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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 20, 1999
REGISTRATION NO. 333-69121
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(Exact name of registrant as specified in its charter)
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MARYLAND 84-1259577
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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1873 SOUTH BELLAIRE STREET, 17TH FLOOR PETER K. KOMPANIEZ
DENVER, COLORADO 80222 PRESIDENT AND VICE-CHAIRMAN
(303) 757-8101 OF THE BOARD OF DIRECTORS
(Address, including zip code, and telephone number, APARTMENT INVESTMENT AND MANAGEMENT COMPANY
including area code, of registrant's principal 1873 SOUTH BELLAIRE STREET, 17TH FLOOR
executive offices) DENVER, COLORADO 80222
(303) 757-8101
(Name, address, including zip code, and telephone
number,
including area code, of Agent for Service)
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JONATHAN L. FRIEDMAN, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
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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 only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If the Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
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CALCULATION OF REGISTRATION FEE
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AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE REGISTERED REGISTERED OFFERING PRICE PER UNIT AGGREGATE OFFERING PRICE REGISTRATION FEE
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Class B Cumulative Convertible
Preferred Stock, par value $.01 per
share................................ 750,000 $100(1) $75,000,000(1) $20,850(4)
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Class A Common Stock, par value $.01
per share............................ 4,212,283(2) $36.4375(3) $63,737,600(3) $17,720(3)(4)
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(1) The estimated maximum offering price of the Class B Cumulative Convertible
Preferred Stock is $100 per share, which represents the per share
liquidation preference of such shares.
(2) Includes (a) the 2,463,053 shares of Class A Common Stock into which the
750,000 shares of Class B Cumulative Convertible Preferred Stock are
convertible (based on a conversion ratio of 3.28407 as of the date hereof)
plus such additional number of shares of Class A Common Stock as may be
issued upon conversion as a result of anti-dilution adjustment provisions,
and (b) the 1,749,230 shares of Class A Common Stock for which 1,749,230
partnership common units of AIMCO Properties, L.P. may be exchanged, plus
such additional number of shares of Class A Common Stock as may be issued in
exchange therefor pursuant to anti-dilution adjustment provisions.
(3) Pursuant to Rule 457(i) under the Securities Act of 1933, as amended, no
additional registration fee is payable in respect of the 2,463,053 shares of
Class A Common Stock registered hereby which are issuable upon conversion of
the 750,000 shares of Class B Cumulative Convertible Preferred Stock. With
respect to the 1,749,230 shares of Class A Common Stock, the registration
fee is calculated pursuant to Rule 457(c) under the Securities Act of 1933,
as amended, based on the average of the high and low prices on January 15,
1999.
(4) A fee of $32,550 was paid prior to the initial filing of this registration
statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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PROSPECTUS
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
1873 South Bellaire Street, 17th Floor
Denver, Colorado 80222
(303) 757-8101
750,000 SHARES OF CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK
AND
4,212,283 SHARES OF CLASS A COMMON STOCK
The selling stockholders described in this prospectus may offer and sell
from time to time up to 750,000 shares of Class B Cumulative Convertible
Preferred Stock, and up to 4,212,283 shares of Class A Common Stock, of
Apartment Investment and Management Company. Apartment Investment and Management
Company will not receive any proceeds from the sale of such shares of Class B
Preferred Stock or Class A Common Stock.
The selling stockholders may sell the Class B Preferred Stock or the Class
A Common Stock offered hereby from time to time on the New York Stock Exchange
or such other national securities exchange or automated interdealer quotation
system on which shares of Class B Preferred Stock or Class A Common Stock are
then listed, through negotiated transactions or otherwise at market prices
prevailing at the time of the sale or at negotiated prices.
Dividends on the Class B Preferred Stock are cumulative and are paid
quarterly in cash. The per share dividend is the greater of:
- $1.78125 per quarter or
- the quarterly cash dividend declared on the number of shares of Class A
Common Stock into which a share of Class B Preferred Stock is
convertible.
Each share of Class B Preferred Stock is convertible into 3.28407 shares of
Class A Common Stock, subject to adjustment under certain circumstances.
Beginning on August 4, 2002, we have the right to redeem any or all of the Class
B Preferred Stock at $100 per share, plus any accumulated and unpaid dividends.
The Class B Preferred Stock is not listed on any stock exchange. The Class
A Common Stock is listed and traded on the New York Stock Exchange under the
symbol "AIV." On January 15, 1999, the average of the high and low prices of the
Class A Common Stock on the NYSE was $36.4375 per share.
INVESTING IN THE CLASS B PREFERRED STOCK OR IN THE CLASS A COMMON STOCK INVOLVES
CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 2.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
January 20, 1999
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TABLE OF CONTENTS
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The Company................................................. 1
Risk Factors................................................ 2
Ratio of Earnings to Fixed Charges.......................... 9
Use of Proceeds............................................. 10
Selling Stockholders........................................ 10
Plan of Distribution........................................ 12
Description of Class B Cumulative Convertible Preferred
Stock..................................................... 13
Certain Federal Income Tax Consequences..................... 22
Where You Can Find More Information......................... 32
Legal Matters............................................... 33
Experts..................................................... 33
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(ii)
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THE COMPANY
Apartment Investment and Management Company ("AIMCO"), a Maryland
corporation formed on January 10, 1994, is a self-administered and self-managed
REIT engaged in the ownership, acquisition, development, expansion and
management of multi-family apartment properties. As of December 31, 1998, we
owned or managed 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 as of January 1, 1998 by the National Multi-Family Housing Council, we
believe that, as of December 31, 1998, we are one of the largest owners and
managers of multi-family apartment properties in the United States. As of
December 31, 1998, we:
- owned or controlled 63,268 units in 243 apartment properties;
- held an equity interest in 170,061 units in 901 apartment properties;
and
- managed 146,034 units in 1,003 apartment properties for third party
owners and affiliates.
We conduct substantially all of our operations through our operating
partnership, AIMCO Properties, L.P. Through wholly owned subsidiaries, we act as
the sole general partner of the AIMCO operating partnership. As of December 31,
1998, we owned approximately a 83% interest in the AIMCO operating partnership.
We manage apartment properties for third parties and affiliates through
unconsolidated subsidiaries that we refer to as the "management companies."
Generally, when we refer to "we," "us" or the "Company" in this prospectus, we
are referring to AIMCO, the AIMCO operating partnership, the management
companies and their respective subsidiaries.
BankBoston, N.A. serves as transfer agent and registrar of our Class B
Cumulative Convertible Preferred Stock and Class A Common Stock.
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RISK FACTORS
Before you invest in our securities, you should be aware that there are
various risks, including those described below. You should consider carefully
these risk factors together with all of the other information included in this
prospectus before you decide to purchase our securities.
Some of the information in this prospectus may contain forward-looking
statements. Such statements can be identified by the use of forward-looking
words such as "may," "will," "expect," "anticipate," "estimate," "continue" or
other similar words. These statements discuss future expectations, contain
projections of results of operations or financial condition or state other
"forward-looking" information. When considering such forward-looking statements,
you should keep in mind the risk factors and other cautionary statements in this
prospectus. The risk factors noted in this section and other factors noted
throughout this prospectus, including certain risks and uncertainties, could
cause our actual results to differ materially from those contained in any
forward-looking statement.
RISKS OF ACQUISITION AND DEVELOPMENT ACTIVITIES
Generally. The selective acquisition, development and expansion of
apartment properties is one component of our growth strategy. However, we can
make no assurance as to our ability to complete transactions in the future.
Although we seek to acquire, develop and expand properties only when such
activities are accretive on a per share basis, such transactions may fail to
perform in accordance with our expectations. When we develop or expand
properties, we are subject to the risks that:
- costs may exceed original estimates;
- projected occupancy and rental rates at the property may not be
realized;
- financing may not be available on favorable terms;
- construction and lease-up may not be completed on schedule; and
- we may experience difficulty or delays in obtaining necessary zoning,
land-use, building, occupancy and other governmental permits and
authorizations.
We May Have Difficulty Managing Our Rapid Growth. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned or managed properties
from 132 apartment properties with 29,343 units to 2,147 apartment properties
with 379,363 units as of December 31, 1998. These acquisitions have included
purchases of properties and interests in entities that own or manage properties,
as well as corporate mergers. Our recent merger with Insignia Financial Group,
Inc. ("Insignia") is our largest acquisition so far. Our ability to successfully
integrate acquired businesses and properties depends on our ability to:
- attract and retain qualified personnel;
- integrate the personnel and operations of the acquired businesses;
- maintain uniform standards, controls, procedures and policies; and
- maintain adequate accounting and information systems.
We can provide no assurance that we will be able to accomplish these goals
and successfully integrate any acquired businesses or properties. If we fail to
successfully integrate such businesses, our results of operations could be
adversely affected.
Litigation Associated with Partnership Acquisitions. We have engaged in and
intend to continue to engage in, the selective acquisition of interests in
limited partnerships that own apartment properties. In some cases, we have
acquired the general partner of a partnership and then made an offer to acquire
the limited partners' interests in the partnership. In these transactions, we
are subject to litigation based on claims that the general partner has breached
its fiduciary duties to its limited partners or that the transaction violates
the relevant partnership agreement. Although we intend to comply with our
fiduciary
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obligations and relevant partnership agreements, we may incur additional costs
in connection with the defense or settlement of such litigation. In some cases,
such litigation may adversely affect our desire to proceed with, or our ability
to complete, a particular transaction. Such litigation could also have a
material adverse effect on our results of operations.
RISKS ASSOCIATED WITH DEBT FINANCING
Our strategy is generally to incur debt to increase the return on our
equity while maintaining acceptable interest coverage ratios. We seek to
maintain a ratio of free cash flow to combined interest expense and preferred
stock dividends of between 2:1 and 3:1. However, our board of directors could
change this strategy at any time and increase our leverage. Our organizational
documents do not limit the amount of debt that we may incur, and we have
significant amounts of debt outstanding. Payments of principal and interest may
leave us with insufficient cash resources to operate our properties or pay
distributions required to be paid in order to maintain our qualification as a
REIT. We are also subject to the risk that our cash flow from operations will be
insufficient to make required payments of principal and interest, and the risk
that existing indebtedness may not be refinanced or that the terms of any
refinancing will not be as favorable as the terms of existing indebtedness. If
we fail to make required payments of principal and interest on any debt, our
lenders could foreclose on the properties securing such debt with a consequent
loss of income and asset value to us. As of September 30, 1998, 95% of the
properties that we own or control and 41% of our assets were encumbered by debt.
On a pro forma basis, giving effect to the recent Insignia merger, as of
September 30, 1998, we had $1,627.8 million of indebtedness outstanding on a
consolidated basis, of which $1,277.0 million was secured.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE
As of September 30, 1998, approximately $115 million of our debt was
subject to variable interest rates. An increase in interest rates could increase
our interest expense and adversely affect our cash flow and our ability to
service our indebtedness and make distributions.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS
From time to time, in anticipation of refinancing debt, we enter into
agreements to reduce the risks associated with increases in short term interest
rates. Although these agreements provide us with some protection against rising
interest rates, these agreements also reduce the benefits to us when interest
rates decline. These agreements involve the following risks:
- interest rate movements during the term of the agreement may result in
a loss to us;
- we may be exposed to losses if the hedge is not indexed to the same
rate as the debt anticipated to be incurred; and
- we may incur a loss if the counterparty to the agreement fails to pay.
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR INVESTORS
Some of our debt and other securities contain covenants that restrict our
ability to make distributions or other payments to our investors unless certain
financial tests or other criteria are satisfied. In some cases, our subsidiaries
are subject to similar provisions, which may restrict their ability to make
distributions to us. Our primary credit facility provides that we may make
distributions to our investors during any 12-month period in an aggregate amount
that does not exceed the greater of 80% of our funds from operations for such
period or such amount as may be necessary to maintain our REIT status. This
credit facility prohibits all distributions if certain financial ratios and
tests are not satisfied. Our outstanding classes of preferred stock prohibit the
payment of dividends on our common stock if we fail to pay the dividends to
which the holders of the preferred stock are entitled.
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WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR SUBSIDIARIES
All of our properties are owned, and all of our operations are conducted,
by the AIMCO operating partnership and our other subsidiaries. As a result, we
depend on distributions and other payments from the AIMCO operating partnership
and other subsidiaries in order to satisfy our financial obligations and make
payments to our investors. The ability of the AIMCO operating partnership and
other subsidiaries to make such distributions and other payments is dependent
upon their earnings and may be subject to statutory or contractual limitations.
As an equity investor in the AIMCO operating partnership and other subsidiaries,
our right to receive assets upon their liquidation or reorganization will be
effectively subordinated to the claims of their creditors. To the extent that we
are recognized as a creditor of the AIMCO operating partnership or such
subsidiaries, our claims would still be subordinate to any security interest in
or other lien on their assets and to any of their debt or other obligations that
are senior to us.
REAL ESTATE INVESTMENT RISKS
Our ability to make payments to our investors depends on our ability to
generate funds from operations in excess of required debt payments and capital
expenditure requirements. Funds from operations and the value of our properties
may be adversely affected by events or conditions which are beyond our control.
Such events or conditions could include:
- the general economic climate;
- competition from other apartment communities and alternative housing;
- local conditions, such as an increase in unemployment or an oversupply
of apartments, that might adversely affect apartment occupancy or
rental rates;
- increases in operating costs (including real estate taxes) due to
inflation and other factors, which may not necessarily be offset by
increased rents;
- changes in governmental regulations and the related costs of
compliance;
- changes in tax laws and housing laws, including the enactment of rent
control laws or other laws regulating multifamily housing;
- changes in interest rate levels and the availability of financing; and
- the relative illiquidity of real estate investments.
POSSIBLE ENVIRONMENTAL LIABILITIES
Various Federal, state and local laws subject property owners or operators
to liability for the costs of removal or remediation of certain hazardous
substances released on a property. Such laws often impose liability without
regard to whether the owner or operator knew of, or was responsible for, the
release of the hazardous substances. The presence of, or the failure to properly
remediate, hazardous substances may adversely affect occupancy at contaminated
apartment communities and our ability to sell or borrow against contaminated
properties. In addition to the costs associated with investigation and
remediation actions brought by governmental agencies, the presence of hazardous
wastes on a property could result in personal injury or similar claims by
private plaintiffs. Various laws also impose liability for the cost of removal
or remediation of hazardous substances at the disposal or treatment facility.
Anyone who arranges for the disposal or treatment of hazardous or toxic
substances is potentially liable under such laws. These laws often impose
liability whether or not the person arranging for the disposal ever owned or
operated the disposal facility.
LAWS BENEFITTING DISABLED PERSONS MAY RESULT IN UNANTICIPATED EXPENSES
Under the Americans with Disabilities Act of 1990 (the "ADA"), all places
of public accommodation are required to meet certain Federal requirements
related to access and use by disabled persons. These requirements became
effective in 1992. A number of additional Federal, state and local laws may also
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require modifications to our properties, or restrict certain further renovations
of the properties, with respect to access thereto by disabled persons. For
example, the Fair Housing Amendments Act of 1988 (the "FHAA") requires apartment
properties first occupied after March 13, 1990 to be accessible to the
handicapped. Noncompliance with the ADA or the FHAA could result in the
imposition of fines or an award of damages to private litigants and also could
result in an order to correct any non-complying feature, which could result in
substantial capital expenditures. Although we believe that our properties are
substantially in compliance with present requirements, we may incur
unanticipated expenses to comply with the ADA and the FHAA.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING
As of December 31, 1998, we owned or controlled 12 properties, held an
equity interest in 462 properties and managed for third parties and affiliates
578 properties that benefit from governmental programs intended to provide
housing to people with low or moderate incomes. These programs, which are
usually administered by the United States Department of Housing and Urban
Development ("HUD") or state housing finance agencies, typically provide
mortgage insurance, favorable financing terms or rental assistance payments to
the property owners. As a condition to the receipt of assistance under these
programs, the properties must comply with various requirements, which typically
limit rents to pre-approved amounts. If permitted rents on a property are
insufficient to cover costs, a sale of the property may become necessary, which
could result in a loss of management fee revenue. We usually need to obtain the
approval of HUD in order to manage, or acquire a significant interest in, a
HUD-assisted property. We can make no assurance that we will always receive such
approval.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS WOULD REDUCE OUR REVENUES
We manage some properties owned by third parties. In 1997, we received
$13.9 million of revenue from the management of such properties, representing
approximately 2% of our gross revenue. During the same period, Insignia, which
merged with us on October 1, 1998, derived approximately 15% of its gross
revenue from management of properties owned by third parties. We may suffer a
loss of revenue if we lose our right to manage these properties or if the rental
revenues upon which our management fees are based decline. In general,
management contracts may be terminated or otherwise lost as a result of:
- a disposition of the property by the owner in the ordinary course or
as a result of financial distress of the property owner;
- the property owner's determination that our management of the property
is unsatisfactory;
- willful misconduct, gross negligence or other conduct that constitutes
grounds for termination; or
- with respect to certain affordable properties, termination of such
contracts by HUD or state housing finance agencies, generally at their
discretion.
DEPENDENCE ON CERTAIN EXECUTIVE OFFICERS
Although we have entered into employment agreements with our Chairman and
Chief Executive Officer, Terry Considine, our President, Peter K. Kompaniez and
our Executive Vice President -- START, Steven D. Ira, the loss of any of their
services could have an adverse effect on our operations.
POSSIBLE CONFLICTS OF INTEREST; TRANSACTIONS WITH AFFILIATES
We have been, and continue to be, involved in various transactions with a
number of our affiliates, including executive officers, directors and entities
in which they own interests. For example, in order to satisfy certain REIT
requirements, Messrs. Considine and Kompaniez directly or indirectly control the
management companies, which manage properties for third parties and affiliates.
Although we own a 95% non-voting interest in these management companies, we have
no control over them or their operations. As a result, the management companies
could implement business decisions or policies that are not in our
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best interests. We have adopted certain policies designed to minimize or
eliminate the conflicts of interest inherent in these transactions, including a
requirement that a majority of our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
TAX RISKS
Adverse Consequences of Failure to Qualify as a REIT. Although we believe
that we operate in a manner that enables us to meet the requirements for
qualification as a REIT for Federal income tax purposes, we do not plan to
request a ruling from the IRS that we qualify as a REIT. We have, however,
received an opinion from the law firm of Skadden, Arps, Slate, Meagher & Flom
LLP to the effect that, beginning with our initial taxable year ended December
31, 1994, we were organized in conformity with the requirements for
qualification as a REIT under the Internal Revenue Code and that our proposed
method of operation, and our actual method of operation since our formation
through the date of such opinion, will enable us to meet the requirements for
qualification and taxation as a REIT. The opinion is expressed as of its date
and Skadden Arps has no obligation to advise us of any change in applicable law
or of any change in matters stated, represented or assumed after the date of
such opinion.
You should be aware that opinions of counsel are not binding on the IRS or
any court. Our opinion of counsel is based upon certain representations and
covenants made by us regarding our properties and the past, present and future
conduct of our business operations. Furthermore, our opinion of counsel is
conditioned on, and our continued qualification as a REIT will depend on, our
ability to meet, through actual annual operating results, the various REIT
qualification tests, the results of which will not be reviewed by Skadden Arps.
Accordingly, no assurance can be given that the actual results of our operations
for any taxable year will satisfy such requirements. Such requirements are
discussed in more detail under the heading "Certain Federal Income Tax
Consequences."
If we fail to qualify as a REIT, we would not be allowed a deduction for
dividends paid to our stockholders in computing our taxable income and we would
be subject to Federal income tax at regular corporate rates. We also could be
subject to the Federal alternative minimum tax. Unless we are entitled to relief
under the tax law, we could not elect to be taxed as a REIT for four years
following the year during which we were disqualified. Therefore, if we lose our
REIT status, the funds available for payment to our investors would be reduced
substantially for each of the years involved. See "Certain Federal Income Tax
Consequences." Also, if we fail to qualify as a REIT, (i) we would be obligated
to repurchase 750,000 shares of our Class B Cumulative Convertible Preferred
Stock at a price of $105 per share, plus accrued and unpaid dividends to the
date of repurchase, and (ii) we would be in default under our primary credit
facilities and certain other loan agreements.
If we acquire a corporation that is not a REIT, we will qualify as a REIT
only if we distribute all of the acquired corporation's "earnings and profits"
by the end of the year. The determination of earnings and profits, however, is
difficult and requires the resolution of technical tax issues. In addition, the
IRS can consider all taxable years of the acquired corporation as open for
review for purposes of determining the amount of its earnings and profits.
Effect of Distribution Requirements. As a REIT, we are subject to annual
distribution requirements, which limit the amount of cash we have available for
other business purposes, including amounts to fund our growth.
Possible Legislative or Other Actions Affecting REITs. The rules dealing
with Federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the U.S. Treasury Department. Changes
to the tax law (which changes may have retroactive application) could adversely
affect our investors. We cannot predict how changes in the tax law might affect
us or our investors.
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Other Tax Liabilities. Even if we qualify as a REIT, we and our
subsidiaries may be subject to certain Federal, state and local taxes on our
income and property. Any such taxes would reduce our operating cash flow.
POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES
Our charter limits ownership of our common stock by any single shareholder
to 8.7% of the outstanding shares (or 15% in the case of certain pension trusts,
registered investment companies and Mr. Considine). The charter also prohibits
anyone from buying shares if the purchase would result in us losing our REIT
status. This could happen if a share transaction results in fewer than 100
persons owning all of our shares or results in five or fewer persons, applying
certain attribution rules of the Internal Revenue Code, owning 50% or more of
our shares. If you or anyone else acquires shares in excess of the ownership
limit or in violation of the ownership requirements of the Internal Revenue Code
for REITs:
- the transfer will be considered null and void;
- we will not reflect the transaction on our books;
- we may institute legal action to enjoin the transaction;
- we may demand repayment of any dividends received by the affected
person on those shares;
- we may redeem the shares at their then current market price;
- the affected person will not have any voting rights for those shares;
and
- the shares (and all voting and dividend rights of the shares) will be
held in trust for the benefit of one or more charitable organizations
designated by us.
We may purchase the shares held in trust at a price equal to the lesser of
the price paid by the transferee of the shares or the then current market price.
If the trust transfers any of the shares, the affected person will receive the
lesser of the price he paid for the shares or the then current market price. An
individual who acquires shares that violate the above rules bears the risk that:
- he may lose control over the power to dispose of such shares;
- he may not recognize profit from the sale of such shares if the market
price of the shares increases;
- he may be required to recognize a loss from the sale of such shares if
the market price decreases; and
- he may be required to repay any distributions received as a result of
his ownership of such shares.
OUR CHARTER AND MARYLAND LAW MAY LIMIT THE ABILITY OF A THIRD PARTY TO ACQUIRE
CONTROL OF THE COMPANY
Ownership Limit. The 8.7% ownership limit discussed above may have the
effect of precluding acquisition of control of us by a third party without the
consent of our board of directors.
Preferred Stock. Our charter authorizes our board of directors to issue up
to 510,750,000 shares of capital stock. As of December 31, 1998, 484,027,500
shares were classified as Class A Common Stock, 262,500 shares were classified
as Class B Common Stock and 26,460,000 were classified as preferred stock. Under
the charter, our board of directors has the authority to classify and reclassify
any of our unissued shares of capital stock into shares of preferred stock with
such preferences, rights, powers and restrictions as our board of directors may
determine. The authorization and issuance of preferred stock could have the
effect of delaying or preventing someone from taking control of us, even if a
change in control were in our stockholders' best interests.
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Maryland Business Statutes. As a Maryland corporation, we are subject to
various Maryland laws which may have the effect of discouraging offers to
acquire us and of increasing the difficulty of consummating any such offers,
even if our acquisition would be in our stockholders' 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 generally only with the approval of stockholders
representing 80% of all votes entitled to be cast and 66% of the votes entitled
to be cast, excluding the interested stockholder, or upon payment of a fair
price. Maryland law also provides that a person who acquires shares of our stock
that represent 20% or more of the voting power in electing directors will have
no voting rights unless approved by a vote of two-thirds of the shares eligible
to vote.
RISKS ASSOCIATED WITH THE YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. Any of our
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities. We have determined that we will be required to modify or replace
significant portions of our software and certain hardware so that those systems
will properly utilize dates beyond December 31, 1999. We believe that with
modifications or replacements of existing software and certain hardware, the
Year 2000 Issue can be mitigated. However, if such modifications and
replacements are not made, or are not completed timely, the Year 2000 Issue
could have a material impact on our operations.
Our plan to resolve the Year 2000 Issue involves the following four phases:
assessment, remediation, testing, and implementation. To date, we have fully
completed its assessment of all information systems that could be significantly
affected by the Year 2000, and have begun the remediation, testing and
implementation phases on both hardware and software systems. We are continuing
our assessments with respect to embedded systems. The total cost of our Year
2000 project is estimated at $3.4 million and is being funded through operating
cash flows. To date, we have spent approximately $2.8 million ($0.4 million
expensed and $2.4 million capitalized for new systems and equipment) related to
all phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.4 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
We have not yet completed all necessary phases of the Year 2000 program. If
we do not complete any additional phases, certain worst case scenarios could
occur. The worst case scenarios include elevators, security and
heating-ventilation-air conditioning systems that read incorrect dates and
operate with incorrect schedules (e.g., elevators will operate on Monday as if
it were Sunday). Although such a change is annoying to residents, it is not
business critical. In addition, disruptions in the economy generally resulting
from the Year 2000 Issue could also materially adversely affect us. We could be
subject to litigation for computer systems failure, for example, equipment
shutdown or failure to properly date business records. The amount of potential
liability and lost revenue cannot be reasonably estimated at this time.
8
<PAGE> 12
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------------------------------------------------------
AIMCO
AIMCO PREDECESSORS(1)
-------------------------------------------------------- -----------------------------
FOR THE NINE FOR THE YEARS FOR THE PERIOD
MONTHS ENDED ENDED FOR THE PERIOD JANUARY 1, FOR THE
SEPTEMBER 30, DECEMBER 31, JANUARY 10, 1994 1994 THROUGH YEAR ENDED
------------- --------------------- TO DECEMBER 31, JULY 28, DECEMBER 31,
1998 1997 1997 1996 1995 1994 1994(2) 1993
----- ----- ----- ----- ----- ---------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
combined fixed charges and
preferred stock
dividends(3)(4)........... 1.8:1 1.6:1 1.8:1 1.5:1 1.6:1 2.1:1 5.8:1 N/A
</TABLE>
- ---------------
(1) On July 29, 1994, AIMCO completed its IPO of 9,075,000 shares of Class A
Common Stock. On such date, the AIMCO Predecessors engaged in a business
combination and consummated a series of related transactions which enabled
AIMCO to continue and to expand the property management and related
businesses of the AIMCO Predecessors.
(2) The earnings of the AIMCO Predecessors for the period from January 1, 1994
to July 28, 1994 were inadequate to cover fixed charges by $1,463,000.
(3) The ratio of earnings to combined fixed charges and preferred stock
dividends for AIMCO was computed by dividing earnings by the total of fixed
charges and preferred stock dividends. For this purpose, "earnings" consists
of income before minority interest plus fixed charges (other than any
interest which has been capitalized); "fixed charges" consists of interest
expense (including amortization of loan costs) and interest which has been
capitalized); and "preferred stock dividends" consists of the amount of
pre-tax earnings that would be required to cover preferred stock dividend
requirements.
(4) The AIMCO Predecessors did not have any shares of preferred stock
outstanding during the period from January 1, 1994 through July 28, 1994.
9
<PAGE> 13
USE OF PROCEEDS
The selling stockholders will receive all of the net proceeds from the sale
of shares of Class B Cumulative Convertible Preferred Stock ("Class B Preferred
Stock") or Class A Common Stock offered hereby. The Company will not receive any
proceeds from the sale of such shares.
SELLING STOCKHOLDERS
This prospectus relates to periodic offers and sales of up to 750,000
shares of Class B Preferred Stock and up to 4,212,283 shares of Class A Common
Stock by the selling stockholders described below and their respective pledgees,
donees and other successors in interest (collectively, "the Selling
Stockholders"). The shares of Class A Common Stock that may be offered and sold
by the Selling Stockholders include shares that may be issued in exchange for
partnership common units of the AIMCO operating partnership and shares that may
be issued upon conversion of Class B Preferred Stock.
The following table sets forth certain information with respect to the
Selling Stockholders and their beneficial ownership of shares of Class B
Preferred Stock and Class A Common Stock as of the date hereof. Except as
indicated below, none of the Selling Stockholders holds any position, office or
has had any other material relationship with the Company, or any of its
predecessors or affiliates, during the past three years. All of the shares owned
by the Selling Stockholders may be offered hereby. Because the Selling
Stockholders may sell some or all of the shares offered hereby, and because
there are currently no agreements, arrangements or understandings with respect
to the sale of any of such shares, no estimate can be given as to the number of
shares that will be held by the Selling Stockholders upon termination of any
offering made hereby. If all of the shares offered hereby are sold, the Selling
Stockholders will not own any shares after the offering.
<TABLE>
<CAPTION>
SHARES OWNED PRIOR
SELLING STOCKHOLDER TO OFFERING(1)
------------------- ------------------
<S> <C>
Security Capital Preferred Growth Incorporated(2)........... 750,000(3)
Security Capital Preferred Growth Incorporated(2)........... 2,463,053(4)
Persons and entities, other than FM Arizona Associates,
L.P., affiliated with Cirque Property L.C. or which
received their Class A Common Stock or partnership common
units by reason of having an ownership interest in
entities affiliated with Cirque Property L.C. ............ 433,663(5)
Pankey Group, a California general partnership.............. 367,500
Edgar E. Pankey, Trustee Under Declaration of Trust dated
December 6, 1985.......................................... 302,479
FM Arizona Associates, L.P.................................. 232,346
The Homer E. Lindley and Avonelle Lindley Family Trust dated
June 29, 1989............................................. 70,915
James H. Pankey............................................. 66,090
Victor S. Pankey............................................ 60,709
Roberta Pankey Hurst........................................ 51,090
Donald E. Crocker and Uretta Mae Crocker, Co-trustees of the
Donald E. Crocker and Uretta Mae Crocker Family Trust
dated October 5, 1992..................................... 33,721
Arbor Station, Ltd.......................................... 28,979
James Andrew Morton......................................... 27,500
B&G Signs................................................... 9,258
Howard A. Parven TTEE....................................... 7,659
Rodger D. Shay.............................................. 7,659
Garfran Smith Revocable Trust............................... 7,419
Carolyn Cunningham-Smith.................................... 5,433
</TABLE>
10
<PAGE> 14
<TABLE>
<CAPTION>
SHARES OWNED PRIOR
SELLING STOCKHOLDER TO OFFERING(1)
------------------- ------------------
<S> <C>
Dewey D. Brown and Harriet Ann Brown, Co-trustees of the
Brown Family Trust dated July 20, 1993.................... 5,433
Cynthia Edgerton............................................ 5,432
The Thomas A. Bradford Jr. Declaration of Trust dated
6/23/97................................................... 4,243
Annelle R. Lindley.......................................... 4,046
Lester G. Shapiro........................................... 2,899
Lawrence D. Levin Esq....................................... 2,755
William E. Brenner.......................................... 2,755
Larry Brandis............................................... 2,352
Michael J. Davidson......................................... 2,352
Edward L. Hiller............................................ 1,461
Greenwich Country Day School................................ 1,250
Lewis & Clark College....................................... 400
Nightingale Bamford School.................................. 350
St. Matthew's Church........................................ 350
Metropolitan Opera.......................................... 200
Cornell University.......................................... 150
Episcopal Charities......................................... 150
President & Fellows of Harvard College...................... 150
First Presbyterian Church................................... 75
Tracy A. Achelis............................................ 7
</TABLE>
- ---------------
(1) Unless otherwise indicated, the number of shares shown reflects the number
of shares of Class A Common Stock (subject to adjustment pursuant to
anti-dilution adjustment provisions) that may be issued to the Selling
Stockholder from time to time by AIMCO in exchange for partnership common
units of the AIMCO operating partnership tendered for redemption by such
Selling Stockholder pursuant to the agreement of limited partnership of the
AIMCO operating partnership.
(2) The Selling Stockholder has pledged its shares to Merrill Lynch
International Private Finance Limited ("MLIPF") to secure certain loans. If
the Selling Stockholder defaults on such loans, MLIPF may sell such shares
hereunder.
(3) Represents shares of Class B Preferred Stock.
(4) Represents the total number of shares of Class A Common Stock that would be
issuable upon conversion of the 750,000 shares of Class B Preferred Stock
owned by the Selling Stockholder (based on a conversion ratio of 3.28407).
There is also offered hereby such additional number of shares of Class A
Common Stock as may be issued upon conversion of shares of Class B Preferred
Stock as a result of future adjustment of the conversion ratio pursuant to
certain anti-dilution provisions.
(5) Represents less than 1% of the class.
11
<PAGE> 15
PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale from time to time by the
Selling Stockholders of up to 750,000 shares of Class B Preferred Stock and up
to 4,212,283 shares of Class A Common Stock. The Selling Stockholders may sell
the shares from time to time in one or more transactions, which may include
underwritten offerings, sales in open market or block transactions on the New
York Stock Exchange, or such other national securities exchange or automated
interdealer quotation system on which shares of Class A Common Stock are then
listed or quoted, sales in the over-the-counter market, privately negotiated
transactions, put or call options transactions relating to the shares, short
sales of shares, or a combination of such methods of sale, at prices related to
prevailing market prices at the time of the sale or at negotiated prices. Such
transactions may or may not involve brokers or dealers. The Selling Stockholders
have advised AIMCO that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding
the sale of their securities, nor is there an underwriter or coordinating broker
acting in connection with the proposed sale of shares by the Selling
Stockholders. In addition, any of the shares covered by this prospectus which
qualify for sale pursuant to Rule 144 under the Securities Act of 1933, as
amended (the "Securities Act"), may be sold under Rule 144 rather than pursuant
to this prospectus.
The Selling Stockholders may effect such transactions by selling shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). In effecting sales,
such broker-dealers may arrange for other broker-dealers to participate.
If shares are sold in an underwritten offering, the shares will be acquired
by the underwriters for their own accounts and may be resold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or prices at the time of the sale or at negotiated prices.
Any initial public offering price and any discounts or commissions allowed or
reallowed or paid to dealers may be changed from time to time. Underwriters may
sell shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters or the purchasers of shares for whom such broker-dealers may act as
agents or to whom they sell as principal, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
The Selling Stockholders and any underwriter or broker-dealer who acts in
connection with the sale of shares hereunder may be deemed to be "underwriters,"
within the meaning of Section 2(11) of the Securities Act, and any compensation
received by them and any profit on any resale of shares sold by them while
acting as principals may be deemed to be underwriting discounts or commissions
under the Securities Act.
Because Selling Stockholders may be deemed to be "underwriters," within the
meaning of Section 2(11) of the Securities Act, the Selling Stockholders will be
subject to the prospectus delivery requirements of the Securities Act, which may
include delivery through the facilities of the New York Stock Exchange pursuant
to Rule 153 under the Securities Act. AIMCO has informed the Selling
Stockholders that the anti-manipulation provisions of Regulation M promulgated
under the Securities Exchange Act of 1934, as amended, may apply to their sales
in the market.
In order to comply with the securities laws of certain jurisdictions, the
securities offered hereby will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the securities offered hereby may not be offered or sold unless
they have been registered or qualified for sale in such jurisdictions or an
exemption from registration or qualification is available and is complied with.
12
<PAGE> 16
The Company has agreed to pay all expenses in connection with the
registration of the shares being offered hereby. Selling Stockholders are
responsible for paying broker's commissions, underwriting discounts and any
other selling expenses, as well as fees and expenses of Selling Stockholders'
counsel.
AIMCO has agreed to indemnify certain of the Selling Stockholders, and
their respective officers and directors and any person who controls such Selling
Stockholders, against certain liabilities and expenses arising out of or based
upon the information set forth or incorporated by reference in this prospectus,
and the registration statement of which this prospectus is a part, including
liabilities under the Securities Act. AIMCO or the Selling Stockholders may
agree to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act.
Upon AIMCO being notified by a Selling Stockholder that any material
arrangement has been entered into with an underwriter or a broker-dealer for the
sale of shares through a special offering, block trade, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such Selling Stockholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii)
the price at which such shares were sold, (iv) the commissions paid or discounts
or concessions allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus and (vi) other facts
material to the transaction. In addition, upon AIMCO being notified by a Selling
Stockholder that a donee or pledgee intends to sell more than 500 shares, a
supplement to this prospectus will be filed.
DESCRIPTION OF CLASS B CUMULATIVE CONVERTIBLE PREFERRED STOCK
The following description is a summary of the material terms and provisions
of the Class B Preferred Stock.
RANKING
The Class B Preferred Stock ranks, with respect to dividend rights and
rights upon liquidation, dissolution or winding up of AIMCO, rank (a) prior or
senior to AIMCO's common stock and Class E Cumulative Convertible Preferred
Stock ("Class E Preferred Stock"), and any other class or series of capital
stock of AIMCO if the holders of Class B Preferred Stock are entitled to the
receipt of dividends or of amounts distributable upon liquidation, dissolution
or winding up in preference or priority to the holders of shares of such class
or series ("Class B Junior Stock"); (b) on a parity with AIMCO's Class C
Cumulative Preferred Stock, Class D Cumulative Preferred Stock, Class G
Cumulative Preferred Stock, Class H Cumulative Preferred Stock and Class J
Cumulative Convertible Preferred Stock, and with any other class or series of
capital stock of AIMCO if the holders of such class or series of stock and the
Class B Preferred Stock shall be entitled to the receipt of dividends and of
amounts distributable upon liquidation, dissolution or winding up in proportion
to their respective amounts of accrued and unpaid dividends per share or
liquidation preferences, without preference or priority of one over the other
("Class B Parity Stock"); and (c) junior to any class or series of capital stock
of AIMCO if the holders of such class or series shall be entitled to the receipt
of dividends and amounts distributable upon liquidation, dissolution or winding
up in preference or priority to the holders of the Class B Preferred Stock
("Class B Senior Stock").
DIVIDENDS
Holders of Class B Preferred Stock are entitled to receive, when and as
declared by the AIMCO board of directors, out of funds of AIMCO legally
available for payment, cash dividends in an amount per share equal to the
greater of (i) the base dividend of $1.78125 per quarter (the "Base Rate") or
(ii) the cash dividends declared on the number of shares of Class A Common
Stock, or portion thereof, into which a share of Class B Preferred Stock is
convertible. The amount referred to in clause (ii) above payable for
13
<PAGE> 17
each full Dividend Period (as defined below) on the Class B Preferred Stock will
be computed by multiplying the number of shares of Class A Common Stock, or
portion thereof calculated to the fourth decimal point, into which a share of
Class B Preferred Stock would be convertible at the opening of business on such
Dividend Payment Date (as defined below) (based on the conversion price then in
effect) by the aggregate cash dividends payable or paid for such Dividend Period
on a share of Class A Common Stock outstanding as of the record date for the
payment of dividends on the Common Stock with respect to such Dividend Period.
If (A) AIMCO pays a cash dividend on its Class A Common Stock after the Dividend
Payment Date for the corresponding Dividend Period and (B) the dividend on the
Class B Preferred Stock for such Dividend Period calculated pursuant to clause
(ii) above, taking into account the Class A Common Stock dividend referenced in
clause (A), exceeds the dividend previously declared on the Class B Preferred
Stock for such Dividend Period, AIMCO will pay an additional dividend to the
holders of Class B Preferred Stock on the date that the Class A Common Stock
dividend referenced in clause (A) is paid, in an amount equal to the difference
between the dividend calculated pursuant to clause (B) and the dividends
previously declared on the Class B Preferred Stock with respect to such Dividend
Period. Such dividends shall be cumulative from the date of original issue,
whether or not in any Dividend Period or Periods such dividends shall be
declared or there shall be funds of AIMCO legally available for payment of such
dividends, and shall be payable quarterly in arrears on the Dividend Payment
Dates. Dividends will be payable in arrears to holders of record as they appear
on the stock records of AIMCO at the close of business on a record date fixed by
AIMCO's board of directors, which shall be not more than 60 days prior to the
applicable Dividend Payment Date and, within such 60-day period, shall be the
same date as the record date for the regular quarterly dividend payable with
respect to Class A Common Stock for the Dividend Period to which such Dividend
Payment Date relates (or, if there is no such record date for Class A Common
Stock, then such date as AIMCO's board of directors may fix).
Upon a final administrative determination by the Internal Revenue Service
that AIMCO does not qualify as a REIT in accordance with Section 856 of the
Internal Revenue Code, the Base Rate will be increased to $3.03125 until such
time as AIMCO regains its status as a REIT; provided, however, that if AIMCO
contests its loss of REIT status in Federal Court, following its receipt of an
opinion of nationally recognized tax counsel to the effect that there is a
reasonable basis to contest such loss of status, the Base Rate shall not be
increased during the pendency of such judicial proceeding; provided further,
however, that upon a final judicial determination in Federal Tax Court, Federal
District Court or the Federal Claims Court that AIMCO does not qualify as a
REIT, the Base Rate will be increased as stated above from the date of such
judicial determination.
Any dividend payable on the Class B Preferred Stock for any partial
dividend period will be computed ratably on the basis of twelve 30-day months
and a 360-day year. Holders of Class B Preferred Stock are not entitled to
receive any dividends in excess of the cumulative cash dividends described
above. No interest, or sum of money in lieu of interest, will be payable in
respect of any dividend payment or payments on the Class B Preferred Stock that
may be in arrears.
So long as any of the shares of Class B Preferred Stock are outstanding,
except as described in the immediately following sentence, no dividends may be
declared or paid or set apart for payment by AIMCO and no other distribution of
cash or other property may be declared or made directly or indirectly by AIMCO
with respect to any class or series of Class B Parity Stock for any period
unless dividends equal to the full amount of accumulated, accrued and unpaid
dividends 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 on the Class B Preferred Stock for all Dividend Periods
terminating on or prior to the Dividend Payment Date with respect to such class
or series of Class B Parity Stock. When dividends are not paid in full or a sum
sufficient for such payment is not set apart, as aforesaid, all dividends
declared upon the Class B Preferred Stock and all dividends declared upon any
other class or series of Class B Parity Stock must be declared ratably in
proportion to the respective amounts of dividends accumulated, accrued and
unpaid on the Class B Preferred Stock and accumulated, accrued and unpaid on
such Class B Parity Stock.
14
<PAGE> 18
So long as any of the shares of Class B Preferred Stock are outstanding, no
dividends (other than dividends or distributions paid in shares of or options,
warrants or rights to subscribe for or purchase shares of Class B Junior Stock)
may be declared or paid or set apart for payment by AIMCO and no other
distribution of cash or other property may be declared or made directly or
indirectly by AIMCO with respect to any shares of Class B Junior Stock, nor
shall any shares of Class B Junior Stock be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of Class A
Common Stock made for purposes of an employee incentive or benefit plan of AIMCO
or any subsidiary) for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any such stock)
directly or indirectly by AIMCO (except by conversion into or exchange for Class
B Junior Stock), nor shall any other cash or other property otherwise be paid or
distributed to or for the benefit of any holder of shares of Class B Junior
Stock in respect thereof, directly or indirectly, by AIMCO unless in each case
(i) the full cumulative dividends (including all accumulated, accrued and unpaid
dividends) on all outstanding shares of Class B Preferred Stock and any other
Class B Parity Stock have been paid or such dividends have been declared and set
apart for payment for all past Dividend Periods with respect to the Class B
Preferred Stock and all past dividend periods with respect to such Class B
Parity Stock and (ii) sufficient funds shall have been paid or set apart for the
payment of the full dividend for the current Dividend Period with respect to the
Class B Preferred Stock and the current dividend period with respect to such
Class B Parity Stock.
AIMCO's credit facilities contain restrictive covenants which may limit,
among other things, the ability of AIMCO to pay dividends or make other
restricted payments. In particular, the credit agreement with Bank of America
National Trust and Savings Association provides that AIMCO may make
distributions during any 12-month period in an amount in the aggregate which
does not exceed the greater of 80% of funds from operations for such period or
such amount as may be necessary to maintain REIT status, provided that no event
of default exists as a result of a breach of certain financial ratios and tests
that AIMCO is required to meet. A failure of AIMCO to comply with these or other
conditions and obligations contained in the credit facilities could result in
adverse consequences to holders of the Class B Preferred Stock, could render
AIMCO unable to pay required dividends or make redemptions, and could result in
an event of default under AIMCO's credit facilities. In addition, AIMCO's 6 1/2%
convertible debentures prohibit the payment of dividends on AIMCO's capital
stock if AIMCO elects to defer payments of interest on such convertible
debentures, which it will have the right, under circumstances, to do for periods
of up to 60 months. Other securities of AIMCO that may be issued in the future
may also contain financial or other covenants more restrictive than those
applicable to AIMCO's existing credit facilities or the convertible debentures.
"Dividend Period" means each quarterly dividend period commencing on and
including January 1, April 1, July 1 and October 1 of each year and ending on
and including the day preceding the first day of the next succeeding Dividend
Period; however, the Dividend Period during which any Class B Preferred Stock
may be redeemed or converted as described below, will end on and include the
redemption date with respect to the Class B Preferred Stock being redeemed.
"Dividend Payment Date" means, with respect to each Dividend Period, (a) the
date that cash dividends are paid on the Class A Common Stock with respect to
such Dividend Period, or (b) if such dividends have not been paid on the Class A
Common Stock by 9:00 a.m., New York City time, on the sixtieth day from and
including the last day of such Dividend Period, then on such day; provided,
further, that if any Dividend Payment Date falls on any day other than a
business day, the dividend payment payable on such Dividend Payment Date will be
paid on the business day immediately following such Dividend Payment Date.
LIQUIDATION PREFERENCES
Upon any voluntary or involuntary liquidation, dissolution or winding up of
AIMCO, before any payment or distribution by AIMCO may be made to or set apart
for the holders of any shares of Class B Junior Stock, the holders of shares of
Class B Preferred Stock will be entitled to receive a liquidation preference of
$100 per share (the "Class B Liquidation Preference"), plus an amount equal to
all accumulated, accrued and unpaid dividends (whether or not earned or
declared) to the date of final
15
<PAGE> 19
distribution to such holders; but such holders shall not be entitled to any
further payment. Until the holders of the Class B Preferred Stock have been paid
the Class B Liquidation Preference in full, plus an amount equal to all
accumulated, accrued and unpaid dividends (whether or not earned or declared) to
the date of final distribution to such holders, no payment may be made to any
holder of Class B Junior Stock upon the liquidation, dissolution or winding up
of AIMCO. If upon any liquidation, dissolution or winding up of AIMCO, the
assets of AIMCO, or proceeds thereof, distributable among the holders of Class B
Preferred Stock are insufficient to pay in full the above described preferential
amount and liquidating payments on any other shares of any class or series of
Class B Parity Stock, then such assets, or the proceeds thereof, will be
distributed among the holders of Class B Preferred Stock and any such other
Class B Parity Stock ratably in the same proportion as the respective amounts
that would be payable on such Class B Preferred Stock and any such other Class B
Parity Stock if all amounts payable thereon were paid in full. For this purpose,
a consolidation or merger of AIMCO with one or more corporations, a sale or
transfer of all or substantially all of AIMCO's assets, or a statutory share
exchange will not be deemed a voluntary or involuntary liquidation, dissolution
or winding up of AIMCO.
Upon any liquidation, dissolution or winding up of AIMCO, after payment has
been made in full to the holders of Class B Preferred Stock and any Class B
Parity Stock, as described above, any other series or class or classes of Class
B Junior Stock will be entitled to receive any and all assets remaining to be
paid or distributed, and the holders of the Class B Preferred Stock and any
Class B Parity Stock will not be entitled to share therein.
REDEMPTION
Shares of Class B Preferred Stock are not redeemable by AIMCO prior to
August 4, 2002. On and after August 4, 2002, AIMCO may, at its option, redeem
shares of Class B Preferred Stock, in whole or from time to time in part, at a
cash redemption price equal to 100% of the Class B Liquidation Preference, plus
all accrued and unpaid dividends to the date fixed for redemption (the "Call
Date"). The Call Date will be selected by AIMCO and will be not less than 30
days nor more than 60 days after the date notice of redemption is sent by AIMCO.
If full cumulative dividends on all outstanding shares of Class B Preferred
Stock and any other class or series of Class B Parity Stock have not been paid
or declared and set apart for payment, no shares of Class B Preferred Stock may
be redeemed unless all outstanding shares of Class B Preferred Stock are
simultaneously redeemed and neither AIMCO nor any of its affiliates may purchase
or acquire shares of Class B Preferred Stock otherwise than pursuant to a
purchase or exchange offer made on the same terms to all holders of Class B
Preferred Stock.
Notice of redemption of the Class B Preferred Stock will be mailed to each
holder of record of the shares to be redeemed by first class mail, postage
prepaid at such holder's address as the same appears on the stock records of
AIMCO. Any notice which was mailed as described above will be conclusively
presumed to have been duly given on the date mailed whether or not the holder
receives the notice. The notice sent to each holder of Class B Preferred Stock
will state: (i) the Call Date; (ii) the number of shares of Class B Preferred
Stock to be redeemed and, if fewer than all such shares held by such holder are
to be redeemed, the number of such shares to be redeemed from such holder; (iii)
the place or places where certificates for such shares of Class B Preferred
Stock are to be surrendered for cash; and (iv) the then-current conversion price
(the "Conversion Price") per share of Class A Common Stock for which each share
of Class B Preferred Stock is convertible. From and after the Call Date,
dividends on the shares of Class B Preferred Stock to be redeemed will cease to
accumulate or accrue, such shares will no longer be deemed to be outstanding and
all rights of the holders thereof will cease (except (a) the right to receive
the cash payable upon such redemption without interest thereon, and (b) if the
Call Date occurs after a dividend record date and prior to the related Dividend
Payment Date, the right of record holders at the close of business on such
record date to receive the dividend payable on such Dividend Payment Date).
The Class B Preferred Stock has no stated maturity and is not subject to
any sinking fund or mandatory redemption provisions (except as provided under
"-- Restrictions on Ownership and Transfer").
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CONVERSION
At any time, a holder of shares of Class B Preferred Stock has the right,
at such holder's option, to convert such shares, in whole or in part, into the
number of fully paid and non-assessable shares of Class A Common Stock per each
share of Class B Preferred Stock obtained by dividing the $100 Class B
Liquidation Preference (excluding any accumulated, accrued and unpaid dividends)
per share of Class B Preferred Stock by the Conversion Price then in effect. The
Conversion Price is currently $30.45. In the case of shares of Class B Preferred
Stock called for redemption, conversion rights will terminate at the close of
business on the Call Date fixed for such redemption, unless AIMCO shall default
in making payment of cash payable upon such redemption.
In order to exercise the conversion right, the holder of each share of
Class B Preferred Stock to be converted must surrender the certificate
representing such share at the office of the transfer agent, accompanied by
written notice to AIMCO that the holder thereof elects to convert such share of
Class B Preferred Stock. Unless the shares issuable on conversion are to be
issued in the same name as the name in which such share of Class B Preferred
Stock is registered, each share surrendered for conversion must be accompanied
by instruments of transfer, in form satisfactory to AIMCO, duly executed by the
holder or such holder's duly authorized attorney and an amount sufficient to pay
any transfer or similar tax (or evidence reasonably satisfactory to AIMCO
demonstrating that such taxes have been paid).
Holders of shares of Class B Preferred Stock at the close of business on a
dividend payment record date will be entitled to receive the dividend payable on
such shares on the corresponding Dividend Payment Date notwithstanding the
conversion thereof following such dividend payment record date and prior to such
Dividend Payment Date. Except as provided above, AIMCO will make no payment or
allowance for unpaid dividends, whether or not in arrears, on converted shares
or for dividends on the shares of Class A Common Stock issued upon such
conversion.
Each conversion will be deemed to have been effected immediately prior to
the close of business on the date on which the holder surrenders the
certificates for shares of Class B Preferred Stock and AIMCO receives notice.
The person or persons in whose name or names any certificate or certificates for
shares of Class A Common Stock are issuable upon such conversion will be deemed
to have become the holder or holders of record of the shares represented thereby
at such time on such date. The conversion will be at the Conversion Price in
effect at such time and on such date unless the stock transfer books of AIMCO
are closed on that date, in which event such person or persons will be deemed to
have become such holder or holders of record at the close of business on the
next succeeding day on which such stock transfer books are open, but such
conversion will be at the Conversion Price in effect on the date on which such
shares were surrendered and such notice received by AIMCO.
No fractional share or scrip representing fractions of a share of Class A
Common Stock will be issued upon conversion of the shares of Class B Preferred
Stock. Instead of any fractional interest in a share of Class A Common Stock
that would otherwise be deliverable upon conversion of shares of Class B
Preferred Stock, AIMCO will pay to the holder of such share an amount in cash
based upon the current market price of the Class A Common Stock on the trading
day immediately preceding the date of conversion. If more than one share is
surrendered for conversion at one time by the same holder, the number of full
shares of Class A Common Stock issuable upon conversion thereof will be computed
on the basis of the aggregate number of shares of Class B Preferred Stock so
surrendered.
The Conversion Price is subject to adjustment upon the occurrence of any of
the following events:
(i) If AIMCO (A) pays a dividend or makes a distribution on its
capital stock in shares of Class A Common Stock, (B) subdivides its
outstanding Class A Common Stock into a greater number of shares, (C)
combines its outstanding Class A Common Stock into a smaller number of
shares or (D) issues any shares of capital stock by reclassification of its
outstanding Class A Common Stock.
(ii) If AIMCO issues rights, options or warrants to all holders of
Class A Common Stock entitling them (for a period expiring within 45 days
after the record date described below) to
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subscribe for or purchase Class A Common Stock at a price per share less
than the fair market value per share of the Class A Common Stock on the
record date for the determination of stockholders entitled to receive such
rights, options or warrants.
(iii) If AIMCO makes a distribution on its Class A Common Stock other
than in cash or shares of Class A Common Stock (including any distribution
in securities (other than rights, options or warrants described in (ii)
above)).
(iv) If AIMCO shall acquire, pursuant to an issuer or self tender
offer, all or any portion of the outstanding Class A Common Stock and such
tender offer involves the payment of consideration per share of Class A
Common Stock having a fair market value (as determined in good faith by
AIMCO's board of directors), at the last time (the "Expiration Time")
tenders may be made pursuant to such offer, that exceeds the current market
price per share of Class A Common Stock on the trading day next succeeding
the Expiration Time.
No adjustment in the conversion price will be required unless such
adjustment would require a cumulative increase or decrease of at least 1% in
such price. However, any adjustments that by reason of the immediately preceding
sentence are not required to be made will be carried forward and taken into
account in any subsequent adjustment until made. Any adjustment will be required
and made in accordance with the provisions herein (other than this paragraph)
not later than such time as may be required in order to preserve the tax-free
nature of a distribution to the holders of shares of Class A Common Stock. AIMCO
will not be required to make any adjustment of the Conversion Price for the
issuance of (A) any shares of Class A Common Stock pursuant to any plan
providing for the reinvestment of dividends or interest payable on securities of
AIMCO and the investment of optional amounts in shares of Class A Common Stock
under such plan or (B) any options, rights or shares of Class A Common Stock
pursuant to any stock option, stock purchase or other stock-based plan
maintained by AIMCO.
If AIMCO is a party to any transaction (including, without limitation, a
merger, consolidation, statutory share exchange, issuer or self tender offer for
at least 30% of the shares of Class A Common Stock outstanding, sale of all or
substantially all of AIMCO's assets or recapitalization of the Class A Common
Stock, but excluding certain stock dividends, subdivisions, combinations and
reclassifications) in which shares of Class A Common Stock are converted into
the right to receive stock, securities or other property (including cash or any
combination thereof), each share of Class B Preferred Stock which is not
converted into the right to receive stock, securities or other property in
connection with such transaction will thereupon be convertible into the kind and
amount of shares of stock, securities and other property (including cash or any
combination thereof) receivable upon consummation of such transaction by a
holder of that number of shares of Class A Common Stock into which one share of
Class B Preferred Stock was convertible immediately prior to such transaction.
AIMCO may not be a party to any transaction unless the terms of such transaction
are consistent with the provisions of this paragraph, and it may not consent or
agree to the occurrence of any transaction until AIMCO has entered into an
agreement with the successor or purchasing entity, as the case may be, for the
benefit of the holders of the Class B Preferred Stock that contains provisions
enabling the holders of the Class B Preferred Stock that remain outstanding
after such transaction to convert into the consideration received by holders of
Class A Common Stock at the Conversion Price in effect immediately prior to such
transaction.
If:
(i) AIMCO declares a dividend (or any other distribution) on the Class
A Common Stock (other than cash dividends and cash distributions); or
(ii) AIMCO authorizes the granting to all holders of the Class A
Common Stock of rights or warrants to subscribe for or purchase any shares
of any class or series of capital stock or any other rights or warrants; or
(iii) there is any reclassification of the outstanding Class A Common
Stock or any consolidation or merger to which AIMCO is a party and for
which approval of any stockholders of AIMCO is required, or a statutory
share exchange, an issuer or self tender offer shall have been commenced
for
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at least 30% of the outstanding shares of Class A Common Stock (or an
amendment thereto changing the maximum number of shares sought or the
amount or type of consideration being offered therefor shall have been
adopted), or the sale or transfer of all or substantially all of the assets
of AIMCO as an entirety; or
(iv) any voluntary or involuntary liquidation, dissolution or winding
up of AIMCO occurs,
then AIMCO will cause to be filed with the transfer agent and mailed to each
holder of shares of Class B Preferred Stock at such holder's address as shown on
the stock records of AIMCO, as promptly as possible, a notice stating (A) the
record date for the payment of such dividend, distribution or rights or
warrants, or, if a record date is not established, the date as of which the
holders of Class A Common Stock of record to be entitled to such dividend,
distribution or rights or warrants are to be determined or (B) the date on which
such reclassification, consolidation, merger, statutory share exchange, sale,
transfer, liquidation, dissolution or winding up is expected to become
effective, and the date as of which it is expected that holders of Class A
Common Stock of record will be entitled to exchange their shares of Class A
Common Stock for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, statutory share exchange, sale,
transfer, liquidation, dissolution or winding up or (C) the date on which such
tender offer commenced, the date on which such tender offer is scheduled to
expire unless extended, the consideration offered and the other material terms
thereof (or the material terms of any amendment thereto).
Whenever the Conversion Price is adjusted, AIMCO will promptly file with
the transfer agent an officer's certificate setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment, which certificate will be conclusive evidence of the
correctness of such adjustment absent manifest error. Promptly after delivery of
such certificate, AIMCO will prepare a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the effective
date such adjustment becomes effective and will mail such notice of such
adjustment of the Conversion Price to each holder of shares of Class B Preferred
Stock at such holder's last address as shown on the stock records of AIMCO.
Conversion of Class B Preferred Stock will be permitted only to the extent
that such conversion would not result in a violation of the ownership
restrictions set forth in AIMCO's charter, after taking into account any waiver
of such limitation granted to any holder of the shares of Class B Preferred
Stock.
VOTING RIGHTS
If and whenever (a) dividends on any shares of Class B Preferred Stock or
any series or class of Class B Parity Stock are in arrears for six or more
quarterly periods (whether or not consecutive), or (b) dividends on the Class A
Common Stock are not paid in an amount per share at least equal to $0.4625
(subject to certain adjustments) (the "Base Common Stock Dividend") for two
consecutive quarterly periods, the number of directors then constituting the
AIMCO board of directors will be increased by two (in the case of an arrearage
in dividends described in clause (a)) or one additional director (in the case of
an arrearage of dividends described in clause (b)) (in each case if not already
increased by reason of similar types of provisions with respect to shares of
Class B Preferred Stock or Class B Parity Stock), and the holders of shares of
Class B Preferred Stock, together with the holders of shares of all other Class
B Parity Stock, voting as a single class regardless of series, will be entitled
to elect the two additional directors (in the case of an arrearage in dividends
described in clause (a)) or one additional director (in the case of arrearage of
dividends described in clause (b)) of AIMCO at any annual meeting of
stockholders or special meeting held in place thereof, or at a special meeting
of the holders of the Class B Preferred Stock and the Class B Parity Stock
called for that purpose. AIMCO must call such special meeting upon the written
request of any holder of shares of Class B Preferred Stock. Whenever, (i) in the
case of an arrearage in dividends described in clause (a), all arrears in
dividends on outstanding shares of the Class B Preferred Stock and the Class B
Parity Stock shall have been paid and dividends thereon for the current
quarterly dividend period shall have been paid or declared and set apart for
payment, or (ii) in the case of an arrearage in dividends described in clause
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(b), AIMCO makes a quarterly dividend payment on the Class A Common Stock in an
amount per share equal to or exceeding the Base Common Stock Dividend, then the
right of the holders of the Class B Preferred Stock and the Class B Parity Stock
to elect such additional director or directors shall cease, and the terms of
office of all persons elected as directors by the holders of the Class B
Preferred Stock and Class B Parity Stock will then terminate and the number of
directors constituting the AIMCO board of directors will be reduced accordingly.
So long as any shares of Class B Preferred Stock are outstanding, in
addition to any other vote or consent of stockholders required by law or by
AIMCO's charter, the affirmative vote or consent of at least 66 2/3% of the
votes entitled to be cast by the holders of the outstanding shares of Class B
Preferred Stock will be required to (i) amend, alter or repeal any provision of
AIMCO's charter (including the articles supplementary creating the Class B
Preferred Stock), or the by-laws of AIMCO, if such action would materially
adversely affect the voting powers, rights or preferences of the holders of the
Class B Preferred Stock; provided, however, that the amendment of AIMCO's
charter to authorize, create or increase the authorized amount of any Class B
Junior Stock or any shares of any class of Class B Parity Stock will not be
deemed to materially adversely affect the voting powers, rights or preferences
of the holders of Class B Preferred Stock, or (ii) authorize, create, increase
the authorized amount of, or issue any shares of any class of Class B Senior
Stock or any security convertible into shares of any class of Class B Senior
Stock; provided, however, that no such vote of the holders of Class B Preferred
Stock will be required if, at or prior to the time such amendment, alteration or
repeal is to take effect or when the issuance of any such Class B Senior Stock
or convertible security is to be made, as the case may be, provision is made for
the redemption of all outstanding shares of Class B Preferred Stock.
With respect to the exercise of the above-described voting rights, each
share of Class B Preferred Stock will have one (1) vote per share, except that
when any other class or series of preferred stock will have the right to vote
with the Class B Preferred Stock as a single class, then the Class B Preferred
Stock and such other class or series will have one vote per $100 of stated
liquidation preference.
RESTRICTIONS ON OWNERSHIP AND TRANSFER
Ownership of shares of Class B 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 B Preferred Stock) owned directly or
constructively by such person may not exceed 8.7% (or 15% in the case of certain
pension trusts, registered investment companies and Terry Considine) of the
aggregate value of all outstanding shares of capital stock of AIMCO (the
"Ownership Limit"). Subject to certain exceptions, any sale, transfer, gift,
assignment, devise or other disposition of a share of Class B Preferred Stock (a
"Transfer") that, if effective, would result in any person violating the
Ownership Limit, or AIMCO failing to qualify as a REIT, will be void ab initio,
and the intended transferee will not acquire any rights in such share of Class B
Preferred Stock.
If AIMCO's board of directors or a committee thereof determines that a
Transfer or other event has taken place that violates the Ownership Limit or
certain other provisions of AIMCO's charter prohibiting Transfers which may have
the effect of causing AIMCO to lose its REIT status, AIMCO's board of directors
or a committee thereof is empowered to take any action it deems advisable to
refuse to give effect to or to prevent such Transfer, including causing AIMCO to
redeem such shares at the then current market price and on such other terms and
conditions as AIMCO's board of directors may determine (including by means of
the issuance of long-term indebtedness for the purpose of such redemption),
demanding the repayment of any distributions received in respect of such shares
or instituting proceedings to enjoin such Transfer or rescind such Transfer or
attempted Transfer. If any Transfer occurs, which, if effective, would result in
any person beneficially or constructively owning Class B Preferred Stock in
violation of the Ownership Limit (a "Prohibited Transferee"), such shares in
excess of the Ownership Limit will be automatically transferred to a trustee in
his capacity as trustee of a trust for the exclusive benefit of one or more
charitable beneficiaries designated by AIMCO. Such automatic transfer to the
trust will be deemed to be effective as of the close of business on the business
day prior to the date of such violative Transfer. Shares of Class B Preferred
Stock held in the trust will be issued and outstanding
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shares of AIMCO. The Prohibited Transferee will not benefit economically from
ownership of any shares of Class B Preferred Stock held in the trust, will have
no rights to dividends and shall not possess any rights to vote or other rights
attributable to the shares of Class B Preferred Stock held in the trust. The
trustee will have all voting rights and rights to dividends with respect to
shares of Class B Preferred Stock held in the trust, which rights will be
exercised for the benefit of the charitable beneficiaries. Any dividend or other
distribution paid prior to the discovery by AIMCO that shares of Class B
Preferred Stock have been transferred to the trustee will be repaid to AIMCO
upon demand, and any dividend or other distribution declared but unpaid with
respect to such shares will be rescinded as void. Any dividend or distribution
so disgorged or rescinded will be paid to the trustee and held in trust for the
charitable beneficiaries.
The trustee may sell the Class B Preferred Stock held in the trust to a
person, designated by the trustee, whose ownership of the Class B Preferred
Stock will not violate the Ownership Limit. Upon such sale, the interest of the
charitable beneficiaries in the shares sold will terminate and the trustee will
distribute the net proceeds of the sale to the Prohibited Transferee and to the
charitable beneficiary as described below. The Prohibited Transferee will
receive the lesser of (i) the price paid by the Prohibited Transferee for the
shares or, if the Prohibited Transferee did not give value for the shares in
connection with the event causing the shares to be held in the trust (e.g., a
gift, devise or other such transaction), the market price of such shares on the
day of the event causing the shares to be held in the trust and (ii) the price
per share received by the trustee from the sale or other disposition of the
shares held in the trust. Any proceeds in excess of the amount payable to the
Prohibited Transferee will be payable to the charitable beneficiaries.
In addition, shares of Class B Preferred Stock held in the trust will be
deemed to have been offered for sale to AIMCO, or its designee, at a price per
share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the trust (or, in the case of a devise or gift, the
market price at the time of such devise or gift) and (ii) the market price on
the date AIMCO or its designee accepts such offer.
Any person who acquires or attempts to acquire beneficial or constructive
ownership of Class B Preferred Stock that will or may violate the Ownership
Limit, or any person who would have owned shares of Class B Preferred Stock
except for the transfer of such shares to the trust as described above, is
required to give notice immediately to AIMCO of such event, and provide AIMCO
with such other information as AIMCO may request in order to determine the
effect of such Transfer or attempted Transfer or other event on AIMCO's status
as a REIT.
Every record and beneficial owner of more than 5% (or such lesser
percentage prescribed in regulations under the Internal Revenue Code) of the
outstanding shares of Class B Preferred Stock is required, within 30 days after
January 1 of each year, to give written notice to AIMCO stating the name and
address of such owner, the number of shares of Class B Preferred Stock which the
owner beneficially owns and a description of the manner in which such shares are
held. Each such record or beneficial owner must provide to AIMCO such additional
information as AIMCO may request in order to determine the effect, if any, of
such ownership on AIMCO's status as a REIT and to ensure compliance with the
Ownership Limit. In addition, every record or beneficial owner of shares of
Class B Preferred Stock, and every proposed transferee of such shares, must
provide AIMCO with such information as AIMCO may request, in its sole
discretion, in order to determine AIMCO's status as a REIT and to comply with
the requirements of any taxing authority or governmental agency to determine any
such compliance or to ensure compliance with the Ownership Limit.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain Federal income tax consequences
regarding an investment in Class B Preferred Stock or Class A Common Stock (the
Class B Preferred Stock and the Class A Common Stock are collectively referred
to herein as "AIMCO Stock"). This discussion is based upon the Internal Revenue
Code, the regulations promulgated by the U.S. Treasury Department thereunder
(the "Treasury Regulations"), rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this prospectus and all of which are subject to
change, possibly retroactively. This discussion is for general information only,
and does not purport to discuss all aspects of Federal income taxation which may
be important to a particular investor in light of its investment or tax
circumstances, or to certain types of investors subject to special tax rules
(including investment companies, financial institutions, broker-dealers,
insurance companies and, except to the extent discussed below, tax-exempt
organizations and foreign investors as determined for Federal income tax
purposes). This summary assumes that investors will hold their AIMCO Stock as
"capital assets" (generally, property held for investment). No advance ruling
has been or will be sought from the IRS regarding any matter discussed herein.
THE FEDERAL INCOME TAX TREATMENT OF HOLDERS OF AIMCO STOCK DEPENDS IN SOME
INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF COMPLEX PROVISIONS OF
FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE
AVAILABLE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR REGARDING
THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF ACQUIRING, HOLDING,
EXCHANGING, OR OTHERWISE DISPOSING OF CLASS B PREFERRED STOCK OR CLASS A COMMON
STOCK AND OF AIMCO'S ELECTION TO BE SUBJECT TO TAX, FOR FEDERAL INCOME TAX
PURPOSES, AS A REAL ESTATE INVESTMENT TRUST.
TAXATION OF AIMCO
General. The REIT provisions of the Internal Revenue Code are highly
technical and complex. The following summary sets forth certain aspects of the
provisions of the Internal Revenue Code that govern the Federal income tax
treatment of a REIT and its stockholders. This summary is qualified in its
entirety by the applicable Internal Revenue Code provisions, Treasury
Regulations, and administrative and judicial interpretations thereof, all of
which are subject to change, possibly retroactively.
AIMCO has elected to be taxed as a REIT under the Internal Revenue Code
commencing with its taxable year ending December 31, 1994, and AIMCO intends to
continue such election. Although AIMCO believes that, and it has received an
opinion from Skadden Arps to the effect that, it was organized in conformity
with the requirements for qualification as a REIT, and that its proposed method
of operation, and its actual method operation since its formation, will enable
it to meet the requirements for qualification and taxation as a REIT under the
Internal Revenue Code. It must be emphasized that this opinion is based and
conditioned upon certain representations and covenants made by AIMCO as to
factual matters (including representations and covenants concerning AIMCO's
properties and the past, present and future conduct of its business operations).
The opinion is expressed as of its date and Skadden Arps has no obligation to
advise AIMCO of any subsequent change in the matters stated, represented or
assumed or any subsequent change in applicable law. Moreover, the opinion of
Skadden Arps is conditioned on, and AIMCO's qualification and taxation as a REIT
will depend upon, AIMCO's ability to meet, through actual annual operating
results, distribution levels and diversity of stock ownership, the various
qualification tests imposed under the Internal Revenue Code as discussed below,
the results of which have not been and will not be reviewed by Skadden Arps. No
assurance can be given that the actual results of AIMCO's operations for any one
taxable year have satisfied or will satisfy such requirements. See "-- Failure
to Qualify." An opinion of counsel is not binding on the IRS, and no assurance
can be given that the IRS will not challenge AIMCO's eligibility for taxation as
a REIT.
Provided AIMCO qualifies for taxation as a REIT, it will generally not be
subject to Federal corporate income tax on its net income that is currently
distributed to stockholders. This treatment
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substantially eliminates the "double taxation" (at the corporate and stockholder
levels) that generally results from investment in a corporation. However,
notwithstanding AIMCO's qualification as a REIT, AIMCO will be subject to
Federal income tax as follows: First, AIMCO will be taxed at regular corporate
rates on any undistributed REIT taxable income, including undistributed net
capital gains. Second, under certain circumstances, AIMCO may be subject to the
"alternative minimum tax" on its items of tax preference. Third, if AIMCO has
net income from prohibited transactions (which are, in general, certain sales or
other dispositions of property held primarily for sale to customers in the
ordinary course of business other than foreclosure property), such income will
be subject to a 100% tax. Fourth, if AIMCO should fail to satisfy the 75% gross
income test or the 95% gross income test (as discussed below), but has
nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on an amount equal
to (a) the gross income attributable to the greater of the amount by which AIMCO
fails the 75% or 95% test multiplied by (b) a fraction intended to reflect
AIMCO's profitability. Fifth, if AIMCO should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year, (ii) 95% of its REIT capital gain net income for such year (other than
certain long-term capital gains that AIMCO elects to retain and pay the tax
thereon), and (iii) any undistributed taxable income from prior periods, AIMCO
would be subjected to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. Sixth, if AIMCO acquires
assets from a subchapter C corporation in a transaction in which the adjusted
tax basis of the assets in the hands of AIMCO is determined by reference to the
adjusted tax basis of such assets in the hands of the subchapter C corporation,
under Treasury Regulations not yet promulgated, the subchapter C corporation
would be required to recognize any net Built-In Gain (as defined below) that
would have been realized if the subchapter C corporation had liquidated on the
day before the date of the transfer. Pursuant to IRS Notice 88-19, AIMCO may
elect, in lieu of the treatment described above, to be subject to tax if it
recognizes gain on the disposition of any such assets during the ten-year period
beginning on the day on which it acquires such assets at the highest regular
corporate tax rate on such gain to the extent of the excess, if any, of the fair
market value over the adjusted basis of such asset as of the beginning of the
ten-year period ("Built-in Gain"). AIMCO intends to make such an election and,
therefore, will be taxed at the highest regular corporate rate on such Built-in
Gain if, and to the extent, such assets are sold within the specified ten-year
period. It should be noted that AIMCO has acquired (and may acquire in the
future) a significant amount of assets with Built-in Gain and a taxable
disposition by AIMCO of any of these assets within ten years of their
acquisitions would subject AIMCO to tax under the foregoing rule. Seventh, AIMCO
could be subject to foreign taxes on its investments and activities in foreign
jurisdictions. In addition, AIMCO could be subject to tax in certain situations
and on certain transactions not presently contemplated.
Requirements for Qualification. The Internal Revenue Code defines a REIT as
a corporation, trust or association (1) that is managed by one or more trustees
or directors; (2) the beneficial ownership of which is evidenced by transferable
shares, or by transferable certificates of beneficial interest; (3) which would
be taxable as a domestic corporation, but for the special Internal Revenue Code
provisions applicable to REITs; (4) that is neither a financial institution nor
an insurance company subject to certain provisions of the Internal Revenue Code;
(5) the beneficial ownership of which is held by 100 or more persons; (6) in
which, during the last half of each taxable year, not more than 50% in value of
the outstanding stock is owned, directly or indirectly, by five or fewer
individuals (as defined in the Internal Revenue Code to include certain
entities); and (7) which meets certain other tests described below (including
with respect to the nature of its income and assets). The Internal Revenue Code
provides that conditions (1) through (4) must be met during the entire taxable
year, and that condition (5) must be met during at least 335 days of a taxable
year of 12 months, or during a proportionate part of a taxable year of less than
12 months. AIMCO's charter provides certain restrictions regarding transfers of
its shares, which provisions are intended to assist AIMCO in satisfying the
share ownership requirements described in conditions (5) and (6) above.
To monitor AIMCO's compliance with the share ownership requirements, AIMCO
is required to maintain records regarding the actual ownership of its shares. To
do so, AIMCO must demand written statements each year from the record holders of
certain percentages of its stock in which the record
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holders are to disclose the actual owners of the shares (i.e., the persons
required to include in gross income the dividends paid by AIMCO). A list of
those persons failing or refusing to comply with this demand must be maintained
as part of AIMCO's records. A stockholder who fails or refuses to comply with
the demand must submit a statement with its tax return disclosing the actual
ownership of the shares and certain other information.
In addition, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. AIMCO satisfies this requirement.
Ownership of Partnership Interests. In the case of a REIT that is a partner
in a partnership, Treasury Regulations provide that the REIT is deemed to own
its proportionate share of the partnership's assets and to earn its
proportionate share of the partnership's income. In addition, the assets and
gross income of the partnership retain the same character in the hands of the
REIT for purposes of the gross income and asset tests applicable to REITs as
described below. Thus, AIMCO's proportionate share of the assets, liabilities
and items of income of the partnerships and limited liability companies in which
it has ownership interests (the "Subsidiary Partnerships") generally will be
treated as assets, liabilities and items of income of AIMCO for purposes of
applying the REIT requirements described herein. A summary of certain rules
governing the Federal income taxation of partnerships and their partners is
provided below in "Tax Aspects of AIMCO's Investments in Partnerships."
Income Tests. In order to maintain qualification as a REIT, AIMCO annually
must satisfy two gross income requirements. First, at least 75% of AIMCO's gross
income (excluding gross income from "prohibited transactions," i.e., certain
sales of property held primarily for sale to customers in the ordinary course of
business) for each taxable year must be derived directly or indirectly from
investments relating to real property or mortgages on real property (including
"rents from real property" and, in certain circumstances, interest) or from
certain types of temporary investments. Second, at least 95% of AIMCO's gross
income (excluding gross income from prohibited transactions) for each taxable
year must be derived from such real property investments, and from dividends,
interest and gain from the sale or disposition of stock or securities (or from
any combination of the foregoing).
Rents received by AIMCO through the Subsidiary Partnerships qualify as
"rents from real property" in satisfying the gross income requirements described
above, only if several conditions are met, including the following. If rent
attributable to personal property leased in connection with a lease of real
property is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
"rents from real property." Moreover, for rents received to qualify as "rents
from real property," the REIT generally must not operate or manage the property
or furnish or render services to the tenants of such property, other than
through an "independent contractor" from which the REIT derives no revenue.
However, AIMCO (or its affiliates) may directly perform services that are
"usually or customarily rendered" in connection with the rental of space for
occupancy only and are not otherwise considered rendered to the occupant of the
property. In addition, AIMCO (or its affiliates) may provide non-customary
services to tenants of its properties without disqualifying all of the rent from
the property if the payment for such services does not exceed 1% of the total
gross income from the property. For purposes of this test, the income received
from such non-customary services is deemed to be at least 150% of the direct
cost of providing the services.
AIMCO's management companies receive management fees and other income. A
portion of such fees and other income will accrue to AIMCO through distributions
from AIMCO's management companies that are classified as dividend income to the
extent of the earnings and profits of AIMCO's management companies. Such
distributions will generally qualify under the 95% gross income test but not
under the 75% gross income test.
If AIMCO fails to satisfy one or both of the 75% or 95% gross income tests
for any taxable year, it may nevertheless qualify as a REIT for such year if it
is entitled to relief under certain provisions of the Internal Revenue Code.
These relief provisions are generally available if AIMCO's failure to meet such
tests was due to reasonable cause and not due to willful neglect, AIMCO attaches
a schedule of the sources of its income to its return, and any incorrect
information on the schedule was not due to fraud
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with intent to evade tax. It is not possible, however, to state whether in all
circumstances AIMCO would be entitled to the benefit of these relief provisions.
If these relief provisions are inapplicable to a particular set of circumstances
involving AIMCO, AIMCO will not qualify as a REIT. As discussed above in
"-- General," even where these relief provisions apply, a tax is imposed with
respect to the excess net income.
Asset Tests. AIMCO, at the close of each quarter of its taxable year, must
also satisfy three tests relating to the nature of its assets. First, at least
75% of the value of AIMCO's total assets must be represented by real estate
assets (including its allocable share of real estate assets held by the
Subsidiary Partnerships), certain stock or debt instruments purchased by AIMCO
with new capital, cash, cash items and U.S. government securities. Second, not
more than 25% of AIMCO's total assets may be represented by securities other
than those in the 75% asset class. Third, of the investments included in the 25%
asset class, the value of any one issuer's securities owned by AIMCO may not
exceed 5% of the value of AIMCO's total assets, and AIMCO may not own more than
10% of any one issuer's outstanding voting securities.
AIMCO indirectly owns interests in AIMCO's management companies. As set
forth above, the ownership of more than 10% of the voting securities of any one
issuer by a REIT or the investment of more than 5% of the REIT's total assets in
any one issuer's securities is prohibited by the asset tests. AIMCO believes
that its indirect ownership interests in AIMCO's management companies qualify
under asset tests set forth above. However, no independent appraisals have been
obtained to support AIMCO's conclusions as to the value of the AIMCO operating
partnership's total assets and the value of the AIMCO operating partnership's
interest in AIMCO's management companies, and these values are subject to change
in the future. Accordingly, there can be no assurance that the IRS will not
contend that the AIMCO operating partnership's ownership interest in AIMCO's
management companies disqualifies AIMCO from treatment as a REIT.
AIMCO's indirect interests in the AIMCO operating partnership and other
Subsidiary Partnerships are generally held through wholly owned corporate
subsidiaries of AIMCO organized and operated as "qualified REIT subsidiaries"
within the meaning of the Internal Revenue Code. Qualified REIT subsidiaries are
not treated as separate entities from their parent REIT for Federal income tax
purposes. Instead, all assets, liabilities and items of income, deduction and
credit of each qualified REIT subsidiary are treated as assets, liabilities and
items of AIMCO. Each qualified REIT subsidiary therefore will not be subject to
Federal corporate income taxation, although it may be subject to state or local
taxation. In addition, AIMCO's ownership of the voting stock of each qualified
REIT subsidiary does not violate the general restriction against ownership of
more than 10% of the voting securities of any issuer.
Annual Distribution Requirements. AIMCO, in order to qualify as a REIT, is
required to distribute dividends (other than capital gain dividends) to its
stockholders in an amount at least equal to (A) the sum of (i) 95% of AIMCO's
"REIT taxable income" (computed without regard to the dividends paid deduction
and AIMCO's net capital gain) and (ii) 95% of the net income (after tax), if
any, from foreclosure property, minus (B) the sum of certain items of noncash
income. Such distributions must be paid in the taxable year to which they
relate, or in the following taxable year if declared before AIMCO timely files
its tax return for such year and if paid with or before the first regular
dividend payment after such declaration. To the extent that AIMCO distributes at
least 95%, but less than 100%, of its "REIT taxable income," as adjusted, it
will be subject to tax thereon at ordinary corporate tax rates.
AIMCO may elect to retain, rather than distribute, its net long-term
capital gains and pay the tax on such gains. In such a case, AIMCO's
stockholders would include their proportionate share of such undistributed
long-term capital gains in income and receive a credit for their share of the
tax paid by AIMCO. AIMCO's stockholders would then increase the adjusted basis
of their AIMCO shares by the difference between the designated amounts included
in their long-term capital gains and the tax deemed paid with respect to their
shares. If AIMCO should fail to distribute during each calendar year at least
the sum of (i) 85% of its REIT ordinary income for such year and (ii) 95% of its
REIT capital gain net income for such year (excluding retained long-term capital
gains), and (iii) any undistributed taxable income from prior periods, AIMCO
would be subject to a 4% excise tax on the excess of such required
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distribution over the amounts actually distributed. AIMCO believes that it has
made, and intends to make, timely distributions sufficient to satisfy this
annual distribution requirement.
It is possible that AIMCO, from time to time, may not have sufficient cash
to meet the 95% distribution requirement due to timing differences between (i)
the actual receipt of cash (including receipt of distributions from the AIMCO
operating partnership) and (ii) the inclusion of certain items in income by
AIMCO for Federal income tax purposes. In the event that such timing differences
occur, in order to meet the 95% distribution requirement, AIMCO may find it
necessary to arrange for short-term, or possibly long-term, borrowings, or to
pay dividends in the form of taxable distributions of property.
Under certain circumstances, AIMCO may be able to rectify a failure to meet
the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in AIMCO's deduction for
dividends paid for the earlier year. Thus, AIMCO may be able to avoid being
taxed on amounts distributed as deficiency dividends; however, AIMCO will be
required to pay interest and a penalty based on the amount of any deduction
taken for deficiency dividends.
Distribution of Earnings and Profits. The Internal Revenue Code provides
that when a REIT acquires a corporation that is currently a C corporation (i.e.,
a corporation without a REIT election), the REIT may qualify as a REIT only if,
as of the close of the year of acquisition, the REIT has no "earnings and
profits" acquired from such C corporation. Any adjustments to the acquired
corporation's income for taxable years ending on or before the closing of the
acquisition, including as a result of an examination of its returns by the IRS,
could affect the calculation of the acquired corporation's earnings and profits.
AIMCO has retained, and may in the future retain, independent certified public
accountants to assist in the determination of certain acquired corporation's
earnings and profits for purposes of this requirement. Furthermore, the
determination of earnings and profits requires the resolution of certain
technical tax issues with respect to which there is no authority directly on
point and, consequently, the proper treatment of these issues for earnings and
profits purposes is not free from doubt. There can be no assurance that the IRS
will not examine the tax returns of the acquired corporation and propose
adjustments to increase its taxable income and therefore its earnings and
profits. In this regard, the IRS can consider all taxable years of the acquired
corporation as open for review for purposes of determining the amount of such
earnings and profits.
Failure to Qualify. If AIMCO fails to qualify for taxation as a REIT in any
taxable year, and the relief provisions do not apply, AIMCO will be subject to
tax (including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in which
AIMCO fails to qualify will not be deductible by AIMCO nor will they be required
to be made. In such event, to the extent of current and accumulated earnings and
profits, all distributions to stockholders will be taxable as ordinary income,
and, subject to certain limitations of the Internal Revenue Code, corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, AIMCO will also be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualification was lost. It is not possible to state whether in
all circumstances AIMCO would be entitled to such statutory relief.
TAX ASPECTS OF AIMCO'S INVESTMENTS IN PARTNERSHIPS
General. Substantially all of AIMCO's investments are held indirectly
through the AIMCO operating partnership. In general, partnerships are
"pass-through" entities that are not subject to Federal income tax. Rather,
partners are allocated their proportionate shares of the items of income, gain,
loss, deduction and credit of a partnership, and are potentially subject to tax
thereon, without regard to whether the partners receive a distribution from the
partnership. AIMCO will include in its income its proportionate share of the
foregoing partnership items for purposes of the various REIT income tests and in
the computation of its REIT taxable income. Moreover, for purposes of the REIT
asset tests, AIMCO will include its proportionate share of assets held by the
Subsidiary Partnerships. See "-- Taxation of AIMCO -- Ownership of Partnership
Interests."
Entity Classification. AIMCO's direct and indirect investment in
partnerships involves special tax considerations, including the possibility of a
challenge by the IRS of the status of any of the Subsidiary
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Partnerships as a partnership (as opposed to as an association taxable as a
corporation) for Federal income tax purposes. If any of these entities were
treated as an association for Federal income tax purposes, it would be subject
to an entity-level tax on its income. In such a situation, the character of
AIMCO's assets and items of gross income would change and could preclude AIMCO
from satisfying the asset tests and the income tests (see "-- Taxation of
AIMCO -- Asset Tests" and "-- Taxation of AIMCO -- Income Tests"), and in turn
could prevent AIMCO from qualifying as a REIT. See "-- Taxation of AIMCO --
Failure to Qualify" above for a discussion of the effect of AIMCO's failure to
meet such tests for a taxable year. In addition, any change in the status of any
of the Subsidiary Partnerships for tax purposes might be treated as a taxable
event, in which case AIMCO might incur a tax liability without any related cash
distributions.
Tax Allocations with Respect to the Properties. Pursuant to the Internal
Revenue Code and Treasury Regulations, income, gain, loss and deduction
attributable to appreciated or depreciated property that is contributed to a
partnership in exchange for an interest in the partnership must be allocated in
a manner such that the contributing partner is charged with, or benefits from,
respectively, the unrealized gain or unrealized loss associated with the
property at the time of the contribution. The amount of such unrealized gain or
unrealized loss is generally equal to the difference between the fair market
value of contributed property at the time of contribution, and the adjusted tax
basis of such property at the time of contribution (a "Book-Tax Difference").
Such allocations are solely for Federal income tax purposes and do not affect
the book capital accounts or other economic or legal arrangements among the
partners. The AIMCO operating partnership was formed by way of contributions of
appreciated property (including certain of the properties owned or controlled by
the Company (the "Owned Properties")). Consequently, allocations must be made in
a manner consistent with these requirements. Where a partner contributes cash to
a partnership that holds appreciated property, the Treasury Regulations provide
for a similar allocation of such items to the other partners. These rules apply
to the contribution by AIMCO to the AIMCO operating partnership of the cash
proceeds received in any offerings of its stock.
In general, certain holders of partnership common units of the AIMCO
operating partnership (the "OP Units") will be allocated lower amounts of
depreciation deductions for tax purposes and increased taxable income and gain
on sale by the AIMCO operating partnership or other Subsidiary Partnerships of
the contributed Owned Properties. This will tend to eliminate the Book-Tax
Difference over the life of these partnerships. However, the special allocations
do not always entirely rectify the Book-Tax Difference on an annual basis or
with respect to a specific taxable transaction such as a sale. Thus, the
carryover basis of the contributed properties in the hands of the Subsidiary
Partnerships may cause AIMCO to be allocated lower depreciation and other
deductions, and possibly greater amounts of taxable income in the event of a
sale of such contributed assets in excess of the economic or book income
allocated to it as a result of such sale. This may cause AIMCO to recognize
taxable income in excess of cash proceeds, which might adversely affect AIMCO's
ability to comply with the REIT distribution requirements. See "-- Taxation of
AIMCO -- Annual Distribution Requirements."
With respect to any property purchased or to be purchased by any of the
Subsidiary Partnerships (other than through the issuance of OP Units) subsequent
to the formation of AIMCO, such property will initially have a tax basis equal
to its fair market value and the special allocation provisions described above
will not apply.
Sale of the Properties. AIMCO's share of any gain realized by the AIMCO
operating partnership or other Subsidiary Partnerships on the sale of any
property held as inventory or primarily for sale to customers in the ordinary
course of business will be treated as income from a prohibited transaction that
is subject to a 100% penalty tax. See "-- Taxation of AIMCO -- Income Tests."
Under existing law, whether property is held as inventory or primarily for sale
to customers in the ordinary course of a partnership's trade or business is a
question of fact that depends on all the facts and circumstances with respect to
the particular transaction. In general, the AIMCO operating partnership and the
Subsidiary Partnerships intend to hold the Owned Properties for investment with
a view to long-term appreciation, to engage in the business of acquiring,
developing, owning, and operating the Owned Properties (and other
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apartment properties) and to make such occasional sales of the Owned Properties,
including peripheral land, as are consistent with AIMCO's investment objectives.
TAXATION OF AIMCO'S MANAGEMENT COMPANIES
A portion of the amounts to be used to fund distributions to stockholders
is expected to come from distributions made by AIMCO's management companies to
the AIMCO operating partnership, and interest paid by AIMCO's management
companies on certain notes held by the AIMCO operating partnership. In general
AIMCO's management companies pay Federal, state and local income taxes on their
taxable income at normal corporate rates. Any Federal, state or local income
taxes that AIMCO's management companies are required to pay will reduce AIMCO's
cash flow from operating activities and its ability to make payments to holders
of its securities.
TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS
General. Provided AIMCO qualifies as a REIT, distributions made to the
AIMCO stockholders out of current or accumulated earnings and profits (and not
designated as capital gain dividends) will be taken into account by them as
ordinary income and will not be eligible for the dividends received deduction
for corporations. Distributions (and retained long-term capital gains) that are
designated as capital gain dividends will be taxed as long-term capital gains
(to the extent that they do not exceed AIMCO's actual net capital gain for the
taxable year) without regard to the period for which the AIMCO stockholder has
held its stock. However, corporate AIMCO stockholders may be required to treat
up to 20% of certain capital gain dividends as ordinary income. In addition, net
capital gains attributable to the sale of depreciable real property held for
more than 12 months are subject to a 25% maximum Federal income tax rate to the
extent of previously claimed real property depreciation.
Distributions in excess of current and accumulated earnings and profits
will not be taxable to an AIMCO stockholder to the extent that they do not
exceed the adjusted basis of the AIMCO stockholder's shares in respect of which
the distributions were made, but rather will reduce the adjusted basis of such
shares. To the extent that such distributions exceed the adjusted basis of an
AIMCO stockholder's shares in respect of which the distributions were made, they
will be included in income as long-term capital gain (or short-term capital gain
if the shares have been held for one year or less) provided that the shares are
a capital asset in the hands of the AIMCO stockholder. In addition, any dividend
declared by AIMCO in October, November or December of any year and payable to an
AIMCO stockholder of record on a specified date in any such month shall be
treated as both paid by AIMCO and received by the AIMCO stockholder on December
31 of such year, provided that the dividend is actually paid by AIMCO during
January of the following calendar year. AIMCO stockholders may not include in
their individual income tax returns any net operating losses or capital losses
of AIMCO.
Disposition of Stock of AIMCO. Except as provided below, an AIMCO
stockholder will generally recognize gain or loss upon the sale, exchange or
other disposition of the AIMCO Stock in an amount equal to the difference
between the amount realized on the disposition and the basis in such AIMCO
Stock. Such gain or loss will be long-term capital gain or loss if the AIMCO
Stock is held for more than one year as of the date of disposition. In general,
any loss upon a sale or exchange of shares by an AIMCO stockholder who has held
such shares for six months or less (after applying certain holding period rules)
will be treated as a long-term capital loss to the extent of distributions from
AIMCO required to be treated by such AIMCO stockholder as long-term capital
gain. A redemption of the Class B Preferred Stock will be treated under Section
302 of the Internal Revenue Code as a dividend subject to tax at ordinary income
tax rates (to the extent of AIMCO's current or accumulated earnings and
profits), unless the redemption satisfies certain tests set forth in Section
302(b) of the Internal Revenue Code enabling the redemption to be treated as a
sale or exchange of the Class B Preferred Stock. The redemption will satisfy
such test if it (i) is "substantially disproportionate" with respect to the
Selling Stockholder, (ii) results in a "complete termination" of the AIMCO
stockholder's stock interest in AIMCO, or (iii) is "not essentially equivalent
to a dividend" with respect to the AIMCO stockholder, all within the meaning of
Section 302(b) of the Internal Revenue Code. In determining whether any of these
tests have been
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met, AIMCO Stock considered to be owned by an AIMCO stockholder by reason of
certain constructive ownership rules set forth in the Internal Revenue Code, as
well as AIMCO Stock actually owned, must generally be taken into account.
Because the determination as to whether any of the alternative tests of Section
302(b) of the Internal Revenue Code is satisfied with respect to an AIMCO
stockholder will depend upon the facts and circumstances as of the time the
determination is made, AIMCO stockholders are advised to consult their own tax
advisors to determine such tax treatment. If a redemption of the Class B
Preferred Stock is treated as a distribution that is taxable as a dividend, the
amount of the distribution would be measured by the amount of cash and the fair
market value of any property received by the AIMCO stockholder. In such event,
the AIMCO stockholder's tax basis in such redeemed Class B Preferred Stock would
be transferred to the AIMCO stockholder's remaining stockholdings in AIMCO. If,
however, the AIMCO stockholder has no remaining stockholdings in AIMCO, such
basis may, under certain circumstances, be transferred to a related person or it
may be lost entirely.
Conversion of Class B Preferred Stock for Class A Common Stock. In general,
gain or loss will not be recognized by an AIMCO stockholder upon the conversion
of Class B Preferred Stock into Class A Common Stock (except with respect to
cash received in exchange for a fractional share interest). An AIMCO stockholder
who receives cash in lieu of a fractional share of Class A Common Stock upon
conversion of its Class B Preferred Stock will be treated as having first
received such fractional share and as having then exchanged such fractional
share for cash in a taxable transaction. Gain or loss will be recognized,
measured by the difference between the amount of cash received and the portion
of the basis of the share of Class B Preferred Stock allocable to such
fractional interest. In general, such gain or loss will constitute a capital
gain or loss and will be a long-term capital gain or loss if the Class B
Preferred Stock is held for more than one year as of the date of such
conversion.
Generally, an AIMCO stockholder's basis in Class A Common Stock received
upon the conversion of the Class B Preferred Stock will equal the AIMCO
stockholder's basis in its Class B Preferred Stock exchanged therefor (reduced
by the portion of such basis allocable to any fractional share interest
exchanged for cash). The holding period of such Class A Common Stock will
include the holding period of the Class B Preferred Stock exchanged therefor.
Future adjustments, if any, of the conversion rates of Class B Preferred
Stock to reflect AIMCO's issuance of certain rights, warrants or evidence of
indebtedness, or distributions of securities or other assets to holders of Class
A Common Stock, may result in constructive distributions taxable as dividends to
the holders of Class B Preferred Stock (to the extent that AIMCO has current or
accumulated earnings and profits).
TAXATION OF FOREIGN STOCKHOLDERS
The following is a discussion of certain U.S. Federal income and estate tax
consequences of the ownership and disposition of AIMCO Stock applicable to an
AIMCO stockholder that is a Non-U.S. Holder. A "Non-U.S. Holder" is any person
other than (i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the laws of the
United States or of any state thereof, (iii) an estate whose income is
includable in gross income for U.S. Federal income tax purposes regardless of
its source or, (iv) a trust if a United States court is able to exercise primary
supervision over the administration of such trust and one or more United States
fiduciaries have the authority to control all substantial decisions of such
trust. The discussion is based on current law and is for general information
only. The discussion addresses only certain and not all aspects of U.S. Federal
income and estate taxation.
Ordinary Dividends. The portion of dividends received by Non-U.S. Holders
payable out of AIMCO's earnings and profits which are not attributable to
capital gains of AIMCO and which are not effectively connected with a U.S. trade
or business of the Non-U.S. Holder will be subject to U.S. withholding tax at
the rate of 30% (unless reduced by treaty). In general, Non-U.S. Holders will
not be considered engaged in a U.S. trade or business solely as a result of
their ownership of AIMCO Stock. In cases where the dividend income from a
Non-U.S. Holder's investment in AIMCO Stock is (or is
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treated as) effectively connected with the Non-U.S. Holder's conduct of a U.S.
trade or business, the Non-U.S. Holder generally will be subject to U.S. tax at
graduated rates, in the same manner as U.S. stockholders are taxed with respect
to such dividends (and may also be subject to the 30% branch profits tax in the
case of a Non-U.S. Holder that is a foreign corporation).
Non-Dividend Distributions. Unless AIMCO Stock constitutes a United States
Real Property Interest (a "USRPI") within the meaning of the Foreign Investment
in Real Property Tax Act of 1980 ("FIRPTA"), distributions by AIMCO which are
not dividends out of the earnings and profits of AIMCO will not be subject to
U.S. income or withholding tax. If it cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of
current and accumulated earnings and profits, the distribution will be subject
to withholding at the rate applicable to dividends. However, the Non-U.S. Holder
may seek a refund of such amounts from the IRS if it is subsequently determined
that such distribution was, in fact, in excess of current and accumulated
earnings and profits of AIMCO. If AIMCO Stock constitutes a USRPI, such
distributions will be subject to 10% withholding and taxed pursuant to FIRPTA at
a rate of 35% to the extent such distributions exceed a stockholder's basis in
his or her AIMCO Stock.
Capital Gain Dividends. Under FIRPTA, a distribution made by AIMCO to a
Non-U.S. Holder, to the extent attributable to gains from dispositions of USRPIs
such as the properties beneficially owned by AIMCO ("USRPI Capital Gains"), will
be considered effectively connected with a U.S. trade or business of the
Non-U.S. Holder and subject to U.S. income tax at the rates applicable to U.S.
individuals or corporations, without regard to whether such distribution is
designated as a capital gain dividend. In addition, AIMCO will be required to
withhold tax equal to 35% of the amount of dividends to the extent such
dividends constitute USRPI Capital Gains. Distributions subject to FIRPTA may
also be subject to a 30% branch profits tax in the hands of a Non-U.S. Holder
that is a corporation.
Disposition of Stock of AIMCO. Unless AIMCO Stock constitutes a USRPI, a
sale of such stock by a Non-U.S. Holder generally will not be subject to U.S.
taxation under FIRPTA. The stock will not constitute a USRPI if AIMCO is a
"domestically controlled REIT." A domestically controlled REIT is a REIT in
which, at all times during a specified testing period, less than 50% in value of
its shares is held directly or indirectly by Non-U.S. Holders. AIMCO believes
that it is, and it expects to continue to be, a domestically controlled REIT,
and therefore that the sale of AIMCO Stock should not be subject to taxation
under FIRPTA. Because various classes of AIMCO stock (including the Class A
Common Stock) are publicly traded, however, no assurance can be given that AIMCO
will continue to be a domestically controlled REIT.
If AIMCO does not constitute a domestically controlled REIT, a Non-U.S.
Holder's sale of stock generally will still not be subject to tax under FIRPTA
as a sale of a USRPI provided that (i) the stock is "regularly traded" (as
defined by applicable Treasury regulations) on an established securities market
(e.g., the New York Stock Exchange, on which the Class A Common Stock is listed)
and the selling Non-U.S. Holder held 5% or less of such class of AIMCO stock at
all times during a specified testing period, or (ii) the stock is not regularly
traded on an established securities market and is convertible into stock that is
so regularly traded and the value of such convertible stock held by a selling
Non-U.S. Holder at all times during a specified testing period is less than or
equal to the value of 5% of the regularly traded class of stock into which it is
convertible.
If gain on the sale of AIMCO Stock were subject to taxation under FIRPTA,
the Non-U.S. Holder generally would be subject to the same treatment as a U.S.
stockholder with respect to such gain (subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals) and the purchaser of the stock could be required to withhold 10% of
the purchase price and remit such amount to the IRS.
Gains from the sale of AIMCO Stock that would not otherwise be subject to
FIRPTA will nonetheless be taxable in the United States to a Non-U.S. Holder in
two cases: (i) if the Non-U.S. Holder's investment in the AIMCO Stock is
effectively connected with a U.S. trade or business conducted by such Non-U.S.
holder, the Non-U.S. Holder will be subject to the same treatment as a U.S.
30
<PAGE> 34
stockholder with respect to such gain, or (ii) if the Non-U.S. Holder is a
nonresident alien individual who was present in the United States for 183 days
or more during the taxable year and has a "tax home" in the United States, the
nonresident alien individual will be subject to a 30% tax on the individual's
capital gain.
Estate Tax. AIMCO Stock owned or treated as owned by an individual who is
not a citizen or resident (as specially defined for U.S. Federal estate tax
purposes) of the United States at the time of death will be includable in the
individual's gross estate for U.S. Federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise. Such individual's estate may be
subject to U.S. Federal estate tax on the property includable in the estate for
U.S. Federal estate tax purposes.
TAXATION OF TAX-EXEMPT STOCKHOLDERS
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"), are
generally exempt from federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI"). While many
investments in real estate generate UBTI, the IRS has ruled that dividend
distributions from a REIT to an exempt employee pension trust do not constitute
UBTI, provided that the shares of the REIT are not otherwise used in an
unrelated trade or business of the exempt employee pension trust. Based on that
ruling, amounts distributed by AIMCO to Exempt Organizations should generally
not constitute UBTI. However, if an Exempt Organization finances its acquisition
of the AIMCO Stock with debt, a portion of its income from AIMCO will constitute
UBTI pursuant to the "debt-financed property" rules. Furthermore, social clubs,
voluntary employee benefit associations, supplemental unemployment benefit
trusts, and qualified group legal services plans that are exempt from taxation
under paragraphs (7), (9), (17) and (20), respectively, of Internal Revenue Code
Section 501(c) are subject to different UBTI rules, which will generally require
them to characterize distributions from AIMCO as UBTI. In addition, in certain
circumstances, a pension trust that owns more than 10% of AIMCO's stock is
required to treat a percentage of the dividends from AIMCO as UBTI (the "UBTI
Percentage"). The UBTI Percentage is the gross income derived by AIMCO from an
unrelated trade or business (determined as if AIMCO were a pension trust)
divided by the gross income of AIMCO for the year in which the dividends are
paid. The UBTI rule applies to a pension trust holding more than 10% of AIMCO's
stock only if (i) the UBTI Percentage is at least 5%, (ii) AIMCO qualifies as a
REIT by reason of the modification of the 5/50 Rule that allows the
beneficiaries of the pension trust to be treated as holding shares of AIMCO in
proportion to their actuarial interest in the pension trust, and (iii) either
(A) one pension trust owns more than 25% of the value of AIMCO's stock or (B) a
group of pension trusts each individually holding more than 10% of the value of
AIMCO's stock collectively owns more than 50% of the value of AIMCO's stock. The
restrictions on ownership and transfer of AIMCO's stock should prevent an Exempt
Organization from owning more than 10% of the value of AIMCO's stock.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
AIMCO will report to its U.S. stockholders and to the IRS the amount of
distributions paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, a stockholder may be subject to backup
withholding at the rate of 31% with respect to distributions paid unless such
holder (i) is a corporation or comes within certain other exempt categories and,
when required, demonstrates this fact or (ii) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with the applicable requirements of the backup withholding
rules. A stockholder who does not provide AIMCO with his correct taxpayer
identification number also may be subject to penalties imposed by the IRS. Any
amount paid as backup withholding will be creditable against the stockholder's
income tax liability. In addition, AIMCO may be required to withhold a portion
of capital gain distributions to any Non-U.S. Holders who fail to certify their
non-foreign status to AIMCO. The IRS has issued final Treasury Regulations
regarding the backup withholding rules as applied to Non-U.S. Holders. Those
final Treasury Regulations alter the current system of backup withholding
compliance and will be effective for payments made after December 31,
31
<PAGE> 35
1999. Prospective investors should consult their tax advisors regarding the
application of the final Treasury Regulations.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS
The rules dealing with Federal income taxation are constantly under review
by persons involved in the legislative process and by the IRS and the U.S.
Treasury Department. Changes to the Federal laws and interpretations thereof
could adversely affect an investment in AIMCO. For example, a proposal issued by
President Clinton on February 2, 1998, if enacted into law, may adversely affect
the ability of AIMCO to expand the present activities of its management
companies. It cannot be predicted whether, when, in what forms, or with what
effective dates, the tax laws applicable to AIMCO or an investment in AIMCO will
be changed.
STATE, LOCAL AND FOREIGN TAXES
The AIMCO operating partnership and its partners and AIMCO and its
stockholders may be subject to state, local or foreign taxation in various state
or local jurisdictions and foreign countries, including those in which they
transact business or reside. The state, local and foreign tax treatment of the
AIMCO operating partnership and its partners and AIMCO and its stockholders may
not conform to the Federal income tax consequences discussed above.
Consequently, prospective investors should consult their own tax advisors
regarding the application and effect of state, local and foreign tax laws on an
investment in the AIMCO operating partnership or AIMCO.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
at the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any future filings with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until our offering is
completed.
- Apartment Investment and Management Company's Annual Report on Form
10-K/A for the year ended December 31, 1997;
- Apartment Investment and Management Company's Quarterly Reports on
Form 10-Q/A for the quarter ended March 31, 1998, and on Form 10-Q for
the quarters ended June 30, 1998 and September 30, 1998;
- Apartment Investment and Management Company's Current Reports on Form
8-K, dated December 23, 1997 (and Amendment No. 1 thereto filed
February 6, 1998 and Amendment No. 2 thereto filed May 22, 1998),
January 31, 1998, March 17, 1998 (and Amendment No. 1 thereto filed
April 3, 1998, Amendment No. 2 thereto filed June 22, 1998, Amendment
No. 3 thereto filed July 2, 1998, Amendment No. 4 thereto filed August
6, 1998, Amendment No. 5 thereto filed September 4, 1998 and Amendment
No. 6 thereto filed September 25, 1998), September 2, 1998, October 1,
1998, November 2, 1998 (and Amendment No. 1 thereto filed November 24,
1998, Amendment No. 2 thereto filed December 7, 1998 and Amendment No.
3 thereto filed December 14, 1998) and December 21, 1998; and
- the description of Apartment Investment and Management Company's
capital stock contained in its Registration Statement on Form 8-A
(File No. 1-13232) filed July 19, 1994, including any amendment or
reports filed for the purpose of updating such description.
32
<PAGE> 36
You may request a copy of these filings, at no cost, by writing or calling
us at the following address and telephone number:
Corporate Secretary
Apartment Investment and Management Company
1873 South Bellaire Street, 17th Floor
Denver, Colorado 80222
(303) 757-8101
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone to provide you with
different information. The selling stockholders named herein are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus is accurate as of any
date other than the date on the front of the document.
LEGAL MATTERS
Certain legal matters will be passed upon for AIMCO by Skadden, Arps,
Slate, Meagher & Flom LLP, Los Angeles, California. The validity of the Class B
Preferred Stock and the Class A Common Stock offered hereby will be passed upon
for AIMCO by Piper & Marbury L.L.P., Baltimore, Maryland.
EXPERTS
Ernst & Young LLP, independent auditors, have audited (i) AIMCO's
consolidated financial statements (and schedule) included in AIMCO's Annual
Report on Form 10-K/A for the year ended December 31, 1997; (ii) Ambassador
Apartments, Inc.'s consolidated financial statements as of December 31, 1997 and
1996 and for each of the three years in the period ended December 31, 1997
included in AIMCO's Current Report on Form 8-K dated March 17, 1998 (as amended
on April 3, 1998); (iii) Ambassador Apartments, Inc.'s consolidated financial
statements as of December 31, 1996 and 1995 and for each of the two years in the
period ended December 31, 1996 and the period from August 31, 1994 through
December 31, 1994 and the combined financial statements of Prime Properties
(Predecessor to Ambassador Apartments, Inc.) for the period from January 1, 1994
through August 30, 1994 included in Amendment No. 1 to AIMCO's Current Report on
Form 8-K dated December 23, 1997 filed on February 6, 1998; (iv) Insignia
Financial Group, Inc.'s consolidated financial statements as of December 31,
1997 and 1996 and for each of the three years in the period ended December 31,
1997 included in AIMCO's Current Report on Form 8-K dated March 17, 1998 (and
Amendment No. 1 thereto filed April 3, 1998); (v) Cirque Apartment Communities
combined historical summary of gross income and direct operating expenses for
the year ended December 31, 1997 included in AIMCO's Current Report on Form 8-K
dated November 2, 1998; (vi) Sun Lake Apartments' historical summary of gross
income and direct operating expenses for each of the three years in the period
ended December 31, 1997 included in Amendment No. 3 to AIMCO's Current Report on
Form 8-K dated November 2, 1998; and (vii) Calhoun Beach Club Apartments'
historical summary of gross income and direct operating expenses for the year
ended December 31, 1997 included in Apartment Investment and Management
Company's Current Report on Form 8-K dated December 21, 1998; as set forth in
their reports, which are incorporated in this prospectus by reference. These
financial statements are incorporated by reference in reliance on their reports,
given on their authority as experts in accounting and auditing.
Beers & Cutler PLLC, independent auditors, have audited (i) Realty
Investment Apartment Communities I's combined historical summary of gross income
and direct operating expenses for the year ended December 31, 1997 included in
AIMCO's Current Report on Form 8-K dated November 2, 1998 and (ii) Realty
Investment Apartment Communities II's combined historical summary of gross
income and direct operating expenses for the year ended December 31, 1997
included in AIMCO's Current Report on Form 8-K dated November 2, 1998; as set
forth in their reports, which are incorporated in this prospectus by reference.
These financial statements are incorporated by reference in reliance on their
reports, given on their authority as experts in accounting and auditing.
33
<PAGE> 37
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTIONS.
The estimated expenses, other than underwriting discounts and commissions,
in connection with the offering of the Class B Preferred Stock and the Class A
Common Stock, are as follows:
<TABLE>
<S> <C>
Registration Fee -- Securities and Exchange Commission...... $ 38,570
Printing and Engraving Expenses............................. 5,000
Legal Fees and Expenses..................................... 25,000
Accounting Fees and Expenses................................ 35,000
Miscellaneous............................................... 5,000
--------
Total............................................. $108,570
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
AIMCO's charter limits the liability of AIMCO's directors and officers to
AIMCO and its stockholders to the fullest extent permitted from time to time by
Maryland law. Maryland law presently permits the liability of directors and
officers to a corporation or its stockholders for money damages to be limited,
except (i) to the extent that it is proved that the director or officer actually
received an improper benefit or profit in money, property or services for the
amount of the benefit or profit in money, property or services actually
received, or (ii) if a judgment or other final adjudication is entered in a
proceeding based on a finding that the director's or officer's action, or
failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. This provision
does not limit the ability of the Company or its stockholders to obtain other
relief, such as an injunction or rescission.
AIMCO's charter and bylaws require AIMCO to indemnify its directors,
officers and certain other parties to the fullest extent permitted from time to
time by Maryland law. The Maryland General Corporation Law permits a corporation
to indemnify its directors, officers and certain other parties against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by them in connection with any proceeding to which they may be made a
party by reason of their service to or at the request of the corporation, unless
it is established that (i) the act or omission of the indemnified party was
material to the matter giving rise to the proceeding and (x) was committed in
bad faith or (y) was the result of active and deliberate dishonesty, (ii) the
indemnified party actually received an improper personal benefit in money,
property or services or (iii) in the case of any criminal proceeding, the
indemnified party had reasonable cause to believe that the act or omission was
unlawful. Indemnification may be made against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by the director or officer
in connection with the proceeding; provided, however, that if the proceeding is
one by or in the right of the corporation, indemnification may not be made with
respect to any proceeding in which the director or officer has been adjudged to
be liable to the corporation. In addition, a director or officer may not be
indemnified with respect to any proceeding charging improper personal benefit to
the director or officer in which the director or officer was adjudged to be
liable on the basis that personal benefit was improperly received. The
termination of any proceeding by conviction, or upon a plea of nolo contendere
or its equivalent, or an entry of any order of probation prior to judgment,
creates a rebuttable presumption that the director or officer did not meet the
requisite standard of conduct required for indemnification to be permitted. It
is the position of the Securities and Exchange Commission that indemnification
of directors and officers for liabilities arising under the Securities Act is
against public policy and is unenforceable pursuant to Section 14 of the
Securities Act.
The Company has entered into agreements with certain of its officers,
pursuant to which the Company has agreed to indemnify such officers to the
fullest extent permitted by applicable law.
II-1
<PAGE> 38
The Agreement of Limited Partnership (the "Operating Partnership
Agreement") of the AIMCO operating partnership also provides for indemnification
of AIMCO, or any director or officer of AIMCO, in its capacity as the previous
general partner of the AIMCO operating partnership, from and against all losses,
claims, damages, liabilities, joint or several, expenses (including legal fees),
fines, settlements and other amounts incurred in connection with any actions
relating to the operations of the AIMCO operating partnership, as set forth in
the operating partnership Agreement.
Section 11.6 of the Apartment Investment and Management Company 1997 Stock
Award and Incentive Plan (the "1997 Plan"), Section 2.8 of the Amended and
Restated Apartment Investment and Management Company Non-Qualified Employee
Stock Option Plan (the "Non-Qualified Plan"), Section 2.8 of the Apartment
Investment and Management Company 1996 Stock Award and Incentive Plan (the "1996
Plan"), and Section 6.7 of the 1994 Stock Option Plan of Apartment Investment
and Management Company (the "1994 Plan") specifically provide that, to the
fullest extent permitted by law, each of the members of the Board of Directors
of AIMCO (the "Board"), the Compensation Committee of the Board and each of the
directors, officers and employees of AIMCO, any AIMCO subsidiary, the AIMCO
operating partnership and any subsidiary of the AIMCO operating partnership
shall be held harmless and indemnified by AIMCO for any liability, loss
(including amounts paid in settlement), damages or expenses (including
reasonable attorneys' fees) suffered by virtue of any determinations, acts or
failures to act, or alleged acts or failures to act, in connection with the
administration of the 1997 Plan, the Non-Qualified Plan, the 1996 Plan or the
1994 Plan, as the case may be, so long as such person is not determined by a
final adjudication to be guilty of willful misconduct with respect to such
determination, action or failure to act.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
4.1 -- Specimen certificate for Class A Common Stock
(incorporated by reference from AIMCO's Registration
Statement on Form 8-A filed on July 19, 1994).
5.1 -- Opinion of Piper & Marbury L.L.P. dated January 20, 1999
regarding the validity of the Securities offered hereby.
8.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP dated
January 20, 1999 regarding tax matters.
12.1 -- Statement re computation of ratios.
23.1 -- Consent of Piper & Marbury L.L.P. dated January 20, 1999
(included in their opinion filed as Exhibit 5.1).
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP dated
January 20, 1999 (included in their opinion filed as
Exhibit 8.1).
23.3 -- Consent of Ernst & Young LLP, Dallas, Texas, dated
January 15, 1999.
23.4 -- Consent of Ernst & Young LLP, Chicago, Illinois, dated
January 15, 1999.
23.5 -- Consent of Ernst & Young LLP, Greenville, South Carolina,
dated January 15, 1999.
23.6 -- Consent of Ernst & Young LLP, Denver, Colorado, dated
January 15, 1999.
23.7 -- Consent of Beers & Cutler PLLC, Washington, D.C., dated
January 15, 1999.
23.8 -- Consent of Ernst & Young LLP, Indianapolis, Indiana,
dated January 15, 1999.
24.1 -- Power of Attorney (included on page II-4 herein).
</TABLE>
II-2
<PAGE> 39
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not
apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 40
POWER OF ATTORNEY
KNOWN TO ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Terry Considine and Peter K. Kompaniez,
jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
registration statement (including post-effective amendments), and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact or his substitutes, may do or cause to be done by
virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on this Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, State of Colorado, on the 19th day of
January, 1999.
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By: /s/ PETER K. KOMPANIEZ
----------------------------------
Peter K. Kompaniez,
Vice Chairman of the Board and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ TERRY CONSIDINE Chairman of the Board and January 19, 1999
- -------------------------------------------------------- Chief Executive Officer
Terry Considine (Principal Executive
Officer)
/s/ TROY D. BUTTS Senior Vice President, January 19, 1999
- -------------------------------------------------------- Chief Financial Officer
Troy D. Butts and Chief Accounting
Officer (Principal
Financial Officer and
Principal Accounting
Officer)
/s/ PETER K. KOMPANIEZ Vice Chairman, President January 19, 1999
- -------------------------------------------------------- and Director
Peter K. Kompaniez
/s/ RICHARD S. ELLWOOD Director January 19, 1999
- --------------------------------------------------------
Richard S. Ellwood
/s/ J. LANDIS MARTIN Director January 19, 1999
- --------------------------------------------------------
J. Landis Martin
</TABLE>
II-4
<PAGE> 41
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ THOMAS L. RHODES Director January 19, 1999
- --------------------------------------------------------
Thomas L. Rhodes
/s/ JOHN D. SMITH Director January 19, 1999
- --------------------------------------------------------
John D. Smith
</TABLE>
II-5
<PAGE> 42
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
4.1 -- Specimen certificate for Class A Common Stock
(incorporated by reference from AIMCO's Registration
Statement on Form 8-A filed on July 19, 1994).
5.1 -- Opinion of Piper & Marbury L.L.P. dated January 20, 1999
regarding the validity of the Securities offered hereby.
8.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP dated
January 20, 1999 regarding tax matters.
12.1 -- Statement re computation of ratios.
23.1 -- Consent of Piper & Marbury L.L.P. dated January 20, 1999
(included in their opinion filed as Exhibit 5.1).
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP dated
January 20, 1999 (included in their opinion filed as
Exhibit 8.1).
23.3 -- Consent of Ernst & Young LLP, Dallas, Texas, dated
January 15, 1999.
23.4 -- Consent of Ernst & Young LLP, Chicago, Illinois, dated
January 15, 1999.
23.5 -- Consent of Ernst & Young LLP, Greenville, South Carolina,
dated January 15, 1999.
23.6 -- Consent of Ernst & Young LLP, Denver, Colorado, dated
January 15, 1999.
23.7 -- Consent of Beers & Cutler PLLC, Washington, D.C., dated
January 15, 1999.
23.8 -- Consent of Ernst & Young LLP, Indianapolis, Indiana,
dated January 15, 1999.
24.1 -- Power of Attorney (included on page II-4 herein).
</TABLE>
<PAGE> 1
EXHIBIT 5.1
[LETTERHEAD OF PIPER & MARBURY L.L.P.]
January 20, 1999
Apartment Investment and Management Company
1873 South Bellaire Street, 17th Floor
Denver, Colorado 80222
Ladies and Gentlemen:
We have acted as special Maryland counsel to Apartment Investment and
Management Company, a Maryland corporation (the "Company"), in connection with
the registration under the Securities Act of 1933, as amended (the "Act"), of
750,000 shares (the "Preferred Shares") of Class B Cumulative Convertible
Preferred Stock, par value $.01 per share, of the Company (the "Class B
Preferred Stock"), and 4,212,283 shares (the "Common Shares" and together with
the Preferred Shares, the "Shares") of Class A Common Stock, par value $.01 per
share, of the Company (the "Class A Common Stock") pursuant to a Registration
Statement of the Company on Form S-3 (Registration No. 333-69121) (the
"Registration Statement") filed with the Securities and Exchange Commission (the
"Commission"). This opinion is being provided at your request in connection with
the filing of Amendment No. 1 to the Registration Statement.
The Common Shares include up to 4,212,283 shares of Class A Common Stock
that may be issued by the Company from time to time as follows: (i) up to
2,463,053 shares (plus such additional shares as may be issued pursuant to
certain anti-dilution provisions) of Class A Common Stock (the "Conversion
Shares") that may be issued by the Company upon conversion of up to 750,000
outstanding shares of the Class B Preferred Stock and (ii) up to 1,749,230
shares (plus such additional shares as may be issued pursuant to certain
antidilution provisions) of Class A Common Stock (the "Exchange Shares") that
may be issued by the Company in exchange for up to 1,749,230 Partnership Common
Units (the "OP Units") of AIMCO Properties, L.P., a Delaware limited partnership
(the "Operating Partnership") tendered for redemption.
In rendering the opinion expressed herein, we have examined the
Registration Statement, the Charter and By-Laws of the Company, the Third
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership, as amended to date (the "Partnership Agreement"), the proceedings
of the Board of Directors of the Company relating to the reservation and
issuance of the Shares, a Certificate of the Secretary of the Company (the
"Certificate"), and such other statutes, certificates, instruments, and
documents relating to the Company and matters of law as we have deemed necessary
to the issuance of this opinion.
In our examination of the aforesaid documents, we have assumed, without
independent investigation, the genuineness of all signatures, the legal capacity
of all individuals who have executed any of the aforesaid documents, the
authenticity of all documents submitted to us as originals, the conformity with
originals of all documents submitted to us as copies (and the authenticity of
the originals of such copies), and the accuracy and completeness of all public
records reviewed by us. In making our examination of documents executed by
parties other than the Company, we have assumed that such parties had the power,
corporate or other, to enter into and perform all obligations thereunder, and we
have also assumed the due authorization by all requisite action, corporate or
other, and the valid execution and delivery by such parties of such documents
and the validity, binding effect and enforceability thereof with respect to such
parties. As to any facts material to this opinion which we did not independently
establish or verify, we have relied solely upon the Certificate.
<PAGE> 2
Based upon the foregoing, having regard for such legal considerations as we
deem relevant, and limited in all respects to applicable Maryland law, we are of
the opinion and advise you that:
(1) The Preferred Shares have been duly authorized and validly issued
and are fully paid and non-assessable.
(2) The Conversion Shares to be issued upon conversion of shares of
Class B Preferred Stock, to the extent that they do not exceed that number
of shares of Common Stock authorized but unissued, have been duly
authorized and, upon satisfaction of the conditions for conversion of such
shares of Class B Preferred Stock as set forth in the Charter of the
Company and issuance and delivery of stock certificates representing the
Conversion Shares, will be validly issued, fully paid, and non-assessable.
(3) The Exchange Shares to be issued in exchange for OP Units tendered
for redemption have been duly authorized and, upon exchange of such OP
Units in accordance with the terms of the Partnership Agreement and
issuance and delivery of stock certificates representing the Exchange
Shares, will be validly issued, fully paid, and non-assessable.
In addition to the qualifications set forth above, this opinion is subject
to the qualification that we express no opinion as to the laws of any
jurisdiction other than the State of Maryland. We assume that the issuance of
the Common Shares will not violate any of the Initial Holder Limit, Look-Through
Ownership Limit or Ownership Limit provisions of the Company's Charter. This
opinion concerns only the effect of the laws (exclusive of the securities or
"blue sky" laws and the principles of conflict of laws) of the State of Maryland
as currently in effect. We assume no obligation to supplement this opinion if
any applicable laws change after the date hereof or if any facts or
circumstances come to our attention after the date hereof that might change this
opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the heading "Legal
Matters" in the Prospectus included in the Registration Statement.
Very truly yours,
/s/ PIPER & MARBURY L.L.P.
<PAGE> 1
EXHIBIT 8.1
[LETTERHEAD OF SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP]
January 20, 1999
Apartment Investment and Management Company
1873 South Bellaire Street
Suite 1700
Denver, Colorado 80222
Re: Certain Federal Income Tax Consequences
Ladies and Gentlemen:
You have requested our opinion concerning certain Federal income tax
considerations in connection with the offering (the "Offering") for sale, from
time to time, of shares of Class B Cumulative Convertible Preferred Stock, par
value $.01 per share (the "Preferred Stock"), of Apartment Investment and
Management Company, a Maryland corporation ("AIMCO") and of shares of Class A
Common Stock, par value $.01 per share ("Class A Common Stock"), of AIMCO, by
certain stockholders pursuant to a Registration Statement on Form S-3 (File No.
333-69121), as amended (the "Registration Statement"). All capitalized terms
used herein, unless otherwise specified, shall have the meanings assigned to
them in the Registration Statement.
In connection with the Offering and with certain previous offerings of
Class A Common Stock by AIMCO, we have acted as counsel to AIMCO, and we have
assisted in the preparation of the Registration Statement and certain other
documents. In formulating our opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of the Registration
Statement and such other documentation and information provided by you as is
relevant to the Offering and necessary to prepare the Registration Statement or
as we have deemed necessary or appropriate as a basis for the opinion set forth
herein. In addition, you have provided us with certain representations and
covenants of officers of AIMCO relating to, among other things, the actual and
proposed operation of AIMCO. For purposes of our opinion, we have not made an
independent investigation of the facts set forth in such representations, the
partnership agreements and organizational documents for each of the partnerships
and limited liability companies in which AIMCO holds a direct or indirect
interest (the "Subsidiaries"), the Registration Statement or any other document.
We have, consequently, assumed and relied on your representations that the
information presented in such documents or otherwise furnished to us accurately
and completely describes all material facts relevant to our opinion. No facts
have come to our attention, however, that would cause us to question the
accuracy and completeness of such facts or documents in a material way. We have
also relied upon the opinion of Piper & Marbury L.L.P. dated January 20, 1999
with respect to certain matters of Maryland law, the opinion of Shumaker, Loop &
Kendrick dated October 18, 1995 with respect to certain matters of Florida law,
and the opinion of Altheimer & Gray dated May 8, 1998 with respect to the
qualification as a real estate investment trust ("REIT") of Ambassador
Apartments, Inc., a Maryland corporation, for its taxable year ended December
31, 1994 and all subsequent taxable years ending on or before May 8, 1998
(including the short taxable year ending immediately prior to May 8, 1998). In
addition, we have assumed the qualification of Insignia Properties Trust as a
REIT under the Code and have relied upon the opinion of Akin, Gump, Strauss,
Hauer & Field, L.L.P. dated October 1, 1998 in this regard.
In rendering our opinion, we have assumed that the transactions
contemplated by the foregoing documents have been or will be consummated in
accordance with the operative documents, and that such documents accurately
reflect the material facts of such transactions. In addition, our opinion is
based on the correctness of the following specific assumptions: (i) each of
AIMCO, the Subsidiaries, Property Asset Management Services, Inc., AIMCO/NHP
Holdings, Inc., AIMCO/NHP Properties, Inc., NHP Management Company, NHP A&R
Services, Inc., and each "qualified REIT subsidiary" of AIMCO (within the
meaning of section 856(i)(2) of the Code), has been and will continue to be
operated in accordance with the laws of the jurisdiction in which it was formed
and in the manner described in the
<PAGE> 2
relevant organizational documents and in the Registration Statement and (ii)
there have been no changes in the applicable laws of the State of Maryland or
any other state under the laws of which any of the Subsidiaries have been
formed. In rendering our opinion, we have also considered and relied upon the
Code, the regulations promulgated thereunder (the "Regulations"), administrative
rulings and the other interpretations of the Code and the Regulations by the
courts and the Internal Revenue Service, all as they exist as of the date
hereof. With respect to the latter assumption, it should be noted that the Code,
Regulations, judicial decisions, and administrative interpretations are subject
to change at any time and, in some circumstances, with retroactive effect. Any
material change which is made after the date hereof in any of the foregoing
bases for our opinion could affect our conclusions herein.
We express no opinion as to the laws of any jurisdiction other than the
Federal laws of the United States of America to the extent specifically referred
to herein.
Based on the foregoing, we are of the opinion that:
1. Commencing with AIMCO's initial taxable year ended December 31,
1994, AIMCO was organized in conformity with the requirements for
qualification as a 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 Registration Statement, 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 will not be reviewed by
us. Accordingly, no assurance can be given that the actual results of
AIMCO's operation for any one taxable year will satisfy the requirements
for taxation as a REIT under the Code.
2. Although the discussion set forth in the Registration Statement
under the caption "CERTAIN FEDERAL INCOME TAX CONSEQUENCES" does not
purport to discuss all possible United States Federal income tax
consequences of the purchase, ownership and disposition of the Preferred
Stock and the Class A Common Stock, such discussion, although general in
nature, constitutes, in all material respects, a fair and accurate summary
under current law of certain material United States Federal income tax
consequences of the purchase, ownership and disposition of the Preferred
Stock and the Class A Common Stock by a holder who purchases such Preferred
Stock and Class A Common Stock, subject to the qualifications set forth
therein. The United States Federal income tax consequences of an investment
in the Preferred Stock and the Class A Common Stock by an investor will
depend upon that holder's particular situation, and we express no opinion
as to the completeness of the discussion set forth in "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES" as applied to any particular holder.
Other than as expressly stated above, we express no opinion on any issue
relating to AIMCO, the Subsidiaries or to any investment therein.
This opinion is intended for the exclusive use of the person to whom it is
addressed, except as set forth herein, and it may not be used, circulated,
quoted or relied upon for any other purpose without our prior written consent.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to Skadden, Arps, Slate, Meagher & Flom LLP under
the caption "Legal Matters" in the Registration Statement. In giving this
consent, we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules or regulations of the Securities and Exchange Commission
thereunder. This opinion is expressed as of the date hereof, and we disclaim any
undertaking to advise you of any subsequent changes of the matters stated,
represented, covenanted, or assumed herein or any subsequent changes in
applicable law.
Very truly yours,
/s/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM, LLP
<PAGE> 1
EXHIBIT 12.1
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------------------------------------
Nine Months
Ended January 10,
September 30, Year Ended December 31, 1994 through
-------------------- -------------------------------- December 31,
1998 1997 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Earnings (1) $ 51,203 $ 20,649 $ 29,535 $ 15,740 $ 14,988 $ 7,702
Fixed charges:
Interest expense 56,756 33,359 51,385 24,802 13,322 1,576
Capitalized interest 2,074 751 1,300 821 113 29
-------- -------- -------- -------- -------- --------
Total fixed charges (A) 58,830 34,110 52,685 25,623 13,435 1,605
-------- -------- -------- -------- -------- --------
Earnings before fixed
charges (2)(B) $107,959 $ 54,008 $ 80,920 $ 40,542 $ 28,310 $ 9,278
======== ======== ======== ======== ======== ========
Ratio of earnings to fixed
charges (B divided by A) 1.8:1.0 1.6:1.0 1.5:1.0 1.6:1.0 2.1:1.0 5.8:1.0
======== ======== ======== ======== ======== ========
</TABLE>
AIMCO PREDECESSORS
<TABLE>
<CAPTION>
HISTORICAL
------------------------------
January 1, Year ended
1994 through December 31,
July 28, 1994 1993
------------- ------------
<S> <C> <C>
Historical:
Income (loss) before extraordinary item and income taxes $ (1,463) $ 627
Fixed charges:
Interest expense 4,214 3,510
Capitalized interest -- --
-------- --------
Total fixed charges (A) 4,214 3,510
-------- --------
Earnings before fixed charges (1)(B) $ 2,751 $ 4,137
======== ========
Ratio of earnings to fixed charges (B divided by A) (3) 1.2:1.0
======== ========
</TABLE>
- ----------------
(1) Earnings represents pretax income before Minority Interest in Operating
Partnership and minority interest in other partnership. Equity in earnings
of unconsolidated subsidiaries and partnerships is included in earnings
only to the extent of dividends and distributions received.
(2) Earnings before fixed charges excludes capitalized interest.
(3) Earnings for the period January 1, 1994 through July 28, 1994 were
inadequate to cover fixed charges. The deficiency for the period was
$1,463.
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-69121) and
related Prospectus of Apartment Investment and Management Company for the
registration of Class A Common Stock and Class B Cumulative Convertible
Preferred Stock and to the incorporation by reference therein of our report
dated March 6, 1998, except for Note 25, as to which the date is March 17, 1998,
with respect to the consolidated financial statements and schedule of Apartment
Investment and Management Company included in its Annual Report, as amended
(Form 10-K/A) for the year ended December 31, 1997, filed with the Securities
and Exchange Commission.
/s/ ERNST & YOUNG LLP
Dallas, Texas
January 15, 1999
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-69121) and
related Prospectus of Apartment Investment and Management Company (AIMCO) for
the registration of 750,000 shares of Class B Cumulative Convertible Preferred
Stock and 4,212,283 shares of Class A Common Stock and to the incorporation by
reference therein of our report dated January 30, 1998 (except for Note 19, as
to which the date is March 5, 1998), with respect to the consolidated financial
statements and schedule of Ambassador Apartments, Inc. (Ambassador) as of
December 31, 1997 and 1996 and for each of the three years in the period ended
December 31, 1997, included in AIMCO's Current Report on Form 8-K dated March
17, 1998 (as amended on April 3, 1998), and our report dated January 27, 1997
(except for Note 15, as to which the date is March 13, 1997, and Note 2(J), as
to which the date is March 31, 1997), with respect to the consolidated financial
statements and schedule of Ambassador as of December 31, 1996 and 1995 and for
each of the two years in the period ended December 31, 1996 and the period from
August 31, 1994 through December 31, 1994, and the combined financial statements
of Prime Properties (Predecessor to Ambassador) for the period from January 1,
1994 through August 30, 1994, included in Amendment No. 1 filed on February 6,
1998 to AIMCO's Current Report on Form 8-K dated December 23, 1997, filed with
the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Chicago, Illinois
January 15, 1999
<PAGE> 1
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-69121) and
related Prospectus of Apartment Investment and Management Company for the
registration of shares of its Class B Cumulative Convertible Preferred Stock and
Class A Common Stock and to the incorporation by reference therein of our report
dated February 13, 1998, except for Note 20, as to which the date is March 19,
1998, with respect to the consolidated financial statements of Insignia
Financial Group, Inc. as of December 31, 1997 and 1996, and for each of the
three years in the period ended December 31, 1997 included as exhibit 99.2 in
Apartment Investment and Management Company's Current Report on Form 8-K dated
March 17, 1998 (and Amendment No. 1 thereto filed April 3, 1998), filed with the
Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Greenville, South Carolina
January 15, 1999
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-69121) and
related Prospectus of Apartment Investment and Management Company for the
registration of Class A Common Stock and Class B Cumulative Convertible
Preferred Stock and to the incorporation by reference therein of our reports (i)
dated June 26, 1998 with respect to the Combined Historical Summary of Gross
Income and Direct Operating Expenses of Cirque Apartment Communities included in
Apartment Investment and Management Company's Current Report on Form 8-K dated
November 2, 1998 and (ii) dated November 10, 1998 with respect to the Historical
Summary of Gross Income and Direct Operating Expenses of Calhoun Beach Club
Apartments included in Apartment Investment and Management Company's Current
Report on Form 8-K dated December 21, 1998, filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
Denver, Colorado
January 15, 1999
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to the Registration Statement (Form S-3 No. 333-69121) and related
Prospectus of Apartment Investment and Management Company for the registration
of Class A Common Stock and Class B Cumulative Convertible Preferred Stock and
to the incorporation by reference therein of our reports (i) dated February 11,
1998, except for Note 1 as to which the date is October 16, 1998, with respect
to the Combined Historical Summary of Gross Income and Direct Operating Expenses
of Realty Investment Apartment Communities I included in Apartment Investment
and Management Company's Current Report on Form 8-K dated November 2, 1998 and
(ii) dated January 28, 1998, except for Note 1 as to which the date is July 24,
1998, with respect to the Combined Historical Summary of Gross Income and Direct
Operating Expenses of Realty Investment Apartment Communities II included in
Apartment Investment and Management Company's Current Report on Form 8-K dated
November 2, 1998, all filed with the Securities and Exchange Commission.
/s/ BEERS & CUTLER PLLC
Washington, D.C.
January 15, 1999
<PAGE> 1
EXHIBIT 23.8
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-69121) and
related Prospectus of Apartment Investment and Management Company for the
registration of Class A Common Stock and Class B Cumulative Convertible
Preferred Stock and to the incorporation by reference therein of our report
dated March 27, 1998, except for Note 1, as to which the date is September 24,
1998, with respect to the Historical Summary of Gross Income and Direct
Operating Expenses of Sun Lake Apartments for each of the three years in the
period ended December 31, 1997 included in Amendment No. 3 to Apartment
Investment and Management Company's Current Report on Form 8-K dated November 2,
1998 filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
------------------------------------
Indianapolis, Indiana
January 15, 1999
