<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 27, 2000
REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 84-1259577
(State or other jurisdiction of (I.R.S. Employer
incorporation or Organization) Identification Number)
</TABLE>
COLORADO CENTER, TOWER TWO
2000 SOUTH COLORADO BOULEVARD, SUITE 2-1000
DENVER, COLORADO 80222
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
PETER K. KOMPANIEZ
PRESIDENT AND VICE-CHAIRMAN OF THE BOARD OF DIRECTORS
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
COLORADO CENTER, TOWER TWO
2000 SOUTH COLORADO BOULEVARD, SUITE 2-1000
DENVER, COLORADO 80222
(303) 757-8101
(Name, Address, Including Zip Code, and Telephone Number,
including Area Code, of Agent For Service)
---------------------
Copy to:
JONATHAN L. FRIEDMAN, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
---------------------
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
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF SHARES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE REGISTRATION FEE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock, par value $.01 per
share...................................... 3,171,272(2) $43-13/16 $138,941,398.32 $36,680.53
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated pursuant to Rule 457(c) under the Securities Act of 1933, as
amended, based on the closing price on November 24, 2000.
(2) Includes (a) 1,904,800 shares of Class A Common Stock into which 4,000,000
shares of Class N Convertible Cumulative Preferred Stock are convertible
(based on a conversion ratio of 0.4762 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; (b) 794,344
shares of Class A Common Stock which may be issued upon redemption of
Limited Partnership Units of AIMCO Properties, L.P., plus such additional
numbers of shares of Class A Common Stock as may be issued as a result of
anti-dilution provisions, and (c) 472,128 shares of Class A Common Stock
which may be issued in exchange for Units of Limited Partnership Interests
of First Alexandria Associates Limited Partnership.
---------------------
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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
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 3,171,272 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 or quoted, 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 November 21, 2000, the closing sale price of
the Class A Common Stock on the NYSE was $43 13/16 per share.
INVESTING IN THE CLASS A COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK
FACTORS" BEGINNING ON PAGE 1.
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.
November , 2000
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY................................................. 1
RISK FACTORS................................................ 1
Risks of Acquisition and Development Activities........... 1
Risks Associated with Debt Financing...................... 2
Increases in Interest Rates May Increase our Interest
Expense................................................ 3
Risks of Interest Rate Hedging Arrangements............... 3
Covenant Restrictions May Limit our Ability to Make
Payments to Our Investors.............................. 3
We Depend on Distributions and Other Payments From Our
Subsidiaries........................................... 3
Real Estate Investment Risks.............................. 3
Possible Environmental Liabilities........................ 4
Laws Benefiting Disabled Persons May Result in
Unanticipated Expenses................................. 4
Risks Relating to Regulation of Affordable Housing........ 4
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................................................. 6
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........................................ 9
PLAN OF DISTRIBUTION........................................ 10
UNITED STATES FEDERAL INCOME TAXATION OF AIMCO AND AIMCO
STOCKHOLDERS.............................................. 12
In General................................................ 12
Tax Aspects of AIMCO's Investments in Partnerships........ 17
Taxation of AIMCO's Management Companies.................. 18
Taxation of Taxable Domestic Stockholders................. 18
Taxation of Foreign Stockholders.......................... 19
Taxation of Tax-Exempt Stockholders....................... 20
Legislative or Other Actions Affecting REITs.............. 21
State, Local and Foreign Taxes............................ 21
WHERE YOU CAN FIND MORE INFORMATION......................... 22
LEGAL MATTERS............................................... 23
EXPERTS..................................................... 23
</TABLE>
i
<PAGE> 4
THE COMPANY
Apartment Investment and Management Company ("AIMCO"), a Maryland
corporation incorporated 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 September 30, 2000,
we owned or managed 333,786 apartment units in 1,756 properties located in 48
states, the District of Columbia and Puerto Rico. Based on apartment unit data
compiled as of January 1, 2000, 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 September 30, 2000, we:
- owned or controlled (consolidated) 137,419 units in 500 apartment
properties;
- held an equity interest in (unconsolidated) 132,909 units in 769
apartment properties; and
- managed 63,458 units in 487 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 September 30,
2000, we owned approximately a 90% 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.
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;
1
<PAGE> 5
- construction and lease-up may not be completed on schedule; and
- we may experience difficulty or delays in obtaining necessary zoning,
land-use, building, occupancy and other governmental permits and
authorizations.
We May Have Difficulty Managing Our Rapid Growth. We have grown rapidly.
Since our initial public offering in July 1994, we have completed numerous
acquisition transactions, expanding our portfolio of owned or managed properties
from 132 apartment properties with 29,343 units to 1,756 apartment properties
with 333,786 units as of September 30, 2000. These acquisitions have included
purchases of properties and interests in entities that own or manage properties,
as well as corporate mergers. Our ability to successfully integrate acquired
businesses and properties depends on our ability to:
- attract and retain qualified personnel;
- integrate the personnel and operations of the acquired businesses;
- maintain uniform standards, controls, procedures and policies; and
- maintain adequate accounting and information systems.
We can provide no assurance that we will be able to accomplish these goals
and successfully integrate any acquired businesses or properties. If we fail to
successfully integrate such businesses, our results of operations could be
adversely affected.
Litigation Associated with Partnership Acquisitions. We have engaged in,
and intend to continue to engage in, the selective acquisition of interests in
limited partnerships that own apartment properties. In some cases, we have
acquired the general partner of a partnership and then made an offer to acquire
the limited partners' interests in the partnership. In these transactions, we
are subject to litigation based on claims that the general partner has breached
its fiduciary duties to its limited partners or that the transaction violates
the relevant partnership agreement. Although we intend to comply with our
fiduciary obligations and relevant partnership agreements, we may incur
additional costs in connection with the defense or settlement of such
litigation. In some cases, such litigation may adversely affect our desire to
proceed with, or our ability to complete, a particular transaction. Such
litigation could also have a material adverse effect on our results of
operations.
RISKS ASSOCIATED WITH DEBT FINANCING
Our strategy is generally to incur debt to increase the return on our
equity while maintaining acceptable interest coverage ratios. We seek to
maintain a ratio of free cash flow to combined interest expense and preferred
stock dividends of between 2:1 and 3:1. However, our board of directors could
change this strategy at any time and increase our leverage. Our organizational
documents do not limit the amount of debt that we may incur, and we have
significant amounts of debt outstanding. Payments of principal and interest may
leave us with insufficient cash resources to operate our properties or pay
distributions required to be paid in order to maintain our qualification as a
REIT. We are also subject to the risk that our cash flow from operations will be
insufficient to make required payments of principal and interest, and the risk
that existing indebtedness may not be refinanced or that the terms of any
refinancing will not be as favorable as the terms of existing indebtedness. If
we fail to make required payments of principal and interest on any debt, our
lenders could foreclose on the properties securing such debt with a consequent
loss of income and asset value to us. As of September 30, 2000, 96% of the
properties that we own or control were encumbered by debt. As of September 30,
2000, we had $3,825 million of indebtedness outstanding on a consolidated basis,
of which $3,419 million was secured.
2
<PAGE> 6
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE
As of September 30, 2000, approximately $553 million of our debt was
subject to variable interest rates. An increase in interest rates could increase
our interest expense and adversely affect our cash flow and our ability to
service our indebtedness and make distributions.
RISKS OF INTEREST RATE HEDGING ARRANGEMENTS
From time to time, in anticipation of refinancing debt, we enter into
agreements to reduce the risks associated with increases in short term interest
rates. Although these agreements provide us with some protection against rising
interest rates, these agreements also reduce the benefits to us when interest
rates decline. These agreements involve the following risks:
- interest rate movements during the term of the agreement may result in a
loss to us;
- we may be exposed to losses if the hedge is not indexed to the same rate
as the debt anticipated to be incurred; and
- we may incur a loss if the counterparty to the agreement fails to pay.
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR INVESTORS
Some of our debt and other securities contain covenants that restrict our
ability to make distributions or other payments to our investors unless certain
financial tests or other criteria are satisfied. In some cases, our subsidiaries
are subject to similar provisions, which may restrict their ability to make
distributions to us. Our credit facilities provide 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 facilities 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 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;
3
<PAGE> 7
- 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 BENEFITING 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 these laws could result in the imposition of
fines or an award of damages to private litigants and also could result in an
order to correct any non-complying feature, which could result in substantial
capital expenditures. Although we believe that our properties are substantially
in compliance with present requirements, we may incur unanticipated expenses to
comply with the ADA and the FHAA.
RISKS RELATING TO REGULATION OF AFFORDABLE HOUSING
As of September 30, 2000, we owned or controlled 54 properties, held an
equity interest in 442 properties and managed for third parties and affiliates
99 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
4
<PAGE> 8
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 $48
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, 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
5
<PAGE> 9
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 419,471, 4,000,000 and 1,904,762
shares of our preferred stock at a price of $105, $26.25 and $55.13 per share,
respectively, 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.
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.
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;
6
<PAGE> 10
- 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 October 31, 2000, 468,432,738
shares were classified as Class A Common Stock, and 42,154,762 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 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;
7
<PAGE> 11
- 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.
8
<PAGE> 12
SELLING STOCKHOLDERS
This prospectus relates to periodic offers and sales of up to 3,171,272
shares of Class A Common Stock by the selling stockholders listed and described
below and their pledgees, donees and other successors in interest (collectively,
the "selling stockholders"). 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 named 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. The shares owned by each group of selling stockholders
represent less than 1% of the shares of Class A Common Stock outstanding, except
for the 1,904,800 shares to be sold by GE Capital Investments, Inc. which
represents approximately 2.8% of the shares outstanding as of the date of this
prospectus. Except as provided below, 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 hereby are sold, the selling stockholders will not own
any shares after the offering, except that GE Capital Investments, Inc. may own
up to 5,000,000 shares of Series L Convertible Cumulative Preferred Stock or
shares of Class A Common Stock issuable upon conversion thereof, (up to
2,689,500 shares of Class A Common Stock which would represent 3.8% of the
outstanding shares as of the date of this prospectus).
<TABLE>
<CAPTION>
SHARES OWNED SHARES COVERED
PRIOR TO BY THIS
SELLING STOCKHOLDER OFFERING PROSPECTUS
------------------- ------------ --------------
<S> <C> <C>
GE Capital Equity Investments, Inc. ........................ 4,594,300(1) 1,904,800(2)
Certain persons or entities who acquired partnership common
units of the AIMCO operating partnership during 2000
(through November 20, 2000)............................... 12,384(3)(4) 12,384(3)(4)
Certain persons or entities who acquired Class Two preferred
partnership units of the AIMCO operating partnership...... 72,572(5) 72,572(5)
Certain persons or entities who acquired Class Four
preferred partnership units of the AIMCO operating
partnership............................................... 4,876(3) 4,876(3)
Certain persons or entities who acquired Class Five
preferred partnership units of the AIMCO operating
partnership............................................... 275,000(6) 275,000(6)
Certain persons or entities who acquired Class Six preferred
partnership units of the AIMCO operating partnership...... 429,512(3) 429,512(3)
Certain persons or entities who acquired partnership units
in First Alexandria Associates Limited Partnership
(Foxchase I).............................................. 454,556(7) 454,556(7)
Certain persons or entities who acquired partnership units
in First Alexandria Associates Limited Partnership
(Foxchase II)............................................. 17,572(8) 17,572(8)
</TABLE>
---------------
(1) Represents the total number of shares of Class A Common Stock that would be
issuable upon conversion of 5,000,000 shares of Class L Convertible
Cumulative Preferred Stock owned by GE Capital Equity Investments, Inc.
(based on a conversion price of $46.48 but subject to adjustment pursuant to
anti-dilution provisions) and upon the conversion of 4,000,000 shares of
Class N Convertible Cumulative Preferred Stock owned by GE Capital Equity
Investments, Inc. (based on a conversion price of $52.50 but subject to
adjustment pursuant to anti-dilution provisions).
(2) Represents the total number of shares of Class A Common Stock that would be
issuable upon the conversion of 4,000,000 shares of Class N Convertible
Cumulative Preferred Stock owned by GE Capital Equity Investments, Inc.
(based on a conversion price of $52.50 but subject to adjustment pursuant to
anti-dilution provisions).
(3) The number of shares shown reflects a number of shares of Class A Common
Stock (subject to adjustment pursuant to anti-dilution adjustment
provisions) that may be issued to the selling stockholders from time to time
by us in exchange for partnership common units, Class Four or
9
<PAGE> 13
Class Six partnership preferred units of the AIMCO operating partnership
pursuant to the agreement of limited partnership.
(4) Excludes officers, directors and affiliates of the Company.
(5) Represents up to 72,572 shares of Class A Common Stock that may be issued to
selling stockholder from time to time by us in exchange for 58,056.95 Class
Two preferred partnership units of the AIMCO operating partnership pursuant
to the agreement of limited partnership.
(6) Represents up to 275,000 shares of Class A Common Stock that may be issued
to selling stockholders from time to time by us in exchange for 68,171 Class
Five preferred partnership units of the AIMCO operating partnership pursuant
to the agreement of limited partnership.
(7) Includes 454,556 shares of Class A Common Stock issuable in exchange for
limited partnership units (Foxchase I) of First Alexandria Associates
Limited Partnership (based on an exchange ratio of 2,114.21286 shares of
Class A Common Stock for each unit of limited partnership interest),
exclusive of limited partnership units held by the AIMCO operating
partnership, pursuant to the First Alexandria Associates Limited Partnership
agreement of limited partnership.
(8) Includes 17,572 shares of Class A Common Stock issuable in exchange for
limited partnership units (Foxchase II) of First Alexandria Associates
Limited Partnership (based on an exchange ratio of 4,685.75562 shares of
Class A Common Stock for each unit of limited partnership interest),
exclusive of limited partnership units held by AIMCO operating partnership,
pursuant to the First Alexandria Associates Limited Partnership agreement of
limited partnership.
PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale from time to time by the
selling stockholders of up to 3,171,272 shares of Class A Common Stock. The
selling stockholders may sell shares from time to time in one or more
transactions, which may include underwritten offerings, sales in open market or
block transactions on the New York Stock Exchange, or such other national
securities exchange or automated interdealer quotation system on which shares of
Class A Common Stock are then listed or quoted, sales in the over-the-counter
market, privately negotiated transactions, put or call options transactions
relating to the shares, short sales of shares, hedging transactions, or in
transactions in which shares may be delivered in connection with issuance of
securities by issuers other than AIMCO that are exchangeable for or payable in
such shares, distributions to beneficiaries, partners, members, or stockholders
of the selling stockholders or a combination of such methods of sale or by any
other legally available means, at market prices prevailing at the time of sale,
at prices related to prevailing market prices at the time of the sale or at
negotiated prices. Such transactions may or may not involve brokers or dealers.
The selling stockholders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities, nor is there an
underwriter or coordinating broker acting in connection with the proposed sale
of shares by the selling stockholders. In addition, any of the shares covered by
this prospectus which qualify for sale pursuant to Rule 144 under the Securities
Act of 1933, (the "Securities Act"), may be sold under Rule 144 rather than
pursuant to this prospectus.
The selling stockholders may effect such transactions by selling shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). In effecting sales,
such broker-dealers may arrange for other broker-dealers to participate.
The selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with these
transactions, broker-dealers or other financial institutions may engage in short
sales of our Class A Common Stock in the course of hedging the positions they
assume with the selling stockholders. The selling stockholders may also enter
into options or other transactions with broker-
10
<PAGE> 14
dealers or other financial institutions of securities offered hereby, which
securities the broker-dealers or other financial institutions may resell
pursuant to this prospectus (as supplemented or amended to reflect the
transaction.)
If shares are sold in an underwritten offering, the shares will be acquired
by the underwriters for their own accounts and may be resold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or prices at the time of the sale or at negotiated prices.
Any initial public offering price and any discounts or commissions allowed or
reallowed or paid to dealers may be changed from time to time. Underwriters may
sell shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters or the purchasers of shares for whom such broker-dealers may act as
agents or to whom they sell as principal, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
Depending upon the circumstances of any sale hereunder, the selling
stockholders and any underwriter or broker-dealer who acts in connection with
the sale of shares hereunder may be deemed to be "underwriters," within the
meaning of Section 2(11) of the Securities Act, and any compensation received by
them and any profit on any resale of shares sold by them while acting as
principals may be deemed to be underwriting discounts or commissions under the
Securities Act.
The selling stockholders will be subject to the prospectus delivery
requirements of the Securities Act, which may include delivery through the
facilities of the New York Stock Exchange pursuant to Rule 153 under the
Securities Act. We have informed the selling stockholders that the
anti-manipulation provisions of Regulation M promulgated under the Securities
Exchange Act of 1934 may apply to their sales in the market.
In order to comply with the securities laws of certain jurisdictions, the
securities offered hereby will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the securities offered hereby may not be offered or sold unless
they have been registered or qualified for sale in such jurisdictions or an
exemption or federal preemption from registration or qualification is available
and is complied with.
We have agreed to pay all expenses in connection with the registration of
the shares being offered hereby. Selling stockholders are responsible for paying
broker's commissions, underwriting discounts and any other selling expenses, as
well as fees and expenses of selling stockholders' counsel.
We have agreed to indemnify certain of the selling stockholders, and their
respective officers and directors and any person who controls such selling
stockholders, against certain liabilities and expenses arising out of or based
upon the information set forth or incorporated by reference in this prospectus,
and the registration statement of which this prospectus is a part, including
liabilities under the Securities Act. We or the selling stockholders may agree
to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the shares against certain liabilities,
including liabilities arising under the Securities Act.
Upon our being notified by a selling stockholder that any material
arrangement has been entered into with an underwriter or a broker-dealer for the
sale of shares through a special offering, block trade, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such selling stockholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii)
the price at which such shares were sold, (iv) the commissions paid or discounts
or concessions allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out or incorporated by reference in this prospectus and (vi) other facts
material to the transaction. In addition, upon our being notified by a named
selling stockholder that a donee or pledgee intends to sell more than 500
shares, a supplement to this prospectus will be filed.
11
<PAGE> 15
UNITED STATES FEDERAL INCOME TAXATION
OF AIMCO AND AIMCO STOCKHOLDERS
The following is a summary of certain Federal income tax consequences
resulting from the acquisition of, holding, exchanging, and otherwise disposing
of AIMCO Class A common stock. This discussion is based upon the Internal
Revenue Code, the Regulations, rulings issued by the IRS, and judicial
decisions, all in effect as of the date of this prospectus and all of which are
subject to change or differing interpretations, possibly retroactively. This
summary if also based on the assumptions that the operation of AIMCO, the AIMCO
operating partnership and the limited liability companies and limited
partnerships in which they own controlling interests (collectively, the
"Subsidiary Partnerships") will be in accordance with their respective
organizational documents and partnership agreements. This summary is for general
information only and does not purport to discuss all aspects of Federal income
taxation which may be important to a particular investor in light of its
investment or tax circumstances, or to certain types of investors subject to
special tax rules (including financial institutions, broker-dealers, insurance
companies, and except to the extent discussed below, tax-exempt organizations
and foreign investors, as determined for Federal income tax purposes). This
summary assumes that investors will hold their AIMCO stock as capital assets
(generally, property held for investment). No advance ruling has been or will be
sought from the IRS regarding any matter discussed in this prospectus. AIMCO's
counsel has not rendered any legal opinion regarding the status of AIMCO as a
REIT, or the tax consequences relating to AIMCO or an investment in AIMCO stock.
No assurance can be given hat the IRS would not assert, or that a court would
not sustain, a position contrary to any of the tax aspects set forth below.
THE FEDERAL INCOME TAX TREATMENT OF HOLDERS OF AIMCO STOCK DEPENDS IN SOME
INSTANCES ON DETERMINATIONS OF FACT AND INTERPRETATIONS OF COMPLEX PROVISIONS OF
FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE
AVAILABLE. ACCORDINGLY, EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF ACQUIRING,
HOLDING, EXCHANGING OR OTHERWISE DISPOSING OF AIMCO CLASS A COMMON STOCK AND OF
AIMCO'S ELECTION TO BE SUBJECT TO TAX, FOR FEDERAL INCOME TAX PURPOSES, AS A
REAL ESTATE INVESTMENT TRUST.
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
12
<PAGE> 16
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.
AIMCO has, however, received an opinion from the law firm of Skadden, Arms,
Slate, Meagher & Flom LLP to the effect that, beginning with its initial taxable
year ended December 31, 1994, AIMCO was organized in conformity with the
requirements for qualification as a REIT under the Internal Revenue Code and
that its actual method of operation has enabled, and its proposed method of
operation will enable, AIMCO to meet the requirements for qualification and
taxations as a REIT. The opinion is expressed as of its date and Skadden, Arps,
Slate, Meagher & Flom LLP has no obligation to advise AIMCO 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. AIMCO's opinion of counsel is based upon certain representations and
covenants made by AIMCO regarding its properties and the past, present and
future conduct of its business operations. Furthermore, AIMCO's opinion of
counsel is conditioned on, and its qualification of taxation as a REIT depend
on, AIMCO's 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. Accordingly, no assurance can be given
that the actual results of AIMCO's operations for any taxable year satisfy such
requirements. Such requirements are discussed in more detail under the heading
"United States Federal Income Taxation of AIMCO and AIMCO Stockholders."
Provided AIMCO qualifies for taxation as a REIT, it will generally not be
subject to Federal corporate income tax on its net income that is currently
distributed to its stockholders. This treatment substantially eliminates the
"double taxation" (at the corporate and stockholder levels) that generally
results from investment in a corporation. However, notwithstanding AIMCO's
qualification as a REIT, AIMCO will be subject to Federal income tax as follows:
First, AIMCO will be taxed at regular corporate rates on any undistributed REIT
taxable income, including undistributed net capital gains. Second, under certain
circumstances, AIMCO may be subject to the "alternative minimum tax" on its
items of tax preference. Third, if AIMCO has net income from prohibited
transactions (which are, in general, certain sales or other dispositions of
property held primarily for sale to customers in the ordinary course of business
other than foreclosure property), such income will be subject to a 100% tax.
Fourth, if AIMCO should fail to satisfy the 75% gross income test or the 95%
gross income test (as discussed below), but has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on an amount equal to (a) the gross income
attributable to the greater of the amount by which AIMCO fails the 75% or 95%
test multiplied by (b) a fraction intended to reflect AIMCO's profitability.
Fifth, if AIMCO should fail to distribute during each calendar year at least the
sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT
capital gain net income for such year (other than certain long-term capital
gains that AIMCO elects to retain and pay the tax thereon), and (iii) any
undistributed taxable income from prior periods, AIMCO would be subjected to a
4% excise tax on the excess of such required distribution over the amounts
actually distributed. Sixth, if AIMCO acquires assets from a 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 recently
issued Temporary Treasury Regulations, 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 Treasury Regulations, 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
13
<PAGE> 17
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 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).
14
<PAGE> 18
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 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. Under recent legislation,
effective in 2001, AIMCO may not own more than 10% of the total value of the
outstanding securities of any one issuer. The 5% and 10% asset limitations
described above do not apply, effective 2001, to electing "taxable REIT
subsidiary" corporations. The value of the stock held by AIMCO in taxable REIT
subsidiaries may not, however, exceed, in the aggregate, 20% of the value of
AIMCO's total assets.
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. Furthermore, as noted above, after
January 1, 2001, AIMCO may not own more than 10% of the total value of the
outstanding securities of any one issuer, except for electing "taxable REIT
subsidiary" corporations. AIMCO believes that the value of the stock held by
AIMCO in such taxable REIT subsidiaries will not exceed, in the aggregate, 20%
of the value of AIMCO's total assets. However, no independent appraisals have
been obtained to support AIMCO's conclusions as to the
15
<PAGE> 19
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. Furthermore, the IRS could
challenge the status of such companies as taxable REIT subsidiaries.
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. Recently enacted legislation has decreased the 95% distribution
requirement to 90%, effective in 2001. 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% (90% after 2000), 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.
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.
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
16
<PAGE> 20
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 "-- United States Federal Income Taxation of AIMCO
and AIMCO Stockholders -- 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 "-- United States Federal Income Taxation of AIMCO and
AIMCO Stockholders -- Asset Tests" and "-- United States Federal Income Taxation
of AIMCO and AIMCO Stockholders -- Income Tests"), and in turn could prevent
AIMCO from qualifying as a REIT. See "-- United States Federal Income Taxation
of AIMCO and AIMCO Stockholders -- Failure to Qualify" above for a discussion of
the effect of AIMCO's failure to meet such tests for a taxable year. In
addition, any change in the status of any of the Subsidiary Partnerships for tax
purposes might be treated as a taxable event, in which case AIMCO might incur a
tax liability without any related cash distributions.
Tax Allocations with Respect to the Properties. Under the 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
17
<PAGE> 21
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 "-- United States
Federal Income Taxation of AIMCO and AIMCO Stockholders -- 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 "-- United States Federal Income Taxation
of AIMCO and AIMCO Stockholders -- 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 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 that 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
18
<PAGE> 22
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 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 and the Non-U.S. Holder provides
appropriate documentation regarding its eligibility for treaty benefits). 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
19
<PAGE> 23
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 taxation under FIRPTA will nonetheless be taxable in the United
States to a Non-U.S. Holder in two cases. First, if the Non-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, AIMCO believes that amounts distributed by AIMCO to Exempt Organizations
should generally not constitute UBTI. If an Exempt Organization finances its
acquisition of the Class A Common Stock
20
<PAGE> 24
with debt, however, 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.
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 an issuer, including a partnership or 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
21
<PAGE> 25
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. Our Securities Exchange Act of 1934 filing number is
1-13232.
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, any of such documents filed since the date this
registration statement was filed 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.
- Proxy Statement for Annual Meeting of Shareholders of Apartment
Investment Management Company held on April 20, 2000;
- Apartment Investment and Management Company's Annual Report on Form 10-K
for the year ended December 31, 1999;
- Apartment Investment Management Company's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 2000; June 30, 2000 and September 30,
2000;
- Apartment Investment and Management Company's Current Reports on Form
8-K, dated February 1, 2000; February 23, 2000; March 13, 2000; March 15,
2000; July 13, 2000; and October 5, 2000; and
- the description of Apartment Investment and Management Company's capital
stock contained in its Registration Statement on Form 8-A (File No.
1-13232) filed July 19, 1994, including any amendment or reports filed
for the purpose of updating such description.
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.
22
<PAGE> 26
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.
23
<PAGE> 27
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...... $ 36,681
Printing and Engraving Expenses............................. 5,000
Legal Fees and Expenses..................................... 25,000
Accounting Fees and Expenses................................ 25,000
Miscellaneous............................................... 5,000
--------
Total............................................. $ 96,681
========
</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> 28
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
, 2000 regarding the validity of the
Securities offered hereby (to be filed by amendment).
8.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP dated
November 20, 2000 regarding tax matters.
23.1 -- Consent of Piper Marbury Rudnick & Wolfe LLP dated
, 2000 (to be included in their opinion to
be filed as Exhibit 5.1).
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP dated
November 20, 2000 (included in their opinion filed as
Exhibit 8.1).
23.3 -- Consent of Ernst & Young LLP, Denver, Colorado, dated
November 20, 2000
24.1 -- Power of Attorney. (included on page II-4)
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range
II-2
<PAGE> 29
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> 30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on this Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, State of Colorado, on the 21st day of
November, 2000.
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
By: /s/ PETER K. KOMPANIEZ
----------------------------------
Peter K. Kompaniez
President
POWER OF ATTORNEY
Each person whose signature appears below authorizes Peter Kompaniez and
Patrick J. Foye, and each of them, each of whom may act without joinder of the
other, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to execute in the name of each such person who is then an
officer or director of Apartment Investment and Management Company, and to file
any amendments (including post effective amendments) to this Registration
Statement and any registration statement for the same offering filed pursuant to
Rule 462 under the Securities Act of 1933, and to file the same, with all
exhibits thereto and all other documents in connection therewith, with the
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing appropriate or
necessary to be done, as fully and for all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully
door cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ TERRY CONSIDINE Chairman of the Board and Chief November 21, 2000
----------------------------------------------------- Executive Officer (Principal
Terry Considine Executive Officer)
/s/ PETER K. KOMPANIEZ Vice Chairman, President and November 21, 2000
----------------------------------------------------- Director
Peter K. Kompaniez
/s/ PAUL J. MCAULIFFE Executive Vice President Capital November 17, 2000
----------------------------------------------------- Markets and Chief Financial
Paul J. McAuliffe Officer
/s/ THOMAS C. NOVOSEL Senior Vice President and Chief November 21, 2000
----------------------------------------------------- Accounting Officer
Thomas C. Novosel
</TABLE>
II-4
<PAGE> 31
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JAMES N. BAILEY Director November 15, 2000
-----------------------------------------------------
James N. Bailey
/s/ RICHARD S. ELLWOOD Director November 21, 2000
-----------------------------------------------------
Richard S. Ellwood
/s/ J. LANDIS MARTIN Director November 21, 2000
-----------------------------------------------------
J. Landis Martin
/s/ THOMAS L. RHODES Director November 21, 2000
-----------------------------------------------------
Thomas L. Rhodes
</TABLE>
II-5
<PAGE> 32
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
4.1 -- Specimen certificate for Class A Common Stock
(incorporated by reference from AIMCO's Registration
Statement on Form 8-A filed on July 19, 1994).
5.1 -- Opinion of Piper Marbury Rudnick & Wolfe LLP dated
, 2000 regarding the validity of the
Securities offered hereby (to be filed by amendment).
8.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP dated
November 20, 2000 regarding tax matters.
23.1 -- Consent of Piper Marbury Rudnick & Wolfe LLP dated
, 2000 (included in their opinion filed as
Exhibit 5.1).
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP dated
November 20, 2000 (to be included in their opinion to be
filed as Exhibit 8.1).
23.3 -- Consent of Ernst & Young LLP, Denver, Colorado, dated
November 20, 2000
24.1 -- Power of Attorney. (included on page II-4)
</TABLE>
