... (48,554) -- (48,554)
Purchase of/additions to notes receivable................. (81,670) -- (81,670)
Proceeds from repayments of notes receivable.............. 10,052 -- 10,052
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 94,686 10,070(I) 104,756
Contribution to unconsolidated subsidiaries............... (42,879) -- (42,879)
Proceeds from sale of securities.......................... 642 -- 642
Purchase of investments held for sale..................... (73) -- (73)
Purchase of NHP........................................... (60,575) -- (60,575)
Purchase of Ambassador common stock....................... (19,881) -- (19,881)
---------- -------- ----------
Net cash used in investing activities............... (1,064,483) (70,555) (1,135,038)
---------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 761,270 -- 761,270
Principal repayments on secured notes payable............. (307,917) (713)(G) (308,630)
Proceeds from secured short-term financing................ 19,050 79,601(H) 98,651
Repayments on secured short-term financing................ (259,461) -- (259,461)
Principal repayments on unsecured short-term notes
payable................................................. (50,879) -- (50,879)
Proceeds (payoff) from unsecured short-term financing..... (12,500) -- (12,500)
Principal repayments on secured tax-exempt bond
financing............................................... (1,487) -- (1,487)
Net borrowings (paydowns) on the Company's revolving
credit facilities....................................... (162,008) -- (162,008)
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (17,032) -- (17,032)
Proceeds from issuance of common and preferred stock,
net..................................................... 1,098,265 -- 1,098,265
Proceeds from exercises of employee stock options and
warrants................................................ 11,553 -- 11,553
Repurchase of common stock................................ (3,283) -- (3,283)
Principal repayments received on notes due from
Officers................................................ 27,280 -- 27,280
Investments made by minority interests.................... 249 -- 249
Receipt of contributions from minority interests.......... 37,345 -- 37,345
Payments of distributions to minority interests........... (2,713) -- (2,713)
Payment of distributions.................................. (130,657) -- (130,657)
Payment of distributions to limited partners.............. (5,208) (1,415)(J) (6,623)
Payment of preferred unit distributions................... (42,984) (979)(K) (43,963)
Payment of distributions to minority interests............ (21,788) -- (21,788)
Net transactions with Insignia/ESG........................ (57,612) -- (57,612)
---------- -------- ----------
Net cash provided by financing activities........... 879,483 76,494 955,977
---------- -------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (50,384) 2,026 (48,358)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 117,896 2,291 120,187
---------- -------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 67,512 $ 4,317 $ 71,829
========== ======== ==========
</TABLE>
P-47
<PAGE> 1594
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 65,372
Cash used in investing activities......................... (11,713)
Cash used in financing activities......................... (74,617)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the cash portion of the purchase price (and additional
borrowings by the Partnership) related to the acquisition by the
Partnership of additional limited partnership interests in 91 real estate
limited partnerships.
(I) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(J) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.85 per Common OP Unit.
(K) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-48
<PAGE> 1595
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ 41,493 $(16,790)(C) $ 24,703
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 101,523 1,941(D) 103,464
(Gain) loss on disposition of properties................ -- -- --
Minority interests...................................... 8,429 119 8,548
Equity in earnings of unconsolidated partnerships....... 10,234 13,156(E)
(41)(F) 23,349
Equity in earnings of unconsolidated subsidiaries....... (851) -- (851)
Non-cash compensation................................... 796 -- 796
Changes in operating assets and operating liabilities... (69,549) (21)(G) (69,570)
--------- -------- ---------
Total adjustments................................... 50,582 15,154 65,736
--------- -------- ---------
Net cash provided by operating activities........... 92,075 (1,636) 90,439
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... 27,122 -- 27,122
Additions to real estate.................................. (57,526) (668)(G) (58,194)
Proceeds from sale of property and investments held for
sale.................................................... (35) -- (35)
Additions to property held for sale....................... (1,986) -- (1,986)
Purchase of general and limited partnership interests..... (9,596) -- (9,596)
Purchase of/additions to notes receivable................. (100,034) -- (100,034)
Proceeds from repayments/sale of notes receivable......... 42,747 -- 42,747
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 23,629 5,809(H) 29,438
Payment of trust based preferred dividends................ (7,415) -- (7,415)
Cash received in connection with Ambassador Merger and
AMIT Merger............................................. 17,915 -- 17,915
Contribution to unconsolidated subsidiaries............... (13,032) -- (13,032)
Purchase of investments held for sale..................... (4,935) -- (4,935)
Redemption of OP Units.................................... (516) -- (516)
Merger costs.............................................. (1,402) -- (1,402)
--------- -------- ---------
Net cash used in investing activities............... (85,064) 5,141 (79,923)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 291,885 -- 291,885
Principal repayments on secured notes payable............. (52,023) -- (52,023)
Principal advances on secured tax-exempt bond financing... 21,784 -- 21,784
Principal repayments on secured tax-exempt bond
financing............................................... (1,436) -- (1,436)
Net borrowings/ repayments on secured short-term
financing............................................... 135,332 -- 135,332
Net borrowings (paydowns) on the revolving credit
facilities.............................................. 2,513 (812)(G) 1,701
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (5,810) -- (5,810)
Proceeds from issuance of common stock and preferred
stock, net.............................................. -- -- --
Repurchase of common stock................................ (10,972) -- (10,972)
Proceeds from exercises of employee stock options and
warrants................................................ 16,294 -- 16,294
Principal repayments received on notes due from
Officers................................................ 8,084 -- 8,084
Receipt of contributions from minority interests.......... -- -- --
Payments of distributions to minority interests........... (2,034) (2,034)
Payment of distributions.................................. (107,989) -- (107,989)
Payment of distributions to limited partners.............. (12,669) (1,291)(I) (13,960)
Payment of preferred unit distributions................... (27,010) (735)(J) (27,745)
Proceeds from issuance of High Performance Units.......... 1,988 -- 1,988
Net transactions with Insignia/ESG........................ (241,003) -- (241,003)
--------- -------- ---------
Net cash provided by financing activities........... 19,578 (2,838) 16,740
--------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 26,589 667 27,256
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 55,700 4,316 60,016
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 82,289 $ 4,983 $ 87,272
========= ======== =========
</TABLE>
P-49
<PAGE> 1596
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the nine months ended September 30, 1998
related to the 91 real estate partnerships is as follows (dollars in
thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 76,113
Cash used in investing activities......................... (22,616)
Cash used in financing activities......................... (42,273)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 30 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(I) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.6875 per Common OP Unit.
(J) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-50
<PAGE> 1597
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: Four Quarters Habitat Apartment Associates Ltd.
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 Four
Quarters Habitat Apartment Associates Ltd. (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 limited partnership interests in the
Partnership (the "Units") will be acquired by the Purchaser in exchange for an
offer price per Unit of $15,090 in cash, or 185.50 Common OP Units of the
Purchaser, or 603.75 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 financial statements for the years ended
December 31, 1996 and 1997, and the quarterly report for the period ending
September 30, 1998, which the Partnership's management has indicated to be
the most current available financial statements;
3. Reviewed descriptive information concerning the real property owned
by the Partnership (the "Property"), including location, number of units
and unit mix, age, amenities and land acreage;
4. Reviewed summary historical operating statements for the Property,
for the years ended December 31, 1996 and 1997, and the nine months ending
September 30, 1998;
A-1
<PAGE> 1598
5. Reviewed the 1998 operating budget for the Property prepared by the
Partnership's management. Such budgets are summarized in the Prospectus
Supplement under the section "Stanger Analysis -- Summary of Materials
Considered";
6. Reviewed the estimate of liquidation value and going concern value
provided by the general partner to Stanger. Such estimates are described in
the Prospectus Supplement under the section "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration." In
addition, we reviewed the 1998 operating budgets for each property provided
by the Partnership;
7. Discussed with management market conditions for the Property;
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 Property and the Partnership; the physical condition
of the Property including any deferred maintenance; and other factors
influencing value of the Property and the Partnership;
8. Performed a site inspection of the Property;
9. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Property, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Property;
10. Reviewed information provided by the Company relating to debt
encumbering the Property; and
11. 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 Property, the allocation of net
Partnership values between the General Partner and Limited Partners, and the
transaction costs and fees associated with a sale of the Property. 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 Property 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 Property 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 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
A-2
<PAGE> 1599
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
March , 1999
A-3
<PAGE> 1600
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 directors
of AIMCO are set forth below. The two directors of AIMCO-GP are Terry Considine
and Peter Kompaniez. The two directors of the general partner of your
partnership are Peter K. Kompaniez and Patrick J. Foye. The two executive
officers of the general partner of your partnership are Patrick J. Foye,
Executive Vice President, and Timothy R. Garrick, Vice President -- Accounting.
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
Paul J. McAuliffe............................ Executive Vice President -- Capital Markets
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
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
</TABLE>
B-1
<PAGE> 1601
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
B.A. from Harvard College, a J.D. from Harvard Law School
and is admitted as a member of the Massachusetts Bar.
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.
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
</TABLE>
B-2
<PAGE> 1602
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
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.
Paul J. McAuliffe.................... Mr. McAuliffe was appointed Executive Vice
President -- Capital Markets in February 1999. Prior to
joining AIMCO, Mr. McAuliffe was Senior Managing Director of
Secured Capital Corp and prior to that time had been a
Managing Director of Smith Barney, Inc. from 1993 to 1996,
where he was a key member of the underwriting team that led
AIMCO's initial public offering in 1994. Mr. McAuliffe was
also a Managing Director and head of the real estate group
at CS First Boston from 1990 to 1993 and he was a Principal
in the real estate group at Morgan Stanley & Co., Inc. from
1983 to 1990. Mr. McAuliffe received a B.A. from Columbia
College and an MBA from University of Virginia, Darden
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
</TABLE>
B-3
<PAGE> 1603
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
and the Apartment Association of Metro Denver. Mr. Ira
received a B.S. from Metropolitan State College in 1975.
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.
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,
</TABLE>
B-4
<PAGE> 1604
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Mr. Martin is a director of Dresser, which is engaged in the
petroleum services, hydrocarbon and engineering industries.
Timothy R. Garrick................... Mr. Garrick has been Vice President -- Accounting of the
general partner and AIMCO since October 1, 1998. Prior to
that date, Mr. Garrick served as Vice
President -- Accounting Services of Insignia Financial Group
from June 1997 until October 1998. From 1992 until June of
1997, Mr. Garrick served as Vice President of Partnership
Accounting for Insignia Financial Group. From 1987 to 1990,
Mr. Garrick served as Investment Advisor for U.S. Shelter
Corporation. From 1984 to 1987, Mr. Garrick served as
Partnership Investment Analyst for U.S. Shelter Corporation.
From 1979 to 1984, Mr. Garrick worked on the audit staff of
Ernst & Whinney. Mr. Garrick received his B.S. Degree from
the University of South Carolina in 1979 and is a certified
public accountant.
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> 1605
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
By Fax:
(201) 896-0910
<PAGE> 1606
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 26, 1999)
AIMCO Properties, L.P.
is offering to acquire units of limited partnership interest of
Georgetown of Columbus Associates, L.P.
in exchange for your choice of:
1,453.00 of our 8.0% Class Two Partnership Preferred Units;
965.25 of our Partnership Common Units; or
$36,322 in cash.
Generally, you will not recognize any immediate taxable gain or loss if you
exchange your units solely for our securities. However, you will recognize
taxable gain or loss if you exchange your units for cash.
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 the offer
consideration from a financial point of view.
Our offer consideration will be reduced for any distributions subsequently
made by your partnership prior to the expiration of our offer.
We will only accept a maximum of 25% 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.
You will not pay any fees or commissions if you tender your units.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline. You may withdraw any tendered units at any time
before we have accepted them for payment.
SEE "RISK FACTORS" BEGINNING ON PAGE S-23 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF RISK FACTORS THAT
YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration of $36,322 per unit without any
arms-length negotiations. Accordingly, our offer consideration may not
reflect the fair market value of your units.
- We cannot predict when the property owned by your partnership may be
sold.
- Your general partner is a subsidiary of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- We are making this offer with a view to making a profit and 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.
- Continuation of your partnership will result in our affiliates continuing
to receive management fees from your partnership which would not be
payable if your partnership was liquidated.
- It is possible that we may conduct a subsequent offer at a higher price
more than one year after expiration of this offer.
- Unlike your partnership, our policy is to reinvest proceeds from the sale
of our properties or refinancing of our indebtedness.
- We may change our investment, acquisition or financing policies without a
vote of our securityholders.
- If you acquire our securities, your investment will change from holding
an interest in a single property to holding an interest in our large
portfolio of properties, thereby fundamentally changing the nature of
your investment.
- Recently, Moody's Investors Service revised its outlook for AIMCO's
ratings from stable to negative.
- There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
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.
March 26, 1999
<PAGE> 1607
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY........................................ S-1
The Offer.................................... S-1
The AIMCO Operating Partnership.............. S-1
Affiliation with your General Partner........ S-1
Risk Factors................................. S-1
Background and Reasons for the Offer......... S-6
Valuation of Units........................... S-9
Fairness of the Offer........................ S-10
Stanger Analysis............................. S-11
Your Partnership............................. S-11
Terms of the Offer........................... S-12
Federal Income Tax Consequences.............. S-14
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-14
Comparison of Your Units and AIMCO OP Units.. S-14
Conflicts of Interest........................ S-15
Source and Amount of Funds and Transactional
Expenses................................... S-16
Summary Financial Information of AIMCO
Properties, L.P............................ S-17
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-19
Summary Financial Information of Georgetown
of Columbus Associates, L.P. .............. S-21
Comparative Per Unit Data.................... S-21
THE AIMCO OPERATING PARTNERSHIP................ S-22
RISK FACTORS................................... S-23
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-23
Offer Consideration Not Based On Third
Party Appraisal or Arms-Length
Negotiation.............................. S-23
Offer Consideration May Not Represent Fair
Market Value............................. S-23
Offer Consideration Does Note Reflect
Future Prospects......................... S-23
Offer Consideration Based on Our Estimate
of Liquidation Proceeds.................. S-23
Offer Consideration May Be Less Than
Liquidation Value........................ S-23
Holding Units May Result in Greater Future
Value.................................... S-23
Conflicts of Interest with Respect to the
Offer.................................... S-23
Conflicts of Interest Relating to
Management Fees.......................... S-24
Possible Subsequent Offer at a Higher
Price.................................... S-24
Possible Recognition of Taxable Gain on a
Sale of Your Units....................... S-24
Fairness Opinion of Third Party Relied on
Information We Provided.................. S-24
Loss of Future Distributions from Your
Partnership.............................. S-24
Possible Effect of the Other Exchange
Offers on Us............................. S-25
Potential Delay in Payment................. S-25
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-25
Fundamental Change in Nature of
Investment............................... S-25
Fundamental Change in Number of Properties
Owned.................................... S-25
Lack of Trading Market for OP Units........ S-25
Uncertain Future Distributions............. S-25
Possible Reduction in Required
Distributions on Preferred OP Units...... S-25
Possible Redemption of Preferred Stock..... S-26
Possible Recognition of Taxable Gains on OP
Units.................................... S-26
Limitations on Effecting a Change of
Control.................................. S-26
Limitation on Transfer of OP Units......... S-26
Limited Voting Rights of Holders of OP
Units.................................... S-26
Market Prices for AIMCO's Securities May
Fluctuate................................ S-26
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Litigation Associated with Partnership
Acquisitions............................. S-26
Dilution of Interests of Holders of OP
Units.................................... S-26
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-27
Possible Increase in Control of Your
Partnership by Us........................ S-27
Recognition of Gain Resulting from Possible
Future Reduction in Your Partnership
Liabilities.............................. S-27
Possible Termination of Your Partnership
for Federal Income Tax Purposes.......... S-27
Risk of Inability to Transfer Units for
12-Month Period.......................... S-27
Possible Change in Time Frame Regarding
Sale of Property......................... S-27
Balloon Payments........................... S-27
SPECIAL FACTORS TO CONSIDER.................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-28
Background of the Offer...................... S-28
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
Disadvantages of the Offer................... S-32
VALUATION OF UNITS............................. S-34
FAIRNESS OF THE OFFER.......................... S-36
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-36
Fairness to Unitholders who Tender their
Units...................................... S-37
Fairness to Unitholders who do not Tender
their Units................................ S-37
Comparison of Consideration to Alternative
Consideration.............................. S-38
Allocation of Consideration.................. S-41
STANGER ANALYSIS............................... S-42
Experience of Stanger........................ S-42
Summary of Materials Considered.............. S-42
Summary of Reviews........................... S-44
Conclusions.................................. S-46
Assumptions, Limitations and
Qualifications............................. S-46
Compensation and Material Relationships...... S-47
YOUR PARTNERSHIP............................... S-48
General...................................... S-48
Your Partnership and its Property............ S-48
Property Management.......................... S-48
Investment Objectives and Policies; Sale or
Financing of Investments................... S-48
Capital Replacement.......................... S-49
Borrowing Policies........................... S-49
Competition.................................. S-50
Legal Proceedings............................ S-50
History of the Partnership................... S-50
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-50
Distributions and Transfers of Units......... S-51
Beneficial Ownership of Interests in Your
Partnership................................ S-51
Compensation Paid to the General Partner and
its Affiliates............................. S-51
SELECTED FINANCIAL INFORMATION OF YOUR
PARTNERSHIP.................................. S-52
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP.......................... S-53
THE OFFER...................................... S-56
Terms of the Offer; Expiration Date.......... S-56
Acceptance for Payment and Payment for
Units...................................... S-56
Procedure for Tendering Units................ S-57
Withdrawal Rights............................ S-60
</TABLE>
i
<PAGE> 1608
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Extension of Tender Period; Termination;
Amendment.................................. S-60
Proration.................................... S-61
Fractional OP Units.......................... S-61
Future Plans of the AIMCO Operating
Partnership................................ S-61
Voting by the AIMCO Operating Partnership.... S-62
Dissenters' Rights........................... S-62
Conditions of the Offer...................... S-62
Effects of the Offer......................... S-65
Certain Legal Matters........................ S-65
Fees and Expenses............................ S-67
Accounting Treatment......................... S-67
FEDERAL INCOME TAX CONSEQUENCES................ S-68
Tax Opinions................................. S-68
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-69
Disguised Sales.............................. S-70
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-70
Tax Consequences of Exchanging Units Solely
for Cash................................... S-71
Adjusted Tax Basis........................... S-71
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-71
Passive Activity Losses...................... S-72
Tax Reporting................................ S-72
Foreign Offerees............................. S-72
Tax Consequences of a Termination of Your
Partnership................................ S-72
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-74
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-81
DESCRIPTION OF PREFERRED OP UNITS.............. S-87
General...................................... S-87
Ranking...................................... S-87
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Distributions................................ S-87
Allocation................................... S-88
Liquidation Preference....................... S-88
Redemption................................... S-89
Voting Rights................................ S-89
Restrictions on Transfer..................... S-90
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-90
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-92
CONFLICTS OF INTEREST.......................... S-96
Conflicts of Interest with Respect to the
Offer...................................... S-96
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-96
Competition Among Properties................. S-96
Features Discouraging Potential Takeovers.... S-96
Future Exchange Offers....................... S-97
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-97
LEGAL MATTERS.................................. S-98
EXPERTS........................................ S-98
INDEX TO FINANCIAL STATEMENTS.................. F-1
PRO FORMA FINANCIAL INFORMATION OF AIMCO
PROPERTIES, L.P. ............................ P-1
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> 1609
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- 1,453.00 of our Class Two Partnership Preferred Units;
- 965.25 of our Partnership Common Units; or
- $36,322 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 accept a maximum of 25% of the outstanding units in response to our
offer. Our offer is not subject to any minimum number of units being tendered.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline.
For the five years ended December 31, 1998, your partnership paid no
distributions.
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
its wholly owned subsidiary, AIMCO-GP, Inc. ("AIMCO GP"), AIMCO acts as the sole
general partner of the AIMCO Operating Partnership. As of December 31, 1998,
AIMCO-GP and another AIMCO subsidiary, AIMCO-LP, Inc., a limited partner of the
AIMCO Operating Partnership (the "Special Limited Partner"), owned approximately
an 83% interest in the AIMCO Operating Partnership. As of December 31, 1998, our
portfolio of owned or managed properties included 379,363 apartment units in
2,147 properties located in 49 states, the District of Columbia and Puerto Rico.
Based on apartment unit data compiled by the National Multi Housing Council, we
believe that we are one of the largest owners and managers of multifamily
apartment properties in the United States. As of December 31, 1998, we:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 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. and our February 26, 1999 merger with Insignia Properties Trust, we
acquired a 100% ownership interest in the general partner of your partnership,
Jacques-Miller Associates, and the company that manages the property owned by
your partnership.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-24 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the
S-1
<PAGE> 1610
risks associated with our offer and the disadvantages of the offer to you and
should be considered when you review "Summary -- Background and Reasons for the
Offer -- Expected Benefits of the Offer":
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. We did not use any third-party appraisal or valuation to determine
the value of any property owned by your partnership. We established the terms of
our offer, including the exchange ratios and the cash consideration, without any
arms-length negotiations.
OFFER CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimated your property to be worth $5,149,000, less
approximately $266,063 of deferred maintenance and investment. It is possible
that a sale of the property could result in your receiving more per unit than in
our offer. Even if our cash offer consideration is equal to liquidation value,
if you accept OP Units, you may not ultimately receive an amount equal to the
cash offer consideration when you sell such OP Units or any AIMCO securities you
may receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
value if you retain your units until your partnership is liquidated.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of ours and, therefore, has substantial conflicts of interest with
respect to our offer. We are making this offer with a view to making a profit.
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 RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its property, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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
S-2
<PAGE> 1611
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.
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. You
should review "Federal Income Tax Consequences" 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. 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.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is our subsidiary).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. For any units that we
acquire from you, you will not receive any future distributions from your
partnership's operating cash flow or upon a sale of property owned by your
partnership or a refinancing of any of its debt. If you tender your units in
exchange for OP Units, you will be entitled to future distributions from us from
our operating cash flow and upon a dissolution, liquidation or wind-up of the
AIMCO Operating Partnership.
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from a sale of a property or a refinancing of its indebtedness, to (ii)
a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of December 31, 2026 to a much larger
partnership with a partnership termination date of 2093.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you tender your units
for our OP Units, you will have changed your investment from an interest in a
partnership that owns and manages one property to an interest in a partnership
that invests in and manages a large portfolio of properties.
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<PAGE> 1612
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAIN ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus.
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions.
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a
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<PAGE> 1613
result, we may incur costs associated with defending or settling such litigation
or paying any judgment if we lose. As of the present time, no limited partners
of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. As a result of the
offer, we may increase our ability to influence voting decisions with respect to
your partnership. However, we will not be able to control voting decisions
unless we acquire more units in another transaction, which cannot take place for
at least one year after expiration of this offer. Also, removal of your general
partner (which is our subsidiary) or the manager of any property owned by your
partnership may become more difficult or impossible without our consent or
approval.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
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.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investment in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to have to
hold the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns one property. The general partner of your partnership
continually considers whether the property should be sold or otherwise disposed
of after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for your partnership. We cannot
predict when the property will be sold or otherwise disposed of. However, there
is no current plan or intention to sell the property in the near future.
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<PAGE> 1614
BALLOON PAYMENTS. Your partnership has approximately $3,216,445 of balloon
payments due on its mortgage debt in November 2002. Your partnership will have
to refinance such debt or sell its property prior to the balloon payment dates,
or it will be in default and could lose the property to foreclosure.
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 51% ownership interest in Insignia Properties Trust, which has
a 100% ownership interest in the general partner of your partnership and the
company that manages the property owned by your partnership. On February 26,
1999, we acquired the remaining 49% interest in Insignia Properties Trust in a
merger transaction. One of the consequences of the merger with Insignia is to
allow us to make the offer and, if successful, to increase our ownership in 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 August 28, 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
(which is our subsidiary):
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.
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. 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. Your partnership's mortgage notes are due in November, 2002 and
require balloon payments of $3,216,445. Your partnership currently has
adequate sources of cash to finance its operations on both a short term and
long term basis but will have to sell its property or refinance its
indebtedness to pay such balloon payments. In addition, continuation of
your partnership without the offer would deny you and your partners the
benefits that your general partner (which is our subsidiary) 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
S-6
<PAGE> 1615
of the fair market value of your partnership's property. There is currently
no market for the Preferred OP Units or Common OP Units.
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 Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the NYSE.
- Preferred Quarterly Distributions. Your partnership made no distributions
for the fiscal year ended December 31, 1998. Holders of Preferred OP
Units will be entitled to receive quarterly distributions of $0.50 per
unit (equivalent to $2.00 on an annualized basis) before any
distributions are paid to holders of Common OP Units. This is equivalent
to a distribution of $2,906 per year on the number of Preferred OP Units
you will receive in exchange for each of your partnership 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 Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- Quarterly Distributions. Your partnership made no distributions for the
fiscal year ended December 31, 1998. In 1998, we paid quarterly
distributions on the Common OP Units totalling $2.25 per unit. In January
1999, we increased our distribution rate on each of the Common OP Units
to $2.50 on an annual basis. See "The AIMCO Operating Partnership."
Assuming no change in the level of our distributions, this is equivalent
to a distribution of $2,413.13 per year on the number of Common OP Units
you will receive in exchange for each of your partnership units.
- 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 Common OP Units.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
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<PAGE> 1616
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.
Disadvantages of the Offer.
The principal disadvantages of the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and determining the offer consideration, no one separately represented
the interests of the limited partners. Although we have a fiduciary duty
to the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of such property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pretax cash proceeds to you than our
offer.
- OP Units. OP Units lack a public market, have transfer restrictions and
must be held for one year before they can be redeemed by a holder. The
ultimate return on the OP Units is directly tied to the future price of
AIMCO's Class A Common Stock or Class I Preferred Stock. You could
ultimately receive less for your OP Units than the cash price in our
offer. Further, on or after March 1, 2005, we may redeem the Class I
Preferred Stock for $25 per share.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
a sale of the property would be advantageous given market conditions, the
condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of the property and the tax consequences to you
and your partners upon a sale of the property.
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
S-8
<PAGE> 1617
VALUATION OF UNITS
We determined the offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower the value produced. We used your partnership's property
income for the fiscal year ended December 31, 1997. However, in determining the
appropriate capitalization rate, we considered the Partnership's property income
since December 31, 1997. Our method for selecting a capitalization rate begins
with each property being assigned a location and condition rating (e.g., "A" for
excellent, "B" for good, "C" for fair, and "D" for poor). We have rated your
property's location B (good) and its condition C (fair). Generally, we assign an
initial capitalization rate of 10.50% to properties in this category. We then
adjust the capitalization rate based on whether the mortgage debt that the
property is subject to bears interest at a rate above or below 7.5% per annum.
Generally, for every 0.5% in excess of 7.5%, the capitalization rate would be
increased by 0.25%. Your property's mortgage debt bears interest at 7.60% per
annum, which resulted in an increase from the initial capitalization rate of
0.25%. We also considered any changes in your partnership's property income from
1997 to 1998. Because your partnership's property income in 1998 remained
relatively unchanged compared to 1997, we made no further revision of the
capitalization rate, resulting in a final capitalization rate of 10.75%. The
evaluation of a property's location and condition, and the determination of an
appropriate capitalization rate for a property, is subjective in nature, and
others evaluating the same property might use a different capitalization rate
and derive a different property value. 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. Further, in applying the direct capitalization method,
others may make different assumptions and obtain different results. 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>
Property income............................................. $ 554,000
Capitalization rate......................................... 10.75%
-----------
Gross valuation of partnership property..................... 5,149,000
Plus: Cash and cash equivalents............................. 15,000
Plus: Other partnership assets, net of security deposits.... 234,893
Less: Mortgage debt, including accrued interest............. (3,897,980)
Less: Accounts payable and accrued expenses................. (161,470)
Less: Other liabilities..................................... (36,602)
-----------
Partnership valuation before taxes and certain costs........ 1,302,841
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures for deferred
maintenance............................................... (266,063)
Less: Closing costs......................................... (128,725)
-----------
Estimates net valuation of your partnership................. 908,053
Percentage of estimated net valuation allocated to holders
of units.................................................. 100.00%
-----------
Estimated net valuation of units............................ 908,053
Total number of units............................. 25.0
-----------
Estimated valuation per unit................................ 36,322
===========
Cash consideration per unit................................. $ 36,322
===========
</TABLE>
In order to determine the number of Preferred OP Units we are offering for
each of your units, we divided the cash offer consideration of $36,322 by the
$25 liquidation preference of each Preferred OP Unit to get 1,453.00 Preferred
OP Units per unit.
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<PAGE> 1618
In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $36,322 by a
price of $37.63 (the closing price of AIMCO's Class A Common Stock on the NYSE
for the 30 trading days ended on March 23, 1999) to get 965.25 Common OP Units
per unit).
FAIRNESS OF THE OFFER
Fairness to Unitholders. Your general partner is our subsidiary. 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. Your general partner did not participate in the structuring of the
offer. We and your general partner believe that the offer and all forms of
consideration offered is fair to you and the other limited partners of your
partnership. 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 (which is our subsidiary) 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 (which is our subsidiary) has compared our offer consideration
to:
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated;
- your general partner's estimate of the going concern value of your
partnership if it continued operating as an independent stand-alone
entity; and
- the net book value of your partnership.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C> <C>
Cash offer consideration.................................... $ 36,322
Partnership Preferred Units................................. $ 36,322
Partnership Common Units.................................... $ 36,322
Alternatives:
Estimated liquidation proceeds............................ $ 36,322
Estimated going concern value(1).......................... $ 22,620
Estimated alternative going concern value(2).............. $ 26,652
Net book value (deficit).................................. $(84,888)
</TABLE>
- ---------------
(1) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(2) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
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<PAGE> 1619
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. Stanger has
rendered similar fairness opinions with regard to the other tender offers being
made by the AIMCO Operating Partnership. Stanger rendered the opinions only as
to the individual fairness of the offer consideration in each proposed exchange
offer.
YOUR PARTNERSHIP
Your Partnership and its Property. Georgetown of Columbus Associates, L.P.
is a Delaware limited partnership which was formed on October 5, 1983 for the
purpose of owning and operating a single property located in Columbus, Ohio,
known as "Georgetown of Columbus Apartments." Your partnership's property
consists of 150 units and was built in 1962. Your partnership has no employees.
As of September 30, 1998, there were 25 units of limited partnership interest
issued and outstanding, which were held of record by 53 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.
Your partnership sold $2,500,000 of limited partnership units in 1983.
Between January 1, 1993 and December 31, 1998 your partnership made no cash
distributions. Your partnership currently owns one property.
Property Management. Your partnership's property has been managed by an
affiliate of ours. 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.
Investment Objectives and Policies; Sale or Financing of Investments. Under
your partnership's agreement of limited partnership, your partnership is not
permitted to raise new capital or reinvest cash in new properties. Your
partnership will terminate on December 31, 2026, unless earlier dissolved. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership property within any specified time period. An
investment in your partnership is a finite life investment in which partners
receive regular cash distributions out of your partnership's distributable cash
flow, if any, and upon liquidation.
Borrowing Policies. Your partnership's agreement of limited partnership
allows your partnership to incur debt. As of December 31, 1998, your partnership
had a mortgage note outstanding of $3,645,028, payable to FNMA, which bears
interest at the rate of 7.60%. The mortgage debt is due in November 2002. Your
partnership also has a second mortgage note outstanding of $131,718, on the same
terms as the current mortgage note. Your partnership's agreement of limited
partnership also allows your general partner to lend funds to your partnership.
Transfers. Your units are not listed on any national securities exchange or
quoted on NASDAQ, and there is no established public trading market for the
units. Secondary sales activity for the units has been limited and sporadic.
Your general partner monitors transfers of the units (i) because the admission
of the transferee as a substitute limited partner in your partnership requires
the consent of your general partner under your partnership agreement, and (ii)
in order to track compliance with applicable safe harbor provisions to avoid
treatment as a "publicly traded partnership" for tax purposes. However, your
general partner does not
S-11
<PAGE> 1620
monitor or regularly receive or maintain information regarding the prices at
which secondary sale transactions in the units have been effectuated.
TERMS OF THE OFFER
General. We are offering to acquire up to 25% of the outstanding 25 units
of your partnership, which we do not directly or indirectly own, for
consideration per unit of 1,453.00 Preferred OP Units, 965.25 Common OP Units,
or $36,322 in cash. If you tender units pursuant to the offer, you may choose 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 Preferred OP Units, 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 January 1, 1999,
although you will be entitled to retain any distributions you may have received
after such date and prior to our commencement of this offer.
If you accept our offer and do not specify the consideration you desire on
the letter of transmittal, we will issue you Preferred OP Units.
Expiration Date. Our offer will expire at 5:00 P.M., New York City time, on
June 4, 1999, 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.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds 25% 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 their acceptance for payment as provided for herein.
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 Common OP Units or 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.
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
S-12
<PAGE> 1621
- amend the offer in any respect (subject to applicable rules regarding
tender offers), including the nature and form of consideration.
The offer may be extended or delayed indefinitely, during which time you
will not receive payment for any tendered units.
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 any property owned by
your partnership's because your general partner (which is our subsidiary) and
the property manager will remain unchanged. If we borrow funds for the cash
consideration for these offers, our interest costs would increase which could
adversely affect our future earnings. If all units in this and our other
contemplated offers were purchased for cash and we borrowed all the funds, at
current interest rates, our interest expense would increase by $3,064,000 per
year.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
number of units pursuant to our offer, we may be in a position to influence
voting decisions with respect to your partnership. However, we will not be able
to control voting decisions unless we acquire more units in another transaction,
which cannot take place for at least one year after expiration of this offer.
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 (which is our subsidiary),
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 Letter of Transmittal,
and the legal and accounting fees and expenses in connection with the offer. We
will also pay the fees of Stanger for providing the fairness opinion 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 $50,000.
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.
No Dissenters' Rights. You are not entitled to dissenters' (appraisal)
rights in connection with the offer.
Other Offers. The AIMCO Operating Partnership is also making similar
exchange offers to approximately 90 other limited partnerships in which it
controls the general partner, interests in substantially all of which were
acquired in the merger on October 1, 1998 with Insignia Financial Group, Inc.
and the February 26, 1999 merger with Insignia Properties Trust. Each of such
exchange offers is being made by a separate prospectus supplement which is
similar to this Prospectus Supplement. Copies of such prospectus supplements may
be obtained upon written request from the Information Agent at the address set
forth in
S-13
<PAGE> 1622
"-- Information Agent" or on the back cover page of this Prospectus Supplement.
The exchange offers may be different for limited partners in each partnership in
terms of pricing and percentage of units sought, but the effects of the offers
will essentially be the same. In general, we believe that the risk factors
(except for certain tax-related risk factors) described herein for this offer
will also be applicable to the other offers.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer. Its telephone numbers are (888)
349-2005 and (201) 896-1900. Its fax number is (201) 896-0910.
FEDERAL INCOME TAX CONSEQUENCES
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Preferred OP
Units or 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.
THE FOREGOING SUMMARY IS A GENERAL DISCUSSION OF THE MATERIAL 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 "FEDERAL INCOME TAX CONSEQUENCES" 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.
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, your general
partner (which is our subsidiary) 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, Preferred
OP Units and 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.
As of February 19, 1999, the AIMCO Operating Partnership had approximately
9,729,130 Common OP Units outstanding (excluding interests held by AIMCO) and no
Class Two Partnership Preferred Units outstanding. The number of OP Units you
may acquire from us in exchange for your units will represent a lower percentage
of the outstanding limited partnership interests in the AIMCO Operating
Partnership than that of your current ownership interest in your partnership. In
response to our offer, you could elect to receive $36,322 in cash, 1,453.00
Preferred OP Units or 965.25 Common OP Units. Both your units and the OP Units
are subject to transfer restrictions and it is unlikely that a real trading
market will ever develop for any of such securities. If you subsequently redeem
OP Units for AIMCO Class A Common Stock or Class I Preferred Stock, we can make
no assurance as to the value of such shares of AIMCO stock, at that time, which
may be less than the cash offer price of $36,322.
S-14
<PAGE> 1623
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
our subsidiary 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
both the general partner of your partnership and the manager of your
partnership's property. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $20,563 for the fiscal year ended December 31,
1998. The property manager received management fees of $57,240 for the fiscal
year ended December 31, 1998. We have no current intention of changing the fee
structure for your general partner or the 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.
AIMCO's Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is 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.
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. We might pay a higher price for any future exchange offers we may make
for units of your partnership. In any event, we will not acquire any units for
at least one year after expiration of this offer.
S-15
<PAGE> 1624
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $227,013 will be required to purchase all of
the units sought in our offer, if such units are tendered for cash excluding
expenses. We will obtain all such funds from cash from operations, equity
issuances and short term borrowings. For a detailed description of estimated
expenses to be incurred in the offer, see "Source and Amount of Funds and
Transactional Expenses."
S-16
<PAGE> 1625
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
nine months ended September 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 of the AIMCO Operating Partnership" included in the accompanying
Prospectus. All dollar values are in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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............... $ 265,700 $ 127,083 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses........... (101,600) (50,737) (76,168) (38,400) (30,150) (10,330)
Owned property management expenses.... (7,746) (4,344) (6,620) (2,746) (2,276) (711)
Depreciation.......................... (59,792) (23,848) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
96,562 48,154 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income...... 13,968 9,173 13,937 8,367 8,132 3,217
Management and other expenses......... (8,101) (5,029) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation......... (196) (441) (588) (590) (581) --
Other assets, depreciation and
amortization........................ (3) (236) (453) (218) (168) (150)
Owner and seller bonuses.............. -- -- -- -- -- --
Amortization of management company
goodwill............................ -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
5,668 3,467 2,038 1,707 2,002 1,020
Minority interests in service company
business............................ -- 48 (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business............ 5,668 3,515 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative expenses... (7,444) (1,408) (5,396) (1,512) (1,804) (977)
Interest income....................... 18,244 4,458 8,676 523 658 123
Interest expense...................... (56,756) (33,359) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships........................ (1,052) (777) 1,008 (111) -- --
Equity in losses of unconsolidated
partnerships(c)..................... (5,078) (463) (1,798) -- -- --
Equity in earnings of unconsolidated
subsidiaries(d)..................... 8,413 456 4,636 -- -- --
Amortization of goodwill.............. (5,071) (711) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations................ 53,486 19,865 30,246 15,629 14,988 7,702
Gain on disposition of properties..... 2,783 (169) 2,720 44 -- --
Provision for income taxes............ -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before extraordinary
item................................ 56,269 19,696 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt.............. -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)..................... $ 56,269 $ 19,427 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)............................. 241 109 147 94 56 48
Total owned apartment units (end of
period)............................. 62,955 28,773 40,039 23,764 14,453 12,513
Units under management (end of
period)............................. 154,729 71,038 69,587 19,045 19,594 20,758
Basic earnings per Common OP Unit..... $ 0.80 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP Unit... $ 0.79 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit................................ $ 1.6875 $ 1.3875 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities.......................... 50,825 53,435 73,032 38,806 25,911 16,825
Cash flows used in investing
activities.......................... (185,453) (314,814) (717,663) (88,144) (60,821) (186,481)
Cash flows provided by (used in)
financing activities................ 141,221 293,984 668,549 60,129 30,145 176,800
<CAPTION>
AIMCO PROPERTIES, L.P.
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)
Cash flows provided by (used in)
financing activities................ (1,032) 14,114
</TABLE>
S-17
<PAGE> 1626
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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>
Funds from operations(e)................ $ 132,881 $ 49,692 $ 81,155 $ 35,185 $ 25,285 $ 9,391
Weighted average number of Common OP
Units outstanding..................... 53,007 24,347 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation.......................... $2,685,487 $1,250,239 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation.......................... 2,355,122 1,107,545 1,503,922 745,145 448,425 392,368
Total assets............................ 3,121,949 1,608,195 2,100,510 827,673 480,361 416,361
Total mortgages and notes payable....... 1,275,401 661,715 808,530 522,146 268,692 141,315
Redeemable Partnership Units............ 232,405 178,321 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994 Cumulative
Senior Preferred Units................ -- -- -- -- -- 107,228
Partners' Capital....................... 1,427,087 560,737 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.
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>
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 10, 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
based on the NAREIT definition, as adjusted for the 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 NINE PERIOD
MONTHS ENDED FOR THE YEAR ENDED JANUARY 10,
SEPTEMBER 30, DECEMBER 31, 1994
------------------ --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
-------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $ 56,269 $19,427 $32,697 $15,673 $14,988 $ 7,702
(Gain) loss on disposition of property...................... (2,783) 169 (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 56,900 21,052 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 7,077 711 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 2,689 3,584 -- -- --
Amortization of management contracts...................... 4,201 430 1,587 -- -- --
Deferred taxes............................................ 6,134 2,164 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 17,379 2,781 6,280 -- -- --
Preferred stock dividends................................. (12,296) -- (135) -- (5,169) (3,114)
-------- ------- ------- ------- ------- -------
Funds from operations....................................... $132,881 $49,692 $81,155 $35,185 $25,285 $ 9,391
======== ======= ======= ======= ======= =======
</TABLE>
S-18
<PAGE> 1627
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. (the AIMCO Operating Partnership) for the
nine months ended September 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 NINE
MONTHS FOR THE
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 345,961 $ 442,526
Property operating expenses............................... (136,240) (189,442)
Owned property management expenses........................ (8,933) (11,831)
Depreciation.............................................. (80,420) (98,853)
--------- ------------
120,368 142,400
--------- ------------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 28,912 41,676
Management and other expenses............................. (14,386) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (15,243) (26,480)
--------- ------------
(913) (9,075)
Minority interests in service company business............ -- (10)
--------- ------------
Partnership's shares of income from service company
business............................................... (913) (9,085)
--------- ------------
General and administrative expenses....................... (8,632) (21,371)
Interest expense.......................................... (90,890) (121,699)
Interest income........................................... 40,887 21,734
Minority interest......................................... (8,548) (10,034)
Equity in losses of unconsolidated partnerships........... (23,349) (43,918)
Equity in earnings of unconsolidated subsidiaries......... 851 5,848
Amortization of Goodwill.................................. (5,071) --
--------- ------------
Net income........................................ $ 24,703 $ (36,125)
========= ============
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (.12) $ (1.16)
Diluted earnings (loss) per Common OP Unit.................. $ (.12) $ (1.16)
Distributions paid per Common OP Unit....................... $ 1.69 $ 1.85
Book value per Common OP Unit............................... $ 24.52 $ 26.96
CASH FLOW DATA:
Cash provided by operating activities....................... $ 90,439 $ 130,703
Cash used in investing activities........................... (79,923) (1,135,038)
Cash provided by (used in) financing activities............. 16,740 955,977
OTHER DATA:
Funds from operations(a).................................... $ 187,985 $ 172,733
Weighted average number of Common OP Units outstanding...... 74,946 74,094
</TABLE>
S-19
<PAGE> 1628
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, net of accumulated depreciation................ $2,679,195
Total assets................................................ 4,558,819
Total mortgages and notes payable........................... 1,762,105
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 320,443
Partners' capital........................................... 1,984,019
</TABLE>
- ---------------
(a) 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
based upon the NAREIT definition, as adjusted for the 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.
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss)................................. $ 24,703 $(36,125)
HUD release fee and legal reserve................. -- 10,202
Real estate depreciation, net of minority
interests....................................... 76,521 93,050
Amortization of management contracts.............. 9,593 12,790
Amortization of management company goodwill....... 10,997 12,551
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation........................ -- 1,715
Amortization of management company goodwill..... 959 1,918
Amortization of management contracts............ 23,010 30,516
Deferred taxes.................................. (713) (1,356)
Equity in earnings of other partnerships:
Real estate depreciation........................ 79,559 95,285
Interest on convertible debentures................ (7,537) (10,003)
Preferred unit distributions...................... (29,107) (37,810)
-------- --------
Funds from operations............................. $187,985 $172,733
======== ========
</TABLE>
S-20
<PAGE> 1629
SUMMARY FINANCIAL INFORMATION OF GEORGETOWN OF COLUMBUS ASSOCIATES, L.P.
The summary financial information of Georgetown of Columbus Associates,
L.P. for the nine months ended September 30, 1998 and 1997 is unaudited. The
summary financial information for Georgetown of Columbus Associates, L.P. 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 of Your Partnership"
included herein. See "Index to Financial Statements."
GEORGETOWN OF COLUMBUS ASSOCIATES, L.P.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 30,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues............... $ 853,000 $ 830,000 $ 1,121,000 $ 1,046,000 $ 1,009,000 $ 987,000 963,000
Net Income/(Loss)............ 90,000 83,000 56,000 (29,000) 20,000 28,000 (206,000)
Net Income (Loss) per limited
partnership unit........... 3,564.00 3,286.80 2,138.40 (1,148,40) 792.00 1,108.80 (8,157.60)
Distributions per limited
partnership unit........... -- -- -- -- -- -- --
Distributions per limited
partnership unit (which
represent a return of
capital)................... -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents.... $ 17,000 $ 9,000 $ 15,000 $ 18,000 $ 61,000 $ 97,000 $ 61,000
Real Estate, Net of
Accumulated
Depreciation............. 1,482,000 1,499,000 1,512,000 1,539,000 1,554,000 1,592,000 1,617,000
Total Assets............. 1,825,000 1,809,000 1,855,000 1,854,000 1,900,000 1,979,000 1,987,000
Notes Payable................ 3,665,000 3,762,000 3,723,000 3,814,000 3,889,000 3,959,000 4,022,000
General Partners Capital/
(Deficit)
Limited Partners Capital/
(Deficit)
Partners' Capital
(Deficit)................ (2,032,000) (2,097,000) (2,122,000) (2,178,000) (2,148,000) (2,168,000) (2,196,000)
Total Distributions........ -- -- -- -- -- -- --
Book value per limited
partnership unit......... -- -- -- -- -- -- --
Net increase (decrease) in
cash and cash
equivalents.............. 2,000 (9,000) (3,000) (43,000) (36,000) 46,000 (80,000)
Net cash provided by
operating activities..... 206,000 134,000 187,000 168,000 130,000 202,000 102,000
Ratio of earnings to fixed
charges.................. 1.36/1 1.32/1 1.16/1 0.92/1 1.06/1 1.08/1 0.44/1
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per unit of your
partnership for the year ended December 31, 1998, and the cash distributions
payable on the number of Common OP Units and Preferred OP Units issuable in
exchange therefor:
<TABLE>
<CAPTION>
ANNUAL
DISTRIBUTIONS
-------------
<S> <C>
Units of Georgetown of Columbus Associates, L.P............. $ 0
Equivalent cash distributions on Common OP Units(1)......... $2,413.13
Equivalent cash distributions on Preferred OP Units(2)...... $ 2,906
</TABLE>
- ---------------
(1) Calculated by multiplying the exchange ratio of 965.25 Common OP Units per
unit by the annualized distributions paid on the Common OP Units of $2.50
per unit.
(2) Calculated by multiplying the exchange ratio of 1,453 Preferred OP Units per
unit by the stated annual distribution rate on the Preferred OP Units of
$2.00 per unit.
S-21
<PAGE> 1630
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of AIMCO. AIMCO is a real estate investment
trust that owns and manages multifamily apartment properties throughout the
United States. Through its wholly owned subsidiaries, AIMCO GP, the sole general
partner of the AIMCO Operating Partnership, and the Special Limited Partner, as
of December 31, 1998, AIMCO held approximately an 83% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled by the National
Multi Housing Council, we believe that AIMCO is one of the largest owner and
manager of multifamily apartment properties in the United States, with a total
portfolio of 379,363 apartment units in 2,147 properties located in 49 states,
the District of Columbia and Puerto Rico. As of December 31, 1998, AIMCO:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 apartment properties for third party
owners and affiliates.
AIMCO's Class A Common Stock is listed and traded on the NYSE under the
symbol "AIV." On March 23, 1999, the last reported sale price of AIMCO Class A
Common Stock on the NYSE was 35 3/16. 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 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>
1999
First Quarter (through March 23)........ $41 5/8 $35 3/16 $0.6250 $0.6250
1998
Fourth Quarter.......................... 37 3/8 30 0.5625 0.5625
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>
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.
S-22
<PAGE> 1631
RISK FACTORS
The following sets forth certain risks and disadvantages of the offer and
should be read and considered when reviewing the potential benefits of the offer
set forth in "Background and Reasons for the Offer -- Expected Benefits of the
Offer." In addition, you should review the other risks of investing in us
beginning on page 2 of our accompanying Prospectus.
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. 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. 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. 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 CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimate your property to be worth $5,149,000 less
approximately $266,063 of deferred maintenance and investment. It is possible
that a sale of the property could result in you receiving more per unit than in
our offer. Even if our cash offer consideration is equal to liquidation value,
if you accept OP Units, you may not ultimately receive an amount equal to the
cash offer consideration when you sell such OP Units or any AIMCO securities you
may receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
pretax cash 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.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and the AIMCO Operating Partnership and, therefore, has
substantial conflicts of interest with respect to our offer. We are making this
offer with a view to making a profit. 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. Another conflict is 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. 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.
S-23
<PAGE> 1632
CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its properties, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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 sold. If you exchange your units
for cash and our 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. 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 allocated to such units 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. If you exercise your redemption right with respect to the OP Units
within two years of the date that you transfer your units to the AIMCO Operating
Partnership, your exchange of units for OP Units or OP Units and cash could be
treated as a disguised sale of your units and you would be required to recognize
gain or loss in the year of the exchange on such disguised sale. See "Federal
Income Tax Consequences -- Disguised Sales." 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. 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 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.
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. You
should review "Federal Income Tax Consequences" 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. Because the income tax
consequences of tendering units will not be the same for everyone, you should
consult your own tax advisor before determining whether to tender your units
pursuant to our offer.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is controlled by us).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all right title and interest
in and to all of the units that we accept, and all distributions in
S-24
<PAGE> 1633
respect of such units on or after the date on which we accept such units for
purchase. Accordingly, for any units that we acquire from you, you will not
receive any future distributions from operating cash flow of your partnership or
upon a sale of property owned by your partnership or a refinancing of any of its
debt. If you tender your units in exchange for OP Units, you will be entitled to
future distributions from the operating cash flow of the AIMCO Operating
Partnership and upon a dissolution, liquidation or winding-up of the AIMCO
Operating Partnership. See "Comparison of Your Units and AIMCO OP
Units -- Distributions."
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from the sale of a property or a refinancing of its indebtedness to
(ii) a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of December 31, 2026 to a much larger
partnership with a partnership termination date of 2093.
Under the AIMCO Operating Partnership's agreement of limited partnership,
the general partner has the ability, without the concurrence of the limited
partners, to acquire and dispose of properties and to borrow funds. Further,
while it is the intent to distribute net income from operations, sales of
properties and refinancings of indebtedness, the general partner may not make
such distributions. Proceeds of future asset sales or refinancings by the AIMCO
Operating Partnership generally will be reinvested rather than distributed.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you exchange your
units for OP Units, you will have changed your investment from an interest in a
partnership which owns and manages a single property to an interest in the AIMCO
Operating Partnership which 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 and our portfolio of properties as compared to the value of your
units and your partnership.
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
S-25
<PAGE> 1634
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAIN ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus. If you
exercise your redemption right with respect to the OP Units within two years of
the date that you transfer your units to the AIMCO Operating Partnership, your
exchange of units for OP Units and cash could be treated as a disguised sale of
your units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as for your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a result, we may incur costs associated with defending or settling such
litigation or paying any judgment if we lose. As of the present time, no limited
partners of your partnership have initiated lawsuits on such grounds.
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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RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. 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. However, we will
not be able to control voting decisions unless we acquire more units in another
transaction, which cannot take place for at least one year after expiration of
this offer. Furthermore, in the event that we acquire a substantial number of
units pursuant to our offer, removal of your general partner (which is our
subsidiary) or the manager of any property owned by your partnership may become
more difficult or impossible without our consent.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
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.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investments in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to hold
the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns one property. The general partner of your partnership
continually considers whether the property should be sold or otherwise disposed
of after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for your partnership. We cannot
predict when the property will be sold or otherwise disposed of. However, there
is no current plan or intention to sell the property in the near future.
BALLOON PAYMENTS. Your partnership has approximately $3,216,445 of balloon
payments due on its mortgage debt in November 2002. Your partnership will have
to refinance such debt or sell its property prior to the balloon payment dates,
or it will be in default and could lose the property to foreclosure.
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SPECIAL FACTORS TO CONSIDER
In reviewing the offer, you should pay special attention to the information
in the Sections entitled "Background and Reasons for the Offer," "Valuation of
Units," "Fairness of the Offer" and "Stanger Analysis," which contain
information regarding the background and reasons for the offer, the method of
evaluating units in the offer and alternative valuation methods considered, our
view as to the fairness of the offer, and the fairness opinion rendered by
Stanger.
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 liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
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 1.00% interest, consisting of no limited
partnership interest and a 1.00% general partnership interest, in your
partnership.
On October 31, 1998, IPT and AIMCO entered into an agreement and plan of
merger, dated as of October 1, 1998 (the "IPT Merger Agreement"), pursuant to
which IPT merged with AIMCO on February 26, 1999 (the "IPT Merger"). Upon
consummation of the IPT Merger, each outstanding share of IPT not owned by AIMCO
was converted into the right to receive 0.3601 shares of AIMCO's Class A Common
Stock (approximately 4,180,000 shares in the aggregate).
One of the reasons we chose to acquire Insignia is that we would be able to
make the exchange 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, and would provide the AIMCO Operating Partnership
with a larger asset and capital base and increased diversification. As of the
date of this offering, the AIMCO Operating Partnership proposes to make offers
to approximately 90 of the Insignia Partnerships, including your partnership.
During our negotiations with Insignia in early 1998, we decided that if the
merger with Insignia were consummated, we could also benefit from making offers
for limited partnership interests in the Insignia Partnerships. While some of
the Insignia Partnerships are public partnerships and information is publicly
available on such partnerships for weighing the benefits of making an exchange
offer, many of the partnerships are private partnerships and information about
such partnerships comes principally from the general partner. Our control of the
general partner makes it possible to obtain access to such information. Further,
such control also means that we control the operations of the partnerships and
their properties. Insignia did not propose that we conduct such exchange offers,
rather we initiated the offers on our own. We determined in June of 1998 that if
the merger with Insignia were consummated, we would offer to limited partners of
the Insignia Partnerships limited partnership units of the AIMCO Operating
Partnership and/or cash.
In connection with the Insignia Merger we acquired general partnership
interests and certain limited partnership interests in a number of private and
public partnerships. Eight private partnerships out of the 90 partnerships
involved in the proposed exchange offers do not have audited financial
statements prepared in accordance with generally accepted accounting practices
("GAAP"). Certain of these partnerships have audited financial statements
prepared on the basis of federal income taxes and others have unaudited
financial
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statements which may or may not be prepared on the basis of GAAP or federal
income taxes. For the Insignia Partnerships for which exchange offers are being
made which do not have audited GAAP financial statements for at least two years,
we are making the offer on the basis of either one year of audited GAAP
financial statements and one year of unaudited GAAP financial statements or just
unaudited GAAP financial statements. We tried to obtain two years of audited
GAAP financial statements for all the partnerships for which offers are being
made, but because of the inability to locate records from inception of the
partnerships which would allow auditors to verify the original purchase price of
the properties, no audits were possible. In these cases, the entities which
controlled the general partners prior to Insignia are no longer in business or
have no current knowledge or records of such partnerships. For the same reasons,
we do not have all the records for past years of some of the partnerships.
Therefore, for the partnerships without an audit, we did not have invoices,
escrow statements, property closing statements or the like to support the
original costs of the real property to the satisfaction of independent auditors,
in order for them to render an unqualified audit report. Consequently, we have
no way to support the original cost of the properties. However, we have general
ledgers and related accounting records that enable us to prepare GAAP basis
financial statements. These records were taken from the entities that controlled
the general partners and were subsequently maintained by us. The amount of
capitalized property costs appearing in those books and records has, to our
knowledge, been appropriately rolled forward from year to year and used by the
general partners of the partnerships in question to prepare tax returns and
periodic reports to the investors in the partnerships. Therefore, we believe
that the unaudited financial statements included in the prospectus supplements
for such partnerships have been prepared in accordance with GAAP.
In acquiring Insignia and the interests in the Insignia Partnerships, we
conducted due diligence with regard to certain of the assets acquired including
the major properties held by the Insignia Partnerships. Our due diligence
focused on the condition of the major properties and the terms of the
partnership agreements. Since Insignia had audited GAAP financial statements and
since those partnerships without audited GAAP financial statements are generally
smaller, we did not focus on the issue of audited GAAP based financial
statements for the smaller partnerships at the time of the merger. Further, for
our internal due diligence use, audited tax based financial statements are also
used. The total number of Insignia Partnerships we acquired an interest in was
approximately 550 of which approximately 25 do not have audited GAAP statements.
We were not able to pick and choose the partnerships in which we would acquire
an interest. The Insignia Partnerships were part of the business of Insignia. As
a consequence, we acquired interests in certain small private partnerships which
do not have the ability to obtain audited GAAP financial statements. It is our
policy to acquire properties or partnerships with audited GAAP based financial
statements. However, in connection with large acquisitions of partnerships
interests, such as with the Insignia Merger, we may occasionally acquire a
partnership or property without audited GAAP financial statements.
Previous Tender Offers
Tender offers have been previously made with respect to certain of the
public Insignia Partnerships. However, there have not been any prior tender
offers to acquire units of your partnership. Except for such tender offers, we
are not aware of any merger, consolidation or other combination involving any of
the Insignia Partnerships, or any acquisitions of any of such partnerships or a
material amount of the assets of such partnerships.
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 August 28, 1998 with Stanger to provide such a 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 your general partner
(which is our subsidiary).
Liquidation
Benefits of 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 (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 your general partner (which is our subsidiary), 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 on the order of 1% of the principal amount
of the mortgage. Your general partner believes it currently is in the best
interest of your partnership to continue holding its real estate assets.
Continuation of the Partnership Without the Offer
Benefits of Continuation. Although our offer permits you to continue your
investment in your partnership, 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. Your
partnership's net income has increased from $83,000 for the nine months ended
September 30, 1997, to $90,000 for the nine months ended September 30, 1998. 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. The continuation of your partnership will allow you to continue to
participate in the net income and any increases of revenue of your partnership
and any net proceeds from the sale of any property owned by your partnership.
The General Partner continues to review operations and expects to complete
capital expenditures in 1999 and 2000 enabling it to possibly increase rents and
lower expenses. In addition, a sale of the property may cause a tax gain to each
investor.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. If your partnership continues operating as presently structured, your
partnership could be forced to borrow on terms that could result in net losses
from operations. Your partnership's mortgage notes are due in November 2002 and
require balloon payments totaling $3,216,445. Your partnership currently has
adequate sources of cash to finance its operations on both a short term and long
term basis but will have to sell the properties or refinance its indebtedness in
2002 to pay such balloon payments. Continuation of your partnership without the
offer would deny you and your partners the benefits that your general partner
(which is our subsidiary) expects to result from the 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.
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Alternative Structures Considered
Before we decided to make our offer, we considered a number of alternative
transactions, including purchasing some or all of your partnership's properties;
making an offer of only cash for your units; making an offer of only Common OP
Units for your units; and making an offer of only Preferred OP Units for your
units. A merger would require a vote of the limited partners of your
partnership. If the merger was approved, all limited partners, including those
who wish to retain their units and continue to participate in your partnership,
would be forced to participate in the merger transaction. If the merger was not
approved, all limited partners, including those who would like to liquidate
their investment in your partnership, would be forced to retain their units.
We also considered purchasing your partnership's properties from your
partnership. However, a sale of your partnership's properties would require a
majority vote of the limited partners. If the sale was approved, all limited
partners, including those who wish to continue to participate in the ownership
of your partnership's properties, would be forced to participate in the sale
transaction, and possibly to recognize taxable income. If the sale was not
approved, all limited partners, including those who would like to dispose of
their investment in your partnership's properties, would be forced to retain
their investment.
In order to give all limited partners in your partnership an opportunity to
make their own investment decision, we elected to make an offer directly to you
and the other limited partners. We considered making an all cash offer in order
to satisfy some limited partners' desire for immediate liquidity. However, an
all cash offer would not be desirable for those limited partners who do not
desire immediate liquidity and do not want to immediately recognize any taxable
income, but might otherwise be interested in disposing of their investment in
your partnership and might want an opportunity to control the timing of any
realization of taxable income associated with liquidating such investment in the
future.
We considered making an offer of only OP Units, either all Common OP Units
or all Preferred OP Units. The primary disadvantage of an all OP Unit offer is
that those limited partners who want immediate liquidity would be forced to wait
at least one year before exchanging their OP Units for cash or AIMCO stock. We
decided to offer limited partners both Common OP Units and Preferred OP Units in
order to permit investors to make their own decision as to whether they
preferred the possibility of future capital appreciation (Common OP Units) or
preferred distribution rights (Preferred OP Units).
After considering these alternatives, we decided to offer limited partners
the possibility of all three forms of consideration: cash, Common OP Units and
Preferred OP Units. We think that such an offer will appeal to a large number of
limited partners in your partnership, while permitting each one to retain any or
all of his or her units and remain a limited partner in your partnership on the
same terms as before.
Sale of Assets
Your partnership could sell the property it owns. The general partner of
your partnership considers sale of your partnership's property from time to
time. However, any such sale would likely be a taxable transaction.
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:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or
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cash. After a two-year holding period, if you choose to redeem your
Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, currently listed and traded on the NYSE.
- Preferred Quarterly Distributions. Your partnership made no distributions
of for the fiscal year ended December 31, 1998. Holders of Preferred OP
Units will be entitled to receive quarterly distributions of $0.50 per
unit (equivalent to $2.00 on an annualized basis) before any
distributions are paid to holders of Common OP Units. This is equivalent
to a distribution of $2,906 per year on the number of Preferred OP Units
you will receive in exchange for each of your partnership 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:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- Quarterly Distributions. Your partnership made no distributions for the
fiscal year ended December 31, 1998. In 1998, we paid quarterly
distributions on the Common OP Units totalling $2.25. In January 1999, we
increased our distribution rate on each of the Common OP Units to $2.50
on an annual basis. Assuming no change in the level of our distributions,
this is equivalent to a distribution of $2,413.13 per year on the number
of Common OP Units you will receive in exchange for each of your
partnership units. See "The AIMCO Operating Partnership."
- 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 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.
DISADVANTAGES OF THE OFFER
The principal disadvantages to the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and the consideration, no one separately represented the interests of the
limited partners. Although we have a fiduciary duty to
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the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of the property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pre-tax cash proceeds to you than our
offer.
- OP Units. Investing in OP Units has risks that include the lack of a
public market, transfer restrictions and a one year holding period before
they can be redeemed by a holder. The ultimate return on the OP Units is
directly tied to the future price of AIMCO's Class A Common Stock or
Class I Preferred Stock. You could ultimately receive less for your OP
Units than the cash price in our offer. Further, on or after March 1,
2005, we may redeem the Class I Preferred Stock for $25 per share.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
the sale of the property would be advantageous given market conditions,
the condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of a property and the tax consequences to you
and your partners on a sale of a property. See also "Your
Partnership -- General Policy Regarding Sales and Refinancings of
Partnership Property."
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
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VALUATION OF UNITS
We determined our cash offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower of the value produced. We used your partnership's
property income for the fiscal year ended December 31, 1997. However, in
determining the appropriate capitalization rate, we considered the partnership's
property income since December 31, 1997. Our method for selecting a
capitalization rate begins with each property being assigned a location and
condition rating (e.g., "A" for excellent, "B" for good, "C" for fair, and "D"
for poor). We have rated your property's location B (good) and its condition C
(fair). Generally, we assign an initial capitalization rate of 10.50% to
properties in this category. We then adjust the capitalization rate based on
whether the mortgage debt that the property is subject to bears interest at a
rate above or below 7.5% per annum. Generally, for every 0.5% in excess of 7.5%,
the capitalization rate would be increased by 0.25%. Your property's mortgage
debt bears interest at 7.60% per annum, which resulted in an increase from the
initial capitalization rate of 0.25%. We also considered any changes in your
partnership's property income from 1997 to 1998. Because your partnership's
property income in 1998 remained relatively unchanged compared to 1997, we made
no further revision of the capitalization rate, resulting in a final
capitalization rate of 10.75%. The evaluation of a property's location and
condition, and the determination of an appropriate capitalization rate for a
property, is subjective in nature, and others evaluating the same property might
use a different capitalization rate and derive a different property value.
Property income is the difference between the revenues from the property and
related costs and expenses, excluding income derived from sources other than its
regular activities and before income deductions. Income deductions include
interest, income taxes, prior-year adjustments, charges to reserves, write-offs
of intangibles, adjustments arising from major changes in accounting methods and
other material and nonrecurrent items. In this respect, property income differs
from net income disclosed in the partnership's financial statements, which does
not exclude these income sources and deductions. The following is a
reconciliation of your partnership's net income for the year ended December 31,
1997, to your partnership's property income for the same period.
<TABLE>
<S> <C>
Net Income (Loss)........................................... $ 55,874
Other Non-Operating Expenses................................ 64,534
Depreciation................................................ 97,697
Interest.................................................... 335,895
--------
Property income............................................. $554,000
</TABLE>
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. Further,
in applying the direct capitalization method, others may make different
assumptions and obtain different results. 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 estimated 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 (property 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 divided
S-34
<PAGE> 1643
fiscal 1997 property income of $554,000 by the property's capitalization
rate of 10.75% to derive an estimated gross property value of $5,149,100.
- 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
certain other costs including required capital expenditures, deferred
maintenance, and closing costs to derive a net equity value for your
partnership of $908,053. Closing costs, which are estimated to be 2.5% of
the gross property value, include legal and accounting fees, real
property, transfer taxes, title and escrow costs and broker's fees.
- 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. Accordingly, 100% of the estimated liquidation
proceeds are assumed to be distributed to holders of units. Our cash
offer consideration represents the per unit liquidation proceeds
determined in this manner.
<TABLE>
<S> <C>
Property income............................................. $ 554,000
Capitalization rate......................................... 10.75%
-----------
Gross valuation of partnership property..................... 5,149,000
Plus: Cash and cash equivalents............................. 15,000
Plus: Other partnership assets, net of security deposits.... 234,893
Less: Mortgage debt, including accrued interest............. (3,897,980)
Less: Accounts payable and accrued expenses................. (161,470)
Less: Other liabilities..................................... (36,602)
-----------
Partnership valuation before taxes and certain costs........ 1,302,841
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures for deferred
maintenance............................................... (266,063)
Less: Closing costs......................................... (128,725)
-----------
Estimated net valuation of your partnership................. 908,053
Percentage of estimated net valuation allocated to units.... 100.00%
-----------
Estimated net valuation of units............................ 908,053
Total number of units............................. 25.0
-----------
Estimated valuation per unit................................ 36,322
===========
Cash consideration per unit................................. $ 36,322
===========
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration of $36,322 by the $25
liquidation preference of each Preferred OP Unit to get 1,453.00
Preferred OP Units per unit.
- In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $36,322 by
a price of $37.63 (the average closing price of AIMCO's Class A Common
Stock on the NYSE for the 30 trading days ended on March 23, 1999) to get
965.25 Common OP Units per unit.
The total net valuation of all partnerships in which the AIMCO Operating
Partnership is making similar exchange offers, and which were valued using the
same methods as used for your partnership, is $568,751,153, of which, $908,053
or .16% is the net valuation of your partnership.
S-35
<PAGE> 1644
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
Your general partner is a subsidiary of the AIMCO Operating Partnership. 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. Your general partner has substantial conflicts of interest with
regard to the offer. However, for all of the reasons discussed herein, we and
your general partner believe that the offer and all forms of consideration
offered is fair to you and the limited partners of your partnership. We also
reasonably believe that the similar offers to the limited partners of the other
partnerships are fair to such limited partners. 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 us 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, your
general partner (which is our subsidiary) 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. The net
income of your partnership has increased from $83,000 for the nine months
ended September 30, 1997 to $90,000 for the nine months ended September 30,
1998. These factors are reflected in our valuation of your partnership.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are substantially the financial
equivalent to your interest in your partnership. 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
and Stanger's estimates of the net asset value ($32,239 per unit), going
concern value ($23,351 per unit) and liquidation value ($27,249 per unit)
of your partnership units. See "Stanger Analysis"
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity. However, we did review whether trading information
was available.
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 by electing to accept Preferred OP Units or
Common OP Units.
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
S-36
<PAGE> 1645
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 $36,322, based on a total estimated
value of your partnership's property of $5,149,000. Your general partner
(which is our subsidiary) has no present intention to liquidate your
partnership or to sell or refinance your partnership's property. See
"Background and Reasons for the Offer". See "Valuation of Units" for a
detailed explanation of the methods we used to value your partnership.
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $2.00 and current annualized distributions with respect to the
Common OP Units are $2.50. This is equivalent to distributions of $2,906
per year on the number of Preferred OP Units, or distributions of $2,413.13
per year on the number of Common OP Units, that you would receive in
exchange for each of your partnership's units. There were no distributions
with respect to your units for the fiscal year ended December 31, 1998. See
"Comparison of Your Units and AIMCO OP Units -- Distributions."
13. The fact that if your partnership were liquidated as opposed to
continuing, the general partner (which is our subsidiary) would not receive
the substantial management fees it currently receives. As discussed in
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," we do not believe that
liquidation of the partnership is in the best interests of the unitholders.
Therefore, we believe the offer is fair in that the fees paid to the
general partner would continue even if the offer was not consummated. We
are not proposing to change the current management fee arrangement.
In evaluating these factors, your general partner (which is our subsidiary)
and the AIMCO Operating Partnership did not quantify or otherwise attach
particular weight to any of them.
Your general partner (which is our subsidiary) has not retained an
unaffiliated representative to act on behalf of the limited partners in
negotiating the terms of the offer since each individual limited partner can
make his own decision as to whether or not to tender and what consideration to
take. Unlike a merger or other form of partnership reorganization, a majority or
more of the holders of limited partnership interests in your partnership cannot
bind you. If an unaffiliated representative had been obtained, it is possible
that such representative could have negotiated a higher price for your units
than was unilaterally offered by the AIMCO Operating Partnership. We have
retained Stanger to conduct an analysis of our offer and to render an opinion as
to the fairness to you of the offer consideration from a financial point of
view. Although no representative has been retained to act solely on behalf of
the limited partners for purposes of negotiating the terms of the offer, we have
determined that the transaction is fair to you from a financial point of view.
We made this determination based, in part, on the fairness opinion from Stanger
and the fact that all limited partners may elect to retain their existing
security on the same terms as before our offer.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
Your general partner (which is our subsidiary) 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 and, although there are
other ways to value real estate, is a reasonably fair method to determine the
consideration offered. Although we believe our offer consideration represents
the amount you would receive if we currently liquidated your partnership, an
actual liquidation might generate a higher or lower price for holders of units.
A liquidation in the future might generate a higher or lower 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
S-37
<PAGE> 1646
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
Your general partner (which is our subsidiary) 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
sell your partnership's property or refinance its indebtedness within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, your general partner
(which is our subsidiary) has attempted to compare the cash offer consideration
against: (a) estimates of the value of the units on a liquidation basis; (b)
estimates of the going concern value of your units based on continuation of your
partnership as a stand-alone entity; and (c) the net book value of your units.
The general partner of your partnership believes that analyzing the alternatives
in terms of estimated value, 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 us. These assumptions relate to, among other things: the operating
results since December 31, 1997 as to income and expenses of each property,
other projected amounts and the capitalization rates that may be used by
prospective buyers if your partnership assets were to be liquidated. The 1998
budget is discussed in "Stanger Analysis -- Summary of Materials Considered" and
other projected amounts are discussed in "Stanger Analysis -- Summary of
Reviews."
In addition, these estimates are based upon certain information available
to your general partner (which is our subsidiary) 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. 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.
S-38
<PAGE> 1647
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 2026, 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.
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C> <C> <C>
Cash offer price............................................ $ 36,322
Partnership preferred units................................. 36,322(1)
Partnership common units.................................... 36,322(1)
Alternatives:
Estimated liquidation proceeds............................ $ 36,322
Estimated going concern value(2).......................... $ 22,620
Estimated alternative going concern value(3).............. $ 26,652
Net book value (deficit).................................. $(84,888)
</TABLE>
- ---------------
(1) In our discussion of the offer price as being fair with regard to other
methods of valuing your partnership, we believe the number of Common OP
Units and Preferred OP Units to be issued per unit in the offer to be equal
to the cash price per unit. Therefore, the fairness discussion applies
equally to the cash and non-cash forms of consideration being effected. See
"Valuation of Units" for details of how the number of OP Units was
determined.
(2) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(3) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
Prices on Secondary Market
There is no active market for your units. Your general partner (which is
our subsidiary) is unaware of any secondary market activity in the units.
Therefore any comparison to prices on the secondary market is not possible at
the present time. See "Your Partnership -- Distributions and Transfers of
Units -- Transfers."
Prior Tender Offers
There have been no previous tender offers for units of your partnership.
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. Your general
partner (which is our subsidiary) 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
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
S-39
<PAGE> 1648
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.
Estimated Going Concern Value and Alternative Going Concern Value
Going concern value is a measure of the value of your partnership if it
continued operating as an independent stand-alone entity. The estimated value of
the partnership on a going concern basis is not intended to reflect the
distributions payable to limited partners if its assets were to be sold at their
current fair market value. The general partner of your partnership estimated the
going-concern value of your partnership by analyzing projected cash flows and
performing a discounted cash flow analysis. The general partner of your
partnership assumed that your partnership will be operated in the same manner as
currently, as an independent stand-alone entity, and its assets sold in a
liquidation after a ten-year holding period. Distribution and sale proceeds per
partnership unit were discounted in the projections at a rate of 30%.
The general partner of your partnership assumed that real estate selling
costs will be incurred which will equal 2.5% of the sales price. This analysis
assumes that the partnership property will be sold in a liquidation, at the
expiration of the ten-year holding period, to an independent third-party buyer.
Upon such liquidation, other balance sheet assets (excluding amortizing assets)
and liabilities of your partnership will be sold at their book value, and the
net proceeds of sale will be allocated between the general partners and offerees
in accordance with your partnership's agreement of limited partnership. Should
the assets be liquidated over time, even at prices equal to those projected,
distributions to limited partners of your partnership's cash flow from
operations might be reduced because relatively fixed costs, such as general and
administrative expenses, are not proportionately reduced with the liquidation of
assets. However, for simplification purposes, the sales are assumed to occur
concurrently.
The going concern method relies on a number of assumptions, including among
other things, (i) rental rates for new leases and lease renewals; (ii)
improvements needed to prepare an apartment for a new lease or a renewal lease;
(iii) lease periods; (iv) capital expenditures; (v) broker's commissions; and
(vi) discount rates applied to future cash flows. The use of assumptions or
variables that differ from those described above could produce substantially
different results. Neither we nor the general partner of your partnership
solicited any offers or inquiries from prospective buyers of the property owned
by your partnership in connection with the preparation of the estimates of value
of the properties and the actual amounts for which the partnership's properties
or the partnership could be sold could be significantly higher or lower than any
of the estimates contained herein. The estimated going concern value of your
partnership is $22,620 per unit, which value is below our offer price per unit.
Therefore, we believe the offer price is fair in relation to the going concern
value.
Your partnership's property currently has balloon payments due in November
2002. While the going concern value was based on your partnership refinancing
its indebtedness and continuing to own its property, the alternative going
concern value of $26,652 is based on selling the property when the balloon
payment is due. For the reasons set forth above, we believe the offer
consideration is fair in relationship to the alternative going concern value.
The general partner determined going concern value based upon the
discounted present value of projected cash flows from the partnership over a
ten-year period of operation, which is a standard period for going concern
analyses for real property assets. Such discounted cash flows were based upon
year one property income from the real estate portfolio of $554,000, escalated
at 3% per annum for the ten-year projection period. Property income was reduced
by: (i) partnership administrative expenses of $36,000 per annum; and (ii) debt
service on existing debt through maturity or the end of ten years, whichever
occurs first. For debt which matures during the ten-year period, a refinancing
at a 7% interest rate was assumed. At the end of the ten-year projection period,
the property was assumed to be sold at a price based upon property income for
the immediately following year, capitalized at a capitalization rate of 11.25%,
less expenses of sale estimated at 3% of the property value. The net cash flow
to limited partners from the continued operation of the property
S-40
<PAGE> 1649
and the net proceeds of sale were then discounted at a discount rate of 25% to
achieve the going concern value of $22,620 per unit.
Your partnership's property currently has a balloon payment due in November
2002. While the going concern value was based on your partnership refinancing
its indebtedness and continuing to own its property; the alternative going
concern value of $26,652 is based on selling the property when the balloon
payment is due and otherwise includes the same assumptions as the going concern
value described above. For the reason set forth above, we believe the offer
consideration is fair in relation to the alternative going concern value.
There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
Net Book Value
Net book value per unit is a deficit of $84,888 and therefore a comparison
with the offering price would not be meaningful in determining the fairness of
the offering price.
Stanger's Estimate of Net Asset Value, Going Concern Value and Liquidation Value
In rendering its opinion set forth as Appendix A, Stanger did its own
independent estimate of your partnership's net value of $32,239 per unit, going
concern value of $23,351 per unit and liquidation value of $27,249 per unit. For
an explanation of how Stanger determined such values see "Stanger Opinion --
Summary of Reviews -- Comparison of Offer Price To Liquidation Value, Going
Concern Value and Secondary Market Prices." An estimate of your partnership's
net asset value per unit is based on a hypothetical sale of your 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 a liquidation value, after provisions in full for all of the
other known liabilities of your partnership. The net asset value does not take
into account (i) timing considerations discussed under "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration -- Estimated
Liquidation Proceeds," and (ii) costs associated with winding up of your
partnership. Therefore, the AIMCO Operating Partnership believes that the
estimate of net asset value per unit does not necessarily represent the fair
market value of a unit or the amount the limited partner reasonably could expect
to receive if the partnership's property was sold and the partnership was
liquidated. For this above reason, the AIMCO Operating Partnership considers net
asset value estimates to be less meaningful in determining the offer
consideration than the analysis described above under "Valuation of Units."
Stanger's estimates of net asset value, going concern value and liquidation
value per unit represent discounts to the offer price of $9,073, $4,083 and
$12,971. In light of these premiums discounts and for all the reasons set forth
above, the AIMCO Operating Partnership believes the offer price is fair to the
limited partners. The AIMCO Operating Partnership believes that the best and
most commonly used method of determining the value of a partnership which only
owns an apartment is the capitalization of income approach set forth in
"Valuation of Units."
ALLOCATION OF CONSIDERATION
Your partnership's agreement of limited partnership provides that, in the
event of a liquidation, available proceeds are to be distributed 0% to the
general partner and 100% to the limited partners. Accordingly, in valuing your
units, we have assumed that 100% of the estimated liquidation proceeds are
distributed to holders of units. Since this allocation is in accordance with the
terms of the partnership agreement, we believe the allocation is fair. See
"Valuation of Units."
S-41
<PAGE> 1650
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. Stanger has
advised us that the description of Stanger's analysis contained herein describes
the material portions of Stanger's review. 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 any losses, claims,
damages, liabilities or expenses to which Stanger may be subject, under any
applicable federal or state law, including federal and state securities laws,
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 NYSE 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 audited financial statements for the years ended December 31, 1996
and 1997, and its unaudited financial statements for the period ended September
30, 1998, which your partnership's management has indicated to be the most
current available financial statements at the time; (iii) reviewed descriptive
information concerning your partnership's real estate assets (the "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, 1997 and 1998; (v) reviewed
operating budgets for your partnership's property for 1998, as prepared by your
partnership; (vi) reviewed
S-42
<PAGE> 1651
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 similar properties; (viii) reviewed internal financial analyses prepared by
your partnership of the estimated current net liquidation value and going
concern value of your partnership; (ix) reviewed information provided by AIMCO
concerning the AIMCO Operating Partnership, the Common OP Units and the
Preferred OP Units; and (x) conducted other studies, analysis and inquiries as
Stanger deemed appropriate.
A summary of the operating budgets per property for the year ended December
31, 1998, which was supplied by your partnership to Stanger, is as follows:
FISCAL 1998 OPERATING BUDGETS
<TABLE>
<CAPTION>
GEORGETOWN
OF COLUMBUS
-----------
<S> <C>
Total Revenues.............................................. $1,149,253
Operating Expenses.......................................... (595,189)
Replacement Reserves -- Net................................. (70,523)
Debt Service................................................ (413,376)
Capital Expenditures........................................ (42,200)
----------
Net Cash Flow..................................... $ 27,965
==========
</TABLE>
The above budget at the time it was made was forward-looking information
developed by the general partner of your partnership. Therefore, the budget was
dependent upon future events with respect to the ability of your partnership to
meet such budget. The budget incorporates various assumptions including, but not
limited to, lease revenue (including occupancy rates), various operating
expenses, general and administrative expenses, depreciation expenses, capital
expenditures, and working capital levels. While we deemed such budgets to be
reasonable and valid at the date made, there is no assurance that the assumed
facts will be validated or that the circumstances will actually occur. Any
estimate of the future performance of a business, such as your partnership's
business, is forward-looking and based on assumptions some of which inevitably
will prove to be incorrect.
The budget amounts provided above are figures that were not computed in
accordance with GAAP. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budget are often
re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budget
presented for fiscal 1998 should not necessarily be considered as indicative of
what the audited operating results for fiscal 1998 will be. For the year ended
December 31, 1998, the partnership expects to report revenues of $1,136,675,
operating expenses of $515,611 and replacement reserves and capital expenditures
of $89,747. Based on these estimates, the partnership's net cash flow before
debt service, which we believe provides a better indication of the partnership's
actual operating performance than net cash flow, was greater than the budgeted
amounts.
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.
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<PAGE> 1652
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 the third quarter of 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 or
square footage; 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 nine month period ending
September 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 property.
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 property, 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 the
liquidation value calculation prepared by the management of your partnership.
Stanger observed that such liquidation value was based upon the gross property
valuation estimate prepared by management, which in turn is based upon fiscal
year 1997 property income capitalized at a capitalization rate of 10.75%.
Stanger further observed that the gross property valuation was adjusted for the
following additional items to achieve the liquidation value of your partnership:
(i) cash, other assets, mortgage indebtedness and other liabilities determined
as of December 31, 1997; (ii) estimated closing costs equal to approximately
2.5% of gross real estate value; and (iii) extraordinary capital expenditure
estimates in the amount of $266,063. Stanger observed that your partnership
liquidation value of $908,053 was divided by the total units outstanding of 25
to provide the liquidation value per unit of $36,322.
Review of Partnership Going Concern Analysis. Stanger reviewed the going
concern value calculation prepared by management of your partnership. Stanger
observed that such going concern value was based upon the discounted present
value of projected cash flows from the partnership over a ten-year period of
operation which is a standard period for going concern analysis for real
property assets. Such discounted cash flows were based upon year one property
income from the real estate portfolio of $554,000 escalated at 3% per annum for
the ten-year projection period. Property income was reduced by: (i) partnership
administrative expenses of $36,000 per annum; and (ii) debt service on existing
debt through maturity or the end of ten years, whichever occurs first. For debt
which matures during the ten-year period, a refinancing at a 7% interest rate
was assumed. At the end of the ten-year projection period, the properties were
assumed to be sold based upon: (i) property income for the immediately following
year capitalized at a capitalization rate of
S-44
<PAGE> 1653
11.25; and (ii) expenses of sale estimated at 3% of property value. Stanger
observed that the proceeds of sale were reduced by the estimated debt balance at
the end of the tenth year to provide net proceeds from the sale of your
partnership's property.
The resulting cash flows for the ten-year period were discounted to present
value at a discount rate of 30%. Stanger observed that such discount rate was
based upon the portfolio real estate discount rate of 12.5%, adjusted for
leverage risk and illiquidity risk. Stanger observed that the resulting
partnership going concern value was divided by units outstanding of 25 to
achieve management's estimate of going concern value of $22,620 per unit.
Review of Secondary Market Prices. Stanger maintains a database of
secondary market information on limited partnership units. Stanger observed for
its data that no units were reported traded in the secondary market during 1998.
Comparison of Offer Price to Liquidation Value, Going Concern Value and
Secondary Market Price. Stanger observed that the offer price of $36,322 per
unit is equal to management's estimate of liquidation value, and reflects a
substantial premium to management's estimate of going concern value of $22,620.
Stanger further observed that investors may select cash, Common OP Units or
Preferred OP Units in exchange for their partnership units or they may elect to
continue to hold their partnership units. Stanger further observed that the
Common OP Units will be priced at $37.625 per unit, an amount which equals the
average of the closing prices for the common shares into which such Common OP
Units are convertible for the 30 trading day period ended March 23, 1999.
Furthermore, Stanger observed that the Preferred OP Units to be issued in the
transaction will be based upon the liquidation preference of $25. Stanger noted
that the Preferred OP Units are redeemable for, at AIMCO's option, either: (i)
$25 in cash per Preferred OP Unit; (ii) common stock of AIMCO based upon a
ten-day average price at the time of the requested redemption; or (iii)
commencing on the third year following the closing of this transaction,
preferred stock of AIMCO with a dividend equal to the distribution on the
Preferred OP Units. Stanger observed that the ten day average closing price of
the AIMCO common stock is $36.425, as of March 23, 1999 and therefore an
investor receiving AIMCO common shares in redemption of the Preferred OP Units
would receive .6497 shares with a value approximating $25 for each $25 Preferred
OP Unit redeemed, based upon AIMCO's average common share price as of March 23,
1999. Stanger noted that commencing in the third year, investors redeeming
Preferred OP Units may receive from AIMCO Preferred Stock with a dividend equal
to the distribution on the AIMCO Preferred OP Units. Stanger observed that the
distribution on the Preferred OP Units is set at 8% of $25 and that the average
dividend yield on AIMCO's outstanding C, D, G and H Preferred Shares
approximates 10.1% as of March 23, 1999. Stanger noted that, based upon the cash
dividend yield on the AIMCO Preferred Shares identified above as of March 23,
1999, investors would receive Preferred Shares with a value of approximately
$19.80 for each $25 Preferred OP Unit if such redemption occurred after the
second year following the closing of the transaction. Stanger further observed
that the above analysis does not take into consideration the present value of
the earnings on the tax deferral an investor may realize as the result of
selecting Preferred OP Units in lieu of cash in a taxable transaction.
In addition to the above analysis, Stanger prepared an independent estimate
of net asset value, going concern value and liquidation value per unit. Stanger
has advised AIMCO that Stanger's estimates of net asset value, liquidation value
and going concern value are based upon Stanger's independent estimate of
property income, a direct capitalization rate of 10.5% transaction costs of 2.5%
to 5.0%, growth rates of 3% and a terminal capitalization rate of 11.0%. Stanger
has advised us that the direct capitalization rate represents Stanger's estimate
of the capitalization rate applicable to its estimate of property income and is
based upon Stanger's independent estimate of the direct capitalization rate for
such property based upon such property's age, condition and location. Stanger
further advised us that the terminal capitalization rate is the capitalization
rate utilized in Stanger's going concern value estimate which is applied to
Stanger's estimate of property income in the eleventh year to establish the
value of the property at the end of the tenth year. Stanger has advised us that
Stanger estimated the terminal capitalization rate at a 50 basis point premium
to the direct capitalization rate estimate for the property. Stanger utilized
deferred maintenance estimates derived from the Adjusters International, Inc.
reports in the calculation of net asset value, liquidation value and going
concern value. With respect to the going concern value estimate prepared by
Stanger, Stanger advised
S-45
<PAGE> 1654
AIMCO that a ten-year projection period and a discount rate of 30% was utilized.
Such discount rate reflects the risk associated with real estate, leverage and a
limited partnership investment. The 30% discount rate was based upon the
property's estimated level internal rate of return derived from the discounted
cash flow analysis, (13.0% as described above), plus a premium reflecting the
additional risk associated with mortgage debt equal to more than 75% of property
value. Stanger's estimates were based in part upon information provided by us.
Stanger relied upon the deferred maintenance estimates, property descriptions,
unit configurations, allocation among partners, and other data provided by us.
Stanger's analyses were based on balance sheet data as of September 30, 1998.
Stanger's review also included a site visit, review of rental rates and
occupancy at the properties as well as competing properties. Stanger's estimate
of net asset value, going concern value and liquidation value per unit were
$32,239, $23,351 and $27,249, representing discounts to the offer price of 11%,
35% and 25%. See "Fairness of the Offer -- Comparison of Consideration to
Alternative Consideration."
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. Stanger has rendered similar fairness opinions with regard to certain
other exchange offers being made by the AIMCO Operating Partnership. Stanger
rendered the opinions only as to the individual fairness of the offer
consideration in each proposed exchange offer. The Fairness Opinion does not
address the fairness of all possible acquisitions of interests in your
partnership. In addition, the Fairness Opinion will not be revised to reflect
the actual participation in the offer.
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 your general partner (which is our subsidiary) and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's property, and the transaction costs and fees associated with a
sale of the property. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's property 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 property 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 property 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 property 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
S-46
<PAGE> 1655
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, nor did Stanger
address the fairness of all possible acquisitions of interests in the
partnership. The opinion will not be revised to reflect the actual results of
the offer. 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 or oral 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 $9,000 with
respect to your partnership. The estimated aggregate fee payable to Stanger in
connection with all affiliated partnerships is estimated at $1,510,000, plus
out-of-pocket expenses estimated at $61,000. 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 was
engaged by AIMCO during 1997 to represent AIMCO in negotiations to acquire
interests in a real estate limited partnership. Such transaction was never
consummated and no fee was ever paid to Stanger in connection with such proposed
transaction. AIMCO and its affiliates may retain the services of Stanger in the
future. Any such future services could relate to this offer, some or all of the
concurrent offers, or a completely separate transaction.
S-47
<PAGE> 1656
YOUR PARTNERSHIP
GENERAL
Georgetown of Columbus Associates, L.P., is a Delaware limited partnership
which completed a private placement of units in October, 1983. Insignia acquired
the general partner of your partnership in December, 1991. AIMCO acquired
Insignia in October 1998. There are currently a total of 53 limited partners of
your partnership and a total of 25 units of your partnership outstanding. Your
partnership is in the business of owning and managing residential housing.
Currently, your partnership owns and manages the property described below. Your
partnership has no employees. 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.
YOUR PARTNERSHIP AND ITS PROPERTY
Your partnership was formed on October 5, 1983 for the purpose of owning an
apartment property located in Columbus, Ohio, known as "Georgetown of Columbus
Apartments." Your partnership's property is owned by the partnership but is
subject to a mortgage. The property was built in 1962 and consists of 150
apartment units. There are 10 one-bedroom apartments, 130 two-bedroom apartments
and 10 three-bedroom apartments. Your partnership's property had an average
occupancy rate of approximately 94.73% in 1998, 95.33% in 1997 and 95.33% in
1996.
Your partnership's property provides residents with a number of amenities
and services, such as 24-hour desk service, exercise room and/or sauna, and
party or meeting rooms. Nearly all apartment units are wired for cable
television, and many apartment units also offer one or more additional features,
such as washer/ dryer, microwave, fireplace, and patio/balcony.
Presently, there are no plans for any major renovations or improvements for
the property. Budgeted renovations or improvements for 1999 total $266,000 and
are intended to be paid for out of cash flow or borrowings. Renovation items
include heating, ventilation and air conditioning systems, electrical,
balconies/patios, sidewalks, drives and parking lot, exterior lighting,
landscaping and irrigation, and fence.
Set forth below are the average rents for the apartments for the last five
years:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$598 $560 $536 $530 $517
</TABLE>
The apartments are being depreciated for federal income tax purposes using
the accelerated cost recovery method. Depreciation is computed principally by
the straight-line and accelerated methods over estimated lives of 3 to 40 years.
Currently, the real estate taxes on the property are $90,202 of $1,607,870
of assessed valuation with a current yearly tax rate of 5.61%. When the proposed
improvements are made it is anticipated that the yearly tax rate may increase by
approximately 5.89% of such improvements.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a wholly 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.
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS
Under your partnership's agreement of limited partnership, your partnership
is not permitted to raise new equity and reinvest cash in new properties.
Consequently, your partnership is limited in its ability to expand its
S-48
<PAGE> 1657
investment portfolio. Your partnership will terminate on December 31, 2026
unless earlier dissolved. Your partnership has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
Generally, your partnership is authorized to acquire, develop, improve, own
and operate your partnership's property as an investment and for income
producing purposes. The investment portfolio of your partnership is limited to
the assets acquired with the initial equity raised through the sale of units to
the limited partners of your partnership or the assets initially contributed to
your partnership by the limited partners, as well as the debt financing obtained
by your partnership within the established borrowing restrictions.
An investment in your partnership is a finite life investment, with the
partners to receive regular cash distributions out of your partnership's
distributable cash flow, if available, and to receive cash distributions upon
liquidation of your partnership's real estate investments, if available.
In general, your general partner (which is our subsidiary) regularly
evaluates the partnership's property by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors the property's specific locale and sub-market
conditions (including stability of the surrounding neighborhood) 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 (including any prepayment penalties), tax implications,
availability of attractive mortgage financing to a purchaser, 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. If rental market conditions improve, 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 viable option than it is
currently. After taking into account the foregoing considerations, your general
partner is not currently seeking a sale of your partnership's property primarily
because it expects the property's operating performance to remain strong in the
near term. In making this assessment, your general partner noted that occupancy
and rental rates at the property were 95% and $596, respectively, at December
31, 1998, compared to 95% and $598, respectively, at December 31, 1997. Although
there can be no assurance as to future performance, the general partner expects
rental rates to improve in the near future because of the market's growth in
rents. In addition, the general partner noted that it expects to spend
approximately $266,000 for initial capital expenditures at the property in 1999
to repair/replace the property's electrical, HVAC, balconies, sidewalks, parking
lots, exterior lighting, landscaping/irrigation, and fence. These expenditures
are expected to improve the desirability of the property to tenants. The general
partner does not believe that a sale of the property at the present time would
adequately reflect the property's future prospects. Another significant factor
considered by your general partner is the likely tax consequences of a sale of
the property for cash. Such a transaction would likely result in tax liabilities
for many limited partners. The general partner has not received any recent
indication of interest or offer to purchase the property.
CAPITAL REPLACEMENT
Your partnership has an ongoing program of capital improvements,
replacements and renovations, including roof replacements, kitchen and bath
renovations, balcony repairs (where applicable), replacement of various building
systems and other replacements and renovations in the ordinary course of
business. All capital improvement and renovation costs are expected to be paid
from operating cash flows, cash reserves, or from short-term or long-term
borrowings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Your Partnership."
BORROWING POLICIES
Your partnership's agreement of limited partnership allows your partnership
to incur debt. As of December 31, 1998, your partnership had a current mortgage
note outstanding of $3,645,028, payable to
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<PAGE> 1658
FNMA, which bears interest at a rate of 7.60%. The mortgage debt is due in
November 2002. Your partnership also has a second mortgage note outstanding of
$131,718, on the same terms as the current mortgage note. Your partnership's
agreement of limited partnership also allows the general partner of your
partnership to lend funds to your partnership. As of December 31, 1998, your
general partner had no loans outstanding to your partnership.
COMPETITION
There are other residential properties within the market area of your
partnership's property. The number and quality of competitive properties in such
an area could have a material effect on the rental market for the apartments at
your partnership's property and the rents that may be charged for such
apartments. While we are a significant factor in the United States in the
apartment industry, competition for apartments is local.
LEGAL PROCEEDINGS
Your partnership is party to a variety of legal proceedings related to its
ownership of the partnership's property and management and leasing business,
respectively, arising in the ordinary course of the business, which are not
expected to have a material adverse effect on your partnership.
HISTORY OF THE PARTNERSHIP
Your partnership sold $2,500,000 of limited partnership units in 1983. Your
partnership currently owns one apartment property.
Your partnership used the funds raised to purchase its property and it has
expended the funds so raised many years ago. Your partnership currently owns the
property described herein, which is subject to a substantial mortgage. Your
general partner (which is our subsidiary) has not experienced any material
adverse financial developments from January 1, 1997 through the present.
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2026, 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.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, your general partner (which is our subsidiary) is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partner of your partnership will
not incur any liability to your partnership or any limited partner for any
mistakes or errors in judgment or for any acts or omission believed by the
general partner in good faith to be within the scope of authority conferred upon
it by your partnership agreement. 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 partnership will, to the extent permitted by law, indemnify and save
harmless the general partner against and from any personal loss, liability
(including attorneys' fees) or damage incurred by it as the result of any act or
omission in its capacity as general partner unless such loss, liability or
damage results from gross negligence or willful misconduct by the general
partner.
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 partners of your partnership.
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<PAGE> 1659
DISTRIBUTIONS AND TRANSFERS OF UNITS
Distributions
From 1993 through 1998 your partnership has paid no distributions.
Transfers
The units are not listed on any national securities exchange or quoted on
the NASDAQ System, the Electronic Bulletin Board or the "pink sheets," and there
is no established public trading market for the units. Secondary sales activity
for the units has been limited and sporadic. The general partner of your
partnership monitors transfers of the units (a) because the admission of the
transferee as a substitute limited partner in your partnership require the
consent of the general partner of your partnership under your partnership's
agreement of limited partnership, and (b) in order to track compliance with safe
harbor provisions to avoid treatment as a "publicly traded partnership" for tax
purposes. However, the general partner of your partnership does not monitor or
regularly receive or maintain information regarding the prices at which
secondary sale transactions in the units have been effectuated. The general
partner of your partnership estimates, based solely on the transfer records of
your partnership (or your partnership's transfer agent), that there have been no
units transferred in sale transactions (excluding transactions believed to be
between related parties, family members or the same beneficial owners).
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate, approximately
a 1.00% interest in your partnership, as a general partner. 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
two years, 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 following table shows, for each of the years indicated, compensation
paid to your general partner and its affiliates on a historical basis, and on a
pro forma basis assuming that all of the units sought in our offer had been
acquired at the beginning of each period:
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------- ----------------------------------------
PARTNERSHIP PROPERTY PARTNERSHIP PROPERTY
FEES AND MANAGEMENT FEES AND MANAGEMENT
YEAR EXPENSES FEES DISTRIBUTIONS EXPENSES FEES DISTRIBUTIONS
---- ----------- ---------- ------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
1994 $24,062 $49,664 $0 $24,062 $49,664 $0
1995 25,936 50,789 0 25,936 50,789 0
1996 27,513 51,864 0 27,513 51,864 0
1997 29,242 55,922 0 29,242 55,922 0
1998 31,830 57,240 0 31,830 57,240 0
</TABLE>
S-51
<PAGE> 1660
SELECTED FINANCIAL INFORMATION
OF YOUR PARTNERSHIP
GEORGETOWN OF COLUMBUS ASSOCIATES, L.P.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and Cash Equivalents..... $ 17,000 $ 9,000 $ 15,000 $ 18,000 $ 61,000 $ 97,000 $ 51,000
Land & Building............... 4,929,000 4,848,000 4,886,000 4,815,000 4,738,000 4,690,000 4,637,000
Accumulated Depreciation...... (3,447,000) (3,350,000) (3,374,000) (3,276,000) (3,184,000) (3,098,000) (3,019,000)
Other Assets.................. 326,000 301,000 328,000 297,000 286,000 290,000 317,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Assets.......... $ 1,825,000 $ 1,808,000 1,855,000 $ 1,854,000 $ 1,901,000 $ 1,979,000 $ 1,986,000
=========== =========== =========== =========== =========== =========== ===========
Notes Payable................. $ 3,665,000 $ 3,762,000 $ 3,723,000 $ 3,814,000 $ 3,889,000 $ 3,959,000 $ 4,022,000
Other Liabilities............. 192,000 144,000 254,000 219,000 150,000 189,000 161,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Liabilities..... $ 3,657,000 $ 3,906,000 $ 3,977,000 $ 4,033,000 4,049,000 $ 4,148,000 $ 4,183,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Partners Deficit...... $(2,032,000) $(2,098,000) $(2,122,000) $(2,179,000) $(2,148,000) $(2,168,000) $(2,197,000)
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Revenue................ $ 804,000 $ 800,000 $ 1,077,000 $ 1,008,000 $ 964,000 $ 954,000 $ 930,000
Other Income.................. 49,000 30,000 43,000 38,000 45,000 33,000 33,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Revenue......... $ 853,000 $ 830,000 $ 1,120,000 $ 1,046,000 $ 1,009,000 $ 987,000 $ 963,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating Expenses............ $ 337,000 $ 318,000 $ 507,000 506,000 $ 420,000 $ 390,000 $ 454,000
General & Administrative...... 32,000 29,000 37,000 39,000 38,000 45,000 46,000
Depreciation.................. 73,000 73,000 98,000 92,000 96,000 83,000 223,000
Interest Expense.............. 252,000 258,000 336,000 350,000 356,000 363,000 358,000
Property Taxes................ 69,000 69,000 88,000 58,000 79,000 78,000 78,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Expenses........ $ 763,000 $ 747,000 $ 1,066,000 $ 1,075,000 $ 989,000 $ 959,000 $ 1,169,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Income (Loss)............. $ 90,000 $ 83,000 $ 54,000 (29,000) $ 20,000 $ 28,000 $ (206,000)
=========== =========== =========== =========== =========== =========== ===========
Net Income (Loss) per limited
partnership unit............ $ 3,564.00 $ 3,286.80 $ 2,138.40 $ (1,148.40) $ 792.00 $ 1,108.80 $ (8,157.60)
=========== =========== =========== =========== =========== =========== ===========
Distributions per limited
partnership unit............ $ -- $ -- $ -- $ -- $ -- $ -- $ --
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
S-52
<PAGE> 1661
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP
Comparison of the Nine Months Ended September 30, 1998 to the Nine Months Ended
September 30, 1997
NET INCOME
Your partnership recognized net income of $90,000 for the nine months ended
September 30, 1998, compared to $83,000 for the nine months ended September 30,
1997. The increase in net income of $7,000 was the result of an increase in
revenues, partially off-set by an increase in operating and other expenses.
These factors are discussed in more detail in the following paragraphs.
REVENUES
Rental and other property revenues from the partnership property totaled
$853,000 for the nine months ended September 30, 1998, compared to $830,000 for
the nine months ended September 30, 1997, an increase of $23,000, or 2.8%. The
partnership increased rental rates by an average of 2.8%; however, occupancy
decreased 1.7% to 95.3%. The increase in Other Income of $19,000 was due
primarily to higher lease cancellation fees and interest income.
EXPENSES
Partnership property operating expenses, consisting of utilities (net of
reimbursements received from tenants), contract services, turnover costs,
repairs and maintenance, advertising and marketing, and insurance totaled
$337,000 for the nine months ended September 30, 1998, compared to $318,000 for
the nine months ended September 30, 1997, an increase of $19,000, due primarily
to higher advertising costs and increases in maintenance expenses. Advertising
increased $6,000 as management tried to increase occupancy. Maintenance costs
increased $15,000 as the Partnership incurred landscaping and interior painting
projects. This increase is partially offset by an exterior building repairs
project during 1997. Partnership property management expenses totaled $42,000
for both periods.
INTEREST EXPENSE
Interest expense decreased $6,000 to $252,000 for the nine months ended
September 30, 1998, compared to the corresponding period for 1997. This decrease
is the result of a lower outstanding mortgage balance due to principal payments
made during the period.
As part of the ongoing business plan of your partnership, the general
partner monitors the rental market environment of your partnership's investment
property to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting your partnership from increases in
expenses. As part of this plan, the general partner attempts to protect your
partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the general partner will be able to sustain such a plan.
Comparison of the Year Ended December 31, 1997 to the Year Ended December 31,
1996
NET INCOME
Your partnership recognized net income of $55,874 for the year ended
December 31, 1997, compared to a net loss of $29,605 for the year ended December
31, 1996. The increase in net income of $85,479, or 288% was primarily the
result of increasing rental revenue while maintaining stable operating expenses.
These factors are discussed in more detail in the following paragraphs.
S-53
<PAGE> 1662
REVENUES
Rental and other property revenues from the partnership's property totaled
$1,120,563 for the year ended December 31, 1997, compared to $1,045,905 for the
year ended December 31, 1996, an increase of $74,658, or 7.1%. This increase is
due to an increase in rental rates of approximately 5% and occupancy rates of
approximately 9%. Occupancy rates increased primarily due to a new management
team that focused efforts on improving occupancy.
EXPENSES
Operating expenses, consisting of utilities (net of reimbursements received
from tenants), contract services, turnover costs, repairs and maintenance,
advertising and marketing, and insurance, totaled $506,823 for the year ended
December 31, 1997, compared to $506,255 for the year ended December 31, 1996, an
increase of $568 or 0.1%. Management expenses totaled $55,922 for the year ended
December 31, 1997, compared to $51,864 for the year ended December 31, 1996, an
increase of $4,058, or 7.8%. The increase resulted from an increase in rental
revenues as management fees are based on a percentage of revenue.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $36,549 for the year ended
December 31, 1997 compared to $38,664 for the year ended December 31, 1996, a
decrease of $2,115 or 5.5%. The decrease was primarily due to decreased training
and travel expenses and decreased legal fees.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $335,895 for the year ended December 31, 1997, compared to
$350,280 for the year ended December 31, 1996, a decrease of $14,385, or 4.1%.
The decrease is due to a lower outstanding balance on the mortgage indebtedness
due to principal payments made during the year.
Comparison of the Year Ended December 31, 1996 to the Year Ended December 31,
1995
NET INCOME
Your partnership recognized a net loss of $29,605 for the year ended
December 31, 1996, compared to a net income of $19,691 for the year ended
December 31, 1995. The decrease in net income of $49,296, or 250%, was primarily
the result of an increase in operating expenses, offset by an increase in rental
revenue. These factors are discussed in more detail in the following paragraphs.
REVENUES
Rental and other property revenues from the partnership's property totaled
$1,045,905 for the year ended December 31, 1996, compared to $1,009,083 for the
year ended December 31, 1995, an increase of $36,822, or 3.6%. This increase is
due to increases in rental rates of approximately 5%, other interest income of
$1,300 and pet fees of $1,600, offset by decreases in lease cancellation fees of
$6,000, cleaning and damage fees of $2,000 and late fees of $1,100.
EXPENSES
Operating expenses, consisting of utilities (net of reimbursements received
from tenants), contract services, turnover costs, repairs and maintenance,
advertising and marketing, and insurance, totaled $506,255 for the year ended
December 31, 1996, compared to $420,214 for the year ended December 31, 1995, an
increase of $86,041 or 20.5%. The increase in expenses is due primarily to
utility expenses caused by a hard winter and an increase in water rates, as
these two expenses increased by $11,000 and $5,000, respectively. Additionally,
maintenance expense increased, due to the hiring of a new employee, by $10,000.
Further increases resulted from major landscaping of $3,000, contract
exterminating of $2,000, contract cleaning of $4,000, contract yards and grounds
of $2,000, plumbing supplies of $6,000, interior improvements of $9,000,
S-54
<PAGE> 1663
exterior building improvements of $7,000, exterior improvements of $6,000,
parking lot repairs of $14,000, and contract painting interior of $6,000.
Management expenses totaled $51,864 for the year ended December 31, 1996,
compared to $50,789 for the year ended December 31, 1995, an increase of $1,075,
or 2.1%.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $38,664 for the year ended
December 31, 1996 compared to $37,672 for the year ended December 31, 1995, an
increase of $992 or 2.6%.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $350,280 for the year ended December 31, 1996, compared to
$356,345 for the year ended December 31, 1995, a decrease of $6,065, or 1.7%.
The decrease is due to a lower outstanding balance on the mortgage indebtedness
due to principal payments made during the year.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, your Partnership had $17,000 in cash and cash
equivalents. Your Partnership's principal demands for liquidity include normal
operating activities, payments of principal and interest on outstanding debt,
capital improvements, and distributions paid to limited partners. At September
30, 1998, the outstanding balance on the mortgage indebtedness, excluding
discount of $158,000, was $3,823,000. The mortgages require monthly payments of
approximately $34,448 until November 2002. The notes are collateralized by
pledge of land and buildings and have a stated interest rate of 7.6%. Cash used
in investing activities consisted of capital improvements and deposits to escrow
accounts maintained by the mortgage lender. Cash used in financing activities
consisted of payments of principal made on the mortgages encumbering your
partnership's properties and partner distributions.
There are no commitments for material capital expenditures as of September
1998. The sufficiency of existing liquid assets to meet future liquidity and
capital expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and meet other operating needs of the partnership. Such assets are currently
thought to be sufficient for any near-term needs of the partnership. Management
believes that your partnership has adequate sources of cash to finance its
operations, both on a short-term and long-term basis. Presently there are no
plans for any major renovations or improvements for the property. Budgeted
renovations or improvements for 1999 total $266,000 and are intended to be paid
for out of cash flow or borrowings. Renovation items include heating,
ventilation and air conditioning systems, electrical, balconies/patios,
sidewalks, drives and parking lot, exterior lighting, landscaping and
irrigation, and fence.
S-55
<PAGE> 1664
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to 25% of the outstanding 25 units of your
partnership (up to 6.25 units) for consideration per unit of (i) 1,453.00
Preferred OP Units, (ii) 965.25 Common OP Units, or (iii) $36,322 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 the commencement of our offer 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., New York City time, on June 4, 1999, 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 January 1, 1999 (subject to proration
as described below), although you will be entitled to retain any distributions
you may have received after such date and prior to our commencement of this
offer.
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 March 26, 1999.
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
S-56
<PAGE> 1665
offer consideration shall be reduced by any interim distributions made by your
partnership between the commencement, 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. However, any tendered units may be
withdrawn at any time prior to our accepting them for payment. The AIMCO
Operating Partnership has an 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.
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.
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.
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.
S-57
<PAGE> 1666
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 pays for your units.
You agree not to exercise any rights pertaining to the tendered units without
the prior consent of the AIMCO Operating Partnership. Upon such 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 your general
partner (which is our subsidiary) (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.
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
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<PAGE> 1667
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 may
have to provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal.
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 "Federal Income Tax Consequences."
Transfer Taxes
The amount of any transfer taxes (whether imposed on the registered holder
of units or any person) payable on account of the transfer to such person will
be deducted from the purchase price unless satisfactory evidence of the such
taxes or exemption therefrom is submitted.
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.
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<PAGE> 1668
WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to our acceptance of such units for payment.
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.
The offer may be extended or delayed indefinitely and no payment will be
made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment. 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 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
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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 25% 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 25% 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 25% 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 25%, 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 the general partner of your partnership and thereby
controls the management of your partnership. In addition, AIMCO owns 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.
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After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units.
However, the AIMCO Operating Partnership and its affiliates will not acquire any
additional units for a period of at least one year after expiration of the
offer. 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. In addition, we are not extending
appraisal rights in connection with the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
No provisions have been made with regard to the offer to allow you or other
limited partners to inspect the books and records of your partnership or to
obtain counsel or appraisal services at our expense or at the expense of your
partnership. However, as described under "Comparison of Your Partnership and the
AIMCO Operating Partnership -- Review of Investor Lists," you have the right
under your partnership's agreement of limited partnership to obtain a list of
the limited partners.
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 the date of this Prospectus Supplement and at or before the expiration
date of the offer, including any extension thereof, 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 reasonable
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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 which, in the reasonable 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 the date hereof, (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
the date hereof, (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 reasonable 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 reasonable judgment of the
AIMCO Operating Partnership, a material acceleration or worsening thereof
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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 your
general partner (which is our subsidiary) 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 reasonable 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
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(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 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 reasonable 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
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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;
or
(h) the offer to purchase may have an adverse effect on AIMCO's status
as a REIT.
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 reasonable 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.
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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. However,
we will not be able to control voting decisions unless we acquire more units in
another transaction, which cannot take place for at least one year after
expiration of this offer. 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 controls the company that manages your partnership's
property. In the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Effect on Trading Market
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.
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. Consummation of
the offer will not affect your partnership's agreement of limited partnership,
the financial condition or results of operations of your partnership, the
business and properties owned, the management compensation payable to your
general partner (which is our subsidiary) or its affiliates or any other matter
relating to your partnership, except it would result in the AIMCO Operating
Partnership substantially increasing its ownership of units of your partnership.
We will receive future distributions from your partnership for any units we
purchase.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by your general partner (which
is our subsidiary), 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
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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 (excluding 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 (which are requests to dismiss the action as a matter
of law) were heard on February 8, 1999, but no decision has been reached by the
Court. While no assurances can be given, we believe that the ultimate outcome of
this litigation will not have a material adverse effect on us.
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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, the accompanying Prospectus, the Letter of Transmittal,
and the legal and accounting fees in connection with this offer. 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 $50,000.
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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FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of the material Federal
income tax consequences of the offer 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
differing interpretations or change, possibly retroactively. This 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 you in light of your specific investment or tax
circumstances, or if you are subject to special tax rules (for example, if you
are a financial institution, broker-dealer, insurance company, or, except to the
extent discussed below, tax-exempt organization or foreign investor, 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 are 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. No clear precedent or authority
may be available on some questions. 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 of your specific tax situation.
TAX OPINIONS
Skadden, Arps, Slate, Meagher & Flom LLP ("Special Tax Counsel") has
delivered an opinion letter with regard to the material United States Federal
income tax consequences of the offer. The opinion letter of Special Tax Counsel
is filed as an exhibit to this Registration Statement. You may obtain a copy of
such opinion letter by sending a written request to the AIMCO Operating
Partnership.
The specific United States Federal income tax opinions that Special Tax
Counsel has provided are:
1. Commencing with AIMCO's initial taxable year ended December 31, 1994,
AIMCO was organized in conformity with the requirements for qualification
as a REIT under the Code, and its actual method of operation has enabled,
and its proposed method of operation will enable, AIMCO to meet the
requirements for qualification and taxation as a REIT. As noted in the
accompanying Prospectus, AIMCO's qualification and taxation as a REIT
depend upon its ability to meet, through actual annual operating results,
certain requirements, including requirements relating to distribution
levels and diversity of stock ownership, and the various qualification
tests imposed under the Code, the results of which have been represented by
the AIMCO's officers and will not be reviewed by Special Tax Counsel. No
assurance can be given that the actual results of AIMCO's future operations
for any one taxable year will satisfy the requirements for taxation as a
REIT under the Code.
2. The AIMCO Operating Partnership will be treated as a partnership and
not as an association taxable as a corporation for Federal income tax
purposes.
3. You will not recognize gain or loss for Federal income tax purposes
when you exchange your units solely for OP Units. If, immediately prior to
such exchange, the amount of your partnership's liabilities allocable to
the units you transfer to the AIMCO Operating Partnership exceeds the
amount of the AIMCO Operating Partnership's liabilities allocable to you
immediately after the exchange, you will receive a deemed distribution in
an amount equal to such liability relief and will recognize gain for
Federal income tax purposes to the extent that the amount of such deemed
distribution exceeds your aggregate adjusted tax basis in your OP Units.
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4. If you exchange your units for cash and OP Units, you will be treated
for Federal income tax purposes as selling some of your units for cash in a
taxable sale and contributing some of your units for OP Units in a tax-free
exchange. With respect to the units that you will be treated as selling for
cash, you will be taxed as described in paragraph number five below. With
respect to the units that you will be treated as exchanging for OP Units,
you will be taxed as described in paragraph number three above.
5. If you sell your units solely for cash, you will recognize gain or
loss for Federal income tax purposes in an amount equal to the difference
between (i) your amount realized on the sale and (ii) your adjusted tax
basis in the units you sold.
6. If you retain all or a portion of your units and your partnership
terminates for Federal income tax purposes, you will not recognize any gain
or loss as a result of such termination and your capital account in your
partnership will not be affected.
7. Because of the factual nature of the inquiry, no opinion is expressed
by Special Tax Counsel as to whether your exercise of a redemption right
with respect to an OP Unit would cause your contribution of units to the
AIMCO Operating Partnership to be a taxable transaction under the disguised
sale rules of the Code.
8. The discussion in the accompanying Prospectus under the captions
"FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS" and "FEDERAL
INCOME TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNIT HOLDERS" and
in this Prospectus Supplement under the caption "FEDERAL INCOME TAX
CONSEQUENCES" is a fair and accurate summary of the material United States
Federal income tax consequences of the offers and of the acquisition,
ownership and disposition of the OP Units and the AIMCO stock by a holder
who acquires the OP Units or AIMCO stock in connection with the offers,
subject to the qualifications set forth therein.
It must be emphasized that these opinions are based and conditioned upon
representations and covenants made by AIMCO and the AIMCO Operating Partnership
as to factual matters (including representations and covenants concerning
AIMCO's properties and the past, present and future conduct of its business and
your partnership's liabilities). These opinions are expressed as of the date of
the opinion letter and Special Tax Counsel has no obligation to advise AIMCO or
the AIMCO Operating Partnership of any subsequent change in the matters stated,
represented, or assumed or any subsequent change in the law. An opinion of
counsel is not binding on the IRS, and no assurance can be given that the IRS
will not challenge the above opinions of Special Tax Counsel.
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 when you exchange your units solely for OP Units. You may
recognize gain upon such exchange if, immediately prior to such exchange, the
amount of liabilities of your partnership allocable to the units you transferred
exceeds the amount of the AIMCO Operating Partnership liabilities allocable to
you immediately after such exchange. If this was true in your case, the excess
would be treated as a deemed distribution of cash to you from the AIMCO
Operating Partnership. This deemed cash distribution would be treated as a
nontaxable return of capital to the extent of your adjusted tax basis in your OP
Units 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 you exchange your units pursuant to the offer,
at least equal to the amount of liabilities of your partnership that were
allocable to your units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most persons who participate in the tender offer
would not recognize gain or loss as a result of an exchange of units solely for
OP Units pursuant to the offer.
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DISGUISED SALES
Under the Code, a transfer of property by a partner to a partnership
followed by a related transfer by the partnership of money or other property to
the partner is treated as a "disguised" sale if (1) the second transfer would
not have occurred but for the first transfer and (2) the second transfer "is not
dependent on the entrepreneurial risks of the partnership operations." In a
disguised sale, the partner is treated as if he or she sold the contributed
property to the partnership as of the date the property was contributed to the
partnership. In addition, unless a few technical exceptions apply, transfers of
money or other property between a partnership and a partner that are made within
two years of each other, including redemptions of OP Units made within two years
of a contribution of your units, must be reported to the IRS and are presumed to
be a "disguised" sale unless the facts and circumstances clearly establish that
the transfers do not constitute a sale.
While there is no authority applying the disguised sale rules to the
exercise of a redemption right by a partner with respect to a partnership
interest received in exchange for property, the exercise of a redemption right
with respect to OP Units within two years of the date of the contribution of
your units to the AIMCO Operating Partnership may be treated as a disguised
sale. If this treatment were to apply, you would be treated for Federal income
tax purposes as if, on the date of the contribution of your units, the AIMCO
Operating Partnership transferred to you an obligation to give you the
redemption proceeds. In that case, you would be required to recognize gain on
the disguised sale in such earlier year. Because of the factual nature of such
an inquiry, Special Tax Counsel is unable to opine whether your exercise of a
redemption right with respect to an OP Unit would cause your contribution of
units to the AIMCO Operating Partnership to be a taxable transaction under the
disguised sale rules of the Code.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Federal Income Taxation of the
AIMCO Operating Partnership and OP Unitholders -- 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
If you exchange your units for cash and OP Units, you will be treated as
selling some of your units for cash in a taxable sale and contributing some of
your units for OP Units in a tax-free exchange. Your adjusted tax basis in your
transferred units will be allocated between the units you will be deemed to have
sold and the units you will be deemed to have contributed to the AIMCO Operating
Partnership.
With respect to the units that you will be treated as selling, you will
recognize gain or loss in an amount equal to the difference between (i) your
"amount realized" on the sale and (ii) your adjusted tax basis in units you
sold. Your "amount realized" on such sale will be equal to the sum of the amount
of cash you received pursuant to the offer (that is, the offer consideration)
plus the amount of your partnership's liabilities attributed to the units you
sold. For purposes of these partial sale rules, the amount of your partnership's
liabilities attributed to the units you sold will be equal to the lesser of (i)
the excess of the amount of your partnership's liabilities allocable to you in
respect of the transferred units immediately prior to the exchange over the
amount of such liabilities allocable to you as determined immediately after the
exchange or (ii) the product of (A) the amount of your partnership's liabilities
allocable to you in respect of the units you are deemed to have sold immediately
prior to the exchange and (B) your "net equity percentage" with respect to those
units. Your "net equity percentage" will be equal to the percentage determined
by dividing (x) the cash you received in the exchange by (y) the excess of the
gross fair market value of the units in the exchange over the amount of your
partnership's liabilities allocable to you in respect of those units immediately
prior to the exchange. Thus, your tax liability could exceed the amount of cash
you receive in the sale.
With respect to the units that you will be treated as exchanging, rather
than selling, you will be taxed as described above under the heading "Tax
Consequences of Exchanging Units Solely for OP Units."
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TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
If you sell your units solely for cash, you will recognize gain or loss on
a sale of your units equal to the difference between (i) your "amount realized"
on the sale and (ii) your adjusted tax basis in the units you sold. The "amount
realized" with respect to a unit will be equal to the sum of the amount of cash
you received for your units (that is, the offer consideration) plus the amount
of the liabilities of your partnership allocable to such units (as determined
under Section 752 of the Code). Thus, your tax liability could exceed the amount
of cash you receive in the sale.
ADJUSTED TAX BASIS
If you acquired your units for cash:
- your initial tax basis in your units will be equal to such cash
investment in your partnership increased by your share of your
partnership's liabilities at the time such units were acquired;
- your initial tax basis generally has been increased by:
- your share of your partnership's income and gains and
- any increases in your share of your partnership's liabilities; and
- your initial tax basis generally has been decreased (but not below zero)
by:
- your share of cash distributions from your partnership,
- any decreases in your share of your partnership's liabilities,
- your share of your partnership's losses, and
- your share of nondeductible expenditures of your partnership that are
not chargeable to capital.
For purposes of determining your adjusted tax basis in your units
immediately prior to a disposition of such units, your adjusted tax basis will
include your 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), the gain you
would recognize pursuant to the offer will exceed the cash proceeds you would
realize upon the sale of your units. The adjusted tax basis of the OP Units you
receive in exchange for your units pursuant to the offer will be equal to (i)
the sum of your adjusted tax basis in the units you transferred plus any gain
recognized in the exchange and will be reduced by (ii) any cash you received or
you were deemed to receive 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 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 that is attributable to your share of "unrealized receivables" of your
partnership exceeds the tax basis attributable to those assets, such excess will
be treated as ordinary income. Among other things, "unrealized receivables"
include depreciation recapture for 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. You will not receive any future distributions
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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 the income or loss. 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 the passive 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 passive losses in the manner described below. If you receive
cash for 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 receive cash for all or a portion of your units
pursuant to the offer and recognize 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
receive cash for all of your units pursuant to the offer, the balance of any
"suspended" losses from your partnership 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.
TAX REPORTING
If you tender any units, you must report the transaction by filing a
statement with your Federal income tax return for the year of the tender which
provides certain required information to the IRS. To prevent the possible
application of back-up Federal income tax withholding of 31% with respect to
payment of the offer consideration, you may have to provide the AIMCO Operating
Partnership with your correct taxpayer identification number. See the
instructions to the Letter of Transmittal.
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"). If you are a foreign person, the AIMCO Operating Partnership will
be required, under the FIRPTA provisions of the Code, to deduct and withhold 10%
of the amount realized by you on the disposition. The amount withheld would be
creditable against your Federal income tax liability and, if the amount withheld
exceeds your actual tax liability you could obtain a refund from the IRS by
filing a U.S. income tax return. See the Instructions to the Letter of
Transmittal.
TAX CONSEQUENCES OF A TERMINATION OF YOUR PARTNERSHIP
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"). The AIMCO Operating Partnership's acquisition of units pursuant
to the offer may result in a Termination of your partnership. If an acquisition
of units results in a
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Termination, the following Federal income tax events will be deemed to occur:
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
interests 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 to the
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
to the New Partnership. A Termination will change (and possibly shorten) a
Remaining Offeree's holding period with respect to its units in your partnership
for Federal income tax purposes. Gains recognized by a Remaining Offeree on the
disposition of New Partnership interests with a holding period of 12 months or
less may be classified as short-term capital gains and subject to taxation at
ordinary income tax rates.
The New Partnership's adjusted tax basis in its assets will be the same as
the Old Partnership's basis in such assets immediately before the Termination. A
Termination will also cause the New Partnership to recalculate the depreciable
lives of its assets. This will cause the assets to be depreciated over a longer
period of time than if there had been no Termination. This would generally
decrease the annual average depreciation deductions allocable to the Remaining
Offerees for a number of years following consummation of the offer (thereby
increasing the taxable income allocable to their retained units in each such
year), but would have no effect on the total depreciation deductions available
over the useful lives of the assets of your partnership.
Elections as to 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.
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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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 The AIMCO Operating Partnership is organized
organized under Delaware law. as a 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 The term of the AIMCO Operating Partnership
partners as a finite life investment, with continues until December 31, 2093, unless
limited partners to receive regular cash the AIMCO Operating Partnership is dissolved
distributions out of your partnership's sooner pursuant to the terms of the AIMCO
Distributable Cash (as defined in your Operating Partnership's agreement of limited
partnership's agreement of limited partnership (the "AIMCO Operating
partnership). The termination date of your Partnership Agreement") or as provided by
partnership is December 31, 2026. law. See "Description of 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, The purpose of the AIMCO Operating
develop, operate, lease, manage and hold for Partnership is to conduct any business that
investment and production of income with may be lawfully conducted by a limited
your partnership's property. Subject to partnership organized pursuant to the
restrictions contained in your partnership's Delaware Revised Uniform Limited Part-
agreement of limited partnership, your nership Act (as amended from time to time,
partnership may perform all act necessary, or any successor to such statute) (the
advisable or convenient to the business of "Delaware Limited Partnership Act"),
your partnership including borrowing money provided that such business is to be
and creating liens. conducted in a manner that permits AIMCO to
be qualified as a REIT, unless AIMCO ceases
to qualify as a REIT. The AIMCO Operating
Partner-
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship 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 ac-
tion, 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>
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is The general partner is authorized to issue
authorized to issue additional limited additional partnership interests in the
partnership interests in your partnership AIMCO Operating Partnership for any
and may admit additional limited partners by partnership purpose from time to time to the
selling not more than 25 units for cash and limited partners and to other persons, and
notes to selected persons who fulfill the to admit such other persons as additional
requirements set forth in your partnership's limited partners, on terms and conditions
agreement of limited partnership. The and for such capital contributions as may be
capital contribution need not be equal for established by the general partner in its
all limited partners and no action or sole discretion. The net capital
consent is required in connection with the contribution need not be equal for all OP
admission of any additional limited Unitholders. No action or consent by the OP
partners, except that the admission of the Unitholders is required in connection with
limited partners other than those who the admission of any additional OP
purchase the 25 units and substituted Unitholder. See "Description of OP
limited partners must be effected by an Units -- Management by the AIMCO GP" in the
amendment to your partnership's agreement of accompanying Prospectus. Subject to Delaware
limited partnership executed and acknowledge law, any additional partnership interests
by the general partner and all the limited may be issued in one or more classes, or one
partners. 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 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 The AIMCO Operating Partnership may lend or
limited partnership, your partnership may contribute funds or other assets to its
contract with the general partner or its subsidiaries or other persons in which it
affiliates for various goods and has an equity investment,
</TABLE>
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YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
services as specified in your partnership's and such persons may borrow funds from the
agreement of limited partnership. In AIMCO Operating Partnership, on terms and
addition, the general partner is authorized conditions established in the sole and
to lend money to your partnership upon the absolute discretion of the general partner.
right of the general partner to be reim- To the extent consistent with the business
bursed for sums expended by the general purpose of the AIMCO Operating Partnership
partner in the conduct of the business of and the permitted activities of the general
your partnership if such expenditure are partner, the AIMCO Operating Partnership may
authorized and not otherwise restricted transfer assets to joint ventures, limited
under the terms of your partnership's liability companies, partnerships,
agreement of limited partnership; provided corporations, business trusts or other
that interest on such loans will accrue at business entities in which it is or thereby
the greater of 2% over the prime interest becomes a participant upon such terms and
rate charged by the Third National Bank in subject to such conditions consistent with
Nashville, adjusted monthly or the general the AIMCO Operating Partnership Agreement
partner's actual interest cost in borrowing and applicable law as the general partner,
such amounts. The principal and interest in its sole and absolute discretion,
with respect to such loans will be fully believes to be advisable. Except as
paid prior to the distributions of funds to expressly permitted by the AIMCO Operating
the partners unless such loans contain a Partnership Agreement, neither the general
specific provision to the contrary. partner nor any of its affiliates may sell,
transfer or convey any property to the AIMCO
Operating Partnership, directly or
indirectly, except pursuant to transactions
that are determined by the general partner
in good faith to be fair and reasonable.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is The AIMCO Operating Partnership Agreement
authorized to obtain a loan of up to contains no restrictions on borrowings, and
$1,650,000 from an institutional lender and the general partner has full power and
to execute, acknowledge and deliver such authority to borrow money on behalf of the
documents and instruments, including AIMCO Operating Partnership. The AIMCO
promissory notes, collection agreements, Operating Partnership has credit agreements
deeds to secure debts, deeds of trust, that restrict, among other things, its
mortgages, assignments and other documents ability to incur indebtedness.
and security instruments as may be necessary
or desirable in connection with obtaining
such loan and also borrow money in the
ordinary course of business and as security
therefor to mortgage all or any part of the
real property of your partnership. The
partnership may also offer and sell up to
$500,000 of mortgage-backed bonds.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited Each OP Unitholder has the right, upon
partnership entitles a limited partner to written demand with a statement of the
inspect the register containing the names purpose of such demand and at such OP
and addresses of all limited partners at all Unitholder's own expense, to obtain a
reasonable times at the principal office of current list of the name and last known
your partnership. business, residence or mailing address of
the general partner and each other OP
Unitholder.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has All management powers over the business and
the exclusive right to manage and control affairs of the AIMCO Operating Partnership
the partner- are vested in
</TABLE>
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<PAGE> 1685
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship's business, to bind your partnership by AIMCO-GP, Inc., which is the general
its sole signature and take any action it partner. No OP Unitholder has any right to
deems necessary or advisable in connection participate in or exercise control or
with the business of your partnership. No management power over the business and
limited partner has any right or power to affairs of the AIMCO Operating Partner-
take part in any way in the control of your ship. The OP Unitholders have the right to
partnership business except as may be vote on certain matters described under
expressly provided in your partnership's "Comparison of Your Units and AIMCO OP
agreement of limited partnership or by Units -- Voting Rights" below. The general
applicable statutes. partner may not be removed by the OP
Unitholders with or without 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>
Under your partnership's agreement of Notwithstanding anything to the contrary set
limited partnership, the general partner of forth in the AIMCO Operating Partnership
your partnership will not incur any Agreement, the general partner is not liable
liability to your partnership or any limited to the AIMCO Operating Partnership for
partner for any mistakes or errors in judg- losses sustained, liabilities incurred or
ment or for any acts or omission believed by benefits not derived as a result of errors
the general partner in good faith to be in judgment or mistakes of fact or law of
within the scope of authority conferred upon any act or omission if the general partner
it by your partnership agreement. In acted in good faith. The AIMCO Operating
addition, your partnership will, to the Partnership Agreement provides for
extent permitted by law, indemnify and save indemnification of AIMCO, or any director or
harmless the general partner against and officer of AIMCO (in its capacity as the
from any personal loss, liability (including previous general partner of the AIMCO
attorneys' fees) or damage incurred by it as Operating Partnership), the general partner,
the result of any act or omission in its any officer or director of general partner
capacity as general partner unless or the AIMCO Operating Partner-
</TABLE>
S-77
<PAGE> 1686
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
such loss, liability or damage results from ship and such other persons as the general
gross negligence or willful misconduct by partner may designate from and against all
the general partner. 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 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
and certain state securities administrations
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 and their
respective state securities laws.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of Except in limited circumstances, the general
limited partnership, the limited partners partner has exclusive management power over
may remove a general partner following the business and affairs of the AIMCO
notice and a failure to cure the injury to Operating Partnership. The general partner
your partnership within a reasonable time may not be removed as general partner of the
for cause upon the vote of the limited AIMCO Operating Partnership by the OP
partners holding 51% of the then outstanding Unitholders with or without cause. Under the
units. The general partner may withdraw AIMCO Operating Partnership Agreement, the
voluntarily from your partnership with the general partner may, in its sole discretion,
consent of holders of 51% of the then prevent a transferee of an OP Unit from
outstanding units. A substitute general becoming a substituted limited partner
partner may be elected upon the affirmative pursuant to the AIMCO Operating Partnership
vote of limited partners owning more than Agreement. The general partner may exercise
50% of the units. A limited partner may not this right of approval to deter, delay or
transfer his interests without the consent hamper attempts by persons to acquire a
of the general partner which may be withheld controlling interest in the AIMCO Operating
at the sole discretion of the general Partnership. Additionally, the AIMCO
partner. 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 With the exception of certain circumstances
partnership may be amended by the limited set forth in the AIMCO Operating Partnership
partners owning more than 50% of the units Agreement, whereby the general partner may,
and the general partner. Any amendment which without the consent of the OP Unitholders,
alters a limited partner's interest in the amend the AIMCO Operating Partnership
capital profits, Distributable Cash of Agreement, amendments to
</TABLE>
S-78
<PAGE> 1687
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
your partnership must be approved by the the AIMCO Operating Partnership Agreement
affected partner. Such proposed amendments require the consent of the holders of a
may be presented to the limited partners majority of the outstanding Common OP Units,
upon the motion of the general partner or excluding AIMCO and certain other limited
receipt of a written request executed by exclusions (a "Majority in Interest").
limited partners owning at least 25% of the Amendments to the AIMCO Operating
units then outstanding. Partnership Agreement may be proposed by the
general partner or by holders of a Majority
in Interest. Following such proposal, the
general partner will submit any proposed
amendment to the OP Unitholders. The general
partner will seek the written consent of the
OP Unitholders on the proposed amendment or
will call a meeting to vote thereon. See
"Description of OP Units -- Amendment of the
AIMCO Operating Partnership Agreement" in
the accompanying Prospectus.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
In addition to the right to distributions in The general partner does not receive
respect of its partnership interest and compensation for its services as general
reimbursement for all fees and expenses as partner of the AIMCO Operating Partnership.
set forth in your partnership's agreement of However, the general partner is entitled to
limited partnership, the general partner payments, allocations and distributions in
receives an annual fee of 1% of the gross its capacity as general partner of the AIMCO
collected income from your partnership's Operating Partnership. In addition, the
property. Moreover, the general partner or AIMCO Operating Partnership is responsible
certain affiliates may be entitled to for all expenses incurred relating to the
compensation for additional services AIMCO Operating Partnership's ownership of
rendered. 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 Except for fraud, willful misconduct or
limited partnership, the liability of each gross negligence, no OP Unitholder has
of the limited partners for his share of the personal liability for the AIMCO Operating
losses and debts of your partnership is Partnership's debts and obligations, and
limited to the total capital contribution of liability of the OP Unitholders for the
such limited partners (subject to the terms AIMCO Operating Partnership's debts and
and conditions pursuant to which such obligations is generally limited to the
capital contribution is to be paid) plus, to amount of their investment in the AIMCO
the extent that such limited partner Operating Partnership. However, the
rightfully has received the return of such limitations on the liability of limited
capital contribution, any sum, not in excess partners for the obligations of a limited
of such return, necessary to discharge partnership have not been clearly
liabilities of your partnership to all established in some states. If it were
creditors who extended credit before such determined that the AIMCO Operating Part-
return; provided that the liability with nership had been conducting business in any
respect to rightfully returned capital state without compliance with the applicable
contribution is limited to one year from the limited partnership statute, or that the
date of such return. 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 Agree-
</TABLE>
S-79
<PAGE> 1688
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ment 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 Unless otherwise provided for in the
limited partnership, the general partner relevant partnership agreement, Delaware law
must devote such of its time and that of its generally requires a general partner of a
employees to your partnership business as Delaware limited partnership to adhere to
may be reasonably necessary to carry on and fiduciary duty standards under which it owes
conduct your partnership's business. The its limited partners the highest duties of
general partner must use its best effort to good faith, fairness and loyalty and which
do all other things and perform such other generally prohibit such general partner from
duties as may be reasonably necessary to the taking any action or engaging in any
successful operation of your partnership and transaction as to which it has a conflict of
the general partner must act as a fiduciary interest. The AIMCO Operating Partnership
with respect to the assets and business of Agreement expressly authorizes the general
your partnership. The general partner and partner to enter into, on behalf of the
its affiliates may engage in or possess an AIMCO Operating Partnership, a right of
interest in other business ventures of every first opportunity arrangement and other
nature and description, including, without conflict avoidance agreements with various
limitation, real estate business ventures, affiliates of the AIMCO Operating
whether or not such other enterprise is in Partnership and the general partner, on such
competition with any of the activities of terms as the general partner, in its sole
your partnership. and absolute discretion, believes are
advisable. The AIMCO Operating Partnership
In general, your partnership's agreement of Agreement expressly limits the liability of
limited partnership and the AIMCO Operating the general partner by providing that the
Partnership Agreement have limitations on general partner, and its officers and
the liability of the general partner but directors will not be liable or accountable
such limitations differ and provide more in damages to the AIMCO Operating
protection for the general partner of the Partnership, the limited partners or as-
AIMCO Operating Partnership. signees 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 The AIMCO Operating Partnership is not
differences between the taxation of your subject to Federal income taxes. Instead,
partnership and the AIMCO Operating each holder of OP Units includes in income
Partnership. 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
consti-
</TABLE>
S-80
<PAGE> 1689
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
tute "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 nonre-
course 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>
<CAPTION>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity in- equity interests entitling each equity interests entitling each OP
terests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of and as declared by the board of rata share of cash distributions
distributions to be made to the directors of the general partner made from Available Cash (as such
partners of your partnership. of the AIMCO Operating Part- term is defined in the AIMCO
nership, quarterly cash distribu- Operating Partnership Agreement)
tion at a rate of $0.50 per to the partners of the AIMCO
Preferred OP Unit, subject to ad- Operating Partnership. To the
justments from time to time on or extent the AIMCO Operating
after the fifth anniversary of the Partnership sells or refi-
</TABLE>
S-81
<PAGE> 1690
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
issue date of the Preferred OP nances its assets, the net
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 Except as otherwise required Under the AIMCO Operating
agreement of limited by applicable law or in the Partnership Agreement, the
partnership, upon the vote AIMCO Operating Partnership OP Unitholders have voting
of the limited partners Agreement, the holders of rights only with respect to
owning a majority of the the Preferred OP Units will certain limited matters such
outstanding units, the have the same voting rights as certain amendments and
limited partners may amend as holders of the Common OP termination of the AIMCO
your partnership's agreement Units. See "Description of Operating Partnership
of limited partnership with OP Units" in the accompany- Agreement and certain
the approval of the general ing Prospectus. So long as transactions such as the
partner, subject to certain any Preferred OP Units are institution of bankruptcy
exceptions; terminate your outstanding, in addition to proceedings, an assignment
partnership with the ap- any other vote or consent of for the benefit of creditors
proval of the general partners required by law or and certain transfers by the
partner; remove or elect a by the AIMCO Operating general partner of its
general partner and approve Partnership Agreement, the interest in the AIMCO
or disapprove the sale of affirmative vote or consent Operating Partnership or the
all or a material portion of of holders of at least 50% admission of a successor
your partnership's property. of the outstanding Preferred general partner.
OP Units will be necessary
The general partner may for effecting any amendment Under the AIMCO Operating
cause the dissolution of of any of the provisions of Partnership Agreement, the
your partnership by the Partnership Unit general partner has the
retiring. Your partnership Designation of the Preferred power to effect the
may then be reformed by the OP Units that materially and acquisition, sale, transfer,
limited partners holding 51% adversely affects the rights exchange or other
of the units then or preferences of the disposition of any assets of
outstanding within ninety holders of the Preferred OP the AIMCO Operating
days following such retire- Units. The creation or Partnership (including, but
ment. In such an event, your issuance of any class or not limited to, the exercise
partnership will dissolve series of partnership units, or grant of any conversion,
and all of its assets and including, without option, privilege or
liability will be con- limitation, any partner- subscription right or any
tributed to a new ship units that may have other right available in
partnership and all parties rights senior or superior to connection with any assets
of your partnership will the Preferred OP Units, at any time held by the
become parties to the new shall not be deemed to AIMCO Operating Partnership)
partnership. materially adversely affect or the merger,
the rights or preferences of consolidation,
In general, you have greater the holders of Preferred OP reorganization or other
voting rights in your Units. With respect to the combination of the AIMCO
partnership than you will exercise of the above Operating Partnership with
have as an OP Unitholder. OP described voting rights, or into another entity, all
Unitholders can not remove each Preferred OP Units without the consent of the
the general partner of the shall have one (1) vote per OP Unitholders.
AIMCO Operating Partnership. Preferred OP Unit.
The general partner may
cause the dissolution of the
AIMCO Operating Partnership
by an
</TABLE>
S-82
<PAGE> 1691
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
"event of withdrawal," as
defined in the Delaware
Limited Partnership Act
(including, without limi-
tation, 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 "Descrip-
tion of OP
Units -- Dissolution and
Winding Up" in the accom-
panying Prospectus.
OP Unitholders cannot remove
the general partner of the
AIMCO Operating Partnership
with or without cause.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement Holders of Preferred OP Subject to the rights of
of limited partnership Units will be entitled to holders of any outstanding
specifies how the cash receive, when and as Preferred OP Units, the
available for distribution, declared by the board of AIMCO Operating Partnership
whether arising from directors of the general Agreement requires the
operations or sales or partner of the AIMCO general partner to cause the
refinancing, is to be shared Operating Partnership, AIMCO Operating Partnership
among the partners. Dis- quarterly cash distributions to distribute quarterly all,
tributions of Distributable at the rate of $0.50 per or such portion as the
Cash are to be made Preferred OP Unit; provided, general partner may in its
quarterly on or about however, that at any time sole and absolute discretion
January 15, April 15, July and from time to time on or determine, of Available Cash
15 and October 15. The dis- after the fifth anniversary (as defined in the AIMCO
tributions payable to the of the issue date of the Operating Partnership
partners are not fixed in Preferred OP Units, the Agreement) generated by the
amount and depend upon the AIMCO Operating Partnership AIMCO Operating Partnership
operating results and net may adjust the annual during such quarter to the
sales or refinancing pro- distribution rate on the general partner, the special
ceeds available from the Preferred OP Units to the limited partner and the
disposition of your lower of (i) 2.00% plus the holders of Common OP Units
partnership's assets. annual interest rate then on the record date es-
applicable to U.S. Treasury tablished by the general
notes with a maturity of partner with respect to such
five years, and (ii) the quarter, in accordance with
annual dividend rate on the their respective
most recently issued AIMCO
</TABLE>
S-83
<PAGE> 1692
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
non-convertible preferred interests in the AIMCO
stock which ranks on a Operating Partnership on
parity with its Class H such record date. Holders of
Cumulative Preferred Stock. any other Preferred OP Units
Such distributions will be issued in the future may
cumulative from the date of have priority over the
original issue. Holders of general partner, the special
Preferred OP Units will not limited partner and holders
be entitled to receive any of Common OP Units with
distributions in excess of respect to distributions of
cumulative distributions on Available Cash,
the Preferred OP Units. No distributions upon
interest, or sum of money in liquidation or other
lieu of interest, shall be distributions. See "Per
payable in respect of any Share and Per Unit Data" in
distribution payment or pay- the accompanying Prospectus.
ments on the Preferred OP
Units that may be in The general partner in its
arrears. sole and absolute discretion
may distribute to the OP
When distributions are not Unitholders Available Cash
paid in full upon the on a more frequent basis and
Preferred OP Units or any provide for an appropriate
Parity Units (as defined record date.
below), all distributions
declared upon the Preferred The AIMCO Operating Partner-
OP Units and any Parity ship Agreement requires the
Units shall be declared general partner to take such
ratably in proportion to the reasonable efforts, as
respective amounts of determined by it in its sole
distributions accumulated, and absolute discretion and
accrued and unpaid on the consistent with AIMCO's
Preferred OP Units and such qualification as a REIT, to
Parity Units. Unless full cause the AIMCO Operating
cumulative distributions on Partnership to distribute
the Preferred OP Units have sufficient amounts to en-
been declared and paid, able the general partner to
except in limited circum- transfer funds to AIMCO and
stances, no distributions enable AIMCO to pay stock-
may be declared or paid or holder dividends that will
set apart for payment by the (i) satisfy the requirements
AIMCO Operating Partnership for qualifying as a REIT
and no other distribution of under the Code and the
cash or other property may Treasury Regulations and
be declared or made, (ii) avoid any Federal
directly or indirectly, by income or excise tax
the AIMCO Operating liability of AIMCO. See
Partnership with respect to "Description of OP
any Junior Units (as de- Units -- Distributions" in
fined below), nor shall any the accompanying Prospectus.
Junior Units be redeemed,
purchased or otherwise
acquired for considera-
tion, 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>
S-84
<PAGE> 1693
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Liquidity and Transferability/Redemption Rights
<TABLE>
<CAPTION>
<S> <C> <C>
A limited partner may There is no public market There is no public market
transfer his units to any for the Preferred OP Units for the OP Units. The AIMCO
person and such person will and the Preferred OP Units Operating Partnership
become a substitute limited are not listed on any Agreement restricts the
partner if: (1) a written securities exchange. The transferability of the OP
assignment has been duly Preferred OP Units are Units. Until the expiration
executed and acknowledged by subject to restrictions on of one year from the date on
the assignor and assignee transfer as set forth in the which an OP Unitholder
and delivered to the general AIMCO Operating Partnership acquired OP Units, subject
partners, (2) the approval Agreement. to certain exceptions, such
of the general partner which OP Unitholder may not
may be withheld in the sole Pursuant to the AIMCO transfer all or any por-
discretion and which will be Operating Partnership tion of its OP Units to any
withheld if the general Agreement, until the transferee without the
partner reasonably believes expiration of one year from consent of the general
that the transfer violates the date on which a holder partner, which consent may
applicable securities law or of Preferred OP Units be withheld in its sole and
result in adverse tax acquired Preferred OP Units, absolute discretion. After
consequences, including the subject to certain the expiration of one year,
termination of your exceptions, such holder of such OP Unitholder has the
partnership for tax Preferred OP Units may not right to transfer all or any
purposes, (3) the assignee transfer all or any portion portion of its OP Units to
has agreement to bound by of its Preferred OP Units to any person, subject to the
all of the terms of your any transferee without the satisfaction of certain con-
partnership's agreement of consent of the general ditions specified in the
limited partnership and partner, which consent may AIMCO Operating Partnership
absolute discretion of the be withheld in its sole and Agreement, including the
general partner has been absolute discretion. After general partner's right of
granted, (4) the assignee the expiration of one year, first refusal. See
represents he is at least 18 such holders of Preferred OP "Description of OP Units --
years of age, is a citizen Units has the right to Transfers and Withdrawals"
and resident of the U.S., transfer all or any portion in the accompanying
has sufficient financial of its Preferred OP Units to Prospectus.
resources to maintain the any person, subject to the
interest acquired and that satisfaction of certain After the first anniversary
he is not acquiring the conditions specified in the of becoming a holder of
interest with a view to AIMCO Operating Partner- Common OP Units, an OP
resell the interest and (5) ship Agreement, including Unitholder has the right,
the assignor and assignee the general partner's right subject to the terms and
have complied with such of first refusal. conditions of the AIMCO
other conditions as set Operating Partnership
forth in your partnership's After a one-year holding Agreement, to require the
agreement of limited period, a holder may redeem AIMCO Operating Partnership
partnership. Preferred OP Units and to redeem all or a portion
receive in exchange of the Common OP Units held
There are no redemption therefor, at the AIMCO Oper- by such party in exchange
rights associated with your ating Partnership's option, for a cash amount based on
units. (i) subject to the terms of the value of shares of Class
any Senior Units (as defined A Common Stock. See
below), cash in an amount "Description of OP
equal to the Liquidation Units -- Redemption Rights"
Preference of the Preferred in the accompanying
OP Units tendered for Prospectus. Upon receipt of
redemption, (ii) a number of a notice of redemption, the
shares of Class A Common AIMCO Operating Partnership
Stock of AIMCO that is equal may, in its sole and
in Value to the Liquidation absolute discretion but
Preference of the Preferred subject to the restrictions
OP Units tendered on the ownership of Class A
Common
</TABLE>
S-85
<PAGE> 1694
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
for redemption, or (iii) for Stock imposed under AIMCO's
Preferred OP Units redeemed charter and the transfer
after a two-year holding restrictions and other
period, a number of shares limitations thereof, elect
of Class I Preferred Stock to cause AIMCO to acquire
of AIMCO that pay an some or all of the ten-
aggregate amount of dered Common OP Units in
dividends equivalent to the exchange for Class A Common
distributions on the Stock, based on an exchange
Preferred OP Units tendered ratio of one share of Class
for redemption; provided A Common Stock for each Com-
that such shares are part of mon OP Unit, subject to
a class or series of adjustment as provided in
preferred stock that is then the AIMCO Operating
listed on the NYSE or an- Partnership Agreement.
other national securities
exchange. See "Federal
Income Tax
Consequences -- Disguised
Sales." 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-86
<PAGE> 1695
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are the Class Two 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 I High Performance 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, the
Class J Partnership Preferred Units, the Class K 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, the Class One 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 $0.50 per Preferred OP
Unit (equivalent to 8.0% per annum of the $25 stated liquidation preference);
provided, however, that at any time and from time to time on or after March 1,
2005, the AIMCO Operating Partnership may adjust the annual distribution rate on
the Preferred OP Units to the lower of (i) 2.0% 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. A reduction in the distribution rate will reduce your rate of return on
the Preferred OP Units and possibly encourage you to redeem such units. 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
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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 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 $25 per Preferred OP
Unit, 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
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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 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 A Common Stock of AIMCO that is equal in Value to the
Liquidation Preference of the Preferred OP Units tendered for redemption, or
(iii) for Preferred OP Units redeemed after a two-year holding period, 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 NYSE or another national securities exchange.
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. Before issuing any preferred
stock upon redemption of Preferred OP Units, AIMCO will register the issuance
and sale of such shares under the Securities Act of 1933. 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.
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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.
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, the Class J 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 8.0% per annum of the $25 liquidation preference (equivalent to
$2.00 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 July 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 March 1, 2005, 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,
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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 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 The Class I Preferred Stock constitutes an
interests entitling each holder of Preferred equity interest entitling each holder of
OP Units to receive, when and as declared by Class I Preferred Stock to receive, when and
the board of directors of the general as declared by the AIMCO board of directors,
partner of the AIMCO Operating Partnership, cash distribution at a rate of $2.00 per
quarterly cash distribution at a rate of annum per share.
$0.50 per 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 Holders of Class I Preferred Stock do not
law or in the AIMCO Operating Partnership's have any voting rights, except as set forth
agreement of limited partnership, the below and except as otherwise required by
holders of the Preferred OP Units will have applicable law.
the same voting rights as holders of the
Common OP Units. See "Description of OP If and whenever dividends on any shares of
Units" in the accompanying Prospectus. So Class I Preferred Stock or any series or
long as any Preferred OP Units are class of Class I Parity Stock are in arrears
outstanding, in addition to any other vote for six or more quarterly periods (whether
or consent of partners required by law or by or not consecutive), the number of directors
the AIMCO Operating Partnership's agreement then constituting the AIMCO board of
of limited partnership, the affirmative vote directors shall be increased by two (if not
or consent of holders of at least 50% of the already increased by reason of similar types
outstanding Preferred OP Units will be of provisions with respect to shares of
necessary for effecting any amendment of any voting preferred stock), and the holders of
of the provisions of the Partnership Unit shares of Class I Preferred Stock, together
Designation of the Preferred OP Units that with the holders of shares of all other
materially and adversely affects the rights voting preferred stock then entitled to
or preferences of the holders of the exercise similar voting rights, voting as a
Preferred OP Units. The creation or issuance single class regardless of series, will be
of any class or series of AIMCO Operating entitled to vote for the election of two
Partnership units, including, without additional directors of AIMCO. Whenever
limitation, any AIMCO Operating Partnership dividends in arrears and dividends for the
units that may have rights senior or current quarterly dividend period have been
superior to the Preferred OP Units, will not paid or declared and set aside in respect of
be deemed to materially adversely affect the the outstanding shares of the Class I
rights or preferences of the holders of Preferred Stock and the voting preferred
Preferred OP Units. With respect to the stock, then the right of the holders of
exercise of the above described voting Class I Preferred Stock and the voting
rights, each Preferred OP Units will have preferred stock to elect such additional two
one (1) vote per Preferred 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
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
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>
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled Holders of Class I Preferred Stock are
to receive, when and as declared by the entitled to receive, when and as declared by
board of directors of the general partner of the AIMCO board of directors, out of funds
the AIMCO Operating Partnership, quarterly legally available for payment, cash
cash distributions at the rate of $0.50 per dividends at the rate of $2.00 per annum per
Preferred OP Unit; provided, however, that share. Such dividends are cumulative from
at any time and from time to time on or the date of original issue. Holders of Class
after the fifth anniversary of the issue I Preferred Stock are not be entitled to
date of the Preferred OP Units, the AIMCO receive any dividends in excess of
Operating Partnership may adjust the annual cumulative dividends on the Class I
distribution rate on the Preferred OP Units Preferred Stock. No interest, or sum of
to the lower of (i) 2.00% plus the annual money in lieu of interest, shall be payable
interest rate then applicable to U.S. in respect of any dividend payment or
Treasury notes with a maturity of five payments on the Class I Preferred Stock that
years, and (ii) the annual dividend rate on may be in arrears.
the most recently issued AIMCO
non-convertible preferred stock which ranks When dividends are not paid in full upon the
on a parity with its Class H Cumulative Class I Preferred Stock or any other class
Preferred Stock. Such distributions will be or series of Class I Parity Stock, all
cumulative from the date of original issue. dividends declared upon the Class I
Holders of Preferred OP Units will not be Preferred Stock and any shares of Class I
entitled to receive any distributions in Parity Stock will be declared ratably in
excess of cumulative distributions on the proportion to the respective amounts of
Preferred OP Units. No interest, or sum of dividends accumulated, accrued and unpaid on
money in lieu of interest, shall be payable the Class I Preferred Stock and such Class I
in respect of any distribution payment or Parity Stock. Unless dividends equal to the
payments on the Preferred OP Units that may full amount of all accumulated, accrued and
be in arrears. unpaid dividends on the Class I Preferred
Stock have been paid, or declared and set
apart for
</TABLE>
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PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
When distributions are not paid in full upon payment, except in limited circumstances, no
the Preferred OP Units or any Parity Units, dividends may be declared or paid or set
all distributions declared upon the apart for payment by AIMCO and no other
Preferred OP Units and any Parity Units will distribution of cash or other property may
be declared ratably in proportion to the be declared or made, directly or indirectly,
respective amounts of distributions by AIMCO with respect to any shares of Class
accumulated, accrued and unpaid on the I Junior Stock, nor shall any shares of
Preferred OP Units and such Parity Units. Class I Junior Stock be redeemed, purchased
Unless full cumulative distributions on the or otherwise acquired for any consideration,
Preferred OP Units have been declared and nor shall any other cash or other property
paid, except in limited circumstances, no be paid or distributed to or for the benefit
distributions may be declared or paid or set of holders of shares of Class I Junior
apart for payment by the AIMCO Operating Stock. See "Description of Class I Preferred
Partnership and no other distribution of Stock -- Dividends."
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 Ownership of shares of Class I Preferred
OP Units and the Preferred OP Units are not Stock by any person will be limited such
listed on any securities exchange. The that the sum of the aggregate value of all
Preferred OP Units are subject to certain equity stock (including all shares of Class
restrictions on transferability set forth in 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)
Pursuant to the AIMCO Operating of the aggregate value of all outstanding
Partnership's agreement of limited shares of equity stock. Further, certain
partnership, until the expiration of one transfers which may have the effect of
year from the date on which a holder of causing AIMCO to lose its status as a REIT
Preferred OP Units acquired Preferred OP are void ab initio.
Units, subject to certain exceptions, such
holder of Preferred OP Units may not If any transfer of Class I Preferred Stock
transfer all or any portion of its Preferred occurs which, if effective, would result in
OP Units to any transferee without the any person beneficially or constructively
consent of the general partner, which owning Class I Preferred Stock in excess or
consent may be withheld in its sole and in violation of the Class I Preferred
absolute discretion. After the expiration of Ownership Limit, such shares of Class I
one year, such holders of Preferred OP Units Preferred Stock in excess of the Class I
has the right to transfer all or any portion Preferred Ownership Limit will be
of its Preferred OP Units to any person, automatically transferred to a trustee in
subject to the satisfaction of certain his capacity as trustee of a trust for the
conditions specified in the AIMCO Operating exclusive benefit of one or more charitable
Partnership's agreement of limited beneficiaries designated by AIMCO, and the
partnership, including the general partner's prohibited transferee will generally have no
right of first refusal. rights in such shares, except upon sale of
the shares by the trustee. The trustee will
After a one-year holding period, a holder have all voting rights and rights to
may redeem Preferred OP Units and receive in dividends with respect to shares of Class I
exchange therefor, at the AIMCO Operating Preferred Stock held in the trust, which
Partnership's option, (i) subject to the rights will be exercised for the benefit of
terms of any Senior Units, the charitable beneficiaries.
</TABLE>
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<PAGE> 1703
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
cash in an amount equal to the Liquidation
Preference of the Preferred OP Units The trustee may sell the Class I Preferred
tendered for redemption, (ii) a number of Stock held in the trust to AIMCO or a
shares of Class A Common Stock of AIMCO that person, designated by the trustee, whose
is equal in value to the Liquidation ownership of the Class I Preferred Stock
Preference of the Preferred OP Units will not violate the Class I Preferred
tendered for redemption, or (iii) for Ownership Limit. Upon such sale, the
Preferred OP Units redeemed after a two-year interest of the charitable beneficiaries in
holding period, a number of shares of Class the shares sold will terminate and the
I Preferred Stock of AIMCO that pay an trustee will distribute to the prohibited
aggregate amount of dividends equivalent to transferee, the lesser of (i) the price paid
the distributions on the Preferred OP Units by the prohibited transferee for the shares
tendered for redemption; provided that such or if the prohibited transferee did not give
shares are part of a class or series of value for the shares in connection with the
preferred stock that is then listed on the event causing the shares to be held in the
NYSE or another national securities trust, the market price of such shares on
exchange. See "Federal Income Tax the day of the event causing the shares to
Consequences -- Disguised Sales." The be held in the trust and (ii) the price per
Preferred OP Units may not be redeemed at share received by the trustee from the sale
the option of the AIMCO Operating or other disposition of the shares held in
Partnership. See "Description of Preferred the trust. Any proceeds in excess of the
OP Units -- Redemption." amount payable to the prohibited transferee
will be payable to the charitable
beneficiaries.
On and after March 1, 2005, 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. Your general
partner became a wholly owned subsidiary on February 26, 1999 of AIMCO when IPT
merged with AIMCO. Accordingly, the general partner of your partnership 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 Unitholders 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 own both the general partner of your partnership and the manager of your
partnership's property. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $27,513 in 1996, $29,242 in 1997 and $31,830 in
1998. The property manager received management fees of $51,864 in 1996, $55,922
in 1997 and $57,240 in 1998. The AIMCO Operating Partnership has no current
intention of changing the fee structure for the general partner or for the
manager of your partnership's 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." AIMCO's
Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is
S-96
<PAGE> 1705
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.
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. However, we will not acquire any
additional units for a period of at least one year after expiration of the
offer. Any such future offers that we might make could be for consideration that
is more or less than the consideration we are currently offering.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $227,013 will be
required to purchase all of the units sought in the offer, if such units are
tendered for cash excluding expenses as itemized below. The AIMCO Operating
Partnership will obtain all such funds from cash from operations, equity
issuances and short term borrowings. The AIMCO Operating Partnership will pay
all of the costs of the offer and not your partnership.
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...................................... $ 5,000
Accountant's Fees........................................... $ 5,000
Legal Fees.................................................. $10,000
Printing Fees............................................... $10,000
Stanger's Fees.............................................. $ 9,000
Other....................................................... $11,000
-------
Total....................................................... $50,000
</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 Bank of America's reference rate, at the election of
the Company, plus 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 2.25% and 2.75% in the case of LIBOR-based
loans and between negative 0.75% and positive 1.25% 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 September 30, 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
S-97
<PAGE> 1706
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.
We may obtain funds pursuant to a credit agreement entered into by our
subsidiary, Insignia Properties, L.P. ("IPLP"), 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, 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). IPLP 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. The AIMCO Operating
Partnership intends to repay any funds borrowed out of working capital in the
ordinary course of business.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP has delivered 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 has delivered an opinion with regard to
the material Federal income tax consequences of the offer. 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 two opinions of Skadden, Arps, Slate, Meagher & Flom LLP are 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 opinions will be sent by the Information Agent.
EXPERTS
The financial statements of Georgetown of Columbus Associates, Limited as
of December 31, 1997 and 1996 and for each of the years in the three-year period
ended December 31, 1997, have been included herein and in the registration
statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
S-98
<PAGE> 1707
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed Balance Sheet as of September 30, 1998
(unaudited)............................................... F-2
Condensed Statements of Operations for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-3
Condensed Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-4
Notes to Condensed Financial Statements..................... F-5
Independent Auditors' Report................................ F-7
Balance Sheets as of December 31, 1997 and 1996............. F-8
Statements of Operations and Changes in Partners' Deficit
for the years ended December 31, 1997 and 1996............ F-9
Statements of Cash Flows for the years ended December 31,
1997 and 1996............................................. F-10
Notes to Financial Statements............................... F-11
Independent Auditors' Report................................ F-15
Balance Sheets as of December 31, 1996 and 1995............. F-16
Statements of Operations and Changes in Partners' Deficit
for the years ended December 31, 1996 and 1995............ F-17
Statements of Cash Flows for the years ended December 31,
1996 and 1995............................................. F-18
Notes to Financial Statements............................... F-19
</TABLE>
F-1
<PAGE> 1708
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
CONDENSED BALANCE SHEET -- UNAUDITED
SEPTEMBER 30, 1998
<TABLE>
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 17,000
Receivables and Deposits.................................... 24,000
Restricted Escrows.......................................... 244,000
Other Assets................................................ 58,000
Investment Property:
Land...................................................... $ 340,000
Building and related personal property.................... 4,589,000
-----------
4,929,000
-----------
Less: Accumulated depreciation............................ (3,447,000) 1,482,000
----------- -----------
Total Assets...................................... $ 1,825,000
===========
LIABILITIES AND PARTNERS' DEFICIT
Accounts Payable............................................ $ 17,000
Other Accrued Liabilities................................... 82,000
Property Taxes Payable...................................... 69,000
Tenant Security Deposits.................................... 24,000
Notes Payable............................................... 3,665,000
Partners' Deficit................................. (2,032,000)
-----------
Total Liabilities and Partners' Deficit........... $ 1,825,000
===========
</TABLE>
See Accompanying Notes to Financial Statements.
F-2
<PAGE> 1709
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
CONDENSED STATEMENTS OF OPERATIONS -- UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1998 1997
-------- --------
<S> <C> <C>
Revenues:
Rental Income............................................. $804,000 $800,000
Other Income.............................................. 49,000 30,000
-------- --------
Total Revenues.................................... 853,000 830,000
Expenses:
Operating Expenses........................................ 337,000 318,000
General and Administrative Expenses....................... 32,000 29,000
Depreciation Expense...................................... 73,000 73,000
Interest Expense.......................................... 252,000 258,000
Property Tax Expense...................................... 69,000 69,000
-------- --------
Total Expenses.................................... 763,000 747,000
Net Income........................................ $ 90,000 $ 83,000
======== ========
</TABLE>
See Accompanying Notes to Financial Statements.
F-3
<PAGE> 1710
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
CONDENSED STATEMENTS OF CASH FLOWS -- UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1998 1997
--------- --------
<S> <C> <C>
Operating activities:
Net income (loss)......................................... $ 90,000 $ 83,000
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and Amortization............................. 105,000 105,000
Changes in accounts:
Receivables and deposits and other assets.............. 73,000 23,000
Accounts Payable and accrued expenses.................. (62,000) (75,000)
--------- --------
Net cash provided by (used in) operating
activities...................................... 206,000 134,000
--------- --------
Investing Activities:
Property improvements and replacements.................... (43,000) (33,000)
Net (increase)/decrease in restricted escrows............. (84,000) (39,000)
--------- --------
Net cash provided by (used in) investing
activities...................................... (127,000) (72,000)
--------- --------
Financing Activities:
Payments on mortgage...................................... (77,000) (71,000)
--------- --------
Net cash provided by (used in) financing
activities...................................... (77,000) (71,000)
--------- --------
Net increase (decrease) in cash and cash equivalents...... 2,000 (9,000)
Cash and cash equivalents at beginning of period.......... 15,000 18,000
--------- --------
Cash and cash equivalents at end of period................ $ 17,000 $ 9,000
========= ========
</TABLE>
See Accompanying Notes to Condensed Financial Statements
F-4
<PAGE> 1711
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements of Georgetown of Columbus
Associates, Limited as of September 30, 1998 and for the nine months ended
September 30, 1998 and 1997 have been prepared in accordance with generally
accepted accounting principles for interim financial information. Accordingly,
they do not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments considered necessary for a fair presentation have
been included and all such adjustments are of a recurring nature.
The financial statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31, 1997. It
should be understood that the accounting measurements at interim dates
inherently involve greater reliance on estimates than at year-end. The results
of operations for the interim periods are not necessarily indicative of the
results for the entire year.
NOTE B -- SUBSEQUENT EVENT
On March 17, 1998, Insignia Financial Group, Inc., an affiliate of the
corporate general partner of the Partnership, entered into an agreement to merge
its national residential property management operations and its controlling
interest in Insignia Properties Trust, with Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust. The merger
was completed effective October 1, 1998, and accordingly, as of that date AIMCO
acquired the corporate general partner and the company that manages the
Partnership.
F-5
<PAGE> 1712
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
F-6
<PAGE> 1713
INDEPENDENT AUDITORS' REPORT
General Partners
Georgetown of Columbus Associates, Limited:
We have audited the accompanying balance sheets of Georgetown of Columbus
Associates, Limited as of December 31, 1997 and 1996, and the related statements
of operations and changes in partners' deficit and cash flows for the years then
ended. These financial statements are the responsibility of the partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Georgetown of Columbus
Associates, Limited as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Greenville, South Carolina
February 26, 1998
F-7
<PAGE> 1714
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash and cash equivalents................................... $ 15,001 $ 17,946
Receivables and deposits.................................... 96,733 67,832
Restricted escrows (Note B)................................. 159,731 153,166
Other assets................................................ 71,576 76,344
Investment properties (Note C):
Land...................................................... 340,190 340,190
Buildings and related personal property................... 4,545,765 4,475,007
----------- -----------
4,885,955 4,815,197
Less accumulated depreciation............................. (3,373,939) (3,276,242)
----------- -----------
1,512,016 1,538,955
----------- -----------
$ 1,855,057 $ 1,854,243
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable (Note D)................................. $ 111,398 $ 75,737
Tenant security deposit liabilities....................... 29,758 28,778
Accrued taxes............................................. 87,386 87,458
Other liabilities......................................... 25,227 26,773
Mortgage notes payable (Note C)........................... 3,723,480 3,813,563
Partners' deficit........................................... (2,122,192) (2,178,066)
----------- -----------
$ 1,855,057 $ 1,854,243
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
F-8
<PAGE> 1715
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
STATEMENTS OF OPERATIONS AND CHANGES IN PARTNERS' DEFICIT
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Revenues:
Rental income............................................. $ 1,077,470 $ 1,007,702
Other income.............................................. 43,093 38,203
----------- -----------
Total revenues.................................... 1,120,563 1,045,905
----------- -----------
Expenses:
Operating (Note D)........................................ 506,823 506,255
General and administrative (Note D)....................... 36,549 38,664
Depreciation.............................................. 97,697 92,069
Interest.................................................. 335,895 350,280
Property taxes............................................ 87,725 88,242
----------- -----------
Total expenses.................................... 1,064,689 1,075,510
----------- -----------
Net income (loss)........................................... 55,874 (29,605)
Partners' deficit at beginning of year...................... (2,178,066) (2,148,461)
----------- -----------
Partners' deficit at end of year............................ $(2,122,192) $(2,178,066)
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
F-9
<PAGE> 1716
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 55,874 $ (29,605)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation........................................... 97,697 92,069
Amortization of discounts, loan costs and other
deferred costs........................................ 35,322 41,477
Change in accounts:
Receivables and deposits............................. (28,901) 5,306
Other assets......................................... (8,187) --
Accounts payable..................................... 35,661 48,229
Tenant security deposit liabilities.................. 980 (2,172)
Accrued taxes........................................ (72) 9,681
Other liabilities.................................... (1,546) 3,061
--------- ---------
Net cash provided by operating activities......... 186,828 168,046
--------- ---------
Cash flows from investing activities:
Property improvements and replacements.................... (70,758) (77,189)
Deposits to restricted escrows............................ (6,565) (6,505)
Receipts from restricted escrows.......................... -- 7,617
--------- ---------
Net cash used in investing activities............. (77,323) (76,077)
--------- ---------
Cash flows from financing activities:
Payments on mortgage notes payable........................ (112,450) (104,245)
--------- ---------
Net cash used in financing activities............. (112,450) (104,245)
--------- ---------
Net decrease in cash and cash equivalents................... (2,945) (12,276)
Cash and cash equivalents at beginning of year.............. 17,946 30,222
--------- ---------
Cash and cash equivalents at end of year.................... $ 15,001 $ 17,946
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 300,929 $ 309,134
========= =========
</TABLE>
See Accompanying Notes to Financial Statements
F-10
<PAGE> 1717
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE A -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Georgetown of Columbus Associates, Limited (the "Partnership") was
organized as a limited partnership under the laws of the State of Delaware
pursuant to a Limited Partnership Agreement and Certificate of Limited
Partnership dated October 13, 1983. The Partnership owns and operates a 150 unit
apartment complex, Georgetown of Columbus Apartments, in Columbus, Ohio.
The Partnership's Managing General Partner is Jacques-Miller Associates, an
affiliate of Insignia Financial Group ("Insignia"). The property is managed by
Insignia Residential Group, an affiliate of Insignia.
Depreciation
Depreciation is computed principally by use of the declining balance and
straight-line methods based upon the estimated useful lives of various classes
of assets; buildings are depreciated over 10 to 25 years and the personal
property assets are depreciated over a 5 to 10 year period.
Other Assets
Other assets at December 31, 1997 and 1996 include deferred loan costs of
$63,389 and $76,344, respectively, which are amortized over the term of the
related borrowing. Deferred loan costs are presented net of accumulated
amortization.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Partnership considers
unrestricted cash and unrestricted highly liquid investments, with an original
maturity of three months or less when purchased, to be cash and cash
equivalents.
Income Taxes
On the basis of Treasury Regulations, the general partners believe that the
Partnership will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss and cash distributions of the
Partnership are allocated in accordance with the partnership agreement and the
Internal Revenue Code and are reportable in the income tax returns of its
partners.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Tenant Security Deposits
The Partnership requires security deposits from lessees for the duration of
the lease and such deposits are included in receivables and deposits. The
security deposits are refunded when the tenant vacates, provided the tenant has
not damaged its space and is current on its rental payments.
F-11
<PAGE> 1718
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Reclassifications
Certain 1996 amounts have been reclassified to conform to the 1997
presentation. These reclassifications had no impact on net loss or partners'
deficit as previously reported.
NOTE B -- RESTRICTED ESCROWS
Restricted escrow deposits at December 31, 1997 and 1996 consist of the
following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Reserve Escrow -- Established with a portion of the proceeds
of the loan. The funds are used for certain repair work,
debt service, expenses and property taxes or insurance.
The funds in the reserve escrow exceed the minimum balance
required to be maintained by the lender during the term of
the loan.................................................. $159,731 $153,166
======== ========
</TABLE>
NOTE C -- MORTGAGE NOTES PAYABLE
Mortgage notes payable at December 31, 1997 and 1996 consist of the
following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
First mortgage note payable in monthly installments of
$33,614, including interest at 7.60%, due November 2002;
collateralized by land and buildings...................... $3,766,261 $3,878,711
Second mortgage note payable in interest only monthly
installments of $834, at a rate of 7.60%, with principal
due November 2002; collateralized by land and buildings... 131,718 131,718
---------- ----------
Principal balances at year end.............................. 3,897,979 4,010,429
Less unamortized discount................................... (174,499) (196,866)
---------- ----------
$3,723,480 $3,813,563
========== ==========
</TABLE>
Scheduled principal payments of the mortgage notes during the years
subsequent to December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998..................................................... $ 121,300
1999..................................................... 130,846
2000..................................................... 141,141
2001..................................................... 152,253
2002..................................................... 3,352,439
----------
$3,897,979
==========
</TABLE>
The principal balance of the mortgage notes may be prepaid in whole upon
payment of a penalty of the greater of one percent of the unpaid principal
balance at the time of prepayment or the present value of the excess of interest
which would be incurred at the stated rate under the notes over the interest
which would be incurred at the Treasury constant maturity for U.S. Government
obligations.
NOTE D -- TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no administrative or management employees and is
dependent on the Managing General Partner and its affiliates for the management
and administration of all partnership activities. The Partnership is obligated
to pay a property management fee equal to 5% of gross monthly collections. In
F-12
<PAGE> 1719
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
addition to the management fee, the partnership agreement provides for payments
to affiliates of a partnership administration fee and reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
Transactions and balances with the Managing General Partner and its
affiliates for the years ended December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
TYPE OF TRANSACTION AMOUNT AMOUNT
------------------- ------- -------
<S> <C> <C>
Management fee.............................................. $55,922 $51,864
Partnership administration fee.............................. $12,510 $10,020
Reimbursement for services of affiliates.................... $16,582 $16,703
Reimbursement for construction oversight costs.............. $ 150 $ 790
Payable to Insignia Residential Group....................... $36,602 $ 7,510
</TABLE>
F-13
<PAGE> 1720
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
F-14
<PAGE> 1721
INDEPENDENT AUDITORS' REPORT
General Partners
Georgetown of Columbus Associates, Limited:
We have audited the accompanying balance sheets of Georgetown of Columbus
Associates, Limited as of December 31, 1996 and 1995, and the related statements
of operations and changes in partners' deficit and cash flows for the years then
ended. These financial statements are the responsibility of the partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Georgetown of Columbus
Associates, Limited as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Greenville, South Carolina
March 6, 1997
F-15
<PAGE> 1722
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash and cash equivalents:
Unrestricted.............................................. $ 17,946 $ 30,222
Restricted -- tenant security deposits.................... 28,778 30,538
Accounts receivable......................................... 1,172 192
Escrow for taxes............................................ 37,882 42,408
Restricted escrows (Note B)................................. 153,166 154,278
Other assets................................................ 76,344 89,248
Investment properties (Note C):
Land...................................................... 340,190 340,190
Buildings and related personal property................... 4,475,007 4,397,818
----------- -----------
4,815,197 4,738,008
Less accumulated depreciation............................. (3,276,242) (3,184,173)
----------- -----------
1,538,955 1,553,835
----------- -----------
$ 1,854,243 $ 1,900,721
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 75,737 $ 27,508
Tenant security deposits.................................. 28,778 30,950
Accrued taxes............................................. 87,458 77,777
Other liabilities......................................... 26,773 23,712
Mortgage notes payable (Note C)........................... 3,813,563 3,889,235
Partners' deficit........................................... (2,178,066) (2,148,461)
----------- -----------
$ 1,854,243 $ 1,900,721
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
F-16
<PAGE> 1723
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
STATEMENTS OF OPERATIONS AND CHANGES IN PARTNERS' DEFICIT
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenues:
Rental income............................................. $ 1,007,702 $ 964,312
Other income.............................................. 38,203 44,771
----------- -----------
Total revenues.................................... 1,045,905 1,009,083
----------- -----------
Expenses:
Operating (Note D)........................................ 357,814 325,836
General and administrative (Note D)....................... 38,664 37,672
Maintenance............................................... 148,441 94,378
Depreciation.............................................. 92,069 96,487
Interest.................................................. 350,280 356,345
Property taxes............................................ 88,242 78,674
----------- -----------
Total expenses.................................... 1,075,510 989,392
----------- -----------
Net (loss) income........................................... (29,605) 19,691
Partners' deficit at beginning of year...................... (2,148,461) (2,168,152)
----------- -----------
Partners' deficit at end of year............................ $(2,178,066) $(2,148,461)
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements
F-17
<PAGE> 1724
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1995
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income......................................... $ (29,605) $ 19,691
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation........................................... 92,069 96,487
Amortization of discounts, loan costs and other
deferred costs........................................ 41,477 50,172
Change in accounts:
Restricted cash...................................... 1,760 690
Accounts receivable.................................. (980) (192)
Escrow for taxes..................................... 4,526 1,657
Accounts payable..................................... 48,229 20,903
Tenant security deposit liabilities.................. (2,172) (2,985)
Accrued taxes........................................ 9,681 1,000
Other liabilities.................................... 3,061 (47,714)
--------- --------
Net cash provided by operating activities......... 168,046 139,709
--------- --------
Cash flows from investing activities:
Property improvements and replacements.................... (77,189) (57,993)
Deposits to restricted escrows............................ (6,505) (31,974)
Receipts from restricted escrows.......................... 7,617 11,093
--------- --------
Net cash used in investing activities............. (76,077) (78,874)
--------- --------
Cash flows from financing activities:
Payments on mortgage notes payable........................ (104,245) (96,639)
--------- --------
Net cash used in financing activities............. (104,245) (96,639)
--------- --------
Net decrease in cash and cash equivalents................... (12,276) (35,804)
Cash and cash equivalents at beginning of year.............. 30,222 66,026
--------- --------
Cash and cash equivalents at end of year.................... $ 17,946 $ 30,222
========= ========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 309,134 $316,740
========= ========
</TABLE>
See Accompanying Notes to Financial Statements
F-18
<PAGE> 1725
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE A -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Georgetown of Columbus Associates, Limited (the "Partnership") was
organized as a limited partnership under the laws of the State of Delaware
pursuant to a Limited Partnership Agreement and Certificate of Limited
Partnership dated October 13, 1983. The Partnership owns and operates a 150 unit
apartment complex, Georgetown of Columbus Apartments, in Columbus, Ohio.
The Partnership's Managing General Partner is Jacques-Miller Associates, an
affiliate of Insignia Financial Group ("Insignia"). The property is managed by
Insignia Residential Group, an affiliate of Insignia.
Depreciation
Depreciation is computed principally by use of the declining balance and
straight-line methods based upon the estimated useful lives of various classes
of assets; buildings are depreciated over 10 to 25 years and the personal
property assets are depreciated over a 5 to 10 year period.
Other Assets
Other assets at December 31, 1996 and 1995 consist of deferred loan costs
which are amortized over the term of the related borrowing. Deferred loan costs
are presented net of accumulated amortization.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Partnership considers
unrestricted cash and unrestricted highly liquid investments, with an original
maturity of three months or less when purchased, to be cash and cash
equivalents.
Income Taxes
On the basis of legal counsel's opinion, the general partners believe that
the Partnership will be classified as a partnership for Federal income tax
purposes. Accordingly, no provision for income taxes is made in the financial
statements of the Partnership. Taxable income or loss and cash distributions of
the Partnership are allocated in accordance with the partnership agreement and
the Internal Revenue Code and are reportable in the income tax returns of its
partners.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain 1995 amounts have been reclassified to conform to the 1996
presentation. These reclassifications had no impact on net loss or partners'
deficit as previously reported.
F-19
<PAGE> 1726
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B -- RESTRICTED ESCROWS
Restricted escrow deposits at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Reserve Escrow -- Established with a portion of the proceeds
of the loan. The funds are used for certain repair work,
debt service, expenses and property taxes or insurance.
The funds in the reserve escrow exceed the minimum balance
required to be maintained by the lender during the term of
the loan.................................................. $153,166 $154,278
======== ========
</TABLE>
NOTE C -- MORTGAGE NOTES PAYABLE
Mortgage notes payable at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
First mortgage note payable in monthly installments of
$33,614, including interest at 7.60%, due November 2002;
collateralized by land and buildings...................... $3,878,711 $3,982,956
Second mortgage note payable in interest only monthly
installments of $834, at a rate of 7.60%, with principal
due November 2002; collateralized by land and buildings... 131,718 131,718
---------- ----------
Principal balances at year end.............................. 4,010,429 4,114,674
Less unamortized discount................................... (196,866) (225,439)
---------- ----------
$3,813,563.. $3,889,235
========== ==========
</TABLE>
Scheduled principal payments of the mortgage notes during the years
subsequent to December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997..................................................... $ 112,449
1998..................................................... 121,300
1999..................................................... 130,846
2000..................................................... 141,141
2001..................................................... 152,253
Thereafter............................................... 3,352,440
----------
$4,010,429
==========
</TABLE>
The principal balance of the mortgage notes may not be prepaid, in whole or
in part, prior to November 15, 1997. Thereafter the principal may be prepaid in
whole upon payment of a penalty of the greater of one percent of the unpaid
principal balance at the time of prepayment or the present value of the excess
of interest which would be incurred at the stated rate under the notes over the
interest which would be incurred at the Treasury constant maturity for U.S.
Government obligations.
NOTE D -- TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no administrative or management employees and is
dependent on the Managing General Partner and its affiliates for the management
and administration of all partnership activities. The Partnership is obligated
to pay a property management fee equal to 5% of gross monthly collections. In
addition to the management fee, the partnership agreement provides for payments
to affiliates of a partnership administration fee and reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
F-20
<PAGE> 1727
GEORGETOWN OF COLUMBUS ASSOCIATES, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Transactions with the Managing General Partner and its affiliates for the
years ended December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
TYPE OF TRANSACTION AMOUNT AMOUNT
------------------- ------- -------
<S> <C> <C>
Management fee.............................................. $51,864 $50,789
Partnership administration fee.............................. $10,020 $10,096
Reimbursement for services of affiliates.................... $16,703 $15,840
Reimbursement for construction oversight costs.............. $ 790 $ --
</TABLE>
F-21
<PAGE> 1728
PRO FORMA FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
AS OF SEPTEMBER 30, 1998 AND FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1998
INTRODUCTION
On October 1, 1998, Apartment Investment and Management Company ("AIMCO")
completed its merger with Insignia Financial Group ("IFG") ("the IFG Merger").
In the IFG Merger, IFG's common stock was converted into 8,423,751 shares of
Class E Cumulative Convertible Preferred Stock of AIMCO ("Class E Preferred
Stock") whose issue date market value approximately equaled $292 million. In
addition to receiving the same dividends as holders of AIMCO Common Stock,
holders of Class E Preferred Stock will be entitled to a special dividend of
approximately $50 million in the aggregate. When that special dividend is paid
in full, the Class E Preferred Stock will automatically convert into AIMCO
Common Stock on a one-for-one basis, subject to antidilution adjustments, if
any. In addition, AIMCO assumed approximately $411 million in indebtedness and
other liabilities of IFG and its subsidiaries and subsidiaries of AIMCO, assumed
approximately $149.5 million of convertible securities and purchased
approximately $5 million of IFG stock prior to the Merger. AIMCO and Insignia
Properties Trust ("IPT") have completed a merger in which IPT has merged into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). In the IPT Merger, shares of
IPT common stock not held by AIMCO were converted into 4,826,745 shares of AIMCO
Class A Common Stock whose market value approximately equaled $152 million.
AIMCO assumed approximately $68 million in indebtedness. In connection with the
IFG Merger and the IPT Merger, AIMCO incurred approximately $55 million in
transaction costs for a combined transactional value of approximately $1,183
million. AIMCO contributed substantially all the assets and liabilities of
Insignia acquired in the Insignia Merger to AIMCO Properties, L.P. (together
with its subsidiaries and other controlled entities, the "Partnership") (and
together with entities in which that Partnership has a controlling financial
interest, the "Company") in exchange for 8,423,751 Class E Preferred Units. The
Class E Preferred Units have terms substantially the same as the Class E
Preferred Stock. In addition, AIMCO contributed substantially all the assets and
liabilities of IPT acquired in the IPT Merger to the Partnership in exchange for
4,826,745 limited partnership units in the Partnership ("OP Units"). In
connection with the IFG Merger, the Partnership assumed property management of
approximately 192,000 multifamily units which consist of general and limited
partnership investments in 115,000 units and third party management of 77,000
units. Insignia Properties Trust ("IPT"), which prior to the IFG Merger was a
subsidiary of IFG, owns a 32% weighted average general and limited partnership
interest in approximately 51,000 units.
Immediately following the IFG Merger, in order to satisfy certain
requirements of the Internal Revenue Code of 1986 (the "Code") applicable to
AIMCO's status as a REIT, AIMCO engaged in a reorganization (the "IFG
Reorganization") of the assets and operations of IFG whereby IFG's operations
are being conducted through corporations (the "Unconsolidated Subsidiaries") in
which the Partnership holds non-voting preferred stock that represents a 95%
economic interest, and certain officers and/or directors of AIMCO hold, directly
or indirectly, all of the voting common stock, representing a 5% economic
interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
In May and September of 1997, AIMCO directly or indirectly through a
subsidiary, acquired (the "NHP Stock Purchase") an aggregate of 6,930,122 shares
of common stock ("NHP Common Stock") of NHP. On December 8, 1997, AIMCO acquired
the remaining shares of NHP Common Stock in a merger transaction accounted for
as a purchase (the "NHP Merger"). As a result of the NHP Merger, AIMCO issued
6,759,148 shares of AIMCO Common Stock, valued at $180.8 million, and paid $86.5
million in cash. The total cost of the purchase of NHP was $349.5 million.
Substantially all assets and liabilities of NHP were contributed by AIMCO to the
Partnership.
In June 1997, the Company purchased a group of companies (the "NHP Real
Estate Companies") affiliated with NHP that hold general and limited partnership
interests in partnerships (the "NHP
P-1
<PAGE> 1729
Partnerships") that own 534 conventional and affordable multifamily apartment
properties (the "NHP Properties") containing 87,659 units, a captive insurance
subsidiary and certain related assets (the "NHP Real Estate Acquisition"). The
Company paid aggregate consideration of $54.8 million in cash and warrants that
entitle the holders to purchase 399,999 shares of AIMCO Common Stock at an
exercise price of $36.00 per share. The Company engaged in a reorganization (the
"NHP Real Estate Reorganization") of its interests in the NHP Real Estate
Companies, which resulted in certain of the assets of the NHP Real Estate
Companies being owned by a limited partnership (the "Unconsolidated
Partnership") in which the Partnership holds 99% limited partner interest and
certain directors and officers of AIMCO directly or indirectly, hold a 1%
general partner interest.
Immediately following the NHP Merger, in order to satisfy certain
requirements of the Code applicable to AIMCO's status as a REIT, AIMCO engaged
in a reorganization (the "NHP Reorganization") of the assets and operations of
NHP that resulted in the Master Property Management Agreement being terminated
and NHP's operations being conducted through Unconsolidated Subsidiaries in
which the AIMCO Operating Partnership holds non-voting preferred stock that
represents a 95% economic interest, and certain officers and/or directors of
AIMCO hold, directly or indirectly, all of the voting common stock, representing
a 5% economic interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
On May 8, 1998, AIMCO completed a merger with Ambassador Apartments, Inc.
("Ambassador"), pursuant to which Ambassador was merged into AIMCO (the
"Ambassador Merger"). Each outstanding share of stock ("Ambassador Common
Stock") of Ambassador, other than those shares held by AIMCO or Ambassador, were
converted into 0.553 (the "Conversion Ratio") shares of AIMCO Common Stock. Any
outstanding options to purchase Ambassador Common Stock were converted, at the
election of the option holder, into cash or options to purchase AIMCO Common
Stock at such options' then current exercise price divided by the Conversion
Ratio. In accordance with the Agreement and Plan of Merger, dated December 23,
1997 and supplemented by letter dated as of March 11, 1998 (the "Ambassador
Merger Agreement"), the outstanding shares of Class A Senior Cumulative
Convertible Preferred Stock of Ambassador, (the "Ambassador Preferred Stock")
were redeemed and converted into Ambassador Common Stock prior to the Ambassador
Merger. Following the consummation of the Ambassador Merger, a subsidiary of the
Partnership was merged with and into the Ambassador Operating Partnership (the
"Ambassador OP Merger"). Each outstanding unit of limited partnership interest
in the Ambassador Operating Partnership was converted into the right to receive
0.553 OP Units, and as a result, the Ambassador Operating Partnership became a
99.9% owned subsidiary partnership of the Partnership.
Also during 1997, the Partnership (i) (a) acquired 44 properties for
aggregate purchase consideration of $467.4 million, of which $56 million was
paid in the form of 1.9 million OP Units (b) paid $34.2 million in cash and
issued OP Units valued at $7.3 million in connection with the acquisition of
partnership interests through tender offers in certain partnerships ((a) and (b)
together are the "1997 Property Acquisitions") and (c) paid $19.9 million to
acquire 886,600 shares of Ambassador Common Stock (together with the 1997
Property Acquisitions, the "1997 Acquisitions"); (ii) sold (a) approximately
16,367,000 shares of AIMCO Common Stock for aggregate net proceeds of $513.4
million; (b) 750,000 shares of AIMCO Class B Cumulative Convertible Preferred
Stock for net proceeds of $75 million; and (c) 2,400,000 shares of AIMCO Class C
9% Cumulative Preferred Stock for net proceeds of $58.1 million; of which all
proceeds were contributed by AIMCO to the Partnership in exchange for 16,367,000
OP Units, 750,000 Class B Preferred Units, and 2,400,000 Class C Preferred Units
(collectively, the "1997 Stock Offerings"); and (iii) sold five real estate
properties (the "1997 Dispositions").
Also during 1998, AIMCO (i) (a) sold 4,200,000 shares of its Class D
Cumulative Preferred Stock for net proceeds of $101.5 million (the "Class D
Preferred Stock Offering"); (b) sold 4,050,000 shares of its Class G Cumulative
Preferred Stock for net proceeds of $98.0 million (the "Class G Preferred Stock
Offering"); (c) sold 2,000,000 shares of its Class H Cumulative Preferred Stock
for net proceeds of $48.1 million (the "Class H Preferred Stock Offering"); and
(d) sold 1,000,000 shares of its Class J Cumulative Convertible Preferred Stock
in a private placement for $100.0 million (the "Class J Preferred
P-2
<PAGE> 1730
Stock Offering"); of which all proceeds were contributed by AIMCO to the
Partnership in exchange for 4,050,000 Class G Preferred Units, 2,000,000 Class H
Preferred Units and 1,000,000 shares of Class J Preferred Units (collectively,
the "1998 Stock Offerings"); (ii) purchased 29 properties for aggregate purchase
consideration of $312.7 million, of which $52.2 million was paid in the form of
OP Units (the "1998 Acquisitions"); (iii) sold two real estate properties (the
"1998 Dispositions"); (iv) contracted to purchase two properties for aggregate
purchase consideration of $62.1 million, of which $26.4 million will be paid in
the form of OP units (the "Probable Purchases") and (v) sold 1,400,000 Class B
Preferred Partnership Units of a subsidiary and warrants to purchase 875,000
shares of AIMCO Class A Common Stock for $35.0 million (the "Preferred
Partnership Unit Offering").
PRO FORMA FINANCIAL INFORMATION OF THE PARTNERSHIP (INSIGNIA MERGER)
The following Pro Forma Consolidated Balance Sheet (Insignia Merger) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) the purchase
of nine properties for an aggregate purchase price of $62.5 million; (ii) the
Class J Preferred Stock Offering; (iii) the Probable Purchases; (iv) the IFG
Merger; (v) the IPT Merger; (vi) the IFG Reorganization; and (vii) the Preferred
Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) the
1997 Acquisitions; (ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions;
(iv) the NHP Real Estate Acquisition; (v) the NHP Real Estate Reorganization;
(vi) the NHP Stock Purchase; (vii) the NHP Merger; (viii) the NHP
Reorganization; (ix) the 1998 Stock Offerings; (x) the 1998 Acquisitions; (xi)
the Probable Purchases; (xii) the 1998 Dispositions; (xiii) the Ambassador
Merger; (xiv) the IFG Merger; (xv) the merger between IPT and Angeles Mortgage
Investment Trust ("AMIT") ("the AMIT Merger"); (xvi) the IPT Merger; (xvii) the
IFG Reorganization; and (xviii) the Preferred Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1997: (i)
the 1998 Stock Offerings; (ii) the 1998 Acquisitions; (iii) the Probable
Purchases; (iv) the 1998 Dispositions; (v) the Ambassador Merger; (vi) the IFG
Merger; (vii) the AMIT Merger; (viii) the IPT Merger; (ix) the IFG
Reorganization; and (x) the Preferred Partnership Unit offering.
The following Pro Forma Financial Information (Insignia Merger) is based,
in part, on the following historical financial statements: (i) the audited
Consolidated Financial Statements of the Partnership for the year ended December
31, 1997; (ii) the unaudited Consolidated Financial Statements of the
Partnership for the nine months ended September 30, 1998; (iii) the audited
Consolidated Financial Statements of Ambassador for the year ended December 31,
1997; (iv) the unaudited Consolidated Financial Statements of Ambassador for the
four months ended April 30, 1998; (v) the audited Consolidated Financial
Statements of IFG for the year ended December 31, 1997; (vi) the audited
Consolidated Financial Statements of AMIT for the year ended December 31, 1997;
(vii) the unaudited Consolidated Financial Statements of IFG for the nine months
ended September 30, 1998; (viii) the unaudited Financial Statements of AMIT for
the period from January 1, 1998 to September 17, 1998; (ix) the unaudited
Consolidated Financial Statements of NHP for the nine months ended September 30,
1997; (x) the unaudited Combined Financial Statements of the NHP Real Estate
Companies for the three months ended March 31, 1997; (xi) the unaudited
Financial Statements of NHP Southwest Partners, L.P. for the three months ended
March 31, 1997; (xii) the unaudited Combined Financial Statements of the NHP New
LP Entities for the three months ended March 31, 1997; (xiii) the unaudited
Combined Financial Statements of the NHP Borrower Entities for the three months
ended March 31, 1997; (xiv) the unaudited Historical Summaries of Gross Income
and Certain Expenses of The Bay Club at Aventura for the three months ended
March 31, 1997; (xv) the unaudited Historical Summary of Gross Income and Direct
Operating Expenses of Morton Towers for the six months ended June 30, 1997;
(xvi) the unaudited Combined Statement of Revenues and Certain Expenses of the
Thirty-Five Acquisition Properties for the six months ended June 30, 1997;
(xvii) the unaudited Statement of
P-3
<PAGE> 1731
Revenues and Certain Expenses of First Alexandria Associates, a Limited
Partnership for the nine months ended September 30, 1997; (xviii) the unaudited
Statement of Revenues and Certain Expenses of Country Lakes Associates Two, a
Limited Partnership for the nine months ended September 30, 1997; (xix) the
unaudited Statement of Revenues and Certain Expenses of Point West Limited
Partnership, A Limited Partnership for the nine months ended September 30, 1997;
(xx) the unaudited Statement of Revenues and Certain Expenses for The Oak Park
Partnership for the nine months ended September 30, 1997; (xxi) the audited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the year ended December 31, 1997,
(xxii) the audited Combined Historical Summary or Gross Income and Direct
Operating Expenses of the Cirque Apartment Communities for the year ended
December 31, 1997; (xxiii) the audited Combined Historical Summary of Gross
Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the year ended December 31, 1997; (xxiv) the audited
Historical Summary of Gross Income and Direct Operating Expenses of the Calhoun
Beach Club Apartments for the year ended December 31, 1997; (xxv) the unaudited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the nine months ended September
30, 1998; (xxvi) the unaudited Combined Historical Summary of Gross Income and
Direct Operating Expenses of the Cirque Apartment Communities for the three
months ended March 31, 1998; (xxvii) the unaudited Combined Historical Summary
of Gross Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the nine months ended September 30, 1998; and (xxviii) the
unaudited Historical Summary of Gross Income and Direct Operating Expenses of
Calhoun Beach Club Apartments for the nine months ended September 30, 1998. The
following Pro Forma Financial Information should be read in conjunction with
such financial statements and the notes thereto incorporated by reference
herein.
The unaudited Pro Forma Financial Information (Insignia Merger) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
1997 Acquisitions, the 1998 Acquisitions, and the Probable Purchases are
adjusted to estimated fair market value, based upon preliminary estimates, which
are subject to change as additional information is obtained. The allocations of
purchase costs are subject to final determination based upon estimates and other
evaluations of fair market value. Therefore, the allocations reflected in the
following unaudited Pro Forma Financial Information may differ from the amounts
ultimately determined.
The following unaudited Pro Forma Financial Information (Insignia Merger)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions or results of
operations. In the opinion of the Partnership's management, all material
adjustments necessary to reflect the effects of these transactions have been
made.
P-4
<PAGE> 1732
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS IFG AIMCO BEFORE IFG
AND PROBABLE IFG MERGER IFG REORGANIZATION
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) REORGANIZATION(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Real estate.............. $2,355,122 $202,332 $ 44,488 $ 23,880(G) $2,625,822 $ --
Property held for sale... 42,212 -- -- -- 42,212 --
Investments in
securities............. -- -- -- 443,513(G)
(443,513)(H) -- --
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 127,082 -- -- -- 127,082 59,195(I)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 246,847 -- 232,892 444,570(G) 924,309 --
Mortgage notes
receivable............. -- -- 20,916 -- 20,916
Cash and cash
equivalents............ 43,681 6,107 73,064 -- 122,852 (17,897)(J)
Restricted cash.......... 83,187 -- 2,691 -- 85,878 (1,352)(J)
Accounts receivable...... 11,545 -- 54,060 (32,234)(G) 33,371 (5,471)(J)
Deferred financing
costs.................. 21,835 -- 7,020 (7,020)(G) 21,835 --
Goodwill................. 120,503 -- 19,503 111,018(G) 251,024 --
Property management
contracts.............. -- -- 86,419 31,147(G) 117,566 (79,195)(I)
Other assets............. 69,935 -- 20,128 (4,533)(G) 85,530 (2,860)(J)
---------- -------- -------- --------- ---------- --------
Total Assets..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
Secured notes payable.... $ 774,676 $122,568 $ 29,002 $ -- $ 926,246 $ --
Secured tax-exempt bond
financing.............. 399,925 -- -- -- 399,925 --
Secured short-term
financing.............. 50,000 (50,000) 332,691 (300,000)(G) 32,691 --
Unsecured short-term
financing.............. 50,800 (50,800) -- 300,000(G) 300,000 --
Accounts payable, accrued
and other
liabilities............ 131,799 -- 33,241 50,000(G)
53,333(G)
4,935(G)
2,525(G) 275,833 (27,580)(J)
Deferred tax liability... -- -- 18,802 1,198(G) 20,000 (20,000)(I)
Security deposits and
prepaid rents.......... 13,171 -- 3,533 (3,533) 13,171 --
---------- -------- -------- --------- ---------- --------
1,420,371 21,768 417,269 108,458 1,967,866 (47,580)
Minority interest........ 42,086 37,345 108,485 (108,485)(G) 79,431 --
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. -- -- 144,282 5,218 149,500 --
Redeemable Partnership
Units.................. 232,405 45,176 -- -- 277,581 --
Partners' capital and
shareholders' equity
Common stock........... -- -- 320 (320)(G) -- --
Additional paid-in
capital.............. -- -- (86,959) 86,959(G) -- --
Distributions in excess
of earnings.......... -- -- (22,216) 22,216(G) -- --
General and Special
Limited Partner...... 1,039,525 4,150 -- 443,513(H)
9,269(G) 1,496,457 --
Preferred Units........ 387,562 100,000 -- -- 487,562 --
---------- -------- -------- --------- ---------- --------
1,427,087 104,150 (108,855) 561,637 1,984,019 --
---------- -------- -------- --------- ---------- --------
Total Liabilities
and Equity..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
<CAPTION>
PRO FORMA
----------
<S> <C>
Real estate.............. $2,625,822
Property held for sale... 42,212
Investments in
securities.............
--
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 186,277(K)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 924,309
Mortgage notes
receivable............. 20,916
Cash and cash
equivalents............ 104,955
Restricted cash.......... 84,526
Accounts receivable...... 27,900
Deferred financing
costs.................. 21,835
Goodwill................. 251,024
Property management
contracts.............. 38,371
Other assets............. 82,670
----------
Total Assets..... $4,410,817
==========
Secured notes payable.... $ 926,246
Secured tax-exempt bond
financing.............. 399,925
Secured short-term
financing.............. 32,691
Unsecured short-term
financing.............. 300,000
Accounts payable, accrued
and other
liabilities............
248,253
Deferred tax liability... --
Security deposits and
prepaid rents.......... 13,171
----------
1,920,286
Minority interest........ 79,431
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. 149,500
Redeemable Partnership
Units.................. 277,581
Partners' capital and
shareholders' equity
Common stock........... --
Additional paid-in
capital.............. --
Distributions in excess
of earnings.......... --
General and Special
Limited Partner......
1,496,457
Preferred Units........ 487,562
----------
1,984,019
----------
Total Liabilities
and Equity..... $4,410,817
==========
</TABLE>
P-5
<PAGE> 1733
- ---------------
(A) Represents the unaudited historical consolidated financial position of the
Partnership as of September 30, 1998.
(B) Represents adjustments to reflect the purchase of ten properties for an
aggregate purchase price of $140.2 million; the Class J Preferred Stock
Offering; the Probable Purchases; and the Preferred Partnership Unit
Offering.
(C) Represents the unaudited historical consolidated financial position of IFG
as of September 30, 1998.
(D) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the issuance of 8,423,751 shares of AIMCO Common Stock, based
on consideration to holders of IFG common stock outstanding as of the date
of the IFG Merger; (ii) the issuance of 4,826,745 shares of AIMCO Class A
Common Stock to holders of IPT common stock (other than AIMCO); (iii) the
payment of a special dividend of $50,000; (iv) the assumption of $149,500
of the convertible debentures of IFG; (v) the allocation of the combined
purchase price of IFG and IPT based on the preliminary estimates of
relative fair market value of the assets and liabilities of IFG and IPT;
and (vi) the contribution by AIMCO of substantially all the assets and
liabilities of Insignia and IPT to the Partnership in exchange for OP
Units.
(E) Represents the effects of AIMCO's acquisition of IFG immediately after the
IFG Merger. These amounts do not give effect to the IFG Reorganization,
which includes the transfers of certain assets and liabilities of IFG to
the combined Unconsolidated Subsidiaries. The IFG Reorganization occurred
immediately after the IFG Merger so that AIMCO could maintain its
qualification as a REIT. This column is included as an intermediate step to
assist the reader in understanding the entire nature of the IFG Merger and
related transactions.
(F) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party property management operations.
The adjustments reflect the transfer of assets valued at the Partnership's
new basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(G) In connection with the IFG Merger and the IPT Merger, AIMCO became
obligated to issue a total of 13,250,496 shares of AIMCO Common Stock
The total purchase price of IFG and IPT is $1,128,009, as follows:
<TABLE>
<S> <C>
Issuance of 8,423,751 shares of AIMCO Common Stock in the
IFG Merger, at $34.658 per share.......................... $ 291,949
Issuance of 4,826,745 shares of AIMCO Common Stock in the
IPT Merger, at $31.50 per share........................... 151,564
Assumption of Convertible Debentures........................ 149,500
Assumption of liabilities as indicated in the Merger
Agreement................................................. 397,459
Transaction costs........................................... 53,333
Generation of deferred tax liability........................ 20,000
Special dividend............................................ 50,000
Purchase of IFG Common Stock prior to merger................ 4,935
Consideration for options................................... 9,269
----------
Total............................................. $1,128,009
==========
</TABLE>
P-6
<PAGE> 1734
The purchase price was allocated to the various assets of IFG acquired in
the IFG Merger, as follows:
<TABLE>
<S> <C>
Purchase price.............................................. $1,128,009
Historical basis of IFG's assets acquired................... (561,181)
----------
Step-up to record the fair value of IFG's assets
acquired............................................... $ 566,828
==========
</TABLE>
This step-up was applied to IFG's assets as follows:
<TABLE>
<S> <C>
Real estate................................................. $ 23,880
Investment in real estate partnerships...................... 444,570
Decrease in accounts receivable............................. (32,234)
Decrease in deferred loan costs............................. (7,020)
Management contracts........................................ 31,147
Increase in goodwill........................................ 111,018
Reduction in value of other assets.......................... (4,533)
--------
Total............................................. $566,828
========
</TABLE>
The fair value of IFG's assets, primarily the real estate and management
contracts, was calculated based on estimated future cash flows of the
underlying assets.
As of September 30, 1998, IFG's stockholder's equity was $(108,855), which
is detailed as follows:
<TABLE>
<S> <C>
Common stock................................................ $ 320
Additional paid-in capital.................................. (86,959)
Distributions in excess of earnings......................... (22,216)
---------
Total............................................. $(108,855)
=========
</TABLE>
Upon completion of the IFG Merger, the entire amount of the stockholder's
equity was eliminated.
In addition, the minority interest in other partnerships of IFG of $108,485
will be eliminated upon the IPT Merger.
At the time of the IFG Merger, AIMCO obtained unsecured short-term
financing of $300 million. The proceeds were used to repay secured
short-term financing of IFG that AIMCO assumed.
(H) Represents the issuance of a total of 13,250,496 OP Units to AIMCO and the
concurrent issuance of 13,250,496 shares of AIMCO Common Stock to IFG and
IPT stockholders, in exchange for all the shares of IFG and IPT common
stock.
In accordance with the IFG Merger Agreement, AIMCO became obligated to
issue 8,423,751 shares of Class E Preferred Stock, approximately equal to
$292 million. Each share of Class E Preferred Stock will automatically
convert to one share of AIMCO Common Stock upon the payment of the special
dividend thereon. As such, for the purpose of preparing the pro forma
financial statements, AIMCO's management believes that the Class E
Preferred Stock is substantially the same as AIMCO Common Stock, and that
the fair value of the Class E Preferred Stock approximates the fair value
of the AIMCO Common Stock. Upon the payment of the special dividend on the
Class E Preferred Stock and the conversion of the Class E Preferred Stock
to AIMCO Common Stock, the former IFG stockholders will own approximately
15.0% of the AIMCO Common Stock and the IPT stockholders will own
approximately 7.3% of AIMCO Common Stock. The special dividend on the Class
E Preferred Stock is intended to represent a distribution in an amount at
least equal to the earnings and profits of IFG at the time of the IFG
Merger, to which AIMCO succeeds.
Concurrent with the issuance of Class E Preferred Stock, the Partnership
will issue comparable Class E Preferred Units to AIMCO. The Class E
Preferred Units will have terms substantially the same as the Class E
Preferred Stock.
(I) Represents the increase in the Partnership's investment in Unconsolidated
Subsidiaries to reflect the contribution or sale of property management
contracts, including the related deferred tax liability, in exchange for
preferred stock and a note payable from the Unconsolidated Subsidiaries.
These assets and
P-7
<PAGE> 1735
liabilities are valued at the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(J) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries,
(K) Represents notes receivable from the Unconsolidated Subsidiaries of
$95,000, advances to the Unconsolidated Subsidiaries of $42,792, and equity
in the Unconsolidated Subsidiaries of $48,485. The combined pro forma
balance sheet of the Unconsolidated Subsidiaries as of September 30, 1998
is presented below, which reflects the effects of the IFG Merger, the IPT
Merger, and the IFG Reorganization as if such transactions had occurred as
of September 30, 1998.
P-8
<PAGE> 1736
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
IFG
HISTORICAL REORGANIZATION(i) PRO FORMA
---------- ----------------- ---------
<S> <C> <C> <C>
ASSETS
Real estate............................................ $ 22,376 $ -- $ 22,376
Cash and cash equivalents.............................. 16,919 17,897(ii) 34,816
Restricted cash........................................ 5,507 1,352(ii) 6,859
Management contracts................................... 47,846 79,195(iii) 127,041
Accounts receivable.................................... 13,109 5,471(ii) 18,580
Deferred financing costs............................... 3,117 -- 3,117
Goodwill............................................... 43,544 -- 43,544
Other assets........................................... 51,498 2,860(ii) 54,358
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable.................................. $114,302 $ 45,000(iii) $159,302
Accounts payable, accrued and other liabilities........ 56,773 27,580(ii) 84,353
Security deposits and deferred income.................. 334 --(ii) 334
Deferred tax liability................................. -- 20,000(iii) 20,000
-------- -------- --------
171,409 92,580 263,989
Common stock........................................... 2,061 747(iv) 2,808
Preferred stock........................................ 34,290 14,195(iii) 48,485
Retained earnings...................................... (3,844) -- (3,844)
Notes receivable on common stock purchases............. -- (747)(iv) (747)
-------- -------- --------
32,507 14,195 46,702
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
</TABLE>
- ---------------
(i) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the transfer of assets valued at the Partnership's new
basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(ii) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries, valued at the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(iii)Represents the transfer or sale of management contracts, the establishment
of an intercompany note, and the establishment of the related estimated net
deferred Federal and state tax liabilities at a combined rate of 40% for
the estimated difference between the book and tax basis of the net assets
of the Unconsolidated Subsidiaries. The primary component of the deferred
tax liability is the difference between the new basis of the property
management contracts, as a result of the allocation of the purchase price
of IFG, and the historical tax basis.
(iv) Represents the issuance of common stock to the common stockholders of the
Unconsolidated Subsidiaries in exchange for notes receivable, in order for
the common stockholders to maintain their respective ownership interest in
the Unconsolidated Subsidiaries.
P-9
<PAGE> 1737
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE NHP AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rental and other property
revenues........................ $193,006 $120,337(I)
11,012(J) $ 6,660 $ 93,329 $ -- $ 6,912
Property operating expenses....... (76,168) (59,466)(I)
(4,860)(J) (2,941) (36,088) -- (3,307)
Owned property management
expense......................... (6,620) (4,327)(I)
(602)(J) (282) -- -- --
Depreciation...................... (37,741) (26,645)(I)
(2,172)(J) (1,414) (18,979) (5,997)(O) (966)
-------- -------- ------- -------- ------- --------
Income from property operations... 72,477 33,277 2,023 38,262 (5,997) 2,639
-------- -------- ------- -------- ------- --------
Management fees and other
income.......................... 13,937 -- 7,813 -- -- 94,330
Management and other expenses..... (9,910) -- (5,394) -- -- (57,615)
Corporate overhead allocation..... (588) -- -- -- -- --
Amortization...................... (1,401) -- (5,800) -- -- (16,768)
-------- -------- ------- -------- ------- --------
Income from service company
business........................ 2,038 -- (3,381) -- -- 19,947
Minority interest in service
company business................ (10) -- -- -- -- --
-------- -------- ------- -------- ------- --------
AIMCO's share of income from
service company business........ 2,028 -- (3,381) -- -- 19,947
-------- -------- ------- -------- ------- --------
General and administrative
expenses........................ (5,396) -- (1,025) (7,392) 7,392(P) (21,199)
Interest expense.................. (51,385) (3,451)(K)
(2,497)(L) (5,462) (26,987) (221)(Q) (9,035)
Interest income................... 8,676 -- 1,900 -- -- 10,967
Minority interest................. 1,008 458(M) 16 (851) 705(R) (12,871)
Equity in losses of unconsolidated
partnerships.................... (1,798) (122)(N) (8,542) 405 -- 12,515
Equity in earnings of
unconsolidated subsidiaries..... 4,636 -- 5,790 -- -- --
-------- -------- ------- -------- ------- --------
Income (loss) from operations..... 30,246 27,665 (8,681) 3,437 1,879 2,963
Income tax provision.............. -- -- -- -- -- 1,701
Gain on dispositions of
property........................ 2,720 (2,720) -- -- -- 80
-------- -------- ------- -------- ------- --------
Income (loss) before extraordinary
item............................ 32,966 24,945 (8,681) 3,437 1,879 4,744
Extraordinary item -- early
extinguishment of debt.......... (269) 269 -- -- -- --
-------- -------- ------- -------- ------- --------
Net income........................ 32,697 25,214 (8,681) 3,437 1,879 4,744
Income attributable to preferred
unitholders..................... 2,315 39,859 -- -- -- --
-------- -------- ------- -------- ------- --------
Income attributable to common
unitholders..................... $ 30,382 $(14,645) $(8,681) $ 3,437 $ 1,879 $ 4,744
======== ======== ======= ======== ======= ========
Basic earnings per OP unit........ $ 1.09
========
Diluted earnings per OP unit...... $ 1.08
========
Weighted average OP units
outstanding..................... 27,732
========
Weighted average OP units and
equivalents outstanding......... 28,113
========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(G) ADJUSTMENTS(H) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property
revenues........................
$ -- $ -- $ 431,256
Property operating expenses.......
-- -- (182,830)
Owned property management
expense.........................
-- -- (11,831)
Depreciation......................
(2,350)(S) -- (96,264)
-------- -------- ---------
Income from property operations... (2,350) -- 140,331
-------- -------- ---------
Management fees and other
income.......................... -- (74,404)(X) 41,676
Management and other expenses..... -- 49,236(X) (23,683)
Corporate overhead allocation..... -- -- (588)
Amortization...................... (32,699)(T) 30,188(Y) (26,480)
-------- -------- ---------
Income from service company
business........................ (32,699) 5,020 (9,075)
Minority interest in service
company business................ -- -- (10)
-------- -------- ---------
AIMCO's share of income from
service company business........ (32,699) 5,020 (9,085)
-------- -------- ---------
General and administrative
expenses........................ -- 6,249(X) (21,371)
Interest expense..................
(14,750) -- (113,788)
Interest income................... -- 191(Z) 21,734(BB)
Minority interest................. 1,552(U) -- (9,983)
Equity in losses of unconsolidated
partnerships.................... (29,995)(V) -- (27,537)
Equity in earnings of
unconsolidated subsidiaries..... -- (4,578)(AA) 5,848(DD)
-------- -------- ---------
Income (loss) from operations..... (78,242) 6,882 (13,851)
Income tax provision.............. (1,701)(W) -- --
Gain on dispositions of
property........................ (80) -- --
-------- -------- ---------
Income (loss) before extraordinary
item............................ (80,023) 6,882 (13,851)
Extraordinary item -- early
extinguishment of debt.......... -- -- --
-------- -------- ---------
Net income........................ (80,023) 6,882 (13,851)
Income attributable to preferred
unitholders..................... -- -- 42,174(CC)
-------- -------- ---------
Income attributable to common
unitholders..................... $(80,023) $ 6,882 $ (56,025)(BB)
======== ======== =========
Basic earnings per OP unit........ $ (0.83)(BB)
=========
Diluted earnings per OP unit...... $ (0.83)(BB)
=========
Weighted average OP units
outstanding..................... 67,522
=========
Weighted average OP units and
equivalents outstanding......... 68,366
=========
</TABLE>
P-10
<PAGE> 1738
- ---------------
(A) Represents the Partnership's audited consolidated results of operations
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1997: (i) the 1997 Acquisitions; (ii) the 1997 Stock
Offerings; (iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings;
(v) the 1998 Acquisitions; (vi) the Probable Purchases; (vii) the 1998
Dispositions; and (v) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues................. $ 6,660(v) $ 16,842 $ -- $(16,842)(xvii) $ 6,660
Property operating
expenses................. (2,941)(v) (8,411) -- 8,411 (xvii (2,941)
Owned property management
expense.................. (282)(v) (862) -- 862 (xvii (282)
Depreciation............... (1,414)(vi) (2,527) (693)(xi) 3,220 (xvii (1,414)
------- -------- ------- -------- -------
Income from property
operations............... 2,023 5,042 (693) (4,349) 2,023
------- -------- ------- -------- -------
Management fees and other
income................... 1,405(vii) 72,176 -- (65,768)(xviii) 7,813
Management and other
expenses................. (2,263)(viii) (35,267) -- 32,136 (xviii (5,394)
Amortization............... -- (9,111) (4,432)(xii) 7,743 (xix (5,800)
------- -------- ------- -------- -------
Income from service company
business................. (858) 27,798 (4,432) (25,889) (3,381)
------- -------- ------- -------- -------
General and administrative
expenses................. -- (16,266) 8,668 (xiii 6,573 (xviii (1,025)
Interest expense........... (5,082)(ix) (10,685) -- 10,305(xx) (5,462)
Interest income............ 540(v) 1,963 -- (603)(xxi) 1,900
Minority interest.......... 16(v) -- -- -- 16
Equity in losses of
unconsolidated
partnerships............. (3,905)(x) -- (4,631)(xiv) (6) (8,542)
Equity in earnings of
unconsolidated
subsidiaries............. -- -- (4,636)(xv) 10,426 (xxii 5,790
------- -------- ------- -------- -------
Income (loss) from
operations............... (7,266) 7,852 (5,724) (3,543) (8,681)
Income tax provision....... -- (3,502) 3,502 (xvi -- --
------- -------- ------- -------- -------
Net income (loss).......... $(7,266) $ 4,350 $(2,222) $ (3,543) $(8,681)
======= ======== ======= ======== =======
</TABLE>
- ---------------
(i) Represents the adjustment to record activity from January 1, 1997 to
the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. The historical
financial statements of the NHP Real Estate Companies consolidate
certain real estate partnerships in which they have an interest that
will be presented on the equity method by the Partnership as a
result of the NHP Real Estate Reorganization. In addition,
represents adjustments to record additional depreciation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest
expense incurred in connection with borrowings incurred by the
Partnership to consummate the NHP Real Estate Acquisition.
(ii)Represents the unaudited consolidated results of operations of NHP
for the period from January 1, 1997 through December 8, 1997 (date
of the NHP Merger).
P-11
<PAGE> 1739
(iii)
Represents the following adjustments occurring as a result of the
NHP Merger: (i) the reduction in personnel costs, primarily
severance costs, pursuant to a restructuring plan; (ii) the
incremental depreciation of the purchase price adjustment related to
real estate; (iii) the incremental amortization of the purchase
price adjustment related to the management contracts, furniture,
fixtures and equipment, and goodwill; (iv) the reversal of equity in
earnings of NHP during the pre-merger period when the Partnership
held a 47.62% interest in NHP; and (v) the amortization of the
increased basis in investments in real estate partnerships based on
the purchase price adjustment related to real estate and an
estimated average life of 20 years.
(iv)Represents adjustments related to the NHP Reorganization, whereby
the Partnership contributed or sold to the Unconsolidated
Subsidiaries and the Unconsolidated Partnership: (i) certain assets
and liabilities of NHP, primarily related to the management
operations and other businesses owned by NHP and (ii) 12 real estate
properties containing 2,905 apartment units. The adjustments
represent (i) the related revenues and expenses primarily related to
the management operations and other businesses owned by NHP and (ii)
the historical results of operations of such real estate
partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis
resulting from the allocation of the combined purchase price of NHP
and the NHP Real Estate Companies.
(v) Represents adjustments to reflect the acquisition of the NHP Real
Estate Companies and the corresponding historical results of
operations as if they had occurred on January 1, 1997.
(vi)Represents incremental depreciation related to the consolidated real
estate assets purchased from the NHP Real Estate Companies.
Buildings and improvements are depreciated on the straight-line
method over a period of 30 years, and furniture and fixtures are
depreciated on the straight-line method over a period of 5 years.
(vii)
Represents the adjustment to record the revenues from ancillary
businesses purchased from the NHP Real Estate Companies as if the
acquisition had occurred on January 1, 1997.
(viii)
Represents $4,878 related to the adjustment to record the expenses
from ancillary businesses purchased from the NHP Real Estate
Companies as if the acquisition had occurred on January 1, 1997,
less $2,615 related to a reduction in personnel costs pursuant to a
restructuring plan, approved by the Company's senior management,
assuming that the acquisition of the NHP Real Estate Companies had
occurred on January 1, 1997 and that the restructuring plan was
completed on January 1, 1997. The restructuring plan specifically
identifies all significant actions to be taken to complete the
restructuring plan, including the reduction of personnel, job
functions, location and the date of completion.
(ix)Represents adjustments in the amount of $3,391 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as the increase in interest expense in the amount
of $1,691 related to borrowings on the Partnership's credit
facilities of $55,807 to finance the NHP Real Estate Acquisition.
(x) Represents adjustments in the amount of $2,432 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as amortization of $1,473 related to the increased
basis in investment in real estate partnerships, as a result of the
allocation of the purchase price of the NHP Real Estate Companies,
based on an estimated average life of 20 years.
(xi)Represents incremental depreciation related to the real estate
assets purchased from NHP. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years,
and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(xii)
Represents incremental depreciation and amortization of the tangible
and intangible assets related to the property management and other
business operated by the Unconsolidated
P-12
<PAGE> 1740
Subsidiaries, based on the Partnership's new basis as adjusted by
the allocation of the combined purchase price of NHP including
amortization of management contracts of $3,782, depreciation of
furniture, fixtures and equipment of $2,018 and amortization of
goodwill of $7,743, less NHP's historical depreciation and
amortization of $9,111. Management contracts are amortized using the
straight-line method over the weighted average life of the contracts
estimated to be approximately 15 years. Furniture, fixtures and
equipment are depreciated using the straight-line method over the
estimated life of 3 years. Goodwill is amortized using the
straight-line method over 20 years.
(xiii)
Represents a reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan, approved by the Company's
senior management, specifically identifying all significant actions
to be taken to complete the restructuring plan, assuming that the
NHP Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997.
(xiv)
Represents adjustment for amortization of the increased basis in
investments in real estate partnerships, as a result of the
allocation of the combined purchase price of NHP and the NHP Real
Estate Companies, based on an estimated average life of 20 years.
(xv)Represents the reversal of equity in earnings in NHP during the
pre-merger period when the Partnership held a 47.62% interest in
NHP, as a result of the Partnership's acquisition of 100% of the NHP
Common Stock.
(xvi)
Represents the reversal of NHP's income tax provision due to the
restructuring of the management business to the Unconsolidated
Subsidiaries.
(xvii)
Represents the contribution of NHP's 12 real estate properties
containing 2,905 apartment units to the Unconsolidated Partnership
pursuant to the NHP Reorganization.
(xviii)
Represents the historical income and expenses associated with
certain assets and liabilities of NHP that were contributed or sold
to the Unconsolidated Subsidiaries, primarily related to the
management operations and other businesses owned by NHP.
(xix)
Represents the amortization and depreciation of certain management
contracts and other assets of NHP, based on the Partnership's new
basis resulting from the allocation of the purchase price of NHP,
that will be contributed or sold to the Unconsolidated Subsidiaries,
primarily related to the management operations and other businesses
owned by NHP.
(xx)Represents interest expense of $6,020 related to the contribution of
NHP's 12 real estate properties containing 2,905 apartment units to
the Unconsolidated Partnership and interest expense of $4,285
related to the certain assets and liabilities that will be
contributed or sold to the Unconsolidated Subsidiaries pursuant to
the NHP Reorganization.
(xxi)
Represents the interest income of $5,000 earned on notes payable of
$50,000 to the Partnership issued as consideration for certain
assets and liabilities sold to the Unconsolidated Subsidiaries by
the Partnership, net of the elimination of the Partnership's share
of the related interest expense of $4,750 reflected in the equity in
earnings of the Unconsolidated Subsidiaries operating results,
offset by $853 in interest income primarily related to the
management operations and other businesses owned by NHP contributed
or sold to the Unconsolidated Subsidiaries pursuant to the NHP
Reorganization.
(xxii)
Represents the Partnership's equity in earnings of the
Unconsolidated Subsidiaries.
(D) Represents the audited historical statement of operations of Ambassador
for the year ended December 31, 1997. Certain reclassifications have been
made to Ambassador's historical statement of operations to conform to the
Partnership's Statement of Operations presentation. The Ambassador
historical statement of operations excludes extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of
P-13
<PAGE> 1741
interest expense resulting from the net reduction of debt; and (iv) the
elimination of the minority interest associated with Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger, and the spin-off of Holdings as if these transactions had
occurred on January 1, 1997. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
IFG AMIT HOLDINGS IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property
revenues....................... $ 6,646 $ 266 $ -- $ 6,912
Property operating expenses...... (3,251) (56) -- (3,307)
Depreciation..................... (966) -- -- (966)
--------- ------- --------- --------
Income from property
operations..................... 2,429 210 -- 2,639
--------- ------- --------- --------
Management fees and other
income......................... 389,626 -- (295,296) 94,330
Management and other expenses.... (315,653) -- 258,038 (57,615)
Amortization..................... (31,709) (303) 15,244 (16,768)
--------- ------- --------- --------
Income from service company
business....................... 42,264 (303) (22,014) 19,947
--------- ------- --------- --------
General and administrative
expenses....................... (20,435) (1,351) 587 (21,199)
Interest expense................. (9,353) -- 318 (9,035)
Interest income.................. 4,571 6,853 (457) 10,967
Minority interest................ (12,448) (382) (41) (12,871)
Equity in income (losses) of
unconsolidated partnership..... 10,027 2,639 (151) 12,515
--------- ------- --------- --------
Income (loss) from operations.... 17,055 7,666 (21,758) 2,963
Income tax provision............. (6,822) (180) 8,703 1,701
Gain on sale of property......... -- 80 -- 80
--------- ------- --------- --------
Net income (loss)................ 10,233 7,566 (13,055) 4,744
========= ======= ========= ========
</TABLE>
- ---------------
(i) Represents the audited consolidated results of operations of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report
on Form 10-K. Certain reclassifications have been made to IFG's
historical statement of operations to conform to the Partnership's
statement of operations presentation.
(ii)Represents the historical statement of operations of AMIT, as well
as pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger: (i) the incremental depreciation of the
purchase price adjustment related to consolidated real estate and
investments in real estate partnerships; (ii) the amortization of
goodwill and property management contracts resulting from the IFG Merger;
(iii) the increase in interest expense resulting from the net increase in
debt; and (iv) the elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
P-14
<PAGE> 1742
(I) Represents adjustments to reflect the 1997 Property Acquisitions and the
1998 Acquisitions, less the 1997 Dispositions and the 1998 Dispositions
as if they had occurred on January 1, 1997. These pro forma operating
results are based on historical results of the properties, except for
depreciation, which is based on the Partnership's investment in the
properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1997 PROPERTY 1997 1998 1998
ACQUISITIONS DISPOSITIONS ACQUISITIONS DISPOSITIONS TOTAL
------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Rental and other
property
revenues........... $ 88,589 $(4,081) $ 39,132 $(3,303) $120,337
Property operating
expense............ (44,109) 1,944 (18,655) 1,354 (59,466)
Owned property
management
expense............ (3,233) 133 (1,349) 122 (4,327)
Depreciation......... (16,839) 452 (10,946) 688 (26,645)
</TABLE>
(J) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1997. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(K) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1997
Property Acquisitions..................................... $(29,490)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1997 Dispositions and
the 1997 Stock Offerings.................................. 19,568
Repayments on the Partnership's credit facilities with
proceeds from a dividend received from one of the
Unconsolidated Subsidiaries............................... 1,889
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1998
Acquisitions.............................................. (15,994)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1998 Dispositions and
the 1998 Stock Offerings.................................. 20,113
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred Partnership
Unit Offering............................................. 463
--------
$ (3,451)
========
</TABLE>
(L) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the Probable Purchases.
(M) Represents (i) loss of $181 related to limited partners in consolidated
partnerships acquired in connection with the 1997 Property Acquisitions
and the 1998 Property Acquisitions and (ii) income of $502 allocable to
the Partnership Preferred Units.
(N) Represents the reduction in the Partnership's earnings in unconsolidated
partnerships as a result of the consolidation of additional partnerships
resulting from additional ownership acquired through tender offers.
(O) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
P-15
<PAGE> 1743
(P) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 724
Reduction in salaries and benefits.......................... 4,197
Merger related costs........................................ 524
Other....................................................... 1,947
------
$7,392
======
</TABLE>
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(Q) Represents the decrease in interest expense of $3,612 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$3,833 related to borrowings under the Partnership's credit facilities.
(R) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(S) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(T) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $38,885, amortization of goodwill of $6,526, and
depreciation of furniture, fixtures, and equipment of $3,753, less IFG's
historical depreciation and amortization of $16,465. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(U) Represents elimination of minority interest of IPT resulting from the IPT
merger.
(V) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(W) Represents the reversal of IFG's income tax provision.
(X) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(Y) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Z) Represents interest income of $3,825 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries by the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $3,634 reflected on the equity in earnings of the
Unconsolidated Subsidiaries.
(AA) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-16
<PAGE> 1744
(BB) The following table presents the net impact to pro forma net loss
applicable to holders of OP Units and net loss per OP Units assuming the
interest rate per annum increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest expense................................ $ 938
========
Net income.................................................. $(14,789)
========
Net loss attributable to OP unitholders..................... $(56,963)
========
Basic loss per OP unit...................................... $ (0.84)
========
Diluted loss per OP unit.................................... $ (0.84)
========
</TABLE>
(CC) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred
Units, the Class G Preferred Units, the Class H Preferred Units and the
Class J Preferred Units as if these Preferred Units had been issued as of
January 1, 1997.
(DD) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(2,536), plus the elimination of intercompany interest
expense of $8,384. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the year ended December 31, 1997 is
presented below, which represents the effects of the Ambassador Merger,
the NHP Merger, the NHP Reorganization, the IFG Merger, and the IFG
Reorganization as if these transactions had occurred as of January 1,
1997.
P-17
<PAGE> 1745
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZATION IFG
HISTORICAL(i) ADJUSTMENTS(ii) REORGANIZATION(iii) PRO FORMA
------------- --------------- ------------------- ---------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 6,194 $ 6,371(iv) $ -- $ 12,565
Property operating expenses............. (3,355) (3,531)(iv) -- (6,886)
Owned property management expense....... (147) (478)(iv) -- (625)
Depreciation expense.................... (1,038) (767)(iv) -- (1,805)
-------- -------- -------- --------
Income from property operations......... 1,654 1,595 -- 3,249
-------- -------- -------- --------
Management fees and other income........ 23,776 41,992(v) 74,404(x) 140,172
Management and other expenses........... (11,733) (20,403)(v) (49,236)(x) (81,372)
Amortization............................ (3,726) (4,017)(v) (30,188)(xi) (37,931)
-------- -------- -------- --------
Income from service company............. 8,317 17,572 (5,020) 20,869
General and administrative expense...... -- (6,573)(v) (6,249)(x) (12,822)
Interest expense........................ (6,058) (5,849)(vi) (3,825)(xii) (15,732)
Interest income......................... 1,001 (148)(v) -- 853
Minority interest....................... (2,819) 2,198(viii) -- (621)
Equity in losses of unconsolidated
partnerships.......................... (1,028) 1,028(iv) -- --
Equity in earnings of Unconsolidated
Subsidiaries.......................... 2,943 (2,943)(vii) -- --
-------- -------- -------- --------
Income (loss) from operations........... 4,010 6,880 (15,094) (4,204)
Income tax provision.................... (1,902) (3,013)(ix) 6,450(xiii) 1,535
-------- -------- -------- --------
Net income (loss)....................... $ 2,108 $ 3,867 $ (8,644) $ (2,669)
======== ======== ======== ========
Income attributable to preferred
unitholders........................... $ 2,198 $ 3,478 $ (8,212) $ (2,536)
======== ======== ======== ========
Income (loss) attributable to common
unitholders........................... $ (90) $ 389 $ (432) $ (133)
======== ======== ======== ========
</TABLE>
- ---------------
(i) Represents the historical results of operations of the Unconsolidated
Subsidiaries for the year ended December 31, 1997.
(ii) Represents adjustments related to the NHP Reorganization, which includes
the sale or contribution of 14 properties containing 2,725 apartment units
from the unconsolidated partnerships to the Unconsolidated Subsidiaries,
as well as the sale or contribution of 12 properties containing 2,905
apartment units from the Unconsolidated Subsidiaries to the Unconsolidated
Partnership.
(iii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iv) Represents adjustments for the historical results of operations of the 14
real estate properties contributed or sold to the Unconsolidated
Subsidiaries, offset by the historical results of operations of the 12
real estate properties contributed or sold to the Unconsolidated
Partnership, with additional depreciation recorded related to the
Partnership's new basis resulting from the allocation of purchase price of
NHP and the NHP Real Estate Companies.
P-18
<PAGE> 1746
(v) Represents adjustments to reflect income and expenses associated with
certain assets and liabilities of NHP contributed or sold to the
Unconsolidated Subsidiaries.
(vi) Represents adjustments of $6,058 to reverse the historical interest
expense of the Unconsolidated Subsidiaries, which resulted from its
original purchase of NHP Common Stock, offset by $2,622 related to the
contribution or sale of the 14 real estate properties, $4,285 related to
assets and liabilities transferred from the Partnership to the
Unconsolidated Subsidiaries and $5,000 related to a note payable to the
Partnership.
(vii) Represents the reversal of the historical equity in earnings of NHP for
the period in which NHP was not consolidated by the Unconsolidated
Subsidiaries.
(viii)Represents the minority interest in the operations of the 14 real estate
properties.
(ix) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill which is not deductible
for tax purposes.
(x) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(xi) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(xii) Represents adjustment for interest expense related to a note payable to
the Partnership.
(xiii)Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-19
<PAGE> 1747
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR
AND PROBABLE AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E)
------------- ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Rental and other property revenues............. $ 265,700 $ 19,603(H) $ $ $
8,398(I) 35,480 -- 8,126
Property operating expenses.................... (101,600) (9,009)(H)
(3,745)(I) (14,912) -- (2,585)
Owned property management expense.............. (7,746) (728)(H)
(459)(I) -- -- --
Depreciation................................... (59,792) (4,886)(H)
(2,624)(I) (7,270) (1,420)(M) (904)
--------- -------- -------- ------- --------
Income from property operations................ 96,562 6,550 13,298 (1,420) 4,637
--------- -------- -------- ------- --------
Management fees and other income............... 13,968 -- -- -- 71,155
Management and other expenses.................. (8,101) -- -- -- (41,477)
Corporate overhead allocation.................. (196) -- -- -- --
Amortization................................... (3) -- -- -- (13,986)
--------- -------- -------- ------- --------
Income from service company business........... 5,668 -- -- -- 15,692
--------- -------- -------- ------- --------
General and administrative expenses............ (7,444) -- (5,278) 5,278(N) (61,386)
Interest expense............................... (56,756) 1,975(J)
(2,469)(K) (10,079) 145(O) (24,871)
Interest income................................ 18,244 (1) -- -- 22,501
Minority interest.............................. (1,052) 160(L) (252) 252(P) (14,159)
Equity in losses of unconsolidated
partnerships................................. (5,078) -- (71) -- 13,492
Equity in earnings of unconsolidated
subsidiaries................................. 8,413 -- -- -- --
Amortization of goodwill....................... (5,071) -- -- -- --
--------- -------- -------- ------- --------
Income (loss) from operations.................. 53,486 6,215 (2,382) 4,255 (44,094)
Income tax provision........................... -- -- -- -- 1,180
Gain on dispositions of property............... 2,783 (2,783) -- -- 6,576
--------- -------- -------- ------- --------
Net income..................................... 56,269 3,432 (2,382) 4,255 (36,338)
Income attributable to preferred unitholders... 16,320 16,094 -- -- --
--------- -------- -------- ------- --------
Income (loss) attributable to common
unitholders.................................. $ 39,949 $(12,662) $ (2,382) $ 4,255 $(36,338)
========= ======== ======== ======= ========
Basic earnings (loss) per OP Unit.............. $ 0.80
=========
Diluted earnings (loss) per OP Unit............ $ 0.79
=========
Weighted average OP Units outstanding.......... 50,420
=========
Weighted average OP Unit and equivalents
outstanding.................................. 50,544
=========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(F) ADJUSTMENTS(G) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property revenues............. $ $ $
-- -- 337,307
Property operating expenses....................
-- -- (131,851)
Owned property management expense..............
-- -- (8,933)
Depreciation...................................
(1,583)(Q) -- (78,479)
-------- -------- ---------
Income from property operations................ (1,583) -- 118,044
-------- -------- ---------
Management fees and other income............... -- (56,211)(W) 28,912
Management and other expenses.................. -- 35,192(W) (14,386)
Corporate overhead allocation.................. -- -- (196)
Amortization................................... (23,895)(R) 22,641(X) (15,243)
-------- -------- ---------
Income from service company business........... (23,895) 1,622 (913)
-------- -------- ---------
General and administrative expenses............ 45,823(S) 14,375(W) (8,632)
Interest expense...............................
7,045 -- (85,010)(AA)
Interest income................................ -- 143(Y) 40,887
Minority interest.............................. 6,622(T) -- (8,429)
Equity in losses of unconsolidated
partnerships................................. (18,577)(U) -- (10,234)
Equity in earnings of unconsolidated
subsidiaries................................. -- (7,562)(Z) 851(CC)
Amortization of goodwill....................... -- -- (5,071)
-------- -------- ---------
Income (loss) from operations.................. 15,435 8,578 41,493
Income tax provision........................... (1,180)(V) -- --
Gain on dispositions of property............... (6,576) -- --
-------- -------- ---------
Net income..................................... 7,679 8,578 41,493
Income attributable to preferred unitholders... -- -- 32,414(BB)
-------- -------- ---------
Income (loss) attributable to common
unitholders.................................. $ 7,679 $ 8,578 $ 9,079(AA)
======== ======== =========
Basic earnings (loss) per OP Unit.............. $ 0.13(AA)
=========
Diluted earnings (loss) per OP Unit............ $ 0.13(AA)
=========
Weighted average OP Units outstanding.......... 68,554
=========
Weighted average OP Unit and equivalents
outstanding.................................. 69,218
=========
</TABLE>
P-20
<PAGE> 1748
- ---------------
(A) Represents the Partnership's unaudited consolidated results of operations
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1998: (i) the 1998 Stock Offerings; (ii) the 1998
Acquisitions; (iii) the Probable Purchases; (iv) the 1998 Dispositions;
and (v) the Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of operations of Ambassador
for the four months ended April 30, 1998. Certain reclassifications have
been made to Ambassador's historical Statement of Operations to conform
to the Partnership's Statement of Operations presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger and the spin-off of the common stock of Holdings as if these
transactions had occurred on January 1, 1998. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
HOLDINGS
IFG AMIT SPIN- IFG
HISTORICAL(i) MERGER(ii) OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 7,566 $ 560 $ -- $ 8,126
Property operating expenses............. (2,585) -- -- (2,585)
Depreciation............................ (904) -- -- (904)
--------- ------ --------- --------
Income from property operations......... 4,077 560 -- 4,637
--------- ------ --------- --------
Management fees and other income........ 311,475 -- (240,320) 71,155
Management and other expenses........... (252,295) -- 210,818 (41,477)
Amortization............................ (26,781) (48) 12,843 (13,986)
--------- ------ --------- --------
Income from service company business.... 32,399 (48) (16,659) 15,692
--------- ------ --------- --------
General and administrative expenses..... (66,272) (675) 5,561 (61,386)
Interest expense........................ (24,164) -- (707) (24,871)
Interest income......................... 18,817 4,193 (509) 22,501
Minority interest....................... (14,159) -- -- (14,159)
Equity in losses of unconsolidated
partnerships.......................... 12,169 1,323 13,492
--------- ------ --------- --------
Income (loss) from operations........... (37,133) 4,030 (10,991) (44,094)
Income tax provision.................... (4,772) -- 5,952 1,180
Gain on disposition of property......... 5,888 688 -- 6,576
--------- ------ --------- --------
Item income (loss)...................... $ (36,017) $4,718 $ (5,039) $(36,338)
========= ====== ========= ========
</TABLE>
----------------------
(i)
Represents the unaudited consolidated results of operations of IFG for
the nine months ended September 30, 1998.
Certain reclassifications have been made to IFG's historical statement
of operations to conform to the Partnership's statement of operations
presentation.
(ii)
Represents the historical statement of operations of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock for
each three shares of IFG common stock to holders of IFG common stock.
(F) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the incremental depreciation of the purchase price adjustment
related to consolidated real estate and investments in real estate
partnerships; (ii) the amortization of goodwill and property management
contracts
P-21
<PAGE> 1749
resulting from the IFG Merger; (iii) the increase in interest expense
resulting from the net increase in debt; and (iv) the elimination of the
income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of
IFG, primarily management contracts and related working capital assets
and liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(H) Represents adjustments to reflect the 1998 Acquisitions, less the 1998
Dispositions as if they had occurred on January 1, 1998. These pro forma
operating results are based on historical results of the properties,
except for depreciation, which is based on the Partnership's investment
in the properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1998 1998
ACQUISITIONS DISPOSITIONS TOTAL
------------ ------------ -------
<S> <C> <C> <C>
Rental and other property revenues......... $20,554 $(951) $19,603
Property operating expense................. (9,385) 376 (9,009)
Owned property management expense.......... (765) 37 (728)
Depreciation............................... (4,979) 93 (4,886)
</TABLE>
(I) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1998. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(J) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and
other loans and mortgages assumed in connection with
the 1998 Acquisitions.................................. $(8,698)
Repayments on the Partnership's credit facilities and
other indebtedness with proceeds from the 1998
Dispositions and the 1998 Stock
Offerings.............................................. 10,326
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred
Partnership Unit Offering.............................. 347
-------
$ 1,975
=======
</TABLE>
(K) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the probable purchases.
(L) Represents (i) loss of $537 related to limited partners in consolidated
partnerships acquired in connection with the 1998 Acquisitions and (ii)
income of $377 allocable to the Partnership Preferred Units.
(M) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(N) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses.................... $ 355
Reduction in salaries and benefits........................ 2,482
Merger related costs...................................... 1,212
Other..................................................... 1,229
------
$5,278
======
</TABLE>
P-22
<PAGE> 1750
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1998 and that the
restructuring plan was completed on January 1, 1998. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(O) Represents the decrease in interest expense of $1,480 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$1,335 related to borrowings under the Partnership's line of credit.
(P) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(Q) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(R) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $30,096, amortization of goodwill of $4,895, and
depreciation of furniture, fixtures, and equipment of $2,842, less IFG's
historical depreciation and amortization of $13,938. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(S) Represents the elimination of merger related expenses recorded by IFG
during the nine months ended September 30, 1998. In connection with the
IFG Merger, certain IFG executives will receive one-time lump-sum
payments in connection with the termination of their employment and
option agreements. The total of these lump sum payments is estimated to
be approximately $50,000.
(T) Represents elimination of minority interest in IPT resulting from the IPT
merger.
(U) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(V) Represents the reversal of IFG's income tax provision.
(W) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(X) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Y) Represents interest income of $2,861 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries of the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $2,718 reflected in the equity in earnings of the
Unconsolidated Subsidiaries.
(Z) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-23
<PAGE> 1751
(AA) The following table presents the net impact to pro forma net income
applicable to holders of shares of AIMCO Common Stock and net income per
share of AIMCO Common Stock assuming the interest rate per annum
increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest........................................ $ 702
=======
Net income.................................................. $40,791
=======
Net income attributable to OP Unitholders................... $ 8,377
=======
Basic loss per OP Unit...................................... $ 0.12
=======
Diluted loss per OP Unit.................................... $ 0.12
=======
</TABLE>
(BB) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred Units
the Class G Preferred Units, the Class H Preferred Units and the Class J
Preferred Units as if these stock offerings had occurred as of January 1,
1997.
(CC) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(1,867) plus the elimination of intercompany interest of
$2,718. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the nine months ended September 30, 1998
is presented below, which represents the effects of the Ambassador
Merger, the IFG Merger and the IFG Reorganization as if these
transactions had occurred as of January 1, 1997.
P-24
<PAGE> 1752
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
IFG
HISTORICAL(i) REORGANIZATION(ii) PRO FORMA
------------- ------------------ ---------
<S> <C> <C> <C>
Rental and other property revenues................... $ 9,910 $ -- $ 9,910
Property operating expense........................... (5,139) -- (5,139)
Owned property management expense.................... (345) -- (345)
Depreciation expense................................. (1,026) -- (1,026)
-------- -------- --------
Income from property operations...................... 3,400 -- 3,400
-------- -------- --------
Management fees and other income..................... 57,665 56,211(iii) 113,876
Management and other expenses........................ (36,221) (35,192)(iii) (71,413)
Amortization......................................... (2,111) (22,641)(iv) (24,752)
-------- -------- --------
Income from service company.......................... 19,333 (1,622) 17,711
General and administrative expense................... -- (14,375)(iii) (14,375)
Interest expense..................................... (6,931) (2,861)(v) (9,792)
Interest income...................................... 617 -- 617
Minority interest.................................... (526) -- (526)
-------- -------- --------
Income (loss) from operations........................ 15,893 (18,858) (2,965)
Income tax provision................................. (7,037) 8,037(vi) 1,000
-------- -------- --------
Net income (loss).................................... $ 8,856 $(10,821) $ (1,965)
======== ======== ========
Income (loss) attributable to preferred
stockholders....................................... $ 8,413 $(10,280) $ (1,867)
======== ======== ========
Income (loss) attributable to common stockholders.... $ 443 $ (541) $ (98)
======== ======== ========
</TABLE>
- ---------------
(i) Represents the Unconsolidated Subsidiaries historical consolidated results
of operations.
(ii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iii)Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG.
(iv) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG, based on the Partnership's new basis resulting from the allocation
of the purchase price of IFG.
(v) Represents adjustment for interest expense related to a note payable to the
Partnership.
(vi) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-25
<PAGE> 1753
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR IFG
AND PROBABLE NHP AMBASSADOR PURCHASE PRICE AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $ 32,697 $ 25,214 $ (8,681) $ 3,437 $ 1,879 $ 4,744
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 43,520 28,817 7,354 20,372 5,997 17,248
Gain on investments............ -- -- (12) -- -- --
(Gain) loss on disposition of
properties.................... (2,720) 2,720 (3,882) -- -- (80)
Minority interests............. (1,008) (458) (16) 851 (705) 12,871
Equity in earnings of
unconsolidated partnerships... 1,798 122 8,542 (405) -- (12,515)
Equity in earnings of
unconsolidated subsidiaries... (4,636) -- (5,790) -- -- --
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 269 (269) -- -- -- (5,366)
Changes in operating assets and
operating liabilities......... 3,112 -- 5,314 (3,523) -- (4,384)
--------- --------- --------- --------- -------- --------
Total adjustments........... 40,335 30,932 11,510 17,295 5,292 7,774
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) operating activities... 73,032 56,146 2,829 20,732 7,171 12,518
Net cash used in
discontinued operations.... -- -- (7,999) -- -- --
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) continuing
operations................. 73,032 56,146 (5,170) 20,732 7,171 12,518
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... 21,792 19,627(I) -- -- -- --
Purchase of real estate.......... (376,315) (220,995)(J) (4,114) (24,179) -- --
Additions to real estate,
investments and property held
for sale....................... (26,966) (5,217)(K) (522) (19,033) -- (4,154)
Proceeds from sale of property
held for sale.................. 303 -- -- -- -- --
Purchase of general and limited
partnership interests.......... (199,146) -- (1,208) -- -- (76,104)
Purchase of management
contracts...................... -- -- (11,686) -- -- (36,868)
Purchase of/additions to notes
receivable..................... (59,787) -- (4,236) -- -- (17,647)
Proceeds from repayments of notes
receivable..................... -- -- 214 1,000 -- 8,838
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... 45,791 -- 3,097 3,183 -- 42,615
Contribution to unconsolidated
subsidiaries................... (42,879) -- -- -- -- --
Proceeds from sale of
securities..................... -- -- 642 -- -- --
Purchase of investments held for
sale........................... -- -- (73) -- -- --
Purchase of NHP mortgage loans... (60,575) -- -- -- -- --
Purchase of Ambassador common
stock.......................... (19,881) -- -- -- -- --
--------- --------- --------- --------- -------- --------
Net cash used in investing
activities................. (717,663) (206,585) (17,886) (39,029) -- (83,320)
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. 225,436 122,568(L) 145,519 156,746 -- 111,001
Principal repayments on secured
notes payable.................. (12,512) -- (141,032) (141,676) -- (12,697)
Proceeds from secured short-term
financing...................... 19,050 -- -- -- -- --
Repayments on secured short-term
financing...................... -- (259,027)(M) (434) -- -- --
Principal repayments on unsecured
short-term notes payable....... (79) (50,800)(M) -- -- -- --
Proceeds (payoff) from unsecured
short-term financing........... (12,500) -- -- -- -- --
Principal repayments on secured
tax-exempt bond financing...... (1,487) -- -- -- -- --
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... (162,008) -- -- -- -- --
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... (6,387) -- (245) (8,095) -- (2,305)
Proceeds from issuance of common
and preferred stock, net....... 643,224 357,389(N) 6,286 28,946 -- 62,420
Proceeds from exercises of
employee stock options and
warrants....................... 871 -- -- 3,195 -- 7,487
Repurchase of common stock....... -- -- -- -- -- (3,283)
Principal repayments received on
notes due from Officers........ 25,957 -- -- 1,323 -- --
Investments made by minority
interests...................... -- -- -- -- -- 249
Receipt of contributions from
minority interests............. -- 37,345(O) -- -- -- --
Payments of distribution to
minority interests............. -- (2,713)(P) -- -- -- --
Payment of distributions......... (44,660) (19,396)(Q) (11,503)(T) (15,717) (12,173)(U) (2,695)
Payment of distributions to
limited partners............... -- (5,193)(R) -- -- (15)(U) --
Payment of preferred unit
distributions.................. (846) (39,859)(S) -- (2,279) -- --
Payment of distributions to
minority interests............. (5,510) -- -- (3,700) -- (12,578)
Net transactions with
Insignia/ESG................... -- -- -- -- -- (57,612)
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) financing activities... 668,549 140,314 (1,409) 18,743 (12,188) 89,987
--------- --------- --------- --------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. 23,918 (10,125) (24,465) 446 (5,017) 19,185
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. 13,170 -- 36,277 4,002 -- 64,447
--------- --------- --------- --------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $ 37,088 $ (10,125) $ 11,812 $ 4,448 $ (5,017) $ 83,632
========= ========= ========= ========= ======== ========
<CAPTION>
IFG IFG
MERGER REORGANIZATION PRO
ADJUSTMENTS(G) ADJUSTMENTS(H) FORMA
-------------- -------------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $(80,023) $ 6,882 $ (13,851)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 35,049 (30,188) 128,169
Gain on investments............ -- -- (12)
(Gain) loss on disposition of
properties.................... 80 -- (3,882)
Minority interests............. (1,552) -- 9,983
Equity in earnings of
unconsolidated partnerships... 29,995 -- 27,537
Equity in earnings of
unconsolidated subsidiaries... -- 4,578 (5,848)
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 5,366 --
Changes in operating assets and
operating liabilities......... -- -- 519
-------- -------- -----------
Total adjustments........... 68,938 (25,610) 156,466
-------- -------- -----------
Net cash provided by (used
in) operating activities... (11,085) (18,728) 142,615
Net cash used in
discontinued operations.... -- -- (7,999)
-------- -------- -----------
Net cash provided by (used
in) continuing
operations................. (11,085) (18,728) 134,616
-------- -------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... -- -- 41,419
Purchase of real estate.......... -- -- (625,603)
Additions to real estate,
investments and property held
for sale....................... -- -- (55,892)
Proceeds from sale of property
held for sale.................. -- -- 303
Purchase of general and limited
partnership interests.......... -- -- (276,458)
Purchase of management
contracts...................... -- -- (48,554)
Purchase of/additions to notes
receivable..................... -- -- (81,670)
Proceeds from repayments of notes
receivable..................... -- -- 10,052
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... -- -- 94,686
Contribution to unconsolidated
subsidiaries................... -- -- (42,879)
Proceeds from sale of
securities..................... -- -- 642
Purchase of investments held for
sale........................... -- -- (73)
Purchase of NHP mortgage loans... -- -- (60,575)
Purchase of Ambassador common
stock.......................... -- -- (19,881)
-------- -------- -----------
Net cash used in investing
activities................. -- -- (1,064,483)
-------- -------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. -- -- 761,270
Principal repayments on secured
notes payable.................. -- -- (307,917)
Proceeds from secured short-term
financing...................... -- -- 19,050
Repayments on secured short-term
financing...................... -- -- (259,461)
Principal repayments on unsecured
short-term notes payable....... -- -- (50,879)
Proceeds (payoff) from unsecured
short-term financing........... -- -- (12,500)
Principal repayments on secured
tax-exempt bond financing...... -- -- (1,487)
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... -- -- (162,008)
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... -- -- (17,032)
Proceeds from issuance of common
and preferred stock, net....... -- -- 1,098,265
Proceeds from exercises of
employee stock options and
warrants....................... -- -- 11,553
Repurchase of common stock....... -- -- (3,283)
Principal repayments received on
notes due from Officers........ -- -- 27,280
Investments made by minority
interests...................... -- -- 249
Receipt of contributions from
minority interests............. -- -- 37,345
Payments of distribution to
minority interests............. -- -- (2,713)
Payment of distributions......... (24,513)(V) -- (130,657)
Payment of distributions to
limited partners............... -- -- (5,208)
Payment of preferred unit
distributions.................. -- -- (42,984)
Payment of distributions to
minority interests............. -- -- (21,788)
Net transactions with
Insignia/ESG................... -- -- (57,612)
-------- -------- -----------
Net cash provided by (used
in) financing activities... (24,513) -- 879,483
-------- -------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. (35,598) (18,728) (50,384)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. -- -- 117,896
-------- -------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $(35,598) $(18,728) $ 67,512
======== ======== ===========
</TABLE>
P-26
<PAGE> 1754
- ---------------
(A) Represents the Partnership's audited consolidated statement of cash flows
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1997 Acquisitions; (ii) the 1997 Stock Offerings;
(iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings; (v) the 1998
Acquisitions; (vi) the Probably Purchases; (vii) the 1998 Dispositions; and
(viii) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(I) HISTORICAL(II) ADJUSTMENTS(III) REORGANIZATION(IV) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)................. $ (7,266) $ 4,350 $(2,222) $ (3,543) $ (8,681)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 4,058 9,134 5,125 (10,963) 7,354
Gain on investments............. (12) -- -- -- (12)
(Gain) loss on disposition of
properties.................... (3,882) -- -- -- (3,882)
Minority interests.............. (16) -- -- -- (16)
Equity in earnings of
unconsolidated partnerships... 3,905 -- 4,631 6 8,542
Equity in earnings of
unconsolidated subsidiaries... -- -- 4,636 (10,426) (5,790)
Changes in operating assets and
operating liabilities......... (1,036) 6,350 -- -- 5,314
-------- -------- ------- -------- ---------
Total adjustments........... 3,017 15,484 14,392 (21,383) 11,510
-------- -------- ------- -------- ---------
Net cash provided by (used
in) operating
activities................ (4,249) 19,834 12,170 (24,926) 2,829
Net cash used in
discontinued operations... -- (7,999) -- -- (7,999)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) continuing
operations................ (4,249) 11,835 12,170 (24,926) (5,170)
-------- -------- ------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate........... -- (4,114) -- -- (4,114)
Additions to real estate,
investments and property held
for sale........................ (522) -- -- -- (522)
Purchase of general and limited
partnership interests........... (1,208) -- -- -- (1,208)
Purchase of management
contracts....................... -- (11,686) -- -- (11,686)
Purchase of/additions to notes
receivable...................... -- (4,236) -- -- (4,236)
Proceeds from repayments of notes
receivable...................... 214 -- -- -- 214
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 3,097 -- -- -- 3,097
Proceeds from sale of
securities...................... 642 -- -- -- 642
Purchase of investments held for
sale............................ (73) -- -- -- (73)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) investing
activities................ 2,150 (20,036) -- -- (17,886)
-------- -------- ------- -------- ---------
</TABLE>
P-27
<PAGE> 1755
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes
payable borrowings.............. $ 74,019 $ 71,500 $ -- $ -- $ 145,519
Principal repayments on secured
notes payable................... (71,256) (69,776) -- -- (141,032)
Repayments on secured short-term
financing....................... (434) -- -- -- (434)
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (245) -- -- (245)
Proceeds from issuances of common
and preferred stock, net........ -- 6,286 -- -- 6,286
Payment of distributions.......... (2,000) -- (9,503) -- (11,503)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) financing
activities................ 329 7,765 (9,503) -- (1,409)
-------- -------- ------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (1,770) (436) 2,667 (24,926) (24,465)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 25,795 10,482 -- -- 36,277
-------- -------- ------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 24,025 $ 10,046 $ 2,667 $(24,926) $ 11,812
======== ======== ======= ======== =========
</TABLE>
- ---------------
(i)Represents the adjustment to record cash flow activity from January 1,
1997 to the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. In addition,
represents adjustments to record additional deprecation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest expense
incurred in connection with borrowings incurred by the Partnership to
consummate the NHP Real Estate Acquisition.
(ii)
Represents the unaudited consolidated statement of cash flows of NHP
for the period from January 1, 1997 through December 8, 1997 (date of
the NHP Merger).
(iii)
Represents the following adjustments occurring as a result of the NHP
Merger: (i) the reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan; (ii) the incremental
depreciation of the purchase price adjustment related to real estate;
(iii) the incremental amortization of the purchase price adjustment
related to management contracts, furniture, fixtures and equipment, and
goodwill; (iv) the reversal of equity in earnings of NHP during the
pre-merger period when the Partnership held a 47.62% interest in NHP;
and (v) the amortization of the increased basis in investments in real
estate partnerships, based on the purchase price adjustment related to
real estate and an estimated average life of 20 years.
(iv)
Represents adjustments related to the NHP Reorganization, whereby the
Partnership contributed or sold to the Unconsolidated Subsidiaries and
the Unconsolidated Partnership; (i) certain assets and liabilities of
NHP, primarily related to the management operations and other
businesses owned by NHP and (ii) 12 real estate properties containing
2,905 apartment units. The adjustments represent (i) the related cash
flow activity primarily related to the management operations of such
real estate partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis resulting
from the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies.
(D) Represents the audited historical statement of cash flows of Ambassador for
the year ended December 31, 1997. Certain reclassifications have been made
to Ambassador's historical statement of cash flows to conform to the
Partnership's statement of cash flows presentation. The Ambassador
P-28
<PAGE> 1756
historical statement of cash flows excludes an extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................... $ 10,233 $ 7,566 $(13,055) $ 4,744
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization...... 32,675 63 (15,490) 17,248
Gain on disposition of property.... -- (80) -- (80)
Minority interests................. 12,448 382 41 12,871
Equity in earnings of
unconsolidated partnerships...... (10,027) (2,639) 151 (12,515)
Extraordinary gain on early
extinguishment of debt........... (5,366) -- -- (5,366)
Changes in operating assets and
liabilities...................... -- (2,405) (1,979) (4,384)
--------- -------- -------- --------
Total adjustments............. 29,730 (4,679) (17,277) 7,774
--------- -------- -------- --------
Net cash provided by (used in) operating
activities............................ 39,963 2,887 (30,332) 12,518
--------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to real estate, investments
and property held for sale......... (7,695) 665 2,876 (4,154)
Purchase of general and limited
partnership interests.............. (93,118) -- 17,014 (76,104)
Purchase of management contracts...... (99,540) -- 62,672 (36,868)
Purchase of/additions to notes
receivable......................... (9,172) (14,251) 5,776 (17,647)
Proceeds from repayments of notes
receivable......................... 4,523 7,552 (3,237) 8,838
Distributions from investments in real
estate partnerships and
unconsolidated subsidiaries........ 44,823 -- (2,208) 42,615
--------- -------- -------- --------
Net cash provided by (used in)
investing activities........ (160,179) (6,034) 82,893 (83,320)
--------- -------- -------- --------
</TABLE>
P-29
<PAGE> 1757
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable
borrowings......................... $ 118,141 $ -- $ (7,140) $111,001
Principal repayments on secured notes
payable............................ (15,682) -- 2,985 (12,697)
Payment of loan costs, net of proceeds
from interest rate hedge........... (2,305) -- -- (2,305)
Proceeds from issuance of common and
preferred stock, net............... 62,420 -- -- 62,420
Proceeds from exercises of employee
stock options and warrants......... 7,487 -- -- 7,487
Repurchase of common stock............ (3,283) -- -- (3,283)
Investment made by minority
interests.......................... 249 -- -- 249
Payment of distributions.............. -- (2,695) -- (2,695)
Payment of distributions to minority
interests.......................... (12,578) -- -- (12,578)
Net transactions with Insignia/ESG.... -- -- (57,612) (57,612)
--------- -------- -------- --------
Net cash provided by (used in)
financing activities........ 154,449 (2,695) (61,767) 89,987
--------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 34,233 (5,842) (9,206) 19,185
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD............................. 54,614 9,789 44 64,447
--------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................ $ 88,847 $ 3,947 $ (9,162) $ 83,632
========= ======== ======== ========
</TABLE>
- ---------------
(i)Represents the audited consolidated statement of cash flows of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report on
Form 10-K. Certain reclassifications have been made to IFG's historical
statement of cash flows to conform to the Partnership's statement of
cash flows presentation.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(I) Represents proceeds from the sale of the 1998 Dispositions, as if these
dispositions occurred on January 1, 1997.
P-30
<PAGE> 1758
(J) Represents the use of cash to purchase the 1998 Acquisitions and the
Probable Purchases, as if these acquisitions occurred on January 1, 1997.
(K) Represents cash payments for capital improvements of $300 per unit on the
1997 Acquisitions, the 1998 Acquisitions and the Probable Purchases.
(L) Represents notes payable assumed in connection with the 1998 Acquisitions
and the Probable Purchases, assuming these transactions occurred January 1,
1997.
(M) Represents net principal repayments assuming the 1998 Acquisitions, the
1998 Dispositions, the Probable Purchases, the 1998 Stock Offerings and the
Preferred Partnership Unit Offering occurred January 1, 1997.
(N) Represents cash proceeds from the 1998 Stock Offerings, as if these
offerings occurred on January 1, 1997.
(O) Represents contributions from minority interests assuming the Preferred
Partnership Unit Offering occurred January 1, 1997.
(P) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(Q) Represents distributions paid on the 1997 Stock Offerings as if these
occurred on January 1, 1997.
(R) Represents distributions paid to limited partners on OP Units issued in
connection with the 1997 Acquisitions, the 1998 Acquisitions and the
Probable Purchases, as if the issuance of the OP Units occurred on January
1, 1997.
(S) Represents preferred unit distributions paid on the Class B Preferred
Stock, the Class C Preferred Stock and the 1998 Stock Offerings as if these
occurred on January 1, 1997.
(T) Represents historical distributions of $2,000 and pro forma distributions
on the shares issued in the NHP Merger as if these shares had been issued
on January 1, 1997.
(U) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(V) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-31
<PAGE> 1759
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE AMBASSADOR PURCHASE PRICE IFG AS IFG MERGER
HISTORICAL(A) PURCHASE(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 56,269 $ 3,432 $ (2,382) $ 4,255 $ (36,338) $ 7,679
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 67,344 7,512 7,520 1,420 14,890 25,478
(Gain) loss on disposition of
properties..................... (2,783) 2,783 -- -- (6,576) 6,576
Minority interests.............. 1,052 (160) 252 (252) 14,159 (6,622)
Equity in earnings of
unconsolidated partnerships.... 5,078 -- 71 -- (13,492) 18,577
Equity in earnings of
unconsolidated subsidiaries.... (8,413) -- -- -- -- --
Non-cash compensation........... -- -- -- -- 796 --
Changes in operating assets and
operating liabilities.......... (67,722) -- 5,948 -- (7,775) --
--------- -------- -------- ------- --------- --------
Total adjustments............ (5,444) 10,135 13,791 1,168 2,002 44,009
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) operating activities... 50,825 13,567 11,409 5,423 (34,336) 51,688
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... (63,839) 63,839(H) -- -- 27,122 --
Additions to real estate.......... (47,878) (1,198)(I) (17,759) -- 9,309 --
Proceeds from sale of property and
investments held for sale....... 19,627 (19,627)(J) -- -- (35) --
Additions to property held for
sale............................ (1,986) -- -- -- -- --
Purchase of general and limited
partnership interests........... (27,016) -- -- -- 17,420 --
Purchase of/additions to notes
receivable...................... (72,445) -- -- -- (27,589) --
Proceeds from repayments/sale of
notes receivable................ 21,562 -- -- -- 21,185 --
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 513 -- 1,063 -- 22,053 --
Payment of trust based preferred
dividends....................... -- -- -- -- (7,415) --
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... 4,492 -- -- -- 13,423 --
Contribution to unconsolidated
subsidiaries.................... (13,032) -- -- -- -- --
Purchase of investments held for
sale............................ (4,935) -- -- -- -- --
Redemption of OP Units............ (516) -- -- -- -- --
Merger costs...................... -- -- -- -- (1,402) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) investing activities... (185,453) 43,014 (16,696) -- 74,071 --
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. 77,489 -- 37,162 -- 177,234 --
Principal repayments on secured
notes payable................... (56,262) -- -- -- 4,239 --
Principal advances on secured
tax-exempt bond financing....... -- -- 21,784 -- -- --
Principal repayments on secured
tax-exempt bond financing....... (1,436) -- -- -- -- --
Net borrowings/repayments on
secured short-term financing.... (30,693) 209,027(K) (43,002) -- -- --
Net borrowings (paydowns) on the
revolving credit facilities..... -- -- 2,513 -- -- --
Principal repayments on unsecured
short-term notes payable........ -- -- -- -- 2,644 --
Payment of loan costs, net of
proceeds from interest rate
hedge........................... (5,727) -- -- -- (83) --
Proceeds from issuance of common
stock and preferred stock,
net............................. 253,239 (253,239)(L) -- -- -- --
Repurchase of common stock........ (10,972) -- -- -- -- --
Proceeds from exercises of
employee stock options and
warrants........................ -- -- 9,761 -- 6,533 --
Principal repayments received on
notes due from Officers......... 8,084 -- -- -- -- --
Payments of distributions to
minority interests.............. -- (2,034)(M) -- -- -- --
Payment of distributions.......... (73,322) -- -- (3,701)(P) (8,606) (22,360)(Q)
Payment of distributions to
limited partners................ (10,251) (1,919)(N) -- (5)(P) (494) --
Payment of preferred unit
distributions................... (10,916) (16,094)(O) -- -- -- --
Proceeds from issuance of High
Performance Units............... 1,988 -- -- -- -- --
Net transactions with
Insignia/ESG.................... -- -- -- -- (241,003) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) financing activities... 141,221 (64,259) 28,218 (3,706) (59,536) (22,360)
--------- -------- -------- ------- --------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. 6,593 (7,678) 22,931 1,717 (19,801) 29,328
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 37,088 (10,125) 4,448 (5,017) 83,632 (35,598)
--------- -------- -------- ------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 43,681 $(17,803) $ 27,379 $(3,300) $ 63,831 $ (6,270)
========= ======== ======== ======= ========= ========
<CAPTION>
IFG
REORGANIZATION PRO
ADJUSTMENTS(G) FORMA
-------------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 8,578 $ 41,493
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... (22,641) 101,523
(Gain) loss on disposition of
properties..................... -- --
Minority interests.............. -- 8,429
Equity in earnings of
unconsolidated partnerships.... -- 10,234
Equity in earnings of
unconsolidated subsidiaries.... 7,562 (851)
Non-cash compensation........... -- 796
Changes in operating assets and
operating liabilities.......... -- (69,549)
-------- ---------
Total adjustments............ (15,079) 50,582
-------- ---------
Net cash provided by (used
in) operating activities... (6,501) 92,075
-------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... -- 27,122
Additions to real estate.......... -- (57,526)
Proceeds from sale of property and
investments held for sale....... -- (35)
Additions to property held for
sale............................ -- (1,986)
Purchase of general and limited
partnership interests........... -- (9,596)
Purchase of/additions to notes
receivable...................... -- (100,034)
Proceeds from repayments/sale of
notes receivable................ -- 42,747
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... -- 23,629
Payment of trust based preferred
dividends....................... -- (7,415)
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... -- 17,915
Contribution to unconsolidated
subsidiaries.................... -- (13,032)
Purchase of investments held for
sale............................ -- (4,935)
Redemption of OP Units............ -- (516)
Merger costs...................... -- (1,402)
-------- ---------
Net cash provided by (used
in) investing activities... -- (85,064)
-------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. -- 291,885
Principal repayments on secured
notes payable................... -- (52,023)
Principal advances on secured
tax-exempt bond financing....... -- 21,784
Principal repayments on secured
tax-exempt bond financing....... -- (1,436)
Net borrowings/repayments on
secured short-term financing.... -- 135,332
Net borrowings (paydowns) on the
revolving credit facilities..... -- 2,513
Principal repayments on unsecured
short-term notes payable........ -- 2,644
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (5,810)
Proceeds from issuance of common
stock and preferred stock,
net............................. -- --
Repurchase of common stock........ -- (10,972)
Proceeds from exercises of
employee stock options and
warrants........................ -- 16,294
Principal repayments received on
notes due from Officers......... -- 8,084
Payments of distributions to
minority interests.............. -- (2,034)
Payment of distributions.......... -- (107,989)
Payment of distributions to
limited partners................ -- (12,669)
Payment of preferred unit
distributions................... -- (27,010)
Proceeds from issuance of High
Performance Units............... -- 1,988
Net transactions with
Insignia/ESG.................... -- (241,003)
-------- ---------
Net cash provided by (used
in) financing activities... -- 19,578
-------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (6,501) 26,589
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... (18,728) 55,700
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $(25,229) $ 82,289
======== =========
</TABLE>
P-32
<PAGE> 1760
- ---------------
(A) Represents the Partnership's unaudited consolidated statement of cash flows
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1998 Stock Offerings; (ii) the 1998 Acquisitions;
(iii) the Probably Purchases; (iv) the 1998 Dispositions and (v) the
Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of cash flows of Ambassador
for the four months ended April 20, 1998. Certain reclassifications have
been made to Ambassador's historical statement of cash flows to conform to
the Partnership's statement of cash flows presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ (36,017) $ 4,718 $ (5,039) $(36,338)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 27,685 48 (12,843) 14,890
Gain on disposition of property......................... (5,888) (688) -- (6,576)
Minority interests...................................... 14,159 -- -- 14,159
Equity in earnings of unconsolidated partnerships....... (12,169) -- (1,323) (13,492)
Non-cash compensation................................... 796 -- -- 796
Changes in operating assets and liabilities............. (18,853) (1,499) 12,577 (7,775)
--------- -------- --------- --------
Total adjustments................................... 5,730 (2,139) (1,589) 2,002
--------- -------- --------- --------
Net cash provided by (used in) operating
activities........................................ (30,287) 2,579 (6,628) (34,336)
--------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... (3,804) -- 30,926 27,122
Additions to real estate.................................. (2,252) (25) 11,586 9,309
Proceeds from sales of property and investments held for
sale.................................................... -- 161 (196) (35)
Purchase of general and limited partnership interests..... (44,270) -- 61,690 17,420
Purchases of / additions to notes receivable.............. (17,107) (15,407) 4,925 (27,589)
Proceeds from repayments/sale of notes receivable......... 151 23,672 (2,638) 21,185
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 21,360 -- 693 22,053
Payment of trust based preferred dividends................ (7,415) -- -- (7,415)
Cash received in connection with AMIT Merger.............. 13,423 -- -- 13,423
Merger costs.............................................. (1,402) -- -- (1,402)
--------- -------- --------- --------
Net cash provided by (used in) investing
activities........................................ (41,316) 8,401 106,986 74,071
--------- -------- --------- --------
</TABLE>
P-33
<PAGE> 1761
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 186,000 -- (8,766) 177,234
Principal repayments on secured notes payable............. (1,874) -- 6,113 4,239
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (83) -- -- (83)
Proceeds from exercises of employee stock options and
warrants................................................ 6,533 -- -- 6,533
Payment of distributions.................................. (6,541) (2,065) -- (8,606)
Payment of distributions minority interests............... (494) -- -- (494)
Net transactions with Insignia/ESG........................ (118,424) -- (122,579) (241,003)
--------- -------- --------- --------
Net cash provided by (used in) financing
activities........................................ 67,761 (2,065) (125,232) (59,536)
--------- -------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (3,842) 8,915 (24,874) (19,801)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 88,847 3,947 (9,162) 83,632
--------- -------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 85,005 $ 12,862 $ (34,036) $ 63,831
========= ======== ========= ========
</TABLE>
- ---------------
(i)Represents the unaudited consolidated statement of cash flows of IFG
for the nine months ended September 30, 1998. Certain reclassifications
have been made to IFG's historical statement of cash flows to conform
to the Partnership's statement of cash flows presentation. In addition,
the cash and cash equivalents at the beginning of the period has been
adjusted.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock. In addition, the cash and cash equivalents at the beginning of
the period has been adjusted.
(F) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(H) Represents adjustment to remove the use of cash to purchase the 1998
Acquisitions, as if these acquisitions occurred on January 1, 1997;
therefore, the purchases are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(I) Represents cash payments for capital improvements of $300 per unit on the
1998 Acquisitions.
(J) Represents adjustment to remove the proceeds from the sale of the 1998
Dispositions, as if these dispositions occurred on January 1, 1997;
therefore, the proceeds are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(K) Represents adjustment to remove net principal repayments assuming the 1998
Acquisitions, the 1998 Dispositions and the 1998 Stock Offerings occurred
January 1, 1997; therefore, the repayments are included on the Pro Forma
Consolidated Statement of Cash Flows for the year ended December 31, 1997.
(L) Represents adjustment to remove cash proceeds from the 1998 Stock
Offerings, as if these offerings occurred on January 1, 1997; therefore,
the repayments are included on the Pro Forma Consolidated Statement of Cash
Flows for the year ended December 31, 1997.
P-34
<PAGE> 1762
(M) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(N) Represents distributions paid to limited partners on OP Units issued in
connection with the 1998 Acquisitions and the Probable Purchases, as if the
issuance of the OP Units occurred on January 1, 1997.
(O) Represents preferred unit distributions paid on the 1998 Stock Offerings as
if these occurred on January 1, 1997.
(P) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(Q) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-35
<PAGE> 1763
PRO FORMA FINANCIAL INFORMATION OF
AIMCO PROPERTIES, L.P.
(EXCHANGE OFFERS)
INTRODUCTION
AIMCO Properties L.P. (the "Partnership") intends to offer to purchase
limited partnership interests in syndicated real estate limited partnerships in
which AIMCO holds partnership interests. The Partnership, is subject to
applicable law, plans to offer to purchase certain of such limited partnership
interests in exchange for (i) equity securities of the Partnership; (ii) cash or
(iii) a combination of such equity securities and cash. Such offers are expected
to include terms that will allow limited partners to continue to hold their
limited partnership interests.
The following Pro Forma Consolidated Balance Sheet (Exchange Offers) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) all the
transactions discussed in the Pro Forma Financial Statements (Insignia Merger)
appearing elsewhere herein; and (ii) the acceptance of exchange offers by
limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) all
the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1998: (i)
all the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The Pro Forma Financial Information (Exchange Offers) is based, in part, on
the historical financial statements of the partnerships in which the Exchange
Offers are made. The Pro Forma Financial Information (Exchange Offers) is also
based, in part, on the Pro Forma Financial Information (Insignia Merger) of the
Partnership included elsewhere herein. Such pro forma information is based in
part upon: (i) the audited Consolidated Financial Statements of Insignia for the
year ended December 31, 1997; (ii) the audited Consolidated Financial Statements
of Angeles Mortgage Investment Trust ("AMIT") for the year ended December 31,
1997; (iii) the unaudited Consolidated Financial Statements of Insignia for the
nine months ended September 30, 1998; and (iv) the unaudited Consolidated
Financial Statements of AMIT for the period from January 1, 1998 to September
17, 1998. The Pro Forma Financial Information (Insignia Merger) is also based,
in part, upon: (i) the audited Consolidated Financial Statements of Ambassador
for the year ended December 31, 1997; (ii) the audited Consolidated Financial
Statements of the Partnership for the year ended December 31, 1997; (iii) the
unaudited Consolidated Financial Statements of Ambassador for the four months
ended April 30, 1998; (iv) the unaudited Consolidated Financial Statements of
the Partnership for the nine months ended September 30, 1998; and (v) the
historical financial statements of certain properties and companies acquired by
AIMCO filed in AIMCO's Current Reports on Form 8-K, dated April 16, 1997, May 5,
1997, June 3, 1997, September 19, 1997, October 15, 1997, December 1, 1997 and
November 2, 1998. The following Pro Forma Financial Information (Exchange
Offers) should be read in conjunction with such financial statements and notes
thereto.
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared under the assumption that after the exchange offers are accepted, AIMCO
will own varying ownership percentages of each partnership, and that the limited
partners will choose to elect to receive 35% of the consideration in the form of
equity securities of AIMCO Properties, L.P. and 65% of the consideration in the
form of cash. The
P-36
<PAGE> 1764
interest to be acquired in each of the partnerships, the estimated purchase
price for each partnership, including cash, common units, or preferred units is
summarized below:
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Angeles Income Properties, Ltd. II.................... 26.70 $ 4,946 $ 3,215 $1,731
Angeles Income Properties, Ltd. III................... 30.63 2,156 1,401 755
Angeles Income Properties, Ltd. IV.................... 18.64 1,154 750 404
Angeles Income Properties, Ltd. 6..................... 37.29 4,523 2,940 1,583
Angeles Opportunity Properties, Ltd................... 37.94 1,729 1,124 605
Angeles Partners VII.................................. 24.86 610 397 213
Angeles Partners VIII................................. 24.80 0 0 0
Angeles Partners IX................................... 18.92 1,171 761 410
Angeles Partners X.................................... 22.97 709 461 248
Angeles Partners XI................................... 21.83 205 133 72
Angeles Partners XII.................................. 11.89 2,877 1,870 1,007
Angeles Partners XIV.................................. 24.93 0 0 0
Baywood Partners, Ltd................................. 25.00 347 226 121
Brampton Associates Partnership....................... 25.00 382 248 134
Buccaneer Trace Limited Partnership................... 25.00 2 1 1
Burgundy Court Associates, L.P........................ 25.00 1,074 698 376
Calmark/Fort Collins, Ltd............................. 25.00 192 125 67
Calmark Heritage Park II Ltd.......................... 25.00 47 31 16
Casa Del Mar Associates Limited Partnership........... 21.16 503 327 176
Catawba Club Associates, L.P.......................... 25.00 85 55 30
Cedar Tree Investors Limited Partnership.............. 25.00 1,037 674 363
Century Properties Fund XVI........................... 12.52 831 540 291
Century Properties Fund XVIII......................... 13.08 474 308 166
Century Properties Fund XIX........................... 15.30 1,765 1,147 618
Century Properties Growth Fund XXII................... 21.43 4,977 3,235 1,742
Chapel Hill, Limited.................................. 21.15 569 370 199
Chestnut Hill Associates Limited Partnership.......... 26.75 1,582 1,028 554
Coastal Commons Limited Partnership................... 25.00 566 368 198
Consolidated Capital Institutional Properties/2 &
Consolidated Capital Equity Properties/2............ 18.98 7,320 4,758 2,562
Consolidated Capital Institutional Properties/3....... 16.37 6,770 4,401 2,369
Consolidated Capital Properties III................... 13.02 1,134 737 397
Consolidated Capital Properties IV.................... 18.04 9,407 6,112 3,295
Consolidated Capital Properties V..................... 16.69 560 364 196
Consolidated Capital Properties VI.................... 25.82 556 361 195
DFW Apartment Investors Limited Partnership........... 35.65 2,719 1,767 952
DFW Residential Investors Limited Partnership......... 37.60 1,092 710 382
Davidson Diversified Real Estate I, L.P............... 34.78 627 408 219
Davidson Diversified Real Estate II, L.P.............. 35.11 1,318 857 461
Davidson Diversified Real Estate III, L.P............. 21.76 0 0 0
Davidson Growth Plus, L.P............................. 23.91 2,304 1,498 806
Davidson Income Real Estate, L.P...................... 30.81 2,691 1,749 942
Drexel Burnham Lambert Real Estate Associates II...... 19.58 994 646 348
Four Quarters Habitat Apartment Associates, Ltd....... 25.00 174 113 61
Fox Strategic Housing Income Partners................. 33.18 2,414 1,569 845
Georgetown of Columbus Associates, L.P................ 25.00 227 148 79
HCW Pension Real Estate Fund Limited Partnership...... 32.64 2,368 1,539 829
Investors First-Staged Equity......................... 49.00 306 199 107
Johnstown/Consolidated Income Partners................ 25.66 1,871 1,216 655
La Colina Partners, Ltd............................... 25.00 583 379 204
Lake Eden Associates, L.P............................. 25.00 632 411 221
Landmark Associates, L.P.............................. 25.00 48 31 17
</TABLE>
P-37
<PAGE> 1765
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Minneapolis Associates II Limited Partnership......... 25.00 $ 2 $ 1 $ 1
Multi-Benefit Realty Fund "87-1-Class A & Class B..... 21.89 1,657 1,077 580
National Property Investors 8......................... 11.13 988 642 346
Northbrook Apartments, Ltd............................ 25.00 209 136 73
Olde Mill Investors Limited Partnership............... 8.75 170 111 59
Orchard Park Apartments Limited Partnership........... 25.00 1 1 0
Park Town Place Associates Limited Partnership........ 24.70 298 194 104
Quail Run Associates, L.P............................. 25.00 487 317 170
Ravensworth Associates Limited Partnership............ 25.00 1 1 0
Rivercreek Apartments Limited Partnership............. 25.00 180 117 63
Rivercrest Apartments, Limited........................ 25.00 1,687 1,097 590
Riverside Park Associates L.P......................... 13.69 590 384 206
Salem Arms of Augusta Limited Partnership............. 25.00 278 181 97
Shaker Square, L.P.................................... 23.75 631 410 221
Shannon Mannor Apartments, Limited Partnership........ 25.00 1,170 761 409
Sharon Woods, L.P..................................... 22.75 499 324 175
Shelter Properties III................................ 15.20 1,960 1,274 686
Shelter Properties IV................................. 50.52 12,764 8,295 4,469
Shelter Properties VI................................. 13.78 1,919 1,247 672
Shelter Properties VII Limited Partnership............ 26.65 1,975 1,284 691
Snowden Village Associates, L.P....................... 25.00 443 288 155
Springhill Lake Investors Limited Partnership......... 11.84 2,908 1,890 1,018
Sturbrook Investors, Ltd.............................. 25.00 377 245 132
Sycamore Creek Associates, L.P........................ 25.00 1 1 0
Texas Residential Investors Limited Partnership....... 18.45 1,147 746 401
Thurber Manor Associates, Limited Partnership......... 25.00 218 142 76
U.S. Realty Partners Limited Partnership.............. 25.00 1,441 937 504
United Investors Growth Properties.................... 39.01 165 107 58
United Investors Growth Properties II................. 25.00 351 228 123
United Investors Income Properties.................... 23.44 1,977 1,285 692
Villa Nova, Limited Partnership....................... 25.00 228 148 80
Walker Springs, Limited............................... 23.99 95 62 33
Wingfield Investors Limited Partnership............... 25.00 179 116 63
Winrock-Houston Limited Partnership................... 13.60 1,041 677 364
Winthrop Apartment Investors Limited Partnership...... 31.60 1,318 857 461
Winthrop Growth Investors 1 Limited Partnership....... 27.94 1,233 801 432
Winthrop Texas Investors Limited Partnership.......... 5.27 158 103 55
Woodmere Associates, L.P.............................. 25.00 280 182 98
Yorktown Towers Associates............................ 25.00 809 526 283
-------- ------- ------
Total (See adjustment C to the Pro Forma Consolidated
Balance Sheet)...................................... $122,463 $79,601 42,862
======== ======= ======
</TABLE>
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
Exchange Offers, the 1997 Acquisitions, the 1998 Acquisitions and the Probable
Purchases are adjusted to estimated fair market value, based on preliminary
estimates, which are subject to change as additional information is obtained.
The allocations of purchase costs are subject to final determination based upon
estimates and other evaluations of fair market value. Therefore, the allocations
reflected in the following unaudited Pro Forma Financial Information (Exchange
Offers) may differ from the amounts ultimately determined.
P-38
<PAGE> 1766
The following unaudited Pro Forma Financial Information (Exchange Offers)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions, results of
operations or cash flows. In the opinion of the Partnership's management, all
material adjustments necessary to reflect the effects of these transactions have
been made.
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (EXCHANGE OFFERS)
AS OF SEPTEMBER 30, 1998
ASSETS
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C>
Real estate....................................... $2,625,822 $ 12,764(C)
26,954(D)
13,655(E) $2,679,195
Property held for sale............................ 42,212 -- 42,212
Investments in and notes receivable from
unconsolidated subsidiaries..................... 186,277 -- 186,277
Investments in and notes receivable from
unconsolidated partnerships..................... 924,309 109,699(C)
(13,655)(E)
(8,161)(F)
816(G) 1,013,008
Mortgage notes receivable......................... 20,916 -- 20,916
Cash and cash equivalents......................... 104,955 2,620(D) 107,575
Restricted cash................................... 84,526 1,807(D) 86,333
Accounts receivable............................... 27,900 1,081(D) 28,981
Deferred financing costs.......................... 21,835 -- 21,835
Goodwill.......................................... 251,024 -- 251,024
Property management contracts..................... 38,371 -- 38,371
Other assets...................................... 82,670 422(D) 83,092
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
LIABILITIES AND PARTNERS' CAPITAL
Secured notes payable............................. $ 926,246 $ 23,642(D) $ 949,888
Secured tax-exempt bond financing................. 399,925 -- 399,925
Secured short-term financing...................... 32,691 -- 32,691
Unsecured short-term financing.................... 300,000 79,601(C) 379,601
Accounts payable, accrued and other liabilities... 248,253 826(D) 249,079
Security deposits and deferred income............. 13,171 255(D) 13,426
---------- -------- ----------
1,920,286 104,324 2,024,610
Minority interests................................ 79,431 816(G) 80,247
Company obligated mandatorily redeemable
convertible securities of a subsidiary trust.... 149,500 -- 149,500
Redeemable common partnership units............... 277,581 8,161(D)
(8,161)(F)
30,616(C) 308,197
Redeemable preferred partnership units............ -- 12,246(C) 12,246
Partner's capital
General and Special Limited Partner............. 1,496,457 -- 1,496,457
Preferred Units................................. 487,562 -- 487,562
---------- -------- ----------
1,984,019 -- 1,984,019
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
P-39
<PAGE> 1767
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical balance sheet data as of September 30, 1998 (unaudited) related
to the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Real estate................................................. $1,082,652
Cash........................................................ 151,024
Total assets................................................ 1,493,409
Mortgages payable........................................... 1,585,196
Partners' capital (deficit)................................. (171,740)
</TABLE>
(C) Represents the purchase price paid by the Partnership to the limited
partners in order to obtain additional ownership by AIMCO in 91 real estate
partnerships. For the purposes of the pro-forma presentation, it is
assumed: (i) 65% of the purchase price is funded with cash by drawing down
on the Partnership's unsecured short term credit facility; (ii) 25% of the
purchase price is funded by the issuance of 749,362 OP Units at $40 per OP
Unit; and (iii) 10% of the purchase price is funded by the issuance of 8%
Preferred OP Units.
(D) Represents historical balance sheet data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(E) Represent the adjustment to real estate recorded in the IFG Merger related
to the one real estate partnership that will be consolidated as a result of
the Partnership's purchase of additional partnership interests.
(F) Represents the elimination of the partners' capital in the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(G) Represents minority interest of the one real estate partnership that will
be consolidated as a result of the Partnership's purchase of additional
partnership interests.
P-40
<PAGE> 1768
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations.............. $ 431,256 $ 11,270(C) $ 442,526
Property operating expenses....................... (182,830) (6,612)(C) (189,442)
Owned property management expense................. (11,831) -- (11,831)
Depreciation...................................... (96,264) (2,589)(C) (98,853)
--------- -------- ---------
Income from property operations................... 140,331 2,069 142,400
--------- -------- ---------
Management fees and other income.................. 41,676 -- 41,676
Management and other expenses..................... (23,683) -- (23,683)
Corporate overhead allocation..................... (588) -- (588)
Amortization...................................... (26,480) -- (26,480)
--------- -------- ---------
Income from service company business.............. (9,075) -- (9,075)
Minority interest in service company business..... (10) -- (10)
--------- -------- ---------
Partnership's share of income from service company
business........................................ (9,085) -- (9,085)
--------- -------- ---------
General and administrative expenses............... (21,371) -- (21,371)
Interest expense.................................. (113,788) (5,691)(D)
(2,220)(C) (121,699)(H)
Interest income................................... 21,734 21,734
Minority interests................................ (9,983) (51)(E) (10,034)
Equity in losses of unconsolidated partnerships... (27,537) (16,864)(F)
483(G) (43,918)(I)
Equity in earnings of Unconsolidated
Subsidiaries.................................... 5,848 -- 5,848
--------- -------- ---------
Net income (loss)................................. (13,851) (22,274) (36,125)(H)
Income attributable to Preferred Unitholders...... 42,174 980 43,154(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders...... (56,025) $(23,254) $ (79,279)(H)
========= ======== =========
Basic earnings (loss) per OP Unit................. (.83) $ (1.16)(H)
========= =========
Diluted earnings (loss) per OP Unit............... $ (.83) $ (1.16)(H)
========= =========
Weighted average OP Units outstanding............. 67,522 68,287
========= =========
Weighted average OP Units and equivalents
outstanding..................................... 68,366 69,131
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $456,968
Operating expense........................................... 249,097
Depreciation................................................ 87,344
Interest.................................................... 138,778
Net income.................................................. 15,005
</TABLE>
P-41
<PAGE> 1769
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $10,740 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $6,124 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net loss,
preferred unit distributions, and net loss per OP Unit in the event that
the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- --------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense......... $(121,699) $(124,763) $(116,008) $(116,008)
Net loss................. (36,125) (39,189 (30,434) (30,434)
Preferred unit
distributions.......... 43,154 42,174 42,174 51,971
Net loss attributable to
OP Unitholders......... (79,279) (81,363) (72,608) (82,405)
Net loss per OP Unit..... (1.16) (1.20) (1.03) (1.22)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................. $ 1,137 $ 1,245 $ 938 $ 938
Net loss................... (37,262) (40,434) (31,372) (31,372)
Net loss attributable to OP
Unitholders.............. (80,416) (82,608) (73,546) (83,343)
Net loss per OP Unit....... (1.18) (1.22) (1.04) (1.23)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, the Partnership will own 49%
of certain 88 Partnerships, 25% of two Partnerships, and 100% of one
Partnership. The amount included in the pro forma financial statements
assume an acceptance rate of 100%. The following table shows the effect on
equity in earnings of unconsolidated partnerships, net loss, net loss
attributable to OP Unitholders, and net loss per OP Unit in the event that
the Partnership will have an acceptance rate of 50% of the interests
tendered and will own varying percentages of each partnership:
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(36,510)
Net loss.................................................... (26,084)
Net loss attributable to OP Unitholders..................... (68,784)
Net loss per OP Unit........................................ (1.01)
</TABLE>
P-42
<PAGE> 1770
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-43
<PAGE> 1771
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations............... $ 337,307 $ 8,654(C) $ 345,961
Property operating expenses........................ (131,851) (4,389)(C) (136,240)
Owned property management expense.................. (8,933) -- (8,933)
Depreciation....................................... (78,479) (1,941)(C) (80,420)
--------- -------- ---------
Income from property operations.................... 118,044 2,324 120,368
--------- -------- ---------
Management fees and other income................... 28,912 -- 28,912
Management and other expenses...................... (14,386) -- (14,386)
Corporate overhead allocation...................... (196) -- (196)
Amortization....................................... (15,243) -- (15,243)
--------- -------- ---------
Income from service company business............... (913) -- (913)
Minority interest in service company business...... -- -- --
--------- -------- ---------
Partnership's share of income from service company
business......................................... (913) -- (913)
--------- -------- ---------
General and administrative expenses................ (8,632) -- (8,632)
Interest expense................................... (85,010) (4,250)(D)
(1,630)(C) (90,890)(H)
Interest income.................................... 40,887 40,887
Minority interests................................. (8,429) (119)(E) (8,548)
Equity in losses of unconsolidated partnerships.... (10,234) (13,156)(F)
41(G) (23,349)(I)
Equity in earnings of Unconsolidated
Subsidiaries..................................... 851 -- 851
Amortization of goodwill........................... (5,071) -- (5,071)
--------- -------- ---------
Net income (loss).................................. 41,493 (16,790) 24,703(H)
Income attributable to Preferred Unitholders....... 32,414 735 33,149(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders....... $ 9,079 $(17,525) $ (8,446)(H)
========= ======== =========
Basic earnings (loss) per OP Unit.................. $ .13 $ (.12)(H)
========= =========
Diluted earnings (loss) per OP Unit................ $ .13 $ (.12)(H)
========= =========
Weighted average OP Units outstanding.............. 68,554 69,319
========= =========
Weighted average OP Units and equivalents
outstanding...................................... 69,218 69,983
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data (unaudited) for the nine months ended September
30, 1998 related to the 91 real estate partnerships is as follows (dollars
in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $338,937
Operating expense........................................... 182,529
Depreciation................................................ 64,127
Interest.................................................... 103,756
Net income.................................................. (9,329)
</TABLE>
P-44
<PAGE> 1772
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $8,552 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $4,604 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net
income, preferred unit distributions, and net loss per OP Unit in the event
that the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense........... $(90,890) $(93,184) $(86,640) $(86,640)
Net income................. 24,703 22,409 28,953 28,953
Preferred unit
distributions............ 33,149 32,414 32,414 39,762
Net loss attributable to OP
Unitholders.............. (8,446) (10,005) (3,461) (10,809)
Net loss per OP Unit....... (.12) (.15) (.05) (.16)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- ------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................... $ 851 $ 931 $ 702 $ 702
Net income................... 24,703 21,478 28,251 28,251
Net loss attributable to OP
Unitholders................ (9,296) (10,936) (4,163) (11,511)
Net loss per OP Unit......... (.13) (.16) (.06) (.17)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, AIMCO will own 49% of certain
88 Partnerships, 25% of two Partnerships, and 100% of one Partnership. The
following table shows the effect on equity in earnings of unconsolidated
partnerships, net income, net income (loss) attributable to OP Unitholders,
and net loss per OP Unit in the event the Partnership will own varying
percentages of each partnership.
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(17,797)
Net income.................................................. 32,216
Net income (loss) attributable to OP Unitholders............ (593)
Net income (loss) per OP Unit............................... (.01)
</TABLE>
P-45
<PAGE> 1773
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-46
<PAGE> 1774
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ (13,851) $(22,274)(C) $ (36,125)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 128,169 2,589(D) 130,758
Gain on investments..................................... (12) -- (12)
(Gain) loss on disposition of properties................ (3,882) -- (3,882)
Minority interests...................................... 9,983 51 10,034
Equity in earnings of unconsolidated partnerships....... 27,537 16,864(E)
(483)(F) 43,918
Equity in earnings of unconsolidated subsidiaries....... (5,848) -- (5,848)
Extraordinary (gain) loss on early extinguishment of
debt.................................................. --
Changes in operating assets and operating liabilities... 519 (660)(G) (141)
---------- -------- ----------
Total adjustments................................... 156,466 18,361 174,827
---------- -------- ----------
Net cash provided by (used in) operating
activities........................................ 142,615 (3,913) 138,702
Net cash used in discontinued operations............ (7,999) -- (7,999)
---------- -------- ----------
Net cash provided by (used in) continuing
operations........................................ 134,616 (3,913) 130,703
---------- -------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate......................... 41,419 -- 41,419
Purchase of real estate................................... (625,603) -- (625,603)
Additions to real estate, investments and property held
for sale................................................ (55,892) (1,024)(G) (56,916)
Proceeds from sale of property held for sale.............. 303 -- 303
Purchase of general and limited partnership interests..... (276,458) (79,601)(H) (356,059)
Purchase of management contracts.......................... (48,554) -- (48,554)
Purchase of/additions to notes receivable................. (81,670) -- (81,670)
Proceeds from repayments of notes receivable.............. 10,052 -- 10,052
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 94,686 10,070(I) 104,756
Contribution to unconsolidated subsidiaries............... (42,879) -- (42,879)
Proceeds from sale of securities.......................... 642 -- 642
Purchase of investments held for sale..................... (73) -- (73)
Purchase of NHP........................................... (60,575) -- (60,575)
Purchase of Ambassador common stock....................... (19,881) -- (19,881)
---------- -------- ----------
Net cash used in investing activities............... (1,064,483) (70,555) (1,135,038)
---------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 761,270 -- 761,270
Principal repayments on secured notes payable............. (307,917) (713)(G) (308,630)
Proceeds from secured short-term financing................ 19,050 79,601(H) 98,651
Repayments on secured short-term financing................ (259,461) -- (259,461)
Principal repayments on unsecured short-term notes
payable................................................. (50,879) -- (50,879)
Proceeds (payoff) from unsecured short-term financing..... (12,500) -- (12,500)
Principal repayments on secured tax-exempt bond
financing............................................... (1,487) -- (1,487)
Net borrowings (paydowns) on the Company's revolving
credit facilities....................................... (162,008) -- (162,008)
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (17,032) -- (17,032)
Proceeds from issuance of common and preferred stock,
net..................................................... 1,098,265 -- 1,098,265
Proceeds from exercises of employee stock options and
warrants................................................ 11,553 -- 11,553
Repurchase of common stock................................ (3,283) -- (3,283)
Principal repayments received on notes due from
Officers................................................ 27,280 -- 27,280
Investments made by minority interests.................... 249 -- 249
Receipt of contributions from minority interests.......... 37,345 -- 37,345
Payments of distributions to minority interests........... (2,713) -- (2,713)
Payment of distributions.................................. (130,657) -- (130,657)
Payment of distributions to limited partners.............. (5,208) (1,415)(J) (6,623)
Payment of preferred unit distributions................... (42,984) (979)(K) (43,963)
Payment of distributions to minority interests............ (21,788) -- (21,788)
Net transactions with Insignia/ESG........................ (57,612) -- (57,612)
---------- -------- ----------
Net cash provided by financing activities........... 879,483 76,494 955,977
---------- -------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (50,384) 2,026 (48,358)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 117,896 2,291 120,187
---------- -------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 67,512 $ 4,317 $ 71,829
========== ======== ==========
</TABLE>
P-47
<PAGE> 1775
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 65,372
Cash used in investing activities......................... (11,713)
Cash used in financing activities......................... (74,617)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the cash portion of the purchase price (and additional
borrowings by the Partnership) related to the acquisition by the
Partnership of additional limited partnership interests in 91 real estate
limited partnerships.
(I) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(J) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.85 per Common OP Unit.
(K) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-48
<PAGE> 1776
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ 41,493 $(16,790)(C) $ 24,703
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 101,523 1,941(D) 103,464
(Gain) loss on disposition of properties................ -- -- --
Minority interests...................................... 8,429 119 8,548
Equity in earnings of unconsolidated partnerships....... 10,234 13,156(E)
(41)(F) 23,349
Equity in earnings of unconsolidated subsidiaries....... (851) -- (851)
Non-cash compensation................................... 796 -- 796
Changes in operating assets and operating liabilities... (69,549) (21)(G) (69,570)
--------- -------- ---------
Total adjustments................................... 50,582 15,154 65,736
--------- -------- ---------
Net cash provided by operating activities........... 92,075 (1,636) 90,439
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... 27,122 -- 27,122
Additions to real estate.................................. (57,526) (668)(G) (58,194)
Proceeds from sale of property and investments held for
sale.................................................... (35) -- (35)
Additions to property held for sale....................... (1,986) -- (1,986)
Purchase of general and limited partnership interests..... (9,596) -- (9,596)
Purchase of/additions to notes receivable................. (100,034) -- (100,034)
Proceeds from repayments/sale of notes receivable......... 42,747 -- 42,747
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 23,629 5,809(H) 29,438
Payment of trust based preferred dividends................ (7,415) -- (7,415)
Cash received in connection with Ambassador Merger and
AMIT Merger............................................. 17,915 -- 17,915
Contribution to unconsolidated subsidiaries............... (13,032) -- (13,032)
Purchase of investments held for sale..................... (4,935) -- (4,935)
Redemption of OP Units.................................... (516) -- (516)
Merger costs.............................................. (1,402) -- (1,402)
--------- -------- ---------
Net cash used in investing activities............... (85,064) 5,141 (79,923)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 291,885 -- 291,885
Principal repayments on secured notes payable............. (52,023) -- (52,023)
Principal advances on secured tax-exempt bond financing... 21,784 -- 21,784
Principal repayments on secured tax-exempt bond
financing............................................... (1,436) -- (1,436)
Net borrowings/ repayments on secured short-term
financing............................................... 135,332 -- 135,332
Net borrowings (paydowns) on the revolving credit
facilities.............................................. 2,513 (812)(G) 1,701
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (5,810) -- (5,810)
Proceeds from issuance of common stock and preferred
stock, net.............................................. -- -- --
Repurchase of common stock................................ (10,972) -- (10,972)
Proceeds from exercises of employee stock options and
warrants................................................ 16,294 -- 16,294
Principal repayments received on notes due from
Officers................................................ 8,084 -- 8,084
Receipt of contributions from minority interests.......... -- -- --
Payments of distributions to minority interests........... (2,034) (2,034)
Payment of distributions.................................. (107,989) -- (107,989)
Payment of distributions to limited partners.............. (12,669) (1,291)(I) (13,960)
Payment of preferred unit distributions................... (27,010) (735)(J) (27,745)
Proceeds from issuance of High Performance Units.......... 1,988 -- 1,988
Net transactions with Insignia/ESG........................ (241,003) -- (241,003)
--------- -------- ---------
Net cash provided by financing activities........... 19,578 (2,838) 16,740
--------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 26,589 667 27,256
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 55,700 4,316 60,016
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 82,289 $ 4,983 $ 87,272
========= ======== =========
</TABLE>
P-49
<PAGE> 1777
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the nine months ended September 30, 1998
related to the 91 real estate partnerships is as follows (dollars in
thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 76,113
Cash used in investing activities......................... (22,616)
Cash used in financing activities......................... (42,273)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 30 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(I) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.6875 per Common OP Unit.
(J) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-50
<PAGE> 1778
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: Georgetown of Columbus Associates Ltd
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
Georgetown of Columbus Associates Ltd (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 limited partnership interests in the Partnership (the "Units")
will be acquired by the Purchaser in exchange for an offer price per Unit of
$36,322 in cash, or 965.25 Common OP Units of the Purchaser, or 1,453 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 financial statements for the years ended
December 31, 1996 and 1997, and the quarterly report for the period ending
September 30, 1998, which the Partnership's management has indicated to be
the most current available financial statements;
3. Reviewed descriptive information concerning the real property owned
by the Partnership (the "Property"), including location, number of units
and unit mix, age, amenities and land acreage;
4. Reviewed summary historical operating statements for the Property,
for the years ended December 31, 1996 and 1997, and the nine months ending
September 30, 1998;
A-1
<PAGE> 1779
5. Reviewed the 1998 operating budget for the Property prepared by the
Partnership's management. Such budgets are summarized in the Prospectus
Supplement under the section "Stanger Analysis -- Summary of Materials
Considered";
6. Reviewed the estimate of liquidation value and going concern value
provided by the general partner to Stanger. Such estimates are described in
the Prospectus Supplement under the section "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration." In
addition, we reviewed the 1998 operating budgets for each property provided
by the partnership;
7. Discussed with management market conditions for the Property;
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 Property and the Partnership; the physical condition
of the Property including any deferred maintenance; and other factors
influencing value of the Property and the Partnership;
8. Performed a site inspection of the Property;
9. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Property, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Property;
10. Reviewed information provided by the Company relating to debt
encumbering the Property; and
11. 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 Property, the allocation of net
Partnership values between the General Partner and Limited Partners, and the
transaction costs and fees associated with a sale of the Property. 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 Property 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 Property 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 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
A-2
<PAGE> 1780
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
March , 1999
A-3
<PAGE> 1781
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 directors
of AIMCO are set forth below. The two directors of AIMCO-GP are Terry Considine
and Peter Kompaniez. The two directors of the general partner of your
partnership are Peter K. Kompaniez and Patrick J. Foye. The two executive
officers of the general partner of your partnership are Patrick J. Foye,
Executive Vice President, and Timothy R. Garrick, Vice President -- Accounting.
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
Paul J. McAuliffe............................ Executive Vice President -- Capital Markets
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
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
</TABLE>
B-1
<PAGE> 1782
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
B.A. from Harvard College, a J.D. from Harvard Law School
and is admitted as a member of the Massachusetts Bar.
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.
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
</TABLE>
B-2
<PAGE> 1783
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
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.
Paul J. McAuliffe.................... Mr. McAuliffe was appointed Executive Vice
President -- Capital Markets in February 1999. Prior to
joining AIMCO, Mr. McAuliffe was Senior Managing Director of
Secured Capital Corp and prior to that time had been a
Managing Director of Smith Barney, Inc. from 1993 to 1996,
where he was a key member of the underwriting team that led
AIMCO's initial public offering in 1994. Mr. McAuliffe was
also a Managing Director and head of the real estate group
at CS First Boston from 1990 to 1993 and he was a Principal
in the real estate group at Morgan Stanley & Co., Inc. from
1983 to 1990. Mr. McAuliffe received a B.A. from Columbia
College and an MBA from University of Virginia, Darden
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
</TABLE>
B-3
<PAGE> 1784
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
and the Apartment Association of Metro Denver. Mr. Ira
received a B.S. from Metropolitan State College in 1975.
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.
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,
</TABLE>
B-4
<PAGE> 1785
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Mr. Martin is a director of Dresser, which is engaged in the
petroleum services, hydrocarbon and engineering industries.
Timothy R. Garrick................... Mr. Garrick has been Vice President -- Accounting of the
general partner and AIMCO since October 1, 1998. Prior to
that date, Mr. Garrick served as Vice
President -- Accounting Services of Insignia Financial Group
from June 1997 until October 1998. From 1992 until June of
1997, Mr. Garrick served as Vice President of Partnership
Accounting for Insignia Financial Group. From 1987 to 1990,
Mr. Garrick served as Investment Advisor for U.S. Shelter
Corporation. From 1984 to 1987, Mr. Garrick served as
Partnership Investment Analyst for U.S. Shelter Corporation.
From 1979 to 1984, Mr. Garrick worked on the audit staff of
Ernst & Whinney. Mr. Garrick received his B.S. Degree from
the University of South Carolina in 1979 and is a certified
public accountant.
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> 1786
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
By Fax:
(201) 896-0910
<PAGE> 1787
PROSPECTUS SUPPLEMENT
(To Prospectus dated March 26, 1999)
AIMCO Properties, L.P.
is offering to acquire units of limited partnership interest of
La Colina Partners, Ltd.
in exchange for your choice of:
1,794.50 of our 8.0% Class Two Partnership Preferred Units;
1,192 of our Partnership Common Units; or
$44,859 in cash.
Generally, you will not recognize any immediate taxable gain or loss if you
exchange your units solely for our securities. However, you will recognize
taxable gain or loss if you exchange your units for cash.
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 the offer
consideration from a financial point of view.
Our offer consideration will be reduced for any distributions subsequently
made by your partnership prior to the expiration of our offer.
We will only accept a maximum of 25% 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.
You will not pay any fees or commissions if you tender your units.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline. You may withdraw any tendered units at any time
before we have accepted them for payment.
SEE "RISK FACTORS" BEGINNING ON PAGE S-23 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF RISK FACTORS THAT
YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration of $44,859 per unit without any
arms-length negotiations. Accordingly, our offer consideration may not
reflect the fair market value of your units.
- We cannot predict when the property owned by your partnership may be
sold.
- Although your partnership's agreement of limited partnership provides for
termination in the year 2023, the private placement memorandum pursuant
to which the units in your partnership were sold in 1983 contained
projections reflecting the sale of the property at the end of ten years
of its acquisition.
- Your general partner is a subsidiary of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- We are making this offer with a view to making a profit and 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.
- Continuation of your partnership will result in our affiliates continuing
to receive management fees from your partnership which would not be
payable if your partnership was liquidated.
- It is possible that we may conduct a subsequent offer at a higher price
more than one year after expiration of this offer.
- Unlike your partnership, our policy is to reinvest proceeds from the sale
of our properties or refinancing of our indebtedness.
- We may change our investment, acquisition or financing policies without a
vote of our securityholders.
- If you acquire our securities, your investment will change from holding
an interest in a single property to holding an interest in our large
portfolio of properties, thereby fundamentally changing the nature of
your investment.
- Recently, Moody's Investors Service revised its outlook for AIMCO's
ratings from stable to negative.
- There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
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.
March 26, 1999
<PAGE> 1788
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY........................................ S-1
The Offer.................................... S-1
The AIMCO Operating Partnership.............. S-1
Affiliation with your General Partner........ S-1
Risk Factors................................. S-1
Background and Reasons for the Offer......... S-6
Valuation of Units........................... S-9
Fairness of the Offer........................ S-10
Stanger Analysis............................. S-11
Your Partnership............................. S-11
Terms of the Offer........................... S-12
Federal Income Tax Consequences.............. S-14
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-14
Comparison of Your Units and AIMCO OP Units.. S-14
Conflicts of Interest........................ S-15
Source and Amount of Funds and Transactional
Expenses................................... S-16
Summary Financial Information of AIMCO
Properties, L.P............................ S-17
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-19
Summary Financial Information of La Colina
Partners, Ltd.............................. S-21
Comparative Per Unit Data.................... S-21
THE AIMCO OPERATING PARTNERSHIP................ S-22
RISK FACTORS................................... S-23
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-23
Offer Consideration Not Based on Third
Party Appraisal or Arms-Length
Negotiation.............................. S-23
Offer Consideration May Not Represent Fair
Market Value............................. S-23
Offer Consideration Does Not Reflect Future
Prospects................................ S-23
Offer Consideration Based on Our Estimate
of Liquidation Proceeds.................. S-23
Offer Consideration May Be Less Than
Liquidation Value........................ S-23
Holding Units May Result in Greater Future
Value.................................... S-23
Conflicts of Interest with Respect to the
Offer.................................... S-23
Conflicts of Interest Relating to
Management Fees.......................... S-24
Possible Subsequent Offer at a Higher
Price.................................... S-24
Possible Recognition of Taxable Gain on a
Sale of Your Units....................... S-24
Fairness Opinion of Third Party Relied on
Information We Provided.................. S-24
Loss of Future Distributions from Your
Partnership.............................. S-24
Possible Effect of the Other Exchange
Offers on Us............................. S-25
Potential Delay in Payment................. S-25
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-25
Fundamental Change in Nature of
Investment............................... S-25
Fundamental Change in Number of Properties
Owned.................................... S-25
Lack of Trading Market for OP Units........ S-25
Uncertain Future Distributions............. S-25
Possible Reduction in Required
Distributions on Preferred OP Units...... S-25
Possible Lower Distributions............... S-26
Possible Redemption of Preferred Stock..... S-26
Possible Recognition of Taxable Gains on OP
Units.................................... S-26
Limitations on Effecting a Change of
Control.................................. S-26
Limitation on Transfer of OP Units......... S-26
Limited Voting Rights of Holders of OP
Units.................................... S-25
Market Prices for AIMCO's Securities May
Fluctuate................................ S-26
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Litigation Associated with Partnership
Acquisitions............................. S-26
Dilution of Interests of Holders of OP
Units.................................... S-27
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-27
Possible Increase in Control of Your
Partnership by Us........................ S-27
Recognition of Gain Resulting from Possible
Future Reduction in Your Partnership
Liabilities.............................. S-27
Possible Termination of Your Partnership
for Federal Income Tax Purposes.......... S-27
Risk of Inability to Transfer Units for
12-Month Period.......................... S-27
Possible Change in Time Frame Regarding
Sale of Property......................... S-27
Balloon Payments........................... S-28
SPECIAL FACTORS TO CONSIDER.................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-28
Background of the Offer...................... S-28
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
Disadvantages of the Offer................... S-32
VALUATION OF UNITS............................. S-34
FAIRNESS OF THE OFFER.......................... S-36
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-36
Fairness to Unitholders who Tender their
Units...................................... S-37
Fairness to Unitholders who do not Tender
their Units................................ S-38
Comparison of Consideration to Alternative
Consideration.............................. S-38
Allocation of Consideration.................. S-41
STANGER ANALYSIS............................... S-42
Experience of Stanger........................ S-42
Summary of Materials Considered.............. S-42
Summary of Reviews........................... S-44
Conclusions.................................. S-46
Assumptions, Limitations and
Qualifications............................. S-46
Compensation and Material Relationships...... S-47
YOUR PARTNERSHIP............................... S-48
General...................................... S-48
Your Partnership and its Property............ S-48
Property Management.......................... S-48
Investment Objectives and Policies; Sale or
Financing of Investments................... S-48
Capital Replacement.......................... S-49
Borrowing Policies........................... S-49
Competition.................................. S-50
Legal Proceedings............................ S-50
History of the Partnership................... S-50
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-50
Distributions and Transfers of Units......... S-51
Beneficial Ownership of Interests in Your
Partnership................................ S-51
Compensation Paid to the General Partner and
its Affiliates............................. S-51
SELECTED FINANCIAL INFORMATION OF YOUR
PARTNERSHIP.................................. S-52
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP.......................... S-53
THE OFFER...................................... S-56
Terms of the Offer; Expiration Date.......... S-56
Acceptance for Payment and Payment for
Units...................................... S-56
Procedure for Tendering Units................ S-57
Withdrawal Rights............................ S-60
</TABLE>
i
<PAGE> 1789
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Extension of Tender Period; Termination;
Amendment.................................. S-60
Proration.................................... S-61
Fractional OP Units.......................... S-61
Future Plans of the AIMCO Operating
Partnership................................ S-61
Voting by the AIMCO Operating Partnership.... S-62
Dissenters' Rights........................... S-62
Conditions of the Offer...................... S-62
Effects of the Offer......................... S-65
Certain Legal Matters........................ S-65
Fees and Expenses............................ S-67
Accounting Treatment......................... S-67
FEDERAL INCOME TAX CONSEQUENCES................ S-68
Tax Opinions................................. S-68
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-69
Disguised Sales.............................. S-70
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-70
Tax Consequences of Exchanging Units Solely
for Cash................................... S-71
Adjusted Tax Basis........................... S-71
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-71
Passive Activity Losses...................... S-72
Tax Reporting................................ S-72
Foreign Offerees............................. S-72
Tax Consequences of a Termination of Your
Partnership................................ S-72
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-74
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-81
DESCRIPTION OF PREFERRED OP UNITS.............. S-87
General...................................... S-87
Ranking...................................... S-87
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Distributions................................ S-87
Allocation................................... S-88
Liquidation Preference....................... S-88
Redemption................................... S-89
Voting Rights................................ S-89
Restrictions on Transfer..................... S-90
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-90
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-92
CONFLICTS OF INTEREST.......................... S-96
Conflicts of Interest with Respect to the
Offer...................................... S-96
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-96
Competition Among Properties................. S-96
Features Discouraging Potential Takeovers.... S-96
Future Exchange Offers....................... S-97
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-97
LEGAL MATTERS.................................. S-98
EXPERTS........................................ S-98
INDEX TO FINANCIAL STATEMENTS.................. F-1
PRO FORMA FINANCIAL INFORMATION OF AIMCO
PROPERTIES, L.P. ............................ P-1
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> 1790
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- 1,794.50 of our Class Two Partnership Preferred Units;
- 1,192 of our Partnership Common Units; or
- $44,859 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 accept a maximum of 25% of the outstanding units in response to our
offer. Our offer is not subject to any minimum number of units being tendered.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline.
The original offer price per unit in 1983 was $49,000. For the five years
ended December 31, 1998, your partnership paid distributions of $12,071 per
unit.
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
its wholly owned subsidiary, AIMCO-GP, Inc. ("AIMCO GP"), AIMCO acts as the sole
general partner of the AIMCO Operating Partnership. As of December 31, 1998,
AIMCO-GP and another AIMCO subsidiary, AIMCO-LP, Inc., a limited partner of the
AIMCO Operating Partnership (the "Special Limited Partner"), owned approximately
an 83% interest in the AIMCO Operating Partnership. As of December 31, 1998, our
portfolio of owned or managed properties included 379,363 apartment units in
2,147 properties located in 49 states, the District of Columbia and Puerto Rico.
Based on apartment unit data compiled by the National Multi Housing Council, we
believe that we are one of the largest owners and managers of multifamily
apartment properties in the United States. As of December 31, 1998, we:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 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. and our February 26, 1999 merger with Insignia Properties Trust, we
acquired a 100% ownership interest in the general partner of your partnership,
Angeles Properties, Inc., and the company that manages the property owned by
your partnership.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-23 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the
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<PAGE> 1791
risks associated with our offer and the disadvantages of the offer to you and
should be considered when you review "Summary -- Background and Reasons for the
Offer -- Expected Benefits of the Offer":
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. We did not use any third-party appraisal or valuation to determine
the value of any property owned by your partnership. We established the terms of
our offer, including the exchange ratios and the cash consideration, without any
arms-length negotiations.
OFFER CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration we estimated your property to be worth $7,500,000, less
approximately $286,879 of deferred maintenance and investment. It is possible
that a sale of the property could result in your receiving more per unit than in
our offer. Even if our cash offer consideration is equal to liquidation value,
if you accept OP Units, you may not ultimately receive an amount equal to the
cash offer consideration when you sell such OP Units or any AIMCO securities you
may receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
value if you retain your units until your partnership is liquidated.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of ours and, therefore, has substantial conflicts of interest with
respect to our offer. We are making this offer with a view to making a profit.
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 RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its property, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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
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<PAGE> 1792
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.
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. You
should review "Federal Income Tax Consequences" 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. 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.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is our subsidiary).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. For any units that we
acquire from you, you will not receive any future distributions from your
partnership's operating cash flow or upon a sale of property owned by your
partnership or a refinancing of any of its debt. If you tender your units in
exchange for OP Units, you will be entitled to future distributions from us from
our operating cash flow and upon a dissolution, liquidation or wind-up of the
AIMCO Operating Partnership.
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from a sale of a property or a refinancing of its indebtedness, to (ii)
a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of December 31, 2023 to a much larger
partnership with a partnership termination date of 2093.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you tender your units
for our OP Units, you will have changed your investment from an interest in a
partnership that owns and manages one property to an interest in a partnership
that invests in and manages a large portfolio of properties.
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<PAGE> 1793
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE LOWER DISTRIBUTIONS. The Preferred OP Units provide for annual
distributions of $2.00 per unit and no more. Current annualized distributions
with respect to the Common OP Units are $2.50 per unit. This is equivalent to
distributions of $3,589 per year on the number of Preferred OP Units, or
distributions of $2,980 per year on the number of Common OP Units, that you
would receive in exchange for each of your partnership's units. During 1998,
your partnership paid cash distributions of $7,731 per unit. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units may be
substantially less, immediately following our offer, than the distributions with
respect to your units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus.
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions.
S-4
<PAGE> 1794
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a result, we may incur costs associated with defending or settling such
litigation or paying any judgement if we lose. As of the present time, no
limited partners of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. As a result of the
offer, we may increase our ability to influence voting decisions with respect to
your partnership. However, we will not be able to control voting decisions
unless we acquire more units in another transaction, which cannot take place for
at least one year after expiration of this offer. Also, removal of your general
partner (which is our subsidiary) or the manager of any property owned by your
partnership may become more difficult or impossible without our consent or
approval.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gains and subject to
taxation at ordinary income tax rates.
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.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investment in the
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<PAGE> 1795
partnership in the future until the property is sold and your partnership is
liquidated. You may continue to have to hold the units not exchanged in this
offer for an indefinite period of time. Although your partnership's agreement of
limited partnership provides for termination in the year 2023, the private
placement memorandum pursuant to which the units in your partnership were sold
in 1983 contained projections reflecting the sale of the property at the end of
ten years of its acquisition. The partnership currently owns one property. The
general partner of your partnership continually considers whether the property
should be sold or otherwise disposed of after consideration of relevant factors,
including prevailing economic conditions, availability of favorable financing
and tax considerations, with a view to achieving maximum capital appreciation
for your partnership. We cannot predict when the property will be sold or
otherwise disposed of. However, there is no current plan or intention to sell
the property in the near future.
BALLOON PAYMENTS. Your partnership has approximately $4,705,787 of balloon
payments due on its mortgage debt in October 2003. Your partnership will have to
refinance such debt or sell its property prior to the balloon payment dates, or
it will be in default and could lose the property to foreclosure.
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 51% ownership interest in Insignia Properties Trust, which has
a 100% ownership interest in the general partner of your partnership and the
company that manages the property owned by your partnership. On February 26,
1999, we acquired the remaining 49% interest in Insignia Properties Trust in a
merger transaction. One of the consequences of the merger with Insignia is to
allow us to make the offer and, if successful, to increase our ownership in 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 August 28, 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
(which is our subsidiary):
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.
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
S-6
<PAGE> 1796
are several risks and disadvantages that result from continuing the
operations of your partnership without the offer. 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. Your
partnership's mortgage notes are due in October 2003 and require balloon
payments of $4,705,787. Your partnership currently has adequate sources of
cash to finance its operations on both a short term and long term basis but
will have to sell its property or refinance its indebtedness to pay such
balloon payments. In addition, continuation of your partnership without the
offer would deny you and your partners the benefits that your general
partner (which is our subsidiary) 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.
There is currently no market for the Preferred OP Units or Common OP Units.
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 three principal advantages of exchanging your units for Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the NYSE.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are four principal advantages of exchanging your units for Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- 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 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.
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<PAGE> 1797
Disadvantages of the Offer.
The principal disadvantages of the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and determining the offer consideration, no one separately represented
the interests of the limited partners. Although we have a fiduciary duty
to the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of such property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pretax cash proceeds to you than our
offer.
- OP Units. OP Units lack a public market, have transfer restrictions and
must be held for one year before they can be redeemed by a holder. The
ultimate return on the OP Units is directly tied to the future price of
AIMCO's Class A Common Stock or Class I Preferred Stock. You could
ultimately receive less for your OP Units than the cash price in our
offer. Further, on or after March 1, 2005, we may redeem the Class I
Preferred Stock for $25 per share.
- Lower Preferred Quarterly Distributions. Your partnership paid
distributions of $7,731 for the fiscal year ended December 31, 1998.
Holders of Preferred OP Units will be entitled to receive quarterly
distributions of $0.50 per unit (equivalent to $2.00 on an annualized
basis) before any distributions are paid to holders of Common OP Units.
This is equivalent to a distribution of $3,589 per year on the number of
Preferred OP Units you will receive in exchange for each of your
partnership units.
- Lower Common Quarterly Distributions. Your partnership paid distributions
of $7,731 for the fiscal year ended December 31, 1998. In 1998, we paid
quarterly distributions on the Common OP Units totalling $2.25 per unit.
In January 1999, we increased our distribution rate on each of the Common
OP Units to $2.50 on an annual basis. See "The AIMCO Operating
Partnership." Assuming no change in the level of our distributions, this
is equivalent to a distribution of $2,980 per year on the number of
Common OP Units you will receive in exchange for each of your partnership
units.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
a sale of the property would be advantageous given market conditions, the
condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of the property and the tax consequences to you
and your partners upon a sale of the property.
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
S-8
<PAGE> 1798
VALUATION OF UNITS
We determined the offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower of the value produced. We used your partnership's
property income for the fiscal year ended December 31, 1997. However, in
determining the appropriate capitalization rate, we considered the partnership's
property income since December 31, 1997. Our method for selecting a
capitalization rate begins with each property being assigned a location and
condition rating (e.g., "A" for excellent, "B" for good, "C" for fair, and "D"
for poor). We have rated your property's location B (good) and its condition B
(good). Generally, we assign an initial capitalization rate of 10.25% to
properties in this category. We then adjust the capitalization rate based on
whether the mortgage debt that the property is subject to bears interest at a
rate above or below 7.5% per annum. Generally, for every 0.5% in excess of 7.5%,
the capitalization rate would be increased by 0.25%. Your property's mortgage
debt bears interest at 7.83% per annum, which resulted in an increase from the
initial capitalization rate of 0.25%. We also considered any changes in your
partnership's property income from 1997 to 1998. Because your partnership's
property income in 1998 increased compared to 1997, we further revised the
capitalization rate downward by approximately 0.13%, resulting in a final
capitalization rate of 10.37%. The evaluation of a property's location and
condition, and the determination of an appropriate capitalization rate for a
property, is subjective in nature, and others evaluating the same property might
use a different capitalization rate and derive a different property value.
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. Further, in
applying the direct capitalization method, others may make different assumptions
and obtain different results. 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>
Property income............................................. $ 778,000
Capitalization rate......................................... 10.37%
-----------
Gross valuation of partnership property..................... $ 7,500,000
Plus: Cash and cash equivalents............................. 522,593
Plus: Other partnership assets, net of security deposits.... 382,915
Less: Mortgage debt, including accrued interest............. (5,230,467)
Less: Accounts payable and accrued expenses................. (17,930)
Less: Other liabilities..................................... (305,094)
-----------
Partnership valuation before taxes and certain costs........ 2,852,017
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures and deferred
maintenance............................................... (286,879)
Less: Closing costs......................................... (187,500)
-----------
Estimated net valuation of your partnership................. 2,377,638
Percentage of estimated net valuation allocated to holders
of units.................................................. 98.11%
-----------
Estimated net valuation of units............................ 2,332,669
Total number of units............................. 52.0
-----------
Estimated valuation per unit................................ 44,859
===========
Cash consideration per unit................................. $ 44,859
===========
</TABLE>
S-9
<PAGE> 1799
In order to determine the number of Preferred OP Units we are offering for
each of your units, we divided the cash offer consideration of $44,859 by the
$25 liquidation preference of each Preferred OP Unit to get 1,794.50 Preferred
OP Units per unit.
In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $44,859 by a
price of $37.63 (the average closing price of AIMCO's Class A Common Stock on
the NYSE for the 30 trading days ended March 23, 1999) to get 1,192 Common OP
Units per unit.
FAIRNESS OF THE OFFER
Fairness to Unitholders. Your general partner is our subsidiary. 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. Your general partner did not participate in the structuring of the
offer. We and your general partner believe that the offer and all forms of
consideration offered is fair to you and the other limited partners of your
partnership. 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 (which is our subsidiary) 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 (which is our subsidiary) has compared our offer consideration
to:
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated;
- your general partner's estimate of the going concern value of your
partnership if it continued operating as an independent stand-alone
entity; and
- the net book value of your partnership.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C>
Cash offer consideration.................................... $ 44,859
Partnership Preferred Units................................. $ 44,859
Partnership Common Units.................................... $ 44,859
Alternatives:
Estimated liquidation proceeds............................ $ 44,859
Estimated going concern value(1).......................... $ 40,192
Estimated alternative going concern value(2).............. $ 41,558
Net book value (deficit).................................. $(62,534)
</TABLE>
S-10
<PAGE> 1800
- ---------------
(1) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(2) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
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. Stanger has
rendered similar fairness opinions with regard to the other tender offers being
made by the AIMCO Operating Partnership. Stanger rendered the opinions only as
to the individual fairness of the offer consideration in each proposed exchange
offer.
YOUR PARTNERSHIP
Your Partnership and its Property. La Colina Partners, Ltd. is a California
limited partnership which was formed on July 15, 1983 to be the sole limited
partner of La Colina Ranch Apartments, Ltd., a limited partnership, which owns
and operates a single apartment property located in Denton, Texas, known as "La
Colina Ranch Apartments." La Colina Ranch Apartments consists of 264 units and
was built in 1984. Your partnership has no employees. As of September 30, 1998,
there were 52 units of limited partnership interest issued and outstanding,
which were held of record by 51 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.
Your partnership sold $2,548,000 of limited partnership units in 1983.
Between January 1, 1993 and December 31, 1998 your partnership paid cash
distributions totalling $12,071 per unit. Your partnership currently owns one
property.
Property Management. Your partnership's property has been managed by an
affiliate of ours. 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.
Investment Objectives and Policies; Sale or Financing of Investments. Under
your partnership's agreement of limited partnership, your partnership is not
permitted to raise new capital or reinvest cash in new properties. Your
partnership will terminate on December 31, 2023, unless earlier dissolved. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership property within any specified time period. An
investment in your partnership is a finite life investment in which partners
receive regular cash distributions out of your partnership's distributable cash
flow, if any, and upon liquidation.
Borrowing Policies. Your partnership's agreement of limited partnership
allows your partnership to incur debt. As of December 31, 1998, your partnership
had a mortgage note outstanding of $4,977,766, payable to FNMA, which bears
interest at the rate of 7.83%. The mortgage debt is due on October 15, 2003.
Your partnership also has a second mortgage note outstanding of $163,710, on the
same terms as the current mortgage note. Your partnership's agreement of limited
partnership also allows your general partner to lend funds to your partnership.
As of December 31, 1998, your general partner had no loans outstanding to your
partnership.
S-11
<PAGE> 1801
Transfers. Your units are not listed on any national securities exchange or
quoted on NASDAQ, and there is no established public trading market for the
units. Secondary sales activity for the units has been limited and sporadic.
Your general partner monitors transfers of the units (i) because the admission
of the transferee as a substitute limited partner in your partnership requires
the consent of your general partner under your partnership agreement, and (ii)
in order to track compliance with applicable safe harbor provisions to avoid
treatment as a "publicly traded partnership" for tax purposes. However, your
general partner does not monitor or regularly receive or maintain information
regarding the prices at which secondary sale transactions in the units have been
effectuated.
TERMS OF THE OFFER
General. We are offering to acquire up to 25% of the outstanding 52 units
of your partnership, which we do not directly or indirectly own, for
consideration per unit of 1,794.50 Preferred OP Units, 1,192 Common OP Units, or
$44,859 in cash. If you tender units pursuant to the offer, you may choose 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 Preferred OP Units, 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 January 1, 1999,
although you will be entitled to retain any distributions you may have received
after such date and prior to our commencement of this offer.
If you accept our offer and do not specify the consideration you desire on
the letter of transmittal, we will issue you Preferred OP Units.
Expiration Date. Our offer will expire at 5:00 P.M., New York City time, on
June 4, 1999, 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.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds 25% 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 their acceptance for payment as provided for herein.
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 Common OP Units or 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.
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;
S-12
<PAGE> 1802
- 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.
The offer may be extended or delayed indefinitely, during which time you
will not receive payment for any tendered units.
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 any property owned by
your partnership's because your general partner (which is our subsidiary) and
the property manager will remain unchanged. If we borrow funds for the cash
consideration for these offers, our interest costs would increase which could
adversely affect our future earnings. If all units in this and our other
contemplated offers were purchased for cash and we borrowed all the funds, at
current interest rates, our interest expense would increase by $3,064,000 per
year.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
number of units pursuant to our offer, we may be in a position to influence
voting decisions with respect to your partnership. However, we will not be able
to control voting decisions unless we acquire more units in another transaction,
which cannot take place for at least one year after expiration of this offer.
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 (which is our subsidiary),
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 Letter of Transmittal,
and the legal and accounting fees and expenses in connection with the offer. We
will also pay the fees of Stanger for providing the fairness opinion 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 $50,000.
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.
No Dissenters' Rights. You are not entitled to dissenters' (appraisal)
rights in connection with the offer.
S-13
<PAGE> 1803
Other Offers. The AIMCO Operating Partnership is also making similar
exchange offers to approximately 90 other limited partnerships in which it
controls the general partner, interests in substantially all of which were
acquired in the merger on October 1, 1998 with Insignia Financial Group, Inc.
and the February 26, 1999 merger with Insignia Properties Trust. Each of such
exchange offers is being made by a separate prospectus supplement which is
similar to this Prospectus Supplement. Copies of such prospectus supplements may
be obtained upon written request from the Information Agent at the address set
forth in "-- Information Agent" or on the back cover page of this Prospectus
Supplement. The exchange offers may be different for limited partners in each
partnership in terms of pricing and percentage of units sought, but the effects
of the offers will essentially be the same. In general, we believe that the risk
factors (except for certain tax-related risk factors) described herein for this
offer will also be applicable to the other offers.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer. Its telephone numbers are (888)
349-2005 and (201) 896-1900. Its fax number is (201) 896-0910.
FEDERAL INCOME TAX CONSEQUENCES
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Preferred OP
Units or 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.
THE FOREGOING SUMMARY IS A GENERAL DISCUSSION OF THE MATERIAL 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 "FEDERAL INCOME TAX CONSEQUENCES" 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.
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, your general
partner (which is our subsidiary) 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, Preferred
OP Units and 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.
As of February 19, 1999, the AIMCO Operating Partnership had approximately
9,729,130 Common OP Units outstanding (excluding interests held by AIMCO) and no
Class Two Partnership Preferred Units outstanding. The number of OP Units you
may acquire from us in exchange for your units will represent a lower percentage
of the outstanding limited partnership interests in the AIMCO Operating
Partnership than that of your current ownership interest in your partnership. In
response to our offer, you could elect to receive $44,859 in cash, 1,794.50
Preferred OP Units or 1,192 Common OP Units. Both your units and the OP Units
S-14
<PAGE> 1804
are subject to transfer restrictions and it is unlikely that a real trading
market will ever develop for any of such securities. If you subsequently redeem
OP Units for AIMCO Class A Common Stock or Class I Preferred Stock, we can make
no assurance as to the value of such shares of AIMCO stock, at that time, which
may be less than the cash offer price of $44,859.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
our subsidiary 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
both the general partner of your partnership and the manager of your
partnership's property. The general partner receives an annual management fee
equal to the greater of 7.5% of net cash flow or $10,000, payable monthly, in
addition to reimbursements for expenses incurred in its capacity as general
partner. The general partner of your partnership received total fees and
reimbursements of $32,447 for the fiscal year ended December 31, 1998. The
property manager received management fees of $89,785 for the fiscal year ended
December 31, 1998. We have no current intention of changing the fee structure
for your general partner or the 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.
AIMCO's Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is 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.
S-15
<PAGE> 1805
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. We might pay a higher price for any future exchange offers we may make
for units of your partnership. In any event, we will not acquire any units for
at least one year after expiration of this offer.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $583,167 will be required to purchase all of
the units sought in our offer, if such units are tendered for cash excluding
expenses. We will obtain all such funds from cash from operations, equity
issuances and short term borrowings. For a detailed description of estimated
expenses to be incurred in the offer, see "Source and Amount of Funds and
Transactional Expenses."
S-16
<PAGE> 1806
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
nine months ended September 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 of the AIMCO Operating Partnership" included in the accompanying
Prospectus. All dollar values are in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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............... $ 265,700 $ 127,083 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses........... (101,600) (50,737) (76,168) (38,400) (30,150) (10,330)
Owned property management expenses.... (7,746) (4,344) (6,620) (2,746) (2,276) (711)
Depreciation.......................... (59,792) (23,848) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
96,562 48,154 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income...... 13,968 9,173 13,937 8,367 8,132 3,217
Management and other expenses......... (8,101) (5,029) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation......... (196) (441) (588) (590) (581) --
Other assets, depreciation and
amortization........................ (3) (236) (453) (218) (168) (150)
Owner and seller bonuses.............. -- -- -- -- -- --
Amortization of management company
goodwill............................ -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
5,668 3,467 2,038 1,707 2,002 1,020
Minority interests in service company
business............................ -- 48 (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business............ 5,668 3,515 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative expenses... (7,444) (1,408) (5,396) (1,512) (1,804) (977)
Interest income....................... 18,244 4,458 8,676 523 658 123
Interest expense...................... (56,756) (33,359) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships........................ (1,052) (777) 1,008 (111) -- --
Equity in losses of unconsolidated
partnerships(c)..................... (5,078) (463) (1,798) -- -- --
Equity in earnings of unconsolidated
subsidiaries(d)..................... 8,413 456 4,636 -- -- --
Amortization of goodwill.............. (5,071) (711) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations................ 53,486 19,865 30,246 15,629 14,988 7,702
Gain on disposition of properties..... 2,783 (169) 2,720 44 -- --
Provision for income taxes............ -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before extraordinary
item................................ 56,269 19,696 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt.............. -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)..................... $ 56,269 $ 19,427 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)............................. 241 109 147 94 56 48
Total owned apartment units (end of
period)............................. 62,955 28,773 40,039 23,764 14,453 12,513
Units under management (end of
period)............................. 154,729 71,038 69,587 19,045 19,594 20,758
Basic earnings per Common OP Unit..... $ 0.80 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP Unit... $ 0.79 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit................................ $ 1.6875 $ 1.3875 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities.......................... 50,825 53,435 73,032 38,806 25,911 16,825
Cash flows used in investing
activities.......................... (185,453) (314,814) (717,663) (88,144) (60,821) (186,481)
Cash flows provided by (used in)
financing activities................ 141,221 293,984 668,549 60,129 30,145 176,800
<CAPTION>
AIMCO PROPERTIES, L.P.
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)
Cash flows provided by (used in)
financing activities................ (1,032) 14,114
</TABLE>
S-17
<PAGE> 1807
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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>
Funds from operations(e)................ $ 132,881 $ 49,692 $ 81,155 $ 35,185 $ 25,285 $ 9,391
Weighted average number of Common OP
Units outstanding..................... 53,007 24,347 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation.......................... $2,685,487 $1,250,239 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation.......................... 2,355,122 1,107,545 1,503,922 745,145 448,425 392,368
Total assets............................ 3,121,949 1,608,195 2,100,510 827,673 480,361 416,361
Total mortgages and notes payable....... 1,275,401 661,715 808,530 522,146 268,692 141,315
Redeemable Partnership Units............ 232,405 178,321 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994 Cumulative
Senior Preferred Units................ -- -- -- -- -- 107,228
Partners' Capital....................... 1,427,087 560,737 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.
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>
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 10, 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
based on the NAREIT definition, as adjusted for the 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 NINE PERIOD
MONTHS ENDED FOR THE YEAR ENDED JANUARY 10,
SEPTEMBER 30, DECEMBER 31, 1994
------------------ --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
-------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $ 56,269 $19,427 $32,697 $15,673 $14,988 $ 7,702
(Gain) loss on disposition of property...................... (2,783) 169 (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 56,900 21,052 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 7,077 711 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 2,689 3,584 -- -- --
Amortization of management contracts...................... 4,201 430 1,587 -- -- --
Deferred taxes............................................ 6,134 2,164 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 17,379 2,781 6,280 -- -- --
Preferred stock dividends................................. (12,296) -- (135) -- (5,169) (3,114)
-------- ------- ------- ------- ------- -------
Funds from operations....................................... $132,881 $49,692 $81,155 $35,185 $25,285 $ 9,391
======== ======= ======= ======= ======= =======
</TABLE>
S-18
<PAGE> 1808
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. (the AIMCO Operating Partnership) for the
nine months ended September 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 NINE
MONTHS FOR THE
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 345,961 $ 442,526
Property operating expenses............................... (136,240) (189,442)
Owned property management expenses........................ (8,933) (11,831)
Depreciation.............................................. (80,420) (98,853)
--------- -----------
120,368 142,400
--------- -----------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 28,912 41,676
Management and other expenses............................. (14,386) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (15,243) (26,480)
--------- -----------
(913) (9,075)
Minority interests in service company business............ -- (10)
--------- -----------
Partnership's shares of income from service company
business............................................... (913) (9,085)
--------- -----------
General and administrative expenses....................... (8,632) (21,371)
Interest expense.......................................... (90,890) (121,699)
Interest income........................................... 40,887 21,734
Minority interest......................................... (8,548) (10,034)
Equity in losses of unconsolidated partnerships........... (23,349) (43,918)
Equity in earnings of unconsolidated subsidiaries......... 851 5,848
Amortization of Goodwill.................................. (5,071) --
--------- -----------
Net income........................................ $ 24,703 $ (36,125)
========= ===========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (.12) $ (1.16)
Diluted earnings (loss) per Common OP Unit.................. $ (.12) $ (1.16)
Distributions paid per Common OP Unit....................... $ 1.69 $ 1.85
Book value per Common OP Unit............................... $ 24.52 $ 26.96
CASH FLOW DATA:
Cash provided by operating activities....................... $ 90,439 $ 130,703
Cash used in investing activities........................... (79,923) (1,135,038)
Cash provided by (used in) financing activities............. 16,740 955,977
OTHER DATA:
Funds from operations(a).................................... $ 187,985 $ 172,733
Weighted average number of Common OP Units outstanding...... 74,946 74,094
</TABLE>
S-19
<PAGE> 1809
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, net of accumulated depreciation................ $2,679,195
Total assets................................................ 4,558,819
Total mortgages and notes payable........................... 1,762,105
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 320,443
Partners' capital........................................... 1,984,019
</TABLE>
- ---------------
(a) 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
based upon the NAREIT definition, as adjusted for the 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.
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss)................................. $ 24,703 $(36,125)
HUD release fee and legal reserve................. -- 10,202
Real estate depreciation, net of minority
interests....................................... 76,521 93,050
Amortization of management contracts.............. 9,593 12,790
Amortization of management company goodwill....... 10,997 12,551
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation........................ -- 1,715
Amortization of management company goodwill..... 959 1,918
Amortization of management contracts............ 23,010 30,516
Deferred taxes.................................. (713) (1,356)
Equity in earnings of other partnerships:
Real estate depreciation........................ 79,559 95,285
Interest on convertible debentures................ (7,537) (10,003)
Preferred unit distributions...................... (29,107) (37,810)
-------- --------
Funds from operations............................. $187,985 $172,733
======== ========
</TABLE>
S-20
<PAGE> 1810
SUMMARY FINANCIAL INFORMATION OF LA COLINA PARTNERS, LTD.
The summary financial information of La Colina Partners Ltd. for the nine
months ended September 30, 1998 and 1997 is unaudited. The summary financial
information for La Colina Partners Ltd. for the years ended December 31, 1997,
1996, 1995 and 1994 is based on historical information for which 1997 has been
audited. 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 of Your Partnership"
included herein. See "Index to Financial Statements."
LA COLINA PARTNERS, LTD.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues................ $1,342,947 $1,288,813 $1,738,655 $1,681,643 $2,152,848 $1,561,608 $1,425,575
Net Income/(Loss)............. 129,322 30,019 103,295 (66,948) 524,401 (41,177) (747,133)
Net Income (Loss) per limited
partnership unit............ 2,462 572 1,967 (1,275) 9,984 (784) (14,224)
Distributions per limited
partnership unit............ 7 9 381 19 3,897 -- --
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash Equivalents.... $ 729,107 $ 1,195,368 $ 522,599 $ 1,148,129 $ 1,002,202 $ 407,445 $ 314,284
Real Estate, Net of
Accumulated Depreciation... 2,529,276 2,660,222 2,623,939 2,682,739 2,828,828 3,045,919 3,196,979
Total Assets................. 3,671,957 4,298,486 3,609,251 4,315,547 4,341,188 3,993,873 3,995,251
Notes Payable................ 5,105,645 5,166,607 5,132,338 5,747,001 5,796,963 5,841,983 5,901,227
General Partners' Capital/
(Deficit).................. (17,112) (18,939) (18,402) (19,235) (18,555) (21,752) (21,341)
Limited Partners' Capital/
(Deficit).................. (1,694,107) (1,875,003) (1,821,786) (1,904,248) (1,836,980) (2,153,490) (2,112,724)
Partners'
Capital/(Deficit).......... (1,711,220) (1,893,942) (1,840,188) (1,923,483) (1,855,535) (2,175,242) (2,134,065)
Total Distributions.......... 354 478 20,080 1,000 204,694 -- --
Book value per limited
partnership unit........... (32,908) (36,422) (35,388) (36,990) (35,683) (41,832) (41,040)
Net increase (decrease) in
cash and cash
equivalents................ 206,508 47,239 (625,530) 145,927 594,757 93,161 314,284
Net cash provided by
operating activities....... 317,326 761,382 139,352 254,671 828,085 195,321 (812,789)
Ratio of earnings to fixed
charges.................... 1.40/1 1.08/1 1.20/1 0.87/1 2.01/1 0.93/1 -0.49/1
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per unit of your
partnership for the year ended December 31, 1998, and the cash distributions
payable on the number of Common OP Units and Preferred OP Units issuable in
exchange therefor:
<TABLE>
<CAPTION>
ANNUAL
DISTRIBUTIONS
-------------
<S> <C>
Units of La Colina Partners, Ltd. .......................... $7,731
Equivalent cash distributions on Common OP Units(1)......... $2,980
Equivalent cash distributions on Preferred OP Units(2)...... $3,589
</TABLE>
- ---------------
(1) Calculated by multiplying the exchange ratio of 1,192 Common OP Units per
unit by the annualized distributions paid on the Common OP Units of $2.50
per unit.
(2) Calculated by multiplying the exchange ratio of 1,794.50 Preferred OP Units
per unit by the stated annual distribution rate on the Preferred OP Units of
$2.00 per unit.
S-21
<PAGE> 1811
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of AIMCO. AIMCO is a real estate investment
trust that owns and manages multifamily apartment properties throughout the
United States. Through its wholly owned subsidiaries, AIMCO GP, the sole general
partner of the AIMCO Operating Partnership, and the Special Limited Partner, as
of December 31, 1998, AIMCO held approximately an 83% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled by the National
Multi Housing Council, we believe that AIMCO is one of the largest owner and
manager of multifamily apartment properties in the United States, with a total
portfolio of 379,363 apartment units in 2,147 properties located in 49 states,
the District of Columbia and Puerto Rico. As of December 31, 1998, AIMCO:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 apartment properties for third party
owners and affiliates.
AIMCO's Class A Common Stock is listed and traded on the NYSE under the
symbol "AIV." On March 23, 1999, the last reported sale price of AIMCO Class A
Common Stock on the NYSE was $35 3/16. 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 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>
1999
First Quarter (through March 23)........ $41 5/8 $35 3/16 $0.6250 $0.6250
1998
Fourth Quarter.......................... 37 3/8 30 0.5625 0.5625
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>
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.
S-22
<PAGE> 1812
RISK FACTORS
The following sets forth certain risks and disadvantages of the offer and
should be read and considered when reviewing the potential benefits of the offer
set forth in "Background and Reasons for the Offer -- Expected Benefits of the
Offer." In addition, you should review the other risks of investing in us
beginning on page 2 of our accompanying Prospectus.
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. 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. 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. 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 CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimate your property to be worth $7,500,000, less
approximately $286,879 of deferred maintenance and investment. It is possible
that a sale of the property could result in you receiving more per unit than in
our offer. Even if our cash offer consideration is equal to liquidation value,
if you accept OP Units, you may not ultimately receive an amount equal to the
cash offer consideration when you sell such OP Units or any AIMCO securities you
may receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
pretax cash 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.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and the AIMCO Operating Partnership and, therefore, has
substantial conflicts of interest with respect to our offer. We are making this
offer with a view to making a profit. 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. Another conflict is 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. 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.
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CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its property, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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 sold. If you exchange your units
for cash and our 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. 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 allocated to such units 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. If you exercise your redemption right with respect to the OP Units
within two years of the date that you transfer your units to the AIMCO Operating
Partnership, your exchange of units for OP Units or OP Units and cash could be
treated as a disguised sale of your units and you would be required to recognize
gain or loss in the year of the exchange on such disguised sale. See "Federal
Income Tax Consequences -- Disguised Sales." 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. 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 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.
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. You
should review "Federal Income Tax Consequences" 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. Because the income tax
consequences of tendering units will not be the same for everyone, you should
consult your own tax advisor before determining whether to tender your units
pursuant to our offer.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is controlled by us).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all right title and interest
in and to all of the units that we accept, and all distributions in
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respect of such units on or after the date on which we accept such units for
purchase. Accordingly, for any units that we acquire from you, you will not
receive any future distributions from operating cash flow of your partnership or
upon a sale of property owned by your partnership or a refinancing of any of its
debt. If you tender your units in exchange for OP Units, you will be entitled to
future distributions from the operating cash flow of the AIMCO Operating
Partnership and upon a dissolution, liquidation or winding-up of the AIMCO
Operating Partnership. See "Comparison of Your Units and AIMCO OP
Units -- Distributions."
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from the sale of a property or a refinancing of its indebtedness to
(ii) a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of December 31, 2023 to a much larger
partnership with a partnership termination date of 2093.
Under the AIMCO Operating Partnership's agreement of limited partnership,
the general partner has the ability, without the concurrence of the limited
partners, to acquire and dispose of properties and to borrow funds. Further,
while it is the intent to distribute net income from operations, sales of
properties and refinancings of indebtedness, the general partner may not make
such distributions. Proceeds of future asset sales or refinancings by the AIMCO
Operating Partnership generally will be reinvested rather than distributed.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you exchange your
units for OP Units, you will have changed your investment from an interest in a
partnership which owns and manages a single property to an interest in the AIMCO
Operating Partnership which 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 and our portfolio of properties as compared to the value of your
units and your partnership.
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
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POSSIBLE LOWER DISTRIBUTIONS. The Preferred OP Units provide for annual
distributions of $2.00 per unit and no more. Current annualized distributions
with respect to the Common OP Units are $2.50 per unit. This is equivalent to
distributions of $3,589 per year on the number of Preferred OP Units, or
distributions of $2,980 per year on the number of Common OP Units, that you
would receive in exchange for each of your partnership's units. During 1998,
your partnership paid cash distributions of $7,731 per unit. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units may be
substantially less, immediately following our offer, than the distributions with
respect to your units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus. If you
exercise your redemption right with respect to the OP Units within two years of
the date that you transfer your units to the AIMCO Operating Partnership, your
exchange of units for OP Units and cash could be treated as a disguised sale of
your units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as for your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be subject to litigation based on
claims that the general partner has breached its
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fiduciary duties to its limited partners or that the transaction violates the
relevant partnership agreement. As a result, we may incur costs associated with
defending or settling such litigation or paying any judgement if we lose. As of
the present time, no limited partners of your partnership have initiated
lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. 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. However, we will
not be able to control voting decisions unless we acquire more units in another
transaction which cannot take place for at least one year after expiration of
this offer. Furthermore, in the event that we acquire a substantial number of
units pursuant to our offer, removal of your general partner (which is our
subsidiary) or the manager of any property owned by your partnership may become
more difficult or impossible without our consent.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
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.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investments in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to hold
the units not exchanged in this offer for an indefinite period of time. Although
your partnership's agreement of limited partnership provides for termination in
the year 2023, the private placement memorandum pursuant to which the units in
your partnership were sold in 1983 contained projections reflecting the sale of
the property at the end of ten years of its acquisition. The partnership
currently owns one property. The general partner of your partnership continually
considers whether the property should be sold or otherwise
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disposed of after consideration of relevant factors, including prevailing
economic conditions, availability of favorable financing and tax considerations,
with a view to achieving maximum capital appreciation for your partnership. We
cannot predict when the property will be sold or otherwise disposed of. However,
there is no current plan or intention to sell the property in the near future.
BALLOON PAYMENTS. Your partnership has approximately $4,705,787 of balloon
payments due on its mortgage debt in October 2003. Your partnership will have to
refinance such debt or sell its property prior to the balloon payment dates, or
it will be in default and could lose the property to foreclosure.
SPECIAL FACTORS TO CONSIDER
In reviewing the offer, you should pay special attention to the information
in the Sections entitled "Background and Reasons for the Offer," "Valuation of
Units," "Fairness of the Offer" and "Stanger Analysis," which contain
information regarding the background and reasons for the offer, the method of
evaluating units in the offer and alternative valuation methods considered, our
view as to the fairness of the offer, and the fairness opinion rendered by
Stanger.
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 liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
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 1.5% interest, consisting of a 0% limited
partnership interest and a 1.5% general partnership interest, in your
partnership.
On October 31, 1998, IPT and AIMCO entered into an agreement and plan of
merger, dated as of October 1, 1998 (the "IPT Merger Agreement"), pursuant to
which IPT merged with AIMCO on February 26, 1999 (the "IPT Merger"). Upon
consummation of the IPT Merger, each outstanding share of IPT not owned by AIMCO
was converted into the right to receive 0.3601 shares of AIMCO's Class A Common
Stock (approximately 4,180,000 shares in the aggregate).
One of the reasons we chose to acquire Insignia is that we would be able to
make the exchange 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, and would provide the AIMCO Operating Partnership
with a larger asset and capital base and increased diversification. As of the
date of this offering, the AIMCO Operating Partnership proposes to make offers
to approximately 90 of the Insignia Partnerships, including your partnership.
During our negotiations with Insignia in early 1998, we decided that if the
merger with Insignia were consummated, we could also benefit from making offers
for limited partnership interests in the Insignia Partnerships. While some of
the Insignia Partnerships are public partnerships and information is publicly
available on such partnerships for weighing the benefits of making an exchange
offer, many of the partnerships are private partnerships and information about
such partnerships comes principally from the general partner. Our control of the
general partner makes it possible to obtain access to such information. Further,
such control also means that we control the operations of the partnerships and
their properties. Insignia did not
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propose that we conduct such exchange offers, rather we initiated the offers on
our own. We determined in June of 1998 that if the merger with Insignia were
consummated, we would offer to limited partners of the Insignia Partnerships
limited partnership units of the AIMCO Operating Partnership and/or cash.
In connection with the Insignia Merger we acquired general partnership
interests and certain limited partnership interests in a number of private and
public partnerships. Eight private partnerships out of the 90 partnerships
involved in the proposed exchange offers do not have audited financial
statements prepared in accordance with generally accepted accounting practices
("GAAP"). Certain of these partnerships have audited financial statements
prepared on the basis of federal income taxes and others have unaudited
financial statements which may or may not be prepared on the basis of GAAP or
federal income taxes. For the Insignia Partnerships for which exchange offers
are being made which do not have audited GAAP financial statements for at least
two years, we are making the offer on the basis of either one year of audited
GAAP financial statements and one year of unaudited GAAP financial statements or
just unaudited GAAP financial statements. We tried to obtain two years of
audited GAAP financial statements for all the partnerships for which offers are
being made, but because of the inability to locate records from inception of the
partnerships which would allow auditors to verify the original purchase price of
the properties, no audits were possible. In these cases, the entities which
controlled the general partners prior to Insignia are no longer in business or
have no current knowledge or records of such partnerships. For the same reasons,
we do not have all the records for past years of some of the partnerships.
Therefore, for the partnerships without an audit, we did not have invoices,
escrow statements, property closing statements or the like to support the
original costs of the real property to the satisfaction of independent auditors,
in order for them to render an unqualified audit report. Consequently, we have
no way to support the original cost of the properties. However, we have general
ledgers and related accounting records that enable us to prepare GAAP basis
financial statements. These records were taken from the entities that controlled
the general partners and were subsequently maintained by us. The amount of
capitalized property costs appearing in those books and records has, to our
knowledge, been appropriately rolled forward from year to year and used by the
general partners of the partnerships in question to prepare tax returns and
periodic reports to the investors in the partnerships. Therefore, we believe
that the unaudited financial statements included in the prospectus supplements
for such partnerships have been prepared in accordance with GAAP.
In acquiring Insignia and the interests in the Insignia Partnerships, we
conducted due diligence with regard to certain of the assets acquired including
the major properties held by the Insignia Partnerships. Our due diligence
focused on the condition of the major properties and the terms of the
partnership agreements. Since Insignia had audited GAAP financial statements and
since those partnerships without audited GAAP financial statements are generally
smaller, we did not focus on the issue of audited GAAP based financial
statements for the smaller partnerships at the time of the merger. Further, for
our internal due diligence use, audited tax based financial statements are also
used. The total number of Insignia Partnerships we acquired an interest in was
approximately 550 of which approximately 25 do not have audited GAAP statements.
We were not able to pick and choose the partnerships in which we would acquire
an interest. The Insignia Partnerships were part of the business of Insignia. As
a consequence, we acquired interests in certain small private partnerships which
do not have the ability to obtain audited GAAP financial statements. It is our
policy to acquire properties or partnerships with audited GAAP based financial
statements. However, in connection with large acquisitions of partnerships
interests, such as with the Insignia Merger, we may occasionally acquire a
partnership or property without audited GAAP financial statements.
Previous Tender Offers
Tender offers have been previously made with respect to certain of the
public Insignia Partnerships. However, there have not been any prior tender
offers to acquire units of your partnership. Except for such tender offers, we
are not aware of any merger, consolidation or other combination involving any of
the Insignia Partnerships, or any acquisitions of any of such partnerships or a
material amount of the assets of such partnerships.
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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 August 28, 1998 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
(which is our subsidiary).
Liquidation
Benefits of 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 (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 your general partner (which is our subsidiary), 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 on the order of 1% of the principal amount of the mortgage.
Your general partner believes it currently is in the best interest of your
partnership to continue holding its real estate assets.
Continuation of the Partnership Without the Offer
Benefits of Continuation. Although our offer permits you to continue your
investment in your partnership, 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. Your
partnership's net income has increased from $30,019 for the nine months ended
September 30, 1997, to $129,322 for the nine months ended September 30, 1998. 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. The continuation of your partnership will allow you to continue to
participate in the net income and any increases of revenue of your partnership
and any net proceeds from the sale of any property owned by your partnership.
The General Partner continues to review operations and expects to complete
capital expenditures in 1999 and 2000 enabling it to possibly increase rents and
lower expenses. In addition, a sale of the property may cause a tax gain to each
investor.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. If your partnership continues operating as presently structured, your
partnership could be forced to borrow on terms that could result in net losses
from operations. Your partnership's mortgage notes are due on October 15, 2003
and require balloon payments totaling $4,705,787. Your partnership currently has
adequate sources of cash to finance its operations on both a short term and long
term basis but will have to sell the properties or refinance its indebtedness in
2003 to pay such balloon payments. Continuation of your partnership without the
offer would deny you and your partners the benefits that your general partner
(which is our subsidiary) expects to result from the offer. For example, you
would have no opportunity for liquidity unless you were to sell your units in a
private transaction. Any such
S-30
<PAGE> 1820
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.
Alternative Structures Considered
Before we decided to make our offer, we considered a number of alternative
transactions, including purchasing of your partnership's property; making an
offer of only cash for your units; making an offer of only Common OP Units for
your units; and making an offer of only Preferred OP Units for your units. A
merger would require a vote of the limited partners of your partnership. If the
merger was approved, all limited partners, including those who wish to retain
their units and continue to participate in your partnership, would be forced to
participate in the merger transaction. If the merger was not approved, all
limited partners, including those who would like to liquidate their investment
in your partnership, would be forced to retain their units.
We also considered purchasing your partnership's property from your
partnership. However, a sale of your partnership's assets could occur only with
the consent of the limited partners holding at least a majority of the units of
your partnership. If the sale was approved, all limited partners, including
those who wish to continue to participate in the ownership of your partnership's
property, would be forced to participate in the sale transaction, and possibly
to recognize taxable income. If the sale was not approved, all limited partners,
including those who would like to dispose of their investment in your
partnership's property, would be forced to retain their investment.
In order to give all limited partners in your partnership an opportunity to
make their own investment decision, we elected to make an offer directly to you
and the other limited partners. We considered making an all cash offer in order
to satisfy some limited partners' desire for immediate liquidity. However, an
all cash offer would not be desirable for those limited partners who do not
desire immediate liquidity and do not want to immediately recognize any taxable
income, but might otherwise be interested in disposing of their investment in
your partnership and might want an opportunity to control the timing of any
realization of taxable income associated with liquidating such investment in the
future.
We considered making an offer of only OP Units, either all Common OP Units
or all Preferred OP Units. The primary disadvantage of an all OP Unit offer is
that those limited partners who want immediate liquidity would be forced to wait
at least one year before exchanging their OP Units for cash or AIMCO stock. We
decided to offer limited partners both Common OP Units and Preferred OP Units in
order to permit investors to make their own decision as to whether they
preferred the possibility of future capital appreciation (Common OP Units) or
preferred distribution rights (Preferred OP Units).
After considering these alternatives, we decided to offer limited partners
the possibility of all three forms of consideration: cash, Common OP Units and
Preferred OP Units. We think that such an offer will appeal to a large number of
limited partners in your partnership, while permitting each one to retain any or
all of his or her units and remain a limited partner in your partnership on the
same terms as before.
Sale of Assets
Your partnership could sell the property it owns. The general partner of
your partnership considers sale of your partnership's property from time to
time. However, any such sale would likely be a taxable transaction.
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.
S-31
<PAGE> 1821
There are three principal advantages of tendering your units for Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, currently listed and traded on the NYSE.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are four principal advantages of tendering your units for Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- 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 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.
DISADVANTAGES OF THE OFFER
The principal disadvantages to the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and the consideration, no one separately represented the interests of the
limited partners. Although we have a fiduciary duty to the limited
partners, we also have conflicting responsibilities to our equity
holders. We did not appoint, or ask the limited partners to appoint, a
party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of the property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true
S-32
<PAGE> 1822
value of the property rather than the method we chose. The sale of the
property and the liquidation of the partnership might result in greater
pre-tax cash proceeds to you than our offer.
- OP Units. Investing in OP Units has risks that include the lack of a
public market, transfer restrictions and a one year holding period before
they can be redeemed by a holder. The ultimate return on the OP Units is
directly tied to the future price of AIMCO's Class A Common Stock or
Class I Preferred Stock. You could ultimately receive less for your OP
Units than the cash price in our offer. Further, on or after March 1,
2005, we may redeem the Class I Preferred Stock for $25 per share.
- Lower Preferred Quarterly Distributions. Your partnership paid
distributions of $7,731 for the fiscal year ended December 31, 1998.
Holders of Preferred OP Units will be entitled to receive quarterly
distributions of $0.50 per unit (equivalent to $2.00 on an annualized
basis) before any distributions are paid to holders of Common OP Units.
This is equivalent to a distribution of $3,589 per year on the number of
Preferred OP Units you will receive in exchange for each of your
partnership units.
- Lower Common Quarterly Distributions. Your partnership paid distributions
of $7,731 for the fiscal year ended December 31, 1998. In 1998, we paid
quarterly distributions on the Common OP Units totalling $2.25. In
January 1999, we increased our distribution rate on each of the Common OP
Units to $2.50 on an annual basis. Assuming no change in the level of our
distributions, this is equivalent to a distribution of $2,980 per year on
the number of Common OP Units you will receive in exchange for each of
your partnership units. See "The AIMCO Operating Partnership."
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
the sale of the property would be advantageous given market conditions,
the condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of a property and the tax consequences to you
and your partners on a sale of a property. See also "Your
Partnership -- General Policy Regarding Sales and Refinancings of
Partnership Property."
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
S-33
<PAGE> 1823
VALUATION OF UNITS
We determined our cash offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower of the value produced. We used your partnership's
property income for the fiscal year ended December 31, 1997. However, in
determining the appropriate capitalization rate, we considered the partnership's
property income since December 31, 1997. Our method for selecting a
capitalization rate begins with each property being assigned a location and
condition rating (e.g., "A" for excellent, "B" for good, "C" for fair, and "D"
for poor). We have rated your property's location B (good) and its condition B
(good). Generally, we assign an initial capitalization rate of 10.25% to
properties in this category. We then adjust the capitalization rate based on
whether the mortgage debt that the property is subject to bears interest at a
rate above or below 7.5% per annum. Generally, for every 0.5% in excess of 7.5%,
the capitalization rate would be increased by 0.25%. Your property's mortgage
debt bears interest at 7.83% per annum, which resulted in an increase from the
initial capitalization rate of 0.25%. We also considered any changes in your
partnership's property income from 1997 to 1998. Because your partnership's
property income in 1998 increased compared to 1997, we further revised the
capitalization rate downward by approximately 0.13%, resulting in a final
capitalization rate of 10.37%. The evaluation of a property's location and
condition, and the determination of an appropriate capitalization rate for a
property, is subjective in nature, and others evaluating the same property might
use a different capitalization rate and derive a different property value.
Property income is the difference between the revenues from the property
and related costs and expenses, excluding income derived from sources other than
its regular activities and before income deductions. Income deductions include
interest, income taxes, prior-year adjustments, charges to reserves, write-offs
of intangibles, adjustments arising from major changes in accounting methods and
other material and nonrecurrent items. In this respect, property income differs
from net income disclosed in the partnership's financial statements, which does
not exclude these income sources and deductions. The following is a
reconciliation of your partnership's net income for the year ended December 31,
1997 to your partnership's property income for the same period.
<TABLE>
<S> <C>
Net Income (Loss)........................................... $103,295
Other Non-Operating Expenses................................ (39,993)
Depreciation................................................ 209,019
Interest.................................................... 505,679
--------
Property income............................................. $778,000
</TABLE>
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. Further,
in applying the direct capitalization method, others may make different
assumptions and obtain different results. 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 estimated 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 (property 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 divided
S-34
<PAGE> 1824
fiscal 1997 property income of $778,000 by the property's capitalization
rate of 10.37% to derive an estimated gross property value of $7,500,000.
- 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
certain other costs including required capital expenditures, deferred
maintenance, and closing costs to derive a net equity value for your
partnership of $2,377,638. Closing costs, which are estimated to be 2.5%
of the gross property value, include legal and accounting fees, real
property, transfer taxes, title and escrow costs and broker's fees.
- 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. Accordingly, 100% of the estimated liquidation
proceeds are assumed to be distributed to holders of units. Our cash
offer consideration represents the per unit liquidation proceeds
determined in this manner.
<TABLE>
<S> <C>
Net operating income........................................ $ 778,000
Capitalization rate......................................... 10.37%
-----------
Gross valuation of partnership property..................... 7,500,000
Plus: Cash and cash equivalents............................. 522,593
Plus: Other partnership assets, net of security deposits.... 382,915
Less: Mortgage debt, including accrued interest............. (5,230,467)
Less: Accounts payable and accrued expenses................. (17,930)
Less: Other liabilities..................................... (305,094)
-----------
Partnership valuation before taxes and certain costs........ 2,852,017
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures and deferred
maintenance............................................... (286,879)
Less: Closing costs......................................... (187,500)
-----------
Estimated net valuation of your partnership................. 2,377,638
Percentage of estimated net valuation allocated to holders
of units.................................................. 98.11%
-----------
Estimated net valuation of units............................ 2,332,669
Total number of units............................. 52.0
-----------
Estimated valuation per unit................................ 44,859
===========
Cash consideration per unit................................. 44,859
===========
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration of $44,859 by the $25
liquidation preference of each Preferred OP Unit to get 1,794.50
Preferred OP Units per unit.
- In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $44,859 by
a price of $37.63 (the average closing price of AIMCO's Class A Common
Stock on the NYSE for the 30 trading day period ended March 23, 1999) to
get 1,192 Common OP Units per unit.
The total net valuation of all partnerships in which the AIMCO Operating
Partnership is making similar exchange offers, and which were valued using the
same methods as used for your partnership, is $568,751,183, of which, $2,377,638
or 0.42% is the net valuation of your partnership.
S-35
<PAGE> 1825
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
Your general partner is a subsidiary of the AIMCO Operating Partnership. 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. Your general partner has substantial conflicts of interest with
regard to the offer. However, for all of the reasons discussed herein, we and
your general partner believe that the offer and all forms of consideration
offered is fair to you and the limited partners of your partnership. We also
reasonably believe that the similar offers to the limited partners of the other
partnerships are fair to such limited partners. 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 us 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, your
general partner (which is our subsidiary) 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. The net
income of your partnership has increased from $30,019 for the nine months
ended September 30, 1997 to $129,322 for the nine months ended September
30, 1998. These factors are reflected in our valuation of your partnership.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are substantially the financial
equivalent to your interest in your partnership. 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
and Stanger's estimates of the net asset value ($44,261 per unit), going
concern value ($38,021 per unit) and liquidation value ($40,596 per unit)
of your partnership units. See "Stanger Analysis."
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity. However, we did review whether trading information
was available.
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 by electing to accept Preferred OP Units or
Common OP Units.
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
S-36
<PAGE> 1826
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 $44,859, based on a total estimated
value of your partnership's property of $7,500,000. Your general partner
(which is our subsidiary) has no present intention to liquidate your
partnership or to sell or refinance your partnership's property. See
"Background and Reasons for the Offer". See "Valuation of Units" for a
detailed explanation of the methods we used to value your partnership.
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $2.00 and current annualized distributions with respect to the
Common OP Units are $2.50. This is equivalent to distributions of $3,589
per year on the number of Preferred OP Units, or distributions of $2,980
per year on the number of Common OP Units, that you would receive in
exchange for each of your partnership's units. Distributions with respect
to your units for the fiscal year ended December 31, 1998 were $9,615.38.
See "Comparison of Your Units and AIMCO OP Units -- Distributions."
13. The fact that if your partnership were liquidated as opposed to
continuing, the general partner (which is our subsidiary) would not receive
the substantial management fees it currently receives. As discussed in
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," we do not believe that
liquidation of the partnership is in the best interests of the unitholders.
Therefore, we believe the offer is fair in that the fees paid to the
general partner would continue even if the offer was not consummated. We
are not proposing to change the current management fee arrangement.
In evaluating these factors, your general partner (which is our subsidiary)
and the AIMCO Operating Partnership did not quantify or otherwise attach
particular weight to any of them.
Your general partner (which is our subsidiary) has not retained an
unaffiliated representative to act on behalf of the limited partners in
negotiating the terms of the offer since each individual limited partner can
make his own decision as to whether or not to tender and what consideration to
take. Unlike a merger or other form of partnership reorganization, a majority or
more of the holders of limited partnership interests in your partnership cannot
bind you. If an unaffiliated representative had been obtained, it is possible
that such representative could have negotiated a higher price for your units
than was unilaterally offered by the AIMCO Operating Partnership. We have
retained Stanger to conduct an analysis of our offer and to render an opinion as
to the fairness to you of the offer consideration from a financial point of
view. Although no representative has been retained to act solely on behalf of
the limited partners for purposes of negotiating the terms of the offer, we have
determined that the transaction is fair to you from a financial point of view.
We made this determination based, in part, on the fairness opinion from Stanger
and the fact that all limited partners may elect to retain their existing
security on the same terms as before our offer.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
Your general partner (which is our subsidiary) 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 and, although there are
other ways to value real estate, is a reasonably fair method to determine the
consideration offered. Although we believe our offer consideration represents
the amount you would receive if we currently liquidated your partnership, an
actual liquidation might generate a higher or lower price for holders of units.
A liquidation in the future might generate a higher or lower 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
S-37
<PAGE> 1827
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
Your general partner (which is our subsidiary) 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
sell your partnership's property or refinance its indebtedness within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, your general partner
(which is our subsidiary) has attempted to compare the cash offer consideration
against: (a) estimates of the value of the units on a liquidation basis; (b)
estimates of the going concern value of your units based on continuation of your
partnership as a stand-alone entity; and (c) the net book value of your units.
The general partner of your partnership believes that analyzing the alternatives
in terms of estimated value, 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 us. These assumptions relate to, among other things: the operating
results since December 31, 1997 as to income and expenses of each property,
other projected amounts and the capitalization rates that may be used by
prospective buyers if your partnership assets were to be liquidated. The 1998
budget is discussed in "Stanger Analysis -- Summary of Materials Considered" and
other projected amounts are discussed in "Stanger Analysis -- Summary of
Reviews."
In addition, these estimates are based upon certain information available
to your general partner (which is our subsidiary) 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. 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.
S-38
<PAGE> 1828
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2023, 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.
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
--------
<S> <C> <C>
Cash offer price............................................ $ 44,859
Partnership preferred units................................. 44,859 (1
Partnership common units.................................... 44,859 (1
Alternatives:
Estimated liquidation proceeds............................ $ 44,859
Estimated going concern value(2).......................... $ 40,192
Estimated alternative going concern value(3).............. $ 41,558
Net book value (deficit).................................. $(62,534)
</TABLE>
- ---------------
(1) In our discussion of the offer price as being fair with regard to other
methods of valuing your partnership, we believe the number of Common OP
Units and Preferred OP Units to be issued per unit in the offer to be equal
to the cash price per unit. Therefore, the fairness discussion applies
equally to the cash and non-cash forms of consideration being effected. See
"Valuation of Units" for details of how the number of OP Units was
determined.
(2) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(3) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
Prices on Secondary Market
There is no active market for your units. Your general partner (which is
our subsidiary) is unaware of any secondary market activity in the units.
Therefore any comparison to prices on the secondary market is not possible at
the present time. See "Your Partnership -- Distributions and Transfers of
Units -- Transfers."
Prior Tender Offers
There have been no previous tender offers for units of your partnership.
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. Your general
partner (which is our subsidiary) 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
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.
Estimated Going Concern Value and Alternative Going Concern Value
Going concern value is a measure of the value of your partnership if it
continued operating as an independent stand-alone entity. The estimated value of
the partnership on a going concern basis is not intended to reflect the
distributions payable to limited partners if its assets were to be sold at their
current fair market value. The general partner of your partnership estimated the
going-concern value of your partnership by analyzing projected cash flows and
performing a discounted cash flow analysis. The general partner of your
partnership assumed that your partnership will be operated in the same manner as
currently, as an independent stand-alone entity, and its assets sold in a
liquidation after a ten-year holding period. Distribution and sale proceeds per
partnership unit were discounted in the projections at a rate of 25%.
The general partner of your partnership assumed that real estate selling
costs will be incurred which will equal 2.5% of the sales price. This analysis
assumes that the partnership property will be sold in a liquidation, at the
expiration of the ten-year holding period, to an independent third-party buyer.
Upon such liquidation, other balance sheet assets (excluding amortizing assets)
and liabilities of your partnership will be sold at their book value, and the
net proceeds of sale will be allocated between the general partners and offerees
in accordance with your partnership's agreement of limited partnership. Should
the assets be liquidated over time, even at prices equal to those projected,
distributions to limited partners of your partnership's cash flow from
operations might be reduced because relatively fixed costs, such as general and
administrative expenses, are not proportionately reduced with the liquidation of
assets. However, for simplification purposes, the sales are assumed to occur
concurrently.
The going concern method relies on a number of assumptions, including among
other things, (i) rental rates for new leases and lease renewals; (ii)
improvements needed to prepare an apartment for a new lease or a renewal lease;
(iii) lease periods; (iv) capital expenditures; (v) broker's commissions; and
(vi) discount rates applied to future cash flows. The use of assumptions or
variables that differ from those described above could produce substantially
different results. Neither we nor the general partner of your partnership
solicited any offers or inquiries from prospective buyers of the property owned
by your partnership in connection with the preparation of the estimates of value
of the property and the actual amounts for which the partnership's property or
the partnership could be sold could be significantly higher or lower than any of
the estimates contained herein. The estimated going concern value of your
partnership is $40,192 per unit, which value is below our offer price per unit.
Therefore, we believe the offer price is fair in relation to the going concern
value.
The general partner determined going concern value based upon the
discounted present value of projected cash flows from the partnership over a
ten-year period of operation, which is a standard period for going concern
analyses for real property assets. Such discounted cash flows were based upon
year one property income from the real estate portfolio of $778,000, escalated
at 3% per annum for the ten-year projection period. Property income was reduced
by: (i) partnership administrative expenses of $39,000 per annum; and (ii) debt
service on existing debt through maturity or the end of ten years, whichever
occurs first. For debt which matures during the ten-year period, a refinancing
at a 7% interest rate was assumed. At the end of the ten-year projection period,
the property was assumed to be sold at a price based upon property income for
the immediately following year, capitalized at a capitalization rate of 10.87%,
less expenses of sale estimated at 3% of the property value. The net cash flow
to limited partners from the continued operation of the property and the net
proceeds of sale were then discounted at a discount rate of 25% to achieve the
going concern value of $40,192 per unit.
Your partnership's property currently has balloon payments due in October,
2003. While the going concern value was based on your partnership refinancing
its indebtedness and continuing to own its property, the alternative going
concern value of $41,558 is based on selling the property when the balloon
payment is
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due. For the reasons set forth above, we believe the offer consideration is fair
in relationship to the alternative going concern value.
There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
Net Book Value
Net book value per unit is a deficit of $62,534 and therefore a comparison
with the offering price would not be meaningful in determining the fairness of
the offering price.
Stanger's Estimate of Net Asset Value, Going Concern Value and Liquidation
Value
In rendering its opinion set forth as Appendix A, Stanger did its own
independent estimate of your partnership's net asset value of $44,261 per unit,
going concern value of $38,021 per unit and liquidation value of $40,596 per
unit. For an explanation of how Stanger determined such values see "Stanger
Opinion -- Summary of Reviews -- Comparison of Offer Price To Liquidation Value,
Going Concern Value and Secondary Market Prices." An estimate of your
partnership's net asset value per unit is based on a hypothetical sale of your
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 a liquidation value, after provisions
in full for all of the other known liabilities of your partnership. The net
asset value does not take into account (i) timing considerations discussed under
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," and (ii) costs associated with
winding up of your partnership. Therefore, the AIMCO Operating Partnership
believes that the estimate of net asset value per unit does not necessarily
represent the fair market value of a unit or the amount the limited partner
reasonably could expect to receive if the partnership's property was sold and
the partnership was liquidated. For this above reason, the AIMCO Operating
Partnership considers net asset value estimates to be less meaningful in
determining the offer consideration than the analysis described above under
"Valuation of Units."
Stanger's estimates of net asset value, going concern value and liquidation
value per unit represents discounts to the offer price of $598, $6,838 and
$4,263. In light of these discounts and for all the reasons set forth above, the
AIMCO Operating Partnership believes the offer price is fair to the limited
partners. The AIMCO Operating Partnership believes that the best and most
commonly used method of determining the value of a partnership which only owns
an apartment is the capitalization of income approach set forth in "Valuation of
Units."
ALLOCATION OF CONSIDERATION
Your partnership's agreement of limited partnership provides that, in the
event of a liquidation, available proceeds are to be distributed 1.89% to the
general partner and 98.11% to the limited partners. Accordingly, in valuing your
units, we have assumed that 98.11% of the estimated liquidation proceeds are
distributed to holders of units. Since this allocation is in accordance with the
terms of the partnership agreement, we believe the allocation is fair. 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. Stanger has
advised us that the description of Stanger's analysis contained herein describes
the material portions of Stanger's review. 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 any losses, claims,
damages, liabilities or expenses to which Stanger may be subject, under any
applicable federal or state law, including federal and state securities laws,
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 NYSE 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 audited financial statements for the years ended December 31, 1996
and 1997, and its unaudited financial statements for the period ended September
30, 1998, which your partnership's management has indicated to be the most
current available financial statements at the time; (iii) reviewed descriptive
information concerning your partnership's real estate assets (the "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, 1997 and 1998; (v) reviewed
operating budgets for your partnership's property for 1998, as prepared by your
partnership; (vi) reviewed
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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 similar properties; (viii) reviewed internal financial analyses prepared by
your partnership of the estimated current net liquidation value and going
concern value of your partnership; (ix) reviewed information provided by AIMCO
concerning the AIMCO Operating Partnership, the Common OP Units and the
Preferred OP Units; and (x) conducted other studies, analysis and inquiries as
Stanger deemed appropriate.
A summary of the operating budgets per property for the year ended December
31, 1998, which was supplied by your partnership to Stanger, is as follows:
FISCAL 1998 OPERATING BUDGETS
<TABLE>
<S> <C>
Total Revenues.............................................. $1,737,329
Operating Expenses.......................................... (836,405)
Replacement Reserves -- Net................................. (41,975)
Debt Service................................................ (477,024)
Capital Expenditures........................................ (68,320)
----------
Net Cash Flow..................................... $ 313,605
==========
</TABLE>
The above budgets at the time they were made were forward-looking
information developed by the general partner of your partnership. Therefore, the
budgets were dependent upon future events with respect to the ability of your
partnership to meet such budget. The budgets incorporated various assumptions
including, but not limited to, lease revenue (including occupancy rates),
various operating expenses, general and administrative expenses, depreciation
expenses, capital expenditures, and working capital levels. While we deemed such
budgets to be reasonable and valid at the date made, there is no assurance that
the assumed facts will be validated or that the circumstances will actually
occur. Any estimate of the future performance of a business, such as your
partnership's business, is forward-looking and based on assumptions some of
which inevitably will prove to be incorrect.
The budget amounts provided above are figures that were not computed in
accordance with GAAP. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budget are often
re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budget
presented for fiscal 1998 should not necessarily be considered as indicative of
what the audited operating results for fiscal 1998 will be. For the year ended
December 31, 1998, the partnership expects to report revenues of $1,797,289,
operating expenses of $893,282 and replacement reserves and capital expenditures
of $138,602. Based on these estimates, the partnership's net cash flow before
debt service, which we believe provides a better indication of the partnership's
actual operating performance than net cash flow, was less than the budgeted
amounts.
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.
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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 property during the third quarter of 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 or
square footage; 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 nine month period ending
September 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 property.
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 property, 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 the
liquidation value calculation prepared by the management of your partnership.
Stanger observed that such liquidation value was based upon the gross property
valuation estimate prepared by management, which in turn is based upon fiscal
year 1997 property income capitalized at a capitalization rate of 10.37%.
Stanger further observed that the gross property valuation was adjusted for the
following additional items to achieve the liquidation value of your partnership:
(i) cash, other assets, mortgage indebtedness and other liabilities determined
as of December 31, 1997; (ii) estimated closing costs equal to approximately
2.5% of gross real estate value; and (iii) extraordinary capital expenditure
estimates in the amount of $286,879. Stanger observed that your partnership
liquidation value of $2,377,638 was allocated 98.11% to the limited partners and
divided by the total units outstanding of 52 to provide the liquidation value
per unit of $44,859.
Review of Partnership Going Concern Analysis. Stanger reviewed the going
concern value calculation prepared by management of your partnership. Stanger
observed that such going concern value was based upon the discounted present
value of projected cash flows from the partnership over a ten-year period of
operation which is a standard period for going concern analysis for real
property assets. Such discounted cash flows were based upon year one property
income from the real estate portfolio of $778,000 escalated at 3% per annum for
the ten-year projection period. Property income was reduced by: (i) partnership
administrative expenses of $39,000 per annum; and (ii) debt service on existing
debt through maturity or the end of ten years, whichever occurs first. For debt
which matures during the ten-year period, a refinancing at a 7% interest rate
was assumed. At the end of the ten-year projection period, the properties were
assumed to be sold based upon: (i) property income for the immediately following
year capitalized at a capitalization rate of
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<PAGE> 1834
10.87%; and (ii) expenses of sale estimated at 3% of property value. Stanger
observed that the proceeds of sale were reduced by the estimated debt balance at
the end of the tenth year to provide net proceeds from the sale of your
partnership's property.
The resulting cash flows for the ten-year period were discounted to present
value at a discount rate of 25%. Stanger observed that such discount rate was
based upon the portfolio real estate discount rate of approximately 13%,
adjusted for leverage risk and illiquidity risk. Stanger observed that the
resulting partnership going concern value was divided by units outstanding of 52
to achieve management's estimate of going concern value of $40,192 per unit.
Review of Secondary Market Prices. Stanger maintains a database of
secondary market information on limited partnership units. Stanger observed for
its data that no units were reported traded in the secondary market during 1998.
Comparison of Offer Price to Liquidation Value, Going Concern Value and
Secondary Market Price. Stanger observed that the offer price of $44,859 per
unit is equal to management's estimate of liquidation value, and reflects an
11.6% premium to management's estimate of going concern value of $40,192.
Stanger further observed that investors may select cash, Common OP Units or
Preferred OP Units in exchange for their partnership units or they may elect to
continue to hold their partnership units. Stanger further observed that the
Common OP Units will be priced at $37.625 per unit, an amount which equals the
average of the closing prices for the common shares into which such Common OP
Units are convertible for the 30 trading day period ended March 23, 1999.
Furthermore, Stanger observed that the Preferred OP Units to be issued in the
transaction will be based upon the liquidation preference of $25. Stanger noted
that the Preferred OP Units are redeemable for, at AIMCO's option, either: (i)
$25 in cash per Preferred OP Unit; (ii) common stock of AIMCO based upon a
ten-day average price at the time of the requested redemption; or (iii)
commencing on the third year following the transaction, preferred stock of AIMCO
with a dividend equal to the distribution on the Preferred OP Units. Stanger
observed that the ten-day average closing price of the AIMCO common stock is
$36.425, as of March 23, 1999 and therefore an investor receiving AIMCO common
shares in redemption of the Preferred OP Units would receive 0.6863 shares with
a value approximating $25 for each $25 Preferred OP Unit redeemed, based upon
AIMCO's average common share price as of March 23, 1999. Stanger noted that
commencing in the third year, investors redeeming Preferred OP Units may receive
from AIMCO Preferred Stock with a dividend equal to the distribution on the
AIMCO Preferred OP Units. Stanger observed that the distribution on the
Preferred OP Units is set at 8% of $25 and that the average dividend yield on
AIMCO's outstanding C, D, G and H Preferred Shares approximates 10.1% as of
March 23, 1999. Stanger noted that, based upon the cash dividend yield on the
AIMCO Preferred Shares identified above as of March 23, 1999, investors would
receive Preferred Shares with a value of approximately $19.80 for each $25
Preferred OP Unit if such redemption occurred after the second year following
the closing of the transaction. Stanger further observed that the above analysis
does not take into consideration the present value of the earnings on the tax
deferral an investor may realize as the result of selecting Preferred OP Units
in lieu of cash in a taxable transaction.
In addition to the above analysis, Stanger prepared an independent estimate
of net asset value, going concern value and liquidation value per unit. Stanger
has advised AIMCO that Stanger's estimates of net asset value, liquidation value
and going concern value are based upon Stanger's independent estimate of
property income, a direct capitalization rate of 10.25%, transaction costs of
2.5% to 5.0%, growth rates of 3% and a terminal capitalization rate of 10.75%.
Stanger has advised us that the direct capitalization rate represents Stanger's
estimate of the capitalization rate applicable to its estimate of property
income and is based upon Stanger's independent estimate of the direct
capitalization rate for such property based upon such property's age, condition
and location. Stanger further advised us that the terminal capitalization rate
is the capitalization rate utilized in Stanger's going concern value estimate
which is applied to Stanger's estimate of property income in the eleventh year
to establish the value of the property at the end of the tenth year. Stanger has
advised us that Stanger estimated the terminal capitalization rate at a 50 basis
point premium to the direct capitalization rate estimate for the property.
Stanger utilized deferred maintenance estimates derived from the Adjusters
International, Inc. reports in the calculation of net asset value, liquidation
value and going concern value. Stanger advised us that Stanger adjusted its
estimate of net asset value and
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<PAGE> 1835
liquidation value for the cost of above market debt using a 7% interest rate.
With respect to the going concern value estimate prepared by Stanger, Stanger
advised AIMCO that a ten-year projection period and a discount rate of 25% was
utilized. Such discount rate reflects the risk associated with real estate,
leverage and a limited partnership investment. The 25% discount rate was based
upon the property's estimated internal rate of return of the portfolio derived
from the discounted cash flow analysis, (12.75% as described above), plus a
premium reflecting the additional risk associated with mortgage debt equal to
more than 60% of property value. Stanger's estimates were based in part upon
information provided by us. Stanger relied upon the deferred maintenance
estimates, property descriptions, unit configurations, allocation among
partners, and other data provided by us. Stanger's analyses were based on
balance sheet data as of September 30, 1998, adjusted for a $400,000 cash
distribution, which we advised Stanger would be made after September 30, 1998.
Stanger's review also included a site visit, review of rental rates and
occupancy at the properties as well as competing properties. Stanger's estimate
of net asset value, going concern value and liquidation value per unit were
$44,261, $38,021, and $40,596 representing discounts to the offer price of 1.3%,
15.2% and 9.5%. See "Fairness of the Offer -- Comparison of Consideration to
Alternative Consideration."
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. Stanger has rendered similar fairness opinions with regard to certain
other exchange offers being made by the AIMCO Operating Partnership. Stanger
rendered the opinions only as to the individual fairness of the offer
consideration in each proposed exchange offer. The Fairness Opinion does not
address the fairness of all possible acquisitions of interests in your
partnership. In addition, the Fairness Opinion will not be revised to reflect
the actual participation in the offer.
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 your general partner (which is our subsidiary) and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's property, and the transaction costs and fees associated with a
sale of the property. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's property 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 property 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 property 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 property 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
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<PAGE> 1836
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, nor did Stanger
address the fairness of all possible acquisitions of interests in the
partnership. The opinion will not be revised to reflect the actual results of
the offer. 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 or oral 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 $9,000 with
respect to your partnership. The estimated aggregate fee payable to Stanger in
connection with all affiliated partnerships is estimated at $1,510,000, plus
out-of-pocket expenses estimated at $61,000. 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 was
engaged by AIMCO during 1997 to represent AIMCO in negotiations to acquire
interests in a real estate limited partnership. Such transaction was never
consummated and no fee was ever paid to Stanger in connection with such proposed
transaction. AIMCO and its affiliates may retain the services of Stanger in the
future. Any such future services could relate to this offer, some or all of the
concurrent offers, or a completely separate transaction.
S-47
<PAGE> 1837
YOUR PARTNERSHIP
GENERAL
La Colina Partners, Ltd., is a California limited partnership which
completed a private placement of units in 1983. Each unit was initially sold at
a price of $49,000. Insignia acquired the general partner of your partnership in
November 1992. AIMCO acquired Insignia in October 1998. There are currently a
total of 51 limited partners of your partnership and a total of 52 units of your
partnership outstanding. Your partnership is the sole limited partner of a
partnership in the business of owning and managing residential housing. Your
partnership has no employees. 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.
YOUR PARTNERSHIP AND ITS PROPERTY
Your partnership was formed on July 15, 1983 to be the sole limited partner
of La Colina Ranch Apartments, Ltd., a limited partnership, which owns an
apartment property located in Denton, Texas, known as "La Colina Ranch
Apartments." Your partnership's property is subject to a mortgage. The property
was built in 1983 and consists of 264 apartment units. There are 112 one-bedroom
apartments and 152 two-bedroom apartments. Your partnership's property had an
average occupancy rate of approximately 95% in 1998, 92% in 1997 and 92% in
1996.
Your partnership's property provides residents with a number of amenities
and services, such as 24-hour desk service, exercise room and/or sauna, and
party or meeting rooms. Nearly all apartment units are wired for cable
television, and many apartment units also offer one or more additional features,
such as washer/ dryer, microwave, fireplace, and patio/balcony.
Budgeted renovations or improvements for 1999 total $256,519 and are
intended to be paid for out of cash flow or borrowings. Renovation items include
electrical, stairwells, sidewalks, drives and parking lot, landscape and
irrigation, and drainage
Set forth below are the average rents for the apartments for the last five
years:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$513 $500 $477 $445 $420
</TABLE>
The apartments are being depreciated for federal income tax purposes using
the accelerated cost recovery method. Depreciation is computed principally by
the straight-line and accelerated methods over estimated lives of 3 to 40 years.
Currently, the real estate taxes on the property are $196,524 of $7,538,620
of assessed valuation with a current yearly tax rate of 2.61%. When the proposed
improvements are made it is anticipated that the yearly tax rate may increase by
approximately 2.74% of such improvements.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a wholly 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.
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS
Under your partnership's agreement of limited partnership, your partnership
is not permitted to raise new equity and reinvest cash in new properties.
Consequently, your partnership is limited in its ability to expand its
investment portfolio. Your partnership will terminate on December 31, 2023
unless earlier dissolved. Your
S-48
<PAGE> 1838
partnership has no present intention to liquidate, sell, finance or refinance
your partnership's property within any specified time period.
Generally, your partnership is authorized to acquire, develop, improve, own
and operate your partnership's property as an investment and for income
producing purposes. The investment portfolio of your partnership is limited to
the assets acquired with the initial equity raised through the sale of units to
the limited partners of your partnership or the assets initially contributed to
your partnership by the limited partners, as well as the debt financing obtained
by your partnership within the established borrowing restrictions.
An investment in your partnership is a finite life investment, with the
partners to receive regular cash distributions out of your partnership's
distributable cash flow, if available, and to receive cash distributions upon
liquidation of your partnership's real estate investments, if available.
In general, your general partner (which is our subsidiary) regularly
evaluates the partnership's property by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors the property's specific locale and sub-market
conditions (including stability of the surrounding neighborhood) 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 (including any prepayment penalties), tax implications,
availability of attractive mortgage financing to a purchaser, 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. If rental market conditions improve, 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 viable option than it is
currently. After taking into account the foregoing considerations, your general
partner is not currently seeking a sale of your partnership's property primarily
because it expects the property's operating performance to remain strong in the
near term. In making this assessment, your general partner noted that occupancy
and rental rates at the property were 95% and $537, respectively, at December
31, 1998, compared to 92% and $513, respectively, at December 31, 1997. Although
there can be no assurance as to future performance, the general partner expects
this trend to continue in the near future because of strong rental market. In
addition, the general partner noted that it expects to spend approximately
$286,879 for capital improvements at the property in 1999 to update the
property's amenities, such as washer/dryer, microwaves, fireplace and
patio/balcony. These expenditures are expected to improve the desirability of
the property to tenants. The general partner does not believe that a sale of the
property at the present time would adequately reflect the property's future
prospects. Another significant factor considered by your general partner is the
likely tax consequences of a sale of the property for cash. Such a transaction
would likely result in tax liabilities for many limited partners. The general
partner has not received any recent indication of interest or offer to purchase
the property.
CAPITAL REPLACEMENT
Your partnership has an ongoing program of capital improvements,
replacements and renovations, including roof replacements, kitchen and bath
renovations, balcony repairs (where applicable), replacement of various building
systems and other replacements and renovations in the ordinary course of
business. All capital improvement and renovation costs are expected to be paid
from operating cash flows, cash reserves, or from short-term or long-term
borrowings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Your Partnership."
BORROWING POLICIES
Your partnership's agreement of limited partnership allows your partnership
to incur debt. As of December 31, 1998, your partnership had a current mortgage
note outstanding of $4,977,766, payable to FNMA, which bears interest at a rate
of 7.83%. The mortgage debt is due on October 2003. Your partnership
S-49
<PAGE> 1839
also has a second mortgage note outstanding of $163,710, on the same terms as
the current mortgage note. Your partnership's agreement of limited partnership
also allows the general partner of your partnership to lend funds to your
partnership. As of December 31, 1998, your general partner had no loans
outstanding to your partnership.
COMPETITION
There are other residential properties within the market area of your
partnership's property. The number and quality of competitive properties in such
an area could have a material effect on the rental market for the apartments at
your partnership's property and the rents that may be charged for such
apartments. While we are a significant factor in the United States in the
apartment industry, competition for apartments is local.
LEGAL PROCEEDINGS
Your partnership is party to a variety of legal proceedings related to its
ownership of the partnership's property and management and leasing business,
respectively, arising in the ordinary course of the business, which are not
expected to have a material adverse effect on your partnership.
HISTORY OF THE PARTNERSHIP
Your partnership sold $2,548,000 of limited partnership units in 1983 for
$49,000 per unit. Your partnership currently owns one apartment property.
Your partnership used the funds raised to purchase its interest in the
partnership which owns the property and it has expended the funds so raised many
years ago. Your partnership currently owns the property described herein, which
is subject to a substantial mortgage. Your general partner (which is our
subsidiary) has not experienced any material adverse financial developments from
January 1, 1997 through the present.
Although your partnership's agreement of limited partnership provides for
termination in the year 2023, the private placement memorandum pursuant to which
the units in your partnership were sold in 1983 contained projections reflecting
the sale of the property at the end of ten years of its acquisition.
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2023, 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.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, your general partner (which is our subsidiary) is
accountable to your partnership as a fiduciary. Your partnership's agreement of
limited partnership does not limit the liability of the general partners to your
partnership or any limited partners for acts done in their capacity as general
partner. The general partner of your partnership is majority-owned by AIMCO. See
"Conflicts of Interest."
Under your partnership's agreement of limited partnership, the general
partners of your partnership are indemnified for any loss or damage, including
legal fees and expenses and amounts paid in settlement, incurred by such parties
by reason of any act performed or omitted by such parties on behalf of your
partnership or in furtherance of your partnership's interest, provided that the
party sued will not be entitled to indemnification for losses sustained by
reason of their gross negligence, willful misconduct or breach of fiduciary
obligations.
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 partners of your partnership.
S-50
<PAGE> 1840
DISTRIBUTIONS AND TRANSFERS OF UNITS
Distributions
The following table shows, for each of the years indicated the
distributions paid per unit in such years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 AMOUNT
- ---------------------- -------
<S> <C>
1993........................................................ $ 0
1994........................................................ 0
1995........................................................ 3,936
1996........................................................ 19
1997........................................................ 385
1998........................................................ 7,731
-------
Total............................................. $12,071
=======
</TABLE>
Transfers
The units are not listed on any national securities exchange or quoted on
the NASDAQ System, the Electronic Bulletin Board or the "pink sheets," and there
is no established public trading market for the units. Secondary sales activity
for the units has been limited and sporadic. The general partner of your
partnership monitors transfers of the units (a) because the admission of the
transferee as a substitute limited partner in your partnership require the
consent of the general partner of your partnership under your partnership's
agreement of limited partnership, and (b) in order to track compliance with safe
harbor provisions to avoid treatment as a "publicly traded partnership" for tax
purposes. However, the general partner of your partnership does not monitor or
regularly receive or maintain information regarding the prices at which
secondary sale transactions in the units have been effectuated. The general
partner of your partnership estimates, based solely on the transfer records of
your partnership (or your partnership's transfer agent), that there have been no
units transferred in privately negotiated transactions or in transactions
believed to be between related parties, family members or the same beneficial
owner.
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate, approximately
a 1.5% interest in your partnership, as general partner and no limited
partnership units 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 two years, 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 following table shows, for each of the years indicated, compensation
paid to your general partner and its affiliates on a historical basis, and on a
pro forma basis assuming that all of the units sought in our offer had been
acquired at the beginning of each period:
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------- ----------------------------------------
PARTNERSHIP PROPERTY PARTNERSHIP PROPERTY
FEES AND MANAGEMENT FEES AND MANAGEMENT
YEAR EXPENSES FEES DISTRIBUTIONS EXPENSES FEES DISTRIBUTIONS
---- ----------- ---------- ------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
1995 $42,281 $78,348 $3,936 $42,281 $78,348 $ 51,174
1996 45,370 80,878 19 45,370 80,878 250
1997 39,929 83,502 385 39,929 83,502 5,000
1998 32,447 89,785 7,731 32,447 89,785 102,500
</TABLE>
S-51
<PAGE> 1841
SELECTED FINANCIAL INFORMATION
OF YOUR PARTNERSHIP
<TABLE>
<CAPTION>
LA COLINA PARTNERS, LTD.
-----------------------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and Cash
Equivalents........... $ 729,107 $ 1,195,368 $ 522,599 $ 1,148,129 $ 1,002,202 $ 407,445 $ 314,284
Land & Building......... 5,772,398 5,691,678 5,708,625 5,558,406 5,500,644 5,597,351 5,554,435
Accumulated
Depreciation.......... (3,243,122) (3,031,456) (3,084,686) (2,875,667) (2,671,816) (2,551,432) (2,357,456)
Other Assets............ 413,574 442,896 462,713 484,979 510,158 540,509 483,988
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Assets.... $ 3,671,957 $ 4,298,486 $ 3,609,251 $ 4,315,847 $ 4,341,188 $ 3,993,873 $ 3,995,251
=========== =========== =========== =========== =========== =========== ===========
Notes Payable........... $ 5,105,645 $ 5,166,607 $ 5,152,338 $ 5,747,001 $ 5,796,983 $ 5,841,983 $ 5,901,227
Other Liabilities....... 277,532 1,025,821 297,101 492,329 399,740 327,132 228,089
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total
Liabilities... $ 5,383,177 $ 6,192,428 $ 5,449,439 $ 6,239,330 $ 6,196,723 $ 6,169,115 $ 6,129,316
----------- ----------- ----------- ----------- ----------- ----------- -----------
Partners Deficit........ $(1,711,220) $(1,893,942) $(1,840,188) $(1,923,483) $(1,855,535) $(2,175,242) $(2,134,065)
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
LA COLINA PARTNERS, LTD.
----------------------------------------------------------------------------------------
FOR THE NINE MONTHS
ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Revenue................. $1,258,151 $1,200,132 $1,624,251 $1,584,879 $1,511,792 $1,411,000 $1,330,511
Other Income................... 84,796 88,681 114,404 96,764 641,056 150,608 95,064
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Revenue.......... $1,342,947 $1,288,813 $1,738,655 $1,681,643 $2,152,848 $1,561,608 $1,425,575
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating Expenses............. $ 557,748 $ 553,465 $ 687,976 $ 799,570 $ 700,493 $ 645,316 $1,162,320
General & Administrative....... 21,593 24,902 39,066 53,865 48,702 60,789 162,802
Depreciation................... 158,434 155,788 209,019 203,851 200,725 193,976 190,243
Interest Expense............... 323,374 379,424 505,679 508,941 520,959 550,242 502,113
Property Taxes................. 152,476 145,215 193,620 182,364 157,568 152,462 155,230
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Expenses......... $1,213,625 $1,258,794 $1,635,360 $1,748,591 $1,628,447 $1,602,785 $2,172,708
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income (loss) before
extraordinary items.......... $ 129,322 $ 30,019 $ 103,295 $ (66,948) $ 524,401 $ (41,177) $ (747,133)
Extraordinary Items............ -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income (loss).............. $ 129,322 $ 30,019 $ 103,295 $ (66,948) $ 524,401 $ (41,177) $ (747,133)
========== ========== ========== ========== ========== ========== ==========
Net Income per limited
partnership unit............. $ 2,462 $ 572 $ 1,967 $ (1,275) $ 9,984 $ (784) $ (14,224)
========== ========== ========== ========== ========== ========== ==========
Distributions per limited
partnership unit............. $ 7 $ 9 $ 381 $ 19 $ 3,897 $ -- $ --
========== ========== ========== ========== ========== ========== ==========
</TABLE>
S-52
<PAGE> 1842
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP
LA COLINA
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1998 TO THE NINE MONTHS
ENDED SEPTEMBER 30, 1997
Net Income
Your partnership recognized net income of $129,322 for the nine months
ended September 30, 1998, compared to $30,019 for the nine months ended
September 30, 1997 an increase in net income of $99,303, or 331%. This increase
was primarily the result of an increase in rental revenue offset by a decrease
in total expenses. These factors are discussed in more detail in the following
paragraphs.
Revenues
Rental and other property revenues from the partnership's property totaled
$1,342,947 for the nine months ended September 30, 1998, compared to $1,288,813
for the nine months ended September 30, 1997, an increase of $54,134 or 4.20%.
The increase in revenues is due to the increase in rental rates of 5%.
Expenses
Operating expenses, consisting of, utilities (net of reimbursements
received from tenants), contract services, turnover costs, repairs and
maintenance, advertising and marketing, and insurance totaled $579,341 for the
nine months ended September 30, 1998, compared to $578,367 for the nine months
ended September 30, 1997, an increase of $974 or .17%. This increase is due
primarily to an increase in non-capitalizable exterior maintenance, painting and
landscaping. Management expenses totaled $66,344 for the nine months ended
September 30, 1998, compared to $61,805 for the nine months ended September 30,
1997, an increase of $4,539 or 7.34% which is related to the increase in rental
rates.
Interest Expense
Interest expense, which includes the amortization of deferred financing
costs, totaled $323,374 for the nine months ended September 30, 1998, compared
to $379,424 for the nine months ended September 30, 1997, a decrease if $56,050,
or 14.77%. The decrease was due to the partnership's note payable to Angeles
Acceptance pool being retired in the third quarter of 1997 and the decrease is
due to a lower outstanding balance on the mortgage indebtedness due to principal
payments made during the year.
As part of the ongoing business plan of your partnership, the general
partner monitors the rental market environment of your partnership's investment
property to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting your partnership from increases in
expenses. As part of this plan, the general partner attempts to protect your
partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the general partner will be able to sustain such a plan.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1997 TO THE YEAR ENDED DECEMBER 31,
1996
Net Income
Your partnership recognized net income of $103,295 for the year ended
December 31, 1997, compared to a loss of $66,948 for the year ended December 31,
1996. The increase in net income of $170,243, or 254.29% was primarily the
result of an increase in revenues and a decrease in operating expenses. These
factors are discussed in more detail in the following paragraphs.
S-53
<PAGE> 1843
Revenues
Rental and other property revenues from the partnership's property totaled
$1,738,655 for the year ended December 31, 1997, compared to $1,681,643 for the
year December 31, 1996, an increase of $57,012, or 3.39%. The increase in
revenues can be attributed to a 3% increase in rental rates, partially offset by
a decrease in occupancy of 2%. Additionally, there was an increase of $7,000 in
lease cancellation fees, and increase in laundry income, application fees, and
late charges.
Expenses
Operating expenses, consisting of, utilities (net of reimbursements
received from tenants), contract services, turnover costs, repairs and
maintenance, advertising and marketing, and insurance, totaled $687,976 for the
year ended December 31, 1997, compared to $799,570 for the year ended December
31, 1996, a decrease of $111,594 or 13.96%. The decrease is due to a $4,000
decrease in periodicals, $5,000 decrease in incentives, $4,000 decrease in
salaries, $29,000 decrease in major landscaping, $56,000 decrease in water and
sewer repairs, and a $25,000 decrease in parking lot repairs. Management
expenses totaled $83,502 for the year ended December 31, 1997, compared to
$80,878 for the year ended December 31, 1996, an increase of $2,624, or 3.24%
which is related to the increase in rental revenues.
General and Administrative Expenses
General and administrative expenses totaled $39,066 for the year ended
December 31, 1997 compared to $53,865 for the year ended December 31, 1996, a
decrease of $14,799 or 27.47%. The decrease is primarily due to a decrease in
General Partner reimbursement fees.
Interest Expense
Interest expense, which includes the amortization of deferred financing
costs, totaled $505,679 for the year ended December 31, 1997, compared to
$508,941 for the year ended December 31, 1996, a decrease of $3,262, or 0.64%.
The decrease is due to a lower outstanding balance on the mortgage indebtedness
due to principal payments made during the year.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31,
1995
Net Income
Your partnership recognized net loss of $66,948 for the year ended December
31, 1996, compared to net income of $524,401 for the year ended December 31,
1995. The decrease in net income of $591,349 or 112.77% was primarily the result
of a decrease in other income and an increase in expenses. These factors are
discussed in more detail in the following paragraphs.
Revenues
Rental and other property revenues from the partnership's property totaled
$1,681,643 for the year ended December 31, 1996, compared to $2,152,848 for the
year ended December 31, 1995, a decrease of $471,205, or 21.89%. The decrease is
due to a large settlement of $544,116 related to an AMIT obligation recorded in
income in 1995.
Expenses
Operating expenses, consisting of, utilities (net of reimbursements
received from tenants), contract services, turnover costs, repairs and
maintenance, advertising and marketing, property taxes and insurance, totaled
$799,570 for the year ended December 31, 1996, compared to $700,493 for the year
ended December 31, 1995, an increase of $99,077 or 14.14%. Operating expenses
increased due to major landscaping expenses of $29,000 of which there were none
in the prior period. Additionally, there were major building renovations,
exterior and interior for approximately $70,000. The property performed an
extensive painting project for the exterior and interior of the complex. The
property also replaced the siding and steps for the
S-54
<PAGE> 1844
complex. These costs were incurred to attract new tenants and increase the curb
appeal of the property. Management expenses totaled $80,878 for the year ended
December 31, 1996, compared to $78,348 for the year ended December 31, 1995, an
increase of $2,530, or 3.23%.
General and Administrative Expenses
General and administrative expenses totaled $53,865 for the year ended
December 31, 1996 compared to $48,702 for the year ended December 31, 1995, an
increase of $5,163 or 10.60%. The increase is primarily due to an increase in
various administrative expenses.
Interest Expense
Interest expense, which includes the amortization of deferred financing
costs, totaled $508,941 for the year ended December 31, 1996, compared to
$520,959 for the year ended December 31, 1995, a decrease of $12,018, or 2.31%.
The decrease is due to a lower outstanding balance on the mortgage indebtedness
due to principal payments made during the year.
Liquidity and Capital Resources
As of September 30, 1998, your Partnership had $729,107 in cash and cash
equivalents. Your Partnership's principal demands for liquidity include normal
operating activities, payments of principal and interest on outstanding debt,
capital improvements, and distributions paid to limited partners. At September
30, 1998, the outstanding balance on the mortgage indebtedness, excluding
discount of $54,203, was $5,105,644. The mortgages require monthly payments of
approximately $39,752 until October 2003. The notes are collateralized by pledge
of land and buildings and have a stated interest rate of 7.8%. Cash used in
investing activities consisted of capital improvements and deposits to escrow
accounts maintained by the mortgage lender. Cash used in financing activities
consisted of payments of principal made on the mortgages encumbering the your
Partnership's properties and partner distributions.
There are no commitments for material capital expenditures as of September
1998. The sufficiency of existing liquid assets to meet future liquidity and
capital expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and meet other operating needs of the partnership. Such assets are currently
thought to be sufficient for any near-term needs of the partnership. Management
believes that your partnership has adequate sources of cash to finance its
operations, both on a short-term and long-term basis. Budgeted renovations for
1999 total $256,519 and are intended to be paid out of cash flow or borrowings.
Renovation items include electrical, stairwells, sidewalks, drives and parking
lot, landscape and irrigation, and drainage.
S-55
<PAGE> 1845
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to 25% of the outstanding 52 units of your
partnership (up to 13 units) for consideration per unit of (i) 1,794.50
Preferred OP Units, (ii) 1,192 Common OP Units, or (iii) $44,859 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 the commencement of our offer 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., New York City time, on June 4, 1999, 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 January 1, 1999 (subject to proration
as described below), although you will be entitled to retain any distributions
you may have received after such date and prior to our commencement of this
offer.
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 March 26, 1999.
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
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offer consideration shall be reduced by any interim distributions made by your
partnership between the commencement, 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. However, any tendered units may be
withdrawn at any time prior to our accepting them for payment. The AIMCO
Operating Partnership has an 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.
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.
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.
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.
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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 pays for your units.
You agree not to exercise any rights pertaining to the tendered units without
the prior consent of the AIMCO Operating Partnership. Upon such 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 your general
partner (which is our subsidiary) (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.
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
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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 may
have to provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal.
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 "Federal Income Tax Consequences."
Transfer Taxes
The amount of any transfer taxes (whether imposed on the registered holder
of units or any person) payable on account of the transfer to such person will
be deducted from the purchase price unless satisfactory evidence of the such
taxes or exemption therefrom is submitted.
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.
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WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to our acceptance of such units for payment.
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.
The offer may be extended or delayed indefinitely and no payment will be
made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment. 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 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
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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 25% 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 25% 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 25% 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 25%, 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 the general partner of your partnership and thereby
controls the management of your partnership. In addition, AIMCO owns 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.
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After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units.
However, the AIMCO Operating Partnership and its affiliates will not acquire any
additional units for a period of at least one year after expiration of the
offer. 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 its property 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. In addition, we are not extending
appraisal rights in connection with the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
No provisions have been made with regard to the offer to allow you or other
limited partners to inspect the books and records of your partnership or to
obtain counsel or appraisal services at our expense or at the expense of your
partnership. However, as described under "Comparison of Your Partnership and the
AIMCO Operating Partnership -- Review of Investor Lists," you have the right
under your partnership's agreement of limited partnership to obtain a list of
the limited partners.
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 the date of this Prospectus Supplement and at or before the expiration
date of the offer, including any extension thereof, 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 reasonable
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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 which, in the reasonable 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 the date hereof, (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
the date hereof, (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 reasonable 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 reasonable judgment of the
AIMCO Operating Partnership, a material acceleration or worsening thereof
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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 your
general partner (which is our subsidiary) 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 reasonable 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
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(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 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 reasonable 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
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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;
or
(h) the offer to purchase may have an adverse effect on AIMCO's status
as a REIT.
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 reasonable 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.
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\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. However,
we will not be able to control voting decisions unless we acquire more units in
another transaction, which cannot take place for at least one year after
expiration of this offer. 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 controls the company that manages your partnership's
property. In the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Effect on Trading Market
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.
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. Consummation of
the offer will not affect your partnership's agreement of limited partnership,
the financial condition or results of operations of your partnership, the
business and properties owned, the management compensation payable to your
general partner (which is our subsidiary) or its affiliates or any other matter
relating to your partnership, except it would result in the AIMCO Operating
Partnership substantially increasing its ownership of units of your partnership.
We will receive future distributions from your partnership for any units we
purchase.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by your general partner (which
is our subsidiary), 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
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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 (excluding 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 (which are requests to dismiss the action as a matter
of law) were heard on February 8, 1999, but no decision has been reached by the
Court. While no assurances can be given, we believe that the ultimate outcome of
this litigation will not have a material adverse effect on us.
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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, the accompanying Prospectus, the Letter of Transmittal,
and the legal and accounting fees in connection with this offer. 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 $50,000.
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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FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of the material Federal
income tax consequences of the offer 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
differing interpretations or change, possibly retroactively. This 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 you in light of your specific investment or tax
circumstances, or if you are subject to special tax rules (for example, if you
are a financial institution, broker-dealer, insurance company, or, except to the
extent discussed below, tax-exempt organization or foreign investor, 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 are 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. No clear precedent or authority
may be available on some questions. 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 of your specific tax situation.
TAX OPINIONS
Skadden, Arps, Slate, Meagher & Flom LLP ("Special Tax Counsel") has
delivered an opinion letter with regard to the material United States Federal
income tax consequences of the offer. The opinion letter of Special Tax Counsel
is filed as an exhibit to this Registration Statement. You may obtain a copy of
such opinion letter by sending a written request to the AIMCO Operating
Partnership.
The specific United States Federal income tax opinions that Special Tax
Counsel has provided are:
1. Commencing with AIMCO's initial taxable year ended December 31, 1994,
AIMCO was organized in conformity with the requirements for qualification
as a REIT under the Code, and its actual method of operation has enabled,
and its proposed method of operation will enable, AIMCO to meet the
requirements for qualification and taxation as a REIT. As noted in the
accompanying Prospectus, AIMCO's qualification and taxation as a REIT
depend upon its ability to meet, through actual annual operating results,
certain requirements, including requirements relating to distribution
levels and diversity of stock ownership, and the various qualification
tests imposed under the Code, the results of which have been represented by
the AIMCO's officers and will not be reviewed by Special Tax Counsel. No
assurance can be given that the actual results of AIMCO's future operations
for any one taxable year will satisfy the requirements for taxation as a
REIT under the Code.
2. The AIMCO Operating Partnership will be treated as a partnership and
not as an association taxable as a corporation for Federal income tax
purposes.
3. You will not recognize gain or loss for Federal income tax purposes
when you exchange your units solely for OP Units. If, immediately prior to
such exchange, the amount of your partnership's liabilities allocable to
the units you transfer to the AIMCO Operating Partnership exceeds the
amount of the AIMCO Operating Partnership's liabilities allocable to you
immediately after the exchange, you will receive a deemed distribution in
an amount equal to such liability relief and will recognize gain for
Federal income tax purposes to the extent that the amount of such deemed
distribution exceeds your aggregate adjusted tax basis in your OP Units.
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4. If you exchange your units for cash and OP Units, you will be treated
for Federal income tax purposes as selling some of your units for cash in a
taxable sale and contributing some of your units for OP Units in a tax-free
exchange. With respect to the units that you will be treated as selling for
cash, you will be taxed as described in paragraph number five below. With
respect to the units that you will be treated as exchanging for OP Units,
you will be taxed as described in paragraph number three above.
5. If you sell your units solely for cash, you will recognize gain or
loss for Federal income tax purposes in an amount equal to the difference
between (i) your amount realized on the sale and (ii) your adjusted tax
basis in the units you sold.
6. If you retain all or a portion of your units and your partnership
terminates for Federal income tax purposes, you will not recognize any gain
or loss as a result of such termination and your capital account in your
partnership will not be affected.
7. Because of the factual nature of the inquiry, no opinion is expressed
by Special Tax Counsel as to whether your exercise of a redemption right
with respect to an OP Unit would cause your contribution of units to the
AIMCO Operating Partnership to be a taxable transaction under the disguised
sale rules of the Code.
8. The discussion in the accompanying Prospectus under the captions
"FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS" and "FEDERAL
INCOME TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNIT HOLDERS" and
in this Prospectus Supplement under the caption "FEDERAL INCOME TAX
CONSEQUENCES" is a fair and accurate summary of the material United States
Federal income tax consequences of the offers and of the acquisition,
ownership and disposition of the OP Units and the AIMCO stock by a holder
who acquires the OP Units or AIMCO stock in connection with the offers,
subject to the qualifications set forth therein.
It must be emphasized that these opinions are based and conditioned upon
representations and covenants made by AIMCO and the AIMCO Operating Partnership
as to factual matters (including representations and covenants concerning
AIMCO's properties and the past, present and future conduct of its business and
your partnership's liabilities). These opinions are expressed as of the date of
the opinion letter and Special Tax Counsel has no obligation to advise AIMCO or
the AIMCO Operating Partnership of any subsequent change in the matters stated,
represented, or assumed or any subsequent change in the law. An opinion of
counsel is not binding on the IRS, and no assurance can be given that the IRS
will not challenge the above opinions of Special Tax Counsel.
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 when you exchange your units solely for OP Units. You may
recognize gain upon such exchange if, immediately prior to such exchange, the
amount of liabilities of your partnership allocable to the units you transferred
exceeds the amount of the AIMCO Operating Partnership liabilities allocable to
you immediately after such exchange. If this was true in your case, the excess
would be treated as a deemed distribution of cash to you from the AIMCO
Operating Partnership. This deemed cash distribution would be treated as a
nontaxable return of capital to the extent of your adjusted tax basis in your OP
Units 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 you exchange your units pursuant to the offer,
at least equal to the amount of liabilities of your partnership that were
allocable to your units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most persons who participate in the tender offer
would not recognize gain or loss as a result of an exchange of units solely for
OP Units pursuant to the offer.
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DISGUISED SALES
Under the Code, a transfer of property by a partner to a partnership
followed by a related transfer by the partnership of money or other property to
the partner is treated as a "disguised" sale if (1) the second transfer would
not have occurred but for the first transfer and (2) the second transfer "is not
dependent on the entrepreneurial risks of the partnership operations." In a
disguised sale, the partner is treated as if he or she sold the contributed
property to the partnership as of the date the property was contributed to the
partnership. In addition, unless a few technical exceptions apply, transfers of
money or other property between a partnership and a partner that are made within
two years of each other, including redemptions of OP Units made within two years
of a contribution of your units, must be reported to the IRS and are presumed to
be a "disguised" sale unless the facts and circumstances clearly establish that
the transfers do not constitute a sale.
While there is no authority applying the disguised sale rules to the
exercise of a redemption right by a partner with respect to a partnership
interest received in exchange for property, the exercise of a redemption right
with respect to OP Units within two years of the date of the contribution of
your units to the AIMCO Operating Partnership may be treated as a disguised
sale. If this treatment were to apply, you would be treated for Federal income
tax purposes as if, on the date of the contribution of your units, the AIMCO
Operating Partnership transferred to you an obligation to give you the
redemption proceeds. In that case, you would be required to recognize gain on
the disguised sale in such earlier year. Because of the factual nature of such
an inquiry, Special Tax Counsel is unable to opine whether your exercise of a
redemption right with respect to an OP Unit would cause your contribution of
units to the AIMCO Operating Partnership to be a taxable transaction under the
disguised sale rules of the Code.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Federal Income Taxation of the
AIMCO Operating Partnership and OP Unitholders -- 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
If you exchange your units for cash and OP Units, you will be treated as
selling some of your units for cash in a taxable sale and contributing some of
your units for OP Units in a tax-free exchange. Your adjusted tax basis in your
transferred units will be allocated between the units you will be deemed to have
sold and the units you will be deemed to have contributed to the AIMCO Operating
Partnership.
With respect to the units that you will be treated as selling, you will
recognize gain or loss in an amount equal to the difference between (i) your
"amount realized" on the sale and (ii) your adjusted tax basis in units you
sold. Your "amount realized" on such sale will be equal to the sum of the amount
of cash you received pursuant to the offer (that is, the offer consideration)
plus the amount of your partnership's liabilities attributed to the units you
sold. For purposes of these partial sale rules, the amount of your partnership's
liabilities attributed to the units you sold will be equal to the lesser of (i)
the excess of the amount of your partnership's liabilities allocable to you in
respect of the transferred units immediately prior to the exchange over the
amount of such liabilities allocable to you as determined immediately after the
exchange or (ii) the product of (A) the amount of your partnership's liabilities
allocable to you in respect of the units you are deemed to have sold immediately
prior to the exchange and (B) your "net equity percentage" with respect to those
units. Your "net equity percentage" will be equal to the percentage determined
by dividing (x) the cash you received in the exchange by (y) the excess of the
gross fair market value of the units in the exchange over the amount of your
partnership's liabilities allocable to you in respect of those units immediately
prior to the exchange. Thus, your tax liability could exceed the amount of cash
you receive in the sale.
With respect to the units that you will be treated as exchanging, rather
than selling, you will be taxed as described above under the heading "Tax
Consequences of Exchanging Units Solely for OP Units."
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TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
If you sell your units solely for cash, you will recognize gain or loss on
a sale of your units equal to the difference between (i) your "amount realized"
on the sale and (ii) your adjusted tax basis in the units you sold. The "amount
realized" with respect to a unit will be equal to the sum of the amount of cash
you received for your units (that is, the offer consideration) plus the amount
of the liabilities of your partnership allocable to such units (as determined
under Section 752 of the Code). Thus, your tax liability could exceed the amount
of cash you receive in the sale.
ADJUSTED TAX BASIS
If you acquired your units for cash:
- your initial tax basis in your units will be equal to such cash
investment in your partnership increased by your share of your
partnership's liabilities at the time such units were acquired;
- your initial tax basis generally has been increased by:
- your share of your partnership's income and gains and
- any increases in your share of your partnership's liabilities; and
- your initial tax basis generally has been decreased (but not below zero)
by:
- your share of cash distributions from your partnership,
- any decreases in your share of your partnership's liabilities,
- your share of your partnership's losses, and
- your share of nondeductible expenditures of your partnership that are
not chargeable to capital.
For purposes of determining your adjusted tax basis in your units
immediately prior to a disposition of such units, your adjusted tax basis will
include your 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), the gain you
would recognize pursuant to the offer will exceed the cash proceeds you would
realize upon the sale of your units. The adjusted tax basis of the OP Units you
receive in exchange for your units pursuant to the offer will be equal to (i)
the sum of your adjusted tax basis in the units you transferred plus any gain
recognized in the exchange and will be reduced by (ii) any cash you received or
you were deemed to receive 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 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 that is attributable to your share of "unrealized receivables" of your
partnership exceeds the tax basis attributable to those assets, such excess will
be treated as ordinary income. Among other things, "unrealized receivables"
include depreciation recapture for 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. You will not receive any future distributions
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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 the income or loss. 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 the passive 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 passive losses in the manner described below. If you receive
cash for 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 receive cash for all or a portion of your units
pursuant to the offer and recognize 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
receive cash for all of your units pursuant to the offer, the balance of any
"suspended" losses from your partnership 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.
TAX REPORTING
If you tender any units, you must report the transaction by filing a
statement with your Federal income tax return for the year of the tender which
provides certain required information to the IRS. To prevent the possible
application of back-up Federal income tax withholding of 31% with respect to
payment of the offer consideration, you may have to provide the AIMCO Operating
Partnership with your correct taxpayer identification number. See the
instructions to the Letter of Transmittal.
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"). If you are a foreign person, the AIMCO Operating Partnership will
be required, under the FIRPTA provisions of the Code, to deduct and withhold 10%
of the amount realized by you on the disposition. The amount withheld would be
creditable against your Federal income tax liability and, if the amount withheld
exceeds your actual tax liability you could obtain a refund from the IRS by
filing a U.S. income tax return. See the Instructions to the Letter of
Transmittal.
TAX CONSEQUENCES OF A TERMINATION OF YOUR PARTNERSHIP
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"). The AIMCO Operating Partnership's acquisition of units pursuant
to the offer may result in a Termination of your partnership. If an acquisition
of units results in a
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Termination, the following Federal income tax events will be deemed to occur:
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
interests 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 to the
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
to the New Partnership. A Termination will change (and possibly shorten) a
Remaining Offeree's holding period with respect to its units in your partnership
for Federal income tax purposes. Gains recognized by a Remaining Offeree on the
disposition of New Partnership interests with a holding period of 12 months or
less may be classified as short-term capital gains and subject to taxation at
ordinary income tax rates.
The New Partnership's adjusted tax basis in its assets will be the same as
the Old Partnership's basis in such assets immediately before the Termination. A
Termination will also cause the New Partnership to recalculate the depreciable
lives of its assets. This will cause the assets to be depreciated over a longer
period of time than if there had been no Termination. This would generally
decrease the annual average depreciation deductions allocable to the Remaining
Offerees for a number of years following consummation of the offer (thereby
increasing the taxable income allocable to their retained units in each such
year), but would have no effect on the total depreciation deductions available
over the useful lives of the assets of your partnership.
Elections as to 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.
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-73
<PAGE> 1863
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 The AIMCO Operating Partnership is organized
organized under California law. as a 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 The term of the AIMCO Operating Partnership
partners as a finite life investment, with continues until December 31, 2093, unless
limited partners to receive regular cash the AIMCO Operating Partnership is dissolved
distributions out of your partnership's Net sooner pursuant to the terms of the AIMCO
Cash Flow (as defined in your partner- Operating Partnership's agreement of limited
ship's agreement of limited partnership). partnership (the "AIMCO Operating
The termination date of your partnership is Partnership Agreement") or as provided by
December 31, 2023. law. See "Description of 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 be the The purpose of the AIMCO Operating
sole limited partner of La Colina Ranch Partnership is to conduct any business that
Apartments, Ltd., a limited partnership, may be lawfully conducted by a limited
which will acquire, complete construction of partnership organized pursuant to the
and hold your partnership's property. Delaware Revised Uniform Limited Part-
Subject to restrictions contained in your nership Act (as amended from time to time,
partnership's agreement of limited or any successor to such statute) (the
partnership, your partnership may do all "Delaware Limited Partnership Act"),
things necessary for or incidental to the provided that such business is to be
protection and benefit of your partner- conducted in a manner that permits AIMCO to
ship, including, without limitation, be qualified as a REIT, unless AIMCO ceases
borrowing funds and creating liens. to qualify as a REIT. The AIMCO Operating
Partner-
</TABLE>
S-74
<PAGE> 1864
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship 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 ac-
tion, 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>
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is The general partner is authorized to issue
authorized to issue additional limited additional partnership interests in the
partnership interests in your partnership AIMCO Operating Partnership for any
and may admit additional limited partners by partnership purpose from time to time to the
selling not more than 200 units for cash and limited partners and to other persons, and
notes to selected persons who fulfill the to admit such other persons as additional
requirements set forth in your partnership's limited partners, on terms and conditions
agreement of limited partnership. In and for such capital contributions as may be
addition, the managing general has the established by the general partner in its
authority to increase the number of units. sole discretion. The net capital
The partnership may not issue senior contribution need not be equal for all OP
securities nor issue units for property Unitholders. No action or consent by the OP
other than cash or cash and notes. The Unitholders is required in connection with
capital contribution need not be equal for the admission of any additional OP
all limited partners and no action or con- Unitholder. See "Description of OP
sent is required in connection with the Units -- Management by the AIMCO GP" in the
admission of any additional limited accompanying Prospectus. Subject to Delaware
partners. 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 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>
The general partner of your partnership may The AIMCO Operating Partnership may lend or
enter into agreements with any of its contribute funds or other assets to its
affiliates; provided that such agreements subsidiaries or other persons in which it
must contain terms reasonably has an equity investment,
</TABLE>
S-75
<PAGE> 1865
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
competitive with those which may be obtained and such persons may borrow funds from the
from independent third parties. The general AIMCO Operating Partnership, on terms and
partner may also lend money to your conditions established in the sole and
partnership as needed with interest charged absolute discretion of the general partner.
at the rate of the lesser of the maximum To the extent consistent with the business
rate permitted under the laws of Califor- purpose of the AIMCO Operating Partnership
nia or the prime rate then being charged for and the permitted activities of the general
short-term commercial loans by Bank of partner, the AIMCO Operating Partnership may
America N.T. & S.A. plus 3%. 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
the AIMCO Operating Partnership Agreement
and applicable law as the general partner,
in its sole and absolute discretion,
believes to be advisable. Except as
expressly permitted by the AIMCO Operating
Partnership Agreement, neither the general
partner nor any of its affiliates may sell,
transfer or convey any property to the AIMCO
Operating Partnership, directly or
indirectly, except pursuant to transactions
that are determined by the general partner
in good faith to be fair and reasonable.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is The AIMCO Operating Partnership Agreement
authorized, on behalf of your partnership, contains no restrictions on borrowings, and
to borrow funds, execute and issue mortgage the general partner has full power and
notes and other evidences of indebtedness authority to borrow money on behalf of the
and secure such indebtedness by mortgage, AIMCO Operating Partnership. The AIMCO
deed of trust, pledge or other lien. Operating Partnership has credit agreements
that restrict, among other things, its
ability to incur indebtedness.
</TABLE>
Review of Investor Lists
<TABLE>
<S> <C>
Your partnership's agreement of limited Each OP Unitholder has the right, upon
partnership entitles the limited partners or written demand with a statement of the
their duly authorized representative to purpose of such demand and at such OP
review the books and records of your Unitholder's own expense, to obtain a
partnership upon reasonable notice at current list of the name and last known
reasonable times at the location where such business, residence or mailing address of
records are kept by your partnership. the general partner and each other OP
Unitholder.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has All management powers over the business and
complete discretion in the management and affairs of the AIMCO Operating Partnership
control of the business of your partnership are vested in AIMCO-GP, Inc., which is the
for the purposes stated in your general partner. No OP Unitholder has any
partnership's agreement of limited right to participate in or exercise control
partnership, makes all decisions affecting or management power over the business and
the business of your partnership and manages affairs of the AIMCO Operating Partner-
and controls the affairs of your ship. The OP Unitholders have the right to
partnership. No limited partner vote on
</TABLE>
S-76
<PAGE> 1866
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
may take part in the management of the certain matters described under "Comparison
business of your partnership, transact any of Your Units and AIMCO OP Units -- Voting
business of your partnership or have the Rights" below. The general partner may not
power to sign for or to bind your be removed by the OP Unitholders with or
partnership to any agreement or document. without 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 Notwithstanding anything to the contrary set
partnership does not limit the liability of forth in the AIMCO Operating Partnership
the general partner to your partnership or Agreement, the general partner is not liable
any limited partners for acts done in their to the AIMCO Operating Partnership for
capacity as general partner. However, under losses sustained, liabilities incurred or
your partnership's agreement of limited benefits not derived as a result of errors
partnership, the general partners of your in judgment or mistakes of fact or law of
partnership are indemnified for any loss or any act or omission if the general partner
damage, including legal fees and expenses acted in good faith. The AIMCO Operating
and amounts paid in settlement, incurred by Partnership Agreement provides for
such parties by reason of any act performed indemnification of AIMCO, or any director or
or omitted by such parties on behalf of your officer of AIMCO (in its capacity as the
partnership or in furtherance of your previous general partner of the AIMCO
partnership's interest, provided that the Operating Partnership), the general partner,
party sued will not be entitled to any officer or director of general partner
indemnification for losses sustained by or the AIMCO Operating Partnership and such
reason of their gross negligence, willful other persons as the general partner may
misconduct or breach of fiduciary designate from and against all losses,
obligations. claims, damages, liabilities, joint or
several, expenses (including legal fees),
fines, settlements and other amounts
incurred in connection with any actions
</TABLE>
S-77
<PAGE> 1867
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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
and certain state securities administrations
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 and their
respective state securities laws.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of Except in limited circumstances, the general
limited partnership, the limited partners partner has exclusive management power over
may remove the general partner upon a vote the business and affairs of the AIMCO
of all of the limited partners. The general Operating Partnership. The general partner
partner may resign upon 90 days notice with may not be removed as general partner of the
the consent of the remaining general AIMCO Operating Partnership by the OP
partner; provided, the remaining general Unitholders with or without cause. Under the
partner is qualified to act as such and has AIMCO Operating Partnership Agreement, the
sufficient net worth to meet the general partner may, in its sole discretion,
requirements of the tax code. The general prevent a transferee of an OP Unit from
partner may add another person as general becoming a substituted limited partner
partner pursuant to the consent granted by pursuant to the AIMCO Operating Partnership
the limited partners in your partnership's Agreement. The general partner may exercise
agreement of limited partnership. The this right of approval to deter, delay or
affirmative vote or written consent of hamper attempts by persons to acquire a
holders of more than 50% of the units is controlling interest in the AIMCO Operating
required for the general partner to Partnership. Additionally, the AIMCO
substitute another in its place. The limited Operating Partnership Agreement contains
partners owning 100% of the limited restrictions on the ability of OP
partnership interests then outstanding may Unitholders to transfer their OP Units. See
elect another person as additional or "Description of OP Units -- Transfers and
substitute general partner without the Withdrawals" in the accompanying Prospectus.
consent of the existing general partner. A
limited partner may not transfer its units
without the consent of the general partner
which may be withheld in sole and absolute
discretion of the managing general partner.
</TABLE>
Amendment of Your Partnership Agreement
<TABLE>
<S> <C>
Amendments to your partnership's agreement With the exception of certain circumstances
of limited partnership may be proposed by set forth in the AIMCO Operating Partnership
the general partner of your partnership or Agreement, whereby the general partner may,
by limited partners owning at least 10% of without the consent of the OP Unitholders,
the then outstanding limited partnership amend the AIMCO Operating Partnership
interests. Approval by a majority of the Agreement, amendments to the AIMCO Operating
then outstanding limited partnership Partnership Agreement require the consent of
interests is necessary to effect an the holders of a majority of the
amendment to your partnership's
</TABLE>
S-78
<PAGE> 1868
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
agreement of limited partnership, except outstanding Common OP Units, excluding AIMCO
that any proposal requiring a greater and certain other limited exclusions (a
affirmative vote for the matter addressed "Majority in Interest"). Amendments to the
also requires such greater affirmative vote AIMCO Operating Partnership Agreement may be
for enactment. In addition, the general proposed by the general partner or by
partner may amend your partnership's holders of a Majority in Interest. Following
agreement of limited partnership from time such proposal, the general partner will
to time to add representations, duties or submit any proposed amendment to the OP
obligation of the general partner or to Unitholders. The general partner will seek
surrender rights granted to the general the written consent of the OP Unitholders on
partner, cure any ambiguity or make the proposed amendment or will call a
modifications required by state or Federal meeting to vote thereon. See "Description of
securities law. Notwithstanding the OP Units -- Amendment of the AIMCO Operating
foregoing, certain provisions of your Partnership Agreement" in the accompanying
partnership's agreement of limited Prospectus.
partnership are not subject to amendment in
any case.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
In addition to the right to distributions in The general partner does not receive
respect of its partnership interest and compensation for its services as general
reimbursement for all fees and expenses as partner of the AIMCO Operating Partnership.
set forth in your partnership's agreement of However, the general partner is entitled to
limited partnership, the general partner payments, allocations and distributions in
receives an annual management fee equal to its capacity as general partner of the AIMCO
the greater of an amount equal to 7.5% of Operating Partnership. In addition, the
the Net Cash Flow or $10,000, payable AIMCO Operating Partnership is responsible
monthly in addition to other fees for for all expenses incurred relating to the
additional services. Moreover, the general AIMCO Operating Partnership's ownership of
partner or certain affiliates may be its assets and the operation of the AIMCO
entitled to compensation for additional Operating Partnership and reimburses the
services rendered. 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>
No limited partner is subject to assessment, Except for fraud, willful misconduct or
nor is any limited partner personally liable gross negligence, no OP Unitholder has
for any of the debts of your partnership or personal liability for the AIMCO Operating
any of losses except to the extent of its Partnership's debts and obligations, and
capital contributions which have become liability of the OP Unitholders for the
payable pursuant to your partnership's AIMCO Operating Partnership's debts and
agreement of limited partnership. obligations 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 Part-
nership 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
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
</TABLE>
S-79
<PAGE> 1869
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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>
The general partner of your partnership must Unless otherwise provided for in the
manage and control the affairs of your relevant partnership agreement, Delaware law
partnership to the best of its ability and generally requires a general partner of a
use its best efforts to carry out the Delaware limited partnership to adhere to
purposes of your partnership. The general fiduciary duty standards under which it owes
partner must diligently and faithfully its limited partners the highest duties of
devote such of its time to the business of good faith, fairness and loyalty and which
your partnership and has fiduciary generally prohibit such general partner from
responsibility for the safekeeping and use taking any action or engaging in any
of all funds and assets of your partnership transaction as to which it has a conflict of
and cannot employ or permit another to interest. The AIMCO Operating Partnership
employ such funds or assets in a manner Agreement expressly authorizes the general
except for the exclusive benefit of your partner to enter into, on behalf of the
partnership. However, the general partner AIMCO Operating Partnership, a right of
may engage or hold interest in other first opportunity arrangement and other
business ventures of every kind and conflict avoidance agreements with various
description, including ventures in affiliates of the AIMCO Operating
competition with your partnership, in which Partnership and the general partner, on such
neither your partnership nor any limited terms as the general partner, in its sole
partners will have any interest. and absolute discretion, believes are
advisable. The AIMCO Operating Partnership
In general, your partnership's agreement of Agreement expressly limits the liability of
limited partnership and the AIMCO Operating the general partner by providing that the
Partnership Agreement have limitations on general partner, and its officers and
the liability of the general partner but directors will not be liable or accountable
such limitations differ and provide more in damages to the AIMCO Operating
protection for the general partner of the Partnership, the limited partners or as-
AIMCO Operating Partnership. signees 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 The AIMCO Operating Partnership is not
differences between the taxation of your subject to Federal income taxes. Instead,
partnership and the AIMCO Operating each holder of OP Units includes in income
Partnership. 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
</TABLE>
S-80
<PAGE> 1870
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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 nonre-
course 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>
<CAPTION>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity in- equity interests entitling each equity interests entitling each OP
terests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of and as declared by the board of rata share of cash distributions
distributions to be made to the directors of the general partner made from Available Cash (as such
partners of your partnership. of the AIMCO Operating Part- term is defined in the AIMCO
nership, quarterly cash distribu- Operating Partnership Agreement)
tion at a rate of $0.50 per to the partners of the AIMCO
Preferred OP Unit, subject to ad- Operating Partnership. To the
justments from time to time on or extent the AIMCO Operating
after the fifth anniversary of the Partnership sells or refinances
issue date of the Preferred OP its assets, the net proceeds
Units. therefrom generally will be re-
</TABLE>
S-81
<PAGE> 1871
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
tained 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 Except as otherwise required Under the AIMCO Operating
agreement of limited by applicable law or in the Partnership Agreement, the
partnership, the limited AIMCO Operating Partnership OP Unitholders have voting
partners have voting rights Agreement, the holders of rights only with respect to
only with respect to the the Preferred OP Units will certain limited matters such
following issues: the sale have the same voting rights as certain amendments and
of or other disposition of as holders of the Common OP termination of the AIMCO
all or substantially all of Units. See "Description of Operating Partnership
the assets of your OP Units" in the accompany- Agreement and certain
partnership, the sale of ing Prospectus. So long as transactions such as the
your partnership's interest any Preferred OP Units are institution of bankruptcy
in La Colina Ranch outstanding, in addition to proceedings, an assignment
Apartments Ltd. to any any other vote or consent of for the benefit of creditors
general partner, a limited partners required by law or and certain transfers by the
partner or any of their by the AIMCO Operating general partner of its
affiliates, any amendments Partnership Agreement, the interest in the AIMCO
to your partnership's affirmative vote or consent Operating Partnership or the
agreement of limited part- of holders of at least 50% admission of a successor
nership, except in certain of the outstanding Preferred general partner.
circumstances, the OP Units will be necessary
termination of your for effecting any amendment Under the AIMCO Operating
partnership, the removal of of any of the provisions of Partnership Agreement, the
a general partner, the the Partnership Unit general partner has the
substitution of a general Designation of the Preferred power to effect the
partner and the sub- OP Units that materially and acquisition, sale, transfer,
stitution or addition of a adversely affects the rights exchange or other
general partner absent or preferences of the disposition of any assets of
approval by the remaining holders of the Preferred OP the AIMCO Operating
general partner. Each matter Units. The creation or Partnership (including, but
requires the approval of issuance of any class or not limited to, the exercise
holders of a majority of the series of partnership units, or grant of any conversion,
outstanding units, except including, without option, privilege or
that the removal of a limitation, any partner- subscription right or any
general partner and the ship units that may have other right available in
election of a substitute or rights senior or superior to connection with any assets
additional general partner the Preferred OP Units, at any time held by the
without the consent of the shall not be deemed to AIMCO Operating Partnership)
existing general partner materially adversely affect or the merger,
requires the unanimous the rights or preferences of consolidation,
consent of all limited the holders of Preferred OP reorganization or other
partners. Units. With respect to the combination of the AIMCO
exercise of the above Operating Partnership with
The general partner may described voting rights, or into another entity, all
cause the dissolution of each Preferred OP Units without the consent of the
your partnership by retiring shall have one (1) vote per OP Unitholders.
unless, the remaining Preferred OP Unit.
general partner, or if none, The general partner may
more than 50% of the hold- cause the dissolution of the
ers of the then outstanding AIMCO Operating Partnership
units consent within sixty by an "event of withdrawal,"
days after the retirement to as defined in the Delaware
continue your partnership Limited Partner-
and elect a successor gen-
eral partner.
</TABLE>
S-82
<PAGE> 1872
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
ship Act (including, without
In general, you have greater limitation, bankruptcy),
voting rights in your unless, within 90 days after
partnership than you will the withdrawal, holders of a
have as an OP Unitholder. OP "majority in interest," as
Unitholders can not remove defined in the Delaware
the general partner of the Limited Partnership Act,
AIMCO Operating Partnership. 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 "Descrip-
tion of OP
Units -- Dissolution and
Winding Up" in the accom-
panying Prospectus.
OP Unitholders cannot remove
the general partner of the
AIMCO Operating Partnership
with or without cause.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement Holders of Preferred OP Subject to the rights of
of limited partnership Units will be entitled to holders of any outstanding
specifies how the cash receive, when and as Preferred OP Units, the
available for distribution, declared by the board of AIMCO Operating Partnership
whether arising from directors of the general Agreement requires the
operations or sales or partner of the AIMCO general partner to cause the
refinancing, is to be shared Operating Partnership, AIMCO Operating Partnership
among the partners. The quarterly cash distributions to distribute quarterly all,
distributions payable to the at the rate of $0.50 per or such portion as the
partners are not fixed in Preferred OP Unit; provided, general partner may in its
amount and depend upon the however, that at any time sole and absolute discretion
operating results and net and from time to time on or determine, of Available Cash
sales or refinancing pro- after the fifth anniversary (as defined in the AIMCO
ceeds available from the of the issue date of the Operating Partnership
disposition of your Preferred OP Units, the Agreement) generated by the
partnership's assets. The AIMCO Operating Partnership AIMCO Operating Partnership
general partner will desig- may adjust the annual during such quarter to the
nate a record date to distribution rate on the general partner, the special
determine the partners Preferred OP Units to the limited partner and the
entitled to cash dis- lower of (i) 2.00% plus the holders of Common OP Units
tributions, which is not annual interest rate then on the record date es-
less than five days nor more applicable to U.S. Treasury tablished by the general
than thirty days before each notes with a maturity of partner with respect to such
cash distribution. five years, and (ii) the quarter, in accordance with
annual dividend rate on the their respective interests
most recently issued AIMCO in the AIMCO Operating
non-convertible preferred Partnership on such record
stock which ranks on a
parity with its
</TABLE>
S-83
<PAGE> 1873
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
Class H Cumulative Preferred date. Holders of any other
Stock. Such distributions Preferred OP Units issued in
will be cumulative from the the future may have priority
date of original issue. over the general partner,
Holders of Preferred OP the special limited partner
Units will not be entitled and holders of Common OP
to receive any distributions Units with respect to
in excess of cumulative distributions of Available
distributions on the Cash, distributions upon
Preferred OP Units. No liquidation or other
interest, or sum of money in distributions. See "Per
lieu of interest, shall be Share and Per Unit Data" in
payable in respect of any the accompanying Prospectus.
distribution payment or pay-
ments on the Preferred OP The general partner in its
Units that may be in sole and absolute discretion
arrears. may distribute to the OP
Unitholders Available Cash
When distributions are not on a more frequent basis and
paid in full upon the provide for an appropriate
Preferred OP Units or any record date.
Parity Units (as defined
below), all distributions The AIMCO Operating Partner-
declared upon the Preferred ship Agreement requires the
OP Units and any Parity general partner to take such
Units shall be declared reasonable efforts, as
ratably in proportion to the determined by it in its sole
respective amounts of and absolute discretion and
distributions accumulated, consistent with AIMCO's
accrued and unpaid on the qualification as a REIT, to
Preferred OP Units and such cause the AIMCO Operating
Parity Units. Unless full Partnership to distribute
cumulative distributions on sufficient amounts to en-
the Preferred OP Units have able the general partner to
been declared and paid, transfer funds to AIMCO and
except in limited circum- enable AIMCO to pay stock-
stances, no distributions holder dividends that will
may be declared or paid or (i) satisfy the requirements
set apart for payment by the for qualifying as a REIT
AIMCO Operating Partnership under the Code and the
and no other distribution of Treasury Regulations and
cash or other property may (ii) avoid any Federal
be declared or made, income or excise tax
directly or indirectly, by liability of AIMCO. See
the AIMCO Operating "Description of OP
Partnership with respect to Units -- Distributions" in
any Junior Units (as de- the accompanying Prospectus.
fined below), nor shall any
Junior Units be redeemed,
purchased or otherwise
acquired for considera-
tion, 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>
S-84
<PAGE> 1874
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
Liquidity and Transferability/Redemption Rights
<TABLE>
<CAPTION>
<S> <C> <C>
A limited partner may not There is no public market There is no public market
transfer or assign any or for the Preferred OP Units for the OP Units. The AIMCO
any portion of his interest and the Preferred OP Units Operating Partnership
in his limited partnership are not listed on any Agreement restricts the
interest unless the general securities exchange. The transferability of the OP
partner consents (which Preferred OP Units are Units. Until the expiration
consent may be withheld at subject to restrictions on of one year from the date on
the sole discretion of the transfer as set forth in the which an OP Unitholder
general partner) and the AIMCO Operating Partnership acquired OP Units, subject
limited partner complies Agreement. to certain exceptions, such
with applicable state and OP Unitholder may not
Federal securities laws. Pursuant to the AIMCO transfer all or any por-
Notwithstanding the Operating Partnership tion of its OP Units to any
foregoing, a limited partner Agreement, until the transferee without the
may gratuitously transfer expiration of one year from consent of the general
all or any portion of his the date on which a holder partner, which consent may
interest in his limited of Preferred OP Units be withheld in its sole and
partnership interest to his acquired Preferred OP Units, absolute discretion. After
spouse, any member of his subject to certain the expiration of one year,
family, a trust for the exceptions, such holder of such OP Unitholder has the
benefit of those individuals Preferred OP Units may not right to transfer all or any
or a corporation in which transfer all or any portion portion of its OP Units to
such partner has a majority of its Preferred OP Units to any person, subject to the
interest. No assignment or any transferee without the satisfaction of certain con-
transfers will be permitted consent of the general ditions specified in the
if such assignment of partner, which consent may AIMCO Operating Partnership
transfer would result in 50% be withheld in its sole and Agreement, including the
or more of the limited absolute discretion. After general partner's right of
partnership interest being the expiration of one year, first refusal. See
assigned or transferred such holders of Preferred OP "Description of OP Units --
within any twelve-month Units has the right to Transfers and Withdrawals"
period. In order for a transfer all or any portion in the accompanying
transferee to be substituted of its Preferred OP Units to Prospectus.
as a limited partner, in any person, subject to the
addition to the above satisfaction of certain After the first anniversary
requirements: (1) a fully conditions specified in the of becoming a holder of
executed and acknowledged AIMCO Operating Partner- Common OP Units, an OP
written instrument of ship Agreement, including Unitholder has the right,
assignment must be filed the general partner's right subject to the terms and
with your partnership, (2) of first refusal. conditions of the AIMCO
the interest transferred Operating Partnership
must be at least one unit, After a one-year holding Agreement, to require the
except in certain period, a holder may redeem AIMCO Operating Partnership
circumstances, (3) the Preferred OP Units and to redeem all or a portion
transfer fees must be paid receive in exchange of the Common OP Units held
and (4) such other therefor, at the AIMCO Oper- by such party in exchange
conditions as are set forth ating Partnership's option, for a cash amount based on
in your partnership's (i) subject to the terms of the value of shares of Class
agreement of limited any Senior Units (as defined A Common Stock. See
partnership must be below), cash in an amount "Description of OP
fulfilled. equal to the Liquidation Units -- Redemption Rights"
Preference of the Preferred in the accompanying
There are no redemption OP Units tendered for Prospectus. Upon receipt of
rights associated with your redemption, (ii) a number of a notice of redemption, the
units. shares of Class A Common AIMCO Operating Partnership
Stock of AIMCO that is equal may, in its sole and
in Value to the Liquidation absolute discretion but
Preference of the Preferred subject to the restrictions
OP Units tendered on the ownership of Class A
Common
</TABLE>
S-85
<PAGE> 1875
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
for redemption, or (iii) for Stock imposed under AIMCO's
Preferred OP Units redeemed charter and the transfer
after a two-year holding restrictions and other
period, a number of shares limitations thereof, elect
of Class I Preferred Stock to cause AIMCO to acquire
of AIMCO that pay an some or all of the ten-
aggregate amount of dered Common OP Units in
dividends equivalent to the exchange for Class A Common
distributions on the Stock, based on an exchange
Preferred OP Units tendered ratio of one share of Class
for redemption; provided A Common Stock for each Com-
that such shares are part of mon OP Unit, subject to
a class or series of adjustment as provided in
preferred stock that is then the AIMCO Operating
listed on the NYSE or an- Partnership Agreement.
other national securities
exchange. See "Federal
Income Tax
Consequences -- Disguised
Sales." 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-86
<PAGE> 1876
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are the Class Two 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 I High Performance 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, the
Class J Partnership Preferred Units, the Class K 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, the Class One 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 $0.50 per Preferred OP
Unit (equivalent to 8.0% per annum of the $25 stated liquidation preference);
provided, however, that at any time and from time to time on or after March 1,
2005, the AIMCO Operating Partnership may adjust the annual distribution rate on
the Preferred OP Units to the lower of (i) 2.0% 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. A reduction in the distribution rate will reduce your rate of return on
the Preferred OP Units and possibly encourage you to redeem such units. 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
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<PAGE> 1877
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 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 $25 per Preferred OP
Unit, 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
S-88
<PAGE> 1878
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 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 A Common Stock of AIMCO that is equal in Value to the
Liquidation Preference of the Preferred OP Units tendered for redemption, or
(iii) for Preferred OP Units redeemed after a two-year holding period, 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 NYSE or another national securities exchange.
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. Before issuing any preferred
stock upon redemption of Preferred OP Units, AIMCO will register the issuance
and sale of such shares under the Securities Act of 1933. 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.
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<PAGE> 1879
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.
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, the Class J 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 8.0% per annum of the $25 liquidation preference (equivalent to
$2.00 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 July 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 March 1, 2005, 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,
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<PAGE> 1880
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 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> 1881
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 The Class I Preferred Stock constitutes an
interests entitling each holder of Preferred equity interest entitling each holder of
OP Units to receive, when and as declared by Class I Preferred Stock to receive, when and
the board of directors of the general as declared by the AIMCO board of directors,
partner of the AIMCO Operating Partnership, cash distribution at a rate of $2.00 per
quarterly cash distribution at a rate of annum per share.
$0.50 per 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 Holders of Class I Preferred Stock do not
law or in the AIMCO Operating Partnership's have any voting rights, except as set forth
agreement of limited partnership, the below and except as otherwise required by
holders of the Preferred OP Units will have applicable law.
the same voting rights as holders of the
Common OP Units. See "Description of OP If and whenever dividends on any shares of
Units" in the accompanying Prospectus. So Class I Preferred Stock or any series or
long as any Preferred OP Units are class of Class I Parity Stock are in arrears
outstanding, in addition to any other vote for six or more quarterly periods (whether
or consent of partners required by law or by or not consecutive), the number of directors
the AIMCO Operating Partnership's agreement then constituting the AIMCO board of
of limited partnership, the affirmative vote directors shall be increased by two (if not
or consent of holders of at least 50% of the already increased by reason of similar types
outstanding Preferred OP Units will be of provisions with respect to shares of
necessary for effecting any amendment of any voting preferred stock), and the holders of
of the provisions of the Partnership Unit shares of Class I Preferred Stock, together
Designation of the Preferred OP Units that with the holders of shares of all other
materially and adversely affects the rights voting preferred stock then entitled to
or preferences of the holders of the exercise similar voting rights, voting as a
Preferred OP Units. The creation or issuance single class regardless of series, will be
of any class or series of AIMCO Operating entitled to vote for the election of two
Partnership units, including, without additional directors of AIMCO. Whenever
limitation, any AIMCO Operating Partnership dividends in arrears and dividends for the
units that may have rights senior or current quarterly dividend period have been
superior to the Preferred OP Units, will not paid or declared and set aside in respect of
be deemed to materially adversely affect the the outstanding shares of the Class I
rights or preferences of the holders of Preferred Stock and the voting preferred
Preferred OP Units. With respect to the stock, then the right of the holders of
exercise of the above described voting Class I Preferred Stock and the voting
rights, each Preferred OP Units will have preferred stock to elect such additional two
one (1) vote per Preferred 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
</TABLE>
S-92
<PAGE> 1882
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
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>
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled Holders of Class I Preferred Stock are
to receive, when and as declared by the entitled to receive, when and as declared by
board of directors of the general partner of the AIMCO board of directors, out of funds
the AIMCO Operating Partnership, quarterly legally available for payment, cash
cash distributions at the rate of $0.50 per dividends at the rate of $2.00 per annum per
Preferred OP Unit; provided, however, that share. Such dividends are cumulative from
at any time and from time to time on or the date of original issue. Holders of Class
after the fifth anniversary of the issue I Preferred Stock are not be entitled to
date of the Preferred OP Units, the AIMCO receive any dividends in excess of
Operating Partnership may adjust the annual cumulative dividends on the Class I
distribution rate on the Preferred OP Units Preferred Stock. No interest, or sum of
to the lower of (i) 2.00% plus the annual money in lieu of interest, shall be payable
interest rate then applicable to U.S. in respect of any dividend payment or
Treasury notes with a maturity of five payments on the Class I Preferred Stock that
years, and (ii) the annual dividend rate on may be in arrears.
the most recently issued AIMCO
non-convertible preferred stock which ranks When dividends are not paid in full upon the
on a parity with its Class H Cumulative Class I Preferred Stock or any other class
Preferred Stock. Such distributions will be or series of Class I Parity Stock, all
cumulative from the date of original issue. dividends declared upon the Class I
Holders of Preferred OP Units will not be Preferred Stock and any shares of Class I
entitled to receive any distributions in Parity Stock will be declared ratably in
excess of cumulative distributions on the proportion to the respective amounts of
Preferred OP Units. No interest, or sum of dividends accumulated, accrued and unpaid on
money in lieu of interest, shall be payable the Class I Preferred Stock and such Class I
in respect of any distribution payment or Parity Stock. Unless dividends equal to the
payments on the Preferred OP Units that may full amount of all accumulated, accrued and
be in arrears. unpaid dividends on the Class I Preferred
Stock have been paid, or declared and set
When distributions are not paid in full upon apart for payment, except in limited
the Preferred OP Units or any Parity Units, circumstances, no dividends may be declared
all or paid or set apart for
</TABLE>
S-93
<PAGE> 1883
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
distributions declared upon the Preferred OP payment by AIMCO and no other distribution
Units and any Parity Units will be declared of cash or other property may be declared or
ratably in proportion to the respective made, directly or indirectly, by AIMCO with
amounts of distributions accumulated, respect to any shares of Class I Junior
accrued and unpaid on the Preferred OP Units Stock, nor shall any shares of Class I
and such Parity Units. Unless full Junior Stock be redeemed, purchased or
cumulative distributions on the Preferred OP otherwise acquired for any consideration,
Units have been declared and paid, except in nor shall any other cash or other property
limited circumstances, no distributions may be paid or distributed to or for the benefit
be declared or paid or set apart for payment of holders of shares of Class I Junior
by the AIMCO Operating Partnership and no Stock. See "Description of Class I Preferred
other distribution of cash or other property Stock -- Dividends."
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 Ownership of shares of Class I Preferred
OP Units and the Preferred OP Units are not Stock by any person will be limited such
listed on any securities exchange. The that the sum of the aggregate value of all
Preferred OP Units are subject to certain equity stock (including all shares of Class
restrictions on transferability set forth in 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)
Pursuant to the AIMCO Operating of the aggregate value of all outstanding
Partnership's agreement of limited shares of equity stock. Further, certain
partnership, until the expiration of one transfers which may have the effect of
year from the date on which a holder of causing AIMCO to lose its status as a REIT
Preferred OP Units acquired Preferred OP are void ab initio.
Units, subject to certain exceptions, such
holder of Preferred OP Units may not If any transfer of Class I Preferred Stock
transfer all or any portion of its Preferred occurs which, if effective, would result in
OP Units to any transferee without the any person beneficially or constructively
consent of the general partner, which owning Class I Preferred Stock in excess or
consent may be withheld in its sole and in violation of the Class I Preferred
absolute discretion. After the expiration of Ownership Limit, such shares of Class I
one year, such holders of Preferred OP Units Preferred Stock in excess of the Class I
has the right to transfer all or any portion Preferred Ownership Limit will be
of its Preferred OP Units to any person, automatically transferred to a trustee in
subject to the satisfaction of certain his capacity as trustee of a trust for the
conditions specified in the AIMCO Operating exclusive benefit of one or more charitable
Partnership's agreement of limited beneficiaries designated by AIMCO, and the
partnership, including the general partner's prohibited transferee will generally have no
right of first refusal. rights in such shares, except upon sale of
the shares by the trustee. The trustee will
After a one-year holding period, a holder have all voting rights and rights to
may redeem Preferred OP Units and receive in dividends with respect to shares of Class I
exchange therefor, at the AIMCO Operating Preferred Stock held in the trust, which
Partnership's option, (i) subject to the rights will be exercised for the benefit of
terms of any Senior Units, cash in an amount the charitable beneficiaries.
equal to the Liquidation Preference of the
Preferred OP Units tendered for The trustee may sell the Class I Preferred
Stock held
</TABLE>
S-94
<PAGE> 1884
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
redemption, (ii) a number of shares of Class in the trust to AIMCO or a person,
A Common Stock of AIMCO that is equal in designated by the trustee, whose ownership
value to the Liquidation Preference of the of the Class I Preferred Stock will not
Preferred OP Units tendered for redemption, violate the Class I Preferred Ownership
or (iii) for Preferred OP Units redeemed Limit. Upon such sale, the interest of the
after a two-year holding period, a number of charitable beneficiaries in the shares sold
shares of Class I Preferred Stock of AIMCO will terminate and the trustee will
that pay an aggregate amount of dividends distribute to the prohibited transferee, the
equivalent to the distributions on the lesser of (i) the price paid by the
Preferred OP Units tendered for redemption; prohibited transferee for the shares or if
provided that such shares are part of a the prohibited transferee did not give value
class or series of preferred stock that is for the shares in connection with the event
then listed on the NYSE or another national causing the shares to be held in the trust,
securities exchange. See "Federal Income Tax the market price of such shares on the day
Consequences -- Disguised Sales." The of the event causing the shares to be held
Preferred OP Units may not be redeemed at in the trust and (ii) the price per share
the option of the AIMCO Operating received by the trustee from the sale or
Partnership. See "Description of Preferred other disposition of the shares held in the
OP Units -- Redemption." trust. Any proceeds in excess of the amount
payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after March 1, 2005, 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-95
<PAGE> 1885
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. Your general
partner became a wholly owned subsidiary on February 26, 1999 of AIMCO when IPT
merged with AIMCO. Accordingly, the general partner of your partnership 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 Unitholders 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 own both the general partner of your partnership and the manager of your
partnership's property. The general partner receives an annual management fee
equal to the greater of 7.5% of the net cash flow or $10,000, payable monthly in
addition to reimbursements for expenses incurred in its capacity as general
partner. The general partner of your partnership received total fees and
reimbursements of $45,370 in 1996, $39,929 in 1997 and $32,447 in 1998. The
property manager received management fees of $80,878 in 1996, $83,502 in 1997
and $89,785 in 1998. The AIMCO Operating Partnership has no current intention of
changing the fee structure for the general partner or for the manager of your
partnership's 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." AIMCO's
Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is
S-96
<PAGE> 1886
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.
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. However, we will not acquire any
additional units for a period of at least one year after expiration of the
offer. Any such future offers that we might make could be for consideration that
is more or less than the consideration we are currently offering.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $583,167 will be
required to purchase all of the units sought in the offer, if such units are
tendered for cash excluding expenses as itemized below. The AIMCO Operating
Partnership will obtain all such funds from cash from operations, equity
issuances and short term borrowings. The AIMCO Operating Partnership will pay
all of the costs of the offer and not your partnership.
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...................................... $ 5,000
Accountant's Fees........................................... $ 5,000
Legal Fees.................................................. $10,000
Printing Fees............................................... $10,000
Stanger's Fees.............................................. $ 9,000
Other....................................................... $11,000
-------
Total............................................. $50,000
=======
</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 Bank of America's reference rate, at the election of
the Company, plus 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 2.25% and 2.75% in the case of LIBOR-based
loans and between 0.75% and 1.25% 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
September 30, 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
S-97
<PAGE> 1887
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.
We may obtain funds pursuant to a credit agreement entered into by our
subsidiary, Insignia Properties, L.P. ("IPLP"), 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, 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). IPLP 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. The AIMCO Operating
Partnership intends to repay any funds borrowed out of working capital in the
ordinary course of business.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP has delivered 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 has delivered an opinion with regard to
the material Federal income tax consequences of the offer. 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 two opinions of Skadden, Arps, Slate, Meagher & Flom LLP are 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 opinions will be sent by the Information Agent.
EXPERTS
The consolidated financial statements of La Colina Partners, Limited as of
December 31, 1997 and for the year then ended, have been included herein and in
the registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
S-98
<PAGE> 1888
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed Balance Sheet as of September 30, 1998
(unaudited)............................................... F-2
Condensed Statements of Operations for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-3
Condensed Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 -- (unaudited)................ F-4
Notes to Condensed Financial Statements..................... F-5
Independent Auditors' Report................................ F-6
Consolidated Balance Sheets as of December 31, 1997 and
1996(unaudited)........................................... F-7
Consolidated Operations and changes in partners' deficit for
the years ended December 31, 1997 and 1996 (unaudited).... F-8
Consolidated Statement of Cash Flows -- for the years ended
December 31, 1997 and 1996 (unaudited).................... F-9
Notes to Consolidated Financial Statements.................. F-10
</TABLE>
F-1
<PAGE> 1889
LA COLINA PARTNERS, LIMITED
CONDENSED BALANCE SHEET -- UNAUDITED
SEPTEMBER 30, 1998
ASSETS
<TABLE>
<S> <C> <C>
Cash and cash equivalents................................... $ 729,107
Other assets................................................ 413,574
Investment property
Land...................................................... $ 546,579
Building and related personal property.................... 5,225,819
5,772,398
-----------
Less: Accumulated depreciation............................ (3,243,122) 2,529,276
----------- -----------
Total assets...................................... $ 3,671,957
===========
LIABILITIES AND PARTNERS' DEFICIT
Other accrued liabilities................................... $ 277,532
Notes payable............................................... 5,105,645
Partners' deficit................................. (1,711,220)
-----------
Total liabilities and partners' deficit........... $ 3,671,957
===========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE> 1890
LA COLINA PARTNERS, LIMITED
CONDENSED STATEMENTS OF OPERATIONS -- UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenues:
Rental income............................................. $1,258,151 $1,200,132
Other income.............................................. 84,796 88,681
---------- ----------
Total revenues.................................... 1,342,947 1,288,813
Expenses:
Operating expenses........................................ 579,341 578,367
Depreciation expense...................................... 158,434 155,788
Interest expense.......................................... 323,374 379,424
Property tax expense...................................... 152,476 145,215
---------- ----------
Total expenses.................................... 1,213,625 1,258,794
Net income........................................ $ 129,322 $ 30,019
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE> 1891
LA COLINA PARTNERS, LIMITED
CONDENSED STATEMENTS OF CASH FLOWS -- UNAUDITED
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1998 1997
-------- ----------
<S> <C> <C>
Operating activities:
Net income................................................ $129,322 $ 30,019
Adjustments to reconcile net income (loss) to net cash
provided by operating activities.......................
Depreciation and amortization............................. 158,434 155,788
Changes in accounts:
Receivables and deposits and other assets.............. 49,139 42,083
Accounts payable and accrued expenses.................. (19,569) 533,492
-------- ----------
Net cash provided by (used in) operating
activities...................................... 317,326 761,382
-------- ----------
Investing activities:
Property improvements and replacements.................... (63,771) (133,271)
-------- ----------
Net cash provided by (used in) investing activities....... (63,771) (133,271)
-------- ----------
Financing activities:
Payments on mortgage...................................... (46,693) (580,394)
Partners' Distributions................................... (354) (478)
-------- ----------
Net cash provided by (used in) financing activities....... (47,047) (580,872)
-------- ----------
Net increase (decrease) in cash and cash equivalents...... 206,508 47,239
Cash and cash equivalents at beginning of period.......... 522,599 1,148,129
-------- ----------
Cash and cash equivalents at end of period................ $729,107 $1,195,368
======== ==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE> 1892
LA COLINA PARTNERS, LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements of La Colina Partners,
Limited as of September 30, 1998 and for the nine months ended September 30,
1998 and 1997 have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included and all such adjustments are of a recurring nature.
The financial statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31, 1997. It
should be understood that the accounting measurements at interim dates
inherently involve greater reliance on estimates than at year-end. The results
of operations for the interim periods are not necessarily indicative of the
results for the entire year.
NOTE B -- SUBSEQUENT EVENT
On March 17, 1998, Insignia Financial Group, Inc., an affiliate of the
corporate general partner of the Partnership, entered into an agreement to merge
its national residential property management operations and its controlling
interest in Insignia Properties Trust, with Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust. The merger
was completed effective October 1, 1998, and accordingly, as of that date AIMCO
acquired the corporate general partner and the company that manages the
Partnership.
F-5
<PAGE> 1893
INDEPENDENT AUDITORS' REPORT
General Partners
La Colina Partners, Limited:
We have audited the consolidated balance sheet of La Colina Partners,
Limited (a limited partnership) and its limited partnership interest as of
December 31, 1997, and the related consolidated statements of operations and
changes in partners' deficit and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the partnership's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of La Colina
Partners, Limited and its limited partnership interest as of December 31, 1997,
and the results of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
Greenville, South Carolina
December 9, 1998
F-6
<PAGE> 1894
LA COLINA PARTNERS, LIMITED
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents................................... $ 522,599 $ 1,148,129
Receivables and deposits.................................... 217,907 224,652
Restricted escrows (Note B)................................. 115,192 110,457
Other Assets................................................ 129,614 149,870
Investment properties (Note C):
Land...................................................... 546,579 546,579
Buildings and related personal property................... 5,162,046 5,011,827
----------- -----------
5,708,625 5,558,406
Less accumulated depreciation............................. (3,084,686) (2,875,667)
----------- -----------
2,623,939 2,682,739
----------- -----------
$ 3,609,251 $ 4,315,847
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 20,214 $ 23,453
Tenant security deposits.................................. 38,715 49,575
Accrued taxes............................................. 193,620 182,364
Other liabilities......................................... 44,552 236,937
Notes payable (Note C).................................... 5,152,338 5,747,001
Partners' deficit........................................... (1,840,188) (1,923,483)
----------- -----------
$ 3,609,251 $ 4,315,847
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 1895
LA COLINA PARTNERS, LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND
CHANGES IN PARTNERS' DEFICIT
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1997 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Revenues:
Rental income............................................. $ 1,624,251 $ 1,584,879
Other income.............................................. 114,404 96,764
----------- -----------
Total revenues.................................... 1,738,655 1,681,643
----------- -----------
Expenses:
Operating (Notes D)....................................... 687,976 799,570
General and administrative (Note D)....................... 39,066 53,865
Depreciation.............................................. 209,019 203,851
Interest.................................................. 505,679 508,941
Property taxes............................................ 193,620 182,364
----------- -----------
Total expenses.................................... 1,635,360 1,748,591
----------- -----------
Net income (loss)........................................... 103,295 (66,948)
Distributions to partners................................... (20,000) (1,000)
Partners' deficit at beginning of year...................... (1,923,483) (1,855,535)
----------- -----------
Partners' deficit at end of year............................ $(1,840,188) $(1,923,483)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 1896
LA COLINA PARTNERS, LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1997 1996
---------- -----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 103,295 $ (66,948)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 209,019 203,851
Amortization of discounts and loan costs............... 37,846 36,167
Change in accounts:
Receivables and deposits............................. 6,745 (8,589)
Other assets......................................... (6,640) --
Accounts payable..................................... (3,239) 9,328
Tenant security deposit liabilities.................. (10,860) (3,254)
Accrued taxes........................................ 11,256 25,126
Other liabilities.................................... (192,385) 61,388
---------- ----------
Net cash provided by operating activities......... 155,037 257,069
---------- ----------
Cash flows from investing activities:
Property improvements and replacements.................... (150,219) (57,762)
Net deposits to restricted escrows........................ (4,735) 8,688
---------- ----------
Net cash used in investing activities............. (154,954) (49,074)
---------- ----------
Cash flows from financing activities:
Payments on notes payable................................. (605,613) (61,068)
Distributions to partners................................. (20,000) (1,000)
---------- ----------
Net cash used in financing activities............. (625,613) (62,068)
---------- ----------
Net (decrease) increase in cash and cash equivalents........ (625,530) 145,927
Cash and cash equivalents at beginning of year.............. 1,148,129 1,002,202
---------- ----------
Cash and cash equivalents at end of year.................... $ 522,599 $1,148,129
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 658,831 $ 415,958
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE> 1897
LA COLINA PARTNERS, LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996 (UNAUDITED)
NOTE A -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
The consolidated financial statements include the accounts of La Colina
Partners, Limited (the "Partnership"), and its limited partnership interest in
La Colina Ranch Apartments, Limited (the "Project Partnership"). The Partnership
was organized solely to invest in the Project Partnership. The Project
Partnership owns and operates a 264 unit apartment complex, located in Denton,
Texas.
The Partnership was organized as a California limited partnership on July
15, 1983. The Managing General Partner of the Partnership is Angeles Properties,
Inc. ("API"). The non-managing general partners, who also serve as non-managing
general partners of the Project Partnership, are the Elliott Family Partnership,
Ltd. (a California limited partnership) and the Elliott Accommodation Trust (a
California limited partnership). The general partners act as general partners in
other limited partnerships and are affiliates of Angeles Investment Properties,
Inc. ("AIPI"), the Project Partnership's managing general partner. Pursuant to
the terms of the Agreement and Amended Certificate of Limited Partnership (the
"Agreement"), the general partners have contributed $26,000 to the Partnership
for which they are entitled to a 2% interest in the operating profits, losses,
credits and cash distributions of the Partnership.
On March 17, 1998, Insignia Financial Group, Inc., an affiliate of the
corporate general partner of the Partnership, entered into an agreement to merge
its national residential property management operations and its controlling
interest in Insignia Properties Trust, with Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust. The merger
was completed effective October 1, 1998, and accordingly, as of that date AIMCO
acquired the corporate general partner and the company that manages the
Partnership.
Capital contributions of the limited partners aggregated $2,548,000.
Pursuant to the terms of the Agreement, the limited partners will receive a 98%
interest in the operating profits, losses, credits and cash distributions of the
Partnership.
The Partnership has made capital contributions to the Project Partnership
and is entitled to a 98% interest in the operating profits, losses, credits and
cash distributions of the Project Partnership. The Project Partnership's general
partners are entitled to the remaining 2% of the same.
Income Taxes
On the basis of Treasury Regulations, the general partners believe that the
Partnership will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss and cash distributions of the
Partnership are allocated in accordance with the partnership agreement and the
Internal Revenue Code and are reportable in the income tax returns of its
partners.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-10
<PAGE> 1898
LA COLINA PARTNERS, LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996 (UNAUDITED)
Depreciation
Depreciation is computed principally by use of the straight-line method
based upon the estimated useful lives of various classes of assets; buildings
are depreciated over 25 years and personal property assets are depreciated over
a 5 to 15 year period.
Other Assets
Other assets at December 31, 1997 and 1996 include deferred loan costs of
$122,974 and $143,870, respectively, which are amortized over the term of the
related borrowing. Deferred loan costs are shown net of accumulated
amortization.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Partnership considers
unrestricted cash and unrestricted highly liquid investments, with an original
maturity of three months or less when purchased, to be cash and cash
equivalents.
NOTE B -- RESTRICTED ESCROWS
Restricted escrow deposits at December 31, 1997 and 1996 were $115,192 and
$110,457, respectively, and consist of a reserve escrow established with a
portion of the proceeds of the loan. The funds are used for certain repair work,
debt service, expenses and property taxes or insurance. The funds in the reserve
escrow exceed the minimum balance required to be maintained by the lender during
the term of the loan.
NOTE C -- NOTES PAYABLE
Notes payable at December 31, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
---------- -----------
(UNAUDITED)
<S> <C> <C>
First mortgage note payable in monthly installments of
$38,684, including interest at 7.83%, due October 15,
2003; collateralized by land and buildings................ $5,049,151 $5,115,177
Second mortgage note payable in interest only monthly
installments of $1,068, at a rate of 7.83%, with principal
due October 15, 2003; collateralized by land and
buildings................................................. 163,710 163,710
Note payable to Angeles Acceptance Pool, L.P., ("AAP"), an
affiliate of API, represents an unsecured working capital
loan with interest at prime plus 3% payable monthly with
principal and any accrued interest to be repaid at the
earlier of 1) the sale or refinancing of the investment
property, or 2) November 25, 1997......................... -- 539,587
---------- ----------
Principal balance at year end............................... 5,212,861 5,818,474
Less unamortized discount................................... (60,523) (71,473)
---------- ----------
$5,152,338 $5,747,001
========== ==========
</TABLE>
F-11
<PAGE> 1899
LA COLINA PARTNERS, LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997 AND 1996 (UNAUDITED)
Scheduled net principal payments of the notes during the years subsequent
to December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998.................................................... $ 71,386
1999.................................................... 77,179
2000.................................................... 83,444
2001.................................................... 90,218
2002.................................................... 97,541
Thereafter.............................................. 4,793,093
----------
$5,212,861
==========
</TABLE>
The principal balance of the mortgage notes may be prepaid in whole upon
payment of a penalty of the greater of one percent of the unpaid principal
balance at the time of prepayment or the present value of the excess of interest
which would be incurred at the stated rate under the notes over the interest
which would be incurred at the Treasury constant maturity for U.S. Government
obligations.
NOTE D -- TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership and the Project Partnership have no administrative or
management employees and are dependent on the general partners for the
management and administration of all partnership activities. The Project
Partnership is obligated to pay a property management fee equal to 5% of gross
monthly collections. In addition to the management fee, the partnership
agreement provides for payments of a partnership administration fee to general
partners and reimbursement of certain expenses incurred by general partners on
behalf of the Partnership and the Project Partnership.
Transactions with the Managing General Partner and its affiliates are as
follows:
<TABLE>
<CAPTION>
1997 1996
TYPE OF TRANSACTION AMOUNT AMOUNT
- ------------------- ------- -----------
(UNAUDITED)
<S> <C> <C>
Property management fee........................ $83,502 $80,878
Reimbursements for services of affiliates...... $32,910 $32,430
Construction oversight reimbursements.......... $ 7,019 $12,940
</TABLE>
F-12
<PAGE> 1900
PRO FORMA FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
AS OF SEPTEMBER 30, 1998 AND FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1998
INTRODUCTION
On October 1, 1998, Apartment Investment and Management Company ("AIMCO")
completed its merger with Insignia Financial Group ("IFG") ("the IFG Merger").
In the IFG Merger, IFG's common stock was converted into 8,423,751 shares of
Class E Cumulative Convertible Preferred Stock of AIMCO ("Class E Preferred
Stock") whose issue date market value approximately equaled $292 million. In
addition to receiving the same dividends as holders of AIMCO Common Stock,
holders of Class E Preferred Stock will be entitled to a special dividend of
approximately $50 million in the aggregate. When that special dividend is paid
in full, the Class E Preferred Stock will automatically convert into AIMCO
Common Stock on a one-for-one basis, subject to antidilution adjustments, if
any. In addition, AIMCO assumed approximately $411 million in indebtedness and
other liabilities of IFG and its subsidiaries and subsidiaries of AIMCO, assumed
approximately $149.5 million of convertible securities and purchased
approximately $5 million of IFG stock prior to the Merger. AIMCO and Insignia
Properties Trust ("IPT") have completed a merger in which IPT has merged into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). In the IPT Merger, shares of
IPT common stock not held by AIMCO were converted into 4,826,745 shares of AIMCO
Class A Common Stock whose market value approximately equaled $152 million.
AIMCO assumed approximately $68 million in indebtedness. In connection with the
IFG Merger and the IPT Merger, AIMCO incurred approximately $55 million in
transaction costs for a combined transactional value of approximately $1,183
million. AIMCO contributed substantially all the assets and liabilities of
Insignia acquired in the Insignia Merger to AIMCO Properties, L.P. (together
with its subsidiaries and other controlled entities, the "Partnership") (and
together with entities in which that Partnership has a controlling financial
interest, the "Company") in exchange for 8,423,751 Class E Preferred Units. The
Class E Preferred Units have terms substantially the same as the Class E
Preferred Stock. In addition, AIMCO contributed substantially all the assets and
liabilities of IPT acquired in the IPT Merger to the Partnership in exchange for
4,826,745 limited partnership units in the Partnership ("OP Units"). In
connection with the IFG Merger, the Partnership assumed property management of
approximately 192,000 multifamily units which consist of general and limited
partnership investments in 115,000 units and third party management of 77,000
units. Insignia Properties Trust ("IPT"), which prior to the IFG Merger was a
subsidiary of IFG, owns a 32% weighted average general and limited partnership
interest in approximately 51,000 units.
Immediately following the IFG Merger, in order to satisfy certain
requirements of the Internal Revenue Code of 1986 (the "Code") applicable to
AIMCO's status as a REIT, AIMCO engaged in a reorganization (the "IFG
Reorganization") of the assets and operations of IFG whereby IFG's operations
are being conducted through corporations (the "Unconsolidated Subsidiaries") in
which the Partnership holds non-voting preferred stock that represents a 95%
economic interest, and certain officers and/or directors of AIMCO hold, directly
or indirectly, all of the voting common stock, representing a 5% economic
interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
In May and September of 1997, AIMCO directly or indirectly through a
subsidiary, acquired (the "NHP Stock Purchase") an aggregate of 6,930,122 shares
of common stock ("NHP Common Stock") of NHP. On December 8, 1997, AIMCO acquired
the remaining shares of NHP Common Stock in a merger transaction accounted for
as a purchase (the "NHP Merger"). As a result of the NHP Merger, AIMCO issued
6,759,148 shares of AIMCO Common Stock, valued at $180.8 million, and paid $86.5
million in cash. The total cost of the purchase of NHP was $349.5 million.
Substantially all assets and liabilities of NHP were contributed by AIMCO to the
Partnership.
In June 1997, the Company purchased a group of companies (the "NHP Real
Estate Companies") affiliated with NHP that hold general and limited partnership
interests in partnerships (the "NHP
P-1
<PAGE> 1901
Partnerships") that own 534 conventional and affordable multifamily apartment
properties (the "NHP Properties") containing 87,659 units, a captive insurance
subsidiary and certain related assets (the "NHP Real Estate Acquisition"). The
Company paid aggregate consideration of $54.8 million in cash and warrants that
entitle the holders to purchase 399,999 shares of AIMCO Common Stock at an
exercise price of $36.00 per share. The Company engaged in a reorganization (the
"NHP Real Estate Reorganization") of its interests in the NHP Real Estate
Companies, which resulted in certain of the assets of the NHP Real Estate
Companies being owned by a limited partnership (the "Unconsolidated
Partnership") in which the Partnership holds 99% limited partner interest and
certain directors and officers of AIMCO directly or indirectly, hold a 1%
general partner interest.
Immediately following the NHP Merger, in order to satisfy certain
requirements of the Code applicable to AIMCO's status as a REIT, AIMCO engaged
in a reorganization (the "NHP Reorganization") of the assets and operations of
NHP that resulted in the Master Property Management Agreement being terminated
and NHP's operations being conducted through Unconsolidated Subsidiaries in
which the AIMCO Operating Partnership holds non-voting preferred stock that
represents a 95% economic interest, and certain officers and/or directors of
AIMCO hold, directly or indirectly, all of the voting common stock, representing
a 5% economic interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
On May 8, 1998, AIMCO completed a merger with Ambassador Apartments, Inc.
("Ambassador"), pursuant to which Ambassador was merged into AIMCO (the
"Ambassador Merger"). Each outstanding share of stock ("Ambassador Common
Stock") of Ambassador, other than those shares held by AIMCO or Ambassador, were
converted into 0.553 (the "Conversion Ratio") shares of AIMCO Common Stock. Any
outstanding options to purchase Ambassador Common Stock were converted, at the
election of the option holder, into cash or options to purchase AIMCO Common
Stock at such options' then current exercise price divided by the Conversion
Ratio. In accordance with the Agreement and Plan of Merger, dated December 23,
1997 and supplemented by letter dated as of March 11, 1998 (the "Ambassador
Merger Agreement"), the outstanding shares of Class A Senior Cumulative
Convertible Preferred Stock of Ambassador, (the "Ambassador Preferred Stock")
were redeemed and converted into Ambassador Common Stock prior to the Ambassador
Merger. Following the consummation of the Ambassador Merger, a subsidiary of the
Partnership was merged with and into the Ambassador Operating Partnership (the
"Ambassador OP Merger"). Each outstanding unit of limited partnership interest
in the Ambassador Operating Partnership was converted into the right to receive
0.553 OP Units, and as a result, the Ambassador Operating Partnership became a
99.9% owned subsidiary partnership of the Partnership.
Also during 1997, the Partnership (i) (a) acquired 44 properties for
aggregate purchase consideration of $467.4 million, of which $56 million was
paid in the form of 1.9 million OP Units (b) paid $34.2 million in cash and
issued OP Units valued at $7.3 million in connection with the acquisition of
partnership interests through tender offers in certain partnerships ((a) and (b)
together are the "1997 Property Acquisitions") and (c) paid $19.9 million to
acquire 886,600 shares of Ambassador Common Stock (together with the 1997
Property Acquisitions, the "1997 Acquisitions"); (ii) sold (a) approximately
16,367,000 shares of AIMCO Common Stock for aggregate net proceeds of $513.4
million; (b) 750,000 shares of AIMCO Class B Cumulative Convertible Preferred
Stock for net proceeds of $75 million; and (c) 2,400,000 shares of AIMCO Class C
9% Cumulative Preferred Stock for net proceeds of $58.1 million; of which all
proceeds were contributed by AIMCO to the Partnership in exchange for 16,367,000
OP Units, 750,000 Class B Preferred Units, and 2,400,000 Class C Preferred Units
(collectively, the "1997 Stock Offerings"); and (iii) sold five real estate
properties (the "1997 Dispositions").
Also during 1998, AIMCO (i) (a) sold 4,200,000 shares of its Class D
Cumulative Preferred Stock for net proceeds of $101.5 million (the "Class D
Preferred Stock Offering"); (b) sold 4,050,000 shares of its Class G Cumulative
Preferred Stock for net proceeds of $98.0 million (the "Class G Preferred Stock
Offering"); (c) sold 2,000,000 shares of its Class H Cumulative Preferred Stock
for net proceeds of $48.1 million (the "Class H Preferred Stock Offering"); and
(d) sold 1,000,000 shares of its Class J Cumulative Convertible Preferred Stock
in a private placement for $100.0 million (the "Class J Preferred
P-2
<PAGE> 1902
Stock Offering"); of which all proceeds were contributed by AIMCO to the
Partnership in exchange for 4,050,000 Class G Preferred Units, 2,000,000 Class H
Preferred Units and 1,000,000 shares of Class J Preferred Units (collectively,
the "1998 Stock Offerings"); (ii) purchased 29 properties for aggregate purchase
consideration of $312.7 million, of which $52.2 million was paid in the form of
OP Units (the "1998 Acquisitions"); (iii) sold two real estate properties (the
"1998 Dispositions"); (iv) contracted to purchase two properties for aggregate
purchase consideration of $62.1 million, of which $26.4 million will be paid in
the form of OP units (the "Probable Purchases") and (v) sold 1,400,000 Class B
Preferred Partnership Units of a subsidiary and warrants to purchase 875,000
shares of AIMCO Class A Common Stock for $35.0 million (the "Preferred
Partnership Unit Offering").
PRO FORMA FINANCIAL INFORMATION OF THE PARTNERSHIP (INSIGNIA MERGER)
The following Pro Forma Consolidated Balance Sheet (Insignia Merger) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) the purchase
of nine properties for an aggregate purchase price of $62.5 million; (ii) the
Class J Preferred Stock Offering; (iii) the Probable Purchases; (iv) the IFG
Merger; (v) the IPT Merger; (vi) the IFG Reorganization; and (vii) the Preferred
Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) the
1997 Acquisitions; (ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions;
(iv) the NHP Real Estate Acquisition; (v) the NHP Real Estate Reorganization;
(vi) the NHP Stock Purchase; (vii) the NHP Merger; (viii) the NHP
Reorganization; (ix) the 1998 Stock Offerings; (x) the 1998 Acquisitions; (xi)
the Probable Purchases; (xii) the 1998 Dispositions; (xiii) the Ambassador
Merger; (xiv) the IFG Merger; (xv) the merger between IPT and Angeles Mortgage
Investment Trust ("AMIT") ("the AMIT Merger"); (xvi) the IPT Merger; (xvii) the
IFG Reorganization; and (xviii) the Preferred Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1997: (i)
the 1998 Stock Offerings; (ii) the 1998 Acquisitions; (iii) the Probable
Purchases; (iv) the 1998 Dispositions; (v) the Ambassador Merger; (vi) the IFG
Merger; (vii) the AMIT Merger; (viii) the IPT Merger; (ix) the IFG
Reorganization; and (x) the Preferred Partnership Unit offering.
The following Pro Forma Financial Information (Insignia Merger) is based,
in part, on the following historical financial statements: (i) the audited
Consolidated Financial Statements of the Partnership for the year ended December
31, 1997; (ii) the unaudited Consolidated Financial Statements of the
Partnership for the nine months ended September 30, 1998; (iii) the audited
Consolidated Financial Statements of Ambassador for the year ended December 31,
1997; (iv) the unaudited Consolidated Financial Statements of Ambassador for the
four months ended April 30, 1998; (v) the audited Consolidated Financial
Statements of IFG for the year ended December 31, 1997; (vi) the audited
Consolidated Financial Statements of AMIT for the year ended December 31, 1997;
(vii) the unaudited Consolidated Financial Statements of IFG for the nine months
ended September 30, 1998; (viii) the unaudited Financial Statements of AMIT for
the period from January 1, 1998 to September 17, 1998; (ix) the unaudited
Consolidated Financial Statements of NHP for the nine months ended September 30,
1997; (x) the unaudited Combined Financial Statements of the NHP Real Estate
Companies for the three months ended March 31, 1997; (xi) the unaudited
Financial Statements of NHP Southwest Partners, L.P. for the three months ended
March 31, 1997; (xii) the unaudited Combined Financial Statements of the NHP New
LP Entities for the three months ended March 31, 1997; (xiii) the unaudited
Combined Financial Statements of the NHP Borrower Entities for the three months
ended March 31, 1997; (xiv) the unaudited Historical Summaries of Gross Income
and Certain Expenses of The Bay Club at Aventura for the three months ended
March 31, 1997; (xv) the unaudited Historical Summary of Gross Income and Direct
Operating Expenses of Morton Towers for the six months ended June 30, 1997;
(xvi) the unaudited Combined Statement of Revenues and Certain Expenses of the
Thirty-Five Acquisition Properties for the six months ended June 30, 1997;
(xvii) the unaudited Statement of
P-3
<PAGE> 1903
Revenues and Certain Expenses of First Alexandria Associates, a Limited
Partnership for the nine months ended September 30, 1997; (xviii) the unaudited
Statement of Revenues and Certain Expenses of Country Lakes Associates Two, a
Limited Partnership for the nine months ended September 30, 1997; (xix) the
unaudited Statement of Revenues and Certain Expenses of Point West Limited
Partnership, A Limited Partnership for the nine months ended September 30, 1997;
(xx) the unaudited Statement of Revenues and Certain Expenses for The Oak Park
Partnership for the nine months ended September 30, 1997; (xxi) the audited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the year ended December 31, 1997,
(xxii) the audited Combined Historical Summary or Gross Income and Direct
Operating Expenses of the Cirque Apartment Communities for the year ended
December 31, 1997; (xxiii) the audited Combined Historical Summary of Gross
Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the year ended December 31, 1997; (xxiv) the audited
Historical Summary of Gross Income and Direct Operating Expenses of the Calhoun
Beach Club Apartments for the year ended December 31, 1997; (xxv) the unaudited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the nine months ended September
30, 1998; (xxvi) the unaudited Combined Historical Summary of Gross Income and
Direct Operating Expenses of the Cirque Apartment Communities for the three
months ended March 31, 1998; (xxvii) the unaudited Combined Historical Summary
of Gross Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the nine months ended September 30, 1998; and (xxviii) the
unaudited Historical Summary of Gross Income and Direct Operating Expenses of
Calhoun Beach Club Apartments for the nine months ended September 30, 1998. The
following Pro Forma Financial Information should be read in conjunction with
such financial statements and the notes thereto incorporated by reference
herein.
The unaudited Pro Forma Financial Information (Insignia Merger) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
1997 Acquisitions, the 1998 Acquisitions, and the Probable Purchases are
adjusted to estimated fair market value, based upon preliminary estimates, which
are subject to change as additional information is obtained. The allocations of
purchase costs are subject to final determination based upon estimates and other
evaluations of fair market value. Therefore, the allocations reflected in the
following unaudited Pro Forma Financial Information may differ from the amounts
ultimately determined.
The following unaudited Pro Forma Financial Information (Insignia Merger)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions or results of
operations. In the opinion of the Partnership's management, all material
adjustments necessary to reflect the effects of these transactions have been
made.
P-4
<PAGE> 1904
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS IFG AIMCO BEFORE IFG
AND PROBABLE IFG MERGER IFG REORGANIZATION
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) REORGANIZATION(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Real estate.............. $2,355,122 $202,332 $ 44,488 $ 23,880(G) $2,625,822 $ --
Property held for sale... 42,212 -- -- -- 42,212 --
Investments in
securities............. -- -- -- 443,513(G)
(443,513)(H) -- --
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 127,082 -- -- -- 127,082 59,195(I)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 246,847 -- 232,892 444,570(G) 924,309 --
Mortgage notes
receivable............. -- -- 20,916 -- 20,916
Cash and cash
equivalents............ 43,681 6,107 73,064 -- 122,852 (17,897)(J)
Restricted cash.......... 83,187 -- 2,691 -- 85,878 (1,352)(J)
Accounts receivable...... 11,545 -- 54,060 (32,234)(G) 33,371 (5,471)(J)
Deferred financing
costs.................. 21,835 -- 7,020 (7,020)(G) 21,835 --
Goodwill................. 120,503 -- 19,503 111,018(G) 251,024 --
Property management
contracts.............. -- -- 86,419 31,147(G) 117,566 (79,195)(I)
Other assets............. 69,935 -- 20,128 (4,533)(G) 85,530 (2,860)(J)
---------- -------- -------- --------- ---------- --------
Total Assets..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
Secured notes payable.... $ 774,676 $122,568 $ 29,002 $ -- $ 926,246 $ --
Secured tax-exempt bond
financing.............. 399,925 -- -- -- 399,925 --
Secured short-term
financing.............. 50,000 (50,000) 332,691 (300,000)(G) 32,691 --
Unsecured short-term
financing.............. 50,800 (50,800) -- 300,000(G) 300,000 --
Accounts payable, accrued
and other
liabilities............ 131,799 -- 33,241 50,000(G)
53,333(G)
4,935(G)
2,525(G) 275,833 (27,580)(J)
Deferred tax liability... -- -- 18,802 1,198(G) 20,000 (20,000)(I)
Security deposits and
prepaid rents.......... 13,171 -- 3,533 (3,533) 13,171 --
---------- -------- -------- --------- ---------- --------
1,420,371 21,768 417,269 108,458 1,967,866 (47,580)
Minority interest........ 42,086 37,345 108,485 (108,485)(G) 79,431 --
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. -- -- 144,282 5,218 149,500 --
Redeemable Partnership
Units.................. 232,405 45,176 -- -- 277,581 --
Partners' capital and
shareholders' equity
Common stock........... -- -- 320 (320)(G) -- --
Additional paid-in
capital.............. -- -- (86,959) 86,959(G) -- --
Distributions in excess
of earnings.......... -- -- (22,216) 22,216(G) -- --
General and Special
Limited Partner...... 1,039,525 4,150 -- 443,513(H)
9,269(G) 1,496,457 --
Preferred Units........ 387,562 100,000 -- -- 487,562 --
---------- -------- -------- --------- ---------- --------
1,427,087 104,150 (108,855) 561,637 1,984,019 --
---------- -------- -------- --------- ---------- --------
Total Liabilities
and Equity..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
<CAPTION>
PRO FORMA
----------
<S> <C>
Real estate.............. $2,625,822
Property held for sale... 42,212
Investments in
securities.............
--
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 186,277(K)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 924,309
Mortgage notes
receivable............. 20,916
Cash and cash
equivalents............ 104,955
Restricted cash.......... 84,526
Accounts receivable...... 27,900
Deferred financing
costs.................. 21,835
Goodwill................. 251,024
Property management
contracts.............. 38,371
Other assets............. 82,670
----------
Total Assets..... $4,410,817
==========
Secured notes payable.... $ 926,246
Secured tax-exempt bond
financing.............. 399,925
Secured short-term
financing.............. 32,691
Unsecured short-term
financing.............. 300,000
Accounts payable, accrued
and other
liabilities............
248,253
Deferred tax liability... --
Security deposits and
prepaid rents.......... 13,171
----------
1,920,286
Minority interest........ 79,431
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. 149,500
Redeemable Partnership
Units.................. 277,581
Partners' capital and
shareholders' equity
Common stock........... --
Additional paid-in
capital.............. --
Distributions in excess
of earnings.......... --
General and Special
Limited Partner......
1,496,457
Preferred Units........ 487,562
----------
1,984,019
----------
Total Liabilities
and Equity..... $4,410,817
==========
</TABLE>
P-5
<PAGE> 1905
- ---------------
(A) Represents the unaudited historical consolidated financial position of the
Partnership as of September 30, 1998.
(B) Represents adjustments to reflect the purchase of ten properties for an
aggregate purchase price of $140.2 million; the Class J Preferred Stock
Offering; the Probable Purchases; and the Preferred Partnership Unit
Offering.
(C) Represents the unaudited historical consolidated financial position of IFG
as of September 30, 1998.
(D) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the issuance of 8,423,751 shares of AIMCO Common Stock, based
on consideration to holders of IFG common stock outstanding as of the date
of the IFG Merger; (ii) the issuance of 4,826,745 shares of AIMCO Class A
Common Stock to holders of IPT common stock (other than AIMCO); (iii) the
payment of a special dividend of $50,000; (iv) the assumption of $149,500
of the convertible debentures of IFG; (v) the allocation of the combined
purchase price of IFG and IPT based on the preliminary estimates of
relative fair market value of the assets and liabilities of IFG and IPT;
and (vi) the contribution by AIMCO of substantially all the assets and
liabilities of Insignia and IPT to the Partnership in exchange for OP
Units.
(E) Represents the effects of AIMCO's acquisition of IFG immediately after the
IFG Merger. These amounts do not give effect to the IFG Reorganization,
which includes the transfers of certain assets and liabilities of IFG to
the combined Unconsolidated Subsidiaries. The IFG Reorganization occurred
immediately after the IFG Merger so that AIMCO could maintain its
qualification as a REIT. This column is included as an intermediate step to
assist the reader in understanding the entire nature of the IFG Merger and
related transactions.
(F) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party property management operations.
The adjustments reflect the transfer of assets valued at the Partnership's
new basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(G) In connection with the IFG Merger and the IPT Merger, AIMCO became
obligated to issue a total of 13,250,496 shares of AIMCO Common Stock
The total purchase price of IFG and IPT is $1,128,009, as follows:
<TABLE>
<S> <C>
Issuance of 8,423,751 shares of AIMCO Common Stock in the
IFG Merger, at $34.658 per share.......................... $ 291,949
Issuance of 4,826,745 shares of AIMCO Common Stock in the
IPT Merger, at $31.50 per share........................... 151,564
Assumption of Convertible Debentures........................ 149,500
Assumption of liabilities as indicated in the Merger
Agreement................................................. 397,459
Transaction costs........................................... 53,333
Generation of deferred tax liability........................ 20,000
Special dividend............................................ 50,000
Purchase of IFG Common Stock prior to merger................ 4,935
Consideration for options................................... 9,269
----------
Total............................................. $1,128,009
==========
</TABLE>
P-6
<PAGE> 1906
The purchase price was allocated to the various assets of IFG acquired in
the IFG Merger, as follows:
<TABLE>
<S> <C>
Purchase price.............................................. $1,128,009
Historical basis of IFG's assets acquired................... (561,181)
----------
Step-up to record the fair value of IFG's assets
acquired............................................... $ 566,828
==========
</TABLE>
This step-up was applied to IFG's assets as follows:
<TABLE>
<S> <C>
Real estate................................................. $ 23,880
Investment in real estate partnerships...................... 444,570
Decrease in accounts receivable............................. (32,234)
Decrease in deferred loan costs............................. (7,020)
Management contracts........................................ 31,147
Increase in goodwill........................................ 111,018
Reduction in value of other assets.......................... (4,533)
--------
Total............................................. $566,828
========
</TABLE>
The fair value of IFG's assets, primarily the real estate and management
contracts, was calculated based on estimated future cash flows of the
underlying assets.
As of September 30, 1998, IFG's stockholder's equity was $(108,855), which
is detailed as follows:
<TABLE>
<S> <C>
Common stock................................................ $ 320
Additional paid-in capital.................................. (86,959)
Distributions in excess of earnings......................... (22,216)
---------
Total............................................. $(108,855)
=========
</TABLE>
Upon completion of the IFG Merger, the entire amount of the stockholder's
equity was eliminated.
In addition, the minority interest in other partnerships of IFG of $108,485
will be eliminated upon the IPT Merger.
At the time of the IFG Merger, AIMCO obtained unsecured short-term
financing of $300 million. The proceeds were used to repay secured
short-term financing of IFG that AIMCO assumed.
(H) Represents the issuance of a total of 13,250,496 OP Units to AIMCO and the
concurrent issuance of 13,250,496 shares of AIMCO Common Stock to IFG and
IPT stockholders, in exchange for all the shares of IFG and IPT common
stock.
In accordance with the IFG Merger Agreement, AIMCO became obligated to
issue 8,423,751 shares of Class E Preferred Stock, approximately equal to
$292 million. Each share of Class E Preferred Stock will automatically
convert to one share of AIMCO Common Stock upon the payment of the special
dividend thereon. As such, for the purpose of preparing the pro forma
financial statements, AIMCO's management believes that the Class E
Preferred Stock is substantially the same as AIMCO Common Stock, and that
the fair value of the Class E Preferred Stock approximates the fair value
of the AIMCO Common Stock. Upon the payment of the special dividend on the
Class E Preferred Stock and the conversion of the Class E Preferred Stock
to AIMCO Common Stock, the former IFG stockholders will own approximately
15.0% of the AIMCO Common Stock and the IPT stockholders will own
approximately 7.3% of AIMCO Common Stock. The special dividend on the Class
E Preferred Stock is intended to represent a distribution in an amount at
least equal to the earnings and profits of IFG at the time of the IFG
Merger, to which AIMCO succeeds.
Concurrent with the issuance of Class E Preferred Stock, the Partnership
will issue comparable Class E Preferred Units to AIMCO. The Class E
Preferred Units will have terms substantially the same as the Class E
Preferred Stock.
(I) Represents the increase in the Partnership's investment in Unconsolidated
Subsidiaries to reflect the contribution or sale of property management
contracts, including the related deferred tax liability, in exchange for
preferred stock and a note payable from the Unconsolidated Subsidiaries.
These assets and
P-7
<PAGE> 1907
liabilities are valued at the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(J) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries,
(K) Represents notes receivable from the Unconsolidated Subsidiaries of
$95,000, advances to the Unconsolidated Subsidiaries of $42,792, and equity
in the Unconsolidated Subsidiaries of $48,485. The combined pro forma
balance sheet of the Unconsolidated Subsidiaries as of September 30, 1998
is presented below, which reflects the effects of the IFG Merger, the IPT
Merger, and the IFG Reorganization as if such transactions had occurred as
of September 30, 1998.
P-8
<PAGE> 1908
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
IFG
HISTORICAL REORGANIZATION(i) PRO FORMA
---------- ----------------- ---------
<S> <C> <C> <C>
ASSETS
Real estate............................................ $ 22,376 $ -- $ 22,376
Cash and cash equivalents.............................. 16,919 17,897(ii) 34,816
Restricted cash........................................ 5,507 1,352(ii) 6,859
Management contracts................................... 47,846 79,195(iii) 127,041
Accounts receivable.................................... 13,109 5,471(ii) 18,580
Deferred financing costs............................... 3,117 -- 3,117
Goodwill............................................... 43,544 -- 43,544
Other assets........................................... 51,498 2,860(ii) 54,358
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable.................................. $114,302 $ 45,000(iii) $159,302
Accounts payable, accrued and other liabilities........ 56,773 27,580(ii) 84,353
Security deposits and deferred income.................. 334 --(ii) 334
Deferred tax liability................................. -- 20,000(iii) 20,000
-------- -------- --------
171,409 92,580 263,989
Common stock........................................... 2,061 747(iv) 2,808
Preferred stock........................................ 34,290 14,195(iii) 48,485
Retained earnings...................................... (3,844) -- (3,844)
Notes receivable on common stock purchases............. -- (747)(iv) (747)
-------- -------- --------
32,507 14,195 46,702
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
</TABLE>
- ---------------
(i) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the transfer of assets valued at the Partnership's new
basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(ii) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries, valued at the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(iii)Represents the transfer or sale of management contracts, the establishment
of an intercompany note, and the establishment of the related estimated net
deferred Federal and state tax liabilities at a combined rate of 40% for
the estimated difference between the book and tax basis of the net assets
of the Unconsolidated Subsidiaries. The primary component of the deferred
tax liability is the difference between the new basis of the property
management contracts, as a result of the allocation of the purchase price
of IFG, and the historical tax basis.
(iv) Represents the issuance of common stock to the common stockholders of the
Unconsolidated Subsidiaries in exchange for notes receivable, in order for
the common stockholders to maintain their respective ownership interest in
the Unconsolidated Subsidiaries.
P-9
<PAGE> 1909
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE NHP AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rental and other property
revenues........................ $193,006 $120,337(I)
11,012(J) $ 6,660 $ 93,329 $ -- $ 6,912
Property operating expenses....... (76,168) (59,466)(I)
(4,860)(J) (2,941) (36,088) -- (3,307)
Owned property management
expense......................... (6,620) (4,327)(I)
(602)(J) (282) -- -- --
Depreciation...................... (37,741) (26,645)(I)
(2,172)(J) (1,414) (18,979) (5,997)(O) (966)
-------- -------- ------- -------- ------- --------
Income from property operations... 72,477 33,277 2,023 38,262 (5,997) 2,639
-------- -------- ------- -------- ------- --------
Management fees and other
income.......................... 13,937 -- 7,813 -- -- 94,330
Management and other expenses..... (9,910) -- (5,394) -- -- (57,615)
Corporate overhead allocation..... (588) -- -- -- -- --
Amortization...................... (1,401) -- (5,800) -- -- (16,768)
-------- -------- ------- -------- ------- --------
Income from service company
business........................ 2,038 -- (3,381) -- -- 19,947
Minority interest in service
company business................ (10) -- -- -- -- --
-------- -------- ------- -------- ------- --------
AIMCO's share of income from
service company business........ 2,028 -- (3,381) -- -- 19,947
-------- -------- ------- -------- ------- --------
General and administrative
expenses........................ (5,396) -- (1,025) (7,392) 7,392(P) (21,199)
Interest expense.................. (51,385) (3,451)(K)
(2,497)(L) (5,462) (26,987) (221)(Q) (9,035)
Interest income................... 8,676 -- 1,900 -- -- 10,967
Minority interest................. 1,008 458(M) 16 (851) 705(R) (12,871)
Equity in losses of unconsolidated
partnerships.................... (1,798) (122)(N) (8,542) 405 -- 12,515
Equity in earnings of
unconsolidated subsidiaries..... 4,636 -- 5,790 -- -- --
-------- -------- ------- -------- ------- --------
Income (loss) from operations..... 30,246 27,665 (8,681) 3,437 1,879 2,963
Income tax provision.............. -- -- -- -- -- 1,701
Gain on dispositions of
property........................ 2,720 (2,720) -- -- -- 80
-------- -------- ------- -------- ------- --------
Income (loss) before extraordinary
item............................ 32,966 24,945 (8,681) 3,437 1,879 4,744
Extraordinary item -- early
extinguishment of debt.......... (269) 269 -- -- -- --
-------- -------- ------- -------- ------- --------
Net income........................ 32,697 25,214 (8,681) 3,437 1,879 4,744
Income attributable to preferred
unitholders..................... 2,315 39,859 -- -- -- --
-------- -------- ------- -------- ------- --------
Income attributable to common
unitholders..................... $ 30,382 $(14,645) $(8,681) $ 3,437 $ 1,879 $ 4,744
======== ======== ======= ======== ======= ========
Basic earnings per OP unit........ $ 1.09
========
Diluted earnings per OP unit...... $ 1.08
========
Weighted average OP units
outstanding..................... 27,732
========
Weighted average OP units and
equivalents outstanding......... 28,113
========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(G) ADJUSTMENTS(H) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property
revenues........................
$ -- $ -- $ 431,256
Property operating expenses.......
-- -- (182,830)
Owned property management
expense.........................
-- -- (11,831)
Depreciation......................
(2,350)(S) -- (96,264)
-------- -------- ---------
Income from property operations... (2,350) -- 140,331
-------- -------- ---------
Management fees and other
income.......................... -- (74,404)(X) 41,676
Management and other expenses..... -- 49,236(X) (23,683)
Corporate overhead allocation..... -- -- (588)
Amortization...................... (32,699)(T) 30,188(Y) (26,480)
-------- -------- ---------
Income from service company
business........................ (32,699) 5,020 (9,075)
Minority interest in service
company business................ -- -- (10)
-------- -------- ---------
AIMCO's share of income from
service company business........ (32,699) 5,020 (9,085)
-------- -------- ---------
General and administrative
expenses........................ -- 6,249(X) (21,371)
Interest expense..................
(14,750) -- (113,788)
Interest income................... -- 191(Z) 21,734(BB)
Minority interest................. 1,552(U) -- (9,983)
Equity in losses of unconsolidated
partnerships.................... (29,995)(V) -- (27,537)
Equity in earnings of
unconsolidated subsidiaries..... -- (4,578)(AA) 5,848(DD)
-------- -------- ---------
Income (loss) from operations..... (78,242) 6,882 (13,851)
Income tax provision.............. (1,701)(W) -- --
Gain on dispositions of
property........................ (80) -- --
-------- -------- ---------
Income (loss) before extraordinary
item............................ (80,023) 6,882 (13,851)
Extraordinary item -- early
extinguishment of debt.......... -- -- --
-------- -------- ---------
Net income........................ (80,023) 6,882 (13,851)
Income attributable to preferred
unitholders..................... -- -- 42,174(CC)
-------- -------- ---------
Income attributable to common
unitholders..................... $(80,023) $ 6,882 $ (56,025)(BB)
======== ======== =========
Basic earnings per OP unit........ $ (0.83)(BB)
=========
Diluted earnings per OP unit...... $ (0.83)(BB)
=========
Weighted average OP units
outstanding..................... 67,522
=========
Weighted average OP units and
equivalents outstanding......... 68,366
=========
</TABLE>
P-10
<PAGE> 1910
- ---------------
(A) Represents the Partnership's audited consolidated results of operations
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1997: (i) the 1997 Acquisitions; (ii) the 1997 Stock
Offerings; (iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings;
(v) the 1998 Acquisitions; (vi) the Probable Purchases; (vii) the 1998
Dispositions; and (v) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues................. $ 6,660(v) $ 16,842 $ -- $(16,842)(xvii) $ 6,660
Property operating
expenses................. (2,941)(v) (8,411) -- 8,411 (xvii (2,941)
Owned property management
expense.................. (282)(v) (862) -- 862 (xvii (282)
Depreciation............... (1,414)(vi) (2,527) (693)(xi) 3,220 (xvii (1,414)
------- -------- ------- -------- -------
Income from property
operations............... 2,023 5,042 (693) (4,349) 2,023
------- -------- ------- -------- -------
Management fees and other
income................... 1,405(vii) 72,176 -- (65,768)(xviii) 7,813
Management and other
expenses................. (2,263)(viii) (35,267) -- 32,136 (xviii (5,394)
Amortization............... -- (9,111) (4,432)(xii) 7,743 (xix (5,800)
------- -------- ------- -------- -------
Income from service company
business................. (858) 27,798 (4,432) (25,889) (3,381)
------- -------- ------- -------- -------
General and administrative
expenses................. -- (16,266) 8,668 (xiii 6,573 (xviii (1,025)
Interest expense........... (5,082)(ix) (10,685) -- 10,305(xx) (5,462)
Interest income............ 540(v) 1,963 -- (603)(xxi) 1,900
Minority interest.......... 16(v) -- -- -- 16
Equity in losses of
unconsolidated
partnerships............. (3,905)(x) -- (4,631)(xiv) (6) (8,542)
Equity in earnings of
unconsolidated
subsidiaries............. -- -- (4,636)(xv) 10,426 (xxii 5,790
------- -------- ------- -------- -------
Income (loss) from
operations............... (7,266) 7,852 (5,724) (3,543) (8,681)
Income tax provision....... -- (3,502) 3,502 (xvi) -- --
------- -------- ------- -------- -------
Net income (loss).......... $(7,266) $ 4,350 $(2,222) $ (3,543) $(8,681)
======= ======== ======= ======== =======
</TABLE>
- ---------------
(i) Represents the adjustment to record activity from January 1, 1997 to
the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. The historical
financial statements of the NHP Real Estate Companies consolidate
certain real estate partnerships in which they have an interest that
will be presented on the equity method by the Partnership as a
result of the NHP Real Estate Reorganization. In addition,
represents adjustments to record additional depreciation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest
expense incurred in connection with borrowings incurred by the
Partnership to consummate the NHP Real Estate Acquisition.
(ii)Represents the unaudited consolidated results of operations of NHP
for the period from January 1, 1997 through December 8, 1997 (date
of the NHP Merger).
P-11
<PAGE> 1911
(iii) Represents the following adjustments occurring as a result of the
NHP Merger: (i) the reduction in personnel costs, primarily
severance costs, pursuant to a restructuring plan; (ii) the
incremental depreciation of the purchase price adjustment related
to real estate; (iii) the incremental amortization of the
purchase price adjustment related to the management contracts,
furniture, fixtures and equipment, and goodwill; (iv) the
reversal of equity in earnings of NHP during the pre-merger
period when the Partnership held a 47.62% interest in NHP; and
(v) the amortization of the increased basis in investments in
real estate partnerships based on the purchase price adjustment
related to real estate and an estimated average life of 20 years.
(iv) Represents adjustments related to the NHP Reorganization, whereby
the Partnership contributed or sold to the Unconsolidated
Subsidiaries and the Unconsolidated Partnership: (i) certain
assets and liabilities of NHP, primarily related to the
management operations and other businesses owned by NHP and (ii)
12 real estate properties containing 2,905 apartment units. The
adjustments represent (i) the related revenues and expenses
primarily related to the management operations and other
businesses owned by NHP and (ii) the historical results of
operations of such real estate partnerships contributed, with
additional depreciation and amortization recorded related to the
Partnership's new basis resulting from the allocation of the
combined purchase price of NHP and the NHP Real Estate Companies.
(v) Represents adjustments to reflect the acquisition of the NHP Real
Estate Companies and the corresponding historical results of
operations as if they had occurred on January 1, 1997.
(vi) Represents incremental depreciation related to the consolidated
real estate assets purchased from the NHP Real Estate Companies.
Buildings and improvements are depreciated on the straight-line
method over a period of 30 years, and furniture and fixtures are
depreciated on the straight-line method over a period of 5 years.
(vii) Represents the adjustment to record the revenues from ancillary
businesses purchased from the NHP Real Estate Companies as if the
acquisition had occurred on January 1, 1997.
(viii) Represents $4,878 related to the adjustment to record
the expenses from ancillary businesses purchased from the NHP
Real Estate Companies as if the acquisition had occurred on
January 1, 1997, less $2,615 related to a reduction in personnel
costs pursuant to a restructuring plan, approved by the Company's
senior management, assuming that the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997. The
restructuring plan specifically identifies all significant
actions to be taken to complete the restructuring plan, including
the reduction of personnel, job functions, location and the date
of completion.
(ix) Represents adjustments in the amount of $3,391 to reflect the
acquisition of the NHP Real Estate Companies and the
corresponding historical results of operations as if they had
occurred on January 1, 1997, as well as the increase in interest
expense in the amount of $1,691 related to borrowings on the
Partnership's credit facilities of $55,807 to finance the NHP
Real Estate Acquisition.
(x) Represents adjustments in the amount of $2,432 to reflect the
acquisition of the NHP Real Estate Companies and the
corresponding historical results of operations as if they had
occurred on January 1, 1997, as well as amortization of $1,473
related to the increased basis in investment in real estate
partnerships, as a result of the allocation of the purchase price
of the NHP Real Estate Companies, based on an estimated average
life of 20 years.
(xi) Represents incremental depreciation related to the real estate
assets purchased from NHP. Buildings and improvements are
depreciated on the straight-line method over a period of 20
years, and furniture and fixtures are depreciated on the
straight-line method over a period of 5 years.
(xii) Represents incremental depreciation and amortization of the
tangible and intangible assets related to the property management
and other business operated by the Unconsolidated
P-12
<PAGE> 1912
Subsidiaries, based on the Partnership's new basis as adjusted
by the allocation of the combined purchase price of NHP
including amortization of management contracts of $3,782,
depreciation of furniture, fixtures and equipment of $2,018 and
amortization of goodwill of $7,743, less NHP's historical
depreciation and amortization of $9,111. Management contracts
are amortized using the straight-line method over the weighted
average life of the contracts estimated to be approximately 15
years. Furniture, fixtures and equipment are depreciated using
the straight-line method over the estimated life of 3 years.
Goodwill is amortized using the straight-line method over 20
years.
(xiii) Represents a reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan, approved by the
Company's senior management, specifically identifying all
significant actions to be taken to complete the restructuring
plan, assuming that the NHP Merger had occurred on January 1,
1997 and that the restructuring plan was completed on January
1, 1997.
(xiv) Represents adjustment for amortization of the increased basis
in investments in real estate partnerships, as a result of the
allocation of the combined purchase price of NHP and the NHP
Real Estate Companies, based on an estimated average life of 20
years.
(xv) Represents the reversal of equity in earnings in NHP during the
pre-merger period when the Partnership held a 47.62% interest
in NHP, as a result of the Partnership's acquisition of 100% of
the NHP Common Stock.
(xvi) Represents the reversal of NHP's income tax provision due to
the restructuring of the management business to the
Unconsolidated Subsidiaries.
(xvii) Represents the contribution of NHP's 12 real estate properties
containing 2,905 apartment units to the Unconsolidated
Partnership pursuant to the NHP Reorganization.
(xviii) Represents the historical income and expenses associated with
certain assets and liabilities of NHP that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to
the management operations and other businesses owned by NHP.
(xix) Represents the amortization and depreciation of certain
management contracts and other assets of NHP, based on the
Partnership's new basis resulting from the allocation of the
purchase price of NHP, that will be contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the
management operations and other businesses owned by NHP.
(xx) Represents interest expense of $6,020 related to the
contribution of NHP's 12 real estate properties containing
2,905 apartment units to the Unconsolidated Partnership and
interest expense of $4,285 related to the certain assets and
liabilities that will be contributed or sold to the
Unconsolidated Subsidiaries pursuant to the NHP Reorganization.
(xxi) Represents the interest income of $5,000 earned on notes
payable of $50,000 to the Partnership issued as consideration
for certain assets and liabilities sold to the Unconsolidated
Subsidiaries by the Partnership, net of the elimination of the
Partnership's share of the related interest expense of $4,750
reflected in the equity in earnings of the Unconsolidated
Subsidiaries operating results, offset by $853 in interest
income primarily related to the management operations and other
businesses owned by NHP contributed or sold to the
Unconsolidated Subsidiaries pursuant to the NHP Reorganization.
(xxii) Represents the Partnership's equity in earnings of the
Unconsolidated Subsidiaries.
(D) Represents the audited historical statement of operations of Ambassador
for the year ended December 31, 1997. Certain reclassifications have been
made to Ambassador's historical statement of operations to conform to the
Partnership's Statement of Operations presentation. The Ambassador
historical statement of operations excludes extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of
P-13
<PAGE> 1913
interest expense resulting from the net reduction of debt; and (iv) the
elimination of the minority interest associated with Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger, and the spin-off of Holdings as if these transactions had
occurred on January 1, 1997. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
IFG AMIT HOLDINGS IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property
revenues....................... $ 6,646 $ 266 $ -- $ 6,912
Property operating expenses...... (3,251) (56) -- (3,307)
Depreciation..................... (966) -- -- (966)
--------- ------- --------- --------
Income from property
operations..................... 2,429 210 -- 2,639
--------- ------- --------- --------
Management fees and other
income......................... 389,626 -- (295,296) 94,330
Management and other expenses.... (315,653) -- 258,038 (57,615)
Amortization..................... (31,709) (303) 15,244 (16,768)
--------- ------- --------- --------
Income from service company
business....................... 42,264 (303) (22,014) 19,947
--------- ------- --------- --------
General and administrative
expenses....................... (20,435) (1,351) 587 (21,199)
Interest expense................. (9,353) -- 318 (9,035)
Interest income.................. 4,571 6,853 (457) 10,967
Minority interest................ (12,448) (382) (41) (12,871)
Equity in income (losses) of
unconsolidated partnership..... 10,027 2,639 (151) 12,515
--------- ------- --------- --------
Income (loss) from operations.... 17,055 7,666 (21,758) 2,963
Income tax provision............. (6,822) (180) 8,703 1,701
Gain on sale of property......... -- 80 -- 80
--------- ------- --------- --------
Net income (loss)................ 10,233 7,566 (13,055) 4,744
========= ======= ========= ========
</TABLE>
- ---------------
(i) Represents the audited consolidated results of operations of IFG
for the year ended December 31, 1997, as reported in IFG's Annual
Report on Form 10-K. Certain reclassifications have been made to
IFG's historical statement of operations to conform to the
Partnership's statement of operations presentation.
(ii) Represents the historical statement of operations of AMIT, as
well as pro forma adjustments related to the AMIT Merger. The
AMIT Merger closed prior to the IFG Merger.
(iii) Represents the distribution of two shares of Holdings common
stock for each three shares of IFG common stock to holders of IFG
common stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger: (i) the incremental depreciation of the
purchase price adjustment related to consolidated real estate and
investments in real estate partnerships; (ii) the amortization of
goodwill and property management contracts resulting from the IFG Merger;
(iii) the increase in interest expense resulting from the net increase in
debt; and (iv) the elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
P-14
<PAGE> 1914
(I) Represents adjustments to reflect the 1997 Property Acquisitions and the
1998 Acquisitions, less the 1997 Dispositions and the 1998 Dispositions
as if they had occurred on January 1, 1997. These pro forma operating
results are based on historical results of the properties, except for
depreciation, which is based on the Partnership's investment in the
properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1997 PROPERTY 1997 1998 1998
ACQUISITIONS DISPOSITIONS ACQUISITIONS DISPOSITIONS TOTAL
------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Rental and other
property
revenues........... $ 88,589 $(4,081) $ 39,132 $(3,303) $120,337
Property operating
expense............ (44,109) 1,944 (18,655) 1,354 (59,466)
Owned property
management
expense............ (3,233) 133 (1,349) 122 (4,327)
Depreciation......... (16,839) 452 (10,946) 688 (26,645)
</TABLE>
(J) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1997. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(K) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1997
Property Acquisitions..................................... $(29,490)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1997 Dispositions and
the 1997 Stock Offerings.................................. 19,568
Repayments on the Partnership's credit facilities with
proceeds from a dividend received from one of the
Unconsolidated Subsidiaries............................... 1,889
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1998
Acquisitions.............................................. (15,994)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1998 Dispositions and
the 1998 Stock Offerings.................................. 20,113
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred Partnership
Unit Offering............................................. 463
--------
$ (3,451)
========
</TABLE>
(L) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the Probable Purchases.
(M) Represents (i) loss of $181 related to limited partners in consolidated
partnerships acquired in connection with the 1997 Property Acquisitions
and the 1998 Property Acquisitions and (ii) income of $502 allocable to
the Partnership Preferred Units.
(N) Represents the reduction in the Partnership's earnings in unconsolidated
partnerships as a result of the consolidation of additional partnerships
resulting from additional ownership acquired through tender offers.
(O) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
P-15
<PAGE> 1915
(P) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 724
Reduction in salaries and benefits.......................... 4,197
Merger related costs........................................ 524
Other....................................................... 1,947
------
$7,392
======
</TABLE>
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(Q) Represents the decrease in interest expense of $3,612 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$3,833 related to borrowings under the Partnership's credit facilities.
(R) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(S) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(T) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $38,885, amortization of goodwill of $6,526, and
depreciation of furniture, fixtures, and equipment of $3,753, less IFG's
historical depreciation and amortization of $16,465. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(U) Represents elimination of minority interest of IPT resulting from the IPT
merger.
(V) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(W) Represents the reversal of IFG's income tax provision.
(X) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(Y) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Z) Represents interest income of $3,825 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries by the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $3,634 reflected on the equity in earnings of the
Unconsolidated Subsidiaries.
(AA) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-16
<PAGE> 1916
(BB) The following table presents the net impact to pro forma net loss
applicable to holders of OP Units and net loss per OP Units assuming the
interest rate per annum increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest expense................................ $ 938
========
Net income.................................................. $(14,789)
========
Net loss attributable to OP unitholders..................... $(56,963)
========
Basic loss per OP unit...................................... $ (0.84)
========
Diluted loss per OP unit.................................... $ (0.84)
========
</TABLE>
(CC) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred
Units, the Class G Preferred Units, the Class H Preferred Units and the
Class J Preferred Units as if these Preferred Units had been issued as of
January 1, 1997.
(DD) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(2,536), plus the elimination of intercompany interest
expense of $8,384. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the year ended December 31, 1997 is
presented below, which represents the effects of the Ambassador Merger,
the NHP Merger, the NHP Reorganization, the IFG Merger, and the IFG
Reorganization as if these transactions had occurred as of January 1,
1997.
P-17
<PAGE> 1917
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZATION IFG
HISTORICAL(i) ADJUSTMENTS(ii) REORGANIZATION(iii) PRO FORMA
------------- --------------- ------------------- ---------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 6,194 $ 6,371(iv) $ -- $ 12,565
Property operating expenses............. (3,355) (3,531)(iv) -- (6,886)
Owned property management expense....... (147) (478)(iv) -- (625)
Depreciation expense.................... (1,038) (767)(iv) -- (1,805)
-------- -------- -------- --------
Income from property operations......... 1,654 1,595 -- 3,249
-------- -------- -------- --------
Management fees and other income........ 23,776 41,992(v) 74,404(x) 140,172
Management and other expenses........... (11,733) (20,403)(v) (49,236)(x) (81,372)
Amortization............................ (3,726) (4,017)(v) (30,188)(xi) (37,931)
-------- -------- -------- --------
Income from service company............. 8,317 17,572 (5,020) 20,869
General and administrative expense...... -- (6,573)(v) (6,249)(x) (12,822)
Interest expense........................ (6,058) (5,849)(vi) (3,825)(xii) (15,732)
Interest income......................... 1,001 (148)(v) -- 853
Minority interest....................... (2,819) 2,198(viii) -- (621)
Equity in losses of unconsolidated
partnerships.......................... (1,028) 1,028(iv) -- --
Equity in earnings of Unconsolidated
Subsidiaries.......................... 2,943 (2,943)(vii) -- --
-------- -------- -------- --------
Income (loss) from operations........... 4,010 6,880 (15,094) (4,204)
Income tax provision.................... (1,902) (3,013)(ix) 6,450(xiii) 1,535
-------- -------- -------- --------
Net income (loss)....................... $ 2,108 $ 3,867 $ (8,644) $ (2,669)
======== ======== ======== ========
Income attributable to preferred
unitholders........................... $ 2,198 $ 3,478 $ (8,212) $ (2,536)
======== ======== ======== ========
Income (loss) attributable to common
unitholders........................... $ (90) $ 389 $ (432) $ (133)
======== ======== ======== ========
</TABLE>
- ---------------
(i) Represents the historical results of operations of the Unconsolidated
Subsidiaries for the year ended December 31, 1997.
(ii) Represents adjustments related to the NHP Reorganization, which includes
the sale or contribution of 14 properties containing 2,725 apartment units
from the unconsolidated partnerships to the Unconsolidated Subsidiaries,
as well as the sale or contribution of 12 properties containing 2,905
apartment units from the Unconsolidated Subsidiaries to the Unconsolidated
Partnership.
(iii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iv) Represents adjustments for the historical results of operations of the 14
real estate properties contributed or sold to the Unconsolidated
Subsidiaries, offset by the historical results of operations of the 12
real estate properties contributed or sold to the Unconsolidated
Partnership, with additional depreciation recorded related to the
Partnership's new basis resulting from the allocation of purchase price of
NHP and the NHP Real Estate Companies.
P-18
<PAGE> 1918
(v) Represents adjustments to reflect income and expenses associated with
certain assets and liabilities of NHP contributed or sold to the
Unconsolidated Subsidiaries.
(vi) Represents adjustments of $6,058 to reverse the historical interest
expense of the Unconsolidated Subsidiaries, which resulted from its
original purchase of NHP Common Stock, offset by $2,622 related to the
contribution or sale of the 14 real estate properties, $4,285 related to
assets and liabilities transferred from the Partnership to the
Unconsolidated Subsidiaries and $5,000 related to a note payable to the
Partnership.
(vii) Represents the reversal of the historical equity in earnings of NHP for
the period in which NHP was not consolidated by the Unconsolidated
Subsidiaries.
(viii)Represents the minority interest in the operations of the 14 real estate
properties.
(ix) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill which is not deductible
for tax purposes.
(x) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(xi) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(xii) Represents adjustment for interest expense related to a note payable to
the Partnership.
(xiii)Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-19
<PAGE> 1919
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR
AND PROBABLE AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E)
------------- ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Rental and other property revenues............. $ 265,700 $ 19,603(H) $ $ $
8,398(I) 35,480 -- 8,126
Property operating expenses.................... (101,600) (9,009)(H)
(3,745)(I) (14,912) -- (2,585)
Owned property management expense.............. (7,746) (728)(H)
(459)(I) -- -- --
Depreciation................................... (59,792) (4,886)(H)
(2,624)(I) (7,270) (1,420)(M) (904)
--------- -------- -------- ------- --------
Income from property operations................ 96,562 6,550 13,298 (1,420) 4,637
--------- -------- -------- ------- --------
Management fees and other income............... 13,968 -- -- -- 71,155
Management and other expenses.................. (8,101) -- -- -- (41,477)
Corporate overhead allocation.................. (196) -- -- -- --
Amortization................................... (3) -- -- -- (13,986)
--------- -------- -------- ------- --------
Income from service company business........... 5,668 -- -- -- 15,692
--------- -------- -------- ------- --------
General and administrative expenses............ (7,444) -- (5,278) 5,278(N) (61,386)
Interest expense............................... (56,756) 1,975(J)
(2,469)(K) (10,079) 145(O) (24,871)
Interest income................................ 18,244 (1) -- -- 22,501
Minority interest.............................. (1,052) 160(L) (252) 252(P) (14,159)
Equity in losses of unconsolidated
partnerships................................. (5,078) -- (71) -- 13,492
Equity in earnings of unconsolidated
subsidiaries................................. 8,413 -- -- -- --
Amortization of goodwill....................... (5,071) -- -- -- --
--------- -------- -------- ------- --------
Income (loss) from operations.................. 53,486 6,215 (2,382) 4,255 (44,094)
Income tax provision........................... -- -- -- -- 1,180
Gain on dispositions of property............... 2,783 (2,783) -- -- 6,576
--------- -------- -------- ------- --------
Net income..................................... 56,269 3,432 (2,382) 4,255 (36,338)
Income attributable to preferred unitholders... 16,320 16,094 -- -- --
--------- -------- -------- ------- --------
Income (loss) attributable to common
unitholders.................................. $ 39,949 $(12,662) $ (2,382) $ 4,255 $(36,338)
========= ======== ======== ======= ========
Basic earnings (loss) per OP Unit.............. $ 0.80
=========
Diluted earnings (loss) per OP Unit............ $ 0.79
=========
Weighted average OP Units outstanding.......... 50,420
=========
Weighted average OP Unit and equivalents
outstanding.................................. 50,544
=========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(F) ADJUSTMENTS(G) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property revenues............. $ $ $
-- -- 337,307
Property operating expenses....................
-- -- (131,851)
Owned property management expense..............
-- -- (8,933)
Depreciation...................................
(1,583)(Q) -- (78,479)
-------- -------- ---------
Income from property operations................ (1,583) -- 118,044
-------- -------- ---------
Management fees and other income............... -- (56,211)(W) 28,912
Management and other expenses.................. -- 35,192(W) (14,386)
Corporate overhead allocation.................. -- -- (196)
Amortization................................... (23,895)(R) 22,641(X) (15,243)
-------- -------- ---------
Income from service company business........... (23,895) 1,622 (913)
-------- -------- ---------
General and administrative expenses............ 45,823(S) 14,375(W) (8,632)
Interest expense...............................
7,045 -- (85,010)(AA)
Interest income................................ -- 143(Y) 40,887
Minority interest.............................. 6,622(T) -- (8,429)
Equity in losses of unconsolidated
partnerships................................. (18,577)(U) -- (10,234)
Equity in earnings of unconsolidated
subsidiaries................................. -- (7,562)(Z) 851(CC)
Amortization of goodwill....................... -- -- (5,071)
-------- -------- ---------
Income (loss) from operations.................. 15,435 8,578 41,493
Income tax provision........................... (1,180)(V) -- --
Gain on dispositions of property............... (6,576) -- --
-------- -------- ---------
Net income..................................... 7,679 8,578 41,493
Income attributable to preferred unitholders... -- -- 32,414(BB)
-------- -------- ---------
Income (loss) attributable to common
unitholders.................................. $ 7,679 $ 8,578 $ 9,079(AA)
======== ======== =========
Basic earnings (loss) per OP Unit.............. $ 0.13(AA)
=========
Diluted earnings (loss) per OP Unit............ $ 0.13(AA)
=========
Weighted average OP Units outstanding.......... 68,554
=========
Weighted average OP Unit and equivalents
outstanding.................................. 69,218
=========
</TABLE>
P-20
<PAGE> 1920
- ---------------
(A) Represents the Partnership's unaudited consolidated results of operations
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1998: (i) the 1998 Stock Offerings; (ii) the 1998
Acquisitions; (iii) the Probable Purchases; (iv) the 1998 Dispositions;
and (v) the Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of operations of Ambassador
for the four months ended April 30, 1998. Certain reclassifications have
been made to Ambassador's historical Statement of Operations to conform
to the Partnership's Statement of Operations presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger and the spin-off of the common stock of Holdings as if these
transactions had occurred on January 1, 1998. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
HOLDINGS
IFG AMIT SPIN- IFG
HISTORICAL(i) MERGER(ii) OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 7,566 $ 560 $ -- $ 8,126
Property operating expenses............. (2,585) -- -- (2,585)
Depreciation............................ (904) -- -- (904)
--------- ------ --------- --------
Income from property operations......... 4,077 560 -- 4,637
--------- ------ --------- --------
Management fees and other income........ 311,475 -- (240,320) 71,155
Management and other expenses........... (252,295) -- 210,818 (41,477)
Amortization............................ (26,781) (48) 12,843 (13,986)
--------- ------ --------- --------
Income from service company business.... 32,399 (48) (16,659) 15,692
--------- ------ --------- --------
General and administrative expenses..... (66,272) (675) 5,561 (61,386)
Interest expense........................ (24,164) -- (707) (24,871)
Interest income......................... 18,817 4,193 (509) 22,501
Minority interest....................... (14,159) -- -- (14,159)
Equity in losses of unconsolidated
partnerships.......................... 12,169 1,323 13,492
--------- ------ --------- --------
Income (loss) from operations........... (37,133) 4,030 (10,991) (44,094)
Income tax provision.................... (4,772) -- 5,952 1,180
Gain on disposition of property......... 5,888 688 -- 6,576
--------- ------ --------- --------
Item income (loss)...................... $ (36,017) $4,718 $ (5,039) $(36,338)
========= ====== ========= ========
</TABLE>
----------------------
(i) Represents the unaudited consolidated results of operations of
IFG for the nine months ended September 30, 1998.
Certain reclassifications have been made to IFG's historical
statement of operations to conform to the Partnership's
statement of operations presentation.
(ii) Represents the historical statement of operations of AMIT,
as well as pro forma adjustments related to the AMIT Merger. The
AMIT Merger closed prior to the IFG Merger.
(iii) Represents the distribution of two shares of Holdings
common stock for each three shares of IFG common stock to
holders of IFG common stock.
(F) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the incremental depreciation of the purchase price adjustment
related to consolidated real estate and investments in real estate
partnerships; (ii) the amortization of goodwill and property management
contracts
P-21
<PAGE> 1921
resulting from the IFG Merger; (iii) the increase in interest expense
resulting from the net increase in debt; and (iv) the elimination of the
income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of
IFG, primarily management contracts and related working capital assets
and liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(H) Represents adjustments to reflect the 1998 Acquisitions, less the 1998
Dispositions as if they had occurred on January 1, 1998. These pro forma
operating results are based on historical results of the properties,
except for depreciation, which is based on the Partnership's investment
in the properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1998 1998
ACQUISITIONS DISPOSITIONS TOTAL
------------ ------------ -------
<S> <C> <C> <C>
Rental and other property revenues......... $20,554 $(951) $19,603
Property operating expense................. (9,385) 376 (9,009)
Owned property management expense.......... (765) 37 (728)
Depreciation............................... (4,979) 93 (4,886)
</TABLE>
(I) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1998. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(J) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and
other loans and mortgages assumed in connection with
the 1998 Acquisitions.................................. $(8,698)
Repayments on the Partnership's credit facilities and
other indebtedness with proceeds from the 1998
Dispositions and the 1998 Stock
Offerings.............................................. 10,326
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred
Partnership Unit Offering.............................. 347
-------
$ 1,975
=======
</TABLE>
(K) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the probable purchases.
(L) Represents (i) loss of $537 related to limited partners in consolidated
partnerships acquired in connection with the 1998 Acquisitions and (ii)
income of $377 allocable to the Partnership Preferred Units.
(M) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(N) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses.................... $ 355
Reduction in salaries and benefits........................ 2,482
Merger related costs...................................... 1,212
Other..................................................... 1,229
------
$5,278
======
</TABLE>
P-22
<PAGE> 1922
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1998 and that the
restructuring plan was completed on January 1, 1998. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(O) Represents the decrease in interest expense of $1,480 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$1,335 related to borrowings under the Partnership's line of credit.
(P) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(Q) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(R) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $30,096, amortization of goodwill of $4,895, and
depreciation of furniture, fixtures, and equipment of $2,842, less IFG's
historical depreciation and amortization of $13,938. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(S) Represents the elimination of merger related expenses recorded by IFG
during the nine months ended September 30, 1998. In connection with the
IFG Merger, certain IFG executives will receive one-time lump-sum
payments in connection with the termination of their employment and
option agreements. The total of these lump sum payments is estimated to
be approximately $50,000.
(T) Represents elimination of minority interest in IPT resulting from the IPT
merger.
(U) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(V) Represents the reversal of IFG's income tax provision.
(W) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(X) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Y) Represents interest income of $2,861 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries of the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $2,718 reflected in the equity in earnings of the
Unconsolidated Subsidiaries.
(Z) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-23
<PAGE> 1923
(AA) The following table presents the net impact to pro forma net income
applicable to holders of shares of AIMCO Common Stock and net income per
share of AIMCO Common Stock assuming the interest rate per annum
increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest........................................ $ 702
=======
Net income.................................................. $40,791
=======
Net income attributable to OP Unitholders................... $ 8,377
=======
Basic loss per OP Unit...................................... $ 0.12
=======
Diluted loss per OP Unit.................................... $ 0.12
=======
</TABLE>
(BB) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred Units
the Class G Preferred Units, the Class H Preferred Units and the Class J
Preferred Units as if these stock offerings had occurred as of January 1,
1997.
(CC) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(1,867) plus the elimination of intercompany interest of
$2,718. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the nine months ended September 30, 1998
is presented below, which represents the effects of the Ambassador
Merger, the IFG Merger and the IFG Reorganization as if these
transactions had occurred as of January 1, 1997.
P-24
<PAGE> 1924
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
IFG
HISTORICAL(i) REORGANIZATION(ii) PRO FORMA
------------- ------------------ ---------
<S> <C> <C> <C>
Rental and other property revenues................... $ 9,910 $ -- $ 9,910
Property operating expense........................... (5,139) -- (5,139)
Owned property management expense.................... (345) -- (345)
Depreciation expense................................. (1,026) -- (1,026)
-------- -------- --------
Income from property operations...................... 3,400 -- 3,400
-------- -------- --------
Management fees and other income..................... 57,665 56,211(iii) 113,876
Management and other expenses........................ (36,221) (35,192)(iii) (71,413)
Amortization......................................... (2,111) (22,641)(iv) (24,752)
-------- -------- --------
Income from service company.......................... 19,333 (1,622) 17,711
General and administrative expense................... -- (14,375)(iii) (14,375)
Interest expense..................................... (6,931) (2,861)(v) (9,792)
Interest income...................................... 617 -- 617
Minority interest.................................... (526) -- (526)
-------- -------- --------
Income (loss) from operations........................ 15,893 (18,858) (2,965)
Income tax provision................................. (7,037) 8,037(vi) 1,000
-------- -------- --------
Net income (loss).................................... $ 8,856 $(10,821) $ (1,965)
======== ======== ========
Income (loss) attributable to preferred
stockholders....................................... $ 8,413 $(10,280) $ (1,867)
======== ======== ========
Income (loss) attributable to common stockholders.... $ 443 $ (541) $ (98)
======== ======== ========
</TABLE>
- ---------------
(i) Represents the Unconsolidated Subsidiaries historical consolidated results
of operations.
(ii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iii)Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG.
(iv) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG, based on the Partnership's new basis resulting from the allocation
of the purchase price of IFG.
(v) Represents adjustment for interest expense related to a note payable to the
Partnership.
(vi) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-25
<PAGE> 1925
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR IFG
AND PROBABLE NHP AMBASSADOR PURCHASE PRICE AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $ 32,697 $ 25,214 $ (8,681) $ 3,437 $ 1,879 $ 4,744
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 43,520 28,817 7,354 20,372 5,997 17,248
Gain on investments............ -- -- (12) -- -- --
(Gain) loss on disposition of
properties.................... (2,720) 2,720 (3,882) -- -- (80)
Minority interests............. (1,008) (458) (16) 851 (705) 12,871
Equity in earnings of
unconsolidated partnerships... 1,798 122 8,542 (405) -- (12,515)
Equity in earnings of
unconsolidated subsidiaries... (4,636) -- (5,790) -- -- --
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 269 (269) -- -- -- (5,366)
Changes in operating assets and
operating liabilities......... 3,112 -- 5,314 (3,523) -- (4,384)
--------- --------- --------- --------- -------- --------
Total adjustments........... 40,335 30,932 11,510 17,295 5,292 7,774
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) operating activities... 73,032 56,146 2,829 20,732 7,171 12,518
Net cash used in
discontinued operations.... -- -- (7,999) -- -- --
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) continuing
operations................. 73,032 56,146 (5,170) 20,732 7,171 12,518
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... 21,792 19,627(I) -- -- -- --
Purchase of real estate.......... (376,315) (220,995)(J) (4,114) (24,179) -- --
Additions to real estate,
investments and property held
for sale....................... (26,966) (5,217)(K) (522) (19,033) -- (4,154)
Proceeds from sale of property
held for sale.................. 303 -- -- -- -- --
Purchase of general and limited
partnership interests.......... (199,146) -- (1,208) -- -- (76,104)
Purchase of management
contracts...................... -- -- (11,686) -- -- (36,868)
Purchase of/additions to notes
receivable..................... (59,787) -- (4,236) -- -- (17,647)
Proceeds from repayments of notes
receivable..................... -- -- 214 1,000 -- 8,838
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... 45,791 -- 3,097 3,183 -- 42,615
Contribution to unconsolidated
subsidiaries................... (42,879) -- -- -- -- --
Proceeds from sale of
securities..................... -- -- 642 -- -- --
Purchase of investments held for
sale........................... -- -- (73) -- -- --
Purchase of NHP mortgage loans... (60,575) -- -- -- -- --
Purchase of Ambassador common
stock.......................... (19,881) -- -- -- -- --
--------- --------- --------- --------- -------- --------
Net cash used in investing
activities................. (717,663) (206,585) (17,886) (39,029) -- (83,320)
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. 225,436 122,568(L) 145,519 156,746 -- 111,001
Principal repayments on secured
notes payable.................. (12,512) -- (141,032) (141,676) -- (12,697)
Proceeds from secured short-term
financing...................... 19,050 -- -- -- -- --
Repayments on secured short-term
financing...................... -- (259,027)(M) (434) -- -- --
Principal repayments on unsecured
short-term notes payable....... (79) (50,800)(M) -- -- -- --
Proceeds (payoff) from unsecured
short-term financing........... (12,500) -- -- -- -- --
Principal repayments on secured
tax-exempt bond financing...... (1,487) -- -- -- -- --
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... (162,008) -- -- -- -- --
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... (6,387) -- (245) (8,095) -- (2,305)
Proceeds from issuance of common
and preferred stock, net....... 643,224 357,389(N) 6,286 28,946 -- 62,420
Proceeds from exercises of
employee stock options and
warrants....................... 871 -- -- 3,195 -- 7,487
Repurchase of common stock....... -- -- -- -- -- (3,283)
Principal repayments received on
notes due from Officers........ 25,957 -- -- 1,323 -- --
Investments made by minority
interests...................... -- -- -- -- -- 249
Receipt of contributions from
minority interests............. -- 37,345(O) -- -- -- --
Payments of distribution to
minority interests............. -- (2,713)(P) -- -- -- --
Payment of distributions......... (44,660) (19,396)(Q) (11,503)(T) (15,717) (12,173)(U) (2,695)
Payment of distributions to
limited partners............... -- (5,193)(R) -- -- (15)(U) --
Payment of preferred unit
distributions.................. (846) (39,859)(S) -- (2,279) -- --
Payment of distributions to
minority interests............. (5,510) -- -- (3,700) -- (12,578)
Net transactions with
Insignia/ESG................... -- -- -- -- -- (57,612)
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) financing activities... 668,549 140,314 (1,409) 18,743 (12,188) 89,987
--------- --------- --------- --------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. 23,918 (10,125) (24,465) 446 (5,017) 19,185
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. 13,170 -- 36,277 4,002 -- 64,447
--------- --------- --------- --------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $ 37,088 $ (10,125) $ 11,812 $ 4,448 $ (5,017) $ 83,632
========= ========= ========= ========= ======== ========
<CAPTION>
IFG IFG
MERGER REORGANIZATION PRO
ADJUSTMENTS(G) ADJUSTMENTS(H) FORMA
-------------- -------------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $(80,023) $ 6,882 $ (13,851)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 35,049 (30,188) 128,169
Gain on investments............ -- -- (12)
(Gain) loss on disposition of
properties.................... 80 -- (3,882)
Minority interests............. (1,552) -- 9,983
Equity in earnings of
unconsolidated partnerships... 29,995 -- 27,537
Equity in earnings of
unconsolidated subsidiaries... -- 4,578 (5,848)
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 5,366 --
Changes in operating assets and
operating liabilities......... -- -- 519
-------- -------- -----------
Total adjustments........... 68,938 (25,610) 156,466
-------- -------- -----------
Net cash provided by (used
in) operating activities... (11,085) (18,728) 142,615
Net cash used in
discontinued operations.... -- -- (7,999)
-------- -------- -----------
Net cash provided by (used
in) continuing
operations................. (11,085) (18,728) 134,616
-------- -------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... -- -- 41,419
Purchase of real estate.......... -- -- (625,603)
Additions to real estate,
investments and property held
for sale....................... -- -- (55,892)
Proceeds from sale of property
held for sale.................. -- -- 303
Purchase of general and limited
partnership interests.......... -- -- (276,458)
Purchase of management
contracts...................... -- -- (48,554)
Purchase of/additions to notes
receivable..................... -- -- (81,670)
Proceeds from repayments of notes
receivable..................... -- -- 10,052
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... -- -- 94,686
Contribution to unconsolidated
subsidiaries................... -- -- (42,879)
Proceeds from sale of
securities..................... -- -- 642
Purchase of investments held for
sale........................... -- -- (73)
Purchase of NHP mortgage loans... -- -- (60,575)
Purchase of Ambassador common
stock.......................... -- -- (19,881)
-------- -------- -----------
Net cash used in investing
activities................. -- -- (1,064,483)
-------- -------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. -- -- 761,270
Principal repayments on secured
notes payable.................. -- -- (307,917)
Proceeds from secured short-term
financing...................... -- -- 19,050
Repayments on secured short-term
financing...................... -- -- (259,461)
Principal repayments on unsecured
short-term notes payable....... -- -- (50,879)
Proceeds (payoff) from unsecured
short-term financing........... -- -- (12,500)
Principal repayments on secured
tax-exempt bond financing...... -- -- (1,487)
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... -- -- (162,008)
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... -- -- (17,032)
Proceeds from issuance of common
and preferred stock, net....... -- -- 1,098,265
Proceeds from exercises of
employee stock options and
warrants....................... -- -- 11,553
Repurchase of common stock....... -- -- (3,283)
Principal repayments received on
notes due from Officers........ -- -- 27,280
Investments made by minority
interests...................... -- -- 249
Receipt of contributions from
minority interests............. -- -- 37,345
Payments of distribution to
minority interests............. -- -- (2,713)
Payment of distributions......... (24,513)(V) -- (130,657)
Payment of distributions to
limited partners............... -- -- (5,208)
Payment of preferred unit
distributions.................. -- -- (42,984)
Payment of distributions to
minority interests............. -- -- (21,788)
Net transactions with
Insignia/ESG................... -- -- (57,612)
-------- -------- -----------
Net cash provided by (used
in) financing activities... (24,513) -- 879,483
-------- -------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. (35,598) (18,728) (50,384)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. -- -- 117,896
-------- -------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $(35,598) $(18,728) $ 67,512
======== ======== ===========
</TABLE>
P-26
<PAGE> 1926
- ---------------
(A) Represents the Partnership's audited consolidated statement of cash flows
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1997 Acquisitions; (ii) the 1997 Stock Offerings;
(iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings; (v) the 1998
Acquisitions; (vi) the Probably Purchases; (vii) the 1998 Dispositions; and
(viii) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)................. $ (7,266) $ 4,350 $(2,222) $ (3,543) $ (8,681)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 4,058 9,134 5,125 (10,963) 7,354
Gain on investments............. (12) -- -- -- (12)
(Gain) loss on disposition of
properties.................... (3,882) -- -- -- (3,882)
Minority interests.............. (16) -- -- -- (16)
Equity in earnings of
unconsolidated partnerships... 3,905 -- 4,631 6 8,542
Equity in earnings of
unconsolidated subsidiaries... -- -- 4,636 (10,426) (5,790)
Changes in operating assets and
operating liabilities......... (1,036) 6,350 -- -- 5,314
-------- -------- ------- -------- ---------
Total adjustments........... 3,017 15,484 14,392 (21,383) 11,510
-------- -------- ------- -------- ---------
Net cash provided by (used
in) operating
activities................ (4,249) 19,834 12,170 (24,926) 2,829
Net cash used in
discontinued operations... -- (7,999) -- -- (7,999)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) continuing
operations................ (4,249) 11,835 12,170 (24,926) (5,170)
-------- -------- ------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate........... -- (4,114) -- -- (4,114)
Additions to real estate,
investments and property held
for sale........................ (522) -- -- -- (522)
Purchase of general and limited
partnership interests........... (1,208) -- -- -- (1,208)
Purchase of management
contracts....................... -- (11,686) -- -- (11,686)
Purchase of/additions to notes
receivable...................... -- (4,236) -- -- (4,236)
Proceeds from repayments of notes
receivable...................... 214 -- -- -- 214
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 3,097 -- -- -- 3,097
Proceeds from sale of
securities...................... 642 -- -- -- 642
Purchase of investments held for
sale............................ (73) -- -- -- (73)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) investing
activities................ 2,150 (20,036) -- -- (17,886)
-------- -------- ------- -------- ---------
</TABLE>
P-27
<PAGE> 1927
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes
payable borrowings.............. $ 74,019 $ 71,500 $ -- $ -- $ 145,519
Principal repayments on secured
notes payable................... (71,256) (69,776) -- -- (141,032)
Repayments on secured short-term
financing....................... (434) -- -- -- (434)
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (245) -- -- (245)
Proceeds from issuances of common
and preferred stock, net........ -- 6,286 -- -- 6,286
Payment of distributions.......... (2,000) -- (9,503) -- (11,503)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) financing
activities................ 329 7,765 (9,503) -- (1,409)
-------- -------- ------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (1,770) (436) 2,667 (24,926) (24,465)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 25,795 10,482 -- -- 36,277
-------- -------- ------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 24,025 $ 10,046 $ 2,667 $(24,926) $ 11,812
======== ======== ======= ======== =========
</TABLE>
- ---------------
(i) Represents the adjustment to record cash flow activity from
January 1, 1997 to the date of acquisition, as if the
acquisition of the NHP Real Estate Companies had occurred on
January 1, 1997. In addition, represents adjustments to record
additional deprecation and amortization related to the increased
basis in the assets of the NHP Real Estate Companies as a result
of the allocation of the purchase price of the NHP Real Estate
Companies and additional interest expense incurred in connection
with borrowings incurred by the Partnership to consummate the
NHP Real Estate Acquisition.
(ii) Represents the unaudited consolidated statement of cash
flows of NHP for the period from January 1, 1997 through
December 8, 1997 (date of the NHP Merger).
(iii) Represents the following adjustments occurring as a
result of the NHP Merger: (i) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan;
(ii) the incremental depreciation of the purchase price
adjustment related to real estate; (iii) the incremental
amortization of the purchase price adjustment related to
management contracts, furniture, fixtures and equipment, and
goodwill; (iv) the reversal of equity in earnings of NHP during
the pre-merger period when the Partnership held a 47.62%
interest in NHP; and (v) the amortization of the increased basis
in investments in real estate partnerships, based on the
purchase price adjustment related to real estate and an
estimated average life of 20 years.
(iv) Represents adjustments related to the NHP Reorganization,
whereby the Partnership contributed or sold to the
Unconsolidated Subsidiaries and the Unconsolidated Partnership;
(i) certain assets and liabilities of NHP, primarily related to
the management operations and other businesses owned by NHP and
(ii) 12 real estate properties containing 2,905 apartment units.
The adjustments represent (i) the related cash flow activity
primarily related to the management operations of such real
estate partnerships contributed, with additional depreciation
and amortization recorded related to the Partnership's new basis
resulting from the allocation of the combined purchase price of
NHP and the NHP Real Estate Companies.
(D) Represents the audited historical statement of cash flows of Ambassador for
the year ended December 31, 1997. Certain reclassifications have been made
to Ambassador's historical statement of cash flows to conform to the
Partnership's statement of cash flows presentation. The Ambassador
P-28
<PAGE> 1928
historical statement of cash flows excludes an extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................... $ 10,233 $ 7,566 $(13,055) $ 4,744
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization...... 32,675 63 (15,490) 17,248
Gain on disposition of property.... -- (80) -- (80)
Minority interests................. 12,448 382 41 12,871
Equity in earnings of
unconsolidated partnerships...... (10,027) (2,639) 151 (12,515)
Extraordinary gain on early
extinguishment of debt........... (5,366) -- -- (5,366)
Changes in operating assets and
liabilities...................... -- (2,405) (1,979) (4,384)
--------- -------- -------- --------
Total adjustments............. 29,730 (4,679) (17,277) 7,774
--------- -------- -------- --------
Net cash provided by (used in) operating
activities............................ 39,963 2,887 (30,332) 12,518
--------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to real estate, investments
and property held for sale......... (7,695) 665 2,876 (4,154)
Purchase of general and limited
partnership interests.............. (93,118) -- 17,014 (76,104)
Purchase of management contracts...... (99,540) -- 62,672 (36,868)
Purchase of/additions to notes
receivable......................... (9,172) (14,251) 5,776 (17,647)
Proceeds from repayments of notes
receivable......................... 4,523 7,552 (3,237) 8,838
Distributions from investments in real
estate partnerships and
unconsolidated subsidiaries........ 44,823 -- (2,208) 42,615
--------- -------- -------- --------
Net cash provided by (used in)
investing activities........ (160,179) (6,034) 82,893 (83,320)
--------- -------- -------- --------
</TABLE>
P-29
<PAGE> 1929
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable
borrowings......................... $ 118,141 $ -- $ (7,140) $111,001
Principal repayments on secured notes
payable............................ (15,682) -- 2,985 (12,697)
Payment of loan costs, net of proceeds
from interest rate hedge........... (2,305) -- -- (2,305)
Proceeds from issuance of common and
preferred stock, net............... 62,420 -- -- 62,420
Proceeds from exercises of employee
stock options and warrants......... 7,487 -- -- 7,487
Repurchase of common stock............ (3,283) -- -- (3,283)
Investment made by minority
interests.......................... 249 -- -- 249
Payment of distributions.............. -- (2,695) -- (2,695)
Payment of distributions to minority
interests.......................... (12,578) -- -- (12,578)
Net transactions with Insignia/ESG.... -- -- (57,612) (57,612)
--------- -------- -------- --------
Net cash provided by (used in)
financing activities........ 154,449 (2,695) (61,767) 89,987
--------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 34,233 (5,842) (9,206) 19,185
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD............................. 54,614 9,789 44 64,447
--------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................ $ 88,847 $ 3,947 $ (9,162) $ 83,632
========= ======== ======== ========
</TABLE>
- ---------------
(i) Represents the audited consolidated statement of cash flows of
IFG for the year ended December 31, 1997, as reported in IFG's
Annual Report on Form 10-K. Certain reclassifications have been
made to IFG's historical statement of cash flows to conform to
the Partnership's statement of cash flows presentation.
(ii) Represents the historical statement of cash flows of AMIT, as
well as pro forma adjustments related to the AMIT Merger. The
AMIT merger closed prior to the IFG Merger.
(iii) Represents the distribution of two shares of New Insignia
common stock for each three shares of IFG common stock to
holders of IFG common stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(I) Represents proceeds from the sale of the 1998 Dispositions, as if these
dispositions occurred on January 1, 1997.
P-30
<PAGE> 1930
(J) Represents the use of cash to purchase the 1998 Acquisitions and the
Probable Purchases, as if these acquisitions occurred on January 1, 1997.
(K) Represents cash payments for capital improvements of $300 per unit on the
1997 Acquisitions, the 1998 Acquisitions and the Probable Purchases.
(L) Represents notes payable assumed in connection with the 1998 Acquisitions
and the Probable Purchases, assuming these transactions occurred January 1,
1997.
(M) Represents net principal repayments assuming the 1998 Acquisitions, the
1998 Dispositions, the Probable Purchases, the 1998 Stock Offerings and the
Preferred Partnership Unit Offering occurred January 1, 1997.
(N) Represents cash proceeds from the 1998 Stock Offerings, as if these
offerings occurred on January 1, 1997.
(O) Represents contributions from minority interests assuming the Preferred
Partnership Unit Offering occurred January 1, 1997.
(P) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(Q) Represents distributions paid on the 1997 Stock Offerings as if these
occurred on January 1, 1997.
(R) Represents distributions paid to limited partners on OP Units issued in
connection with the 1997 Acquisitions, the 1998 Acquisitions and the
Probable Purchases, as if the issuance of the OP Units occurred on January
1, 1997.
(S) Represents preferred unit distributions paid on the Class B Preferred
Stock, the Class C Preferred Stock and the 1998 Stock Offerings as if these
occurred on January 1, 1997.
(T) Represents historical distributions of $2,000 and pro forma distributions
on the shares issued in the NHP Merger as if these shares had been issued
on January 1, 1997.
(U) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(V) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-31
<PAGE> 1931
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE AMBASSADOR PURCHASE PRICE IFG AS IFG MERGER
HISTORICAL(A) PURCHASE(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 56,269 $ 3,432 $ (2,382) $ 4,255 $ (36,338) $ 7,679
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 67,344 7,512 7,520 1,420 14,890 25,478
(Gain) loss on disposition of
properties..................... (2,783) 2,783 -- -- (6,576) 6,576
Minority interests.............. 1,052 (160) 252 (252) 14,159 (6,622)
Equity in earnings of
unconsolidated partnerships.... 5,078 -- 71 -- (13,492) 18,577
Equity in earnings of
unconsolidated subsidiaries.... (8,413) -- -- -- -- --
Non-cash compensation........... -- -- -- -- 796 --
Changes in operating assets and
operating liabilities.......... (67,722) -- 5,948 -- (7,775) --
--------- -------- -------- ------- --------- --------
Total adjustments............ (5,444) 10,135 13,791 1,168 2,002 44,009
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) operating activities... 50,825 13,567 11,409 5,423 (34,336) 51,688
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... (63,839) 63,839(H) -- -- 27,122 --
Additions to real estate.......... (47,878) (1,198)(I) (17,759) -- 9,309 --
Proceeds from sale of property and
investments held for sale....... 19,627 (19,627)(J) -- -- (35) --
Additions to property held for
sale............................ (1,986) -- -- -- -- --
Purchase of general and limited
partnership interests........... (27,016) -- -- -- 17,420 --
Purchase of/additions to notes
receivable...................... (72,445) -- -- -- (27,589) --
Proceeds from repayments/sale of
notes receivable................ 21,562 -- -- -- 21,185 --
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 513 -- 1,063 -- 22,053 --
Payment of trust based preferred
dividends....................... -- -- -- -- (7,415) --
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... 4,492 -- -- -- 13,423 --
Contribution to unconsolidated
subsidiaries.................... (13,032) -- -- -- -- --
Purchase of investments held for
sale............................ (4,935) -- -- -- -- --
Redemption of OP Units............ (516) -- -- -- -- --
Merger costs...................... -- -- -- -- (1,402) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) investing activities... (185,453) 43,014 (16,696) -- 74,071 --
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. 77,489 -- 37,162 -- 177,234 --
Principal repayments on secured
notes payable................... (56,262) -- -- -- 4,239 --
Principal advances on secured
tax-exempt bond financing....... -- -- 21,784 -- -- --
Principal repayments on secured
tax-exempt bond financing....... (1,436) -- -- -- -- --
Net borrowings/repayments on
secured short-term financing.... (30,693) 209,027(K) (43,002) -- -- --
Net borrowings (paydowns) on the
revolving credit facilities..... -- -- 2,513 -- -- --
Principal repayments on unsecured
short-term notes payable........ -- -- -- -- 2,644 --
Payment of loan costs, net of
proceeds from interest rate
hedge........................... (5,727) -- -- -- (83) --
Proceeds from issuance of common
stock and preferred stock,
net............................. 253,239 (253,239)(L) -- -- -- --
Repurchase of common stock........ (10,972) -- -- -- -- --
Proceeds from exercises of
employee stock options and
warrants........................ -- -- 9,761 -- 6,533 --
Principal repayments received on
notes due from Officers......... 8,084 -- -- -- -- --
Payments of distributions to
minority interests.............. -- (2,034)(M) -- -- -- --
Payment of distributions.......... (73,322) -- -- (3,701)(P) (8,606) (22,360)(Q)
Payment of distributions to
limited partners................ (10,251) (1,919)(N) -- (5)(P) (494) --
Payment of preferred unit
distributions................... (10,916) (16,094)(O) -- -- -- --
Proceeds from issuance of High
Performance Units............... 1,988 -- -- -- -- --
Net transactions with
Insignia/ESG.................... -- -- -- -- (241,003) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) financing activities... 141,221 (64,259) 28,218 (3,706) (59,536) (22,360)
--------- -------- -------- ------- --------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. 6,593 (7,678) 22,931 1,717 (19,801) 29,328
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 37,088 (10,125) 4,448 (5,017) 83,632 (35,598)
--------- -------- -------- ------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 43,681 $(17,803) $ 27,379 $(3,300) $ 63,831 $ (6,270)
========= ======== ======== ======= ========= ========
<CAPTION>
IFG
REORGANIZATION PRO
ADJUSTMENTS(G) FORMA
-------------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 8,578 $ 41,493
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... (22,641) 101,523
(Gain) loss on disposition of
properties..................... -- --
Minority interests.............. -- 8,429
Equity in earnings of
unconsolidated partnerships.... -- 10,234
Equity in earnings of
unconsolidated subsidiaries.... 7,562 (851)
Non-cash compensation........... -- 796
Changes in operating assets and
operating liabilities.......... -- (69,549)
-------- ---------
Total adjustments............ (15,079) 50,582
-------- ---------
Net cash provided by (used
in) operating activities... (6,501) 92,075
-------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... -- 27,122
Additions to real estate.......... -- (57,526)
Proceeds from sale of property and
investments held for sale....... -- (35)
Additions to property held for
sale............................ -- (1,986)
Purchase of general and limited
partnership interests........... -- (9,596)
Purchase of/additions to notes
receivable...................... -- (100,034)
Proceeds from repayments/sale of
notes receivable................ -- 42,747
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... -- 23,629
Payment of trust based preferred
dividends....................... -- (7,415)
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... -- 17,915
Contribution to unconsolidated
subsidiaries.................... -- (13,032)
Purchase of investments held for
sale............................ -- (4,935)
Redemption of OP Units............ -- (516)
Merger costs...................... -- (1,402)
-------- ---------
Net cash provided by (used
in) investing activities... -- (85,064)
-------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. -- 291,885
Principal repayments on secured
notes payable................... -- (52,023)
Principal advances on secured
tax-exempt bond financing....... -- 21,784
Principal repayments on secured
tax-exempt bond financing....... -- (1,436)
Net borrowings/repayments on
secured short-term financing.... -- 135,332
Net borrowings (paydowns) on the
revolving credit facilities..... -- 2,513
Principal repayments on unsecured
short-term notes payable........ -- 2,644
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (5,810)
Proceeds from issuance of common
stock and preferred stock,
net............................. -- --
Repurchase of common stock........ -- (10,972)
Proceeds from exercises of
employee stock options and
warrants........................ -- 16,294
Principal repayments received on
notes due from Officers......... -- 8,084
Payments of distributions to
minority interests.............. -- (2,034)
Payment of distributions.......... -- (107,989)
Payment of distributions to
limited partners................ -- (12,669)
Payment of preferred unit
distributions................... -- (27,010)
Proceeds from issuance of High
Performance Units............... -- 1,988
Net transactions with
Insignia/ESG.................... -- (241,003)
-------- ---------
Net cash provided by (used
in) financing activities... -- 19,578
-------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (6,501) 26,589
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... (18,728) 55,700
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $(25,229) $ 82,289
======== =========
</TABLE>
P-32
<PAGE> 1932
- ---------------
(A) Represents the Partnership's unaudited consolidated statement of cash flows
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1998 Stock Offerings; (ii) the 1998 Acquisitions;
(iii) the Probably Purchases; (iv) the 1998 Dispositions and (v) the
Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of cash flows of Ambassador
for the four months ended April 20, 1998. Certain reclassifications have
been made to Ambassador's historical statement of cash flows to conform to
the Partnership's statement of cash flows presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ (36,017) $ 4,718 $ (5,039) $(36,338)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 27,685 48 (12,843) 14,890
Gain on disposition of property......................... (5,888) (688) -- (6,576)
Minority interests...................................... 14,159 -- -- 14,159
Equity in earnings of unconsolidated partnerships....... (12,169) -- (1,323) (13,492)
Non-cash compensation................................... 796 -- -- 796
Changes in operating assets and liabilities............. (18,853) (1,499) 12,577 (7,775)
--------- -------- --------- --------
Total adjustments................................... 5,730 (2,139) (1,589) 2,002
--------- -------- --------- --------
Net cash provided by (used in) operating
activities........................................ (30,287) 2,579 (6,628) (34,336)
--------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... (3,804) -- 30,926 27,122
Additions to real estate.................................. (2,252) (25) 11,586 9,309
Proceeds from sales of property and investments held for
sale.................................................... -- 161 (196) (35)
Purchase of general and limited partnership interests..... (44,270) -- 61,690 17,420
Purchases of / additions to notes receivable.............. (17,107) (15,407) 4,925 (27,589)
Proceeds from repayments/sale of notes receivable......... 151 23,672 (2,638) 21,185
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 21,360 -- 693 22,053
Payment of trust based preferred dividends................ (7,415) -- -- (7,415)
Cash received in connection with AMIT Merger.............. 13,423 -- -- 13,423
Merger costs.............................................. (1,402) -- -- (1,402)
--------- -------- --------- --------
Net cash provided by (used in) investing
activities........................................ (41,316) 8,401 106,986 74,071
--------- -------- --------- --------
</TABLE>
P-33
<PAGE> 1933
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 186,000 -- (8,766) 177,234
Principal repayments on secured notes payable............. (1,874) -- 6,113 4,239
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (83) -- -- (83)
Proceeds from exercises of employee stock options and
warrants................................................ 6,533 -- -- 6,533
Payment of distributions.................................. (6,541) (2,065) -- (8,606)
Payment of distributions minority interests............... (494) -- -- (494)
Net transactions with Insignia/ESG........................ (118,424) -- (122,579) (241,003)
--------- -------- --------- --------
Net cash provided by (used in) financing
activities........................................ 67,761 (2,065) (125,232) (59,536)
--------- -------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (3,842) 8,915 (24,874) (19,801)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 88,847 3,947 (9,162) 83,632
--------- -------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 85,005 $ 12,862 $ (34,036) $ 63,831
========= ======== ========= ========
</TABLE>
- ---------------
(i) Represents the unaudited consolidated statement of cash flows
of IFG for the nine months ended September 30, 1998. Certain
reclassifications have been made to IFG's historical statement
of cash flows to conform to the Partnership's statement of cash
flows presentation. In addition, the cash and cash equivalents
at the beginning of the period has been adjusted.
(ii) Represents the historical statement of cash flows of AMIT, as well
as pro forma adjustments related to the AMIT Merger. The AMIT
merger closed prior to the IFG Merger.
(iii) Represents the distribution of two shares of New Insignia common
stock for each three shares of IFG common stock to holders of
IFG common stock. In addition, the cash and cash equivalents at
the beginning of the period has been adjusted.
(F) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(H) Represents adjustment to remove the use of cash to purchase the 1998
Acquisitions, as if these acquisitions occurred on January 1, 1997;
therefore, the purchases are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(I) Represents cash payments for capital improvements of $300 per unit on the
1998 Acquisitions.
(J) Represents adjustment to remove the proceeds from the sale of the 1998
Dispositions, as if these dispositions occurred on January 1, 1997;
therefore, the proceeds are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(K) Represents adjustment to remove net principal repayments assuming the 1998
Acquisitions, the 1998 Dispositions and the 1998 Stock Offerings occurred
January 1, 1997; therefore, the repayments are included on the Pro Forma
Consolidated Statement of Cash Flows for the year ended December 31, 1997.
(L) Represents adjustment to remove cash proceeds from the 1998 Stock
Offerings, as if these offerings occurred on January 1, 1997; therefore,
the repayments are included on the Pro Forma Consolidated Statement of Cash
Flows for the year ended December 31, 1997.
P-34
<PAGE> 1934
(M) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(N) Represents distributions paid to limited partners on OP Units issued in
connection with the 1998 Acquisitions and the Probable Purchases, as if the
issuance of the OP Units occurred on January 1, 1997.
(O) Represents preferred unit distributions paid on the 1998 Stock Offerings as
if these occurred on January 1, 1997.
(P) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(Q) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-35
<PAGE> 1935
PRO FORMA FINANCIAL INFORMATION OF
AIMCO PROPERTIES, L.P.
(EXCHANGE OFFERS)
INTRODUCTION
AIMCO Properties L.P. (the "Partnership") intends to offer to purchase
limited partnership interests in syndicated real estate limited partnerships in
which AIMCO holds partnership interests. The Partnership, is subject to
applicable law, plans to offer to purchase certain of such limited partnership
interests in exchange for (i) equity securities of the Partnership; (ii) cash or
(iii) a combination of such equity securities and cash. Such offers are expected
to include terms that will allow limited partners to continue to hold their
limited partnership interests.
The following Pro Forma Consolidated Balance Sheet (Exchange Offers) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) all the
transactions discussed in the Pro Forma Financial Statements (Insignia Merger)
appearing elsewhere herein; and (ii) the acceptance of exchange offers by
limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) all
the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1998: (i)
all the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The Pro Forma Financial Information (Exchange Offers) is based, in part, on
the historical financial statements of the partnerships in which the Exchange
Offers are made. The Pro Forma Financial Information (Exchange Offers) is also
based, in part, on the Pro Forma Financial Information (Insignia Merger) of the
Partnership included elsewhere herein. Such pro forma information is based in
part upon: (i) the audited Consolidated Financial Statements of Insignia for the
year ended December 31, 1997; (ii) the audited Consolidated Financial Statements
of Angeles Mortgage Investment Trust ("AMIT") for the year ended December 31,
1997; (iii) the unaudited Consolidated Financial Statements of Insignia for the
nine months ended September 30, 1998; and (iv) the unaudited Consolidated
Financial Statements of AMIT for the period from January 1, 1998 to September
17, 1998. The Pro Forma Financial Information (Insignia Merger) is also based,
in part, upon: (i) the audited Consolidated Financial Statements of Ambassador
for the year ended December 31, 1997; (ii) the audited Consolidated Financial
Statements of the Partnership for the year ended December 31, 1997; (iii) the
unaudited Consolidated Financial Statements of Ambassador for the four months
ended April 30, 1998; (iv) the unaudited Consolidated Financial Statements of
the Partnership for the nine months ended September 30, 1998; and (v) the
historical financial statements of certain properties and companies acquired by
AIMCO filed in AIMCO's Current Reports on Form 8-K, dated April 16, 1997, May 5,
1997, June 3, 1997, September 19, 1997, October 15, 1997, December 1, 1997 and
November 2, 1998. The following Pro Forma Financial Information (Exchange
Offers) should be read in conjunction with such financial statements and notes
thereto.
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared under the assumption that after the exchange offers are accepted, AIMCO
will own varying ownership percentages of each partnership, and that the limited
partners will choose to elect to receive 35% of the consideration in the form of
equity securities of AIMCO Properties, L.P. and 65% of the consideration in the
form of cash. The
P-36
<PAGE> 1936
interest to be acquired in each of the partnerships, the estimated purchase
price for each partnership, including cash, common units, or preferred units is
summarized below:
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Angeles Income Properties, Ltd. II.................... 26.70 $ 4,946 $ 3,215 $1,731
Angeles Income Properties, Ltd. III................... 30.63 2,156 1,401 755
Angeles Income Properties, Ltd. IV.................... 18.64 1,154 750 404
Angeles Income Properties, Ltd. 6..................... 37.29 4,523 2,940 1,583
Angeles Opportunity Properties, Ltd................... 37.94 1,729 1,124 605
Angeles Partners VII.................................. 24.86 610 397 213
Angeles Partners VIII................................. 24.80 0 0 0
Angeles Partners IX................................... 18.92 1,171 761 410
Angeles Partners X.................................... 22.97 709 461 248
Angeles Partners XI................................... 21.83 205 133 72
Angeles Partners XII.................................. 11.89 2,877 1,870 1,007
Angeles Partners XIV.................................. 24.93 0 0 0
Baywood Partners, Ltd................................. 25.00 347 226 121
Brampton Associates Partnership....................... 25.00 382 248 134
Buccaneer Trace Limited Partnership................... 25.00 2 1 1
Burgundy Court Associates, L.P........................ 25.00 1,074 698 376
Calmark/Fort Collins, Ltd............................. 25.00 192 125 67
Calmark Heritage Park II Ltd.......................... 25.00 47 31 16
Casa Del Mar Associates Limited Partnership........... 21.16 503 327 176
Catawba Club Associates, L.P.......................... 25.00 85 55 30
Cedar Tree Investors Limited Partnership.............. 25.00 1,037 674 363
Century Properties Fund XVI........................... 12.52 831 540 291
Century Properties Fund XVIII......................... 13.08 474 308 166
Century Properties Fund XIX........................... 15.30 1,765 1,147 618
Century Properties Growth Fund XXII................... 21.43 4,977 3,235 1,742
Chapel Hill, Limited.................................. 21.15 569 370 199
Chestnut Hill Associates Limited Partnership.......... 26.75 1,582 1,028 554
Coastal Commons Limited Partnership................... 25.00 566 368 198
Consolidated Capital Institutional Properties/2 &
Consolidated Capital Equity Properties/2............ 18.98 7,320 4,758 2,562
Consolidated Capital Institutional Properties/3....... 16.37 6,770 4,401 2,369
Consolidated Capital Properties III................... 13.02 1,134 737 397
Consolidated Capital Properties IV.................... 18.04 9,407 6,112 3,295
Consolidated Capital Properties V..................... 16.69 560 364 196
Consolidated Capital Properties VI.................... 25.82 556 361 195
DFW Apartment Investors Limited Partnership........... 35.65 2,719 1,767 952
DFW Residential Investors Limited Partnership......... 37.60 1,092 710 382
Davidson Diversified Real Estate I, L.P............... 34.78 627 408 219
Davidson Diversified Real Estate II, L.P.............. 35.11 1,318 857 461
Davidson Diversified Real Estate III, L.P............. 21.76 0 0 0
Davidson Growth Plus, L.P............................. 23.91 2,304 1,498 806
Davidson Income Real Estate, L.P...................... 30.81 2,691 1,749 942
Drexel Burnham Lambert Real Estate Associates II...... 19.58 994 646 348
Four Quarters Habitat Apartment Associates, Ltd....... 25.00 174 113 61
Fox Strategic Housing Income Partners................. 33.18 2,414 1,569 845
Georgetown of Columbus Associates, L.P................ 25.00 227 148 79
HCW Pension Real Estate Fund Limited Partnership...... 32.64 2,368 1,539 829
Investors First-Staged Equity......................... 49.00 306 199 107
Johnstown/Consolidated Income Partners................ 25.66 1,871 1,216 655
La Colina Partners, Ltd............................... 25.00 583 379 204
Lake Eden Associates, L.P............................. 25.00 632 411 221
Landmark Associates, L.P.............................. 25.00 48 31 17
</TABLE>
P-37
<PAGE> 1937
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Minneapolis Associates II Limited Partnership......... 25.00 $ 2 $ 1 $ 1
Multi-Benefit Realty Fund "87-1-Class A & Class B..... 21.89 1,657 1,077 580
National Property Investors 8......................... 11.13 988 642 346
Northbrook Apartments, Ltd............................ 25.00 209 136 73
Olde Mill Investors Limited Partnership............... 8.75 170 111 59
Orchard Park Apartments Limited Partnership........... 25.00 1 1 0
Park Town Place Associates Limited Partnership........ 24.70 298 194 104
Quail Run Associates, L.P............................. 25.00 487 317 170
Ravensworth Associates Limited Partnership............ 25.00 1 1 0
Rivercreek Apartments Limited Partnership............. 25.00 180 117 63
Rivercrest Apartments, Limited........................ 25.00 1,687 1,097 590
Riverside Park Associates L.P......................... 13.69 590 384 206
Salem Arms of Augusta Limited Partnership............. 25.00 278 181 97
Shaker Square, L.P.................................... 23.75 631 410 221
Shannon Mannor Apartments, Limited Partnership........ 25.00 1,170 761 409
Sharon Woods, L.P..................................... 22.75 499 324 175
Shelter Properties III................................ 15.20 1,960 1,274 686
Shelter Properties IV................................. 50.52 12,764 8,295 4,469
Shelter Properties VI................................. 13.78 1,919 1,247 672
Shelter Properties VII Limited Partnership............ 26.65 1,975 1,284 691
Snowden Village Associates, L.P....................... 25.00 443 288 155
Springhill Lake Investors Limited Partnership......... 11.84 2,908 1,890 1,018
Sturbrook Investors, Ltd.............................. 25.00 377 245 132
Sycamore Creek Associates, L.P........................ 25.00 1 1 0
Texas Residential Investors Limited Partnership....... 18.45 1,147 746 401
Thurber Manor Associates, Limited Partnership......... 25.00 218 142 76
U.S. Realty Partners Limited Partnership.............. 25.00 1,441 937 504
United Investors Growth Properties.................... 39.01 165 107 58
United Investors Growth Properties II................. 25.00 351 228 123
United Investors Income Properties.................... 23.44 1,977 1,285 692
Villa Nova, Limited Partnership....................... 25.00 228 148 80
Walker Springs, Limited............................... 23.99 95 62 33
Wingfield Investors Limited Partnership............... 25.00 179 116 63
Winrock-Houston Limited Partnership................... 13.60 1,041 677 364
Winthrop Apartment Investors Limited Partnership...... 31.60 1,318 857 461
Winthrop Growth Investors 1 Limited Partnership....... 27.94 1,233 801 432
Winthrop Texas Investors Limited Partnership.......... 5.27 158 103 55
Woodmere Associates, L.P.............................. 25.00 280 182 98
Yorktown Towers Associates............................ 25.00 809 526 283
-------- ------- ------
Total (See adjustment C to the Pro Forma Consolidated
Balance Sheet)...................................... $122,463 $79,601 42,862
======== ======= ======
</TABLE>
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
Exchange Offers, the 1997 Acquisitions, the 1998 Acquisitions and the Probable
Purchases are adjusted to estimated fair market value, based on preliminary
estimates, which are subject to change as additional information is obtained.
The allocations of purchase costs are subject to final determination based upon
estimates and other evaluations of fair market value. Therefore, the allocations
reflected in the following unaudited Pro Forma Financial Information (Exchange
Offers) may differ from the amounts ultimately determined.
P-38
<PAGE> 1938
The following unaudited Pro Forma Financial Information (Exchange Offers)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions, results of
operations or cash flows. In the opinion of the Partnership's management, all
material adjustments necessary to reflect the effects of these transactions have
been made.
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (EXCHANGE OFFERS)
AS OF SEPTEMBER 30, 1998
ASSETS
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C>
Real estate....................................... $2,625,822 $ 12,764(C)
26,954(D)
13,655(E) $2,679,195
Property held for sale............................ 42,212 -- 42,212
Investments in and notes receivable from
unconsolidated subsidiaries..................... 186,277 -- 186,277
Investments in and notes receivable from
unconsolidated partnerships..................... 924,309 109,699(C)
(13,655)(E)
(8,161)(F)
816(G) 1,013,008
Mortgage notes receivable......................... 20,916 -- 20,916
Cash and cash equivalents......................... 104,955 2,620(D) 107,575
Restricted cash................................... 84,526 1,807(D) 86,333
Accounts receivable............................... 27,900 1,081(D) 28,981
Deferred financing costs.......................... 21,835 -- 21,835
Goodwill.......................................... 251,024 -- 251,024
Property management contracts..................... 38,371 -- 38,371
Other assets...................................... 82,670 422(D) 83,092
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
LIABILITIES AND PARTNERS' CAPITAL
Secured notes payable............................. $ 926,246 $ 23,642(D) $ 949,888
Secured tax-exempt bond financing................. 399,925 -- 399,925
Secured short-term financing...................... 32,691 -- 32,691
Unsecured short-term financing.................... 300,000 79,601(C) 379,601
Accounts payable, accrued and other liabilities... 248,253 826(D) 249,079
Security deposits and deferred income............. 13,171 255(D) 13,426
---------- -------- ----------
1,920,286 104,324 2,024,610
Minority interests................................ 79,431 816(G) 80,247
Company obligated mandatorily redeemable
convertible securities of a subsidiary trust.... 149,500 -- 149,500
Redeemable common partnership units............... 277,581 8,161(D)
(8,161)(F)
30,616(C) 308,197
Redeemable preferred partnership units............ -- 12,246(C) 12,246
Partner's capital
General and Special Limited Partner............. 1,496,457 -- 1,496,457
Preferred Units................................. 487,562 -- 487,562
---------- -------- ----------
1,984,019 -- 1,984,019
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
P-39
<PAGE> 1939
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical balance sheet data as of September 30, 1998 (unaudited) related
to the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Real estate................................................. $1,082,652
Cash........................................................ 151,024
Total assets................................................ 1,493,409
Mortgages payable........................................... 1,585,196
Partners' capital (deficit)................................. (171,740)
</TABLE>
(C) Represents the purchase price paid by the Partnership to the limited
partners in order to obtain additional ownership by AIMCO in 91 real estate
partnerships. For the purposes of the pro-forma presentation, it is
assumed: (i) 65% of the purchase price is funded with cash by drawing down
on the Partnership's unsecured short term credit facility; (ii) 25% of the
purchase price is funded by the issuance of 749,362 OP Units at $40 per OP
Unit; and (iii) 10% of the purchase price is funded by the issuance of 8%
Preferred OP Units.
(D) Represents historical balance sheet data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(E) Represent the adjustment to real estate recorded in the IFG Merger related
to the one real estate partnership that will be consolidated as a result of
the Partnership's purchase of additional partnership interests.
(F) Represents the elimination of the partners' capital in the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(G) Represents minority interest of the one real estate partnership that will
be consolidated as a result of the Partnership's purchase of additional
partnership interests.
P-40
<PAGE> 1940
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations.............. $ 431,256 $ 11,270(C) $ 442,526
Property operating expenses....................... (182,830) (6,612)(C) (189,442)
Owned property management expense................. (11,831) -- (11,831)
Depreciation...................................... (96,264) (2,589)(C) (98,853)
--------- -------- ---------
Income from property operations................... 140,331 2,069 142,400
--------- -------- ---------
Management fees and other income.................. 41,676 -- 41,676
Management and other expenses..................... (23,683) -- (23,683)
Corporate overhead allocation..................... (588) -- (588)
Amortization...................................... (26,480) -- (26,480)
--------- -------- ---------
Income from service company business.............. (9,075) -- (9,075)
Minority interest in service company business..... (10) -- (10)
--------- -------- ---------
Partnership's share of income from service company
business........................................ (9,085) -- (9,085)
--------- -------- ---------
General and administrative expenses............... (21,371) -- (21,371)
Interest expense.................................. (113,788) (5,691)(D)
(2,220)(C) (121,699)(H)
Interest income................................... 21,734 21,734
Minority interests................................ (9,983) (51)(E) (10,034)
Equity in losses of unconsolidated partnerships... (27,537) (16,864)(F)
483(G) (43,918)(I)
Equity in earnings of Unconsolidated
Subsidiaries.................................... 5,848 -- 5,848
--------- -------- ---------
Net income (loss)................................. (13,851) (22,274) (36,125)(H)
Income attributable to Preferred Unitholders...... 42,174 980 43,154(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders...... (56,025) $(23,254) $ (79,279)(H)
========= ======== =========
Basic earnings (loss) per OP Unit................. (.83) $ (1.16)(H)
========= =========
Diluted earnings (loss) per OP Unit............... $ (.83) $ (1.16)(H)
========= =========
Weighted average OP Units outstanding............. 67,522 68,287
========= =========
Weighted average OP Units and equivalents
outstanding..................................... 68,366 69,131
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $456,968
Operating expense........................................... 249,097
Depreciation................................................ 87,344
Interest.................................................... 138,778
Net income.................................................. 15,005
</TABLE>
P-41
<PAGE> 1941
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $10,740 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $6,124 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net loss,
preferred unit distributions, and net loss per OP Unit in the event that
the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- --------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense......... $(121,699) $(124,763) $(116,008) $(116,008)
Net loss................. (36,125) (39,189 (30,434) (30,434)
Preferred unit
distributions.......... 43,154 42,174 42,174 51,971
Net loss attributable to
OP Unitholders......... (79,279) (81,363) (72,608) (82,405)
Net loss per OP Unit..... (1.16) (1.20) (1.03) (1.22)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................. $ 1,137 $ 1,245 $ 938 $ 938
Net loss................... (37,262) (40,434) (31,372) (31,372)
Net loss attributable to OP
Unitholders.............. (80,416) (82,608) (73,546) (83,343)
Net loss per OP Unit....... (1.18) (1.22) (1.04) (1.23)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, the Partnership will own 49%
of certain 88 Partnerships, 25% of two Partnerships, and 100% of one
Partnership. The amount included in the pro forma financial statements
assume an acceptance rate of 100%. The following table shows the effect on
equity in earnings of unconsolidated partnerships, net loss, net loss
attributable to OP Unitholders, and net loss per OP Unit in the event that
the Partnership will have an acceptance rate of 50% of the interests
tendered and will own varying percentages of each partnership:
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(36,510)
Net loss.................................................... (26,084)
Net loss attributable to OP Unitholders..................... (68,784)
Net loss per OP Unit........................................ (1.01)
</TABLE>
P-42
<PAGE> 1942
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-43
<PAGE> 1943
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations............... $ 337,307 $ 8,654(C) $ 345,961
Property operating expenses........................ (131,851) (4,389)(C) (136,240)
Owned property management expense.................. (8,933) -- (8,933)
Depreciation....................................... (78,479) (1,941)(C) (80,420)
--------- -------- ---------
Income from property operations.................... 118,044 2,324 120,368
--------- -------- ---------
Management fees and other income................... 28,912 -- 28,912
Management and other expenses...................... (14,386) -- (14,386)
Corporate overhead allocation...................... (196) -- (196)
Amortization....................................... (15,243) -- (15,243)
--------- -------- ---------
Income from service company business............... (913) -- (913)
Minority interest in service company business...... -- -- --
--------- -------- ---------
Partnership's share of income from service company
business......................................... (913) -- (913)
--------- -------- ---------
General and administrative expenses................ (8,632) -- (8,632)
Interest expense................................... (85,010) (4,250)(D)
(1,630)(C) (90,890)(H)
Interest income.................................... 40,887 40,887
Minority interests................................. (8,429) (119)(E) (8,548)
Equity in losses of unconsolidated partnerships.... (10,234) (13,156)(F)
41(G) (23,349)(I)
Equity in earnings of Unconsolidated
Subsidiaries..................................... 851 -- 851
Amortization of goodwill........................... (5,071) -- (5,071)
--------- -------- ---------
Net income (loss).................................. 41,493 (16,790) 24,703(H)
Income attributable to Preferred Unitholders....... 32,414 735 33,149(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders....... $ 9,079 $(17,525) $ (8,446)(H)
========= ======== =========
Basic earnings (loss) per OP Unit.................. $ .13 $ (.12)(H)
========= =========
Diluted earnings (loss) per OP Unit................ $ .13 $ (.12)(H)
========= =========
Weighted average OP Units outstanding.............. 68,554 69,319
========= =========
Weighted average OP Units and equivalents
outstanding...................................... 69,218 69,983
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data (unaudited) for the nine months ended September
30, 1998 related to the 91 real estate partnerships is as follows (dollars
in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $338,937
Operating expense........................................... 182,529
Depreciation................................................ 64,127
Interest.................................................... 103,756
Net income.................................................. (9,329)
</TABLE>
P-44
<PAGE> 1944
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $8,552 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $4,604 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net
income, preferred unit distributions, and net loss per OP Unit in the event
that the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense........... $(90,890) $(93,184) $(86,640) $(86,640)
Net income................. 24,703 22,409 28,953 28,953
Preferred unit
distributions............ 33,149 32,414 32,414 39,762
Net loss attributable to OP
Unitholders.............. (8,446) (10,005) (3,461) (10,809)
Net loss per OP Unit....... (.12) (.15) (.05) (.16)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- ------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................... $ 851 $ 931 $ 702 $ 702
Net income................... 24,703 21,478 28,251 28,251
Net loss attributable to OP
Unitholders................ (9,296) (10,936) (4,163) (11,511)
Net loss per OP Unit......... (.13) (.16) (.06) (.17)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, AIMCO will own 49% of certain
88 Partnerships, 25% of two Partnerships, and 100% of one Partnership. The
following table shows the effect on equity in earnings of unconsolidated
partnerships, net income, net income (loss) attributable to OP Unitholders,
and net loss per OP Unit in the event the Partnership will own varying
percentages of each partnership.
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(17,797)
Net income.................................................. 32,216
Net income (loss) attributable to OP Unitholders............ (593)
Net income (loss) per OP Unit............................... (.01)
</TABLE>
P-45
<PAGE> 1945
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-46
<PAGE> 1946
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ (13,851) $(22,274)(C) $ (36,125)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 128,169 2,589(D) 130,758
Gain on investments..................................... (12) -- (12)
(Gain) loss on disposition of properties................ (3,882) -- (3,882)
Minority interests...................................... 9,983 51 10,034
Equity in earnings of unconsolidated partnerships....... 27,537 16,864(E)
(483)(F) 43,918
Equity in earnings of unconsolidated subsidiaries....... (5,848) -- (5,848)
Extraordinary (gain) loss on early extinguishment of
debt.................................................. --
Changes in operating assets and operating liabilities... 519 (660)(G) (141)
---------- -------- ----------
Total adjustments................................... 156,466 18,361 174,827
---------- -------- ----------
Net cash provided by (used in) operating
activities........................................ 142,615 (3,913) 138,702
Net cash used in discontinued operations............ (7,999) -- (7,999)
---------- -------- ----------
Net cash provided by (used in) continuing
operations........................................ 134,616 (3,913) 130,703
---------- -------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate......................... 41,419 -- 41,419
Purchase of real estate................................... (625,603) -- (625,603)
Additions to real estate, investments and property held
for sale................................................ (55,892) (1,024)(G) (56,916)
Proceeds from sale of property held for sale.............. 303 -- 303
Purchase of general and limited partnership interests..... (276,458) (79,601)(H) (356,059)
Purchase of management contracts.......................... (48,554) -- (48,554)
Purchase of/additions to notes receivable................. (81,670) -- (81,670)
Proceeds from repayments of notes receivable.............. 10,052 -- 10,052
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 94,686 10,070(I) 104,756
Contribution to unconsolidated subsidiaries............... (42,879) -- (42,879)
Proceeds from sale of securities.......................... 642 -- 642
Purchase of investments held for sale..................... (73) -- (73)
Purchase of NHP........................................... (60,575) -- (60,575)
Purchase of Ambassador common stock....................... (19,881) -- (19,881)
---------- -------- ----------
Net cash used in investing activities............... (1,064,483) (70,555) (1,135,038)
---------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 761,270 -- 761,270
Principal repayments on secured notes payable............. (307,917) (713)(G) (308,630)
Proceeds from secured short-term financing................ 19,050 79,601(H) 98,651
Repayments on secured short-term financing................ (259,461) -- (259,461)
Principal repayments on unsecured short-term notes
payable................................................. (50,879) -- (50,879)
Proceeds (payoff) from unsecured short-term financing..... (12,500) -- (12,500)
Principal repayments on secured tax-exempt bond
financing............................................... (1,487) -- (1,487)
Net borrowings (paydowns) on the Company's revolving
credit facilities....................................... (162,008) -- (162,008)
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (17,032) -- (17,032)
Proceeds from issuance of common and preferred stock,
net..................................................... 1,098,265 -- 1,098,265
Proceeds from exercises of employee stock options and
warrants................................................ 11,553 -- 11,553
Repurchase of common stock................................ (3,283) -- (3,283)
Principal repayments received on notes due from
Officers................................................ 27,280 -- 27,280
Investments made by minority interests.................... 249 -- 249
Receipt of contributions from minority interests.......... 37,345 -- 37,345
Payments of distributions to minority interests........... (2,713) -- (2,713)
Payment of distributions.................................. (130,657) -- (130,657)
Payment of distributions to limited partners.............. (5,208) (1,415)(J) (6,623)
Payment of preferred unit distributions................... (42,984) (979)(K) (43,963)
Payment of distributions to minority interests............ (21,788) -- (21,788)
Net transactions with Insignia/ESG........................ (57,612) -- (57,612)
---------- -------- ----------
Net cash provided by financing activities........... 879,483 76,494 955,977
---------- -------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (50,384) 2,026 (48,358)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 117,896 2,291 120,187
---------- -------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 67,512 $ 4,317 $ 71,829
========== ======== ==========
</TABLE>
P-47
<PAGE> 1947
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 65,372
Cash used in investing activities......................... (11,713)
Cash used in financing activities......................... (74,617)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the cash portion of the purchase price (and additional
borrowings by the Partnership) related to the acquisition by the
Partnership of additional limited partnership interests in 91 real estate
limited partnerships.
(I) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(J) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.85 per Common OP Unit.
(K) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-48
<PAGE> 1948
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ 41,493 $(16,790)(C) $ 24,703
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 101,523 1,941(D) 103,464
(Gain) loss on disposition of properties................ -- -- --
Minority interests...................................... 8,429 119 8,548
Equity in earnings of unconsolidated partnerships....... 10,234 13,156(E)
(41)(F) 23,349
Equity in earnings of unconsolidated subsidiaries....... (851) -- (851)
Non-cash compensation................................... 796 -- 796
Changes in operating assets and operating liabilities... (69,549) (21)(G) (69,570)
--------- -------- ---------
Total adjustments................................... 50,582 15,154 65,736
--------- -------- ---------
Net cash provided by operating activities........... 92,075 (1,636) 90,439
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... 27,122 -- 27,122
Additions to real estate.................................. (57,526) (668)(G) (58,194)
Proceeds from sale of property and investments held for
sale.................................................... (35) -- (35)
Additions to property held for sale....................... (1,986) -- (1,986)
Purchase of general and limited partnership interests..... (9,596) -- (9,596)
Purchase of/additions to notes receivable................. (100,034) -- (100,034)
Proceeds from repayments/sale of notes receivable......... 42,747 -- 42,747
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 23,629 5,809(H) 29,438
Payment of trust based preferred dividends................ (7,415) -- (7,415)
Cash received in connection with Ambassador Merger and
AMIT Merger............................................. 17,915 -- 17,915
Contribution to unconsolidated subsidiaries............... (13,032) -- (13,032)
Purchase of investments held for sale..................... (4,935) -- (4,935)
Redemption of OP Units.................................... (516) -- (516)
Merger costs.............................................. (1,402) -- (1,402)
--------- -------- ---------
Net cash used in investing activities............... (85,064) 5,141 (79,923)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 291,885 -- 291,885
Principal repayments on secured notes payable............. (52,023) -- (52,023)
Principal advances on secured tax-exempt bond financing... 21,784 -- 21,784
Principal repayments on secured tax-exempt bond
financing............................................... (1,436) -- (1,436)
Net borrowings/ repayments on secured short-term
financing............................................... 135,332 -- 135,332
Net borrowings (paydowns) on the revolving credit
facilities.............................................. 2,513 (812)(G) 1,701
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (5,810) -- (5,810)
Proceeds from issuance of common stock and preferred
stock, net.............................................. -- -- --
Repurchase of common stock................................ (10,972) -- (10,972)
Proceeds from exercises of employee stock options and
warrants................................................ 16,294 -- 16,294
Principal repayments received on notes due from
Officers................................................ 8,084 -- 8,084
Receipt of contributions from minority interests.......... -- -- --
Payments of distributions to minority interests........... (2,034) (2,034)
Payment of distributions.................................. (107,989) -- (107,989)
Payment of distributions to limited partners.............. (12,669) (1,291)(I) (13,960)
Payment of preferred unit distributions................... (27,010) (735)(J) (27,745)
Proceeds from issuance of High Performance Units.......... 1,988 -- 1,988
Net transactions with Insignia/ESG........................ (241,003) -- (241,003)
--------- -------- ---------
Net cash provided by financing activities........... 19,578 (2,838) 16,740
--------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 26,589 667 27,256
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 55,700 4,316 60,016
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 82,289 $ 4,983 $ 87,272
========= ======== =========
</TABLE>
P-49
<PAGE> 1949
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the nine months ended September 30, 1998
related to the 91 real estate partnerships is as follows (dollars in
thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 76,113
Cash used in investing activities......................... (22,616)
Cash used in financing activities......................... (42,273)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 30 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(I) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.6875 per Common OP Unit.
(J) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-50
<PAGE> 1950
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: La Colina Partners, Ltd.
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 La
Colina Partners, Ltd. (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 limited partnership interests in the Partnership (the "Units") will be
acquired by the Purchaser in exchange for an offer price per Unit of $44,859 in
cash, or 1,192 Common OP Units of the Purchaser, or 1,794.50 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 financial statements for the years ended
December 31, 1996 and 1997, and the quarterly report for the period ending
September 30, 1998, which the Partnership's management has indicated to be
the most current available financial statements;
3. Reviewed descriptive information concerning the real property owned
by the Partnership (the "Property"), including location, number of units
and unit mix, age, amenities and land acreage;
4. Reviewed summary historical operating statements for the Property,
for the years ended October 31, 1996 and 1997, and the nine months ending
July 31, 1998;
A-1
<PAGE> 1951
5. Reviewed the 1998 operating budget for the Property prepared by the
Partnership's management. Such budgets are summarized in the Prospectus
Supplement under the section "Stanger Analysis -- Summary of Materials
Considered";
6. Reviewed the estimate of liquidation value and going concern value
provided by the general partner to Stanger. Such estimates are described in
the Prospectus Supplement under the section "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration." In
addition, we reviewed the 1998 operating budgets for each property provided
by the Partnership;
7. Discussed with management market conditions for the Property;
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 Property and the Partnership; the physical condition
of the Property including any deferred maintenance; and other factors
influencing value of the Property and the Partnership;
8. Performed a site inspection of the Property;
9. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Property, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Property;
10. Reviewed information provided by the Company relating to debt
encumbering the Property; and
11. 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 Property, the allocation of net
Partnership values between the General Partner and Limited Partners, and the
transaction costs and fees associated with a sale of the Property. 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 Property 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 Property 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 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
A-2
<PAGE> 1952
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
March , 1999
A-3
<PAGE> 1953
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 directors
of AIMCO are set forth below. The two directors of AIMCO-GP are Terry Considine
and Peter Kompaniez. The two directors of the general partner of your
partnership are Peter K. Kompaniez and Patrick J. Foye. The two executive
officers of the general partner of your partnership are Patrick J. Foye,
Executive Vice President, and Timothy R. Garrick, Vice President -- Accounting.
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
Paul J. McAuliffe............................ Executive Vice President -- Capital Markets
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
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
</TABLE>
B-1
<PAGE> 1954
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
B.A. from Harvard College, a J.D. from Harvard Law School
and is admitted as a member of the Massachusetts Bar.
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.
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
</TABLE>
B-2
<PAGE> 1955
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
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.
Paul J. McAuliffe.................... Mr. McAuliffe was appointed Executive Vice
President -- Capital Markets in February 1999. Prior to
joining AIMCO, Mr. McAuliffe was Senior Managing Director of
Secured Capital Corp and prior to that time had been a
Managing Director of Smith Barney, Inc. from 1993 to 1996,
where he was a key member of the underwriting team that led
AIMCO's initial public offering in 1994. Mr. McAuliffe was
also a Managing Director and head of the real estate group
at CS First Boston from 1990 to 1993 and he was a Principal
in the real estate group at Morgan Stanley & Co., Inc. from
1983 to 1990. Mr. McAuliffe received a B.A. from Columbia
College and an MBA from University of Virginia, Darden
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
</TABLE>
B-3
<PAGE> 1956
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
and the Apartment Association of Metro Denver. Mr. Ira
received a B.S. from Metropolitan State College in 1975.
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.
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,
</TABLE>
B-4
<PAGE> 1957
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Mr. Martin is a director of Dresser, which is engaged in the
petroleum services, hydrocarbon and engineering industries.
Timothy R. Garrick................... Mr. Garrick has been Vice President -- Accounting of the
general partner and AIMCO since October 1, 1998. Prior to
that date, Mr. Garrick served as Vice
President -- Accounting Services of Insignia Financial Group
from June 1997 until October 1998. From 1992 until June of
1997, Mr. Garrick served as Vice President of Partnership
Accounting for Insignia Financial Group. From 1987 to 1990,
Mr. Garrick served as Investment Advisor for U.S. Shelter
Corporation. From 1984 to 1987, Mr. Garrick served as
Partnership Investment Analyst for U.S. Shelter Corporation.
From 1979 to 1984, Mr. Garrick worked on the audit staff of
Ernst & Whinney. Mr. Garrick received his B.S. Degree from
the University of South Carolina in 1979 and is a certified
public accountant.
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> 1958
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
By Fax:
(201) 896-0910
<PAGE> 1959
PROSPECTUS SUPPLEMENT
(To Prospectus dated March 26, 1999)
AIMCO Properties, L.P.
is offering to acquire units of limited partnership interest of
Lake Eden Associates, L.P.
in exchange for your choice of:
2,848.50 of our 8.0% Class Two Partnership Preferred Units;
1,892.50 of our Partnership Common Units; or
$71,211 in cash.
Generally, you will not recognize any immediate taxable gain or loss if you
exchange your units solely for our securities. However, you will recognize
taxable gain or loss if you exchange your units for cash.
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 the offer
consideration from a financial point of view.
Our offer consideration will be reduced for any distributions subsequently
made by your partnership prior to the expiration of our offer.
We will only accept a maximum of 25% 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.
You will not pay any fees or commissions if you tender your units.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline. You may withdraw any tendered units at any time
before we have accepted them for payment.
SEE "RISK FACTORS" BEGINNING ON PAGE S-23 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF RISK FACTORS THAT
YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration of $71,211 per unit without any
arms-length negotiations. Accordingly, our offer consideration may not
reflect the fair market value of your units. Stanger, in rendering its
fairness opinion, determined that the net asset value of your partnership
units was $72,420 per unit.
- We cannot predict when the property owned by your partnership may be
sold.
- Your general partner is a subsidiary of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- We are making this offer with a view to making a profit and 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.
- Continuation of your partnership will result in our affiliates continuing
to receive management fees from your partnership which would not be
payable if your partnership was liquidated.
- It is possible that we may conduct a subsequent offer at a higher price
more than one year after expiration of this offer.
- Unlike your partnership, our policy is to reinvest proceeds from the sale
of our properties or refinancing of our indebtedness.
- We may change our investment, acquisition or financing policies without a
vote of our securityholders.
- If you acquire our securities, your investment will change from holding
an interest in a single property to holding an interest in our large
portfolio of properties, thereby fundamentally changing the nature of
your investment.
- Recently, Moody's Investors Service revised its outlook for AIMCO's
ratings from stable to negative.
- There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
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.
March 26, 1999
<PAGE> 1960
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY........................................ S-1
The AIMCO Operating Partnership.............. S-1
Affiliation with your General Partner........ S-1
Risk Factors................................. S-1
Background and Reasons for the Offer......... S-6
Valuation of Units........................... S-9
Fairness of the Offer........................ S-10
Stanger Analysis............................. S-11
Your Partnership............................. S-11
Terms of the Offer........................... S-12
Federal Income Tax Consequences.............. S-14
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-14
Comparison of Your Units and AIMCO OP Units.. S-14
Conflicts of Interest........................ S-15
Source and Amount of Funds and Transactional
Expenses................................... S-16
Summary Financial Information of AIMCO
Properties, L.P............................ S-17
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-19
Summary Financial Information of Lake Eden
Associates, L.P............................ S-21
Comparative Per Unit Data.................... S-21
THE AIMCO OPERATING PARTNERSHIP................ S-22
RISK FACTORS................................... S-23
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-23
Conflicts of Interest with Respect to the
Offer.................................... S-23
Holding Units May Result in Greater Future
Value.................................... S-23
Offer Consideration May Not Represent Fair
Market Value............................. S-23
Offer Consideration Based on Our Estimate
of Liquidation Proceeds.................. S-23
Offer Consideration May Be Less Than
Liquidation Value........................ S-23
Possible Subsequent Offer at a Higher
Price.................................... S-24
Possible Recognition of Taxable Gain on a
Sale of Your Units....................... S-24
Fairness Opinion of Third Party Relied on
Information We Provided.................. S-24
Loss of Future Distributions from Your
Partnership.............................. S-24
Possible Effect of the Other Exchange
Offers on Us............................. S-25
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-25
Fundamental Change in Nature of
Investment............................... S-25
Fundamental Change in Number of Properties
Owned.................................... S-25
Lack of Trading Market for OP Units........ S-25
Uncertain Future Distributions............. S-25
Possible Reduction in Required
Distributions on Preferred OP Units...... S-25
Possible Lower Distributions............... S-25
Possible Redemption of Preferred Stock..... S-25
Possible Recognition of Taxable Gains on OP
Units.................................... S-26
Limitations on Effecting a Change of
Control.................................. S-26
Limitation on Transfer of OP Units......... S-26
Limited Voting Rights of Holders of OP
Units.................................... S-26
Market Prices for AIMCO's Securities May
Fluctuate................................ S-26
Litigation Associated with Partnership
Acquisitions............................. S-26
Dilution of Interests of Holders of OP
Units.................................... S-26
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-26
Possible Increase in Control of Your
Partnership by Us........................ S-26
Recognition of Gain Resulting from Possible
Future Reduction in Your Partnership
Liabilities.............................. S-27
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Possible Termination of Your Partnership
for Federal Income Tax Purposes.......... S-27
Risk of Inability to Transfer Units for
12-Month Period.......................... S-27
Possible Change in Time Frame Regarding
Sale of Property......................... S-27
Balloon Payments........................... S-27
SPECIAL FACTORS TO CONSIDER.................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-28
Background of the Offer...................... S-28
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-31
Disadvantages of the Offer................... S-32
VALUATION OF UNITS............................. S-34
FAIRNESS OF THE OFFER.......................... S-36
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-36
Fairness to Unitholders who Tender their
Units...................................... S-37
Fairness to Unitholders who do not Tender
their Units................................ S-38
Comparison of Consideration to Alternative
Consideration.............................. S-38
Allocation of Consideration.................. S-41
STANGER ANALYSIS............................... S-42
Experience of Stanger........................ S-42
Summary of Materials Considered.............. S-42
Summary of Reviews........................... S-44
Conclusions.................................. S-46
Assumptions, Limitations and
Qualifications............................. S-46
Compensation and Material Relationships...... S-47
YOUR PARTNERSHIP............................... S-48
General...................................... S-48
Your Partnership and its Property............ S-48
Property Management.......................... S-48
Investment Objectives and Policies; Sale or
Financing of Investments................... S-48
Capital Replacement.......................... S-49
Borrowing Policies........................... S-49
Competition.................................. S-50
Legal Proceedings............................ S-50
History of the Partnership................... S-50
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-50
Compensation Paid to the General Partner and
its Affiliates............................. S-52
SELECTED FINANCIAL INFORMATION OF YOUR
PARTNERSHIP.................................. S-53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP.......................... S-54
Overview..................................... S-54
Results of Operations........................ S-54
THE OFFER...................................... S-57
Terms of the Offer; Expiration Date.......... S-57
Acceptance for Payment and Payment for
Units...................................... S-57
Procedure for Tendering Units................ S-58
Withdrawal Rights............................ S-61
Extension of Tender Period; Termination;
Amendment.................................. S-61
Proration.................................... S-62
Fractional OP Units.......................... S-62
Future Plans of the AIMCO Operating
Partnership................................ S-62
Voting by the AIMCO Operating Partnership.... S-63
Dissenters' Rights........................... S-63
Conditions of the Offer...................... S-63
</TABLE>
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<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Effects of the Offer......................... S-66
Certain Legal Matters........................ S-66
Fees and Expenses............................ S-68
Accounting Treatment......................... S-68
FEDERAL INCOME TAX CONSEQUENCES................ S-69
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-70
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-71
Tax Consequences of Exchanging Units Solely
for Cash................................... S-72
Adjusted Tax Basis........................... S-72
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-72
Passive Activity Losses...................... S-73
Tax Reporting................................ S-73
Foreign Offerees............................. S-73
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-75
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-82
DESCRIPTION OF PREFERRED OP UNITS.............. S-88
General...................................... S-88
Ranking...................................... S-88
Distributions................................ S-88
Allocation................................... S-89
Liquidation Preference....................... S-89
Redemption................................... S-90
Voting Rights................................ S-90
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Restrictions on Transfer..................... S-91
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-91
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-93
CONFLICTS OF INTEREST.......................... S-97
Conflicts of Interest with Respect to the
Offer...................................... S-97
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-97
Competition Among Properties................. S-97
Features Discouraging Potential Takeovers.... S-97
Future Exchange Offers....................... S-98
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-98
LEGAL MATTERS.................................. S-99
EXPERTS........................................ S-99
INDEX TO FINANCIAL STATEMENTS.................. F-1
PRO FORMA FINANCIAL INFORMATION OF AIMCO
PROPERTIES, L.P. ............................ P-1
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>
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SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- 2,848.50 of our Class Two Partnership Preferred Units;
- 1,892.50 of our Partnership Common Units; or
- $71,211 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 accept a maximum of 25% of the outstanding units in response to our
offer. Our offer is not subject to any minimum number of units being tendered.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline.
For the five years ended December 31, 1998, your partnership paid
distributions of $8,781 per unit.
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
its wholly owned subsidiary, AIMCO-GP, Inc. ("AIMCO GP"), AIMCO acts as the sole
general partner of the AIMCO Operating Partnership. As of December 31, 1998,
AIMCO-GP and another AIMCO subsidiary, AIMCO-LP, Inc., a limited partner of the
AIMCO Operating Partnership (the "Special Limited Partner"), owned approximately
an 83% interest in the AIMCO Operating Partnership. As of December 31, 1998, our
portfolio of owned or managed properties included 379,363 apartment units in
2,147 properties located in 49 states, the District of Columbia and Puerto Rico.
Based on apartment unit data compiled by the National Multi Housing Council, we
believe that we are one of the largest owners and managers of multifamily
apartment properties in the United States. As of December 31, 1998, we:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 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. and our February 26, 1999 merger with Insignia Properties Trust, we
acquired a 100% ownership interest in the general partner of your partnership,
Jacques-Miller Associates, and the company that manages the property owned by
your partnership.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-23 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the
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risks associated with our offer and the disadvantages of the offer to you and
should be considered when you review "Summary -- Background and Reasons for the
Offer -- Expected Benefits of the Offer":
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. We did not use any third-party appraisal or valuation to determine
the value of any property owned by your partnership. We established the terms of
our offer, including the exchange ratios and the cash consideration, without any
arms-length negotiations.
OFFER CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimated your property to be worth $10,011,000, less
approximately $272,130 of deferred maintenance and investment. It is possible
that a sale of the property could result in your receiving more per unit than in
our offer. Even if our cash offer consideration is equal to liquidation value,
if you accept OP Units, you may not ultimately receive an amount equal to the
cash offer consideration when you sell such OP Units or any AIMCO securities you
may receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
value if you retain your units until your partnership is liquidated.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of ours and, therefore, has substantial conflicts of interest with
respect to our offer. We are making this offer with a view to making a profit.
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 RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its property, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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
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<PAGE> 1964
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.
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. You
should review "Federal Income Tax Consequences" 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. 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.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is our subsidiary).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. For any units that we
acquire from you, you will not receive any future distributions from your
partnership's operating cash flow or upon a sale of property owned by your
partnership or a refinancing of any of its debt. If you tender your units in
exchange for OP Units, you will be entitled to future distributions from us from
our operating cash flow and upon a dissolution, liquidation or wind-up of the
AIMCO Operating Partnership.
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from a sale of a property or a refinancing of its indebtedness, to (ii)
a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of December 31, 2008 to a much larger
partnership with a partnership termination date of 2093.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you tender your units
for our OP Units, you will have changed your investment from an interest in a
partnership that owns and manages one property to an interest in a partnership
that invests in and manages a large portfolio of properties.
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<PAGE> 1965
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus.
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions.
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a
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<PAGE> 1966
result, we may incur costs associated with defending or settling such litigation
or paying any judgment if we lose. As of the present time, no limited partners
of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. As a result of the
offer, we may increase our ability to influence voting decisions with respect to
your partnership. However, we will not be able to control voting decisions
unless we acquire more units in another transaction, which cannot take place for
at least one year after expiration of this offer. Also, removal of your general
partner (which is our subsidiary) or the manager of any property owned by your
partnership may become more difficult or impossible without our consent or
approval.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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.
Gain recognized by you on the disposition of retained units with a holding
period of 12 months or less may be classified as short-term capital gain and
subject to taxation at ordinary income tax rates.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of units without the
consent of your general partner (which is our subsidiary). Such consent may be
withheld by your general partner in its sole discretion. Your general partner
may withhold its consent if such transfer would result in the termination of
your partnership for tax purposes which would occur if 50% or more of the total
interest in your partnership is transferred within a 12-month period. If we
acquire a significant percentage of the interest in your partnership, your
general partner may not consent to a transfer for a 12-month period following
our offer.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investment in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to have to
hold the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns one property. The general partner of your partnership
continually considers whether the property should be sold or otherwise disposed
of after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum
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capital appreciation for your partnership. We cannot predict when the property
will be sold or otherwise disposed of. However, there is no current plan or
intention to sell the property in the near future.
BALLOON PAYMENTS. Your partnership has balloon payments of approximately
$6,110,287 due on its mortgage debt in November 2002. Your partnership will have
to refinance such debt or sell its property prior to the balloon payment dates,
or it will be in default and could lose the property to foreclosure.
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 51% ownership interest in Insignia Properties Trust, which has
a 100% ownership interest in the general partner of your partnership and the
company that manages the property owned by your partnership. On February 26,
1999, we acquired the remaining 49% interest in Insignia Properties Trust in a
merger transaction. One of the consequences of the merger with Insignia is to
allow us to make the offer and, if successful, to increase our ownership in 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 August 28, 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
(which is our subsidiary):
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.
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. 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. Your partnership's mortgage notes are due in November 2002 and
requires balloon payments totaling 6,110,287. Your partnership currently
has adequate sources of cash to finance its operations on both a short term
and long term basis but will have to sell its property or refinance its
indebtedness to pay such balloon payments. In addition, continuation of
your partnership without the offer would deny you and your partners the
benefits that your general partner (which is our subsidiary) expects to
result from the offer. For example, a partner of
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<PAGE> 1968
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. There is currently no market
for the Preferred OP Units or Common OP Units.
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 Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the NYSE.
- Preferred Quarterly Distributions. Your partnership paid distributions of
$1,394.37 per unit for the fiscal year ended December 31, 1998. Holders
of Preferred OP Units will be entitled to receive quarterly distributions
of $0.50 per unit (equivalent to $2.00 on an annualized basis) before any
distributions are paid to holders of Common OP Units. This is equivalent
to a distribution of $5,697.00 per year on the number of Preferred OP
Units you will receive in exchange for each of your partnership 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 Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- Quarterly Distributions. Your partnership paid distributions of $1,408
per unit for the fiscal year ended December 31, 1998. In 1998, we paid
quarterly distributions on the Common OP Units totalling $2.25 per unit.
In January 1999, we increased our distribution rate on each of the Common
OP Units to $2.50 on an annual basis. See "The AIMCO Operating
Partnership." Assuming no change in the level of our distributions, this
is equivalent to a distribution of $4,731.25 per year on the number of
Common OP Units you will receive in exchange for each of your partnership
units.
- 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 Common OP Units.
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<PAGE> 1969
- 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.
Disadvantages of the Offer.
The principal disadvantages of the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and determining the offer consideration, no one separately represented
the interests of the limited partners. Although we have a fiduciary duty
to the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of such property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pretax cash proceeds to you than our
offer.
- OP Units. OP Units lack a public market, have transfer restrictions and
must be held for one year before they can be redeemed by a holder. The
ultimate return on the OP Units is directly tied to the future price of
AIMCO's Class A Common Stock or Class I Preferred Stock. You could
ultimately receive less for your OP Units than the cash price in our
offer. Further, on or after March 1, 2005, we may redeem the Class I
Preferred Stock for $25 per share.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
a sale of the property would be advantageous given market conditions, the
condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of the property and the tax consequences to you
and your partners upon a sale of the property.
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
S-8
<PAGE> 1970
VALUATION OF UNITS
We determined the offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower the value produced. We used your partnership's property
income for the fiscal year ended December 31, 1997. However, in determining the
appropriate capitalization rate, we considered the partnership's property income
since December 31, 1997. Our method for selecting a capitalization rate begins
with each property being assigned a location and condition rating (e.g., "A" for
excellent, "B" for good, "C" for fair, and "D" for poor). We have rated your
property's location C (fair) and its condition C (fair). Generally, we assign an
initial capitalization rate of 11.00% to properties in this category. We then
adjust the capitalization rate based on whether the mortgage debt that the
property is subject to bears interest at a rate above or below 7.5% per annum.
Generally, for every 0.5% in excess of 7.5%, the capitalization rate would be
increased by 0.25%. Your property's mortgage debt bears interest at 7.60% per
annum, which resulted in an increase from the initial capitalization rate of
0.25%. We also considered any changes in your partnership's property income from
1997 to 1998. Because your partnership's property income in 1998 remained
relatively unchanged compared to 1997, we made no further revision of the
capitalization rate, resulting in a final capitalization rate of 11.25%. The
evaluation of a property's location and condition, and the determination of an
appropriate capitalization rate for a property, is subjective in nature, and
others evaluating the same property might use a different capitalization rate
and derive a different property value. 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. Further, in applying the direct capitalization method,
others may make different assumptions and obtain different results. 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>
Property income............................................. $ 1,126,000
Capitalization rate......................................... 11.25%
-----------
Gross valuation of partnership property..................... $10,011,000
Plus: Cash and cash equivalents............................. 276,892
Plus: Other partnership assets, net of security deposits.... 626,127
Less: Mortgage debt, including accrued interest............. (7,429,742)
Less: Accounts payable and accrued expenses................. (204,140)
Less: Other liabilities..................................... (204,211)
-----------
Partnership valuation before taxes and certain costs........ 3,075,926
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures and deferred
maintenance............................................... (272,130)
Less: Closing costs......................................... (250,275)
-----------
Estimated net valuation of your partnership................. 2,553,521
Percentage of estimated net valuation allocated to holders
of units.................................................. 99.00%
-----------
Estimated net valuation of units............................ 2,527,986
Total number of units............................. 35.5
-----------
Estimated valuation per unit................................ 71,211
===========
Cash consideration per unit................................. $ 71,211
===========
</TABLE>
S-9
<PAGE> 1971
In order to determine the number of Preferred OP Units we are offering for
each of your units, we divided the cash offer consideration of $71,211 by the
$25 liquidation preference of each Preferred OP Unit to get 2,848.50 Preferred
OP Units per unit.
In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $71,211 by a
price of $37.63 (the average closing price of AIMCO's Class A Common Stock on
the NYSE for the 30 trading days ended March 23, 1999) to get 1,892.50 Common OP
Units per unit.
FAIRNESS OF THE OFFER
Fairness to Unitholders. Your general partner is our subsidiary. 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. Your general partner did not participate in the structuring of the
offer. We and your general partner believe that the offer and all forms of
consideration offered is fair to you and the other limited partners of your
partnership. 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 (which is our subsidiary) 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 (which is our subsidiary) has compared our offer consideration
to:
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated;
- your general partner's estimate of the going concern value of your
partnership if it continued operating as an independent stand-alone
entity; and
- the net book value of your partnership.
The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
---------
<S> <C>
Cash offer consideration.................................... $ 71,211
Partnership Preferred Units................................. $ 71,211
Partnership Common Units.................................... $ 71,211
Alternatives:
Estimated liquidation proceeds............................ $ 71,211
Estimated going concern value(1).......................... $ 63,594
Estimated alternative going concern value(2).............. $ 69,669
Net book value (deficit).................................. $(102,545)
</TABLE>
S-10
<PAGE> 1972
- ---------------
(1) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(2) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
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. Stanger has
rendered similar fairness opinions with regard to the other tender offers being
made by the AIMCO Operating Partnership. Stanger rendered the opinions only as
to the individual fairness of the offer consideration in each proposed exchange
offer.
YOUR PARTNERSHIP
Your Partnership and its Property. Lake Eden Associates, L.P. is a Delaware
limited partnership which was formed on January 11, 1985 for the purpose of
owning and operating a single property located in Columbus, Ohio, known as "Lake
Eden/Lebanon Station Apartments." Your partnership's property consists of 387
units and was built in two phases, the first of which was completed in 1972, and
the second was completed between 1980 and 1983. Your partnership has no
employees. As of September 30, 1998, there were 35.5 units of limited
partnership interest issued and outstanding, which were held of record by 64
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.
Your partnership sold 2,045,000 limited partnership units in 1985. Between
January 1, 1993 and December 31, 1998 your partnership paid cash distributions
totalling $9,848 per unit. Your partnership currently owns one property.
Property Management. Your partnership's property has been managed by an
affiliate of ours. 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.
Investment Objectives and Policies, Sale or Financing of Investments. Your
partnership will terminate on December 31, 2008, unless earlier dissolved. Your
general partner has no present intention to liquidate, sell, finance or
refinance your partnership property within any specified time period. An
investment in your partnership is a finite life investment in which partners
receive regular cash distributions out of your partnership's distributable cash
flow, if any, and upon liquidation.
Borrowing Policies. Your partnership's agreement of limited partnership
allows your partnership to incur debt. As of December 31, 1998, your partnership
had a mortgage note outstanding of $6,924,207, payable to Marine Midland Bank of
America, which bears interest at the rate of 7.60%. The mortgage debt is due in
November 2002. Your partnership also has a second mortgage note outstanding of
$250,216, on the same terms as the current mortgage note. Your partnership's
agreement of limited partnership also allows your general partner to lend funds
to your partnership. As of December 31, 1998, your general partner had no
outstanding loans to your partnership.
S-11
<PAGE> 1973
Transfers. Your units are not listed on any national securities exchange or
quoted on NASDAQ, and there is no established public trading market for the
units. Secondary sales activity for the units has been limited and sporadic.
Your general partner monitors transfers of the units (i) because the admission
of the transferee as a substitute limited partner in your partnership requires
the consent of your general partner under your partnership agreement, and (ii)
in order to track compliance with applicable safe harbor provisions to avoid
treatment as a "publicly traded partnership" for tax purposes. However, your
general partner does not monitor or regularly receive or maintain information
regarding the prices at which secondary sale transactions in the units have been
effectuated.
TERMS OF THE OFFER
General. We are offering to acquire up to 25% of the outstanding 35.5 units
of your partnership, which we do not directly or indirectly own, for
consideration per unit of 2,848.50 Preferred OP Units, 1,892.50 Common OP Units,
or $71,211 in cash. If you tender units pursuant to the offer, you may choose 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 Preferred OP Units, 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 January 1, 1999,
although you will be entitled to retain any distributions you may have received
after such date and prior to our commencement of this offer.
If you accept our offer and do not specify the consideration you desire on
the letter of transmittal, we will issue you Preferred OP Units.
Expiration Date. Our offer will expire at 5:00 P.M., New York City time, on
June 4, 1999, 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.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds 25% 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 their acceptance for payment as provided for herein.
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 Common OP Units or 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.
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;
S-12
<PAGE> 1974
- 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.
The offer may be extended or delayed indefinitely, during which time you
will not receive payment for any tendered units.
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 any property owned by
your partnership's because your general partner (which is our subsidiary) and
the property manager will remain unchanged. If we borrow funds for the cash
consideration for these offers, our interest costs would increase which could
adversely affect our future earnings. If all units in this and our other
contemplated offers were purchased for cash and we borrowed all the funds, at
current interest rates, our interest expense would increase by $3,064,000 per
year.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
number of units pursuant to our offer, we may be in a position to influence
voting decisions with respect to your partnership. However, we will not be able
to control voting decisions unless we acquire more units in another transaction,
which cannot take place for at least one year after expiration of this offer.
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 (which is our subsidiary),
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 Letter of Transmittal,
and the legal and accounting fees and expenses in connection with the offer. We
will also pay the fees of Stanger for providing the fairness opinion 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 $50,000.
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.
No Dissenters' Rights. You are not entitled to dissenters' (appraisal)
rights in connection with the offer.
S-13
<PAGE> 1975
Other Offers. The AIMCO Operating Partnership is also making similar
exchange offers to approximately 90 other limited partnerships in which it
controls the general partner, interests in substantially all of which were
acquired in the merger on October 1, 1998 with Insignia Financial Group, Inc.
and the February 26, 1999 merger with Insignia Properties Trust. Each of such
exchange offers is being made by a separate prospectus supplement which is
similar to this Prospectus Supplement. Copies of such prospectus supplements may
be obtained upon written request from the Information Agent at the address set
forth in "-- Information Agent" or on the back cover page of this Prospectus
Supplement. The exchange offers may be different for limited partners in each
partnership in terms of pricing and percentage of units sought, but the effects
of the offers will essentially be the same. In general, we believe that the risk
factors (except for certain tax-related risk factors) described herein for this
offer will also be applicable to the other offers.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer. Its telephone numbers are (888)
349-2005 and (201) 896-1900. Its fax number is (201) 896-0910.
FEDERAL INCOME TAX CONSEQUENCES
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Preferred OP
Units or 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.
THE FOREGOING SUMMARY IS A GENERAL DISCUSSION OF THE MATERIAL 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 "FEDERAL INCOME TAX CONSEQUENCES" 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.
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, your general
partner (which is our subsidiary) 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, Preferred
OP Units and 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.
As of February 19, 1999, the AIMCO Operating Partnership had approximately
9,729,130 Common OP Units outstanding (excluding interests held by AIMCO) and no
Class Two Partnership Preferred Units outstanding. The number of OP Units you
may acquire from us in exchange for your units will represent a lower percentage
of the outstanding limited partnership interests in the AIMCO Operating
Partnership than that of your current ownership interest in your partnership. In
response to our offer, you could elect to receive $71,211 in cash, 2,848.50
Preferred OP Units or 1,892.50 Common OP Units. Both your units and the
S-14
<PAGE> 1976
OP Units are subject to transfer restrictions and it is unlikely that a real
trading market will ever develop for any of such securities. If you subsequently
redeem OP Units for AIMCO Class A Common Stock or Class I Preferred Stock, we
can make no assurance as to the value of such shares of AIMCO stock, at that
time, which may be less than the cash offer price of $71,211.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
our subsidiary 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
both the general partner of your partnership and the manager of your
partnership's property. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $38,271 for the fiscal year ended December 31,
1998. The property manager received management fees of $110,364 for the fiscal
year ended December 31, 1998. We have no current intention of changing the fee
structure for your general partner or the 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.
AIMCO's Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is 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.
S-15
<PAGE> 1977
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. We might pay a higher price for any future exchange offers we may make
for units of your partnership. In any event, we will not acquire any units for
at least one year after expiration of this offer.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $631,998 will be required to purchase all of
the units sought in our offer, if such units are tendered for cash excluding
expenses. We will obtain all such funds from cash from operations, equity
issuances and short term borrowings. For a detailed description of estimated
expenses to be incurred in the offer, see "Source and Amount of Funds and
Transactional Expenses."
S-16
<PAGE> 1978
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
nine months ended September 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 of the AIMCO Operating Partnership" included in the accompanying
Prospectus. All dollar values are in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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............... $ 265,700 $ 127,083 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses........... (101,600) (50,737) (76,168) (38,400) (30,150) (10,330)
Owned property management expenses.... (7,746) (4,344) (6,620) (2,746) (2,276) (711)
Depreciation.......................... (59,792) (23,848) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
96,562 48,154 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income...... 13,968 9,173 13,937 8,367 8,132 3,217
Management and other expenses......... (8,101) (5,029) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation......... (196) (441) (588) (590) (581) --
Other assets, depreciation and
amortization........................ (3) (236) (453) (218) (168) (150)
Owner and seller bonuses.............. -- -- -- -- -- --
Amortization of management company
goodwill............................ -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
5,668 3,467 2,038 1,707 2,002 1,020
Minority interests in service company
business............................ -- 48 (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business............ 5,668 3,515 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative expenses... (7,444) (1,408) (5,396) (1,512) (1,804) (977)
Interest income....................... 18,244 4,458 8,676 523 658 123
Interest expense...................... (56,756) (33,359) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships........................ (1,052) (777) 1,008 (111) -- --
Equity in losses of unconsolidated
partnerships(c)..................... (5,078) (463) (1,798) -- -- --
Equity in earnings of unconsolidated
subsidiaries(d)..................... 8,413 456 4,636 -- -- --
Amortization of goodwill.............. (5,071) (711) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations................ 53,486 19,865 30,246 15,629 14,988 7,702
Gain on disposition of properties..... 2,783 (169) 2,720 44 -- --
Provision for income taxes............ -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before extraordinary
item................................ 56,269 19,696 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt.............. -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)..................... $ 56,269 $ 19,427 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)............................. 241 109 147 94 56 48
Total owned apartment units (end of
period)............................. 62,955 28,773 40,039 23,764 14,453 12,513
Units under management (end of
period)............................. 154,729 71,038 69,587 19,045 19,594 20,758
Basic earnings per Common OP Unit..... $ 0.80 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP Unit... $ 0.79 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit................................ $ 1.6875 $ 1.3875 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities.......................... 50,825 53,435 73,032 38,806 25,911 16,825
Cash flows used in investing
activities.......................... (185,453) (314,814) (717,663) (88,144) (60,821) (186,481)
Cash flows provided by (used in)
financing activities................ 141,221 293,984 668,549 60,129 30,145 176,800
<CAPTION>
AIMCO PROPERTIES, L.P.
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)
Cash flows provided by (used in)
financing activities................ (1,032) 14,114
</TABLE>
S-17
<PAGE> 1979
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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>
Funds from operations(e)................ $ 132,881 $ 49,692 $ 81,155 $ 35,185 $ 25,285 $ 9,391
Weighted average number of Common OP
Units outstanding..................... 53,007 24,347 29,119 14,994 11,461 10,920
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation.......................... $2,685,487 $1,250,239 $1,657,207 $865,222 $477,162 $ 406,067
Real estate, net of accumulated
depreciation.......................... 2,355,122 1,107,545 1,503,922 745,145 448,425 392,368
Total assets............................ 3,121,949 1,608,195 2,100,510 827,673 480,361 416,361
Total mortgages and notes payable....... 1,275,401 661,715 808,530 522,146 268,692 141,315
Redeemable Partnership Units............ 232,405 178,321 197,086 96,064 38,463 32,047
Mandatorily redeemable 1994 Cumulative
Senior Preferred Units................ -- -- -- -- -- 107,228
Partners' Capital....................... 1,427,087 560,737 960,176 178,462 160,947 137,354
<CAPTION>
AIMCO PROPERTIES, L.P.
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>
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 10, 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
based on the NAREIT definition, as adjusted for the 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 NINE PERIOD
MONTHS ENDED FOR THE YEAR ENDED JANUARY 10,
SEPTEMBER 30, DECEMBER 31, 1994
------------------ --------------------------- THROUGH
1998 1997 1997 1996 1995 JULY 28, 1994
-------- ------- ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net income.................................................. $ 56,269 $19,427 $32,697 $15,673 $14,988 $ 7,702
(Gain) loss on disposition of property...................... (2,783) 169 (2,720) (44) -- --
Extraordinary item.......................................... -- 269 269 -- -- --
Real estate depreciation, net of minority interests......... 56,900 21,052 33,751 19,056 15,038 4,727
Amortization of goodwill.................................... 7,077 711 948 500 428 76
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation.................................. -- 2,689 3,584 -- -- --
Amortization of management contracts...................... 4,201 430 1,587 -- -- --
Deferred taxes............................................ 6,134 2,164 4,894 -- -- --
Equity in earnings of other partnerships:
Real estate depreciation.................................. 17,379 2,781 6,280 -- -- --
Preferred stock dividends................................. (12,296) -- (135) -- (5,169) (3,114)
-------- ------- ------- ------- ------- -------
Funds from operations....................................... $132,881 $49,692 $81,155 $35,185 $25,285 $ 9,391
======== ======= ======= ======= ======= =======
</TABLE>
S-18
<PAGE> 1980
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. (the AIMCO Operating Partnership) for the
nine months ended September 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 NINE
MONTHS FOR THE
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C> <C>
OPERATING DATA:
RENTAL PROPERTY OPERATIONS:
Rental and other income................................... $ 345,961 $ 442,526
Property operating expenses............................... (136,240) (189,442)
Owned property management expenses........................ (8,933) (11,831)
Depreciation.............................................. (80,420) (98,853)
--------- -----------
120,368 142,400
--------- -----------
SERVICE COMPANY BUSINESS:
Management fees and other income.......................... 28,912 41,676
Management and other expenses............................. (14,386) (23,683)
Corporate overhead allocation............................. (196) (588)
Depreciation and amortization............................. (15,243) (26,480)
--------- -----------
(913) (9,075)
Minority interests in service company business............ -- (10)
--------- -----------
Partnership's shares of income from service company
business............................................... (913) (9,085)
--------- -----------
General and administrative expenses....................... (8,632) (21,371)
Interest expense.......................................... (90,890) (121,699)
Interest income........................................... 40,887 21,734
Minority interest......................................... (8,548) (10,034)
Equity in losses of unconsolidated partnerships........... (23,349) (43,918)
Equity in earnings of unconsolidated subsidiaries......... 851 5,848
Amortization of Goodwill.................................. (5,071) --
--------- -----------
Net income........................................ $ 24,703 $ (36,125)
========= ===========
PER OP UNIT DATA:
Basic earnings (loss) per Common OP Unit.................... $ (.12) $ (1.16)
Diluted earnings (loss) per Common OP Unit.................. $ (.12) $ (1.16)
Distributions paid per Common OP Unit....................... $ 1.69 $ 1.85
Book value per Common OP Unit............................... $ 24.52 $ 26.96
CASH FLOW DATA:
Cash provided by operating activities....................... $ 90,439 $ 130,703
Cash used in investing activities........................... (79,923) (1,135,038)
Cash provided by (used in) financing activities............. 16,740 955,977
OTHER DATA:
Funds from operations(a).................................... $ 187,985 $ 172,733
Weighted average number of Common OP Units outstanding...... 74,946 74,094
</TABLE>
S-19
<PAGE> 1981
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
----------------------
FOR THE NINE
MONTHS ENDED
SEPTEMBER 30, 1998
----------------------
(IN THOUSANDS, EXCEPT
PER UNIT DATA)
<S> <C>
BALANCE SHEET DATA:
Real estate, net of accumulated depreciation................ $2,679,195
Total assets................................................ 4,558,819
Total mortgages and notes payable........................... 1,762,105
Company-obligated mandatorily redeemable convertible
securities of a subsidiary trust.......................... 149,500
Redeemable partnership units................................ 320,443
Partners' capital........................................... 1,984,019
</TABLE>
- ---------------
(a) 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
based upon the NAREIT definition, as adjusted for the 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.
The following is a reconciliation of pro forma net income to pro forma
funds from operations:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ ------------------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss)................................. $ 24,703 $(36,125)
HUD release fee and legal reserve................. -- 10,202
Real estate depreciation, net of minority
interests....................................... 76,521 93,050
Amortization of management contracts.............. 9,593 12,790
Amortization of management company goodwill....... 10,997 12,551
Equity in earnings of unconsolidated subsidiaries:
Real estate depreciation........................ -- 1,715
Amortization of management company goodwill..... 959 1,918
Amortization of management contracts............ 23,010 30,516
Deferred taxes.................................. (713) (1,356)
Equity in earnings of other partnerships:
Real estate depreciation........................ 79,559 95,285
Interest on convertible debentures................ (7,537) (10,003)
Preferred unit distributions...................... (29,107) (37,810)
-------- --------
Funds from operations............................. $187,985 $172,733
======== ========
</TABLE>
S-20
<PAGE> 1982
SUMMARY FINANCIAL INFORMATION OF LAKE EDEN ASSOCIATES, L.P.
The summary financial information of Lake Eden Associates, L.P. for the
nine months ended September 30, 1998 and 1997 is unaudited. The summary
financial information for Lake Eden Associates, L.P. for the years ended
December 31, 1997, 1996, 1995, 1994 and 1993 is derived from the 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 of Your
Partnership" included herein. See "Index to Financial Statements."
LAKE EDEN ASSOCIATES, L.P.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, FOR THE YEAR ENDED DECEMBER 31,
--------------------------- --------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total Revenues................. $1,643,376 $1,681,494 $2,249,681 $2,115,254 $2,075,758 $2,018,815 $1,955,707
Net Income/(Loss).............. 139,433 164,705 252,740 48,490 144,148 (204,553) (243,914)
Net Income (Loss) per limited
partnership unit............. 3,688.42 4,593.18 7,048.25 1,352.25 4,019.92 (5,704.42) (6,802.11)
Distributions per limited
partnership unit............. 1,394.37 1,770.04 1,767.69 2,574.00 1,056.57 1,900.83 --
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Cash
Equivalents.......... $ 82,323 $ 375,286 $ 326,890 $ 431,733 $ 436,086 $ 142,899 $ 288,458
Real Estate, Net of
Accumulated
Depreciation......... 2,834,889 2,683,808 2,856,193 2,708,827 2,758,941 2,802,668 3,143,200
Total Assets........... 3,653,016 3,694,711 3,925,746 3,825,929 3,977,920 3,971,190 4,310,475
Notes Payable.......... 6,954,603 7,119,979 7,088,397 7,245,235 7,388,963 7,520,678 7,641,385
Partners'
Capital/(Deficit)...... (3,550,909) (3,728,461) (3,640,342) (3,829,695) (3,785,885) (3,892,146) (3,619,432)
Total Distributions...... 50,000 63,357 63,387 92,300 37,887 68,161 --
Net increase (decrease)
in cash and cash
equivalents............ (234,567) (68,447) (104,843) (4,353) 293,187 (83,459) --
Net cash provided by
operating activities... 85,451 287,408 530,163 412,336 656,788 275,317 --
Ratio of earnings to
fixed charges.......... 1.32/1 1.37/1 1.38/1 1.07/1 1.21/1 0.69/1 0.64/1
</TABLE>
COMPARATIVE PER UNIT DATA
Set forth below are historical cash distributions per unit of your
partnership for the year ended December 31, 1998, and the cash distributions
payable on the number of Common OP Units and Preferred OP Units issuable in
exchange therefor:
<TABLE>
<CAPTION>
ANNUAL
DISTRIBUTIONS
-------------
<S> <C>
Units of Lake Eden Associates, L.P.......................... $ 1,408
Equivalent cash distributions on Common OP Units(1)......... $4,731.25
Equivalent cash distributions on Preferred OP Units(2)...... $5,697.00
</TABLE>
- ---------------
(1) Calculated by multiplying the exchange ratio of 1,892.50 Common OP Units per
unit by the annualized distributions paid on the Common OP Units of $2.50
per unit.
(2) Calculated by multiplying the exchange ratio of 2,848.50 Preferred OP units
per unit by the stated annual distribution rate on the Preferred OP Units of
$2.00 per unit.
S-21
<PAGE> 1983
THE AIMCO OPERATING PARTNERSHIP
AIMCO Properties, L.P. is the "AIMCO Operating Partnership." It conducts
substantially all of the operations of AIMCO. AIMCO is a real estate investment
trust that owns and manages multifamily apartment properties throughout the
United States. Through its wholly owned subsidiaries, AIMCO GP, the sole general
partner of the AIMCO Operating Partnership, and the Special Limited Partner, as
of December 31, 1998, AIMCO held approximately an 83% interest in the AIMCO
Operating Partnership. Based on apartment unit data compiled by the National
Multi Housing Council, we believe that AIMCO is one of the largest owner and
manager of multifamily apartment properties in the United States, with a total
portfolio of 379,363 apartment units in 2,147 properties located in 49 states,
the District of Columbia and Puerto Rico. As of December 31, 1998, AIMCO:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 apartment properties for third party
owners and affiliates.
AIMCO's Class A Common Stock is listed and traded on the NYSE under the
symbol "AIV." On March 23, 1999, the last reported sale price of AIMCO Class A
Common Stock on the NYSE was $35 3/16. 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 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>
1999
First Quarter (through March 23)........ $41 5/8 $35 3/16 $0.6250 $0.6250
1998
Fourth Quarter.......................... 37 3/8 30 0.5625 0.5625
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>
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.
S-22
<PAGE> 1984
RISK FACTORS
The following sets forth certain risks and disadvantages of the offer and
should be read and considered when reviewing the potential benefits of the offer
set forth in "Background and Reasons for the Offer -- Expected Benefits of the
Offer." In addition, you should review the other risks of investing in us
beginning on page 2 of our accompanying Prospectus.
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOT BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. 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. 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. 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 CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. In determining our
offer consideration, we estimate your property to be worth $10,011,000, less
approximately $272,130 of deferred maintenance. It is possible that a sale of
the property could result in you receiving more pretax cash per unit than our
offer. Even if our cash offer consideration is equal to liquidation value, if
you accept OP Units, you may not ultimately receive an amount equal to the cash
offer consideration when you sell such OP Units or any AIMCO securities you may
receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
pretax cash 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.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of AIMCO and the AIMCO Operating Partnership and, therefore, has
substantial conflicts of interest with respect to our offer. We are making this
offer with a view to making a profit. 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. Another conflict is 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. 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.
S-23
<PAGE> 1985
CONFLICTS OF INTEREST RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its property, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among other things,
the performance of your partnership, prevailing interest rates, and our interest
in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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 sold. If you exchange your units
for cash and our 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. 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 allocated to such units 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. If you exercise your redemption right with respect to the OP Units
within two years of the date that you transfer your units to the AIMCO Operating
Partnership, your exchange of units for OP Units or OP Units and cash could be
treated as a disguised sale of your units and you would be required to recognize
gain or loss in the year of the exchange on such disguised sale. See "Federal
Income Tax Consequences -- Disguised Sales." 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. 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 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.
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. You
should review "Federal Income Tax Consequences" 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. Because the income tax
consequences of tendering units will not be the same for everyone, you should
consult your own tax advisor before determining whether to tender your units
pursuant to our offer.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is controlled by us).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. If you tender your
units in response to our offer, you will transfer all right title and interest
in and to all of the units that we accept, and all distributions in
S-24
<PAGE> 1986
respect of such units on or after the date on which we accept such units for
purchase. Accordingly, for any units that we acquire from you, you will not
receive any future distributions from operating cash flow of your partnership or
upon a sale of property owned by your partnership or a refinancing of any of its
debt. If you tender your units in exchange for OP Units, you will be entitled to
future distributions from the operating cash flow of the AIMCO Operating
Partnership and upon a dissolution, liquidation or winding-up of the AIMCO
Operating Partnership. See "Comparison of Your Units and AIMCO OP
Units -- Distributions."
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000, based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from the sale of a property or a refinancing of its indebtedness to
(ii) a partnership that reinvests the proceeds from sales of properties and
refinancings of its indebtedness. You will have changed from a small partnership
with a partnership termination date of December 31, 2008 to a much larger
partnership with a partnership termination date of 2093.
Under the AIMCO Operating Partnership's agreement of limited partnership,
the general partner has the ability, without the concurrence of the limited
partners, to acquire and dispose of properties and to borrow funds. Further,
while it is the intent to distribute net income from operations, sales of
properties and refinancings of indebtedness, the general partner may not make
such distributions. Proceeds of future asset sales or refinancings by the AIMCO
Operating Partnership generally will be reinvested rather than distributed.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you exchange your
units for OP Units, you will have changed your investment from an interest in a
partnership which owns and manages a single property to an interest in the AIMCO
Operating Partnership which 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 and our portfolio of properties as compared to the value of your
units and your partnership.
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock
S-25
<PAGE> 1987
for $25 per share, you will have received the present value equivalent of the
cash consideration of our offer (assuming annual distributions of $2.00 on each
Preferred OP Unit, a discount rate of 8% and without giving effect to the
potential tax deferral associated with receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAINS ON OP UNITS. There are certain tax
risks associated with the acquisition, retention and disposition of OP Units.
Although your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus. If you
exercise your redemption right with respect to the OP Units within two years of
the date that you transfer your units to the AIMCO Operating Partnership, your
exchange of units for OP Units and cash could be treated as a disguised sale of
your units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
limited partnership interests. 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. Such matters affecting the
operation of the AIMCO Operating Partnership include liquidation and
distribution policies, property purchases, and potential mergers or
acquisitions. See "Comparison of Your Units and AIMCO OP Units -- Voting
Rights."
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as for your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a result, we may incur costs associated with defending or settling such
litigation or paying any judgement if we lose. As of the present time, no
limited partners of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. 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
S-26
<PAGE> 1988
increase our ability to influence voting decisions with respect to your
partnership. However, we will not be able to control voting decisions unless we
acquire more units in another transaction, which cannot take place for at least
one year. Furthermore, in the event that we acquire a substantial number of
units pursuant to our offer, removal of your general partner (which is our
subsidiary) or the manager of any property owned by your partnership may become
more difficult or impossible without our consent.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of units without the
consent of your general partner (which is our subsidiary). Such consent may be
withheld by your general partner in its sole discretion. Your general partner
may withhold its consent if such transfer would result in the termination of
your partnership for tax purposes which would occur if 50% or more of the total
interest in your partnership is transferred within a 12-month period. If we
acquire a significant percentage of the interest in your partnership, your
general partner may not consent to a transfer for a 12-month period following
our offer.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investments in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to hold
the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns one property. The general partner of your partnership
continually considers whether the property should be sold or otherwise disposed
of after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for your partnership. We cannot
predict when the property will be sold or otherwise disposed of. However, there
is no current plan or intention to sell the property in the near future.
BALLOON PAYMENTS. Your partnership has balloon payments of approximately
$6,110,287 due on its mortgage debt in November 2002. Your partnership will have
to refinance such debt or sell its property prior to the balloon payment date,
or it will be in default and could lose the property to foreclosure.
S-27
<PAGE> 1989
SPECIAL FACTORS TO CONSIDER
In reviewing the offer, you should pay special attention to the information
in the Sections entitled "Background and Reasons for the Offer," "Valuation of
Units," "Fairness of the Offer" and "Stanger Analysis," which contain
information regarding the background and reasons for the offer, the method of
evaluating units in the offer and alternative valuation methods considered, our
view as to the fairness of the offer, and the fairness opinion rendered by
Stanger.
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 liquidate your current investment and to invest in our OP Units
or receive cash, or to retain your units.
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 .992% interest, consisting of a 0%
limited partnership interest and a .992% general partnership interest, in your
partnership.
On October 31, 1998, IPT and AIMCO entered into an agreement and plan of
merger, dated as of October 1, 1998 (the "IPT Merger Agreement"), pursuant to
which IPT merged with AIMCO on February 26, 1999 (the "IPT Merger"). Upon
consummation of the IPT Merger, each outstanding share of IPT not owned by AIMCO
was converted into the right to receive 0.3601 shares of AIMCO's Class A Common
Stock (approximately 4,180,000 shares in the aggregate).
One of the reasons we chose to acquire Insignia is that we would be able to
make the exchange 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, and would provide the AIMCO Operating Partnership
with a larger asset and capital base and increased diversification. As of the
date of this offering, the AIMCO Operating Partnership proposes to make offers
to approximately 90 of the Insignia Partnerships, including your partnership.
During our negotiations with Insignia in early 1998, we decided that if the
merger with Insignia were consummated, we could also benefit from making offers
for limited partnership interests in the Insignia Partnerships. While some of
the Insignia Partnerships are public partnerships and information is publicly
available on such partnerships for weighing the benefits of making an exchange
offer, many of the partnerships are private partnerships and information about
such partnerships comes principally from the general partner. Our control of the
general partner makes it possible to obtain access to such information. Further,
such control also means that we control the operations of the partnerships and
their properties. Insignia did not propose that we conduct such exchange offers,
rather we initiated the offers on our own. We determined in June of 1998 that if
the merger with Insignia were consummated, we would offer to limited partners of
the Insignia Partnerships limited partnership units of the AIMCO Operating
Partnership and/or cash.
In connection with the Insignia Merger we acquired general partnership
interests and certain limited partnership interests in a number of private and
public partnerships. Eight private partnerships out of the 90 partnerships
involved in the proposed exchange offers do not have audited financial
statements prepared in accordance with generally accepted accounting practices
("GAAP"). Certain of these partnerships have audited financial statements
prepared on the basis of federal income taxes and others have unaudited
financial
S-28
<PAGE> 1990
statements which may or may not be prepared on the basis of GAAP or federal
income taxes. For the Insignia Partnerships for which exchange offers are being
made which do not have audited GAAP financial statements for at least two years,
we are making the offer on the basis of either one year of audited GAAP
financial statements and one year of unaudited GAAP financial statements or just
unaudited GAAP financial statements. We tried to obtain two years of audited
GAAP financial statements for all the partnerships for which offers are being
made, but because of the inability to locate records from inception of the
partnerships which would allow auditors to verify the original purchase price of
the properties, no audits were possible. In these cases, the entities which
controlled the general partners prior to Insignia are no longer in business or
have no current knowledge or records of such partnerships. For the same reasons,
we do not have all the records for past years of some of the partnerships.
Therefore, for the partnerships without an audit, we did not have invoices,
escrow statements, property closing statements or the like to support the
original costs of the real property to the satisfaction of independent auditors,
in order for them to render an unqualified audit report. Consequently, we have
no way to support the original cost of the properties. However, we have general
ledgers and related accounting records that enable us to prepare GAAP basis
financial statements. These records were taken from the entities that controlled
the general partners and were subsequently maintained by us. The amount of
capitalized property costs appearing in those books and records has, to our
knowledge, been appropriately rolled forward from year to year and used by the
general partners of the partnerships in question to prepare tax returns and
periodic reports to the investors in the partnerships. Therefore, we believe
that the unaudited financial statements included in the prospectus supplements
for such partnerships have been prepared in accordance with GAAP.
In acquiring Insignia and the interests in the Insignia Partnerships, we
conducted due diligence with regard to certain of the assets acquired including
the major properties held by the Insignia Partnerships. Our due diligence
focused on the condition of the major properties and the terms of the
partnership agreements. Since Insignia had audited GAAP financial statements and
since those partnerships without audited GAAP financial statements are generally
smaller, we did not focus on the issue of audited GAAP based financial
statements for the smaller partnerships at the time of the merger. Further, for
our internal due diligence use, audited tax based financial statements are also
used. The total number of Insignia Partnerships we acquired an interest in was
approximately 550 of which approximately 25 do not have audited GAAP statements.
We were not able to pick and choose the partnerships in which we would acquire
an interest. The Insignia Partnerships were part of the business of Insignia. As
a consequence, we acquired interests in certain small private partnerships which
do not have the ability to obtain audited GAAP financial statements. It is our
policy to acquire properties or partnerships with audited GAAP based financial
statements. However, in connection with large acquisitions of partnerships
interests, such as with the Insignia Merger, we may occasionally acquire a
partnership or property without audited GAAP financial statements.
Previous Tender Offers
Tender offers have been previously made with respect to certain of the
public Insignia Partnerships. However, there have not been any prior tender
offers to acquire units of your partnership. Except for such tender offers, we
are not aware of any merger, consolidation or other combination involving any of
the Insignia Partnerships, or any acquisitions of any of such partnerships or a
material amount of the assets of such partnerships.
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 August 28, 1998 with Stanger to provide such a fairness opinion for your
partnership and other partnerships.
S-29
<PAGE> 1991
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
(which is our subsidiary).
Liquidation
Benefits of 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 (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 your general partner (which is our subsidiary), 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 on the order of 1% of the principal amount of the mortgage.
Your general partner believes it currently is in the best interest of your
partnership to continue holding its real estate assets.
Continuation of the Partnership Without the Offer
Benefits of Continuation. Although our offer permits you to continue your
investment in your partnership, 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 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. The
continuation of your partnership will allow you to continue to participate in
the net income and any increases of revenue of your partnership and any net
proceeds from the sale of any property owned by your partnership. The General
Partner continues to review operations and expects to complete capital
expenditures in 1999 and 2000 enabling it to possibly increase rents and lower
expenses. In addition, a sale of the property may cause a tax gain to each
investor.
Disadvantages of Continuation. There are several risks and disadvantages
that result from continuing the operations of your partnership without our
offer. If your partnership continues operating as presently structured, your
partnership could be forced to borrow on terms that could result in net losses
from operations. Your partnership's mortgage notes are due in November 2002 and
require balloon payments totaling $6,110,287. Your partnership currently has
adequate sources of cash to finance its operations on both a short term and long
term basis but will have to sell the properties or refinance its indebtedness in
2002 to pay such balloon payments. Continuation of your partnership without the
offer would deny you and your partners the benefits that your general partner
(which is our subsidiary) expects to result from the 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.
Alternative Structures Considered
Before we decided to make our offer, we considered a number of alternative
transactions, including purchasing some or all of your partnership's property;
making an offer of only cash for your units; making an offer of only Common OP
Units for your units; and making an offer of only Preferred OP Units for your
units.
S-30
<PAGE> 1992
A merger would require a vote of the limited partners of your partnership. If
the merger was approved, all limited partners, including those who wish to
retain their units and continue to participate in your partnership, would be
forced to participate in the merger transaction. If the merger was not approved,
all limited partners, including those who would like to liquidate their
investment in your partnership, would be forced to retain their units.
We also considered purchasing your partnership's property from your
partnership. However, a sale of your partnership's property would require a vote
of a majority of all the limited partners. If the sale was approved, all limited
partners, including those who wish to continue to participate in the ownership
of your partnership's property, would be forced to participate in the sale
transaction, and possibly to recognize taxable income. If the sale was not
approved, all limited partners, including those who would like to dispose of
their investment in your partnership's property, would be forced to retain their
investment.
In order to give all limited partners in your partnership an opportunity to
make their own investment decision, we elected to make an offer directly to you
and the other limited partners. We considered making an all cash offer in order
to satisfy some limited partners' desire for immediate liquidity. However, an
all cash offer would not be desirable for those limited partners who do not
desire immediate liquidity and do not want to immediately recognize any taxable
income, but might otherwise be interested in disposing of their investment in
your partnership and might want an opportunity to control the timing of any
realization of taxable income associated with liquidating such investment in the
future.
We considered making an offer of only OP Units, either all Common OP Units
or all Preferred OP Units. The primary disadvantage of an all OP Unit offer is
that those limited partners who want immediate liquidity would be forced to wait
at least one year before exchanging their OP Units for cash or AIMCO stock. We
decided to offer limited partners both Common OP Units and Preferred OP Units in
order to permit investors to make their own decision as to whether they
preferred the possibility of future capital appreciation (Common OP Units) or
preferred distribution rights (Preferred OP Units).
After considering these alternatives, we decided to offer limited partners
the possibility of all three forms of consideration: cash, Common OP Units and
Preferred OP Units. We think that such an offer will appeal to a large number of
limited partners in your partnership, while permitting each one to retain any or
all of his or her units and remain a limited partner in your partnership on the
same terms as before.
Sale of Assets
Your partnership could sell the property it owns. The general partner of
your partnership considers sale of your partnership's property from time to
time. However, any such sale would likely be a taxable transaction.
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:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, currently listed and traded on the NYSE.
S-31
<PAGE> 1993
- Preferred Quarterly Distributions. Your partnership paid distributions of
$1,394.37 per unit for the fiscal year ended December 31, 1998. Holders
of Preferred OP Units will be entitled to receive quarterly distributions
of $0.50 per unit (equivalent to $2.00 on an annualized basis) before any
distributions are paid to holders of Common OP Units. This is equivalent
to a distribution of $5,697 per year on the number of Preferred OP Units
you will receive in exchange for each of your partnership 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:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- Quarterly Distributions. Your partnership paid distributions of $1,394.37
per unit for the fiscal year ended December 31, 1998. In 1998, we paid
quarterly distributions on the Common OP Units totalling $2.25. In
January 1999, we increased our distribution rate on each of the Common OP
Units to $2.50 on an annual basis. Assuming no change in the level of our
distributions, this is equivalent to a distribution of $4,731.25 per year
on the number of Common OP Units you will receive in exchange for each of
your partnership units. See "The AIMCO Operating Partnership."
- 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 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.
DISADVANTAGES OF THE OFFER
The principal disadvantages to the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and the consideration, no one separately represented the interests of the
limited partners. Although we have a fiduciary duty to the limited
partners, we also have conflicting responsibilities to our equity
holders. We did not appoint, or ask the limited partners to appoint, a
party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of the property after
S-32
<PAGE> 1994
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pre-tax cash proceeds to you than our
offer.
- OP Units. Investing in OP Units has risks that include the lack of a
public market, transfer restrictions and a one year holding period before
they can be redeemed by a holder. The ultimate return on the OP Units is
directly tied to the future price of AIMCO's Class A Common Stock or
Class I Preferred Stock. You could ultimately receive less for your OP
Units than the cash price in our offer. Further, on or after March 1,
2005, we may redeem the Class I Preferred Stock for $25 per share.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
the sale of the property would be advantageous given market conditions,
the condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of a property and the tax consequences to you
and your partners on a sale of a property. See also "Your
Partnership -- General Policy Regarding Sales and Refinancings of
Partnership Property."
- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
S-33
<PAGE> 1995
VALUATION OF UNITS
We determined our cash offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower the value produced. We used your partnership's property
income for the fiscal year ended December 31, 1997. However, in determining the
appropriate capitalization rate, we considered the partnership's property income
since December 31, 1997. Our method for selecting a capitalization rate begins
with each property being assigned a location and condition rating (e.g., "A" for
excellent, "B" for good, "C" for fair, and "D" for poor). We have rated your
property's location C (fair) and its condition C (fair). Generally, we assign an
initial capitalization rate of 11.00% to properties in this category. We then
adjust the capitalization rate based on whether the mortgage debt that the
property is subject to bears interest at a rate above or below 7.5% per annum.
Generally, for every 0.5% in excess of 7.5%, the capitalization rate would be
increased by 0.25%. Your property's mortgage debt bears interest at 7.60% per
annum, which resulted in an increase from the initial capitalization rate of
0.25%. We also considered any changes in your partnership's property income from
1997 to 1998. Because your partnership's property income in 1998 remained
relatively unchanged compared to 1997, we made no further revision of the
capitalization rate, resulting in a final capitalization rate of 11.25%. The
evaluation of a property's location and condition, and the determination of an
appropriate capitalization rate for a property, is subjective in nature, and
others evaluating the same property might use a different capitalization rate
and derive a different property value.
Property income is the difference between the revenues from the property
and related costs and expenses, excluding income derived from sources other than
its regular activities and before income deductions. Income deductions include
interest, income taxes, prior-year adjustments, charges to reserves, write-offs
of intangibles, adjustments arising from major changes in accounting methods and
other material and nonrecurrent items. In this respect, property income differs
from net income disclosed in the partnership's financial statements, which does
not exclude these income sources and deductions. The following is a
reconciliation of your partnership's net income for the year ended December 31,
1997, to your partnership's property income for the same period.
<TABLE>
<S> <C>
Net Income (Loss)........................................ $ 252,740
Other Non-Operating Expenses............................. 27,426
Depreciation............................................. 193,723
Interest................................................. 652,111
----------
Property income.......................................... $1,126,000
</TABLE>
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. Further,
in applying the direct capitalization method, others may make different
assumptions and obtain different results. 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 estimated 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 (property 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 divided
S-34
<PAGE> 1996
fiscal 1997 property income of $1,126,000 by the property's
capitalization rate of 11.25% to derive an estimated gross property value
of $10,011,000.
- 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
certain other costs including required capital expenditures, deferred
maintenance, and closing costs to derive a net equity value for your
partnership of $2,553,521. Closing costs, which are estimated to be 2.5%
of the gross property value, include legal and accounting fees, real
property, transfer taxes, title and escrow costs and broker's fees.
- 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. Accordingly, 99% of the estimated liquidation
proceeds are assumed to be distributed to holders of units. Our cash
offer consideration represents the per unit liquidation proceeds
determined in this manner.
<TABLE>
<S> <C>
Net operating income........................................ $ 1,126,000
Capitalization rate......................................... 11.25%
-----------
Gross valuation of partnership property..................... 10,011,000
Plus: Cash and cash equivalents............................. 276,892
Plus: Other partnership assets, net of security deposits.... 626,127
Less: Mortgage debt, including accrued interest............. (7,429,742)
Less: Accounts payable and accrued expenses................. (204,140)
Less: Other liabilities..................................... (204,211)
-----------
Partnership valuation before taxes and certain costs........ 3,075,926
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures and deferred
maintenance............................................... (272,130)
Less: Closing costs......................................... (250,275)
-----------
Estimates net valuation of your partnership................. 2,553,521
Percentage of estimated net valuation allocated to holders
of units.................................................. 99.00%
-----------
Estimated net valuation of units............................ 2,527,986
Total number of units............................. 35.5
-----------
Estimated valuation per unit................................ 71,211
===========
Cash consideration per unit................................. 71,211
===========
</TABLE>
- In order to determine the number of Preferred OP Units we are offering
you, we divided the cash offer consideration of $71,211 by the $25
liquidation preference of each Preferred OP Unit to get 2,848.50
Preferred OP Units per unit.
- In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $71,211 by
a price of $37.63 (the average closing price of AIMCO's Class A Common
Stock on the NYSE for the 30 trading days ended on March 23, 1999) to get
1,892.50 Common OP Units per unit.
The total net valuation of all partnerships in which the AIMCO Operating
Partnership is making similar exchange offers, and which were valued using the
same methods as used for your partnership, is $568,751,183, of which, $2,553,521
or .45% is the net valuation of your partnership.
S-35
<PAGE> 1997
FAIRNESS OF THE OFFER
POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER;
FAIRNESS
Your general partner is a subsidiary of the AIMCO Operating Partnership. 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. Your general partner has substantial conflicts of interest with
regard to the offer. However, for all of the reasons discussed herein, we and
your general partner believe that the offer and all forms of consideration
offered is fair to you and the limited partners of your partnership. We also
reasonably believe that the similar offers to the limited partners of the other
partnerships are fair to such limited partners. 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 us 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, your
general partner (which is our subsidiary) 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. The net
income of your partnership has decreased from $165,000 for the nine months
ended September 30, 1997 to $139,000 for the nine months ended September
30, 1998. These factors are reflected in our valuation of your partnership.
5. The method of determining the offer consideration which is intended
to provide you with OP Units or cash that are substantially the financial
equivalent to your interest in your partnership. 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
and Stanger's estimates of the net asset value ($72,420 per unit), going
concern value ($51,422 per unit) and liquidation value ($65,392 per unit)
of your partnership units. See "Stanger Analysis."
7. The fact that the units are illiquid and the offer provides holders
of units with liquidity. However, we did review whether trading information
was available.
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 by electing to accept Preferred OP Units or
Common OP Units.
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
S-36
<PAGE> 1998
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 $71,211, based on a total estimated
value of your partnership's property of $10,011,000. Your general partner
(which is our subsidiary) has no present intention to liquidate your
partnership or to sell or refinance your partnership's property. See
"Background and Reasons for the Offer". See "Valuation of Units" for a
detailed explanation of the methods we used to value your partnership.
12. Anticipated annualized distributions with respect to the Preferred
OP Units are $2.00 and current annualized distributions with respect to the
Common OP Units are $2.50. This is equivalent to distributions of $5,697
per year on the number of Preferred OP Units, or distributions of $4,731.25
per year on the number of Common OP Units, that you would receive in
exchange for each of your partnership's units. Distributions with respect
to your units for the fiscal year ended December 31, 1998 were $1,394.37.
See "Comparison of Your Units and AIMCO OP Units -- Distributions."
13. The fact that if your partnership were liquidated as opposed to
continuing, the general partner (which is our subsidiary) would not receive
the substantial management fees it currently receives. As discussed in
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," we do not believe that
liquidation of the partnership is in the best interests of the unitholders.
Therefore, we believe the offer is fair in that the fees paid to the
general partner would continue even if the offer was not consummated. We
are not proposing to change the current management fee arrangement.
In evaluating these factors, your general partner (which is our subsidiary)
and the AIMCO Operating Partnership did not quantify or otherwise attach
particular weight to any of them.
Your general partner (which is our subsidiary) has not retained an
unaffiliated representative to act on behalf of the limited partners in
negotiating the terms of the offer since each individual limited partner can
make his own decision as to whether or not to tender and what consideration to
take. Unlike a merger or other form of partnership reorganization, a majority or
more of the holders of limited partnership interests in your partnership cannot
bind you. If an unaffiliated representative had been obtained, it is possible
that such representative could have negotiated a higher price for your units
than was unilaterally offered by the AIMCO Operating Partnership. We have
retained Stanger to conduct an analysis of our offer and to render an opinion as
to the fairness to you of the offer consideration from a financial point of
view. Although no representative has been retained to act solely on behalf of
the limited partners for purposes of negotiating the terms of the offer, we have
determined that the transaction is fair to you from a financial point of view.
We made this determination based, in part, on the fairness opinion from Stanger
and the fact that all limited partners may elect to retain their existing
security on the same terms as before our offer.
FAIRNESS TO UNITHOLDERS WHO TENDER THEIR UNITS
Your general partner (which is our subsidiary) 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 and, although there are
other ways to value real estate, is a reasonably fair method to determine the
consideration offered. Although we believe our offer consideration represents
the amount you would receive if we currently liquidated your partnership, an
actual liquidation might generate a higher or lower price for holders of units.
A liquidation in the future might generate a higher or lower 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
S-37
<PAGE> 1999
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
Your general partner (which is our subsidiary) 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
sell your partnership's property or refinance its indebtedness within any
specified time period.
COMPARISON OF CONSIDERATION TO ALTERNATIVE CONSIDERATION
General
To assist holders of units in evaluating the offer, your general partner
(which is our subsidiary) has attempted to compare the cash offer consideration
against: (a) estimates of the value of the units on a liquidation basis; (b)
estimates of the going concern value of your units based on continuation of your
partnership as a stand-alone entity; and (c) the net book value of your units.
The general partner of your partnership believes that analyzing the alternatives
in terms of estimated value, 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 us. These assumptions relate to, among other things: the operating
results since December 31, 1997 as to income and expenses of each property,
other projected amounts and the capitalization rates that may be used by
prospective buyers if your partnership assets were to be liquidated. The 1998
budget is discussed in "Stanger Analysis -- Summary of Materials Considered" and
other projected amounts are discussed in "Stanger Analysis -- Summary of
Reviews."
In addition, these estimates are based upon certain information available
to your general partner (which is our subsidiary) 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. 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.
S-38
<PAGE> 2000
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 31, 2008, 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.
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
---------
<S> <C>
Cash offer price............................................ $ 71,211
Partnership preferred units................................. $ 71,211(1)
Partnership common units.................................... $ 71,211(1)
Alternatives:
Estimated liquidation proceeds............................ $ 71,211
Estimated going concern value............................. $ 63,594(2)
Estimated alternative going concern value................. $ 69,669(3)
Net book value (deficit).................................. $(102,545)
</TABLE>
- ---------------
(1) In our discussion of the offer price as being fair with regard to other
methods of valuing your partnership, we believe the number of Common OP
Units and Preferred OP Units to be issued per unit in the offer to be equal
to the cash price per unit. Therefore, the fairness discussion applies
equally to the cash and non-cash forms of consideration being effected. See
"Valuation of Units" for details of how the number of OP Units was
determined.
(2) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(3) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
Prices on Secondary Market
There is no active market for your units. Your general partner (which is
our subsidiary) is unaware of any secondary market activity in the units.
Therefore any comparison to prices on the secondary market is not possible at
the present time. See "Your Partnership -- Distributions and Transfers of
Units -- Transfers."
Prior Tender Offers
There have been no previous tender offers for units of your partnership.
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. Your general
partner (which is our subsidiary) 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
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
S-39
<PAGE> 2001
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.
Estimated Going Concern Value and Alternative Going Concern Value
Going concern value is a measure of the value of your partnership if it
continued operating as an independent stand-alone entity. The estimated value of
the partnership on a going concern basis is not intended to reflect the
distributions payable to limited partners if its assets were to be sold at their
current fair market value. The general partner of your partnership estimated the
going-concern value of your partnership by analyzing projected cash flows and
performing a discounted cash flow analysis. The general partner of your
partnership assumed that your partnership will be operated in the same manner as
currently, as an independent stand-alone entity, and its assets sold in a
liquidation after a ten-year holding period. Distribution and sale proceeds per
partnership unit were discounted in the projections at a rate of 30%.
The general partner of your partnership assumed that real estate selling
costs will be incurred which will equal 2.5% of the sales price. This analysis
assumes that the partnership property will be sold in a liquidation, at the
expiration of the ten-year holding period, to an independent third-party buyer.
Upon such liquidation, other balance sheet assets (excluding amortizing assets)
and liabilities of your partnership will be sold at their book value, and the
net proceeds of sale will be allocated between the general partners and offerees
in accordance with your partnership's agreement of limited partnership. Should
the assets be liquidated over time, even at prices equal to those projected,
distributions to limited partners of your partnership's cash flow from
operations might be reduced because relatively fixed costs, such as general and
administrative expenses, are not proportionately reduced with the liquidation of
assets. However, for simplification purposes, the sales are assumed to occur
concurrently.
The going concern method relies on a number of assumptions, including among
other things, (i) rental rates for new leases and lease renewals; (ii)
improvements needed to prepare an apartment for a new lease or a renewal lease;
(iii) lease periods; (iv) capital expenditures; (v) broker's commissions; and
(vi) discount rates applied to future cash flows. The use of assumptions or
variables that differ from those described above could produce substantially
different results. Neither we nor the general partner of your partnership
solicited any offers or inquiries from prospective buyers of the property owned
by your partnership in connection with the preparation of the estimates of value
of the properties and the actual amounts for which the partnership's properties
or the partnership could be sold could be significantly higher or lower than any
of the estimates contained herein. The estimated going concern value of your
partnership is $63,594 per unit, which value is below our offer price per unit.
Therefore, we believe the offer price is fair in relation to the going concern
value.
Your partnership's property currently has balloon payments due in 2002.
While the going concern value was based on your partnership refinancing its
indebtedness and continuing to own its property, the alternative going concern
value of $69,669 is based on selling the property when the balloon payment is
due. For the reasons set forth above, we believe the offer consideration is fair
in relationship to the alternative going concern value.
The general partner determined going concern value based upon the
discounted present value of projected cash flows from the partnership over a
ten-year period of operation, which is a standard period for going concern
analyses for real property assets. Such discounted cash flows were based upon
year one property income from the real estate portfolio of $1,126,000, escalated
at 3% per annum for the ten-year projection period. Property income was reduced
by: (i) partnership administrative expenses of $22,000 per annum; and (ii) debt
service on existing debt through maturity or the end of ten years, whichever
occurs first. For debt which matures during the ten-year period, a refinancing
at a 7% interest rate was assumed. At the end of the ten-year projection period,
the property was assumed to be sold at a price based upon property income for
the immediately following year, capitalized at a capitalization rate of 11.75%,
less expenses of sale estimated at 3% of the property value. The net cash flow
to limited partners from the continued operation of the property
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<PAGE> 2002
and the net proceeds of sale were then discounted at a discount rate of 25% to
achieve the going concern value of $63,594 per unit.
Your partnership's property currently has a balloon payment due in November
2002. While the going concern value was based on your partnership refinancing
its indebtedness and continuing to own its property; the alternative going
concern value of $69,669 is based on selling the property when the balloon
payment is due and otherwise includes the same assumptions as the going concern
value described above. For the reason set forth above, we believe the offer
consideration is fair in relation to the alternative going concern value.
There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
Net Book Value
Net book value per unit is a deficit of $102,545 and therefore a comparison
with the offering price would not be meaningful in determining the fairness of
the offering price.
Stanger's Estimate of Net Asset Value, Going Concern Value and Liquidation
Value
In rendering its opinion set forth as Appendix A, Stanger did its own
independent estimate of your partnership's net asset value of $72,420 per unit,
going concern value of $51,422 per unit and liquidation value of $65,392 per
unit. For an explanation of how Stanger determined such values see "Stanger
Opinion -- Summary of Reviews -- Comparison of Offer Price To Liquidation Value,
Going Concern Value and Secondary Market Prices." An estimate of your
partnership's net asset value per unit is based on a hypothetical sale of your
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 a liquidation value, after provisions
in full for all of the other known liabilities of your partnership. The net
asset value does not take into account (i) timing considerations discussed under
"Fairness of the Offer -- Comparison of Consideration to Alternative
Consideration -- Estimated Liquidation Proceeds," and (ii) costs associated with
winding up of your partnership. Therefore, the AIMCO Operating Partnership
believes that the estimate of net asset value per unit does not necessarily
represent the fair market value of a unit or the amount the limited partner
reasonably could expect to receive if the partnership's property was sold and
the partnership was liquidated. For this above reason, the AIMCO Operating
Partnership considers net asset value estimates to be less meaningful in
determining the offer consideration than the analysis described above under
"Valuation of Units."
Stanger's estimates of net asset value, going concern value and liquidation
value per unit represents premiums (discounts) to the offer price of $1,209,
$(19,789) and $(5,819). In light of these premiums (discounts) and for all the
reasons set forth above, the AIMCO Operating Partnership believes the offer
price is fair to the limited partners. The AIMCO Operating Partnership believes
that the best and most commonly used method of determining the value of a
partnership which only owns an apartment is the capitalization of income
approach set forth in "Valuation of Units."
ALLOCATION OF CONSIDERATION
Your partnership's agreement of limited partnership provides that, in the
event of a liquidation, available proceeds are to be distributed 1% to the
general partner and 99% to the limited partners. Accordingly, in valuing your
units, we have assumed that 99% of the estimated liquidation proceeds are
distributed to holders of units. Since this allocation is in accordance with the
terms of the partnership agreement, we believe the allocation is fair. See
"Valuation of Units."
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<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. Stanger has
advised us that the description of Stanger's analysis contained herein describes
the material portions of Stanger's review. 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 any losses, claims,
damages, liabilities or expenses to which Stanger may be subject, under any
applicable federal or state law, including federal and state securities laws,
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 NYSE 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 audited financial statements for the years ended December 31, 1996
and 1997, and its unaudited financial statements for the period ended September
30, 1998, which your partnership's management has indicated to be the most
current available financial statements at the time; (iii) reviewed descriptive
information concerning your partnership's real estate assets (the "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, 1997 and 1998; (v) reviewed
operating budgets for your partnership's property for 1998, as prepared by your
partnership; (vi) reviewed
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<PAGE> 2004
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 similar properties; (viii) reviewed internal financial analyses prepared by
your partnership of the estimated current net liquidation value and going
concern value of your partnership; (ix) reviewed information provided by AIMCO
concerning the AIMCO Operating Partnership, the Common OP Units and the
Preferred OP Units; and (x) conducted other studies, analysis and inquiries as
Stanger deemed appropriate.
A summary of the operating budgets per property for the year ended December
31, 1998, which was supplied by your partnership to Stanger, is as follows:
FISCAL 1998 OPERATING BUDGETS
<TABLE>
<S> <C>
Total Revenues.............................................. $ 2,311,050
Operating Expenses.......................................... (1,094,175)
Replacement Reserves -- Net................................. (171,371)
Debt Service................................................ (785,256)
Capital Expenditures........................................ (134,000)
-----------
Net Cash Flow..................................... $ 126,248
===========
</TABLE>
The above budgets at the time they were made were forward-looking
information developed by the general partner of your partnership. Therefore, the
budgets were dependent upon future events with respect to the ability of your
partnership to meet such budget. The budgets incorporated various assumptions
including, but not limited to, lease revenue (including occupancy rates),
various operating expenses, general and administrative expenses, depreciation
expenses, capital expenditures, and working capital levels. While we deemed such
budgets to be reasonable and valid at the date made, there is no assurance that
the assumed facts will be validated or that the circumstances will actually
occur. Any estimate of the future performance of a business, such as your
partnership's business, is forward-looking and based on assumptions some of
which inevitably will prove to be incorrect.
The budget amounts provided above are figures that were not computed in
accordance with GAAP. In particular, items that are categorized as capital
expenditures for purposes of preparing the operating budget are often
re-categorized as expenses when the financial statements are audited and
presented in accordance with GAAP. Therefore, the summary operating budget
presented for fiscal 1998 should not necessarily be considered as indicative of
what the audited operating results for fiscal 1998 will be. For the year ended
December 31, 1998, the partnership expects to report revenues of $2,193,251,
operating expenses of $1,005,560 and replacement reserves and capital
expenditures of $266,551. Based on these estimates, the partnership's net cash
flow before debt service, which we believe provides a better indication of the
partnership's actual operating performance than net cash flow, was greater than
the budgeted amounts.
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.
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<PAGE> 2005
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 the third quarter of 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 or
square footage; 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 nine month period ending
September 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 property.
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 property, 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 the
liquidation value calculation prepared by the management of your partnership.
Stanger observed that such liquidation value was based upon the gross property
valuation estimate prepared by management, which in turn is based upon fiscal
year 1997 property income capitalized at a capitalization rate of 11.25%.
Stanger further observed that the gross property valuation was adjusted for the
following additional items to achieve the liquidation value of your partnership:
(i) cash, other assets, mortgage indebtedness and other liabilities determined
as of December 31, 1997; (ii) estimated closing costs equal to approximately
2.5% of gross real estate value; and (iii) extraordinary capital expenditure
estimates in the amount of $272,130. Stanger observed that your partnership
liquidation value of $2,527,986 was allocated 99% to the limited partners and
was divided by the total units outstanding of 35.5 to provide the liquidation
value per unit of $71,211.
Review of Partnership Going Concern Analysis. Stanger reviewed the going
concern value calculation prepared by management of your partnership. Stanger
observed that such going concern value was based upon the discounted present
value of projected cash flows from the partnership over a ten-year period of
operation which is a standard period for going concern analysis for real
property assets. Such discounted cash flows were based upon year one property
income from the real estate portfolio of $1,126,000 escalated at 3% per annum
for the ten-year projection period. Property income was reduced by: (i)
partnership administrative expenses of $22,000 per annum; and (ii) debt service
on existing debt through maturity or the end of ten years, whichever occurs
first. For debt which matures during the ten-year period, a refinancing at a 7%
interest rate was assumed. At the end of the ten-year projection period, the
properties were assumed to be sold based upon: (i) property income for the
immediately following year capitalized at a capitalization rate of
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<PAGE> 2006
11.75%; and (ii) expenses of sale estimated at 3% of property value. Stanger
observed that the proceeds of sale were reduced by the estimated debt balance at
the end of the tenth year to provide net proceeds from the sale of your
partnership's property.
The resulting cash flows for the ten-year period were discounted to present
value at a discount rate of 30%. Stanger observed that such discount rate was
based upon the portfolio real estate discount rate of 13.8%, adjusted for
leverage risk and illiquidity risk. Stanger observed that the resulting
partnership going concern value was divided by units outstanding of 35.5 to
achieve management's estimate of going concern value of $63,594 per unit.
Review of Secondary Market Prices. Stanger maintains a database of
secondary market information on limited partnership units. Stanger observed for
its data that no units were reported traded in the secondary market during 1998.
Comparison of Offer Price to Liquidation Value, Going Concern Value and
Secondary Market Price. Stanger observed that the offer price of $71,211 per
unit is equal to management's estimate of liquidation value, and reflects a 12%
premium to management's estimate of going concern value of $63,594. Stanger
further observed that investors may select cash, Common OP Units or Preferred OP
Units in exchange for their partnership units or they may elect to continue to
hold their partnership units. Stanger further observed that the Common OP Units
will be priced at $37.625 per unit, an amount which equals the average of the
closing prices of the common shares into which such Common OP Units are
convertible for the 30 trading day period ended March 23, 1999. Furthermore,
Stanger observed that the Preferred OP Units to be issued in the transaction
will be based upon the liquidation preference of $25. Stanger noted that the
Preferred OP Units are redeemable for, at AIMCO's option, either: (i) $25 in
cash per Preferred OP Unit; (ii) common stock of AIMCO based upon a ten-day
average price at the time of the requested redemption; or (iii) commencing on
the third year following the closing of this transaction, preferred stock of
AIMCO with a dividend equal to the distribution on the Preferred OP Units.
Stanger observed that the ten day average closing price of the AIMCO common
stock is $36.425, as of March 23, 1999 and therefore an investor receiving AIMCO
common shares in redemption of the Preferred OP Units would receive .6863 shares
with a value approximating $25 for each $25 Preferred OP Unit redeemed, based
upon AIMCO's average common share price as of March 23, 1999. Stanger noted that
commencing in the third year, investors redeeming Preferred OP Units may receive
from AIMCO Preferred Stock with a dividend equal to the distribution on the
AIMCO Preferred OP Units. Stanger observed that the distribution on the
Preferred OP Units is set at 8% of $25 and that the average dividend yield on
AIMCO's outstanding C, D, G and H Preferred Shares approximates 10.1% as of
March 23, 1999. Stanger noted that, based upon the cash dividend yield on the
AIMCO Preferred Shares identified above as of March 23, 1999, investors would
receive Preferred Shares with a value of approximately $19.80 for each $25
Preferred OP Unit if such redemption occurred after the second year following
the closing of the transaction. Stanger further observed that the above analysis
does not take into consideration the present value of the earnings on the tax
deferral an investor may realize as the result of selecting Preferred OP Units
in lieu of cash in a taxable transaction.
In addition to the above analysis, Stanger prepared an independent estimate
of net asset value, going concern value and liquidation value per unit. Stanger
has advised AIMCO that Stanger's estimates of net asset value, liquidation value
and going concern value are based upon Stanger's independent estimate of
property income, a direct capitalization rate of 10.0%, transaction costs of
2.5% to 5.0%, growth rates of 3% and a terminal capitalization rate of 10.5%.
Stanger has advised us that the direct capitalization rate represents Stanger's
estimate of the capitalization rate applicable to its estimate of property
income and is based upon Stanger's independent estimate of the direct
capitalization rate for such property based upon such property's age, condition
and location. Stanger further advised us that the terminal capitalization rate
is the capitalization rate utilized in Stanger's going concern value estimate
which is applied to Stanger's estimate of property income in the eleventh year
to establish the value of the property at the end of the tenth year. Stanger has
advised us that Stanger estimated the terminal capitalization rate at a 50 basis
point premium to the direct capitalization rate estimate for the property.
Stanger utilized deferred maintenance estimates derived from the Adjusters
International, Inc. reports in the calculation of net asset value, liquidation
value and going concern value. Stanger advised us that Stanger adjusted its
estimate of net asset value and liquidation value
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<PAGE> 2007
for the cost of above market debt using a 7% interest rate. With respect to the
going concern value estimate prepared by Stanger, Stanger advised AIMCO that a
ten-year projection period and a discount rate of 30% was utilized. Such
discount rate reflects the risk associated with real estate, leverage and a
limited partnership investment. The 30% discount rate was based upon the
property's estimated internal rate of return derived from the discounted cash
flow analysis, (12.5% as described above), plus a premium reflecting the
additional risk associated with mortgage debt equal to approximately more than
70% of property value. Stanger's estimates were based in part upon information
provided by us. Stanger relied upon the deferred maintenance estimates, property
descriptions, unit configurations, allocation among partners, and other data
provided by us. Stanger's analyses were based on balance sheet data as of
September 30, 1998. Stanger's review also included a site visit, review of
rental rates and occupancy at the properties as well as competing properties.
Stanger's estimate of net asset value, going concern value and liquidation value
per unit were $72,420, $51,422, and $65,392 representing premiums (discounts) to
the offer price of 1.7%, (27.8%) and (8.2)%. See "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration."
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. Stanger has rendered similar fairness opinions with regard to certain
other exchange offers being made by the AIMCO Operating Partnership. Stanger
rendered the opinions only as to the individual fairness of the offer
consideration in each proposed exchange offer. The Fairness Opinion does not
address the fairness of all possible acquisitions of interests in your
partnership. In addition, the Fairness Opinion will not be revised to reflect
the actual participation in the offer.
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 your general partner (which is our subsidiary) and limited partners of
your partnership, the terms and conditions of any debt encumbering the
partnership's property, and the transaction costs and fees associated with a
sale of the property. Stanger also relied upon the assurance of your
partnership, AIMCO, and the management of the partnership's property 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 property 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 property 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 property 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
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<PAGE> 2008
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, nor did Stanger
address the fairness of all possible acquisitions of interests in the
partnership. The opinion will not be revised to reflect the actual results of
the offer. 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 or oral 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 $9,000 with
respect to your partnership. The estimated aggregate fee payable to Stanger in
connection with all affiliated partnerships is estimated at $1,510,000, plus
out-of-pocket expenses estimated at $61,000. 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 was
engaged by AIMCO during 1997 to represent AIMCO in negotiations to acquire
interests in a real estate limited partnership. Such transaction was never
consummated and no fee was ever paid to Stanger in connection with such proposed
transaction. AIMCO and its affiliates may retain the services of Stanger in the
future. Any such future services could relate to this offer, some or all of the
concurrent offers, or a completely separate transaction.
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<PAGE> 2009
YOUR PARTNERSHIP
GENERAL
Lake Eden Associates, L.P., is a Delaware limited partnership which
completed a private placement of units in 1985. Insignia acquired the general
partner of your partnership in 1985. AIMCO acquired Insignia in October 1998.
There are currently a total of 64 limited partners of your partnership and a
total of 35.5 units of your partnership outstanding. Your partnership is in the
business of owning and managing residential housing. Currently, your partnership
owns and manages the property described below. Your partnership has no
employees. 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.
YOUR PARTNERSHIP AND ITS PROPERTY
Your partnership was formed on January 11, 1985 for the purpose of owning
an apartment property located in Columbus, Ohio, known as "Lake Eden/Lebanon
Station Apartment." Your partnership's property is owned by the partnership but
is subject to a mortgage. The property was built in two phases, the first of
which was completed in 1972, and the second was completed between 1980 and 1983
and consists of 387 apartment units. There are 184 one-bedroom apartments, 173
two-bedroom apartments and 30 three-bedroom apartments. Your partnership's
property had an average occupancy rate of approximately 89.06% in 1998, 96.90%
in 1997 and 96.90% in 1996.
Your partnership's property provides residents with a number of amenities
and services, such as 24-hour desk service, exercise room and/or sauna, and
party or meeting rooms. Nearly all apartment units are wired for cable
television, and many apartment units also offer one or more additional features,
such as washer/ dryer, microwave, fireplace, and patio/balcony.
Presently, there are no plans for any major renovations or improvements for
the property. Budgeted renovations or improvements for 1999 total $272,130 and
are intended to be paid for out of cash flow or borrowings. Renovation items
include roofing, heating, ventilation and air conditioning systems ("HVAC"),
electrical, siding/trim/facia/soffits, exterior paint, drives and parking lot,
and life support systems.
Set forth below are the average rents for the apartments for the last five
years:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
$455 $431 $420 $407 $399
</TABLE>
The apartments are being depreciated for federal income tax purposes using
the accelerated cost recovery method. Depreciation is computed principally by
the straight-line and accelerated methods over estimated lives of 3 to 40 years.
Currently, the real estate taxes on the property are $182,603 of $3,065,390
of assessed valuation with a current yearly tax rate of 5.96%. When the proposed
improvements are made it is anticipated that the yearly tax rate may increase by
approximately 6.25% of such improvements.
PROPERTY MANAGEMENT
Your partnership's property is managed by an entity which is a wholly 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.
INVESTMENT OBJECTIVES AND POLICIES; SALE OR FINANCING OF INVESTMENTS
Under your partnership's agreement of limited partnership, your partnership
is not permitted to raise new equity and reinvest cash in new properties.
Consequently, your partnership is limited in its ability to expand its
S-48
<PAGE> 2010
investment portfolio. Your partnership will terminate on December 31, 2008
unless earlier dissolved. Your partnership has no present intention to
liquidate, sell, finance or refinance your partnership's property within any
specified time period.
Generally, your partnership is authorized to acquire, develop, improve, own
and operate your partnership's property as an investment and for income
producing purposes. The investment portfolio of your partnership is limited to
the assets acquired with the initial equity raised through the sale of units to
the limited partners of your partnership or the assets initially contributed to
your partnership by the limited partners, as well as the debt financing obtained
by your partnership within the established borrowing restrictions.
An investment in your partnership is a finite life investment, with the
partners to receive regular cash distributions out of your partnership's
distributable cash flow, if available, and to receive cash distributions upon
liquidation of your partnership's real estate investments, if available.
In general, your general partner (which is our subsidiary) regularly
evaluates the partnership's property by considering various factors, such as the
partnership's financial position and real estate and capital markets conditions.
The general partner monitors the property's specific locale and sub-market
conditions (including stability of the surrounding neighborhood) 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 (including any prepayment penalties), tax implications,
availability of attractive mortgage financing to a purchaser, 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. If rental market conditions improve, 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 viable option than it is
currently. After taking into account the foregoing considerations, your general
partner is not currently seeking a sale of your partnership's property primarily
because it expects the property's operating performance to improve in the near
term. In making this assessment, your general partner noted that occupancy and
rental rates at the property were 89% and $442, respectively, at December 31,
1998, compared to 97% and $455, respectively, at December 31, 1997. In addition,
the general partner noted that it expects to spend approximately $272,130 for
capital improvements at the property in 1999 to repair and improve the
property's HVAC, electrical, siding, exterior paint, parking lot and life
support systems. These expenditures are expected to improve the desirability of
the property to tenants. The general partner does not believe that a sale of the
property at the present time would adequately reflect the property's future
prospects. Another significant factor considered by your general partner is the
likely tax consequences of a sale of the property for cash. Such a transaction
would likely result in tax liabilities for many limited partners. The general
partner has not received any recent indication of interest or offer to purchase
the property.
CAPITAL REPLACEMENT
Your partnership has an ongoing program of capital improvements,
replacements and renovations, including roof replacements, kitchen and bath
renovations, balcony repairs (where applicable), replacement of various building
systems and other replacements and renovations in the ordinary course of
business. All capital improvement and renovation costs are expected to be paid
from operating cash flows, cash reserves, or from short-term or long-term
borrowings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations of Your Partnership."
BORROWING POLICIES
Your partnership's agreement of limited partnership allows your partnership
to incur debt. As of December 31, 1998, your partnership had a current mortgage
note outstanding of $6,924,307, payable to Marine Midland Bank of America, which
bears interest at a rate of 7.60%. The mortgage debt is due on November 2002.
Your partnership also has a second mortgage note outstanding of $250,216, on the
same
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<PAGE> 2011
terms as the current mortgage note. Your partnership's agreement of limited
partnership also allows the general partner of your partnership to lend funds to
your partnership. As of December 31, 1998, your general partner had outstanding
loans to your partnership.
COMPETITION
There are other residential properties within the market area of your
partnership's property. The number and quality of competitive properties in such
an area could have a material effect on the rental market for the apartments at
your partnership's property and the rents that may be charged for such
apartments. While we are a significant factor in the United States in the
apartment industry, competition for apartments is local.
LEGAL PROCEEDINGS
Your partnership is party to a variety of legal proceedings related to its
ownership of the partnership's property and management and leasing business,
respectively, arising in the ordinary course of the business, which are not
expected to have a material adverse effect on your partnership.
HISTORY OF THE PARTNERSHIP
Your partnership sold $2,045,000 of limited partnership units in 1985. Your
partnership currently owns one apartment property.
Your partnership used the funds raised to purchase its property and it has
expended the funds so raised many years ago. Your partnership currently owns the
property described herein, which is subject to a substantial mortgage. Your
general partner (which is our subsidiary) has not experienced any material
adverse financial developments from January 1, 1997 through the present.
Under your partnership's agreement of limited partnership, the term of the
partnership will continue until December 2008, 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.
FIDUCIARY RESPONSIBILITY OF THE GENERAL PARTNER OF YOUR PARTNERSHIP
Under applicable law, your general partner (which is our subsidiary) is
accountable to your partnership as a fiduciary. Under your partnership's
agreement of limited partnership, the general partners of your partnership are
not liable to your partnership or any limited partner for any acts performed by
any of them or any failure to act in the absence of gross negligence or willful
malfeasance. 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 partnership's agreement of limited partnership does not provide for
the indemnification of the general partners or their affiliates for any acts or
omissions performed by them on behalf of your partnership.
Your partnership's agreement of limited partnership does not limit the
amount of type of insurance your partnership may purchase to cover the liability
of the general partners of your partnership.
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<PAGE> 2012
DISTRIBUTIONS AND TRANSFERS OF UNITS
Distributions
The following table shows, for each of the years indicated, the
distribution paid per unit in such years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 AMOUNT
---------------------- ------
<S> <C>
1993........................................................ $1,067
1994........................................................ 1,920
1995........................................................ 1,067
1996........................................................ 2,600
1997........................................................ 1,786
1998........................................................ 1,408
------
Total............................................. $9,848
</TABLE>
Transfers
The units are not listed on any national securities exchange or quoted on
the NASDAQ System, the Electronic Bulletin Board or the "pink sheets," and there
is no established public trading market for the units. Secondary sales activity
for the units has been limited and sporadic. The general partner of your
partnership monitors transfers of the units (a) because the admission of the
transferee as a substitute limited partner in your partnership require the
consent of the general partner of your partnership under your partnership's
agreement of limited partnership, and (b) in order to track compliance with safe
harbor provisions to avoid treatment as a "publicly traded partnership" for tax
purposes. However, the general partner of your partnership does not monitor or
regularly receive or maintain information regarding the prices at which
secondary sale transactions in the units have been effectuated. The general
partner of your partnership estimates, based solely on the transfer records of
your partnership (or your partnership's transfer agent), that the number of
units transferred in privately negotiated transactions or in transactions
believed to be between related parties, family members or the same beneficial
owner was as follows:
<TABLE>
<CAPTION>
NUMBER OF UNITS PERCENTAGE OF TOTAL UNITS NUMBER OF
YEAR TRANSFERRED OUTSTANDING TRANSACTIONS
- ---- --------------- ------------------------- ------------
<S> <C> <C> <C>
1994......................... 0 0.0% 0
1995......................... 0 0.0% 0
1996......................... 0 0.0% 0
1997......................... 0.5% 1.41% 1
1998......................... 0 0.0% 0
</TABLE>
BENEFICIAL OWNERSHIP OF INTERESTS IN YOUR PARTNERSHIP
Through subsidiaries, AIMCO currently owns, in the aggregate, approximately
a 0.992% interest 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
two years, 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.
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<PAGE> 2013
COMPENSATION PAID TO THE GENERAL PARTNER AND ITS AFFILIATES
The following table shows, for each of the years indicated, compensation
paid to your general partner and its affiliates on a historical basis, and on a
pro forma basis assuming that all of the units sought in our offer had been
acquired at the beginning of each period:
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------- ----------------------------------------
PARTNERSHIP PROPERTY PARTNERSHIP PROPERTY
FEES AND MANAGEMENT FEES AND MANAGEMENT
YEAR EXPENSES FEES DISTRIBUTIONS EXPENSES FEES DISTRIBUTIONS
---- ----------- ---------- ------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
1995................. $51,604 $103,207 $1,067 $51,604 $103,207 $ 9,756
1996................. 67,256 104,498 2,600 67,256 104,498 23,767
1997................. 67,076 111,851 1,786 67,076 111,851 16,322
1998................. 38,271 110,364 1,408 38,271 110,364 12,875
</TABLE>
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<PAGE> 2014
SELECTED FINANCIAL INFORMATION
OF YOUR PARTNERSHIP
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and Cash Equivalents...... $ 92,323 $ 375,286 $ 326,890 $ 431,733 $ 436,086 $ 142,899 $ 288,458
Land & Building................ 8,971,915 8,627,112 8,847,926 8,506,837 8,377,553 8,243,198 8,106,287
Accumulated Depreciation....... (6,137,026) (5,943,304) (5,991,733) (5,798,010) (5,618,612) (5,440,530) (4,963,087)
Other Assets................... 725,804 635,617 742,663 685,369 720,499 962,690 878,818
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Assets........... $ 3,653,016 $ 3,694,711 $ 3,925,746 $ 3,825,929 $ 3,977,920 $ 3,971,190 $ 4,310,476
=========== =========== =========== =========== =========== =========== ===========
Notes Payable.................. $ 6,954,603 $ 7,119,979 $ 7,088,397 $ 7,245,235 $ 7,388,963 $ 7,520,678 $ 7,641,385
Other Liabilities.............. 249,322 303,193 477,691 410,389 374,842 342,658 288,523
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Liabilities...... $ 7,203,925 $ 7,423,172 $ 7,566,088 7,655,624 $ 7,763,805 $ 7,863,336 $ 7,929,908
----------- ----------- ----------- ----------- ----------- ----------- -----------
Partners Deficit............... $(3,550,909) $(3,728,461) $(3,640,342) $(3,829,695) $(3,785,885) $(3,892,146) $(3,619,432)
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS FOR THE YEAR
ENDED SEPTEMBER 30, ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental Revenue................. $ 1,529,692 $ 1,573,351 $ 2,112,517 $ 2,003,086 $ 1,952,779 $ 1,891,415 $ 1,851,266
Other Income................... 113,684 108,143 137,164 112,168 122,979 127,400 104,441
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Revenue.......... $ 1,643,376 $ 1,681,494 $ 2,249,681 $ 2,115,254 $ 2,075,758 $ 2,018,815 $ 1,955,707
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating Expenses............. $ 799,574 $ 798,673 $ 927,690 $ 999,362 $ 840,566 $ 846,666 $ 845,721
General & Administrative....... -- -- 59,886 59,403 56,641 47,598 73,921
Depreciation................... 145,293 145,293 193,723 179,399 193,531 477,444 464,998
Interest Expense............... 431,020 443,508 652,111 664,592 676,651 687,702 675,753
Property Taxes................. 128,056 129,315 163,531 164,008 164,221 163,958 139,228
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Expenses......... $ 1,503,943 $ 1,516,789 $ 1,996,941 $ 2,066,764 $ 1,931,610 $ 2,223,368 $ 2,199,621
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Income (loss) before
extraordinary items.......... $ 139,433 $ 164,705 $ 252,740 $ 48,490 $ 144,148 $ (204,553) $ (243,914)
Extraordinary Items............ -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net Income (loss).............. $ 139,433 $ 164,705 $ 252,740 $ 48,490 $ 144,148 $ (204,553) $ (243,914)
=========== =========== =========== =========== =========== =========== ===========
Net Income per limited
partnership unit............. $ 3,888.42 $ 4,593.18 $ 7,048.25 $ 1,352.25 $ 4,019.92 $ (5,704.42) $ (6,802.11)
=========== =========== =========== =========== =========== =========== ===========
Distributions per limited
partnership unit............. $ 1,394.37 $ 1,770.04 $ 1,767.69 $ 2,574.00 $ 1,056.57 $ 1,900.83 $ --
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
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<PAGE> 2015
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP
OVERVIEW
The following discussion and analysis of the results of operations and
financial condition of Your Partnership should be read in conjunction with the
audited financial statements of Your Partnership included herein.
RESULTS OF OPERATIONS
Comparison of the Nine Months Ended September 30, 1998 to the Nine Months
Ended September 30, 1997
NET INCOME
Your Partnership recognized net income of $139,000 for the nine months
ended September 30, 1998, compared to $165,000 for the nine months ended
September 30, 1997. The decrease in net income of $26,000 was the result of a
decrease in revenues, partially off-set by a decrease in operating and other
expenses. These factors are discussed in more detail in the following
paragraphs.
REVENUES
Rental and other property revenues from the Partnership Property totaled
$1,643,000 for the nine months ended September 30, 1998, compared to $1,681,000
for the nine months ended September 30, 1997, a decrease of $38,000, or 2.3%.
The Partnership increased rental rates by an average of 4.5%; however, occupancy
decreased 6% to 89%. The increase in Other Income of $6,000 was due primarily to
higher lease cancellation fees and utility fees.
EXPENSES
Partnership Property operating expenses, consisting of utilities (net of
reimbursements received from tenants), contract services, turnover costs,
repairs and maintenance, advertising and marketing, and insurance totaled
$800,000 for the nine months ended September 30, 1998, compared to $799,000 for
the nine months ended September 30, 1997, an increase of $1,000. Advertising
costs increased by $20,000 as management tried to increase occupancy. This was
off-set by lower maintenance costs of $21,000. The property incurred a major
landscaping project of $109,000 in 1998, whereas it spent $130,000 on an
exterior painting and construction rehab project for the prior year. Partnership
Property management expenses totaled $81,000 for the nine months ended September
30, 1998, compared to $84,000 for the nine months ended September 30, 1997, a
decrease of $3,000.
INTEREST EXPENSE
Interest expense decreased $12,000 to $431,000 for the nine months ended
September 30, 1998, compared to the corresponding period for 1997. This decrease
is the result of a lower outstanding mortgage balance due to principal payments
made during the period.
As part of the ongoing business plan of your partnership, the general
partner monitors the rental market environment of your partnership's investment
property to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting your partnership from increases in
expenses. As part of this plan, the general partner attempts to protect your
partnership from the burden of inflation-related increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market conditions, which can result in the use of rental concessions
and rental reductions to offset softening market conditions, there is no
guarantee that the general partner will be able to sustain such a plan.
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<PAGE> 2016
Comparison of the Year Ended December 31, 1997 to the Year Ended December 31,
1996
NET INCOME
Your Partnership recognized net income of $252,740 for the year ended
December 31, 1997, compared to $48,490 for the year ended December 31, 1996. The
increase in net income of $204,250, or 421%, was primarily the result of an
increase in rental revenue and other income offset by a decrease in operating
expenses. These factors are discussed in more detail in the following
paragraphs.
REVENUES
Rental and other property revenues from the Partnership's Property totaled
$2,249,681 for the year ended December 31, 1997, compared to $2,115,254 for the
year ended December 31, 1996, an increase of $134,427 or 6.4%. This increase was
primarily the result of an increase in occupancy of 2% to 94% and a rental rate
increase averaging 4%. Additionally, other income increased by $24,996 due to
increased income related to pet fees, deposit forfeitures, laundry income, and
late payment charges.
EXPENSES
Operating expenses, consisting of utilities (net of reimbursements received
from tenants), contract services, turnover costs, repairs and maintenance,
advertising and marketing, and insurance, totaled $927,690 for the year ended
December 31, 1997, compared to $999,362 for the year ended December 31, 1996, a
decrease of $71,672 or 7.2%. This decrease was primarily due to a decrease in
costs associated with noncapitalizable exterior improvements. During 1996
exterior painting expenses, interior building improvements and office equipment
expenditures were incurred to help improve occupancy. Therefore a $103,000
decrease was incurred in 1997 as further extensive expenses were not necessary.
These decreases are offset by exterior building repairs, parking lot
construction services, and major landscaping expense increases of $53,000.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $59,886 for the year ended
December 31, 1997 compared to $59,403 for the year ended December 31, 1996, an
increase of $483 or 0.8%.
General and administrative expenses remained relatively constant throughout
comparable periods.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $652,111 for the year ended December 31, 1997, compared to
$664,592 for the year ended December 31, 1996, a decrease of $12,481, or 1.9%.
This decrease is due to a lower outstanding balance on the mortgage indebtedness
due to principal payments made during the period.
Comparison of the Year Ended December 31, 1996 to the Year Ended December 31,
1995
NET INCOME
Your Partnership recognized net income of $48,490 for the year ended
December 31, 1996 compared to $144,148 for the year ended December 31, 1995. The
decrease of $95,658 or 66.4% was primarily due to an increase in operating
expenses offset by an increase in total revenue. These factors will be discussed
in more detail in the following paragraphs.
REVENUES
Rental and other property revenues from the Partnership's Property totaled
$2,115,254 for the year ended December 31, 1996, compared to $2,075,758 for the
year ended December 31, 1995, an increase of $39,496, or 1.9%. The partnership
increased rental rates by an average of 3% which was partially offset by a
decrease
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<PAGE> 2017
in occupancy of 2% to 92.5%. Other income decreased due to decreases in
cleaning, damage, and lease cancellation.
EXPENSES
Operating expenses, consisting of, utilities (net of reimbursements
received from tenants), contract services, turnover costs, repairs and
maintenance, advertising and marketing, and insurance, totaled $999,362 for the
year ended December 31, 1996, compared to $840,566 for the year ended December
31, 1995, an increase of $158,796 or 18.9%. This increase was primarily the
result of an increase in renovation expenditures related to increases in major
landscaping of $4,200, landscaping supplies of $4,300, contract yard and grounds
of $4,800, contract cleaning of $17,700, plumbing supplies of $13,300, exterior
building of $4,900, exterior painting of $97,000, and wallpaper of $4,900. These
expenses are offset by a decrease in parking lot costs of $11,600. Management
expenses totaled $104,498 for the year ended December 31, 1996, compared to
$103,202 for the year ended December 31, 1995, an increase of $1,296, or 1.3%.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses totaled $59,403 for the year ended
December 31, 1996 compared to $56,641 for the year ended December 31, 1995, an
increase of $2,762 or 4.9%.
General and administrative expenses remained relatively constant throughout
comparable periods.
INTEREST EXPENSE
Interest expense, which includes the amortization of deferred financing
costs, totaled $664,592 for the year ended December 31, 1996, compared to
$676,651 for the year ended December 31, 1995, a decrease of $12,059, or 1.8%.
This decrease is due to a lower outstanding balance on the mortgage indebtedness
due to principal payments made during the period.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, your Partnership had $92,323 in cash and cash
equivalents. Your Partnership's principal demands for liquidity include normal
operating activities, payments of principal and interest on outstanding debt,
capital improvements, and distributions paid to limited partners. At September
30, 1998, the outstanding balance on the mortgage indebtedness was $6,594,603.
The mortgages require monthly payments of approximately $65,438 until November
2002, at which time a balloon payment of approximately $6,369,388 will be due.
The notes are collateralized by pledge of land and buildings and have a stated
interest rate of 7.60%. Cash used in investing activities consisted of capital
improvements. Cash used in financing activities consisted of payments of
principal made on the mortgages encumbering your Partnership's properties and
partner distributions.
There are no commitments for material capital expenditures as of September
1998. The sufficiency of existing liquid assets to meet future liquidity and
capital expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and meet other operating needs of the partnership. Such assets are currently
thought to be sufficient for any near-term needs of the partnership. Management
believes that your partnership has adequate sources of cash to finance its
operations, both on a short-term and long-term basis. Presently there are no
plans for any major renovations or improvements for the property. Budgeted
renovations or improvements for 1999 total $272,130 and are intended to be paid
for out of cash flow or borrowings. Renovation items include roofing, heating,
ventilation and air conditioning systems ("HVAC"), electrical,
siding/trim/facia/soffits, exterior paint, drives and parking lot, and life
support systems.
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<PAGE> 2018
THE OFFER
TERMS OF THE OFFER; EXPIRATION DATE
We are offering to acquire up to 25% of the outstanding 35.5 units of your
partnership (up to 8.75 units) for consideration per unit of (i) 2,848.50
Preferred OP Units, (ii) 1,892.50 Common OP Units, or (iii) $71,211 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 the commencement of our offer 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., New York City time, on June 4, 1999, 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 January 1, 1999 (subject to proration
as described below), although you will be entitled to retain any distributions
you may have received after such date and prior to our commencement of this
offer.
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 March 26, 1999.
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
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offer consideration shall be reduced by any interim distributions made by your
partnership between the commencement 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. However, any tendered units may be
withdrawn at any time prior to our accepting them for payment. The AIMCO
Operating Partnership has an 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.
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.
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.
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.
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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 pays for your units. Upon such 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 pays for your units.
You agree not to exercise any rights pertaining to the tendered units without
the prior consent of the AIMCO Operating Partnership. Upon such 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 your general
partner (which is our subsidiary) (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.
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
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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 may
have to provide the AIMCO Operating Partnership with your correct taxpayer
identification number. See the instructions to the Letter of Transmittal.
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 "Federal Income Tax Consequences."
Transfer Taxes
The amount of any transfer taxes (whether imposed on the registered holder
of units or any person) payable on account of the transfer to such person will
be deducted from the purchase price unless satisfactory evidence of the such
taxes or exemption therefrom is submitted.
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.
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WITHDRAWAL RIGHTS
Tenders of units pursuant to the offer may be withdrawn at any time prior
to our acceptance of such units for payment.
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.
The offer may be extended or delayed indefinitely and no payment will be
made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment. 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 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
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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 25% 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 25% 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 25% 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 25%, 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 the general partner of your partnership and thereby
controls the management of your partnership. In addition, AIMCO owns 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.
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After the completion or termination of the offer, the AIMCO Operating
Partnership and its affiliates may acquire additional units or sell units.
However, the AIMCO Operating Partnership and its affiliates will not acquire any
additional units for a period of at least one year after expiration of the
offer. 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. In addition, we are not extending
appraisal rights in connection with the offer. You have the opportunity to make
your own decision on whether to tender your units in the offer.
No provisions have been made with regard to the offer to allow you or other
limited partners to inspect the books and records of your partnership or to
obtain counsel or appraisal services at our expense or at the expense of your
partnership. However, as described under "Comparison of Your Partnership and the
AIMCO Operating Partnership -- Review of Investor Lists," you have the right
under your partnership's agreement of limited partnership to obtain a list of
the limited partners.
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 the date of this Prospectus Supplement and at or before the expiration
date of the offer, including any extension thereof, 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 reasonable
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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 which, in the reasonable 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 the date hereof, (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
the date hereof, (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 reasonable 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 reasonable judgment of the
AIMCO Operating Partnership, a material acceleration or worsening thereof
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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 your
general partner (which is our subsidiary) 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 reasonable 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
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(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 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 reasonable 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
(any changes to the offer resulting from the conditions set forth in this
paragraph will most likely involve a change in the amount or terms of the
consideration offered or the termination of the offer); 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;
or
(h) the offer to purchase may have an adverse effect on AIMCO's status
as a REIT.
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 reasonable 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.
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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. However,
we will not be able to control voting decisions unless we acquire more units in
another transaction, which cannot take place for at least one year after
expiration of this offer. 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 controls the company that manages your partnership's
property. In the event that the AIMCO Operating Partnership acquires a
substantial number of units pursuant to the offer, removal of the property
manager may become more difficult or impossible.
Effect on Trading Market
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.
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. Consummation of
the offer will not affect your partnership's agreement of limited partnership,
the financial condition or results of operations of your partnership, the
business and properties owned, the management compensation payable to your
general partner (which is our subsidiary) or its affiliates or any other matter
relating to your partnership, except it would result in the AIMCO Operating
Partnership substantially increasing its ownership of units of your partnership.
We will receive future distributions from your partnership for any units we
purchase.
CERTAIN LEGAL MATTERS
General. Except as set forth in this section, the AIMCO Operating
Partnership is not, based on information provided by your general partner (which
is our subsidiary), 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
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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 (excluding 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 (which are requests to dismiss the action as a matter
of law) were heard on February 8, 1999, but no decision has been reached by the
Court. While no assurances can be given, we believe that the ultimate outcome of
this litigation will not have a material adverse effect on us.
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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, the accompanying Prospectus, the Letter of Transmittal,
and the legal and accounting fees in connection with this offer. 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 $50,000.
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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FEDERAL INCOME TAX CONSEQUENCES
The following summary is a general discussion of the material Federal
income tax consequences of the offer 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
differing interpretations or change, possibly retroactively. This 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 you in light of your specific investment or tax
circumstances, or if you are subject to special tax rules (for example, if you
are a financial institution, broker-dealer, insurance company, or, except to the
extent discussed below, tax-exempt organization or foreign investor, 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 are 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. No clear precedent or authority
may be available on some questions. 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 of your specific tax situation.
TAX OPINIONS
Skadden, Arps, Slate, Meagher & Flom LLP ("Special Tax Counsel") has
delivered an opinion letter with regard to the material United States Federal
income tax consequences of the offer. The opinion letter of Special Tax Counsel
is filed as an exhibit to this Registration Statement. You may obtain a copy of
such opinion letter by sending a written request to the AIMCO Operating
Partnership.
The specific United States Federal income tax opinions that Special Tax
Counsel has provided are:
1. Commencing with AIMCO's initial taxable year ended December 31, 1994,
AIMCO was organized in conformity with the requirements for qualification
as a REIT under the Code, and its actual method of operation has enabled,
and its proposed method of operation will enable, AIMCO to meet the
requirements for qualification and taxation as a REIT. As noted in the
accompanying Prospectus, AIMCO's qualification and taxation as a REIT
depend upon its ability to meet, through actual annual operating results,
certain requirements, including requirements relating to distribution
levels and diversity of stock ownership, and the various qualification
tests imposed under the Code, the results of which have been represented by
the AIMCO's officers and will not be reviewed by Special Tax Counsel. No
assurance can be given that the actual results of AIMCO's future operations
for any one taxable year will satisfy the requirements for taxation as a
REIT under the Code.
2. The AIMCO Operating Partnership will be treated as a partnership and
not as an association taxable as a corporation for Federal income tax
purposes.
3. You will not recognize gain or loss for Federal income tax purposes
when you exchange your units solely for OP Units. If, immediately prior to
such exchange, the amount of your partnership's liabilities allocable to
the units you transfer to the AIMCO Operating Partnership exceeds the
amount of the AIMCO Operating Partnership's liabilities allocable to you
immediately after the exchange, you will receive a deemed distribution in
an amount equal to such liability relief and will recognize gain for
Federal income tax purposes to the extent that the amount of such deemed
distribution exceeds your aggregate adjusted tax basis in your OP Units.
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4. If you exchange your units for cash and OP Units, you will be treated
for Federal income tax purposes as selling some of your units for cash in a
taxable sale and contributing some of your units for OP Units in a tax-free
exchange. With respect to the units that you will be treated as selling for
cash, you will be taxed as described in paragraph number five below. With
respect to the units that you will be treated as exchanging for OP Units,
you will be taxed as described in paragraph number three above.
5. If you sell your units solely for cash, you will recognize gain or
loss for Federal income tax purposes in an amount equal to the difference
between (i) your amount realized on the sale and (ii) your adjusted tax
basis in the units you sold.
6. If you retain all or a portion of your units and your partnership
terminates for Federal income tax purposes, you will not recognize any gain
or loss as a result of such termination and your capital account in your
partnership will not be affected.
7. Because of the factual nature of the inquiry, no opinion is expressed
by Special Tax Counsel as to whether your exercise of a redemption right
with respect to an OP Unit would cause your contribution of units to the
AIMCO Operating Partnership to be a taxable transaction under the disguised
sale rules of the Code.
8. The discussion in the accompanying Prospectus under the captions
"FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS" and "FEDERAL
INCOME TAXATION OF THE AIMCO OPERATING PARTNERSHIP AND OP UNIT HOLDERS" and
in this Prospectus Supplement under the caption "FEDERAL INCOME TAX
CONSEQUENCES" is a fair and accurate summary of the material United States
Federal income tax consequences of the offers and of the acquisition,
ownership and disposition of the OP Units and the AIMCO stock by a holder
who acquires the OP Units or AIMCO stock in connection with the offers,
subject to the qualifications set forth therein.
It must be emphasized that these opinions are based and conditioned upon
representations and covenants made by AIMCO and the AIMCO Operating Partnership
as to factual matters (including representations and covenants concerning
AIMCO's properties and the past, present and future conduct of its business and
your partnership's liabilities). These opinions are expressed as of the date of
the opinion letter and Special Tax Counsel has no obligation to advise AIMCO or
the AIMCO Operating Partnership of any subsequent change in the matters stated,
represented, or assumed or any subsequent change in the law. An opinion of
counsel is not binding on the IRS, and no assurance can be given that the IRS
will not challenge the above opinions of Special Tax Counsel.
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 when you exchange your units solely for OP Units. You may
recognize gain upon such exchange if, immediately prior to such exchange, the
amount of liabilities of your partnership allocable to the units you transferred
exceeds the amount of the AIMCO Operating Partnership liabilities allocable to
you immediately after such exchange. If this was true in your case, the excess
would be treated as a deemed distribution of cash to you from the AIMCO
Operating Partnership. This deemed cash distribution would be treated as a
nontaxable return of capital to the extent of your adjusted tax basis in your OP
Units 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 you exchange your units pursuant to the offer,
at least equal to the amount of liabilities of your partnership that were
allocable to your units prior to such exchange. Accordingly, the AIMCO Operating
Partnership anticipates that most persons who participate in the tender offer
would not recognize gain or loss as a result of an exchange of units solely for
OP Units pursuant to the offer.
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DISGUISED SALES
Under the Code, a transfer of property by a partner to a partnership
followed by a related transfer by the partnership of money or other property to
the partner is treated as a "disguised" sale if (1) the second transfer would
not have occurred but for the first transfer and (2) the second transfer "is not
dependent on the entrepreneurial risks of the partnership operations." In a
disguised sale, the partner is treated as if he or she sold the contributed
property to the partnership as of the date the property was contributed to the
partnership. In addition, unless a few technical exceptions apply, transfers of
money or other property between a partnership and a partner that are made within
two years of each other, including redemptions of OP Units made within two years
of a contribution of your units, must be reported to the IRS and are presumed to
be a "disguised" sale unless the facts and circumstances clearly establish that
the transfers do not constitute a sale.
While there is no authority applying the disguised sale rules to the
exercise of a redemption right by a partner with respect to a partnership
interest received in exchange for property, the exercise of a redemption right
with respect to OP Units within two years of the date of the contribution of
your units to the AIMCO Operating Partnership may be treated as a disguised
sale. If this treatment were to apply, you would be treated for Federal income
tax purposes as if, on the date of the contribution of your units, the AIMCO
Operating Partnership transferred to you an obligation to give you the
redemption proceeds. In that case, you would be required to recognize gain on
the disguised sale in such earlier year. Because of the factual nature of such
an inquiry, Special Tax Counsel is unable to opine whether your exercise of a
redemption right with respect to an OP Unit would cause your contribution of
units to the AIMCO Operating Partnership to be a taxable transaction under the
disguised sale rules of the Code.
If you are considering exchanging units for OP Units pursuant to the offer,
please read the description under the heading "Federal Income Taxation of the
AIMCO Operating Partnership and OP Unitholders -- 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
If you exchange your units for cash and OP Units, you will be treated as
selling some of your units for cash in a taxable sale and contributing some of
your units for OP Units in a tax-free exchange. Your adjusted tax basis in your
transferred units will be allocated between the units you will be deemed to have
sold and the units you will be deemed to have contributed to the AIMCO Operating
Partnership.
With respect to the units that you will be treated as selling, you will
recognize gain or loss in an amount equal to the difference between (i) your
"amount realized" on the sale and (ii) your adjusted tax basis in units you
sold. Your "amount realized" on such sale will be equal to the sum of the amount
of cash you received pursuant to the offer (that is, the offer consideration)
plus the amount of your partnership's liabilities attributed to the units you
sold. For purposes of these partial sale rules, the amount of your partnership's
liabilities attributed to the units you sold will be equal to the lesser of (i)
the excess of the amount of your partnership's liabilities allocable to you in
respect of the transferred units immediately prior to the exchange over the
amount of such liabilities allocable to you as determined immediately after the
exchange or (ii) the product of (A) the amount of your partnership's liabilities
allocable to you in respect of the units you are deemed to have sold immediately
prior to the exchange and (B) your "net equity percentage" with respect to those
units. Your "net equity percentage" will be equal to the percentage determined
by dividing (x) the cash you received in the exchange by (y) the excess of the
gross fair market value of the units in the exchange over the amount of your
partnership's liabilities allocable to you in respect of those units immediately
prior to the exchange. Thus, your tax liability could exceed the amount of cash
you receive in the sale.
With respect to the units that you will be treated as exchanging, rather
than selling, you will be taxed as described above under the heading "Tax
Consequences of Exchanging Units Solely for OP Units."
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TAX CONSEQUENCES OF EXCHANGING UNITS SOLELY FOR CASH
If you sell your units solely for cash, you will recognize gain or loss on
a sale of your units equal to the difference between (i) your "amount realized"
on the sale and (ii) your adjusted tax basis in the units you sold. The "amount
realized" with respect to a unit will be equal to the sum of the amount of cash
you received for your units (that is, the offer consideration) plus the amount
of the liabilities of your partnership allocable to such units (as determined
under Section 752 of the Code). Thus, your tax liability could exceed the amount
of cash you receive in the sale.
ADJUSTED TAX BASIS
If you acquired your units for cash:
- your initial tax basis in your units will be equal to such cash
investment in your partnership increased by your share of your
partnership's liabilities at the time such units were acquired;
- your initial tax basis generally has been increased by:
- your share of your partnership's income and gains and
- any increases in your share of your partnership's liabilities; and
- your initial tax basis generally has been decreased (but not below zero)
by:
- your share of cash distributions from your partnership,
- any decreases in your share of your partnership's liabilities,
- your share of your partnership's losses, and
- your share of nondeductible expenditures of your partnership that are
not chargeable to capital.
For purposes of determining your adjusted tax basis in your units
immediately prior to a disposition of such units, your adjusted tax basis will
include your 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), the gain you
would recognize pursuant to the offer will exceed the cash proceeds you would
realize upon the sale of your units. The adjusted tax basis of the OP Units you
receive in exchange for your units pursuant to the offer will be equal to (i)
the sum of your adjusted tax basis in the units you transferred plus any gain
recognized in the exchange and will be reduced by (ii) any cash you received or
you were deemed to receive 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 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 that is attributable to your share of "unrealized receivables" of your
partnership exceeds the tax basis attributable to those assets, such excess will
be treated as ordinary income. Among other things, "unrealized receivables"
include depreciation recapture for 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. You will not receive any future distributions
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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 the income or loss. 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 the passive 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 passive losses in the manner described below. If you receive
cash for 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 receive cash for all or a portion of your units
pursuant to the offer and recognize 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
receive cash for all of your units pursuant to the offer, the balance of any
"suspended" losses from your partnership 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.
TAX REPORTING
If you tender any units, you must report the transaction by filing a
statement with your Federal income tax return for the year of the tender which
provides certain required information to the IRS. To prevent the possible
application of back-up Federal income tax withholding of 31% with respect to
payment of the offer consideration, you may have to provide the AIMCO Operating
Partnership with your correct taxpayer identification number. See the
instructions to the Letter of Transmittal.
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"). If you are a foreign person, the AIMCO Operating Partnership will
be required, under the FIRPTA provisions of the Code, to deduct and withhold 10%
of the amount realized by you on the disposition. The amount withheld would be
creditable against your Federal income tax liability and, if the amount withheld
exceeds your actual tax liability you could obtain a refund from the IRS by
filing a U.S. income tax return. See the Instructions to the Letter of
Transmittal.
TAX CONSEQUENCES OF A TERMINATION OF YOUR PARTNERSHIP
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"). The AIMCO Operating Partnership's acquisition of units pursuant
to the offer may result in a Termination of your partnership. If an acquisition
of units results in a
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Termination, the following Federal income tax events will be deemed to occur:
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
interests 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 to the
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
to the New Partnership. A Termination will change (and possibly shorten) a
Remaining Offeree's holding period with respect to its units in your partnership
for Federal income tax purposes. Gains recognized by a Remaining Offeree on the
disposition of New Partnership interests with a holding period of 12 months or
less may be classified as short-term capital gains and subject to taxation at
ordinary income tax rates.
The New Partnership's adjusted tax basis in its assets will be the same as
the Old Partnership's basis in such assets immediately before the Termination. A
Termination will also cause the New Partnership to recalculate the depreciable
lives of its assets. This will cause the assets to be depreciated over a longer
period of time than if there had been no Termination. This would generally
decrease the annual average depreciation deductions allocable to the Remaining
Offerees for a number of years following consummation of the offer (thereby
increasing the taxable income allocable to their retained units in each such
year), but would have no effect on the total depreciation deductions available
over the useful lives of the assets of your partnership.
Elections as to 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.
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-74
<PAGE> 2036
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 The AIMCO Operating Partnership is organized
organized under Delaware law. as a 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 The term of the AIMCO Operating Partnership
partners as a finite life investment, with continues until December 31, 2093, unless
limited partners to receive regular cash the AIMCO Operating Partnership is dissolved
distributions out of your partnership's sooner pursuant to the terms of the AIMCO
Available Cash Flow (as defined in your Operating Partnership's agreement of limited
partnership's agreement of limited partnership (the "AIMCO Operating
partnership). The termination date of your Partnership Agreement") or as provided by
partnership is December 31, 2008. law. See "Description of 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 The purpose of the AIMCO Operating
purchase, hold, lease, manage and operate Partnership is to conduct any business that
your partnership's property. Subject to may be lawfully conducted by a limited
restrictions contained in your part- partnership organized pursuant to the
nership's agreement of limited partnership, Delaware Revised Uniform Limited Part-
your partnership may perform all acts nership Act (as amended from time to time,
necessary or appropriate in connection or any successor to such statute) (the
therewith and reasonably related thereto, "Delaware Limited Partnership Act"),
including acquiring additional real or per- provided that such business is to be
sonal property, borrowing money and creating conducted in a manner that permits AIMCO to
liens. be qualified as a REIT, unless AIMCO ceases
to qualify as a REIT. The AIMCO Operating
Partner-
</TABLE>
S-75
<PAGE> 2037
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ship 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 ac-
tion, 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>
Additional Equity
<TABLE>
<S> <C>
The general partner of your partnership is The general partner is authorized to issue
authorized to issue additional limited additional partnership interests in the
partnership interests in your partnership AIMCO Operating Partnership for any
and may admit additional limited partners by partnership purpose from time to time to the
selling 35.5 units for cash and notes to limited partners and to other persons, and
selected persons who fulfill the to admit such other persons as additional
requirements set forth in your partnership's limited partners, on terms and conditions
agreement of limited partnership. The and for such capital contributions as may be
capital contribution need not be equal for established by the general partner in its
all limited partners and no action or con- sole discretion. The net capital
sent is required in connection with the contribution need not be equal for all OP
admission of any additional limited Unitholders. No action or consent by the OP
partners. 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,
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 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>
Your partnership's agreement of limited The AIMCO Operating Partnership may lend or
partnership sets forth contracts that are to contribute funds or other assets to its
be made with the general partner and subsidiaries or other persons in which it
affiliates of the general partner. has an equity investment,
</TABLE>
S-76
<PAGE> 2038
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
In addition, the general partner may make and such persons may borrow funds from the
loans to your partnership in such sums as AIMCO Operating Partnership, on terms and
the general partner deems appropriate and conditions established in the sole and
necessary for the conduct of your absolute discretion of the general partner.
partnership's business. The terms and To the extent consistent with the business
maturities of such loans must be reasonable purpose of the AIMCO Operating Partnership
as determined by the general partner, and the permitted activities of the general
interest charged cannot exceed the greater partner, the AIMCO Operating Partnership may
of 2 1/2% over the base rate then being transfer assets to joint ventures, limited
charged by Third National Bank in Nashville liability companies, partnerships,
or the interest rate paid by the general corporations, business trusts or other
partner to a third party lender for the business entities in which it is or thereby
funds and other charges and fees must be at becomes a participant upon such terms and
least as favorable to your partnership as subject to such conditions consistent with
those negotiated by unaffiliated lenders on the AIMCO Operating Partnership Agreement
comparable loans for the same purpose in the and applicable law as the general partner,
same locale. in its sole and absolute discretion,
believes to be advisable. Except as
expressly permitted by the AIMCO Operating
Partnership Agreement, neither the general
partner nor any of its affiliates may sell,
transfer or convey any property to the AIMCO
Operating Partnership, directly or
indirectly, except pursuant to transactions
that are determined by the general partner
in good faith to be fair and reasonable.
</TABLE>
Borrowing Policies
<TABLE>
<S> <C>
The general partner of your partnership is The AIMCO Operating Partnership Agreement
authorized to borrow money on the credit of contains no restrictions on borrowings, and
and enter into obligations on behalf of your the general partner has full power and
partnership and to give as security therefor authority to borrow money on behalf of the
any partnership's property. However, the AIMCO Operating Partnership. The AIMCO
general partner may not incur any indebt- Operating Partnership has credit agreements
edness pursuant to a non-recourse loan if that restrict, among other things, its
the creditor acquires, at any time as a ability to incur indebtedness.
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 Each OP Unitholder has the right, upon
partnership entitles the limited partners to written demand with a statement of the
have access to the current list of the names purpose of such demand and at such OP
and addresses of all of the limited partners Unitholder's own expense, to obtain a
at all reasonable times at the principal current list of the name and last known
office of the general partners in Tennessee. business, residence or mailing address of
the general partner and each other OP
Unitholder.
</TABLE>
Management Control
<TABLE>
<S> <C>
The general partner of your partnership has All management powers over the business and
the exclusive power to manage and control affairs of the AIMCO Operating Partnership
your partnership and its business and are vested in AIMCO-GP, Inc., which is the
affairs. The general partner has all rights general partner. No OP Unitholder has any
and power which may be possessed by general right to participate in or exercise control
partners under applicable laws and such or management power over the busi-
</TABLE>
S-77
<PAGE> 2039
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
additional rights and power as necessary, ness and affairs of the AIMCO Operating
advisable or convenient to the discharge of Partnership. The OP Unitholders have the
their duties under your partnership's right to vote on certain matters described
agreement of limited partnership. A limited under "Comparison of Your Units and AIMCO OP
partner may not take part in or interfere in Units -- Voting Rights" below. The general
any manner with the conduct or control of partner may not be removed by the OP
the business of your partnership and will Unitholders with or without cause.
have no right or authority to act for or
bind your partnership, except that limited In addition to the powers granted a general
partners may exercise the voting and other partner of a limited partnership under
rights provided in this your partnership's applicable law or that are granted to the
agreement of limited partnership and under general partner under any other provision of
applicable laws. 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 Notwithstanding anything to the contrary set
limited partnership, the general partner of forth in the AIMCO Operating Partnership
your partnership is not liable to your Agreement, the general partner is not liable
partnership or any limited partner for any to the AIMCO Operating Partnership for
acts performed by it or any failure to act losses sustained, liabilities incurred or
in the absence of gross negligence or benefits not derived as a result of errors
willful malfeasance. However, your in judgment or mistakes of fact or law of
partnership's agreement of limited any act or omission if the general partner
partnership does not provide for the acted in good faith. The AIMCO Operating
indemnification of the general partner or Partnership Agreement provides for
its affiliates for any acts or omissions indemnification of AIMCO, or any director or
performed by them on behalf of your officer of AIMCO (in its capacity as the
partnership. previous general partner of the AIMCO
Operating Partnership), the general partner,
any officer or director of general partner
or the AIMCO Operating Partnership and such
other persons as the general partner may
designate from and against all losses,
claims, damages, liabilities, joint or
several, expenses (in-
</TABLE>
S-78
<PAGE> 2040
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
cluding 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 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
and certain state securities administrations
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 and their
respective state securities laws.
</TABLE>
Anti-Takeover Provisions
<TABLE>
<S> <C>
Under your partnership's agreement of Except in limited circumstances, the general
limited partnership, the limited partners partner has exclusive management power over
may remove the general partner for cause the business and affairs of the AIMCO
upon a vote of the limited partners owning a Operating Partnership. The general partner
majority of the outstanding units. The may not be removed as general partner of the
general partner may not transfer, assign, AIMCO Operating Partnership by the OP
sell, withdraw or otherwise dispose of its Unitholders with or without cause. Under the
interest unless it obtains the prior written AIMCO Operating Partnership Agreement, the
consent of those persons owning more than general partner may, in its sole discretion,
50% of the units and satisfies other prevent a transferee of an OP Unit from
conditions set forth in your partnership's becoming a substituted limited partner
agreement of limited partnership. The pursuant to the AIMCO Operating Partnership
consent of all limited partners is necessary Agreement. The general partner may exercise
for the approval of a new general partner. A this right of approval to deter, delay or
limited partner may not transfer his hamper attempts by persons to acquire a
interests without the written consent of the controlling interest in the AIMCO Operating
general partner. Partnership. 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 With the exception of certain circumstances
partnership may be amended by the general set forth in the AIMCO Operating Partnership
partner to add representations, duties or Agreement, whereby the general partner may,
obligations of the general partner or its without the consent of the OP Unitholders,
affiliates or to surrender any right or amend the AIMCO Operating Partnership
power granted to them for the benefit of the Agreement, amendments to the AIMCO Operating
limited partners, to cure any ambiguity or Partnership Agreement require the consent of
error and to admit additional or substitute the holders of a majority of the outstanding
limited partners. Other amendments of your Common OP Units, excluding AIMCO
partnership's agreement of lim-
</TABLE>
S-79
<PAGE> 2041
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
ited partnership may be proposed by the and certain other limited exclusions (a
general partner. Such proposals will be sent "Majority in Interest"). Amendments to the
to the limited partners together with a AIMCO Operating Partnership Agreement may be
recommendation of the general partner as to proposed by the general partner or by
the proposal. The general partner may holders of a Majority in Interest. Following
require a response within a specified time such proposal, the general partner will
not less than 30 days from the notice and submit any proposed amendment to the OP
failure to respond will constitute a vote Unitholders. The general partner will seek
which is consistent with the general the written consent of the OP Unitholders on
partners' recommendation. Approval of such the proposed amendment or will call a
proposals must be given by the limited meeting to vote thereon. See "Description of
partners owning at least 51% of the units. OP Units -- Amendment of the AIMCO Operating
Partnership Agreement" in the accompanying
Prospectus.
</TABLE>
Compensation and Fees
<TABLE>
<S> <C>
In addition to the right to distributions in The general partner does not receive
respect of its partnership interest and compensation for its services as general
reimbursement for all fees and expenses as partner of the AIMCO Operating Partnership.
set forth in your partnership's agreement of However, the general partner is entitled to
limited partnership, the general partner payments, allocations and distributions in
receives no fees for its services as general its capacity as general partner of the AIMCO
partner. Moreover, the general partner or Operating Partnership. In addition, the
certain affiliates may be entitled to AIMCO Operating Partnership is responsible
compensation for additional services for all expenses incurred relating to the
rendered. 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 Except for fraud, willful misconduct or
limited partnership, limited partners are gross negligence, no OP Unitholder has
not bound by, or personally liable for, the personal liability for the AIMCO Operating
expenses, liabilities or obligation of your Partnership's debts and obligations, and
partnership in excess of the limited liability of the OP Unitholders for the
partners' capital contribution, except as AIMCO Operating Partnership's debts and
provided by applicable law. obligations 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 Part-
nership 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
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
</TABLE>
S-80
<PAGE> 2042
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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 Unless otherwise provided for in the
limited partnership, the general partner relevant partnership agreement, Delaware law
must manage and control your partnership, generally requires a general partner of a
its business and affairs to the best of Delaware limited partnership to adhere to
their abilities and use their best efforts fiduciary duty standards under which it owes
to carry out the business of your its limited partners the highest duties of
partnership. The general partner must devote good faith, fairness and loyalty and which
itself to the business of your partnership generally prohibit such general partner from
to the extent that it, in its discretion, taking any action or engaging in any
deem necessary for the efficient carrying on transaction as to which it has a conflict of
thereof. The general partner must act as a interest. The AIMCO Operating Partnership
fiduciary with respect to the safekeeping Agreement expressly authorizes the general
and use of the funds and assets of your partner to enter into, on behalf of the
partnership. However, the partners may AIMCO Operating Partnership, a right of
engage in whatever activities they choose, first opportunity arrangement and other
whether or not it is in competition with conflict avoidance agreements with various
your partnership, without having or affiliates of the AIMCO Operating
incurring any obligation to offer any Partnership and the general partner, on such
interest in such activities to your partner- terms as the general partner, in its sole
ship and the partners and your partnership and absolute discretion, believes are
and the partners will have no rights in or advisable. The AIMCO Operating Partnership
to such independent business ventures or the Agreement expressly limits the liability of
income and profits derived therefrom. the general partner by providing that the
general partner, and its officers and
In general, your partnership's agreement of directors will not be liable or accountable
limited partnership and the AIMCO Operating in damages to the AIMCO Operating
Partnership Agreement have limitations on Partnership, the limited partners or as-
the liability of the general partner but signees for errors in judgment or mistakes
such limitations differ and provide more of fact or law or of any act or omission if
protection for the general partner of the the general partner or such director or
AIMCO Operating Partnership. 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 The AIMCO Operating Partnership is not
differences between the taxation of your subject to Federal income taxes. Instead,
partnership and the AIMCO Operating each holder of OP Units includes in income
Partnership. 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
</TABLE>
S-81
<PAGE> 2043
YOUR PARTNERSHIP AIMCO OPERATING PARTNERSHIP
<TABLE>
<S> <C>
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 nonre-
course 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>
<CAPTION>
<S> <C> <C>
The partnership interests in your The Preferred OP Units constitute The Common OP Units constitute
partnership constitute equity in- equity interests entitling each equity interests entitling each OP
terests entitling each partner to holder of Preferred OP Units, when Unitholder to such partner's pro
its pro rata share of and as declared by the board of rata share of cash distributions
distributions to be made to the directors of the general partner made from Available Cash (as such
partners of your partnership. of the AIMCO Operating Part- term is defined in the AIMCO
nership, quarterly cash distribu- Operating Partnership Agreement)
tion at a rate of $0.50 per to the partners of the AIMCO
Preferred OP Unit, subject to ad- Operating Partnership. To the
justments from time to time on or extent the AIMCO Operating
after the fifth anniversary of the Partnership sells or refinances
issue date of the Preferred OP its assets, the net proceeds
Units. therefrom generally will be re-
tained by the AIMCO Operating
</TABLE>
S-82
<PAGE> 2044
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
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 Except as otherwise required Under the AIMCO Operating
agreement of limited by applicable law or in the Partnership Agreement, the
partnership, upon the vote AIMCO Operating Partnership OP Unitholders have voting
of the limited partners Agreement, the holders of rights only with respect to
owning a majority of the the Preferred OP Units will certain limited matters such
outstanding units and the have the same voting rights as certain amendments and
consent of the general as holders of the Common OP termination of the AIMCO
partners, the limited Units. See "Description of Operating Partnership
partners may amend your OP Units" in the accompany- Agreement and certain
partnership's agreement of ing Prospectus. So long as transactions such as the
limited partnership, any Preferred OP Units are institution of bankruptcy
dissolve and terminate your outstanding, in addition to proceedings, an assignment
partnership; remove a any other vote or consent of for the benefit of creditors
general partner for cause partners required by law or and certain transfers by the
without the consent of the by the AIMCO Operating general partner of its
general partner; change the Partnership Agreement, the interest in the AIMCO
nature of your partnership's affirmative vote or consent Operating Partnership or the
business and approve or of holders of at least 50% admission of a successor
disapprove the sale of all of the outstanding Preferred general partner.
or substantially all of the OP Units will be necessary
assets of your partnership. for effecting any amendment Under the AIMCO Operating
The election of a substitute of any of the provisions of Partnership Agreement, the
general partner requires the the Partnership Unit general partner has the
approval of all of the Designation of the Preferred power to effect the
limited partners. OP Units that materially and acquisition, sale, transfer,
adversely affects the rights exchange or other
The general partner may or preferences of the disposition of any assets of
cause the dissolution of holders of the Preferred OP the AIMCO Operating
your partnership by retiring Units. The creation or Partnership (including, but
when there is no remaining issuance of any class or not limited to, the exercise
general partner unless all series of partnership units, or grant of any conversion,
of the limited partners including, without option, privilege or
elect a substitute general limitation, any partner- subscription right or any
partner within 90 days after ship units that may have other right available in
the retirement of the rights senior or superior to connection with any assets
general partner. the Preferred OP Units, at any time held by the
shall not be deemed to AIMCO Operating Partnership)
In general, you have greater materially adversely affect or the merger,
voting rights in your the rights or preferences of consolidation,
partnership than you will the holders of Preferred OP reorganization or other
have as an OP Unitholder. OP Units. With respect to the combination of the AIMCO
Unitholders cannot remove exercise of the above Operating Partnership with
the general partner of the described voting rights, or into another entity, all
AIMCO Operating Partnership. each Preferred OP Units without the consent of the
shall have one (1) vote per OP Unitholders.
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 limi-
</TABLE>
S-83
<PAGE> 2045
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
tation, 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 "Descrip-
tion of OP
Units -- Dissolution and
Winding Up" in the accom-
panying Prospectus.
OP Unitholders cannot remove
the general partner of the
AIMCO Operating Partnership
with or without cause.
</TABLE>
Distributions
<TABLE>
<S> <C> <C>
Your partnership's agreement Holders of Preferred OP Subject to the rights of
of limited partnership Units will be entitled to holders of any outstanding
specifies how the cash receive, when and as Preferred OP Units, the
available for distribution, declared by the board of AIMCO Operating Partnership
whether arising from directors of the general Agreement requires the
operations or sales or partner of the AIMCO general partner to cause the
refinancing, is to be shared Operating Partnership, AIMCO Operating Partnership
among the partners. The quarterly cash distributions to distribute quarterly all,
general partner makes at the rate of $0.50 per or such portion as the
distributions from Available Preferred OP Unit; provided, general partner may in its
Cash Flow quarterly within however, that at any time sole and absolute discretion
45 days after the end of and from time to time on or determine, of Available Cash
such quarter or at such time after the fifth anniversary (as defined in the AIMCO
or times as the general of the issue date of the Operating Partnership
partner deems practicable. Preferred OP Units, the Agreement) generated by the
The distributions payable to AIMCO Operating Partnership AIMCO Operating Partnership
the partners are not fixed may adjust the annual during such quarter to the
in amount and depend upon distribution rate on the general partner, the special
the operating results and Preferred OP Units to the limited partner and the
net sales or refinancing lower of (i) 2.00% plus the holders of Common OP Units
proceeds available from the annual interest rate then on the record date es-
disposition of your applicable to U.S. Treasury tablished by the general
partnership's assets. notes with a maturity of partner with respect to such
five years, and (ii) the quarter, in accordance with
annual dividend rate on the their respective interests
most recently issued AIMCO in the AIMCO Operating
non-convertible preferred Partnership on such record
stock which ranks on a date. Holders of any other
parity with its Class H Pre-
Cumulative Preferred
</TABLE>
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<PAGE> 2046
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
Stock. Such distributions ferred OP Units issued in
will be cumulative from the the future may have priority
date of original issue. over the general partner,
Holders of Preferred OP the special limited partner
Units will not be entitled and holders of Common OP
to receive any distributions Units with respect to
in excess of cumulative distributions of Available
distributions on the Cash, distributions upon
Preferred OP Units. No liquidation or other
interest, or sum of money in distributions. See "Per
lieu of interest, shall be Share and Per Unit Data" in
payable in respect of any the accompanying Prospectus.
distribution payment or pay-
ments on the Preferred OP The general partner in its
Units that may be in sole and absolute discretion
arrears. may distribute to the OP
Unitholders Available Cash
When distributions are not on a more frequent basis and
paid in full upon the provide for an appropriate
Preferred OP Units or any record date.
Parity Units (as defined
below), all distributions The AIMCO Operating Partner-
declared upon the Preferred ship Agreement requires the
OP Units and any Parity general partner to take such
Units shall be declared reasonable efforts, as
ratably in proportion to the determined by it in its sole
respective amounts of and absolute discretion and
distributions accumulated, consistent with AIMCO's
accrued and unpaid on the qualification as a REIT, to
Preferred OP Units and such cause the AIMCO Operating
Parity Units. Unless full Partnership to distribute
cumulative distributions on sufficient amounts to en-
the Preferred OP Units have able the general partner to
been declared and paid, transfer funds to AIMCO and
except in limited circum- enable AIMCO to pay stock-
stances, no distributions holder dividends that will
may be declared or paid or (i) satisfy the requirements
set apart for payment by the for qualifying as a REIT
AIMCO Operating Partnership under the Code and the
and no other distribution of Treasury Regulations and
cash or other property may (ii) avoid any Federal
be declared or made, income or excise tax
directly or indirectly, by liability of AIMCO. See
the AIMCO Operating "Description of OP
Partnership with respect to Units -- Distributions" in
any Junior Units (as de- the accompanying Prospectus.
fined below), nor shall any
Junior Units be redeemed,
purchased or otherwise
acquired for considera-
tion, 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>
<CAPTION>
<S> <C> <C>
A limited partner may There is no public market There is no public market
transfer his units to any for the Preferred OP Units for the OP Units. The AIMCO
person and such and the Pre- Oper-
</TABLE>
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<PAGE> 2047
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
transferee will be ferred OP Units are not ating Partnership Agreement
substituted in place of the listed on any securities restricts the
transferor if (1) such sale exchange. The Preferred OP transferability of the OP
is not of a fraction of a Units are subject to Units. Until the expiration
unit, except in limited restrictions on transfer as of one year from the date on
circumstances, (2) the set forth in the AIMCO which an OP Unitholder
transfer and transferee Operating Partnership acquired OP Units, subject
execute, acknowledge and Agreement. to certain exceptions, such
deliver to the general OP Unitholder may not
partner an instrument Pursuant to the AIMCO transfer all or any por-
evidencing the transfer, (3) Operating Partnership tion of its OP Units to any
the transferor pays a Agreement, until the transferee without the
transfer fee, (4) the expiration of one year from consent of the general
general partner consents to the date on which a holder partner, which consent may
such transfer in writing, of Preferred OP Units be withheld in its sole and
which consent will not be acquired Preferred OP Units, absolute discretion. After
granted if such transfer subject to certain the expiration of one year,
would: (a) result in the exceptions, such holder of such OP Unitholder has the
termination of your partner- Preferred OP Units may not right to transfer all or any
ship for tax purposes, transfer all or any portion portion of its OP Units to
result in your partnership of its Preferred OP Units to any person, subject to the
being taxed as an any transferee without the satisfaction of certain con-
association, (b) violate any consent of the general ditions specified in the
applicable securities laws, partner, which consent may AIMCO Operating Partnership
(c) reduce the depreciation be withheld in its sole and Agreement, including the
available to other partner absolute discretion. After general partner's right of
or (d) the units would not the expiration of one year, first refusal. See
be a suitable investment for such holders of Preferred OP "Description of OP Units --
the transferee and (5) the Units has the right to Transfers and Withdrawals"
assignor and assignee have transfer all or any portion in the accompanying
complied with such other of its Preferred OP Units to Prospectus.
conditions as set forth in any person, subject to the
your partnership's agreement satisfaction of certain After the first anniversary
of limited partnership. conditions specified in the of becoming a holder of
AIMCO Operating Partner- Common OP Units, an OP
There are no redemption ship Agreement, including Unitholder has the right,
rights associated with your the general partner's right subject to the terms and
units. of first refusal. conditions of the AIMCO
Operating Partnership
After a one-year holding Agreement, to require the
period, a holder may redeem AIMCO Operating Partnership
Preferred OP Units and to redeem all or a portion
receive in exchange of the Common OP Units held
therefor, at the AIMCO Oper- by such party in exchange
ating Partnership's option, for a cash amount based on
(i) subject to the terms of the value of shares of Class
any Senior Units (as defined A Common Stock. See
below), cash in an amount "Description of OP
equal to the Liquidation Units -- Redemption Rights"
Preference of the Preferred in the accompanying
OP Units tendered for Prospectus. Upon receipt of
redemption, (ii) a number of a notice of redemption, the
shares of Class A Common AIMCO Operating Partnership
Stock of AIMCO that is equal may, in its sole and
in Value to the Liquidation absolute discretion but
Preference of the Preferred subject to the restrictions
OP Units tendered for on the ownership of Class A
redemption, or (iii) for Common Stock imposed under
Preferred OP Units redeemed AIMCO's charter and the
after a two-year holding transfer restrictions and
period, a number of shares other limitations thereof,
of Class I Preferred elect to cause AIMCO to
</TABLE>
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<PAGE> 2048
YOUR UNITS PREFERRED OP UNITS COMMON OP UNITS
<TABLE>
<S> <C> <C>
Stock of AIMCO that pay an acquire some or all of the
aggregate amount of tendered Common OP Units in
dividends equivalent to the exchange for Class A Common
distributions on the Stock, based on an exchange
Preferred OP Units tendered ratio of one share of Class
for redemption; provided A Common Stock for each Com-
that such shares are part of mon OP Unit, subject to
a class or series of adjustment as provided in
preferred stock that is then the AIMCO Operating
listed on the NYSE or an- Partnership Agreement.
other national securities
exchange. See "Federal
Income Tax
Consequences -- Disguised
Sales." 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> 2049
DESCRIPTION OF PREFERRED OP UNITS
GENERAL
The Preferred OP Units are the Class Two 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 I High Performance 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, the
Class J Partnership Preferred Units, the Class K 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, the Class One 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 $0.50 per Preferred OP
Unit (equivalent to 8.0% per annum of the $25 stated liquidation preference);
provided, however, that at any time and from time to time on or after March 1,
2005, the AIMCO Operating Partnership may adjust the annual distribution rate on
the Preferred OP Units to the lower of (i) 2.0% 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. A reduction in the distribution rate will reduce your rate of return on
the Preferred OP Units and possibly encourage you to redeem such units. 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
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<PAGE> 2050
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 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 $25 per Preferred OP
Unit, 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
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<PAGE> 2051
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 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 A Common Stock of AIMCO that is equal in Value to the
Liquidation Preference of the Preferred OP Units tendered for redemption, or
(iii) for Preferred OP Units redeemed after a two-year holding period, 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 NYSE or another national securities exchange.
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. Before issuing any preferred
stock upon redemption of Preferred OP Units, AIMCO will register the issuance
and sale of such shares under the Securities Act of 1933. 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.
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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.
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, the Class J 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 8.0% per annum of the $25 liquidation preference (equivalent to
$2.00 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 July 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 March 1, 2005, 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,
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<PAGE> 2053
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 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> 2054
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 The Class I Preferred Stock constitutes an
interests entitling each holder of Preferred equity interest entitling each holder of
OP Units to receive, when and as declared by Class I Preferred Stock to receive, when and
the board of directors of the general as declared by the AIMCO board of directors,
partner of the AIMCO Operating Partnership, cash distribution at a rate of $2.00 per
quarterly cash distribution at a rate of annum per share.
$0.50 per 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 Holders of Class I Preferred Stock do not
law or in the AIMCO Operating Partnership's have any voting rights, except as set forth
agreement of limited partnership, the below and except as otherwise required by
holders of the Preferred OP Units will have applicable law.
the same voting rights as holders of the
Common OP Units. See "Description of OP If and whenever dividends on any shares of
Units" in the accompanying Prospectus. So Class I Preferred Stock or any series or
long as any Preferred OP Units are class of Class I Parity Stock are in arrears
outstanding, in addition to any other vote for six or more quarterly periods (whether
or consent of partners required by law or by or not consecutive), the number of directors
the AIMCO Operating Partnership's agreement then constituting the AIMCO board of
of limited partnership, the affirmative vote directors shall be increased by two (if not
or consent of holders of at least 50% of the already increased by reason of similar types
outstanding Preferred OP Units will be of provisions with respect to shares of
necessary for effecting any amendment of any voting preferred stock), and the holders of
of the provisions of the Partnership Unit shares of Class I Preferred Stock, together
Designation of the Preferred OP Units that with the holders of shares of all other
materially and adversely affects the rights voting preferred stock then entitled to
or preferences of the holders of the exercise similar voting rights, voting as a
Preferred OP Units. The creation or issuance single class regardless of series, will be
of any class or series of AIMCO Operating entitled to vote for the election of two
Partnership units, including, without additional directors of AIMCO. Whenever
limitation, any AIMCO Operating Partnership dividends in arrears and dividends for the
units that may have rights senior or current quarterly dividend period have been
superior to the Preferred OP Units, will not paid or declared and set aside in respect of
be deemed to materially adversely affect the the outstanding shares of the Class I
rights or preferences of the holders of Preferred Stock and the voting preferred
Preferred OP Units. With respect to the stock, then the right of the holders of
exercise of the above described voting Class I Preferred Stock and the voting
rights, each Preferred OP Units will have preferred stock to elect such additional two
one (1) vote per Preferred 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
</TABLE>
S-93
<PAGE> 2055
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
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>
Distributions
<TABLE>
<S> <C>
Holders of Preferred OP Units are entitled Holders of Class I Preferred Stock are
to receive, when and as declared by the entitled to receive, when and as declared by
board of directors of the general partner of the AIMCO board of directors, out of funds
the AIMCO Operating Partnership, quarterly legally available for payment, cash
cash distributions at the rate of $0.50 per dividends at the rate of $2.00 per annum per
Preferred OP Unit; provided, however, that share. Such dividends are cumulative from
at any time and from time to time on or the date of original issue. Holders of Class
after the fifth anniversary of the issue I Preferred Stock are not be entitled to
date of the Preferred OP Units, the AIMCO receive any dividends in excess of
Operating Partnership may adjust the annual cumulative dividends on the Class I
distribution rate on the Preferred OP Units Preferred Stock. No interest, or sum of
to the lower of (i) 2.00% plus the annual money in lieu of interest, shall be payable
interest rate then applicable to U.S. in respect of any dividend payment or
Treasury notes with a maturity of five payments on the Class I Preferred Stock that
years, and (ii) the annual dividend rate on may be in arrears.
the most recently issued AIMCO
non-convertible preferred stock which ranks When dividends are not paid in full upon the
on a parity with its Class H Cumulative Class I Preferred Stock or any other class
Preferred Stock. Such distributions will be or series of Class I Parity Stock, all
cumulative from the date of original issue. dividends declared upon the Class I
Holders of Preferred OP Units will not be Preferred Stock and any shares of Class I
entitled to receive any distributions in Parity Stock will be declared ratably in
excess of cumulative distributions on the proportion to the respective amounts of
Preferred OP Units. No interest, or sum of dividends accumulated, accrued and unpaid on
money in lieu of interest, shall be payable the Class I Preferred Stock and such Class I
in respect of any distribution payment or Parity Stock. Unless dividends equal to the
payments on the Preferred OP Units that may full amount of all accumulated, accrued and
be in arrears. unpaid dividends on the Class I Preferred
Stock have been paid, or declared and set
When distributions are not paid in full upon apart for payment, except in limited
the Preferred OP Units or any Parity Units, circumstances, no dividends may be declared
all or paid or set apart for
</TABLE>
S-94
<PAGE> 2056
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
distributions declared upon the Preferred OP payment by AIMCO and no other distribution
Units and any Parity Units will be declared of cash or other property may be declared or
ratably in proportion to the respective made, directly or indirectly, by AIMCO with
amounts of distributions accumulated, respect to any shares of Class I Junior
accrued and unpaid on the Preferred OP Units Stock, nor shall any shares of Class I
and such Parity Units. Unless full Junior Stock be redeemed, purchased or
cumulative distributions on the Preferred OP otherwise acquired for any consideration,
Units have been declared and paid, except in nor shall any other cash or other property
limited circumstances, no distributions may be paid or distributed to or for the benefit
be declared or paid or set apart for payment of holders of shares of Class I Junior
by the AIMCO Operating Partnership and no Stock. See "Description of Class I Preferred
other distribution of cash or other property Stock -- Dividends."
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 Ownership of shares of Class I Preferred
OP Units and the Preferred OP Units are not Stock by any person will be limited such
listed on any securities exchange. The that the sum of the aggregate value of all
Preferred OP Units are subject to certain equity stock (including all shares of Class
restrictions on transferability set forth in 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)
Pursuant to the AIMCO Operating of the aggregate value of all outstanding
Partnership's agreement of limited shares of equity stock. Further, certain
partnership, until the expiration of one transfers which may have the effect of
year from the date on which a holder of causing AIMCO to lose its status as a REIT
Preferred OP Units acquired Preferred OP are void ab initio.
Units, subject to certain exceptions, such
holder of Preferred OP Units may not If any transfer of Class I Preferred Stock
transfer all or any portion of its Preferred occurs which, if effective, would result in
OP Units to any transferee without the any person beneficially or constructively
consent of the general partner, which owning Class I Preferred Stock in excess or
consent may be withheld in its sole and in violation of the Class I Preferred
absolute discretion. After the expiration of Ownership Limit, such shares of Class I
one year, such holders of Preferred OP Units Preferred Stock in excess of the Class I
has the right to transfer all or any portion Preferred Ownership Limit will be
of its Preferred OP Units to any person, automatically transferred to a trustee in
subject to the satisfaction of certain his capacity as trustee of a trust for the
conditions specified in the AIMCO Operating exclusive benefit of one or more charitable
Partnership's agreement of limited beneficiaries designated by AIMCO, and the
partnership, including the general partner's prohibited transferee will generally have no
right of first refusal. rights in such shares, except upon sale of
the shares by the trustee. The trustee will
After a one-year holding period, a holder have all voting rights and rights to
may redeem Preferred OP Units and receive in dividends with respect to shares of Class I
exchange therefor, at the AIMCO Operating Preferred Stock held in the trust, which
Partnership's option, (i) subject to the rights will be exercised for the benefit of
terms of any Senior Units, cash in an amount the charitable beneficiaries.
equal to the Liquidation Preference of the
Preferred OP Units tendered for The trustee may sell the Class I Preferred
Stock held
</TABLE>
S-95
<PAGE> 2057
PREFERRED OP UNITS CLASS I PREFERRED STOCK
<TABLE>
<S> <C>
redemption, (ii) a number of shares of Class in the trust to AIMCO or a person,
A Common Stock of AIMCO that is equal in designated by the trustee, whose ownership
value to the Liquidation Preference of the of the Class I Preferred Stock will not
Preferred OP Units tendered for redemption, violate the Class I Preferred Ownership
or (iii) for Preferred OP Units redeemed Limit. Upon such sale, the interest of the
after a two-year holding period, a number of charitable beneficiaries in the shares sold
shares of Class I Preferred Stock of AIMCO will terminate and the trustee will
that pay an aggregate amount of dividends distribute to the prohibited transferee, the
equivalent to the distributions on the lesser of (i) the price paid by the
Preferred OP Units tendered for redemption; prohibited transferee for the shares or if
provided that such shares are part of a the prohibited transferee did not give value
class or series of preferred stock that is for the shares in connection with the event
then listed on the NYSE or another national causing the shares to be held in the trust,
securities exchange. See "Federal Income Tax the market price of such shares on the day
Consequences -- Disguised Sales." The of the event causing the shares to be held
Preferred OP Units may not be redeemed at in the trust and (ii) the price per share
the option of the AIMCO Operating received by the trustee from the sale or
Partnership. See "Description of Preferred other disposition of the shares held in the
OP Units -- Redemption." trust. Any proceeds in excess of the amount
payable to the prohibited transferee will be
payable to the charitable beneficiaries.
On and after March 1, 2005, 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-96
<PAGE> 2058
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. Your general
partner became a wholly owned subsidiary on February 26, 1999 of AIMCO when IPT
merged with AIMCO. Accordingly, the general partner of your partnership 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 Unitholders 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 own both the general partner of your partnership and the manager of your
partnership's property. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $67,256 in 1996, $67,076 in 1997 and $38,271 in
1998. The property manager received management fees of $104,498 in 1996,
$111,851 in 1997 and $110,364 in 1998. The AIMCO Operating Partnership has no
current intention of changing the fee structure for the general partner or for
the manager of your partnership's 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." AIMCO's
Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is
S-97
<PAGE> 2059
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.
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. However, we will not acquire any
additional units for a period of at least one year after expiration of the
offer. Any such future offers that we might make could be for consideration that
is more or less than the consideration we are currently offering.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The AIMCO Operating Partnership expects that approximately $631,998 will be
required to purchase all of the units sought in the offer, if such units are
tendered for cash excluding expenses as itemized below. The AIMCO Operating
Partnership will obtain all such funds from cash from operations, equity
issuances and short term borrowings. The AIMCO Operating Partnership will pay
all of the costs of the offer and not your partnership.
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...................................... $ 5,000
Accountant's Fees........................................... $ 5,000
Legal Fees.................................................. $10,000
Printing Fees............................................... $10,000
Stanger's Fees.............................................. $ 9,000
Other....................................................... $11,000
-------
Total............................................. $50,000
=======
</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 Bank of America's reference rate, at the election of
the Company, plus 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 2.25% and 2.75% in the case of LIBOR-based
loans and between negative 0.75% and 01.25% 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 September 30, 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
S-98
<PAGE> 2060
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.
We may obtain funds pursuant to a credit agreement entered into by our
subsidiary, Insignia Properties, L.P. ("IPLP"), 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, 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). IPLP 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. The AIMCO Operating
Partnership intends to repay any funds borrowed out of working capital in the
ordinary course of business.
LEGAL MATTERS
Skadden, Arps, Slate, Meagher & Flom LLP has delivered 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 has delivered an opinion with regard to
the material Federal income tax consequences of the offer. 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 two opinions of Skadden, Arps, Slate, Meagher & Flom LLP are 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 opinions will be sent by the Information Agent.
EXPERTS
The financial statements of Lake Eden, Limited as of December 31, 1997 and
1996 and for each of the years in the three-year period ended December 31, 1997,
have been included herein and in the registration statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
S-99
<PAGE> 2061
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed Balance Sheet as of September 30, 1998
(unaudited)............................................... F-2
Condensed Statements of Operations for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-3
Condensed Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 (unaudited)................... F-4
Notes to Condensed Financial Statements..................... F-5
Independent Auditors' Report................................ F-7
Balance Sheets as of December 31, 1997 and 1996............. F-8
Statements of Operations and Changes in Partners' Deficit
for the years ended December 31, 1997 and 1996............ F-9
Statements of Cash Flows for the years ended December 31,
1997 and 1996............................................. F-10
Notes to Financial Statements............................... F-11
Independent Auditors' Report................................ F-15
Balance Sheets as of December 31, 1996 and 1995............. F-16
Statements of Operations and Changes in Partners' Deficit
for the years ended December 31, 1996 and 1995............ F-17
Statements of Cash Flows for the years ended December 31,
1996 and 1995............................................. F-18
Notes to Financial Statements............................... F-19
</TABLE>
F-1
<PAGE> 2062
LAKE EDEN, LIMITED
CONDENSED BALANCED SHEET -- UNAUDITED
SEPTEMBER 30, 1998
ASSETS
<TABLE>
<S> <C> <C>
Cash and cash equivalents................................... $ 92,323
Other assets................................................ 725,804
Investment property.........................................
Land...................................................... $ 517,000
Building and related personal property.................... 8,454,915
-----------
8,971,915
Less: Accumulated depreciation............................ (6,137,026) 2,834,889
----------- -----------
Total assets...................................... $ 3,653,016
===========
LIABILITIES AND PARTNERS' CAPITAL
Other accrued liabilities................................... $ 249,322
Notes payable............................................... 6,954,603
Partners' deficit................................. (3,550,909)
-----------
Total liabilities and partners' deficit........... $ 3,653,016
===========
</TABLE>
See Accompanying Notes to Financial Statements.
F-2
<PAGE> 2063
LAKE EDEN, LIMITED
CONDENSED STATEMENTS OF OPERATIONS -- UNAUDITED
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Revenues:
Rental income............................................. $1,529,692 $1,573,351
Other income.............................................. 113,684 108,143
---------- ----------
Total revenues.................................... 1,643,376 1,681,494
Expenses:
Operating expenses........................................ 799,574 798,673
Depreciation expense...................................... 145,293 145,293
Interest expense.......................................... 431,020 443,508
Property tax expense...................................... 128,056 129,315
---------- ----------
Total expenses.................................... 1,503,943 1,516,789
Net income........................................ $ 139,433 $ 164,705
========== ==========
</TABLE>
See Accompanying Notes to Financial Statements.
F-3
<PAGE> 2064
LAKE EDEN, LIMITED
CONDENSED STATEMENTS OF CASH FLOWS -- UNAUDITED
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1998 1997
----------- -----------
<S> <C> <C>
Operating activities:
Net income................................................ $ 139,433 $ 164,705
Adjustments to reconcile net income (loss) to net cash
provided
by operating activities................................
Depreciation and amortization............................. 158,528 158,528
Changes in accounts:
Receivables and deposits and other assets.............. 16,859 45,803
Accounts payable and accrued expenses.................. (228,369) (81,628)
--------- ---------
Net cash provided by (used in) operating
activities...................................... 86,451 287,408
--------- ---------
Investing activities:
Property improvements and replacements.................... (123,989) (120,274)
--------- ---------
Net cash provided by (used in) investing activities....... (123,989) (120,274)
--------- ---------
Financing activities:
Payments on mortgage...................................... (147,029) (160,194)
Partners' distributions................................... (50,000) (63,387)
--------- ---------
Net cash provided by (used in) financing activities....... (197,029) (223,581)
--------- ---------
Net increase (decrease) in cash and cash equivalents...... (234,567) (56,447)
Cash and cash equivalents at beginning of period.......... 326,890 431,733
--------- ---------
Cash and cash equivalents at end of period................ $ 92,323 $ 375,286
========= =========
</TABLE>
See Accompanying Notes to Financial Statements.
F-4
<PAGE> 2065
LAKE EDEN, LIMITED
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited financial statements of Lake Eden, Limited as of
September 30, 1998 and for the nine months ended September 30, 1998 and 1997
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included and all such
adjustments are of a recurring nature.
The financial statements should be read in conjunction with the audited
financial statements and notes thereto for the year ended December 31, 1997. It
should be understood that the accounting measurements at interim dates
inherently involve greater reliance on estimates than at year-end. The results
of operations for the interim periods are not necessarily indicative of the
results for the entire year.
NOTE B -- SUBSEQUENT EVENT
On March 17, 1998, Insignia Financial Group, Inc., an affiliate of the
corporate general partner of the Partnership, entered into an agreement to merge
its national residential property management operations and its controlling
interest in Insignia Properties Trust, with Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust. The merger
was completed effective October 1, 1998, and accordingly, as of that date AIMCO
acquired the corporate general partner and the company that manages the
Partnership.
F-5
<PAGE> 2066
LAKE EDEN, LIMITED
FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
F-6
<PAGE> 2067
INDEPENDENT AUDITORS' REPORT
General Partners
Lake Eden, Limited:
We have audited the accompanying balance sheets of Lake Eden, Limited as of
December 31, 1997 and 1996, and the related statements of operations and changes
in partners' deficit and cash flows for the years then ended. These financial
statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Lake Eden, Limited as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
Greenville, SC
February 17, 1998
F-7
<PAGE> 2068
LAKE EDEN, LIMITED
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash and cash equivalents................................... $ 326,890 $ 431,733
Receivable and deposits..................................... 200,964 149,984
Restricted escrows (Note B)................................. 412,092 395,154
Other assets................................................ 129,607 140,231
Investment properties (Note C):
Land...................................................... 517,000 517,000
Buildings and related personal property................... 8,330,926 7,989,837
----------- -----------
8,847,926 8,506,837
Less accumulated depreciation............................... (5,991,733) (5,798,010)
----------- -----------
2,856,193 2,708,827
----------- -----------
$ 3,925,746 $ 3,825,929
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 204,144 $ 138,257
Tenant security deposit liabilities....................... 62,794 58,782
Accrued taxes............................................. 162,611 163,042
Other liabilities......................................... 48,142 50,308
Mortgage notes payable (Note C)........................... 7,088,397 7,245,235
Partners' deficit........................................... (3,640,342) (3,829,695)
----------- -----------
$ 3,925,746 $ 3,825,929
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements.
F-8
<PAGE> 2069
LAKE EDEN, LIMITED
STATEMENTS OF OPERATIONS AND CHANGES IN PARTNERS' DEFICIT
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Revenues:
Rental income............................................. $ 2,112,517 $ 2,003,086
Other income.............................................. 137,164 112,168
----------- -----------
Total revenues......................................... 2,249,681 2,115,254
----------- -----------
Expenses:
Operating (Note D)........................................ 927,690 999,362
General and administrative (Note D)....................... 59,886 59,403
Depreciation.............................................. 193,723 179,399
Interest.................................................. 652,111 664,592
Property taxes............................................ 163,531 164,008
----------- -----------
Total expenses......................................... 1,996,941 2,066,764
----------- -----------
Net income.................................................. 252,740 48,490
Distributions to partners................................... (63,387) (92,300)
Partners' deficit at beginning of year...................... (3,829,695) (3,785,885)
----------- -----------
Partners' deficit at end of year............................ $(3,640,342) $(3,829,695)
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements.
F-9
<PAGE> 2070
LAKE EDEN, LIMITED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 252,740 $ 48,490
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 193,723 179,399
Amortization of discounts and loan costs............... 80,450 77,975
Change in accounts:
Receivable and deposits.............................. (50,980) 70,925
Other assets......................................... (13,072) --
Accounts payable..................................... 65,887 87,068
Tenant security deposit liabilities.................. 4,012 (1,408)
Accrued taxes........................................ (431) (160)
Other liabilities.................................... (2,166) (49,953)
--------- ---------
Net cash provided by operating activities......... 530,163 412,336
--------- ---------
Cash flows from investing activities:
Property improvements and replacements.................... (341,089) (129,285)
Net (deposits to) receipts from restricted escrows........ (16,938) 2,903
--------- ---------
Net cash used in investing activities............. (358,027) (126,382)
--------- ---------
Cash flows from financing activities:
Payments on mortgage notes payable........................ (213,592) (198,007)
Distributions to partners................................. (63,387) (92,300)
--------- ---------
Net cash used in financing activities............. (276,979) (290,307)
--------- ---------
Net decrease in cash and cash equivalents................... (104,843) (4,353)
Cash and cash equivalents at beginning of year.............. 431,733 436,086
--------- ---------
Cash and cash equivalents at end of year.................... $ 326,890 $ 431,733
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 571,661 $ 587,825
========= =========
</TABLE>
See Accompanying Notes to Financial Statements.
F-10
<PAGE> 2071
LAKE EDEN, LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE A -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Lake Eden, Limited (the "Partnership") was organized as a limited
partnership under the laws of the State of Delaware pursuant to a Limited
Partnership Agreement and Certificate of Limited Partnership dated January 11,
1985. The Partnership owns and operates a 387 unit apartment residential
complex, Lake Eden/Lebanon Station Apartments, in Columbus, Ohio.
The Partnership's Managing General Partner is Jacques-Miller Associates, an
affiliate of Insignia Financial Group ("Insignia"). The property is managed by
Insignia Residential Group, an affiliate of Insignia.
Depreciation
Depreciation is computed principally by use of the declining balance and
straight-line methods based upon the estimated useful lives of various classes
of assets; buildings are depreciated over 25 years and the personal property
assets are depreciated over a 5 to 10 year period.
Other Assets
Other assets at December 31, 1997 and 1996 include unamortized deferred
loan costs of $116,535 and $140,231, respectively, which are amortized over the
term of the related borrowing. They are presented net of accumulated
amortization.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Partnership considers
unrestricted cash and unrestricted highly liquid investments, with an original
maturity of three months or less when purchased, to be cash and cash
equivalents.
Income Taxes
On the basis of Treasury Regulations, the general partners believe that the
Partnership will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss and cash distributions of the
Partnership are allocated in accordance with the partnership agreement and the
Internal Revenue Code and are reportable in the income tax returns of its
partners.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Tenant Security Deposits
The Partnership requires security deposits from lessees for the duration of
the lease and such deposits are included in receivables and deposits. The
security deposits are refunded when the tenant vacates, provided the tenant has
not damaged its space and is current on its rental payments.
F-11
<PAGE> 2072
LAKE EDEN, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Reclassifications
Certain 1996 amounts have been reclassified to conform to the 1997
presentation. These reclassifications had no impact on net income or partners'
deficit as previously reported.
NOTE B -- RESTRICTED ESCROWS
Restricted escrow deposits at December 31, 1997 and 1996 consist of the
following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Reserve Escrow -- A portion of the proceeds of the 1992 loan
refinancing was placed into a reserve escrow. The funds
are used for certain repair work, debt service, expenses
and property taxes or insurance. The funds in the reserve
escrow exceed the minimum balance required to be
maintained by the lender during the term of the loan...... $412,092 $395,154
======== ========
</TABLE>
NOTE C -- MORTGAGE NOTES PAYABLE
Mortgage notes payable at December 31, 1997 and 1996 consist of the
following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
First mortgage note payable in monthly installments of
$63,853, including interest at 7.60%, due November 2002;
collateralized by land and buildings...................... $7,155,401 $7,368,993
Second mortgage note payable in interest only monthly
installments of $1,585, at a rate of 7.60%, with principal
due November 2002; collateralized by land and buildings... 250,216 250,216
---------- ----------
Principal balance at year end............................... 7,405,617 7,619,209
Less unamortized discount................................... (317,220) (373,974)
---------- ----------
$7,088,397 $7,245,235
========== ==========
</TABLE>
Scheduled principal payments of the mortgage notes during the years
subsequent to December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998..................................................... $ 230,402
1999..................................................... 248,535
2000..................................................... 268,096
2001..................................................... 289,196
2002..................................................... 6,369,388
----------
$7,405,617
==========
</TABLE>
The principal balance of the mortgage notes may be prepaid in whole upon
payment of a penalty of the greater of one percent of the unpaid principal
balance at the time of prepayment or the present value of the excess of interest
which would be incurred at the stated rate under the notes over the interest
which would be incurred at the Treasury constant maturity for U.S. Government
obligations.
F-12
<PAGE> 2073
LAKE EDEN, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no administrative or management employees and is
dependent on the Managing General Partner and its affiliates for the management
and administration of all partnership activities. The Partnership is obligated
to pay a property management fee equal to 5% of gross monthly collections. In
addition to the management fee, the partnership agreement provides for payments
to affiliates of a partnership administration fee and reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
Transactions with the Managing General Partner and its affiliates are as
follows:
<TABLE>
<CAPTION>
1997 1996
TYPE OF TRANSACTION AMOUNT AMOUNT
- ------------------- -------- --------
<S> <C> <C>
Management fee......................................... $111,851 $104,498
Partnership administration fee......................... $ 20,469 $ 20,840
Reimbursement for services of affiliates............... $ 31,607 $ 30,763
Construction oversight costs........................... $ 15,000 $ 15,653
</TABLE>
F-13
<PAGE> 2074
LAKE EDEN, LIMITED
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
F-14
<PAGE> 2075
INDEPENDENT AUDITORS' REPORT
General Partners
Lake Eden, Limited:
We have audited the accompanying balance sheets of Lake Eden, Limited as of
December 31, 1996 and 1995, and the related statements of operations and changes
in partners' deficit and cash flows for the years then ended. These financial
statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Lake Eden, Limited as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
Greenville, SC
February 25, 1997
F-15
<PAGE> 2076
LAKE EDEN, LIMITED
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash and cash equivalents:
Unrestricted.............................................. $ 431,733 $ 436,086
Restricted -- tenant security deposits.................... 58,782 62,394
Accounts receivable......................................... 4,732 5,835
Escrow for taxes............................................ 86,470 152,680
Restricted escrows (Note B)................................. 395,154 398,057
Other assets................................................ 140,231 163,927
Investment properties (Note C):
Land...................................................... 517,000 517,000
Buildings and related personal property................... 7,989,837 7,860,553
----------- -----------
8,506,837 8,377,553
Less accumulated depreciation............................. (5,798,010) (5,618,612)
----------- -----------
2,708,827 2,758,941
----------- -----------
$ 3,825,929 $ 3,977,920
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 138,257 $ 51,189
Tenant security deposits.................................. 58,782 60,190
Accrued taxes............................................. 163,042 163,202
Other liabilities......................................... 50,308 100,261
Mortgage notes payable (Note C)........................... 7,245,235 7,388,963
Partners' deficit........................................... (3,829,695) (3,785,885)
----------- -----------
$ 3,825,929 $ 3,977,920
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements.
F-16
<PAGE> 2077
LAKE EDEN, LIMITED
STATEMENTS OF OPERATIONS AND CHANGES IN PARTNERS' DEFICIT
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenues:
Rental income............................................. $ 2,003,086 $ 1,952,779
Other income.............................................. 112,168 122,979
----------- -----------
Total revenues......................................... 2,115,254 2,075,758
----------- -----------
Expenses:
Operating (Note D)........................................ 675,927 666,596
General and administrative (Note D)....................... 59,403 56,641
Maintenance............................................... 323,435 173,970
Depreciation.............................................. 179,399 193,531
Interest.................................................. 664,592 676,651
Property taxes............................................ 164,008 164,221
----------- -----------
Total expenses......................................... 2,066,764 1,931,610
----------- -----------
Net income.................................................. 48,490 144,148
Distributions to partners................................... (92,300) (37,887)
Partners' deficit at beginning of year...................... (3,785,885) (3,892,146)
----------- -----------
Partners' deficit at end of year............................ $(3,829,695) $(3,785,885)
=========== ===========
</TABLE>
See Accompanying Notes to Financial Statements.
F-17
<PAGE> 2078
LAKE EDEN, LIMITED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 48,490 $ 144,148
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 179,399 193,531
Amortization of discounts and loan costs............... 77,975 75,540
Change in accounts:
Restricted cash...................................... 3,612 539
Accounts receivable.................................. 1,103 (3,401)
Escrow for taxes..................................... 66,210 214,247
Accounts payable..................................... 87,068 14,556
Tenant security deposit liabilities.................. (1,408) (5,166)
Accrued taxes........................................ (160) 226
Other liabilities.................................... (49,953) 22,568
--------- ---------
Net cash provided by operating activities......... 412,336 656,788
--------- ---------
Cash flows from investing activities:
Property improvements and replacements.................... (129,285) (149,804)
Deposits to restricted escrows............................ (16,798) (16,503)
Receipts from restricted escrows.......................... 19,701 24,153
--------- ---------
Net cash used in investing activities............. (126,382) (142,154)
--------- ---------
Cash flows from financing activities:
Payments on mortgage notes payable........................ (198,007) (183,560)
Distributions to partners................................. (92,300) (37,887)
--------- ---------
Net cash used in financing activities............. (290,307) 221,447
--------- ---------
Net (decrease) increase in cash and cash equivalents........ (4,353) 293,187
Cash and cash equivalents at beginning of year.............. 436,086 142,899
--------- ---------
Cash and cash equivalents at end of year.................... $ 431,733 $ 436,086
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest.................... $ 587,825 $ 601,692
========= =========
</TABLE>
See Accompanying Notes to Financial Statements.
F-18
<PAGE> 2079
LAKE EDEN, LIMITED
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE A -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Lake Eden, Limited (the "Partnership") was organized as a limited
partnership under the laws of the State of Delaware pursuant to a Limited
Partnership Agreement and Certificate of Limited Partnership dated January 11,
1985. The Partnership owns and operates a 387 unit apartment residential
complex, Lake Eden/Lebanon Station Apartments, in Columbus, Ohio.
The Partnership's Managing General Partner is Jacques-Miller Associates, an
affiliate of Insignia Financial Group ("Insignia"). The property is managed by
Insignia Management Group, an affiliate of Insignia.
Depreciation
Depreciation is computed principally by use of the declining balance and
straight-line methods based upon the estimated useful lives of various classes
of assets; buildings are depreciated over 25 years and the personal property
assets are depreciated over a 5 to 10 year period.
Other Assets
Other assets at December 31, 1996 and 1995 consist of deferred loan costs
which are amortized over the term of the related borrowing. They are presented
net of accumulated amortization.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Partnership considers
unrestricted cash and unrestricted highly liquid investments, with an original
maturity of three months or less when purchased, to be cash and cash
equivalents.
Income Taxes
On the basis of legal counsel's opinion, the general partners believe that
the Partnership will be classified as a partnership for Federal income tax
purposes. Accordingly, no provision for income taxes is made in the financial
statements of the Partnership. Taxable income or loss and cash distributions of
the Partnership are allocated in accordance with the partnership agreement and
the Internal Revenue Code and are reportable in the income tax returns of its
partners.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain 1995 amounts have been reclassified to conform to the 1996
presentation. These reclassifications had no impact on net income or partners'
deficit as previously reported.
F-19
<PAGE> 2080
LAKE EDEN, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B -- RESTRICTED ESCROWS
Restricted escrow deposits at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Reserve Escrow -- Established with a portion of the proceeds
of the loan. The funds are used for certain repair work,
debt service, expenses and property taxes or insurance.
The funds in the reserve escrow exceed the minimum balance
required to be maintained by the lender during the term of
the loan. ................................................ $395,154 $398,057
======== ========
</TABLE>
NOTE C -- MORTGAGE NOTES PAYABLE
Mortgage notes payable at December 31, 1996 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
First mortgage note payable in monthly installments of
$63,853, including interest at 7.60%, due November 2002;
collateralized by land and buildings...................... $7,368,993 $7,567,000
Second mortgage note payable in interest only monthly
installments of $1,585, at a rate of 7.60%, with principal
due November 2002; collateralized by land and buildings... 250,216 250,216
---------- ----------
Principal balance at year end............................... 7,619,209 7,817,216
Less unamortized discount................................... (373,974) (428,253)
---------- ----------
$7,245,235 $7,388,963
========== ==========
</TABLE>
Scheduled principal payments of the mortgage notes during the years
subsequent to December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997..................................................... $ 213,591
1998..................................................... 230,402
1999..................................................... 248,535
2000..................................................... 268,096
2001..................................................... 289,196
Thereafter............................................... 6,369,389
----------
$7,619,209
==========
</TABLE>
The principal balance of the mortgage notes may not be prepaid, in whole or
in part, prior to November 15, 1997. Thereafter the principal may be prepaid in
whole upon payment of a penalty of the greater of one percent of the unpaid
principal balance at the time of prepayment or the present value of the excess
of interest which would be incurred at the stated rate under the notes over the
interest which would be incurred at the Treasury constant maturity for U.S.
Government obligations.
F-20
<PAGE> 2081
LAKE EDEN, LIMITED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no administrative or management employees and is
dependent on the Managing General Partner and its affiliates for the management
and administration of all partnership activities. The Partnership is obligated
to pay a property management fee equal to 5% of gross monthly collections. In
addition to the management fee, the partnership agreement provides for payments
to affiliates of a partnership administration fee and reimbursement of certain
expenses incurred by affiliates on behalf of the Partnership.
Transactions with the Managing General Partner and its affiliates are as
follows:
<TABLE>
<CAPTION>
1996 1995
TYPE OF TRANSACTION AMOUNT AMOUNT
- ------------------- -------- --------
<S> <C> <C>
Management fee......................................... $104,498 $103,202
Partnership administration fee......................... $ 20,840 $ 20,583
Reimbursement for services of affiliates............... $ 30,763 $ 28,725
Construction oversight fee............................. $ 15,653 $ 2,296
</TABLE>
F-21
<PAGE> 2082
PRO FORMA FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
AS OF SEPTEMBER 30, 1998 AND FOR THE YEAR
ENDED DECEMBER 31, 1997 AND THE
NINE MONTHS ENDED SEPTEMBER 30, 1998
INTRODUCTION
On October 1, 1998, Apartment Investment and Management Company ("AIMCO")
completed its merger with Insignia Financial Group ("IFG") ("the IFG Merger").
In the IFG Merger, IFG's common stock was converted into 8,423,751 shares of
Class E Cumulative Convertible Preferred Stock of AIMCO ("Class E Preferred
Stock") whose issue date market value approximately equaled $292 million. In
addition to receiving the same dividends as holders of AIMCO Common Stock,
holders of Class E Preferred Stock will be entitled to a special dividend of
approximately $50 million in the aggregate. When that special dividend is paid
in full, the Class E Preferred Stock will automatically convert into AIMCO
Common Stock on a one-for-one basis, subject to antidilution adjustments, if
any. In addition, AIMCO assumed approximately $411 million in indebtedness and
other liabilities of IFG and its subsidiaries and subsidiaries of AIMCO, assumed
approximately $149.5 million of convertible securities and purchased
approximately $5 million of IFG stock prior to the Merger. AIMCO and Insignia
Properties Trust ("IPT") have completed a merger in which IPT has merged into
AIMCO or a subsidiary of AIMCO (the "IPT Merger"). In the IPT Merger, shares of
IPT common stock not held by AIMCO were converted into 4,826,745 shares of AIMCO
Class A Common Stock whose market value approximately equaled $152 million.
AIMCO assumed approximately $68 million in indebtedness. In connection with the
IFG Merger and the IPT Merger, AIMCO incurred approximately $55 million in
transaction costs for a combined transactional value of approximately $1,183
million. AIMCO contributed substantially all the assets and liabilities of
Insignia acquired in the Insignia Merger to AIMCO Properties, L.P. (together
with its subsidiaries and other controlled entities, the "Partnership") (and
together with entities in which that Partnership has a controlling financial
interest, the "Company") in exchange for 8,423,751 Class E Preferred Units. The
Class E Preferred Units have terms substantially the same as the Class E
Preferred Stock. In addition, AIMCO contributed substantially all the assets and
liabilities of IPT acquired in the IPT Merger to the Partnership in exchange for
4,826,745 limited partnership units in the Partnership ("OP Units"). In
connection with the IFG Merger, the Partnership assumed property management of
approximately 192,000 multifamily units which consist of general and limited
partnership investments in 115,000 units and third party management of 77,000
units. Insignia Properties Trust ("IPT"), which prior to the IFG Merger was a
subsidiary of IFG, owns a 32% weighted average general and limited partnership
interest in approximately 51,000 units.
Immediately following the IFG Merger, in order to satisfy certain
requirements of the Internal Revenue Code of 1986 (the "Code") applicable to
AIMCO's status as a REIT, AIMCO engaged in a reorganization (the "IFG
Reorganization") of the assets and operations of IFG whereby IFG's operations
are being conducted through corporations (the "Unconsolidated Subsidiaries") in
which the Partnership holds non-voting preferred stock that represents a 95%
economic interest, and certain officers and/or directors of AIMCO hold, directly
or indirectly, all of the voting common stock, representing a 5% economic
interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
In May and September of 1997, AIMCO directly or indirectly through a
subsidiary, acquired (the "NHP Stock Purchase") an aggregate of 6,930,122 shares
of common stock ("NHP Common Stock") of NHP. On December 8, 1997, AIMCO acquired
the remaining shares of NHP Common Stock in a merger transaction accounted for
as a purchase (the "NHP Merger"). As a result of the NHP Merger, AIMCO issued
6,759,148 shares of AIMCO Common Stock, valued at $180.8 million, and paid $86.5
million in cash. The total cost of the purchase of NHP was $349.5 million.
Substantially all assets and liabilities of NHP were contributed by AIMCO to the
Partnership.
In June 1997, the Company purchased a group of companies (the "NHP Real
Estate Companies") affiliated with NHP that hold general and limited partnership
interests in partnerships (the "NHP
P-1
<PAGE> 2083
Partnerships") that own 534 conventional and affordable multifamily apartment
properties (the "NHP Properties") containing 87,659 units, a captive insurance
subsidiary and certain related assets (the "NHP Real Estate Acquisition"). The
Company paid aggregate consideration of $54.8 million in cash and warrants that
entitle the holders to purchase 399,999 shares of AIMCO Common Stock at an
exercise price of $36.00 per share. The Company engaged in a reorganization (the
"NHP Real Estate Reorganization") of its interests in the NHP Real Estate
Companies, which resulted in certain of the assets of the NHP Real Estate
Companies being owned by a limited partnership (the "Unconsolidated
Partnership") in which the Partnership holds 99% limited partner interest and
certain directors and officers of AIMCO directly or indirectly, hold a 1%
general partner interest.
Immediately following the NHP Merger, in order to satisfy certain
requirements of the Code applicable to AIMCO's status as a REIT, AIMCO engaged
in a reorganization (the "NHP Reorganization") of the assets and operations of
NHP that resulted in the Master Property Management Agreement being terminated
and NHP's operations being conducted through Unconsolidated Subsidiaries in
which the AIMCO Operating Partnership holds non-voting preferred stock that
represents a 95% economic interest, and certain officers and/or directors of
AIMCO hold, directly or indirectly, all of the voting common stock, representing
a 5% economic interest. As a result of the controlling ownership interest in the
Unconsolidated Subsidiaries held by others, the Partnership accounts for its
interest in the Unconsolidated Subsidiaries on the equity method.
On May 8, 1998, AIMCO completed a merger with Ambassador Apartments, Inc.
("Ambassador"), pursuant to which Ambassador was merged into AIMCO (the
"Ambassador Merger"). Each outstanding share of stock ("Ambassador Common
Stock") of Ambassador, other than those shares held by AIMCO or Ambassador, were
converted into 0.553 (the "Conversion Ratio") shares of AIMCO Common Stock. Any
outstanding options to purchase Ambassador Common Stock were converted, at the
election of the option holder, into cash or options to purchase AIMCO Common
Stock at such options' then current exercise price divided by the Conversion
Ratio. In accordance with the Agreement and Plan of Merger, dated December 23,
1997 and supplemented by letter dated as of March 11, 1998 (the "Ambassador
Merger Agreement"), the outstanding shares of Class A Senior Cumulative
Convertible Preferred Stock of Ambassador, (the "Ambassador Preferred Stock")
were redeemed and converted into Ambassador Common Stock prior to the Ambassador
Merger. Following the consummation of the Ambassador Merger, a subsidiary of the
Partnership was merged with and into the Ambassador Operating Partnership (the
"Ambassador OP Merger"). Each outstanding unit of limited partnership interest
in the Ambassador Operating Partnership was converted into the right to receive
0.553 OP Units, and as a result, the Ambassador Operating Partnership became a
99.9% owned subsidiary partnership of the Partnership.
Also during 1997, the Partnership (i) (a) acquired 44 properties for
aggregate purchase consideration of $467.4 million, of which $56 million was
paid in the form of 1.9 million OP Units (b) paid $34.2 million in cash and
issued OP Units valued at $7.3 million in connection with the acquisition of
partnership interests through tender offers in certain partnerships ((a) and (b)
together are the "1997 Property Acquisitions") and (c) paid $19.9 million to
acquire 886,600 shares of Ambassador Common Stock (together with the 1997
Property Acquisitions, the "1997 Acquisitions"); (ii) sold (a) approximately
16,367,000 shares of AIMCO Common Stock for aggregate net proceeds of $513.4
million; (b) 750,000 shares of AIMCO Class B Cumulative Convertible Preferred
Stock for net proceeds of $75 million; and (c) 2,400,000 shares of AIMCO Class C
9% Cumulative Preferred Stock for net proceeds of $58.1 million; of which all
proceeds were contributed by AIMCO to the Partnership in exchange for 16,367,000
OP Units, 750,000 Class B Preferred Units, and 2,400,000 Class C Preferred Units
(collectively, the "1997 Stock Offerings"); and (iii) sold five real estate
properties (the "1997 Dispositions").
Also during 1998, AIMCO (i) (a) sold 4,200,000 shares of its Class D
Cumulative Preferred Stock for net proceeds of $101.5 million (the "Class D
Preferred Stock Offering"); (b) sold 4,050,000 shares of its Class G Cumulative
Preferred Stock for net proceeds of $98.0 million (the "Class G Preferred Stock
Offering"); (c) sold 2,000,000 shares of its Class H Cumulative Preferred Stock
for net proceeds of $48.1 million (the "Class H Preferred Stock Offering"); and
(d) sold 1,000,000 shares of its Class J Cumulative Convertible Preferred Stock
in a private placement for $100.0 million (the "Class J Preferred
P-2
<PAGE> 2084
Stock Offering"); of which all proceeds were contributed by AIMCO to the
Partnership in exchange for 4,050,000 Class G Preferred Units, 2,000,000 Class H
Preferred Units and 1,000,000 shares of Class J Preferred Units (collectively,
the "1998 Stock Offerings"); (ii) purchased 29 properties for aggregate purchase
consideration of $312.7 million, of which $52.2 million was paid in the form of
OP Units (the "1998 Acquisitions"); (iii) sold two real estate properties (the
"1998 Dispositions"); (iv) contracted to purchase two properties for aggregate
purchase consideration of $62.1 million, of which $26.4 million will be paid in
the form of OP units (the "Probable Purchases") and (v) sold 1,400,000 Class B
Preferred Partnership Units of a subsidiary and warrants to purchase 875,000
shares of AIMCO Class A Common Stock for $35.0 million (the "Preferred
Partnership Unit Offering").
PRO FORMA FINANCIAL INFORMATION OF THE PARTNERSHIP (INSIGNIA MERGER)
The following Pro Forma Consolidated Balance Sheet (Insignia Merger) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) the purchase
of nine properties for an aggregate purchase price of $62.5 million; (ii) the
Class J Preferred Stock Offering; (iii) the Probable Purchases; (iv) the IFG
Merger; (v) the IPT Merger; (vi) the IFG Reorganization; and (vii) the Preferred
Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) the
1997 Acquisitions; (ii) the 1997 Stock Offerings; (iii) the 1997 Dispositions;
(iv) the NHP Real Estate Acquisition; (v) the NHP Real Estate Reorganization;
(vi) the NHP Stock Purchase; (vii) the NHP Merger; (viii) the NHP
Reorganization; (ix) the 1998 Stock Offerings; (x) the 1998 Acquisitions; (xi)
the Probable Purchases; (xii) the 1998 Dispositions; (xiii) the Ambassador
Merger; (xiv) the IFG Merger; (xv) the merger between IPT and Angeles Mortgage
Investment Trust ("AMIT") ("the AMIT Merger"); (xvi) the IPT Merger; (xvii) the
IFG Reorganization; and (xviii) the Preferred Partnership Unit offering.
The following Pro Forma Consolidated Statement of Operations (Insignia
Merger) and Pro Forma Consolidated Statement of Cash Flows (Insignia Merger) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1997: (i)
the 1998 Stock Offerings; (ii) the 1998 Acquisitions; (iii) the Probable
Purchases; (iv) the 1998 Dispositions; (v) the Ambassador Merger; (vi) the IFG
Merger; (vii) the AMIT Merger; (viii) the IPT Merger; (ix) the IFG
Reorganization; and (x) the Preferred Partnership Unit offering.
The following Pro Forma Financial Information (Insignia Merger) is based,
in part, on the following historical financial statements: (i) the audited
Consolidated Financial Statements of the Partnership for the year ended December
31, 1997; (ii) the unaudited Consolidated Financial Statements of the
Partnership for the nine months ended September 30, 1998; (iii) the audited
Consolidated Financial Statements of Ambassador for the year ended December 31,
1997; (iv) the unaudited Consolidated Financial Statements of Ambassador for the
four months ended April 30, 1998; (v) the audited Consolidated Financial
Statements of IFG for the year ended December 31, 1997; (vi) the audited
Consolidated Financial Statements of AMIT for the year ended December 31, 1997;
(vii) the unaudited Consolidated Financial Statements of IFG for the nine months
ended September 30, 1998; (viii) the unaudited Financial Statements of AMIT for
the period from January 1, 1998 to September 17, 1998; (ix) the unaudited
Consolidated Financial Statements of NHP for the nine months ended September 30,
1997; (x) the unaudited Combined Financial Statements of the NHP Real Estate
Companies for the three months ended March 31, 1997; (xi) the unaudited
Financial Statements of NHP Southwest Partners, L.P. for the three months ended
March 31, 1997; (xii) the unaudited Combined Financial Statements of the NHP New
LP Entities for the three months ended March 31, 1997; (xiii) the unaudited
Combined Financial Statements of the NHP Borrower Entities for the three months
ended March 31, 1997; (xiv) the unaudited Historical Summaries of Gross Income
and Certain Expenses of The Bay Club at Aventura for the three months ended
March 31, 1997; (xv) the unaudited Historical Summary of Gross Income and Direct
Operating Expenses of Morton Towers for the six months ended June 30, 1997;
(xvi) the unaudited Combined Statement of Revenues and Certain Expenses of the
Thirty-Five Acquisition Properties for the six months ended June 30, 1997;
(xvii) the unaudited Statement of
P-3
<PAGE> 2085
Revenues and Certain Expenses of First Alexandria Associates, a Limited
Partnership for the nine months ended September 30, 1997; (xviii) the unaudited
Statement of Revenues and Certain Expenses of Country Lakes Associates Two, a
Limited Partnership for the nine months ended September 30, 1997; (xix) the
unaudited Statement of Revenues and Certain Expenses of Point West Limited
Partnership, A Limited Partnership for the nine months ended September 30, 1997;
(xx) the unaudited Statement of Revenues and Certain Expenses for The Oak Park
Partnership for the nine months ended September 30, 1997; (xxi) the audited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the year ended December 31, 1997,
(xxii) the audited Combined Historical Summary or Gross Income and Direct
Operating Expenses of the Cirque Apartment Communities for the year ended
December 31, 1997; (xxiii) the audited Combined Historical Summary of Gross
Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the year ended December 31, 1997; (xxiv) the audited
Historical Summary of Gross Income and Direct Operating Expenses of the Calhoun
Beach Club Apartments for the year ended December 31, 1997; (xxv) the unaudited
Combined Historical Summary of Gross Income and Direct Operating Expenses of the
Realty Investment Apartment Communities I for the nine months ended September
30, 1998; (xxvi) the unaudited Combined Historical Summary of Gross Income and
Direct Operating Expenses of the Cirque Apartment Communities for the three
months ended March 31, 1998; (xxvii) the unaudited Combined Historical Summary
of Gross Income and Direct Operating Expenses of the Realty Investment Apartment
Communities II for the nine months ended September 30, 1998; and (xxviii) the
unaudited Historical Summary of Gross Income and Direct Operating Expenses of
Calhoun Beach Club Apartments for the nine months ended September 30, 1998. The
following Pro Forma Financial Information should be read in conjunction with
such financial statements and the notes thereto incorporated by reference
herein.
The unaudited Pro Forma Financial Information (Insignia Merger) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
1997 Acquisitions, the 1998 Acquisitions, and the Probable Purchases are
adjusted to estimated fair market value, based upon preliminary estimates, which
are subject to change as additional information is obtained. The allocations of
purchase costs are subject to final determination based upon estimates and other
evaluations of fair market value. Therefore, the allocations reflected in the
following unaudited Pro Forma Financial Information may differ from the amounts
ultimately determined.
The following unaudited Pro Forma Financial Information (Insignia Merger)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions or results of
operations. In the opinion of the Partnership's management, all material
adjustments necessary to reflect the effects of these transactions have been
made.
P-4
<PAGE> 2086
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
IN THOUSANDS, EXCEPT SHARE DATA
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS IFG AIMCO BEFORE IFG
AND PROBABLE IFG MERGER IFG REORGANIZATION
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) REORGANIZATION(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Real estate.............. $2,355,122 $202,332 $ 44,488 $ 23,880(G) $2,625,822 $ --
Property held for sale... 42,212 -- -- -- 42,212 --
Investments in
securities............. -- -- -- 443,513(G)
(443,513)(H) -- --
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 127,082 -- -- -- 127,082 59,195(I)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 246,847 -- 232,892 444,570(G) 924,309 --
Mortgage notes
receivable............. -- -- 20,916 -- 20,916
Cash and cash
equivalents............ 43,681 6,107 73,064 -- 122,852 (17,897)(J)
Restricted cash.......... 83,187 -- 2,691 -- 85,878 (1,352)(J)
Accounts receivable...... 11,545 -- 54,060 (32,234)(G) 33,371 (5,471)(J)
Deferred financing
costs.................. 21,835 -- 7,020 (7,020)(G) 21,835 --
Goodwill................. 120,503 -- 19,503 111,018(G) 251,024 --
Property management
contracts.............. -- -- 86,419 31,147(G) 117,566 (79,195)(I)
Other assets............. 69,935 -- 20,128 (4,533)(G) 85,530 (2,860)(J)
---------- -------- -------- --------- ---------- --------
Total Assets..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
Secured notes payable.... $ 774,676 $122,568 $ 29,002 $ -- $ 926,246 $ --
Secured tax-exempt bond
financing.............. 399,925 -- -- -- 399,925 --
Secured short-term
financing.............. 50,000 (50,000) 332,691 (300,000)(G) 32,691 --
Unsecured short-term
financing.............. 50,800 (50,800) -- 300,000(G) 300,000 --
Accounts payable, accrued
and other
liabilities............ 131,799 -- 33,241 50,000(G)
53,333(G)
4,935(G)
2,525(G) 275,833 (27,580)(J)
Deferred tax liability... -- -- 18,802 1,198(G) 20,000 (20,000)(I)
Security deposits and
prepaid rents.......... 13,171 -- 3,533 (3,533) 13,171 --
---------- -------- -------- --------- ---------- --------
1,420,371 21,768 417,269 108,458 1,967,866 (47,580)
Minority interest........ 42,086 37,345 108,485 (108,485)(G) 79,431 --
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. -- -- 144,282 5,218 149,500 --
Redeemable Partnership
Units.................. 232,405 45,176 -- -- 277,581 --
Partners' capital and
shareholders' equity
Common stock........... -- -- 320 (320)(G) -- --
Additional paid-in
capital.............. -- -- (86,959) 86,959(G) -- --
Distributions in excess
of earnings.......... -- -- (22,216) 22,216(G) -- --
General and Special
Limited Partner...... 1,039,525 4,150 -- 443,513(H)
9,269(G) 1,496,457 --
Preferred Units........ 387,562 100,000 -- -- 487,562 --
---------- -------- -------- --------- ---------- --------
1,427,087 104,150 (108,855) 561,637 1,984,019 --
---------- -------- -------- --------- ---------- --------
Total Liabilities
and Equity..... $3,121,949 $208,439 $561,181 $ 566,828 $4,458,397 $(47,580)
========== ======== ======== ========= ========== ========
<CAPTION>
PRO FORMA
----------
<S> <C>
Real estate.............. $2,625,822
Property held for sale... 42,212
Investments in
securities.............
--
Investments in and notes
receivable from
unconsolidated
subsidiaries........... 186,277(K)
Investments in and notes
receivable from
unconsolidated real
estate partnerships.... 924,309
Mortgage notes
receivable............. 20,916
Cash and cash
equivalents............ 104,955
Restricted cash.......... 84,526
Accounts receivable...... 27,900
Deferred financing
costs.................. 21,835
Goodwill................. 251,024
Property management
contracts.............. 38,371
Other assets............. 82,670
----------
Total Assets..... $4,410,817
==========
Secured notes payable.... $ 926,246
Secured tax-exempt bond
financing.............. 399,925
Secured short-term
financing.............. 32,691
Unsecured short-term
financing.............. 300,000
Accounts payable, accrued
and other
liabilities............
248,253
Deferred tax liability... --
Security deposits and
prepaid rents.......... 13,171
----------
1,920,286
Minority interest........ 79,431
Company-obligated
mandatorily redeemable
convertible securities
of a subsidiary
trust.................. 149,500
Redeemable Partnership
Units.................. 277,581
Partners' capital and
shareholders' equity
Common stock........... --
Additional paid-in
capital.............. --
Distributions in excess
of earnings.......... --
General and Special
Limited Partner......
1,496,457
Preferred Units........ 487,562
----------
1,984,019
----------
Total Liabilities
and Equity..... $4,410,817
==========
</TABLE>
P-5
<PAGE> 2087
- ---------------
(A) Represents the unaudited historical consolidated financial position of the
Partnership as of September 30, 1998.
(B) Represents adjustments to reflect the purchase of ten properties for an
aggregate purchase price of $140.2 million; the Class J Preferred Stock
Offering; the Probable Purchases; and the Preferred Partnership Unit
Offering.
(C) Represents the unaudited historical consolidated financial position of IFG
as of September 30, 1998.
(D) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the issuance of 8,423,751 shares of AIMCO Common Stock, based
on consideration to holders of IFG common stock outstanding as of the date
of the IFG Merger; (ii) the issuance of 4,826,745 shares of AIMCO Class A
Common Stock to holders of IPT common stock (other than AIMCO); (iii) the
payment of a special dividend of $50,000; (iv) the assumption of $149,500
of the convertible debentures of IFG; (v) the allocation of the combined
purchase price of IFG and IPT based on the preliminary estimates of
relative fair market value of the assets and liabilities of IFG and IPT;
and (vi) the contribution by AIMCO of substantially all the assets and
liabilities of Insignia and IPT to the Partnership in exchange for OP
Units.
(E) Represents the effects of AIMCO's acquisition of IFG immediately after the
IFG Merger. These amounts do not give effect to the IFG Reorganization,
which includes the transfers of certain assets and liabilities of IFG to
the combined Unconsolidated Subsidiaries. The IFG Reorganization occurred
immediately after the IFG Merger so that AIMCO could maintain its
qualification as a REIT. This column is included as an intermediate step to
assist the reader in understanding the entire nature of the IFG Merger and
related transactions.
(F) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party property management operations.
The adjustments reflect the transfer of assets valued at the Partnership's
new basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(G) In connection with the IFG Merger and the IPT Merger, AIMCO became
obligated to issue a total of 13,250,496 shares of AIMCO Common Stock
The total purchase price of IFG and IPT is $1,128,009, as follows:
<TABLE>
<S> <C>
Issuance of 8,423,751 shares of AIMCO Common Stock in the
IFG Merger, at $34.658 per share.......................... $ 291,949
Issuance of 4,826,745 shares of AIMCO Common Stock in the
IPT Merger, at $31.50 per share........................... 151,564
Assumption of Convertible Debentures........................ 149,500
Assumption of liabilities as indicated in the Merger
Agreement................................................. 397,459
Transaction costs........................................... 53,333
Generation of deferred tax liability........................ 20,000
Special dividend............................................ 50,000
Purchase of IFG Common Stock prior to merger................ 4,935
Consideration for options................................... 9,269
----------
Total............................................. $1,128,009
==========
</TABLE>
P-6
<PAGE> 2088
The purchase price was allocated to the various assets of IFG acquired in
the IFG Merger, as follows:
<TABLE>
<S> <C>
Purchase price.............................................. $1,128,009
Historical basis of IFG's assets acquired................... (561,181)
----------
Step-up to record the fair value of IFG's assets
acquired............................................... $ 566,828
==========
</TABLE>
This step-up was applied to IFG's assets as follows:
<TABLE>
<S> <C>
Real estate................................................. $ 23,880
Investment in real estate partnerships...................... 444,570
Decrease in accounts receivable............................. (32,234)
Decrease in deferred loan costs............................. (7,020)
Management contracts........................................ 31,147
Increase in goodwill........................................ 111,018
Reduction in value of other assets.......................... (4,533)
--------
Total............................................. $566,828
========
</TABLE>
The fair value of IFG's assets, primarily the real estate and management
contracts, was calculated based on estimated future cash flows of the
underlying assets.
As of September 30, 1998, IFG's stockholder's equity was $(108,855), which
is detailed as follows:
<TABLE>
<S> <C>
Common stock................................................ $ 320
Additional paid-in capital.................................. (86,959)
Distributions in excess of earnings......................... (22,216)
---------
Total............................................. $(108,855)
=========
</TABLE>
Upon completion of the IFG Merger, the entire amount of the stockholder's
equity was eliminated.
In addition, the minority interest in other partnerships of IFG of $108,485
will be eliminated upon the IPT Merger.
At the time of the IFG Merger, AIMCO obtained unsecured short-term
financing of $300 million. The proceeds were used to repay secured
short-term financing of IFG that AIMCO assumed.
(H) Represents the issuance of a total of 13,250,496 OP Units to AIMCO and the
concurrent issuance of 13,250,496 shares of AIMCO Common Stock to IFG and
IPT stockholders, in exchange for all the shares of IFG and IPT common
stock.
In accordance with the IFG Merger Agreement, AIMCO became obligated to
issue 8,423,751 shares of Class E Preferred Stock, approximately equal to
$292 million. Each share of Class E Preferred Stock will automatically
convert to one share of AIMCO Common Stock upon the payment of the special
dividend thereon. As such, for the purpose of preparing the pro forma
financial statements, AIMCO's management believes that the Class E
Preferred Stock is substantially the same as AIMCO Common Stock, and that
the fair value of the Class E Preferred Stock approximates the fair value
of the AIMCO Common Stock. Upon the payment of the special dividend on the
Class E Preferred Stock and the conversion of the Class E Preferred Stock
to AIMCO Common Stock, the former IFG stockholders will own approximately
15.0% of the AIMCO Common Stock and the IPT stockholders will own
approximately 7.3% of AIMCO Common Stock. The special dividend on the Class
E Preferred Stock is intended to represent a distribution in an amount at
least equal to the earnings and profits of IFG at the time of the IFG
Merger, to which AIMCO succeeds.
Concurrent with the issuance of Class E Preferred Stock, the Partnership
will issue comparable Class E Preferred Units to AIMCO. The Class E
Preferred Units will have terms substantially the same as the Class E
Preferred Stock.
(I) Represents the increase in the Partnership's investment in Unconsolidated
Subsidiaries to reflect the contribution or sale of property management
contracts, including the related deferred tax liability, in exchange for
preferred stock and a note payable from the Unconsolidated Subsidiaries.
These assets and
P-7
<PAGE> 2089
liabilities are valued at the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(J) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries,
(K) Represents notes receivable from the Unconsolidated Subsidiaries of
$95,000, advances to the Unconsolidated Subsidiaries of $42,792, and equity
in the Unconsolidated Subsidiaries of $48,485. The combined pro forma
balance sheet of the Unconsolidated Subsidiaries as of September 30, 1998
is presented below, which reflects the effects of the IFG Merger, the IPT
Merger, and the IFG Reorganization as if such transactions had occurred as
of September 30, 1998.
P-8
<PAGE> 2090
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET (INSIGNIA MERGER)
AS OF SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
IFG
HISTORICAL REORGANIZATION(i) PRO FORMA
---------- ----------------- ---------
<S> <C> <C> <C>
ASSETS
Real estate............................................ $ 22,376 $ -- $ 22,376
Cash and cash equivalents.............................. 16,919 17,897(ii) 34,816
Restricted cash........................................ 5,507 1,352(ii) 6,859
Management contracts................................... 47,846 79,195(iii) 127,041
Accounts receivable.................................... 13,109 5,471(ii) 18,580
Deferred financing costs............................... 3,117 -- 3,117
Goodwill............................................... 43,544 -- 43,544
Other assets........................................... 51,498 2,860(ii) 54,358
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable.................................. $114,302 $ 45,000(iii) $159,302
Accounts payable, accrued and other liabilities........ 56,773 27,580(ii) 84,353
Security deposits and deferred income.................. 334 --(ii) 334
Deferred tax liability................................. -- 20,000(iii) 20,000
-------- -------- --------
171,409 92,580 263,989
Common stock........................................... 2,061 747(iv) 2,808
Preferred stock........................................ 34,290 14,195(iii) 48,485
Retained earnings...................................... (3,844) -- (3,844)
Notes receivable on common stock purchases............. -- (747)(iv) (747)
-------- -------- --------
32,507 14,195 46,702
-------- -------- --------
$203,916 $106,775 $310,691
======== ======== ========
</TABLE>
- ---------------
(i) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the transfer of assets valued at the Partnership's new
basis resulting from the allocation of the purchase price of IFG. The
Partnership received non-voting preferred stock as consideration in
exchange for the net assets contributed. The net deferred tax liability is
assumed by the Unconsolidated Subsidiaries as it resulted from the assets
and liabilities transferred to the Unconsolidated Subsidiaries.
(ii) Represents certain assets and liabilities of IFG, primarily related to the
management operations of IFG, contributed or sold by the Partnership to the
Unconsolidated Subsidiaries, valued at the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(iii)Represents the transfer or sale of management contracts, the establishment
of an intercompany note, and the establishment of the related estimated net
deferred Federal and state tax liabilities at a combined rate of 40% for
the estimated difference between the book and tax basis of the net assets
of the Unconsolidated Subsidiaries. The primary component of the deferred
tax liability is the difference between the new basis of the property
management contracts, as a result of the allocation of the purchase price
of IFG, and the historical tax basis.
(iv) Represents the issuance of common stock to the common stockholders of the
Unconsolidated Subsidiaries in exchange for notes receivable, in order for
the common stockholders to maintain their respective ownership interest in
the Unconsolidated Subsidiaries.
P-9
<PAGE> 2091
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE NHP AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Rental and other property
revenues........................ $193,006 $120,337(I)
11,012(J) $ 6,660 $ 93,329 $ -- $ 6,912
Property operating expenses....... (76,168) (59,466)(I)
(4,860)(J) (2,941) (36,088) -- (3,307)
Owned property management
expense......................... (6,620) (4,327)(I)
(602)(J) (282) -- -- --
Depreciation...................... (37,741) (26,645)(I)
(2,172)(J) (1,414) (18,979) (5,997)(O) (966)
-------- -------- ------- -------- ------- --------
Income from property operations... 72,477 33,277 2,023 38,262 (5,997) 2,639
-------- -------- ------- -------- ------- --------
Management fees and other
income.......................... 13,937 -- 7,813 -- -- 94,330
Management and other expenses..... (9,910) -- (5,394) -- -- (57,615)
Corporate overhead allocation..... (588) -- -- -- -- --
Amortization...................... (1,401) -- (5,800) -- -- (16,768)
-------- -------- ------- -------- ------- --------
Income from service company
business........................ 2,038 -- (3,381) -- -- 19,947
Minority interest in service
company business................ (10) -- -- -- -- --
-------- -------- ------- -------- ------- --------
AIMCO's share of income from
service company business........ 2,028 -- (3,381) -- -- 19,947
-------- -------- ------- -------- ------- --------
General and administrative
expenses........................ (5,396) -- (1,025) (7,392) 7,392(P) (21,199)
Interest expense.................. (51,385) (3,451)(K)
(2,497)(L) (5,462) (26,987) (221)(Q) (9,035)
Interest income................... 8,676 -- 1,900 -- -- 10,967
Minority interest................. 1,008 458(M) 16 (851) 705(R) (12,871)
Equity in losses of unconsolidated
partnerships.................... (1,798) (122)(N) (8,542) 405 -- 12,515
Equity in earnings of
unconsolidated subsidiaries..... 4,636 -- 5,790 -- -- --
-------- -------- ------- -------- ------- --------
Income (loss) from operations..... 30,246 27,665 (8,681) 3,437 1,879 2,963
Income tax provision.............. -- -- -- -- -- 1,701
Gain on dispositions of
property........................ 2,720 (2,720) -- -- -- 80
-------- -------- ------- -------- ------- --------
Income (loss) before extraordinary
item............................ 32,966 24,945 (8,681) 3,437 1,879 4,744
Extraordinary item -- early
extinguishment of debt.......... (269) 269 -- -- -- --
-------- -------- ------- -------- ------- --------
Net income........................ 32,697 25,214 (8,681) 3,437 1,879 4,744
Income attributable to preferred
unitholders..................... 2,315 39,859 -- -- -- --
-------- -------- ------- -------- ------- --------
Income attributable to common
unitholders..................... $ 30,382 $(14,645) $(8,681) $ 3,437 $ 1,879 $ 4,744
======== ======== ======= ======== ======= ========
Basic earnings per OP unit........ $ 1.09
========
Diluted earnings per OP unit...... $ 1.08
========
Weighted average OP units
outstanding..................... 27,732
========
Weighted average OP units and
equivalents outstanding......... 28,113
========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(G) ADJUSTMENTS(H) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property
revenues........................
$ -- $ -- $ 431,256
Property operating expenses.......
-- -- (182,830)
Owned property management
expense.........................
-- -- (11,831)
Depreciation......................
(2,350)(S) -- (96,264)
-------- -------- ---------
Income from property operations... (2,350) -- 140,331
-------- -------- ---------
Management fees and other
income.......................... -- (74,404)(X) 41,676
Management and other expenses..... -- 49,236(X) (23,683)
Corporate overhead allocation..... -- -- (588)
Amortization...................... (32,699)(T) 30,188(Y) (26,480)
-------- -------- ---------
Income from service company
business........................ (32,699) 5,020 (9,075)
Minority interest in service
company business................ -- -- (10)
-------- -------- ---------
AIMCO's share of income from
service company business........ (32,699) 5,020 (9,085)
-------- -------- ---------
General and administrative
expenses........................ -- 6,249(X) (21,371)
Interest expense..................
(14,750) -- (113,788)
Interest income................... -- 191(Z) 21,734(BB)
Minority interest................. 1,552(U) -- (9,983)
Equity in losses of unconsolidated
partnerships.................... (29,995)(V) -- (27,537)
Equity in earnings of
unconsolidated subsidiaries..... -- (4,578)(AA) 5,848(DD)
-------- -------- ---------
Income (loss) from operations..... (78,242) 6,882 (13,851)
Income tax provision.............. (1,701)(W) -- --
Gain on dispositions of
property........................ (80) -- --
-------- -------- ---------
Income (loss) before extraordinary
item............................ (80,023) 6,882 (13,851)
Extraordinary item -- early
extinguishment of debt.......... -- -- --
-------- -------- ---------
Net income........................ (80,023) 6,882 (13,851)
Income attributable to preferred
unitholders..................... -- -- 42,174(CC)
-------- -------- ---------
Income attributable to common
unitholders..................... $(80,023) $ 6,882 $ (56,025)(BB)
======== ======== =========
Basic earnings per OP unit........ $ (0.83)(BB)
=========
Diluted earnings per OP unit...... $ (0.83)(BB)
=========
Weighted average OP units
outstanding..................... 67,522
=========
Weighted average OP units and
equivalents outstanding......... 68,366
=========
</TABLE>
P-10
<PAGE> 2092
- ---------------
(A) Represents the Partnership's audited consolidated results of operations
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1997: (i) the 1997 Acquisitions; (ii) the 1997 Stock
Offerings; (iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings;
(v) the 1998 Acquisitions; (vi) the Probable Purchases; (vii) the 1998
Dispositions; and (v) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
Rental and other property
revenues................. $ 6,660(v) $ 16,842 $ -- $(16,842)(xvii) $ 6,660
Property operating
expenses................. (2,941)(v) (8,411) -- 8,411 (xvii) (2,941)
Owned property management
expense.................. (282)(v) (862) -- 862 (xvii) (282)
Depreciation............... (1,414)(vi) (2,527) (693)(xi) 3,220 (xvii) (1,414)
------- -------- ------- -------- -------
Income from property
operations............... 2,023 5,042 (693) (4,349) 2,023
------- -------- ------- -------- -------
Management fees and other
income................... 1,405(vii) 72,176 -- (65,768)(xviii) 7,813
Management and other
expenses................. (2,263)(viii) (35,267) -- 32,136 (xviii) (5,394)
Amortization............... -- (9,111) (4,432)(xii) 7,743 (xix) (5,800)
------- -------- ------- -------- -------
Income from service company
business................. (858) 27,798 (4,432) (25,889) (3,381)
------- -------- ------- -------- -------
General and administrative
expenses................. -- (16,266) 8,668 (xiii) 6,573 (xviii) (1,025)
Interest expense........... (5,082)(ix) (10,685) -- 10,305(xx) (5,462)
Interest income............ 540(v) 1,963 -- (603)(xxi) 1,900
Minority interest.......... 16(v) -- -- -- 16
Equity in losses of
unconsolidated
partnerships............. (3,905)(x) -- (4,631)(xiv) (6) (8,542)
Equity in earnings of
unconsolidated
subsidiaries............. -- -- (4,636)(xv) 10,426 (xxii) 5,790
------- -------- ------- -------- -------
Income (loss) from
operations............... (7,266) 7,852 (5,724) (3,543) (8,681)
Income tax provision....... -- (3,502) 3,502 (xvi) -- --
------- -------- ------- -------- -------
Net income (loss).......... $(7,266) $ 4,350 $(2,222) $ (3,543) $(8,681)
======= ======== ======= ======== =======
</TABLE>
- ---------------
(i) Represents the adjustment to record activity from January 1, 1997 to
the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. The historical
financial statements of the NHP Real Estate Companies consolidate
certain real estate partnerships in which they have an interest that
will be presented on the equity method by the Partnership as a
result of the NHP Real Estate Reorganization. In addition,
represents adjustments to record additional depreciation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest
expense incurred in connection with borrowings incurred by the
Partnership to consummate the NHP Real Estate Acquisition.
(ii)Represents the unaudited consolidated results of operations of NHP
for the period from January 1, 1997 through December 8, 1997 (date
of the NHP Merger).
P-11
<PAGE> 2093
(iii)
Represents the following adjustments occurring as a result of the
NHP Merger: (i) the reduction in personnel costs, primarily
severance costs, pursuant to a restructuring plan; (ii) the
incremental depreciation of the purchase price adjustment related to
real estate; (iii) the incremental amortization of the purchase
price adjustment related to the management contracts, furniture,
fixtures and equipment, and goodwill; (iv) the reversal of equity in
earnings of NHP during the pre-merger period when the Partnership
held a 47.62% interest in NHP; and (v) the amortization of the
increased basis in investments in real estate partnerships based on
the purchase price adjustment related to real estate and an
estimated average life of 20 years.
(iv)Represents adjustments related to the NHP Reorganization, whereby
the Partnership contributed or sold to the Unconsolidated
Subsidiaries and the Unconsolidated Partnership: (i) certain assets
and liabilities of NHP, primarily related to the management
operations and other businesses owned by NHP and (ii) 12 real estate
properties containing 2,905 apartment units. The adjustments
represent (i) the related revenues and expenses primarily related to
the management operations and other businesses owned by NHP and (ii)
the historical results of operations of such real estate
partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis
resulting from the allocation of the combined purchase price of NHP
and the NHP Real Estate Companies.
(v) Represents adjustments to reflect the acquisition of the NHP Real
Estate Companies and the corresponding historical results of
operations as if they had occurred on January 1, 1997.
(vi)Represents incremental depreciation related to the consolidated real
estate assets purchased from the NHP Real Estate Companies.
Buildings and improvements are depreciated on the straight-line
method over a period of 30 years, and furniture and fixtures are
depreciated on the straight-line method over a period of 5 years.
(vii)
Represents the adjustment to record the revenues from ancillary
businesses purchased from the NHP Real Estate Companies as if the
acquisition had occurred on January 1, 1997.
(viii)
Represents $4,878 related to the adjustment to record the expenses
from ancillary businesses purchased from the NHP Real Estate
Companies as if the acquisition had occurred on January 1, 1997,
less $2,615 related to a reduction in personnel costs pursuant to a
restructuring plan, approved by the Company's senior management,
assuming that the acquisition of the NHP Real Estate Companies had
occurred on January 1, 1997 and that the restructuring plan was
completed on January 1, 1997. The restructuring plan specifically
identifies all significant actions to be taken to complete the
restructuring plan, including the reduction of personnel, job
functions, location and the date of completion.
(ix)Represents adjustments in the amount of $3,391 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as the increase in interest expense in the amount
of $1,691 related to borrowings on the Partnership's credit
facilities of $55,807 to finance the NHP Real Estate Acquisition.
(x) Represents adjustments in the amount of $2,432 to reflect the
acquisition of the NHP Real Estate Companies and the corresponding
historical results of operations as if they had occurred on January
1, 1997, as well as amortization of $1,473 related to the increased
basis in investment in real estate partnerships, as a result of the
allocation of the purchase price of the NHP Real Estate Companies,
based on an estimated average life of 20 years.
(xi)Represents incremental depreciation related to the real estate
assets purchased from NHP. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years,
and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(xii)
Represents incremental depreciation and amortization of the tangible
and intangible assets related to the property management and other
business operated by the Unconsolidated
P-12
<PAGE> 2094
Subsidiaries, based on the Partnership's new basis as adjusted by
the allocation of the combined purchase price of NHP including
amortization of management contracts of $3,782, depreciation of
furniture, fixtures and equipment of $2,018 and amortization of
goodwill of $7,743, less NHP's historical depreciation and
amortization of $9,111. Management contracts are amortized using the
straight-line method over the weighted average life of the contracts
estimated to be approximately 15 years. Furniture, fixtures and
equipment are depreciated using the straight-line method over the
estimated life of 3 years. Goodwill is amortized using the
straight-line method over 20 years.
(xiii)
Represents a reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan, approved by the Company's
senior management, specifically identifying all significant actions
to be taken to complete the restructuring plan, assuming that the
NHP Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997.
(xiv)
Represents adjustment for amortization of the increased basis in
investments in real estate partnerships, as a result of the
allocation of the combined purchase price of NHP and the NHP Real
Estate Companies, based on an estimated average life of 20 years.
(xv)Represents the reversal of equity in earnings in NHP during the
pre-merger period when the Partnership held a 47.62% interest in
NHP, as a result of the Partnership's acquisition of 100% of the NHP
Common Stock.
(xvi)
Represents the reversal of NHP's income tax provision due to the
restructuring of the management business to the Unconsolidated
Subsidiaries.
(xvii)
Represents the contribution of NHP's 12 real estate properties
containing 2,905 apartment units to the Unconsolidated Partnership
pursuant to the NHP Reorganization.
(xviii)
Represents the historical income and expenses associated with
certain assets and liabilities of NHP that were contributed or sold
to the Unconsolidated Subsidiaries, primarily related to the
management operations and other businesses owned by NHP.
(xix)
Represents the amortization and depreciation of certain management
contracts and other assets of NHP, based on the Partnership's new
basis resulting from the allocation of the purchase price of NHP,
that will be contributed or sold to the Unconsolidated Subsidiaries,
primarily related to the management operations and other businesses
owned by NHP.
(xx)Represents interest expense of $6,020 related to the contribution of
NHP's 12 real estate properties containing 2,905 apartment units to
the Unconsolidated Partnership and interest expense of $4,285
related to the certain assets and liabilities that will be
contributed or sold to the Unconsolidated Subsidiaries pursuant to
the NHP Reorganization.
(xxi)
Represents the interest income of $5,000 earned on notes payable of
$50,000 to the Partnership issued as consideration for certain
assets and liabilities sold to the Unconsolidated Subsidiaries by
the Partnership, net of the elimination of the Partnership's share
of the related interest expense of $4,750 reflected in the equity in
earnings of the Unconsolidated Subsidiaries operating results,
offset by $853 in interest income primarily related to the
management operations and other businesses owned by NHP contributed
or sold to the Unconsolidated Subsidiaries pursuant to the NHP
Reorganization.
(xxii)
Represents the Partnership's equity in earnings of the
Unconsolidated Subsidiaries.
(D) Represents the audited historical statement of operations of Ambassador
for the year ended December 31, 1997. Certain reclassifications have been
made to Ambassador's historical statement of operations to conform to the
Partnership's Statement of Operations presentation. The Ambassador
historical statement of operations excludes extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of
P-13
<PAGE> 2095
interest expense resulting from the net reduction of debt; and (iv) the
elimination of the minority interest associated with Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger, and the spin-off of Holdings as if these transactions had
occurred on January 1, 1997. These adjustments are detailed, as follows:
<TABLE>
<CAPTION>
IFG AMIT HOLDINGS IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property
revenues....................... $ 6,646 $ 266 $ -- $ 6,912
Property operating expenses...... (3,251) (56) -- (3,307)
Depreciation..................... (966) -- -- (966)
--------- ------- --------- --------
Income from property
operations..................... 2,429 210 -- 2,639
--------- ------- --------- --------
Management fees and other
income......................... 389,626 -- (295,296) 94,330
Management and other expenses.... (315,653) -- 258,038 (57,615)
Amortization..................... (31,709) (303) 15,244 (16,768)
--------- ------- --------- --------
Income from service company
business....................... 42,264 (303) (22,014) 19,947
--------- ------- --------- --------
General and administrative
expenses....................... (20,435) (1,351) 587 (21,199)
Interest expense................. (9,353) -- 318 (9,035)
Interest income.................. 4,571 6,853 (457) 10,967
Minority interest................ (12,448) (382) (41) (12,871)
Equity in income (losses) of
unconsolidated partnership..... 10,027 2,639 (151) 12,515
--------- ------- --------- --------
Income (loss) from operations.... 17,055 7,666 (21,758) 2,963
Income tax provision............. (6,822) (180) 8,703 1,701
Gain on sale of property......... -- 80 -- 80
--------- ------- --------- --------
Net income (loss)................ 10,233 7,566 (13,055) 4,744
========= ======= ========= ========
</TABLE>
- ---------------
(i) Represents the audited consolidated results of operations of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report
on Form 10-K. Certain reclassifications have been made to IFG's
historical statement of operations to conform to the Partnership's
statement of operations presentation.
(ii)Represents the historical statement of operations of AMIT, as well
as pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger: (i) the incremental depreciation of the
purchase price adjustment related to consolidated real estate and
investments in real estate partnerships; (ii) the amortization of
goodwill and property management contracts resulting from the IFG Merger;
(iii) the increase in interest expense resulting from the net increase in
debt; and (iv) the elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
P-14
<PAGE> 2096
(I) Represents adjustments to reflect the 1997 Property Acquisitions and the
1998 Acquisitions, less the 1997 Dispositions and the 1998 Dispositions
as if they had occurred on January 1, 1997. These pro forma operating
results are based on historical results of the properties, except for
depreciation, which is based on the Partnership's investment in the
properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1997 PROPERTY 1997 1998 1998
ACQUISITIONS DISPOSITIONS ACQUISITIONS DISPOSITIONS TOTAL
------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C>
Rental and other
property
revenues........... $ 88,589 $(4,081) $ 39,132 $(3,303) $120,337
Property operating
expense............ (44,109) 1,944 (18,655) 1,354 (59,466)
Owned property
management
expense............ (3,233) 133 (1,349) 122 (4,327)
Depreciation......... (16,839) 452 (10,946) 688 (26,645)
</TABLE>
(J) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1997. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(K) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1997
Property Acquisitions..................................... $(29,490)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1997 Dispositions and
the 1997 Stock Offerings.................................. 19,568
Repayments on the Partnership's credit facilities with
proceeds from a dividend received from one of the
Unconsolidated Subsidiaries............................... 1,889
Borrowings on the Partnership's credit facilities and other
loans and mortgages assumed in connection with the 1998
Acquisitions.............................................. (15,994)
Repayments on the Partnership's credit facilities and other
indebtedness with proceeds from the 1998 Dispositions and
the 1998 Stock Offerings.................................. 20,113
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred Partnership
Unit Offering............................................. 463
--------
$ (3,451)
========
</TABLE>
(L) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the Probable Purchases.
(M) Represents (i) loss of $181 related to limited partners in consolidated
partnerships acquired in connection with the 1997 Property Acquisitions
and the 1998 Property Acquisitions and (ii) income of $502 allocable to
the Partnership Preferred Units.
(N) Represents the reduction in the Partnership's earnings in unconsolidated
partnerships as a result of the consolidation of additional partnerships
resulting from additional ownership acquired through tender offers.
(O) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
P-15
<PAGE> 2097
(P) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses...................... $ 724
Reduction in salaries and benefits.......................... 4,197
Merger related costs........................................ 524
Other....................................................... 1,947
------
$7,392
======
</TABLE>
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1997 and that the
restructuring plan was completed on January 1, 1997. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(Q) Represents the decrease in interest expense of $3,612 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$3,833 related to borrowings under the Partnership's credit facilities.
(R) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(S) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(T) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $38,885, amortization of goodwill of $6,526, and
depreciation of furniture, fixtures, and equipment of $3,753, less IFG's
historical depreciation and amortization of $16,465. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(U) Represents elimination of minority interest of IPT resulting from the IPT
merger.
(V) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(W) Represents the reversal of IFG's income tax provision.
(X) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(Y) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Z) Represents interest income of $3,825 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries by the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $3,634 reflected on the equity in earnings of the
Unconsolidated Subsidiaries.
(AA) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-16
<PAGE> 2098
(BB) The following table presents the net impact to pro forma net loss
applicable to holders of OP Units and net loss per OP Units assuming the
interest rate per annum increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest expense................................ $ 938
========
Net income.................................................. $(14,789)
========
Net loss attributable to OP unitholders..................... $(56,963)
========
Basic loss per OP unit...................................... $ (0.84)
========
Diluted loss per OP unit.................................... $ (0.84)
========
</TABLE>
(CC) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred
Units, the Class G Preferred Units, the Class H Preferred Units and the
Class J Preferred Units as if these Preferred Units had been issued as of
January 1, 1997.
(DD) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(2,536), plus the elimination of intercompany interest
expense of $8,384. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the year ended December 31, 1997 is
presented below, which represents the effects of the Ambassador Merger,
the NHP Merger, the NHP Reorganization, the IFG Merger, and the IFG
Reorganization as if these transactions had occurred as of January 1,
1997.
P-17
<PAGE> 2099
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
REORGANIZATION IFG
HISTORICAL(i) ADJUSTMENTS(ii) REORGANIZATION(iii) PRO FORMA
------------- --------------- ------------------- ---------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 6,194 $ 6,371(iv) $ -- $ 12,565
Property operating expenses............. (3,355) (3,531)(iv) -- (6,886)
Owned property management expense....... (147) (478)(iv) -- (625)
Depreciation expense.................... (1,038) (767)(iv) -- (1,805)
-------- -------- -------- --------
Income from property operations......... 1,654 1,595 -- 3,249
-------- -------- -------- --------
Management fees and other income........ 23,776 41,992(v) 74,404(x) 140,172
Management and other expenses........... (11,733) (20,403)(v) (49,236)(x) (81,372)
Amortization............................ (3,726) (4,017)(v) (30,188)(xi) (37,931)
-------- -------- -------- --------
Income from service company............. 8,317 17,572 (5,020) 20,869
General and administrative expense...... -- (6,573)(v) (6,249)(x) (12,822)
Interest expense........................ (6,058) (5,849)(vi) (3,825)(xii) (15,732)
Interest income......................... 1,001 (148)(v) -- 853
Minority interest....................... (2,819) 2,198(viii) -- (621)
Equity in losses of unconsolidated
partnerships.......................... (1,028) 1,028(iv) -- --
Equity in earnings of Unconsolidated
Subsidiaries.......................... 2,943 (2,943)(vii) -- --
-------- -------- -------- --------
Income (loss) from operations........... 4,010 6,880 (15,094) (4,204)
Income tax provision.................... (1,902) (3,013)(ix) 6,450(xiii) 1,535
-------- -------- -------- --------
Net income (loss)....................... $ 2,108 $ 3,867 $ (8,644) $ (2,669)
======== ======== ======== ========
Income attributable to preferred
unitholders........................... $ 2,198 $ 3,478 $ (8,212) $ (2,536)
======== ======== ======== ========
Income (loss) attributable to common
unitholders........................... $ (90) $ 389 $ (432) $ (133)
======== ======== ======== ========
</TABLE>
- ---------------
(i) Represents the historical results of operations of the Unconsolidated
Subsidiaries for the year ended December 31, 1997.
(ii) Represents adjustments related to the NHP Reorganization, which includes
the sale or contribution of 14 properties containing 2,725 apartment units
from the unconsolidated partnerships to the Unconsolidated Subsidiaries,
as well as the sale or contribution of 12 properties containing 2,905
apartment units from the Unconsolidated Subsidiaries to the Unconsolidated
Partnership.
(iii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iv) Represents adjustments for the historical results of operations of the 14
real estate properties contributed or sold to the Unconsolidated
Subsidiaries, offset by the historical results of operations of the 12
real estate properties contributed or sold to the Unconsolidated
Partnership, with additional depreciation recorded related to the
Partnership's new basis resulting from the allocation of purchase price of
NHP and the NHP Real Estate Companies.
P-18
<PAGE> 2100
(v) Represents adjustments to reflect income and expenses associated with
certain assets and liabilities of NHP contributed or sold to the
Unconsolidated Subsidiaries.
(vi) Represents adjustments of $6,058 to reverse the historical interest
expense of the Unconsolidated Subsidiaries, which resulted from its
original purchase of NHP Common Stock, offset by $2,622 related to the
contribution or sale of the 14 real estate properties, $4,285 related to
assets and liabilities transferred from the Partnership to the
Unconsolidated Subsidiaries and $5,000 related to a note payable to the
Partnership.
(vii) Represents the reversal of the historical equity in earnings of NHP for
the period in which NHP was not consolidated by the Unconsolidated
Subsidiaries.
(viii)Represents the minority interest in the operations of the 14 real estate
properties.
(ix) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill which is not deductible
for tax purposes.
(x) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(xi) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(xii) Represents adjustment for interest expense related to a note payable to
the Partnership.
(xiii)Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-19
<PAGE> 2101
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR
AND PROBABLE AMBASSADOR PURCHASE PRICE IFG AS
HISTORICAL(A) PURCHASES(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E)
------------- ------------ ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Rental and other property revenues............. $ 265,700 $ 19,603(H) $ $ $
8,398(I) 35,480 -- 8,126
Property operating expenses.................... (101,600) (9,009)(H)
(3,745)(I) (14,912) -- (2,585)
Owned property management expense.............. (7,746) (728)(H)
(459)(I) -- -- --
Depreciation................................... (59,792) (4,886)(H)
(2,624)(I) (7,270) (1,420)(M) (904)
--------- -------- -------- ------- --------
Income from property operations................ 96,562 6,550 13,298 (1,420) 4,637
--------- -------- -------- ------- --------
Management fees and other income............... 13,968 -- -- -- 71,155
Management and other expenses.................. (8,101) -- -- -- (41,477)
Corporate overhead allocation.................. (196) -- -- -- --
Amortization................................... (3) -- -- -- (13,986)
--------- -------- -------- ------- --------
Income from service company business........... 5,668 -- -- -- 15,692
--------- -------- -------- ------- --------
General and administrative expenses............ (7,444) -- (5,278) 5,278(N) (61,386)
Interest expense............................... (56,756) 1,975(J)
(2,469)(K) (10,079) 145(O) (24,871)
Interest income................................ 18,244 (1) -- -- 22,501
Minority interest.............................. (1,052) 160(L) (252) 252(P) (14,159)
Equity in losses of unconsolidated
partnerships................................. (5,078) -- (71) -- 13,492
Equity in earnings of unconsolidated
subsidiaries................................. 8,413 -- -- -- --
Amortization of goodwill....................... (5,071) -- -- -- --
--------- -------- -------- ------- --------
Income (loss) from operations.................. 53,486 6,215 (2,382) 4,255 (44,094)
Income tax provision........................... -- -- -- -- 1,180
Gain on dispositions of property............... 2,783 (2,783) -- -- 6,576
--------- -------- -------- ------- --------
Net income..................................... 56,269 3,432 (2,382) 4,255 (36,338)
Income attributable to preferred unitholders... 16,320 16,094 -- -- --
--------- -------- -------- ------- --------
Income (loss) attributable to common
unitholders.................................. $ 39,949 $(12,662) $ (2,382) $ 4,255 $(36,338)
========= ======== ======== ======= ========
Basic earnings (loss) per OP Unit.............. $ 0.80
=========
Diluted earnings (loss) per OP Unit............ $ 0.79
=========
Weighted average OP Units outstanding.......... 50,420
=========
Weighted average OP Unit and equivalents
outstanding.................................. 50,544
=========
<CAPTION>
IFG IFG
MERGER REORGANIZATION
ADJUSTMENTS(F) ADJUSTMENTS(G) PRO FORMA
-------------- -------------- ---------
<S> <C> <C> <C>
Rental and other property revenues............. $ $ $
-- -- 337,307
Property operating expenses....................
-- -- (131,851)
Owned property management expense..............
-- -- (8,933)
Depreciation...................................
(1,583)(Q) -- (78,479)
-------- -------- ---------
Income from property operations................ (1,583) -- 118,044
-------- -------- ---------
Management fees and other income............... -- (56,211)(W) 28,912
Management and other expenses.................. -- 35,192(W) (14,386)
Corporate overhead allocation.................. -- -- (196)
Amortization................................... (23,895)(R) 22,641(X) (15,243)
-------- -------- ---------
Income from service company business........... (23,895) 1,622 (913)
-------- -------- ---------
General and administrative expenses............ 45,823(S) 14,375(W) (8,632)
Interest expense...............................
7,045 -- (85,010)(AA)
Interest income................................ -- 143(Y) 40,887
Minority interest.............................. 6,622(T) -- (8,429)
Equity in losses of unconsolidated
partnerships................................. (18,577)(U) -- (10,234)
Equity in earnings of unconsolidated
subsidiaries................................. -- (7,562)(Z) 851(CC)
Amortization of goodwill....................... -- -- (5,071)
-------- -------- ---------
Income (loss) from operations.................. 15,435 8,578 41,493
Income tax provision........................... (1,180)(V) -- --
Gain on dispositions of property............... (6,576) -- --
-------- -------- ---------
Net income..................................... 7,679 8,578 41,493
Income attributable to preferred unitholders... -- -- 32,414(BB)
-------- -------- ---------
Income (loss) attributable to common
unitholders.................................. $ 7,679 $ 8,578 $ 9,079(AA)
======== ======== =========
Basic earnings (loss) per OP Unit.............. $ 0.13(AA)
=========
Diluted earnings (loss) per OP Unit............ $ 0.13(AA)
=========
Weighted average OP Units outstanding.......... 68,554
=========
Weighted average OP Unit and equivalents
outstanding.................................. 69,218
=========
</TABLE>
P-20
<PAGE> 2102
- ---------------
(A) Represents the Partnership's unaudited consolidated results of operations
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred
on January 1, 1998: (i) the 1998 Stock Offerings; (ii) the 1998
Acquisitions; (iii) the Probable Purchases; (iv) the 1998 Dispositions;
and (v) the Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of operations of Ambassador
for the four months ended April 30, 1998. Certain reclassifications have
been made to Ambassador's historical Statement of Operations to conform
to the Partnership's Statement of Operations presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the
IPT Merger and the spin-off of the common stock of Holdings as if these
transactions had occurred on January 1, 1998. These adjustments are
detailed, as follows:
<TABLE>
<CAPTION>
HOLDINGS
IFG AMIT SPIN- IFG
HISTORICAL(i) MERGER(ii) OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Rental and other property revenues...... $ 7,566 $ 560 $ -- $ 8,126
Property operating expenses............. (2,585) -- -- (2,585)
Depreciation............................ (904) -- -- (904)
--------- ------ --------- --------
Income from property operations......... 4,077 560 -- 4,637
--------- ------ --------- --------
Management fees and other income........ 311,475 -- (240,320) 71,155
Management and other expenses........... (252,295) -- 210,818 (41,477)
Amortization............................ (26,781) (48) 12,843 (13,986)
--------- ------ --------- --------
Income from service company business.... 32,399 (48) (16,659) 15,692
--------- ------ --------- --------
General and administrative expenses..... (66,272) (675) 5,561 (61,386)
Interest expense........................ (24,164) -- (707) (24,871)
Interest income......................... 18,817 4,193 (509) 22,501
Minority interest....................... (14,159) -- -- (14,159)
Equity in losses of unconsolidated
partnerships.......................... 12,169 1,323 13,492
--------- ------ --------- --------
Income (loss) from operations........... (37,133) 4,030 (10,991) (44,094)
Income tax provision.................... (4,772) -- 5,952 1,180
Gain on disposition of property......... 5,888 688 -- 6,576
--------- ------ --------- --------
Item income (loss)...................... $ (36,017) $4,718 $ (5,039) $(36,338)
========= ====== ========= ========
</TABLE>
----------------------
(i)
Represents the unaudited consolidated results of operations of IFG for
the nine months ended September 30, 1998.
Certain reclassifications have been made to IFG's historical statement
of operations to conform to the Partnership's statement of operations
presentation.
(ii)
Represents the historical statement of operations of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT Merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of Holdings common stock for
each three shares of IFG common stock to holders of IFG common stock.
(F) Represents the following adjustments occurring as a result of the IFG
Merger: (i) the incremental depreciation of the purchase price adjustment
related to consolidated real estate and investments in real estate
partnerships; (ii) the amortization of goodwill and property management
contracts
P-21
<PAGE> 2103
resulting from the IFG Merger; (iii) the increase in interest expense
resulting from the net increase in debt; and (iv) the elimination of the
income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of
IFG, primarily management contracts and related working capital assets
and liabilities related to IFG's third party management operations. The
adjustments reflect the related revenues and expenses primarily related
to the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(H) Represents adjustments to reflect the 1998 Acquisitions, less the 1998
Dispositions as if they had occurred on January 1, 1998. These pro forma
operating results are based on historical results of the properties,
except for depreciation, which is based on the Partnership's investment
in the properties.
These adjustments are as follows:
<TABLE>
<CAPTION>
1998 1998
ACQUISITIONS DISPOSITIONS TOTAL
------------ ------------ -------
<S> <C> <C> <C>
Rental and other property revenues......... $20,554 $(951) $19,603
Property operating expense................. (9,385) 376 (9,009)
Owned property management expense.......... (765) 37 (728)
Depreciation............................... (4,979) 93 (4,886)
</TABLE>
(I) Represents adjustments to reflect the Probable Purchases as if they had
occurred on January 1, 1998. These pro forma operating results are based
on historical results of the properties, except for depreciation, which
is based on the Partnership's investment in the properties.
(J) Represents adjustments to interest expense for the following:
<TABLE>
<S> <C>
Borrowings on the Partnership's credit facilities and
other loans and mortgages assumed in connection with
the 1998 Acquisitions.................................. $(8,698)
Repayments on the Partnership's credit facilities and
other indebtedness with proceeds from the 1998
Dispositions and the 1998 Stock
Offerings.............................................. 10,326
Repayments on AIMCO's credit facilities and other
indebtedness with proceeds from the Preferred
Partnership Unit Offering.............................. 347
-------
$ 1,975
=======
</TABLE>
(K) Represents adjustments to interest expense related to the assumption of
mortgage debt in connection with the probable purchases.
(L) Represents (i) loss of $537 related to limited partners in consolidated
partnerships acquired in connection with the 1998 Acquisitions and (ii)
income of $377 allocable to the Partnership Preferred Units.
(M) Represents incremental depreciation related to the real estate assets
purchased in connection with the Ambassador Merger. Buildings and
improvements are depreciated on the straight-line method over a period of
30 years, and furniture and fixtures are depreciated on the straight-line
method over a period of 5 years.
(N) Decrease results from identified historical costs of certain items which
will be eliminated or reduced as a result of the Ambassador Merger, as
follows:
<TABLE>
<S> <C>
Duplication of public company expenses.................... $ 355
Reduction in salaries and benefits........................ 2,482
Merger related costs...................................... 1,212
Other..................................................... 1,229
------
$5,278
======
</TABLE>
P-22
<PAGE> 2104
The reduction in salaries and benefits is pursuant to a restructuring
plan, approved by the Company's senior management, assuming that the
Ambassador Merger had occurred on January 1, 1998 and that the
restructuring plan was completed on January 1, 1998. The restructuring
plan specifically identifies all significant actions to be taken to
complete the restructuring plan, including the reduction of personnel,
job functions, location and date of completion.
(O) Represents the decrease in interest expense of $1,480 related to the
repayment of the Ambassador revolving lines of credit upon consummation
of the Ambassador Merger, offset by an increase in interest expense of
$1,335 related to borrowings under the Partnership's line of credit.
(P) Represents elimination of minority interest in Jupiter-I, L.P. resulting
from the redemption of limited partnership interests not owned by
Ambassador in connection with the Ambassador Merger.
(Q) Represents incremental depreciation related to the consolidated real
estate assets purchased in connection with the IFG Merger and IPT Merger,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT. Buildings and improvements are depreciated
on the straight-line method over a period of 20 years, and furniture and
fixtures are depreciated on the straight-line method over a period of 5
years.
(R) Represents incremental depreciation and amortization of the tangible and
intangible assets related to the property management business of IFG,
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG, including amortization of property management
contracts of $30,096, amortization of goodwill of $4,895, and
depreciation of furniture, fixtures, and equipment of $2,842, less IFG's
historical depreciation and amortization of $13,938. Property management
contracts are amortized using the straight-line method over a period of
three years. Furniture, fixtures, and equipment are depreciated using the
straight-line method over a period of three years. Goodwill is amortized
using the straight-line method over 20 years.
(S) Represents the elimination of merger related expenses recorded by IFG
during the nine months ended September 30, 1998. In connection with the
IFG Merger, certain IFG executives will receive one-time lump-sum
payments in connection with the termination of their employment and
option agreements. The total of these lump sum payments is estimated to
be approximately $50,000.
(T) Represents elimination of minority interest in IPT resulting from the IPT
merger.
(U) Represents amortization related to the increased basis in investment in
real estate partnerships, as a result of the allocation of the purchase
price of IFG and IPT, based on an estimated average life of 20 years, and
based on the Partnership's new basis resulting from the allocation of the
purchase price of IFG and IPT.
(V) Represents the reversal of IFG's income tax provision.
(W) Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management
operations of IFG.
(X) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment that were contributed or
sold to the Unconsolidated Subsidiaries, primarily related to the
management operations of IFG, based on the Partnership's new basis
resulting from the allocation of the purchase price of IFG.
(Y) Represents interest income of $2,861 earned on notes payable of $45,000
to the Partnership issued as consideration for certain assets and
liabilities sold to the Unconsolidated Subsidiaries of the Partnership,
net of the elimination of the Partnership's share of the related interest
expense of $2,718 reflected in the equity in earnings of the
Unconsolidated Subsidiaries.
(Z) Represents the Partnership's equity in earnings of the Unconsolidated
Subsidiaries.
P-23
<PAGE> 2105
(AA) The following table presents the net impact to pro forma net income
applicable to holders of shares of AIMCO Common Stock and net income per
share of AIMCO Common Stock assuming the interest rate per annum
increases by 0.25%:
<TABLE>
<S> <C>
Increase in interest........................................ $ 702
=======
Net income.................................................. $40,791
=======
Net income attributable to OP Unitholders................... $ 8,377
=======
Basic loss per OP Unit...................................... $ 0.12
=======
Diluted loss per OP Unit.................................... $ 0.12
=======
</TABLE>
(BB) Represents the net income attributable to holders of the Class B
Preferred Units, the Class C Preferred Units, the Class D Preferred Units
the Class G Preferred Units, the Class H Preferred Units and the Class J
Preferred Units as if these stock offerings had occurred as of January 1,
1997.
(CC) Represents the Partnership's equity in earnings in the Unconsolidated
Subsidiaries of $(1,867) plus the elimination of intercompany interest of
$2,718. The combined Pro Forma Statement of Operations of the
Unconsolidated Subsidiaries for the nine months ended September 30, 1998
is presented below, which represents the effects of the Ambassador
Merger, the IFG Merger and the IFG Reorganization as if these
transactions had occurred as of January 1, 1997.
P-24
<PAGE> 2106
UNCONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
IFG
HISTORICAL(I) REORGANIZATION(II) PRO FORMA
------------- ------------------ ---------
<S> <C> <C> <C>
Rental and other property revenues................... $ 9,910 $ -- $ 9,910
Property operating expense........................... (5,139) -- (5,139)
Owned property management expense.................... (345) -- (345)
Depreciation expense................................. (1,026) -- (1,026)
-------- -------- --------
Income from property operations...................... 3,400 -- 3,400
-------- -------- --------
Management fees and other income..................... 57,665 56,211(iii) 113,876
Management and other expenses........................ (36,221) (35,192)(iii) (71,413)
Amortization......................................... (2,111) (22,641)(iv) (24,752)
-------- -------- --------
Income from service company.......................... 19,333 (1,622) 17,711
General and administrative expense................... -- (14,375)(iii) (14,375)
Interest expense..................................... (6,931) (2,861)(v) (9,792)
Interest income...................................... 617 -- 617
Minority interest.................................... (526) -- (526)
-------- -------- --------
Income (loss) from operations........................ 15,893 (18,858) (2,965)
Income tax provision................................. (7,037) 8,037(vi) 1,000
-------- -------- --------
Net income (loss).................................... $ 8,856 $(10,821) $ (1,965)
======== ======== ========
Income (loss) attributable to preferred
stockholders....................................... $ 8,413 $(10,280) $ (1,867)
======== ======== ========
Income (loss) attributable to common stockholders.... $ 443 $ (541) $ (98)
======== ======== ========
</TABLE>
- ---------------
(i) Represents the Unconsolidated Subsidiaries historical consolidated results
of operations.
(ii) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
combined Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily related to the management operations owned by IFG. The
adjustments reflect the related revenues and expenses primarily related to
the management operations owned by IFG, with additional amortization
recorded related to the Partnership's new basis resulting from the
allocation of the purchase price of IFG.
(iii)Represents the historical income and expenses associated with certain
assets and liabilities of IFG that were contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG.
(iv) Represents the depreciation and amortization of certain management
contracts and furniture, fixtures, and equipment contributed or sold to the
Unconsolidated Subsidiaries, primarily related to the management operations
of IFG, based on the Partnership's new basis resulting from the allocation
of the purchase price of IFG.
(v) Represents adjustment for interest expense related to a note payable to the
Partnership.
(vi) Represents the estimated Federal and state tax provisions, which are
calculated on the pro forma operating results of the Unconsolidated
Subsidiaries, excluding amortization of goodwill, which is not deductible
for tax purposes.
P-25
<PAGE> 2107
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS AMBASSADOR IFG
AND PROBABLE NHP AMBASSADOR PURCHASE PRICE AS
HISTORICAL(A) PURCHASES(B) TRANSACTIONS(C) HISTORICAL(D) ADJUSTMENTS(E) ADJUSTED(F)
------------- ------------ --------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $ 32,697 $ 25,214 $ (8,681) $ 3,437 $ 1,879 $ 4,744
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 43,520 28,817 7,354 20,372 5,997 17,248
Gain on investments............ -- -- (12) -- -- --
(Gain) loss on disposition of
properties.................... (2,720) 2,720 (3,882) -- -- (80)
Minority interests............. (1,008) (458) (16) 851 (705) 12,871
Equity in earnings of
unconsolidated partnerships... 1,798 122 8,542 (405) -- (12,515)
Equity in earnings of
unconsolidated subsidiaries... (4,636) -- (5,790) -- -- --
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 269 (269) -- -- -- (5,366)
Changes in operating assets and
operating liabilities......... 3,112 -- 5,314 (3,523) -- (4,384)
--------- --------- --------- --------- -------- --------
Total adjustments........... 40,335 30,932 11,510 17,295 5,292 7,774
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) operating activities... 73,032 56,146 2,829 20,732 7,171 12,518
Net cash used in
discontinued operations.... -- -- (7,999) -- -- --
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) continuing
operations................. 73,032 56,146 (5,170) 20,732 7,171 12,518
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... 21,792 19,627(I) -- -- -- --
Purchase of real estate.......... (376,315) (220,995)(J) (4,114) (24,179) -- --
Additions to real estate,
investments and property held
for sale....................... (26,966) (5,217)(K) (522) (19,033) -- (4,154)
Proceeds from sale of property
held for sale.................. 303 -- -- -- -- --
Purchase of general and limited
partnership interests.......... (199,146) -- (1,208) -- -- (76,104)
Purchase of management
contracts...................... -- -- (11,686) -- -- (36,868)
Purchase of/additions to notes
receivable..................... (59,787) -- (4,236) -- -- (17,647)
Proceeds from repayments of notes
receivable..................... -- -- 214 1,000 -- 8,838
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... 45,791 -- 3,097 3,183 -- 42,615
Contribution to unconsolidated
subsidiaries................... (42,879) -- -- -- -- --
Proceeds from sale of
securities..................... -- -- 642 -- -- --
Purchase of investments held for
sale........................... -- -- (73) -- -- --
Purchase of NHP mortgage loans... (60,575) -- -- -- -- --
Purchase of Ambassador common
stock.......................... (19,881) -- -- -- -- --
--------- --------- --------- --------- -------- --------
Net cash used in investing
activities................. (717,663) (206,585) (17,886) (39,029) -- (83,320)
--------- --------- --------- --------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. 225,436 122,568(L) 145,519 156,746 -- 111,001
Principal repayments on secured
notes payable.................. (12,512) -- (141,032) (141,676) -- (12,697)
Proceeds from secured short-term
financing...................... 19,050 -- -- -- -- --
Repayments on secured short-term
financing...................... -- (259,027)(M) (434) -- -- --
Principal repayments on unsecured
short-term notes payable....... (79) (50,800)(M) -- -- -- --
Proceeds (payoff) from unsecured
short-term financing........... (12,500) -- -- -- -- --
Principal repayments on secured
tax-exempt bond financing...... (1,487) -- -- -- -- --
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... (162,008) -- -- -- -- --
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... (6,387) -- (245) (8,095) -- (2,305)
Proceeds from issuance of common
and preferred stock, net....... 643,224 357,389(N) 6,286 28,946 -- 62,420
Proceeds from exercises of
employee stock options and
warrants....................... 871 -- -- 3,195 -- 7,487
Repurchase of common stock....... -- -- -- -- -- (3,283)
Principal repayments received on
notes due from Officers........ 25,957 -- -- 1,323 -- --
Investments made by minority
interests...................... -- -- -- -- -- 249
Receipt of contributions from
minority interests............. -- 37,345(O) -- -- -- --
Payments of distribution to
minority interests............. -- (2,713)(P) -- -- -- --
Payment of distributions......... (44,660) (19,396)(Q) (11,503)(T) (15,717) (12,173)(U) (2,695)
Payment of distributions to
limited partners............... -- (5,193)(R) -- -- (15)(U) --
Payment of preferred unit
distributions.................. (846) (39,859)(S) -- (2,279) -- --
Payment of distributions to
minority interests............. (5,510) -- -- (3,700) -- (12,578)
Net transactions with
Insignia/ESG................... -- -- -- -- -- (57,612)
--------- --------- --------- --------- -------- --------
Net cash provided by (used
in) financing activities... 668,549 140,314 (1,409) 18,743 (12,188) 89,987
--------- --------- --------- --------- -------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. 23,918 (10,125) (24,465) 446 (5,017) 19,185
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. 13,170 -- 36,277 4,002 -- 64,447
--------- --------- --------- --------- -------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $ 37,088 $ (10,125) $ 11,812 $ 4,448 $ (5,017) $ 83,632
========= ========= ========= ========= ======== ========
<CAPTION>
IFG IFG
MERGER REORGANIZATION PRO
ADJUSTMENTS(G) ADJUSTMENTS(H) FORMA
-------------- -------------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................ $(80,023) $ 6,882 $ (13,851)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization.................. 35,049 (30,188) 128,169
Gain on investments............ -- -- (12)
(Gain) loss on disposition of
properties.................... 80 -- (3,882)
Minority interests............. (1,552) -- 9,983
Equity in earnings of
unconsolidated partnerships... 29,995 -- 27,537
Equity in earnings of
unconsolidated subsidiaries... -- 4,578 (5,848)
Extraordinary (gain) loss on
early extinguishment of
debt.......................... 5,366 --
Changes in operating assets and
operating liabilities......... -- -- 519
-------- -------- -----------
Total adjustments........... 68,938 (25,610) 156,466
-------- -------- -----------
Net cash provided by (used
in) operating activities... (11,085) (18,728) 142,615
Net cash used in
discontinued operations.... -- -- (7,999)
-------- -------- -----------
Net cash provided by (used
in) continuing
operations................. (11,085) (18,728) 134,616
-------- -------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds from sale of real
estate......................... -- -- 41,419
Purchase of real estate.......... -- -- (625,603)
Additions to real estate,
investments and property held
for sale....................... -- -- (55,892)
Proceeds from sale of property
held for sale.................. -- -- 303
Purchase of general and limited
partnership interests.......... -- -- (276,458)
Purchase of management
contracts...................... -- -- (48,554)
Purchase of/additions to notes
receivable..................... -- -- (81,670)
Proceeds from repayments of notes
receivable..................... -- -- 10,052
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries.... -- -- 94,686
Contribution to unconsolidated
subsidiaries................... -- -- (42,879)
Proceeds from sale of
securities..................... -- -- 642
Purchase of investments held for
sale........................... -- -- (73)
Purchase of NHP mortgage loans... -- -- (60,575)
Purchase of Ambassador common
stock.......................... -- -- (19,881)
-------- -------- -----------
Net cash used in investing
activities................. -- -- (1,064,483)
-------- -------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings............. -- -- 761,270
Principal repayments on secured
notes payable.................. -- -- (307,917)
Proceeds from secured short-term
financing...................... -- -- 19,050
Repayments on secured short-term
financing...................... -- -- (259,461)
Principal repayments on unsecured
short-term notes payable....... -- -- (50,879)
Proceeds (payoff) from unsecured
short-term financing........... -- -- (12,500)
Principal repayments on secured
tax-exempt bond financing...... -- -- (1,487)
Net borrowings (paydowns) on the
Company's revolving credit
facilities..................... -- -- (162,008)
Payment of loan costs, net of
proceeds from interest rate
hedge.......................... -- -- (17,032)
Proceeds from issuance of common
and preferred stock, net....... -- -- 1,098,265
Proceeds from exercises of
employee stock options and
warrants....................... -- -- 11,553
Repurchase of common stock....... -- -- (3,283)
Principal repayments received on
notes due from Officers........ -- -- 27,280
Investments made by minority
interests...................... -- -- 249
Receipt of contributions from
minority interests............. -- -- 37,345
Payments of distribution to
minority interests............. -- -- (2,713)
Payment of distributions......... (24,513)(V) -- (130,657)
Payment of distributions to
limited partners............... -- -- (5,208)
Payment of preferred unit
distributions.................. -- -- (42,984)
Payment of distributions to
minority interests............. -- -- (21,788)
Net transactions with
Insignia/ESG................... -- -- (57,612)
-------- -------- -----------
Net cash provided by (used
in) financing activities... (24,513) -- 879,483
-------- -------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............. (35,598) (18,728) (50,384)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD.............. -- -- 117,896
-------- -------- -----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD........................ $(35,598) $(18,728) $ 67,512
======== ======== ===========
</TABLE>
P-26
<PAGE> 2108
- ---------------
(A) Represents the Partnership's audited consolidated statement of cash flows
for the year ended December 31, 1997.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1997 Acquisitions; (ii) the 1997 Stock Offerings;
(iii) the 1997 Dispositions; (iv) the 1998 Stock Offerings; (v) the 1998
Acquisitions; (vi) the Probably Purchases; (vii) the 1998 Dispositions; and
(viii) the Preferred Partnership Unit Offering.
(C) Represents adjustments to reflect the purchase of the NHP Real Estate
Companies, the NHP Merger, and the NHP Reorganization, as if the
transactions had taken place on January 1, 1997. These adjustments are
detailed as follows:
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)................. $ (7,266) $ 4,350 $(2,222) $ (3,543) $ (8,681)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 4,058 9,134 5,125 (10,963) 7,354
Gain on investments............. (12) -- -- -- (12)
(Gain) loss on disposition of
properties.................... (3,882) -- -- -- (3,882)
Minority interests.............. (16) -- -- -- (16)
Equity in earnings of
unconsolidated partnerships... 3,905 -- 4,631 6 8,542
Equity in earnings of
unconsolidated subsidiaries... -- -- 4,636 (10,426) (5,790)
Changes in operating assets and
operating liabilities......... (1,036) 6,350 -- -- 5,314
-------- -------- ------- -------- ---------
Total adjustments........... 3,017 15,484 14,392 (21,383) 11,510
-------- -------- ------- -------- ---------
Net cash provided by (used
in) operating
activities................ (4,249) 19,834 12,170 (24,926) 2,829
Net cash used in
discontinued operations... -- (7,999) -- -- (7,999)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) continuing
operations................ (4,249) 11,835 12,170 (24,926) (5,170)
-------- -------- ------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate........... -- (4,114) -- -- (4,114)
Additions to real estate,
investments and property held
for sale........................ (522) -- -- -- (522)
Purchase of general and limited
partnership interests........... (1,208) -- -- -- (1,208)
Purchase of management
contracts....................... -- (11,686) -- -- (11,686)
Purchase of/additions to notes
receivable...................... -- (4,236) -- -- (4,236)
Proceeds from repayments of notes
receivable...................... 214 -- -- -- 214
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 3,097 -- -- -- 3,097
Proceeds from sale of
securities...................... 642 -- -- -- 642
Purchase of investments held for
sale............................ (73) -- -- -- (73)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) investing
activities................ 2,150 (20,036) -- -- (17,886)
-------- -------- ------- -------- ---------
</TABLE>
P-27
<PAGE> 2109
<TABLE>
<CAPTION>
NHP
REAL ESTATE NHP NHP NHP NHP
PURCHASE(i) HISTORICAL(ii) ADJUSTMENTS(iii) REORGANIZATION(iv) TRANSACTIONS
----------- -------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes
payable borrowings.............. $ 74,019 $ 71,500 $ -- $ -- $ 145,519
Principal repayments on secured
notes payable................... (71,256) (69,776) -- -- (141,032)
Repayments on secured short-term
financing....................... (434) -- -- -- (434)
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (245) -- -- (245)
Proceeds from issuances of common
and preferred stock, net........ -- 6,286 -- -- 6,286
Payment of distributions.......... (2,000) -- (9,503) -- (11,503)
-------- -------- ------- -------- ---------
Net cash provided by (used
in) financing
activities................ 329 7,765 (9,503) -- (1,409)
-------- -------- ------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (1,770) (436) 2,667 (24,926) (24,465)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 25,795 10,482 -- -- 36,277
-------- -------- ------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 24,025 $ 10,046 $ 2,667 $(24,926) $ 11,812
======== ======== ======= ======== =========
</TABLE>
- ---------------
(i)Represents the adjustment to record cash flow activity from January 1,
1997 to the date of acquisition, as if the acquisition of the NHP Real
Estate Companies had occurred on January 1, 1997. In addition,
represents adjustments to record additional deprecation and
amortization related to the increased basis in the assets of the NHP
Real Estate Companies as a result of the allocation of the purchase
price of the NHP Real Estate Companies and additional interest expense
incurred in connection with borrowings incurred by the Partnership to
consummate the NHP Real Estate Acquisition.
(ii)
Represents the unaudited consolidated statement of cash flows of NHP
for the period from January 1, 1997 through December 8, 1997 (date of
the NHP Merger).
(iii)
Represents the following adjustments occurring as a result of the NHP
Merger: (i) the reduction in personnel costs, primarily severance
costs, pursuant to a restructuring plan; (ii) the incremental
depreciation of the purchase price adjustment related to real estate;
(iii) the incremental amortization of the purchase price adjustment
related to management contracts, furniture, fixtures and equipment, and
goodwill; (iv) the reversal of equity in earnings of NHP during the
pre-merger period when the Partnership held a 47.62% interest in NHP;
and (v) the amortization of the increased basis in investments in real
estate partnerships, based on the purchase price adjustment related to
real estate and an estimated average life of 20 years.
(iv)
Represents adjustments related to the NHP Reorganization, whereby the
Partnership contributed or sold to the Unconsolidated Subsidiaries and
the Unconsolidated Partnership; (i) certain assets and liabilities of
NHP, primarily related to the management operations and other
businesses owned by NHP and (ii) 12 real estate properties containing
2,905 apartment units. The adjustments represent (i) the related cash
flow activity primarily related to the management operations of such
real estate partnerships contributed, with additional depreciation and
amortization recorded related to the Partnership's new basis resulting
from the allocation of the combined purchase price of NHP and the NHP
Real Estate Companies.
(D) Represents the audited historical statement of cash flows of Ambassador for
the year ended December 31, 1997. Certain reclassifications have been made
to Ambassador's historical statement of cash flows to conform to the
Partnership's statement of cash flows presentation. The Ambassador
P-28
<PAGE> 2110
historical statement of cash flows excludes an extraordinary loss of $1,384
and a loss on sale of an interest rate cap of $509.
(E) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(F) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)..................... $ 10,233 $ 7,566 $(13,055) $ 4,744
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization...... 32,675 63 (15,490) 17,248
Gain on disposition of property.... -- (80) -- (80)
Minority interests................. 12,448 382 41 12,871
Equity in earnings of
unconsolidated partnerships...... (10,027) (2,639) 151 (12,515)
Extraordinary gain on early
extinguishment of debt........... (5,366) -- -- (5,366)
Changes in operating assets and
liabilities...................... -- (2,405) (1,979) (4,384)
--------- -------- -------- --------
Total adjustments............. 29,730 (4,679) (17,277) 7,774
--------- -------- -------- --------
Net cash provided by (used in) operating
activities............................ 39,963 2,887 (30,332) 12,518
--------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to real estate, investments
and property held for sale......... (7,695) 665 2,876 (4,154)
Purchase of general and limited
partnership interests.............. (93,118) -- 17,014 (76,104)
Purchase of management contracts...... (99,540) -- 62,672 (36,868)
Purchase of/additions to notes
receivable......................... (9,172) (14,251) 5,776 (17,647)
Proceeds from repayments of notes
receivable......................... 4,523 7,552 (3,237) 8,838
Distributions from investments in real
estate partnerships and
unconsolidated subsidiaries........ 44,823 -- (2,208) 42,615
--------- -------- -------- --------
Net cash provided by (used in)
investing activities........ (160,179) (6,034) 82,893 (83,320)
--------- -------- -------- --------
</TABLE>
P-29
<PAGE> 2111
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable
borrowings......................... $ 118,141 $ -- $ (7,140) $111,001
Principal repayments on secured notes
payable............................ (15,682) -- 2,985 (12,697)
Payment of loan costs, net of proceeds
from interest rate hedge........... (2,305) -- -- (2,305)
Proceeds from issuance of common and
preferred stock, net............... 62,420 -- -- 62,420
Proceeds from exercises of employee
stock options and warrants......... 7,487 -- -- 7,487
Repurchase of common stock............ (3,283) -- -- (3,283)
Investment made by minority
interests.......................... 249 -- -- 249
Payment of distributions.............. -- (2,695) -- (2,695)
Payment of distributions to minority
interests.......................... (12,578) -- -- (12,578)
Net transactions with Insignia/ESG.... -- -- (57,612) (57,612)
--------- -------- -------- --------
Net cash provided by (used in)
financing activities........ 154,449 (2,695) (61,767) 89,987
--------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 34,233 (5,842) (9,206) 19,185
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD............................. 54,614 9,789 44 64,447
--------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................ $ 88,847 $ 3,947 $ (9,162) $ 83,632
========= ======== ======== ========
</TABLE>
- ---------------
(i)Represents the audited consolidated statement of cash flows of IFG for
the year ended December 31, 1997, as reported in IFG's Annual Report on
Form 10-K. Certain reclassifications have been made to IFG's historical
statement of cash flows to conform to the Partnership's statement of
cash flows presentation.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock.
(G) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(H) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(I) Represents proceeds from the sale of the 1998 Dispositions, as if these
dispositions occurred on January 1, 1997.
P-30
<PAGE> 2112
(J) Represents the use of cash to purchase the 1998 Acquisitions and the
Probable Purchases, as if these acquisitions occurred on January 1, 1997.
(K) Represents cash payments for capital improvements of $300 per unit on the
1997 Acquisitions, the 1998 Acquisitions and the Probable Purchases.
(L) Represents notes payable assumed in connection with the 1998 Acquisitions
and the Probable Purchases, assuming these transactions occurred January 1,
1997.
(M) Represents net principal repayments assuming the 1998 Acquisitions, the
1998 Dispositions, the Probable Purchases, the 1998 Stock Offerings and the
Preferred Partnership Unit Offering occurred January 1, 1997.
(N) Represents cash proceeds from the 1998 Stock Offerings, as if these
offerings occurred on January 1, 1997.
(O) Represents contributions from minority interests assuming the Preferred
Partnership Unit Offering occurred January 1, 1997.
(P) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(Q) Represents distributions paid on the 1997 Stock Offerings as if these
occurred on January 1, 1997.
(R) Represents distributions paid to limited partners on OP Units issued in
connection with the 1997 Acquisitions, the 1998 Acquisitions and the
Probable Purchases, as if the issuance of the OP Units occurred on January
1, 1997.
(S) Represents preferred unit distributions paid on the Class B Preferred
Stock, the Class C Preferred Stock and the 1998 Stock Offerings as if these
occurred on January 1, 1997.
(T) Represents historical distributions of $2,000 and pro forma distributions
on the shares issued in the NHP Merger as if these shares had been issued
on January 1, 1997.
(U) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(V) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-31
<PAGE> 2113
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (INSIGNIA MERGER)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED
TRANSACTIONS
AND AMBASSADOR
PROBABLE AMBASSADOR PURCHASE PRICE IFG AS IFG MERGER
HISTORICAL(A) PURCHASE(B) HISTORICAL(C) ADJUSTMENTS(D) ADJUSTED(E) ADJUSTMENTS(F)
------------- ------------ ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 56,269 $ 3,432 $ (2,382) $ 4,255 $ (36,338) $ 7,679
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... 67,344 7,512 7,520 1,420 14,890 25,478
(Gain) loss on disposition of
properties..................... (2,783) 2,783 -- -- (6,576) 6,576
Minority interests.............. 1,052 (160) 252 (252) 14,159 (6,622)
Equity in earnings of
unconsolidated partnerships.... 5,078 -- 71 -- (13,492) 18,577
Equity in earnings of
unconsolidated subsidiaries.... (8,413) -- -- -- -- --
Non-cash compensation........... -- -- -- -- 796 --
Changes in operating assets and
operating liabilities.......... (67,722) -- 5,948 -- (7,775) --
--------- -------- -------- ------- --------- --------
Total adjustments............ (5,444) 10,135 13,791 1,168 2,002 44,009
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) operating activities... 50,825 13,567 11,409 5,423 (34,336) 51,688
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... (63,839) 63,839(H) -- -- 27,122 --
Additions to real estate.......... (47,878) (1,198)(I) (17,759) -- 9,309 --
Proceeds from sale of property and
investments held for sale....... 19,627 (19,627)(J) -- -- (35) --
Additions to property held for
sale............................ (1,986) -- -- -- -- --
Purchase of general and limited
partnership interests........... (27,016) -- -- -- 17,420 --
Purchase of/additions to notes
receivable...................... (72,445) -- -- -- (27,589) --
Proceeds from repayments/sale of
notes receivable................ 21,562 -- -- -- 21,185 --
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... 513 -- 1,063 -- 22,053 --
Payment of trust based preferred
dividends....................... -- -- -- -- (7,415) --
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... 4,492 -- -- -- 13,423 --
Contribution to unconsolidated
subsidiaries.................... (13,032) -- -- -- -- --
Purchase of investments held for
sale............................ (4,935) -- -- -- -- --
Redemption of OP Units............ (516) -- -- -- -- --
Merger costs...................... -- -- -- -- (1,402) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) investing activities... (185,453) 43,014 (16,696) -- 74,071 --
--------- -------- -------- ------- --------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. 77,489 -- 37,162 -- 177,234 --
Principal repayments on secured
notes payable................... (56,262) -- -- -- 4,239 --
Principal advances on secured
tax-exempt bond financing....... -- -- 21,784 -- -- --
Principal repayments on secured
tax-exempt bond financing....... (1,436) -- -- -- -- --
Net borrowings/repayments on
secured short-term financing.... (30,693) 209,027(K) (43,002) -- -- --
Net borrowings (paydowns) on the
revolving credit facilities..... -- -- 2,513 -- -- --
Principal repayments on unsecured
short-term notes payable........ -- -- -- -- 2,644 --
Payment of loan costs, net of
proceeds from interest rate
hedge........................... (5,727) -- -- -- (83) --
Proceeds from issuance of common
stock and preferred stock,
net............................. 253,239 (253,239)(L) -- -- -- --
Repurchase of common stock........ (10,972) -- -- -- -- --
Proceeds from exercises of
employee stock options and
warrants........................ -- -- 9,761 -- 6,533 --
Principal repayments received on
notes due from Officers......... 8,084 -- -- -- -- --
Payments of distributions to
minority interests.............. -- (2,034)(M) -- -- -- --
Payment of distributions.......... (73,322) -- -- (3,701)(P) (8,606) (22,360)(Q)
Payment of distributions to
limited partners................ (10,251) (1,919)(N) -- (5)(P) (494) --
Payment of preferred unit
distributions................... (10,916) (16,094)(O) -- -- -- --
Proceeds from issuance of High
Performance Units............... 1,988 -- -- -- -- --
Net transactions with
Insignia/ESG.................... -- -- -- -- (241,003) --
--------- -------- -------- ------- --------- --------
Net cash provided by (used
in) financing activities... 141,221 (64,259) 28,218 (3,706) (59,536) (22,360)
--------- -------- -------- ------- --------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. 6,593 (7,678) 22,931 1,717 (19,801) 29,328
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... 37,088 (10,125) 4,448 (5,017) 83,632 (35,598)
--------- -------- -------- ------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $ 43,681 $(17,803) $ 27,379 $(3,300) $ 63,831 $ (6,270)
========= ======== ======== ======= ========= ========
<CAPTION>
IFG
REORGANIZATION PRO
ADJUSTMENTS(G) FORMA
-------------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (loss)................. $ 8,578 $ 41,493
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization... (22,641) 101,523
(Gain) loss on disposition of
properties..................... -- --
Minority interests.............. -- 8,429
Equity in earnings of
unconsolidated partnerships.... -- 10,234
Equity in earnings of
unconsolidated subsidiaries.... 7,562 (851)
Non-cash compensation........... -- 796
Changes in operating assets and
operating liabilities.......... -- (69,549)
-------- ---------
Total adjustments............ (15,079) 50,582
-------- ---------
Net cash provided by (used
in) operating activities... (6,501) 92,075
-------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of real estate........... -- 27,122
Additions to real estate.......... -- (57,526)
Proceeds from sale of property and
investments held for sale....... -- (35)
Additions to property held for
sale............................ -- (1,986)
Purchase of general and limited
partnership interests........... -- (9,596)
Purchase of/additions to notes
receivable...................... -- (100,034)
Proceeds from repayments/sale of
notes receivable................ -- 42,747
Distributions from investments in
real estate partnerships and
unconsolidated subsidiaries..... -- 23,629
Payment of trust based preferred
dividends....................... -- (7,415)
Cash received in connection with
Ambassador Merger and AMIT
Merger.......................... -- 17,915
Contribution to unconsolidated
subsidiaries.................... -- (13,032)
Purchase of investments held for
sale............................ -- (4,935)
Redemption of OP Units............ -- (516)
Merger costs...................... -- (1,402)
-------- ---------
Net cash provided by (used
in) investing activities... -- (85,064)
-------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from secured notes
payable borrowings.............. -- 291,885
Principal repayments on secured
notes payable................... -- (52,023)
Principal advances on secured
tax-exempt bond financing....... -- 21,784
Principal repayments on secured
tax-exempt bond financing....... -- (1,436)
Net borrowings/repayments on
secured short-term financing.... -- 135,332
Net borrowings (paydowns) on the
revolving credit facilities..... -- 2,513
Principal repayments on unsecured
short-term notes payable........ -- 2,644
Payment of loan costs, net of
proceeds from interest rate
hedge........................... -- (5,810)
Proceeds from issuance of common
stock and preferred stock,
net............................. -- --
Repurchase of common stock........ -- (10,972)
Proceeds from exercises of
employee stock options and
warrants........................ -- 16,294
Principal repayments received on
notes due from Officers......... -- 8,084
Payments of distributions to
minority interests.............. -- (2,034)
Payment of distributions.......... -- (107,989)
Payment of distributions to
limited partners................ -- (12,669)
Payment of preferred unit
distributions................... -- (27,010)
Proceeds from issuance of High
Performance Units............... -- 1,988
Net transactions with
Insignia/ESG.................... -- (241,003)
-------- ---------
Net cash provided by (used
in) financing activities... -- 19,578
-------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................. (6,501) 26,589
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD............... (18,728) 55,700
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD............................ $(25,229) $ 82,289
======== =========
</TABLE>
P-32
<PAGE> 2114
- ---------------
(A) Represents the Partnership's unaudited consolidated statement of cash flows
for the nine months ended September 30, 1998.
(B) Represents adjustments to reflect the following as if they had occurred on
January 1, 1997; (i) the 1998 Stock Offerings; (ii) the 1998 Acquisitions;
(iii) the Probably Purchases; (iv) the 1998 Dispositions and (v) the
Preferred Partnership Unit Offering.
(C) Represents the unaudited historical statement of cash flows of Ambassador
for the four months ended April 20, 1998. Certain reclassifications have
been made to Ambassador's historical statement of cash flows to conform to
the Partnership's statement of cash flows presentation.
(D) Represents the following adjustments occurring as a result of the
Ambassador Merger: (i) the incremental depreciation of the purchase price
adjustment related to real estate; (ii) the reduction in personnel costs,
primarily severance costs, pursuant to a restructuring plan; (iii) the
reduction of interest expense, resulting from the net reduction of debt;
and (iv) the elimination of the minority interest associated with
Jupiter-I, L.P.
(E) Represents adjustments to reflect the IFG Merger, the AMIT Merger, the IPT
Merger, and the spin-off of New Insignia as if those transaction had
occurred on January 1, 1997. These adjustments are detailed as follows:
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ (36,017) $ 4,718 $ (5,039) $(36,338)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 27,685 48 (12,843) 14,890
Gain on disposition of property......................... (5,888) (688) -- (6,576)
Minority interests...................................... 14,159 -- -- 14,159
Equity in earnings of unconsolidated partnerships....... (12,169) -- (1,323) (13,492)
Non-cash compensation................................... 796 -- -- 796
Changes in operating assets and liabilities............. (18,853) (1,499) 12,577 (7,775)
--------- -------- --------- --------
Total adjustments................................... 5,730 (2,139) (1,589) 2,002
--------- -------- --------- --------
Net cash provided by (used in) operating
activities........................................ (30,287) 2,579 (6,628) (34,336)
--------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... (3,804) -- 30,926 27,122
Additions to real estate.................................. (2,252) (25) 11,586 9,309
Proceeds from sales of property and investments held for
sale.................................................... -- 161 (196) (35)
Purchase of general and limited partnership interests..... (44,270) -- 61,690 17,420
Purchases of / additions to notes receivable.............. (17,107) (15,407) 4,925 (27,589)
Proceeds from repayments/sale of notes receivable......... 151 23,672 (2,638) 21,185
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 21,360 -- 693 22,053
Payment of trust based preferred dividends................ (7,415) -- -- (7,415)
Cash received in connection with AMIT Merger.............. 13,423 -- -- 13,423
Merger costs.............................................. (1,402) -- -- (1,402)
--------- -------- --------- --------
Net cash provided by (used in) investing
activities........................................ (41,316) 8,401 106,986 74,071
--------- -------- --------- --------
</TABLE>
P-33
<PAGE> 2115
<TABLE>
<CAPTION>
NEW
IFG AMIT INSIGNIA IFG
HISTORICAL(i) MERGER(ii) SPIN-OFF(iii) AS ADJUSTED
------------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 186,000 -- (8,766) 177,234
Principal repayments on secured notes payable............. (1,874) -- 6,113 4,239
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (83) -- -- (83)
Proceeds from exercises of employee stock options and
warrants................................................ 6,533 -- -- 6,533
Payment of distributions.................................. (6,541) (2,065) -- (8,606)
Payment of distributions minority interests............... (494) -- -- (494)
Net transactions with Insignia/ESG........................ (118,424) -- (122,579) (241,003)
--------- -------- --------- --------
Net cash provided by (used in) financing
activities........................................ 67,761 (2,065) (125,232) (59,536)
--------- -------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (3,842) 8,915 (24,874) (19,801)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 88,847 3,947 (9,162) 83,632
--------- -------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 85,005 $ 12,862 $ (34,036) $ 63,831
========= ======== ========= ========
</TABLE>
- ---------------
(i)Represents the unaudited consolidated statement of cash flows of IFG
for the nine months ended September 30, 1998. Certain reclassifications
have been made to IFG's historical statement of cash flows to conform
to the Partnership's statement of cash flows presentation. In addition,
the cash and cash equivalents at the beginning of the period has been
adjusted.
(ii)
Represents the historical statement of cash flows of AMIT, as well as
pro forma adjustments related to the AMIT Merger. The AMIT merger
closed prior to the IFG Merger.
(iii)
Represents the distribution of two shares of New Insignia common stock
for each three shares of IFG common stock to holders of IFG common
stock. In addition, the cash and cash equivalents at the beginning of
the period has been adjusted.
(F) Represents the following adjustments occurring as a result of the IFG
Merger and the IPT Merger; (i) the incremental depreciation of the purchase
price adjustment related to consolidated real estate and investments in
real estate partnerships; (ii) the amortization of goodwill and property
management contracts resulting from the IFG Merger; (iii) the increase in
interest expense resulting from the net increase in debt; and (iv) the
elimination of the income tax provision.
(G) Represents adjustments related to the IFG Reorganization, whereby,
following the IFG Merger, the Partnership contributed or sold to the
Unconsolidated Subsidiaries certain assets and liabilities of IFG,
primarily management contracts and related working capital assets and
liabilities related to IFG's third party management operations. The
adjustments reflect the related cash flow activity primarily related to the
management operations owned by IFG, with additional amortization recorded
related to the Partnership's new basis resulting from the allocation of the
purchase price of IFG.
(H) Represents adjustment to remove the use of cash to purchase the 1998
Acquisitions, as if these acquisitions occurred on January 1, 1997;
therefore, the purchases are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(I) Represents cash payments for capital improvements of $300 per unit on the
1998 Acquisitions.
(J) Represents adjustment to remove the proceeds from the sale of the 1998
Dispositions, as if these dispositions occurred on January 1, 1997;
therefore, the proceeds are included on the Pro Forma Consolidated
Statement of Cash Flows for the year ended December 31, 1997.
(K) Represents adjustment to remove net principal repayments assuming the 1998
Acquisitions, the 1998 Dispositions and the 1998 Stock Offerings occurred
January 1, 1997; therefore, the repayments are included on the Pro Forma
Consolidated Statement of Cash Flows for the year ended December 31, 1997.
(L) Represents adjustment to remove cash proceeds from the 1998 Stock
Offerings, as if these offerings occurred on January 1, 1997; therefore,
the repayments are included on the Pro Forma Consolidated Statement of Cash
Flows for the year ended December 31, 1997.
P-34
<PAGE> 2116
(M) Represents pro forma distributions on the units issued in the Preferred
Partnership Unit Offering as if these units had been issued January 1,
1997.
(N) Represents distributions paid to limited partners on OP Units issued in
connection with the 1998 Acquisitions and the Probable Purchases, as if the
issuance of the OP Units occurred on January 1, 1997.
(O) Represents preferred unit distributions paid on the 1998 Stock Offerings as
if these occurred on January 1, 1997.
(P) Represents pro forma distributions and distributions to limited partners on
the shares issued in the Ambassador Merger as if these shares had been
issued on January 1, 1997.
(Q) Represents pro forma distributions on the shares issued in the IFG Merger
and IPT Merger as if these shares had been issued on January 1, 1997.
P-35
<PAGE> 2117
PRO FORMA FINANCIAL INFORMATION OF
AIMCO PROPERTIES, L.P.
(EXCHANGE OFFERS)
INTRODUCTION
AIMCO Properties L.P. (the "Partnership") intends to offer to purchase
limited partnership interests in syndicated real estate limited partnerships in
which AIMCO holds partnership interests. The Partnership, is subject to
applicable law, plans to offer to purchase certain of such limited partnership
interests in exchange for (i) equity securities of the Partnership; (ii) cash or
(iii) a combination of such equity securities and cash. Such offers are expected
to include terms that will allow limited partners to continue to hold their
limited partnership interests.
The following Pro Forma Consolidated Balance Sheet (Exchange Offers) of the
Partnership as of September 30, 1998 has been prepared as if each of the
following transactions had occurred as of September 30, 1998: (i) all the
transactions discussed in the Pro Forma Financial Statements (Insignia Merger)
appearing elsewhere herein; and (ii) the acceptance of exchange offers by
limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the year ended December 31, 1997 has been prepared as if
each of the following transactions had occurred as of January 1, 1997: (i) all
the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The following Pro Forma Consolidated Statement of Operations (Exchange
Offers) and Pro Forma Consolidated Statement of Cash Flows (Exchange Offers) of
the Partnership for the nine months ended September 30, 1998 has been prepared
as if each of the following transactions had occurred as of January 1, 1998: (i)
all the transactions discussed in the Pro Forma Financial Statements (Insignia
Merger) appearing elsewhere herein; and (ii) the acceptance of exchange offers
by limited partners in 91 limited partnerships.
The Pro Forma Financial Information (Exchange Offers) is based, in part, on
the historical financial statements of the partnerships in which the Exchange
Offers are made. The Pro Forma Financial Information (Exchange Offers) is also
based, in part, on the Pro Forma Financial Information (Insignia Merger) of the
Partnership included elsewhere herein. Such pro forma information is based in
part upon: (i) the audited Consolidated Financial Statements of Insignia for the
year ended December 31, 1997; (ii) the audited Consolidated Financial Statements
of Angeles Mortgage Investment Trust ("AMIT") for the year ended December 31,
1997; (iii) the unaudited Consolidated Financial Statements of Insignia for the
nine months ended September 30, 1998; and (iv) the unaudited Consolidated
Financial Statements of AMIT for the period from January 1, 1998 to September
17, 1998. The Pro Forma Financial Information (Insignia Merger) is also based,
in part, upon: (i) the audited Consolidated Financial Statements of Ambassador
for the year ended December 31, 1997; (ii) the audited Consolidated Financial
Statements of the Partnership for the year ended December 31, 1997; (iii) the
unaudited Consolidated Financial Statements of Ambassador for the four months
ended April 30, 1998; (iv) the unaudited Consolidated Financial Statements of
the Partnership for the nine months ended September 30, 1998; and (v) the
historical financial statements of certain properties and companies acquired by
AIMCO filed in AIMCO's Current Reports on Form 8-K, dated April 16, 1997, May 5,
1997, June 3, 1997, September 19, 1997, October 15, 1997, December 1, 1997 and
November 2, 1998. The following Pro Forma Financial Information (Exchange
Offers) should be read in conjunction with such financial statements and notes
thereto.
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared under the assumption that after the exchange offers are accepted, AIMCO
will own varying ownership percentages of each partnership, and that the limited
partners will choose to elect to receive 35% of the consideration in the form of
equity securities of AIMCO Properties, L.P. and 65% of the consideration in the
form of cash. The
P-36
<PAGE> 2118
interest to be acquired in each of the partnerships, the estimated purchase
price for each partnership, including cash, common units, or preferred units is
summarized below:
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Angeles Income Properties, Ltd. II.................... 26.70 $ 4,946 $ 3,215 $1,731
Angeles Income Properties, Ltd. III................... 30.63 2,156 1,401 755
Angeles Income Properties, Ltd. IV.................... 18.64 1,154 750 404
Angeles Income Properties, Ltd. 6..................... 37.29 4,523 2,940 1,583
Angeles Opportunity Properties, Ltd................... 37.94 1,729 1,124 605
Angeles Partners VII.................................. 24.86 610 397 213
Angeles Partners VIII................................. 24.80 0 0 0
Angeles Partners IX................................... 18.92 1,171 761 410
Angeles Partners X.................................... 22.97 709 461 248
Angeles Partners XI................................... 21.83 205 133 72
Angeles Partners XII.................................. 11.89 2,877 1,870 1,007
Angeles Partners XIV.................................. 24.93 0 0 0
Baywood Partners, Ltd................................. 25.00 347 226 121
Brampton Associates Partnership....................... 25.00 382 248 134
Buccaneer Trace Limited Partnership................... 25.00 2 1 1
Burgundy Court Associates, L.P........................ 25.00 1,074 698 376
Calmark/Fort Collins, Ltd............................. 25.00 192 125 67
Calmark Heritage Park II Ltd.......................... 25.00 47 31 16
Casa Del Mar Associates Limited Partnership........... 21.16 503 327 176
Catawba Club Associates, L.P.......................... 25.00 85 55 30
Cedar Tree Investors Limited Partnership.............. 25.00 1,037 674 363
Century Properties Fund XVI........................... 12.52 831 540 291
Century Properties Fund XVIII......................... 13.08 474 308 166
Century Properties Fund XIX........................... 15.30 1,765 1,147 618
Century Properties Growth Fund XXII................... 21.43 4,977 3,235 1,742
Chapel Hill, Limited.................................. 21.15 569 370 199
Chestnut Hill Associates Limited Partnership.......... 26.75 1,582 1,028 554
Coastal Commons Limited Partnership................... 25.00 566 368 198
Consolidated Capital Institutional Properties/2 &
Consolidated Capital Equity Properties/2............ 18.98 7,320 4,758 2,562
Consolidated Capital Institutional Properties/3....... 16.37 6,770 4,401 2,369
Consolidated Capital Properties III................... 13.02 1,134 737 397
Consolidated Capital Properties IV.................... 18.04 9,407 6,112 3,295
Consolidated Capital Properties V..................... 16.69 560 364 196
Consolidated Capital Properties VI.................... 25.82 556 361 195
DFW Apartment Investors Limited Partnership........... 35.65 2,719 1,767 952
DFW Residential Investors Limited Partnership......... 37.60 1,092 710 382
Davidson Diversified Real Estate I, L.P............... 34.78 627 408 219
Davidson Diversified Real Estate II, L.P.............. 35.11 1,318 857 461
Davidson Diversified Real Estate III, L.P............. 21.76 0 0 0
Davidson Growth Plus, L.P............................. 23.91 2,304 1,498 806
Davidson Income Real Estate, L.P...................... 30.81 2,691 1,749 942
Drexel Burnham Lambert Real Estate Associates II...... 19.58 994 646 348
Four Quarters Habitat Apartment Associates, Ltd....... 25.00 174 113 61
Fox Strategic Housing Income Partners................. 33.18 2,414 1,569 845
Georgetown of Columbus Associates, L.P................ 25.00 227 148 79
HCW Pension Real Estate Fund Limited Partnership...... 32.64 2,368 1,539 829
Investors First-Staged Equity......................... 49.00 306 199 107
Johnstown/Consolidated Income Partners................ 25.66 1,871 1,216 655
La Colina Partners, Ltd............................... 25.00 583 379 204
Lake Eden Associates, L.P............................. 25.00 632 411 221
Landmark Associates, L.P.............................. 25.00 48 31 17
</TABLE>
P-37
<PAGE> 2119
<TABLE>
<CAPTION>
INTEREST TO ESTIMATED
BE ACQUIRED PURCHASE
PARTNERSHIP NAME IN PARTNERSHIP PRICE CASH OP UNITS
---------------- -------------- --------- ------- --------
<S> <C> <C> <C> <C>
Minneapolis Associates II Limited Partnership......... 25.00 $ 2 $ 1 $ 1
Multi-Benefit Realty Fund "87-1-Class A & Class B..... 21.89 1,657 1,077 580
National Property Investors 8......................... 11.13 988 642 346
Northbrook Apartments, Ltd............................ 25.00 209 136 73
Olde Mill Investors Limited Partnership............... 8.75 170 111 59
Orchard Park Apartments Limited Partnership........... 25.00 1 1 0
Park Town Place Associates Limited Partnership........ 24.70 298 194 104
Quail Run Associates, L.P............................. 25.00 487 317 170
Ravensworth Associates Limited Partnership............ 25.00 1 1 0
Rivercreek Apartments Limited Partnership............. 25.00 180 117 63
Rivercrest Apartments, Limited........................ 25.00 1,687 1,097 590
Riverside Park Associates L.P......................... 13.69 590 384 206
Salem Arms of Augusta Limited Partnership............. 25.00 278 181 97
Shaker Square, L.P.................................... 23.75 631 410 221
Shannon Mannor Apartments, Limited Partnership........ 25.00 1,170 761 409
Sharon Woods, L.P..................................... 22.75 499 324 175
Shelter Properties III................................ 15.20 1,960 1,274 686
Shelter Properties IV................................. 50.52 12,764 8,295 4,469
Shelter Properties VI................................. 13.78 1,919 1,247 672
Shelter Properties VII Limited Partnership............ 26.65 1,975 1,284 691
Snowden Village Associates, L.P....................... 25.00 443 288 155
Springhill Lake Investors Limited Partnership......... 11.84 2,908 1,890 1,018
Sturbrook Investors, Ltd.............................. 25.00 377 245 132
Sycamore Creek Associates, L.P........................ 25.00 1 1 0
Texas Residential Investors Limited Partnership....... 18.45 1,147 746 401
Thurber Manor Associates, Limited Partnership......... 25.00 218 142 76
U.S. Realty Partners Limited Partnership.............. 25.00 1,441 937 504
United Investors Growth Properties.................... 39.01 165 107 58
United Investors Growth Properties II................. 25.00 351 228 123
United Investors Income Properties.................... 23.44 1,977 1,285 692
Villa Nova, Limited Partnership....................... 25.00 228 148 80
Walker Springs, Limited............................... 23.99 95 62 33
Wingfield Investors Limited Partnership............... 25.00 179 116 63
Winrock-Houston Limited Partnership................... 13.60 1,041 677 364
Winthrop Apartment Investors Limited Partnership...... 31.60 1,318 857 461
Winthrop Growth Investors 1 Limited Partnership....... 27.94 1,233 801 432
Winthrop Texas Investors Limited Partnership.......... 5.27 158 103 55
Woodmere Associates, L.P.............................. 25.00 280 182 98
Yorktown Towers Associates............................ 25.00 809 526 283
-------- ------- ------
Total (See adjustment C to the Pro Forma Consolidated
Balance Sheet)...................................... $122,463 $79,601 42,862
======== ======= ======
</TABLE>
The unaudited Pro Forma Financial Information (Exchange Offers) has been
prepared using the purchase method of accounting whereby the assets and
liabilities of NHP, the NHP Real Estate Companies, Ambassador, IFG, IPT, the
Exchange Offers, the 1997 Acquisitions, the 1998 Acquisitions and the Probable
Purchases are adjusted to estimated fair market value, based on preliminary
estimates, which are subject to change as additional information is obtained.
The allocations of purchase costs are subject to final determination based upon
estimates and other evaluations of fair market value. Therefore, the allocations
reflected in the following unaudited Pro Forma Financial Information (Exchange
Offers) may differ from the amounts ultimately determined.
P-38
<PAGE> 2120
The following unaudited Pro Forma Financial Information (Exchange Offers)
is presented for informational purposes only and is not necessarily indicative
of the financial position or results of operations of the Partnership that would
have occurred if such transactions had been completed on the dates indicated,
nor does it purport to be indicative of future financial positions, results of
operations or cash flows. In the opinion of the Partnership's management, all
material adjustments necessary to reflect the effects of these transactions have
been made.
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (EXCHANGE OFFERS)
AS OF SEPTEMBER 30, 1998
ASSETS
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT UNIT DATA)
<S> <C> <C> <C>
Real estate....................................... $2,625,822 $ 12,764(C)
26,954(D)
13,655(E) $2,679,195
Property held for sale............................ 42,212 -- 42,212
Investments in and notes receivable from
unconsolidated subsidiaries..................... 186,277 -- 186,277
Investments in and notes receivable from
unconsolidated partnerships..................... 924,309 109,699(C)
(13,655)(E)
(8,161)(F)
816(G) 1,013,008
Mortgage notes receivable......................... 20,916 -- 20,916
Cash and cash equivalents......................... 104,955 2,620(D) 107,575
Restricted cash................................... 84,526 1,807(D) 86,333
Accounts receivable............................... 27,900 1,081(D) 28,981
Deferred financing costs.......................... 21,835 -- 21,835
Goodwill.......................................... 251,024 -- 251,024
Property management contracts..................... 38,371 -- 38,371
Other assets...................................... 82,670 422(D) 83,092
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
LIABILITIES AND PARTNERS' CAPITAL
Secured notes payable............................. $ 926,246 $ 23,642(D) $ 949,888
Secured tax-exempt bond financing................. 399,925 -- 399,925
Secured short-term financing...................... 32,691 -- 32,691
Unsecured short-term financing.................... 300,000 79,601(C) 379,601
Accounts payable, accrued and other liabilities... 248,253 826(D) 249,079
Security deposits and deferred income............. 13,171 255(D) 13,426
---------- -------- ----------
1,920,286 104,324 2,024,610
Minority interests................................ 79,431 816(G) 80,247
Company obligated mandatorily redeemable
convertible securities of a subsidiary trust.... 149,500 -- 149,500
Redeemable common partnership units............... 277,581 8,161(D)
(8,161)(F)
30,616(C) 308,197
Redeemable preferred partnership units............ -- 12,246(C) 12,246
Partner's capital
General and Special Limited Partner............. 1,496,457 -- 1,496,457
Preferred Units................................. 487,562 -- 487,562
---------- -------- ----------
1,984,019 -- 1,984,019
---------- -------- ----------
$4,410,817 $148,002 $4,558,819
========== ======== ==========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
P-39
<PAGE> 2121
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical balance sheet data as of September 30, 1998 (unaudited) related
to the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Real estate................................................. $1,082,652
Cash........................................................ 151,024
Total assets................................................ 1,493,409
Mortgages payable........................................... 1,585,196
Partners' capital (deficit)................................. (171,740)
</TABLE>
(C) Represents the purchase price paid by the Partnership to the limited
partners in order to obtain additional ownership by AIMCO in 91 real estate
partnerships. For the purposes of the pro-forma presentation, it is
assumed: (i) 65% of the purchase price is funded with cash by drawing down
on the Partnership's unsecured short term credit facility; (ii) 25% of the
purchase price is funded by the issuance of 749,362 OP Units at $40 per OP
Unit; and (iii) 10% of the purchase price is funded by the issuance of 8%
Preferred OP Units.
(D) Represents historical balance sheet data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(E) Represent the adjustment to real estate recorded in the IFG Merger related
to the one real estate partnership that will be consolidated as a result of
the Partnership's purchase of additional partnership interests.
(F) Represents the elimination of the partners' capital in the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional partnership interests.
(G) Represents minority interest of the one real estate partnership that will
be consolidated as a result of the Partnership's purchase of additional
partnership interests.
P-40
<PAGE> 2122
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations.............. $ 431,256 $ 11,270(C) $ 442,526
Property operating expenses....................... (182,830) (6,612)(C) (189,442)
Owned property management expense................. (11,831) -- (11,831)
Depreciation...................................... (96,264) (2,589)(C) (98,853)
--------- -------- ---------
Income from property operations................... 140,331 2,069 142,400
--------- -------- ---------
Management fees and other income.................. 41,676 -- 41,676
Management and other expenses..................... (23,683) -- (23,683)
Corporate overhead allocation..................... (588) -- (588)
Amortization...................................... (26,480) -- (26,480)
--------- -------- ---------
Income from service company business.............. (9,075) -- (9,075)
Minority interest in service company business..... (10) -- (10)
--------- -------- ---------
Partnership's share of income from service company
business........................................ (9,085) -- (9,085)
--------- -------- ---------
General and administrative expenses............... (21,371) -- (21,371)
Interest expense.................................. (113,788) (5,691)(D)
(2,220)(C) (121,699)(H)
Interest income................................... 21,734 21,734
Minority interests................................ (9,983) (51)(E) (10,034)
Equity in losses of unconsolidated partnerships... (27,537) (16,864)(F)
483(G) (43,918)(I)
Equity in earnings of Unconsolidated
Subsidiaries.................................... 5,848 -- 5,848
--------- -------- ---------
Net income (loss)................................. (13,851) (22,274) (36,125)(H)
Income attributable to Preferred Unitholders...... 42,174 980 43,154(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders...... (56,025) $(23,254) $ (79,279)(H)
========= ======== =========
Basic earnings (loss) per OP Unit................. (.83) $ (1.16)(H)
========= =========
Diluted earnings (loss) per OP Unit............... $ (.83) $ (1.16)(H)
========= =========
Weighted average OP Units outstanding............. 67,522 68,287
========= =========
Weighted average OP Units and equivalents
outstanding..................................... 68,366 69,131
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $456,968
Operating expense........................................... 249,097
Depreciation................................................ 87,344
Interest.................................................... 138,778
Net income.................................................. 15,005
</TABLE>
P-41
<PAGE> 2123
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $10,740 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $6,124 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net loss,
preferred unit distributions, and net loss per OP Unit in the event that
the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- --------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense......... $(121,699) $(124,763) $(116,008) $(116,008)
Net loss................. (36,125) (39,189 (30,434) (30,434)
Preferred unit
distributions.......... 43,154 42,174 42,174 51,971
Net loss attributable to
OP Unitholders......... (79,279) (81,363) (72,608) (82,405)
Net loss per OP Unit..... (1.16) (1.20) (1.03) (1.22)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................. $ 1,137 $ 1,245 $ 938 $ 938
Net loss................... (37,262) (40,434) (31,372) (31,372)
Net loss attributable to OP
Unitholders.............. (80,416) (82,608) (73,546) (83,343)
Net loss per OP Unit....... (1.18) (1.22) (1.04) (1.23)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, the Partnership will own 49%
of certain 88 Partnerships, 25% of two Partnerships, and 100% of one
Partnership. The amount included in the pro forma financial statements
assume an acceptance rate of 100%. The following table shows the effect on
equity in earnings of unconsolidated partnerships, net loss, net loss
attributable to OP Unitholders, and net loss per OP Unit in the event that
the Partnership will have an acceptance rate of 50% of the interests
tendered and will own varying percentages of each partnership:
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(36,510)
Net loss.................................................... (26,084)
Net loss attributable to OP Unitholders..................... (68,784)
Net loss per OP Unit........................................ (1.01)
</TABLE>
P-42
<PAGE> 2124
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-43
<PAGE> 2125
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Rental and other property operations............... $ 337,307 $ 8,654(C) $ 345,961
Property operating expenses........................ (131,851) (4,389)(C) (136,240)
Owned property management expense.................. (8,933) -- (8,933)
Depreciation....................................... (78,479) (1,941)(C) (80,420)
--------- -------- ---------
Income from property operations.................... 118,044 2,324 120,368
--------- -------- ---------
Management fees and other income................... 28,912 -- 28,912
Management and other expenses...................... (14,386) -- (14,386)
Corporate overhead allocation...................... (196) -- (196)
Amortization....................................... (15,243) -- (15,243)
--------- -------- ---------
Income from service company business............... (913) -- (913)
Minority interest in service company business...... -- -- --
--------- -------- ---------
Partnership's share of income from service company
business......................................... (913) -- (913)
--------- -------- ---------
General and administrative expenses................ (8,632) -- (8,632)
Interest expense................................... (85,010) (4,250)(D)
(1,630)(C) (90,890)(H)
Interest income.................................... 40,887 40,887
Minority interests................................. (8,429) (119)(E) (8,548)
Equity in losses of unconsolidated partnerships.... (10,234) (13,156)(F)
41(G) (23,349)(I)
Equity in earnings of Unconsolidated
Subsidiaries..................................... 851 -- 851
Amortization of goodwill........................... (5,071) -- (5,071)
--------- -------- ---------
Net income (loss).................................. 41,493 (16,790) 24,703(H)
Income attributable to Preferred Unitholders....... 32,414 735 33,149(J)
--------- -------- ---------
Income (loss) attributable to OP Unitholders....... $ 9,079 $(17,525) $ (8,446)(H)
========= ======== =========
Basic earnings (loss) per OP Unit.................. $ .13 $ (.12)(H)
========= =========
Diluted earnings (loss) per OP Unit................ $ .13 $ (.12)(H)
========= =========
Weighted average OP Units outstanding.............. 68,554 69,319
========= =========
Weighted average OP Units and equivalents
outstanding...................................... 69,218 69,983
========= =========
</TABLE>
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical operating data (unaudited) for the nine months ended September
30, 1998 related to the 91 real estate partnerships is as follows (dollars
in thousands):
<TABLE>
<S> <C>
Revenue..................................................... $338,937
Operating expense........................................... 182,529
Depreciation................................................ 64,127
Interest.................................................... 103,756
Net income.................................................. (9,329)
</TABLE>
P-44
<PAGE> 2126
(C) Represents historical statement of operations data related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(D) Represents the increase in interest expense related to borrowings to pay
the cash portion of the purchase price of the partnership interests. The
interest rate used in the calculation of interest expense was LIBOR plus
1.75%.
(E) Represents the minority interests share of net income of the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(F) Represents the changes in the Partnership's equity in losses from the 91
real estate partnerships of (i) $8,552 resulting from the Partnership's
increase in the ownership based on the historical operating results of the
91 real estate partnerships; and (ii) amortization of $4,604 related to the
increased basis in investments in real estate partnerships, as a result of
the allocation of the purchase price of the partnership interests, based on
an estimated average life of 20 years.
(G) Represents the elimination of the equity earnings related to the one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of additional limited partnership interests.
(H) The pro forma financial statements have been prepared under the assumption
that the limited partners will elect 65% of the consideration to be paid in
cash, 25% of the consideration to be paid in the form of common OP Units,
and 10% of the consideration to be paid in the form of 8% Preferred OP
Units. The following table shows the effect on interest expense, net
income, preferred unit distributions, and net loss per OP Unit in the event
that the limited partners elect to receive all their consideration in cash,
common OP Units, and 8% Preferred OP Units, respectively:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- -------- --------------- ------------
<S> <C> <C> <C> <C>
Interest expense........... $(90,890) $(93,184) $(86,640) $(86,640)
Net income................. 24,703 22,409 28,953 28,953
Preferred unit
distributions............ 33,149 32,414 32,414 39,762
Net loss attributable to OP
Unitholders.............. (8,446) (10,005) (3,461) (10,809)
Net loss per OP Unit....... (.12) (.15) (.05) (.16)
</TABLE>
In addition, the following table presents the net impact to interest
expense, net loss, and net loss per OP Unit assuming the interest rate per
annum increases by 0.25%:
<TABLE>
<CAPTION>
8% PREFERRED
PRO FORMA CASH COMMON OP UNITS OP UNITS
--------- ------- --------------- ------------
<S> <C> <C> <C> <C>
Increase in interest
expense.................... $ 851 $ 931 $ 702 $ 702
Net income................... 24,703 21,478 28,251 28,251
Net loss attributable to OP
Unitholders................ (9,296) (10,936) (4,163) (11,511)
Net loss per OP Unit......... (.13) (.16) (.06) (.17)
</TABLE>
(I) The pro forma financial statements have been prepared under the assumption
that after the exchange offers are accepted, AIMCO will own 49% of certain
88 Partnerships, 25% of two Partnerships, and 100% of one Partnership. The
following table shows the effect on equity in earnings of unconsolidated
partnerships, net income, net income (loss) attributable to OP Unitholders,
and net loss per OP Unit in the event the Partnership will own varying
percentages of each partnership.
<TABLE>
<S> <C>
Equity in earnings of unconsolidated partnerships........... $(17,797)
Net income.................................................. 32,216
Net income (loss) attributable to OP Unitholders............ (593)
Net income (loss) per OP Unit............................... (.01)
</TABLE>
P-45
<PAGE> 2127
(J) Represents the net income attributable to holders of the Class B Preferred
Units, the Class C Preferred Units, the Class D Preferred Units, the Class
G Preferred Units, the Class H Preferred Units, the Class J Preferred Units
and the 8% Preferred OP Units as if these Preferred Units had been issued
as of January 1, 1997.
P-46
<PAGE> 2128
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ (13,851) $(22,274)(C) $ (36,125)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 128,169 2,589(D) 130,758
Gain on investments..................................... (12) -- (12)
(Gain) loss on disposition of properties................ (3,882) -- (3,882)
Minority interests...................................... 9,983 51 10,034
Equity in earnings of unconsolidated partnerships....... 27,537 16,864(E)
(483)(F) 43,918
Equity in earnings of unconsolidated subsidiaries....... (5,848) -- (5,848)
Extraordinary (gain) loss on early extinguishment of
debt.................................................. --
Changes in operating assets and operating liabilities... 519 (660)(G) (141)
---------- -------- ----------
Total adjustments................................... 156,466 18,361 174,827
---------- -------- ----------
Net cash provided by (used in) operating
activities........................................ 142,615 (3,913) 138,702
Net cash used in discontinued operations............ (7,999) -- (7,999)
---------- -------- ----------
Net cash provided by (used in) continuing
operations........................................ 134,616 (3,913) 130,703
---------- -------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate......................... 41,419 -- 41,419
Purchase of real estate................................... (625,603) -- (625,603)
Additions to real estate, investments and property held
for sale................................................ (55,892) (1,024)(G) (56,916)
Proceeds from sale of property held for sale.............. 303 -- 303
Purchase of general and limited partnership interests..... (276,458) (79,601)(H) (356,059)
Purchase of management contracts.......................... (48,554) -- (48,554)
Purchase of/additions to notes receivable................. (81,670) -- (81,670)
Proceeds from repayments of notes receivable.............. 10,052 -- 10,052
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 94,686 10,070(I) 104,756
Contribution to unconsolidated subsidiaries............... (42,879) -- (42,879)
Proceeds from sale of securities.......................... 642 -- 642
Purchase of investments held for sale..................... (73) -- (73)
Purchase of NHP........................................... (60,575) -- (60,575)
Purchase of Ambassador common stock....................... (19,881) -- (19,881)
---------- -------- ----------
Net cash used in investing activities............... (1,064,483) (70,555) (1,135,038)
---------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 761,270 -- 761,270
Principal repayments on secured notes payable............. (307,917) (713)(G) (308,630)
Proceeds from secured short-term financing................ 19,050 79,601(H) 98,651
Repayments on secured short-term financing................ (259,461) -- (259,461)
Principal repayments on unsecured short-term notes
payable................................................. (50,879) -- (50,879)
Proceeds (payoff) from unsecured short-term financing..... (12,500) -- (12,500)
Principal repayments on secured tax-exempt bond
financing............................................... (1,487) -- (1,487)
Net borrowings (paydowns) on the Company's revolving
credit facilities....................................... (162,008) -- (162,008)
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (17,032) -- (17,032)
Proceeds from issuance of common and preferred stock,
net..................................................... 1,098,265 -- 1,098,265
Proceeds from exercises of employee stock options and
warrants................................................ 11,553 -- 11,553
Repurchase of common stock................................ (3,283) -- (3,283)
Principal repayments received on notes due from
Officers................................................ 27,280 -- 27,280
Investments made by minority interests.................... 249 -- 249
Receipt of contributions from minority interests.......... 37,345 -- 37,345
Payments of distributions to minority interests........... (2,713) -- (2,713)
Payment of distributions.................................. (130,657) -- (130,657)
Payment of distributions to limited partners.............. (5,208) (1,415)(J) (6,623)
Payment of preferred unit distributions................... (42,984) (979)(K) (43,963)
Payment of distributions to minority interests............ (21,788) -- (21,788)
Net transactions with Insignia/ESG........................ (57,612) -- (57,612)
---------- -------- ----------
Net cash provided by financing activities........... 879,483 76,494 955,977
---------- -------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (50,384) 2,026 (48,358)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 117,896 2,291 120,187
---------- -------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 67,512 $ 4,317 $ 71,829
========== ======== ==========
</TABLE>
P-47
<PAGE> 2129
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the year ended December 31, 1997 related to
the 91 real estate partnerships is as follows (dollars in thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 65,372
Cash used in investing activities......................... (11,713)
Cash used in financing activities......................... (74,617)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 20 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the cash portion of the purchase price (and additional
borrowings by the Partnership) related to the acquisition by the
Partnership of additional limited partnership interests in 91 real estate
limited partnerships.
(I) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(J) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.85 per Common OP Unit.
(K) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-48
<PAGE> 2130
AIMCO PROPERTIES, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (EXCHANGE OFFERS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
INSIGNIA MERGER PRO FORMA
PRO FORMA(A) ADJUSTMENTS(B) EXCHANGE OFFERS
--------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss)......................................... $ 41,493 $(16,790)(C) $ 24,703
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization........................... 101,523 1,941(D) 103,464
(Gain) loss on disposition of properties................ -- -- --
Minority interests...................................... 8,429 119 8,548
Equity in earnings of unconsolidated partnerships....... 10,234 13,156(E)
(41)(F) 23,349
Equity in earnings of unconsolidated subsidiaries....... (851) -- (851)
Non-cash compensation................................... 796 -- 796
Changes in operating assets and operating liabilities... (69,549) (21)(G) (69,570)
--------- -------- ---------
Total adjustments................................... 50,582 15,154 65,736
--------- -------- ---------
Net cash provided by operating activities........... 92,075 (1,636) 90,439
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of real estate................................... 27,122 -- 27,122
Additions to real estate.................................. (57,526) (668)(G) (58,194)
Proceeds from sale of property and investments held for
sale.................................................... (35) -- (35)
Additions to property held for sale....................... (1,986) -- (1,986)
Purchase of general and limited partnership interests..... (9,596) -- (9,596)
Purchase of/additions to notes receivable................. (100,034) -- (100,034)
Proceeds from repayments/sale of notes receivable......... 42,747 -- 42,747
Distributions from investments in real estate partnerships
and unconsolidated subsidiaries......................... 23,629 5,809(H) 29,438
Payment of trust based preferred dividends................ (7,415) -- (7,415)
Cash received in connection with Ambassador Merger and
AMIT Merger............................................. 17,915 -- 17,915
Contribution to unconsolidated subsidiaries............... (13,032) -- (13,032)
Purchase of investments held for sale..................... (4,935) -- (4,935)
Redemption of OP Units.................................... (516) -- (516)
Merger costs.............................................. (1,402) -- (1,402)
--------- -------- ---------
Net cash used in investing activities............... (85,064) 5,141 (79,923)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from secured notes payable borrowings............ 291,885 -- 291,885
Principal repayments on secured notes payable............. (52,023) -- (52,023)
Principal advances on secured tax-exempt bond financing... 21,784 -- 21,784
Principal repayments on secured tax-exempt bond
financing............................................... (1,436) -- (1,436)
Net borrowings/ repayments on secured short-term
financing............................................... 135,332 -- 135,332
Net borrowings (paydowns) on the revolving credit
facilities.............................................. 2,513 (812)(G) 1,701
Principal repayments on unsecured short-term notes
payable................................................. 2,644 -- 2,644
Payment of loan costs, net of proceeds from interest rate
hedge................................................... (5,810) -- (5,810)
Proceeds from issuance of common stock and preferred
stock, net.............................................. -- -- --
Repurchase of common stock................................ (10,972) -- (10,972)
Proceeds from exercises of employee stock options and
warrants................................................ 16,294 -- 16,294
Principal repayments received on notes due from
Officers................................................ 8,084 -- 8,084
Receipt of contributions from minority interests.......... -- -- --
Payments of distributions to minority interests........... (2,034) (2,034)
Payment of distributions.................................. (107,989) -- (107,989)
Payment of distributions to limited partners.............. (12,669) (1,291)(I) (13,960)
Payment of preferred unit distributions................... (27,010) (735)(J) (27,745)
Proceeds from issuance of High Performance Units.......... 1,988 -- 1,988
Net transactions with Insignia/ESG........................ (241,003) -- (241,003)
--------- -------- ---------
Net cash provided by financing activities........... 19,578 (2,838) 16,740
--------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 26,589 667 27,256
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 55,700 4,316 60,016
--------- -------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 82,289 $ 4,983 $ 87,272
========= ======== =========
</TABLE>
P-49
<PAGE> 2131
- ---------------
(A) See "Pro Forma Financial Information (Insignia Merger)."
(B) Represents adjustments related to the Partnership's purchase of additional
limited partnership interests in 91 real estate partnerships. Selected
historical cash flow data for the nine months ended September 30, 1998
related to the 91 real estate partnerships is as follows (dollars in
thousands):
<TABLE>
<S> <C>
Cash provided by operating activities..................... $ 76,113
Cash used in investing activities......................... (22,616)
Cash used in financing activities......................... (42,273)
</TABLE>
(C) Represents the pro forma net loss related to the Partnership's purchase of
additional limited partnership interests in 91 real estate partnerships.
(D) Represents additional deprecation related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests, based on the
Partnership's new basis in the real estate. Buildings and improvements are
depreciated on the straight-line method over a period of 30 years and
furniture and fixtures are depreciated on the straight-line method over a
period of 5 years.
(E) Represents the increase in the Partnership's equity in earnings from the 90
real estate partnerships resulting from the Partnership's corresponding
increase in ownership.
(F) Represents the elimination of the equity earnings related to one real
estate partnership that will be consolidated as a result of the
Partnership's purchase of the additional limited partnership interests.
(G) Represents historical cash flow data related to the one real estate
partnership that will be consolidated as a result of the Partnership's
purchase of additional limited partnership interests.
(H) Represents the distributions to be received for the additional partnership
interests acquired by the Partnership in the 91 real estate partnerships,
based on the historical distributions paid per partnership unit.
(I) Represents adjustments for distributions paid on the Common OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at the
historical distribution amount of $1.6875 per Common OP Unit.
(J) Represents adjustments for distributions paid on the Preferred OP Units
assumed to be issued by the Partnership to acquire the additional limited
partnership interests in 91 real estate limited partnerships, at a
distribution rate of 8% per Preferred OP Unit.
P-50
<PAGE> 2132
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: Lake Eden Limited
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 Lake
Eden Limited (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 limited
partnership interests in the Partnership (the "Units") will be acquired by the
Purchaser in exchange for an offer price per Unit of $71,211 in cash, or
1,892.50 Common OP Units of the Purchaser, or 2,848.50 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 financial statements for the years ended
December 31, 1996 and 1997 and the quarterly report for the period ending
September 30, 1998, which the Partnership's management has indicated to be
the most current available financial statements;
3. Reviewed descriptive information concerning the real property owned
by the Partnership (the "Property"), including location, number of units
and unit mix, age, amenities and land acreage;
4. Reviewed summary historical operating statements for the Property,
for the years ended December 31, 1996 and 1997, and the nine months ending
September 30, 1998;
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<PAGE> 2133
5. Reviewed the 1998 operating budget for the Property prepared by the
Partnership's management. Such budgets are summarized in the Prospectus
Supplement under the section "Stanger Analysis -- Summary of Materials
Considered";
6. Reviewed the estimate of liquidation value and going concern value
provided the general partner to Stanger. Such estimates are described in
the Prospectus Supplement under the section "Fairness of the
Offer -- Comparison of Consideration to Alternative Consideration." In
addition, we reviewed the 1998 operating budgets for each property provided
by the Partnership;
7. Discussed with management market conditions for the Property;
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 Property and the Partnership; the physical condition
of the Property including any deferred maintenance; and other factors
influencing value of the Property and the Partnership;
8. Performed a site inspection of the Property;
9. Reviewed data and discussed with local sources real estate rental
market conditions in the market of the Property, and reviewed available
information relating to acquisition criteria for income-producing
properties similar to the Property;
10. Reviewed information provided by the Company relating to debt
encumbering the Property; and
11. 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 Property, the allocation of net
Partnership values between the General Partner and Limited Partners, and the
transaction costs and fees associated with a sale of the Property. 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 Property 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 Property 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 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
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<PAGE> 2134
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
March , 1999
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<PAGE> 2135
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 directors
of AIMCO are set forth below. The two directors of AIMCO-GP are Terry Considine
and Peter Kompaniez. The two directors of the general partner of your
partnership are Peter K. Kompaniez and Patrick J. Foye. The two executive
officers of the general partner of your partnership are Patrick J. Foye,
Executive Vice President, and Timothy R. Garrick, Vice President -- Accounting.
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
Paul J. McAuliffe............................ Executive Vice President -- Capital Markets
Robert Ty Howard............................. Executive Vice President -- Ancillary Services
Steven D. Ira................................ Executive Vice President and Co-Founder
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
</TABLE>
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<PAGE> 2136
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
B.A. from Harvard College, a J.D. from Harvard Law School
and is admitted as a member of the Massachusetts Bar.
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.
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
</TABLE>
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<PAGE> 2137
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
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.
Paul J. McAuliffe.................... Mr. McAuliffe was appointed Executive Vice
President -- Capital Markets in February 1999. Prior to
joining AIMCO, Mr. McAuliffe was Senior Managing Director of
Secured Capital Corp and prior to that time had been a
Managing Director of Smith Barney, Inc. from 1993 to 1996,
where he was a key member of the underwriting team that led
AIMCO's initial public offering in 1994. Mr. McAuliffe was
also a Managing Director and head of the real estate group
at CS First Boston from 1990 to 1993 and he was a Principal
in the real estate group at Morgan Stanley & Co., Inc. from
1983 to 1990. Mr. McAuliffe received a B.A. from Columbia
College and an MBA from University of Virginia, Darden
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
</TABLE>
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<PAGE> 2138
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
and the Apartment Association of Metro Denver. Mr. Ira
received a B.S. from Metropolitan State College in 1975.
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.
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,
</TABLE>
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<PAGE> 2139
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS FOR THE LAST FIVE YEARS
---- ---------------------------------------------
<S> <C>
Mr. Martin is a director of Dresser, which is engaged in the
petroleum services, hydrocarbon and engineering industries.
Timothy R. Garrick................... Mr. Garrick has been Vice President -- Accounting of the
general partner and AIMCO since October 1, 1998. Prior to
that date, Mr. Garrick served as Vice
President -- Accounting Services of Insignia Financial Group
from June 1997 until October 1998. From 1992 until June of
1997, Mr. Garrick served as Vice President of Partnership
Accounting for Insignia Financial Group. From 1987 to 1990,
Mr. Garrick served as Investment Advisor for U.S. Shelter
Corporation. From 1984 to 1987, Mr. Garrick served as
Partnership Investment Analyst for U.S. Shelter Corporation.
From 1979 to 1984, Mr. Garrick worked on the audit staff of
Ernst & Whinney. Mr. Garrick received his B.S. Degree from
the University of South Carolina in 1979 and is a certified
public accountant.
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> 2140
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
By Fax:
(201) 896-0910
<PAGE> 2141
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 26, 1999)
AIMCO Properties, L.P.
is offering to acquire units of limited partnership interest of
Landmark Associates, Ltd.
in exchange for your choice of:
6.75 of our 8.0% Class Two Partnership Preferred Units;
4.50 of our Partnership Common Units; or
$168 in cash.
Generally, you will not recognize any immediate taxable gain or loss if you
exchange your units solely for our securities. However, you will recognize
taxable gain or loss if you exchange your units for cash.
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 the offer
consideration from a financial point of view.
Our offer consideration will be reduced for any distributions subsequently
made by your partnership prior to the expiration of our offer.
We will only accept a maximum of 25% 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.
You will not pay any fees or commissions if you tender your units.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline. You may withdraw any tendered units at any time
before we have accepted them for payment.
SEE "RISK FACTORS" BEGINNING ON PAGE S-23 OF THIS PROSPECTUS SUPPLEMENT AND
ON PAGE 2 OF THE ACCOMPANYING PROSPECTUS FOR A DESCRIPTION OF RISK FACTORS THAT
YOU SHOULD CONSIDER IN CONNECTION WITH OUR OFFER, INCLUDING THE FOLLOWING:
- We determined the offer consideration of $168 per unit without any
arms-length negotiations. Accordingly, our offer consideration may not
reflect the fair market value of your units. In October 1997, the
property owned by your partnership was appraised at $3,800,000. Based on
this appraised value, your units have a liquidation value of $1,029 per
unit. Stanger, in analyzing our offer, has estimated the net asset value
of your partnership units to be $200 per unit.
- We cannot predict when the property owned by your partnership may be
sold.
- Your general partner is a subsidiary of ours and, therefore, has
substantial conflicts of interest with respect to our offer.
- We are making this offer with a view to making a profit and 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.
- Continuation of your partnership will result in our affiliates continuing
to receive management fees from your partnership which would not be
payable if your partnership was liquidated.
- It is possible that we may conduct a subsequent offer at a higher price
more than one year after expiration of this offer.
- Unlike your partnership, our policy is to reinvest proceeds from the sale
of our properties or refinancing of our indebtedness.
- We may change our investment, acquisition or financing policies without a
vote of our securityholders.
- If you acquire our securities, your investment will change from holding
an interest in a single property to holding an interest in our large
portfolio of properties, thereby fundamentally changing the nature of
your investment.
- Recently, Moody's Investors Service revised its outlook for AIMCO's
ratings from stable to negative.
- There is currently no market for the Partnership Preferred Units or
Partnership Common Units.
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.
March 26, 1999
<PAGE> 2142
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
SUMMARY........................................ S-1
The Offer.................................... S-1
The AIMCO Operating Partnership.............. S-1
Affiliation with your General Partner........ S-1
Risk Factors................................. S-1
Background and Reasons for the Offer......... S-6
Valuation of Units........................... S-9
Fairness of the Offer........................ S-10
Stanger Analysis............................. S-11
Your Partnership............................. S-11
Terms of the Offer........................... S-12
Federal Income Tax Consequences.............. S-14
Comparison of Your Partnership and the AIMCO
Operating Partnership...................... S-14
Comparison of Your Units and AIMCO OP Units.. S-15
Conflicts of Interest........................ S-15
Source and Amount of Funds and Transactional
Expenses................................... S-16
Summary Financial Information of AIMCO
Properties, L.P............................ S-17
Summary Pro Forma Financial and Operating
Information of AIMCO Properties, L.P....... S-19
Summary Financial Information of Landmark
Associates, Ltd............................ S-21
Comparative Per Unit Data.................... S-21
THE AIMCO OPERATING PARTNERSHIP................ S-22
RISK FACTORS................................... S-23
Risks to Unitholders Who Tender Their Units
in the Offer............................... S-23
Offer Consideration Not Based on Third
Party Appraisal or Arms-Length
Negotiation.............................. S-23
Offer Consideration May Not Represent Fair
Market Value............................. S-23
Recent Appraisal Indicates a Higher
Valuation Per Unit....................... S-23
Offer Consideration Does Not Reflect Future
Prospects................................ S-23
Offer Consideration Based on Our Estimate
of Liquidation Proceeds.................. S-23
Offer Consideration May Be Less Than
Liquidation Value........................ S-23
Holding Units May Result in Greater Future
Value.................................... S-23
Conflicts of Interest with Respect to the
Offer.................................... S-24
Conflicts of Interest Relating to
Management Fees.......................... S-24
Possible Subsequent Offer at a Higher
Price.................................... S-24
Possible Recognition of Taxable Gain on a
Sale of Your Units....................... S-24
Fairness Opinion of Third Party Relied on
Information We Provided.................. S-25
Loss of Future Distributions from Your
Partnership.............................. S-25
Possible Effect of the Other Exchange
Offers on Us............................. S-25
Potential Delay in Payment................. S-25
Risks to Unitholders Exchanging Units for OP
Units in the Offer......................... S-25
Fundamental Change in Nature of
Investment............................... S-25
Fundamental Change in Number of Properties
Owned.................................... S-25
Lack of Trading Market for OP Units........ S-25
Uncertain Future Distributions............. S-26
Possible Reduction in Required
Distributions on Preferred OP Units...... S-26
Possible Lower Distributions............... S-26
</TABLE>
<TABLE>
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<S> <C>
Possible Redemption of Preferred Stock..... S-26
Possible Recognition of Taxable Gains on OP
Units.................................... S-26
Limitations on Effecting a Change of
Control.................................. S-26
Limitation on Transfer of OP Units......... S-26
Limited Voting Rights of Holders of OP
Units.................................... S-26
Market Prices for AIMCO's Securities May
Fluctuate................................ S-27
Litigation Associated with Partnership
Acquisitions............................. S-27
Dilution of Interests of Holders of OP
Units.................................... S-27
Risks to Unitholders Who Do Not Tender Their
Units in the Offer......................... S-27
Possible Increase in Control of Your
Partnership by Us........................ S-27
Recognition of Gain Resulting from Possible
Future Reduction in Your Partnership
Liabilities.............................. S-27
Possible Termination of Your Partnership
for Federal Income Tax Purposes.......... S-27
Risk of Inability to Transfer Units for
12-Month Period.......................... S-27
Possible Change in Time Frame Regarding
Sale of Property......................... S-28
Balloon Payments........................... S-28
SPECIAL FACTORS TO CONSIDER.................... S-28
BACKGROUND AND REASONS FOR THE OFFER........... S-28
Background of the Offer...................... S-28
Alternatives Considered...................... S-30
Expected Benefits of the Offer............... S-32
Disadvantages of the Offer................... S-32
VALUATION OF UNITS............................. S-34
FAIRNESS OF THE OFFER.......................... S-36
Position of the General Partner of Your
Partnership With Respect to the Offer;
Fairness................................... S-36
Fairness to Unitholders who Tender their
Units...................................... S-37
Fairness to Unitholders who do not Tender
their Units................................ S-38
Comparison of Consideration to Alternative
Consideration.............................. S-38
Allocation of Consideration.................. S-42
STANGER ANALYSIS............................... S-42
Experience of Stanger........................ S-43
Summary of Materials Considered.............. S-43
Summary of Reviews........................... S-44
Review of Appraisal.......................... S-46
Conclusions.................................. S-47
Assumptions, Limitations and
Qualifications............................. S-47
Compensation and Material Relationships...... S-48
YOUR PARTNERSHIP............................... S-48
General...................................... S-48
Your Partnership and its Property............ S-48
Property Management.......................... S-49
Investment Objectives and Policies; Sale or
Financing of Investments................... S-49
Capital Replacement.......................... S-50
Borrowing Policies........................... S-50
Competition.................................. S-50
Legal Proceedings............................ S-51
History of the Partnership................... S-51
Fiduciary Responsibility of the General
Partner of Your Partnership................ S-51
Distributions and Transfers of Units......... S-51
</TABLE>
i
<PAGE> 2143
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Beneficial Ownership of Interests in Your
Partnership................................ S-52
Compensation Paid to the General Partner and
its Affiliates............................. S-52
SELECTED FINANCIAL INFORMATION OF YOUR
PARTNERSHIP.................................. S-53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF YOUR PARTNERSHIP.......................... S-54
Overview..................................... S-54
Results of Operations........................ S-54
THE OFFER...................................... S-57
Terms of the Offer; Expiration Date.......... S-57
Acceptance for Payment and Payment for
Units...................................... S-57
Procedure for Tendering Units................ S-58
Withdrawal Rights............................ S-61
Extension of Tender Period; Termination;
Amendment.................................. S-61
Proration.................................... S-62
Fractional OP Units.......................... S-62
Future Plans of the AIMCO Operating
Partnership................................ S-62
Voting by the AIMCO Operating Partnership.... S-63
Dissenters' Rights........................... S-63
Conditions of the Offer...................... S-63
Effects of the Offer......................... S-66
Certain Legal Matters........................ S-66
Fees and Expenses............................ S-68
Accounting Treatment......................... S-68
FEDERAL INCOME TAX CONSEQUENCES................ S-69
Tax Opinions................................. S-69
Tax Consequences of Exchanging Units Solely
for OP Units............................... S-70
Disguised Sales.............................. S-71
Tax Consequences of Exchanging Units for Cash
and OP Units............................... S-72
Tax Consequences of Exchanging Units Solely
for Cash................................... S-72
Adjusted Tax Basis........................... S-72
Character of Gain or Loss Recognized Pursuant
to the Offer............................... S-72
Passive Activity Losses...................... S-73
Tax Reporting................................ S-73
</TABLE>
<TABLE>
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<S> <C>
Foreign Offerees............................. S-73
Tax Consequences of a Termination of Your
Partnership................................ S-73
COMPARISON OF YOUR PARTNERSHIP AND THE AIMCO
OPERATING PARTNERSHIP........................ S-75
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS.... S-83
DESCRIPTION OF PREFERRED OP UNITS.............. S-88
General...................................... S-88
Ranking...................................... S-88
Distributions................................ S-88
Allocation................................... S-89
Liquidation Preference....................... S-89
Redemption................................... S-90
Voting Rights................................ S-90
Restrictions on Transfer..................... S-91
DESCRIPTION OF CLASS I PREFERRED STOCK......... S-91
COMPARISON OF PREFERRED OP UNITS AND CLASS I
PREFERRED STOCK.............................. S-93
CONFLICTS OF INTEREST.......................... S-97
Conflicts of Interest with Respect to the
Offer...................................... S-97
Conflicts of Interest that Currently Exist
for Your Partnership....................... S-97
Competition Among Properties................. S-97
Features Discouraging Potential Takeovers.... S-97
Future Exchange Offers....................... S-98
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL
EXPENSES..................................... S-98
LEGAL MATTERS.................................. S-99
EXPERTS........................................ S-99
INDEX TO FINANCIAL STATEMENTS.................. F-1
PRO FORMA FINANCIAL INFORMATION OF AIMCO
PROPERTIES, L.P. ............................ P-1
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> 2144
SUMMARY
This summary highlights some of the information in this Prospectus
Supplement and the accompanying Prospectus.
THE OFFER
In exchange for each of your units, we are offering you a choice of:
- 6.75 of our Class Two Partnership Preferred Units;
- 4.50 of our Partnership Common Units; or
- $168 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 accept a maximum of 25% of the outstanding units in response to our
offer. Our offer is not subject to any minimum number of units being tendered.
Our offer will expire at 5:00 p.m., New York City time, on June 4, 1999,
unless we extend the deadline.
Each unit was initially sold at a price of $1,000. For the five years ended
December 31, 1998, your partnership paid no distributions.
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
its wholly owned subsidiary, AIMCO-GP, Inc. ("AIMCO GP"), AIMCO acts as the sole
general partner of the AIMCO Operating Partnership. As of December 31, 1998,
AIMCO-GP and another AIMCO subsidiary, AIMCO-LP, Inc., a limited partner of the
AIMCO Operating Partnership (the "Special Limited Partner"), owned approximately
an 83% interest in the AIMCO Operating Partnership. As of December 31, 1998, our
portfolio of owned or managed properties included 379,363 apartment units in
2,147 properties located in 49 states, the District of Columbia and Puerto Rico.
Based on apartment unit data compiled by the National Multi Housing Council, we
believe that we are one of the largest owners and managers of multifamily
apartment properties in the United States. As of December 31, 1998, we:
- owned or controlled 63,086 units in 242 apartment properties;
- held an equity interest in 170,243 units in 902 apartment properties; and
- managed 146,034 units in 1,003 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. and our February 26, 1999 merger with Insignia Properties Trust, we
acquired a 100% ownership interest in the general partner of your partnership,
Jacques-Miller Associates, and the company that manages the property owned by
your partnership.
RISK FACTORS
You should carefully consider the risks set forth under "Risk Factors"
beginning on page S-25 of this Prospectus Supplement and on page 2 of the
accompanying Prospectus. The following highlights some of the
S-1
<PAGE> 2145
risks associated with our offer and the disadvantages of the offer to you and
should be considered when you review "Summary -- Background and Reasons for the
Offer -- Expected Benefits of the Offer":
RISKS TO UNITHOLDERS WHO TENDER THEIR UNITS IN THE OFFER
OFFER CONSIDERATION NOTE BASED ON THIRD PARTY APPRAISAL OR ARMS-LENGTH
NEGOTIATION. We did not use any third-party appraisal or valuation to determine
the value of any property owned by your partnership. We established the terms of
our offer, including the exchange ratios and the cash consideration, without any
arms-length negotiations.
OFFER CONSIDERATION MAY NOT 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 your units. The offer
consideration does not necessarily reflect the price that you would receive in
an open market for your units. Such prices could be higher or lower than our
offer consideration.
RECENT APPRAISAL INDICATES A HIGHER VALUATION PER UNIT. In October 1997, an
independent appraiser valued the property on an unencumbered basis to be
$3,800,000. Based on this appraised value, your units have a liquidation value
of $1,029 per unit. In determining our offer consideration, we estimated your
property to be worth $2,800,000, less approximately $396,220 of deferred
maintenance and investment. Therefore, it is possible that a sale of the
property could result in your receiving more per unit than in our offer and you
would receive more than our offer if the property was actually sold for such
appraised value.
OFFER CONSIDERATION DOES NOT REFLECT FUTURE PROSPECTS. Our offer
consideration is based on your partnership's historical property income. It does
not ascribe any value to potential future improvements in the operating
performance of your partnership's property.
OFFER CONSIDERATION BASED ON OUR ESTIMATE OF LIQUIDATION PROCEEDS. The
offer consideration represents only our estimate of the amount you would receive
if we liquidated the partnership. In determining the liquidation value, we used
the direct capitalization method to estimate the value of your partnership's
property because we think a prospective purchaser of the property would value
the property using this method. In doing so, we applied a capitalization rate to
your partnership's property income for the year ended December 31, 1997. In
determining the appropriate capitalization rate, we considered your
partnership's results of operations since December 31, 1997. If property income
for a different period or a different capitalization rate was used, a higher
valuation could result. Other methods of valuing your units could also result in
a higher valuation.
OFFER CONSIDERATION MAY BE LESS THAN LIQUIDATION VALUE. The actual proceeds
obtained from a liquidation are highly uncertain and could be more or less than
our estimate. Accordingly, our offer consideration could be less than the net
proceeds that you would realize upon an actual liquidation of your partnership.
Even if our cash offer consideration is equal to liquidation value, if you
accept OP Units, you may not ultimately receive an amount equal to the cash
offer consideration when you sell such OP Units or any AIMCO securities you may
receive upon redemption of such OP Units.
HOLDING UNITS MAY RESULT IN GREATER FUTURE VALUE. You might receive more
value if you retain your units until your partnership is liquidated.
CONFLICTS OF INTEREST WITH RESPECT TO THE OFFER. Your general partner is a
subsidiary of ours and, therefore, has substantial conflicts of interest with
respect to our offer. We are making this offer with a view to making a profit.
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 RELATING TO MANAGEMENT FEES. Since our subsidiaries
receive fees for managing your partnership and its property, a conflict of
interest exists between our continuing the partnership and receiving such fees,
and the liquidation of the partnership and the termination of such fees.
POSSIBLE SUBSEQUENT OFFER AT A HIGHER PRICE. It is possible that we may
make a subsequent offer at a higher price, but not earlier than one year after
expiration of this offer. Such a decision will depend on, among
S-2
<PAGE> 2146
other things, the performance of your partnership, prevailing interest rates,
and our interest in acquiring additional limited partnership interests.
POSSIBLE RECOGNITION OF TAXABLE GAIN ON A SALE OF YOUR UNITS. 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.
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. You
should review "Federal Income Tax Consequences" 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. 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.
FAIRNESS OPINION OF THIRD PARTY RELIED ON INFORMATION WE PROVIDED. Robert
A. Stanger & Co.'s analysis of our offer and opinion as to the fairness to you
of our offer consideration from a financial point of view relies on information
prepared by the general partner of your partnership (which is our subsidiary).
No tests of the underlying data were performed, and no independent appraisal was
conducted. Because the fairness opinion will not be updated, changes may occur
from the date of the fairness opinion that might affect the conclusions
expressed in the opinion.
LOSS OF FUTURE DISTRIBUTIONS FROM YOUR PARTNERSHIP. For any units that we
acquire from you, you will not receive any future distributions from your
partnership's operating cash flow or upon a sale of property owned by your
partnership or a refinancing of any of its debt. If you tender your units in
exchange for OP Units, you will be entitled to future distributions from us from
our operating cash flow and upon a dissolution, liquidation or wind-up of the
AIMCO Operating Partnership.
POSSIBLE EFFECT OF THE OTHER EXCHANGE OFFERS ON US. Concurrently with this
offer, we are making or intend to make similar offers to investors in
approximately 90 other limited partnerships. If all of these offers had been
completed by December 31, 1997, our net income for the nine months ended
September 30, 1998 would have been $24,703,000 instead of $41,493,000 based on
the assumptions included in the Pro Forma Financial Statements. If we borrow
funds for the cash consideration for these offers, our interest costs would
increase which could adversely affect our future earnings. If all units in all
the offers were purchased for cash and we borrowed all the funds, at current
interest rates, our interest expense would increase by $3,064,000 per year. See
"Pro Forma Financial Information of AIMCO Properties, L.P."
POTENTIAL DELAY IN PAYMENT. We reserve the right to extend the period of
time during which our offer is open and thereby delay acceptance for payment of
any tendered units. The offer may be extended indefinitely and no payment will
be made in respect of tendered units until the expiration of the offer and the
acceptance of units for payment.
RISKS TO UNITHOLDERS EXCHANGING UNITS FOR OP UNITS IN THE OFFER
FUNDAMENTAL CHANGE IN NATURE OF INVESTMENT. If you tender your units in
exchange for our OP Units, you will have changed fundamentally the nature of
your investment from (i) a partnership that distributes to its partners the
proceeds from a sale of a property or a refinancing of its indebtedness, to (ii)
a partnership
S-3
<PAGE> 2147
that reinvests the proceeds from sales of properties and refinancings of its
indebtedness. You will have changed from a small partnership with a partnership
termination date of 2025 to a much larger partnership with a partnership
termination date of 2093.
FUNDAMENTAL CHANGE IN NUMBER OF PROPERTIES OWNED. If you tender your units
for our OP Units, you will have changed your investment from an interest in a
partnership that owns and manages one property to an interest in a partnership
that invests in and manages a large portfolio of properties.
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.
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.
POSSIBLE REDUCTION IN REQUIRED DISTRIBUTIONS ON PREFERRED OP UNITS. On and
after March 1, 2005, we may reduce the rate of distributions required to be paid
on the Preferred OP Units, thus reducing the rate of return and possibly
encouraging you to redeem such units.
POSSIBLE LOWER DISTRIBUTIONS. The Preferred OP Units provide for annual
distributions of $2.00 per unit and no more. Current annualized distributions
with respect to the Common OP Units are $2.50 per unit. This is equivalent to
distributions of $13.50 per year on the number of Preferred OP Units, or
distributions of $11.25 per year on the number of Common OP Units, that you
would receive in exchange for each of your partnership's units. During 1998,
your partnership paid cash distributions of $434 per unit. Therefore,
distributions with respect to the Preferred OP Units and Common OP Units may be
substantially less, immediately following our offer, than the distributions with
respect to your units.
POSSIBLE REDEMPTION OF PREFERRED STOCK. On and after March 1, 2005, we may
redeem each share of Class I Preferred Stock for $25, plus any accumulated,
accrued and unpaid dividends, possibly forcing you to sell such shares to AIMCO
or to sell in the open market at a possibly lower price per share than would
have occurred without the redemption. If, for example, after five years we
redeemed the Class I Preferred Stock for $25 per share, you will have received
the present value equivalent of the cash consideration of our offer (assuming
annual distributions of $2.00 on each Preferred OP Unit, a discount rate of 8%
and without giving effect to the potential tax deferral associated with
receiving OP Units instead of cash).
POSSIBLE RECOGNITION OF TAXABLE GAIN ON OP UNITS. There are tax risks
associated with the acquisition, retention and disposition of OP Units. Although
your general partner (which is our subsidiary) 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 OP Unitholders" in the accompanying Prospectus.
LIMITATIONS ON EFFECTING A 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.
LIMITATION ON TRANSFER OF OP UNITS. Investors in our partnership must hold
the OP Units for one year, subject to exceptions. Thereafter transfers may be
made subject to applicable transfer restrictions.
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
S-4
<PAGE> 2148
partner may not be removed by holders of limited partnership interests. 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. Such matters affecting the operation of the AIMCO
Operating Partnership include liquidation and distribution policies, property
purchases, and potential mergers or acquisitions.
MARKET PRICES FOR AIMCO'S SECURITIES MAY FLUCTUATE. We cannot predict the
prices at which our stock will trade in the future. Recently, there have been
fluctuations in the trading prices for many REIT equity securities, including
ours.
LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS. We often acquire
interests in limited partnerships that own apartment properties. In some cases
(such as your partnership), we have acquired the general partner of a
partnership and then made an offer to acquire the limited partners' interests in
the partnership. There is a risk that we will be 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. As
a result, we may incur costs associated with defending or settling such
litigation or paying any judgement if we lose. As of the present time, no
limited partners of your partnership have initiated lawsuits on such grounds.
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.
RISKS TO UNITHOLDERS WHO DO NOT TENDER THEIR UNITS IN THE OFFER
POSSIBLE INCREASE IN CONTROL OF YOUR PARTNERSHIP BY US. As a result of the
offer, we may increase our ability to influence voting decisions with respect to
your partnership. However, we will not be able to control voting decisions
unless we acquire more units in another transaction, which cannot take place for
at least one year after expiration of this offer. Also, removal of your general
partner (which is our subsidiary) or the manager of any property owned by your
partnership may become more difficult or impossible without our consent or
approval.
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 (which is our
subsidiary) 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 our 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. This would generally decrease the annual average
depreciation deductions allocable to you for a number of years if you do not
tender all of your units (thereby increasing the taxable income allocable to
your units in each such 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. Gain
recognized by you on the disposition of retained units with a holding period of
12 months or less may be classified as short-term capital gain and subject to
taxation at ordinary income tax rates.
RISK OF INABILITY TO TRANSFER UNITS FOR 12-MONTH PERIOD. Your partnership's
agreement of limited partnership prohibits any transfer of units without the
consent of your general partner (which is our
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subsidiary). Such consent may be withheld by your general partner in its sole
discretion. Your general partner may withhold its consent if such transfer would
result in the termination of your partnership for tax purposes which would occur
if 50% or more of the total interest in your partnership is transferred within a
12-month period. If we acquire a significant percentage of the interest in your
partnership, your general partner may not consent to a transfer for a 12-month
period following our offer.
POSSIBLE CHANGE IN TIME FRAME REGARDING SALE OF PROPERTY. It is not known
when the property owned by your partnership may be sold. Therefore, there may be
no way to liquidate your investment in the partnership in the future until the
property is sold and your partnership is liquidated. You may continue to have to
hold the units not exchanged in this offer for an indefinite period of time. The
partnership currently owns one property. The general partner of your partnership
continually considers whether the property should be sold or otherwise disposed
of after consideration of relevant factors, including prevailing economic
conditions, availability of favorable financing and tax considerations, with a
view to achieving maximum capital appreciation for your partnership. We cannot
predict when the property will be sold or otherwise disposed of. However, there
is no current plan or intention to sell the property in the near future.
BALLOON PAYMENTS. Your partnership has approximately $2,291,973 of balloon
payments due on its mortgage debt in January 2004. Your partnership will have to
refinance such debt or sell its property prior to the balloon payment dates, or
it will be in default and could lose the property to foreclosure.
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 51% ownership interest in Insignia Properties Trust, which has
a 100% ownership interest in the general partner of your partnership and the
company that manages the property owned by your partnership. On February 26,
1999, we acquired the remaining 49% interest in Insignia Properties Trust in a
merger transaction. One of the consequences of the merger with Insignia is to
allow us to make the offer and, if successful, to increase our ownership in 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 August 28, 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
(which is our subsidiary):
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.
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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. 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. Your partnership's mortgage notes are due in January 2004 and
require balloon payments of $2,291,973. Your partnership currently has
adequate sources of cash to finance its operations on both a short term and
long term basis but will have to sell its property or refinance its
indebtedness to pay such balloon payments. In addition, continuation of
your partnership without the offer would deny you and your partners the
benefits that your general partner (which is our subsidiary) 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. There is currently no market for the Preferred OP
Units or Common OP Units.
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 three principal advantages of exchanging your units for Preferred
OP Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Preferred OP Units.
- Enhanced Liquidity After One Year. While holders of the Preferred OP
Units must hold such units for one year, subject to certain exceptions,
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 A Common
Stock or cash. After a two-year holding period, if you choose to redeem
your Preferred OP Units, you may receive, at our option, cash, shares of
AIMCO's Class I Preferred Stock or shares of AIMCO's Class A Common
Stock. AIMCO's Class A Common Stock is, and AIMCO's Class I Preferred
Stock is expected to be, listed and traded on the NYSE.
- Diversification. We have a substantially larger and more diverse
portfolio of apartment properties than your partnership.
There are four principal advantages of exchanging your units for Common OP
Units:
- Tax Deferral. You will generally not recognize any immediate taxable gain
if you exchange your units solely for Common OP Units.
- Enhanced Liquidity After One Year. While the holders of the Common OP
Units must hold such units for one year, subject to certain exceptions,
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 NYSE.
- 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
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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.
Disadvantages of the Offer
The principal disadvantages of the offer are:
- Lack of Independent Price Determination. We determined the offer price
and the terms of the offer, including the exchange ratio for Common OP
Units and Preferred OP Units, and the terms of the Preferred OP Units and
the Class I Preferred Stock. The terms of the offer and the nature of the
securities could differ if they were subject to independent third party
negotiations. We determined the offering price and asked Stanger to
determine if the price was fair. We did not ask Stanger to determine a
fair price.
- No Separate Representation of Limited Partners. In structuring the offer
and determining the offer consideration, no one separately represented
the interests of the limited partners. Although we have a fiduciary duty
to the limited partners, we also have conflicting responsibilities to our
equity holders. We did not appoint, or ask the limited partners to
appoint, a party to represent only their interests.
- No Proposal to Sell the Property. We are not proposing to try to
liquidate the partnership and sell the partnership's property and
distribute the net proceeds. An arms-length sale of such property after
offering it for sale through licensed real estate brokers might be a
better way to determine the true value of the property rather than the
method we chose. The sale of the property and the liquidation of the
partnership might result in greater pretax cash proceeds to you than our
offer.
- OP Units. OP Units lack a public market, have transfer restrictions and
must be held for one year before they can be redeemed by a holder. The
ultimate return on the OP Units is directly tied to the future price of
AIMCO's Class A Common Stock or Class I Preferred Stock. You could
ultimately receive less for your OP Units than the cash price in our
offer. Further, on or after March 1, 2005, we may redeem the Class I
Preferred Stock for $25 per share.
- Lower Preferred Quarterly Distributions. Your partnership paid
distributions of $433 for the fiscal year ended December 31, 1998.
Holders of Preferred OP Units will be entitled to receive quarterly
distributions of $0.50 per unit (equivalent to $2.00 on an annualized
basis) before any distributions are paid to holders of Common OP Units.
This is equivalent to a distribution of $13.50 per year on the number of
Preferred OP Units you will receive in exchange for each of your
partnership units.
- Lower Common Quarterly Distributions. Your partnership paid distributions
of $433 for the fiscal year ended December 31, 1998. In 1998, we paid
quarterly distributions on the Common OP Units totalling $2.25 per unit.
In January 1999, we increased our distribution rate on each of the Common
OP Units to $2.50 on an annual basis. See "The AIMCO Operating
Partnership." Assuming no change in the level of our distributions, this
is equivalent to a distribution of $11.25 per year on the number of
Common OP Units you will receive in exchange for each of your partnership
units.
- Continuation of the Partnership. We are proposing to continue to operate
your partnership and not to attempt to liquidate it at the present time.
Thus, our offer does not satisfy any expectation that you would receive
the return of your investment in the partnership through a sale of the
property at the present time. At the current time we do not believe that
a sale of the property would be advantageous given market conditions, the
condition of the property and tax considerations. In particular, we
considered the changes in the local rental market, the potential for
appreciation in the value of the property and the tax consequences to you
and your partners upon a sale of the property.
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- Possible Recognition of Taxable Gain. If you exercise your redemption
right with respect to the OP Units within two years of the date that you
transfer your units to the AIMCO Operating Partnership, your exchange of
units for OP Units and cash could be treated as a disguised sale of your
units and you would be required to recognize gain or loss in the year of
the exchange on such disguised sale. See "Federal Income Tax
Consequences -- Disguised Sales."
For a description of certain risks of our offer, see "Risk Factors."
VALUATION OF UNITS
We determined the offer consideration by estimating 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
property income. A capitalization rate is a percentage (rate of return),
commonly applied by purchasers of residential real estate to property income to
determine the present value of income property. The lower the capitalization
rate utilized the higher the value produced, and the higher the capitalization
rate utilized the lower of the value produced. We used your partnership's
property income for the fiscal year ended December 31, 1997. However, in
determining the appropriate capitalization rate, we considered the partnership's
property income since December 31, 1997. Our method for selecting a
capitalization rate begins with each property being assigned a location and
condition rating (e.g., "A" for excellent, "B" for good, "C" for fair, and "D"
for poor). We have rated your property's location B (good) and its condition C
(fair). Generally, we assign an initial capitalization rate of 10.50% to
properties in this category. We then adjust the capitalization rate based on
whether the mortgage debt that the property is subject to bears interest at a
rate above or below 7.5% per annum. Generally, for every 0.5% in excess of 7.5%,
the capitalization rate would be increased by 0.25%. Because the mortgage debt
bears interest at 7.29%, the capitalization rate was not adjusted. We also
considered any changes in your partnership's property income from 1997 to 1998.
Because your partnership's property income in 1998 decreased compared to 1997,
we further revised the capitalization rate upward by approximately 1.58%,
resulting in a final capitalization rate of 12.08%. The evaluation of a
property's location and condition, and the determination of an appropriate
capitalization rate for a property, is subjective in nature, and others
evaluating the same property might use a different capitalization rate and
derive a different property value. 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. Further, in applying the direct capitalization method,
others may make different assumptions and obtain different results. 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>
Property income............................................. $ 338,000
Capitalization rate......................................... 12.08%
-----------
Gross valuation of partnership property..................... $ 2,800,000
Plus: Cash and cash equivalents............................. 205,376
Plus: Other partnership assets, net of security deposits.... 191,859
Less: Mortgage debt, including accrued interest............. (2,500,000)
Less: Accounts payable and accrued expenses................. (14,337)
Less: Other liabilities..................................... (26,936)
-----------
Partnership valuation before taxes and certain costs........ 655,962
Less: Disposition fees...................................... 0
Less: Extraordinary capital expenditures and deferred
maintenance............................................... (396,220)
Less: Closing costs......................................... (70,000)
-----------
Estimates net valuation of your partnership................. 189,742
Percentage of estimated net valuation allocated to holders
of units.................................................. 100.00%
-----------
Estimated net valuation of units............................ 189,742
Total number of units............................. 1,132.0
-----------
Estimated valuation per unit................................ 168
===========
Cash consideration per unit................................. $ 168
===========
</TABLE>
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In order to determine the number of Preferred OP Units we are offering for
each of your units, we divided the cash offer consideration of $168 by the $25
liquidation preference of each Preferred OP Unit to get 6.75 Preferred OP Units
per unit.
In order to determine the number of Common OP Units we are offering for
each of your units, we divided the cash offer consideration of $168 by a price
of $37.63 (the average closing price of AIMCO's Class A Common Stock on the NYSE
for the 30 trading days ending on March 23, 1999) to get 4.50 Common OP Units
per unit.
FAIRNESS OF THE OFFER
Fairness to Unitholders. Your general partner is our subsidiary. 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. Your general partner did not participate in the structuring of the
offer. We and your general partner believe that the offer and all forms of
consideration offered is fair to you and the other limited partners of your
partnership. 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 (which is our subsidiary) 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 (which is our subsidiary) has compared our offer consideration
to:
- your general partner's estimate of the net proceeds that would be
distributed to you and your partners if your partnership was liquidated;
- your general partner's estimate of the going concern value of your
partnership if it continued operating as an independent stand-alone
entity;
- the net book value of your partnership; and
- recent appraisal for the property for $3,800,000, which appraisal did
not take into account the mortgages, other assets and liabilities, costs
of sale of the property and over $396,000 of deferred maintenance of the
property.
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The results of these comparative analyses are summarized as follows:
COMPARISON TABLE
<TABLE>
<CAPTION>
PER UNIT
---------
<S> <C>
Cash offer consideration.................................... $ 168
Partnership Preferred Units................................. $ 168
Partnership Common Units.................................... $ 168
Alternatives:
Estimated liquidation proceeds............................ $ 168
Estimated going concern value(1).......................... $ 124
Estimated alternative going concern value(2).............. $ 164
Net book value (deficit).................................. $ (881)
Estimated liquidation value based on appraised property
value.................................................. $ 1,029
</TABLE>
- ---------------
(1) Assumes a refinancing of the partnership property's mortgage when it comes
due.
(2) Assumes a sale of the partnership property when the mortgage is due, rather
than a refinancing of the mortgage.
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. Stanger has
rendered similar fairness opinions with regard to the other tender offers being
made by the AIMCO Operating Partnership. Stanger rendered the opinions only as
to the individual fairness of the offer consideration in each proposed exchange
offer.
YOUR PARTNERSHIP
Your Partnership and its Property. Landmark Associates, Ltd. is a Tennessee
limited partnership which was formed on July 30, 1982 for the purpose of owning
and operating a single apartment property located in Florence, South Carolina,
known as "Landmark Woods Apartments." Your partnership's property consists of
104 apartment units and was built in 1974. Your partnership has no employees. As
of September 30, 1998, there were 1,132 units of limited partnership interest
issued and outstanding, which were held of record by 35 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.
Your partnership sold $1,132,000 of limited partnership units in 1982.
Between January 1, 1993 and December 31, 1998 your partnership paid cash
distributions totalling $433 per unit. Your partnership currently owns one
property.
Property Management. Your partnership's property has been managed by an
affiliate of ours. 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.
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Investment Objectives and Policies; Sale or Financing of Investments. Under
your partnership's agreement of limited partnership, your partnership is not
permitted to raise new capital or reinvest cash in new properties. Your
partnership will terminate in 2025, unless earlier dissolved. Your general
partner has no present intention to liquidate, sell, finance or refinance your
partnership property within any specified time period. An investment in your
partnership is a finite life investment in which partners receive regular cash
distributions out of your partnership's distributable cash flow, if any, and
upon liquidation.
Borrowing Policies. Your partnership's agreement of limited partnership
allows your partnership to incur debt. As of December 31, 1998, your partnership
had a mortgage note outstanding of $2,475,991, payable to State Street and
Lehman which bears interest at the rate of 7.29%. The mortgage debt is due in
January 2004. Your partnership's agreement of limited partnership also allows
your general partner to lend funds to your partnership.
Transfers. Your units are not listed on any national securities exchange or
quoted on NASDAQ, and there is no established public trading market for the
units. Secondary sales activity for the units has been limited and sporadic.
Your general partner monitors transfers of the units (i) because the admission
of the transferee as a substitute limited partner in your partnership requires
the consent of your general partner under your partnership agreement, and (ii)
in order to track compliance with applicable safe harbor provisions to avoid
treatment as a "publicly traded partnership" for tax purposes. However, your
general partner does not monitor or regularly receive or maintain information
regarding the prices at which secondary sale transactions in the units have been
effectuated.
TERMS OF THE OFFER
General. We are offering to acquire up to 25% of the outstanding 1,132
units of your partnership, which we do not directly or indirectly own, for
consideration per unit of 6.75 Preferred OP Units, 4.50 Common OP Units, or $168
in cash. If you tender units pursuant to the offer, you may choose 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 Preferred OP Units, 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 January 1, 1999, although you will
be entitled to retain any distributions you may have received after such date
and prior to our commencement of this offer.
If you accept our offer and do not specify the consideration you desire on
the letter of transmittal, we will issue you Preferred OP Units.
Expiration Date. Our offer will expire at 5:00 P.M., New York City time, on
June 4, 1999, 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.
Proration. If the number of units properly tendered and not withdrawn prior
to the Expiration Date exceeds 25% 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 their acceptance for payment as provided for herein.
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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 Common OP Units or 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.
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.
The offer may be extended or delayed indefinitely, during which time you
will not receive payment for any tendered units.
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 any property owned by
your partnership's because your general partner (which is our subsidiary) and
the property manager will remain unchanged. If we borrow funds for the cash
consideration for these offers, our interest costs would increase which could
adversely affect our future earnings. If all units in this and our other
contemplated offers were purchased for cash and we borrowed all the funds, at
current interest rates, our interest expense would increase by $3,064,000 per
year.
Voting by the AIMCO Operating Partnership. If we acquire a substantial
number of units pursuant to our offer, we may be in a position to influence
voting decisions with respect to your partnership. However, we will not be able
to control voting decisions unless we acquire more units in another transaction,
which cannot take place for at least one year after expiration of this offer.
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 (which is our subsidiary),
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.
S-13
<PAGE> 2157
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 Letter of Transmittal, and the
legal and accounting fees and expenses in connection with the offer. We will
also pay the fees of Stanger for providing the fairness opinion 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 $50,000.
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.
No Dissenters' Rights. You are not entitled to dissenters' (appraisal)
rights in connection with the offer.
Other Offers. The AIMCO Operating Partnership is also making similar
exchange offers to approximately 90 other limited partnerships in which it
controls the general partner, interests in substantially all of which were
acquired in the merger on October 1, 1998 with Insignia Financial Group, Inc.
and the February 26, 1999 merger with Insignia Properties Trust. Each of such
exchange offers is being made by a separate prospectus supplement which is
similar to this Prospectus Supplement. Copies of such prospectus supplements may
be obtained upon written request from the Information Agent at the address set
forth in "-- Information Agent" or on the back cover page of this Prospectus
Supplement. The exchange offers may be different for limited partners in each
partnership in terms of pricing and percentage of units sought, but the effects
of the offers will essentially be the same. In general, we believe that the risk
factors (except for certain tax-related risk factors) described herein for this
offer will also be applicable to the other offers.
Information Agent. River Oaks Partnership Services, Inc. is serving as
Information Agent in connection with the offer. Its telephone numbers are (888)
349-2005 and (201) 896-1900. Its fax number is (201) 896-0910.
FEDERAL INCOME TAX CONSEQUENCES
You will generally not recognize any immediate taxable gain or loss for
Federal income tax purposes if you exchange your units solely for Preferred OP
Units or 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.
THE FOREGOING SUMMARY IS A GENERAL DISCUSSION OF THE MATERIAL 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 "FEDERAL INCOME TAX CONSEQUENCES" 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.
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, your general
partner (which is our subsidiary) 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.
S-14
<PAGE> 2158
COMPARISON OF YOUR UNITS AND AIMCO OP UNITS
There are a number of significant differences between your units, Preferred
OP Units and 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.
As of February 19, 1999, the AIMCO Operating Partnership had approximately
9,729,130 Common OP Units outstanding (excluding interests held by AIMCO) and no
Class Two Partnership Preferred Units outstanding. The number of OP Units you
may acquire from us in exchange for your units will represent a lower percentage
of the outstanding limited partnership interests in the AIMCO Operating
Partnership than that of your current ownership interest in your partnership. In
response to our offer, you could elect to receive $168 in cash, 6.75 Preferred
OP Units or 4.50 Common OP Units. Both your units and the OP Units are subject
to transfer restrictions and it is unlikely that a real trading market will ever
develop for any of such securities. If you subsequently redeem OP Units for
AIMCO Class A Common Stock or Class I Preferred Stock, we can make no assurance
as to the value of such shares of AIMCO stock, at that time, which may be less
than the cash offer price of $168.
CONFLICTS OF INTEREST
Conflicts of Interest with Respect to the Offer. Your general partner is
our subsidiary 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
both the general partner of your partnership and the manager of your
partnership's property. The general partner does not receive an annual
management fee but may receive reimbursements for expenses incurred in its
capacity as general partner. The general partner of your partnership received
total fees and reimbursements of $15,067 for the fiscal year ended December 31,
1998. The property manager received management fees of $32,460 for the fiscal
year ended December 31, 1998. We have no current intention of changing the fee
structure for your general partner or the 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.
AIMCO's Charter limits ownership of its 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 AIMCO's Chairman, Terry Considine). The 8.7%
ownership limit may have the effect of precluding acquisition of control of us
by a third party without the consent of our Board of Directors. Under AIMCO's
Charter, the Board of Directors has the authority to classify and reclassify any
of its 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. As a Maryland
corporation, AIMCO is
S-15
<PAGE> 2159
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.
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. We might pay a higher price for any future exchange offers we may make
for units of your partnership. In any event, we will not acquire any units for
at least one year after expiration of this offer.
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
We expect that approximately $47,544 will be required to purchase all of
the units sought in our offer, if such units are tendered for cash excluding
expenses. We will obtain all such funds from cash from operations, equity
issuances and short term borrowings. For a detailed description of estimated
expenses to be incurred in the offer, see "Source and Amount of Funds and
Transactional Expenses."
S-16
<PAGE> 2160
SUMMARY FINANCIAL INFORMATION OF AIMCO PROPERTIES, L.P.
The historical summary financial data for AIMCO Properties, L.P. for the
nine months ended September 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 of the AIMCO Operating Partnership" included in the accompanying
Prospectus. All dollar values are in thousands, except per unit data.
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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............... $ 265,700 $ 127,083 $ 193,006 $100,516 $ 74,947 $ 24,894
Property operating expenses........... (101,600) (50,737) (76,168) (38,400) (30,150) (10,330)
Owned property management expenses.... (7,746) (4,344) (6,620) (2,746) (2,276) (711)
Depreciation.......................... (59,792) (23,848) (37,741) (19,556) (15,038) (4,727)
---------- ---------- ---------- -------- -------- ---------
96,562 48,154 72,477 39,814 27,483 9,126
---------- ---------- ---------- -------- -------- ---------
SERVICE COMPANY BUSINESS:
Management fees and other income...... 13,968 9,173 13,937 8,367 8,132 3,217
Management and other expenses......... (8,101) (5,029) (9,910) (5,352) (4,953) (2,047)
Corporate overhead allocation......... (196) (441) (588) (590) (581) --
Other assets, depreciation and
amortization........................ (3) (236) (453) (218) (168) (150)
Owner and seller bonuses.............. -- -- -- -- -- --
Amortization of management company
goodwill............................ -- -- (948) (500) (428) --
---------- ---------- ---------- -------- -------- ---------
5,668 3,467 2,038 1,707 2,002 1,020
Minority interests in service company
business............................ -- 48 (10) 10 (29) (14)
---------- ---------- ---------- -------- -------- ---------
Company's shares of income from
service company business............ 5,668 3,515 2,028 1,717 1,973 1,006
---------- ---------- ---------- -------- -------- ---------
General and administrative expenses... (7,444) (1,408) (5,396) (1,512) (1,804) (977)
Interest income....................... 18,244 4,458 8,676 523 658 123
Interest expense...................... (56,756) (33,359) (51,385) (24,802) (13,322) (1,576)
Minority interest in other
partnerships........................ (1,052) (777) 1,008 (111) -- --
Equity in losses of unconsolidated
partnerships(c)..................... (5,078) (463) (1,798) -- -- --
Equity in earnings of unconsolidated
subsidiaries(d)..................... 8,413 456 4,636 -- -- --
Amortization of goodwill.............. (5,071) (711) -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income from operations................ 53,486 19,865 30,246 15,629 14,988 7,702
Gain on disposition of properties..... 2,783 (169) 2,720 44 -- --
Provision for income taxes............ -- -- -- -- -- --
---------- ---------- ---------- -------- -------- ---------
Income (loss) before extraordinary
item................................ 56,269 19,696 32,966 15,673 14,988 7,702
Extraordinary item -- early
extinguishment of debt.............. -- (269) (269) -- -- --
---------- ---------- ---------- -------- -------- ---------
Net income (loss)..................... $ 56,269 $ 19,427 $ 32,697 $ 15,673 $ 14,988 $ 7,702
========== ========== ========== ======== ======== =========
OTHER INFORMATION:
Total owned properties (end of
period)............................. 241 109 147 94 56 48
Total owned apartment units (end of
period)............................. 62,955 28,773 40,039 23,764 14,453 12,513
Units under management (end of
period)............................. 154,729 71,038 69,587 19,045 19,594 20,758
Basic earnings per Common OP Unit..... $ 0.80 $ 0.53 $ 1.09 $ 1.05 $ 0.86 $ 0.42
Diluted earnings per Common OP Unit... $ 0.79 $ 0.53 $ 1.08 $ 1.04 $ 0.86 $ 0.42
Distributions paid per Common OP
Unit................................ $ 1.6875 $ 1.3875 $ 1.85 $ 1.70 $ 1.66 $ 0.29
Cash flows provided by operating
activities.......................... 50,825 53,435 73,032 38,806 25,911 16,825
Cash flows used in investing
activities.......................... (185,453) (314,814) (717,663) (88,144) (60,821) (186,481)
Cash flows provided by (used in)
financing activities................ 141,221 293,984 668,549 60,129 30,145 176,800
<CAPTION>
AIMCO PROPERTIES, L.P.
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)
Cash flows provided by (used in)
financing activities................ (1,032) 14,114
</TABLE>
S-17
<PAGE> 2161
<TABLE>
<CAPTION>
AIMCO PROPERTIES, L.P.
-------------------------------------------------------------------------
FOR THE
PERIOD
JULY 29,
FOR THE NINE MONTHS FOR THE YEAR ENDED 1994
ENDED SEPTEMBER 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>