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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 20, 2001
REGISTRATION NO. 333-64460
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(Exact name of registrant as specified in its charter)
MARYLAND 84-1259577
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or Organization)
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)
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Copy to:
JONATHAN L. FRIEDMAN, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, other
than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If the Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier registration
statement for the same offering. [ ]
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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. [ ]
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CALCULATION OF REGISTRATION FEE
==========================================================================================================================
PROPOSED PROPOSED
AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SHARES TO BE REGISTERED REGISTERED PRICE PER UNIT(1) OFFERING PRICE REGISTRATION FEE
--------------------------------------- ---------------- ------------------- ------------------- ------------------
Class A Common Stock, par value $.01
per share............................ 553,592 shares $48.02 $26,583,487 (2)
==========================================================================================================================
(1) Calculated pursuant to Rule 457(c) under the Securities Act of 1933, as
amended, based on the closing price on June 28, 2001.
(2) Previously paid.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Colorado Center, Tower Two
2000 South Colorado Boulevard, Suite 2-1000
Denver, Colorado 80222
(303) 757-8101
553,592 SHARES OF CLASS A COMMON STOCK
The selling stockholders described in this prospectus may offer and sell from
time to time up to 553,592 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 July 19, 2001, the closing sale price of the Class A
Common Stock on the NYSE was $48.34 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.
July 20, 2001
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TABLE OF CONTENTS
THE COMPANY............................................................... 1
RISK FACTORS.............................................................. 1
IF WE ARE NOT ABLE TO SUCCESSFULLY ACQUIRE, REDEVELOP
AND EXPAND APARTMENT PROPERTIES, OUR RESULTS OF
OPERATIONS WILL BE ADVERSELY AFFECTED............................... 2
WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH....................... 2
AS OUR SIZE INCREASES, IT BECOMES MORE DIFFICULT FOR US
TO ACHIEVE RAPID GROWTH............................................. 2
WE ARE SUBJECT TO LITIGATION ASSOCIATED WITH PARTNERSHIP
ACQUISITIONS, WHICH COULD INCREASE OUR EXPENSES AND PREVENT
COMPLETION OF BENEFICIAL TRANSACTIONS............................... 3
OUR EXISTING AND FUTURE DEBT FINANCING COULD RENDER US UNABLE
TO OPERATE AND RESULT IN FORECLOSURE ON OUR PROPERTIES OR
PREVENT US FROM MAKING DISTRIBUTIONS ON OUR EQUITY.................. 3
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE.......... 3
WE MAY INCUR LOSSES DUE TO INTEREST RATE HEDGING TRANSACTIONS.......... 3
COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS
TO OUR INVESTORS.................................................... 4
WE DEPEND ON DISTRIBUTIONS AND OTHER PAYMENTS FROM OUR
SUBSIDIARIES THAT THEY MAY BE PROHIBITED FROM MAKING............... 4
CHANGES IN THE REAL ESTATE MARKET MAY LIMIT OUR ABILITY
TO GENERATE FUNDS FROM OPERATIONS................................... 4
WE MAY BE SUBJECT TO COSTLY ENVIRONMENTAL LIABILITIES,
WHICH COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.............. 5
LAWS BENEFITING DISABLED PERSONS MAY RESULT IN OUR INCURRENCE
OF UNANTICIPATED EXPENSES........................................... 5
AFFORDABLE HOUSING REGULATIONS MAY LIMIT RENT INCREASES
AT SOME OF OUR PROPERTIES, REDUCING OUR REVENUE AND,
IN SOME CASES, CAUSING US TO SELL PROPERTIES THAT WE MIGHT
OTHERWISE CONTINUE TO OWN........................................... 5
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS MAY REDUCE
OUR REVENUES........................................................ 6
WE DEPEND ON OUR CHIEF EXECUTIVE OFFICER AND OUR PRESIDENT;
OUR OPERATIONS WOULD BE HARMED IF WE LOST THEIR SERVICES............ 6
WE MAY ENGAGE IN TRANSACTIONS WITH AFFILIATES AND EXPERIENCE
CONFLICTS OF INTEREST IN THESE TRANSACTIONS......................... 6
WE MAY FAIL TO QUALIFY AS A REIT....................................... 6
REIT DISTRIBUTION REQUIREMENTS LIMIT OUR AVAILABLE CASH................ 6
LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS COULD HAVE A
NEGATIVE IMPACT ON US............................................... 7
WE MAY BE SUBJECT TO OTHER TAX LIABILITIES............................. 7
LIMITS ON OWNERSHIP OF OUR SHARES IN OUR CHARTER MAY RESULT
IN THE LOSS OF ECONOMIC AND VOTING RIGHTS BY PURCHASERS
THAT VIOLATE SHARE LIMITS........................................... 7
OUR CHARTER MAY LIMIT THE ABILITY OF A THIRD PARTY TO ACQUIRE
CONTROL OF US....................................................... 8
MARYLAND BUSINESS STATUTES MAY LIMIT THE ABILITY OF A THIRD PARTY
TO ACQUIRE CONTROL OF US............................................ 8
USE OF PROCEEDS........................................................... 9
SELLING STOCKHOLDERS...................................................... 9
PLAN OF DISTRIBUTION...................................................... 10
FEDERAL INCOME TAXATION OF AIMCO AND AIMCO STOCKHOLDERS................... 11
WHERE YOU CAN FIND MORE INFORMATION....................................... 23
LEGAL MATTERS............................................................. 24
EXPERTS................................................................... 24
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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 March 31, 2001, we owned, managed or
held an equity interest in 313,376 apartment units in 1,643 properties located
in 47 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 March 31, 2001, we:
o owned or controlled (consolidated) 157,368 units in 580 apartment
properties;
o held an equity interest in (unconsolidated) 99,374 units in 612 apartment
properties; and
o managed 56,634 units in 451 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 March 31,
2001, we owned approximately an 86% interest in the AIMCO operating partnership.
Generally, when we refer to "we," "us" or the "Company" in this prospectus, we
are referring to AIMCO, the AIMCO operating partnership and their respective
subsidiaries.
EquiServe Trust 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.
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IF WE ARE NOT ABLE TO SUCCESSFULLY ACQUIRE, REDEVELOP AND EXPAND APARTMENT
PROPERTIES, OUR RESULTS OF OPERATIONS WILL BE ADVERSELY AFFECTED.
The selective acquisition, development and expansion of apartment properties are
one component of our growth strategy. However, we may not be able to
successfully complete transactions in the future. Although we seek to acquire,
develop and expand properties only when such activities increase our net income
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:
o costs may exceed original estimates;
o projected occupancy and rental rates at the property may be below our
expectations;
o financing may not be available on favorable terms or at all;
o redevelopment and leasing of the property may not be completed on schedule;
and
o 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 1,643
apartment properties with 313,376 units as of March 31, 2001. 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, among other things, on our
ability to:
o attract and retain qualified personnel;
o integrate the personnel and operations of the acquired businesses;
o maintain uniform standards, controls, procedures and policies; and
o 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.
AS OUR SIZE INCREASES, IT BECOMES MORE DIFFICULT FOR US TO ACHIEVE RAPID GROWTH.
Our rapid growth since our initial public offering in July 1994 was achieved
when we were a smaller company. As a result of our current size, future
acquisitions of the same size and magnitude will have a smaller impact on us. It
is also more difficult for us to identify and complete acquisitions of greater
size that are consistent with our growth strategy. In fact, since December 31,
2000, our portfolio of owned or managed properties has declined from 1,720
apartment properties with 326,289 units to 1,643 properties with 313,376 units
as of March 31, 2001.
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WE ARE SUBJECT TO LITIGATION ASSOCIATED WITH PARTNERSHIP ACQUISITIONS, WHICH
COULD INCREASE OUR EXPENSES AND PREVENT COMPLETION OF BENEFICIAL TRANSACTIONS.
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, this type of litigation may
adversely affect our desire to proceed with, or our ability to complete, a
particular transaction. Any litigation of this type could also have a material
adverse effect on our results of operations.
OUR EXISTING AND FUTURE DEBT FINANCING COULD RENDER US UNABLE TO OPERATE AND
RESULT IN FORECLOSURE ON OUR PROPERTIES OR PREVENT US FROM MAKING DISTRIBUTIONS
ON OUR EQUITY.
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 March 31, 2001, substantially all of
the properties that we own or control were encumbered by debt. As of March 31,
2001, we had approximately $4,602 million of indebtedness outstanding on a
consolidated basis, all of which was secured.
INCREASES IN INTEREST RATES MAY INCREASE OUR INTEREST EXPENSE.
As of March 31, 2001, approximately $420.7 million (9.1% of the total) of our
debt was subject to variable interest rates. An increase in interest rates could
increase our interest expense and reduce our cash flow and our ability to
service our indebtedness and make distributions.
WE MAY INCUR LOSSES DUE TO INTEREST RATE HEDGING TRANSACTIONS.
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:
o interest rate movements during the term of the agreement may result in a
loss to us;
o we may be exposed to losses if the hedge is not indexed to the same rate as
the debt anticipated to be incurred; and
o we may incur a loss if the counter party to the agreement fails to pay.
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COVENANT RESTRICTIONS MAY LIMIT OUR ABILITY TO MAKE PAYMENTS TO OUR INVESTORS.
Some of our debt and other securities contain covenants that restrict our
ability to make distributions or other payments to our investors unless certain
financial tests or other criteria are satisfied. In some cases, our subsidiaries
are subject to similar provisions, which may restrict their ability to make
distributions to us. Our credit facility provides that we may make distributions
to our investors during any 12-month period in an aggregate amount that does not
exceed the greater of 80% of our funds from operations for such period or such
amount as may be necessary to maintain our REIT status. The credit facility
prohibits all distributions if our:
o fixed charge coverage ratio is less than 1.50 to 1;
o interest coverage ratio is less than 2.25 to 1;
o unsecured debt service coverage ratio is less than 3.00 to 1;
o total combined debt to gross asset value ratio exceeds 0.55 to 1;
o total obligations to gross asset value ratio exceeds 0.65 to 1;
o encumbered property debt coverage ratio is less than 1.60 to 1; or
o consolidated net worth is less than the sum of $2.24 billion and 85% of the
net proceeds of any securities issuances after June 30, 2000.
Our outstanding classes of preferred stock and partnership preferred units
prohibit the payment of dividends on our common stock or the partnership common
units if we fail to pay the dividends or distributions to which the holders of
the preferred stock or partnership preferred units are entitled. In addition,
our 6 1/2% convertible debentures prohibit the payment of dividends on our
capital stock if we elect to defer payments of interest on these convertible
debentures, which we have the right to do for periods of up to 60 months. 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 THAT THEY
MAY BE PROHIBITED FROM MAKING.
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.
CHANGES IN THE REAL ESTATE MARKET MAY LIMIT OUR ABILITY TO GENERATE FUNDS FROM
OPERATIONS.
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:
o the general economic climate;
o competition from other apartment communities and alternative housing;
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o local conditions, such as an increase in unemployment or an oversupply of
apartments, that might adversely affect apartment occupancy or rental
rates;
o changes in governmental regulations and the related cost of compliance;
o increases in operating costs (including real estate taxes) due to inflation
and other factors, which may not necessarily be offset by increased rents;
o changes in tax laws and housing laws, including the enactment of rent
control laws or other laws regulating multifamily housing;
o changes in interest rate levels and the availability of financing; and
o the relative illiquidity of real estate investments.
WE MAY BE SUBJECT TO COSTLY ENVIRONMENTAL LIABILITIES, WHICH COULD ADVERSELY
AFFECT OUR RESULTS OF OPERATIONS.
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. These 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 OUR INCURRENCE OF UNANTICIPATED
EXPENSES.
Under the Americans with Disabilities Act of 1990, or ADA, all places of public
accommodation are required to meet certain Federal requirements related to
access and use by disabled persons. Likewise, the Fair Housing Amendments Act of
1988 or FHAA requires apartment properties first occupied after March 13, 1990
to be accessible to the handicapped. These and other Federal, state and local
laws may also require modifications to our properties, or restrict certain
further renovations of the properties. 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.
AFFORDABLE HOUSING REGULATIONS MAY LIMIT RENT INCREASES AT SOME OF OUR
PROPERTIES, REDUCING OUR REVENUE AND, IN SOME CASES, CAUSING US TO SELL
PROPERTIES THAT WE MIGHT OTHERWISE CONTINUE TO OWN.
As of March 31, 2001, we owned or controlled 580 properties, held an equity
interest in 612 properties and managed for third parties and affiliates 451
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,
or HUD, or state housing finance agencies, typically provide mortgage
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insurance, favorable financing terms or rental assistance payments to the
property owners. As a condition to the receipt of assistance under these
programs, the properties must comply with various requirements, which typically
limit rents to pre-approved amounts. If permitted rents on a property are
insufficient to cover costs, a sale of the property may become necessary, which
could result in a loss of management fee revenue. We usually need to obtain the
approval of HUD in order to manage, or acquire a significant interest in, a
HUD-assisted property. We can make no assurance that we will always receive such
approval.
THE LOSS OF PROPERTY MANAGEMENT CONTRACTS MAY REDUCE OUR REVENUES.
We manage some properties owned by third parties. In 2000, we received $25.1
million of revenue from the management of such properties, including $9.4
million from the Oxford Properties, which we acquired in 2000. 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:
o a disposition of the property by the owner in the ordinary course or as a
result of financial distress of the property owner;
o the property owner's determination that our management of the property is
unsatisfactory;
o willful misconduct, gross negligence or other conduct that constitutes
grounds for termination; or
o with respect to certain affordable properties, termination of such
contracts by HUD or state housing finance agencies, generally at their
discretion.
WE DEPEND ON OUR CHIEF EXECUTIVE OFFICER AND OUR PRESIDENT; OUR OPERATIONS WOULD
BE HARMED IF WE LOST THEIR SERVICES.
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.
WE MAY ENGAGE IN TRANSACTIONS WITH AFFILIATES AND EXPERIENCE CONFLICTS OF
INTEREST INHERENT IN THESE TRANSACTIONS
We have been, and continue to be, involved in various transactions with a number
of our affiliates, including our executive officers, directors and entities in
which they own interests. We have adopted certain policies designed to minimize
or eliminate the conflicts of interest inherent in these transactions,
including a requirement that a majority of our disinterested directors approve
certain transactions with affiliates. However, we cannot assure you that these
policies will be successful in eliminating the influence of such conflicts.
Furthermore, these policies are subject to change without the approval of our
stockholders.
WE MAY FAIL TO QUALIFY AS A REIT.
AIMCO believes that it operates in a manner that enables it to meet the
requirements for qualification as a REIT for Federal income tax purposes.
However, future economic, market, legal, tax or other considerations may cause
it to fail to qualify as a REIT, or its board of directors may determine to
revoke its REIT status. If AIMCO fails to qualify as a REIT, it will not be
allowed a deduction for dividends paid to its stockholders in computing its
taxable income, and AIMCO will be subject to Federal income tax at regular
corporate rates. This would substantially reduce the funds available for payment
to AIMCO's investors. See "Federal Income Taxation of AIMCO and AIMCO
Stockholders" for more detail.
In addition, the failure of AIMCO to qualify as a REIT would trigger the
following consequences:
o AIMCO would be obligated to repurchase a material amount of its preferred
stock, plus accrued and unpaid dividends to the date of repurchase; and
o AIMCO would be in default under its primary credit facility and certain
other loan agreements.
REIT DISTRIBUTION REQUIREMENTS LIMIT OUR AVAILABLE CASH.
As a REIT, AIMCO is subject to annual distribution requirements, which limit the
amount of cash it has available for other business purposes, including amounts
to fund its growth.
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LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS COULD HAVE A NEGATIVE IMPACT ON US.
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 in the tax laws (which may have retroactive application),
could adversely affect AIMCO's investors. AIMCO cannot predict how changes in
the tax law might affect it or its investors.
WE MAY BE SUBJECT TO OTHER TAX LIABILITIES.
Even if AIMCO qualifies as a REIT, AIMCO and its subsidiaries may be subject to
certain Federal, state and local taxes on its income and property. Any such
taxes would reduce AIMCO's operating cash flow.
LIMITS ON OWNERSHIP OF OUR SHARES IN OUR CHARTER MAY RESULT IN THE LOSS OF
ECONOMIC AND VOTING RIGHTS BY PURCHASERS THAT VIOLATE SHARE LIMITS
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:
o the transfer will be considered null and void;
o we will not reflect the transaction on our books;
o we may institute legal action to enjoin the transaction;
o we may demand repayment of any dividends received by the affected person on
those shares;
o we may redeem the shares;
o the affected person will not have any voting rights for those shares; and
o 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
the individual:
o may lose control over the power to dispose of such shares;
o may not recognize profit from the sale of such shares if the market price
of the shares increases;
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o may be required to recognize a loss from the sale of such shares if the
market price decreases; and
o may be required to repay AIMCO any distributions received from AIMCO as a
result of his ownership of such shares.
OUR CHARTER MAY LIMIT THE ABILITY OF A THIRD PARTY TO ACQUIRE CONTROL OF US.
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. Our charter authorizes our board of directors to issue up to
510,587,500 shares of capital stock. As of March 31, 2001, 461,902,738 shares
were classified as Class A Common Stock, and 48,684,762 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 MAY LIMIT THE ABILITY OF A THIRD PARTY TO ACQUIRE
CONTROL OF US.
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:
o have three directors who are not employees of the entity or related to an
acquiring person; and
o are subject to the reporting requirements of the Securities Exchange Act of
1934;
o 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:
o the corporation will have a staggered board of directors;
o 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;
o the number of directors may only be set by the board of directors, even if
the procedure is contrary to the charter or bylaws;
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o vacancies may only be filled by the remaining directors, even if the
procedure is contrary to the charter or bylaws; and
o 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 Class A Common Stock offered hereby. We will not receive any proceeds
from the sale of such shares.
SELLING STOCKHOLDERS
This prospectus relates to periodic offers and sales of up to 553,592 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 us, or any of our predecessors or affiliates, during the past
three years. The shares owned by each selling stockholder represents less than
1% of the shares of Class A Common Stock outstanding as of June 30, 2001. 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 owned by them, 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.
Shares Owned Shares Covered By
Selling Stockholder Prior to Offering(1) this Prospectus
------------------- -------------------- -----------------
K.B.O. Partners, 86 - 1(2) 122,202 122,202
TransAction Income Partners(2) 276,096 276,096
TransAction Financial Corporation(2) 98,150 98,150
The Blumberg 1984 Revocable Trust 57,144 57,144
----------
(1) The number of shares owned prior to this offering reflects the
number of shares of Class A Common Stock (subject to adjustment pursuant to
antidilution provisions) that may be issued to the selling stockholders from
time to time by us in exchange for partnership common units of the AIMCO
operating partnership issuable upon conversion of Class Nine Partnership
Preferred Units (the "Preferred OP Units") of the AIMCO operating partnership
owned by the selling stockholders. Each Preferred OP Unit may be converted into
0.4762 partnership common units (subject to adjustment). Each partnership common
unit may be exchanged for one share of Class A Common Stock (subject to
adjustment), upon tender of such unit for redemption.
(2) The selling stockholder may pledge some or all of its Preferred OP
Units, partnership common units issued upon conversion of the Preferred OP Units
and/or shares of Class A Common Stock issued in exchange for partnership common
units to Merrill Lynch Private Finance Inc. ("Merrill Lynch"), to secure certain
loans. Shares of Class A Common Stock issued in exchange for partnership common
units may be sold hereunder by Merrill Lynch in the event of a default on any
such loans.
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PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale from time to time by the selling
stockholders of up to 553,592 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-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
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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.
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 summary is based upon the Internal Revenue Code, the
Treasury Regulations (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 is also based on the assumptions that the operation
of AIMCO, the AIMCO operating partnership and the limited liability companies
and limited partnerships in which they own controlling interests (collectively,
the "Subsidiary Partnerships") will be in accordance with their respective
organizational documents and partnership agreements. This summary is for general
information only and does not purport to discuss all aspects of Federal income
taxation which may be important to a particular investor in light of its
investment or tax circumstances, or to certain types of investors subject to
special tax rules (including financial institutions, broker-dealers, insurance
companies, and except to the extent discussed below, tax-exempt organizations
and foreign investors, as determined for 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. No
assurance can be given that the IRS would not assert, or that a court would not
sustain, a position contrary to any of the tax aspects set forth below.
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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 UNIT HOLDER 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.
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, Regulations, and administrative and
judicial interpretations thereof, all of which are subject to change, possibly
retroactively.
AIMCO has elected to be taxed as a REIT under the Internal Revenue Code
commencing with its taxable year ended December 31, 1994, and AIMCO intends to
continue such election. Although AIMCO believes that, commencing with AIMCO's
initial taxable year ended December 31, 1994, AIMCO was organized in conformity
with the requirements for qualification as a REIT, and 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, no assurance can be given that AIMCO has been or will
remain so qualified. Such qualification and taxation as a REIT depends upon
AIMCO's ability to meet, through actual annual operating results, distribution
levels requirements regarding diversity of stock ownership, and the various
qualification tests imposed under the Internal Revenue Code as discussed below.
No assurance can be given that the actual results of AIMCO's operation for any
one taxable year will satisfy such requirements. See " -- Failure to Qualify."
No assurance can be given that the IRS will not challenge AIMCO's eligibility
for taxation as a REIT.
AIMCO has received an opinion from the law firm of Skadden, Arps, 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 taxation 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, including representations 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 and 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 LLP. 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 "Requirements for Qualification."
Provided AIMCO qualifies as a REIT, AIMCO will 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, AIMCO will be subject to Federal income tax as follows:
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o First, AIMCO will be taxed at regular corporate rates on any undistributed
REIT taxable income, including undistributed net capital gains.
o Second, under certain circumstances, AIMCO may be subject to the
"alternative minimum tax" on its items of tax preference.
o 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.
o 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.
o 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.
o Sixth, if AIMCO acquires assets from a corporation that is not a REIT (a
"subchapter C corporation") in a transaction in which the adjusted tax
basis of the assets in the hands of AIMCO is determined by reference to the
adjusted tax basis of such assets in the hands of the subchapter C
corporation, under Temporary Regulations, the subchapter C corporation
would be required to recognize any net Built-In Gain (as defined below)
that would have been realized if the Subchapter C corporation had
liquidated on the day before the date of the transfer. Pursuant to
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 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.
o Seventh, AIMCO could be subject to foreign taxes on 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:
o that is managed by one or more trustees or directors;
o the beneficial ownership of which is evidenced by transferable shares, or
by transferable certificates of beneficial interest;
o which would be taxable as a domestic corporation, but for the special
Internal Revenue Code provisions applicable to REITs;
o that is neither a financial institution nor an insurance company subject to
certain provisions of the Internal Revenue Code;
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o the beneficial ownership of which is held by 100 or more persons;
o 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
o which meets certain other tests described below (including with respect to
the nature of its income and assets).
The Internal Revenue Code provides that the first four conditions must be met
during the entire taxable year, and that the fifth condition must be met during
at least 335 days of a taxable year of 12 months, or during a proportionate part
of a taxable year of less than 12 months. The articles of incorporation provide
certain restrictions regarding transfers of its shares, which provisions are
intended to assist AIMCO in satisfying the share ownership requirements
described in the fifth and sixth conditions 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 REIT dividends). A list of those persons failing or refusing to
comply with this demand must be maintained as part of AIMCO's records. A
stockholder who fails or refuses to comply with the demand must submit a
statement with its tax return disclosing the actual ownership of the shares and
certain other information.
In addition, a corporation may not elect to become a REIT unless its taxable
year is the calendar year. AIMCO satisfies this requirement.
Ownership of Partnership Interests. In the case of a REIT that is a partner in a
partnership, the 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 Subsidiary Partnerships will be treated as assets, liabilities and items
of income of AIMCO for purposes of applying the REIT requirements described
herein. A summary of certain rules governing the Federal income taxation of
partnerships and their partners is provided below in " -- Tax Aspects of AIMCO's
Investments in Partnerships."
Income Tests. In order to maintain qualification as a REIT, AIMCO annually must
satisfy two gross income requirements:
o 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.
o Second, at least 95% of AIMCO's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from such
real property investments, and from dividends, interest and gain from the
sale or disposition of stock or securities (or from any combination of the
foregoing).
Rents received by AIMCO through the Subsidiary Partnerships will qualify as
"rents from real property" in satisfying the gross income requirements described
above, only if several conditions
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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 furnish or render services to the tenants of such property, other than
through an "independent contractor" from which the REIT derives no revenue or a
"taxable REIT subsidiary." 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 manages apartment properties for third parties and affiliates through
subsidiaries that we refer to as the "management companies." The management
companies receive management fees and other income. A portion of such fees and
other income accrue to AIMCO through distributions from the management companies
that are classified as dividend income to the extent of the earnings and profits
of the 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:
o 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.
o Second, not more than 25% of AIMCO's total assets may be represented by
securities other than those in the 75% asset class.
o 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, AIMCO may not own more than 10% of any one issuer's
outstanding voting securities, and 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 do not apply to securities of "taxable REIT
subsidiaries."
o The value of the securities held by AIMCO in taxable REIT subsidiaries may
not exceed, in the aggregate, 20% of the value of AIMCO's total assets.
As set forth above, AIMCO indirectly owns interests in the management companies
that have elected to be taxable REIT subsidiaries. AIMCO believes that its
indirect ownership interests in the management companies qualify under the asset
tests set forth above. Under legislation effective January 1, 2001, the
operation or management of a health care or lodging facility precludes
qualification as a taxable REIT subsidiary, and therefore precludes the REIT
from relying upon this exception to the 10% ownership limitation set forth
above. Consequently, if any of the management companies were deemed to operate
or manage a health care or lodging facility, such management companies would
fail to qualify as taxable REIT subsidiaries, and AIMCO would fail to qualify as
a REIT. AIMCO believes that, as of January 1, 2001, none of the management
companies operate or manage any health care or lodging facilities. However, the
statute provides little guidance as to the definition of a health care or
lodging facility. Accordingly, there can be no assurance that the IRS will not
contend that any of the management companies operate or manage a health care or
lodging facility, disqualifying it from treatment as a taxable REIT subsidiary,
thereby resulting in the disqualification of AIMCO as a REIT.
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Furthermore AIMCO believes that the value of the securities held by AIMCO in its
taxable REIT subsidiaries (including the management companies) 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 value of the AIMCO operating partnership's total assets and the value of the
AIMCO operating partnership's interest in the taxable REIT subsidiaries and
these values are subject to change in the future.
AIMCO's indirect interests in the AIMCO operating partnership and other
Subsidiary Partnerships are held through wholly owned corporate subsidiaries of
AIMCO organized and operated as "qualified REIT subsidiaries" within the meaning
of the 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:
o the sum of:
(i) 90% of AIMCO's "REIT taxable income" (computed without regard to the
dividends paid deduction and AIMCO's net capital gain i.e., the excess of net
long-term capital gain over net short-term capital loss)) and
(ii) 90% of the net income (after tax), if any, from foreclosure property,
minus
o the sum of certain items of noncash income.
Such distributions must be paid in the taxable year to which they relate, or in
the following taxable year if declared before AIMCO timely files its tax return
for such year and if paid with or before the first regular dividend payment
after such declaration. To the extent that AIMCO distributes at least 90%, but
less than 100%, of its "REIT taxable income," as adjusted, it will be subject to
tax thereon at ordinary corporate tax rates. In any year, AIMCO may elect to
retain, rather than distribute, its net capital gain and pay tax on such gain.
In such a case, AIMCO's stockholders would include their proportionate share of
such undistributed capital gain 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:
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(i) 85% of its REIT ordinary income for such year,
(ii) 95% of its REIT capital gain net income for such year (excluding retained
net capital gain), 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 90% 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 90% 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 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 "Federal Income Taxation of AIMCO and AIMCO
Stockholders -- General."
Entity Classification. AIMCO's direct and indirect investment in partnerships
involves special tax considerations, including the possibility of a challenge by
the IRS of the status of any of the Subsidiary Partnerships as a partnership (as
opposed to as an association taxable as a corporation)
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for Federal income tax purposes. If any of these entities were treated as an
association for Federal income tax purposes, it would be subject to an
entity-level tax on its income. In such a situation, the character of AIMCO's
assets and items of gross income would change and could preclude AIMCO from
satisfying the asset tests and the income tests (see "Federal Income Taxation of
AIMCO and AIMCO Stockholders -- Asset Tests" and "Federal Income Taxation of
AIMCO and AIMCO Stockholders -- Income Tests"), and in turn could prevent AIMCO
from qualifying as a REIT. See "Federal Income Taxation of AIMCO and AIMCO
Stockholders -- Failure to Qualify" above for a summary 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 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. 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 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 unitholders will be allocated lower amounts of depreciation
deductions for tax purposes and increased taxable income and gain on the sale by
the AIMCO operating partnership or other Subsidiary Partnerships of the
contributed properties. This will tend to eliminate the Book-Tax Difference over
the life of these partnerships. However, the special allocations do not always
entirely rectify the Book-Tax Difference on an annual basis or with respect to a
specific taxable transaction such as a sale. Thus, the carryover basis of the
contributed properties in the hands of the AIMCO operating partnership or other
Subsidiary Partnerships may cause AIMCO to be allocated lower depreciation and
other deductions, and possibly greater amounts of taxable income in the event of
a sale of such contributed assets in excess of the economic or book income
allocated to it as a result of such sale. This may cause AIMCO to recognize
taxable income in excess of cash proceeds, which might adversely affect AIMCO's
ability to comply with the REIT distribution requirements. See "Federal Income
Taxation of AIMCO and AIMCO Stockholders -- Annual Distribution Requirements."
With respect to any property purchased or to be purchased by any of the
Subsidiary Partnerships (other than through the issuance of 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 "Federal Income Taxation of AIMCO and
AIMCO Stockholders -- General -- Income Tests." Under existing law, whether
property is held as inventory or primarily for sale to customers in the ordinary
course of a partnership's trade or business is a question of fact that depends
on all the facts and circumstances with respect to the particular transaction.
The AIMCO operating partnership and the other Subsidiary Partnerships intend to
hold their properties for investment with a view to long-term appreciation, to
engage in
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the business of acquiring, developing, owning and operating the properties and
to make such occasional sales of the properties, including peripheral land, as
are consistent with AIMCO's investment objectives.
TAXATION OF MANAGEMENT COMPANIES
A portion of the amounts to be used to fund distributions to stockholders is
expected to come from distributions made by the management companies to the
AIMCO operating partnership, and interest paid by the management companies on
certain notes held by the AIMCO operating partnership. In general, the
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
the 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's taxable domestic stockholders out of current or accumulated earnings and
profits (and not designated as capital gain dividends) will be taken into
account by them as ordinary income and will not be eligible for the dividends
received deduction for corporations. Distributions (and retained net capital
gains) that are designated as capital gain dividends will be taxed as long-term
capital gains (to the extent that they do not exceed AIMCO's actual net capital
gain for the taxable year) without regard to the period for which the
stockholder has held its stock. However, corporate stockholders may be required
to treat up to 20% of certain capital gain dividends as ordinary income. In
addition, net capital gains attributable to the sale of depreciable real
property held for more than 12 months are subject to a 25% maximum Federal
income tax rate to the extent of previously claimed real property depreciation.
Distributions in excess of current and accumulated earnings and profits will not
be taxable to a stockholder to the extent that they do not exceed the adjusted
basis of the stockholder's shares in respect of which the distributions were
made, but rather will reduce the adjusted basis of such shares. To the extent
that such distributions exceed the adjusted basis of a stockholder's shares in
respect of which the distributions were made, they will be included in income as
long-term capital gain (or short-term capital gain if the shares have been held
for one year or less). 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. Stockholders may not include in their individual income tax returns any
net operating losses or capital losses of AIMCO.
Dispositions of AIMCO Class A Common Stock. Capital gains recognized by
individuals and other non-corporate taxpayers upon the sale or disposition of
AIMCO Class A Common Stock held for more than one year at the time of
disposition will be long-term capital gains and will be short-term capital gains
if the AIMCO Class A Common Stock is held for one year or less. Capital losses
recognized by a stockholder upon the disposition of AIMCO Class A Common Stock
held for more than one year at the time of disposition will be a long-term
capital loss. In addition, any loss upon a sale or exchange of shares of AIMCO
Class A Common Stock by a stockholder who has held such shares for six months or
less (after applying certain holding period rules) will be treated as a
long-term capital loss to the extent of distributions from AIMCO required to be
treated by such stockholder as long-term capital gain.
TAXATION OF FOREIGN STOCKHOLDERS
The following is a summary of certain anticipated U.S. Federal income and estate
tax consequences of the ownership and disposition of AIMCO Class A Common Stock
applicable to
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Non-U.S. Holders of AIMCO Class A Common Stock. A "Non-U.S. Holder" is generally
any person other than (i) a citizen or resident of the United States, (ii) a
corporation or partnership created or organized in the United States or under
the laws of the United States or of any state thereof or the District of
Columbia, (iii) an estate whose income is 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 AIMCO Class A Common Stock. In
cases where the dividend income from a Non-U.S. Holder's investment in AIMCO
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. Holders are taxed with respect to such dividends (and may also be subject
to the 30% branch profits tax in the case of a Non-U.S. Holder that is a
corporation).
Non-Dividend Distributions. Unless AIMCO 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 AIMCO Stock
constitutes a USRPI, such distributions will be subject to 10% withholding and
taxed pursuant to FIRPTA at a rate of 35% to the extent such distributions
exceed a stockholder's basis in his or her AIMCO Class A Common Stock.
Capital Gain Dividends. Under FIRPTA, a distribution made by AIMCO to a Non-U.S.
Holder, to the extent attributable to gains from dispositions of USRPIs such as
the properties beneficially owned by AIMCO ("USRPI Capital Gains"), will be
considered effectively connected with a U.S. trade or business of the Non-U.S.
Holder and subject to U.S. income tax at the rates applicable to U.S.
individuals or corporations, without regard to whether such distribution is
designated as a capital gain dividend. In addition, AIMCO will be required to
withhold tax equal to 35% of the amount of dividends to the extent such
dividends constitute USRPI Capital Gains. Distributions subject to FIRPTA may
also be subject to a 30% branch profits tax in the hands of Non-U.S. Holder that
is a corporation.
Dispositions of AIMCO Class A Common Stock. Unless AIMCO Class A Common Stock
constitutes a USRPI, a sale of such stock by a Non-U.S. Holder generally will
not be subject to taxation under FIRPTA. The AIMCO 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 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 AIMCO Stock should not be subject to taxation under FIRPTA.
Because most classes of stock of AIMCO are publicly traded, however, no
assurance can be given that AIMCO is or will continue to be a domestically
controlled REIT.
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Even if AIMCO does not constitute a domestically controlled REIT, a Non-U.S.
Holder's sale of AIMCO Class A Common Stock generally will still not be subject
to tax under FIRPTA as a sale of a USRPI provided that:
o the stock is "regularly traded" (as defined by applicable Regulations) on
an established securities market (e.g., the NYSE, on which AIMCO Class A
Common Stock is listed) and
o the selling Non-U.S. Holder held 5% or less of such class of AIMCO Class A
Common Stock at all times during a specified testing period.
If gain on the sale of stock of AIMCO were subject to taxation under FIRPTA, the
Non-U.S. Holder would be subject to the same treatment as a U.S. stockholder
with respect to such gain (subject to applicable alternative minimum tax and a
special alternative minimum tax in the case of nonresident alien individuals)
and the purchaser of the stock could be required to withhold 10% of the purchase
price and remit such amount to the IRS.
Gain from the sale of AIMCO Class A Common Stock that is not 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 AIMCO
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. AIMCO 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. However, if an Exempt Organization finances its acquisition of
AIMCO Class A Common Stock with debt, a portion of its income from AIMCO will
constitute UBTI pursuant to the "debt-financed property" rules. Furthermore,
social clubs, voluntary employee benefit associations, supplemental unemployment
benefit trusts, and qualified group legal services plans that are exempt from
taxation under paragraphs (7), (9), (17) and (20), respectively, of Section
501(c) of the Internal Revenue Code are subject to different UBTI rules, which
generally will require them to characterize distributions from AIMCO as UBTI. In
addition, in certain circumstances, a pension trust that owns more than 10% of
AIMCO's stock is required to treat a percentage of the dividends from AIMCO as
UBTI (the "UBTI Percentage"). The UBTI Percentage is the gross income derived by
AIMCO from an unrelated trade or business (determined as if AIMCO were a pension
trust) divided by the gross income of AIMCO for the year in which the dividends
are paid. The UBTI rule applies to a pension trust holding more than 10% of
AIMCO's stock only if:
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o the UBTI Percentage is at least 5%,
o 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
o either (A) one pension trust owns more than 25% of the value of AIMCO's
stock or (B) a group of pension trusts each individually holding more than
10% of the value of AIMCO's stock collectively owns more that 50% of the
value of AIMCO's stock.
The restrictions on ownership and transfer of AIMCO's stock should prevent an
Exempt Organization from owning more than 10% of the value of AIMCO's stock.
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, among
other things:
o modifies 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 does not
apply to taxable REIT subsidiaries, but securities of taxable REIT
subsidiaries can not exceed 20% of the total value of a REIT's assets;
o permits a taxable REIT subsidiary to perform services to a REIT's tenants
and imposes a 100% excise tax on certain non-arms length transactions
between a taxable REIT subsidiary and a REIT;
o disallows REIT status where health care or lodging facilities are operated
or managed by a taxable REIT subsidiary;
o generally restricts 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;
o imposes certain limitations to the deductibility of interest paid by a
taxable REIT subsidiary to a related REIT;
o allows 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;
o reduces the annual REIT distribution requirement from a 95% to a 90% level;
and
o changes the measurement of rent attributable to personal property leased in
connection with a lease of real property from a comparison based on
adjusted tax bases of properties to a comparison of fair market values.
It cannot be predicted whether, when, in what form, or with what effective
dates, other legislative proposals applicable to AIMCO or its stockholders will
become law.
STATE, LOCAL AND FOREIGN TAXES
The AIMCO operating partnership and its partners and AIMCO and its stockholders
may be subject to state, local or foreign taxation in various jurisdictions,
including those in which it or they transact business, own property or reside.
The state, local or foreign tax treatment of the AIMCO operating partnership and
its partners and AIMCO and its stockholders may not conform
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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.
o Proxy Statement for Annual Meeting of Shareholders of Apartment Investment
and Management Company held on June 19, 2001;
o Apartment Investment and Management Company's Annual Report on Form 10-K
for the year ended December 31, 2000;
o Apartment Investment and Management Company's Quarterly Reports on Form
10-Q for the quarter ended March 31, 2001;
o Apartment Investment and Management Company's Current Reports on Form 8-K,
dated September 20, 2000 (as amended by Amendment No. 2 filed January 18,
2001 and Amendment No. 3 filed February 28, 2001); January 25, 2001 (filed
February 1, 2001) (as amended by Amendment No. 1 filed March 12, 2001);
March 19, 2001 (filed March 22, 2001); March 26, 2001 (filed March 27,
2001); April 17, 2001 (filed April 17, 2001); and April 26, 2001 (filed
April 27, 2001); and
o 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.
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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 for the year ended December 31, 2000, 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 their authority as experts in
accounting and auditing.
Reznick Fedder & Silverman, independent auditors, have audited (i) Oxford
Holding corporation and subsidiaries, Oxford Realty Financial Group, Inc. and
Subsidiaries, ZIMCO Entities and Oxford Equities Corporation III's combined
financial statements for the year ended December 31, 1999; (ii) ORFG Operations,
L.L.C. and Subsidiary's combined financial statements for the year ended
December 31, 1999; (iii) OXPARC L.L.C.'s combined financial statements for the
year ended December 31, 1999; and (iv) Oxford Realty Financial Group Properties'
combined financial statements for the year ended December 31, 1999; as set forth
in their reports, which are incorporated by reference in this prospectus. These
financial statements are incorporated by reference in reliance on Reznick Fedder
& Silverman's reports given their authority as experts in accounting and
auditing.
The consolidated financial statements of Oxford Tax Exempt Fund II Limited
Partnership ("OTEF") appearing in OTEF's Annual Report on form 10-K for the year
ended December 31, 1999 have been audited by PricewaterhouseCoopers LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
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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:
Registration Fee -- Securities and Exchange Commission.... $ 6,646
Printing and Engraving Expenses........................... 10,000
Legal Fees and Expenses................................... 25,000
Accounting Fees and Expenses.............................. 25,000
Miscellaneous............................................. 5,000
-----------
Total........................................... $ 71,646
===========
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
30
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.
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.
8.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
23.1 -- Consent of Piper Marbury Rudnick & Wolfe LLP (included in their
opinion filed as Exhibit 5.1).
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
their opinion filed as Exhibit 8.1).
23.3 -- Consent of Ernst & Young LLP, Denver, Colorado, dated June 28,
2001.*
23.4 -- Consent of Reznick Fedder and Silverman, Bethesda, Maryland,
dated June 28, 2001.*
23.5 -- Consent of PricewaterhouseCoopers LLP, Washington, D.C., dated
July 2, 2001.*
24.1 -- Power of Attorney (included on page II-4).
----------
* Previously filed.
II-2
31
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
32
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on this Amendment No. 1 to Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver, State of Colorado, on the 17th
day of July, 2001.
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 Amendment No. 1
to Registration Statement on Form S-3 has been signed below by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ TERRY CONSIDINE
-------------------------------------------------- Chairman of the Board and July 17, 2001
Terry Considine Chief Executive Officer
(Principal Executive
Officer)
/s/ PETER K. KOMPANIEZ
-------------------------------------------------- Vice Chairman, President and July 17, 2001
Peter K. Kompaniez Director
/s/ PAUL J. MCAULIFFE*
-------------------------------------------------- Executive Vice President July 17, 2001
Paul J. McAuliffe Capital Markets and Chief
Financial Officer
/s/ THOMAS C. NOVOSEL*
-------------------------------------------------- Senior Vice President and July 17, 2001
Thomas C. Novosel Chief Accounting Officer
/s/ JAMES N. BAILEY*
-------------------------------------------------- Director July 17, 2001
James N. Bailey
/s/ RICHARD S. ELLWOOD*
-------------------------------------------------- Director July 17, 2001
Richard S. Ellwood
/s/ J. LANDIS MARTIN*
-------------------------------------------------- Director July 17, 2001
J. Landis Martin
/s/ THOMAS L. RHODES*
-------------------------------------------------- Director July 17, 2001
Thomas L. Rhodes
*By: /s/ PETER K. KOMPANIEZ
-------------------------------------------------- Director July 17, 2001
Peter K. Kompaniez
Attorney-in-Fact for each of
the persons indicated
II-4
33
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
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.
8.1 -- Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
23.1 -- Consent of Piper Marbury Rudnick & Wolfe LLP (included in their
opinion filed as Exhibit 5.1).
23.2 -- Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included
in their opinion filed as Exhibit 8.1).
23.3 -- Consent of Ernst & Young LLP, Denver, Colorado, dated June 28,
2001.*
23.4 -- Consent of Reznick Fedder and Silverman, Bethesda, Maryland,
dated June 28, 2001.*
23.5 -- Consent of PricewaterhouseCoopers LLP, Washington, D.C., dated
July 2, 2001.*
24.1 -- Power of Attorney (included on page II-4).
----------
* Previously filed.