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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 27, 2000
REGISTRATION NO. 333-31718
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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 of Other Jurisdiction of Incorporation or
Organization) (I.R.S. Employer Identification Number)
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PETER K. KOMPANIEZ
PRESIDENT AND VICE-CHAIRMAN OF THE BOARD OF
DIRECTORS
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
COLORADO CENTER, TOWER TWO
COLORADO CENTER, TOWER TWO 2000 SOUTH COLORADO BOULEVARD, SUITE 2-1000
2000 SOUTH COLORADO BOULEVARD, SUITE 2-1000 DENVER, COLORADO 80222
DENVER, COLORADO 80222 (303) 757-8101
(Address, Including Zip Code, and Telephone Number, (Name, Address, Including Zip Code, and Telephone
Including Area Code, of Principal Executive Number,
Offices) Including Area Code, of Agent For Service)
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Copy to:
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. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TITLE OF SHARES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE REGISTRATION FEE
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Class A Common Stock, par value
$.01 per share................... 681,818(2) $36.9687 $25,205,925.00 $6,654.36(3)
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(1) 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 March 2, 2000.
(2) 681,818 shares of Class A Common Stock into which 1,200,000 shares of Class
M Convertible Cumulative Preferred Stock are convertible (based on a
conversion ratio of .5681818 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.
(3) A fee of $6,654.36 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
Colorado Center, Tower Two
2000 South Colorado Boulevard, Suite 2-1000
Denver, Colorado 80222
(303) 757-8101
SHARES OF CLASS A COMMON STOCK
The selling stockholders described in this prospectus may offer and sell
from time to time up to 681,818 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 A Common
Stock.
The selling stockholders may sell 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 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.
The Class A Common Stock is listed and traded on the New York Stock
Exchange under the symbol "AIV." On March 24, 2000, the average of the high and
low prices of the Class A Common Stock on the NYSE was $38.125 per share.
INVESTING 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.
March 27, 2000
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TABLE OF CONTENTS
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THE COMPANY................................................. 1
RISK FACTORS................................................ 2
Risks of Acquisition and Development Activities........... 2
Risks Associated with Debt Financing...................... 3
Increases in Interest Rates May Increase our Interest
Expense................................................ 3
Covenant Restrictions May Limit our Ability to Make
Payments to our Investors.............................. 3
We Depend on Distributions and Other Payments from our
Subsidiaries........................................... 3
Real Estate Investment Risks.............................. 4
Possible Environmental Liabilities........................ 4
Laws Benefitting Disabled Persons May Result in
Unanticipated Expenses................................. 4
Risks Relating to Regulation of Affordable Housing........ 5
The Loss of Property Management Contracts Would Reduce Our
Revenues............................................... 5
Dependence on Certain Executive Officers.................. 5
Possible Conflicts of Interest; Transactions With
Affiliates............................................. 5
Tax Risks................................................. 5
Possible Adverse Consequences of Limits on Ownership of
Shares................................................. 7
Our Charter and Maryland Law May Limit the Ability of a
Third Party to Acquire Control of the Company.......... 7
USE OF PROCEEDS............................................. 8
SELLING STOCKHOLDERS........................................ 8
PLAN OF DISTRIBUTION........................................ 9
TAXATION OF AIMCO........................................... 11
In General................................................ 11
Tax Aspects of Aimco's Investments in Partnerships........ 15
Taxation of Aimco's Management Companies.................. 16
Taxation of Taxable Domestic Stockholders................. 17
Taxation of Foreign Stockholders.......................... 17
Taxation of Tax-Exempt Stockholders....................... 19
Information Reporting Requirements and Backup
Withholding............................................ 19
Legislative or Other Actions Affecting REITs.............. 20
State, Local and Foreign Taxes............................ 20
WHERE YOU CAN FIND MORE INFORMATION......................... 20
LEGAL MATTERS............................................... 21
EXPERTS..................................................... 21
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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, 1999, we
owned or managed 363,462 apartment units in 1,942 properties located in 48
states, the District of Columbia and Puerto Rico. Based on apartment unit data
compiled as of January 1, 1999, by the National Multi Housing Council, we
believe that we are the largest owner and manager of multi-family apartment
properties in the United States. As of December 31, 1999, we:
- owned or controlled 106,148 units in 373 apartment properties;
- held an equity interest in 133,113 units in 751 apartment properties; and
- managed 124,201 units in 818 apartment properties for third party owners
and affiliates.
We conduct substantially all of our operations through our operating
partnership, AIMCO Properties, L.P. Through a wholly owned subsidiary, we act as
the sole general partner of the AIMCO operating partnership. As of December 31,
1999, we owned approximately a 91% 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 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 or
incorporated by reference into 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 or
incorporated by reference into this prospectus. The risk factors noted in this
section and other factors noted throughout this prospectus or incorporated
herein, 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;
- we may experience difficulty or delays in obtaining necessary zoning,
land-use, building, occupancy and other governmental permits and
authorizations; and
- our return on investment may be lower than expected.
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 1,942 apartment properties
with 363,462 units as of December 31, 1999. 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
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limited partners' interests in the partnership. In these transactions, we are
subject to litigation based on 2 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 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 December 31, 1999, 96.8% of the
properties that we own or control were encumbered by debt. As of December 31,
1999, we had $2,584 million of indebtedness outstanding on a consolidated basis,
of which $2,375 million was secured by properties.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE
As of December 31, 1999, approximately $232.6 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.
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 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. The 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. If we are unable to pay dividends,
we may fail to qualify as a REIT. This would subject us to corporate taxation
and reduce our ability to make distributions to you.
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 subsidiaries in order to
satisfy our financial obligations and make payments to our investors. The
ability of the subsidiaries to make such distributions and other payments is
dependent upon their earnings and may be subject to statutory or contractual
limitations. As an equity investor in the subsidiaries, our right to receive
assets upon their liquidation or reorganization will be effectively subordinated
to the claims of their creditors. To the extent that we are recognized as a
creditor of such subsidiaries, our claims would still be
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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 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;
- changes in governmental regulations and the related cost of compliance;
- 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 or toxic 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
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.
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RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING
As of December 31, 1999, we owned or controlled 27 properties, held an
equity interest in 434 properties and managed for third parties and affiliates
477 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 1999, we received $46
million of revenue from the management of such properties. 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 and our President, Peter K. Kompaniez,
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 99% non-voting interest in these management companies, we have
no control over them or their operations. As a result, the management companies
could implement business decisions or policies that are not in our best
interests. We have adopted certain policies designed to minimize or eliminate
the conflicts of interest inherent in these transactions, including a
requirement that a majority of our disinterested directors approve certain
transactions with affiliates. However, there can be no assurance that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, such policies are subject to change without the approval of our
stockholders.
TAX RISKS
Adverse Consequences of Failure to Qualify as a REIT. Although we believe
that we operate in a manner that enables us to meet the requirements for
qualification as a REIT for Federal income tax purposes, we do not plan to
request a ruling from the IRS that we qualify as a REIT. We have, however,
received an opinion from the law firm of Skadden, Arps, Slate, Meagher & Flom
LLP to the effect that,
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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 actual method of operation has enabled,
and our proposed method of operation 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, Slate, Meagher & Flom LLP 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 qualification and taxation as a REIT depend on, our
ability to meet, through actual annual operating results, the various REIT
qualification tests, the results of which are not reviewed by Skadden, Arps,
Slate, Meagher & Flom LLP. Accordingly, no assurance can be given that the
actual results of our operations for any taxable year satisfy such requirements.
Such requirements are discussed in more detail under the heading "Taxation of
AIMCO."
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 "Taxation of AIMCO." As a
result of the additional tax liability, we might need to borrow funds or
liquidate certain investments on terms that may be disadvantageous to us in
order to pay the applicable tax, and we would not be compelled to make
distributions under the Internal Revenue Code. Also, if we fail to qualify as a
REIT, (i) we would be obligated to repurchase 750,000 shares of our preferred
stock at a price of $105 per share, plus accrued and unpaid dividends to the
date of repurchase, and (ii) we would be in default under our primary credit
facilities and certain other loan agreements. Although we currently intend to
operate in a manner that enables us to qualify as a REIT, future economic,
market, legal, tax or other considerations may cause us to fail to qualify as a
REIT or our board of directors may determine to revoke our REIT status.
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 in which the acquisition occurs. AIMCO has retained, and
may in the future retain, independent certified public accountants to review the
determination of certain acquired corporations' earnings and profits for
purposes of this requirement. 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. Our failure to distribute an amount equal to the acquired corporation's
earnings and profits on or before the end of the year in which the acquisition
occurs would result in our failure to qualify as a REIT.
Effect of Distribution Requirements. As a REIT, we are subject to annual
distribution requirements, which limit the amount of cash we have available for
other business purposes, including amounts to fund our growth.
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.
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.
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POSSIBLE ADVERSE CONSEQUENCES OF LIMITS ON OWNERSHIP OF SHARES
Our charter limits ownership of our common stock by any single stockholder
to 8.7% of the outstanding shares (or 15% in the case of certain pension trusts,
registered investment companies and Mr. Considine). Our charter also limits
ownership of our common stock and preferred stock by any single stockholder to
8.7% of the value of the outstanding common stock and preferred stock (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 the value of all 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;
- 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 AIMCO any distributions received from AIMCO
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 510,587,500 shares of capital stock. As of December 31, 1999, 474,121,284
shares were classified as Class A Common Stock, and 36,466,216 shares 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.
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
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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. Additionally, recent changes to
Maryland law may make it more difficult for someone to acquire us. Maryland law
now provides, among other things, that the board of directors has broad
discretion in adopting stockholders' rights plans and has the sole power to fix
the record date, time and place for special meetings of the stockholders. In
addition, Maryland law provides that corporations which:
- have three directors who are not employees of the entity or related to an
acquiring person, and
- are subject to the reporting requirements of the Securities Exchange Act
of 1934, may elect in their charter or bylaws or by resolution of the
board of directors to be subject to all or part of a special subtitle
which provides that:
- the corporation will have a staggered board of directors;
- any director may be removed only for cause and by the vote of two-thirds
of the votes entitled to be cast in the election of directors generally
(even if a lesser proportion is provided in the charter or bylaws);
- the number of directors may only be set by the board of directors (even
if the procedure is contrary to the charter or bylaws);
- vacancies may only be filled by the remaining directors (even if the
procedure is contrary to the charter or bylaws); and
- the secretary of the corporation may call a special meeting of
stockholders at the request of stockholders only on the written request
of the stockholders entitled to cast at least a majority of all the
votes entitled to be cast at the meeting (even if the procedure is
contrary to the charter or bylaws).
USE OF PROCEEDS
The selling stockholders will receive all of the net proceeds from the sale
of shares of Class A Common Stock offered hereby. We will not receive any
proceeds from the sale of such shares.
SELLING STOCKHOLDERS
This prospectus relates to periodic offers and sales of up to 681,818
shares of Class A Common Stock by the selling stockholder listed below and its
pledgees, donees and other successors in interest (collectively, the "selling
stockholders"). Such shares represent less than 1% of the shares of Class A
Common Stock outstanding. The shares of Class A Common Stock that may be offered
and sold by the selling stockholders include shares that may be issued upon
conversion of shares of Class M Convertible Cumulative Preferred Stock of AIMCO.
The following table sets forth certain information with respect to the
selling stockholders and their beneficial ownership of shares of Class A Common
Stock as of the date hereof. 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 the shares offered
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hereby are sold, the selling stockholders will not own any shares after the
offering. All of the shares shown below represent the number of shares of Class
A Common Stock that would be issuable upon conversion of 1,200,000 shares of
Class M Convertible Cumulative Preferred Stock owned by the selling
stockholders. 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 M
Convertible Cumulative Preferred Stock as a result of future adjustment of the
conversion ratio pursuant to certain anti-dilution provisions.
<TABLE>
<CAPTION>
SHARES COVERED
SHARES OWNED PRIOR BY THIS
SELLING STOCKHOLDER TO OFFERING(1) PROSPECTUS(1)
- ------------------- ------------------ --------------
<S> <C> <C>
AEW Targeted Securities Fund II, L.P........................ 681,818 681,818
</TABLE>
- ---------------
(1) Excludes shares held by AEW Targeted Securities Fund, L.P., whose general
partner is an affiliate of the general partner of the selling stockholder.
PLAN OF DISTRIBUTION
The selling stockholders, or their pledgees, donees, transferees, or any of
their successors in interest, may sell the securities from time to time on any
stock exchange or automated interdealer quotation system on which the securities
are listed, in the over-the-counter market, in privately negotiated transactions
or otherwise, at fixed prices that may be changed, at market prices prevailing
at the time of sale, at prices related to prevailing market prices or at prices
otherwise negotiated. The selling stockholders may sell the securities by one or
more of the following methods, without limitation:
(a) block trades in which the broker or dealer so engaged will attempt
to sell the securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction;
(b) purchases by a broker or dealer as principal and resale by the
broker or dealer for its own account pursuant to this prospectus;
(c) an exchange distribution in accordance with the rules of any stock
exchange on which the securities are listed;
(d) ordinary brokerage transactions and transactions in which the
broker solicits purchases;
(e) privately negotiated transactions;
(f) short sales;
(g) through the writing of options on the securities, whether or the
options are listed on an options exchange;
(h) through the distribution of the securities by any selling
stockholder to its partners, members or stockholders;
(i) one or more underwritten offerings on a firm commitment or best
efforts basis; and
(j) any combination of any of these methods of sale.
The selling stockholders may also transfer the securities by gift. We do
not know of any arrangements by the selling stockholders for the sale of any of
the securities.
The selling stockholders may engage brokers and dealers, and any brokers or
dealers may arrange for other brokers or dealers to participate in effecting
sales of the securities. These brokers, dealers or underwriters may act as
principals, or as an agent of a selling stockholder. Broker-dealers may agree
with a selling stockholder to sell a specified number of the securities at a
stipulated price per security. If the broker-dealer is unable to sell securities
acting as agent for a selling stockholder, it may purchase as principal any
unsold securities at the stipulated price. Broker-dealers who acquire securities
as principals may thereafter resell the securities from time to time in
transactions in any stock exchange or automated
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interdealer quotation system on which the securities are then listed, at prices
and on terms then prevailing at the time of sale, at prices related to the
then-current market price or in negotiated transactions. Broker-dealers may use
block transactions and sales to and through broker-dealers, including
transactions of the nature described above. The selling stockholders may also
sell the securities in accordance with Rule 144 under the Securities Act of
1933, as amended, rather than pursuant to this prospectus, regardless of whether
the securities are covered by this prospectus.
From time to time, one or more of the selling stockholders may pledge,
hypothecate or grant a security interest in some or all of the securities owned
by them. The pledgees, secured parties or persons to whom the securities have
been hypothecated will, upon foreclosure in the event of default, be deemed to
be selling stockholders. The number of a selling stockholder's securities
offered under this prospectus will decrease as and when it takes such actions.
The plan of distribution for that selling stockholder's securities will
otherwise remain unchanged. In addition, a selling stockholder may, from time to
time, sell the securities short, and, in those instances, this prospectus may be
delivered in connection with the short sales and the securities offered under
this prospectus may be used to cover short sales.
To the extent required under the Securities Act of 1933, the aggregate
amount of selling stockholders' securities being offered and the terms of the
offering, the names of any agents, brokers, dealers or underwriters and any
applicable commission with respect to a particular offer will be set forth in an
accompanying prospectus supplement. Any underwriters, dealers, brokers or agents
participating in the distribution of the securities may receive compensation in
the form of underwriting discounts, concessions, commissions or fees from a
selling stockholder and/or purchasers of selling stockholders' securities of
securities, for whom they may act (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
The selling stockholders and any underwriters, brokers, dealers or agents
that participate in the distribution of the securities may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, and any
discounts, concessions, commissions or fees received by them and any profit on
the resale of the securities sold by them may be deemed to be underwriting
discounts and commissions.
A selling stockholder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the
securities in the course of hedging the positions they assume with that selling
stockholder, including, without limitation, in connection with distributions of
the securities by those broker-dealers. A selling stockholder may enter into
option or other transactions with broker-dealers that involve the delivery of
the securities offered hereby to the broker-dealers, who may then resell or
otherwise transfer those securities. A selling stockholder may also loan or
pledge the securities offered hereby to a broker-dealer and the broker-dealer
may sell the securities offered hereby so loaned or upon a default may sell or
otherwise transfer the pledged securities offered hereby.
The selling stockholders and other persons participating in the sale or
distribution of the securities will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder, including Regulation M. This regulation may limit the timing of
purchases and sales of any of the securities by the selling stockholders and any
other person. The anti-manipulation rules under the Securities Exchange Act of
1934 may apply to sales of securities in the market and to the activities of the
selling stockholders and their affiliates. Furthermore, Regulation M may
restrict the ability of any person engaged in the distribution of the securities
to engage in market-making activities with respect to the particular securities
being distributed for a period of up to five business days before the
distribution. These restrictions may affect the marketability of the securities
and the ability of any person or entity to engage in market-making activities
with respect to the securities.
We have agreed to indemnify in certain circumstances the selling
stockholders and any brokers, dealers and agents who may be deemed to be
underwriters, if any, of the securities covered by the registration statement,
against certain liabilities, including liabilities under the Securities Act of
1933. The selling stockholders have agreed to indemnify us in certain
circumstances against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
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The securities offered hereby were originally issued to the selling
stockholders pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended. We agreed to register the securities under
the Securities Act of 1933, and to keep the registration statement of which this
prospectus is a part effective. We have agreed to pay all expenses in connection
with this offering, including the fees and expenses of counsel or other advisors
to the selling stockholders, but not including underwriting discounts,
concessions, commissions or fees of the selling stockholders.
We will not receive any proceeds from sales of any securities by the
selling stockholders.
We can not assure you that the selling stockholders will sell all or any
portion of the securities offered hereby.
TAXATION OF AIMCO
IN 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
differing interpretation or 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. AIMCO believes that, and it has received an opinion from
Skadden, Arps, Slate, Meagher & Flom LLP ("Counsel") to the effect that, it was
organized in conformity with the requirements for qualification as a REIT, and
that its actual method of operation has enabled, and its proposed method of
operation 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 assumptions and
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 Counsel has no obligation to advise AIMCO of any subsequent
change in the matters stated, represented or assumed or any subsequent change in
the applicable law. Moreover, the opinion of Counsel is conditioned on, and
AIMCO's qualification and taxation as a REIT depend upon, AIMCO's ability to
meet, through actual annual operating results, certain requirements, including
requirements relating to distribution levels and diversity of stock ownership,
and the various qualification tests imposed under the Internal Revenue Code as
discussed below, the results of which are not reviewed by Counsel. No assurance
can be given that the actual results of AIMCO's operations for any one taxable
year 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 its stockholders. This treatment substantially eliminates the
"double taxation" (at the corporate and stockholder levels) that generally
results from investment in a corporation. However, notwithstanding AIMCO's
qualification as a REIT, AIMCO will be subject to Federal income tax as follows:
First, AIMCO will be taxed at regular corporate rates on any undistributed REIT
taxable income, including undistributed net capital gains. Second, under certain
circumstances, AIMCO may be subject to the "alternative minimum tax" on its
items of tax preference. Third, if AIMCO has net income from prohibited
transactions (which are, in general, certain sales or other dispositions of
property held primarily for sale to customers in the ordinary course of business
other than foreclosure property), such income will be subject to a 100% tax.
Fourth, if AIMCO should fail to satisfy the 75% gross income test or the 95%
gross income test (as discussed below), but has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on an amount equal to (a) the gross income
attributable to the greater of
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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 corporation that is not a REIT (a "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 C corporation, under Treasury Regulations not yet promulgated, the C
corporation would be required to recognize any net Built-In Gain (as defined
below) that would have been realized if the C corporation had liquidated on the
day before the date of the transfer. Pursuant to IRS Notice 88-19, AIMCO may
elect, in lieu of the treatment described above, to be subject to tax at the
highest regular corporate tax rate on any gain it recognizes on the disposition
of any such asset during the ten-year period beginning on the day on which AIMCO
acquires such asset to the extent of the excess, if any, of the fair market
value over the adjusted basis of such asset as of its acquisition date
("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 also 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 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
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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 will qualify as
"rents from real property" in satisfying the gross income requirements described
above, only if several conditions are met, including the following. If rent
attributable to personal property leased in connection with a lease of real
property is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
"rents from real property." Moreover, for rents received to qualify as "rents
from real property," the REIT generally must not operate or manage the property
or furnish or render services to the tenants of such property, other than
through an "independent contractor" from which the REIT derives no revenue.
However, AIMCO (or its affiliates) is permitted to directly perform services
that are "usually or customarily rendered" in connection with the rental of
space for occupancy only and are not otherwise considered rendered to the
occupant of the property. In addition, AIMCO (or its affiliates) may provide
non-customary services to tenants of its properties without disqualifying all of
the rent from the property if the payment for such services does not exceed 1%
of the total gross income from the property. For purposes of this test, the
income received from such non-customary services is deemed to be at least 150%
of the direct cost of providing the services.
AIMCO's management companies receive management fees and other income. A
portion of such fees and other income 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 will be generally available if AIMCO's failure to meet
such tests was due to reasonable cause and not due to willful neglect, AIMCO
attaches a schedule of the sources of its income to its return, and any
incorrect information on the schedule was not due to fraud with intent to evade
tax. It is not possible, however, to state whether in all circumstances AIMCO
would be entitled to the benefit of these relief provisions. If these relief
provisions are inapplicable to a particular set of circumstances involving
AIMCO, AIMCO will not qualify as a REIT. As discussed above in "-- General,"
even where these relief provisions apply, a tax is imposed with respect to the
excess net income.
Asset Tests. AIMCO, at the close of each quarter of its taxable year, must
also satisfy three tests relating to the nature of its assets. First, at least
75% of the value of AIMCO's total assets must be represented by real estate
assets (including its allocable share of real estate assets held by the
Subsidiary Partnerships), 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
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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 the asset tests set forth above. However, no independent appraisals have
been obtained to support AIMCO's conclusions as to the value of the AIMCO
operating partnership's total assets and the value of the AIMCO operating
partnership's interest in 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 is not subject to
Federal corporate income taxation, although it may be subject to state or local
taxation. In addition, AIMCO's ownership of the voting stock of each qualified
REIT subsidiary does not violate the general restriction against ownership of
more than 10% of the voting securities of any issuer.
Annual Distribution Requirements. In order for AIMCO to qualify as a REIT,
AIMCO is required to distribute dividends (other than capital gain dividends) to
its stockholders in an amount at least equal to (A) the sum of (i) 95% of
AIMCO's "REIT taxable income" (computed without regard to the dividends paid
deduction and AIMCO's net capital gain) and (ii) 95% of the net income (after
tax), if any, from foreclosure property, minus (B) the sum of certain items of
noncash income. Such distributions must be paid in the taxable year to which
they relate, or in the following taxable year if declared before AIMCO timely
files its tax return for such year and if paid with or before the first regular
dividend payment after such declaration. To the extent that AIMCO distributes at
least 95%, but less than 100%, of its "REIT taxable income," as adjusted, it
will be subject to tax thereon at ordinary corporate tax rates.
AIMCO may elect to retain, rather than distribute, its net long-term
capital gains and pay tax on such gains. In such a case, AIMCO's stockholders
would include their proportionate share of such undistributed long-term capital
gains in income and receive a credit for their share of the tax paid by
AIMCO. AIMCO's stockholders would then increase the adjusted basis of their
AIMCO shares by the difference between the designated amounts included in their
long-term capital gains and the tax deemed paid with respect to their shares. If
AIMCO should fail to distribute during each calendar year at least the sum of
(i) 85% of its REIT ordinary income for such year and (ii) 95% of its REIT
capital gain net income for such year (excluding retained long-term capital
gains), and (iii) any undistributed taxable income from prior periods, AIMCO
would be subject to a 4% excise tax on the excess of such required distribution
over the amounts actually distributed. AIMCO believes that it has made, and
intends to make, timely distributions sufficient to satisfy these annual
distribution requirements.
It is possible that AIMCO, from time to time, may not have sufficient cash
to meet the 95% distribution requirement due to timing differences between (i)
the actual receipt of cash (including receipt of distributions from the AIMCO
operating partnership) and (ii) the inclusion of certain items in income by
AIMCO for Federal income tax purposes. In the event that such timing differences
occur, in order to meet the 95% distribution requirement, AIMCO may find it
necessary to arrange for short-term, or possibly long-term, borrowings, or to
pay dividends in the form of taxable distributions of property.
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Under certain circumstances, AIMCO may be able to rectify a failure to meet
the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in AIMCO's deduction for
dividends paid for the earlier year. Thus, AIMCO may be able to avoid being
taxed on amounts distributed as deficiency dividends; however, AIMCO will be
required to pay interest and a penalty based on the amount of any deduction
taken for deficiency dividends.
Distribution of Acquired Earnings and Profits. The Internal Revenue Code
provides that when a REIT acquires a corporation that is currently a C
corporation (i.e., a corporation without an effective 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 review 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. If AIMCO failed to distribute an amount
equal to any such acquired corporation's earnings and profits effective on or
before the end of the year of acquisition, AIMCO would not qualify as a REIT.
Failure to Qualify. If AIMCO fails to qualify for taxation as a REIT in any
taxable year, and the relief provisions do not apply, AIMCO will be subject to
tax (including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in which
AIMCO fails to qualify will not be deductible by AIMCO nor will they be required
to be made. In such event, to the extent of current and accumulated earnings and
profits, all distributions to stockholders will be taxable as ordinary income,
and, subject to certain limitations of the Internal Revenue Code, corporate
distributees may be eligible for the dividends received deduction. Unless AIMCO
is entitled to relief under specific statutory provisions, AIMCO would also be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualification was lost. It is not possible to state whether in
all circumstances AIMCO would be entitled to such statutory relief.
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 Partnerships as a
partnership (as opposed to an association taxable as a corporation) for Federal
income tax purposes. If any of these entities were treated as an association for
Federal income tax purposes, it would be subject to an entity-level tax on its
income. In such a situation, the character of AIMCO's assets and items of gross
income would change and could preclude AIMCO from satisfying the asset tests and
the income tests (see "-- 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 --
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Failure to Qualify" above for a discussion of the effect of AIMCO's failure to
meet such tests for a taxable year. In addition, any change in the status of any
of the Subsidiary Partnerships for tax purposes might be treated as a taxable
event, in which case AIMCO might incur a tax liability without any related cash
distributions.
Tax Allocations with Respect to the Properties. Under the Internal Revenue
Code and the Treasury Regulations, income, gain, loss and deduction attributable
to appreciated or depreciated property that is contributed to a partnership in
exchange for an interest in the partnership must be allocated in a manner such
that the contributing partner is charged with, or benefits from, respectively,
the unrealized gain or unrealized loss associated with the property at the time
of the contribution. The amount of such unrealized gain or unrealized loss is
generally equal to the difference between the fair market value of the
contributed property at the time of contribution, and the adjusted tax basis of
such property at the time of contribution (a "Book-Tax Difference"). Such
allocations are solely for Federal income tax purposes and do not affect the
book capital accounts or other economic or legal arrangements among the
partners. 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 the sale by the AIMCO operating partnership or other Subsidiary Partnerships
of the contributed properties. This will tend to eliminate the Book-Tax
Difference over the life of these partnerships. However, the special allocations
do not always entirely rectify the Book-Tax Difference on an annual basis or
with respect to a specific taxable transaction such as a sale. Thus, the
carryover basis of the contributed properties in the hands of the AIMCO
operating partnership or other Subsidiary Partnerships may cause AIMCO to be
allocated lower depreciation and other deductions, and 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 the AIMCO
operating partnership or other Subsidiary Partnerships (other than through the
issuance of OP Units) subsequent to the formation of AIMCO, such property will
initially have a tax basis equal to its fair market value and the special
allocation provisions described above will not apply.
Sale of the Properties. AIMCO's share of any gain realized by the AIMCO
operating partnership or any other Subsidiary Partnership on the sale of any
property held as inventory or primarily for sale to customers in the ordinary
course of business will be treated as income from a prohibited transaction that
is subject to a 100% penalty tax. See "-- Taxation of AIMCO -- 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, AIMCO operating partnership and the
other Subsidiary Partnerships intend to hold their properties for investment
with a view to long-term appreciation, to engage in the business of acquiring,
developing, owning, and operating their properties (and other apartment
properties) and to make such occasional sales of their 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
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<PAGE> 20
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
Distributions. Provided AIMCO qualifies as a REIT, distributions made to
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,
certain capital gain dividends may be taxed at different rates, depending on the
type of gain recognized by AIMCO.
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 stockholder's shares in respect of which the
distributions were made, but rather will reduce the adjusted basis of such
shares. To the extent that such distributions exceed the adjusted basis of a
stockholder's shares in respect of which the distributions were made, they will
be included in income as long-term capital gain (or short-term capital gain if
the shares have been held for one year or less) provided that the shares are a
capital asset in the hands of the stockholder. In addition, any dividend
declared by AIMCO in October, November or December of any year and payable to a
stockholder of record on a specified date in any such month will be treated as
both paid by AIMCO and received by the stockholder on December 31 of such year,
provided that the dividend is actually paid by AIMCO during January of the
following calendar year. AIMCO stockholders may not include in their individual
income tax returns any net operating losses or capital losses of AIMCO.
Disposition of Class A Common Stock. Except as provided below, an AIMCO
stockholder will generally recognize gain or loss upon the sale, exchange or
other disposition of Class A Common Stock in an amount equal to the difference
between the amount realized on the disposition and the basis in such stock. Such
gain or loss will be long-term capital gain or loss if the Class A Common 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.
TAXATION OF FOREIGN STOCKHOLDERS
The following is a discussion of certain anticipated U.S. Federal income
and estate tax consequences of the ownership and disposition of Class A Common
Stock applicable to a Non-U.S. Holder of Class A Common Stock. A "Non-U.S.
Holder" is any person other than (i) a citizen or resident of the United States,
(ii) a corporation or partnership created or organized in the United States or
under the laws of the United States or of any state thereof, (iii) an estate
whose income is includable in gross income for U.S. Federal income tax purposes
regardless of its source, or (iv) a trust if a United States court is able to
exercise primary supervision over the administration of such trust and one or
more United States fiduciaries have the authority to control all substantial
decisions of such trust. The discussion is based on current law and is for
general information only. The discussion addresses only certain and not all
aspects of U.S. Federal income and estate taxation.
Ordinary Dividends. The portion of dividends received by Non-U.S. Holders
payable out of AIMCO's earnings and profits which are not attributable to
capital gains of AIMCO and which are not
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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 Class A Common Stock.
In cases where the dividend income from a Non-U.S. Holder's investment in Class
A Common Stock is (or is treated as) effectively connected with the Non-U.S.
Holder's conduct of a U.S. trade or business, the Non-U.S. Holder generally will
be subject to U.S. tax at graduated rates, in the same manner as U.S.
stockholders are taxed with respect to such dividends (and may also be subject
to the 30% branch profits tax in the case of a Non-U.S. Holder that is a
corporation).
Non-Dividend Distributions. Unless Class A Common 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 Class A Common 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 Class A Common 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 Class A Common 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 Class A Common 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. If AIMCO is, and continues to be, a domestically
controlled REIT, the sale of Class A Common Stock should not be subject to
taxation under FIRPTA. Because various classes of stock of AIMCO (including the
Class A Common Stock) are publicly traded, however, no assurance can be given
that AIMCO is or will continue to be a domestically controlled REIT.
If AIMCO does not constitute a domestically controlled REIT, a Non-U.S.
Holder's sale of stock of AIMCO 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 Class A Common Stock is
listed) and the selling Non-U.S. Holder held 5% or less of such class of Class A
Common Stock at all times during a specified testing period.
If gain on the sale of Class A Common 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.
Gain from the sale of Class A Common 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. First, if the Non-
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U.S. Holder's investment in the Class A Common Stock is effectively connected
with a U.S. trade or business conducted by such Non-U.S. holder, the Non-U.S.
Holder will be subject to the same treatment as a U.S. stockholder with respect
to such gain. Second, 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. Class A Common 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"),
generally are exempt from federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI"). While many
investments in real estate generate UBTI, the IRS has ruled that dividend
distributions from a REIT to an exempt employee pension trust do not constitute
UBTI, provided that the shares of the REIT are not otherwise used in an
unrelated trade or business of the exempt employee pension trust. Based on that
ruling, amounts distributed by AIMCO to Exempt Organizations should generally
not constitute UBTI. However, if an Exempt Organization finances its acquisition
of the Class A Common 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 paragraph (7), (9), (17) and (20), respectively, of Section
501(c) of the Internal Revenue Code 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
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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, 2000. Prospective investors in
Class A Common Stock should consult their tax advisors regarding the application
of these Treasury Regulations.
LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS
The rules dealing with Federal income taxation are constantly under review
by persons involved in the legislative process and by the IRS and the U.S.
Treasury Department. Changes to the Federal laws and interpretations thereof
could adversely affect an investment in AIMCO or the AIMCO operating
partnership. Congress recently enacted legislation, generally effective in 2001,
that will, among other things:
- modify the current ownership limitations to permit a REIT to own up to
100% of the voting securities and 100% of the value of the other
interests in a taxable REIT subsidiary. In addition, the 5% REIT asset
test would not apply to taxable REIT subsidiaries, but securities of
taxable REIT subsidiaries could not exceed 20% of the total value of a
REIT's assets;
- permit a taxable REIT subsidiary to perform services to a REIT's tenants
and impose a 100% excise tax on certain non-arms length transactions
between a taxable REIT subsidiary and a REIT;
- generally restrict a REIT from owning more than 10% of the vote or value
of the securities of a non-REIT C corporation that is not a taxable REIT
subsidiary;
- apply certain limitations to the deductibility of interest paid by a
taxable REIT subsidiary to a related REIT;
- allow a REIT to rent up to 10% of a property to a taxable REIT subsidiary
and generally have the rent qualify as good income for purposes of the
REIT gross income tests;
- reduce the annual REIT distribution requirement from a 95% to a 90%
level; and
- change the measurement of rent attributable to personal property leased
in connection with a lease of real property from a comparison based on
adjusted tax bases of properties to a comparison of fair market values.
It cannot be predicted whether, when, in what form, or with what effective
dates, other legislative proposals applicable to AIMCO or its stockholders will
become law.
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
jurisdictions, including those in which it or they transact business, own
property or reside. The state, local or 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 at 450 Fifth Street, N.W., Washington, D.C. 20549
and in 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.
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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 the offering is
completed.
- Apartment Investment and Management Company's Annual Report on Form 10-K
for the year ended December 31, 1999;
- Apartment Investment and Management Company's Current Reports on Form
8-K, dated January 20, 2000; February 1, 2000; February 23, 2000; March
13, 2000; and March 15, 2000;
- 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.
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
Colorado Center, Tower Two
2000 South Colorado Boulevard, Suite 2-1000
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 A
Common Stock offered hereby will be passed upon for AIMCO by Piper Marbury
Rudnick & Wolfe LLP, Baltimore, Maryland.
EXPERTS
Ernst & Young LLP, independent auditors, have audited AIMCO's consolidated
financial statements and schedule included in AIMCO's Annual Report on Form 10-K
for the year ended December 31, 1999, as set forth in their report, which is
incorporated by reference in this Prospectus. These financial statements and
schedule are incorporated by reference in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.
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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 A Common Stock, are as follows:
<TABLE>
<S> <C>
Registration Fee -- Securities and Exchange Commission...... $ 6,654.36
Printing and Engraving Expenses............................. 5,000
Legal Fees and Expenses..................................... 25,000
Accounting Fees and Expenses................................ 25,000
Miscellaneous............................................... 5,000
----------
Total............................................. $66,654.36
==========
</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> 26
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 Rudnick & Wolfe LLP dated March
3, 2000 regarding the validity of the Securities offered
hereby.
*8.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP dated
February 28, 2000 regarding tax matters.
*23.1 -- Consent of Piper Marbury Rudnick & Wolfe LLP dated March
3, 2000 (included in their opinion filed as Exhibit 5.1).
*23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP dated
February 28, 2000 (included in their opinion filed as
Exhibit 8.1).
23.3 -- Consent of Ernst & Young LLP, Denver, Colorado, dated
March 10, 2000 (incorporated by reference from AIMCO's
Annual Report on Form 10-K for the year ended December
31, 1999).
*24.1 -- Power of Attorney.
</TABLE>
- ---------------
* Filed previously.
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
II-2
<PAGE> 27
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> 28
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 Amendment No. 1 to 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 24th
day of March, 2000.
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By: /s/ PETER K. KOMPANIEZ
----------------------------------
Peter K. Kompaniez
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to 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 Chief March 24, 2000
- ----------------------------------------------------- Executive Officer (Principal
Terry Considine Executive Officer)
/s/ PETER K. KOMPANIEZ Vice Chairman, President and March 24, 2000
- ----------------------------------------------------- Director
Peter K. Kompaniez
/s/ PAUL J. MCAULIFFE* Executive Vice President March 24, 2000
- ----------------------------------------------------- Capital Markets and Chief
Paul J. McAuliffe Financial Officer
/s/ RICHARD S. ELLWOOD* Director March 24, 2000
- -----------------------------------------------------
Richard S. Ellwood
/s/ J. LANDIS MARTIN* Director March 24, 2000
- -----------------------------------------------------
J. Landis Martin
/s/ THOMAS L. RHODES* Director March 24, 2000
- -----------------------------------------------------
Thomas L. Rhodes
/s/ JOHN D. SMITH* Director March 24, 2000
- -----------------------------------------------------
John D. Smith
*By: /s/ PETER K. KOMPANIEZ
------------------------------------------------
Peter K. Kompaniez
Attorney-in-fact for each
of the persons indicated
</TABLE>
II-4
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER 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 Rudnick & Wolfe LLP dated March
3, 2000 regarding the validity of the Securities offered
hereby.
*8.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP dated
February 28, 2000 regarding tax matters.
*23.1 -- Consent of Piper Marbury Rudnick & Wolfe LLP dated March
3, 2000 (included in their opinion filed as Exhibit 5.1).
*23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP dated
February 28, 2000 (included in their opinion filed as
Exhibit 8.1).
23.3 -- Consent of Ernst & Young LLP, Denver, Colorado, dated
March 10, 2000 (incorporated by reference from AIMCO's
Annual Report on Form 10-K for the year ended December
31, 1999).
*24.1 -- Power of Attorney.
</TABLE>
- ---------------
* Filed previously.
