e10vk
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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One) |
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2005 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period
from to |
Commission File Number 1-13232
Apartment Investment and Management Company
(Exact name of registrant as specified in its charter)
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Maryland |
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84-1259577 |
(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer
Identification No.) |
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4582 South Ulster Street Parkway, Suite 1100
Denver, Colorado
(Address of principal executive offices) |
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80237
(Zip Code) |
Registrants telephone number, Including Area Code:
(303) 757-8101
Securities Registered Pursuant to Section 12(b) of the
Act:
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Title of Each Class |
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Name of Each Exchange on Which Registered |
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Class A Common Stock |
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New York Stock Exchange |
Class G Cumulative Preferred Stock |
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New York Stock Exchange |
Class Q Cumulative Preferred Stock |
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New York Stock Exchange |
Class R Cumulative Preferred Stock |
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New York Stock Exchange |
Class T Cumulative Preferred Stock |
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New York Stock Exchange |
Class U Cumulative Preferred Stock |
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New York Stock Exchange |
Class V Cumulative Preferred Stock |
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New York Stock Exchange |
Class Y Cumulative Preferred Stock |
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New York Stock Exchange |
Securities Registered Pursuant to Section 12(g) of the
Act: none
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined by Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K is
not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any
amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated
filer þ Accelerated o Non-accelerated
filer o
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2 of the
Act). Yes o No þ
The aggregate market value of the voting and non-voting common
stock held by non-affiliates of the registrant, was
approximately $3.9 billion as of June 30, 2005. As of
February 28, 2006, there were 96,566,698 shares of
Class A Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrants definitive proxy statement to
be issued in conjunction with the registrants annual
meeting of stockholders to be held May 10, 2006 are
incorporated by reference into Part III of this Annual
Report.
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
TABLE OF CONTENTS
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 2005
1
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides
a safe harbor for forward-looking statements in
certain circumstances. Certain information included in this
Annual Report on Form 10-K (Annual Report)
contains or may contain information that is forward-looking,
including, without limitation, statements regarding the effect
of acquisitions, our future financial performance and the effect
of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will
be affected by a variety of risks and factors that are beyond
our control including, without limitation: natural disasters
such as hurricanes, national and local economic conditions; the
general level of interest rates; energy costs; the terms of
governmental regulations that affect us and interpretations of
those regulations; the competitive environment in which we
operate; financing risks, including the risk that our cash flows
from operations may be insufficient to meet required payments of
principal and interest; real estate risks, including
fluctuations in real estate values and the general economic
climate in local markets and competition for tenants in such
markets; insurance risks; acquisition and development risks,
including failure of such acquisitions and development projects
to perform in accordance with projections; the timing of
acquisitions and dispositions; litigation, including costs
associated with prosecuting or defending claims and any adverse
outcomes; and possible environmental liabilities, including
costs, fines or penalties that may be incurred due to necessary
remediation of contamination of properties presently owned or
previously owned by us. In addition, our current and continuing
qualification as a real estate investment trust involves the
application of highly technical and complex provisions of the
Internal Revenue Code and depends on our ability to meet the
various requirements imposed by the Internal Revenue Code,
through actual operating results, distribution levels and
diversity of stock ownership. Readers should carefully review
our financial statements and the notes thereto, as well as the
section entitled Risk Factors described in
Item 1A of this Annual Report and the other documents we
file from time to time with the Securities and Exchange
Commission.
PART I
Item 1. Business
The Company
Apartment Investment and Management Company, or Aimco, is a
Maryland corporation incorporated on January 10, 1994. We
are a self-administered and self-managed real estate investment
trust, or REIT, engaged in the acquisition, ownership,
management and redevelopment of apartment properties. As of
December 31, 2005, we owned or managed a real estate
portfolio of 1,370 apartment properties containing 240,484
apartment units located in 47 states, the District of Columbia
and Puerto Rico. Based on apartment unit data compiled by the
National Multi Housing Council, as of December 31, 2005 we
were the largest REIT owner and operator of apartment properties
in the United States. Our portfolio includes garden style,
mid-rise and high-rise properties.
We own an equity interest in, and consolidate the majority of,
the properties in our owned real estate portfolio. These
properties represent the consolidated real estate holdings in
our financial statements, which we refer to as consolidated
properties. In addition, we have an equity interest in, but do
not consolidate for financial statement purposes, certain
properties that are accounted for under the equity method. These
properties represent our investment in unconsolidated real
estate partnerships in our financial statements, which we refer
to as unconsolidated properties. Additionally, we manage (both
property and asset) but do not own an equity interest in other
properties, although in certain cases we may indirectly own
generally less than one percent of the
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operations of such properties through a partnership syndication
or other fund. Our equity holdings and managed properties are as
follows as of December 31, 2005:
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Total Portfolio | |
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Properties | |
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Units | |
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Consolidated properties
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619 |
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158,548 |
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Unconsolidated properties
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264 |
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35,269 |
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Property management for third parties
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52 |
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5,246 |
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Asset management for third parties
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435 |
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41,421 |
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Total
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1,370 |
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240,484 |
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Through our wholly-owned subsidiaries, AIMCO-GP, Inc. and
AIMCO-LP, Inc., we own a majority of the ownership interests in
AIMCO Properties, L.P., which we refer to as the Aimco Operating
Partnership. As of December 31, 2005, we held approximately
a 90% interest in the common partnership units and equivalents
of the Aimco Operating Partnership. We conduct substantially all
of our business and own substantially all of our assets through
the Aimco Operating Partnership. Interests in the Aimco
Operating Partnership that are held by limited partners other
than Aimco are referred to as OP Units. OP Units
include common OP Units, partnership preferred units, or
preferred OP Units, and high performance partnership units, or
High Performance Units. Generally after a holding period of
twelve months, holders of common OP Units may redeem such units
for cash or, at the Aimco Operating Partnerships option,
Aimco Class A Common Stock, which we refer to as Common
Stock. At December 31, 2005, 95,732,200 shares of our
Common Stock were outstanding and the Aimco Operating
Partnership had 10,339,262 common OP Units and equivalents
outstanding for a combined total of 106,071,462 shares of Common
Stock and OP Units outstanding (excluding preferred OP Units).
Since our initial public offering in July 1994, we have
completed numerous transactions, expanding our portfolio of
owned or managed properties from 132 properties with 29,343
apartment units to 1,370 properties with 240,484 apartment units
as of December 31, 2005. These transactions have included
purchases of properties and interests in entities that own or
manage properties, as well as corporate mergers.
Except as the context otherwise requires, we,
our, us and the Company
refer to Aimco, the Aimco Operating Partnership and their
consolidated entities, collectively. As used herein, and except
where the context otherwise requires, partnership
refers to a limited partnership or a limited liability company
and partner refers to a limited partner in a limited
partnership or a member in a limited liability company.
Available Information
Our Annual Report on Form 10-K, our Quarterly Reports on
Form 10-Q, our Current Reports on Form 8-K and any
amendments to any of those reports that we file with the
Securities and Exchange Commission are available free of charge
as soon as reasonably practicable through our website at
www.aimco.com. The information contained on our website is not
incorporated into this Annual Report. Our Common Stock is listed
on the New York Stock Exchange under the symbol AIV.
In 2005, our chief executive officer submitted his annual
corporate governance listing standards certification to the New
York Stock Exchange, which certification was unqualified.
Financial Information About Industry Segments
We operate in two reportable segments: real estate (owning and
operating apartments) and investment management business
(providing property management and other services relating to
the apartment business to third parties and affiliates). For
further information on these segments, see Note 17 of the
consolidated financial statements in Item 8, and
Managements Discussion and Analysis in Item 7.
Business Overview
Our principal objective is to increase long-term stockholder
value, which we believe results from increasing asset values,
increasing operating cash flows and long-term, predictable Funds
From Operations, or FFO (as
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defined by the National Association of Real Estate Investment
Trusts), per share of Common Stock, less capital spending for
replacements. For a description of the meaning of FFO and its
use and limitations as an operating measure, see the discussion
titled Funds From Operations in Item 7.
We strive to meet our objectives by focusing on property
operations, generation of fees, portfolio management,
reinvestment in properties, increasing land values through
entitlements, managing our cost of capital by using leverage
that is largely long-term, non-recourse and property specific,
and managing our general and administrative costs through
increasing productivity.
We divide property operations into two business components:
conventional and affordable. Our conventional operations, which
are market-rate apartments with rents paid by the resident,
include 526 properties with 151,613 units and also include our
university communities portfolio (15 properties with 4,443
units). Aimco Capital conducts our affordable operations of 357
properties with 42,204 units, which typically are apartments
with rents frequently subsidized or paid by a government agency.
Our property operations are characterized by diversification of
product, location and price point. We operate a broad range of
property types, from suburban garden-style to urban high-rise
properties in 47 states, the District of Columbia and Puerto
Rico at a broad range of average monthly rental rates, with most
between $500 and $1,100 per month, and reaching as high as
$6,400 per month at some of our premier properties. This
geographic diversification insulates us, to some degree, from
inevitable downturns in any one market.
Our conventional operations at the beginning of 2006 were
organized into four divisions, each of which is supervised by a
Division Vice President, or DVP, and were further sub-divided
into 17 regional operating centers, or ROCs. As changes in our
portfolio occur, we reevaluate this structure. A Regional Vice
President, or RVP, supervises each ROC. The ROCs are generally
smaller business units with specialized operational, financial
and human resource leadership. We seek to improve the operating
results from our property operations by, among other methods,
combining centralized financial control and uniform operating
procedures with localized property management decision-making
and market knowledge. To manage our nationwide portfolio more
efficiently and to increase the benefits from our local
management expertise, we have given direct responsibility for
operations to the RVP with oversight from extensive regular
reviews with senior management. To enable the RVPs to focus on
sales and service, as well as improve financial control and
budgeting, we have dedicated a regional financial officer to
support each RVP. In addition, our construction services group
handles all work on site beyond routine maintenance, thus
reducing the need for RVPs to spend time on oversight of
construction projects. We continue to improve our
corporate-level oversight of conventional property operations by
developing better systems, standardizing business goals,
operational measurements and internal reporting, and enhancing
financial controls over field operations. Our objectives are to
focus on the areas discussed below:
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Customer Service. Our operating culture is to be focused
on our customers. Our goal is to provide our residents with
consistent service in clean, safe and attractive communities. We
evaluate our performance through a customer satisfaction
tracking system. In addition, we emphasize the quality of our
on-site employees through recruiting, training and retention
programs, which we believe contributes to improved customer
service and leads to increased occupancy rates and enhanced
performance. |
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Resident Selection and Retention. In apartment
properties, neighbors are a part of the product, together with
the location of the property and the physical quality of the
apartment units. Part of our conventional operations strategy is
to focus on resident acquisition and retention
attracting and retaining credit-worthy residents who are good
neighbors. We have structured goals and coaching for all of our
sales personnel, a tracking system for inquiries and a
standardized renewal communication program. We have standardized
residential financial stability requirements and have policies
and monitoring practices to maintain our resident quality. We
believe that the costs exceed the benefits when higher occupancy
results from lowering of financial stability standards. |
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Revenue Increases. We increase rents where feasible and
seek to improve occupancy rates. We are also focused on the
automation of on-site operations, as we believe that timely and
accurate collection of property performance and resident profile
data will enable us to maximize revenue through better property
management and leasing decisions. We have standardized policies
for new and renewal pricing with timely data and analyses by
floor-plan, thereby enabling us to maximize our ability to
modify pricing, even in challenging sub-markets. |
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Controlling Expenses. Cost controls are accomplished by
local focus at the ROC level and by taking advantage of
economies of scale at the corporate level. As a result of the
size of our portfolio and our regional concentrations of
properties, we have the ability to spread over a large property
base fixed costs for general and administrative expenditures and
certain operating functions, such as purchasing, insurance and
information technology. We are expanding our local vendor
consolidation program and implementing an electronic procurement
system to provide better ongoing control over purchasing
decisions and to take advantage of volume discounts.
Additionally, we intend to focus on energy management and
centralized media programs to control expenses. |
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Ancillary Services. We believe that our ownership and
management of properties provide us with unique access to a
customer base that allows us to provide additional services and
thereby increase occupancy and rents, while also generating
incremental revenue. We currently provide cable television,
telephone services, appliance rental, and carport, garage and
storage space rental at certain properties. |
We are among the largest owners and operators of affordable
properties in the United States. Aimco Capital was organized to
focus on our affordable housing properties, the operations of
which are most often subsidized or financed by the United States
Department of Housing and Urban Development, or HUD, state
housing agencies or tax credit financing, and is led by a
management team dedicated to this sector. Aimco Capital operates
our affordable properties through three ROCs. Affordable
properties tend to have stable rents and occupancy due to
government subsidies and thus are much less affected by market
circumstances.
Aimco Capital also generates activity fees from transactions
related to affordable holdings (including tax credit
redevelopments, syndications, dispositions and refinancings),
and asset management income from the financial management of our
owned and operated affordable portfolio as well as two other
large portfolios for which we provide asset management services
only. We believe that Aimco Capital is well positioned as it has
the national structure, knowledge and pipeline to grow as a more
autonomous operation with dedicated capital.
We view our conventional property portfolio in terms of
core and non-core properties. Core
properties are those properties that are located in markets
where population and employment growth are expected to exceed
national trends and where we believe there is potential for
long-term growth at higher rates of return. During 2005, we made
a decision to concentrate our core portfolio in markets located
predominantly in coastal states as well as the Rocky Mountain
region and Chicago. This reduced the number of markets in which
we intend to remain from 38 to 27. We plan to exit certain Texas
and Midwest markets where the average four-year growth rate is
projected below average of the remainder of the core portfolio.
At December 31, 2005, we had 272 conventional core
properties, which generally we intend to hold and improve over
the long-term. Within our core portfolio, the largest single
market (Washington, D.C.) contributed approximately 10%, and the
five largest markets (Washington, D.C., greater Los Angeles, New
England, Philadelphia and Miami-Fort Lauderdale) together
contributed approximately 38%, to income before depreciation and
interest expense, or net operating income. At December 31,
2005, we had 254 conventional non-core properties, which we
generally intend to hold for investment for the intermediate
term. Non-core properties are those properties located within
the 32 markets we intend to exit or in less favored locations
within the 27 markets that comprise our core portfolio. We
exited nine markets in 2005. During 2006, we expect to exit an
additional five markets and over the next several years we
expect to exit the remaining markets in which we hold our
non-core properties.
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Portfolio management includes expanding our core portfolio
through acquisitions of properties located in markets where our
core portfolio is concentrated. We specifically seek investments
in a variety of asset qualities and types at a purchase price
below replacement cost. Currently, we acquire properties and
property interests primarily in three ways:
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the direct acquisition of a property or portfolio of properties; |
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acquisition of a portfolio of properties through a purchase
from, or a merger or business combination with, an entity that
owns or controls the property or portfolio being acquired; and |
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the purchase from third parties, subject to our fiduciary
duties, of additional interests in partnerships where we own a
general partnership interest. |
In 2005, we completed direct acquisitions of six conventional
core properties, containing approximately 1,006 residential
units and six retail spaces for an aggregate purchase price of
approximately $284 million (including transaction costs)
and acquired additional interests in 84 partnerships for
approximately $56 million (including transaction costs).
These properties were located in New York City, New Jersey and
Los Angeles.
Portfolio management also includes dispositions of properties
located within markets we intend to exit, properties in less
favored locations within the 27 markets that comprise our core
portfolio or properties that do not meet our long-term
investment criteria. Additionally, from time to time, we may
dispose of certain core properties that are consistent with our
long-term investment strategy but offer attractive returns, such
as in sales to buyers who intend to convert the properties to
condominiums. The sales of core and non-core properties
partially fund our acquisitions and capital improvements on our
existing properties. In 2005, we sold 71 non-core properties
generating net cash proceeds to us, after repayment of existing
debt, payment of transaction costs and distributions to limited
partners, of $262 million.
The portfolio management strategy for Aimco Capital is similar
to that of our Conventional portfolio. Aimco Capital seeks to
dispose of properties that are inconsistent with our long-term
investment strategy and Aimco Capitals operations. During
2005, we sold 47 non-core properties from within the Aimco
Capital portfolio, generating net cash proceeds to us, after
repayment of existing debt, payment of transaction costs and
distributions to limited partners, of $70 million. At
December 31, 2005 within the Aimco Capital portfolio, we
had 357 properties, a majority of which are non-core properties
that we generally intend to hold for investment for the
intermediate term. During 2006, we intend to sell approximately
the same number of Aimco Capital properties as we sold in 2005.
We have the opportunity to improve land values by seeking new
entitlements for many properties. Entitlements provide us the
opportunity to enhance the value of our existing portfolio by
obtaining local governmental approvals to increase density and
add dwelling or residential units to a site. Also we seek to add
incremental value through redevelopment of existing units and
excess land sales. We currently have 50 entitlement projects
under way or under review. These properties are typically well
located and in many cases were built 30 or more years ago.
During 2005, we received final approval on the conceptual site
plan for Springhill Lake in Greenbelt, Maryland, which includes
doubling the density of the property from 2,899 units to 5,800
units.
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Reinvestment in Properties |
We believe that the physical condition and amenities of our
apartment properties are important factors in our ability to
maintain and increase rental rates. In 2005, we spent
$89.7 million, or $597 per owned apartment unit, for
Capital Replacements, which represent the share of expenditures
that are deemed to replace the consumed portion of acquired
capital assets. Additionally, we spent $112.0 million for
Capital Improvements, which are non-redevelopment capital
expenditures that are made to enhance the value, profitability
or useful life of an asset from its original purchase condition.
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In addition to maintenance and improvements of our properties,
we focus on the redevelopment of certain properties each year.
We believe redevelopment of certain properties in superior
locations provides advantages over ground-up development,
enabling us to generate rents comparable to new properties with
relatively lower financial risk, in less time and with reduced
delays associated with governmental permits and authorizations.
We undertake two types of redevelopment projects: major
projects, where a substantial number or all available units are
vacated for significant renovations to the property; and
moderate projects, where there is significant renovation, such
as exteriors, common areas or unit improvements, typically done
upon lease expirations without the need to vacate units on any
wholesale or substantial basis. We have a specialized
Redevelopment and Construction Services Group, which includes
engineers, architects and construction managers, to oversee
these projects. As of December 31, 2005, we had 59 projects
at various stages of redevelopment. Of the 59 projects, 37 are
conventional properties (two major projects and 35 moderate
projects) and 22 are affordable properties. During 2005,
redevelopment expenditures totaled $203.5 million, of which
our share totaled $140.3 million, and we completed our two
major projects as well as interior upgrades or new construction
on 2,188 conventional units, of which 1,687 were leased at
year-end for increased rental rates. Total redevelopment
expenditures for our 35 active conventional moderate projects
will be approximately $228.9 million, of which
approximately $108.4 million remains to be spent. Total
redevelopment expenditures for our 22 affordable redevelopments
will be approximately $142.0 million, of which
approximately $52.5 million remains to be spent, most of
which will be funded by third-party tax credit equity and
tax-exempt debt. In 2006, we plan to invest between $150 and
$200 million in conventional redevelopment projects that
will impact approximately 70 properties with nearly 30,000
units. Additionally, in 2006 redevelopment expenditures on
affordable properties will be approximately $80 million,
predominantly funded by third-party tax credit equity, impacting
20 to 25 properties with more than 3,000 units.
We are focused on minimizing our cost of capital. We have a
deliberate policy of using non-recourse property debt. The lower
risk inherent in non-recourse property debt permits us to
operate with higher debt leverage and a lower weighted average
cost of capital. During 2005, we closed loans totaling
$971.5 million at an average interest rate of 5.06%, which
included the refinancing of loans totaling $415.2 million
with prior interest rates averaging 7.33%. In 2006, we intend to
further reduce our cost of capital through the redemption of
$286.8 million of preferred securities at a weighted
average cost of 9.76%.
Over the past several years, we have had growth in our general
and administrative spending as a result of the building of our
infrastructure in certain areas in which we had needs,
including, operational systems, information technology and other
automation, human resources, and expanded accounting, legal, and
financial planning and analysis functions. We are focused on
containing this spending going forward through enhanced
productivity, process improvements and staff reductions.
Competition
In attracting and retaining residents to occupy our properties
we compete with numerous other housing alternatives. Our
properties compete directly with other rental apartments, as
well as with condominiums and single-family homes that are
available for rent or purchase in the markets in which our
properties are located. Principal factors of competition include
rent or price charged, attractiveness of the location and
property and quality and breadth of services. The number of
competitive properties in a particular area has a material
effect on our ability to lease apartment units at our properties
and on the rents we charge. Additionally, we compete with other
real estate investors, including other apartment REITs, pension
and investment funds, partnerships and investment companies in
acquiring, redeveloping and managing apartment properties. This
competition affects our ability to acquire properties we want to
add to our portfolio and the price that we pay in such
acquisitions.
7
Taxation
We have elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended, which we refer to as the Code,
commencing with our taxable year ended December 31, 1994,
and intend to continue to operate in such a manner. Our current
and continuing qualification as a REIT depends on our ability to
meet the various requirements imposed by the Code, which are
related to organizational structure, distribution levels,
diversity of stock ownership and certain restrictions with
regard to owned assets and categories of income. If we qualify
for taxation as a REIT, we will generally not be subject to
United States Federal corporate income tax on our taxable income
that is currently distributed to stockholders. This treatment
substantially eliminates the double taxation (at the
corporate and stockholder levels) that generally results from
investment in a corporation.
Even if we qualify as a REIT, we may be subject to United States
Federal income and excise taxes in various situations, such as
on our undistributed income. We also will be required to pay a
100% tax on any net income on non-arms length transactions
between us and a TRS (described below) and on any net income
from sales of property that was property held for sale to
customers in the ordinary course. We and our stockholders may be
subject to state or local taxation in various state or local
jurisdictions, including those in which we transact business or
our stockholders reside. Any taxes imposed on us would reduce
our operating cash flow and net income. The state and local tax
laws may not conform to the United States Federal income tax
treatment.
Certain of our operations (property management, asset
management, risk, etc.) are conducted through taxable REIT
subsidiaries, each of which we refer to as a TRS. A TRS is a
C-corporation that has not elected REIT status and as such is
subject to United States Federal corporate income tax. We use
the TRS format to facilitate our ability to offer certain
services and activities to our residents, which services and
activities are not generally considered as qualifying REIT
activities.
Regulation
Apartment properties are subject to various laws, ordinances and
regulations, including regulations relating to recreational
facilities such as swimming pools, activity centers and other
common areas. Changes in laws increasing the potential liability
for environmental conditions existing on properties or
increasing the restrictions on discharges or other conditions,
as well as changes in laws affecting development, construction
and safety requirements, may result in significant unanticipated
expenditures, which would adversely affect our net income and
cash flows from operating activities. In addition, future
enactment of rent control or rent stabilization laws or other
laws regulating multifamily housing may reduce rental revenue or
increase operating costs in particular markets.
Various Federal, state and local laws subject property owners or
operators to liability for management, and the costs of removal
or remediation, of certain hazardous substances present on a
property. Such laws often impose liability without regard to
whether the owner or operator knew of, or was responsible for,
the release or presence of the hazardous substances. The
presence of, or the failure to manage or remedy properly,
hazardous substances may adversely affect occupancy at affected
apartment communities and the ability to sell or finance
affected properties. In addition to the costs associated with
investigation and remediation actions brought by government
agencies, and potential fines or penalties imposed by such
agencies in connection therewith, the presence of hazardous
substances on a property could result in claims by private
plaintiffs for personal injury, disease, disability or other
infirmities. Various laws also impose liability for the cost of
removal, remediation or disposal of hazardous substances through
a licensed disposal or treatment facility. Anyone who arranges
for the disposal or treatment of hazardous 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. In connection with
the ownership, operation and management of properties, we could
potentially be liable for environmental liabilities or costs
associated with our properties or properties we acquire or
manage in the future.
8
We have been named as a defendant in lawsuits that have alleged
personal injury and property damage as a result of the presence
of mold. In addition, we are aware of lawsuits against owners
and managers of multifamily properties asserting claims of
personal injury and property damage caused by the presence of
mold, some of which have resulted in substantial monetary
judgments or settlements. We have only limited insurance
coverage for property damage loss claims arising from the
presence of mold and for personal injury claims related to mold
exposure. We have implemented policies, procedures, third-party
audits and training, and include a detailed moisture intrusion
and mold assessment during acquisition due diligence. We believe
these measures will prevent or eliminate mold exposure from our
properties and will minimize the effects that mold may have on
our residents. To date, we have not incurred any material costs
or liabilities relating to claims of mold exposure or to abate
mold conditions. Because the law regarding mold is unsettled and
subject to change we can make no assurance that liabilities
resulting from the presence of or exposure to mold will not have
a material adverse effect on our consolidated financial
condition or results of operations.
Insurance
Our primary lines of insurance coverage are property, general
liability, and workers compensation. We believe that our
insurance coverages adequately insure our properties against the
risk of loss attributable to fire, earthquake, hurricane,
tornado, flood and other perils and adequately insure us against
other risks. Our coverage includes deductibles, retentions and
limits that are customary in the industry. We have established
loss prevention, loss mitigation, claim handling, litigation
management and loss reserving procedures to manage our exposure.
Employees
We currently have approximately 6,400 employees, of which
approximately 5,200 are at the property level, performing
various on-site functions, with the balance managing corporate
and regional operations, including investment and debt
transactions, legal, financial reporting, accounting,
information systems, human resources and other support
functions. Unions represent approximately 200 of our employees.
We have never experienced a work stoppage and believe we
maintain satisfactory relations with our employees.
Item 1A. Risk
Factors
The risk factors noted in this section and other factors noted
throughout this Annual Report, describe certain risks and
uncertainties that could cause our actual results to differ
materially from those contained in any forward-looking statement.
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Failure to generate sufficient net operating income may
limit our ability to pay dividends. |
Our ability to make payments to our investors depends on our
ability to generate net operating income in excess of required
debt payments and capital expenditure requirements. Net
operating income may be adversely affected by events or
conditions beyond our control, including:
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the general economic climate; |
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competition from other apartment communities and other housing
options; |
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local conditions, such as loss of jobs or an increase in the
supply of apartments, that might adversely affect apartment
occupancy or rental rates; |
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changes in governmental regulations and the related cost of
compliance; |
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increases in operating costs (including real estate taxes) due
to inflation and other factors, which may not be offset by
increased rents; |
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changes in tax laws and housing laws, including the enactment of
rent control laws or other laws regulating multifamily housing; |
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changes in interest rates and the availability of financing; and |
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the relative illiquidity of real estate investments. |
9
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If we are not able successfully to acquire, operate,
redevelop and expand properties, our results of operations will
be adversely affected. |
The selective acquisition, redevelopment and expansion of
properties are components of our strategy. However, we may not
be able to complete transactions successfully in the future.
Although we seek to acquire, operate, redevelop 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 redevelop or expand
properties, we are subject to the risks that:
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costs may exceed original estimates; |
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occupancy and rental rates at the property may be below our
projections; |
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financing may not be available on favorable terms or at all; |
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redevelopment and leasing of the properties may not be completed
on schedule; and |
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we may experience difficulty or delays in obtaining necessary
zoning, land-use, building, occupancy and other governmental
permits and authorizations. |
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Our existing and future debt financing could render us
unable to operate, 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. For the year ended December 31, 2005, we had a
ratio of free cash flow (net operating income less spending for
capital replacements) to combined interest expense and preferred
stock dividends of 1.4:1. 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 secured
debt, our lenders could foreclose on the properties securing
such debt, which would result in loss of income and asset value
to us. As of December 31, 2005, substantially all of the
properties that we owned or controlled were encumbered by debt.
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Increases in interest rates would increase our interest
expense. |
As of December 31, 2005, we had approximately
$2,010.5 million of variable-rate indebtedness outstanding.
Of the total debt subject to variable interest rates, floating
rate tax-exempt bond financing was $726.1 million. Floating
rate tax-exempt bond financing is benchmarked against the BMA
Index, which since 1981 has averaged 68.0% of 30-day LIBOR. If
this relationship continues, an increase in the 30-day LIBOR, of
1% (0.68% in tax-exempt interest rates) would result in our
income before minority interests and cash flows being reduced by
$17.8 million on an annual basis. This would be offset by
variable rate interest income earned on certain assets,
including cash and cash equivalents and notes receivable, as
well as interest that is capitalized on a portion of this
variable rate debt incurred in connection with our redevelopment
activities. Considering these offsets, the same increase in the
30-day LIBOR would result in our income before minority
interests being reduced by $8.9 million on an annual basis.
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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. Our credit facility provides, among other things,
that we may make distributions to our investors during any four
consecutive fiscal quarters in an aggregate amount that does not
exceed the greater of 95% of our Funds From Operations for such
period or such amount as may be necessary to maintain our REIT
status. Our outstanding classes of preferred stock
10
prohibit the payment of dividends on our Common Stock if we fail
to pay the dividends to which the holders of the preferred stock
are entitled.
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We depend on distributions and other payments from our
subsidiaries that they may be prohibited from making to
us. |
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 our subsidiaries in order to satisfy our financial
obligations and make payments to our investors. The ability of
our subsidiaries to make such distributions and other payments
depends on their earnings and may be subject to statutory or
contractual limitations. As an equity investor in our
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 may 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 our claims.
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We may be subject to litigation associated with
partnership acquisitions that 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 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 may be subject to litigation based on
claims that we, as the general partner, have breached our
fiduciary duty to our limited partners or that the transaction
violates the relevant partnership agreement or state law.
Although we intend to comply with our fiduciary obligations and
the relevant partnership agreements, we may incur additional
costs in connection with the defense or settlement of this type
of 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 financial
condition or results of operations.
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The marketplace for insurance coverage is uncertain and in
some cases insurance is becoming more expensive and more
difficult to obtain. |
The insurance market is characterized by volatility with respect
to premiums, deductibles and coverage. Although we make use of
many alternative methods of risk financing that enable us to
insulate ourselves to some degree from variations in coverage
and cost, sustained deterioration in insurance marketplace
conditions may have a negative effect on our operating results.
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The FBI has issued alerts regarding potential terrorist
threats involving apartment buildings. |
From time to time, the Federal Bureau of Investigation, or FBI,
and the United States Department of Homeland Security issue
alerts regarding potential terrorist threats involving apartment
buildings. Threats of future terrorist attacks, such as those
announced by the FBI and the Department of Homeland Security,
could have a negative effect on rent and occupancy levels at our
properties. The effect that future terrorist activities or
threats of such activities could have on our business is
uncertain and unpredictable. If we incur a loss at a property as
a result of an act of terrorism, we could lose all or a portion
of the capital we have invested in the property, as well as the
future revenue from the property.
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We depend on our senior management. |
Our success depends upon the retention of our senior management,
including Terry Considine, our chief executive officer and
president. There are no assurances that we would be able to find
qualified replacements for the individuals who make up our
senior management if their services were no longer available.
The loss of services of one or more members of our senior
management team could have a material adverse effect on our
business, financial condition and results of operations. We do
not currently maintain key-man life insurance for any of our
employees. The loss of any member of senior management could
adversely affect our ability to pursue effectively our business
strategy.
11
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Affordable housing regulations may limit the opportunities
at some of our properties, reducing our revenue and, in some
cases, causing us to sell properties that we might otherwise
continue to own. |
We own an equity interest in certain affordable properties and
manage for third parties and affiliates other properties that
benefit from governmental programs intended to provide housing
to people with low or moderate incomes. These programs, which
are usually administered by HUD or state housing finance
agencies, typically provide mortgage insurance, favorable
financing terms or rental assistance payments to the property
owners. As a condition of 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 may not always receive
such approval.
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Laws benefiting disabled persons may result in our
incurrence of unanticipated expenses. |
Under the Americans with Disabilities Act of 1990, or ADA, all
places intended to be used by the public 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 require
modifications to our properties, or restrict 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.
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We may fail to qualify as a REIT. |
If we fail to qualify as a REIT, we will not be allowed a
deduction for dividends paid to our stockholders in computing
our taxable income, and we will be subject to Federal income tax
at regular corporate rates, including any applicable alternative
minimum tax. This would substantially reduce our funds available
for payment to our investors. Unless entitled to relief under
certain provisions of the Code, we also would be disqualified
from taxation as a REIT for the four taxable years following the
year during which we ceased to qualify as a REIT. In addition,
our failure to qualify as a REIT would trigger the following
consequences:
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we would be obligated to repurchase certain classes of our
preferred stock; and |
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we would be in default under our primary credit facilities and
certain other loan agreements. |
We believe that we operate, and have always operated, in a
manner that enables us to meet the requirements for
qualification as a REIT for Federal income tax purposes. Our
continued qualification as a REIT will depend on our
satisfaction of certain asset, income, investment,
organizational, distribution, stockholder ownership and other
requirements on a continuing basis. Our ability to satisfy the
asset tests depends upon our analysis of the fair market values
of our assets, some of which are not susceptible to a precise
determination, and for which we will not obtain independent
appraisals. Our compliance with the REIT income and quarterly
asset requirements also depends upon our ability to manage
successfully the composition of our income and assets on an
ongoing basis. Moreover, the proper classification of an
instrument as debt or equity for Federal income tax purposes may
be uncertain in some circumstances, which could affect the
application of the REIT qualification requirements. Accordingly,
there can be no assurance that the Internal Revenue Service, or
the IRS, will not contend that our interests in subsidiaries or
other issuers constitutes a violation of the REIT requirements.
Moreover, future economic, market, legal, tax or other
considerations may cause us to fail to qualify as a REIT, or our
Board of Directors may determine to revoke our REIT status.
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REIT distribution requirements limit our available
cash. |
As a REIT, we are subject to annual distribution requirements,
which limit the amount of cash we retain for other business
purposes, including amounts to fund our growth. We generally
must distribute annually at least
12
90% of our net REIT taxable income, excluding any net capital
gain, in order for our distributed earnings not to be subject to
corporate income tax. We intend to make distributions to our
stockholders to comply with the requirements of the Code.
However, differences in timing between the recognition of
taxable income and the actual receipt of cash could require us
to sell assets or borrow funds on a short-term or long-term
basis to meet the 90% distribution requirement of the Code.
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Limits on ownership of shares in our charter may result in
the loss of economic and voting rights by purchasers that
violate those limits. |
Our charter limits ownership of our Common Stock by any single
stockholder (applying certain beneficial ownership
rules under Federal securities laws) to 8.7% of our outstanding
shares of Common Stock, 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 of our capital stock if the purchase
would result in us losing our REIT status. This could happen if
a transaction results in fewer than 100 persons owning all of
our shares of capital stock or results in five or fewer persons
(applying certain attribution rules of the Code) owning 50% or
more of the value of all of our shares of capital stock. If
anyone acquires shares in excess of the ownership limit or in
violation of the ownership requirements of the Code for REITs:
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the transfer will be considered null and void; |
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we will not reflect the transaction on our books; |
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we may institute legal action to enjoin the transaction; |
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we may demand repayment of any dividends received by the
affected person on those shares; |
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we may redeem the shares; |
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the affected person will not have any voting rights for those
shares; and |
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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 of capital stock 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 of capital stock, the affected
person will receive the lesser of the price paid for the shares
or the then current market price. An individual who acquires
shares of capital stock that violate the above rules bears the
risk that the individual:
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may lose control over the power to dispose of such shares; |
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may not recognize profit from the sale of such shares if the
market price of the shares increases; |
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may be required to recognize a loss from the sale of such shares
if the market price decreases; and |
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may be required to repay to us any distributions received from
us as a result of his or her ownership of the shares. |
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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 December 31, 2005, 426,157,976 shares
were classified as Common Stock, of which 95,732,200 were
outstanding, and 84,429,524 shares were classified as preferred
stock, of which 38,324,762 were outstanding. Under our charter,
our Board of Directors has the authority to classify and
reclassify any of our unissued shares of capital stock into
shares of capital stock with such preferences, rights, powers
and restrictions as our Board of Directors may determine. The
authorization and issuance of a new class
13
of capital stock could have the effect of delaying or preventing
someone from taking control of us, even if a change in control
were in our stockholders best interests.
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Maryland business statutes may limit the ability of a
third party to acquire control of us. |
As a Maryland corporation, we are subject to various Maryland
laws that may have the effect of discouraging offers to acquire
us and increasing the difficulty of consummating any such
offers, even if an 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
662/3%
of the votes entitled to be cast, excluding the interested
stockholder, or upon payment of a fair price. Maryland law also
provides generally that a person who acquires shares of our
capital stock that represent 10% 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, Maryland law 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 that:
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have at least three directors who are not employees of the
entity or related to an acquiring person; and |
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are subject to the reporting requirements of the Securities
Exchange Act of 1934, |
may elect in their charter or bylaws or by resolution of the
board of directors to be subject to all or part of a special
subtitle that provides that:
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the corporation will have a staggered board of directors; |
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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; |
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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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vacancies may only be filled by the remaining directors, even if
the procedure is contrary to the charter or bylaws; and |
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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. |
To date, we have not made any of the elections described above.
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Item 1.B. |
Unresolved Staff Comments |
None.
14
Our properties are located in 47 states, the District of
Columbia and Puerto Rico. As of December 31, 2005, our
conventional properties are operated through 17 regional
operating centers and a university communities group. Affordable
property operations are managed through Aimco Capital and are
operated through three regional operating centers. The following
table sets forth information on all of our property operations
as of December 31, 2005 and 2004:
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December 31, 2005 | |
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December 31, 2004 | |
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Number of | |
|
Number | |
|
Number of | |
|
Number | |
Regional Operating Center(1) |
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Properties | |
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of Units | |
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Properties | |
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of Units | |
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| |
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| |
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| |
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| |
Conventional:
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|
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Atlanta, GA
|
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|
41 |
|
|
|
10,712 |
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|
|
31 |
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|
|
8,644 |
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Austin, TX
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|
|
25 |
|
|
|
5,566 |
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|
|
24 |
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|
|
5,388 |
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Boston, MA
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|
|
16 |
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|
|
5,745 |
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|
|
16 |
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|
|
5,745 |
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Chicago, IL
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|
|
32 |
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|
|
8,784 |
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|
|
36 |
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|
|
9,697 |
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Columbus, OH
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|
|
39 |
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|
|
10,139 |
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|
|
30 |
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|
|
6,099 |
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Columbia, SC
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|
|
|
|
|
|
|
|
|
|
61 |
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|
|
14,414 |
|
Dallas, TX
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|
|
31 |
|
|
|
7,945 |
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|
|
36 |
|
|
|
8,867 |
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Denver, CO
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|
|
33 |
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|
|
7,487 |
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|
|
34 |
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|
|
7,572 |
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Houston, TX
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|
|
37 |
|
|
|
9,776 |
|
|
|
37 |
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|
|
9,776 |
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Indianapolis, IN
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|
|
32 |
|
|
|
11,947 |
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|
|
37 |
|
|
|
11,191 |
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Los Angeles, CA
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|
|
36 |
|
|
|
10,622 |
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|
|
38 |
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|
|
10,468 |
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Michigan
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|
|
|
|
|
|
|
|
|
|
26 |
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|
|
9,507 |
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Orlando, FL
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|
|
31 |
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|
|
8,600 |
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|
|
|
|
|
|
|
|
Philadelphia, PA
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|
|
15 |
|
|
|
7,180 |
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|
|
16 |
|
|
|
7,451 |
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Phoenix, AZ
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|
|
36 |
|
|
|
10,002 |
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|
|
36 |
|
|
|
10,001 |
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Rockville, MD
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|
|
29 |
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|
|
12,156 |
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|
|
38 |
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|
|
14,024 |
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South Florida
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|
|
15 |
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|
|
5,862 |
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|
|
15 |
|
|
|
5,862 |
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Tampa, FL
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|
|
21 |
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|
|
5,926 |
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|
|
|
|
|
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|
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Tampa/ Orlando, FL
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|
|
|
|
|
|
|
|
|
|
54 |
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|
|
14,931 |
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Tidewater, VA
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|
|
28 |
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|
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7,716 |
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University Communities
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|
|
15 |
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|
|
4,443 |
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|
|
16 |
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|
|
4,277 |
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|
|
|
|
|
|
|
|
|
|
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Total conventional owned and managed
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|
|
512 |
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|
|
150,608 |
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|
|
581 |
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|
|
163,914 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
Affordable (Aimco Capital):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central
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|
|
131 |
|
|
|
13,721 |
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|
|
|
|
|
|
|
|
Midwest
|
|
|
|
|
|
|
|
|
|
|
63 |
|
|
|
8,324 |
|
Northeast
|
|
|
104 |
|
|
|
14,769 |
|
|
|
108 |
|
|
|
16,280 |
|
Southeast
|
|
|
|
|
|
|
|
|
|
|
109 |
|
|
|
10,025 |
|
West
|
|
|
71 |
|
|
|
7,607 |
|
|
|
86 |
|
|
|
8,872 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total affordable owned and managed
|
|
|
306 |
|
|
|
36,097 |
|
|
|
366 |
|
|
|
43,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Owned but not managed
|
|
|
65 |
|
|
|
7,112 |
|
|
|
59 |
|
|
|
7,245 |
|
Property management for third parties
|
|
|
52 |
|
|
|
5,246 |
|
|
|
72 |
|
|
|
7,841 |
|
Asset management for third parties
|
|
|
435 |
|
|
|
41,421 |
|
|
|
421 |
|
|
|
41,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,370 |
|
|
|
240,484 |
|
|
|
1,499 |
|
|
|
263,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
As our portfolio changes due to property acquisitions and
dispositions, we are continually evaluating the organization of
our regional operating centers, or ROCs. During 2005, the
Orlando/ Tampa ROC was separated into two ROCs, Tidewater was
added and the Michigan and Columbia ROCs were combined into
other ROCs. Subsequent to December 31, 2005, we combined
the Austin and Dallas ROCs and added a ROC in New York.
Additionally, the properties within University Communities have
been moved into various ROCs depending on the location of the
property. |
15
At December 31, 2005, we owned an equity interest in and
consolidated 619 properties containing 158,548 apartment units,
which we refer to as consolidated. These
consolidated properties contain, on average, 256 apartment
units, with the largest property containing 2,899 apartment
units. These properties offer residents a range of amenities,
including swimming pools, clubhouses, spas, fitness centers,
tennis courts and saunas. Many of the apartment units offer
features such as vaulted ceilings, fireplaces, washer and dryer
hook-ups, cable television, balconies and patios. Additional
information on our consolidated properties is contained in
Schedule III, Real Estate and Accumulated
Depreciation in this Annual Report. At December 31,
2005, we held an equity interest in and did not consolidate 264
properties containing 35,269 apartment units, which we refer to
as unconsolidated. In addition, we provided property
management services for third parties owning 52 properties
containing 5,246 apartment units, and asset management services
for third parties owning 435 properties containing 41,421
apartment units, although in certain cases we may indirectly own
generally less than one percent of the operations of such
properties through a partnership syndication or other fund.
Substantially all of our consolidated properties are encumbered
by mortgage indebtedness. At December 31, 2005, our
consolidated properties were encumbered by aggregate mortgage
indebtedness totaling $5,667.2 million (not including
$33.7 million of mortgage indebtedness included within
liabilities related to assets held for sale), having an
aggregate weighted average interest rate of 5.99%. Such mortgage
indebtedness was secured by 596 properties with a combined net
book value of $8,673.2 million. Included in the 596
properties, we had a total of 50 mortgage loans, with an
aggregate principal balance outstanding of $795.5 million,
that were each secured by property and cross-collateralized with
certain (but not all) other mortgage loans within this group of
50 mortgage loans. See Note 6 of the consolidated financial
statements in Item 8 for additional information about our
indebtedness.
|
|
Item 3. |
Legal Proceedings |
See the information under the caption Legal Matters
in Note 9 of the consolidated financial statements in
Item 8 for information regarding legal proceedings, which
information is incorporated by reference in this Item 3.
|
|
Item 4. |
Submission of Matters to a Vote of Security Holders |
No matters were submitted to a vote of security holders during
the fourth quarter of 2005.
16
PART II
|
|
Item 5. |
Market for the Registrants Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity
Securities |
Our Common Stock has been listed and traded on the NYSE under
the symbol AIV since July 22, 1994. The
following table sets forth the quarterly high and low sales
prices of our Common Stock, as reported on the NYSE, and the
dividends declared for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends | |
|
|
|
|
|
|
Declared | |
Quarter Ended |
|
High | |
|
Low | |
|
(per share) | |
|
|
| |
|
| |
|
| |
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005(1)
|
|
$ |
39.80 |
|
|
$ |
34.93 |
|
|
$ |
1.20 |
|
|
September 30, 2005
|
|
|
44.14 |
|
|
|
37.57 |
|
|
|
0.60 |
|
|
June 30, 2005
|
|
|
41.30 |
|
|
|
36.24 |
|
|
|
0.60 |
|
|
March 31, 2005
|
|
|
39.39 |
|
|
|
34.17 |
|
|
|
0.60 |
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2004
|
|
|
39.25 |
|
|
|
34.60 |
|
|
|
0.60 |
|
|
September 30, 2004
|
|
|
36.95 |
|
|
|
30.85 |
|
|
|
0.60 |
|
|
June 30, 2004
|
|
|
31.50 |
|
|
|
26.45 |
|
|
|
0.60 |
|
|
March 31, 2004
|
|
|
36.00 |
|
|
|
30.18 |
|
|
|
0.60 |
|
|
|
(1) |
On December 28, 2005, our Board of Directors declared a
quarterly cash dividend of $0.60 per common share for the
quarter ended December 31, 2005, that was paid on
January 31, 2006, to stockholders of record on
December 31, 2005. Our Board of Directors declared the
dividend a month early in order to offset gains from 2005
property sales otherwise subject to REIT excise tax. Our Board
of Directors anticipates that dividend declarations for the
remainder of 2006 will occur on a schedule consistent with prior
years. |
On February 28, 2006, the closing price of our Common Stock
was $44.31 per share, as reported on the NYSE and there
were 96,566,698 shares of Common Stock outstanding, held by
3,459 stockholders of record. The number of holders does not
include individuals or entities who beneficially own shares but
whose shares are held of record by a broker or clearing agency,
but does include each such broker or clearing agency as one
recordholder.
As a REIT, we are required to distribute annually to holders of
common stock at least 90% of our real estate investment
trust taxable income, which, as defined by the Code and
United States Department of Treasury regulations, is generally
equivalent to net taxable ordinary income. We measure our
economic profitability and intend to pay regular dividends to
our stockholders based on Funds From Operations, less Capital
Replacements during the relevant period. Future payment of
dividends are at the discretion of our Board of Directors and
will depend on numerous factors including our financial
condition, capital requirements, the annual distribution
requirements under the provisions of the Code applicable to
REITs and such other factors as our Board of Directors deems
relevant.
From time to time, we issue shares of Common Stock in exchange
for common and preferred OP Units tendered to the Aimco
Operating Partnership for redemption in accordance with the
terms and provisions of the agreement of limited partnership of
the Aimco Operating Partnership. Such shares are issued based on
an exchange ratio of one share for each common OP Unit or the
applicable conversion ratio for preferred OP Units. The shares
are generally issued in exchange for OP Units in private
transactions exempt from registration under the Securities Act
of 1933, as amended, pursuant to Section 4(2) thereof.
During the three and twelve months ended December 31, 2005,
approximately 4,800 and 425,000 shares of Common Stock were
issued in exchange for common OP Units. During the three and
twelve months ended December 31, 2005, approximately 700
and 1,100 shares of Common Stock were issued in exchange for
preferred OP Units.
17
The following table summarizes repurchases of our equity
securities in the quarter ended December 31, 2005 (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum | |
|
|
|
|
|
|
Total Number of | |
|
Number of Shares | |
|
|
|
|
|
|
Shares Purchased as | |
|
that May Yet Be | |
|
|
|
|
Average | |
|
Part of Publicly | |
|
Purchased Under | |
|
|
Total Number of | |
|
Price Paid | |
|
Announced Plans or | |
|
Plans or Programs | |
Fiscal period |
|
Shares Purchased | |
|
per Share | |
|
Programs | |
|
(in millions) | |
|
|
| |
|
| |
|
| |
|
| |
October 1 October 31, 2005
|
|
|
0 |
|
|
|
N/A |
|
|
|
0 |
|
|
|
8.0 |
|
November 1 November 30, 2005
|
|
|
0 |
|
|
|
N/A |
|
|
|
0 |
|
|
|
8.0 |
|
December 1 December 31, 2005
|
|
|
0 |
|
|
|
N/A |
|
|
|
0 |
|
|
|
8.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
0 |
|
|
|
N/A |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Our Board of Directors has, from time to time, authorized us to
repurchase shares of our outstanding capital stock. In April
2005, our Board of Directors replaced the existing authorization
with a new authorization to repurchase up to a total of eight
million shares of our Common Stock. These repurchases may be
made from time to time in the open market or in privately
negotiated transactions, subject to applicable law. During 2005,
we did not repurchase any shares of our Common Stock. |
Dividend Payments. Our Credit Agreement includes
customary covenants, including a restriction on dividends and
other restricted payments, but permits dividends during any four
consecutive fiscal quarters in an aggregate amount of up to 95%
of our Funds From Operations for such period or such amount as
may be necessary to maintain our REIT status.
18
|
|
Item 6. |
Selected Financial Data |
The following selected financial data is based on our audited
historical financial statements. This information should be read
in conjunction with such financial statements, including the
notes thereto, and Managements Discussion and
Analysis of Financial Condition and Results of Operations
included herein or in previous filings with the Securities and
Exchange Commission.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004(1) | |
|
2003(1) | |
|
2002(1) | |
|
2001(1) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollar amounts in thousands, except per share data) | |
OPERATING DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$ |
1,521,523 |
|
|
$ |
1,376,077 |
|
|
$ |
1,307,906 |
|
|
$ |
1,193,224 |
|
|
$ |
1,103,842 |
|
Total expenses
|
|
|
(1,222,082 |
) |
|
|
(1,074,010 |
) |
|
|
(919,753 |
) |
|
|
(759,956 |
) |
|
|
(742,064 |
) |
Operating income
|
|
|
299,441 |
|
|
|
302,067 |
|
|
|
388,153 |
|
|
|
433,268 |
|
|
|
361,778 |
|
Income (loss) from continuing operations
|
|
|
(27,897 |
) |
|
|
53,975 |
|
|
|
61,668 |
|
|
|
138,221 |
|
|
|
86,912 |
|
Income from discontinued operations, net
|
|
|
98,879 |
|
|
|
213,479 |
|
|
|
97,189 |
|
|
|
30,825 |
|
|
|
20,440 |
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
(3,957 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
70,982 |
|
|
|
263,497 |
|
|
|
158,857 |
|
|
|
169,046 |
|
|
|
107,352 |
|
Net income attributable to preferred stockholders
|
|
|
87,948 |
|
|
|
88,804 |
|
|
|
93,565 |
|
|
|
93,558 |
|
|
|
90,331 |
|
Net income (loss) attributable to common stockholders
|
|
|
(16,966 |
) |
|
|
174,693 |
|
|
|
65,292 |
|
|
|
75,488 |
|
|
|
17,021 |
|
OTHER INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated properties (end of period)
|
|
|
619 |
|
|
|
676 |
|
|
|
679 |
|
|
|
728 |
|
|
|
557 |
|
Total consolidated apartment units (end of period)
|
|
|
158,548 |
|
|
|
169,932 |
|
|
|
174,172 |
|
|
|
187,506 |
|
|
|
157,256 |
|
Total unconsolidated properties (end of period)
|
|
|
264 |
|
|
|
330 |
|
|
|
441 |
|
|
|
511 |
|
|
|
569 |
|
Total unconsolidated apartment units (end of period)
|
|
|
35,269 |
|
|
|
44,728 |
|
|
|
62,823 |
|
|
|
73,924 |
|
|
|
91,512 |
|
Units managed for others (end of period)(2)
|
|
|
46,667 |
|
|
|
49,074 |
|
|
|
50,565 |
|
|
|
56,722 |
|
|
|
31,520 |
|
Earnings (loss) per common share basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations (net of income
attributable to preferred stockholders)
|
|
$ |
(1.23 |
) |
|
$ |
(0.37 |
) |
|
$ |
(0.34 |
) |
|
$ |
0.52 |
|
|
$ |
(0.05 |
) |
|
Net income (loss) attributable to common stockholders
|
|
$ |
(0.18 |
) |
|
$ |
1.88 |
|
|
$ |
0.70 |
|
|
$ |
0.88 |
|
|
$ |
0.23 |
|
Earnings (loss) per common share diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations (net of income
attributable to preferred stockholders)
|
|
$ |
(1.23 |
) |
|
$ |
(0.37 |
) |
|
$ |
(0.34 |
) |
|
$ |
0.51 |
|
|
$ |
(0.05 |
) |
|
Net income (loss) attributable to common stockholders
|
|
$ |
(0.18 |
) |
|
$ |
1.88 |
|
|
$ |
0.70 |
|
|
$ |
0.87 |
|
|
$ |
0.23 |
|
Dividends declared per common share
|
|
$ |
3.00 |
|
|
$ |
2.40 |
|
|
$ |
2.84 |
|
|
$ |
3.28 |
|
|
$ |
3.16 |
|
BALANCE SHEET INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, net of accumulated depreciation
|
|
$ |
8,751,707 |
|
|
$ |
8,228,451 |
|
|
$ |
7,633,103 |
|
|
$ |
7,464,431 |
|
|
$ |
5,576,054 |
|
Total assets
|
|
|
10,016,751 |
|
|
|
10,072,241 |
|
|
|
10,087,394 |
|
|
|
10,309,101 |
|
|
|
8,300,672 |
|
Total indebtedness
|
|
|
6,284,243 |
|
|
|
5,618,831 |
|
|
|
4,839,462 |
|
|
|
5,224,147 |
|
|
|
3,882,641 |
|
Stockholders equity
|
|
|
2,716,103 |
|
|
|
3,008,160 |
|
|
|
2,860,657 |
|
|
|
3,163,387 |
|
|
|
2,710,615 |
|
|
|
(1) |
Certain reclassifications have been made to conform to the 2005
presentation. These reclassifications primarily represent
presentation changes related to discontinued operations
resulting from the 2002 adoption of Statement of Financial
Accounting Standards No. 144. |
|
(2) |
In 2005, 2004, 2003 and 2002, includes approximately 41,421,
41,233, 39,428 and 45,187 units, respectively, for which we
provide asset management services only, although in certain
cases we may indirectly own generally less than one percent of
the operations of such properties through a partnership
syndication or other fund. |
19
|
|
Item 7. |
Managements Discussion and Analysis of Financial
Condition and Results of Operations |
Executive Overview
We are a self-administered and self-managed real estate
investment trust, or REIT, engaged in the ownership,
acquisition, management and redevelopment of apartment
properties. Our property operations are characterized by
diversification of product, location and price point. As of
December 31, 2005, we owned or managed 1,370 apartment
properties containing 240,484 units located in 47 states, the
District of Columbia and Puerto Rico. Our primary sources of
income and cash are rents associated with apartment leases.
The key financial indicators that we use in managing our
business and in evaluating our financial condition and operating
performance are: Funds From Operations, or FFO; FFO less
spending for Capital Replacements, or AFFO; same store property
operating results; net operating income; net operating income
less spending for Capital Replacements, or Free Cash Flow;
financial coverage ratios; and leverage as shown on our balance
sheet. These terms are defined and described in the sections
captioned Funds From Operations and Capital
Expenditures below. The key macro-economic factors and
non-financial indicators that affect our financial condition and
operating performance are: rates of job growth; single-family
and multifamily housing starts; and interest rates.
Because our operating results depend primarily on income from
our properties, the supply and demand for apartments influences
our operating results. Additionally, the level of expenses
required to operate and maintain our properties, the pace and
price at which we redevelop, acquire and dispose of our
apartment properties, and the volume and timing of fee
transactions affect our operating results. Our cost of capital
is affected by the conditions in the capital and credit markets
and the terms that we negotiate for our equity and debt
financings.
Our focus in 2005 has been to increase revenue and implement
cost management and productivity initiatives, which includes
centralizing purchasing, restructuring business processes, using
technology to increase efficiency and implementing structured
monthly reporting to identify issues and improve effectiveness
of spending. We believe that our efforts are having their
intended effect, are resulting in a positive trend in certain
operating results and are the foundation for improved long-term
operating results. These initiatives and others have also
resulted in improved asset quality, and we will continue to seek
opportunities to reinvest in our properties through capital
expenditures and to manage our portfolio through property sales
and acquisitions.
For 2006, our focus will include the following: continue to
improve operations so that customer satisfaction and occupancy
increase to bring improved profitability; upgrade the quality of
our portfolio through portfolio management and redevelopment;
increase efficiency through improved business processes and
automation; improve balance sheet flexibility; minimize our cost
of capital in the face of rising interest rates; and monetize a
portion of the value inherent in our properties with increased
entitlements.
The following discussion and analysis of the results of our
operations and financial condition should be read in conjunction
with the financial statements.
Results of Operations
We reported net income of $71.0 million and net loss
attributable to common stockholders of $17.0 million for
the year ended December 31, 2005, compared to net income of
$263.5 million and net income attributable to common
stockholders of $174.7 million for the year ended
December 31, 2004, decreases of $192.5 million and
$191.7 million, respectively. These decreases were
principally due to the following items, all of which are
discussed in further detail within this section:
|
|
|
|
|
a decrease in income from discontinued operations, primarily
related to lower net gains on dispositions of real estate; |
|
|
|
a decrease in net gain on disposition of real estate related to
unconsolidated entities and other, primarily related to a 2004
gain on sale of land; |
20
|
|
|
|
|
an increase in depreciation and amortization expense; |
|
|
|
an increase in interest expense; and |
|
|
|
an increase in general and administrative expenses. |
These decreases were partially offset by an increase in net
operating income associated with property operations, which
included increases related to acquisition, newly consolidated
and same store properties.
We reported net income of $263.5 million and net income
attributable to common stockholders of $174.7 million for
the year ended December 31, 2004, compared to net income of
$158.9 million and net income attributable to common
stockholders of $65.3 million for the year ended
December 31, 2003, increases of $104.6 million and
$109.4 million, respectively. These increases were
principally due to the following items, all of which are
discussed in further detail within this section:
|
|
|
|
|
an increase in net gain on disposition of real estate (including
the gain recognized in discontinued operations and the gain
related to unconsolidated entities and other); and |
|
|
|
an increase in activity fees and asset management revenues. |
These increases were partially offset by:
|
|
|
|
|
an overall decline in net operating income, which included a
decline in same store net operating results, partially offset by
increases related to acquisition and newly consolidated
properties; |
|
|
|
an increase in general and administrative expenses; |
|
|
|
an increase in interest expense; and |
|
|
|
an increase in depreciation and amortization expense. |
The following paragraphs discuss these and other items affecting
the results of our operations in more detail.
|
|
|
Rental Property Operations |
Our operating income is primarily generated from the operations
of our consolidated properties. The principal components within
our total consolidated property operations are: consolidated
same store properties, which consist of all conventional
properties that were owned (and not classified as held for sale)
and managed by us, stabilized and consolidated for all
comparable periods presented; and other consolidated entities,
which primarily include acquisition, newly consolidated,
affordable and redevelopment properties.
The following table summarizes the overall performance of our
consolidated properties for the years ended December 31,
2005, 2004 and 2003 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Rental and other property revenues
|
|
$ |
1,459,646 |
|
|
$ |
1,308,815 |
|
|
$ |
1,249,716 |
|
Property operating expenses
|
|
|
705,505 |
|
|
|
632,512 |
|
|
|
553,482 |
|
|
|
|
|
|
|
|
|
|
|
Net operating income
|
|
$ |
754,141 |
|
|
$ |
676,303 |
|
|
$ |
696,234 |
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2005 compared to the year
ended December 31, 2004, net operating income for our
consolidated property operations increased by
$77.8 million, or 11.5%. This increase was principally due
to a $39.3 million increase in consolidated same store net
operating income (see further discussion of same store results
under the heading Conventional Same Store Property
Operating Results); a $21.3 million increase related
to operations of acquisition properties, which were principally
comprised of Palazzo East at Park La Brea and five other
properties purchased in 2005 and The Palazzo at Park La Brea and
10 other properties purchased in 2004; an $18.0 million
increase related to operations of newly consolidated properties,
which are properties that had been previously unconsolidated and
accounted for by the equity method
21
(21 properties first consolidated in 2005 and 42 properties
first consolidated in 2004, which includes 24 properties that
were consolidated due to the adoption of FASB Interpretation
No. 46, Consolidation of Variable Interest Entities,
or FIN 46,); a $3.9 million increase related to
operations of our affordable properties; and a $2.7 million
increase related to the completion of certain redevelopment
properties. These increases were offset by $6.4 million of
increased property management expenses and $3.3 million of
higher net casualty losses in 2005 as compared to 2004,
primarily relating to greater hurricane and tropical storm
damage that occurred in 2005.
For the year ended December 31, 2004, compared to the year
ended December 31, 2003, net operating income for our
consolidated property operations decreased by
$19.9 million, or 2.9%. This decrease was principally due
to a $40.3 million decrease in consolidated same store net
operating income (see further discussion of same store results
under the heading Conventional Same Store Property
Operating Results). Additionally, there was a
$6.6 million decrease related to net casualty losses and
other costs primarily resulting from hurricanes and tropical
storms in the third quarter of 2004, which damaged over 100 of
our properties and $4.0 million in higher property
management expenses. These decreases were offset by an
$18.2 million increase related to operations of newly
consolidated properties, which are properties that had been
previously unconsolidated and accounted for by the equity method
(42 properties first consolidated in 2004 and 12 properties that
were first consolidated after the first quarter of 2003) and a
$16.0 million increase related to operations of acquisition
properties, which were principally comprised of The Palazzo at
Park La Brea and 10 other properties purchased in 2004, and
three properties purchased in 2003.
Conventional Same Store Property Operating Results
Same store operating results is a key indicator we use to assess
the performance of our property operations and to understand the
period over period operations of a consistent portfolio of
properties. We define same store properties as
conventional properties (i) that we manage, (ii) in
which our ownership interest exceeds 10%, (iii) the
operations of which have been stabilized for all periods
presented and (iv) that have not been classified as held
for sale. Our share reflects Aimcos ownership share before
minority interest in the Aimco Operating Partnership. To ensure
comparability, the information for all periods shown is based on
our ownership in the most current period presented in each
table. The following tables summarize the conventional rental
property operations on a same store basis (which is
not in accordance with generally accepted accounting principles,
or GAAP) and reconcile them to consolidated rental property
operations (which is in accordance with GAAP) described in the
above comparative discussions (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
|
|
| |
|
|
|
|
2005 | |
|
2004 | |
|
Change | |
|
|
| |
|
| |
|
| |
Our share of same store revenues
|
|
$ |
999,383 |
|
|
$ |
941,731 |
|
|
|
6.1 |
% |
Less: Our share of same store expenses
|
|
|
443,112 |
|
|
|
418,221 |
|
|
|
6.0 |
% |
|
|
|
|
|
|
|
|
|
|
Our share of same store net operating income
|
|
|
556,271 |
|
|
|
523,510 |
|
|
|
6.3 |
% |
Adjustments to reconcile same store net operating income to real
estate segment net operating income(1)
|
|
|
197,870 |
|
|
|
152,793 |
|
|
|
29.5 |
% |
|
|
|
|
|
|
|
|
|
|
Real estate segment net operating income
|
|
$ |
754,141 |
|
|
$ |
676,303 |
|
|
|
11.5 |
% |
|
|
|
|
|
|
|
|
|
|
Same store statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Properties
|
|
|
458 |
|
|
|
458 |
|
|
|
|
|
|
Apartment units
|
|
|
131,491 |
|
|
|
131,491 |
|
|
|
|
|
|
Average physical occupancy
|
|
|
92.2 |
% |
|
|
89.3 |
% |
|
|
2.9 |
% |
|
Average rent/unit/month
|
|
$ |
762 |
|
|
$ |
746 |
|
|
|
2.1 |
% |
|
|
(1) |
Includes: (i) minority partners share of
consolidated, less our share of unconsolidated, property
revenues and property operating expenses (at 2005 ownership);
(ii) property revenues and property operating expenses
related to consolidated properties other than same store
properties (e.g., affordable, acquisition and |
22
|
|
|
redevelopment properties); and (iii) eliminations and other
adjustments and reclassifications made in accordance with GAAP. |
For the year ended December 31, 2005, compared to the year
ended December 31, 2004, our share of same store net
operating income increased $32.8 million, or 6.3%. Revenues
increased $57.7 million, or 6.1%, primarily due to higher
occupancy (up 2.9%), higher average rent (up $16 per unit) and
lower bad debt. Expenses increased by $24.9 million, or
6.0%, primarily due to: an increase of $9.1 million in
compensation expense related to increased staffing levels to
support our initiatives to improve customer service; a
$7.2 million increase in utilities due primarily to higher
natural gas rates; a $5.5 million increase in real estate
taxes; and $2.4 million of increases primarily related to
turnover expenses associated with our efforts to increase
occupancy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
|
|
| |
|
|
|
|
2004 | |
|
2003 | |
|
Change | |
|
|
| |
|
| |
|
| |
Our share of same store revenues
|
|
$ |
1,005,095 |
|
|
$ |
1,011,323 |
|
|
|
(0.6 |
)% |
Less: Our share of same store expenses
|
|
|
441,413 |
|
|
|
417,281 |
|
|
|
5.8 |
% |
|
|
|
|
|
|
|
|
|
|
Our share of same store net operating income
|
|
|
563,682 |
|
|
|
594,042 |
|
|
|
(5.1 |
)% |
Adjustments to reconcile same store net operating income to real
estate segment net operating income(1)
|
|
|
112,621 |
|
|
|
102,192 |
|
|
|
10.2 |
% |
|
|
|
|
|
|
|
|
|
|
Real estate segment net operating income
|
|
$ |
676,303 |
|
|
$ |
696,234 |
|
|
|
(2.9 |
)% |
|
|
|
|
|
|
|
|
|
|
Same store statistics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Properties
|
|
|
524 |
|
|
|
524 |
|
|
|
|
|
|
Apartment units
|
|
|
147,070 |
|
|
|
147,070 |
|
|
|
|
|
|
Average physical occupancy
|
|
|
90.3 |
% |
|
|
91.9 |
% |
|
|
(1.6 |
)% |
|
Average rent/unit/month
|
|
$ |
721 |
|
|
$ |
721 |
|
|
|
|
|
|
|
(1) |
Includes: (i) minority partners share of
consolidated, less our share of unconsolidated, property
revenues and property operating expenses (at 2004 ownership);
(ii) property revenues and property operating expenses
related to consolidated properties other than same store
properties (e.g., affordable, acquisition and redevelopment
properties); and (iii) eliminations and other adjustments
and reclassifications made in accordance with GAAP. |
For the year ended December 31, 2004, compared to the year
ended December 31, 2003, our share of same store net
operating income decreased $30.4 million, or 5.1%. Revenues
decreased $6.2 million, or 0.6%, primarily due to lower
occupancy (down 1.6%), offset by higher utility reimbursements
from residents and lower bad debt expense. Expenses increased by
$24.1 million, or 5.8%, primarily due to: an increase of
$20.0 million in compensation and benefit expense related
to a new employee health plan, merit increases and increased
staffing levels; an increase of $4.3 million in utilities
due to the increase in the cost of natural gas; and an increase
of $3.9 million in marketing and administrative expenses
associated with our efforts to increase occupancy. These
increases were partially offset by a decrease in property taxes
related to successful appeals and changes in estimates related
to assessments.
We earn income from property management primarily from certain
unconsolidated real estate partnerships for which we are the
general partner. The income is primarily in the form of fees
generated through property management and other associated
activities. Reported revenue from property management decreases
as we consolidate real estate partnerships because it is
eliminated in consolidation. We expect this trend to continue as
we increase our ownership in more of these partnerships or
otherwise determine that consolidation is required by GAAP.
Additionally, our revenue decreases as properties within our
unconsolidated real estate partnerships are sold. Offsetting the
revenue earned in property management are the direct expenses
associated with property management.
23
The following table summarizes the overall performance of our
property management business for the years ended
December 31, 2005, 2004 and 2003 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Property management revenues, primarily from affiliates
|
|
$ |
24,528 |
|
|
$ |
32,461 |
|
|
$ |
37,992 |
|
Property management expenses
|
|
|
7,292 |
|
|
|
9,789 |
|
|
|
8,419 |
|
|
|
|
|
|
|
|
|
|
|
Net operating income from property management
|
|
$ |
17,236 |
|
|
$ |
22,672 |
|
|
$ |
29,573 |
|
|
|
|
|
|
|
|
|
|
|
For the year ended December 31, 2005, compared to the year
ended December 31, 2004, net operating income from property
management decreased by $5.4 million, or 24.0%. For the
year ended December 31, 2004, compared to the year ended
December 31, 2003, net operating income from property
management decreased by $6.9 million, or 23.3%. In both
periods the decreases were principally due to an increase in the
number of consolidated real estate partnerships (resulting from
increased ownership and GAAP consolidation requirements), which
required elimination of fee income and associated
property-operating expense related to such partnerships and the
sales of properties within our unconsolidated partnerships (35
properties in 2005, 53 properties in 2004 and 37 properties in
2003) that had previously generated property management revenues.
|
|
|
Activity Fees and Asset Management |
Activity fees are generated from transactional activity
including tax credit syndications and redevelopments,
dispositions, and refinancings. These transactions occur on
varying timetables, thus the income varies from period to
period. The majority of these fees are earned in connection with
transactions related to affordable properties within the Aimco
Capital portfolio. We have a large number of affiliated real
estate partnerships for which we have identified a pipeline of
transactional opportunities. As a result, we view activity fees
as a predictable part of our core business strategy. Asset
management revenue is from the financial management of
partnerships, rather than management of day-to-day property
operations. Asset management revenue includes deferred asset
management fees that are recognized once a transaction or
improvement in operations has occurred thereby generating
available cash. Activity and asset management expenses are the
direct expenses associated with transactional activities and
asset management.
The following table summarizes the operating results of our
transactional and asset management activities for the years
ended December 31, 2005, 2004 and 2003 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Activity fees and asset management revenues, primarily from
affiliates
|
|
$ |
37,349 |
|
|
$ |
34,801 |
|
|
$ |
20,198 |
|
Activity and asset management expenses
|
|
|
10,606 |
|
|
|
11,802 |
|
|
|
8,367 |
|
|
|
|
|
|
|
|
|
|
|
Net operating income from activity fees and asset management
|
|
$ |
26,743 |
|
|
$ |
22,999 |
|
|
$ |
11,831 |
|
|
|
|
|
|
|
|
|
|
|
Included in the activity fees and asset management revenues,
primarily from affiliates for the years ended December 31,
2005, 2004 and 2003, were $33.3 million, $30.3 million
and $18.9 million, respectively, of fees related to
affordable properties within the Aimco Capital portfolio.
For the year ended December 31, 2005, compared to the year
ended December 31, 2004, net operating income from activity
fees and asset management increased $3.7 million, or 16.3%.
This overall increase was principally a result of increased
activity fees related to syndication and developer activities of
$6.0 million and $3.7 million, respectively, as well
as a $1.2 million decrease in expenses associated with
these activities. Additionally, we received $3.1 million in
promote distributions from an unconsolidated partnership, as a
result of us, as general partner, achieving financial returns to
the limited partners in excess of established targets. These
increases were offset by a $5.2 million decrease in asset
management fees and decreases of $3.3 million and
$1.9 million in activity fees related to disposition and
refinancing activities, respectively.
24
For the year ended December 31, 2004, compared to the year
ended December 31, 2003, net operating income from activity
fees and asset management increased by $11.2 million, or
94.4%. This overall increase was principally a result of
increased activity fees related to disposition, refinancing and
developer activities of $7.3 million, $2.3 million and
$3.0 million, respectively, due to a greater number of
transactions in 2004 than in 2003. Additionally, there was an
increase of $2.9 million related to the recognition of
deferred asset management fees resulting from closed
transactions and improved operations. These increases were
offset by a $2.1 million decrease in syndication fees and
$3.4 million in higher expenses associated with these
activities.
|
|
|
Depreciation and Amortization |
For the year ended December 31, 2005, compared to the year
ended December 31, 2004, depreciation and amortization
increased $71.5 million, or 21.0%. This increase was
principally due to: $34.6 million of additional
depreciation on certain real estate assets where the
depreciation was adjusted prospectively (see Impairment of
Long-Lived Assets in Note 2 of the consolidated financial
statements in Item 8); $13.8 million and
$8.3 million of additional depreciation related to newly
consolidated and acquisition properties, respectively; and
$11.0 million from the completion of certain redevelopment
properties. Additionally, $4.3 million of the increase was
due to a change in estimated useful lives that apply to
capitalized payroll and certain indirect costs (see Capital
Expenditures and Related Depreciation in Note 2 of the
consolidated financial statements in Item 8).
For the year ended December 31, 2004, compared to the year
ended December 31, 2003, depreciation and amortization
increased $32.5 million, or 10.5%. This increase was
principally due to $8.5 million and $7.2 million of
additional depreciation related to the newly consolidated and
acquisition properties, respectively, as well as
$9.9 million from the completion of certain redevelopment
properties. Additionally, $5.9 million of the increase
resulted from additional depreciation on certain real estate
assets where the depreciation was adjusted prospectively (see
Impairment of Long-Lived Assets in Note 2 of the
consolidated financial statements in Item 8).
|
|
|
General and Administrative Expenses |
For the year ended December 31, 2005, compared to the year
ended December 31, 2004, general and administrative
expenses increased $15.4 million, or 19.9%. This increase
was principally due to $14.1 million in higher compensation
related to increased staffing levels, increased health care
costs, and transition costs associated with the chief financial
and chief accounting officer positions. Additionally, at the end
of 2005 there was $0.6 million in severance costs related
to the restructuring of regional operating centers as a result
of property dispositions.
For the year ended December 31, 2004, compared to the year
ended December 31, 2003, general and administrative
expenses increased $29.1 million, or 60.3%. This increase
was principally due to: $15.5 million in higher
compensation related to increased staffing levels, merit
increases and variable compensation; $7.7 million related
to increased health insurance costs and the effect of a
favorable change in 2003 related to our accrual for insurance
claims incurred but not reported (IBNR); $3.2 million in
increased amortization of restricted stock and stock option
compensation; and $3.1 million in legal costs and
compliance costs primarily related to the internal control
reporting requirements of Section 404 of the Sarbanes-Oxley
Act of 2002.
|
|
|
Other Expenses (Income), Net |
Other expenses (income), net includes income tax
provision/benefit, franchise taxes, risk management activities
related to our unconsolidated partnerships and partnership
expenses.
For the year ended December 31, 2005 compared to the year
ended December 31, 2004, other expenses (income), net
changed $8.2 million from expense of $1.9 million in
2004 to income of $6.3 million in 2005. This change was
principally due to an $11.4 million higher income tax
benefit recognized in 2005 as compared to 2004, reflecting
increased losses of our taxable REIT subsidiaries (see further
discussion in Note 10 of the consolidated financial
statements in Item 8). In the year ended December 31,
2005, there was a tax benefit of $18.6 million recorded, as
compared to $7.2 million in the year ended
December 31, 2004. Additionally, we had higher income
associated with our risk management activities, primarily due to
better workers compensation
25
claim experience as a result of more focused loss prevention
measures. These increases in other income were partially offset
by $3.8 million of higher partnership expenses primarily
related to increases in professional fees.
For the year ended December 31, 2004, compared to the year
ended December 31, 2003, other expenses (income), net
changed $8.9 million from income of $7.0 million in
2003 to expense of $1.9 million in 2004. This change was
principally due to a $10.8 million lower income tax benefit
recognized in 2004 as compared to 2003, due primarily to an
$8.0 million benefit related to the reversal of a deferred
income tax asset valuation allowance in 2003 (see further
discussion in Note 10 of the consolidated financial
statements in Item 8). In the year ended December 31,
2004, there was a tax benefit of $7.2 million recorded, as
compared to $18.0 million in the year ended
December 31, 2003.
Interest income consists primarily of interest and accretion on
general partner notes receivable from our unconsolidated real
estate partnerships. Transactions that result in accretion occur
on varying timetables and thus the income generated may vary
from period to period.
For the year ended December 31, 2005, as compared to the
year ended December 31, 2004, interest income decreased
$0.9 million, or 2.7%. This decrease was principally a
result of $3.8 million in lower accretion income, partially
offset by higher interest income from money market and
interest-bearing accounts due to increased interest rates and
higher cash balances.
For the year ended December 31, 2004, as compared to the
year ended December 31, 2003, interest income increased
$7.6 million, or 30.9%. This increase was principally a
result of $5.0 million in higher interest due from general
partner notes receivable, and $3.0 million in higher
accretion income.
For the year ended December 31, 2005, compared to the year
ended December 31, 2004, interest expense, which includes
the amortization of deferred financing costs, increased
$25.8 million, or 7.5%. This increase was principally due
to: $16.0 million and $5.0 million resulting from
interest on the additional debt related to acquisition and newly
consolidated properties, respectively; $17.7 million due to
increased borrowings and increased interest rates on corporate
and variable rate property debt and other items. These increases
were partially offset by: $4.8 million in lower
amortization of loan costs, primarily due to corporate debt
restructuring in 2004; $8.5 million in higher capitalized
interest due to increased redevelopment activity; and a
$2.1 million decrease related to the redemption of
mandatorily redeemable preferred securities in 2004 and early
2005.
For the year ended December 31, 2004, compared to the year
ended December 31, 2003, interest expense increased
$24.8 million, or 7.8%. This increase was principally due
to: $9.9 million resulting from interest on the additional
debt related to the newly consolidated properties;
$9.6 million resulting from interest on the additional debt
related to acquisition properties; and a $4.7 million
decrease in capitalized interest due to redevelopment properties
being placed in service. Additionally, an $8.8 million
increase related to the credit facility and term loan (of which
$1.8 million was associated with the write-off of deferred
loan costs related to the November 2004 modification of the
credit facility and term loan and $0.8 million related to
the payoff of the indebtedness incurred to complete the
acquisition of Casden Properties, Inc) due to higher average
principal balances along with a higher weighted average interest
rate. The November 2004 modification reduced the spread over
LIBOR by an average of 1.25%, which has favorably impacted
interest expense related to our revolving credit facility and
$300 million term loan. These increases were partially
offset by lower weighted average effective interest rates on
mortgage debt due to refinancings that occurred in 2003 and 2004.
|
|
|
Deficit Distributions to Minority Partners |
When real estate partnerships consolidated in our financial
statements make cash distributions to partners in excess of the
carrying amount of the minority interest, we record a charge
equal to the amount of such distribution, even though there is
no economic effect or cost.
26
For the year ended December 31, 2005, as compared to the
year ended December 31, 2004, deficit distributions to
minority partners decreased $5.9 million, or 33.1%. For the
year ended December 31, 2004, as compared to the year ended
December 31, 2003, deficit distributions to minority
partners decreased $2.4 million, or 11.6%. The decrease in
both periods was due to reduced levels of distributions being
made by the consolidated real estate partnerships as a result of
lower refinancing activity and decreased operating results, as
well as our increased ownership of such partnerships.
|
|
|
Gain on Dispositions of Real Estate Related to
Unconsolidated Entities and Other |
Gain on dispositions of real estate related to unconsolidated
entities and other includes our share of gain related to
dispositions of real estate within our unconsolidated real
estate partnerships, gain on dispositions of land and other
non-depreciable assets and costs related to asset disposal
activities.
For the year ended December 31, 2005, as compared to the
year ended December 31, 2004, gain on dispositions of real
estate related to unconsolidated entities and other decreased
$52.8 million. For the year ended December 31, 2004,
as compared to the year ended December 31, 2003, gain on
dispositions of real estate related to unconsolidated entities
and other increased $66.1 million. The change in both
periods was principally due to a $34.6 million gain on the
sale of a parcel of land located in Florida and a
$17.4 million gain from the sale of one of our
unconsolidated core properties, both of which occurred in 2004.
Changes in the level of gains recognized from period to period
reflect the changing level of our disposition activity from
period to period. Additionally, gains on properties sold are
determined on an individual property basis or in the aggregate
for a group of properties that are sold in a single transaction,
and are not comparable period to period.
|
|
|
Minority Interest in Consolidated Real Estate
Partnerships |
Minority interest in consolidated real estate partnerships
reflects minority partners share of operating results of
consolidated real estate partnerships. This includes the
minority partners share of property management fees,
interest on notes and other amounts eliminated in consolidation
that we charge to such partnerships. For the years ended
December 31, 2005, 2004 and 2003, such minority interests
had a favorable effect on our consolidated operating results.
For the year ended December 31, 2005, as compared to the
year ended December 31, 2004, the benefit from minority
interest in consolidated real estate partnerships decreased
$10.3 million. For the year ended December 31, 2004,
as compared to the year ended December 31, 2003, the
benefit from minority interest in consolidated real estate
partnerships increased $16.6 million. The change in both
periods was driven by property operating results. During 2005 as
compared to 2004 our property operating results improved,
thereby reducing the benefit from minority interest. When
comparing 2004 to 2003 our property operating results declined,
thereby increasing the benefit from minority interest.
|
|
|
Income from Discontinued Operations, Net |
For properties accounted for as held for sale, the results of
operations for properties sold during the period or designated
as held for sale at the end of the period are generally required
to be classified as discontinued operations for all periods
presented (see Note 2 of the consolidated financial
statements in Item 8 for further policy information). The
property-specific components of net earnings that are classified
as discontinued operations include all property-related revenues
and operating expenses, depreciation expense recognized prior to
the classification as held for sale, property-specific interest
expense to the extent there is secured debt on the property and
the associated minority interest. In addition, any impairment
losses on assets held for sale, and the net gain on the eventual
disposal of properties held for sale are reported as
discontinued operations.
For the years ended December 31, 2005, 2004, and 2003,
income from discontinued operations, net totaled
$98.9 million, $213.5 million and $97.2 million,
respectively, which includes a loss from operations of
$2.0 million in 2005 and income from operations of
$9.2 million and $21.4 million in 2004 and 2003,
respectively. In 2005, the income from operations included the
operating results of 91 properties and one
27
partnership that were sold or classified as held for sale during
2005. In 2004 and 2003, the income from operations included the
operating results of 145 properties and one partnership and 217
properties and one partnership, respectively, that were sold or
classified as held for sale in 2003, 2004 and 2005. Due to
varying number of properties and the timing of sales, the income
from operations is not comparable year to year.
During 2005, we sold 83 properties and one partnership,
resulting in a net gain on sale of approximately
$100.9 million (which is net of $4.5 million of
related income taxes). Additionally, we recognized
$3.8 million in impairment losses on assets sold or held
for sale in 2005 and $14.9 million of net recoveries of
deficit distributions to minority partners. During 2004, we sold
54 properties, resulting in a net gain on sale of approximately
$233.4 million (which is net of $16.0 million of
related income taxes). Additionally, we recognized
$7.3 million in impairment losses on assets sold or held
for sale in 2004 and $3.7 million of net recoveries of
deficit distributions to minority partners. During 2003, we sold
72 properties, resulting in a net gain on sale of approximately
$89.7 million (which is net of $12.1 million of
related taxes). Additionally, we recognized $9.0 million in
impairment losses on assets sold or held for sale in 2003 and
$8.3 million of net recoveries of deficit distributions to
minority partners.
Changes in the level of gains recognized from period to period
reflect the changing level of our disposition activity from
period to period. Additionally, gains on properties sold are
determined on an individual property basis or in the aggregate
for a group of properties that are sold in a single transaction,
and are not comparable period to period. See Note 14 of the
consolidated financial statements in Item 8 for more
details on discontinued operations.
|
|
|
Cumulative Effect of Change in Accounting Principle |
On March 31, 2004, we recorded a $4.0 million
cumulative effect of change in accounting principle related to
the adoption of FIN 46. This charge is attributable to our
recognition of cumulative losses allocable to minority interest
that would otherwise have resulted in minority interest
deficits. See Note 2 of the consolidated financial
statements in Item 8 for further information.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance
with GAAP, which requires us to make estimates and assumptions.
We believe that the following critical accounting policies
involve our more significant judgments and estimates used in the
preparation of our consolidated financial statements.
|
|
|
Impairment of Long-Lived Assets |
Real estate and other long-lived assets to be held and used are
stated at cost, less accumulated depreciation and amortization,
unless the carrying amount of the asset is not recoverable. If
events or circumstances indicate that the carrying amount of a
property may not be recoverable, we make an assessment of its
recoverability by comparing the carrying amount to our estimate
of the undiscounted future cash flows, excluding interest
charges, of the property. If the carrying amount exceeds the
aggregate undiscounted future cash flows, we recognize an
impairment loss to the extent the carrying amount exceeds the
estimated fair value of the property.
Real estate investments are subject to varying degrees of risk.
Several factors may adversely affect the economic performance
and value of our real estate investments. These factors include:
|
|
|
|
|
the general economic climate; |
|
|
|
competition from other apartment communities and other housing
options; |
|
|
|
local conditions, such as loss of jobs or an increase in the
supply of apartments, that might adversely affect apartment
occupancy or rental rates; |
|
|
|
changes in governmental regulations and the related cost of
compliance; |
|
|
|
increases in operating costs (including real estate taxes) due
to inflation and other factors, which may not be offset by
increased rents; |
28
|
|
|
|
|
changes in tax laws and housing laws, including the enactment of
rent control laws or other laws regulating multifamily housing; |
|
|
|
changes in market capitalization rates; and |
|
|
|
the relative illiquidity of such investments. |
Any adverse changes in these and other factors could cause an
impairment in our long-lived assets, including real estate and
investments in unconsolidated real estate partnerships. Based on
periodic tests of recoverability of long-lived assets, for the
year ended December 31, 2005, we recorded impairment losses
of $3.4 million related to properties to be held and used.
For the years ended December 31, 2004 and 2003, we
determined that the carrying amount for our properties to be
held and used was recoverable and, therefore, we did not record
any impairment losses related to such properties.
|
|
|
Notes Receivable and Interest Income
Recognition |
Notes receivable from unconsolidated real estate partnerships
consist primarily of notes receivable from partnerships in which
we are the general partner. The ultimate repayment of these
notes is subject to a number of variables, including the
performance and value of the underlying real estate property and
the claims of unaffiliated mortgage lenders. Our notes
receivable include loans extended by us that we carry at the
face amount plus accrued interest, which we refer to as
par value notes, and loans extended by predecessors
whose positions we generally acquired at a discount, which we
refer to as discounted notes.
We record interest income on par value notes as earned in
accordance with the terms of the related loan agreements. We
discontinue the accrual of interest on such notes when the notes
are impaired, as discussed below, or when there is otherwise
significant uncertainty as to the collection of interest. We
record income on such nonaccrual loans using the cost recovery
method, under which we apply cash receipts first to the recorded
amount of the loan; thereafter, any additional receipts are
recognized as income.
We recognize interest income on discounted notes receivable
based upon whether the amount and timing of collections are both
probable and reasonably estimable. We consider collections to be
probable and reasonably estimable when the borrower has entered
into certain closed or pending transactions (which include real
estate sales, refinancings, foreclosures and rights offerings)
that provide a reliable source of repayment. In such instances,
we recognize accretion income, on a prospective basis using the
effective interest method over the estimated remaining term of
the loans, equal to the difference between the carrying amount
of the discounted notes and the estimated collectible value. We
record income on all other discounted notes using the cost
recovery method. For the year ended December 31, 2005, if
we had not been able to complete certain transactions, our
accretion income would have been lower by $2.5 million.
Accretion income recognized in any given period is based on our
ability to complete transactions to monetize the notes
receivable and the difference between the carrying value and the
estimated collectible value of the notes; therefore, accretion
income varies on a period by period basis and could be lower or
higher than in prior periods.
|
|
|
Allowance for Losses on Notes Receivable |
We assess the collectibility of notes receivable on a periodic
basis, which assessment consists primarily of an evaluation of
cash flow projections of the borrower to determine whether
estimated cash flows are sufficient to repay principal and
interest in accordance with the contractual terms of the note.
We recognize impairments on notes receivable when it is probable
that principal and interest will not be received in accordance
with the contractual terms of the loan. The amount of the
impairment to be recognized generally is based on the fair value
of the partnerships real estate that represents the
primary source of loan repayment. In certain instances where
other sources of cash flow are available to repay the loan, the
impairment is measured by discounting the estimated cash flows
at the loans original effective interest rate.
During the years ended December 31, 2005 and 2004, we
recorded $1.4 million and $1.8 million in net recovery
of impairment losses on notes receivable. During the year ended
December 31, 2003, we identified and recorded
$2.2 million in net impairment losses on notes receivable.
We will continue to evaluate the collectibility
29
of these notes, and we will adjust related allowances in the
future due to changes in market conditions and other factors.
We capitalize costs, including certain indirect costs, incurred
in connection with our capital expenditure activities, including
redevelopment and construction projects, other tangible property
improvements, and replacements of existing property components.
Included in these capitalized costs are payroll costs associated
with time spent by site employees in connection with the
planning, execution and control of all capital expenditure
activities at the property level. We characterize as
indirect costs an allocation of certain department
costs, including payroll, at the regional operating center and
corporate levels that clearly relate to capital expenditure
activities. We capitalize interest, property taxes and insurance
during periods in which redevelopment and construction projects
are in progress. Costs incurred in connection with capital
expenditure activities are capitalized where the costs of the
improvements or replacements exceed $250. We charge to expense
as incurred costs that do not relate to capital expenditure
activities, including ordinary repairs, maintenance, resident
turnover costs and general and administrative expenses. See
Note 2 Capital Expenditures and Related
Depreciation of the consolidated financial statements in
Item 8 for further policy information.
For the years ended December 31, 2005, 2004 and 2003, for
continuing and discontinued operations, we capitalized
$18.1 million, $9.5 million and $14.5 million of
interest costs, respectively, and $53.3 million,
$46.7 million and $45.4 million of site payroll and
indirect costs, respectively.
Funds From Operations
Funds From Operations, or FFO, is a non-GAAP financial measure
that we believe, when considered with the financial statements
determined in accordance with GAAP, is helpful to investors in
understanding our performance because it captures features
particular to real estate performance by recognizing that real
estate generally appreciates over time or maintains residual
value to a much greater extent than do other depreciable assets
such as machinery, computers or other personal property. The
Board of Governors of the National Association of Real Estate
Investment Trusts, or NAREIT, defines FFO as net income (loss),
computed in accordance with GAAP, excluding gains from sales of
depreciable property, plus depreciation and amortization, and
after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint
ventures are calculated to reflect FFO on the same basis. We
compute FFO for all periods presented in accordance with the
guidance set forth by NAREITs April 1, 2002 White
Paper, which we refer to as the White Paper. We calculate FFO
(diluted) by subtracting redemption related preferred stock
issuance costs and dividends on preferred stock and adding back
dividends/distributions on dilutive preferred securities and
interest expense on dilutive mandatorily redeemable convertible
preferred securities. FFO should not be considered an
alternative to net income or net cash flows from operating
activities, as determined in accordance with GAAP, as an
indication of our performance or as a measure of liquidity. FFO
is not necessarily indicative of cash available to fund future
cash needs. In addition, although FFO is a measure used for
comparability in assessing the performance of real estate
investment trusts, there can be no assurance that our basis for
computing FFO is comparable with that of other real estate
investment trusts.
30
For the years ended December 31, 2005, 2004 and 2003, our
FFO is calculated as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Net income (loss) attributable to common
stockholders(1)
|
|
$ |
(16,966 |
) |
|
$ |
174,693 |
|
|
$ |
65,292 |
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization(2)
|
|
|
412,075 |
|
|
|
340,536 |
|
|
|
308,080 |
|
|
Depreciation and amortization related to non-real estate assets
|
|
|
(17,700 |
) |
|
|
(18,349 |
) |
|
|
(20,370 |
) |
|
Depreciation of rental property related to minority
partners interest(3)
|
|
|
(37,389 |
) |
|
|
(40,581 |
) |
|
|
(23,626 |
) |
|
Depreciation of rental property related to unconsolidated
entities
|
|
|
20,661 |
|
|
|
22,360 |
|
|
|
25,817 |
|
|
Gain on dispositions of real estate related to unconsolidated
entities and other
|
|
|
(16,489 |
) |
|
|
(69,241 |
) |
|
|
(3,178 |
) |
|
Gain on dispositions of non-depreciable assets
|
|
|
2,481 |
|
|
|
38,977 |
|
|
|
|
|
|
Deficit distributions to minority partners(4)
|
|
|
11,952 |
|
|
|
17,865 |
|
|
|
20,216 |
|
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
3,957 |
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on dispositions of real estate, net of minority
partners interest(3)
|
|
|
(105,417 |
) |
|
|
(249,376 |
) |
|
|
(101,849 |
) |
|
|
Depreciation of rental property, net of minority partners
interest(3)
|
|
|
20,280 |
|
|
|
37,946 |
|
|
|
55,790 |
|
|
|
Recovery of deficit distributions to minority partners, net(4)
|
|
|
(14,941 |
) |
|
|
(3,722 |
) |
|
|
(8,273 |
) |
|
|
Income tax arising from disposals
|
|
|
4,481 |
|
|
|
16,015 |
|
|
|
12,134 |
|
Minority interest in Aimco Operating Partnerships share of
above adjustments
|
|
|
(28,381 |
) |
|
|
(10,289 |
) |
|
|
(29,910 |
) |
Preferred stock dividends
|
|
|
86,825 |
|
|
|
85,315 |
|
|
|
85,920 |
|
Redemption related preferred stock issuance costs
|
|
|
1,123 |
|
|
|
3,489 |
|
|
|
7,645 |
|
|
|
|
|
|
|
|
|
|
|
Funds From Operations
|
|
$ |
322,595 |
|
|
$ |
349,595 |
|
|
$ |
393,688 |
|
Preferred stock dividends
|
|
|
(86,825 |
) |
|
|
(85,315 |
) |
|
|
(85,920 |
) |
Redemption related preferred stock issuance costs
|
|
|
(1,123 |
) |
|
|
(3,489 |
) |
|
|
(7,645 |
) |
Dividends/distributions on dilutive preferred securities
|
|
|
168 |
|
|
|
2,798 |
|
|
|
11,330 |
|
Interest expense on mandatorily redeemable convertible preferred
securities
|
|
|
|
|
|
|
|
|
|
|
987 |
|
|
|
|
|
|
|
|
|
|
|
Funds From Operations attributable to common
stockholders diluted
|
|
$ |
234,815 |
|
|
$ |
263,589 |
|
|
$ |
312,440 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares, common share
equivalents and dilutive preferred securities outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares and equivalents(5)
|
|
|
94,465 |
|
|
|
93,252 |
|
|
|
92,968 |
|
|
Dilutive preferred securities
|
|
|
74 |
|
|
|
1,106 |
|
|
|
3,639 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
94,539 |
|
|
|
94,358 |
|
|
|
96,607 |
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
|
(1) |
Represents the numerator for earnings per common share,
calculated in accordance with GAAP. |
|
(2) |
Includes amortization of management contracts where we are the
general partner. Such management contracts were established in
certain instances where we acquired a general partner interest
in either a consolidated or an unconsolidated partnership.
Because the recoverability of these management contracts depends
primarily on the operations of the real estate owned by the
limited partnerships, we believe it is |
31
|
|
|
consistent with the White Paper to add back such amortization,
as the White Paper directs the add-back of amortization of
assets uniquely significant to the real estate industry. |
|
(3) |
Minority partners interest, means minority
interest in our consolidated real estate partnerships. |
|
(4) |
In accordance with GAAP, deficit distributions to minority
partners are charges recognized in our income statement when
cash is distributed to a non-controlling partner in a
consolidated real estate partnership in excess of the positive
balance in such partners capital account, which is
classified as minority interest on our balance sheet. We record
these charges for GAAP purposes even though there is no economic
effect or cost. Deficit distributions to minority partners occur
when the fair value of the underlying real estate exceeds its
depreciated net book value because the underlying real estate
has appreciated or maintained its value. As a result, the
recognition of expense for deficit distributions to minority
partners represents, in substance, either (a) our
recognition of depreciation previously allocated to the
non-controlling partner or (b) a payment related to the
non-controlling partners share of real estate
appreciation. Based on White Paper guidance that requires real
estate depreciation and gains to be excluded from FFO, we add
back deficit distributions and subtract related recoveries in
our reconciliation of net income to FFO. |
|
(5) |
Represents the denominator for earnings per common
share diluted, calculated in accordance with GAAP,
plus additional common share equivalents that are dilutive for
FFO. |
Liquidity and Capital Resources
Liquidity is the ability to meet present and future financial
obligations either through the sale or maturity of existing
assets or by the acquisition of additional funds through working
capital management. Both the coordination of asset and liability
maturities and effective working capital management are
important to the maintenance of liquidity. Our primary source of
liquidity is cash flow from our operations. Additional sources
are proceeds from property sales and proceeds from refinancings
of existing mortgage loans and borrowings under new mortgage
loans.
Our principal uses for liquidity include normal operating
activities, payments of principal and interest on outstanding
debt, capital expenditures, dividends paid to stockholders and
distributions paid to partners, and acquisitions of, and
investments in, properties. We use our cash provided by
operating activities to meet short-term liquidity needs. In the
event that the cash provided by operating activities is not
sufficient to cover our short-term liquidity demands, we have
additional means, such as short-term borrowing availability and
proceeds from property sales and refinancings, to help us meet
our short-term liquidity demands. We use our revolving credit
facility for general corporate purposes and to fund investments
on an interim basis. We expect to meet our long-term liquidity
requirements, such as debt maturities and property acquisitions,
through long-term borrowings, both secured and unsecured, the
issuance of debt or equity securities (including OP Units), the
sale of properties and cash generated from operations.
At December 31, 2005, we had $161.7 million in cash
and cash equivalents, an increase of $56.4 million from
December 31, 2004, which cash is principally from sales and
refinancing transactions that has yet to be distributed or
applied to the outstanding balance of the revolving credit
facility (see Note 8 to the consolidated financial
statements in Item 8). At December 31, 2005, we had
$284.8 million of restricted cash, primarily consisting of
reserves and escrows held by lenders for bond sinking funds,
capital expenditures, property taxes and insurance. In addition,
cash, cash equivalents and restricted cash are held by
partnerships that are not presented on a consolidated basis. The
following discussion relates to changes in cash due to
operating, investing and financing activities, which are
presented in our Consolidated Statements of Cash Flows in
Item 8.
For the year ended December 31, 2005, our net cash provided
by operating activities of $355.5 million was primarily
from operating income from our consolidated properties, which is
affected primarily by rental rates, occupancy levels and
operating expenses related to our portfolio of properties. Cash
provided by operating activities decreased $10.0 million
compared with the year ended December 31, 2004, driven by
changes in operating assets and liabilities. The changes in
operating assets and liabilities were primarily due to cash used
to
32
reduce current liabilities related to interest and real estate
tax accruals, offset by decreases in accounts receivable related
to improved collections, and decreases in prepaid expense and
restricted cash balances.
For the year ended December 31, 2005, our net cash used in
investing activities of $50.0 million primarily resulted
from investments in our existing real estate assets through
capital spending as well as the acquisition of Palazzo East at
Park La Brea and five other properties (see Note 3 to the
consolidated financial statements in Item 8 for further
information on acquisitions), partially offset by proceeds
received from sales of properties.
Although we hold all of our properties for investment, we sell
properties when they do not meet our investment criteria or are
located in areas that we believe do not justify our continued
investment when compared to alternative uses for our capital.
During the year ended December 31, 2005, we sold 83
consolidated properties and 35 unconsolidated properties. These
properties were sold for an aggregate sales price of
$960.0 million, of which $764.0 million related to the
consolidated properties. The sale of the consolidated properties
generated proceeds totaling $718.4 million, after the
payment of transaction costs. Our share of the total net
proceeds from the sale of the 118 properties, after repayment of
existing debt, payment of transaction costs and distributions to
limited partners, was $331.8 million, of which
$36.4 million related to the unconsolidated properties and
was included in our distributions received from investments in
unconsolidated real estate partnerships. Sales proceeds were
used to repay a portion of our outstanding short-term
indebtedness and for other corporate purposes.
We are currently marketing for sale certain properties that are
inconsistent with our long-term investment strategy.
Additionally, from time to time, we may market certain
properties that are consistent with our long-term investment
strategy but offer attractive returns, such as sales to buyers
who intend to convert the properties to condominiums. Gross
sales proceeds from 2006 dispositions are expected to be
$750 million to $950 million, and we plan to use our
share of the net proceeds from such dispositions to reduce debt,
fund capital expenditures on existing assets, fund property and
partnership acquisitions, redeem preferred securities and for
other operating needs and corporate purposes.
Capital Expenditures
We classify all capital spending as Capital Replacements (which
we refer to as CR), Capital Improvements (which we refer to as
CI), casualties or redevelopment. Non-redevelopment and
non-casualty capitalizable expenditures are apportioned between
CR and CI based on the useful life of the capital item under
consideration and the period we have owned the property (i.e.,
the portion that was consumed during our ownership of the item
represents CR; the portion of the item that was consumed prior
to our ownership represents CI).
For the year ended December 31, 2005, we spent a total of
$89.7 million on CR. These are expenditures that represent
the share of expenditures that are deemed to replace the
consumed portion of acquired capital assets. For the year ended
December 31, 2005, we spent a total of $112.0 million,
$23.9 million and $140.3 million, respectively, on CI,
casualties and redevelopment. CI expenditures represent all
non-redevelopment and non-casualty capital expenditures that are
made to enhance the value, profitability or useful life of an
asset from its original purchase condition. Casualty
expenditures represent capitalized costs incurred in connection
with casualty losses and are associated with the restoration of
the asset. A portion of the restoration costs may be reimbursed
by insurance carriers subject to deductibles associated with
each loss. Redevelopment expenditures represent expenditures
that substantially upgrade the property.
33
The table below details our share of actual spending, on both
consolidated and unconsolidated real estate partnerships, for
CR, CI, casualties and redevelopment for the year ended
December 31, 2005 on a per unit and total dollar basis
(based on approximately 150,200 ownership equivalent units
(excluding non-managed units) weighted for the portion of the
period that we owned the property), and reconciles it to our
Consolidated Statement of Cash Flows for the same period (in
thousands, except per unit amounts).
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual Cost | |
|
Cost Per Unit | |
|
|
| |
|
| |
Capital Replacements Detail:
|
|
|
|
|
|
|
|
|
Building interiors
|
|
$ |
14,453 |
|
|
$ |
96 |
|
|
|
Includes: hot water heaters, kitchen/bath
|
|
|
|
|
|
|
|
|
Building exteriors
|
|
|
13,932 |
|
|
|
93 |
|
|
|
Includes: roofs, exterior painting, electrical, plumbing
|
|
|
|
|
|
|
|
|
Landscaping and grounds
|
|
|
7,509 |
|
|
|
50 |
|
|
|
Includes: parking lot improvements, pool improvements
|
|
|
|
|
|
|
|
|
Turnover related
|
|
|
38,047 |
|
|
|
253 |
|
|
|
Includes: carpet, vinyl, tile, appliance, and fixture
replacements
|
|
|
|
|
|
|
|
|
Capitalized site payroll and indirect costs
|
|
|
15,719 |
|
|
|
105 |
|
|
|
|
|
|
|
|
Our share of Capital Replacements
|
|
$ |
89,660 |
|
|
$ |
597 |
|
|
|
|
|
|
|
|
Capital Replacements:
|
|
|
|
|
|
|
|
|
Conventional
|
|
$ |
83,197 |
|
|
|
|
|
Affordable
|
|
|
6,463 |
|
|
|
|
|
|
|
|
|
|
|
|
Our share of Capital Replacements
|
|
|
89,660 |
|
|
|
|
|
|
|
|
|
|
|
|
Capital Improvements:
|
|
|
|
|
|
|
|
|
Conventional
|
|
|
91,228 |
|
|
|
|
|
Affordable
|
|
|
20,736 |
|
|
|
|
|
|
|
|
|
|
|
|
Our share of Capital Improvements
|
|
|
111,964 |
|
|
|
|
|
|
|
|
|
|
|
|
Casualties:
|
|
|
|
|
|
|
|
|
Conventional
|
|
|
22,537 |
|
|
|
|
|
Affordable
|
|
|
1,380 |
|
|
|
|
|
|
|
|
|
|
|
|
Our share of casualties
|
|
|
23,917 |
|
|
|
|
|
|
|
|
|
|
|
|
Redevelopment:
|
|
|
|
|
|
|
|
|
Conventional
|
|
|
137,311 |
|
|
|
|
|
Affordable
|
|
|
3,021 |
|
|
|
|
|
|
|
|
|
|
|
|
Our share of redevelopment
|
|
|
140,332 |
|
|
|
|
|
|
|
|
|
|
|
|
Our share of capital expenditures
|
|
|
365,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus minority partners share of consolidated spending
|
|
|
90,113 |
|
|
|
|
|
|
Less our share of unconsolidated spending
|
|
|
(12,104 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures per Consolidated Statement of Cash
Flows
|
|
$ |
443,882 |
|
|
|
|
|
|
|
|
|
|
|
|
Included in the above spending for CI, casualties and
redevelopment, was approximately $33.2 million of our share
of capitalized site payroll and indirect costs related to these
activities for the year ended December 31, 2005.
We funded all of the above capital expenditures with cash
provided by operating activities, working capital, property
sales and borrowings under the revolving credit facility.
34
For the year ended December 31, 2005, net cash used in
financing activities of $249.2 million primarily related to
payments on our secured notes payable, payment of our dividends,
and redemptions of the Class D Cumulative Preferred Stock
and Trust Based Convertible Preferred Securities, which we
refer to as TOPRS, partially offset by proceeds from borrowings.
At December 31, 2005 and 2004, we had $5.7 billion in
consolidated mortgage debt outstanding, which included
$33.7 million and $419.8 million, respectively, of
mortgage debt classified within liabilities related to assets
held for sale. During the year ended December 31, 2005, we
refinanced or closed mortgage loans on 68 consolidated
properties generating $591.1 million of proceeds from
borrowings with a weighted average interest rate of 5.02%. Our
share of the net proceeds after repayment of existing debt,
payment of transaction costs and distributions to limited
partners, was $254.1 million. In addition, we closed
mortgage loans on 15 unconsolidated properties, with a weighted
average interest rate of 4.95%. Our share of the net proceeds
from these 15 mortgage loans totaled $26.4 million. We used
our total net proceeds from all loans closed of
$280.5 million for corporate purposes. We intend to
continue to refinance mortgage debt to generate proceeds in
amounts exceeding our scheduled amortizations and maturities.
During the year ended December 31, 2005, we closed five
mortgage loans totaling $130.3 million, with an initial
weighted average interest rate of 3.27%, to finance our
consolidated acquisitions.
|
|
|
Revolving Credit Facility and Term Loans |
We have an Amended and Restated Senior Secured Credit Agreement
with a syndicate of financial institutions, which we refer to as
the Credit Agreement. On June 16, 2005, we amended our
Credit Agreement, to provide for $100.0 million in
additional term loan borrowings. The additional term loan
matures on November 2, 2009 and bears interest at a rate of
either LIBOR plus 1.75% or a base rate (determined by reference
to the federal funds rate or Bank of Americas prime rate)
plus 0.25%. The proceeds from the additional term loan were used
to repay outstanding revolving loans.
The aggregate amount of commitments and loans under the Credit
Agreement is $850.0 million, comprised of
$450.0 million of revolving loan commitments and
$400.0 million in term loans. The term loans mature on
November 2, 2009 and the revolving loans mature on
November 2, 2007. At December 31, 2005, the term loans
had an outstanding principal balance of $400.0 million and
a weighted average interest rate of 6.18% (based on LIBOR plus
2.00% for the original $300.0 million and LIBOR plus 1.75%
for the additional $100.0 million). At December 31,
2005, the revolving loans had an outstanding principal balance
of $217.0 million and a weighted average interest rate of
6.26% (based on various weighted average LIBOR and base rate
borrowings outstanding with various maturities). The amount
available under the revolving credit facility at
December 31, 2005 was $208.3 million (after giving
effect to $24.7 million outstanding for undrawn letters of
credit issued under the revolving credit facility). The proceeds
of revolving loans are generally permitted to be used to fund
working capital and for other corporate purposes. For more
information, see Note 8 of the consolidated financial
statements in Item 8.
During the year ended December 31, 2005, we redeemed all
outstanding shares of Class D Cumulative Preferred Stock
for $31.3 million in cash.
As of December 31, 2005, under our shelf registration
statement, which was declared effective in April 2004, we had
available for issuance approximately $877 million of debt
and equity securities and the Aimco Operating Partnership had
available for issuance $500 million of debt securities.
From time to time we may issue preferred securities in both
public offerings and private placements to generate proceeds to
be used to redeem higher cost preferred securities, to finance
acquisitions of real estate interests and for other corporate
purposes.
35
Our Board of Directors has, from time to time authorized us to
repurchase shares of our outstanding capital stock. In April
2005, our Board of Directors replaced the existing authorization
with a new authorization to repurchase up to a total of eight
million shares of our Common Stock. These repurchases may be
made from time to time in the open market or in privately
negotiated transactions, subject to applicable law. During 2005,
we did not repurchase any shares of our Common Stock.
Contractual Obligations
This table summarizes information contained elsewhere in this
Annual Report regarding payments due under contractual
obligations and commitments as of December 31, 2005
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than | |
|
1-3 | |
|
3-5 | |
|
More than | |
|
|
Total | |
|
One Year | |
|
Years | |
|
Years | |
|
5 Years | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Scheduled long-term debt maturities
|
|
$ |
5,667,243 |
|
|
$ |
541,445 |
|
|
$ |
933,325 |
|
|
$ |
599,105 |
|
|
$ |
3,593,368 |
|
Secured credit facility and term loans
|
|
|
617,000 |
|
|
|
|
|
|
|
217,000 |
|
|
|
400,000 |
|
|
|
|
|
Long-term liabilities related to assets held for sale
|
|
|
33,676 |
|
|
|
1,261 |
|
|
|
2,816 |
|
|
|
3,271 |
|
|
|
26,328 |
|
Redevelopment and other construction commitments
|
|
|
99,591 |
|
|
|
96,704 |
|
|
|
2,887 |
|
|
|
|
|
|
|
|
|
Leases for space occupied
|
|
|
43,743 |
|
|
|
7,784 |
|
|
|
14,663 |
|
|
|
9,925 |
|
|
|
11,371 |
|
Development fee payments(1)
|
|
|
12,500 |
|
|
|
10,000 |
|
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
6,473,753 |
|
|
$ |
657,194 |
|
|
$ |
1,173,191 |
|
|
$ |
1,012,301 |
|
|
$ |
3,631,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The development fee payments above were established in
connection with the acquisition of Casden Properties, Inc. and
our commitment as it relates to the Casden Development Company,
LLC. We agreed to pay $2.5 million per quarter for five
years (up to an aggregate amount of $50.0 million) to
Casden Development Company, LLC as a retainer on account for
redevelopment services on our assets. |
In addition, we may enter into commitments to purchase goods and
services in connection with the operations of our properties.
Those commitments generally have terms of one year or less and
reflect expenditure levels comparable to our historical
expenditures.
In addition to the items set forth in Contractual
Obligations above, we expect to fund any future
acquisitions, additional redevelopment projects and capital
improvements principally with proceeds from property sales
(including tax-free exchange proceeds), short-term borrowings,
debt and equity financings and operating cash flows.
In 2006, we plan to invest between $150 and $200 million in
conventional redevelopment projects that will impact
approximately 70 properties with nearly 30,000 units.
Additionally, in 2006 redevelopment expenditures on affordable
properties will be approximately $80 million, predominantly
funded by third-party tax credit equity, impacting 20 to 25
properties with more than 3,000 units.
Off-Balance Sheet Arrangements
We own general and limited partner interests in unconsolidated
real estate partnerships, in which our total ownership interests
range typically from less than 1% up to 50%. However, based on
the provisions of the relevant partnership agreements, we are
not deemed to have control of these partnerships sufficient to
require or permit consolidation for accounting purposes (see
Note 2 of the consolidated financial statements in
Item 8). There are no lines of credit, side agreements, or
any other derivative financial instruments related to or between
our unconsolidated real estate partnerships and us and no
material exposure to financial guarantees. Accordingly, our
maximum risk of loss related to these unconsolidated real estate
partnerships is limited to the aggregate carrying amount of our
investment in the unconsolidated real estate partnerships and
any outstanding notes
36
receivable as reported in our consolidated financial statements.
See Note 4 of the consolidated financial statements in
Item 8 for additional information on our unconsolidated
real estate partnerships.
|
|
Item 7A. |
Quantitative and Qualitative Disclosures About Market
Risk |
Our primary market risk exposure relates to changes in interest
rates. We are not subject to any foreign currency exchange rate
risk or commodity price risk, or any other material market rate
or price risks. We use predominantly long-term, fixed-rate
non-recourse mortgage debt in order to avoid the refunding and
repricing risks of short-term borrowings. We use short-term debt
financing and working capital primarily to fund short-term uses
and acquisitions and generally expect to refinance such
borrowings with cash from operating activities, property sales
proceeds, long-term debt or equity financings.
We had $2,010.6 million of floating rate debt outstanding
at December 31, 2005 including debt classified within
liabilities related to assets held for sale. Of the total
floating rate debt, the major components were floating rate
tax-exempt bond financing ($726.1 million), floating rate
secured notes ($667.5 million), revolving loans
($217.0 million), and term loans ($400.0 million).
Historically, changes in tax-exempt interest rates have been at
a ratio of less than 1:1 with changes in taxable interest rates.
Floating rate tax-exempt bond financing is benchmarked against
the BMA Index, which since 1981 has averaged 68.0% of 30-day
LIBOR. If this relationship continues, an increase in the 30-day
LIBOR, of 1% (0.68% in tax-exempt interest rates) would result
in our income before minority interests and cash flows being
reduced by $17.8 million on an annual basis. This would be
offset by variable rate interest income earned on certain
assets, including cash and cash equivalents and notes
receivable, as well as interest that is capitalized on a portion
of this variable rate debt incurred in connection with our
redevelopment activities. Considering these offsets, the same
increase in the 30-day LIBOR would result in our income before
minority interests being reduced by $8.9 million on an
annual basis. Comparatively, if the 30-day LIBOR had increased
by 1% in 2004, our income before minority interests would have
been reduced by $6.0 million on an annual basis. The
potential reduction of income before minority interests was
greater in 2005 as compared to 2004 primarily due to higher
floating rate balances resulting from additional borrowings,
primarily related to the additional $100 million term loan,
revolving loans and secured notes.
We believe that the fair value of our floating rate secured
tax-exempt bond debt and floating rate secured long-term debt as
of December 31, 2005 approximate their carrying values. The
fair value for our fixed-rate debt agreements was estimated
based on the market rate for debt with the same or similar
terms. The combined carrying amount of our fixed-rate secured
tax-exempt bonds and fixed-rate secured notes payable at
December 31, 2005 was $4.3 billion compared to the
estimated fair value of $4.4 billion (see Note 2 to
the consolidated financial statements in Item 8). If market
rates for our fixed-rate debt were higher by 1%, the estimated
fair value of our fixed-rate debt would have decreased from
$4.4 billion to $4.1 billion. If market rates for our
fixed-rate debt were lower by 1%, the estimated fair value of
our fixed-rate debt would have increased from $4.4 billion
to $4.8 billion.
|
|
Item 8. |
Financial Statements and Supplementary Data |
The independent registered public accounting firms report,
consolidated financial statements and schedule listed in the
accompanying index are filed as part of this report and
incorporated herein by this reference. See Index to
Financial Statements on page F-1 of this Annual Report.
|
|
Item 9. |
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure |
None.
37
|
|
Item 9A. |
Controls and Procedures |
|
|
|
Disclosure Controls and Procedures |
Our management, with the participation of our chief executive
officer and chief financial officer, has evaluated the
effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the Exchange
Act)) as of the end of the period covered by this report.
Based on such evaluation, our chief executive officer and chief
financial officer have concluded that, as of the end of such
period, our disclosure controls and procedures are adequate.
Managements Report on Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal
control over financial reporting is defined in
Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a
process designed by, or under the supervision of, our principal
executive and principal financial officers and effected by our
Board of Directors, management and other personnel to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures
that:
|
|
|
|
|
pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions
of assets; |
|
|
|
provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures are being made only in accordance
with authorizations of our management and directors; and |
|
|
|
provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of
assets that could have a material effect on the financial
statements. |
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods
are subject to the risks that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control
over financial reporting as of December 31, 2005. In making
this assessment, management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework.
Based on their assessment, management concluded that, as of
December 31, 2005, our internal control over financial
reporting is effective.
Our independent registered public accounting firm has issued an
audit report on managements assessment of our internal
control over financial reporting.
|
|
|
Changes in Internal Control over Financial
Reporting |
There have been no significant changes in our internal control
over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f)) under the Exchange Act) during fourth quarter 2005
that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
38
Report of Independent Registered Public Accounting Firm
Stockholders and Board of Directors of Apartment Investment
and Management Company
We have audited managements assessment, included in the
accompanying Managements Report on Internal Control Over
Financial Reporting, that Apartment Investment and Management
Company (the Company) maintained effective internal
control over financial reporting as of December 31, 2005,
based on criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria).
The Companys management is responsible for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting. Our responsibility is to express an opinion
on managements assessment and an opinion on the
effectiveness of the Companys internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
managements assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, managements assessment that Apartment
Investment and Management Company maintained effective internal
control over financial reporting as of December 31, 2005,
is fairly stated, in all material respects, based on the COSO
criteria. Also, in our opinion, Apartment Investment and
Management Company maintained, in all material respects,
effective internal control over financial reporting as of
December 31, 2005, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Apartment Investment and
Management Company as of December 31, 2005 and 2004, and
the related consolidated statements of income,
stockholders equity, and cash flows for each of the three
years in the period ended December 31, 2005, and our report
dated March 6, 2006 expressed an unqualified opinion
thereon.
Denver, Colorado
March 6, 2006
39
|
|
Item 9B. |
Other Information |
None.
PART III
|
|
Item 10. |
Directors and Executive Officers of the Registrant |
The information required by this item is presented under the
captions Board of Directors and Officers,
Corporate Governance Matters Code of
Ethics and Other Matters
Section 16(a) Beneficial Ownership Reporting
Compliance in the proxy statement for our 2006 annual
meeting of stockholders and is incorporated herein by reference.
|
|
Item 11. |
Executive Compensation |
The information required by this item is presented under the
captions Corporate Governance Matters
Compensation of Directors, Corporate Governance
Matters Compensation and Human Resources Committee
Interlocks and Insider Participation, Compensation
and Human Resources Committee Report to Stockholders,
Summary Compensation Table, Option/ SAR Grants
in Last Fiscal Year, Aggregated Option/ SAR
Exercises in Last Fiscal Year and Fiscal Year-End Option/ SAR
Values, Employment Arrangements and
Stock Price Performance Graph in the proxy statement
for our 2006 annual meeting of stockholders and is incorporated
herein by reference.
|
|
Item 12. |
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters |
The information required by this item is presented under the
captions Security Ownership of Certain Beneficial Owners
and Management and Securities Authorized for
Issuance Under Equity Compensation Plans in the proxy
statement for our 2006 annual meeting of stockholders and is
incorporated herein by reference.
|
|
Item 13. |
Certain Relationships and Related Transactions |
The information required by this item is presented under the
caption Certain Relationships and Related
Transactions in the proxy statement for our 2006 annual
meeting of stockholders and is incorporated herein by reference.
|
|
Item 14. |
Principal Accountant Fees and Services |
The information required by this item is presented under the
caption Principal Accountant Fees and Services in
the proxy statement for our 2006 annual meeting of stockholders
and is incorporated herein by reference.
PART IV
|
|
Item 15. |
Exhibits, Financial Statement Schedules |
(a)(1) The financial statements listed in the Index to
Financial Statements on Page F-1 of this report are filed as
part of this report and incorporated herein by reference.
(a)(2) The financial statement schedule listed in the Index
to Financial Statements on Page F-1 of this report is filed as
part of this report and incorporated herein by reference.
(a)(3) The Exhibit Index is incorporated herein by
reference.
40
INDEX TO EXHIBITS(1)(2)
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
2 |
.1 |
|
Agreement and Plan of Merger, dated as of December 3, 2001,
by and among Apartment Investment and Management Company, Casden
Properties, Inc. and XYZ Holdings LLC (Exhibit 2.1 to
Aimcos Current Report on Form 8-K, filed
December 6, 2001, is incorporated herein by this reference) |
|
3 |
.1 |
|
Charter (Exhibit 3.1 to Aimcos Annual Report on
Form 10-K for the year ended December 31, 2004, is
incorporated herein by this reference) |
|
3 |
.2 |
|
Bylaws (Exhibit 3.2 to Aimcos Quarterly Report on
Form 10-Q for the quarterly period ended March 31,
2001, is incorporated herein by this reference) |
|
10 |
.1 |
|
Third Amended and Restated Agreement of Limited Partnership of
AIMCO Properties, L.P., dated as of July 29, 1994 as
amended and restated as of October 1, 1998
(Exhibit 10.8 to Aimcos Quarterly Report on
Form 10-Q for the quarterly period ended September 30,
1998, is incorporated herein by this reference) |
|
10 |
.2 |
|
First Amendment to the Third Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
November 6, 1998 (Exhibit 10.9 to Aimcos
Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1998, is incorporated herein by this
reference) |
|
10 |
.3 |
|
Second Amendment to the Third Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
December 30, 1998 (Exhibit 10.1 to Amendment
No. 1 to Aimcos Current Report on Form 8-K/ A,
filed February 11, 1999, is incorporated herein by this
reference) |
|
10 |
.4 |
|
Third Amendment to Third Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
February 18, 1999 (Exhibit 10.12 to Aimcos
Annual Report on Form 10-K for the year ended
December 31 1998, is incorporated herein by this reference) |
|
10 |
.5 |
|
Fourth Amendment to the Third Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
March 25, 1999 (Exhibit 10.2 to Aimcos Quarterly
Report on Form 10-Q for the quarterly period ended
March 31, 1999, is incorporated herein by this reference) |
|
10 |
.6 |
|
Fifth Amendment to the Third Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
March 26, 1999 (Exhibit 10.3 to Aimcos Quarterly
Report on Form 10-Q for the quarterly period ended
March 31, 1999, is incorporated herein by this reference) |
|
10 |
.7 |
|
Sixth Amendment to the Third Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
March 26, 1999 (Exhibit 10.1 to Aimcos Quarterly
Report on Form 10-Q for the quarterly period ended
June 30, 1999, is incorporated herein by this reference) |
|
10 |
.8 |
|
Seventh Amendment to the Third Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
September 27, 1999 (Exhibit 10.1 to Aimcos
Quarterly Report on Form 10-Q for the quarterly period
ended September 30, 1999, is incorporated herein by this
reference) |
|
10 |
.9 |
|
Eighth Amendment to the Third Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
December 14, 1999 (Exhibit 10.9 to Aimcos Annual
Report on Form 10-K for the year ended December 31,
1999, is incorporated herein by reference) |
|
10 |
.10 |
|
Ninth Amendment to the Third Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
December 21, 1999 (Exhibit 10.10 to Aimcos
Annual Report on Form 10-K for the year ended
December 31, 1999, is incorporated hereby by reference) |
|
10 |
.11 |
|
Tenth Amendment to the Third Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
December 21, 1999 (Exhibit 10.11 to Aimcos
Annual Report on Form 10-K for the year ended
December 31, 1999, is incorporated herein by reference) |
|
10 |
.12 |
|
Eleventh Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as of
January 13, 2000 (Exhibit 10.12 to Aimcos Annual
Report on Form 10-K for the year ended December 31,
1999, is incorporated herein by reference) |
|
10 |
.13 |
|
Twelfth Amendment to the Third Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
April 19, 2000 (Exhibit 10.2 to Aimcos Quarterly
Report on Form 10-Q for the quarterly period ended
March 31, 2000, is incorporated herein by this reference) |
41
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
10 |
.14 |
|
Thirteenth Amendment to the Third and Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of August 7, 2000 (Exhibit 10.1 to the
Quarterly Report on Form 10-Q of AIMCO Properties, L.P. for
the quarterly period ended June 30, 2000, is incorporated
herein by this reference) |
|
10 |
.15 |
|
Fourteenth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as of
September 12, 2000 (Exhibit 10.1 to the Quarterly
Report on Form 10-Q of AIMCO Properties, L.P. for the
quarterly period ended September 30, 2000, is incorporated
herein by this reference) |
|
10 |
.16 |
|
Fifteenth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as of
September 15, 2000 (Exhibit 10.2 to the Quarterly
Report on Form 10-Q of AIMCO Properties, L.P. for the
quarterly period ended September 30, 2000, is incorporated
herein by this reference) |
|
10 |
.17 |
|
Sixteenth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as of
September 15, 2000 (Exhibit 10.3 to the Quarterly
Report on Form 10-Q of AIMCO Properties, L.P. for the
quarterly period ended September 30, 2000, is incorporated
herein by this reference) |
|
10 |
.18 |
|
Seventeenth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of November 10, 2000 (Exhibit 10.4 to the
Quarterly Report on Form 10-Q of AIMCO Properties, L.P. for
the quarterly period ended September 30, 2000, is
incorporated herein by this reference) |
|
10 |
.19 |
|
Eighteenth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as of
November 16, 2000 (Exhibit 10.19 to Aimcos
Annual Report on Form 10-K/ A for the fiscal year 2000, is
incorporated herein by this reference) |
|
10 |
.20 |
|
Nineteenth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as of
February 28, 2001 (Exhibit 10.20 to Aimcos
Annual Report on Form 10-K/ A for the fiscal year 2000, is
incorporated herein by this reference) |
|
10 |
.21 |
|
Twentieth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as of
March 19, 2001 (Exhibit 10.21 to Aimcos Annual
Report on Form 10-K/ A for the fiscal year 2000, is
incorporated herein by this reference) |
|
10 |
.22 |
|
Twenty-first Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of May 10, 2001 (Exhibit 10.1 to the
Quarterly Report on Form 10-Q of AIMCO Properties, L.P. for
the quarterly period ended June 30, 2001, is incorporated
herein by this reference) |
|
10 |
.23 |
|
Twenty-second Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of June 20, 2001 (Exhibit 10.2 to the
Quarterly Report on Form 10-Q of AIMCO Properties, L.P. for
the quarterly period ended June 30, 2001, is incorporated
herein by this reference) |
|
10 |
.24 |
|
Twenty-third Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of July 20, 2001 (Exhibit 10.3 to the
Quarterly Report on Form 10-Q of AIMCO Properties, L.P. for
the quarterly period ended June 30, 2001, is incorporated
herein by this reference) |
|
10 |
.25 |
|
Twenty-fourth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of August 1, 2001 (Exhibit 10.4 to the
Quarterly Report on Form 10-Q of AIMCO Properties, L.P. for
the quarterly period ended June 30, 2001, is incorporated
herein by this reference) |
|
10 |
.26 |
|
Twenty-fifth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of July 2, 2001 (Exhibit 10.5 to the
Quarterly Report on Form 10-Q of AIMCO Properties, L.P. for
the quarterly period ended June 30, 2001, is incorporated
herein by this reference) |
|
10 |
.27 |
|
Twenty-sixth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of July 2, 2001 (Exhibit 10.6 to the
Quarterly Report on Form 10-Q of AIMCO Properties, L.P. for
the quarterly period ended June 30, 2001, is incorporated
herein by this reference) |
42
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
10 |
.28 |
|
Twenty-seventh Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of July 2, 2001 (Exhibit 10.7 to the
Quarterly Report on Form 10-Q of AIMCO Properties, L.P. for
the quarterly period ended June 30, 2001, is incorporated
herein by this reference) |
|
10 |
.29 |
|
Twenty-eighth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of March 25, 2002 (Exhibit 10.1 to the
Quarterly Report on Form 10-Q of AIMCO Properties, L.P. for
the quarterly period ended March 31, 2002, is incorporated
herein by this reference) |
|
10 |
.30 |
|
Twenty-ninth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of March 11, 2002 (Exhibit 10.2 to the
Quarterly Report on Form 10-Q of AIMCO Properties, L.P. for
the quarterly period ended March 31, 2002, is incorporated
herein by this reference) |
|
10 |
.31 |
|
Thirtieth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as of
April 1, 2002 (Exhibit 10.3 to the Quarterly Report on
Form 10-Q of AIMCO Properties, L.P. for the quarterly
period ended March 31, 2002, is incorporated herein by this
reference) |
|
10 |
.32 |
|
Thirty-first Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of April 10, 2002 (Exhibit 10.4 to the
Quarterly Report on Form 10-Q of AIMCO Properties, L.P. for
the quarterly period ended March 31, 2002, is incorporated
herein by this reference) |
|
10 |
.33 |
|
Thirty-second Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of May 14, 2002 (Exhibit 10.1 to Aimcos
Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2002, is incorporated herein by this
reference) |
|
10 |
.34 |
|
Thirty-third Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of November 27, 2002 (Exhibit 10.34 to
Aimcos Annual Report on Form 10-K for the year ended
December 31, 2002, is incorporated herein by this reference) |
|
10 |
.35 |
|
Thirty-fourth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of April 29, 2003 (Exhibit 10.1 to
Aimcos Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2003, is incorporated
herein by this reference) |
|
10 |
.36 |
|
Thirty-fifth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of April 30, 2003 (Exhibit 10.2 to
Aimcos Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2003, is incorporated
herein by this reference) |
|
10 |
.37 |
|
Thirty-sixth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of July 16, 2003 (Exhibit 10.1 to
Aimcos Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2003, is incorporated
herein by this reference) |
|
10 |
.38 |
|
Thirty-seventh Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of July 24, 2003 (Exhibit 10.2 to
Aimcos Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 2003, is incorporated
herein by this reference) |
|
10 |
.39 |
|
Thirty-eighth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of January 30, 2004 (Exhibit 10.39 to
Aimcos Annual Report on Form 10-K for the year ended
December 31, 2003, is incorporated herein by this reference) |
|
10 |
.40 |
|
Thirty-ninth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of March 17, 2004 (Exhibit 10.1 to
Aimcos Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2004, is incorporated
herein by this reference) |
|
10 |
.41 |
|
Fortieth Amendment to the Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as of
June 18, 2004 (Exhibit 10.1 to Aimcos Quarterly
Report on Form 10-Q for the quarterly period ended
June 30, 2004, is incorporated herein by this reference) |
|
10 |
.42 |
|
Forty-first Amendment to Third Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
September 24, 2004 (Exhibit 4.1 to AIMCO Properties,
L.P.s Current Report on Form 8-K dated
September 24, 2004, is incorporated herein by this
reference) |
43
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
10 |
.43 |
|
Forty-second Amendment to Third Amended and Restated Agreement
of Limited Partnership of AIMCO Properties, L.P., dated as of
September 30, 2004 (Exhibit 4.2 to AIMCO Properties,
L.P.s Current Report on Form 8-K dated
September 24, 2004, is incorporated herein by this
reference) |
|
10 |
.44 |
|
Forty-third Amendment to Third Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
September 30, 2004 (Exhibit 4.1 to AIMCO Properties,
L.P.s Current Report on Form 8-K dated
September 29, 2004, is incorporated herein by this
reference) |
|
10 |
.45 |
|
Forty-fourth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of December 21, 2004 (Exhibit 4.1 to AIMCO
Properties, L.P.s Current Report on Form 8-K dated
September 29,2004, is incorporated herein by this reference) |
|
10 |
.46 |
|
Forty-fifth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of February 18, 2005 (Exhibit 4.1 to AIMCO
Properties, L.P.s Current Report on Form 8-K dated
February 18, 2005, is incorporated herein by this reference) |
|
10 |
.47 |
|
Forty-sixth Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of February 28, 2005 (Exhibit 4.1 to AIMCO
Properties, L.P.s Current Report on Form 8-K dated
February 28, 2005, is incorporated herein by this reference) |
|
10 |
.48 |
|
Forty-seventh Amendment to the Third Amended and Restated
Agreement of Limited Partnership of AIMCO Properties, L.P.,
dated as of May 31, 2005 (Exhibit 4.1 to AIMCO
Properties, L.P.s Current Report on Form 8-K dated
May 31, 2005, is incorporated herein by this reference) |
|
10 |
.49 |
|
Amended and Restated Secured Credit Agreement, dated as of
November 2, 2004, by and among Aimco, AIMCO Properties,
L.P., AIMCO/ Bethesda Holdings, Inc., and NHP Management Company
as the borrowers and Bank of America, N.A., Keybank National
Association, and the Lenders listed therein (Exhibit 4.1 to
Aimcos Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 2004, is incorporated
herein by this reference) |
|
10 |
.50 |
|
First Amendment to Amended and Restated Secured Credit
Agreement, dated as of June 16, 2005, by and among Aimco,
AIMCO Properties, L.P., AIMCO/ Bethesda Holdings, Inc., and NHP
Management Company as the borrowers and Bank of America, N.A.,
Keybank National Association, and the Lenders listed therein
(Exhibit 10.1 to Aimcos Current Report on
Form 8-K, dated June 16, 2005, is incorporated herein
by this reference) |
|
10 |
.51 |
|
Master Indemnification Agreement, dated December 3, 2001,
by and among Apartment Investment and Management Company, AIMCO
Properties, L.P., XYZ Holdings LLC, and the other parties
signatory thereto (Exhibit 2.3 to Aimcos Current
Report on Form 8-K, filed December 6, 2001, is
incorporated herein by this reference) |
|
10 |
.52 |
|
Tax Indemnification and Contest Agreement, dated
December 3, 2001, by and among Apartment Investment and
Management Company, National Partnership Investments,
Corp., and XYZ Holdings LLC and the other parties signatory
thereto (Exhibit 2.4 to Aimcos Current Report on
Form 8-K, filed December 6, 2001, is incorporated
herein by this reference) |
|
10 |
.53 |
|
Limited Liability Company Agreement of AIMCO JV
Portfolio #1, LLC dated as of December 30, 2003 by and
among AIMCO BRE I, LLC, AIMCO BRE II, LLC and
SRV-AJVP#1, LLC (Exhibit 10.54 to Aimcos Annual
Report on Form 10-K for the year ended December 31,
2003, is incorporated herein by this reference) |
|
10 |
.54 |
|
Employment Contract executed on July 29, 1994 by and
between AIMCO Properties, L.P. and Terry Considine
(Exhibit 10.44C to Aimcos Annual Report on
Form 10-K for the year ended December 31, 1994, is
incorporated herein by this reference)* |
|
10 |
.55 |
|
Apartment Investment and Management Company 1997 Stock Award and
Incentive Plan (October 1999) (Exhibit 10.26 to
Aimcos Annual Report on Form 10-K for the year ended
December 31, 1999, is incorporated herein by this
reference)* |
|
10 |
.56 |
|
Form of Restricted Stock Agreement (1997 Stock Award and
Incentive Plan) (Exhibit 10.11 to Aimcos Quarterly
Report on Form 10-Q for the quarterly period ended
September 30, 1997, is incorporated herein by this
reference)* |
|
10 |
.57 |
|
Form of Incentive Stock Option Agreement (1997 Stock Award and
Incentive Plan) (Exhibit 10.42 to Aimcos Annual
Report on Form 10-K for the year ended December 31,
1998, is incorporated herein by this reference)* |
44
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
10 |
.58 |
|
The 1996 Stock Incentive Plan for Officers, Directors and Key
Employees of Ambassador Apartments, Inc., Ambassador Apartments,
L.P., and Subsidiaries, as amended March 20, 1997
(Exhibit 10.42 to Ambassador Apartments, Inc. Annual Report
on Form 10-K for the year ended December 31, 1997, is
incorporated herein by this reference)* |
|
21 |
.1 |
|
List of Subsidiaries |
|
23 |
.1 |
|
Consent of Independent Registered Public Accounting Firm |
|
31 |
.1 |
|
Certification of Chief Executive Officer pursuant to Securities
Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
31 |
.2 |
|
Certification of Chief Financial Officer pursuant to Securities
Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
32 |
.1 |
|
Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 |
|
32 |
.2 |
|
Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 |
|
99 |
.1 |
|
Agreement re: disclosure of long-term debt instruments |
|
|
(1) |
Schedule and supplemental materials to the exhibits have been
omitted but will be provided to the Securities and Exchange
Commission upon request. |
|
(2) |
The file reference number for all exhibits is 001-13232, and all
such exhibits remain available pursuant to the Records Control
Schedule of the Securities and Exchange Commission. |
|
|
|
|
* |
Management contract or compensatory plan or arrangement |
45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 8th day of March 2006.
|
|
|
Apartment Investment and
|
|
Management Company
|
|
|
/s/ Terry Considine
|
|
|
|
Terry Considine |
|
Chairman of the Board, |
|
Chief Executive Officer and President |
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
|
/s/ Terry Considine
Terry Considine |
|
Chairman of the Board, Chief Executive Officer and President
(principal executive officer) |
|
March 8, 2006 |
|
/s/ Thomas M. Herzog
Thomas M. Herzog |
|
Executive Vice President and Chief Financial Officer
(principal financial officer) |
|
March 8, 2006 |
|
/s/ Robert Y. Walker,
IV
Robert Y. Walker, IV |
|
Senior Vice President and Chief Accounting Officer
(principal accounting officer) |
|
March 8, 2006 |
|
/s/ James N. Bailey
James N. Bailey |
|
Director |
|
March 8, 2006 |
|
/s/ Richard S. Ellwood
Richard S. Ellwood |
|
Director |
|
March 8, 2006 |
|
/s/ J. Landis Martin
J. Landis Martin |
|
Director |
|
March 8, 2006 |
|
/s/ Thomas L. Rhodes
Thomas L. Rhodes |
|
Director |
|
March 8, 2006 |
|
/s/ Michael A. Stein
Michael A. Stein |
|
Director |
|
March 8, 2006 |
46
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
INDEX TO FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
Page | |
|
|
| |
Financial Statements:
|
|
|
|
|
|
|
|
|
F-2 |
|
|
|
|
|
F-3 |
|
|
|
|
|
F-4 |
|
|
|
|
|
F-5 |
|
|
|
|
|
F-6 |
|
|
|
|
|
F-8 |
|
Financial Statement Schedule:
|
|
|
|
|
|
|
|
|
F-43 |
|
|
All other schedules are omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto
|
|
|
|
|
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Board of Directors Apartment Investment and
Management Company
We have audited the accompanying consolidated balance sheets of
Apartment Investment and Management Company as of
December 31, 2005 and 2004, and the related consolidated
statements of income, stockholders equity and cash flows
for each of the three years in the period ended
December 31, 2005. Our audits also included the financial
statement schedule listed in the accompanying Index to Financial
Statements. These financial statements and schedule are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the
consolidated financial position of Apartment Investment and
Management Company at December 31, 2005 and 2004, and the
consolidated results of its operations and its cash flows for
each of the three years in the period ended December 31,
2005, in conformity with United States generally accepted
accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly, in
all material respects the information set forth therein.
As discussed in Note 2 to the consolidated financial
statements, in 2004 the Company adopted the provisions of
Financial Accounting Standards Board Interpretation No. 46
(revised December 2003), Consolidation of Variable Interest
Entities.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of Apartment Investment and Management
Companys internal control over financial reporting as of
December 31, 2005, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated March 6, 2006 expressed an
unqualified opinion thereon.
Denver, Colorado
March 6, 2006
F-2
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED BALANCE SHEETS
As of December 31, 2005 and 2004
(In thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
ASSETS |
Real estate:
|
|
|
|
|
|
|
|
|
|
Land
|
|
$ |
2,299,039 |
|
|
$ |
2,090,737 |
|
|
Buildings and improvements
|
|
|
8,690,782 |
|
|
|
7,984,874 |
|
|
|
|
|
|
|
|
Total real estate
|
|
|
10,989,821 |
|
|
|
10,075,611 |
|
|
Less accumulated depreciation
|
|
|
(2,238,114 |
) |
|
|
(1,847,160 |
) |
|
|
|
|
|
|
|
|
|
Net real estate
|
|
|
8,751,707 |
|
|
|
8,228,451 |
|
Cash and cash equivalents
|
|
|
161,730 |
|
|
|
105,343 |
|
Restricted cash
|
|
|
284,834 |
|
|
|
289,135 |
|
Accounts receivable
|
|
|
57,479 |
|
|
|
75,044 |
|
Accounts receivable from affiliates
|
|
|
43,070 |
|
|
|
39,216 |
|
Deferred financing costs
|
|
|
67,498 |
|
|
|
68,175 |
|
Notes receivable from unconsolidated real estate partnerships
|
|
|
177,218 |
|
|
|
165,289 |
|
Notes receivable from non-affiliates
|
|
|
23,760 |
|
|
|
31,716 |
|
Investment in unconsolidated real estate partnerships
|
|
|
167,799 |
|
|
|
207,839 |
|
Other assets
|
|
|
216,863 |
|
|
|
243,317 |
|
Deferred income tax assets, net
|
|
|
9,835 |
|
|
|
|
|
Assets held for sale
|
|
|
54,958 |
|
|
|
618,716 |
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
10,016,751 |
|
|
$ |
10,072,241 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
Secured tax-exempt bond financing
|
|
$ |
1,076,569 |
|
|
$ |
1,101,225 |
|
Secured notes payable
|
|
|
4,590,674 |
|
|
|
4,133,887 |
|
Mandatorily redeemable preferred securities
|
|
|
|
|
|
|
15,019 |
|
Term loans
|
|
|
400,000 |
|
|
|
300,000 |
|
Credit facility
|
|
|
217,000 |
|
|
|
68,700 |
|
|
|
|
|
|
|
|
|
|
|
Total indebtedness
|
|
|
6,284,243 |
|
|
|
5,618,831 |
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
34,381 |
|
|
|
34,663 |
|
Accrued liabilities and other
|
|
|
421,225 |
|
|
|
400,974 |
|
Deferred income
|
|
|
47,138 |
|
|
|
43,808 |
|
Security deposits
|
|
|
38,789 |
|
|
|
35,070 |
|
Deferred income tax liabilities, net
|
|
|
|
|
|
|
20,139 |
|
Liabilities related to assets held for sale
|
|
|
39,464 |
|
|
|
426,755 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
6,865,240 |
|
|
|
6,580,240 |
|
|
|
|
|
|
|
|
Minority interest in consolidated real estate partnerships
|
|
|
217,679 |
|
|
|
211,804 |
|
Minority interest in Aimco Operating Partnership
|
|
|
217,729 |
|
|
|
272,037 |
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
Preferred Stock, perpetual
|
|
|
860,250 |
|
|
|
891,500 |
|
|
Preferred Stock, convertible
|
|
|
150,000 |
|
|
|
150,000 |
|
|
Class A Common Stock, $.01 par value,
426,157,976 shares authorized, 95,732,200 and
94,853,696 shares issued and outstanding, at
December 31, 2005 and 2004, respectively
|
|
|
957 |
|
|
|
949 |
|
|
Additional paid-in capital
|
|
|
3,105,961 |
|
|
|
3,070,073 |
|
|
Unearned restricted stock
|
|
|
(24,255 |
) |
|
|
(19,740 |
) |
|
Notes due on common stock purchases
|
|
|
(25,911 |
) |
|
|
(36,725 |
) |
|
Distributions in excess of earnings
|
|
|
(1,350,899 |
) |
|
|
(1,047,897 |
) |
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
2,716,103 |
|
|
|
3,008,160 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$ |
10,016,751 |
|
|
$ |
10,072,241 |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-3
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2005, 2004 and 2003
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other property revenues
|
|
$ |
1,459,646 |
|
|
$ |
1,308,815 |
|
|
$ |
1,249,716 |
|
Property management revenues, primarily from affiliates
|
|
|
24,528 |
|
|
|
32,461 |
|
|
|
37,992 |
|
Activity fees and asset management revenues, primarily from
affiliates
|
|
|
37,349 |
|
|
|
34,801 |
|
|
|
20,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
1,521,523 |
|
|
|
1,376,077 |
|
|
|
1,307,906 |
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses
|
|
|
705,505 |
|
|
|
632,512 |
|
|
|
553,482 |
|
Property management expenses
|
|
|
7,292 |
|
|
|
9,789 |
|
|
|
8,419 |
|
Activity and asset management expenses
|
|
|
10,606 |
|
|
|
11,802 |
|
|
|
8,367 |
|
Depreciation and amortization
|
|
|
412,075 |
|
|
|
340,536 |
|
|
|
308,080 |
|
General and administrative expenses
|
|
|
92,918 |
|
|
|
77,501 |
|
|
|
48,357 |
|
Other expenses (income), net
|
|
|
(6,314 |
) |
|
|
1,870 |
|
|
|
(6,952 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
1,222,082 |
|
|
|
1,074,010 |
|
|
|
919,753 |
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
299,441 |
|
|
|
302,067 |
|
|
|
388,153 |
|
Interest income
|
|
|
31,451 |
|
|
|
32,310 |
|
|
|
24,679 |
|
Recovery of (provision for) losses on notes receivable
|
|
|
1,365 |
|
|
|
1,765 |
|
|
|
(2,183 |
) |
Interest expense
|
|
|
(367,860 |
) |
|
|
(342,059 |
) |
|
|
(317,260 |
) |
Deficit distributions to minority partners
|
|
|
(11,952 |
) |
|
|
(17,865 |
) |
|
|
(20,216 |
) |
Equity in losses of unconsolidated real estate partnerships
|
|
|
(3,139 |
) |
|
|
(1,768 |
) |
|
|
(6,428 |
) |
Impairment losses related to real estate partnerships
|
|
|
(6,120 |
) |
|
|
(3,426 |
) |
|
|
(4,122 |
) |
Gain on dispositions of real estate related to unconsolidated
entities and other
|
|
|
16,489 |
|
|
|
69,241 |
|
|
|
3,178 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interests, discontinued operations
and cumulative effect of change in accounting principle
|
|
|
(40,325 |
) |
|
|
40,265 |
|
|
|
65,801 |
|
Minority interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in consolidated real estate partnerships
|
|
|
6,581 |
|
|
|
16,922 |
|
|
|
286 |
|
|
|
Minority interest in Aimco Operating Partnership, preferred
|
|
|
(7,226 |
) |
|
|
(7,858 |
) |
|
|
(9,312 |
) |
|
|
Minority interest in Aimco Operating Partnership, common
|
|
|
13,073 |
|
|
|
4,646 |
|
|
|
4,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total minority interests
|
|
|
12,428 |
|
|
|
13,710 |
|
|
|
(4,133 |
) |
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(27,897 |
) |
|
|
53,975 |
|
|
|
61,668 |
|
Income from discontinued operations, net
|
|
|
98,879 |
|
|
|
213,479 |
|
|
|
97,189 |
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of change in accounting principle
|
|
|
70,982 |
|
|
|
267,454 |
|
|
|
158,857 |
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
(3,957 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
70,982 |
|
|
|
263,497 |
|
|
|
158,857 |
|
Net income attributable to preferred stockholders
|
|
|
87,948 |
|
|
|
88,804 |
|
|
|
93,565 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common stockholders
|
|
$ |
(16,966 |
) |
|
$ |
174,693 |
|
|
$ |
65,292 |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations (net of preferred dividends)
|
|
$ |
(1.23 |
) |
|
$ |
(0.37 |
) |
|
$ |
(0.34 |
) |
|
Income from discontinued operations
|
|
|
1.05 |
|
|
|
2.29 |
|
|
|
1.04 |
|
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
(0.04 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common stockholders
|
|
$ |
(0.18 |
) |
|
$ |
1.88 |
|
|
$ |
0.70 |
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations (net of preferred dividends)
|
|
$ |
(1.23 |
) |
|
$ |
(0.37 |
) |
|
$ |
(0.34 |
) |
|
Income from discontinued operations
|
|
|
1.05 |
|
|
|
2.29 |
|
|
|
1.04 |
|
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
(0.04 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common stockholders
|
|
$ |
(0.18 |
) |
|
$ |
1.88 |
|
|
$ |
0.70 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
93,894 |
|
|
|
93,118 |
|
|
|
92,850 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares and equivalents outstanding
|
|
|
93,894 |
|
|
|
93,118 |
|
|
|
92,850 |
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
|
$ |
3.00 |
|
|
$ |
2.40 |
|
|
$ |
2.84 |
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-4
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
For the Years Ended December 31, 2005, 2004 and 2003 (In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A | |
|
|
|
|
|
Notes | |
|
|
|
|
|
|
Preferred Stock | |
|
Common Stock | |
|
|
|
|
|
Due on | |
|
Distri- | |
|
|
|
|
| |
|
| |
|
Additional | |
|
Unearned | |
|
Common | |
|
butions in | |
|
|
|
|
Shares | |
|
|
|
Shares | |
|
|
|
Paid-In | |
|
Restricted | |
|
Stock | |
|
Excess of | |
|
|
|
|
Issued | |
|
Amount | |
|
Issued | |
|
Amount | |
|
Capital | |
|
Stock | |
|
Purchases | |
|
Earnings | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
BALANCE DECEMBER 31, 2002
|
|
|
35,725 |
|
|
$ |
945,012 |
|
|
|
93,770 |
|
|
$ |
938 |
|
|
$ |
3,050,057 |
|
|
$ |
(7,079 |
) |
|
$ |
(48,964 |
) |
|
$ |
(776,577 |
) |
|
$ |
3,163,387 |
|
Net proceeds from issuances of Preferred Stock
|
|
|
6,000 |
|
|
|
150,000 |
|
|
|
|
|
|
|
|
|
|
|
(5,192 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144,808 |
|
Conversion of Aimco Operating Partnership units to Class A
Common Stock
|
|
|
|
|
|
|
|
|
|
|
338 |
|
|
|
3 |
|
|
|
12,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,035 |
|
Conversion of Preferred Operating Partnership units to
Class A Common Stock
|
|
|
|
|
|
|
|
|
|
|
22 |
|
|
|
|
|
|
|
884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
884 |
|
Redemption of Preferred Stock
|
|
|
(9,600 |
) |
|
|
(239,770 |
) |
|
|
|
|
|
|
|
|
|
|
7,645 |
|
|
|
|
|
|
|
|
|
|
|
(7,645 |
) |
|
|
(239,770 |
) |
Class A Common Stock received under Casden indemnification
agreement and other activity
|
|
|
|
|
|
|
|
|
|
|
(585 |
) |
|
|
(6 |
) |
|
|
(25,520 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25,526 |
) |
Conversion of mandatorily redeemable convertible preferred
securities to Class A Common Stock
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50 |
|
Repayment of notes receivable from officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,518 |
|
|
|
|
|
|
|
10,518 |
|
Purchase of stock by officers and awards of restricted stock,
net of forfeitures
|
|
|
|
|
|
|
|
|
|
|
265 |
|
|
|
3 |
|
|
|
9,968 |
|
|
|
(7,781 |
) |
|
|
(1,600 |
) |
|
|
|
|
|
|
590 |
|
Stock options exercised
|
|
|
|
|
|
|
|
|
|
|
72 |
|
|
|
1 |
|
|
|
2,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,344 |
|
Amortization of stock option fair value and unearned restricted
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
892 |
|
|
|
4,088 |
|
|
|
|
|
|
|
|
|
|
|
4,980 |
|
Class A Common Stock issued as consideration for
acquisition of interest in real estate
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153 |
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
158,857 |
|
|
|
158,857 |
|
Dividends paid Class A Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(285,054 |
) |
|
|
(285,054 |
) |
Dividends paid Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87,599 |
) |
|
|
(87,599 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE DECEMBER 31, 2003
|
|
|
32,125 |
|
|
|
855,242 |
|
|
|
93,887 |
|
|
|
939 |
|
|
|
3,053,312 |
|
|
|
(10,772 |
) |
|
|
(40,046 |
) |
|
|
(998,018 |
) |
|
|
2,860,657 |
|
Net proceeds from issuances/exchanges of Preferred Stock
|
|
|
18,805 |
|
|
|
372,500 |
|
|
|
|
|
|
|
|
|
|
|
(12,828 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
359,672 |
|
Conversion of Aimco Operating Partnership units to Class A
Common Stock
|
|
|
|
|
|
|
|
|
|
|
735 |
|
|
|
7 |
|
|
|
23,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,322 |
|
Conversion of Preferred Operating Partnership units to
Class A Common Stock
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
259 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
259 |
|
Conversion of mandatorily redeemable convertible preferred
securities to Class A Common Stock
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100 |
|
Repurchase of Class A Common Stock
|
|
|
|
|
|
|
|
|
|
|
(397 |
) |
|
|
(4 |
) |
|
|
(12,594 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,598 |
) |
Redemption/exchange of Preferred Stock
|
|
|
(11,355 |
) |
|
|
(186,242 |
) |
|
|
|
|
|
|
|
|
|
|
3,638 |
|
|
|
|
|
|
|
|
|
|
|
(3,489 |
) |
|
|
(186,093 |
) |
Repayment of notes receivable from officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,639 |
|
|
|
|
|
|
|
4,639 |
|
Casden note receivable and legal settlement fair value
contingent consideration adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,848 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,848 |
) |
Purchase of stock by officers and awards of restricted and
unrestricted stock, net of forfeitures
|
|
|
|
|
|
|
|
|
|
|
550 |
|
|
|
6 |
|
|
|
16,234 |
|
|
|
(13,871 |
) |
|
|
(1,318 |
) |
|
|
|
|
|
|
1,051 |
|
Stock options exercised
|
|
|
|
|
|
|
|
|
|
|
69 |
|
|
|
1 |
|
|
|
1,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,883 |
|
Amortization of stock option fair value and unearned restricted
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,603 |
|
|
|
4,903 |
|
|
|
|
|
|
|
|
|
|
|
6,506 |
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
263,497 |
|
|
|
263,497 |
|
Dividends paid Class A Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(225,903 |
) |
|
|
(225,903 |
) |
Dividends paid Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(83,984 |
) |
|
|
(83,984 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE DECEMBER 31, 2004
|
|
|
39,575 |
|
|
|
1,041,500 |
|
|
|
94,854 |
|
|
|
949 |
|
|
|
3,070,073 |
|
|
|
(19,740 |
) |
|
|
(36,725 |
) |
|
|
(1,047,897 |
) |
|
|
3,008,160 |
|
Conversion of Aimco Operating Partnership units to Class A
Common Stock
|
|
|
|
|
|
|
|
|
|
|
425 |
|
|
|
4 |
|
|
|
16,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,853 |
|
Conversion of Preferred Operating Partnership units to
Class A Common Stock
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41 |
|
Preferred Stock issuance costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(409 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(409 |
) |
Redemption of Preferred Stock
|
|
|
(1,250 |
) |
|
|
(31,250 |
) |
|
|
|
|
|
|
|
|
|
|
1,123 |
|
|
|
|
|
|
|
|
|
|
|
(1,123 |
) |
|
|
(31,250 |
) |
Repayment of notes receivable from officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,255 |
|
|
|
|
|
|
|
12,255 |
|
Purchase of stock by officers and awards of restricted and
unrestricted stock, net of forfeitures and other
|
|
|
|
|
|
|
|
|
|
|
379 |
|
|
|
4 |
|
|
|
14,874 |
|
|
|
(12,655 |
) |
|
|
(1,441 |
) |
|
|
|
|
|
|
782 |
|
Stock options exercised
|
|
|
|
|
|
|
|
|
|
|
65 |
|
|
|
|
|
|
|
2,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,315 |
|
Purchase of Oxford warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,050 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,050 |
) |
Class A Common Stock issued as consideration for
acquisition of interest in real estate
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
310 |
|
Amortization of stock option fair value and unearned restricted
stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,835 |
|
|
|
8,140 |
|
|
|
|
|
|
|
|
|
|
|
9,975 |
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,982 |
|
|
|
70,982 |
|
Dividends paid Class A Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(226,815 |
) |
|
|
(226,815 |
) |
Dividends declared Class A Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57,439 |
) |
|
|
(57,439 |
) |
Dividends paid Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(86,582 |
) |
|
|
(86,582 |
) |
Dividends declared Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,025 |
) |
|
|
(2,025 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE DECEMBER 31, 2005
|
|
|
38,325 |
|
|
$ |
1,010,250 |
|
|
|
95,732 |
|
|
$ |
957 |
|
|
$ |
3,105,961 |
|
|
$ |
(24,255 |
) |
|
$ |
(25,911 |
) |
|
$ |
(1,350,899 |
) |
|
$ |
2,716,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-5
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2005, 2004 and 2003
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
70,982 |
|
|
$ |
263,497 |
|
|
$ |
158,857 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
412,075 |
|
|
|
340,536 |
|
|
|
308,080 |
|
|
|
Deficit distributions to minority partners, net
|
|
|
11,952 |
|
|
|
17,865 |
|
|
|
20,216 |
|
|
|
Equity in losses of unconsolidated real estate partnerships
|
|
|
3,139 |
|
|
|
1,768 |
|
|
|
6,428 |
|
|
|
Gain on dispositions of real estate related to unconsolidated
entities and other
|
|
|
(16,489 |
) |
|
|
(69,241 |
) |
|
|
(3,178 |
) |
|
|
Impairment losses related to real estate partnerships
|
|
|
6,120 |
|
|
|
3,426 |
|
|
|
4,122 |
|
|
|
Deferred income tax provision (benefit)
|
|
|
(19,146 |
) |
|
|
706 |
|
|
|
(11,215 |
) |
|
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
3,957 |
|
|
|
|
|
|
|
Minority interest in Aimco Operating Partnership
|
|
|
(5,847 |
) |
|
|
3,212 |
|
|
|
4,419 |
|
|
|
Minority interest in consolidated real estate partnerships
|
|
|
(6,581 |
) |
|
|
(16,922 |
) |
|
|
(286 |
) |
|
|
Stock-based compensation expense
|
|
|
9,975 |
|
|
|
6,506 |
|
|
|
4,980 |
|
|
|
Amortization of deferred loan costs and other
|
|
|
1,700 |
|
|
|
5,484 |
|
|
|
(5,002 |
) |
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
22,789 |
|
|
|
42,194 |
|
|
|
65,135 |
|
|
|
|
Recovery of deficit distributions to minority partners
|
|
|
(14,941 |
) |
|
|
(3,722 |
) |
|
|
(8,273 |
) |
|
|
|
Gain on dispositions of real estate, net of minority
partners interest
|
|
|
(105,417 |
) |
|
|
(249,376 |
) |
|
|
(101,849 |
) |
|
|
|
Impairment losses on real estate assets sold or held for sale
|
|
|
3,836 |
|
|
|
7,289 |
|
|
|
8,991 |
|
|
|
|
Minority interest in consolidated real estate partnerships
|
|
|
(1,499 |
) |
|
|
102 |
|
|
|
2,638 |
|
|
|
|
Minority interest in Aimco Operating Partnership
|
|
|
11,159 |
|
|
|
25,512 |
|
|
|
13,248 |
|
|
|
Changes in operating assets and operating liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
11,450 |
|
|
|
(2,067 |
) |
|
|
5,763 |
|
|
|
|
Other assets
|
|
|
17,542 |
|
|
|
(11,406 |
) |
|
|
5,630 |
|
|
|
|
Accounts payable, accrued liabilities and other
|
|
|
(57,250 |
) |
|
|
(3,797 |
) |
|
|
(14,825 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
284,567 |
|
|
|
102,026 |
|
|
|
305,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
355,549 |
|
|
|
365,523 |
|
|
|
463,879 |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of real estate
|
|
|
(243,996 |
) |
|
|
(280,002 |
) |
|
|
(126,046 |
) |
|
Capital expenditures
|
|
|
(443,882 |
) |
|
|
(301,937 |
) |
|
|
(245,528 |
) |
|
Proceeds from dispositions of real estate
|
|
|
718,434 |
|
|
|
971,568 |
|
|
|
697,642 |
|
|
Change in funds held in escrow from tax-free exchanges
|
|
|
(4,571 |
) |
|
|
5,489 |
|
|
|
(21,643 |
) |
|
Purchases of non-real estate related corporate assets
|
|
|
(14,405 |
) |
|
|
(28,270 |
) |
|
|
(23,621 |
) |
|
Proceeds from sale of investments and other assets
|
|
|
4,629 |
|
|
|
|
|
|
|
6,730 |
|
|
Cash from newly consolidated properties
|
|
|
4,186 |
|
|
|
14,765 |
|
|
|
5,835 |
|
|
Purchases of general and limited partnership interests and other
assets
|
|
|
(111,372 |
) |
|
|
(104,441 |
) |
|
|
(51,356 |
) |
|
Originations of notes receivable from unconsolidated real estate
partnerships
|
|
|
(38,336 |
) |
|
|
(76,157 |
) |
|
|
(71,969 |
) |
|
Proceeds from repayment of notes receivable
|
|
|
28,556 |
|
|
|
79,599 |
|
|
|
60,576 |
|
|
Cash paid in connection with merger/acquisition related costs
|
|
|
(6,910 |
) |
|
|
(15,861 |
) |
|
|
(16,383 |
) |
|
Distributions received from investments in unconsolidated real
estate partnerships
|
|
|
57,706 |
|
|
|
72,160 |
|
|
|
64,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(49,961 |
) |
|
|
336,913 |
|
|
|
278,283 |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from secured notes payable borrowings
|
|
|
721,414 |
|
|
|
501,611 |
|
|
|
445,793 |
|
|
Principal repayments on secured notes payable
|
|
|
(735,816 |
) |
|
|
(728,084 |
) |
|
|
(755,786 |
) |
|
Proceeds from tax-exempt bond financing
|
|
|
|
|
|
|
69,471 |
|
|
|
14,505 |
|
|
Principal repayments on tax-exempt bond financing
|
|
|
(78,648 |
) |
|
|
(188,577 |
) |
|
|
(77,793 |
) |
|
Net borrowings (paydowns) on term loans and revolving
credit facility
|
|
|
248,300 |
|
|
|
(66,687 |
) |
|
|
29,376 |
|
|
Proceeds from other borrowings
|
|
|
|
|
|
|
38,871 |
|
|
|
|
|
|
Payment of loan costs
|
|
|
(11,242 |
) |
|
|
(17,576 |
) |
|
|
(19,516 |
) |
|
Proceeds from issuance (redemption) of mandatorily
redeemable preferred securities
|
|
|
(15,019 |
) |
|
|
(98,875 |
) |
|
|
97,250 |
|
|
Contributions from minority interest
|
|
|
34,990 |
|
|
|
44,292 |
|
|
|
100,684 |
|
|
Payment of distributions to minority interest
|
|
|
(78,739 |
) |
|
|
(119,056 |
) |
|
|
(107,964 |
) |
|
Proceeds from issuance of Class A Common Stock, High
Performance Units and exercise of options/warrants and other
|
|
|
2,454 |
|
|
|
3,164 |
|
|
|
4,552 |
|
|
Proceeds from issuance of preferred stock, net
|
|
|
|
|
|
|
359,672 |
|
|
|
144,808 |
|
|
Redemptions of preferred stock
|
|
|
(31,250 |
) |
|
|
(186,093 |
) |
|
|
(239,770 |
) |
|
Principal repayments received on notes due on Class A
Common Stock purchases
|
|
|
12,255 |
|
|
|
4,639 |
|
|
|
10,518 |
|
|
Repurchase of Class A Common Stock, redemption of
OP Units and warrant purchase
|
|
|
(4,503 |
) |
|
|
(18,410 |
) |
|
|
(1,287 |
) |
|
Payment of Class A Common Stock dividends
|
|
|
(226,815 |
) |
|
|
(225,903 |
) |
|
|
(285,054 |
) |
|
Payment of preferred stock dividends
|
|
|
(86,582 |
) |
|
|
(83,984 |
) |
|
|
(87,599 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(249,201 |
) |
|
|
(711,525 |
) |
|
|
(727,283 |
) |
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
56,387 |
|
|
|
(9,089 |
) |
|
|
14,879 |
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
|
|
105,343 |
|
|
|
114,432 |
|
|
|
99,553 |
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF YEAR
|
|
$ |
161,730 |
|
|
$ |
105,343 |
|
|
$ |
114,432 |
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
F-6
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2005, 2004 and 2003
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$ |
399,511 |
|
|
$ |
372,703 |
|
|
$ |
372,815 |
|
|
Dividends declared
|
|
|
65,679 |
|
|
|
|
|
|
|
|
|
|
Non Cash Transactions Associated with the Acquisition of Real
Estate and Interests in Unconsolidated Real Estate Partnerships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured debt assumed in connection with purchase of real estate
|
|
|
38,740 |
|
|
|
83,114 |
|
|
|
45,009 |
|
|
|
Issuance of OP Units for interests in unconsolidated real
estate partnerships and acquisitions of real estate
|
|
|
125 |
|
|
|
2,609 |
|
|
|
841 |
|
|
Non Cash Transactions Associated with Merger:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate
|
|
|
|
|
|
|
|
|
|
|
(63,535 |
) |
|
|
Investments in and notes receivable, primarily from
unconsolidated real estate partnerships
|
|
|
|
|
|
|
|
|
|
|
(2,163 |
) |
|
|
Restricted cash
|
|
|
|
|
|
|
|
|
|
|
11,979 |
|
|
|
Other assets
|
|
|
|
|
|
|
|
|
|
|
3,349 |
|
|
|
Accounts payable, accrued and other liabilities
|
|
|
|
|
|
|
|
|
|
|
49,770 |
|
|
|
Deferred income tax payable, net
|
|
|
|
|
|
|
|
|
|
|
600 |
|
|
Non Cash Transactions Associated with Consolidation of Real
Estate Partnerships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, net
|
|
|
201,492 |
|
|
|
231,932 |
|
|
|
152,248 |
|
|
|
Investments in and notes receivable primarily from affiliated
entities
|
|
|
(72,341 |
) |
|
|
(40,178 |
) |
|
|
(52,478 |
) |
|
|
Restricted cash and other assets
|
|
|
16,942 |
|
|
|
47,744 |
|
|
|
9,972 |
|
|
|
Secured debt
|
|
|
112,521 |
|
|
|
204,243 |
|
|
|
101,962 |
|
|
|
Accounts payable, accrued and other liabilities
|
|
|
17,326 |
|
|
|
21,394 |
|
|
|
7,030 |
|
|
|
Minority interest in consolidated real estate partnerships
|
|
|
6,834 |
|
|
|
29,439 |
|
|
|
6,585 |
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Common OP Units for Class A Common Stock
|
|
|
16,853 |
|
|
|
23,322 |
|
|
|
12,035 |
|
|
|
Conversion of Preferred OP Units for Class A Common
Stock
|
|
|
41 |
|
|
|
259 |
|
|
|
884 |
|
|
|
Origination of notes receivable from officers for Class A
Common Stock purchases
|
|
|
1,441 |
|
|
|
1,528 |
|
|
|
1,600 |
|
|
|
Exchanges of preferred stock
|
|
|
|
|
|
|
150,000 |
|
|
|
|
|
|
|
Tenders payable for purchase of limited partner interests
|
|
|
950 |
|
|
|
2,799 |
|
|
|
10,037 |
|
See notes to consolidated financial statements.
F-7
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2005
Note 1 Organization
Apartment Investment and Management Company, or Aimco, is a
Maryland corporation incorporated on January 10, 1994. We
are a self-administered and self-managed real estate investment
trust, or REIT, engaged in the acquisition, ownership,
management and redevelopment of apartment properties. As of
December 31, 2005, we owned or managed a real estate
portfolio of 1,370 apartment properties containing 240,484
apartment units located in 47 states, the District of
Columbia and Puerto Rico. Based on apartment unit data compiled
by the National Multi Housing Council, as of December 31,
2005, we were the largest REIT owner and operator of apartment
properties in the United States.
As of December 31, 2005, we:
|
|
|
|
|
owned an equity interest in and consolidated 158,548 units
in 619 properties (which we refer to as
consolidated), of which 157,638 units were also
managed by us; |
|
|
|
owned an equity interest in and did not consolidate
35,269 units in 264 properties (which we refer to as
unconsolidated), of which 29,182 units were
also managed by us; and |
|
|
|
provided services or managed, for third-party owners,
46,667 units in 487 properties, primarily pursuant to
long-term agreements (including 41,421 units in 435
properties for which we provide asset management services only,
and not also property management services), although in certain
cases we may indirectly own generally less than one percent of
the operations of such properties through a partnership
syndication or other fund. |
Through our wholly-owned subsidiaries, AIMCO-GP, Inc. and
AIMCO-LP, Inc., we own a majority of the ownership interests in
AIMCO Properties, L.P., which we refer to as the Aimco Operating
Partnership. As of December 31, 2005, we held approximately
a 90% interest in the common partnership units and equivalents
of the Aimco Operating Partnership. We conduct substantially all
of our business and own substantially all of our assets through
the Aimco Operating Partnership. Interests in the Aimco
Operating Partnership that are held by limited partners other
than Aimco are referred to as OP Units.
OP Units include common OP Units, partnership
preferred units, or preferred OP Units, and high
performance partnership units, or High Performance Units. The
Aimco Operating Partnerships income is allocated to
holders of common OP Units based on the weighted average
number of common OP Units outstanding during the period.
The Aimco Operating Partnership records the issuance of common
OP Units and the assets acquired in purchase transactions
based on the market price of Aimcos Class A Common
Stock at the date of execution of the purchase contract. The
holders of the common OP Units receive distributions,
prorated from the date of issuance, in an amount equivalent to
the dividends paid to holders of Aimco Class A Common
Stock. Holders of common OP Units may redeem such units for
cash or, at the Aimco Operating Partnerships option, Aimco
Class A Common Stock, which we refer to as Common Stock.
During 2005, 2004 and 2003, the weighted average ownership
interest in the Aimco Operating Partnership held by the common
OP Unit holders was 10%, 10%, and 11%, respectively.
Preferred OP Units entitle the holders thereof to a
preference with respect to distributions or upon liquidation. At
December 31, 2005, 95,732,200 shares of our Common
Stock were outstanding and the Aimco Operating Partnership had
10,339,262 common OP Units and equivalents outstanding for
a combined total of 106,071,462 shares of Common Stock and
OP Units outstanding (excluding preferred OP Units).
Except as the context otherwise requires, we,
our, us and the Company
refer to Aimco, the Aimco Operating Partnership and their
consolidated entities, collectively.
F-8
Note 2 Basis of Presentation and Summary of
Significant Accounting Policies
|
|
|
Principles of Consolidation |
The accompanying consolidated financial statements include the
accounts of Aimco, the Aimco Operating Partnership, and their
consolidated entities. As used herein, and except where the
context otherwise requires, partnership refers to a
limited partnership or a limited liability company and
partner refers to a limited partner in a limited
partnership or a member in a limited liability company.
Interests held in consolidated real estate partnerships by
limited partners other than us are reflected as minority
interest in consolidated real estate partnerships. All
significant intercompany balances and transactions have been
eliminated in consolidation. The assets of consolidated real
estate partnerships owned or controlled by Aimco or the Aimco
Operating Partnership generally are not available to pay
creditors of Aimco or the Aimco Operating Partnership.
FASB Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest Entities, or
FIN 46, addresses the consolidation by business enterprises
of variable interest entities. As a result of the adoption of
FIN 46, as of March 31, 2004, we consolidate all
variable interest entities for which we are the primary
beneficiary. Generally, a variable interest entity, or VIE, is
an entity with one or more of the following characteristics:
(a) the total equity investment at risk is not sufficient
to permit the entity to finance its activities without
additional subordinated financial support; (b) as a group,
the holders of the equity investment at risk lack (i) the
ability to make decisions about an entitys activities
through voting or similar rights, (ii) the obligation to
absorb the expected losses of the entity, or (iii) the
right to receive the expected residual returns of the entity; or
(c) the equity investors have voting rights that are not
proportional to their economic interests and substantially all
of the entitys activities either involve, or are conducted
on behalf of, an investor that has disproportionately few voting
rights. FIN 46 requires a VIE to be consolidated in the
financial statements of the entity that is determined to be the
primary beneficiary of the VIE. The primary beneficiary
generally is the entity that will receive a majority of the
VIEs expected losses, receive a majority of the VIEs
expected residual returns, or both.
Upon adoption of FIN 46, we determined that we were the
primary beneficiary of 27 previously unconsolidated and five
previously consolidated VIEs. These VIEs consisted of
partnerships that are engaged, directly or indirectly, in the
ownership and management of 29 apartment properties with
3,478 units. The initial consolidation of the previously
unconsolidated entities as of March 31, 2004 resulted in an
increase in our consolidated total assets (primarily real
estate), liabilities (primarily indebtedness) and minority
interest of approximately $113.5 million,
$90.6 million and $26.8 million, respectively. We
recorded a charge of approximately $4.0 million for the
cumulative effect on retained earnings resulting from the
adoption of FIN 46. This charge is attributable to our
recognition of cumulative losses allocable to minority interests
that would otherwise have resulted in minority interest deficits.
As of December 31, 2005, we were the primary beneficiary
of, and therefore consolidated, 46 VIEs, which owned 40
apartment properties with 5,816 units. Real estate with a
carrying value of $378.2 million collateralized the debt of
those VIEs. The creditors of the consolidated VIEs do not have
recourse to our general credit. As of December 31, 2005, we
also held variable interests in 107 VIEs for which we were not
the primary beneficiary. Those 107 VIEs consist primarily of
partnerships, in which we acquired an interest prior to the
adoption of FIN 46, that are engaged, directly or
indirectly, in the ownership and management of 112 apartment
properties with 10,812 units. We are involved with those
VIEs as a non-controlling equity holder, lender, management
agent, or through other contractual relationships. Our maximum
exposure to loss as a result of our involvement with
unconsolidated VIEs is limited to our recorded investments in
and receivables from those VIEs totaling $30.8 million at
December 31, 2005. We may be subject to additional losses
to the extent of any financial support that we voluntarily
provide in the future.
Generally, we consolidate real estate partnerships and other
entities that are not VIEs when we own, directly or indirectly,
a majority voting interest in the entity. In June 2005, the
Financial Accounting Standards Board, or FASB, ratified Emerging
Issues Task Force
Issue 04-5,
Determining Whether a General Partner, or the General
Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights, or
EITF 04-5.
EITF 04-5 provides
an accounting model to be used by a general partner, or group of
general partners, to determine whether the general partner(s)
controls a limited partnership or similar entity in light of
certain rights held by the limited partners and provides
additional guidance on what constitutes
F-9
substantive kick-out rights and substantive participating
rights. EITF 04-5
was effective after June 29, 2005 for general partners of
(a) all newly formed limited partnerships and
(b) existing limited partnerships for which the partnership
agreements have been modified. We consolidated four limited
partnerships in the fourth quarter of 2005 based on
EITF 04-5
requirements. The consolidation of these partnerships had an
immaterial effect on our consolidated financial statements. As
discussed in Note 19, we are required to apply
EITF 04-5 to all
existing limited partnerships and similar entities where we are
the general partner as of January 1, 2006.
|
|
|
Acquisition of Real Estate Assets and Related Depreciation
and Amortization |
We capitalize the purchase price and incremental direct costs
associated with the acquisition of properties as the cost of the
assets acquired. In accordance with Statement of Financial
Accounting Standards No. 141, Business Combinations,
or SFAS 141, we allocate the cost of acquired properties to
land, building, furniture, fixtures and equipment and
intangibles, such as the value of above and below market leases,
and origination costs associated with the in-place leases. In
order to allocate purchase price on these various components we
perform the following procedures for properties we acquire:
|
|
|
|
1. |
Determine the as-if vacant fair value of the
physical property acquired (this value assumes the property goes
dark); |
|
|
2. |
Allocate the as-if vacant fair value among land,
building, improvements (based on real estate valuation
techniques), and furniture, fixtures and equipment; and |
|
|
3. |
Compute the difference between the purchase price of the
property and the as-if vacant fair value and
allocate such difference to leases in-place (based on the nature
of our business, customer relationship value is assumed to be
zero), which will represent the total intangible assets. The
fair value of the leases in-place are comprised of: |
|
|
|
|
a. |
The value of the above and/or below market leases in-place.
Above-market and below-market in-place lease values are computed
based on the difference between (i) the contractual amounts
to be paid pursuant to the in-place leases and
(ii) managements estimate of fair market lease rates
for the corresponding in-place leases, measured over the period,
including estimated lease renewals for below-market leases, that
the leases are expected to remain in effect. |
|
|
|
|
b. |
Avoided leasing commissions and other costs that were incurred
to execute leases. |
|
|
|
|
c. |
The value associated with lost rents during the absorption
period (estimates of lost rental revenue during the expected
lease-up periods based
on current market demand). |
The values of the above and below market leases are amortized
over the remaining terms of the associated lease, including
estimated lease renewals for below-market leases, to rental
income. For the values associated with avoided leasing
commissions and other costs that were incurred to execute leases
and the value associated with lost rents during the absorption
period, amortization expense is recorded over the expected terms
of the associated leases. If a resident vacates the unit prior
to the contractual termination of the lease and no rental
payments are being made on the lease, any unamortized balance of
the related intangible will be written off.
Depreciation for all tangible real estate assets is calculated
using the straight-line method over their estimated useful
lives. Acquired buildings and improvements are depreciated over
a composite life of 14 to 52 years, based on the age,
condition and other physical characteristics of the property. As
discussed under Impairment of Long Lived Assets below, we
may adjust depreciation of properties that are expected to be
disposed of prior to the end of their useful lives. Furniture,
fixtures and equipment associated with acquired properties are
depreciated over five years.
|
|
|
Capital Expenditures and Related Depreciation |
We capitalize costs, including certain indirect costs, incurred
in connection with our capital expenditure activities, including
redevelopment and construction projects, other tangible property
improvements, and replacements of existing property components.
Included in these capitalized costs are payroll costs associated
with time spent by site employees in connection with the
planning, execution and control of all capital
F-10
expenditure activities at the property level. We characterize as
indirect costs an allocation of certain department
costs, including payroll, at the regional operating center and
corporate levels that clearly relate to capital expenditure
activities. We capitalize interest, property taxes and insurance
during periods in which redevelopment and construction projects
are in progress. Costs incurred in connection with capital
expenditure activities are capitalized where the costs of the
improvements or replacements exceed $250. We charge to expense
as incurred costs that do not relate to capital expenditure
activities, including ordinary repairs, maintenance, resident
turnover costs and general and administrative expenses.
We depreciate capitalized costs using the straight-line method
over the estimated useful life of the related component or
improvement, which is five, 15 or 30 years. Prior to
July 1, 2005, we recorded capitalized site payroll costs
and most capitalized indirect costs separately from other costs
of the related capital projects. We depreciated capitalized site
payroll costs over five years and capitalized indirect costs
associated with capital replacement and improvement projects
over five or 15 years. Capitalized indirect costs
associated with redevelopment projects, together with other
costs of the redevelopment projects, were depreciated over the
estimated useful lives of those projects, predominantly
30 years.
Effective July 1, 2005, we refined the estimated useful
lives for the capitalized site payroll and indirect costs that
were recorded separately from other costs of the related capital
projects. All capitalized site payroll and indirect costs
incurred after June 30, 2005 are allocated proportionately,
based on direct costs, among capital projects and depreciated
over the estimated useful lives of such projects. This change in
estimate is also being applied prospectively to the
June 30, 2005 carrying amounts, net of accumulated
depreciation, of previously incurred site payroll and indirect
costs. Those amounts, based on the periods the costs were
incurred, were allocated among capital projects that were
completed in the corresponding periods in proportion to the
original direct costs of such projects and are being depreciated
over the remaining useful lives of the projects. We anticipate
that these refinements will result in generally higher
depreciation expense in foreseeable future accounting periods.
For the year ended December 31, 2005, these changes in
estimated useful lives resulted in decreased net income of
approximately $4.6 million, and resulted in a decrease in
basic and diluted earnings per share of $0.05.
Certain homogeneous items that are purchased in bulk on a
recurring basis, such as carpeting and appliances, are
depreciated using group methods that reflect the average
estimated useful life of the items in each group. Except in the
case of property casualties, where the net book value of lost
property is written off in the determination of casualty gains
or losses, we generally do not recognize any loss in connection
with the replacement of an existing property component because
normal replacements are considered in determining the estimated
useful lives used in connection with our composite and group
depreciation methods.
For the years ended December 31, 2005, 2004 and 2003, for
continuing and discontinued operations, we capitalized
$18.1 million, $9.5 million and $14.5 million of
interest costs, respectively, and $53.3 million,
$46.7 million and $45.4 million of site payroll and
indirect costs, respectively.
|
|
|
Asset Retirement Obligations |
In March 2005, the FASB issued FASB Interpretation No. 47,
Accounting for Conditional Asset Retirement Obligations,
or FIN 47. FIN 47 clarifies the accounting for legal
obligations to perform asset retirement activity in which the
timing and/or method of settlement are conditional on future
events. FIN 47 requires the fair value of such conditional
asset retirement obligations to be recorded as incurred, if the
fair value of the liability can be reasonably estimated. We have
determined that FIN 47 applies to certain obligations that
we have based on laws that require property owners to remove or
remediate hazardous substances in certain circumstances. We
adopted the provisions of FIN 47 as of December 31,
2005 and determined that asset retirement obligations that are
required to be recognized under FIN 47 are immaterial to
our financial condition and results of operations. See
Note 9 for further discussion of asset retirement
obligations.
|
|
|
Impairment of Long-Lived Assets |
We apply the provisions of Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, or SFAS 144, to
determine whether our real estate and other long-
F-11
lived assets are impaired. Such assets to be held and used are
stated at cost, less accumulated depreciation and amortization,
unless the carrying amount of the asset is not recoverable. If
events or circumstances indicate that the carrying amount of a
property may not be recoverable, we make an assessment of its
recoverability by comparing the carrying amount to our estimate
of the undiscounted future cash flows, excluding interest
charges, of the property. If the carrying amount exceeds the
aggregate undiscounted future cash flows, we recognize an
impairment loss to the extent the carrying amount exceeds the
estimated fair value of the property. Based on periodic tests of
recoverability of long-lived assets, for the year ended
December 31, 2005, we recorded impairment losses of
$3.4 million related to properties to be held and used. For
the years ended December 31, 2004 and 2003, we determined
that the carrying amounts of our properties to be held and used
were recoverable and, therefore, we did not record any
impairment losses related to such properties.
Our tests of recoverability address real estate assets that do
not currently meet all conditions to be classified as held for
sale, but are expected to be disposed of prior to the end of
their estimated useful lives. If an impairment loss is not
required to be recorded in accordance with SFAS 144, the
recognition of depreciation is adjusted prospectively, as
necessary, to reduce the carrying value of the real estate to
its estimated disposition value over the remaining period that
the real estate is expected to be held and used. These
depreciation adjustments decreased net income by
$31.9 million and $6.4 million, and resulted in a
decrease in basic and diluted earnings per share of $0.34 and
$0.07, for the years ended December 31, 2005 and 2004,
respectively.
We consider highly liquid investments with an original maturity
of three months or less to be cash equivalents.
Restricted cash includes capital replacement reserves, tax-free
exchange funds, completion repair reserves, bond sinking fund
amounts and tax and insurance escrow accounts held by lenders.
|
|
|
Accounts Receivable and Allowance for Doubtful
Accounts |
Accounts receivable are generally comprised of amounts
receivable from residents, amounts receivable from
non-affiliated real estate partnerships for which we provide
property management and other services and other miscellaneous
receivables from non-affiliated entities. We evaluate
collectibility of accounts receivable from residents and
establish an allowance, after the application of security
deposits and other anticipated recoveries, for accounts greater
than 30 days past due for current residents and all
receivables due from former residents. Accounts receivable from
residents are stated net of allowances for doubtful accounts of
approximately $2.3 million and $2.4 million as of
December 31, 2005 and 2004, respectively.
We evaluate collectibility of accounts receivable from
non-affiliated entities and establish an allowance for amounts
that are considered to be uncollectible. Accounts receivable
relating to non-affiliated entities are stated net of allowances
for doubtful accounts of approximately $4.2 million and
$4.5 million as of December 31, 2005 and 2004,
respectively.
|
|
|
Accounts Receivable and Allowance for Doubtful Accounts
from Affiliates |
Accounts receivable from affiliates are generally comprised of
receivables related to property management and other services
provided to unconsolidated real estate partnerships in which we
have an ownership interest. We evaluate collectibility of
accounts receivable balances from affiliates on a periodic
basis, and establish an allowance for the amounts deemed to be
uncollectible. Accounts receivable from affiliates are stated
net of allowances for doubtful accounts of approximately
$4.7 million and $4.4 million as of December 31,
2005 and 2004, respectively.
F-12
We defer lender fees and other direct costs incurred in
obtaining financing and amortize the cost over the terms of the
related loan agreements. Amortization of these costs is included
in interest expense.
We defer leasing commissions and other direct costs incurred in
connection with successful leasing efforts and amortize the
costs over the terms of the related leases. Amortization of
these costs is included in property operating expenses.
We generally expense all advertising costs as incurred to
property operating expense. For the years ended
December 31, 2005, 2004 and 2003, for both continuing and
discontinued operations, total advertising expense was
$36.1 million, $33.1 million and $28.7 million,
respectively.
|
|
|
Notes Receivable from Unconsolidated Real Estate
Partnerships and Related Interest Income and Provision for
Losses |
Notes receivable from unconsolidated real estate partnerships
consist primarily of notes receivable from partnerships in which
we are the general partner. The ultimate repayment of these
notes is subject to a number of variables, including the
performance and value of the underlying real estate property and
the claims of unaffiliated mortgage lenders. Our notes
receivable include loans extended by us that we carry at the
face amount plus accrued interest, which we refer to as
par value notes, and loans extended by predecessors
whose positions we generally acquired at a discount, which we
refer to as discounted notes.
We record interest income on par value notes as earned in
accordance with the terms of the related loan agreements. We
discontinue the accrual of interest on such notes when the notes
are impaired, as discussed below, or when there is otherwise
significant uncertainty as to the collection of interest. We
record income on such nonaccrual loans using the cost recovery
method, under which we apply cash receipts first to the recorded
amount of the loan; thereafter, any additional receipts are
recognized as income.
We recognize interest income on discounted notes receivable
based upon whether the amount and timing of collections are both
probable and reasonably estimable. We consider collections to be
probable and reasonably estimable when the borrower has entered
into certain closed or pending transactions (which include real
estate sales, refinancings, foreclosures and rights offerings)
that provide a reliable source of repayment. In such instances,
we recognize accretion income, on a prospective basis using the
effective interest method over the estimated remaining term of
the loans, equal to the difference between the carrying amount
of the discounted notes and the estimated collectible value. We
record income on all other discounted notes using the cost
recovery method.
We assess the collectibility of notes receivable on a periodic
basis, which assessment consists primarily of an evaluation of
cash flow projections of the borrower to determine whether
estimated cash flows are sufficient to repay principal and
interest in accordance with the contractual terms of the note.
We recognize impairments on notes receivable when it is probable
that principal and interest will not be received in accordance
with the contractual terms of the loan. The amount of the
impairment to be recognized generally is based on the fair value
of the partnerships real estate that represents the
primary source of loan repayment. In certain instances where
other sources of cash flow are available to repay the loan, the
impairment is measured by discounting the estimated cash flows
at the loans original effective interest rate.
|
|
|
Investments in Unconsolidated Real Estate
Partnerships |
We own general and limited partner interests in real estate
partnerships that own apartment properties. We generally account
for investments in real estate partnerships that we do not
consolidate under the equity method. Under the equity method,
our share of the earnings or losses of the entity for the
periods being presented is included in equity in earnings
(losses) from unconsolidated real estate partnerships, except
for our share of impairments and property disposition gains
related to such entities, which we report separately in the
consolidated statements of income. Certain investments in real
estate partnerships that were acquired in business
F-13
combinations were determined to have insignificant value at the
acquisition date and are accounted for under the cost method.
Any distributions received from such partnerships are recognized
as income when received.
At December 31, 2005 and 2004, other assets included
goodwill of $81.9 million and $88.1 million,
respectively, associated with our real estate segment. We
account for goodwill and other intangible assets in accordance
with the requirements of Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible
Assets, or SFAS 142. SFAS 142 does not permit
amortization of goodwill and other intangible assets with
indefinite lives, but requires an annual impairment test of such
assets. The impairment test compares the fair value of reporting
units with their carrying amounts, including goodwill. Based on
the application of the goodwill impairment test set forth in
SFAS 142, we determined that our goodwill was not impaired
in 2005, 2004 or 2003. As discussed in Note 10, we reduced
goodwill by $6.2 million in 2005 in connection with the
recognition of deferred income tax assets that were acquired in
connection with business combinations in prior years.
Other assets also includes intangible assets for purchased
management contracts with finite lives that we amortize on a
straight-line basis over terms ranging from five to twenty years
and intangible assets for in-place leases as discussed under
Acquisition of Real Estate Assets and Related Depreciation
and Amortization.
|
|
|
Capitalized Software Costs |
Purchased software and other costs related to software developed
for internal use are capitalized during the application
development stage and are amortized using the straight-line
method over the estimated useful life of the software, generally
five years. We write off the costs of software development
projects when it is no longer probable that the software will be
completed and placed in service. For the years ended
December 31, 2005, 2004 and 2003, we capitalized software
development costs totaling $9.9 million, $18.1 million
and $18.9 million, respectively. During 2005 and 2004, we
wrote off $0.5 million and $1.1 million of software
development costs. At December 31, 2005 and 2004, other
assets included $40.2 million and $43.4 million of net
capitalized software, respectively.
|
|
|
Minority Interest in Consolidated Real Estate
Partnerships |
We report unaffiliated partners interests in consolidated
real estate partnerships as minority interest in consolidated
real estate partnerships. Minority interest in consolidated real
estate partnerships represents the minority partners share
of the underlying net assets of our consolidated real estate
partnerships. When these consolidated real estate partnerships
make cash distributions to partners in excess of the carrying
amount of the minority interest, we generally record a charge
equal to the amount of such excess distribution, even though
there is no economic effect or cost. We report this charge in
the consolidated statements of income as deficit distributions
to minority partners. We allocate the minority partners
share of partnership losses to minority partners to the extent
of the carrying amount of the minority interest. We generally
record a charge when the minority partners share of
partnership losses exceed the carrying amount of the minority
interest, even though there is no economic effect or cost. We
report this charge in the consolidated statements of income
within minority interest in consolidated real estate
partnerships. We do not record charges for distributions or
losses in certain limited instances where the minority partner
has a legal obligation and financial capacity to contribute
additional capital to the partnership. For the years ended
December 31, 2005, 2004, and 2003, we recorded charges for
partnership losses resulting from depreciation of approximately
$9.5 million, $5.2 million, and $1.5 million,
respectively, that were not allocated to minority partners
because the losses exceeded the carrying amount of the minority
interest.
Minority interest in consolidated real estate partnerships
consists primarily of equity interests held by limited partners
in consolidated real estate partnerships that have finite lives.
The terms of the related partnership agreements generally
require the partnership to be liquidated following the sale of
the partnerships real estate. As the general partner in
these partnerships, we ordinarily control the execution of real
estate sales and other events that could lead to the
liquidation, redemption or other settlement of minority
interests. The aggregate carrying value of minority interests in
consolidated real estate partnerships is approximately
$217.7 million at Decem-
F-14
ber 31, 2005. The aggregate fair value of these interests
varies based on the fair value of the real estate owned by the
partnerships. Based on the number of classes of finite-life
minority interests, the number of properties in which there is
direct or indirect minority ownership, complexities in
determining the allocation of liquidation proceeds among
partners and other factors, we believe it is impracticable to
determine the total required payments to the minority interests
in an assumed liquidation at December 31, 2005. As a result
of real estate depreciation that is recognized in our financial
statements and appreciation in the fair value of real estate
that is not recognized in our financial statements, we believe
that the aggregate fair value of our minority interests exceeds
their aggregate carrying value. As a result of our ability to
control real estate sales and other events that require payment
of minority interests and our expectation that proceeds from
real estate sales will be sufficient to liquidate related
minority interests, we anticipate that the eventual liquidation
of these minority interests will not have an adverse impact on
our financial condition.
Our properties have operating leases with apartment residents
with terms generally of twelve months or less. We recognize
rental revenue related to these leases, net of any concessions,
on a straight-line basis over the term of the lease. We
recognize revenues from property management, asset management,
syndication, development and other services when the related
fees are earned and are realized or realizable.
Effective January 1, 2003, we adopted the accounting
provisions of Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation, or
SFAS 123, as amended by Statement of Financial Accounting
Standards No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure-an amendment of FASB
Statement No. 123, or SFAS 148, and applied the
prospective method set forth in SFAS 148 with respect to
the transition. Under this method, we apply the fair value
recognition provisions of SFAS 123 to all employee awards
granted, modified, or settled on or after January 1, 2003,
which has resulted in recognition of compensation expense
related to stock options based on the fair value of the stock
options. For stock options granted prior to January 1,
2003, we apply Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, or APB 25,
and related interpretations. Under APB 25, because the
exercise price of our employee stock options equaled the market
price of the underlying stock on the date of grant, no
compensation expense related to such options has been
recognized. We recognize compensation expense for stock options
accounted for under SFAS 123 and restricted stock awards
ratably over the period the awards vest. Compensation expense is
reversed as forfeitures occur.
For purposes of the pro forma disclosures below, the estimated
fair values for all awards made prior to January 1, 2003
are amortized over the respective vesting period for each such
option and are shown as expense as if SFAS 123 had been
applied to all such awards. Pro forma information regarding net
income and earnings per share is required by SFAS 123,
which also requires that the information be determined as if we
had accounted for our employee stock options granted subsequent
to December 31, 1994 under the fair value method. The fair
value for our options granted over the last three years was
estimated at the date of grant using a Black-Scholes valuation
model. The estimated fair value of our stock options and
underlying assumptions are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Weighted average fair value of options granted during the year
|
|
|
$3.57 |
|
|
|
$2.24 |
|
|
|
$2.26 |
|
|
|
|
|
|
|
|
|
|
|
Assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk free interest rate
|
|
|
4.1% |
|
|
|
3.5% |
|
|
|
3.5% |
|
|
Expected dividend yield
|
|
|
6.31% |
|
|
|
7.5% |
|
|
|
9.0% |
|
|
Volatility factor of the expected market price of our Common
Stock
|
|
|
0.190 |
|
|
|
0.191 |
|
|
|
0.195 |
|
|
Weighted average expected life of options
|
|
|
5.0 years |
|
|
|
5.0 years |
|
|
|
5.0 years |
|
The Black-Scholes valuation model was developed for use in
estimating the fair value of traded options and does not take
into account vesting requirements or restrictions on
transferability. In addition, the valuation model
F-15
requires the input of highly subjective assumptions including
the expected stock price volatility. Our employee stock options
have characteristics significantly different from those of
traded options, and changes in the subjective input assumptions
can materially affect the fair value estimate.
The following table illustrates the effect on net income and
earnings per share if the fair value based method had been
applied to all outstanding and unvested awards in each period
presented. Our pro forma information for the years ended
December 31, 2005, 2004 and 2003 is as follows (in
thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Net income (loss) attributable to common stockholders, as
reported
|
|
$ |
(16,966 |
) |
|
$ |
174,693 |
|
|
$ |
65,292 |
|
Add: Stock-based employee compensation expense included in
reported net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock awards
|
|
|
8,140 |
|
|
|
4,903 |
|
|
|
4,088 |
|
|
Stock options
|
|
|
1,835 |
|
|
|
1,603 |
|
|
|
892 |
|
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock awards
|
|
|
(8,140 |
) |
|
|
(4,903 |
) |
|
|
(4,088 |
) |
|
Stock options
|
|
|
(3,422 |
) |
|
|
(4,289 |
) |
|
|
(4,744 |
) |
Add: Additional minority interest in Aimco Operating Partnership
|
|
|
161 |
|
|
|
276 |
|
|
|
435 |
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income (loss) attributable to common stockholders
|
|
$ |
(18,392 |
) |
|
$ |
172,283 |
|
|
$ |
61,875 |
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
$ |
(0.18 |
) |
|
$ |
1.88 |
|
|
$ |
0.70 |
|
|
Pro forma
|
|
$ |
(0.20 |
) |
|
$ |
1.85 |
|
|
$ |
0.67 |
|
Diluted earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
$ |
(0.18 |
) |
|
$ |
1.88 |
|
|
$ |
0.70 |
|
|
Pro forma
|
|
$ |
(0.20 |
) |
|
$ |
1.85 |
|
|
$ |
0.67 |
|
The effects of applying SFAS 123 in calculating pro forma
income attributable to common stockholders and pro forma basic
and diluted earnings per share may not necessarily be indicative
of the effects of applying SFAS 123 to future years
earnings. As discussed in Note 19, we will change our
method of accounting for share-based compensation in 2006.
In accordance with SFAS 144, we classify certain properties
and related liabilities as held for sale (see Note 14). The
operating results of such properties are presented in
discontinued operations in both current periods and all
comparable periods presented. Depreciation is not recorded on
properties held for sale; however, depreciation expense recorded
prior to classification as held for sale is included in
discontinued operations. The net gain on sale and any impairment
losses are presented in discontinued operations when recognized.
|
|
|
Derivative Financial Instruments |
We primarily use long-term, fixed-rate and self-amortizing
non-recourse debt to avoid, among other things, risk related to
fluctuating interest rates. For our variable-rate debt, we are
sometimes required by our lenders to limit our exposure to
interest rate fluctuations by entering into interest rate swap
or cap agreements. The interest rate swap agreements moderate
our exposure to interest rate risk by converting the
variable-rate debt to a fixed rate. The interest rate cap
agreements effectively limit our exposure to interest rate risk
by providing a ceiling on the underlying variable interest rate.
The fair values of these instruments are reflected as assets or
liabilities in the balance sheet, and periodic changes in fair
value are included in interest expense. In 2005, we entered into
a
F-16
natural gas commodity swap agreement to limit our exposure to
increases in the price of natural gas purchases for certain
properties. These instruments are not material to our financial
position and results of operations.
We believe that our insurance coverages insure our properties
adequately against the risk of loss attributable to fire,
earthquake, hurricane, tornado, flood, and other perils. In
addition, we reinsure substantial portions of our property,
workers compensation, health, and general liability
insurance coverage. Losses are accrued based upon our estimates
of the aggregate liability for claims incurred using certain
actuarial assumptions followed in the insurance industry and
based on our experience.
We have elected to be taxed as a REIT, as defined under the
Internal Revenue Code of 1986, as amended. As a REIT, we
generally will not be subject to United States Federal income
taxes at the corporate level on our net income that is
distributed to our stockholders if we distribute at least 90% of
our REIT taxable income to our stockholders. If our taxable
income exceeds our dividends in a tax year, REIT tax rules allow
us to throw back dividends from the subsequent tax
year in order to avoid current taxation on undistributed income.
Throwing back of dividends can result in excise taxes. REITs are
also subject to a number of other organizational and operational
requirements. If we fail to qualify as a REIT in any taxable
year, our taxable income will be subject to United States
Federal income tax at regular corporate rates (including any
applicable alternative minimum tax). Even if we qualify as a
REIT, we may be subject to certain state and local income taxes
and to United States Federal income tax. We also will be
required to pay a 100% tax on non-arms length transactions
between us and a taxable REIT subsidiary and on any net income
from sales of property that was property held for sale to
customers in the ordinary course.
Certain of our operations (property management, asset
management, risk, etc.) are conducted through taxable REIT
subsidiaries, which are subsidiaries of the Aimco Operating
Partnership and each of which we refer to as a TRS. A TRS is a
C-corporation that has not elected REIT status and as such is
subject to United States Federal corporate income tax. We use
the TRS format to facilitate our ability to offer certain
services and activities to our residents, which services and
activities are not generally considered to be qualifying REIT
activities.
For our taxable REIT subsidiaries, deferred income taxes result
from temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for Federal income tax purposes, and are measured
using the enacted tax rates and laws that are expected to be in
effect when the differences reverse. We reduce deferred tax
assets by recording a valuation allowance when we determine
based on available evidence that it is more likely than not that
the assets will not be realized.
We calculate earnings per share based on the weighted average
number of shares of Common Stock, common stock equivalents and
dilutive convertible securities outstanding during the period
(see Note 15).
|
|
|
Fair Value of Financial Instruments |
The aggregate fair value of our cash and cash equivalents,
receivables, payables and short-term secured debt as of
December 31, 2005 approximates their carrying value due to
their relatively short-term nature. We further believe that the
fair value of our variable rate secured tax-exempt bond debt and
secured long-term debt also approximate their carrying value.
For notes receivable, fixed rate secured tax-exempt bond debt
and secured long-term debt, fair values have been based on
estimates using present value techniques. Present value
calculations vary significantly depending on the assumptions
used, including the discount rate and estimates of future cash
flows. We estimate fair value for our fixed rate debt agreements
based on the market rate for debt with the same or similar
terms. In many cases, the fair value estimates may not be
realized in immediate settlement of the instruments. The
estimated combined fair value of our notes receivable at
December 31, 2005 and December 31, 2004, was
approximately $211 million and $201 million,
respectively. See Note 5 for further details on notes
F-17
receivable. The estimated combined fair value of our secured
tax-exempt bonds and secured notes payable, including amounts
within liabilities related to assets held for sale, at
December 31, 2005 and December 31, 2004, was
approximately $5.8 billion and $5.9 billion,
respectively. The combined carrying value of our secured
tax-exempt bonds and secured notes payable, including amounts
within liabilities related to assets held for sale, at both
December 31, 2005 and December 31, 2004, was
approximately $5.7 billion. See Note 6 for further
details on secured tax-exempt bonds and secured notes payable.
|
|
|
Concentration of Credit Risk |
Financial instruments that potentially could subject us to
significant concentrations of credit risk consist principally of
notes receivable. Concentrations of credit risk with respect to
notes receivable are limited due to the large number of
partnerships comprising our partnership base, and the geographic
diversity of the underlying properties.
The preparation of our consolidated financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the reported amounts included in the
financial statements and accompanying notes thereto. Actual
results could differ from those estimates.
Certain items included in the 2004 and 2003 financial statements
amounts have been reclassified to conform to the 2005
presentation.
Note 3 Acquisitions
During 2005, we completed acquisitions of six properties
(including Palazzo East at Park La Brea), containing
approximately 1,006 residential units and six retail spaces for
an aggregate purchase price of approximately
$283.6 million, including transaction costs. Of the six
properties acquired, four are located in the New York City area,
one in Los Angeles, and one in New Jersey. The purchases were
funded with cash, new debt and the assumption of existing debt.
During 2004, we completed acquisitions of 11 properties
(including The Palazzo at Park La Brea), containing
approximately 1,880 residential units (and some ground floor
retail space) for an aggregate purchase price of approximately
$361 million. Of the 11 properties acquired, six are
located in the New York City area, one in Los Angeles, two in
Massachusetts, one in Florida and one in the Chicago area. The
purchases were funded with cash, tax-free exchange funds, new
debt and the assumption of existing debt.
|
|
|
Acquisitions of Partnership Interests |
During 2005 and 2004, we acquired limited partnership interests
in 84 partnerships and 147 partnerships, respectively, in which
our affiliates served as general partner. In connection with
such acquisitions in both consolidated and unconsolidated real
estate partnerships, during 2005 we paid approximately
$56.0 million, including transaction costs, of which
$55.6 million was in cash and the remainder in
OP Units, and during 2004 we paid approximately
$50.0 million, including transaction costs, of which
$47.8 million was in cash and the remainder in
OP Units. The 2005 and 2004 amounts were approximately
$60.6 million and $89.2 million, respectively, in
excess of the carrying amount of minority interest in such
limited partnerships, which excess we generally assigned to real
estate.
Note 4 Investments in Unconsolidated Real
Estate Partnerships
We owned general and limited partner interests in unconsolidated
real estate partnerships owning approximately 264, 330 and 441
properties at December 31, 2005, 2004 and 2003,
respectively. We acquired these
F-18
interests through various transactions, including large
portfolio acquisitions and offers to individual limited
partners. Our total ownership interests in these unconsolidated
real estate partnerships ranges typically from less than 1% to
50%.
The following table provides selected combined financial
information for unconsolidated real estate partnerships as of
and for the years ended December 31, 2005, 2004 and 2003
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Real estate, net of accumulated depreciation
|
|
$ |
763,219 |
|
|
$ |
1,004,501 |
|
|
$ |
1,441,739 |
|
Total assets
|
|
|
954,970 |
|
|
|
1,255,434 |
|
|
|
1,809,990 |
|
Secured and other notes payable
|
|
|
932,454 |
|
|
|
1,146,141 |
|
|
|
1,704,963 |
|
Total liabilities
|
|
|
1,248,450 |
|
|
|
1,545,250 |
|
|
|
2,256,370 |
|
Partners deficit
|
|
|
(293,480 |
) |
|
|
(289,816 |
) |
|
|
(446,380 |
) |
Rental and other property revenues
|
|
|
311,429 |
|
|
|
320,687 |
|
|
|
538,759 |
|
Property operating expenses
|
|
|
(177,970 |
) |
|
|
(201,248 |
) |
|
|
(328,759 |
) |
Depreciation expense
|
|
|
(63,056 |
) |
|
|
(72,577 |
) |
|
|
(110,978 |
) |
Interest expense
|
|
|
(84,252 |
) |
|
|
(99,120 |
) |
|
|
(157,513 |
) |
Gain on sale
|
|
|
106,465 |
|
|
|
100,669 |
|
|
|
85,718 |
|
Net income
|
|
|
82,123 |
|
|
|
50,778 |
|
|
|
40,782 |
|
The decrease in the amounts in the above table from year to year
was primarily due to dispositions of real estate owned by the
unconsolidated real estate partnerships and our purchase of
additional interests in, and resulting consolidation of, various
partnerships previously accounted for under the equity method.
As a result of our acquisition of interests in unconsolidated
real estate partnerships, the investment in these partnerships
at December 31, 2005 and 2004 of $167.8 million and
$207.8 million, respectively, is approximately
$236.0 million and $272.3 million, respectively, in
excess of our share of the underlying historical partners
deficit of the partnerships. The excess of the cost of the
investments acquired over the equity in the underlying
historical partners deficit is primarily ascribed to the
fair values of land and buildings owned by the unconsolidated
real estate partnerships. We amortize the excess basis related
to the buildings over the estimated useful lives of the
buildings. Such amortization is recorded as a component of
equity in losses of unconsolidated real estate partnerships.
Note 5 Notes Receivable
The following table summarizes our notes receivable at
December 31, 2005 and 2004 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
Unconsolidated | |
|
|
|
Unconsolidated | |
|
|
|
|
Real Estate | |
|
Non- | |
|
|
|
Real Estate | |
|
Non- | |
|
|
|
|
Partnerships | |
|
Affiliates | |
|
Total | |
|
Partnerships | |
|
Affiliates | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Par value notes
|
|
$ |
89,658 |
|
|
$ |
22,681 |
|
|
$ |
112,339 |
|
|
$ |
81,217 |
|
|
$ |
31,217 |
|
|
$ |
112,434 |
|
Discounted notes
|
|
|
92,451 |
|
|
|
1,079 |
|
|
|
93,530 |
|
|
|
91,221 |
|
|
|
499 |
|
|
|
91,720 |
|
Allowance for loan losses
|
|
|
(4,891 |
) |
|
|
|
|
|
|
(4,891 |
) |
|
|
(7,149 |
) |
|
|
|
|
|
|
(7,149 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total notes receivable
|
|
$ |
177,218 |
|
|
$ |
23,760 |
|
|
$ |
200,978 |
|
|
$ |
165,289 |
|
|
$ |
31,716 |
|
|
$ |
197,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Face value of discounted notes
|
|
$ |
130,342 |
|
|
$ |
|
|
|
$ |
130,342 |
|
|
$ |
132,654 |
|
|
$ |
1,249 |
|
|
$ |
133,903 |
|
Included in notes receivable from unconsolidated real estate
partnerships at December 31, 2005 and 2004, are
$28.8 million and $31.3 million, respectively, in
notes that were secured by interests in real estate or interests
in real estate partnerships. We earn interest on these secured
notes receivable at various annual interest rates ranging
between 6.0% and 12.0% and averaging 10.3%.
F-19
Included in the notes receivable from non-affiliates at
December 31, 2005 and 2004, are $6.4 million and
$9.1 million, respectively, in notes that were secured by
interests in real estate or interests in real estate
partnerships. We earn interest on these secured notes receivable
at various annual interest rates ranging between 4.0% and 7.3%
and averaging 6.1%.
Additionally, included in notes receivable from non-affiliates
at December 31, 2005 and 2004 are notes receivable from
Alan I. Casden for an aggregate of $2.5 million and
$9.4 million, respectively. The notes were part of the
settlement of litigation involving NAPICO that was underway
prior to the March 2002 acquisition of Casden Properties, Inc.
(which we refer to as the Casden Transactions) in which we
acquired NAPICO. The notes were secured by certain shares of
Common Stock and certain cash settlement proceeds. In 2004, we
entered into an agreement with respect to certain proceeds to be
received by Alan I. Casden and his right to deliver Common Stock
at an agreed-upon value of $47 per share in satisfaction of
the Notes. Pursuant to this agreement, in 2004 we received
$20 million in cash as payment in full on three notes due
in 2004, 2005 and 2006. In 2005, we received cash payments of
$7.0 million in satisfaction of the note due in 2007 and in
partial satisfaction of the note due in 2008. In 2006, we will
receive a final payment of $2.5 million in satisfaction of
the note due in 2008. This transaction resolved a contingency
based on the price of our Common Stock related to the Casden
Transactions. In accordance with SFAS 141, in 2004 we
recorded a $4.8 million charge to additional paid-in
capital, representing the difference between the
$29.1 million fair value of the consideration to be paid
pursuant to the settlement and the $33.9 million book value
of the notes.
Interest income from total non-impaired par value and certain
discounted notes for the years ended December 31, 2005,
2004 and 2003 totaled $19.2 million, $20.5 million and
$15.5 million, respectively. For the years ended
December 31, 2005, 2004, and 2003, we recognized accretion
income on certain discounted notes of approximately
$2.5 million, $6.3 million and $3.3 million,
respectively.
The activity in the allowance for loan losses in total for both
par value notes and discounted notes for the years ended
December 31, 2005 and 2004, is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Balance at beginning of year
|
|
$ |
(7,149 |
) |
|
$ |
(10,122 |
) |
|
Additional provisions for losses on notes receivable
|
|
|
(577 |
) |
|
|
(2,061 |
) |
|
Recoveries of losses on notes receivable
|
|
|
1,942 |
|
|
|
3,826 |
|
|
Net reductions due to consolidation of real estate partnerships
and property dispositions
|
|
|
893 |
|
|
|
1,208 |
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$ |
(4,891 |
) |
|
$ |
(7,149 |
) |
|
|
|
|
|
|
|
During the years ended December 31, 2005 and 2004, we
determined that an allowance for loan losses of
$2.4 million and $3.7 million, respectively, was
required on certain of our par value notes that had carrying
values of $6.5 million and $17.1 million,
respectively. The average recorded investment in the impaired
par value notes for the years ended December 31, 2005 and
2004 was $6.7 million and $11.8 million, respectively.
The remaining $105.8 million in par value notes receivable
at December 31, 2005 is estimated to be collectible and,
therefore, interest income on these par value notes is
recognized as it is earned.
As of December 31, 2005 and 2004, we determined that an
allowance for loan losses of $2.5 million and
$3.4 million, respectively, was required on certain of our
discounted notes that had carrying values of $5.0 million
and $6.0 million, respectively. The average recorded
investment in the impaired discounted notes for the years ended
December 31, 2005 and 2004 was $5.0 million and
$5.9 million, respectively.
F-20
Note 6 Secured Tax-Exempt Bond Financings
and Secured Notes Payable
The following table summarizes our secured tax-exempt bond
financings at December 31, 2005 and 2004, the majority of
which is non-recourse to us (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average | |
|
Principal Outstanding | |
|
|
Interest Rate | |
|
| |
|
|
2005 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Fixed rate secured tax-exempt bonds payable
|
|
|
5.67 |
% |
|
$ |
350,519 |
|
|
$ |
369,410 |
|
Variable rate secured tax-exempt bonds payable
|
|
|
3.56 |
|
|
|
726,050 |
|
|
|
731,815 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$ |
1,076,569 |
|
|
$ |
1,101,225 |
|
|
|
|
|
|
|
|
|
|
|
Fixed rate secured tax-exempt bonds payable mature at various
dates through October 2045. Variable rate secured tax-exempt
bonds payable mature at various dates through June 2034.
Principal and interest on these bonds are generally payable in
semi-annual installments or in monthly interest-only payments
with balloon payments due at maturity. Certain of our tax-exempt
bonds at December 31, 2005 are remarketed periodically by a
remarketing agent to maintain a variable yield. If the
remarketing agent is unable to remarket the bonds, then the
remarketing agent can put the bonds to us. We believe that the
likelihood of this occurring is remote. At December 31,
2005, our secured tax-exempt bond financings were secured by 81
properties with a combined net book value of
$1,661.0 million.
The following table summarizes our secured notes payable at
December 31, 2005 and 2004, the majority of which are
non-recourse to us (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average | |
|
Principal Outstanding | |
|
|
Interest Rate | |
|
| |
|
|
2005 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
Conventional fixed rate secured notes payable
|
|
|
6.62 |
% |
|
$ |
3,923,178 |
|
|
$ |
3,730,973 |
|
Conventional variable rate secured notes payable
|
|
|
5.10 |
|
|
|
564,708 |
|
|
|
335,544 |
|
Secured notes credit facility
|
|
|
5.08 |
|
|
|
102,788 |
|
|
|
67,370 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$ |
4,590,674 |
|
|
$ |
4,133,887 |
|
|
|
|
|
|
|
|
|
|
|
Fixed rate secured notes payable mature at various dates through
August 2053. Variable rate secured notes payable mature at
various dates through August 2011. Principal and interest are
generally payable monthly or in monthly interest-only payments
with balloon payments due at maturity. At December 31,
2005, our secured notes payable were secured by 515 properties
with a combined net book value of $7,012.2 million.
We have a secured revolving credit facility that provides for
borrowings of up to $250 million primarily to be used for
financing properties that we generally intend to hold for the
intermediate term, as well as properties that are designated for
redevelopment. In addition to the amounts in the above table,
there were approximately $4 million and $10 million of
notes that were provided through this facility that are
obligations of unconsolidated real estate partnerships and not
included within secured notes payable at December 31, 2005
and 2004, respectively. The interest rate on the notes provided
through this facility is the Fannie Mae Discounted
Mortgage-Backed Security index plus 0.85%, which interest rate
resets monthly. Each such loan under this facility is treated as
a separate borrowing and is collateralized by a specific
property, and none of the loans is cross-collateralized or
cross-defaulted. This facility matures in September 2007, but
can be terminated and repaid in full without penalty.
Our consolidated debt instruments generally contain covenants
common to the type of facility or borrowing, including financial
covenants establishing minimum debt service coverage ratios and
maximum leverage ratios. At December 31, 2005, we were in
material compliance with all financial covenants pertaining to
our consolidated debt instruments.
F-21
As of December 31, 2005, the scheduled principal
amortization and maturity payments for our secured tax-exempt
bonds and secured notes payable are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization | |
|
Maturities | |
|
Total | |
|
|
| |
|
| |
|
| |
2006
|
|
$ |
131,907 |
|
|
$ |
409,538 |
|
|
$ |
541,445 |
|
2007
|
|
|
137,659 |
|
|
|
275,002 |
|
|
|
412,661 |
|
2008
|
|
|
142,996 |
|
|
|
377,668 |
|
|
|
520,664 |
|
2009
|
|
|
148,938 |
|
|
|
113,265 |
|
|
|
262,203 |
|
2010
|
|
|
153,173 |
|
|
|
183,729 |
|
|
|
336,902 |
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
3,593,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,667,243 |
|
|
|
|
|
|
|
|
|
|
|
Note 7 Mandatorily Redeemable Preferred
Securities
In connection with the Insignia merger in 1998, we assumed the
obligations under Trust Based Convertible Preferred
Securities, which we refer to as TOPRS, with an aggregate
liquidation amount of $149.5 million. Prior to 2005,
approximately $134.5 million of these securities were
converted, resulting in $15.0 million remaining as of
December 31, 2004, which also represented the redemption
value. On January 11, 2005, we redeemed for cash all
outstanding TOPRS for a total redemption price of $50 per
security, or $15.0 million, plus any accrued and unpaid
distributions through the redemption date. For the years ended
December 31, 2005, 2004 and 2003, $30,000,
$1.0 million and $1.0 million, respectively, of
distributions have been recorded in interest expense.
Note 8 Term Loans and Credit Facility
On November 2, 2004, we entered into an Amended and
Restated Senior Secured Credit Agreement, which we refer to as
the Credit Agreement, with a syndicate of financial
institutions. In addition to Aimco, the Aimco Operating
Partnership and an Aimco subsidiary are also borrowers under the
Credit Agreement. The Credit Agreement replaced our previous two
separate credit agreements.
The Credit Agreement includes customary financial covenants,
including the maintenance of specified ratios with respect to
total indebtedness to gross asset value, total secured
indebtedness to gross asset value, aggregate recourse
indebtedness to gross asset value, variable rate debt to total
indebtedness, debt service coverage and fixed charge coverage;
the maintenance of a minimum adjusted tangible net worth; and
limitations regarding the amount of cross-collateralized debt.
The Credit Agreement includes other customary covenants,
including a restriction on distributions and other restricted
payments, but permits distributions during any four consecutive
fiscal quarters in an aggregate amount of up to 95% of our funds
from operations for such period or such amount as may be
necessary to maintain our REIT status. The Credit Agreement also
permits us to repurchase our Common Stock using up to 80% of
sales proceeds in any trailing four-quarter period.
The original aggregate commitment under the Credit Agreement was
$750 million, comprised of $450 million of revolving
loan commitments and a $300 million term loan tranche. The
revolving loans bear interest at a rate equal to (i) the
LIBOR rate plus a margin that can range from 1.50% to 2.00% (for
LIBOR loans) or (ii) the base rate plus a margin that can
range from 0% to 0.25% (for base rate loans), in each case,
depending on our leverage ratio. The original $300 million
term loan bears interest at a rate equal to (i) the LIBOR
rate plus 2.00% (for LIBOR loans) or (ii) the base rate
plus 0.25% (for base rate loans). The default rate of interest
for the loan is equal to the applicable rate described above
plus 3%. The revolving loans mature on November 2, 2007,
and the term loan matures on November 2, 2009.
On June 16, 2005, we amended the Credit Agreement to
provide for $100.0 million in additional term loan
borrowings from a syndicate of financial institutions. The
additional $100.0 million term loan matures on
November 2, 2009 and bears interest at a rate of either
LIBOR plus 1.75% or a base rate (determined by reference to the
federal funds rate or Bank of Americas prime rate) plus
0.25%. The proceeds from the additional term loan were used to
repay outstanding revolving loans.
F-22
The lenders under the Credit Agreement may accelerate any
outstanding loans if, among other things: we fail to make
payments when due (subject to applicable grace periods);
material defaults occur under other debt agreements; certain
bankruptcy or insolvency events occur; material judgments are
entered against us; we fail to comply with certain covenants,
such as the requirement to deliver financial information or the
requirement to provide notices regarding material events
(subject to applicable grace periods in some cases);
indebtedness is incurred in violation of the covenants; or
prohibited liens arise.
At December 31, 2005, the outstanding principal balance of
the term loans was $400.0 million at a weighted average
interest rate of 6.18%. At December 31, 2005, the
outstanding principal balance of the revolving loans was
$217.0 million at a weighted average interest rate of 6.26%
(based on various weighted average LIBOR and base rate
borrowings outstanding with various maturities). The amount
available under the revolving facility at December 31, 2005
was $208.3 million (after giving effect to
$24.7 million outstanding for undrawn letters of credit
issued under the revolving facility). As of December 31,
2005, we were in compliance with all financial covenant
requirements.
Note 9 Commitments and Contingencies
In connection with the Casden Transactions, we made commitments
to:
|
|
|
|
|
invest up to $50 million for a 20% limited liability
company interest in Casden Properties LLC. As of
December 31, 2005, we had invested $44.8 million.
Casden Properties LLC intends to pursue new development
opportunities in Southern California and other markets. We have
an option, but not an obligation, to purchase at completion all
multifamily rental projects developed by Casden Properties
LLC; and |
|
|
|
pay $2.5 million per quarter for five years (for an
aggregate amount of $50 million) to Casden Properties LLC
as a retainer on account for redevelopment services on our
assets. As of December 31, 2005, $37.5 million has
been paid. |
In connection with our redevelopment and capital improvement
activities, we have commitments of approximately
$99.6 million related to construction projects that are due
to be completed by early 2007. Additionally, there are times we
may enter into certain commitments for future purchases of goods
and services in connection with the operations of our
properties. Those commitments generally have terms of one year
or less and reflect expenditure levels comparable to our
historical expenditures.
We are required to manage certain consolidated real estate
partnerships in compliance with various laws, regulations and
contractual provisions that apply to our syndication of historic
and low-income housing tax credits. In some instances,
noncompliance with applicable requirements could result in
projected tax benefits not being realized and require a refund
or reduction of investor capital contributions, which are
reported as minority interests in our consolidated balance
sheet. The remaining compliance period for our tax credit
syndication arrangements range from less than one year to
15 years. At December 31, 2005, we do not anticipate
that any material refunds or reductions of investor capital
contributions will be required in connection with these
arrangements.
In addition to the matters described below, we are a party to
various legal actions and administrative proceedings arising in
the ordinary course of business, some of which are covered by
liability insurance, and none of which we expect to have a
material adverse effect on our consolidated financial condition
or results of operations.
F-23
In connection with our acquisitions of interests in real estate
partnerships, we are sometimes subject to legal actions,
including allegations that such activities may involve breaches
of fiduciary duties to the partners of such real estate
partnerships or violations of the relevant partnership
agreements. We may incur costs in connection with the defense or
settlement of such litigation. We believe that we comply with
our fiduciary obligations and relevant partnership agreements.
Although the outcome of any litigation is uncertain, we do not
expect any such legal actions to have a material adverse affect
on our consolidated financial condition or results of operations.
Various Federal, state and local laws subject property owners or
operators to liability for management, and the costs of removal
or remediation, of certain hazardous substances present on a
property. Such laws often impose liability without regard to
whether the owner or operator knew of, or was responsible for,
the release or presence of the hazardous substances. The
presence of, or the failure to manage or remedy properly,
hazardous substances may adversely affect occupancy at affected
apartment communities and the ability to sell or finance
affected properties. In addition to the costs associated with
investigation and remediation actions brought by government
agencies, and potential fines or penalties imposed by such
agencies in connection therewith, the presence of hazardous
substances on a property could result in claims by private
plaintiffs for personal injury, disease, disability or other
infirmities. Various laws also impose liability for the cost of
removal, remediation or disposal of hazardous substances through
a licensed disposal or treatment facility. Anyone who arranges
for the disposal or treatment of hazardous 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. In connection with
the ownership, operation and management of properties, we could
potentially be liable for environmental liabilities or costs
associated with our properties or properties we acquire or
manage in the future.
We have determined that our legal obligations to remove or
remediate hazardous substances may be conditional asset
retirement obligations as defined in FIN 47. Except in
limited circumstances where the asset retirement activities are
expected to be performed in connection with a planned
construction project or property casualty, we believe that the
fair value of our asset retirement obligations cannot be
reasonably estimated due to significant uncertainties in the
timing and manner of settlement of those obligations. Asset
retirement obligations that are reasonably estimable as of
December 31, 2005 are immaterial to our consolidated
financial condition and results of operations.
We have been named as a defendant in lawsuits that have alleged
personal injury and property damage as a result of the presence
of mold. In addition, we are aware of lawsuits against owners
and managers of multifamily properties asserting claims of
personal injury and property damage caused by the presence of
mold, some of which have resulted in substantial monetary
judgments or settlements. We have only limited insurance
coverage for property damage loss claims arising from the
presence of mold and for personal injury claims related to mold
exposure. We have implemented policies, procedures, third-party
audits and training, and include a detailed moisture intrusion
and mold assessment during acquisition due diligence. We believe
these measures will prevent or eliminate mold exposure from our
properties and will minimize the effects that mold may have on
our residents. To date, we have not incurred any material costs
or liabilities relating to claims of mold exposure or to abate
mold conditions. Because the law regarding mold is unsettled and
subject to change we can make no assurance that liabilities
resulting from the presence of or exposure to mold will not have
a material adverse effect on our consolidated financial
condition or results of operations.
|
|
|
Unclaimed Property and Use Taxes |
Based on inquiries from several states, we are reviewing our
historic forfeiture of unclaimed property pursuant to applicable
state and local laws. We are also reviewing our historic filing
of use tax returns in certain state and local jurisdictions that
impose such taxes. At this time, we do not have sufficient
information available
F-24
to determine the extent or potential effect of any
non-compliance on our consolidated financial condition or
results of operations.
|
|
|
National Union Litigation |
National Program Services, Inc. and Vito Gruppuso (collectively
NPS) were insurance agents who sold to us property
insurance issued by National Union Fire Insurance Company of
Pittsburgh, Pennsylvania (National Union). The
financial failure of NPS resulted in defaults under two
agreements by which NPS indemnified us from losses relating to
the matters described below. As a result of such defaults, we
had a $16.7 million insurance-related receivable that was
subsequently reduced to $6.7 million following our
settlement with Lumbermens Mutual Casualty Company
(Lumbermens) and an insurance agency. In addition,
we have pending litigation against National Union, First Capital
Group, a New York based insurance wholesaler, NPS and other
agents of National Union, for a refund of at least
$10 million of the prepaid premium plus other damages.
Trial is set for May 30, 2006. The contingent liabilities
arising from the NPS defaults also resulted in litigation
against us by Cananwill, Inc. (Cananwill), a premium
funding company, regarding an alleged balance due of
$5.7 million on a premium finance agreement that funded
premium payments made to National Union. We are also plaintiffs
in litigation against Cananwill and Combined Specialty Insurance
Company, formerly known as Virginia Surety Company, Inc.,
alleging Cananwills conversion of $1.6 million of
unearned premium belonging to us and misapplication of such
funds to the alleged debt asserted in the lawsuit initiated by
Cananwill. The matter in which we are plaintiffs has been stayed
by the court pending resolution of the action filed by Cananwill
against us. The previously disclosed litigation brought by
WestRM - West Risk Markets, Ltd. (WestRM) against XL
Reinsurance America, Inc. (XL), Greenwich Insurance
Company (Greenwich) and Lumbermens in which we have
been made a third party defendant continues. Summary judgment
has been entered against defendants XL and Greenwich. Similarly,
the previously disclosed litigation brought by Highlands
Insurance Company (Highlands) against Cananwill, XL,
Greenwich and us also continues. In those cases in which we are
a defendant, we believe that we have meritorious defenses to
assert, and we will vigorously defend ourselves against claims
brought against us. In addition, we will vigorously prosecute
our own claims. Although the outcome of any claim or matter in
litigation is uncertain, we do not believe that we will incur
any material loss in connection with the insurance-related
receivable or that the ultimate outcome of these separate but
related matters will have a material adverse effect on our
consolidated financial condition or results of operations.
The Aimco Operating Partnership and NHP Management Company
(NHPMN), our subsidiary, are defendants in a lawsuit
alleging that they willfully violated the Fair Labor Standards
Act (FLSA) by failing to pay maintenance workers
overtime for all hours worked in excess of forty per week. The
complaint, filed in the United States District Court for the
District of Columbia, attempts to bring a collective action
under the FLSA and seeks to certify state subclasses in
California, Maryland, and the District of Columbia.
Specifically, the plaintiffs contend that the Aimco Operating
Partnership and NHPMN failed to compensate maintenance workers
for time that they were required to be on-call.
Additionally, the complaint alleges the Aimco Operating
Partnership and NHPMN failed to comply with the FLSA in
compensating maintenance workers for time that they worked in
excess of 40 hours in a week. In June 2005, the court
conditionally certified the collective action on both the
on-call and overtime issues, which allows the plaintiffs to
provide notice of the collective action to all non-exempt
maintenance workers from August 7, 2000 through the
present. Notices have been sent out to all current and former
hourly maintenance workers. The opt-in period has not yet
closed. When it does, the Aimco Operating Partnership and NHPMN
will have the opportunity to move to decertify the collective
action. Because the court denied plaintiffs motion to
certify state subclasses, on September 26, 2005, the
plaintiffs filed a class action with the same allegations in the
Superior Court of California (Contra Costa County), and on
November 5, 2005 in Montgomery County Maryland Circuit
Court. Although the outcome of any litigation is uncertain, we
do not believe that the ultimate outcome will have a material
adverse effect on our consolidated financial condition or
results of operations.
F-25
The Central Regional Office (the Regional Office) of
the United States Securities and Exchange Commission (the
Commission) conducted a formal investigation
relating to certain matters. We believe the areas of
investigation included our miscalculated monthly net rental
income figures in third quarter 2003, forecasted guidance,
accounts payable, rent concessions, vendor rebates,
capitalization of payroll and certain other costs, and tax
credit transactions. On December 19, 2005, we announced
that the Regional Office informed us that its investigation has
been recommended for termination and no enforcement action has
been recommended to the Commission.
We are obligated under office space and equipment non-cancelable
operating leases. In addition, we sublease certain of our office
space to tenants under non-cancelable subleases. Approximate
minimum annual rentals under operating leases and approximate
minimum payments to be received under annual subleases are as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Operating | |
|
|
|
|
Lease | |
|
Sublease | |
|
|
Obligations | |
|
Receivables | |
|
|
| |
|
| |
2006
|
|
$ |
7,784 |
|
|
$ |
1,485 |
|
2007
|
|
|
7,622 |
|
|
|
1,508 |
|
2008
|
|
|
7,041 |
|
|
|
1,086 |
|
2009
|
|
|
5,508 |
|
|
|
597 |
|
2010
|
|
|
4,417 |
|
|
|
597 |
|
Thereafter
|
|
|
11,371 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
43,743 |
|
|
$ |
5,273 |
|
|
|
|
|
|
|
|
Substantially all of the office space and equipment subject to
the operating leases described above are for the use of our
corporate offices and regional operating centers. Rent expense
recognized totaled $7.4 million, $5.8 million, and
$6.1 million for the years ended December 31, 2005,
2004 and 2003, respectively. Sublease receipts that offset rent
expense totaled approximately $0.7 million,
$0.9 million and $1.1 million for the years ended
December 31, 2005, 2004 and 2003, respectively.
Note 10 Income Taxes
Deferred income taxes reflect the net effects of temporary
differences between the carrying amounts of assets and
liabilities of the taxable REIT subsidiaries for financial
reporting purposes and the amounts used for
F-26
income tax purposes. Significant components of our deferred tax
liabilities and assets are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
December 31, | |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Partnership differences
|
|
$ |
53,347 |
|
|
$ |
50,109 |
|
|
Depreciation
|
|
|
6,330 |
|
|
|
3,745 |
|
|
Interest income
|
|
|
|
|
|
|
809 |
|
|
Deferred gains
|
|
|
|
|
|
|
13,070 |
|
|
Other
|
|
|
178 |
|
|
|
130 |
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
$ |
59,855 |
|
|
$ |
67,863 |
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Net operating, capital and other loss carryforwards
|
|
$ |
34,046 |
|
|
$ |
10,432 |
|
|
Receivables
|
|
|
5,856 |
|
|
|
7,350 |
|
|
Accrued liabilities
|
|
|
6,942 |
|
|
|
11,184 |
|
|
Accrued interest expense
|
|
|
6,519 |
|
|
|
5,215 |
|
|
Intangibles management contracts
|
|
|
9,880 |
|
|
|
10,922 |
|
|
Tax credit carryforwards
|
|
|
7,878 |
|
|
|
5,703 |
|
|
Other
|
|
|
442 |
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
71,563 |
|
|
|
50,806 |
|
Valuation allowance for deferred tax assets
|
|
|
(1,873 |
) |
|
|
(3,082 |
) |
|
|
|
|
|
|
|
Deferred tax assets, net of valuation allowance
|
|
|
69,690 |
|
|
|
47,724 |
|
|
|
|
|
|
|
|
Net deferred income tax assets (liabilities)
|
|
$ |
9,835 |
|
|
$ |
(20,139 |
) |
|
|
|
|
|
|
|
During the year ended December 31, 2005, we identified
approximately $12.2 million in previously unrecorded net
deferred tax assets that were acquired in connection with
business combinations in prior years. We recorded adjustments to
recognize these net assets and reduce goodwill and real estate
acquired in the corresponding business combinations by
$6.2 million and $6.0 million, respectively. At
December 31, 2005 and 2004, we maintained a
$1.9 million valuation allowance for deferred tax assets
primarily related to alternative minimum tax credits totaling
approximately $1.9 million. At December 31, 2004, we
also maintained a $1.2 million valuation allowance for
certain low income housing credits and rehabilitation credits.
That allowance was reversed in 2005 based on our determination
that it is more likely than not that the credits will be
realized.
F-27
Significant components of the provision (benefit) for income
taxes are as follows and are classified within other expenses
(income), net in continuing operations and income from
discontinued operations, net in our statements of income for
2005, 2004 and 2003 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended | |
|
Year Ended | |
|
Year Ended | |
|
|
December 31, | |
|
December 31, | |
|
December 31, | |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$ |
3,412 |
|
|
$ |
7,345 |
|
|
$ |
4,556 |
|
|
State
|
|
|
1,590 |
|
|
|
748 |
|
|
|
840 |
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
5,002 |
|
|
|
8,093 |
|
|
|
5,396 |
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(17,303 |
) |
|
|
634 |
|
|
|
(10,065 |
) |
|
State
|
|
|
(1,843 |
) |
|
|
72 |
|
|
|
(1,150 |
) |
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(19,146 |
) |
|
|
706 |
|
|
|
(11,215 |
) |
|
|
|
|
|
|
|
|
|
|
Total provision (benefit)
|
|
$ |
(14,144 |
) |
|
$ |
8,799 |
|
|
$ |
(5,819 |
) |
|
|
|
|
|
|
|
|
|
|
Classification:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$ |
(18,625 |
) |
|
$ |
(7,216 |
) |
|
$ |
(17,953 |
) |
|
Discontinued operations
|
|
$ |
4,481 |
|
|
$ |
16,015 |
|
|
$ |
12,134 |
|
Consolidated income (loss) subject to tax, consisting of pretax
income of our taxable REIT subsidiaries and gains on certain
property sales that are subject to income tax under
section 1374 of the Internal Revenue Code, is
$(36.9) million for 2005, $20.5 million for 2004, and
($4.0) million for 2003. The reconciliation of income tax
attributable to continuing and discontinued operations computed
at the U.S. statutory rate to income tax expense (benefit)
is shown below (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended | |
|
Year Ended | |
|
Year Ended | |
|
|
December 31, 2005 | |
|
December 31, 2004 | |
|
December 31, 2003 | |
|
|
| |
|
| |
|
| |
|
|
Amount | |
|
Percent | |
|
Amount | |
|
Percent | |
|
Amount | |
|
Percent | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Tax at U.S. statutory rates on consolidated income (loss)
subject to tax
|
|
$ |
(12,922 |
) |
|
|
35.0 |
% |
|
$ |
7,174 |
|
|
|
35.0 |
% |
|
$ |
(1,396 |
) |
|
|
35.0 |
% |
State income tax, net of Federal tax benefit
|
|
|
(253 |
) |
|
|
0.7 |
% |
|
|
818 |
|
|
|
4.0 |
% |
|
|
(306 |
) |
|
|
7.6 |
% |
Effect of permanent differences
|
|
|
(69 |
) |
|
|
0.2 |
% |
|
|
314 |
|
|
|
1.5 |
% |
|
|
2,202 |
|
|
|
(55.2 |
%) |
Increase (decrease) valuation allowance
|
|
|
(900 |
) |
|
|
2.4 |
% |
|
|
493 |
|
|
|
2.4 |
% |
|
|
(6,319 |
) |
|
|
158.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(14,144 |
) |
|
|
38.3 |
% |
|
$ |
8,799 |
|
|
|
42.9 |
% |
|
$ |
(5,819 |
) |
|
|
145.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the quarter ended March 31, 2003, in an effort to
streamline business processes and operational efficiencies of
our property management and services businesses, we contributed
all of the capital stock of NHP Management Company to AIMCO/
Bethesda Holdings, Inc. (both of which are wholly-owned taxable
REIT subsidiaries). In connection with this transaction, we
reversed a valuation allowance related to future deductions and
tax loss carryforwards of NHP Management Company and thereby
recognized approximately $8.0 million of deferred tax
benefits within other expenses (income), net. This deferred tax
benefit increased net income by approximately $7.1 million,
net of minority interest, and resulted in an increase in basic
and diluted earnings per share of $0.08 for the year ended
December 31, 2003.
Income taxes paid totaled approximately $4.8 million,
$2.7 million, and $3.8 million in the years ended
December 31, 2005, 2004 and 2003, respectively.
F-28
At December 31, 2005, we had net operating loss
carryforwards (NOLs) of approximately $87.0 million for
income tax purposes that expire in years 2020 to 2023. Subject
to certain separate return limitations, we may use these NOLs to
offset all or a portion of taxable income generated by our
taxable REIT subsidiaries. Additionally, at December 31,
2005, we had low income housing and rehabilitation tax credit
carryforwards of approximately $6.0 million for income tax
purposes that expire in years 2012 to 2024.
For income tax purposes, dividends paid to holders of Common
Stock primarily consist of ordinary income, return of capital,
capital gains, qualified dividends and unrecaptured Sec. 1250
gains, or a combination thereof. For the years ended
December 31, 2005, 2004 and 2003, dividends per share held
for the entire year were estimated to be taxable as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005(1) | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
Amount | |
|
Percentage | |
|
Amount | |
|
Percentage | |
|
Amount | |
|
Percentage | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Ordinary income
|
|
$ |
0.21 |
|
|
|
7 |
% |
|
$ |
0.04 |
|
|
|
2 |
% |
|
$ |
0.80 |
|
|
|
26 |
% |
Return of capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital gains
|
|
|
1.44 |
|
|
|
48 |
% |
|
|
1.77 |
|
|
|
74 |
% |
|
|
0.77 |
|
|
|
25 |
% |
Qualified dividends
|
|
|
0.24 |
|
|
|
8 |
% |
|
|
0.03 |
|
|
|
1 |
% |
|
|
|
|
|
|
|
|
Unrecaptured Sec. 1250 gain
|
|
|
1.11 |
|
|
|
37 |
% |
|
|
0.56 |
|
|
|
23 |
% |
|
|
1.49 |
|
|
|
49 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3.00 |
|
|
|
100 |
% |
|
$ |
2.40 |
|
|
|
100 |
% |
|
$ |
3.06 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
On December 28, 2005, our Board of Directors declared a
quarterly cash dividend of $0.60 per common share for the
quarter ended December 31, 2005, that was paid on
January 31, 2006, to stockholders of record on
December 31, 2005, which was one month earlier than the
typical declaration. Pursuant to certain provisions within the
Internal Revenue Code, this dividend is deemed paid by Aimco and
received by the shareholders, in 2005. |
|
|
Note 11 |
Transactions Involving Minority Interest in Aimco Operating
Partnership |
Various classes of preferred OP Units of the Aimco
Operating Partnership are outstanding. Depending on the terms of
each class, these preferred OP Units are convertible into
common OP Units or redeemable for Common Stock and are paid
distributions varying from 5.9% to 9.6% per annum per unit,
or equal to the dividends paid on Common Stock based on the
conversion terms. As of December 31, 2005, a total of
3.3 million preferred OP Units were outstanding with a
redemption value of $90.2 million, which were redeemable
into approximately 2.4 million shares of Common Stock. As
of December 31, 2004, a total of 3.3 million preferred
OP Units were outstanding with a redemption value of
$90.5 million, which were redeemable into approximately
2.5 million shares of Common Stock.
During the years ended December 31, 2005 and 2004,
approximately 1,700 and 10,400 preferred OP Units were
tendered for redemption in exchange for approximately 1,100 and
7,900 shares of Common Stock, respectively. During the
years ended December 31, 2005 and 2004, there were
approximately 12,800 and 1,600 preferred OP Units tendered
for redemption in exchange for cash, respectively.
We completed tender offers for limited partnership interests
resulting in the issuance of approximately 3,000 and 82,000
common OP Units in 2005 and 2004, respectively.
During the years ended December 31, 2005 and 2004,
approximately 77,000 and 160,000 common OP Units,
respectively, were redeemed in exchange for cash, and
approximately 425,000 and 735,000 common OP Units,
respectively, were redeemed in exchange for shares of Common
Stock.
F-29
|
|
|
High Performance Partnership Units |
As of December 31, 2005 and 2004, there were 2,379,084
Class I High Performance Partnership Units of the Aimco
Operating Partnership outstanding. Also outstanding were 5,000
Class VI High Performance Partnership Units, or the
Class VI Units, for which the valuation period began on
January 1, 2003 and ended on December 31, 2005, 4,109
Class VII High Performance Partnership Units, or the
Class VII Units, for which the valuation period began on
January 1, 2004 and will end on December 31, 2006 and
5,000 Class VIII High Performance Partnership Units, or the
Class VIII Units, for which the valuation period began on
January 1, 2005 and will end on December 31, 2007. At
December 31, 2005, we did not meet the required measurement
benchmarks for the Class VI Units, Class VII Units or
Class VIII Units and, therefore, we have not recorded any
additional minority interest in Aimco Operating Partnership for
such High Performance Partnership Units in the consolidated
financial statements as of December 31, 2005 and such High
Performance Partnership Units have no dilutive effect.
F-30
Note 12 Stockholders Equity
At December 31, 2005 and 2004, we had the following classes
of preferred stock outstanding classified as equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance | |
|
|
|
|
|
|
Annual Dividend | |
|
| |
|
|
Redemption | |
|
Conversion | |
|
Rate Per Share | |
|
2005 | |
|
2004 | |
Perpetual: |
|
Date(1) | |
|
Price | |
|
(paid quarterly) | |
|
(in thousands) | |
|
(in thousands) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Class D Cumulative Preferred Stock, $.01 par value,
4,200,000 shares authorized, zero and 1,250,002 shares
issued and outstanding(2)
|
|
|
02/19/2003 |
|
|
|
|
|
|
|
8.75% |
|
|
$ |
|
|
|
$ |
31,250 |
|
Class G Cumulative Preferred Stock, $.01 par value,
4,050,000 shares authorized, 4,050,000 shares issued
and outstanding
|
|
|
07/15/2008 |
|
|
|
|
|
|
|
9.375% |
|
|
|
101,000 |
|
|
|
101,000 |
|
Class Q Cumulative Preferred Stock, $.01 par value,
2,530,000 shares authorized, 2,530,000 shares issued
and outstanding
|
|
|
03/19/2006 |
|
|
|
|
|
|
|
10.10% |
|
|
|
63,250 |
|
|
|
63,250 |
|
Class R Cumulative Preferred Stock, $.01 par value,
6,940,000 shares authorized, 6,940,000 shares issued
and outstanding
|
|
|
07/20/2006 |
|
|
|
|
|
|
|
10.00% |
|
|
|
173,500 |
|
|
|
173,500 |
|
Class T Cumulative Preferred Stock, $.01 par value,
6,000,000 shares authorized, 6,000,000 shares issued
and outstanding
|
|
|
07/31/2008 |
|
|
|
|
|
|
|
8.00% |
|
|
|
150,000 |
|
|
|
150,000 |
|
Class U Cumulative Preferred Stock, $.01 par value,
8,000,000 shares authorized, 8,000,000 shares issued
and outstanding
|
|
|
03/24/2009 |
|
|
|
|
|
|
|
7.75% |
|
|
|
200,000 |
|
|
|
200,000 |
|
Class V Cumulative Preferred Stock, $.01 par value,
3,450,000 shares authorized, 3,450,000 shares issued
and outstanding
|
|
|
09/29/2009 |
|
|
|
|
|
|
|
8.00% |
|
|
|
86,250 |
|
|
|
86,250 |
|
Class Y Cumulative Preferred Stock, $.01 par value,
3,450,000 shares authorized, 3,450,000 shares issued
and outstanding
|
|
|
12/21/2009 |
|
|
|
|
|
|
|
7.875% |
|
|
|
86,250 |
|
|
|
86,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
860,250 |
|
|
|
891,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance | |
|
|
|
|
|
|
Annual Dividend | |
|
| |
|
|
Redemption | |
|
Conversion | |
|
Rate Per Share | |
|
2005 | |
|
2004 | |
Convertible(3): |
|
Date(1) | |
|
Price | |
|
(paid quarterly) | |
|
(in thousands) | |
|
(in thousands) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Class W Cumulative Convertible Preferred Stock,
$.01 par value, 1,904,762 shares authorized,
1,904,762 shares issued and outstanding
|
|
|
09/30/2007 |
|
|
$ |
52.50 |
|
|
|
8.10% |
|
|
|
100,000 |
|
|
|
100,000 |
|
Class X Cumulative Convertible Preferred Stock,
$.01 par value, 2,000,000 shares authorized,
2,000,000 shares issued and outstanding
|
|
|
03/31/2006 |
|
|
$ |
52.50 |
|
|
|
8.50% |
|
|
|
50,000 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000 |
|
|
|
150,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,010,250 |
|
|
$ |
1,041,500 |
|
|
|
|
|
|
|
|
|
|
(1) |
All classes of preferred stock are redeemable, at our option, on
and after the dates specified. |
|
(2) |
On January 21, 2005, we redeemed for cash the remaining
1.25 million shares outstanding of the Class D
Cumulative Preferred Stock, or the Class D Preferred Stock,
for a total redemption price of $25.0425 per share, which
included a redemption price of $25.0 per share, and
$0.0425 per share of accumulated and unpaid dividends
through January 21, 2005. This redemption resulted in
$1.1 million of related preferred stock issuance costs
being deducted from net income to arrive at net loss
attributable to common stockholders and thereby increased by
$0.01 our loss per basic and diluted common share for the year
ended December 31, 2005. |
|
(3) |
The articles supplementary set forth the relative rights and
preferences of each class of securities and as shown above, the
dividend rate on each class of convertible securities is the
rate specified in the articles supplementary for each class.
Such rate can be increased to the rate of the dividends paid on
the number of shares of Common Stock into which a share of such
preferred security is convertible. The initial conversion price
of each class was in excess of the fair market value of a share
of Common Stock on the respective dates on which the purchasers
of each class agreed to purchase such securities. |
All classes of preferred stock are pari passu with each other
and are senior to Common Stock. The holders of each class of
preferred stock are generally not entitled to vote on matters
submitted to stockholders. Dividends on all shares of preferred
stock are subject to declaration by our Board of Directors. All
of the above outstanding classes of preferred stock have a
liquidation preference per share of $25, with the exception of
the Class W Preferred Stock, which has a liquidation
preference per share of $52.50.
F-32
The dividends paid on each class of preferred stock classified
as equity for the years ended December 31, 2005, 2004, and
2003 are as follows (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
Amount | |
|
Total | |
|
Amount | |
|
Total | |
|
Amount | |
|
Total | |
|
|
Per | |
|
Amount | |
|
Per | |
|
Amount | |
|
Per | |
|
Amount | |
Class of Preferred Stock |
|
Share(1) | |
|
Paid | |
|
Share(1) | |
|
Paid | |
|
Share(1) | |
|
Paid | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Perpetual:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class C
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1.60 |
(7) |
|
$ |
3,840 |
|
Class D
|
|
|
0.59 |
(2) |
|
|
736 |
|
|
|
4.87 |
(4) |
|
|
6,090 |
|
|
|
3.21 |
(8) |
|
|
8,677 |
|
Class G
|
|
|
2.34 |
|
|
|
9,492 |
|
|
|
2.34 |
|
|
|
9,492 |
|
|
|
2.34 |
|
|
|
9,492 |
|
Class H
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.01 |
(7) |
|
|
4,011 |
|
Class Q
|
|
|
2.53 |
|
|
|
6,388 |
|
|
|
2.53 |
|
|
|
6,388 |
|
|
|
2.53 |
|
|
|
6,389 |
|
Class R
|
|
|
2.50 |
|
|
|
17,350 |
|
|
|
2.50 |
|
|
|
17,350 |
|
|
|
2.50 |
|
|
|
17,350 |
|
Class S
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.23 |
(9) |
|
|
908 |
|
Class T
|
|
|
2.00 |
|
|
|
12,000 |
|
|
|
2.00 |
|
|
|
12,000 |
|
|
|
0.42 |
(10) |
|
|
2,501 |
|
Class U
|
|
|
1.94 |
|
|
|
15,500 |
|
|
|
1.08 |
(5) |
|
|
8,655 |
|
|
|
|
|
|
|
|
|
Class V
|
|
|
2.09 |
(3) |
|
|
7,207 |
|
|
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
Class Y
|
|
|
1.61 |
(3) |
|
|
5,547 |
|
|
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,220 |
|
|
|
|
|
|
|
59,975 |
|
|
|
|
|
|
|
53,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class L
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.81 |
(7) |
|
|
4,532 |
|
Class M
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.42 |
(11) |
|
|
2,903 |
|
Class N
|
|
|
|
|
|
|
|
|
|
|
2.59 |
(6) |
|
|
10,361 |
|
|
|
2.25 |
|
|
|
9,000 |
|
Class O
|
|
|
|
|
|
|
|
|
|
|
4.73 |
(6) |
|
|
9,000 |
|
|
|
4.73 |
|
|
|
9,000 |
|
Class P
|
|
|
|
|
|
|
|
|
|
|
1.16 |
(6) |
|
|
4,648 |
|
|
|
2.25 |
|
|
|
8,996 |
|
Class W
|
|
|
4.25 |
(3) |
|
|
8,100 |
|
|
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
Class X
|
|
|
2.13 |
(3) |
|
|
4,262 |
|
|
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,362 |
|
|
|
|
|
|
|
24,009 |
|
|
|
|
|
|
|
34,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$ |
86,582 |
|
|
|
|
|
|
$ |
83,984 |
|
|
|
|
|
|
$ |
87,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Amounts per share are calculated based on the number of
preferred shares outstanding either at the end of each year or
as of conversion or redemption date, as noted. |
|
(2) |
For the period from January 1, 2005 to the date of
redemption. |
|
(3) |
For the period from the date of issuance to December 31,
2005. No dividends were paid during 2004 as preferred shares
were issued during the third and fourth quarters of 2004. |
|
(4) |
Total amount paid includes dividends paid on 2.7 million
shares of Class D Preferred Stock until November 5,
2004, when 1.5 million shares were redeemed for cash. |
|
(5) |
For the period from the date of issuance to December 31,
2004. |
|
(6) |
For the period from January 1, 2004 to the date of
redemption. For Class N Preferred Stock, includes a 2%, or
$0.50 redemption premium per share, on 2,000,000 shares. |
|
(7) |
For the period from January 1, 2003 to the date of
redemption. |
|
(8) |
Total amount paid includes dividends paid on all
4.2 million shares of Class D Preferred Stock until
August 18, 2003, when 1.5 million shares were redeemed
for cash. |
|
(9) |
For the period from the date of issuance to July 1, 2003
when Statement of Financial Accounting Standards No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity required the
Class S Cumulative Redeemable Preferred Stock to be
reclassified from equity to liabilities. |
F-33
|
|
(10) |
For the period from the date of issuance to December 31,
2003. |
|
(11) |
For the period from January 1, 2003 to the date of
redemption. Additionally, the amount per share includes a
scheduled increase in the dividend from $2.13 per share to
$2.31 per share starting after January 13, 2003 and a
2%, or $0.50 redemption premium per share. |
During 2005 and 2004, we issued approximately 37,000 shares
and 45,000 shares, respectively, of Common Stock to certain
non-executive officers at market prices. In exchange for the
shares purchased, the officers executed notes payable totaling
$1.4 million and $1.5 million, respectively. These
notes, which are 25% recourse to the borrowers, have a
10-year maturity and
bear interest either at a fixed rate of 6% annually or a
floating rate based on the one-month LIBOR plus 3.85%, which is
subject to an annual interest rate cap of typically 7.25%. Total
payments on such notes from officers in 2005 and 2004 were
$12.3 million and $4.6 million, respectively.
In addition, in 2005 and 2004, we issued approximately 393,000
and 532,000 restricted shares of Common Stock, respectively, to
certain officers and employees. The restricted stock was
recorded at the fair market value of the Common Stock on the
date of issuance. These shares of restricted Common Stock may
not be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of and are subject to a risk of forfeiture
prior to the expiration of the applicable vesting period
(typically ratably over a period of three or five years).
Certain shares of restricted stock issued during 2005 are
subject to accelerated vesting upon the achievement of a
specified calendar year performance measure target. As of
December 31, 2005, achievement of the specified target is
not considered probable.
There were no shares of stock repurchased during the year ended
December 31, 2005. On February 18, 19 and 24,
2004, we purchased on the open market 30,000, 60,000 and
20,000 shares of Common Stock, respectively, at an average
price per share of approximately $32.03, $32.17 and $31.26,
respectively. Additionally, on February 24, 2004, we
completed the purchase of 287,272 shares of Common Stock in
a privately negotiated transaction at a price of $31.60 per
share.
As of December 31, 2005, under our shelf registration
statement, which was declared effective in April 2004, we had
available for issuance approximately $876.6 million of debt
and equity securities, and the Aimco Operating Partnership had
available for issuance $500.0 million of debt securities.
Note 13 Employee Benefit and Stock Plans
We provide a 401(k) defined-contribution employee savings plan.
Employees who have completed 30 days of service and are
age 18 or older are eligible to participate. Our matching
contributions are made in the following manner: (1) a 100%
match on the first 3% of the participants contribution;
(2) a 50% match on the next 2% of the participants
contribution. We incurred costs in connection with this plan of
approximately $4.1 million, $3.2 million and
$2.4 million in 2005, 2004 and 2003, respectively.
|
|
|
Stock Award and Incentive Plan and Stock Warrants |
We adopted the Apartment Investment and Management Company 1997
Stock Award and Incentive Plan, or the 1997 Plan to attract and
retain officers, key employees and independent directors. The
1997 Plan reserves for issuance a maximum of
20,000,000 shares, which may be in the form of incentive
stock options, non-qualified stock options and restricted stock,
or other types of awards as authorized under the 1997 Plan. At
December 31, 2005, there were approximately
4,200,000 shares available for issuance. The 1997 Plan is
administered by the Compensation and Human Resources Committee
of the Board of Directors. In the case of incentive stock
options, the exercise price of the options granted may not be
less than the fair market value of the Common Stock at the date
of grant. The term of the incentive and non-qualified options is
ten years from the date of grant. The options
F-34
typically vest over a period of one to five years from the date
of grant. Terms may be modified at the discretion of the
Compensation and Human Resources Committee of the Board of
Directors.
The 1997 Plan also authorizes grants of restricted stock awards
as part of our equity compensation plan. For the years ended
December 31, 2005, 2004 and 2003, we granted restricted
stock awards of approximately 393,000, 532,000 and
235,000 shares, respectively, with weighted average fair
values per share of $38.46, $29.56, and $38.09, respectively.
Compensation cost related to these awards is being recognized
ratably over the applicable vesting period (typically three or
five years). Dividends paid on restricted stock awards (whether
vested or unvested) are charged to distributions in excess of
earnings. We evaluate quarterly the previously paid dividends on
restricted stock awards that are forfeited to determine whether
a reclassification between distributions in excess of earnings
and compensation expense should be recorded. Dividends paid on
restricted stock awards that were forfeited were immaterial for
the years ended December 31, 2005, 2004 and 2003.
On December 2, 1997, we issued warrants, which we refer to
as the Oxford Warrants, exercisable through December 31,
2006 to purchase up to an aggregate of 500,000 shares of
Common Stock at $41 per share. The Oxford Warrants were
issued to affiliates of Oxford Realty Financial Group, Inc., a
Maryland corporation, or Oxford, in connection with the
amendment of certain agreements pursuant to which we manage
properties formerly controlled by Oxford or its affiliates.
During the year ended December 31, 2005, we purchased from
the holders thereof all outstanding Oxford Warrants for an
aggregate purchase price of $1.05 million, which was
determined to be fair value.
The following table summarizes the option and warrant activity
for the years ended December 31, 2005, 2004 and 2003 (in
thousands, except price data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
|
|
Weighted | |
|
|
|
Weighted | |
|
|
|
Weighted | |
|
|
Options | |
|
Average | |
|
Options | |
|
Average | |
|
Options | |
|
Average | |
|
|
and | |
|
Exercise | |
|
and | |
|
Exercise | |
|
and | |
|
Exercise | |
|
|
Warrants | |
|
Price | |
|
Warrants | |
|
Price | |
|
Warrants | |
|
Price | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Outstanding at beginning of year
|
|
|
11,338 |
|
|
$ |
38.87 |
|
|
|
10,607 |
|
|
$ |
39.59 |
|
|
|
9,269 |
|
|
$ |
40.13 |
|
Granted
|
|
|
383 |
|
|
|
38.14 |
|
|
|
1,219 |
|
|
|
32.19 |
|
|
|
1,757 |
|
|
|
36.37 |
|
Exercised
|
|
|
(65 |
) |
|
|
38.22 |
|
|
|
(69 |
) |
|
|
29.11 |
|
|
|
(72 |
) |
|
|
37.46 |
|
Forfeited
|
|
|
(102 |
) |
|
|
39.98 |
|
|
|
(419 |
) |
|
|
37.81 |
|
|
|
(347 |
) |
|
|
37 |