e424b3
Filed
Pursuant to Rule 424(b)(3)
Registration File No. 333-175848
INFORMATION
STATEMENT/PROSPECTUS
ANGELES
PARTNERS XII, LP
Angeles Partners XII, LP, or AP XII, has entered into an
agreement and plan of merger with a wholly-owned subsidiary of
AIMCO Properties, L.P., or Aimco OP. Under the merger agreement,
the Aimco Subsidiary, AIMCO AP XII Merger Sub LLC, will be
merged with and into AP XII, with AP XII as the surviving
entity. The Aimco Subsidiary was formed for the purpose of
effecting this transaction and does not have any assets or
operations. In the merger, each Unit of Limited Partnership
Interest of AP XII, or AP XII Unit, will be converted into the
right to receive, at the election of the holder of such unit,
either:
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$483.14 in cash, or
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$483.14 in partnership common units of Aimco OP, or
OP Units.
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The merger consideration of $483.14 per AP XII Unit was based on
independent third party appraisals of AP XIIs properties
by independent valuation firms.
The number of OP Units offered for each AP XII Unit will be
calculated by dividing $483.14 by the average closing price of
common stock of Apartment Investment and Management Company, or
Aimco, as reported on the New York Stock Exchange, or the NYSE,
over the ten consecutive trading days ending on the second
trading day immediately prior to the consummation of the merger.
For example, as of November 10, 2011, the average closing price
of Aimco common stock over the preceding ten consecutive trading
days was $23.79, which would have resulted in 20.31
OP Units offered for each AP XII Unit. However, if Aimco OP
determines that the law of the state or other jurisdiction in
which a limited partner resides would prohibit the issuance of
OP Units in that state or other jurisdiction (or that
registration or qualification in that state or jurisdiction
would be prohibitively costly), then such limited partner will
not be entitled to elect OP Units, and will receive cash.
The OP Units are not listed on any securities exchange nor
do they trade in an active secondary market. However, after a
one-year holding period, OP Units are redeemable for shares
of Aimco common stock (on a
one-for-one
basis) or cash equal to the value of such shares, as Aimco
elects. As a result, the trading price of Aimco common stock is
considered a reasonable estimate of the fair market value of an
OP Unit. Aimcos common stock is listed and traded on
the NYSE under the symbol AIV.
In the merger, Aimco OPs interest in the Aimco Subsidiary
will be converted into AP XII Units. As a result, after the
merger, Aimco OP will be the sole limited partner of AP XII and
will own all of the outstanding AP XII Units.
Within ten days after the effective time of the merger, Aimco OP
will prepare and mail to the former holders of AP XII Units an
election form pursuant to which they can elect to receive cash
or OP Units. Holders of AP XII Units may elect their form
of consideration by completing and returning the election form
in accordance with its instructions. If the information agent
does not receive a properly completed election form from a
holder before 5:00 p.m., New York time, on the
30th day after the mailing of the election form, the holder
will be deemed to have elected to receive cash. Former holders
of AP XII Units may also use the election form to elect to
receive, in lieu of the merger consideration, the appraised
valued of their AP XII Units, determined through an arbitration
proceeding.
Under Delaware law, the merger must be approved by all general
partners of AP XII and a majority in interest of the AP XII
Units. Both AP XIIs managing general partner, Angeles
Realty Corporation II, or the Managing General Partner, and AP
XIIs non-managing general partner, AIMCO Angeles GP, LLC,
or the Non-Managing General Partner (and, together with the
Managing General Partner, the General Partners), have determined
that the merger is advisable, fair to and in the best interests
of AP XII and its limited partners and have approved the merger
and the merger agreement. As of November 18, 2011, there were
issued and outstanding 44,718 AP XII Units, and Aimco OP and its
affiliates owned 33,750 of those units, or approximately 75.47%
of the number of units outstanding. Aimco OP and its affiliates
have indicated that they intend to take action by written
consent, as permitted under the partnership agreement, to
approve the merger on or about January 23, 2012. As a
result, approval of the merger is assured, and your consent to
the merger is not required.
WE ARE
NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
This information statement/prospectus contains information about
the merger and the securities offered hereby, and the reasons
that the Managing General Partner has decided that the merger is
in the best interests of AP XII and its limited partners. The
Managing General Partner has conflicts of interest with respect
to the merger that are described in greater detail herein.
Please read this information statement/prospectus carefully,
including the section entitled Risk Factors
beginning on page 20. It provides you with detailed
information about the merger and the securities offered hereby.
The merger agreement is attached to this information
statement/prospectus as Annex A.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the
securities to be issued in connection with the merger,
determined if this information statement/prospectus is truthful
or complete, approved or disapproved of the merger, passed upon
the merits or fairness of the merger, or passed upon the
adequacy or accuracy of the disclosure in this information
statement/prospectus. Any representation to the contrary is a
criminal offense.
This information statement/prospectus is dated
November 21, 2011, and is first being mailed to limited
partners on or about November 23, 2011.
WE ARE CURRENTLY SEEKING QUALIFICATION TO ALLOW ALL HOLDERS
OF AP XII UNITS THE ABILITY TO ELECT TO RECEIVE OP UNITS IN
CONNECTION WITH THE MERGER. HOWEVER, AT THE PRESENT TIME, IF YOU
ARE A RESIDENT OF ONE OF THE FOLLOWING STATES, YOU ARE NOT
PERMITTED TO ELECT TO RECEIVE OP UNITS IN CONNECTION WITH THE
MERGER:
CALIFORNIA
MASSACHUSETTS
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED
ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
ADDITIONAL
INFORMATION
This information statement/prospectus incorporates important
business and financial information about Aimco from documents
that it has filed with the Securities and Exchange Commission,
or the SEC, but that have not been included in or delivered with
this information statement/prospectus. For a listing of
documents incorporated by reference into this information
statement/prospectus, please see Where You Can Find
Additional Information beginning on page 94 of this
information statement/prospectus.
Aimco will provide you with copies of such documents relating to
Aimco (excluding all exhibits unless Aimco has specifically
incorporated by reference an exhibit in this information
statement/prospectus), without charge, upon written or oral
request to:
ISTC
Corporation
P.O. Box 2347
Greenville, South Carolina 29602
(864) 239-1029
If you have any questions or require any assistance, please
contact our information agent, Eagle Rock Proxy Advisors, LLC,
by mail at 12 Commerce Drive, Cranford, New Jersey 07016; by fax
at
(908) 497-2349;
or by telephone at
(800) 217-9608.
ABOUT
THIS INFORMATION STATEMENT/PROSPECTUS
This information statement/prospectus, which forms a part of a
registration statement on
Form S-4
filed with the SEC by Aimco and Aimco OP, constitutes a
prospectus of Aimco OP under Section 5 of the Securities
Act of 1933, as amended, or the Securities Act, with respect to
the OP Units that may be issued to holders of AP XII Units in
connection with the merger, and a prospectus of Aimco under
Section 5 of the Securities Act with respect to shares of
Aimco common stock that may be issued in exchange for such OP
Units tendered for redemption. This document also constitutes an
information statement under Section 14(c) of the Securities
Exchange Act of 1934, as amended, or the Exchange Act, with
respect to the action to be taken by written consent to approve
the merger.
TABLE OF
CONTENTS
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Annexes
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A-1
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B-1
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C-1
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D-1
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E-1
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F-1
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H-1
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J-1
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iii
SUMMARY
TERM SHEET
This summary term sheet highlights the material information
with respect to the merger, the merger agreement and the other
matters described herein. It may not contain all of the
information that is important to you. You are urged to carefully
read the entire information statement/prospectus and the other
documents referred to in this information statement/prospectus,
including the merger agreement. Aimco, Aimco OP, the General
Partners and Aimcos subsidiaries that may be deemed to
directly or indirectly beneficially own AP XII Units are
referred to herein, collectively, as the Aimco
Entities.
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The Merger: AP XII has entered into an
agreement and plan of merger with the Aimco Subsidiary and Aimco
OP. Under the merger agreement, at the effective time of the
merger, the Aimco Subsidiary will be merged with and into AP
XII, with AP XII as the surviving entity. A copy of the merger
agreement is attached as Annex A to this information
statement/prospectus. You are encouraged to read the merger
agreement carefully in its entirety because it is the legal
agreement that governs the merger.
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Merger Consideration: In the merger,
each AP XII Unit will be converted into the right to receive, at
the election of the holder of such AP XII Unit, either $483.14
in cash or equivalent value in OP Units, except in those
jurisdictions where the law prohibits the offer of OP Units
(or registration or qualification would be prohibitively
costly). The number of OP Units issuable with respect to
each AP XII Unit will be calculated by dividing the $483.14 per
unit cash merger consideration by the average closing price of
Aimco common stock, as reported on the NYSE, over the ten
consecutive trading days ending on the second trading day
immediately prior to the consummation of the merger. Each holder
of AP XII Units must make the same election (cash or
OP Units) for all of his or her AP XII Units. For a full
description of the determination of the merger consideration,
see The Merger Determination of Merger
Consideration beginning on page 42.
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Fairness of the Merger: Although the
Aimco Entities have interests that may conflict with those of AP
XIIs unaffiliated limited partners, each of the Aimco
Entities believe that the merger is fair to the unaffiliated
limited partners of AP XII. See Special
Factors Fairness of the Transaction beginning
on page 6. The merger consideration of $483.14 per AP XII
Unit was based on independent third party appraisals of AP
XIIs properties by independent valuation firms.
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Opinion of Financial Advisor: In
connection with the merger, Duff & Phelps, LLC, or
Duff & Phelps, has delivered its written opinion to
the boards of directors of Aimco, the general partner of Aimco
OP, the Managing General Partner and the general partner of the
sole member of the Non-Managing General Partner to the effect
that, as of November 15, 2011, the cash consideration of
$483.14 per unit is fair, from a financial point of view, to the
unaffiliated limited partners of AP XII. The full text of
Duff & Phelpss written opinion, which sets forth
the assumptions made, procedures followed, factors considered
and qualifications and limitations on the review undertaken by
Duff & Phelps in connection with its opinion, is
attached to this information statement/prospectus as
Annex C. You are encouraged to read Duff &
Phelpss opinion, and the section entitled Special
Factors Opinion of Financial Advisor beginning
on page 14, carefully and in their entirety.
Duff & Phelpss opinion was directed to the
boards of directors of Aimco, the general partner of Aimco OP,
the Managing General Partner and the general partner of the sole
member of the Non-Managing General Partner, and addresses only
the fairness to the unaffiliated limited partners of AP XII,
from a financial point of view, of the cash consideration of
$483.14 per unit as of the date of the opinion. Duff &
Phelpss opinion did not address any other aspect of the
merger and was not intended to and does not constitute a
recommendation as to how any party should vote or act with
respect to the merger or any matter relating thereto.
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Effects of the Merger: After the
merger, Aimco OP will be the sole limited partner in AP XII, and
will own all of the outstanding AP XII Units. As a result, after
the merger, you will cease to have any rights in AP XII as a
limited partner. See Special Factors Effects
of the Merger, beginning on page 5.
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Appraisal Rights: Pursuant to the terms
of the merger agreement, Aimco OP will provide each limited
partner with contractual dissenters appraisal rights that
are similar to the dissenters appraisal rights available
to a stockholder of a constituent corporation in a merger under
Delaware law, and which will enable a limited partner to obtain
an appraisal of the value of the limited partners AP XII
Units in connection with the merger. See The
Merger Appraisal Rights, beginning on
page 44. A description of the
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appraisal rights being provided, and the procedures that a
limited partner must follow to seek such rights, is attached to
this information statement/prospectus as Annex B.
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List of Investors: Under AP XIIs
partnership agreement and Delaware law, upon written request and
at the cost of the limited partner, a limited partner who holds
AP XII Units has the right to receive by mail a list of the
names and addresses of the partners of AP XII and the number of
units of partnership interest held by each of them. This list
may be obtained by making written request to the General
Partners, c/o Eagle Rock Proxy Advisors, LLC, 12 Commerce Drive,
Cranford, New Jersey 07016, or by fax at
(908) 497-2349.
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Parties Involved:
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Angeles Partners XII, LP, or AP XII, is a Delaware limited
partnership formed on November 24, 2010, following a
redomestication of the partnership from California to Delaware.
AP XII owns and operates two investment
properties: (i) the Hunters Glen Apartments, or
the Hunters Glen Property, which consists of the Hunters Glen
Apartments IV, a 264 unit apartment project, or the Hunters
Glen IV Property, the Hunters Glen Apartments V, which
consists of a 304 unit apartment project, or the Hunters
Glen V Property, and the Hunters Glen Apartments VI, which
consists of a 328 unit apartment project, or the Hunters
Glen VI Property, each of which is located in Plainsboro, New
Jersey; and (ii) the Twin Lake Towers Apartments, which
consists of a 399 unit apartment project located in
Westmont, Illinois, or the Twin Lake Towers Property. As a
result of a refinancing which collateralizes the three phases of
the Hunters Glen Property under one mortgage loan, AP XII has
combined the assets, liabilities and operations of the Hunters
Glen IV Property, the Hunters Glen V Property and the
Hunters Glen VI Property, into one property, the Hunters Glen
Property. See Information About Angeles Partners XII,
LP beginning on page 33. AP XIIs principal
address is 55 Beattie Place, P.O. Box 1089,
Greenville, South Carolina 29602, and its telephone number is
(864) 239-1000.
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Apartment Investment and Management Company, or Aimco, is a
Maryland corporation that is a self-administered and
self-managed real estate investment trust, or REIT. Aimcos
principal financial objective is to provide predictable and
attractive returns to its stockholders. Aimcos common
stock is listed and traded on the NYSE under the symbol
AIV. See Information about the Aimco
Entities, beginning on page 31. Aimcos
principal address is 4582 South Ulster Street, Suite 1100,
Denver, Colorado 80237, and its telephone number is
(303) 757-8101.
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AIMCO Properties, L.P., or Aimco OP, is a Delaware limited
partnership which, through its operating divisions and
subsidiaries, holds substantially all of Aimcos assets and
manages the daily operations of Aimcos business and
assets. See Information about the Aimco Entities,
beginning on page 31. Aimco OPs principal
address is 4582 South Ulster Street, Suite 1100, Denver,
Colorado 80237, and its telephone number is
(303) 757-8101.
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AIMCO AP XII Merger Sub LLC, or the Aimco Subsidiary, is a
Delaware limited liability company formed for the purpose of
consummating the merger with AP XII. The Aimco Subsidiary is a
direct wholly-owned subsidiary of Aimco OP. See
Information about the Aimco Entities, beginning on
page 31.
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Reasons for the Merger: Aimco and Aimco
OP are in the business of acquiring, owning and managing
apartment properties such as the ones owned by AP XII, and have
decided to proceed with the merger as a means of acquiring the
properties currently owned by AP XII in a manner that they
believe (i) provides fair value to limited partners,
(ii) offers limited partners an opportunity to receive
immediate liquidity, or defer recognition of taxable gain
(except where the law of the state or other jurisdiction in
which a limited partner resides would prohibit the issuance of
OP Units in that state or other jurisdiction, or where
registration or qualification would be prohibitively costly),
and (iii) relieves AP XII of the expenses associated with a
sale of the property, including marketing and other transaction
costs. The Aimco Entities decided to proceed with the merger at
this time for the following reasons:
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In the absence of a transaction, limited partners of AP XII have
only limited options to liquidate their investment in AP XII.
The AP XII Units are not traded on an exchange or other
reporting system, and transactions in the securities are limited
and sporadic.
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The value of the properties owned by AP XII is not sufficient to
justify its continued operation as a public company. As a public
company with a significant number of unaffiliated limited
partners, AP XII incurs costs associated with preparing audited
annual financial statements, unaudited quarterly financial
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statements, tax returns and partner
Schedule K-1s,
periodic SEC reports and other expenses. The Aimco Entities
estimate these costs to be approximately $97,000 per year.
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AP XII has been operating at a loss for the past two years.
Since late 2010 , Aimco OP has made loans of approximately
$10,939,000 to AP XII to help fund operating expenses, pay off
old mortgages and fund loan commitment fees for the new mortgage
encumbering the Hunters Glen Property. AP XII may receive
additional advances of funds from Aimco OP, although Aimco OP is
not obligated to provide such advances. If the Aimco Entities
acquire 100% ownership of AP XII, they will have greater
flexibility in financing and operating its properties.
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Conflicts of Interest: The Managing
General Partner is wholly-owned by AIMCO/IPT, Inc., which in
turn is wholly-owned by Aimco. Therefore, the Managing General
Partner has a conflict of interest with respect to the merger.
The Managing General Partner has fiduciary duties to AIMCO/IPT,
Inc., the Managing General Partners sole stockholder and
an affiliate of Aimco, on the one hand, and to AP XII and its
limited partners, on the other hand. The duties of the Managing
General Partner to AP XII and its limited partners conflict with
the duties of the Managing General Partner to AIMCO/IPT, Inc.,
which could result in the Managing General Partner approving a
transaction that is more favorable to Aimco than might be the
case absent such conflict of interest. See, The
Merger Conflicts of Interest, beginning on
page 43.
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Risk Factors: In evaluating the merger
agreement and the merger, AP XII limited partners should
carefully read this information statement/prospectus and
especially consider the factors discussed in the section
entitled Risk Factors beginning on page 20.
Some of the risk factors associated with the merger are
summarized below:
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Aimco owns the Managing General Partner. As a result, the
Managing General Partner has a conflict of interest in the
merger. A transaction with a third party in the absence of this
conflict could result in better terms or greater consideration
to AP XII limited partners.
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AP XII limited partners who receive cash may recognize taxable
gain in the merger and that gain could exceed the merger
consideration.
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There are a number of significant differences between AP XII
Units and Aimco OP Units relating to, among other things,
the nature of the investment, voting rights, distributions and
liquidity and transferability/redemption. For more information
regarding those differences, see Comparison of AP XII
Units and Aimco OP Units, beginning on page 64.
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AP XII limited partners may elect to receive OP Units as
merger consideration, and there are risks related to an
investment in OP Units, including the fact that there are
restrictions on transferability of OP Units; there is no
public market for OP Units; and there is no assurance as to
the value that might be realized upon a future redemption of
OP Units.
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Material United States Federal Income Tax Consequences of
the Merger: The merger will generally be
treated as a partnership merger for U.S. federal income tax
purposes. In general, any payment of cash for AP XII Units will
be treated as a sale of such AP XII Units by the holder thereof,
and any exchange of AP XII Units for OP Units under the
terms of the merger agreement will be treated as a tax-free
transaction, except to the extent described in Material
United States Federal Income Tax Considerations
United States Federal Income Tax Consequences Relating to the
Merger, beginning on page 70.
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The foregoing is a general discussion of the material
U.S. federal income tax consequences of the merger. This
summary does not discuss all aspects of U.S. federal income
taxation that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under
the U.S. federal income tax laws. The particular tax
consequences of the merger to you will depend on a number of
factors related to your tax situation. You should review
Material United States Federal Income Tax
Considerations, herein and consult your tax advisors for a
full understanding of the tax consequences to you of the
merger.
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3
SPECIAL
FACTORS
Purposes,
Alternatives and Reasons for the Merger
Aimco and Aimco OP are in the business of acquiring, owning and
managing apartment properties such as the ones owned by AP XII,
and have decided to proceed with the merger as a means of
acquiring the properties currently owned by AP XII in a manner
that they believe (i) provides fair value to limited
partners, (ii) offers limited partners an opportunity to
receive immediate liquidity, or defer recognition of taxable
gain (except where the law of the state or other jurisdiction in
which a limited partner resides would prohibit the issuance of
OP Units in that state or other jurisdiction, or where
registration or qualification would be prohibitively costly),
and (iii) relieves AP XII of the expenses associated with a
sale of the properties, including marketing and other
transaction costs.
The Aimco Entities decided to proceed with the merger at this
time for the following reasons:
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In the absence of a transaction, AP XII limited partners have
only limited options to liquidate their investment in AP XII.
The AP XII Units are not traded on an exchange or other
reporting system, and transactions in the securities are limited
and sporadic.
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The value of the properties owned by AP XII is not sufficient to
justify its continued operation as a public company. As a public
company with a significant number of unaffiliated limited
partners, AP XII incurs costs associated with preparing audited
annual financial statements, unaudited quarterly financial
statements, tax returns and partner
Schedule K-1s,
periodic SEC reports and other expenses. The Aimco Entities
estimate these costs to be approximately $97,000 per year.
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AP XII has been operating at a loss for the past two years.
Since late 2010, Aimco OP has made loans of approximately
$10,939,000 to AP XII to help fund operating expenses, pay off
old mortgages and fund loan commitment fees for the new mortgage
encumbering the Hunters Glen Property. AP XII may receive
additional advances of funds from Aimco OP, although Aimco OP is
not obligated to provide such advances. If the Aimco Entities
acquire 100% ownership of AP XII, they will have greater
flexibility in financing and operating its properties.
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As discussed in more detail below, the Aimco Entities considered
a sale of the Hunters Glen Property in early 2009, but
determined that they would most likely not be able to find any
buyers at acceptable prices.
Before deciding to proceed with the merger, the Managing General
Partner and the other Aimco Entities considered the alternatives
described below:
Continuation of AP XII as a Public Company Operating the
Properties. The Managing General Partner and the
Aimco Entities did not consider the continuation of AP XII as a
public company operating the properties to be a viable
alternative primarily because of the costs associated with
preparing financial statements, tax returns, periodic SEC
reports and other expenses, and the inability of AP XII to
generate sufficient funds to cover operating expenses without
advances from Aimco OP which may not be available in the future.
Liquidation of AP XII. As discussed above, the
Managing General Partner and the other Aimco Entities considered
a liquidation of AP XII in which AP XIIs properties would
be marketed and sold to third parties for cash, with any net
proceeds remaining after payment of all liabilities distributed
to AP XIIs limited partners. The primary advantage of such
a transaction would be that the sale prices would reflect
arms-length negotiations and might therefore be higher
than the appraised values which have been used to determine the
merger consideration. The Managing General Partner and the Aimco
Entities rejected this alternative because of: (i) the risk
that a third party purchaser might not be found that would offer
a satisfactory price; (ii) the costs imposed on AP XII in
connection with marketing and selling the properties; and
(iii) the fact that limited partners would recognize
taxable gain on the sales. In early 2009, the Managing General
Partner and the other Aimco Entities considered a sale of the
Hunters Glen Property, but determined that they would most
likely not be able to find any buyers at acceptable prices.
Contribution of Properties to Aimco OP. The
Aimco Entities considered a transaction in which AP XIIs
properties would be contributed to Aimco OP in exchange for
OP Units. The primary advantage of such a transaction would
be that AP XII limited partners would not recognize taxable
gain. The Aimco Entities rejected this alternative because it
would not offer limited partners an opportunity for immediate
liquidity.
4
Effects
of the Merger
The Aimco Entities believe that the merger will have the
following benefits and detriments to unaffiliated limited
partners, AP XII and the Aimco Entities:
Benefits to Unaffiliated Limited Partners. The
merger is expected to have the following principal benefits to
unaffiliated limited partners:
Liquidity. Limited partners are given a choice
of merger consideration and may elect to receive either cash or
OP Units in the merger, except in those jurisdictions where
the law prohibits the offer of OP Units (or registration or
qualification would be prohibitively costly). Limited partners
who receive the cash consideration will receive immediate
liquidity with respect to their investment.
Option to Defer Taxable Gain. Limited partners
who receive OP Units in the merger may defer recognition of
taxable gain (except where the law of the state or other
jurisdiction in which a limited partner resides would prohibit
the issuance of OP Units in that state or other
jurisdiction, or where registration or qualification would be
prohibitively costly).
Diversification. Limited partners who receive
OP Units in the merger will have the opportunity to
participate in Aimco OP, which has a more diversified property
portfolio than AP XII.
Benefits to AP XII. The merger is expected to
have the following principal benefits to AP XII:
Elimination of Costs Associated with SEC Reporting
Requirements and Multiple Limited Partners. AP
XII will terminate registration after the merger is completed,
and will cease filing periodic reports with the SEC. As a
result, AP XII will no longer incur costs associated with
preparing audited financial statements, unaudited quarterly
financial statements, tax returns and partner
Schedule K-1s,
periodic SEC reports and other expenses. The Aimco Entities
estimate these expenses to be approximately $97,000 per year.
Benefits to the Aimco Entities. The merger is
expected to have the following principal benefits to the Aimco
Entities:
Increased Interest in AP XII. Upon completion
of the merger, Aimco OP will be the sole limited partner of AP
XII. As a result, the Aimco Entities will receive all of the
benefit from any future appreciation in value of the properties
after the merger, and any future income from such properties.
Detriments to Unaffiliated Limited
Partners. The merger is expected to have the
following principal detriments to unaffiliated limited partners:
Taxable Gain. Limited partners who receive the
cash consideration may recognize taxable gain in the merger that
could exceed the merger consideration. In addition, limited
partners who receive OP Units in the merger could recognize
taxable gain if Aimco subsequently sells any of AP XIIs
properties.
Risks Related to OP Units. Limited
partners who receive OP Units in the merger will be subject
to the risks related to an investment in OP Units, as
described in greater detail under the heading Risk
Factors Risks Related to an Investment in
OP Units.
Conflicts of Interest; No Separate Representation of
Unaffiliated Limited Partners. The Managing
General Partner is wholly-owned by AIMCO/IPT, Inc., which in
turn is wholly-owned by Aimco. Therefore, the Managing General
Partner has a conflict of interest with respect to the merger.
The Managing General Partner has fiduciary duties to AIMCO/IPT,
Inc., the Managing General Partners sole stockholder and
an affiliate of Aimco, on the one hand, and to AP XII and its
limited partners, on the other hand. The duties of the Managing
General Partner to AP XII and its limited partners conflict with
the duties of the Managing General Partner to AIMCO/IPT, Inc.,
which could result in the Managing General Partner approving a
transaction that is more favorable to Aimco than might be the
case absent such conflict of interest. In negotiating the merger
agreement, no one separately represented the interests of the
unaffiliated limited partners. If an independent advisor had
been engaged, it is possible that such advisor could have
negotiated better terms for AP XIIs unaffiliated limited
partners.
Detriments to AP XII. The merger is not
expected to have any detriments to AP XII.
5
Detriments to the Aimco Entities. The merger
is expected to have the following principal detriments to the
Aimco Entities:
Increased Interest in AP XII. Upon completion
of the merger, the Aimco Entities interest in the net book
value of AP XII will increase from 75.7% to 100%, or from a
deficit of $54,071,000 to a deficit of $71,382,000 as of
December 31, 2010, and their interest in the net losses of
AP XII will increase from 75.7% to 100%, or from $2,162,000 to
$2,855,000 for the period ended December 31, 2010. Upon
completion of the merger, Aimco OP will be the sole limited
partner of AP XII. As a result, Aimco OP will bear the burden of
all future operating or other losses of AP XII, as well as any
decline in the value of AP XIIs properties.
Burden of Capital Expenditures. Upon
completion of the merger, the Aimco Entities will have sole
responsibility for providing any funds necessary to pay for
capital expenditures at the properties.
Material
United States Federal Income Tax Consequences of the
Merger
For a discussion of the material U.S. federal income tax
consequences of the merger, see Material
United States Federal Income Tax Considerations
United States Federal Income Tax Consequences Relating to the
Merger, beginning on page 70.
Fairness
of the Transaction
Factors in Favor of Fairness
Determination. The Aimco Entities (including the
Managing General Partner of AP XII) believe that the merger
is advisable, fair to and in the best interests of AP XII and
its unaffiliated limited partners. In support of such
determination, the Aimco Entities considered the following
factors:
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The merger consideration of $483.14 per AP XII Unit was based on
independent third party appraisals of AP XIIs properties
by either Cogent Realty Advisors, LLC, or CRA, or KTR Real
Estate Advisors LLC, or KTR, each an independent valuation firm.
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Duff & Phelps has delivered its written opinion to the
boards of directors of Aimco, the general partner of Aimco OP,
the Managing General Partner and the general partner of the sole
member of the Non-Managing General Partner to the effect that,
as of November 15, 2011, based upon and subject to the
assumptions made, procedures followed, factors considered, and
qualifications and limitations on the review undertaken by
Duff & Phelps in connection with its opinion, the cash
consideration of $483.14 per unit is fair, from a financial
point of view, to the unaffiliated limited partners of AP XII.
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The merger consideration is greater than the Aimco
Entities estimate of liquidation value because there was
no deduction for certain amounts that would be payable upon a
sale of the properties, including transaction costs related to
the sale and prepayment penalties on the mortgage debt that
would apply (based on current interest rates) if the properties
were sold after the expiration of the current lockout periods
(during which a prepayment of the mortgage debt is prohibited)
in June 2013 (for the Hunters Glen Property) and September 2012
(for the Twin Lake Towers Property).
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The merger consideration is equal to the Aimco Entities
estimate of going concern value, calculated as the aggregate
appraised value of all of AP XIIs properties, plus the
amount of any other assets, less the amount of AP XIIs
liabilities, including the market value of mortgage debt (but
without deducting any prepayment penalties thereon).
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The
mark-to-market
adjustment to the mortgage debt encumbering AP XIIs
properties is less than the prepayment penalties that would be
payable (based on current interest rates) upon a sale of the
Hunters Glen Property and the Twin Lake Towers Property after
the expiration of the current lockout periods.
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The merger consideration exceeds the net book value per unit (a
deficit of $1,752.83 per AP XII Unit at September 30, 2011).
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The appraised value of the Twin Lake Towers Property relied on
to determine the merger consideration is higher than a December
2009 lender appraisal for the Twin Lake Towers Property, which
indicated a market value of $37,000,000 as of December 4,
2009.
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Limited partners may defer recognition of taxable gain by
electing to receive OP Units in the merger, except in those
jurisdictions where the law prohibits the offer of OP Units
(or registration or qualification would be prohibitively costly).
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The number of OP Units issuable to limited partners in the
merger will be determined based on the average closing price of
Aimco common stock, as reported on the NYSE, over the ten
consecutive trading days ending on the second trading day
immediately prior to the consummation of the merger.
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Limited partners who receive the cash consideration will achieve
immediate liquidity with respect to their investment.
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Limited partners who receive OP Units in the merger will
have the opportunity to participate in Aimco OP, which has a
more diversified property portfolio than AP XII.
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Although limited partners are not entitled to dissenters
appraisal rights under Delaware law, the merger agreement
provides them with contractual dissenters appraisal rights
that are similar to the dissenters appraisal rights that
are available to stockholders in a corporate merger under
Delaware law.
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Although the merger agreement may be terminated by either side
at any time, Aimco OP and the Aimco Subsidiary are very likely
to complete the merger on a timely basis.
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Unlike a typical property sale agreement, the merger agreement
contains no indemnification provisions, so there is no risk of
subsequent reduction of the proceeds.
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In contrast to a sale of the properties to a third party, which
would involve marketing and other transaction costs, Aimco OP
has agreed to pay all expenses associated with the merger.
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The merger consideration is greater than the prices at which AP
XII Units have recently sold in the secondary market ($104.00 to
$270.00 per AP XII Unit from January 1, 2010 through
November 4, 2011).
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The merger consideration is greater than the prices at which AP
XII Units have historically sold in the secondary market
($180.00 to $212.00 per AP XII Unit from January 1, 2009
through December 31, 2009).
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Factors Not in Favor of Fairness
Determination. In addition to the foregoing
factors, the Aimco Entities also considered the following
countervailing factors:
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The Managing General Partner has substantial conflicts of
interest with respect to the merger as a result of (i) the
fiduciary duties they owe to unaffiliated limited partners, who
have an interest in receiving the highest possible
consideration, and (ii) the fiduciary duties it owes to its
sole stockholder, an affiliate of Aimco, which has an interest
in obtaining the AP XII properties for the lowest possible
consideration.
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The terms of the merger were not approved by any independent
directors.
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An unaffiliated representative was not retained to act solely on
behalf of the unaffiliated limited partners for purposes of
negotiating the merger agreement on an independent,
arms-length basis, which might have resulted in better
terms for the unaffiliated limited partners.
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The merger agreement does not require the approval of any
unaffiliated limited partners.
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In calculating the merger consideration, the market value of the
mortgage debt encumbering AP XIIs properties was deducted,
which resulted in less merger consideration than would have been
the case if the aggregate amount outstanding was deducted.
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The appraised value of the Hunters Glen Property relied on to
determine the merger consideration is lower than a January 2011
lender appraisal for the Hunters Glen Property, which indicated
a market value of $102,000,000 as of November 19, 2010.
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Limited partners who receive the cash consideration in the
merger may recognize taxable gain that could exceed the merger
consideration.
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Limited partners who receive OP Units in the merger could
recognize taxable gain if Aimco subsequently sells any of AP
XIIs properties.
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Limited partners who receive OP Units in the merger will be
subject to the risks related to an investment in OP Units,
as described in greater detail under the heading Risk
Factors Risks Related to an Investment in
OP Units.
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CRA and KTR, the valuation firms that appraised the AP XII
properties, have performed work for Aimco OP and its affiliates
in the past, and these pre-existing relationships could
negatively impact CRAs and KTRs independence.
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The Aimco Entities did not assign relative weights to the above
factors in reaching their decision that the merger is fair to AP
XII and its unaffiliated limited partners. However, in
determining that the benefits of the proposed merger outweigh
the costs and risks, they relied primarily on the following
factors: (i) the merger consideration of $483.14 per AP XII
Unit is based on independent third party appraisals of AP
XIIs properties, (ii) the Duff & Phelps
opinion that, as of November 15, 2011, based upon and subject to
the assumptions made, procedures followed, factors considered,
and qualifications and limitations on the review undertaken by
Duff & Phelps in connection with its opinion, the cash
consideration of $483.14 per unit is fair, from a financial
point of view, to the unaffiliated limited partners of AP XII;
(iii) limited partners may defer recognition of taxable
gain by electing to receive OP Units in the merger (except
in certain jurisdictions) and (iv) limited partners are
entitled to contractual dissenters appraisal rights. The
Aimco Entities were aware of, but did not place much emphasis
on, information regarding prices at which AP XII Units may have
sold in the secondary market because they do not view that
information as a reliable measure of value. The AP XII Units are
not traded on an exchange or other reporting system, and
transactions in the secondary market are very limited and
sporadic. In addition, some of the historical prices are not
comparable to current value because of intervening events,
including refinancing, distribution of proceeds and advances
from Aimco OP.
Procedural Fairness. The Aimco Entities
determined that the merger is fair from a procedural standpoint
despite the absence of any customary procedural safeguards, such
as the engagement of an unaffiliated representative, the
approval of independent directors or approval by a majority of
unaffiliated limited partners. In making this determination, the
Aimco Entities relied primarily on the dissenters
appraisal rights provided to unaffiliated limited partners under
the merger agreement that are similar to the dissenters
appraisal rights available to stockholders in a corporate merger
under Delaware law.
The
Appraisals
Selection and Qualifications of Independent
Appraisers. The Managing General Partner retained
the services of CRA to appraise the market value of the Twin
Lake Towers Property. The Managing General Partner retained the
services of KTR to appraise the market value of the Hunters Glen
Property. CRA and KTR are each experienced independent valuation
consulting firms that have performed appraisal services for
Aimco OP and its affiliates in the past. Aimco OP believes that
its relationship with CRA and KTR had no negative impact on
those firms independence in conducting the appraisals
related to the merger.
Factors Considered. CRA performed a complete
appraisal of the Twin Lake Towers Property. KTR performed a
complete appraisal of the Hunters Glen Property. CRA and KTR
have each represented that its respective reports were prepared
in conformity with the Uniform Standards of Professional
Appraisal Practice, as promulgated by the Appraisal Standards
Board of the Appraisal Foundation and the Code of Professional
Ethics and Standards of Professional Appraisal Practice of the
Appraisal Institute. AP XII furnished CRA and KTR with all of
the necessary information requested by CRA or KTR, as
applicable, in connection with the appraisals. The appraisals
were not prepared in conjunction with a request for a specific
value or a value within a given range. In preparing its
valuation of each property, CRA and, KTR, among other things:
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Inspected the property and its environs;
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Reviewed demographic and other socioeconomic trends pertaining
to the city and region where the property is located;
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Examined regional apartment, office and retail market
conditions, with special emphasis on the propertys
submarket;
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Investigated lease and sale transactions involving comparable
properties in the influencing market;
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Reviewed the existing rent roll and discussed the leasing status
with the building manager and leasing agent. In addition, CRA
and KTR reviewed the propertys recent operating history
and those of competing properties;
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Utilized appropriate appraisal methodology to derive estimates
of value; and
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Reconciled the estimates of value into a single value conclusion.
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Summary of Approaches and Methodologies
Employed. The following summary describes the
approaches and analyses employed by CRA and KTR, respectively,
in preparing the appraisals. CRA and KTR principally relied on
two approaches to valuation: (i) the income capitalization
approach and (ii) the sales comparison approach.
The income capitalization approach is based on the premise that
value is derived by converting anticipated benefits into
property value. Anticipated benefits include the present value
of the net income and the present value of the net proceeds
resulting from the re-sale of the property. CRA reported that
the Twin Lake Towers Property has an adequate operations history
to determine its income-producing capabilities over the near
future. KTR reported that the Hunters Glen Property has an
adequate operations history to determine its income-producing
capabilities over the near future. In addition, each firm
reported that performance levels of competitive properties
served as an adequate check as to the reasonableness of each
propertys actual performance. As such, the income
capitalization approach was utilized in the appraisal of each
property.
As part of the income capitalization approach, CRA and KTR used
the direct capitalization method to estimate a value for the
Twin Lake Towers Property and the Hunters Glen Property,
respectively. According to the appraisal reports, the basic
steps in the direct capitalization analysis are as follows:
(i) calculate potential gross income from all sources that
a competent owner could legally generate; (ii) estimate and
deduct an appropriate vacancy and collection loss factor to
arrive at effective gross income; (iii) estimate and deduct
operating expenses that would be expected during a stabilized
year to arrive at a probable net operating income;
(iv) develop an appropriate overall capitalization rate to
apply to the net operating income; and (v) estimate value
by dividing the net operating income by the overall
capitalization rate. In addition, any adjustments to account for
differences between the current conditions and stabilized
conditions are also considered. The assumptions utilized by CRA
and KTR with respect to each property are set forth below. The
property-specific assumptions were determined by CRA and KTR to
be reasonable based on their review of historical operating and
financial data for their respective property and comparison of
said data to the operating statistics of similar properties in
the respective influencing market areas. The capitalization rate
for each property was determined to be reasonable by CRA and
KTR, as applicable, based on its review of applicable data
ascertained within the market in which the respective property
is located.
The sales comparison approach is an estimate of value based upon
a process of comparing recent sales of similar properties in the
surrounding or competing areas to the subject property. This
comparative process involves judgment as to the similarity of
the subject property and the comparable sales with respect to
many value factors such as location, contract rent levels,
quality of construction, reputation and prestige, age and
condition, and the interest transferred, among others. The value
estimated through this approach represents the probable price at
which the subject property would be sold by a willing seller to
a willing and knowledgeable buyer as of the date of value. The
reliability of this technique is dependent upon the availability
of comparable sales data, the verification of the sales data,
the degree of comparability and extent of adjustment necessary
for differences, and the absence of atypical conditions
affecting the individual sales prices. CRA and KTR each reported
that research revealed adequate sales activity to form a
reasonable estimation of each of the subject propertys
market value pursuant to the sales comparison approach. For
their respective appraisals, CRA and KTR conducted research in
the influencing market in an attempt to locate sales of
properties similar to the appraised properties. The results of
CRAs and KTRs research indicated that an adequate
number of comparable sales were obtained from the local markets
in which the Twin Lake Towers Property and the Hunters Glen
Property are located.
In each of the appraisals, numerous sales were uncovered and the
specific sales included in the appraisal reports were deemed
representative of the most comparable data available at the time
the appraisals were prepared. Important criteria utilized in
selecting the most comparable data included: conditions under
which the sale occurred; date of sale; sales were selected based
on their physical similarity to the appraised property;
transactions were selected based on the
9
similarity of location between the comparable and appraised
property; and, similarity of economic characteristics between
the comparable and appraised property. Sales data that may have
been uncovered during the course of research that was not
included in the appraisal did not meet the described criteria
and/or could
not be adequately confirmed.
According to CRAs and KTRs reports, the basic steps
in processing the sales comparison approach are outlined as
follows: (i) research the market for recent sales
transactions, listings, and offers to purchase or sell of
properties similar to the subject property; (ii) select a
relevant unit of comparison and develop a comparative analysis;
(iii) compare comparable sale properties with the subject
property using the elements of comparison and adjust the price
of each comparable to the subject property; and
(iv) reconcile the various value indications produced by
the analysis of the comparables.
The final step in the appraisal process is the reconciliation of
the value indicators into a single value estimate. CRA and KTR
reviewed each approach in order to determine its appropriateness
relative to the properties that they appraised. The accuracy of
the data available and the quantity of evidence were weighted in
each approach. For the appraisal of the Twin Lake Towers
Property, CRA placed primary emphasis on the income
capitalization approach to valuation, and the direct
capitalization approach was considered in the conclusion of
value for the property. CRA relied secondarily on the sales
comparison approach, and reported that the value conclusion
derived pursuant to the sales comparison approach was utilized
as a means to support the value conclusion rendered for the Twin
Lake Towers Property pursuant to the income capitalization
approach. For the appraisal of the Hunters Glen Property, KTR
relied principally on the income capitalization approach to
valuation, and the direct capitalization method was given
greatest consideration in the conclusion of value for this
approach. While KTR granted some weight to the sales comparison
approach, KTR noted that less weight was accorded to this
approach than otherwise might be typical given the degree of
adjustments necessary and the lack of directly comparable sales.
Twin
Lake Towers Property
Summary of Independent Appraisal of the Twin Lake Towers
Property. CRA performed a complete appraisal of
the Twin Lake Towers Property. The appraisal report of the Twin
Lake Towers Property is dated May 19, 2010, and indicates
that the estimated market value of the Twin Lake Towers Property
was $36,000,000 as of April 21, 2010. The appraisal report
was updated by CRA as reflected in CRAs supplemental
letters dated January 3, 2011, June 9, 2011, and
October 28, 2011. The appraisal report, as updated by the
supplemental letters dated January 3, 2011 and June 9,
2011, indicates that the estimated market value of the Twin Lake
Towers Property was $41,400,000 as of December 20, 2010 and
$45,600,000 as of May 31, 2011, respectively. The appraisal
report, as updated by the supplemental letter dated
October 28, 2011, provides an estimate of the
propertys market value as of October 1, 2011. The
summary set forth below describes the material conclusions
reached by CRA based on the value determined under the valuation
approaches and subject to the assumptions and limitations
described below. According to CRAs report, as updated by
the supplemental letters, the estimated market value of the Twin
Lake Towers Property was $47,200,000 as of October 1, 2011.
The following is a summary of the appraisal report dated
May 19, 2010, as updated by the supplemental letters dated
January 3, 2011, June 9, 2011, and October 28,
2011. There is no present intention to further update the
appraisal report. The Aimco Entities are not aware of any events
that have occurred or conditions that have changed since the
October 28, 2011 supplemental letter that may have caused a
material change in the value of the Twin Lake Towers Property.
Extraordinary Assumption. In connection with
the preparation of its January 2011 supplemental letter of the
Twin Lake Towers Property, CRA inspected the property on
December 20, 2010. CRA noted that a physical inspection of
the Twin Lake Towers Property and its environs was not conducted
in conjunction with the May 2011 supplemental letter or the
October 2011 supplemental letter, and that it is assumed
for purposes of the May 2011 supplemental letter and the October
2011 supplemental letter that the Twin Lake Towers Property is
in a similar state of repair and condition, and that
neighborhood conditions and composition are consistent with
observations noted on December 20, 2010.
Valuation under Income Capitalization
Approach. Using the income capitalization
approach, CRA performed a direct capitalization analysis to
derive a value for the Twin Lake Towers Property. The direct
capitalization analysis resulted in a valuation conclusion for
the Twin Lake Towers Property of approximately $47,200,000 as of
October 1, 2011.
10
The assumptions employed by CRA to determine the value of the
Twin Lake Towers Property under the income capitalization
approach using a direct capitalization analysis included:
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potential gross income from apartment unit rentals of $429,437
per month or $5,153,244 for the appraised year;
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a 5.0% allowance attributable to loss to lease;
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concession allowance of 3.0% of the gross rent potential;
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a combined vacancy and collection loss factor of 4.5%;
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estimated utility income of $359,100, or $900 per unit;
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estimated other income of $285,285, or $715 per unit;
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total estimated expenses of $2,189,165;
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capitalization rate of 6.25%.
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Using a direct capitalization analysis, CRA calculated the value
of the Twin Lake Towers Property by dividing the stabilized net
operating income of $2,952,338 by the concluded capitalization
rate of 6.25%.
CRA calculated the value conclusion of the Twin Lake Towers
Property under the income capitalization approach of
approximately $47,200,000 as of October 1, 2011.
Valuation Under Sales Comparison Approach. CRA
estimated the property value of the Twin Lake Towers Property
under the sales comparison approach by analyzing sales from the
influencing market that were most similar to the Twin Lake
Towers Property in terms of age, size, tenant profile and
location. In addition to the sales outlined in the May 2011
Supplemental Letter, CRA researched and analyzed two recent
comparable transactions. CRA reported that the sales comparison
approach was utilized as a means of support to the value
conclusion rendered for the Twin Lake Towers Property via the
income capitalization approach.
The sales comparison approach resulted in a valuation conclusion
for the Twin Lake Towers Property of approximately $44,900,000
as of October 1, 2011.
In reaching a valuation conclusion for the Twin Lake Towers
Property, CRA examined and analyzed comparable sales of five
properties in the influencing market. The sales reflected per
unit unadjusted sales prices ranging from $71,429 to $120,833.
After adjustment, the comparable sales illustrated a range from
$103,714 to $115,917 per unit, with mean and median adjusted
sale prices of $111,447 and $112,946 per unit, respectively. CRA
estimated a value of $112,500 per unit. Applied to the Twin Lake
Towers Propertys 399 units, this resulted in
CRAs total value estimate for the Twin Lake Towers
Property of approximately $44,900,000 as of October 1, 2011.
Reconciliation of Values and Conclusion of
Appraisal. For the appraisal of the Twin Lake
Towers Property, CRA placed primary emphasis on the value
indicator produced by the income capitalization approach to
valuation, and the direct capitalization method was given
greatest consideration in the conclusion of value for this
approach. CRA relied secondarily on the sales comparison
approach, and reported that the value conclusion derived
pursuant to the sales comparison approach is utilized as a means
to support the value conclusion rendered for the Twin Lake
Towers Property pursuant to the income capitalization approach.
The income capitalization approach using a direct capitalization
analysis resulted in a value of $47,200,000, and the sales
comparison approach resulted in a value of $44,900,000. CRA
concluded that the market value of the Twin Lake Towers Property
as of October 1, 2011 was $47,200,000.
Hunters
Glen Property
Summary of Independent Appraisal of the Hunters Glen
Property. KTR performed a complete appraisal of
the Hunters Glen Property. The appraisal report of the Hunters
Glen Property is dated October 20, 2011. The appraisal
report provides an estimate of the propertys market value
as of October 1, 2011. The summary set forth below
describes the material conclusions reached by KTR based on the
value determined under the valuation approaches and subject to
the assumptions and limitations described below. According to
KTRs report, the estimated market value of the Hunters
Glen Property was $92,000,000 as of October 1, 2011.
Previous appraisal
11
reports by KTR of the Hunters Glen Property, dated
March 17, 2011 and June 1, 2011, indicated that the
estimated market value of the Hunters Glen Property was
$91,000,000 as of March 4, 2011 and $92,000,000 as of
June 1, 2011, respectively. The increase in the estimated
market value of the Hunters Glen Property is mainly due to
changes in the assumptions employed by KTR to determine the
value of the Hunters Glen Property (including a lower allowance
attributable to loss to lease). The following is a summary of
the appraisal report dated October 20, 2011. There is no
present intention to update the appraisal report. The Aimco
Entities are not aware of any events that have occurred or
conditions that have changed since the date of the appraisal
report that may have caused a material change in the value of
the Hunters Glen Property.
Extraordinary Assumption. In connection with
the preparation of its March 2011 appraisal report of the
Hunters Glen Property, KTR inspected the property on
March 4, 2011. KTR noted that the scope of work of the June
2011 appraisal report and the October 2011 appraisal report of
the Hunters Glen Property did not include a physical inspection
of the Hunters Glen Property, and that the values derived in the
reports are based on the extraordinary assumption that the
physical condition of the Hunters Glen Property has not
materially changed since March 4, 2011.
Valuation under Income Capitalization
Approach. Using the income capitalization
approach, KTR performed a direct capitalization analysis to
derive a value for the Hunters Glen Property.
The direct capitalization analysis resulted in a valuation
conclusion for the Hunters Glen Property of approximately
$91,800,000 as of October 1, 2011.
The assumptions employed by KTR to determine the value of the
Hunters Glen Property under the income capitalization approach
using a direct capitalization analysis included:
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potential gross income from apartment unit rentals of $874,456
per month or $10,493,472 for the appraised year;
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a 1.0% allowance attributable to loss to lease;
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concession allowance of 1.75% of the gross rent potential;
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a combined vacancy and credit loss factor of 5.0%;
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estimated other income of $1,075,200, or $1,200 per unit;
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estimated administrative unit rental loss associated with the
operation of five administrative units of $52,245;
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total estimated expenses of $5,197,544;
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capitalization rate of 6.0%.
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Using a direct capitalization analysis, KTR calculated the value
of the Hunters Glen Property by dividing the stabilized net
operating income of $5,505,639 by the concluded overall
capitalization rate of 6.00%.
KTR calculated the value conclusion of the Hunters Glen Property
under the income capitalization approach of approximately
$91,800,000 as of October 1, 2011.
Valuation Under Sales Comparison Approach. KTR
estimated the property value of the Hunters Glen Property under
the sales comparison approach by analyzing sales from the
influencing market that were most similar to the Hunters Glen
Property in terms of age, size, tenant profile and location. KTR
reported that, due to the insignificant average unit size
disparity between the Hunters Glen Property and the comparable
sales, it considered that a price per unit comparison was
reliable.
The sales comparison approach resulted in a valuation conclusion
for the Hunters Glen Property of approximately $94,000,000 as of
October 1, 2011.
In reaching a valuation conclusion for the Hunters Glen
Property, KTR examined and analyzed comparable sales of four
properties in the influencing market. The sales reflected per
unit unadjusted sales prices ranging from $93,487 to $125,000.
After adjustment, the comparable sales illustrated a range from
$105,896 to $118,750 per unit. KTR reported
12
that one of the sales was a portfolio sale of three properties
in which two of the buildings were located in the same town as
the Hunters Glen Property. KTR also reported that two of the
sales are of properties located in the neighborhood of the
Hunters Glen Property and that these sales indicated a value
range of $105,896 to $108,143 per unit. KTR also reported that
it placed the greatest reliance on one of these three sales as
it is the most recent transaction in the immediate market of the
Hunters Glen Property and required the least adjustments. KTR
estimated a value of $105,000 per unit. Applied to the Hunters
Glen Property, 896 total units, this resulted in KTRs
total value estimate for the Hunters Glen Property of
approximately $94,000,000 as of October 1, 2011.
Reconciliation of Values and Conclusion of
Appraisal. For the appraisal of the Hunters Glen
Property, KTR relied principally on the income capitalization
approach to valuation, and the direct capitalization method was
given greatest consideration in the conclusion of value for this
approach. While KTR granted some weight to the sales comparison
approach, KTR noted that less weight was accorded to this
approach than otherwise might be typical given the degree of
adjustments necessary and the lack of directly comparable sales.
The income capitalization approach using a direct capitalization
analysis result in a value of $91,800,000, and the sales
comparison approach resulted in a value of $94,000,000, each as
of October 1, 2011. KTR concluded that the market value of
the Hunters Glen Property as of October 1, 2011 was
$92,000,000.
Assumptions, Limitations and Qualifications of CRAs and
KTRs Valuations. In preparing their
respective appraisals, CRA and KTR relied, without independent
verification, on the information furnished by others. Each of
CRAs and KTRs appraisal reports was subject to,
among others, the following assumptions and limiting conditions:
no responsibility was assumed for the legal description or for
matters including legal or title considerations, and title to
each property was assumed to be good and marketable unless
otherwise stated; each property was appraised free and clear of
any or all liens or encumbrances unless otherwise stated;
responsible ownership and competent property management were
assumed; all engineering was assumed to be correct; there were
no hidden or unapparent conditions of the property, subsoil, or
structures that render it more or less valuable, and no
responsibility was assumed for such conditions or for arranging
for engineering studies that may be required to discover them;
there was full compliance with all applicable federal, state,
and local environmental regulations and laws unless
noncompliance was stated, defined, and considered in the
appraisal report; all applicable zoning and use regulations and
restrictions have been complied with, unless nonconformity had
been stated, defined, and considered in the appraisal report;
all required licenses, certificates of occupancy, consents, or
other legislative or administrative authority from any local,
state, or national government or private entity or organization
have been or can be obtained or renewed for any use on which the
value estimate contained in each report was based; the
utilization of the land and improvements is within the
boundaries or property lines of the property described and that
there is no encroachment or trespass unless noted in either
report; the distribution, if any, of the total valuation in each
report between land and improvements applies only under the
respective stated program of utilization; unless otherwise
stated in each report, the existence of hazardous substances,
including without limitation, asbestos, polychlorinated
biphenyls, petroleum leakage, or agricultural chemicals, which
may or may not be present on each property, or other
environmental conditions, were not called to the attention of
nor did the appraiser become aware of such during the
appraisers inspection, and the appraiser had no knowledge
of the existence of such materials on or in the property unless
otherwise stated; the appraiser has not made a specific
compliance survey and analysis of this property to determine
whether or not it is in conformity with the various detailed
requirements of the Americans with Disabilities Act; and former
personal property items such as kitchen and bathroom appliances
were, at the time of each appraisal report, either permanently
affixed to the real estate or were implicitly part of the real
estate in that tenants expect the use of such items in exchange
for rent and never gain any of the rights of ownership, and the
intention of the owners is not to remove the articles which are
required under the implied or express warranty of habitability.
Compensation of Appraisers. CRAs fee for
the appraisal of the Twin Lake Towers Property was approximately
$20,300. KTRs fee for the appraisal of the Hunters Glen
Property was approximately $21,500. Aimco OP paid for the costs
of the appraisals. Neither CRAs nor KTRs fee for the
appraisals was contingent on the approval or completion of the
merger. Aimco OP also has agreed to indemnify CRA and KTR for
certain liabilities that may arise out of the rendering of the
appraisals. During the past two years, in addition to these
fees, Aimco OP and its affiliates have paid CRA and KTR
approximately $241,900 and $283,100, respectively, for other
appraisal services, including, but not limited to, fees of
approximately $146,100 and $154,600, respectively, for appraisal
services related to certain other merger transactions that are
being effected concurrently with this merger. Except as set
forth above, during the prior two years, no material
relationship has existed between CRA or KTR, on the one hand,
and
13
AP XII or Aimco OP or any of their affiliates, on the other
hand. Aimco OP believes that its relationships with CRA and KTR
had no negative impact on either firms independence in
conducting the appraisals.
Availability of Appraisal Reports. You may
obtain a full copy of CRAs and KTRs appraisals upon
request, without charge, by contacting Eagle Rock Proxy
Advisors, LLC, by mail at 12 Commerce Drive, Cranford,
New Jersey 07016; by fax at
(908) 497-2349;
or by telephone at
(800) 217-9608.
In addition, the appraisal reports have been filed with the SEC.
For more information about how to obtain a copy of the appraisal
reports see Where You Can Find Additional
Information.
Opinion
of Financial Advisor
Aimco OP retained Duff & Phelps to act as financial
advisor to the boards of directors of Aimco, the general partner
of Aimco OP, the Managing General Partner and the general
partner of the sole member of the Non-Managing General Partner
in connection with their evaluation of the proposed terms of the
merger.
On November 15, 2011, Duff & Phelps rendered its
written opinion to the boards of directors of Aimco, the general
partner of Aimco OP, the Managing General Partner and the
general partner of the sole member of the Non-Managing General
Partner, to the effect that, as of November 15, 2011, based
upon and subject to the assumptions made, procedures followed,
factors considered, and qualifications and limitations on the
review undertaken, the cash consideration offered in the merger
is fair from a financial point of view to the unaffiliated
limited partners of AP XII.
The full text of the written opinion of Duff &
Phelps, dated November 15, 2011, which sets forth the
assumptions made, procedures followed, factors considered, and
qualifications and limitations on the review undertaken by
Duff & Phelps in connection with the opinion, is
attached as Annex C to this information
statement/prospectus. You are encouraged to read the opinion
carefully and in its entirety. The summary of Duff &
Phelpss opinion in this information statement/prospectus
is qualified in its entirety by reference to the full text of
the opinion.
Duff & Phelps opinion was directed to the
boards of directors of Aimco, the general partner of Aimco OP,
the Managing General Partner and the general partner of the sole
member of the Non-Managing General Partner, and addressed only
the fairness from a financial point of view of the cash
consideration of $483.14 per unit, as of the date of the
opinion. Duff & Phelps provided its opinion for the
information and assistance of the boards of directors of Aimco,
the general partner of Aimco OP, the Managing General Partner
and the general partner of the sole member of the Non-Managing
General Partner in connection with their evaluation of the
merger. Neither Duff & Phelps opinion nor the
summary of the opinion and the related analyses set forth in
this information statement/prospectus are intended to be, and do
not constitute, advice or a recommendation as to how any person
should act with respect to any matters relating to the merger,
or whether to proceed with the merger or any related
transaction.
In connection with its opinion, Duff & Phelps made
such reviews, analyses and inquiries as it deemed necessary and
appropriate under the circumstances. Duff & Phelps
also took into account its assessment of general economic,
market and financial conditions, as well as its experience in
securities and business valuation, in general, and with respect
to similar transactions, in particular. Duff &
Phelps procedures, investigations, and financial analysis
with respect to the preparation of its opinion included, but
were not limited to, the items summarized below:
1. Reviewed the following documents:
a. Reviewed AP XIIs property level internal unaudited
financial statements for the nine months ended
September 30, 2011 and AP XIIs property level
unaudited annual financial statements for each of the three
fiscal years ended December 31, 2010;
b. Reviewed other internal documents relating to the
history, current operations, and probable future outlook of AP
XII, including financial projections, provided to
Duff & Phelps by the management of Aimco OP; and
c. Reviewed documents related to the merger, including
certain portions of a draft of this information
statement/prospectus, including a draft of the merger agreement
dated as of November 10, 2011, and certain other documents
related to the merger;
14
2. Reviewed the following information
and/or
documents related to the real estate holdings of AP XII:
a. Reviewed previously completed appraisal reports
associated with the properties owned by AP XII prepared by KTR
and CRA as of October 1, 2011 and provided to
Duff & Phelps by management of Aimco OP (which
appraisal reports are incorporated by reference in
Exhibits 99.1 through 99.5 in this information
statement/prospectus);
b. Reviewed facts and circumstances related to each of the
properties owned by AP XII to understand factors relevant to the
appraisals; and
c. Reviewed market data for each of the subject markets and
assessed current supply and demand trends;
3. Reviewed the following information
and/or
documents related to the properties owned by AP XII:
a. Reviewed operating statements and balance sheets for the
twelve month periods ending December 31, 2008, 2009, and
2010;
b. Reviewed the
year-to-date
operating statement and balance sheet for the nine month period
ending September 30, 2011;
c. Reviewed budgeted financial statements for the twelve
month period ending December 31, 2011;
d. Reviewed rent rolls prepared as of September
2011; and
e. Discussed the information referred to above and the
background and other elements of the merger with the management
of Aimco OP; and
4. Conducted such other analyses and considered such other
factors as Duff & Phelps deemed appropriate.
In performing its analyses and rendering its opinion with
respect to the merger, Duff & Phelps made certain
assumptions, qualifications and limiting conditions, which
included, but were not limited to, the items summarized below:
1. Relied upon the accuracy, completeness, reliability, and
fair presentation of all information, data, advice, opinions and
representations obtained from public sources or provided to it
from private sources regarding or otherwise relating to the
properties owned by AP XII, AP XII, the merger
and/or
otherwise received by it in connection with the opinion,
including information obtained from Aimco OP management, and did
not independently verify such information;
2. Assumed that any estimates, evaluations, forecasts or
projections furnished to Duff & Phelps by management
of Aimco OP were reasonably prepared and based upon the best
currently available information and good faith judgment of the
person furnishing the same;
3. Assumed that the final versions of all documents
reviewed by Duff & Phelps in draft form conform in all
material respects to the drafts reviewed;
4. Assumed that there has been no material change in the
assets, financial condition, business, or prospects of AP XII or
any of its owned properties since the respective dates of the
appraisal reports, the most recent financial statements and the
other information made available to Duff & Phelps;
5. Assumed that title to the properties owned by AP XII is
good and marketable, that all material licenses and related
regulatory approvals that are required or advisable to be
obtained with respect to the properties owned by AP XII have
been obtained and are current, and that, except as expressly
disclosed in the appraisal reports, the properties owned by AP
XII are in compliance with applicable material zoning, use,
occupancy, environmental, and similar laws and regulations;
6. Assumed responsible ownership and competent property
management of each of the properties owned by AP XII, that,
except as expressly disclosed in the appraisal reports, there
are no unapparent conditions with respect to any of the
properties owned by AP XII that could affect the value of such
property, and that, except as
15
expressly disclosed in the appraisal reports, there are no
hazardous substances on or near any of the properties owned by
AP XII that could affect the value of such property;
7. Assumed that all of the conditions required to implement
the merger will be satisfied and that the merger will be
completed in accordance with the merger agreement without any
amendments thereto or any waivers of any terms or conditions
thereof; and
8. Assumed that each of the unaffiliated limited partners
elects to receive the cash consideration offered, and therefore,
Duff & Phelps made no determination as to the fair
value of, or fairness with respect to the OP Unit
consideration.
Duff & Phelps did not evaluate AP XIIs solvency
or conduct an independent appraisal or physical inspection of
any specific liabilities (contingent or otherwise).
Duff & Phelps did not evaluate the tax consequences
the merger may have on any person, including any unaffiliated
limited partner, and did not take any such consequences into
account in rendering the opinion. Duff & Phelps was
not requested to, and did not, (i) initiate any discussions
with, or solicit any indications of interest from, third parties
with respect to the merger, the assets, businesses or operations
of AP XII, or any alternatives to the merger,
(ii) negotiate the terms of the merger, or
(iii) advise Aimco OP or any other party with respect to
alternatives to the merger.
Duff & Phelps did not express any opinion as to the
market price or value of AP XIIs or Aimco OPs equity
(or anything else) after the announcement or the consummation of
the merger. Without limiting the generality of the foregoing,
Duff & Phelps did not express any opinion as to the
liquidity of, rights
and/or risks
associated with owning, or any other feature or characteristic
of, the OP Units. The opinion should not be construed as a
valuation opinion, credit rating, solvency opinion, an analysis
of AP XIIs or Aimco OPs credit worthiness, as tax
advice, or as accounting advice. Duff & Phelps did not
make, and assumed no responsibility to make, any representation,
or render any opinion, as to any legal matter (including with
respect to title to or any encumbrances relating to any of the
properties owned by AP XII.
Duff & Phelps did not investigate any of the physical
conditions of any of the properties owned by AP XII and has not
made, and assumed no responsibility to make, any representation,
or render any opinion, as to the physical condition of any of
the properties owned by AP XII. No independent surveys of the
properties owned by AP XII were conducted by Duff &
Phelps. Duff & Phelps did not arrange for any
engineering studies that may be required to discover any
unapparent condition in the properties owned by AP XII.
Duff & Phelps did not arrange for or conduct any soil
analysis or geological studies or any investigation of any
water, oil, gas, coal, or other subsurface mineral and use
rights or conditions or arrange for or conduct any other
environmental analysis, including with respect to any hazardous
materials, which may or may not be present on, in or near any of
the properties owned by AP XII.
In rendering its opinion, Duff & Phelps did not
express any opinion with respect to the amount or nature of any
compensation to any of Aimco OPs
and/or
Aimcos respective officers, directors, or employees, or
any class of such persons, relative to the consideration offered
to the unaffiliated limited partners in the merger, or with
respect to the fairness of any such compensation.
The opinion (i) does not address the merits of the
underlying business decision to enter into the merger versus any
alternative strategy or transaction, (ii) does not address
any transaction related to the merger, (iii) is not a
recommendation as to how any party should vote or act with
respect to any matters relating to the merger or any related
transaction, or whether to proceed with the merger or any
related transaction, and (iv) does not indicate that the
consideration offered is the best possibly attainable under any
circumstances; instead, the opinion merely states whether the
consideration offered in the merger is within a range suggested
by certain financial analyses. The decision as to whether to
proceed with the merger or any related transaction may depend on
an assessment of factors unrelated to the financial analysis on
which the opinion was based.
Duff & Phelps prepared its opinion effective as of
November 15, 2011. The opinion was necessarily based upon
market, economic, financial and other conditions as they existed
and could be evaluated as of such date, and Duff &
Phelps disclaims any undertaking or obligation to advise any
person of any change in any fact or matter affecting the opinion
which may come or be brought to the attention of
Duff & Phelps after such date.
16
The following is a summary of the material financial analyses
performed by Duff & Phelps in connection with
providing its opinion. The summary of Duff &
Phelpss valuation analyses is not a complete description
of the analyses underlying Duff & Phelpss
opinion. The preparation of an opinion regarding fairness is a
complex process involving various quantitative and qualitative
judgments and determinations with respect to the financial,
comparative and other analytic methods employed and the
adaptation and application of these methods to the unique facts
and circumstances presented. As a consequence, neither an
opinion regarding fairness nor its underlying analyses is
readily susceptible to partial analysis or summary description.
Duff & Phelps arrived at its opinion based on the
results of all analyses undertaken by it and assessed as a whole
and did not draw, in isolation, conclusions from or with regard
to any individual analysis, analytic method or factor.
Accordingly, Duff & Phelps believes that its analyses
must be considered as a whole and that selecting portions of its
analyses, analytic methods and factors, without considering all
analyses and factors or the narrative description of the
analyses could create a misleading or incomplete view of the
processes underlying its analyses and opinion.
Valuation
Analysis
Duff & Phelps estimated the value attributable to the
interests of the unaffiliated limited partners as follows:
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Duff & Phelps reviewed the valuation conclusions for
each of the properties owned by AP XII reached in the third
party appraisals that were provided by the management of Aimco
OP and as described in greater detail under the heading
Special Factors The Appraisals and
Annex E Summary of Appraisals Table;
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Duff & Phelps review of the third party
appraisals included a review of the key assumptions used in and
the conclusions reached by the appraisals and a comparison of
such assumptions and conclusions to appropriate sources of real
estate market data including, but not limited to: market
surveys, selected comparable real estate transaction data, and
discussions with opinions of professionals in the market place.
Duff & Phelps also reviewed the valuation methodology
employed by the third party appraisers and determined it to be
appropriate;
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Duff & Phelps estimated the range of value
attributable to the interests of the unaffiliated limited
partners by adding to the range of the aggregate appraised value
of the properties owned by AP XII the amount of AP XIIs
other non-real estate assets that were not included in the
appraisals, and subtracting the amount of AP XIIs
liabilities, including the market value of mortgage debt (but
without deducting any prepayment penalties thereon) and the
amount of liabilities estimated by management of Aimco OP for
expenses attributable to the properties owned by AP XII that
would be incurred prior to the transactions but payable after
the transactions; and
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Duff & Phelps reviewed Aimco OP managements
estimate of the fair value of the mortgage debt associated with
the properties owned by AP XII, as described in greater detail
under the heading The Merger Determination of
Merger Consideration, by reviewing the valuation
methodology and the determination of the appropriate current
market yield on mortgage debt of similar type, leverage and
duration.
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Estimated
Value of Limited Partnership Units
The table below provides a summary of (i) the estimated
range of value for the properties owned by AP XII by applying a
capitalization rate range that was 25 basis points above
and below the capitalization rate used by the third party
appraisers to the appropriate measure of income from the
properties owned by AP XII used by the third party appraisers,
(ii) a summary of the estimated fair market value of
mortgage debt associated with the properties owned
17
by AP XII, and (iii) the proposed merger consideration
(which was determined by the Aimco Entities) and
Duff & Phelps range of value for the AP XII
Units.
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Low Value
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Proposed Value
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High Value
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% of Total
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Property Value
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Twin Lake Towers Apartments
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$
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45,400,000
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$
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47,200,000
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$
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49,200,000
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Hunters Glen Apartments
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88,100,000
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92,000,000
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95,800,000
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Total
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$
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133,500,000
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$
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139,200,000
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$
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145,000,000
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Debt Summary
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Book Value of Debt(1)
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$
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93,393,575
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$
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93,393,575
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$
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93,393,575
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Fair Value of Debt(1)
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100,373,734
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100,373,734
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100,373,734
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Fair Value as a % of Book
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107%
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107%
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107%
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LP Interest Summary
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Proceeds Distributable to LPs
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$
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16,905,208
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$
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21,604,858
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$
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26,386,958
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Affiliated LP Units
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33,750
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33,750
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33,750
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75
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%
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Unaffiliated LP Units
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10,968
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10,968
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10,968
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25
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%
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Total LP Units
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44,718
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44,718
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44,718
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Value Per LP Unit
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$
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378.04
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$
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483.14
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$
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590.07
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(1) |
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Includes accrued interest. |
Based on an aggregate range of value for the properties owned by
AP XII of $133.5 million to $145.0 million,
Duff & Phelps estimated the range of value per AP XII
Unit to be approximately $378.04 to $590.07, compared to the
cash merger consideration of $483.14 per AP XII Unit.
Other
Matters
By letter agreement dated June 10, 2011 between
Duff & Phelps and Aimco OP, Duff & Phelps
was engaged to opine, as to the fairness, from a financial point
of view, to the unaffiliated limited partners of each of certain
limited partnerships (including AP XII) of the cash
consideration offered in the proposed merger relating to that
limited partnership. Duff & Phelps was engaged based
on its experience as a leading global independent provider of
financial advisory and investment banking services.
Duff & Phelps delivers advice principally in the areas
of valuation, transactions, financial restructuring, dispute and
taxation. Since 2005, Duff & Phelps has completed
hundreds of valuations in the real estate investment trust and
real estate operating company industry and rendered over 308
fairness opinions in transactions aggregating over
$103 billion. Duff & Phelps has also rendered
over 222 solvency opinions in transactions aggregating over
$1.02 trillion.
Duff & Phelps has received a fee in the aggregate
amount of $450,000 for its services with respect to all of the
partnerships pursuant to this engagement (which includes a
retainer in the amount of $200,000 allocated among eleven
partnerships, including AP XII and a partnership that ultimately
did not pursue a merger transaction, and $50,000 for a bringdown
of the initial fairness opinions dated July 28, 2011) as
well as reimbursement for its expenses in the amount of
approximately $50,000. No portion of Duff &
Phelps fee is contingent upon either the conclusion
expressed in this (or any other) opinion or whether or not this
(or any other) merger is successfully consummated. Aimco OP also
has agreed to indemnify Duff & Phelps for certain
liabilities that may arise out of the rendering of this opinion
and any related to Duff & Phelps engagement.
During the two years preceding the date of this opinion,
Duff & Phelps has been paid approximately $199,400 for
property tax consulting services by Aimco OP and its affiliates
for which Duff & Phelps received customary fees and
indemnification. Except as set forth above, during the two years
preceding the date of this opinion, Duff & Phelps had not
had any material relationship with any party to the merger for
which compensation has been received or is intended to be
received, nor is any such material relationship or related
compensation mutually understood to be contemplated.
Estimated
Operating Budgets for the Properties
At the end of each calendar year, Aimco OPs management
prepares an estimated operating budget for the next calendar
year for each of the properties owned by AP XII. Aimco OPs
management provided the 2011 estimated operating budgets for
these properties to Duff & Phelps for use in
connection with the preparation of its fairness opinion, and to
CRA and KTR in connection with the preparation of their
appraisals.
18
In preparing the 2011 estimated operating budgets, Aimco
OPs management made a number of assumptions and estimates,
including the following:
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income was projected to grow in accordance with estimated rent
growth projections provided by Property & Portfolio
Research, Inc., Reis, Inc., and Axiometrics Inc. by market;
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expense growth was assumed to be 2.4% for budget year 2011;
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vacancy rates were budgeted to remain at or above 96%; and
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turnover was budgeted in accordance with historic experience at
each property.
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Aimco OPs management believed these assumptions and
estimates were reasonable at the time the budgets were prepared,
but these assumptions and estimates may not be realized and are
inherently subject to significant uncertainties and
contingencies, including, among others, the risks and
uncertainties described under Managements Discussion
and Analysis of Financial Condition and Results of
Operations in AP XIIs Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2011, which is included
as Annex G to this information statement/prospectus.
All of these uncertainties and contingencies are difficult to
predict and many are beyond the control of Aimco, Aimco OP and
AP XII.
The 2011 estimated operating budgets have been prepared by, and
are the responsibility of, Aimco OPs management. The 2011
estimated operating budgets were prepared solely for internal
use and not with a view toward public disclosure and,
accordingly, do not comply with generally accepted accounting
principles, the published guidelines of the SEC regarding
projections, or the guidelines established by the American
Institute of Certified Public Accountants for preparation and
presentation of prospective financial information. Neither
Aimcos independent registered public accounting firm, nor
any other independent accountants, have compiled, examined or
performed any procedures with respect to the 2011 estimated
operating budgets, nor have they expressed any opinion or any
other form of assurance on such information or its
achievability, and they assume no responsibility for, and
disclaim any association with, the 2011 estimated operating
budgets. Furthermore, the 2011 estimated operating budgets do
not take into account any circumstances or events occurring
after the date they were prepared.
The inclusion of the 2011 estimated operating budgets in this
information statement/prospectus should not be regarded as an
indication that any of Aimco, Aimco OP or their respective
affiliates, advisors or representatives consider the 2011
estimated operating budgets to be predictive of actual future
results, and they should not be relied upon as such. There can
be no assurance that the underlying assumptions will prove to be
accurate or that the estimated results will be realized, and
actual results likely will differ, and may differ materially,
from those reflected in the 2011 estimated operating budgets.
None of Aimco, Aimco OP or their respective affiliates,
advisors, officers, directors or representatives undertakes any
obligation to update or otherwise revise the 2011 estimated
operating budgets to reflect circumstances existing after the
date they were prepared, or to reflect the occurrence of future
events, even if any or all of the assumptions underlying the
2011 estimated operating budgets are no longer appropriate,
except as required by law.
In light of the foregoing factors and the uncertainties
inherent in the 2011 estimated operating budgets, holders of AP
XII Units are cautioned not to place undue, if any, reliance on
them.
The following table summarizes the 2011 estimated operating
budgets for each of the properties owned by AP XII:
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Hunters Glen
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Hunters Glen
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Hunters Glen
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Twin Lake
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Apartments IV
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Apartments V
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Apartments VI
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Towers Apartments
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Effective Gross Income
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$
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3,261,544
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$
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3,742,008
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$
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3,945,771
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$
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5,106,699
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Total Expenses
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1,645,176
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1,566,514
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1,656,240
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2,201,830
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Net Operating Income
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$
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1,616,368
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$
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2,175,494
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$
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2,289,531
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$
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2,904,869
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Limited Partners are urged to review AP XIIs Quarterly
Report on
Form 10-Q
for the quarter ended September 30, 2011, which is included
as Annex G to this information statement/prospectus,
for information regarding AP XIIs results of operations
during the nine months ended September 30, 2011, including
Managements Discussion and Analysis of Financial
Condition and Results of Operations.
19
RISK
FACTORS
Risks
Related to the Merger
Conflicts of Interest. The Managing General
Partner is wholly-owned by AIMCO/IPT, Inc., which in turn is
wholly-owned by Aimco. Therefore, the Managing General Partner
has a conflict of interest with respect to the merger. The
Managing General Partner has fiduciary duties to AIMCO/IPT,
Inc., the Managing General Partners sole stockholder and
an affiliate of Aimco, on the one hand, and to AP XII and its
limited partners, on the other hand. The duties of the Managing
General Partner to AP XII and its limited partners conflict with
the duties of the Managing General Partner to AIMCO/IPT, Inc.,
which could result in the Managing General Partner approving a
transaction that is more favorable to Aimco than might be the
case absent such conflict of interest. The Managing General
Partner, in its capacity as the managing general partner of AP
XII, seeks the best possible terms for AP XIIs limited
partners. This conflicts with Aimcos interest in obtaining
the best possible terms for Aimco OP.
No independent representative was engaged to represent the
unaffiliated limited partners in negotiating the terms of the
merger. If an independent advisor had been
engaged, it is possible that such advisor could have negotiated
better terms for AP XIIs unaffiliated limited partners.
The terms of the merger have not been determined in
arms-length negotiations. The terms of the
merger, including the merger consideration, were determined
through discussions between officers and directors of the
Managing General Partner, on the one hand, and officers of
Aimco, on the other. All of the officers and directors of the
Managing General Partner are also officers of Aimco. There are
no independent directors of the Managing General Partner. If the
terms of the merger had been determined through
arms-length negotiations, the terms might be more
favorable to AP XII and its limited partners.
The merger agreement does not require approval of the merger
by a majority of the unaffiliated limited
partners. Under the provisions of the AP XII
partnership agreement and applicable Delaware law, the merger
must be approved by a majority in interest of AP XII Units. As
of November 18, 2011, there were issued and outstanding
44,718 AP XII Units, and Aimco OP and its affiliates owned
33,750 of those units, or approximately 75.47% of the units
outstanding, enabling them to approve the merger without the
consent or approval of any unaffiliated limited partners.
In connection with previous partnership merger transactions,
lawsuits have been filed alleging that Aimco and certain of its
affiliates breached their fiduciary duties to the unaffiliated
limited partners. In February 2011, Aimco and
Aimco OP completed six partnership mergers. In each merger, the
limited partners who were not affiliated with Aimco received
cash or OP Units with a value calculated based on the
estimated proceeds that would be available for distribution to
limited partners if the partnerships properties were sold
at prices equal to their appraised values. In March 2011,
counsel representing a putative class consisting of former
limited partners in each of those partnerships contacted Aimco
alleging that the merger transactions were unfair to the
unaffiliated limited partners because the appraisals used were
not of a recent date and no fairness opinions were obtained,
among other reasons. Aimco denied the purported class
allegations, but agreed to mediate plaintiffs claims in
June 2011, and agreed to settle this dispute by paying the
unaffiliated limited partners additional consideration of $7.5
million. The merger contemplated hereby may also be subject to
claims that the merger consideration is unfair and a result of
self-dealing.
The merger consideration was determined based on the
appraised values of the properties as of the date of the
respective appraisals, and there can be no assurance that the
value of the properties will not increase as of the date of the
consummation of the merger. CRA and KTR appraised the Twin
Lake Towers Property and the Hunters Glen Property,
respectively, as of October 1, 2011. The Managing General
Partner calculated the amount of the merger consideration based
on the appraised values of the properties as of such date. The
Managing General Partner has not made any other attempt to
assess or account for any changes in the value of the properties
since the date of the appraisals in its determination of the
merger consideration.
Alternative valuations of AP XIIs properties might
exceed the appraised values relied on to determine the merger
consideration. Aimco determined the merger
consideration in reliance on the appraised values of AP
XIIs properties. See, Special Factors
The Appraisals, beginning on page 8, for more
information about the
20
appraisals. Although independent appraisers were engaged to
perform complete appraisals of the properties, valuation is not
an exact science. There are a number of other methods available
to value real estate, each of which may result in different
valuations of a property. Also, others using the same valuation
methodology could make different assumptions and judgments, and
obtain different results. A January 2011 lender appraisal for
the Hunters Glen Property indicated a market value of
$102,000,000 as of November 19, 2010, which is higher than
the value relied on to determine the merger consideration.
However, this lender appraisal is more than ten months old and
does not account for certain changes in the operating metrics of
the Hunters Glen Property related to operational challenges in
the second half of 2010.
Actual sales prices of AP XIIs properties could exceed
the appraised values that Aimco relied on to determine the
merger consideration. No recent attempt has been
made to market the Twin Lake Towers Property to unaffiliated
third parties. There can be no assurance that the Twin Lake
Towers Property could not be sold for a value higher than the
appraised value used to determine the merger consideration if it
was marketed to third-party buyers interested in properties of
this type. In March 2009, the Managing General Partner
considered a sale of the Hunters Glen Property, but determined
that it would most likely not be able to find any buyers at
acceptable prices.
The merger consideration may not represent the price limited
partners could obtain for their AP XII Units in an open
market. There is no established or regular
trading market for AP XII Units, nor is there another reliable
standard for determining the fair market value of the AP XII
Units. The merger consideration does not necessarily reflect the
price that AP XII limited partners would receive in an open
market for their AP XII Units. Such prices could be higher than
the aggregate value of the merger consideration.
Limited partners may recognize taxable gain in the merger
that could exceed the merger
consideration. Limited partners who elect to
receive cash in the merger will recognize gain or loss equal to
the difference between their amount realized and
their adjusted tax basis in the AP XII Units sold. The resulting
tax liability could exceed the value of the cash received in the
merger.
Limited partners in certain jurisdictions will not be able to
elect OP Units. In those states where the
offering of the OP Units hereby is not permitted, residents
of those states will receive only the cash consideration in the
merger.
Risks
Related to an Investment in Aimco or Aimco OP
For a description of risks related to an investment in Aimco and
Aimco OP, please see the information set forth under
Part I Item 1A. Risk Factors
in the Annual Reports on
Form 10-K
for the year ended December 31, 2010 of each of Aimco and
Aimco OP. Aimcos Annual Report is incorporated herein by
reference and is available electronically through the SECs
website, www.sec.gov, or by request to Aimco. Aimco OPs
Annual Report on
Form 10-K
for the year ended December 31, 2010 (excluding the report
of the independent registered public accounting firm, the
financial statements and the notes thereto), is included as
Annex H to this information statement/prospectus.
Risks
Related to an Investment in OP Units
There are restrictions on the ability to transfer
OP Units, and there is no public market for Aimco
OP Units. The Aimco OP partnership agreement
restricts the transferability of OP Units. Until the
expiration of a one-year holding period, subject to certain
exceptions, investors may not transfer OP Units without the
consent of Aimco OPs general partner. Thereafter,
investors may transfer such OP Units subject to the
satisfaction of certain conditions, including the general
partners right of first refusal. There is no public market
for the OP Units. Aimco OP has no plans to list any
OP Units on a securities exchange. It is unlikely that any
person will make a market in the OP Units, or that an
active market for the OP Units will develop. If a market
for the OP Units develops and the OP Units are
considered readily tradable on a secondary
market (or the substantial equivalent thereof), Aimco OP
would be classified as a publicly traded partnership for
U.S. federal income tax purposes, which could have a
material adverse effect on Aimco OP.
Cash distributions by Aimco OP are not guaranteed and may
fluctuate with partnership performance. Aimco OP
makes quarterly distributions to holders of OP Units (on a
per unit basis) that generally are equal to dividends paid on
the Aimco common stock (on a per share basis). However, such
distributions will not necessarily continue to be equal to such
21
dividends. Although Aimco OP makes quarterly distributions on
its OP Units, there can be no assurance regarding the
amounts of available cash that Aimco OP will generate or the
portion that its general partner will choose to distribute. The
actual amounts of available cash will depend upon numerous
factors, including profitability of operations, required
principal and interest payments on our debt, the cost of
acquisitions (including related debt service payments), its
issuance of debt and equity securities, fluctuations in working
capital, capital expenditures, adjustments in reserves,
prevailing economic conditions and financial, business and other
factors, some of which may be beyond Aimco OPs control.
Cash distributions depend primarily on cash flow, including from
reserves, and not on profitability, which is affected by
non-cash items. Therefore, cash distributions may be made during
periods when Aimco OP records losses and may not be made during
periods when it records profits. The Aimco OP partnership
agreement gives the general partner discretion in establishing
reserves for the proper conduct of the partnerships
business that will affect the amount of available cash. Aimco is
required to make reserves for the future payment of principal
and interest under its credit facilities and other indebtedness.
In addition, Aimco OPs credit facility limits its ability
to distribute cash to holders of OP Units. As a result of
these and other factors, there can be no assurance regarding
actual levels of cash distributions on OP Units, and Aimco
OPs ability to distribute cash may be limited during the
existence of any events of default under any of its debt
instruments.
Holders of OP Units are limited in their ability to
effect a change of control. The limited partners
of Aimco OP are unable to remove the general partner of Aimco OP
or to vote in the election of Aimcos directors unless they
own shares of Aimco. In order to comply with specific REIT tax
requirements, Aimcos charter has restrictions on the
ownership of its equity securities. As a result, Aimco OP
limited partners and Aimco stockholders are limited in their
ability to effect a change of control of Aimco OP and Aimco,
respectively.
Holders of OP Units have limited voting
rights. Aimco OP is managed and operated by its
general partner. Unlike the holders of common stock in a
corporation, holders of OP Units have only limited voting
rights on matters affecting Aimco OPs business. Such
matters relate to certain amendments of the partnership
agreement and certain transactions such as the institution of
bankruptcy proceedings, an assignment for the benefit of
creditors and certain transfers by the general partner of its
interest in Aimco OP or the admission of a successor general
partner. Holders of OP Units have no right to elect the
general partner on an annual or other continuing basis, or to
remove the general partner. As a result, holders of
OP Units have limited influence on matters affecting the
operation of Aimco OP, and third parties may find it difficult
to attempt to gain control over, or influence the activities of,
Aimco OP.
Holders of OP Units are subject to
dilution. Aimco OP may issue an unlimited number
of additional OP Units or other securities for such
consideration and on such terms as it may establish, without the
approval of the holders of OP Units. Such securities could
have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such
issuance may be to dilute the interests of holders of
OP Units.
Holders of OP Units may not have limited liability in
specific circumstances. The limitations on the
liability of limited partners for the obligations of a limited
partnership have not been clearly established in some states. If
it were determined that Aimco OP had been conducting business in
any state without compliance with the applicable limited
partnership statute, or that the right or the exercise of the
right by the OP Unitholders as a group to make specific
amendments to the agreement of limited partnership or to take
other action under the agreement of limited partnership
constituted participation in the control of Aimco
OPs business, then a holder of OP Units could be held
liable under specific circumstances for Aimco OPs
obligations to the same extent as the general partner.
Aimco may have conflicts of interest with holders of
OP Units. Conflicts of interest have arisen
and could arise in the future as a result of the relationships
between the general partner of Aimco OP and its affiliates
(including Aimco), on the one hand, and Aimco OP or any partner
thereof, on the other. The directors and officers of the general
partner have fiduciary duties to manage the general partner in a
manner beneficial to Aimco, as the sole stockholder of the
general partner. At the same time, as the general partner of
Aimco OP, it has fiduciary duties to manage Aimco OP in a manner
beneficial to Aimco OP and its limited partners. The duties of
the general partner of Aimco OP to Aimco OP and its partners may
therefore come into conflict with the duties of the directors
and
22
officers of the general partner to its sole stockholder, Aimco.
Such conflicts of interest might arise in the following
situations, among others:
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Decisions of the general partner with respect to the amount and
timing of cash expenditures, borrowings, issuances of additional
interests and reserves in any quarter will affect whether or the
extent to which there is available cash to make distributions in
a given quarter.
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Under the terms of the Aimco OP partnership agreement, Aimco OP
will reimburse the general partner and its affiliates for costs
incurred in managing and operating Aimco OP, including
compensation of officers and employees.
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Whenever possible, the general partner seeks to limit Aimco
OPs liability under contractual arrangements to all or
particular assets of Aimco OP, with the other party thereto
having no recourse against the general partner or its assets.
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Any agreements between Aimco OP and the general partner and its
affiliates will not grant to the OP Unitholders, separate
and apart from Aimco OP, the right to enforce the obligations of
the general partner and such affiliates in favor of Aimco OP.
Therefore, the general partner, in its capacity as the general
partner of Aimco OP, will be primarily responsible for enforcing
such obligations.
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Under the terms of the Aimco OP partnership agreement, the
general partner is not restricted from causing Aimco OP to pay
the general partner or its affiliates for any services rendered
on terms that are fair and reasonable to Aimco OP or entering
into additional contractual arrangements with any of such
entities on behalf of Aimco OP. Neither the Aimco OP partnership
agreement nor any of the other agreements, contracts and
arrangements between Aimco OP, on the one hand, and the general
partner of Aimco OP and its affiliates, on the other, are or
will be the result of arms-length negotiations.
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Provisions in the Aimco OP partnership agreement may limit
the ability of a holder of OP Units to challenge actions
taken by the general partner. Delaware law
provides that, except as provided in a partnership agreement, a
general partner owes the fiduciary duties of loyalty and care to
the partnership and its limited partners. The Aimco OP
partnership agreement expressly authorizes the general partner
to enter into, on behalf of Aimco OP, a right of first
opportunity arrangement and other conflict avoidance agreements
with various affiliates of Aimco OP and the general partner, on
such terms as the general partner, in its sole and absolute
discretion, believes are advisable. The latitude given in the
Aimco OP partnership agreement to the general partner in
resolving conflicts of interest may significantly limit the
ability of a holder of OP Units to challenge what might
otherwise be a breach of fiduciary duty. The general partner
believes, however, that such latitude is necessary and
appropriate to enable it to serve as the general partner of
Aimco OP without undue risk of liability.
The Aimco OP partnership agreement limits the liability of the
general partner for actions taken in good faith. Aimco OPs
partnership agreement expressly limits the liability of the
general partner by providing that the general partner, and its
officers and directors, will not be liable or accountable in
damages to Aimco OP, the limited partners or assignees for
errors in judgment or mistakes of fact or law or of any act or
omission if the general partner or such director or officer
acted in good faith. In addition, Aimco OP is required to
indemnify the general partner, its affiliates and their
respective officers, directors, employees and agents to the
fullest extent permitted by applicable law, against any and all
losses, claims, damages, liabilities, joint or several,
expenses, judgments, fines and other actions incurred by the
general partner or such other persons, provided that Aimco OP
will not indemnify for (i) willful misconduct or a knowing
violation of the law or (ii) for any transaction for which
such person received an improper personal benefit in violation
or breach of any provision of the partnership agreement. The
provisions of Delaware law that allow the common law fiduciary
duties of a general partner to be modified by a partnership
agreement have not been resolved in a court of law, and the
general partner has not obtained an opinion of counsel covering
the provisions set forth in the Aimco OP partnership agreement
that purport to waive or restrict the fiduciary duties of the
general partner that would be in effect under common law were it
not for the partnership agreement.
Certain
United States Tax Risks Associated with an Investment in the OP
Units
The following are among the U.S. federal income tax
considerations to be taken into account in connection with an
investment in OP Units. For a general discussion of
material U.S. federal income tax consequences resulting
23
from acquiring, holding, exchanging, and otherwise disposing of
OP Units, see Material United States Federal Income
Tax Considerations Taxation of Aimco OP and
OP Unitholders.
Aimco OP may be treated as a publicly traded
partnership taxable as a corporation. If
Aimco OP were treated as a publicly traded
partnership taxed as a corporation for U.S. federal
income tax purposes, material adverse consequences to the
partners would result. Moreover, in such case, a holder of
AP XII Units receiving OP Units in the merger would be
required to recognize gain or loss on the transaction. In
addition, Aimco would not qualify as a REIT for
U.S. federal income tax purposes, which would have a
material adverse impact on Aimco and its shareholders. Aimco
believes and intends to take the position that Aimco OP should
not be treated as a publicly traded partnership
taxable as a corporation. No assurances can be given that the
Internal Revenue Service, or the IRS, would not assert, or that
a court would not sustain a contrary position. Accordingly, each
prospective investor is urged to consult his tax advisor
regarding the classification and treatment of Aimco OP as a
partnership for U.S. federal income tax
purposes.
The limited partners may recognize gain on the
transaction. If a limited partner of AP XII
receives or is deemed to receive cash or consideration other
than OP Units in connection with the merger, the receipt of
such cash or other consideration may be taxable to the limited
partner. Subject to certain exceptions, including exceptions
applicable to periodic distributions of operating cash flow, any
transfer or deemed transfer of cash by Aimco OP to the limited
partner (or its owners) within two years before or after the
merger, including cash paid at closing, will generally be
treated as part of a disguised sale. The application of the
disguised sale rules is complex and depends, in part, upon the
facts and circumstances applicable to the limited partner, which
Aimco has not undertaken to review. Accordingly, limited
partners are particularly urged to consult with their tax
advisors concerning the extent to which the disguised sale rules
would apply.
A contribution of appreciated or depreciated property may
result in special allocations to the contributing
partner. If property is contributed to Aimco OP
and the adjusted tax basis of the property differs from its fair
market value, then Aimco OP tax items must be specially
allocated for U.S. federal income tax purposes, in a manner
chosen by Aimco OP, such that the contributing partner is
charged with and recognizes the unrealized gain, or benefits
from the unrealized loss, associated with the property at the
time of the contribution. As a result of such special
allocations, the amount of net taxable income allocated to a
contributing partner may exceed the amount of cash
distributions, if any, to which such contributing partner is
entitled.
The Aimco OP general partner could take actions that would
impose tax liability on a contributing
partner. There are a variety of transactions that
Aimco OP may in its sole discretion undertake following a
property contribution that could cause the transferor (or its
partners) to incur a tax liability without a corresponding
receipt of cash. Such transactions include, but are not limited
to, the sale or distribution of a particular property and a
reduction in nonrecourse debt, or the making of certain tax
elections by Aimco OP. In addition, future economic, market,
legal, tax or other considerations may cause Aimco OP to dispose
of the contributed property or to reduce its debt. As permitted
by the Aimco OP partnership agreement, the general partner
intends to make decisions in its capacity as general partner of
Aimco OP so as to maximize the profitability of Aimco OP as a
whole, independent of the tax effects on individual holders of
OP Units.
An investors tax liability from OP Units could
exceed the cash distributions received on such
OP Units. A holder of OP Units will be
required to pay U.S. federal income tax on such
holders allocable share of Aimco OPs income, even if
such holder receives no cash distributions from Aimco OP. No
assurance can be given that a holder of OP Units will
receive cash distributions equal to such holders allocable
share of taxable income from Aimco OP or equal to the tax
liability to such holder resulting from that income. Further,
upon the sale, exchange or redemption of any OP Units, a
reduction in nonrecourse debt, or upon the special allocation at
the liquidation of Aimco OP, an investor may incur a tax
liability in excess of the amount of cash received.
OP Unitholders may be subject to state, local or foreign
taxation. OP Unitholders may be subject to
state, local or foreign taxation in various jurisdictions,
including those in which Aimco OP transacts business and owns
property. It should be noted that Aimco OP owns properties
located in a number of states and local jurisdictions, and an
OP Unitholder may be required to file income tax returns in
some or all of those jurisdictions. The state, local or foreign
tax treatment of OP Unitholders may not conform to the
U.S. federal income tax consequences of an investment in
OP Units, as described in Material United States
Federal Income Tax Considerations beginning on
page 69.
24
SELECTED
SUMMARY HISTORICAL FINANCIAL DATA OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
The following table sets forth Aimcos selected summary
historical financial data as of the dates and for the periods
indicated. Aimcos historical consolidated statements of
operations data set forth below for each of the five fiscal
years in the period ended December 31, 2010 and the
historical consolidated balance sheet data for each of the five
fiscal year-ends in the period ended December 31, 2010, are
derived from information included in Aimcos Current Report
on
Form 8-K,
filed with the SEC on November 15, 2011. Aimcos
unaudited historical consolidated statements of operations data
set forth below for each of the nine months ended
September 30, 2011 and 2010, and the unaudited historical
consolidated balance sheet data as of September 30, 2011,
are derived from information included in Aimcos Quarterly
Report on
Form 10-Q
for the quarter ended September 30, 2011, filed with the
SEC on October 28, 2011.
You should read this information together with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and with the
consolidated financial statements and notes to the consolidated
financial statements included in Aimcos Current Report on
Form 8-K,
filed with the SEC on November 15, 2011, and Aimcos
Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2011, filed with the
SEC on October 28, 2011, which are incorporated by
reference in this information statement/prospectus. See
Where You Can Find Additional Information in this
information statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months
|
|
|
|
|
|
|
Ended September 30,
|
|
|
For The Years Ended December 31,
|
|
|
|
2011
|
|
|
2010(1)
|
|
|
2010(1)
|
|
|
2009(1)
|
|
|
2008(1)
|
|
|
2007(1)
|
|
|
2006(1)
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollar amounts in thousands, except per share data)
|
|
|
Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
834,521
|
|
|
$
|
812,265
|
|
|
$
|
1,092,606
|
|
|
$
|
1,082,231
|
|
|
$
|
1,128,099
|
|
|
$
|
1,063,962
|
|
|
$
|
978,692
|
|
Total operating expenses(2)
|
|
|
(702,240
|
)
|
|
|
(720,017
|
)
|
|
|
(967,144
|
)
|
|
|
(995,469
|
)
|
|
|
(1,096,498
|
)
|
|
|
(901,629
|
)
|
|
|
(825,485
|
)
|
Operating income(2)
|
|
|
132,281
|
|
|
|
92,248
|
|
|
|
125,462
|
|
|
|
86,762
|
|
|
|
31,601
|
|
|
|
162,333
|
|
|
|
153,207
|
|
Loss from continuing operations(2)
|
|
|
(100,550
|
)
|
|
|
(121,293
|
)
|
|
|
(161,725
|
)
|
|
|
(199,680
|
)
|
|
|
(117,743
|
)
|
|
|
(47,827
|
)
|
|
|
(44,129
|
)
|
Income from discontinued operations, net(3)
|
|
|
50,959
|
|
|
|
65,881
|
|
|
|
72,101
|
|
|
|
154,880
|
|
|
|
744,745
|
|
|
|
173,333
|
|
|
|
331,151
|
|
Net (loss) income
|
|
|
(49,591
|
)
|
|
|
(55,412
|
)
|
|
|
(89,624
|
)
|
|
|
(44,800
|
)
|
|
|
627,002
|
|
|
|
125,506
|
|
|
|
287,022
|
|
Net loss (income) attributable to noncontrolling interests
|
|
|
5,438
|
|
|
|
5,147
|
|
|
|
17,896
|
|
|
|
(19,474
|
)
|
|
|
(214,995
|
)
|
|
|
(95,595
|
)
|
|
|
(110,234
|
)
|
Net (income) attributable to Aimcos preferred stockholders
|
|
|
(35,429
|
)
|
|
|
(36,626
|
)
|
|
|
(53,590
|
)
|
|
|
(50,566
|
)
|
|
|
(53,708
|
)
|
|
|
(66,016
|
)
|
|
|
(81,132
|
)
|
Net (loss) income attributable to Aimcos common
stockholders
|
|
|
(79,751
|
)
|
|
|
(86,891
|
)
|
|
|
(125,318
|
)
|
|
|
(114,840
|
)
|
|
|
351,314
|
|
|
|
(40,586
|
)
|
|
|
93,710
|
|
Earnings (loss) per common share basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations attributable to Aimcos
common stockholders
|
|
$
|
(0.92
|
)
|
|
$
|
(1.10
|
)
|
|
$
|
(1.45
|
)
|
|
$
|
(1.77
|
)
|
|
$
|
(2.09
|
)
|
|
$
|
(1.39
|
)
|
|
$
|
(1.49
|
)
|
Net (loss) income attributable to Aimcos common
stockholders
|
|
$
|
(0.67
|
)
|
|
$
|
(0.75
|
)
|
|
$
|
(1.08
|
)
|
|
$
|
(1.00
|
)
|
|
$
|
3.96
|
|
|
$
|
(0.43
|
)
|
|
$
|
0.98
|
|
Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, net of accumulated depreciation
|
|
$
|
6,179,415
|
|
|
|
|
|
|
$
|
6,297,557
|
|
|
$
|
6,474,700
|
|
|
$
|
6,633,790
|
|
|
$
|
6,405,002
|
|
|
$
|
5,946,219
|
|
Total assets
|
|
|
7,042,702
|
|
|
|
|
|
|
|
7,378,566
|
|
|
|
7,906,468
|
|
|
|
9,441,870
|
|
|
|
10,617,681
|
|
|
|
10,292,587
|
|
Total indebtedness
|
|
|
5,259,725
|
|
|
|
|
|
|
|
5,338,630
|
|
|
|
5,316,303
|
|
|
|
5,679,544
|
|
|
|
5,303,531
|
|
|
|
4,647,864
|
|
Total equity
|
|
|
1,201,114
|
|
|
|
|
|
|
|
1,306,772
|
|
|
|
1,534,703
|
|
|
|
1,646,749
|
|
|
|
2,048,546
|
|
|
|
2,650,182
|
|
Other Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share(4)
|
|
$
|
0.36
|
|
|
$
|
0.20
|
|
|
$
|
0.30
|
|
|
$
|
0.40
|
|
|
$
|
7.48
|
|
|
$
|
4.31
|
|
|
$
|
2.40
|
|
Total consolidated properties (end of period)
|
|
|
359
|
|
|
|
419
|
|
|
|
399
|
|
|
|
426
|
|
|
|
514
|
|
|
|
657
|
|
|
|
703
|
|
Total consolidated apartment units (end of period)
|
|
|
83,304
|
|
|
|
93,008
|
|
|
|
89,875
|
|
|
|
95,202
|
|
|
|
117,719
|
|
|
|
153,758
|
|
|
|
162,432
|
|
Total unconsolidated properties (end of period)
|
|
|
47
|
|
|
|
59
|
|
|
|
48
|
|
|
|
77
|
|
|
|
85
|
|
|
|
94
|
|
|
|
102
|
|
Total unconsolidated apartment units (end of period)
|
|
|
5,517
|
|
|
|
6,933
|
|
|
|
5,637
|
|
|
|
8,478
|
|
|
|
9,613
|
|
|
|
10,878
|
|
|
|
11,791
|
|
25
|
|
|
(1) |
|
Certain reclassifications have been made to conform to the
September 30, 2011 financial statement presentation,
including retroactive adjustments to reflect additional
properties sold or classified as held for sale as of
September 30, 2011 as discontinued operations (see
Note 3 to the condensed consolidated financial statements
in Item 1 Financial
Statements in Aimcos Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2011 and Note 13
to the consolidated financial statements in
Item 8 Financial Statements and
Supplementary Data in Aimcos Current Report on
Form 8-K,
filed with the SEC on November 15, 2011, which are
incorporated by reference in this information
statement/prospectus.). |
|
|
|
(2) |
|
Total operating expenses, operating income and loss from
continuing operations for the year ended December 31, 2008,
include a $91.1 million pre-tax provision for impairment
losses on real estate development assets, which is discussed
further in Item 7 Managements
Discussion and Analysis of Financial Condition and Results of
Operations in Aimcos Annual Report on
Form 10-K
for the year ended December 31, 2010, filed with the SEC on
February 25, 2011, which is incorporated by reference in
this information
statement/prospectus. |
|
|
|
(3) |
|
Income from discontinued operations for the years ended
December 31, 2010, 2009, 2008, 2007 and 2006 includes
$94.9 million, $221.8 million, $800.3 million,
$116.1 million and $336.2 million in gains on
disposition of real estate, respectively. Income from
discontinued operations for 2010, 2009 and 2008 is discussed
further in Item 7 Managements
Discussion and Analysis of Financial Condition and Results of
Operations in Aimcos Current Report on
Form 8-K,
filed with the SEC on November 15, 2011, which is
incorporated by reference in this information
statement/prospectus. |
|
|
|
(4) |
|
Dividends declared per common share during the years ended
December 31, 2008 and 2007, included $5.08 and $1.91,
respectively, of per share dividends that were paid through the
issuance of shares of Aimco Class A Common Stock (see
Note 11 to the consolidated financial statements in
Item 8 Financial Statements and
Supplementary Data included in Aimcos Current
Report on
Form 8-K,
filed with the SEC on November 15, 2011, which is
incorporated by reference in this information
statement/prospectus). |
26
SELECTED
SUMMARY HISTORICAL FINANCIAL DATA OF AIMCO PROPERTIES,
L.P.
The following table sets forth Aimco OPs selected summary
historical financial data as of the dates and for the periods
indicated. Aimco OPs historical consolidated statements of
operations data set forth below for each of the five fiscal
years in the period ended December 31, 2010 and the
historical consolidated balance sheet data for each of the five
fiscal year-ends in the period ended December 31, 2010, are
derived from information included in Aimco OPs Current
Report on
Form 8-K,
filed with the SEC on November 15, 2011 and included as
Annex J to this information statement/prospectus.
Aimco OPs unaudited historical consolidated statements of
operations data set forth below for each of the nine months
ended September 30, 2011 and 2010, and the unaudited
historical consolidated balance sheet data as of
September 30, 2011, are derived from information included
in Aimco OPs Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2011 included as
Annex I to this information statement/prospectus.
You should read this information together with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and with the
consolidated financial statements and notes to the consolidated
financial statements included in Aimco OPs Current Report
on
Form 8-K,
filed with the SEC on November 15, 2011, and Aimco
OPs Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2011, filed with the
SEC on October 28, 2011, which are included as
Annex J and Annex I to this information
statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months
|
|
|
|
|
|
|
Ended September 30,
|
|
|
For The Years Ended December 31,
|
|
|
|
2011
|
|
|
2010(1)
|
|
|
2010(1)
|
|
|
2009(1)
|
|
|
2008(1)
|
|
|
2007(1)
|
|
|
2006(1)
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollar amounts in thousands, except per unit data)
|
|
|
Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
834,521
|
|
|
$
|
812,265
|
|
|
$
|
1,092,606
|
|
|
$
|
1,082,231
|
|
|
$
|
1,128,099
|
|
|
$
|
1,063,962
|
|
|
$
|
978,692
|
|
Total operating expenses(2)
|
|
|
(702,240
|
)
|
|
|
(720,017
|
)
|
|
|
(967,144
|
)
|
|
|
(995,469
|
)
|
|
|
(1,096,498
|
)
|
|
|
(901,629
|
)
|
|
|
(825,485
|
)
|
Operating income(2)
|
|
|
132,281
|
|
|
|
92,248
|
|
|
|
125,462
|
|
|
|
86,762
|
|
|
|
31,601
|
|
|
|
162,333
|
|
|
|
153,207
|
|
Loss from continuing operations(2)
|
|
|
(99,290
|
)
|
|
|
(120,651
|
)
|
|
|
(160,866
|
)
|
|
|
(198,860
|
)
|
|
|
(116,957
|
)
|
|
|
(47,078
|
)
|
|
|
(41,169
|
)
|
Income from discontinued operations, net(3)
|
|
|
50,959
|
|
|
|
65,881
|
|
|
|
72,101
|
|
|
|
154,880
|
|
|
|
744,745
|
|
|
|
173,333
|
|
|
|
331,151
|
|
Net (loss) income
|
|
|
(48,331
|
)
|
|
|
(54,770
|
)
|
|
|
(88,765
|
)
|
|
|
(43,980
|
)
|
|
|
627,788
|
|
|
|
126,255
|
|
|
|
289,982
|
|
Net loss (income) attributable to noncontrolling interests
|
|
|
4,612
|
|
|
|
1,795
|
|
|
|
13,301
|
|
|
|
(22,442
|
)
|
|
|
(155,749
|
)
|
|
|
(92,138
|
)
|
|
|
(92,917
|
)
|
Net (income) attributable to Aimco OPs preferred
unitholders
|
|
|
(40,441
|
)
|
|
|
(39,918
|
)
|
|
|
(58,554
|
)
|
|
|
(56,854
|
)
|
|
|
(61,354
|
)
|
|
|
(73,144
|
)
|
|
|
(90,527
|
)
|
Net (loss) income attributable to Aimco OPs common
unitholders
|
|
|
(84,329
|
)
|
|
|
(92,893
|
)
|
|
|
(134,018
|
)
|
|
|
(123,276
|
)
|
|
|
403,700
|
|
|
|
(43,508
|
)
|
|
|
104,592
|
|
Earnings (loss) per common unit basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations attributable to Aimco OPs
common unitholders
|
|
$
|
(0.91
|
)
|
|
$
|
(1.10
|
)
|
|
$
|
(1.44
|
)
|
|
$
|
(1.76
|
)
|
|
$
|
(1.94
|
)
|
|
$
|
(1.38
|
)
|
|
$
|
(1.47
|
)
|
Net (loss) income attributable to Aimco OPs common
unitholders
|
|
$
|
(0.66
|
)
|
|
$
|
(0.75
|
)
|
|
$
|
(1.07
|
)
|
|
$
|
(1.00
|
)
|
|
$
|
4.11
|
|
|
$
|
(0.42
|
)
|
|
$
|
0.99
|
|
Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, net of accumulated depreciation
|
|
$
|
6,179,920
|
|
|
|
|
|
|
$
|
6,298,062
|
|
|
$
|
6,475,205
|
|
|
$
|
6,634,295
|
|
|
$
|
6,405,507
|
|
|
$
|
5,946,724
|
|
Total assets
|
|
|
7,060,492
|
|
|
|
|
|
|
|
7,395,096
|
|
|
|
7,922,139
|
|
|
|
9,456,721
|
|
|
|
10,631,746
|
|
|
|
10,305,903
|
|
Total indebtedness
|
|
|
5,259,725
|
|
|
|
|
|
|
|
5,338,630
|
|
|
|
5,316,303
|
|
|
|
5,679,544
|
|
|
|
5,303,531
|
|
|
|
4,647,864
|
|
Total partners capital
|
|
|
1,218,904
|
|
|
|
|
|
|
|
1,323,302
|
|
|
|
1,550,374
|
|
|
|
1,661,600
|
|
|
|
2,152,326
|
|
|
|
2,753,617
|
|
Other Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions declared per common unit(4)
|
|
$
|
0.36
|
|
|
$
|
0.20
|
|
|
$
|
0.30
|
|
|
$
|
0.40
|
|
|
$
|
7.48
|
|
|
$
|
4.31
|
|
|
$
|
2.40
|
|
Total consolidated properties (end of period)
|
|
|
359
|
|
|
|
419
|
|
|
|
399
|
|
|
|
426
|
|
|
|
514
|
|
|
|
657
|
|
|
|
703
|
|
Total consolidated apartment units (end of period)
|
|
|
83,304
|
|
|
|
93,008
|
|
|
|
89,875
|
|
|
|
95,202
|
|
|
|
117,719
|
|
|
|
153,758
|
|
|
|
162,432
|
|
Total unconsolidated properties (end of period)
|
|
|
47
|
|
|
|
59
|
|
|
|
48
|
|
|
|
77
|
|
|
|
85
|
|
|
|
94
|
|
|
|
102
|
|
Total unconsolidated apartment units (end of period)
|
|
|
5,517
|
|
|
|
6,933
|
|
|
|
5,637
|
|
|
|
8,478
|
|
|
|
9,613
|
|
|
|
10,878
|
|
|
|
11,791
|
|
27
|
|
|
(1) |
|
Certain reclassifications have been made to conform to the
September 30, 2011 financial statement presentation,
including retroactive adjustments to reflect additional
properties sold or classified as held for sale as of
September 30, 2011 as discontinued operations (see
Note 3 to the condensed consolidated financial statements
in Item 1 Financial
Statements in Aimco OPs Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2011 included as
Annex I to this information statement/prospectus,
and Note 13 to the consolidated financial statements in
Item 8 Financial Statements and
Supplementary Data in Aimco OPs Current Report
on
Form 8-K,
filed with the SEC on November 15, 2011 and included as
Annex J to this information statement/prospectus.). |
|
|
|
(2) |
|
Total operating expenses, operating income and loss from
continuing operations for the year ended December 31, 2008,
include a $91.1 million pre-tax provision for impairment
losses on real estate development assets, which is discussed
further in Item 7 Managements
Discussion and Analysis of Financial Condition and Results of
Operations in Aimco OPs Annual Report on
Form 10-K
for the year ended December 31, 2010 included as
Annex H to this information statement/prospectus. |
|
|
|
(3) |
|
Income from discontinued operations for the years ended
December 31, 2010, 2009, 2008, 2007 and 2006 includes
$94.9 million, $221.8 million, $800.3 million,
$116.1 million and $336.2 million in gains on
disposition of real estate, respectively. Income from
discontinued operations for 2010, 2009 and 2008 is discussed
further in Item 7 Managements
Discussion and Analysis of Financial Condition and Results of
Operations in Aimco OPs Current Report on
Form 8-K,
filed with the SEC on November 15, 2011 and included as
Annex J to this information statement/prospectus. |
|
|
|
(4) |
|
Distributions declared per common unit during the years ended
December 31, 2008 and 2007, included $5.08 and $1.91,
respectively, of per unit distributions that were paid to Aimco
through the issuance of OP Units (see Note 11 to the
consolidated financial statements in
Item 8 Financial Statements and
Supplementary Data in Aimco OPs Current Report
on
Form 8-K,
filed with the SEC on November 15, 2011 and included as
Annex J to this information statement/prospectus). |
28
SELECTED
SUMMARY HISTORICAL FINANCIAL DATA OF ANGELES PARTNERS XII,
LP
The following table sets forth AP XIIs selected summary
historical financial data as of the dates and for the periods
indicated. AP XIIs historical consolidated statements of
operations and cash flow data set forth below for each of the
two fiscal years in the period ended December 31, 2010 and
the historical consolidated balance sheet data as of
December 31, 2010 and 2009, are derived from AP XIIs
consolidated financial statements included in AP XIIs
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010. AP XIIs
unaudited historical consolidated statements of operations and
cash flow data set forth below for each of the nine months ended
September 30, 2011 and 2010, and the unaudited historical
consolidated balance sheet data as of September 30, 2011,
are derived from information included in AP XIIs Quarterly
Report on
Form 10-Q
for the quarter ended September 30, 2011.
You should read this information together with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and with the
consolidated financial statements and notes to the consolidated
financial statements for the fiscal year ended December 31,
2010 included in AP XIIs Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010, filed with the
SEC on March 25, 2011, and AP XIIs Quarterly Report
on
Form 10-Q
for the quarter ended September 30, 2011, filed with the
SEC on November 10, 2011, which are included as
Annex F and Annex G to this information
statement/prospectus. See Where You Can Find Additional
Information in this information statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months
|
|
|
For the Years Ended
|
|
|
|
Ended September 30,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in thousands, except per unit data)
|
|
|
Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
11,919
|
|
|
$
|
11,968
|
|
|
$
|
15,938
|
|
|
$
|
16,039
|
|
Net loss
|
|
|
(7,891
|
)
|
|
|
(2,199
|
)
|
|
|
(2,855
|
)
|
|
|
(975
|
)
|
Net loss per limited partnership unit
|
|
|
(174.69
|
)
|
|
|
(48.68
|
)
|
|
|
(63.20
|
)
|
|
|
(21.58
|
)
|
Distributions per limited partnership unit
|
|
|
|
|
|
|
103.98
|
|
|
|
103.98
|
|
|
|
|
|
Deficit of earnings to fixed charges
|
|
|
(7,891
|
)
|
|
|
(2,200
|
)
|
|
|
(2,857
|
)
|
|
|
(1,061
|
)
|
Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
782
|
|
|
$
|
325
|
|
|
$
|
526
|
|
|
$
|
301
|
|
Real estate, net of accumulated depreciation
|
|
|
21,055
|
|
|
|
23,711
|
|
|
|
22,897
|
|
|
|
26,792
|
|
Total assets
|
|
|
24,713
|
|
|
|
26,674
|
|
|
|
26,139
|
|
|
|
29,329
|
|
Mortgage notes payable
|
|
|
92,969
|
|
|
|
95,675
|
|
|
|
95,325
|
|
|
|
78,822
|
|
Due to affiliates
|
|
|
9,162
|
|
|
|
|
|
|
|
15
|
|
|
|
12,184
|
|
General partners deficit
|
|
|
(890
|
)
|
|
|
(804
|
)
|
|
|
(811
|
)
|
|
|
(352
|
)
|
Limited partners deficit
|
|
|
(78,383
|
)
|
|
|
(69,922
|
)
|
|
|
(70,571
|
)
|
|
|
(63,095
|
)
|
Total partners deficit
|
|
|
(79,273
|
)
|
|
|
(70,726
|
)
|
|
|
(71,382
|
)
|
|
|
(63,447
|
)
|
Total distributions
|
|
|
|
|
|
|
5,080
|
|
|
|
5,080
|
|
|
|
|
|
Book value per limited partnership unit
|
|
|
(1,752.83
|
)
|
|
|
(1,563.62
|
)
|
|
|
(1,578.13
|
)
|
|
|
(1,410.95
|
)
|
Other Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
256
|
|
|
$
|
24
|
|
|
$
|
225
|
|
|
$
|
(12
|
)
|
Net cash provided by operating activities
|
|
|
1,918
|
|
|
|
1,992
|
|
|
|
2,917
|
|
|
|
3,988
|
|
29
COMPARATIVE
PER SHARE DATA
Aimco common stock trades on the NYSE under the symbol
AIV. The OP Units are not listed on any
securities exchange and do not trade in an active secondary
market. However, as described below, the trading price of Aimco
common stock is considered a reasonable estimate of the fair
market value of an OP Unit.
After a one-year holding period, OP Units are redeemable
for shares of Aimco common stock (on a
one-for-one
basis) or cash equal to the value of such shares, as Aimco
elects. As a result, the trading price of Aimco common stock is
considered a reasonable estimate of the fair market value of an
OP Unit. The number of OP Units offered in the merger
with respect to each AP XII Unit was calculated by dividing the
per unit cash merger consideration by the average closing price
of Aimco common stock, as reported on the NYSE over the ten
consecutive trading days ending on the second trading day
immediately prior to the consummation of the merger. The closing
price of Aimco common stock as reported on the NYSE on
November 10 was $22.82.
The AP XII Units are not listed on any securities exchange nor
do they trade in an active secondary market. The per unit cash
merger consideration payable to each holder of AP XII Units is
greater than the Managing General Partners estimate of the
proceeds that would be available for distribution to limited
partners of AP XII if its properties were sold at prices equal
to their respective appraised values.
The following tables summarize the historical per share/unit
information for Aimco, Aimco OP and AP XII for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
Fiscal Year Ended
|
|
|
Ended September 30,
|
|
December 31,
|
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
|
Cash dividends declared per share/unit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aimco Common Stock
|
|
$
|
0.36
|
|
|
$
|
0.30
|
|
|
$
|
0.40
|
|
|
$
|
2.40
|
|
Aimco OP Units
|
|
|
0.36
|
|
|
|
0.30
|
|
|
|
0.40
|
|
|
|
2.40
|
|
AP XII Units
|
|
|
|
|
|
|
103.98
|
|
|
|
|
|
|
|
|
|
(Loss) Income per common share/unit from continuing
operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aimco Common Stock
|
|
$
|
(0.92
|
)
|
|
$
|
(1.45
|
)
|
|
$
|
(1.77
|
)
|
|
$
|
(2.09
|
)
|
Aimco OP Units
|
|
|
(0.91
|
)
|
|
|
(1.44
|
)
|
|
|
(1.76
|
)
|
|
|
(1.94
|
)
|
AP XII Units
|
|
|
(174.69
|
)
|
|
|
(63.20
|
)
|
|
|
(21.58
|
)
|
|
|
17.76
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2011
|
|
December 31, 2010
|
|
Book value per share/unit
|
|
|
|
|
|
|
|
|
Aimco Common Stock(1)
|
|
$
|
7.87
|
|
|
$
|
8.89
|
|
Aimco OP Units(2)
|
|
|
7.26
|
|
|
|
8.18
|
|
AP XII Units(3)
|
|
|
(1,752,83
|
)
|
|
|
(1,578.13
|
)
|
|
|
|
(1) |
|
Based on 120.9 million and 117.6 million shares of
Aimco common stock outstanding at September 30, 2011 and
December 31, 2010, respectively. |
|
|
|
(2) |
|
Based on 129.2 million and 126.1 million Aimco OP
Units and equivalents outstanding at September 30, 2011 and
December 31, 2010, respectively. |
|
|
|
(3) |
|
Based on 44,718 AP XII Units outstanding at September 30,
2011 and December 31, 2010, respectively. |
30
INFORMATION
ABOUT THE AIMCO ENTITIES
Aimco is a Maryland corporation incorporated on January 10,
1994. Aimco is a self-administered and self-managed real estate
investment trust, or REIT. Aimcos principal financial
objective is to provide predictable and attractive returns to
its stockholders. Aimcos business plan to achieve this
objective is to:
|
|
|
|
|
own and operate a broadly diversified portfolio of primarily
class B/B+ assets (defined below) with properties
concentrated in the 20 largest markets in the United States (as
measured by total apartment value, which is the estimated total
market value of apartment properties in a particular market);
|
|
|
|
improve its portfolio by selling assets with lower projected
returns and reinvesting those proceeds through the purchase of
new assets or additional investment in existing assets in its
portfolio, including increased ownership or
redevelopment; and
|
|
|
|
provide financial leverage primarily by the use of non-recourse,
long-dated, fixed-rate property debt and perpetual preferred
equity.
|
As of September 30, 2011, Aimco:
|
|
|
|
|
owned an equity interest in 205 conventional real estate
properties with 64,781 units;
|
|
|
|
|
|
owned an equity interest in 201 affordable real estate
properties with 24,040 units; and
|
|
|
|
|
|
provided services for, or managed, 11,233 units in 159
properties, primarily pursuant to long-term asset management
agreements. In certain cases, Aimco may indirectly own generally
less than one percent of the operations of such properties
through a syndication or other fund.
|
Of these properties, Aimco consolidated 199 conventional
properties with 63,335 units and 160 affordable properties
with 19,969 units.
For conventional assets, Aimco focuses on the ownership of
primarily B/B+ assets. Aimco measures conventional property
asset quality based on average rents of its units compared to
local market average rents as reported by a third-party provider
of commercial real estate performance and analysis, with
A-quality assets earning rents greater than 125% of local market
average, B-quality assets earning rents 90% to 125% of local
market average and C-quality assets earning rents less than 90%
of local market average. Aimco classifies as B/B+ those assets
earning rents ranging from 100% to 125% of local market average.
Although some companies and analysts within the multifamily real
estate industry use asset class ratings of A, B and C, some of
which are tied to local market rent averages, the metrics used
to classify asset quality as well as the timing for which local
markets rents are calculated may vary from company to company.
Accordingly, Aimcos rating system for measuring asset
quality is neither broadly nor consistently used in the
multifamily real estate industry.
Through its wholly-owned subsidiaries, AIMCO-GP, Inc., the
general partner of Aimco OP, and AIMCO-LP Trust, Aimco owns a
majority of the ownership interests in Aimco OP. As of
September 30, 2011, Aimco held approximately 94% of the
OP Units and high performance units, or HPUs, of Aimco OP.
Aimco conducts substantially all of its business and owns
substantially all of its assets through Aimco OP. Interests in
Aimco OP that are held by limited partners other than Aimco
include OP Units, HPUs and partnership preferred units. The
holders of OP Units receive distributions, prorated from
the date of issuance, in an amount equivalent to the dividends
paid to holders of Aimco common stock. Holders of OP Units
may redeem such units for cash or, at Aimco OPs option,
Aimco common stock. Partnership preferred units entitle the
holders thereof to a preference with respect to distributions or
upon liquidation. At September 30, 2011, after elimination
of shares held by consolidated subsidiaries,
120,916,144 shares of Aimco common stock were outstanding
and Aimco OP had 8,289,841 OP Units and HPUs outstanding
for a combined total of 129,205,985 shares of Aimco common
stock, OP Units and HPUs outstanding.
Through its wholly-owned subsidiary, AIMCO/IPT, Inc., a Delaware
corporation, Aimco owns all of the outstanding common stock of
the Managing General Partner.
AIMCO/IPT, Inc. holds a 70% interest in AIMCO IPLP, L.P. as its
general partner. AIMCO/IPT, Inc. and AIMCO IPLP, L.P. share
voting and dispositive power over 14,433 AP XII Units, or
approximately 32.28% of the
31
outstanding AP XII Units. AIMCO IPLP, L.P. also owns 100% of
each of Broad River Properties, L.L.C. and Cooper River
Properties, L.L.C., which own 8,002 and 4,607 AP XII Units,
respectively, or approximately 17.89% and 10.30% of AP
XIIs outstanding AP XII Units, respectively.
AIMCO AP XII Merger Sub LLC, or the Aimco Subsidiary, is a
Delaware limited liability company formed on September 29,
2010, for the purpose of consummating the merger with AP XII.
The Aimco Subsidiary is a direct wholly-owned subsidiary of
Aimco OP. The Aimco Subsidiary has not carried on any activities
to date, except for activities incidental to its formation and
activities undertaken in connection with the transactions
contemplated by the merger agreement.
The names, positions and business addresses of the directors and
executive officers of Aimco, Aimco OP, AIMCO-GP, Inc.,
AIMCO/IPT, Inc., AIMCO IPLP, L.P., Broad River Properties,
L.L.C., Cooper River Properties, L.L.C. and the Aimco
Subsidiary, as well as a biographical summary of the experience
of such persons for the past five years or more, are set forth
in Annex D attached hereto and are incorporated in
this information statement/prospectus by reference. During the
last five years, none of Aimco, Aimco OP, Aimco-GP, Inc.,
AIMCO/IPT, Inc., AIMCO IPLP, L.P., Broad River Properties,
L.L.C., Cooper River Properties, L.L.C., AP XII or the General
Partners nor, to the best of their knowledge, any of the persons
listed in Annex D of this information
statement/prospectus (i) has been convicted in a criminal
proceeding (excluding traffic violations or similar
misdemeanors) or (ii) was a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining further violations of or
prohibiting activities subject to federal or state securities
laws or finding any violation with respect to such laws.
Additional information about Aimco is included in documents
incorporated by reference into this information
statement/prospectus. Additional information about Aimco OP is
included in Annex H and Annex I to this
information statement/prospectus. See Where You Can Find
Additional Information.
The following chart represents the organizational structure of
the Aimco Entities:
32
INFORMATION
ABOUT ANGELES PARTNERS XII, LP
AP XII is a Delaware limited partnership organized on
November 24, 2010, in connection with a redomestication of
a predecessor limited partnership from California to Delaware in
November 2010. The predecessor was organized as a California
limited partnership on May 26, 1983. Commencing
May 26, 1983, the predecessor of AP XII offered up to
80,000 limited partnership units at a purchase price of $1,000
per unit with a minimum purchase of 5 units pursuant to a
registration statement filed with the SEC. The Managing General
Partner contributed capital in the amount of $1,000 for a 1%
interest in the predecessor of AP XII. The offering terminated
on February 13, 1985. Upon termination of the offering, the
predecessor to AP XII had sold 44,773 Units aggregating
$44,773,000. AP XIIs partnership agreement provides that
the partnership is to terminate on December 31, 2035,
unless terminated prior to such date. The Managing General
Partner is a wholly-owned subsidiary of AIMCO/IPT, which in turn
is a wholly-owned subsidiary of Aimco.
AP XII is engaged in the business of operating and holding real
estate properties for investment. At September 30, 2011, AP
XII owned the following properties:
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the Hunters Glen Property, which consists of the Hunters
Glen IV Property, a 264 unit apartment project, the
Hunters Glen V Property, which consists of a 304 unit
apartment project, and the Hunters Glen VI Property, which
consists of a 328 unit apartment project, each of which is
located in Plainsboro, New Jersey; and
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the Twin Lake Towers Property, a 399 unit apartment project
located in Westmont, Illinois.
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The average annual rental rates for each of the five years ended
December 31, 2010 for each property are as follows:
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Average Annual Rental Rates
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Property
|
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2010
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2009
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2008
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2007
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2006
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(per unit)
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Hunters Glen Apartments IV
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$
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11,913
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$
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12,459
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$
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12,963
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$
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12,538
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$
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11,986
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Hunters Glen Apartments V
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11,837
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12,432
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12,941
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12,487
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11,809
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Hunters Glen Apartments VI
|
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11,555
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12,151
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12,714
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12,289
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11,726
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Twin Lake Towers Apartments
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11,376
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11,503
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10,959
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10,026
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9,451
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The average occupancy for each of the five years ended
December 31, 2010 for each property is as follows:
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Average Occupancy
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For the Years Ended December 31,
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Property
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2010
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2009
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|
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2008
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2007
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2006
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|
Hunters Glen Apartments IV
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96
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%
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|
|
95
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%
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|
97
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%
|
|
|
98
|
%
|
|
|
95
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%
|
Hunters Glen Apartments V
|
|
|
95
|
%
|
|
|
93
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%
|
|
|
96
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%
|
|
|
97
|
%
|
|
|
96
|
%
|
Hunters Glen Apartments VI
|
|
|
95
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%
|
|
|
92
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%
|
|
|
96
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%
|
|
|
96
|
%
|
|
|
95
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%
|
Twin Lake Towers Apartments
|
|
|
97
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%
|
|
|
92
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%
|
|
|
87
|
%
|
|
|
97
|
%
|
|
|
98
|
%
|
The average occupancy for the nine months ended
September 30, 2011 and 2010 for each property is as follows:
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Average Occupancy
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For the
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Nine Months Ended September 30,
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Property
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2011
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|
2010
|
|
|
Hunters Glen Apartments (formerly Hunters Glen Apartments IV,
Hunters Glen Apartments V and Hunters Glen Apartments VI)
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|
|
95
|
%
|
|
|
96
|
%
|
Twin Lake Towers Apartments
|
|
|
97
|
%
|
|
|
96
|
%
|
33
The real estate industry is highly competitive. All of the
properties are subject to competition from other residential
apartment complexes in the area. The Managing General Partner
believes that all of the properties are adequately insured. The
residential properties are apartment complexes which lease units
for terms of one year or less. As of September 30, 2011, no
residential tenant leases 10% or more of the available rental
space.
During the year ended December 31, 2010, AP XII completed
approximately $198,000 of capital improvements at the Hunters
Glen IV Property consisting primarily of water heaters and
floor covering replacement. These improvements were funded from
operating cash flow. During the year ended December 31,
2010, AP XII completed approximately $189,000 of capital
improvements at the Hunters Glen V Property consisting primarily
of water heaters and floor covering replacement. These
improvements were funded from operating cash flow. During the
year ended December 31, 2010, AP XII completed
approximately $194,000 of capital improvements at the Hunters
Glen VI Property consisting primarily of water heaters, HVAC
upgrades and floor covering replacement. These improvements were
funded from operating cash flow. During the year ended
December 31, 2010, AP XII completed approximately $298,000
of capital improvements at the Twin Lake Towers Property,
consisting primarily of fire safety equipment, balcony upgrades
and floor covering replacement. These improvements were funded
from operating cash flow.
During the nine months ended September 30, 2011, AP XII
completed approximately $917,000 of capital improvements at the
Hunters Glen Property, consisting primarily of patio and balcony
upgrades, exterior painting, water heater upgrades and floor
covering replacements. These improvements were funded from
replacement reserves and operating cash flow. During the nine
months ended September 30, 2011, AP XII completed
approximately $579,000 of capital improvements at the Twin Lake
Towers Property, consisting primarily of kitchen upgrades,
electrical and plumbing upgrades and appliance and floor
covering replacements. These improvements were funded from
operating cash flow.
AP XII regularly evaluates the capital improvement needs of the
properties, and anticipates making certain routine capital
expenditures with respect to each property during the remainder
of 2011. Such capital expenditures will depend on the physical
conditions of the properties as well as anticipated cash flows
generated by the properties. During 2011, AP XII also intends to
replace the steel piping with copper piping in those units of
the Twin Lake Towers Property where such work has not yet been
completed, as mandated by the lender, as well as kitchen and
bath work associated with the piping replacement, at an
estimated cost of approximately $744,000. In addition, AP XII
intends to make repairs to a retaining wall, as mandated by the
lender, resurface a pool, replace the balconies, repair sidewalk
concrete and renovate the laundry room, at an estimated total
cost of approximately $670,000. As discussed above, a portion
(but not all) of these capital improvements was completed during
the nine months ended September 30, 2011. All of AP
XIIs properties are in good physical condition, subject to
normal depreciation and deterioration as is typical for assets
of this type and age.
The following table sets forth certain information relating to
the mortgages encumbering AP XIIs properties at
September 30, 2011.
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Principal,
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|
Principal
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|
Balance at
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|
|
|
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|
Balance
|
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|
September 30,
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Interest
|
|
|
Period
|
|
|
Maturity
|
|
|
Due at
|
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Property
|
|
2011
|
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|
Rate(2)
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|
|
Amortized
|
|
|
Date
|
|
|
Maturity(1)
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|
(In thousands)
|
|
|
|
|
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|
|
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(In thousands)
|
|
|
Hunters Glen Apartments IV, V and VI(3)
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1st
Mortgage
|
|
$
|
66,491
|
|
|
|
5.47
|
%
|
|
|
360 months
|
|
|
|
6/21
|
|
|
$
|
55,145
|
|
Twin Lake Towers Apartments
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|
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|
|
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|
1st
Mortgage
|
|
|
26,478
|
|
|
|
5.49
|
%
|
|
|
360 months
|
|
|
|
04/20
|
|
|
|
22,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
92,969
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
$
|
77,476
|
|
|
|
|
|
|
|
|
|
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|
|
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|
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|
(1) |
|
See Note B Mortgage Notes
Payable to the consolidated financial statements
included in Item 8 Financial
Statements and Supplementary Data in AP XIIs
Annual Report on
Form 10-K
for the year ended December 31, 2010, included as
Annex F to this information statement/prospectus,
for information with respect to AP XIIs ability to prepay
these mortgages and other specific details about the mortgages. |
34
|
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|
(2) |
|
Fixed rate mortgages. |
|
(3) |
|
On May 2, 2011, AP XII refinanced the mortgage debt
encumbering the Hunters Glen Property. This refinancing replaced
the existing mortgage loans, which at the time of refinancing
had an aggregate principal balance of approximately $68,211,000,
with a new mortgage loan in the principal amount of $66,713,000.
The new loan bears interest at a rate of 5.47% per annum and
requires monthly payments of principal and interest of
approximately $378,000 beginning on July 1, 2011, through
the June 1, 2021 maturity date. The new mortgage loan has a
balloon payment of approximately $55,145,000 due at maturity.
For more information regarding the new mortgage loan, see AP
XIIs Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2011, included as
Annex G to this information statement/prospectus. |
Distributions
to Limited Partners
AP XII presently has AP XII Units issued and outstanding. The AP
XII Units are entitled to allocations of profit and loss, and
distributions, relating to AP XIIs interest in the Twin
Lake Towers Property and the Hunters Glen Property. As of
November 18, 2011, there were 44,718 AP XII Units
outstanding, and Aimco OP and its affiliates owned 33,750 of
those units, or approximately 75.47% of those units.
AP XII distributed the following amounts during the years ended
December 31, 2010 and 2009 (in thousands, except per unit
data):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2010
|
|
|
Year Ended December 31, 2009
|
|
|
|
|
|
|
Per Limited
|
|
|
|
|
|
Per Limited
|
|
|
|
|
|
|
Partnership
|
|
|
|
|
|
Partnership
|
|
|
|
Aggregate
|
|
|
Unit
|
|
|
Aggregate
|
|
|
Unit
|
|
|
Refinancing(1)
|
|
$
|
3,900
|
|
|
$
|
77.87
|
|
|
$
|
|
|
|
$
|
|
|
Operations
|
|
|
1,180
|
|
|
|
26.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,080
|
|
|
$
|
103.98
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Proceeds from the March 2010 refinancing of the mortgage
encumbering Twin Lake Towers Apartments. |
AP XII distributed the following amounts during the nine months
ended September 30, 2011 and 2010 (in thousands,
except per unit data):
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30, 2011
|
|
|
September 30, 2010
|
|
|
|
|
|
|
Per Limited
|
|
|
|
|
|
Per Limited
|
|
|
|
|
|
|
Partnership
|
|
|
|
|
|
Partnership
|
|
|
|
Aggregate
|
|
|
Unit
|
|
|
Aggregate
|
|
|
Unit
|
|
|
Refinancing(1)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,900
|
|
|
$
|
77.87
|
|
Operations
|
|
|
|
|
|
|
|
|
|
|
1,180
|
|
|
|
26.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
5,080
|
|
|
$
|
103.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Proceeds from the March 2010 refinancing of the mortgage
encumbering Twin Lake Towers Apartments. |
Future cash distributions will depend on the levels of net cash
generated from operations, the timing of debt maturities,
property sales and refinancings. AP XIIs cash available
for distribution is reviewed on a monthly basis. In light of the
amounts accrued and payable to affiliates of the Managing
General Partner at September 30, 2011, there can be no
assurance that AP XII will generate sufficient funds from
operations, after required capital improvement expenditures, to
permit additional distributions to its partners in subsequent
periods.
Certain
Relationships and Related Transactions
AP XII has no employees and depends on the Managing General
Partner and its affiliates for the management and administration
of all partnership activities. The AP XII partnership agreement
provides that the Managing General Partner and its affiliates
receive certain payments for services and reimbursement of
certain expenses incurred on behalf of AP XII.
35
The AP XII partnership agreement also provides that the Managing
General Partner and its affiliates receive 5% of gross receipts
from all of AP XIIs properties as compensation for
providing property management services. AP XII paid to such
affiliates approximately $787,000 and $794,000 for the years
ended December 31, 2010 and 2009, respectively, and
approximately $577,000 and $590,000 for the nine months ended
September 30, 2011 and 2010, respectively.
The AP XII partnership agreement also provides for a fee equal
to 7.5% of net cash from operations to be paid to
the Managing General Partner for executive and administrative
management services. One half of this fee is to be accrued and
not paid unless the limited partners have received distributions
equal to a 5% cumulative annual return on their adjusted capital
investment or there are net proceeds from the sale or
refinancing of a property. During the year ended
December 31, 2010, the Managing General Partner earned a
fee of approximately $2,000. This amount was paid to the
Managing General Partner during the nine months ended
September 30, 2011. No fee was earned during the year ended
December 31, 2009. No fee was earned or accrued for the
nine months ended September 30, 2011 and 2010.
Affiliates of the Managing General Partner charged AP XII for
reimbursement of accountable administrative expenses amounting
to approximately $158,000 and $352,000 for the years ended
December 31, 2010 and 2009, respectively. A portion of
these reimbursements for the years ended December 31, 2010
and 2009 are for construction management services provided by an
affiliate of the Managing General Partner of approximately
$26,000 and $56,000, respectively. Additionally, in connection
with a redevelopment project at the Twin Lake Towers Property
completed in 2009, an affiliate of the Managing General Partner
received a redevelopment supervision fee of 4% of the actual
redevelopment costs incurred. AP XII was charged approximately
$166,000 in redevelopment supervision fees during the year ended
December 31, 2009.
Affiliates of the Managing General Partner charged AP XII for
reimbursement of accountable administrative expenses amounting
to approximately $196,000 and $111,000 for the nine months ended
September 30, 2011 and 2010, respectively. A portion of
these reimbursements for the nine months ended
September 30, 2011 and 2010 are construction management
services provided by an affiliate of the Managing General
Partner of approximately $104,000 and $10,000, respectively. At
September 30, 2011, approximately $83,000 of such
reimbursements remained unpaid.
In accordance with the AP XII partnership agreement, during the
year ended December 31, 2010, Aimco OP, an affiliate of the
Managing General Partner, advanced AP XII approximately $687,000
to fund a refinance commitment fee at the Twin Lake Towers
Property and to assist with the payment of real estate taxes at
the Hunters Glen Property. During the year ended
December 31, 2009, Aimco OP advanced AP XII approximately
$695,000 to fund operations at all four of AP XIIs
properties and approximately $2,130,000 to fund redevelopment
costs at the Twin Lake Towers Property. During the years ended
December 31, 2010 and 2009, AP XII repaid advances and
accrued interest of approximately $12,950,000 and $650,000,
respectively. During the nine months ended September 30,
2011, Aimco OP advanced AP XII approximately $43,000 to fund
real estate taxes at the Hunters Glen Property, approximately
$1,352,000 to fund a refinance commitment fee and approximately
$9,397,000 in connection with the refinancing of the previous
mortgage encumbering the Hunters Glen Property. During the nine
months ended September 30, 2010, Aimco OP advanced AP XII
approximately $540,000 to fund a refinance commitment fee at the
Twin Lake Towers Property. Aimco OP charges interest on advances
under the terms permitted by the partnership agreement. The
interest rate charged on the outstanding advances made to AP XII
is the prime rate. The interest rate on the outstanding advances
at September 30, 2011 and December 31, 2010 was 3.25%.
Interest expense was approximately $94,000 and $390,000 for the
years ended December 31, 2010 and 2009, respectively.
Interest expense was approximately $133,000 and $93,000 for the
nine months ended September 30, 2011 and 2010,
respectively. During the nine months ended September 30,
2011 and 2010, AP XII repaid advances and accrued interest of
approximately $1,861,000 and $12,817,000, respectively. Total
advances and accrued interest of approximately $9,079,000 and
$15,000 were unpaid at September 30, 2011 and
December 31, 2010.
Pursuant to the AP XII partnership agreement, the Managing
General Partner is entitled to receive a distribution equal to
3% of the aggregate disposition price of sold properties. AP XII
paid a distribution of $186,000 to the Managing General Partner
related to the sale of Cooper Point Plaza in 1999. During 2001,
AP XII
36
paid distributions of approximately $85,000 and $375,000 related
to the sales of Briarwood and Gateway Gardens Apartments,
respectively. These distributions are subordinate to the limited
partners receiving their original capital contributions plus a
cumulative preferred return of 6% per annum of their adjusted
capital investment, as defined in the AP XII partnership
agreement. This return was met in conjunction with the
distributions paid to the partners during the year ended
December 31, 2010. Accordingly, the Managing General
Partner is entitled to keep these amounts.
AP XII insures its properties up to certain limits through
coverage provided by Aimco, which is generally self-insured for
a portion of losses and liabilities related to workers
compensation, property casualty, general liability and vehicle
liability. AP XII insures its properties above the Aimco limits
through insurance policies obtained by Aimco from insurers
unaffiliated with the Managing General Partner or Aimco. During
the years ended December 31, 2010 and 2009, AP XII was
charged by Aimco and its affiliates approximately $252,000 and
$197,000, respectively, for insurance coverage and fees
associated with policy claims administration. During the
nine months ended September 30, 2011, AP XII was
charged by Aimco and its affiliates approximately $123,000 for
hazard insurance coverage and fees associated with policy claims
administration. Additional charges will be incurred by AP XII
during 2011 as other insurance policies renew later in the year.
In addition to its indirect ownership of the general partner
interests in AP XII, Aimco and its affiliates owned 33,750 of
the AP XII Units, or approximately 75.47% of the number of AP
XII Units outstanding, at November 18, 2011. Pursuant
to the AP XII partnership agreement, limited partners holding a
majority of the outstanding units are entitled to take action
with respect to a variety of matters that would include, but are
not limited to, voting on certain amendments to the AP XII
partnership agreement and voting to remove the Managing General
Partner as the managing general partner. As a result of its
ownership of 75.47% of the outstanding units of limited
partnership interests, Aimco and its affiliates are in a
position to control all such voting decisions with respect to AP
XII. Although the Managing General Partner owes fiduciary duties
to AP XIIs limited partners, it also owes fiduciary duties
to its sole stockholder, which is an affiliate of Aimco. As a
result, the duties of the Managing General Partner, as managing
general partner, to AP XII and its limited partners may come
into conflict with the duties of the Managing General Partner to
AIMCO/IPT, Inc. as its sole stockholder.
Directors,
Executive Officers and Corporate Governance
AP XII has no directors or executive officers of its own. The
names and ages of, as well as the positions and offices held by,
the present directors and officers of the Managing General
Partner, as of September 30, 2011 are set forth in
Annex D to this information statement/prospectus.
One or more of those persons are also directors
and/or
officers of a general partner (or general partner of a general
partner) of limited partnerships which either have a class of
securities registered pursuant to Section 12(g) of the
Exchange Act, or are subject to the reporting requirements of
Section 15(d) of the Exchange Act. Further, one or more of
those persons are also officers of Aimco and the general partner
of Aimco OP, entities that have a class of securities registered
pursuant to Section 12(g) of the Exchange Act, or are
subject to the reporting requirements of Section 15(d) of
the Exchange Act. There are no family relationships between or
among any officers or directors. No remuneration was paid to AP
XII nor its directors or officers during the year ended
December 31, 2010.
The board of directors of the Managing General Partner does not
have a separate audit committee. As such, the board of directors
of the Managing General Partner fulfills the functions of an
audit committee. The board of directors has determined that
Steven D. Cordes meets the requirement of an audit
committee financial expert.
The directors and officers of the Managing General Partner with
authority over AP XII are all employees of subsidiaries of
Aimco. Aimco has adopted a code of ethics that applies to such
directors and officers that is posted on Aimcos website
(www.aimco.com). Aimcos website is not incorporated by
reference to this filing.
37
Security
Ownership of Certain Beneficial Owners and Management
The General Partners own all of the outstanding general partner
interests in AP XII, which constitute 1% of the total interests
in the partnership. AP XII has no directors or executive
officers of its own. The Managing General Partner is a
California corporation, which is indirectly wholly-owned by
Aimco. The Non-Managing General Partner is a Delaware limited
liability company, which is wholly-owned by Aimco OP. None of
the Managing General Partner or any of its directors or
executive officers owns any of the AP XII Units. The following
table sets forth certain information as of November 18,
2011 with respect to the ownership by any person (including any
group, as that term is used in Section 13(d)(3)
of the Exchange Act) known to us to be the beneficial owner of
more than 5% of the AP XII Units.
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
Approximate
|
|
|
|
Number of AP
|
|
|
Percent of
|
|
Entity Name and Address
|
|
XII Units
|
|
|
Class
|
|
|
Apartment Investment and Management Company (1)
|
|
|
33,750
|
(2)
|
|
|
75.47
|
%
|
4582 South Ulster Street,
Suite 1100
Denver, CO 80237
|
|
|
|
|
|
|
|
|
AIMCO-GP, Inc.(1)
|
|
|
33,750
|
(2)
|
|
|
75.47
|
%
|
4582 South Ulster Street,
Suite 1100
Denver, CO 80237
|
|
|
|
|
|
|
|
|
AIMCO Properties, L.P.(1)
|
|
|
33,750
|
(2)
|
|
|
75.47
|
%
|
4582 South Ulster Street,
Suite 1100
Denver, CO 80237
|
|
|
|
|
|
|
|
|
AIMCO IPLP, L.P.(3)
|
|
|
14,433
|
(4)
|
|
|
32.28
|
%
|
4582 South Ulster Street,
Suite 1100
Denver, CO 80237
|
|
|
|
|
|
|
|
|
AIMCO/IPT, Inc.(3)
|
|
|
14,433
|
(4)
|
|
|
32.28
|
%
|
4582 South Ulster Street,
Suite 1100
Denver, CO 80237
|
|
|
|
|
|
|
|
|
Cooper River Properties, L.L.C.(5)
|
|
|
4,607
|
|
|
|
10.30
|
%
|
4582 South Ulster Street,
Suite 1100
Denver, CO 80237
|
|
|
|
|
|
|
|
|
Broad River Properties, L.L.C. (5)
|
|
|
8,002
|
|
|
|
17.89
|
%
|
4582 South Ulster Street,
Suite 1100
Denver, CO 80237
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
AIMCO-GP, Inc., a Delaware corporation, is the sole general
partner of AIMCO Properties, L.P., and owns approximately a 1%
general partner interest in AIMCO Properties, L.P. AIMCO-GP,
Inc. is wholly-owned by Apartment Investment and Management
Company. As of November 10, 2011, AIMCO-LP Trust, a
Delaware trust wholly-owned by Apartment Investment and
Management Company, owns approximately a 93% interest in the OP
Units and equivalents of AIMCO Properties, L.P. |
|
(2) |
|
AIMCO Properties, L.P., AIMCO-GP, Inc. and Apartment Investment
and Management Company share voting and dispositive power over
33,750 AP XII Units, representing approximately 75.47% of the
class. AIMCO-GP, Inc. holds its AP XII Units, directly or
indirectly, as nominee for AIMCO Properties, L.P. and so AIMCO
Properties, L.P. may be deemed the beneficial owner of the AP
XII Units held by AIMCO-GP, Inc. Apartment Investment and
Management Company may be deemed the beneficial owner of the AP
XII Units held by AIMCO Properties, L.P. and AIMCO-GP, Inc. by
virtue of its indirect ownership or control of these entities. |
38
|
|
|
(3) |
|
AIMCO/IPT, Inc. is wholly-owned by Apartment Investment and
Management Company and holds a 70.0% interest in AIMCO IPLP,
L.P. as its general partner. AIMCO Properties, L.P. holds a 30%
interest in AIMCO IPLP, L.P. as the limited partner. |
|
(4) |
|
AIMCO IPLP, L.P. and AIMCO/IPT, Inc. share voting and
dispositive power over 14,433 AP XII Units, representing
approximately 32.28% of the class. |
|
(5) |
|
AIMCO IPLP, L.P. owns 100% of Cooper River Properties, L.L.C.
and Broad River Properties, L.L.C. |
Additional
Information
For additional information about AP XII and its properties and
operating data related to those properties, see AP XIIs
Annual Report on
Form 10-K
for the year ended December 31, 2010, attached hereto as
Annex F and AP XIIs Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2011, attached hereto
as Annex G.
39
THE
MERGER
Background
of the Merger
The Managing General Partner regularly evaluates AP XIIs
properties by considering various factors, such as AP XIIs
financial position and real estate and capital markets
conditions. The Managing General Partner monitors a
propertys specific locale and
sub-market
conditions (including stability of the surrounding
neighborhood), evaluating current trends, competition, new
construction and economic changes. It oversees the operating
performance of each property and continuously evaluates the
physical improvement requirements. In addition, the financing
structure for each property (including any prepayment
penalties), tax implications to limited partners, availability
of attractive mortgage financing to a purchaser, and the
investment climate are all considered. Any of these factors, and
possibly others, could potentially contribute to any decision by
the Managing General Partner to sell, refinance, upgrade with
capital improvements or hold AP XIIs properties.
After taking into account the foregoing considerations, in early
2009, the Managing General Partner considered a sale of the
Hunters Glen Property, but determined that it would most likely
not be able to find any buyers at acceptable prices.
On April 13, 2010, the Managing General Partner engaged CRA
to appraise the Twin Lake Towers Property. CRA delivered the
appraisal for the Twin Lake Towers Property on May 19,
2010. Pursuant to this appraisal, CRA valued the property at
$36,000,000.
In November 2010, AP XII was redomesticated from California to
Delaware.
On December 3, 2010, the Managing General Partner engaged
CRA to update the results of its prior appraisal of the Twin
Lake Towers Property. CRA delivered the updated appraisal for
the Twin Lake Towers Property on January 3, 2011. Pursuant
to the updated appraisal, CRA valued the Twin Lake Towers
Property at $41,400,000.
During January 2011, officers of the Managing General Partner,
who are also officers of Aimco, met several times to consider
and discuss strategic alternatives for AP XII. During these
meetings, they considered the costs of maintaining AP XIIs
current ownership structure, including audit, tax and SEC
reporting costs, given Aimco OPs ownership of 75.47% of
the AP XII Units and the outstanding debt owed to Aimco OP.
After considering all of these factors, the officers agreed to
explore the possibility of Aimco OP acquiring some or all of AP
XIIs properties through a transaction that would provide
the unaffiliated limited partners with the opportunity to defer
taxable gain through an exchange of AP XII Units for
OP Units.
During January and February of 2011, the Managing General
Partners management sought advice from outside counsel to
determine whether a transaction would be feasible that would
result in Aimco OPs ownership of some or all of AP
XIIs properties while also providing potential tax
deferral to limited partners who are unaffiliated with Aimco OP.
At the same time, they spoke with KTR regarding the possibility
of appraising the Hunters Glen Property for purposes of
evaluating a potential transaction with Aimco OP.
The Managing General Partner engaged KTR on February 15,
2011 to appraise the Hunters Glen Property. KTR delivered the
appraisal for the Hunters Glen Property on March 17, 2011.
Pursuant to this appraisal, KTR valued the property at
$91,000,000.
Over the following weeks, the Managing General Partners
management reviewed the appraisal reports and discussed both
CRAs and KTRs assumptions and their valuations of
the properties and determined that CRAs and KTRs
assumptions were reasonable and the valuations appropriate. As
part of their review, they considered the fiduciary duties owed
by the Managing General Partner to unaffiliated limited
partners, as well as the properties respective appraised
value and the amount of indebtedness secured by each appraised
property, which at March 31, 2011 was approximately
$68,290,000 for the Hunters Glen Property and
$26,670,000 million for the Twin Lake Towers Property.
In April and May 2011, Aimco OP and the Managing General Partner
continued discussions regarding a possible merger transaction
between AP XII and Aimco OP. In connection with these
discussions, Aimco OP and the Managing General Partner agreed
that, if they were to pursue the merger, they should consider
retaining an
40
independent financial advisor to opine as to the fairness of the
merger to the unaffiliated limited partners of AP XII. Aimco OP
and the Managing General Partner, together with outside counsel,
conducted interviews with representatives of Duff &
Phelps and two other financial advisory firms.
On June 9, 2011, at the request of Aimco OP and the
Managing General Partner, CRA delivered an updated appraisal for
the Twin Lake Towers Property, pursuant to which it valued the
property at $45,600,000 as of May 31, 2011. On June 1,
2011, at the request of Aimco OP and the Managing General
Partner, KTR delivered an updated appraisal for the Hunters Glen
Property, pursuant to which it valued the property at
$92,000,000 as of June 1, 2011. Aimco OP and the Managing
General Partner reviewed the updated appraisal reports and
calculated the equity value of AP XII Units based on these
updated appraisals.
On June 10, 2011, Aimco OP engaged Duff & Phelps
to provide a fairness opinion, and if requested, an updated
fairness opinion, with respect to the proposed merger
transaction and ten other possible merger transactions. In the
following weeks, Duff & Phelps had due diligence calls
with the Managing General Partners management and received
due diligence materials in response to its diligence requests.
On July 28, 2011, Duff & Phelps delivered its
written opinion to the boards of directors of Aimco, the general
partner of Aimco OP, the Managing General Partner and the
general partner of the sole member of the Non-Managing General
Partner to the effect that, as of July 28, 2011, based upon and
subject to the assumptions made, procedures followed, factors
considered, and qualifications and limitations on the review
undertaken by Duff & Phelps in connection with its
opinion, the cash consideration of $526.71 per unit is fair,
from a financial point of view, to the unaffiliated limited
partners of AP XII.
On July 28, 2011, the General Partners and the general partner
of Aimco approved an agreement and plan of merger that provided
for consideration of $526.71 per unit to holders of AP XII
Units, payable in cash or OP Units. Before doing so, the
Managing General Partner and the other Aimco Entities considered
a number of possible alternatives to the proposed transaction,
as described in greater detail in this information
statement/prospectus. However, they ultimately determined that
the proposed merger is in the best interests of AP XII and its
unaffiliated limited partners. On July 28, 2011, AP XII,
Aimco OP and the Aimco Subsidiary entered into the agreement and
plan of merger.
Also on July 28, 2011, Aimco and Aimco OP filed with the
SEC a registration statement relating to the merger. In
addition, the Aimco Entities made certain other filings required
in connection with the merger. From August through November
2011, Aimco and Aimco OP responded to SEC comments and revised
the registration statement.
On September 20, 2011, the Managing General Partners
management met to discuss the merger transaction and the
valuations of AP XIIs properties. On October 4, 2011,
the Managing General Partners management met again to
discuss the timing of the merger transaction and considered
updating the valuations of AP XIIs properties. On
October 5, 2011, the Managing General Partner engaged CRA
and KTR to update their appraisals and Duff & Phelps
to provide an updated fairness opinion with respect to the
equity value resulting from such updated appraisals.
On October 20, 2011, KTR delivered an updated appraisal for
the Hunters Glen Property, pursuant to which it valued the
property at $92,000,000 as of October 1, 2011. On
October 28, 2011, CRA delivered an updated appraisal for
the Twin Lake Towers Property, pursuant to which it valued the
property at $47,200,000 as of October 1, 2011. Aimco OP and
the Managing General Partner reviewed and discussed the updated
appraisal reports and calculated the equity value of the AP XII
Units based on these updated appraisals, AP XIIs updated
financial position and the updated
mark-to-market
adjustment of the mortgage debt encumbering AP XIIs
properties. This calculation resulted in a decrease of the
equity value of the AP XII Units from $526.71 per unit to
$483.14 per unit.
On November 15, 2011, Duff & Phelps delivered its
updated written opinion to the boards of directors of Aimco, the
general partner of Aimco OP, the Managing General Partner and
the general partner of the sole member of the Non-Managing
General Partner to the effect that, as of November 15, 2011,
based upon and subject to the assumptions made, procedures
followed, factors considered, and qualifications and limitations
on the review undertaken by Duff & Phelps in
connection with its opinion, the cash consideration of $483.14
per unit is fair, from a financial point of view, to the
unaffiliated limited partners of AP XII.
41
On November 15, 2011, the Managing General Partner, the
Non-Managing General Partner and the general partner of Aimco OP
approved an amendment and restatement of the merger agreement
that provides for consideration of $483.14 per unit, payable in
cash or OP Units. On November 15, 2011, AP XII, Aimco OP
and the Aimco Subsidiary entered into the amended and restated
agreement and plan of merger.
Determination
of Merger Consideration
In the merger, each AP XII Unit outstanding immediately prior to
consummation of the merger will be converted into the right to
receive, at the election of the holder of such AP XII Unit,
either $483.14 in cash or equivalent value in Aimco
OP Units, except in those jurisdictions where the law
prohibits the offer of OP Units in this transaction (or
registration or qualification would be prohibitively costly).
Because Aimco indirectly owns the Managing General Partner, the
merger consideration has not been determined in an
arms-length negotiation. In order to arrive at a fair
consideration, CRA and KTR, each an independent real estate
appraisal firm, were engaged to perform complete appraisals of
AP XIIs properties. For more detailed information about
the independent appraisers determinations of the estimated
values of the properties, see Special Factors
The Appraisals. The per unit cash merger consideration
payable to each holder of AP XII Units is greater than the
Managing General Partners estimate of the proceeds that
would be available for distribution to limited partners
(following the repayment of debt and other liabilities of AP
XII) if the properties were sold at prices equal to their
respective appraised values. The Managing General Partner did
not deduct certain amounts that would be payable upon an
immediate sale of the partnerships properties, such as
prepayment penalties on the mortgage debt of the properties that
would apply (based on current interest rates) if the Hunters
Glen Property and the Twin Lake Towers Property were sold after
the expiration of the current lockout periods (during which a
prepayment of the mortgage debt is prohibited). The Managing
General Partner calculated the net proceeds available to all
partners by (i) adding to the appraised value of the
properties the value of any other non-real estate assets of AP
XII that would not be included in the appraisals; and
(ii) deducting all liabilities, including the market value
of mortgage debt as of September 30, 2011, debt owed to the
Managing General Partner or its affiliates, accounts payable and
accrued expenses and certain other costs. The amount of
liabilities deducted includes an estimate of $518,000 for
expenses attributable to the properties that would be incurred
prior to the merger but payable after the merger. In order to
determine the per unit cash merger consideration, the Managing
General Partner divided this amount by the number of total
outstanding AP XII Units. This calculation, which is summarized
below, resulted in per unit cash merger consideration of $483.14.
|
|
|
|
|
Appraised value of the Hunters Glen Property
|
|
$
|
92,000,000
|
|
Plus: Appraised value of the Twin Lake Towers Property
|
|
|
47,200,000
|
|
Plus: Cash and cash equivalents
|
|
|
527,491
|
|
Plus: Other assets
|
|
|
1,984,972
|
|
Less: Mortgage debt, including accrued interest
|
|
|
(93,393,575
|
)
|
Less:
Mark-to-market
adjustment(1)
|
|
|
(6,980,159
|
)
|
Less: Loans from affiliates of the general partners
|
|
|
(9,079,072
|
)
|
Less: Other amounts payable to affiliates of the general partners
|
|
|
(82,872
|
)
|
Less: Accounts payable and accrued expenses owed to third parties
|
|
|
(738,425
|
)
|
Less: Other liabilities(2)
|
|
|
(523,848
|
)
|
Less: Estimated trailing payables
|
|
|
(518,000
|
)
|
|
|
|
|
|
Net partnership equity
|
|
$
|
30,396,512
|
|
Percentage of net partnership equity allocable to limited
partners
|
|
|
71.08
|
%
|
|
|
|
|
|
Net partnership equity allocable to limited partners
|
|
$
|
21,604,858
|
|
Total number of AP XII Units
|
|
|
44,718
|
|
|
|
|
|
|
Cash consideration per unit
|
|
$
|
483.14
|
|
|
|
|
|
|
|
|
|
(1) |
|
The
mark-to-market
adjustment reflects the difference between the outstanding
amount of the mortgage debt and its market value as of
September 30, 2011. The market value was calculated as the
present value of the remaining required payments under the loan
through maturity, discounted at 4.55% (in the case of the
Hunters |
42
|
|
|
|
|
Glen Property) and at 3.99% (in the case of the Twin Lake
Towers Property), which we believe is an appropriate market rate
based on our analysis of interest rates for selected loans of a
similar type, leverage and duration. |
|
|
|
(2) |
|
Consists primarily of security deposits paid by tenants of the
properties. |
The number of OP Units offered per AP XII Unit was
calculated by dividing the per unit cash merger consideration by
the average closing price of Aimco common stock, as reported on
the NYSE, over the ten consecutive trading days ending on the
second trading day immediately prior to the consummation of the
merger. Although there is no public market for OP Units,
after a one-year holding period, each OP Unit is generally
redeemable for cash in an amount equal to the value of one share
of Aimco common stock at the time, subject to Aimcos right
to acquire each OP Unit in exchange for one share of Aimco
common stock (subject to antidilution adjustments). Therefore,
the Managing General Partner considers the trading price of
Aimco common stock to be a reasonable estimate of the fair
market value of an OP Unit. As of November 10, 2011,
the average closing price of Aimco common stock over the
preceding ten consecutive trading days was $23.79, which would
have resulted in OP Unit consideration of 20.31
OP Units per AP XII Unit.
Conflicts
of Interest
The Managing General Partner is wholly-owned by AIMCO/IPT, Inc.,
which in turn is wholly-owned by Aimco. Therefore, the Managing
General Partner has a conflict of interest with respect to the
merger. The Managing General Partner has fiduciary duties to
AIMCO/IPT, Inc., the Managing General Partners sole
stockholder and an affiliate of Aimco, on the one hand, and to
AP XII and its limited partners, on the other hand. The duties
of the Managing General Partner to AP XII and its limited
partners conflict with the duties of the Managing General
Partner to AIMCO/IPT, Inc., which could result in the Managing
General Partner approving a transaction that is more favorable
to Aimco than might be the case absent such conflict of
interest. The Managing General Partner, in its capacity as
managing general partner of AP XII, seeks the best possible
terms for AP XIIs limited partners. This conflicts with
Aimcos interest in obtaining the best possible terms for
Aimco OP.
Future
Plans for the Properties
After the merger, Aimco OP will be the sole limited partner in
AP XII and will own all of the outstanding AP XII Units. The
Managing General Partner will continue to be the managing
general partner of AP XII after the merger, the Non-Managing
Partner will continue to be the non-managing partner of AP XII
after the merger, and AP XIIs partnership agreement in
effect immediately prior to the merger will remain unchanged
after the merger. Aimco OP intends to retain the AP XII Units
after the merger.
Aimco anticipates owning and operating the properties following
the merger. After the merger, Aimco will evaluate the capital
improvement needs of the properties, and anticipates making
certain routine capital expenditures with respect to each
property during the remainder of 2011.
Material
United States Federal Income Tax Consequences of the
Merger
For a discussion of the material United States federal income
tax consequences of the merger, see Material United States
Federal Income Tax Considerations United States
Federal Income Tax Consequences Relating to the Merger.
Regulatory
Matters
No material federal or state regulatory requirements must be
satisfied or approvals obtained in connection with the merger,
except (1) filing a registration statement that includes
this information statement/prospectus with the SEC and obtaining
the SECs declaration that the registration statement is
effective under the Securities Act, (2) registration or
qualification of the issuance of OP Units under state
securities laws, and (3) filing a certificate of merger
with the Secretary of State of the State of Delaware.
43
Accounting
Treatment of the Merger
Aimco and Aimco OP will treat the merger as a purchase of
noncontrolling interests for financial accounting purposes. This
means that Aimco and Aimco OP will recognize any difference
between the purchase price for these noncontrolling interests
and the carrying amount of such noncontrolling interests in
Aimco and Aimco OPs consolidated financial statements as
an adjustment to the amounts of consolidated equity and
partners capital attributed to Aimco and Aimco OP,
respectively.
Appraisal
Rights
Limited partners are not entitled to dissenters appraisal
rights under applicable law or AP XIIs partnership
agreement in connection with the merger. However, pursuant to
the terms of the merger agreement, Aimco OP will provide each
limited partner with contractual dissenters appraisal
rights that are similar to the dissenters appraisal rights
available to a stockholder of a constituent corporation in a
merger under Delaware law. These contractual appraisal rights
will enable a limited partner to obtain an appraisal of the
value of the limited partners AP XII Units in connection
with the merger. Prosecution of these contractual appraisal
rights will involve an arbitration proceeding, and the
consideration paid to a limited partner after the prosecution of
such contractual appraisal rights, which will take a period of
time that cannot be predicted with accuracy, will be a cash
payment, resulting in a taxable event to such limited partner. A
description of the appraisal rights being provided, and the
procedures that a limited partner must follow to seek such
rights, is attached to this information statement/prospectus as
Annex B.
List of
Investors
Under AP XIIs partnership agreement and Delaware law, upon
written request and at the cost of the limited partner, a
limited partner who holds AP XII Units has the right to receive
by mail a list of the names and addresses of the partners of AP
XII and the number of units of partnership interest held by each
of them. This list may be obtained by making written request to
the General Partners,
c/o Eagle
Rock Proxy Advisors, LLC, 12 Commerce Drive, Cranford, New
Jersey 07016, or by fax at
(908) 497-2349.
Expenses
and Fees and Source of Funds
The costs of planning and implementing the merger, including the
cash merger consideration and the preparation of this
information statement/prospectus, will be borne by Aimco OP
without regard to whether the merger is effectuated. The
estimated amount of these costs is approximately $5,964,800
(assuming all limited partners elect to receive the cash merger
consideration). Aimco OP is paying for the costs of the merger
with funds on hand or from drawings under its revolving credit
facility. The revolving credit facility is pursuant to Aimco
OPs Amended and Restated Senior Secured Credit Agreement,
as amended, with a syndicate of financial institutions, with
Bank of America, N.A. as administrative agent, swing line lender
and L/C issuer. Borrowings under the revolving credit facility
bear interest based on a pricing grid determined by leverage
(either at LIBOR plus 4.25% with a LIBOR floor of 1.50% or, at
Aimco OPs option, a base rate equal to the Prime rate plus
a spread of 3.00%). The revolving credit facility matures
May 1, 2013, and may be extended for one year, subject to
certain conditions. Aimco OPs obligations under the
Amended and Restated Senior Secured Credit Agreement are secured
by its equity interests in its subsidiaries.
Approvals
Required
Under Delaware law, the merger must be approved by the General
Partners and a majority in interest of the AP XII Units. The
General Partners have determined that the merger is advisable,
fair to and in the best interests of AP XII and its limited
partners and have approved the merger and the merger agreement.
As of November 18, 2011, there were issued and outstanding
44,718 AP XII Units, and Aimco OP and its affiliates owned
33,750 of those units, or approximately 75.47% of the number of
units outstanding. Aimco OP and its affiliates have indicated
that they intend to take action by written consent, as permitted
under the partnership agreement, to approve the merger on or
about January 23, 2012.
44
THE
MERGER AGREEMENT
The following is a summary of the material terms of the
merger agreement and is qualified in its entirety by reference
to the merger agreement, which is attached to this information
statement/prospectus as Annex A. You should read the
merger agreement carefully in its entirety as it is the legal
document that governs this merger.
The
Merger
AP XII has entered into an agreement and plan of merger with the
Aimco Subsidiary and Aimco OP. The merger agreement amends and
restates a prior merger agreement to reflect a decrease in the
merger consideration from $526.71 in cash (or equivalent value
in OP Units) to $483.14 in cash (or equivalent value in
OP Units) due to, among other things, changes in the
mark-to-market
adjustment of the mortgage debt encumbering AP XIIs
properties and changes to the estimated market values of AP
XIIs properties which were relied upon to determine the
merger consideration. The Aimco Subsidiary is a wholly-owned
subsidiary of Aimco OP, and was formed for the purpose of
effecting the merger with AP XII. Aimco owns the Managing
General Partner and, together with its affiliates, owns a
majority of outstanding AP XII Units.
Under the merger agreement, at the effective time of the merger,
the Aimco Subsidiary will be merged with and into AP XII, with
AP XII as the surviving entity. In the merger, each AP XII Unit
outstanding immediately prior to consummation of the merger will
be converted into the right to receive, at the election of the
holder of such AP XII Unit, either $483.14 in cash or equivalent
value in Aimco OP Units (calculated by dividing $483.14 by
the average closing price of Aimco common stock, as reported on
the NYSE, over the ten consecutive trading days ending on the
second trading day immediately prior to the consummation of the
merger); provided, however, that if Aimco OP determines that the
law of the state or other jurisdiction in which a limited
partner that holds AP XII Units resides would prohibit the
issuance of Aimco OP Units in that state or other
jurisdiction (or that registration or qualification in that
state or jurisdiction would be prohibitively costly), then such
limited partner will only be entitled to receive $483.14 in cash
for each AP XII Unit. Each holder of AP XII Units must make the
same election (cash or OP Units) for all of his or her AP
XII Units. Aimco OPs interest in the Aimco Subsidiary will
be converted into AP XII Units. As a result, after the merger,
Aimco OP will be the sole limited partner of AP XII and will own
all of the outstanding AP XII Units.
The agreement of limited partnership of AP XII as in effect
immediately prior to the consummation of the merger will be the
agreement of limited partnership of AP XII after the merger,
until thereafter amended in accordance with the provisions
thereof and applicable law.
Treatment
of Interests in the Merger
AP XII. Under the merger agreement, each AP
XII Unit outstanding immediately prior to consummation of the
merger will be converted into the right to receive, at the
election of the holder of such AP XII Unit, either $483.14 in
cash or equivalent value in Aimco OP Units (calculated by
dividing $483.14 by the average closing price of Aimco common
stock, as reported on the NYSE, over the ten consecutive trading
days ending on the second trading day immediately prior to the
consummation of the merger), except in those jurisdictions where
the law prohibits the issuance of Aimco OP Units (or
registration or qualification would be prohibitively costly).
The Managing General Partner will continue to be the managing
general partner of AP XII after the merger, the Non-Managing
General Partner will continue to be the non-managing general
partner of AP XII and the current respective general partner
interests will remain unchanged after the merger.
Aimco Subsidiary. All membership interests in
the Aimco Subsidiary immediately prior to the effective time of
the merger will be converted into AP XII Units after the merger.
Approvals
Required
Under Delaware law, the merger must be approved by the General
Partners and a majority in interest of the AP XII Units. The
General Partners have determined that the merger is advisable,
fair to and in the best interests of AP XII and its limited
partners and have approved the merger and the merger agreement.
As of November 18, 2011, there were issued and outstanding
44,718 AP XII Units, and Aimco OP and its affiliates owned
33,750 of those units, or approximately 75.47% of the number of
units outstanding. Aimco OP and its affiliates have indicated
that
45
they intend to take action by written consent, as permitted
under the partnership agreement, to approve the merger on or
about January 23, 2012. As a result, approval of the
merger is assured, and your consent to the merger is not
required. Aimco OP has approved the merger on behalf of the
Aimco Subsidiary.
Conditions
to Obligations to Complete the Merger
None of the parties to the merger agreement are required to
consummate the merger if any third party consent, authorization
or approval that any of the parties deems necessary or desirable
in connection with the merger agreement, and the consummation of
the transactions contemplated thereby, has not been obtained or
received.
Termination
of the Merger Agreement
The merger agreement may be terminated and the merger may be
abandoned at any time prior to consummation of the merger,
without liability to any party to the merger agreement, by AP
XII, Aimco OP or the Aimco Subsidiary, in each case, acting in
its sole discretion and for any reason or for no reason,
notwithstanding the approval of the merger agreement by any of
the partners of AP XII or the member of the Aimco Subsidiary.
Amendment
Subject to applicable law, the merger agreement may be amended,
modified or supplemented by written agreement of the parties at
any time prior to the consummation of the merger with respect to
any of the terms contained therein.
Governing
Law
The merger agreement is governed by and construed in accordance
with the laws of the State of Delaware, without reference to the
conflict of law provisions thereof.
Appraisal
Rights
Limited partners are not entitled to dissenters appraisal
rights under applicable law or AP XIIs partnership
agreement in connection with the merger. However, pursuant to
the terms of the merger agreement, Aimco OP will provide each
limited partner with contractual dissenters appraisal
rights that are similar to the dissenters appraisal rights
available to a stockholder of a constituent corporation in a
merger under Delaware law. These contractual appraisal rights
will enable a limited partner to obtain an appraisal of the
value of the limited partners AP XII Units in connection
with the merger. Prosecution of these contractual appraisal
rights will involve an arbitration proceeding, and the
consideration paid to a limited partner after the prosecution of
such contractual appraisal rights, which will take a period of
time that cannot be predicted with accuracy, will be a cash
payment, resulting in a taxable event to such limited partner. A
description of the appraisal rights being provided, and the
procedures that a limited partner must follow to seek such
rights, is attached to this information statement/prospectus as
Annex B.
Election
Forms
Within 10 days after the effective time of the merger,
Aimco OP will prepare and mail to the former holders of AP XII
Units an election form pursuant to which they can elect to
receive cash or OP Units. Each holder of AP XII Units must
make the same election (cash or OP Units) for all of his or
her AP XII Units. Limited partners may also elect appraisal of
their AP XII Units pursuant to the election form. Holders of AP
XII Units may elect their form of consideration by completing
and returning the election form in accordance with its
instructions. If the information agent does not receive a
properly completed election form from a holder before
5:00 p.m., New York time, on the 30th day after
the mailing of the election form, the holder will be deemed to
have elected to receive the cash consideration. Former holders
of AP XII Units may also use the election form to elect to
receive, in lieu of the merger consideration, the appraised
value of their AP XII Units, determined through an arbitration
proceeding.
46
DESCRIPTION
OF AIMCO OP UNITS; SUMMARY OF AIMCO OP PARTNERSHIP
AGREEMENT
The following description sets forth some general terms and
provisions of the Aimco OP partnership agreement. The following
description of the Aimco OP partnership agreement is qualified
in its entirety by the terms of the agreement.
General
Aimco OP is a limited partnership organized under the provisions
of the Delaware Revised Uniform Limited Partnership Act, as
amended from time to time, or any successor to such statute, or
the Delaware Act, and upon the terms and subject to the
conditions set forth in its agreement of limited partnership.
AIMCO-GP, Inc., a Delaware corporation and wholly-owned
subsidiary of Aimco, is the sole general partner of Aimco OP.
Another wholly-owned subsidiary of Aimco, AIMCO-LP Trust, a
Delaware trust, or the special limited partner, is a limited
partner in Aimco OP. The term of Aimco OP commenced on
May 16, 1994, and will continue in perpetuity, unless Aimco
OP is dissolved sooner under the provisions of the partnership
agreement or as otherwise provided by law.
Purpose
and Business
The purpose and nature of Aimco OP is to conduct any business,
enterprise or activity permitted by or under the Delaware Act,
including, but not limited to, (i) conducting the business
of ownership, construction, development and operation of
multifamily rental apartment communities, (ii) entering
into any partnership, joint venture, business trust arrangement,
limited liability company or other similar arrangement to engage
in any business permitted by or under the Delaware Act, or to
own interests in any entity engaged in any business permitted by
or under the Delaware Act, (iii) conducting the business of
providing property and asset management and brokerage services,
whether directly or through one or more partnerships, joint
ventures, subsidiaries, business trusts, limited liability
companies or other similar arrangements, and (iv) doing
anything necessary or incidental to the foregoing; provided,
however, such business and arrangements and interests may be
limited to and conducted in such a manner as to permit Aimco, in
the sole and absolute discretion of the general partner, at all
times to be classified as a REIT.
Management
by the General Partner
Except as otherwise expressly provided in the Aimco OP
partnership agreement, all management powers over the business
and affairs of Aimco OP are exclusively vested in the general
partner. No limited partner of Aimco OP or any other person to
whom one or more OP Units have been transferred (each, an
assignee) may take part in the operations,
management or control (within the meaning of the Delaware Act)
of Aimco OPs business, transact any business in Aimco
OPs name or have the power to sign documents for or
otherwise bind Aimco OP. The general partner may not be removed
by the limited partners with or without cause, except with the
consent of the general partner. In addition to the powers
granted to a general partner of a limited partnership under
applicable law or that are granted to the general partner under
any other provision of the Aimco OP partnership agreement, the
general partner, subject to the other provisions of the Aimco OP
partnership agreement, has full power and authority to do all
things deemed necessary or desirable by it to conduct the
business of Aimco OP, to exercise all powers of Aimco OP and to
effectuate the purposes of Aimco OP. Aimco OP may incur debt or
enter into other similar credit, guarantee, financing or
refinancing arrangements for any purpose (including, without
limitation, in connection with any acquisition of properties)
upon such terms as the general partner determines to be
appropriate. The general partner is authorized to execute,
deliver and perform specific agreements and transactions on
behalf of Aimco OP without any further act, approval or vote of
the limited partners.
Restrictions on General Partners
Authority. The general partner may not take any
action in contravention of the Aimco OP partnership agreement.
The general partner may not, without the prior consent of the
limited partners, undertake, on behalf of Aimco OP, any of the
following actions or enter into any transaction that would have
the effect of such transactions: (i) except as provided in
the partnership agreement, amend, modify or terminate the
partnership agreement other than to reflect the admission,
substitution, termination or withdrawal of partners;
(ii) make a general assignment for the benefit of creditors
or appoint or acquiesce in the appointment of a custodian,
receiver or trustee for all or any part of the assets of Aimco
OP; (iii) institute any proceeding for bankruptcy on
47
behalf of Aimco OP; or (iv) subject to specific exceptions,
approve or acquiesce to the transfer of the Aimco OP general
partner interest, or admit into Aimco OP any additional or
successor general partners.
Additional Limited Partners. The general
partner is authorized to admit additional limited partners to
Aimco OP from time to time, on terms and conditions and for such
capital contributions as may be established by the general
partner in its reasonable discretion. The net capital
contribution need not be equal for all partners. No action or
consent by the limited partners is required in connection with
the admission of any additional limited partner. The general
partner is expressly authorized to cause Aimco OP to issue
additional interests (i) upon the conversion, redemption or
exchange of any debt, OP Units or other securities issued
by Aimco OP, (ii) for less than fair market value, so long
as the general partner concludes in good faith that such
issuance is in the best interests of the general partner and
Aimco OP, and (iii) in connection with any merger of any
other entity into Aimco OP if the applicable merger agreement
provides that persons are to receive interests in Aimco OP in
exchange for their interests in the entity merging into Aimco
OP. Subject to Delaware law, any additional partnership
interests may be issued in one or more classes, or one or more
series of any of such classes, with such designations,
preferences and relative, participating, optional or other
special rights, powers and duties as shall be determined by the
general partner, in its sole and absolute discretion without the
approval of any limited partner, and set forth in a written
document thereafter attached to and made an exhibit to the
partnership agreement. Without limiting the generality of the
foregoing, the general partner has authority to specify
(a) the allocations of items of partnership income, gain,
loss, deduction and credit to each such class or series of
partnership interests; (b) the right of each such class or
series of partnership interests to share in distributions;
(c) the rights of each such class or series of partnership
interests upon dissolution and liquidation of Aimco OP;
(d) the voting rights, if any, of each such class or series
of partnership interests; and (e) the conversion,
redemption or exchange rights applicable to each such class or
series of partnership interests. No person may be admitted as an
additional limited partner without the consent of the general
partner, which consent may be given or withheld in the general
partners sole and absolute discretion.
Indemnification. As a part of conducting the
merger described herein, the general partner has agreed not to
seek indemnification from, or to be held harmless by, Aimco OP,
or its affiliates, for any liability or loss suffered by the
general partner related to the merger, unless (i) the
general partner has determined, in good faith, that the course
of conduct which caused the loss or liability was in the best
interests of Aimco OP, (ii) the general partner was acting
on behalf of or performing services for Aimco OP,
(iii) such liability or loss was not the result of
negligence or misconduct by the general partner and
(iv) such indemnification or agreement to hold harmless is
recoverable only out of the assets of Aimco OP and not from the
limited partners of Aimco OP. In addition, the general partner,
and any of its affiliates that are performing services on behalf
of Aimco OP, have agreed that they will not seek indemnification
for any losses, liabilities or expenses arising from or out of
an alleged violation of federal or state securities laws unless
(i) there has been a successful adjudication on the merits
of each count involving alleged securities law violations as to
the particular indemnitee, (ii) such claims have been
dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee, or (iii) a
court of competent jurisdiction approves a settlement of the
claims against a particular indemnitee and finds that
indemnification of the settlement and related costs should be
made, and, as relates to (iii), the court of law considering the
request for indemnification has been advised of the position of
the SEC and the position of any state securities regulatory
authority in which securities of Aimco OP were offered or sold
as to indemnification for violations of securities laws. Aimco
OP shall not incur the cost of that portion of liability
insurance, if any, which insures the general partner for any
liability as to which the general partner is prohibited from
being indemnified as described in this paragraph. Finally, the
general partner has agreed that the provision of advancement
from Aimco OP funds to the general partner or any of its
affiliates for legal expenses and other costs incurred as a
result of any legal action is permissible if (i) the legal
action relates to acts or omissions with respect to the
performance of duties or services on behalf of Aimco OP;
(ii) the legal action is initiated by a third party who is
not a limited partner of Aimco OP, or the legal action is
initiated by a limited partner and a court of competent
jurisdiction specifically approves such advancement; and
(iii) the general partner or its affiliates undertake to
repay the advanced funds to Aimco OP in cases in which such
person is not entitled to indemnification under this paragraph.
48
Outstanding
Classes of Units
As of October 31, 2011, Aimco OP had issued and outstanding
the following partnership interests:
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Liquidation
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Units
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Quarterly Distribution
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Preference
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Class
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Outstanding
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per Unit
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(per Unit)
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Partnership Common Units (OP Units)
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120,916,144
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$
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|
|
|
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N/A
|
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Class T Partnership Preferred Units
|
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6,000,000
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$
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0.50
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|
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$
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25.00
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Class U Partnership Preferred Units
|
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12,000,000
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|
|
$
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0.485
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|
$
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25.00
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Class V Partnership Preferred Units
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2,587,500
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$
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0.50
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$
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25.00
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Class Y Partnership Preferred Units
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3,450,000
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$
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0.4925
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$
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25.00
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Class Z Partnership Preferred Units
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823,817
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$
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0.4375
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$
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25.00
|
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Series A Community Reinvestment Act Perpetual Partnership
Preferred Units(1)
|
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94
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$
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1,875.00
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$
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500,000.00
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Class One Partnership Preferred Units(2)
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90,000
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$
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2.00
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|
$
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91.43
|
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Class Two Partnership Preferred Units(2)
|
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19,289
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|
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$
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0.12
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|
|
$
|
25.00
|
|
Class Three Partnership Preferred Units(2)
|
|
|
1,365,284
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|
|
$
|
0.4925
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|
|
$
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25.00
|
|
Class Four Partnership Preferred Units(2)
|
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755,999
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$
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0.50
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|
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$
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25.00
|
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Class Six Partnership Preferred Units(2)
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|
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796,668
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|
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$
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0.5325
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|
|
$
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25.00
|
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Class Seven Partnership Preferred Units(2)
|
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27,960
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|
$
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0.595
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|
|
$
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25.00
|
|
Class Eight Partnership Preferred Units(3)
|
|
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6,250
|
|
|
$
|
|
|
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N/A
|
|
Class I High Performance Partnership Units (HPUs)(3)
|
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2,339,950
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$
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N/A
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(1) |
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The Series A Community Reinvestment Act Perpetual
Partnership Preferred Units, or the CRA Preferred Units, have
substantially the same terms as Aimcos Series A
Community Reinvestment Act Perpetual Preferred Stock, or the CRA
Preferred Stock. Holders of the CRA Preferred Units are entitled
to cumulative cash dividends payable quarterly in arrears on
March 31, June 30, September 30, and December 31
of each year, when and as declared, beginning on
September 30, 2006. For the period from the date of
original issuance through March 31, 2015, the distribution
rate is a variable rate per annum equal to the Three-Month LIBOR
Rate (as defined in the articles supplementary designating the
CRA Preferred Stock) plus 1.25%, calculated as of the beginning
of each quarterly dividend period. The rate at
September 30, 2011 was 1.50%. Upon liquidation, holders of
the CRA Preferred Stock are entitled to a preference of $500,000
per share, plus an amount equal to accumulated, accrued and
unpaid dividends, whether or not earned or declared. The CRA
Preferred Units rank prior to Common OP Units and on the same
level as Aimco OPs other Preferred OP Units, with respect
to the payment of distributions and the distribution of amounts
upon liquidation, dissolution or winding up. The CRA Preferred
Units were not redeemable prior to June 30, 2011, except in
limited circumstances related to Aimcos REIT
qualification. On and after June 30, 2011, the CRA
Preferred Units are redeemable for cash, in whole or from time
to time in part, upon the redemption, at Aimcos option, of
its CRA Preferred Stock at a price per share equal to the
liquidation preference, plus accumulated, accrued and unpaid
distributions, if any, to the redemption date. |
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(2) |
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The Class One, Class Two, Class Three,
Class Four, Class Six and Class Seven preferred
OP Units are redeemable, at the holders option. Aimco OP,
at its sole discretion, may settle such redemption requests in
cash or shares of Aimco common stock in a value equal to the
redemption preference. In the event Aimco OP requires Aimco to
issue shares to settle a redemption request, it would issue to
Aimco a corresponding number of OP Units. Aimco OP has a
redemption policy that requires cash settlement of redemption
requests for the redeemable preferred OP Units, subject to
limited exceptions. |
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(3) |
|
The holders of Class Eight preferred OP Units and HPUs
receive the same amount of distributions that are paid to
holders of an equivalent number of Aimco OPs outstanding
OP Units. |
49
Distributions
Subject to the rights of holders of any outstanding partnership
preferred units, the Aimco OP partnership agreement requires the
general partner to cause Aimco OP to distribute quarterly all,
or such portion as the general partner may in its sole and
absolute discretion determine, of Available Cash (as defined in
the partnership agreement) generated by Aimco OP during such
quarter to the general partner, the special limited partner, the
other holders of OP Units and holders of HPUs on the record
date established by the general partner with respect to such
quarter, in accordance with their respective interests in Aimco
OP on such record date. Holders of any partnership preferred
units issued in the future may have priority over the general
partner, the special limited partner, holders of OP Units
and holders of HPUs with respect to distributions of Available
Cash, distributions upon liquidation or other distributions.
Distributions payable with respect to any interest in Aimco OP
that was not outstanding during the entire quarterly period in
respect of which any distribution is made will be prorated based
on the portion of the period that such interest was outstanding.
The general partner in its sole and absolute discretion may
distribute to the limited partners Available Cash on a more
frequent basis and provide for an appropriate record date. The
partnership agreement requires the general partner to take such
reasonable efforts, as determined by it in its sole and absolute
discretion and consistent with the requirements for
qualification as a REIT, to cause Aimco OP to distribute
sufficient amounts to enable the general partner to transfer
funds to Aimco and enable Aimco to pay stockholder dividends
that will (i) satisfy the requirements, or the REIT
Requirements, for qualifying as a REIT under the Internal
Revenue Code and the applicable regulations promulgated by the
U.S. Treasury Department, or the Treasury Regulations, and
(ii) avoid any U.S. federal income or excise tax
liability of Aimco.
While some of the debt instruments to which Aimco OP is a party,
including its credit facilities, contain restrictions on the
payment of distributions to OP Unitholders, the debt
instruments allow Aimco OP to distribute sufficient amounts to
enable the general partner and special limited partner to
transfer funds to Aimco which are then used to pay stockholder
dividends, thereby allowing Aimco to meet the requirements for
qualifications as a REIT under the Internal Revenue Code.
Distributions in Kind. No OP Unitholder
has any right to demand or receive property other than cash as
provided in the partnership agreement. The general partner may
determine, in its sole and absolute discretion, to make a
distribution in kind of partnership assets to the
OP Unitholders, and such assets will be distributed in such
a fashion as to ensure that the fair market value is distributed
and allocated in accordance with the Aimco OP partnership
agreement.
Distributions Upon Liquidation. Subject to the
rights of holders of any outstanding partnership preferred
units, net proceeds from the sale or other disposition of all or
substantially all of its assets in a transaction that will lead
to a liquidation of Aimco OP or a related series of transactions
that, taken together, result in the sale or other disposition of
all or substantially all of the assets of Aimco OP, or a
Terminating Capital Transaction, and any other cash received or
reductions in reserves made after commencement of the
liquidation of Aimco OP, will be distributed to the
OP Unitholders in accordance with the Aimco OP partnership
agreement.
Restricted Distributions. The Aimco OP
partnership agreement prohibits Aimco OP and the general
partner, on behalf of Aimco OP, from making a distribution to
any OP Unitholder on account of its interest in
OP Units if such distribution would violate
Section 17-607
of the Delaware Act or other applicable law.
Allocations
of Net Income and Net Loss
OP Units and HPUs. Net Income (as defined
in the Aimco OP partnership agreement) and Net Loss (as defined
in the Aimco OP partnership agreement) of Aimco OP will be
determined and allocated with respect to each fiscal year of
Aimco OP as of the end of each such year. Except as otherwise
provided in the Aimco OP partnership agreement, an allocation to
an OP Unitholder of a share of Net Income or Net Loss will
be treated as an allocation of the same share of each item of
income, gain, loss or deduction that is taken into account in
computing Net Income or Net Loss. Except as otherwise provided
in the Aimco OP partnership agreement and subject to the terms
of any outstanding partnership preferred units, Net Income and
Net Loss will be allocated to the holders of OP Units and
holders of HPUs in accordance with their respective interests at
the end of each fiscal year. The Aimco OP
50
partnership agreement contains provisions for special
allocations intended to comply with certain regulatory
requirements, including the requirements of Treasury Regulations
Sections 1.704-1(b)
and 1.704-2. Except as otherwise provided in the Aimco OP
partnership agreement and subject to the terms of any
outstanding partnership preferred units, for U.S. federal
income tax purposes under the Internal Revenue Code and the
Treasury Regulations, each partnership item of income, gain,
loss and deduction will be allocated among the
OP Unitholders in the same manner as its correlative item
of book income, gain, loss or deduction is allocated
under the Aimco OP partnership agreement.
Partnership Preferred Units. Net income will
be allocated to the holders of partnership preferred units for
any fiscal year (and, if necessary, subsequent fiscal years) to
the extent that the holders of partnership preferred units
receive a distribution on any partnership preferred units (other
than an amount included in any redemption of partnership
preferred units). If any partnership preferred units are
redeemed, for the fiscal year that includes such redemption
(and, if necessary, for subsequent fiscal years) (i) gross
income and gain (in such relative proportions as the general
partner in its discretion will determine) will be allocated to
the holders of partnership preferred units to the extent that
the redemption amounts paid or payable with respect to the
partnership preferred units so redeemed exceeds the aggregate
capital contributions (net of liabilities assumed or taken
subject to by Aimco OP) per partnership preferred units
allocable to the partnership preferred units so redeemed and
(ii) deductions and losses (in such relative proportions as
the general partner in its discretion will determine) will be
allocated to the holders of partnership preferred units to the
extent that the aggregate capital contributions (net of
liabilities assumed or taken subject to by Aimco OP) per
partnership preferred units allocable to the partnership
preferred units so redeemed exceeds the redemption amount paid
or payable with respect to the partnership preferred units so
redeemed.
Withholding
Aimco OP is authorized to withhold from or pay on behalf of or
with respect to each limited partner any amount of federal,
state, local or foreign taxes that the general partner
determines that Aimco OP is required to withhold or pay with
respect to any amount distributable or allocable to such limited
partner under the Aimco OP partnership agreement. The Aimco OP
partnership agreement also provides that any withholding tax
amount paid on behalf of or with respect to a limited partner
constitutes a loan by Aimco OP to such limited partner. This
loan is required to be repaid within 15 days after notice
to the limited partner from the general partner, and each
limited partner grants a security interest in its partnership
interest to secure its obligation to pay any partnership
withholding tax amounts paid on its behalf or with respect to
such limited partner. In addition, under the Aimco OP
partnership agreement, the partnership may redeem the
partnership interest of any limited partner who fails to pay
partnership withholding tax amounts paid on behalf of or with
respect to such limited partner. Also, the general partner has
authority to withhold, from any amounts otherwise distributable,
allocable or payable to a limited partner, the general
partners estimate of further taxes required to be paid by
such limited partner.
Return of
Capital
No partner is entitled to interest on its capital contribution
or on such partners capital account. Except (i) under
the rights of redemption set forth in the Aimco OP partnership
agreement, (ii) as provided by law, or (iii) under the
terms of any outstanding partnership preferred units, no partner
has any right to demand or receive the withdrawal or return of
its capital contribution from Aimco OP, except to the extent of
distributions made under the Aimco OP partnership agreement or
upon termination of Aimco OP. Except to the extent otherwise
expressly provided in the Aimco OP partnership agreement and
subject to the terms of any outstanding partnership preferred
units, no limited partner or assignee will have priority over
any other limited partner or Assignee either as to the return of
capital contributions or as to profits, losses or distributions.
Redemption Rights
of Qualifying Parties
After the first anniversary of becoming a holder of
OP Units, each OP Unitholder and some assignees have
the right, subject to the terms and conditions set forth in the
Aimco OP partnership agreement, to require Aimco OP to redeem
all or a portion of the OP Units held by such party in
exchange for shares of Aimco common stock or a cash amount equal
to the value of such shares, as Aimco OP may determine. On or
before the close of business on the fifth business day after a
holder of OP Units gives the general partner a notice of
redemption, Aimco OP may, in its
51
sole and absolute discretion but subject to the restrictions on
the ownership of Aimco stock imposed under Aimcos charter
and the transfer restrictions and other limitations thereof,
elect to cause Aimco to acquire some or all of the tendered
OP Units from the tendering party in exchange for Aimco
common stock, based on an exchange ratio of one share of Aimco
common stock for each OP Unit, subject to adjustment as
provided in the Aimco OP partnership agreement. The Aimco OP
partnership agreement does not obligate Aimco or the general
partner to register, qualify or list any Aimco common stock
issued in exchange for OP Units with the SEC, with any
state securities commissioner, department or agency, or with any
stock exchange. Aimco common stock issued in exchange for
OP Units under the Aimco OP partnership agreement will
contain legends regarding restrictions under the Securities Act
and applicable state securities laws as Aimco in good faith
determines to be necessary or advisable in order to ensure
compliance with securities laws. In the event of a change of
control of Aimco, holders of HPUs will have redemption rights
similar to those of holders of OP Units.
Partnership
Right to Call Limited Partner Interests
Notwithstanding any other provision of the Aimco OP partnership
agreement, on and after the date on which the aggregate
percentage interests of the limited partners, other than the
special limited partner, are less than one percent (1%), Aimco
OP will have the right, but not the obligation, from time to
time and at any time to redeem any and all outstanding limited
partner interests (other than the special limited partners
interest) by treating any limited partner as if such limited
partner had tendered for redemption under the Aimco OP
partnership agreement the amount of OP Units specified by
the general partner, in its sole and absolute discretion, by
notice to the limited partner.
Transfers
and Withdrawals
Restrictions On Transfer. The Aimco OP
partnership agreement restricts the transferability of
OP Units. Any transfer or purported transfer of an
OP Unit not made in accordance with the Aimco OP
partnership agreement will be null and void ab initio. Until the
expiration of one year from the date on which an
OP Unitholder acquired OP Units, subject to some
exceptions, such OP Unitholder may not transfer all or any
portion of its OP Units to any transferee without the
consent of the general partner, which consent may be withheld in
its sole and absolute discretion. After the expiration of one
year from the date on which an OP Unitholder acquired
OP Units, such OP Unitholder has the right to transfer
all or any portion of its OP Units to any person, subject
to the satisfaction of specific conditions specified in the
Aimco OP partnership agreement, including the general
partners right of first refusal.
It is a condition to any transfer (whether or not such transfer
is effected before or after the one year holding period) that
the transferee assumes by operation of law or express agreement
all of the obligations of the transferor limited partner under
the Aimco OP partnership agreement with respect to such
OP Units, and no such transfer (other than under a
statutory merger or consolidation wherein all obligations and
liabilities of the transferor partner are assumed by a successor
corporation by operation of law) will relieve the transferor
partner of its obligations under the Aimco OP partnership
agreement without the approval of the general partner, in its
sole and absolute discretion.
In connection with any transfer of OP Units, the general
partner will have the right to receive an opinion of counsel
reasonably satisfactory to it to the effect that the proposed
transfer may be effected without registration under the
Securities Act, and will not otherwise violate any federal or
state securities laws or regulations applicable to Aimco OP or
the OP Units transferred.
No transfer by a limited partner of its OP Units (including
any redemption or any acquisition of OP Units by the
general partner or by Aimco OP) may be made to any person if
(i) in the opinion of legal counsel for Aimco OP, it would
result in Aimco OP being treated as an association taxable as a
corporation, or (ii) such transfer is effectuated through
an established securities market or a
secondary market (or the substantial equivalent
thereof) within the meaning of section 7704 of the
Internal Revenue Code.
HPUs. HPUs are subject to different
restrictions on transfer. Individuals may not transfer HPUs
except to a family member (or a family-owned entity) or in the
event of their death.
52
Substituted Limited Partners. No limited
partner will have the right to substitute a transferee as a
limited partner in its place. A transferee of the interest of a
limited partner may be admitted as a substituted limited partner
only with the consent of the general partner, which consent may
be given or withheld by the general partner in its sole and
absolute discretion. If the general partner, in its sole and
absolute discretion, does not consent to the admission of any
permitted transferee as a substituted limited partner, such
transferee will be considered an assignee for purposes of the
Aimco OP partnership agreement. An assignee will be entitled to
all the rights of an assignee of a limited partnership interest
under the Delaware Act, including the right to receive
distributions from Aimco OP and the share of Net Income, Net
Losses and other items of income, gain, loss, deduction and
credit of Aimco OP attributable to the OP Units assigned to
such transferee and the rights to transfer the OP Units
provided in the Aimco OP partnership agreement, but will not be
deemed to be a holder of OP Units for any other purpose
under the Aimco OP partnership agreement, and will not be
entitled to effect a consent or vote with respect to such
OP Units on any matter presented to the limited partners
for approval (such right to consent or vote, to the extent
provided in the Aimco OP partnership agreement or under the
Delaware Act, fully remaining with the transferor limited
partner).
Withdrawals. No limited partner may withdraw
from Aimco OP other than as a result of a permitted transfer of
all of such limited partners OP Units in accordance
with the Aimco OP partnership agreement, with respect to which
the transferee becomes a substituted limited partner, or under a
redemption (or acquisition by Aimco) of all of such limited
partners OP Units.
Restrictions on the general partner. The
general partner may not transfer any of its general partner
interest or withdraw from Aimco OP unless (i) the limited
partners consent or (ii) immediately after a merger of the
general partner into another entity, substantially all of the
assets of the surviving entity, other than the general
partnership interest in Aimco OP held by the general partner,
are contributed to Aimco OP as a capital contribution in
exchange for OP Units.
Amendment
of the Partnership Agreement
By the General Partner Without the Consent of the Limited
Partners. The general partner has the power,
without the consent of the limited partners, to amend the Aimco
OP partnership agreement as may be required to facilitate or
implement any of the following purposes: (1) to add to the
obligations of the general partner or surrender any right or
power granted to the general partner or any affiliate of the
general partner for the benefit of the limited partners;
(2) to reflect the admission, substitution or withdrawal of
partners or the termination of Aimco OP in accordance with the
partnership agreement; (3) to reflect a change that is of
an inconsequential nature and does not adversely affect the
limited partners in any material respect, or to cure any
ambiguity, correct or supplement any provision in the
partnership agreement not inconsistent with law or with other
provisions, or make other changes with respect to matters
arising under the partnership agreement that will not be
inconsistent with law or with the provisions of the partnership
agreement; (4) to satisfy any requirements, conditions or
guidelines contained in any order, directive, opinion, ruling or
regulation of a federal or state agency or contained in federal
or state law; (5) to reflect such changes as are reasonably
necessary for Aimco to maintain its status as a REIT; and
(6) to modify the manner in which capital accounts are
computed (but only to the extent set forth in the definition of
Capital Account in the Aimco OP partnership
agreement or contemplated by the Internal Revenue Code or the
Treasury Regulations).
With the Consent of the Limited
Partners. Amendments to the Aimco OP partnership
agreement may be proposed by the general partner or by holders
of a majority of the outstanding OP Units and other classes
of units that have the same voting rights as holders of
OP Units, excluding the special limited partner. Following
such proposal, the general partner will submit any proposed
amendment to the limited partners. The general partner will seek
the written consent of a majority in interest of the limited
partners on the proposed amendment or will call a meeting to
vote thereon and to transact any other business that the general
partner may deem appropriate.
Procedures
for Actions and Consents of Partners
Meetings of the partners may be called by the general partner
and will be called upon the receipt by the general partner of a
written request by a majority in interest of the limited
partners. Notice of any such meeting will be given to all
partners not less than seven (7) days nor more than thirty
(30) days prior to the date of such meeting. Partners
53
may vote in person or by proxy at such meeting. Each meeting of
partners will be conducted by the general partner or such other
person as the general partner may appoint under such rules for
the conduct of the meeting as the general partner or such other
person deems appropriate in its sole and absolute discretion.
Whenever the vote or consent of partners is permitted or
required under the partnership agreement, such vote or consent
may be given at a meeting of partners or may be given by written
consent. Any action required or permitted to be taken at a
meeting of the partners may be taken without a meeting if a
written consent setting forth the action so taken is signed by
partners holding a majority of outstanding OP Units (or
such other percentage as is expressly required by the Aimco OP
partnership agreement for the action in question).
Records
and Accounting; Fiscal Year
The Aimco OP partnership agreement requires the general partner
to keep or cause to be kept at the principal office of Aimco OP
those records and documents required to be maintained by the
Delaware Act and other books and records deemed by the general
partner to be appropriate with respect to Aimco OPs
business. The books of Aimco OP will be maintained, for
financial and tax reporting purposes, on an accrual basis in
accordance with generally accepted accounting principles, or on
such other basis as the general partner determines to be
necessary or appropriate. To the extent permitted by sound
accounting practices and principles, Aimco OP, the general
partner and Aimco may operate with integrated or consolidated
accounting records, operations and principles. The fiscal year
of Aimco OP is the calendar year.
Reports
As soon as practicable, but in no event later than one hundred
and five (105) days after the close of each calendar
quarter and each fiscal year, the general partner will make
available to limited partners (which may be done by filing a
report with the SEC) a report containing financial statements of
Aimco OP, or of Aimco if such statements are prepared solely on
a consolidated basis with Aimco, for such calendar quarter or
fiscal year, as the case may be, presented in accordance with
generally accepted accounting principles, and such other
information as may be required by applicable law or regulation
or as the general partner determines to be appropriate.
Statements included in quarterly reports are not audited.
Statements included in annual reports are audited by a
nationally recognized firm of independent public accountants
selected by the general partner.
Tax
Matters Partner
The general partner is the tax matters partner of
Aimco OP for U.S. federal income tax purposes. The tax
matters partner is authorized, but not required, to take certain
actions on behalf of Aimco OP with respect to tax matters. In
addition, the general partner will arrange for the preparation
and timely filing of all returns with respect to partnership
income, gains, deductions, losses and other items required of
Aimco OP for U.S. federal and state income tax purposes and
will use all reasonable effort to furnish, within ninety
(90) days of the close of each taxable year, the tax
information reasonably required by limited partners for
U.S. federal and state income tax reporting purposes. The
limited partners will promptly provide the general partner with
such information as may be reasonably requested by the general
partner from time to time.
Dissolution
and Winding Up
Dissolution. Aimco OP will dissolve, and its
affairs will be wound up, upon the first to occur of any of the
following (each a liquidating event): (i) an
event of withdrawal, as defined in the Delaware Act (including,
without limitation, bankruptcy), of the sole general partner
unless, within ninety (90) days after the withdrawal, a
majority in interest (as such phrase is used in
Section 17-801(3)
of the Delaware Act) of the remaining partners agree in writing,
in their sole and absolute discretion, to continue the business
of Aimco OP and to the appointment, effective as of the date of
withdrawal, of a successor general partner; (ii) an
election to dissolve Aimco OP made by the general partner in its
sole and absolute discretion, with or without the consent of the
limited partners; (iii) entry of a decree of judicial
dissolution of Aimco OP under the provisions of the Delaware
Act; (iv) the occurrence of a Terminating Capital
Transaction; or (v) the redemption (or acquisition by
Aimco, the general partner
and/or the
special limited partner) of all OP Units other than
OP Units held by the general partner or the special limited
partner.
54
Winding Up. Upon the occurrence of a
liquidating event, Aimco OP will continue solely for the
purposes of winding up its affairs in an orderly manner,
liquidating its assets and satisfying the claims of its
creditors and partners. The general partner (or, in the event
that there is no remaining general partner or the general
partner has dissolved, become bankrupt within the meaning of the
Delaware Act or ceased to operate, any person elected by a
majority in interest of the limited partners) will be
responsible for overseeing the winding up and dissolution of
Aimco OP and will take full account of Aimco OPs
liabilities and property, and Aimco OP property will be
liquidated as promptly as is consistent with obtaining the fair
value thereof, and the proceeds therefrom (which may, to the
extent determined by the general partner, include Aimco stock)
will be applied and distributed in the following order:
(i) first, to the satisfaction of all of Aimco OPs
debts and liabilities to creditors other than the partners and
their assignees (whether by payment or the making of reasonable
provision for payment thereof); (ii) second, to the
satisfaction of all of Aimco OPs debts and liabilities to
the general partner (whether by payment or the making of
reasonable provision for payment thereof), including, but not
limited to, amounts due as reimbursements under the partnership
agreement; (ii) third, to the satisfaction of all of Aimco
OPs debts and liabilities to the other partners and any
assignees (whether by payment or the making of reasonable
provision for payment thereof); (iv) fourth, to the
satisfaction of all liquidation preferences of outstanding
Partnership Preferred Units, if any; and (v) the balance,
if any, to the general partner, the limited partners and any
assignees in accordance with and in proportion to their positive
capital account balances, after giving effect to all
contributions, distributions and allocations for all periods. In
the event of a liquidation, holders of HPUs will be specially
allocated items of income and gain in an amount sufficient to
cause the capital account of such holder to be equal to that of
a holder of an equal number of OP Units.
55
DESCRIPTION
OF AIMCO COMMON STOCK
General
Aimcos charter authorizes the issuance of up to
510,587,500 shares of capital stock, consisting of
480,887,260 shares currently classified as common stock
with a par value of $0.01 per share and
29,700,240 shares of preferred stock with a par value of
$0.01 per share. As of October 31, 2011,
120,916,144 shares were issued and outstanding. Aimco
common stock is traded on the NYSE under the symbol
AIV. Computershare Limited serves as transfer agent
and registrar of Aimco common stock. On November 10, 2011,
the closing price of the Aimco common stock on the NYSE was
$22.82. The following table shows the high and low reported
sales prices and dividends paid per share of Aimcos common
stock in the periods indicated.
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Quarter Ended
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High
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|
Low
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|
Dividends
|
|
December 31, 2011 (through November 10, 2011)
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$
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27.26
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|
|
$
|
20.08
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|
|
$
|
|
|
September 30, 2011
|
|
|
28.12
|
|
|
|
21.92
|
|
|
|
0.12
|
|
June 30, 2011
|
|
|
27.67
|
|
|
|
24.50
|
|
|
|
0.12
|
|
March 31, 2011
|
|
|
26.33
|
|
|
|
23.38
|
|
|
|
0.12
|
|
December 31, 2010
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|
$
|
26.24
|
|
|
$
|
21.22
|
|
|
$
|
0.10
|
|
September 30, 2010
|
|
|
22.82
|
|
|
|
18.12
|
|
|
|
0.10
|
|
June 30, 2010
|
|
|
24.21
|
|
|
|
18.14
|
|
|
|
0.10
|
|
March 31, 2010
|
|
|
19.17
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|
|
|
15.01
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|
|
|
0.00
|
|
December 31, 2009
|
|
$
|
17.09
|
|
|
$
|
11.80
|
|
|
$
|
0.20
|
|
September 30, 2009
|
|
|
15.91
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|
|
|
7.36
|
|
|
|
0.10
|
|
June 30, 2009
|
|
|
11.10
|
|
|
|
5.18
|
|
|
|
0.10
|
|
March 31, 2009
|
|
|
12.89
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|
|
|
4.57
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|
|
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0.00
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|
Aimco has a Stock Award and Incentive Plan to attract and retain
officers, key employees and independent directors. Aimcos
plan reserves for issuance a maximum of 4.1 million 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 Aimcos plan.
Holders of Aimco common stock are entitled to receive dividends,
when and as declared by the board of directors of Aimco, or the
Aimco Board of Directors, out of funds legally available
therefor. The holders of shares of common stock, upon any
liquidation, dissolution or winding up of Aimco, are entitled to
receive ratably any assets remaining after payment in full of
all liabilities of Aimco and the liquidation preferences of
preferred stock. The shares of common stock possess ordinary
voting rights for the election of directors and in respect of
other corporate matters, each share entitling the holder thereof
to one vote. Holders of shares of common stock do not have
cumulative voting rights in the election of directors, which
means that holders of more than 50% of the shares of common
stock voting for the election of directors can elect all of the
directors if they choose to do so and the holders of the
remaining shares cannot elect any directors. Holders of shares
of common stock do not have preemptive rights, which means they
have no right to acquire any additional shares of common stock
that may be issued by Aimco at a subsequent date.
Outstanding
Classes of Preferred Stock
Aimco is authorized to issue shares of preferred stock in one or
more classes or subclasses, with such designations, preferences,
conversion and other rights, voting powers, restriction,
limitations as to dividends, qualifications and terms and
conditions of redemption, in each case, if any as are permitted
by Maryland law and as
56
the Aimco Board of Directors may determine by resolution. As of
October 31, 2011, Aimco had issued and outstanding the
following classes of preferred stock:
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|
|
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|
|
Quarterly
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|
|
Liquidation
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|
|
|
|
|
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Shares
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|
|
Shares
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|
|
Dividend
|
|
|
Preference
|
|
|
Conversion
|
|
Class
|
|
Authorized
|
|
|
Outstanding
|
|
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per Share
|
|
|
per Share
|
|
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Price
|
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|
Class T Cumulative Preferred Stock
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|
|
6,000,000
|
|
|
|
6,000,000
|
|
|
$
|
0.50
|
|
|
$
|
25.00
|
|
|
|
N/A
|
|
Class U Cumulative Preferred Stock
|
|
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12,000,000
|
|
|
|
12,000,000
|
|
|
$
|
0.485
|
|
|
$
|
25.00
|
|
|
|
N/A
|
|
Class V Cumulative Preferred Stock
|
|
|
3,450,000
|
|
|
|
2,587,500
|
|
|
$
|
0.50
|
|
|
$
|
25.00
|
|
|
|
N/A
|
|
Class Y Cumulative Preferred Stock
|
|
|
3,450,000
|
|
|
|
3,450,000
|
|
|
$
|
0.4925
|
|
|
$
|
25.00
|
|
|
|
N/A
|
|
Class Z Cumulative Preferred Stock
|
|
|
4,800,000
|
|
|
|
823,817
|
|
|
$
|
0.4375
|
|
|
$
|
25.00
|
|
|
|
N/A
|
|
Series A Community Reinvestment Act Perpetual Preferred
Stock(1)
|
|
|
240
|
|
|
|
94
|
|
|
$
|
1,875.00
|
|
|
$
|
500,000.00
|
|
|
|
N/A
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|
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|
(1) |
|
For the period from the date of original issuance through
March 31, 2015, the dividend rate is a variable rate per
annum equal to the Three-Month LIBOR Rate (as defined in the
articles supplementary designating the CRA Preferred Stock) plus
1.25%, calculated as of the beginning of each quarterly dividend
period. The rate at September 30, 2011 was 1.50%. Upon
liquidation, holders of the CRA Preferred Stock are entitled to
a preference of $500,000 per share, plus an amount equal to
accumulated, accrued and unpaid dividends, whether or not earned
or declared. The CRA Preferred Stock ranks prior to the Aimco
common stock and on the same level as Aimcos outstanding
shares of preferred stock with respect to the payment of
dividends and the distribution of amounts upon liquidation,
dissolution or winding up. The CRA Preferred Stock was not
redeemable prior to June 30, 2011, except in limited
circumstances related to REIT qualification. On and after
June 30, 2011, the CRA Preferred Stock is redeemable for
cash, in whole or from time to time in part, at Aimcos
option, at a price per share equal to the liquidation
preference, plus accumulated, accrued and unpaid dividends, if
any, to the redemption date. |
Ranking. Each authorized class of preferred
stock ranks, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of Aimco, (a) prior
or senior to the common stock and any other class or series of
capital stock of Aimco if the holders of that class of preferred
stock are entitled to the receipt of dividends or amounts
distributable upon liquidation, dissolution or
winding-up
in preference or priority to the holders of shares of such class
or series (Junior Stock); (b) on a parity with
the other authorized classes of preferred stock and any other
class or series of capital stock of Aimco if the holders of such
class or series of stock and that class of preferred stock are
entitled to receive dividends and amounts distributable upon
liquidation, dissolution or
winding-up
in proportion to their respective amounts of accrued and unpaid
dividends per share or liquidation preferences, without
preference or priority of one over the other (Parity
Stock); and (c) junior to any class or series of
capital stock of Aimco if the holders of such class or series
are entitled to receive dividends and amounts distributable upon
liquidation, dissolution or
winding-up
in preference or priority to the holders of that class of
preferred stock (Senior Stock).
Dividends. Holders of each authorized class of
preferred stock are entitled to receive, when and as declared by
the Aimco Board of Directors, out of funds legally available for
payment, quarterly cash dividends in the amount per share set
forth in the table above under the heading, Quarterly
Dividend Per Share. The dividends are cumulative from the
date of original issue, whether or not in any dividend period or
periods Aimco declares any dividends or have funds legally
available for the payment of such dividend. Holders of preferred
stock are not entitled to receive any dividends in excess of
cumulative dividends on the preferred stock. No interest, or sum
of money in lieu of interest, shall be payable in respect of any
dividend payment or payments on the preferred stock that may be
in arrears.
When dividends are not paid in full upon any class of preferred
stock, or a sum sufficient for such payment is not set apart,
all dividends declared upon that class of preferred stock and
any shares of Parity Stock will be declared ratably in
proportion to the respective amounts of dividends accumulated,
accrued and unpaid on that class of preferred stock and
accumulated, accrued and unpaid on such Parity Stock. Except as
set forth in the preceding sentence, unless dividends on each
class of preferred stock equal to the full amount of
accumulated, accrued and unpaid dividends have been or
contemporaneously are declared and paid or declared and a sum
sufficient for the
57
payment thereof has been or contemporaneously is set apart for
such payment, for all past dividend periods, no dividends may be
declared or paid or set apart for payment by Aimco and no other
distribution of cash or other property may be declared or made,
directly or indirectly, by Aimco with respect to any shares of
Parity Stock. Unless dividends equal to the full amount of all
accumulated, accrued and unpaid dividends on each class of
preferred stock have been declared and paid, or declared and a
sum sufficient for the payment thereof has been set apart for
such payment, for all past dividend periods, no dividends (other
than dividends or distributions paid in shares of Junior Stock
or options, warrants or rights to subscribe for or purchase
shares of Junior Stock) may be declared or paid or set apart for
payment by Aimco and no other distribution of cash or other
property may be declared or made, directly or indirectly, by
Aimco with respect to any shares of Junior Stock, nor may any
shares of Junior Stock be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition
of common stock made for purposes of an employee incentive or
benefit plan of Aimco or any subsidiary) for any consideration
(or any monies be paid to or made available for a sinking fund
for the redemption of any shares of any such stock), directly or
indirectly, by Aimco (except by conversion into or exchange for
shares of Junior Stock, or options, warrants or rights to
subscribe for or purchase shares of Junior Stock), nor shall any
other cash or other property be paid or distributed to or for
the benefit of holders of shares of Junior Stock.
Notwithstanding the foregoing provisions of this paragraph,
Aimco is not prohibited from (1) declaring or paying or
setting apart for payment any dividend or distribution on any
shares of Parity Stock or (2) redeeming, purchasing or
otherwise acquiring any Parity Stock, in each case, if such
declaration, payment, redemption, purchase or other acquisition
is necessary to maintain Aimcos qualification as a REIT.
Liquidation Preference. Upon any voluntary or
involuntary liquidation, dissolution or winding up of Aimco,
before it makes or sets apart any payment or distribution for
the holders of any shares of Junior Stock, the holders of each
class of preferred stock are entitled to receive a liquidation
preference per share in the amount set forth above under the
heading, Liquidation Preference Per Share, plus an
amount equal to all accumulated, accrued and unpaid dividends
(whether or not formed or declared) to the date of final
distribution to such holders. Holders of each class of preferred
stock are not entitled to any further payment. Until the holders
of each class of preferred stock have been paid their respective
liquidation preferences in full, plus an amount equal to all
accumulated, accrued and unpaid dividends (whether or not earned
or declared) to the date of final distribution to such holders,
no payment may be made to any holder of Junior Stock upon the
liquidation, dissolution or winding up of Aimco. If, upon any
liquidation, dissolution or winding up of Aimco, its assets, or
proceeds thereof, distributable among the holders of preferred
stock are insufficient to pay in full the preference described
above for any class of preferred stock and any liquidating
payments on any other shares of any class or series of Parity
Stock, then such proceeds shall be distributed among the holders
of such class of preferred stock and holders of all other shares
of any class or series of Parity Stock ratably in the same
proportion as the respective amounts that would be payable on
such class of preferred stock and any such Parity Stock if all
amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of Aimco does
not include its consolidation or merger with one or more
corporations, a sale or transfer of all or substantially all of
its assets, or a statutory share exchange. Upon any liquidation,
dissolution or winding up of Aimco, after payment shall have
been made in full to the holders of preferred stock, any other
series or class or classes of Junior Stock shall be entitled to
receive any and all assets remaining to be paid or distributed,
and the holders of each class of preferred stock and any Parity
Stock shall not be entitled to share therein.
Redemption. Except as described below and in
certain limited circumstances, including circumstances relating
to maintaining Aimcos ability to qualify as a REIT, Aimco
may not redeem the shares of preferred stock. On or after the
dates set forth in the table below, Aimco may, at its option,
redeem shares of the classes of preferred stock set forth below,
in whole or from time to time in part, at a cash redemption
price equal to the percentage of the liquidation preference for
that class of preferred stock indicated under the heading
Price, plus all accumulated, accrued and unpaid
dividends, if any, to the date fixed for redemption. The
redemption price for each class of non-convertible preferred
stock (other than any portion thereof consisting of accumulated,
accrued and unpaid dividends) is payable solely with the
proceeds from the sale of equity securities by Aimco or Aimco OP
(whether or not such sale occurs concurrently with such
redemption). For purposes of the preceding sentence,
capital shares means any common stock, preferred
stock, depositary shares, partnership or other interests,
participations or other ownership interests (however designated)
and any rights (other than debt securities convertible into or
exchangeable
58
at the option of the holder for equity securities (unless and to
the extent such debt securities are subsequently converted into
capital stock)) or options to purchase any of the foregoing
securities issued by Aimco or Aimco OP.
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Class
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Date
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Price
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Class T Cumulative Preferred Stock
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July 31, 2008
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|
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100
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%
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Class U Cumulative Preferred Stock
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March 24, 2009
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|
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100
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%
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Class V Cumulative Preferred Stock
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September 29, 2009
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100
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%
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Class Y Cumulative Preferred Stock
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December 21, 2009
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100
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%
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Class Z Cumulative Preferred Stock
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|
July 29, 2016
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|
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100
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%
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Series A Community Reinvestment Act Perpetual Preferred
Stock
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June 30, 2011
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100
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%
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Except as otherwise described in this information
statement/prospectus, none of the authorized classes of
preferred stock have any stated maturity or are subject to any
sinking find or mandatory redemption provisions.
Conversion. The shares of convertible
preferred stock are convertible at any time, at the option of
the holder, into a number of shares of Aimco common stock
obtained by dividing its liquidation preference (excluding any
accumulated, accrued and unpaid dividends) by the conversion
price set forth in the table above. In the case of shares called
for redemption, conversion rights will terminate at the close of
business on the date fixed for such redemption, unless Aimco
defaults in making such redemption payment. Each conversion will
be deemed to have been effected immediately prior to the close
of business on the date on which the holder surrenders
certificates representing shares of preferred stock and Aimco
receives notice and any applicable instruments of transfer and
any required taxes. The conversion will be at the conversion
price in effect at such time and on such date unless the stock
transfer books of Aimco are closed on that date, in which event
such person or persons will be deemed to have become such holder
or holders of record at the close of business on the next
succeeding day on which such stock transfer books are open, but
such conversion will be at the conversion price in effect on the
date on which such shares were surrendered and such notice
received by Aimco. No fractional shares of Aimco common stock or
scrip representing fractions of a share of Aimco common stock
will be issued upon conversion of shares of preferred stock.
Instead of any fractional interest in a share of Aimco common
stock that would otherwise be deliverable upon the conversion of
any share of preferred stock, Aimco will pay to the holder of
such shares an amount in cash based upon the closing price of
the Aimco common stock on the trading day immediately preceding
the date of conversion. If more than one share of preferred
stock is surrendered for conversion at one time by the same
holder, the number of full shares of Aimco common stock issuable
upon conversion thereof will be computed on the basis of the
aggregate number of shares of preferred stock so converted.
Except as otherwise required, Aimco will make no payment or
allowance for unpaid dividends, whether or not in arrears, on
converted shares or for dividends (other than dividends on the
common stock the record date for which is after the conversion
date and which Aimco shall pay in the ordinary course to the
record holder as of the record date) on the Aimco common stock
issued upon such conversion. Holders of preferred stock at the
close of business on a record date for the payment of dividends
on the preferred stock will be entitled to receive an amount
equal to the dividend payable on such shares on the
corresponding dividend payment date notwithstanding the
conversion of such shares following such record date.
Each conversion price is subject to adjustment upon the
occurrence of certain events, including: (i) if Aimco
(A) pays a dividend or makes a distribution on its capital
stock in shares of Aimco common stock, (B) subdivides its
outstanding common stock into a greater number of shares,
(C) combines its outstanding common stock into a smaller
number of shares or (D) issues any shares of capital stock
by reclassification of its outstanding common stock;
(ii) if Aimco issues rights, options or warrants to holders
of common stock entitling them to subscribe for or purchase
common stock at a price per share less than the fair market
value thereof; and (iii) if Aimco makes a distribution on
its common stock other than in cash or shares of common stock.
Conversion of preferred stock will be permitted only to the
extent that such conversion would not result in a violation of
the ownership restrictions set forth in Aimcos charter.
Voting Rights. Holders of shares of the
authorized classes of preferred stock do not have any voting
rights, except as set forth below and except as otherwise
required by applicable law.
59
If and whenever dividends on any shares of any class of
preferred stock or any series or class of Parity Stock are in
arrears for six or more quarterly periods, whether or not
consecutive, the number of directors then constituting the Aimco
Board of Directors will be increased by two, if not already
increased by reason of similar types of provisions with respect
to shares of Parity Stock of any other class or series which is
entitled to similar voting rights (the Voting Preferred
Stock), and the holders of shares of that class of
preferred stock, together with the holders of shares of all
other Voting Preferred Stock then entitled to exercise similar
voting rights, voting as a single class regardless of series,
will be entitled to vote for the election of the two additional
directors of Aimco at any annual meeting of stockholders or at a
special meeting of the holders of that class of preferred stock
and of the Voting Preferred Stock called for that purpose.
Whenever dividends in arrears on outstanding shares of Voting
Preferred Stock shall have been paid and dividends thereon for
the current quarterly dividend period have been paid or declared
and set apart for payment, then the right of the holders of the
Voting Preferred Stock to elect the additional two directors
shall cease and the terms of office of the directors shall
terminate and the number of directors constituting the Aimco
Board of Directors shall be reduced accordingly. Holders of
Class W Cumulative Convertible Preferred Stock, voting as a
single class, are also entitled to elect one director of Aimco
if and whenever (i) for two consecutive quarterly dividend
periods, Aimco fails to pay at least $0.45 per share in
dividends on the common stock or (ii) Aimco fails to pay a
quarterly dividend on that class of preferred stock, whether or
not earned or declared.
The affirmative vote or consent of at least
662/3%
of the votes entitled to be cast by the holders of the
outstanding shares of each class of preferred stock and the
holders of all other classes or series of Parity Stock entitled
to vote on such matters, voting as a single class, will be
required to (1) authorize, create, increase the authorized
amount of, or issue any shares of any class of Senior Stock or
any security convertible into shares of any class of Senior
Stock, or (2) amend, alter or repeal any provision of, or
add any provision to, Aimcos charter or by-laws, if such
action would materially adversely affect the voting powers,
rights or preferences of the holders of that class of preferred
stock or, with respect to the Class W Cumulative
Convertible Preferred Stock, would convert such preferred stock
into cash or any other security other than Preferred Stock with
terms and provisions equivalent to those set forth in the
articles supplementary for such class of preferred stock
(including any amendment, alteration or repeal effected pursuant
to a merger, consolidation, or similar transaction); provided,
however, that no such vote of the holders of that class of
preferred stock shall be required if, at or prior to the time
such amendment, alteration or repeal is to take effect or the
issuance of any such Senior Stock or convertible security is to
be made, as the case may be, provisions are made for the
redemption of all outstanding shares of that class of preferred
stock. The amendment of or supplement to Aimcos charter to
authorize, create, increase or decrease the authorized amount of
or to issue Junior Stock, or any shares of any class of Parity
Stock shall not be deemed to materially adversely affect the
voting powers, rights or preferences of any class of preferred
stock.
Transfer. For Aimco to qualify as a REIT under
the Internal Revenue Code, not more than 50% in value of its
outstanding capital stock may be owned, directly or indirectly,
by five or fewer individuals (as defined in the Internal Revenue
Code to include certain entities) during the last half of a
taxable year, and the shares of Aimco common stock must be
beneficially owned by 100 or more persons during at least
335 days of a taxable year of 12 months or during a
proportionate part of a shorter taxable year. Because the Aimco
Board of Directors believes that it is essential for Aimco to
meet the REIT Requirements, the Aimco Board of Directors has
adopted, and the stockholders have approved, provisions of
Aimcos charter restricting the acquisition of shares of
Aimco common stock.
Subject to specific exceptions specified in Aimcos
charter, no holder may own, or be deemed to own by virtue of
various attribution and constructive ownership provisions of the
Internal Revenue Code and
Rule 13d-3
under the Exchange Act, more than 8.7% (or 15% in the case of
specific pension trusts described in the Internal Revenue Code,
investment companies registered under the Investment Company Act
of 1940, as amended, and Mr. Considine) of the outstanding
shares of Aimco common stock (the Ownership Limit).
The Aimco Board of Directors may waive the Ownership Limit if
evidence satisfactory to the Aimco Board of Directors and
Aimcos tax counsel is presented that such ownership will
not then or in the future jeopardize Aimcos status as a
REIT. However, in no event may such holders direct or
indirect ownership of Aimco common stock exceed 12% of the total
outstanding shares of Aimco common stock. As a condition of such
waiver, the Aimco Board of Directors may require opinions of
counsel satisfactory to it
and/or an
undertaking from the applicant with respect to preserving the
60
REIT status of Aimco. The foregoing restrictions on
transferability and ownership will not apply if the Aimco Board
of Directors determines that it is no longer in the best
interests of Aimco to attempt to qualify, or to continue to
quality as a REIT and a resolution terminating Aimcos
status as a REIT and amending Aimcos charter to remove the
foregoing restrictions is duly adopted by the Aimco Board of
Directors and a majority of Aimcos stockholders. If shares
of Aimco common stock in excess of the Ownership Limit, or
shares of Aimco common stock which would cause the REIT to be
beneficially owned by fewer than 100 persons, or which
would result in Aimco being closely held, within the
meaning of section 856(h) of the Internal Revenue Code, or
which would otherwise result in Aimco failing to qualify as a
REIT, are issued or transferred to any person, such issuance or
transfer shall be null and void to the intended transferee, and
the intended transferee would acquire no rights to the stock.
Shares of Aimco common stock transferred in excess of the
Ownership Limit or other applicable limitations will
automatically be transferred to a trust for the exclusive
benefit of one or more qualifying charitable organizations to be
designated by Aimco. Shares transferred to such trust will
remain outstanding, and the trustee of the trust will have all
voting and dividend rights pertaining to such shares. The
trustee of such trust may transfer such shares to a person whose
ownership of such shares does not violate the Ownership Limit or
other applicable limitation. Upon a sale of such shares by the
trustee, the interest of the charitable beneficiary will
terminate, and the sales proceeds would be paid, first, to the
original intended transferee, to the extent of the lesser of
(a) such transferees original purchase price (or the
original market value of such shares if purportedly acquired by
gift or devise) and (b) the price received by the trustee,
and, second, any remainder to the charitable beneficiary. In
addition, shares of stock held in such trust are purchasable by
Aimco for a 90 day period at a price equal to the lesser of
the price paid for the stock by the original intended transferee
(or the original market value of such shares if purportedly
acquired by gift or devise) and the market price for the stock
on the date that Aimco determines to purchase the stock. The
90 day period commences on the date of the violative
transfer or the date that the Aimco Board of Directors
determines in good faith that a violative transfer has occurred,
whichever is later. All certificates representing shares of
Aimco common stock bear a legend referring to the restrictions
described above.
All persons who own, directly or by virtue of the attribution
provisions of the Internal Revenue Code and
Rule 13d-3
under the Exchange Act, more than a specified percentage of the
outstanding shares of Aimco common stock must file an affidavit
with Aimco containing the information specified in Aimcos
charter within 30 days after January 1 of each year. In
addition, each stockholder shall upon demand be required to
disclose to Aimco in writing such information with respect to
the direct, indirect and constructive ownership of shares as the
board of directors deems necessary to comply with the provisions
of the Internal Revenue Code applicable to a REIT or to comply
with the requirements of any taxing authority or governmental
agency.
The ownership limitations may have the effect of precluding
acquisition of control of Aimco by specific parties unless the
Aimco Board of Directors determines that maintenance of REIT
status is no longer in the best interests of Aimco.
61
COMPARISON
OF AIMCO OP UNITS AND AIMCO COMMON STOCK
Set forth below is a comparison of the OP Units to the
Aimco common stock.
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OP Units
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Common Stock
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Nature of Investment
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The OP Units constitute equity interests entitling each holder
to his or her pro rata share of cash distributions made from
Available Cash (as such term is defined in the Aimco OP
partnership agreement) to the partners of Aimco OP, a Delaware
limited partnership.
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The Aimco common stock constitutes equity interests in Aimco, a
Maryland corporation.
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Voting Rights
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Under the Aimco OP partnership agreement, limited partners have
voting rights only with respect to certain limited matters such
as certain amendments of the partnership agreement and certain
transactions such as the institution of bankruptcy proceedings,
an assignment for the benefit of creditors and certain transfers
by the general partner of its interest in Aimco OP or the
admission of a successor general partner.
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Each outstanding share of Aimco common stock entitles the holder
thereof to one vote on all matters submitted to stockholders for
a vote, including the election of directors. Holders of Aimco
common stock have the right to vote on, among other things, a
merger of Aimco, amendments to the Aimco charter and the
dissolution of Aimco. Certain amendments to the Aimco charter
require the affirmative vote of not less than two-thirds of
votes entitled to be cast on the matter. The Aimco charter
permits the Aimco Board of Directors to classify and issue
capital stock in one or more series having voting power which
may differ from that of the common stock. Under Maryland law, a
consolidation, merger, share exchange or transfer of all or
substantially all of the assets of Aimco requires the
affirmative vote of not less than two-thirds of all of the votes
entitled to be cast on the matter. With respect to each of these
transactions, only the holders of common stock are entitled to
vote on the matters. No approval of the stockholders is required
for the sale of less than all or substantially all of
Aimcos assets. Maryland law provides that the Aimco Board
of Directors must obtain the affirmative vote of at least
two-thirds of the votes entitled to be cast on the matter in
order to dissolve Aimco. Only the holders of Aimco common stock
are entitled to vote on Aimcos dissolution.
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Distributions/Dividends
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Subject to the rights of holders of any outstanding partnership
preferred units, the Aimco OP partnership agreement requires the
general partner to cause Aimco OP to distribute quarterly all,
or such portion as the general partner may in its sole and
absolute discretion determine, of Available Cash (as such term
is defined in the partnership agreement) generated by Aimco OP
during such quarter to the general partner, the Special Limited
Partner and the holders of OP Units and HPUs on the record date
established by the general partner with respect to such quarter,
in accordance with their respective interests in Aimco OP on
such record date. Holders of any Partnership Preferred Units
currently issued and which may be issued in the future may have
priority over the general partner, the special limited partner
and holders of OP Units and HPUs with respect to distributions
of Available Cash, distributions upon liquidation or other
distributions.
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Holders of Aimco common stock are entitled to receive dividends
when and as declared by the Aimco Board of Directors, out of
funds legally available therefor. Under the REIT rules, Aimco is
required to distribute dividends (other than capital gain
dividends) to its stockholders in an amount at least equal to
(A) the sum of (i) 90% of Aimcos REIT taxable
income (computed without regard to the dividends paid
deduction and Aimcos net capital gain) and (ii) 90% of the
net income (after tax), if any, from foreclosure property, minus
(B) the sum of certain items of noncash income. See
Material United States Federal Income Tax Matters.
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62
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OP Units
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Common Stock
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See Description of Aimco OP Units; Summary of Aimco OP
Partnership Agreement Distributions. The
general partner in its sole and absolute discretion may
distribute to the holders of OP Units and HPUs Available Cash on
a more frequent basis and provide for an appropriate record
date. The partnership agreement requires the general partner to
take such reasonable efforts, as determined by it in its sole
and absolute discretion and consistent with the REIT
Requirements, to cause Aimco OP to distribute sufficient amounts
to enable the general partner to transfer funds to Aimco and
enable Aimco to pay stockholder dividends that
will(i) satisfy the requirements for qualifying as a REIT
under the Internal Revenue Code, and the Treasury Regulations
and (ii) avoid any U.S. federal income or excise tax
liability of Aimco. See Description of Aimco OP Units;
Summary of Aimco OP Partnership Agreement
Distributions.
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Liquidity and Transferability/Redemption
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There is no public market for the OP Units and the OP Units are
not listed on any securities exchange.
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The Aimco common stock is transferable subject to the Ownership
Limit set forth in the Aimco charter. The Aimco common stock is
listed on the NYSE.
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Under the Aimco OP partnership agreement, until the expiration
of one year from the date on which a holder acquired OP Units,
subject to certain exceptions, such OP Unitholder may not
transfer all or any portion of its OP Units to any transferee
without the consent of the general partner, which consent may be
withheld in its sole and absolute discretion. After the
expiration of one year, such OP Unitholder has the right to
transfer all or any portion of its OP Units to any person,
subject to the satisfaction of certain conditions specified in
the partnership agreement, including the general partners
right of first refusal. See Description of Aimco OP Units;
Summary of Aimco OP Partnership Agreement Transfers
and Withdrawals. After the first anniversary of becoming a
holder of OP Units, a holder has the right, subject to the terms
and conditions of the partnership agreement, to require Aimco OP
to redeem all or a portion of such holders OP Units in
exchange for shares of common stock or a cash amount equal to
the value of such shares, as Aimco OP may elect. See
Description of Aimco OP Units; Summary of Aimco OP
Partnership Agreement Redemption Rights of
Qualifying Parties. Upon receipt of a notice of
redemption, Aimco OP may, in its sole and absolute discretion
but subject to the restrictions on the ownership of common stock
imposed under the Aimco charter and the transfer restrictions
and other limitations thereof, elect to cause Aimco to acquire
some or all of the tendered OP Units in exchange for common
stock, based on an exchange ratio of one share of common stock
for each OP Unit, subject to adjustment as provided in the
partnership agreement.
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63
COMPARISON
OF AP XII UNITS AND AIMCO OP UNITS
The rights of AP XII limited partners are currently governed by
the Delaware Act and the AP XII partnership agreement. The
rights of the limited partners of Aimco OP are currently
governed by the Delaware Act and the Aimco OP partnership
agreement.
The information below highlights a number of the significant
differences between AP XII Units and Aimco OP Units. These
comparisons are intended to assist AP XII limited partners in
understanding how their investment will be changed after
completion of the merger, if they elect to receive OP Units
in lieu of cash with respect to the merger.
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AP XII Units
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OP Units
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Nature of Investment
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The AP XII Units constitute equity interests entitling each
partner to its pro rata share of distributions to be made to the
partners of AP XII.
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The OP Units constitute equity interests entitling each holder
to his or her pro rata share of cash distributions made from
Available Cash (as such term is defined in the partnership
agreement) to the partners of Aimco OP.
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Voting Rights
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With limited exceptions, the AP XII partnership agreement may be
amended upon the vote of limited partners holding more than
fifty percent (50%) of each series of outstanding limited
partnership units. Limited partners holding more than fifty
percent (50%) of each series of units may remove a general
partner; provided, however, that the removal of
any non-managing general partner shall require the simultaneous
removal of the managing general partner. If a general partner is
removed, AP XII will be dissolved, unless(a) the remaining
general partner, if any, elects to continue AP XIIs
business, provided that counsel to AP XII is of the opinion that
AP XII will meet the requirements for continued qualification as
a partnership for Federal income tax purposes without the
admission of a substitute general partner or(b) a
substitute general partner is admitted in accordance with the AP
XII partnership agreement. An affiliate of the General Partners
currently owns a majority of the AP XII Units.
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Under the Aimco OP partnership agreement, limited partners have
voting rights only with respect to certain limited matters such
as certain amendments of the partnership agreement and certain
transactions such as the institution of bankruptcy proceedings,
an assignment for the benefit of creditors and certain transfers
by the general partner of its interest in Aimco OP or the
admission of a successor general partner. Under the Aimco OP
partnership agreement, the general partner has the power to
effect the acquisition, sale, transfer, exchange or other
disposition of any assets of Aimco OP (including, but not
limited to, the exercise or grant of any conversion, option,
privilege or subscription right or any other right available in
connection with any assets at any time held by Aimco OP) or the
merger, consolidation, reorganization or other combination of
Aimco OP with or into another entity, all without the consent of
the OP Unitholders.
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The Managing General Partner may serialize interests without the
consent of the limited partners.
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The general partner may cause the dissolution of Aimco OP by an
event of withdrawal, as defined in the Delaware Act
(including, without limitation, bankruptcy), unless, within
90 days after the withdrawal, holders of a majority
in interest, as defined in the Delaware Act, agree in
writing, in their sole and absolute discretion, to continue the
business of Aimco OP and to the appointment of a successor
general partner. The general partner may elect to dissolve Aimco
OP in its sole and absolute discretion, with or without the
consent of the OP Unitholders. OP Unitholders cannot remove the
general partner of Aimco OP with or without cause.
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Distributions
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Net Cash from Operations (as such term is defined in the AP XII
partnership agreement) of AP XII for each fiscal year will be
distributed quarterly in the manner specified in the AP XII
partnership agreement. Distributable Net Proceeds (as such term
is defined in the AP XII
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Subject to the rights of holders of any outstanding partnership
preferred units, the Aimco OP partnership agreement requires the
general partner to cause Aimco OP to distribute quarterly all,
or such portion as the general partner may in its sole and
absolute discretion
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64
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AP XII Units
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OP Units
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partnership agreement) of any Disposition (as such term is
defined in the AP XII partnership agreement) will be distributed
in the manner specified in the AP XII partnership agreement. The
distributions payable to the partners are not fixed in amount
and depend upon the operating results and net sales or
refinancing proceeds available from the disposition of AP
XIIs assets.
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determine, of Available Cash (as such term is defined in the
partnership agreement) generated by Aimco OP during such quarter
to the general partner, the special limited partner and the
holders of OP Units and HPUs on the record date established by
the general partner with respect to such quarter, in accordance
with their respective interests in Aimco OP on such record date.
Holders of any partnership preferred units currently issued and
which may be issued in the future may have priority over the
general partner, the special limited partner and holders of OP
Units and HPUs with respect to distributions of Available Cash,
distributions upon liquidation or other distributions. See
Description of Aimco OP Units; Summary of Aimco OP
Partnership Agreement Distributions. The
general partner in its sole and absolute discretion may
distribute to the holders of OP Units and HPUs Available Cash on
a more frequent basis and provide for an appropriate record
date. The partnership agreement requires the general partner to
take such reasonable efforts, as determined by it in its sole
and absolute discretion and consistent with the REIT
requirements, to cause Aimco OP to distribute sufficient amounts
to enable the general partner to transfer funds to Aimco and
enable Aimco to pay stockholder dividends that will (i) satisfy
the requirements for qualifying as a REIT under the Internal
Revenue Code, and the Treasury Regulations and (ii) avoid any
U.S. federal income or excise tax liability of Aimco. See
Description of Aimco OP Units; Summary of Aimco OP
Partnership Agreement Distributions.
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Liquidity and Transferability/Redemption
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There is a limited market for the AP XII Units, and the AP XII
Units are not listed on any securities exchange.
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There is no public market for the OP Units and the OP Units are
not listed on any securities exchange.
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Under the AP XII partnership agreement, a limited partner may
assign his or her entire interest in any of all of the AP XII
Units owned by such limited partner, provided, however,
that(a) such assignment is not with respect to any
fractional unit and, if such assignment is of less than all of
the AP XII Units held by such limited partner, such limited
partner and his or her assignee shall each immediately
thereafter hold at least five(5) AP XII Units
and(b) such limited partner and his or her assignee
executive, acknowledge and deliver to the managing general
partner such instruments of assignment with respect to such
transactions as are in form and substance satisfactory to the
managing general partner. No transfer of AP XII Units shall be
made to a resident of Illinois who does not comply with the
suitability standards for investors imposed in connection with
the offering of AP XII Units referred to in Section 6.2 of
the AP XII partnership agreement. Notwithstanding the above, no
AP XII Unit may be sold, assigned or exchanged if such AP XII
Unit, when added to the total of all other AP XII Units sold or
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Under the Aimco OP partnership agreement, until the expiration
of one year from the date on which a holder acquired OP Units,
subject to certain exceptions, such OP Unitholder may not
transfer all or any portion of its OP Units to any transferee
without the consent of the general partner, which consent may be
withheld in its sole and absolute discretion. After the
expiration of one year, such OP Unitholder has the right to
transfer all or any portion of its OP Units to any person,
subject to the satisfaction of certain conditions specified in
the partnership agreement, including the general partners
right of first refusal. See Description of Aimco OP Units;
Summary of Aimco OP Partnership Agreement Transfers
and Withdrawals. After the first anniversary of becoming a
holder of OP Units, a holder has the right, subject to the terms
and conditions of the partnership agreement, to require Aimco OP
to redeem all or a portion of such holders OP Units in
exchange for shares of common stock or a cash amount equal to
the value of such shares, as Aimco OP may elect. See
Description of Aimco OP Units; Summary of
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65
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AP XII Units
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OP Units
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exchanged within the period of twelve consecutive months prior
to the proposed date of sale or exchange, would, in the opinion
of counsel for AP XII, result in the termination of AP XII under
section 708 of the Internal Revenue Code unless AP XII and
the transferring holder shall have received a ruling from the
Internal Revenue Service that the proposed sale or exchange will
not cause such termination. No assignee of an AP XII Unit shall
become a substituted limited partner in the place of his or her
assignee unless the managing general partner consents in writing
to the admission of such assignee as a substitute limited
partner, and such assignee(a) elects to become a substitute
limited partner by delivering to the managing general partner a
written notice, executed and acknowledged by the assignor and
assignee, of such election,(b) executes and acknowledges
such other instruments as the managing general partner may deem
necessary or advisable to effect the admission of such person as
a substitute limited partner, including, without limitation, the
written acceptance and adoption by such person of the provisions
of the AP XII partnership agreement, and a specific grant to the
managing general partner of the power of attorney contained in
Article 16 of the AP XII partnership agreement
and(c) pays to AP XII a substitution fee in the amount from
time to time established by the managing general partner
sufficient to pay all reasonable expenses of AP XII in
connection with such substitution. The managing general partner,
in its sole discretion, may grant or withhold consent to a
substitution. The AP XII partnership agreement contains no
redemption rights.
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Aimco OP Partnership Agreement Redemption Rights of
Qualifying Parties. Upon receipt of a notice of
redemption, Aimco OP may, in its sole and absolute discretion
but subject to the restrictions on the ownership of common stock
imposed under the Aimco charter and the transfer restrictions
and other limitations thereof, elect to cause Aimco to acquire
some or all of the tendered OP Units in exchange for common
stock, based on an exchange ratio of one share of common stock
for each OP Unit, subject to adjustment as provided in the
partnership agreement.
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Fiduciary Duty
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Delaware law provides that, except as provided in a partnership
agreement, a general partner owes the fiduciary duties of
loyalty and care to the partnership and its limited partners.
The AP XII partnership agreement provides that the Managing
General Partner has a fiduciary responsibility for the
safekeeping and use of all funds of the partnership, whether or
not in the Managing General Partners immediate possession
or control, and shall not employ or permit another to employ
such funds or assets in any manner except for the exclusive
benefit of the partnership. The general partners may purchase AP
XII Units for their own account from AP XII or from limited
partners or assignees or other holders of AP XII Units and
become limited partners or assignees in respect of such units.
The AP XII partnership agreement expressly limits the liability
of the general partners by providing that the general partners
will have not liability to AP XII or the limited partners for
any loss suffered by AP XII that arises out of any action of
inaction of the general partners if the general
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Delaware law provides that, except as provided in a partnership
agreement, a general partner owes the fiduciary duties of
loyalty and care to the partnership and its limited partners.
The Aimco OP partnership agreement expressly authorizes the
general partner to enter into, on behalf of Aimco OP, a right of
first opportunity arrangement and other conflict avoidance
agreements with various affiliates of Aimco OP and the general
partner, on such terms as the general partner, in its sole and
absolute discretion, believes are advisable. The Aimco OP
partnership agreement expressly limits the liability of the
general partner by providing that the general partner, and its
officers and directors, will not be liable or accountable in
damages to Aimco OP, the limited partners or assignees for
errors in judgment or mistakes of fact or law or of any act or
omission if the general partner or such director or officer
acted in good faith.
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AP XII Units
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OP Units
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partners, in good faith, determined that such course of conduct
was in the best interests of AP XII and such course of conduct
did not constitute negligence, misconduct or breach of fiduciary
duties of the general partners.
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Investment Policy
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AP XII is engaged in the business of operating and holding real
estate properties for investment. In general, the Managing
General Partner regularly evaluates AP XIIs properties by
considering various factors, such as AP XIIs financial
position and real estate and capital markets conditions. The
Managing General Partner monitors a propertys specific
locale and
sub-market
conditions (including stability of the surrounding
neighborhood), evaluating current trends, competition, new
construction and economic changes. It oversees the operating
performance of each property and evaluates the physical
improvement requirements. In addition, the financing structure
for each property (including any prepayment penalties), tax
implications, availability of attractive mortgage financing to a
purchaser, and the investment climate are all considered. Any of
these factors, and possibly others, could potentially contribute
to any decision by the Managing General Partner to sell,
refinance, upgrade with capital improvements or hold a
partnership property.
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Aimco OP was formed to engage in the acquisition, ownership,
management and redevelopment of apartment properties. Although
it holds all of its properties for investment, Aimco OP may sell
properties when they do not meet its investment criteria or are
located in areas that it believes do not justify a continued
investment when compared to alternative uses for capital. Its
portfolio management strategy includes property acquisitions and
dispositions to concentrate its portfolio in its target markets.
It may market for sale certain properties that are inconsistent
with this long-term investment strategy. Additionally, from time
to time, Aimco OP may market certain properties that are
consistent with this strategy but offer attractive returns.
Aimco OP may use its share of the net proceeds from such
dispositions to, among other things, reduce debt, fund capital
expenditures on existing assets, fund acquisitions, and for
other operating needs and corporate purposes.
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Compensation
and Distributions
AP XII. AP XII has no employees and depends on
the Managing General Partner and its affiliates for the
management and administration of all partnership activities. The
AP XII partnership agreement provides that the Managing General
Partner and its affiliates receive certain payments for services
and reimbursement of certain expenses incurred on behalf of AP
XII. The AP XII partnership agreement also provides that AP XII
shall pay the Managing General Partner and its affiliates a fee,
which shall not exceed five percent (5%) of gross receipts from
the property under management, for property management services
rendered.
In addition, under the AP XII partnership agreement,
(a) Distributable Net Proceeds (as defined in the AP XII
partnership agreement) of any Disposition (as defined in the AP
XII partnership agreement) shall be distributed in the manner
specified in the AP XII partnership agreement, and
(b) ninety-nine percent (99%) of the excess of Net Cash
From Operations (as defined in the AP XII partnership
agreement), if any, over the distributions constituting the
Management Fee (as defined in the AP XII partnership agreement)
is distributed quarterly to the limited partners.
A description of the compensation paid to the Managing General
Partner and its affiliates during the years ended
December 31, 2010 and 2009, and during the nine months
ended September 30, 2011 and 2010, can be found under the
heading Certain Relationships and Related
Transactions in this information statement/prospectus. In
addition, for more information, see
Note D Transactions with Affiliated
Parties in the notes to the consolidated financial
statements appearing in AP XIIs Annual Report on
Form 10-K
for the year ended December 31, 2010, which is included as
Annex F to this information statement/prospectus,
and Note B Transactions with
Affiliated Parties in AP XIIs Quarterly Report
on
Form 10-Q
for the quarter ended September 30, 2011, which is included
as Annex G to this information statement/prospectus.
Aimco OP. The Aimco OP partnership agreement
provides that Aimco OPs general partner shall not be
compensated for its services as a general partner, other than
the compensation it receives with respect to distributions and
allocations in accordance with the partnership agreement.
Subject to certain provisions of the partnership agreement,
Aimco OP will reimburse the general partner for all sums
expended in connection with the partnerships business.
In addition, subject to the rights of holders of any outstanding
preferred OP Units, the Aimco OP partnership agreement
requires the general partner to cause Aimco OP to distribute
quarterly all, or such portion of, as the general partner may in
its sole and absolute discretion determine, Available Cash (as
such term is defined in the partnership agreement) generated by
Aimco OP during such quarter to the general partner, the special
limited partner and the holders of common OP Units and HPUs
on the record date established by the general partner with
respect to such quarter, in accordance with their respective
interests in Aimco OP on such record date. The partnership
agreement requires the general partner to take such reasonable
efforts, as determined by it in its sole and absolute discretion
and consistent with the REIT Requirements, to cause Aimco OP to
distribute sufficient amounts to enable the general partner to
transfer funds to Aimco and enable Aimco to pay stockholder
dividends that will (i) satisfy the requirements for
qualifying as a REIT under the Internal Revenue Code and the
Treasury Regulations and (ii) avoid any U.S. federal
income or excise tax liability of Aimco.
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MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. federal
income tax consequences of the merger and the material
U.S. federal income tax considerations related to an
investment in Aimco OP Units and Aimco stock. This
discussion is based upon the Internal Revenue Code , Treasury
Regulations, rulings issued by the IRS, and judicial decisions,
all in effect as of the date of this information
statement/prospectus and all of which are subject to change or
differing interpretations, possibly with retroactive effect.
This summary is also based on the assumption that the operation
of Aimco, Aimco OP and the limited liability companies and
limited partnerships in which they own controlling interests
(collectively, the Subsidiary Partnerships) and any
affiliated entities will be in accordance with their respective
organizational documents and partnership agreements. This
summary is for general information only and does not purport to
discuss all aspects of U.S. federal income taxation which
may be important to a particular investor. This summary also
assumes that investors will hold their OP Units and Aimco
stock as capital assets (generally, property held for
investment). Except to the extent provided below, this summary
is not directed to investors subject to special tax rules, such
as:
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banks or other financial institutions;
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regulated investment companies;
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holders that receive Aimco stock through the exercise of stock
options or otherwise as compensation;
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persons holding Aimco stock as part of a straddle,
hedge, conversion transaction,
synthetic security or other integrated investment;
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and, except to the extent discussed below:
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tax-exempt organizations;
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No advance ruling from the IRS has been or will be sought
regarding the tax status of Aimco or Aimco OP, or the tax
consequences relating to Aimco or Aimco OP of an investment in
OP Units or Aimco stock. No assurance can be given that the
IRS would not assert, or that a court would not sustain, a
position contrary to any of the tax consequences set forth below.
THE U.S. FEDERAL INCOME TAX TREATMENT OF A PARTICULAR
HOLDER DEPENDS UPON DETERMINATIONS OF FACT AND INTERPRETATIONS
OF COMPLEX PROVISIONS OF UNITED STATES FEDERAL INCOME TAX LAW
FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE AVAILABLE.
ACCORDINGLY, EACH HOLDER IS URGED TO CONSULT ITS TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX
CONSEQUENCES OF THE MERGER, OF ACQUIRING, HOLDING, EXCHANGING,
OR OTHERWISE DISPOSING OF OP UNITS AND AIMCO STOCK, AND OF
AIMCOS ELECTION TO BE SUBJECT TO TAX, FOR
U.S. FEDERAL INCOME TAX PURPOSES, AS A REAL ESTATE
INVESTMENT TRUST.
Federal
Income Tax Opinion
Skadden, Arps, Slate, Meagher & Flom LLP has acted as
Aimco and Aimco OPs counsel in connection with the merger.
Skadden, Arps, Slate, Meagher & Flom LLP has also
issued an opinion regarding the material U.S. federal
income tax consequences of the merger summarized below under
United States Federal Income Tax Consequences
Relating to the Merger. The opinion is expressed as of the
date issued. Skadden, Arps, Slate, Meagher & Flom LLP
will have no obligation to advise Aimco, Aimco OP or the limited
partners of any subsequent change in the matters stated,
represented or assumed, or of any subsequent change in the
applicable law. Each investor should be aware that opinions of
counsel are not binding on the IRS, and no assurance can be
given that the IRS will not challenge the conclusions set forth
in such opinions.
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The opinion is not included as an appendix to this information
statement/prospectus, but has been filed as an exhibit to the
registration statement filed with the SEC. Aimco will provide a
copy of the opinion, without charge, if an investor (or an
investors representative who has been so designated in
writing) makes a written request at the address set forth herein
under Where You Can Find Additional Information.
United
States Federal Income Tax Consequences Relating to the
Merger
Tax
Consequences of the Transaction to AP XII, Aimco OP, and
Aimco
When the assets or operations of two partnerships such as AP XII
and Aimco OP are combined in a transaction pursuant to which one
of the partnerships (AP XII) ceases to exist as a
partnership (the terminated partnership) for
U.S. federal income tax purposes, and the members of the
terminated partnership become members of the surviving
partnership (i.e., Aimco OP), that combined transaction is
generally treated as a partnership merger.
In general, AP XII will be treated as contributing all of its
assets, and assigning all of its liabilities, to Aimco OP in
exchange for interests in Aimco OP. To the extent Aimco OP
issues consideration other than interests in Aimco OP, AP XII
may recognize gain. Immediately thereafter, AP XII will be
treated as distributing all of its assets to its partners in
complete liquidation.
Aimco is not expected to recognize any gain or loss on the
transaction.
Tax
Consequences of Exchanging AP XII Units Solely for
Cash
For U.S. federal income tax purposes, any payment of cash
for AP XII Units will be treated as a sale of such AP XII Units
by such holder. Each such holder of AP XII Units who accepts
cash must explicitly agree and consent to treat the payment of
cash for AP XII Units as a sale of such units to Aimco OP, in
accordance with the terms of the merger agreement.
If a holder of AP XII Units exchanges such units for cash, such
holder will recognize gain or loss on the exchange of his units
equal to the difference between (i) such holders
amount realized on the exchange and (ii) such
holders adjusted tax basis in the AP XII Units exchanged.
The amount realized with respect to an AP XII Unit
will be equal to the sum of the amount of cash such holder
receives for his units plus the amount of liabilities of AP XII
allocable to such AP XII Units as determined under
section 752 of the Internal Revenue Code.
Tax
Consequences of Exchanging AP XII Units Solely for OP
Units
For U.S. federal income tax purposes, a holder of AP XII
Units receiving OP Units in the merger will be treated as
receiving the OP Units pursuant to a distribution in
complete liquidation of such holders interest in AP XII.
Except to the extent described below, a holder receiving
OP Units in the merger will not recognize gain or loss on
the transaction.
If a holder of AP XII Units receives solely OP Units in the
merger, such holder generally will not recognize gain or loss.
If, immediately prior to the merger, the amount of liabilities
of AP XII allocable to such holders AP XII Units exceeds
the amount of the Aimco OP partnership liabilities allocable to
such holder immediately after the merger, the excess will be
treated as a deemed distribution of cash to such holder. This
deemed cash distribution will be treated as a return of capital
to the extent of such holders adjusted tax basis in his AP
XII Units exchanged, which is not subject to tax, and thereafter
as taxable gain. If such holder exercises his redemption rights
with respect to the OP Units within the two year period
beginning on the date of the merger, please see the discussion
below under Taxation of Aimco OP and OP
Unitholders Disguised Sale Rules.
Taxation
of Aimco OP and OP Unitholders
Partnership
Status
Aimco believes that Aimco OP is classified as a partnership, and
not as an association or a publicly traded partnership taxable
as a corporation for U.S. federal income tax purposes. If
Aimco OP were treated as an association or a publicly traded
partnership taxable as a corporation for U.S. federal
income tax purposes, material adverse consequences to the
partners would result. Moreover, in such case, a holder of
AP XII Units receiving
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OP Units in the merger would be required to recognize gain
or loss on the transaction. In addition, classification of Aimco
OP as an association or publicly traded partnership taxable as a
corporation would also result in the termination of Aimcos
status as a REIT for U.S. federal income tax purposes,
which would have a material adverse impact on Aimco and its
shareholders. See Taxation of Aimco and Aimco
Stockholders Tax Aspects of Aimcos
Investments in Partnerships. This discussion assumes that
Aimco OP is, and will continue to be, classified and taxed as a
partnership for U.S. federal income tax purposes.
Taxation
of OP Unitholders
In general, a partnership is treated as a
pass-through entity for U.S. federal income tax
purposes and is not itself subject to U.S. federal income
taxation. Each partner of a partnership, however, is subject to
tax on his allocable share of partnership tax items, including
partnership income, gains, losses, deductions, and expenses
(Partnership Tax Items) for each taxable year of the
partnership ending within or with such taxable year of the
partner, regardless of whether he receives any actual
distributions from the partnership during the taxable year.
Generally, the characterization of any particular Partnership
Tax Item is determined at the partnership, rather than at the
partner level, and the amount of a partners allocable
share of such item is governed by the terms of the partnership
agreement. An OP Unitholders allocable share of Aimco
OPs taxable income may exceed the cash distributions to
the OP Unitholder for any year if Aimco OP retains its
profits rather than distributing them.
Allocations
of Aimco OP Profits and Losses
For U.S. federal income tax purposes, an
OP Unitholders allocable share of Aimco OPs
Partnership Tax Items will be determined by Aimco OPs
partnership agreement, provided such allocations either have
substantial economic effect or are determined to be
in accordance with the OP Unitholders interests in
Aimco OP. If the allocations provided by Aimco OPs
partnership agreement were successfully challenged by the IRS,
the redetermination of the allocations to a particular
OP Unitholder for U.S. federal income tax purposes may
be less favorable than the allocation set forth in Aimco
OPs partnership agreement.
Tax
Basis of a Partnership Interest
A partners adjusted tax basis in his partnership interest
is relevant, among other things, for determining (i) gain
or loss upon a taxable disposition of his partnership interest,
(ii) gain upon the receipt of partnership distributions,
and (iii) the limitations imposed on the use of partnership
deductions and losses allocable to such partner. Generally, the
adjusted tax basis of an OP unitholders interest in Aimco
OP is equal to the sum of the adjusted tax basis of the property
contributed by the OP unitholder to Aimco OP in exchange for an
interest in Aimco OP and the amount of cash, if any, contributed
by the OP unitholder to Aimco OP, increased by the OP
unitholders allocable share of Aimco OP
(a) partnership income and gains and (b) partnership
liabilities. The OP unitholders adjusted tax basis will
be reduced, but not below zero, by (a) the OP
unitholders allocable share of Aimco OP partnership
distributions, deductions, and losses and (b) the OP
unitholders liabilities assumed by Aimco OP and the OP
unitholders allocable share of any reduction in Aimco OP
partnership liabilities.
Cash
Distributions
Cash distributions received from a partnership do not
necessarily correlate with income earned by the partnership as
determined for U.S. federal income tax purposes. Thus, an
OP Unitholders U.S. federal income tax liability
in respect of his allocable share of Aimco OP taxable income for
a particular taxable year may exceed the amount of cash, if any,
received by the OP Unitholder from Aimco OP during such
year.
If cash distributions, including a deemed cash
distribution as discussed below, received by an
OP Unitholder in any taxable year exceed his allocable
share of Aimco OP taxable income for the year, the excess will
generally constitute, for U.S. federal income tax purposes,
a return of capital to the extent of such
OP Unitholders adjusted tax basis in his Aimco OP
interest. Such return of capital will not be includible in the
taxable income of the OP Unitholder, for U.S. federal
income tax purposes, but it will reduce, but not below zero, the
adjusted tax basis of Aimco OP interests held by the
OP Unitholder. If an OP Unitholders tax basis in
his Aimco OP interest is reduced to zero, a subsequent cash
distribution received by the OP Unitholder will be subject
to tax as capital gain
and/or
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ordinary income, but only if, and to the extent that, such
distribution exceeds the subsequent positive adjustments, if
any, to the tax basis of the OP Unitholders Aimco OP
interest as determined at the end of the taxable year during
which such distribution is received. A decrease in an
OP Unitholders allocable share of Aimco OP
liabilities resulting from the payment or other settlement, or
reallocation of such liabilities is generally treated, for
U.S. federal income tax purposes, as a deemed cash
distribution. A decrease in an OP Unitholders
percentage interest in Aimco OP because of the issuance by Aimco
OP of additional OP Units or otherwise, may decrease an
OP Unitholders share of nonrecourse liabilities of
Aimco OP and thus, may result in a corresponding deemed
distribution of cash. A deemed distribution of cash resulting
from the payment, settlement, or other reduction or reallocation
of Aimco OP liabilities formerly allocated to an
OP Unitholder will result in taxable gain to such
OP Unitholder to the extent such deemed distribution of
cash exceeds the OP Unitholders basis in his
OP Units.
A non-pro rata distribution (or deemed distribution) of money or
property may result in ordinary income to an OP Unitholder,
regardless of such OP Unitholders tax basis in his
OP Units, if the distribution reduces such
OP Unitholders share of Aimco OPs
unrealized receivables. Unrealized
receivables include amounts attributable to previously
claimed depreciation deductions on certain types of property. To
the extent that such a reduction in an OP Unitholders
share of unrealized receivables occurs, Aimco OP
will be deemed to have distributed a proportionate share of the
unrealized receivables to the OP Unitholder
followed by a deemed exchange of such assets with Aimco OP in
return for the non-pro rata portion of the actual distribution
made to such OP Unitholder. This deemed exchange will
generally result in the realization of ordinary income by the
OP Unitholder. Such income will equal the excess of
(1) the non-pro rata portion of such distribution over
(2) the OP Unitholders tax basis in such
OP Unitholders share of such unrealized
receivables deemed relinquished in the exchange.
Tax
Consequences Relating to Contributed Assets
If an investor contributes property to Aimco OP in exchange for
OP Units, and the adjusted tax basis of such property
differs from its fair market value, Partnership Tax Items must
be allocated in a manner such that the contributing partner,
over the life of Aimco OP, is charged with, or benefits from,
the unrealized gain or unrealized loss associated with such
property at the time of the contribution. This may result in a
tax liability without a corresponding receipt of cash. Where a
partner contributes cash to a partnership that holds appreciated
property, Treasury Regulations provide for a similar allocation
of such items to the other partners. For example, these rules
may apply to a contribution by Aimco to Aimco OP of cash
proceeds received by Aimco from the offering of its stock. Such
allocations are solely for U.S. federal income tax purposes
and do not affect the book capital accounts or other economic or
legal arrangements among the OP Unitholders. The general
purpose underlying this provision is to specially allocate
certain Partnership Tax Items in order to place both the
noncontributing and contributing partners in the same tax
position that they would have been in had the contributing
partner contributed property with an adjusted tax basis equal to
its fair market value. Treasury Regulations provide Aimco OP
with several alternative methods and allow Aimco OP to adopt any
other reasonable method to make allocations to reduce or
eliminate these book-tax differences. The general
partner, in its sole and absolute discretion and in a manner
consistent with Treasury Regulations, will select and adopt a
method of allocating Partnership Tax Items for purposes of
eliminating such disparities. The method selected by Aimco OP in
its sole discretion could cause those AP XII limited partners
that receive OP Units in connection with the merger to
incur a tax liability without a corresponding receipt of cash.
Each prospective investor is urged to consult his tax advisor
regarding the tax consequences of any special allocations of
Partnership Tax Items resulting from the contribution of
property to Aimco OP.
Disguised
Sale Rules
Generally, section 721 of the Internal Revenue Code
provides that neither the contributing partner nor Aimco OP will
recognize a gain or loss, for U.S. federal income tax
purposes, upon a contribution of property to Aimco OP solely in
exchange for OP Units. If, however, in connection with such
a contribution of property, the investor receives, or is deemed
to receive, cash or other consideration in addition to
OP Units, the receipt or deemed receipt of such cash or
other consideration may be treated as part of a disguised
sale. In that case, the investor would be treated as
having sold, in a taxable transaction, a portion of the
contributed property to Aimco OP in exchange for
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such cash or other consideration; the balance of the contributed
property would, however, remain subject to the tax-free
contribution treatment described above.
The disguised sale rules further provide that, unless certain
exceptions apply (including exceptions that apply to
distributions of operating cash flow), transfers of money or
other property between a partnership and a partner that are made
within two years of each other must be reported to the IRS and
are presumed to be a disguised sale unless the facts
and circumstances clearly establish that the transfers do not
constitute a sale. The disguised sale rules may also
apply, and give rise to taxable income without a corresponding
receipt of cash where, for example, a partner contributes
property to Aimco OP subject to one or more liabilities or where
liabilities are assumed or paid by Aimco OP. If the
disguised sale rules apply, all or a portion of the
liabilities associated with the contributed property may be
treated as consideration received by the contributing partner in
a sale of the property to Aimco OP. The disguised
sale rules also may apply if, for example, the issuance of
OP Units to AP XII limited partners in connection with the
merger is integrated with any other acquisition between Aimco
and any OP Unitholder or any related party. For example,
the IRS may assert that any redemption or exchange for several
years between Aimco OP and any OP Unitholder who receives
OP Units in the merger constitutes an integrated
disguised sale that may result in taxation (without
receipt of cash) for such OP Unitholders. No assurances can
be given that the IRS would not be successful in such an
assertion. Each prospective investor is urged to consult his tax
advisor regarding the application of the disguised
sale rules.
Limitations
on Deductibility of Losses
Basis Limitation. To the extent that an
OP Unitholders allocable share of Aimco OP
partnership deductions and losses exceeds his adjusted tax basis
in his Aimco OP interest at the end of the taxable year in which
the losses and deductions flow through, the excess losses and
deductions cannot be utilized, for U.S. federal income tax
purposes, by the OP Unitholder in such year. The excess
losses and deductions may, however, be utilized in the first
succeeding taxable year in which, and to the extent that, there
is an increase in the tax basis of the Aimco OP interest held by
such OP Unitholder, but only to the extent permitted under
the at risk and passive activity loss
rules discussed below.
At Risk Limitation. Under the
at risk rules of section 465 of the Internal
Revenue Code, a noncorporate taxpayer and a closely held
corporate taxpayer are generally not permitted to claim a
deduction, for U.S. federal income tax purposes, in respect
of a loss from an activity, whether conducted directly by the
taxpayer or through an investment in a partnership, to the
extent that the loss exceeds the aggregate dollar amount which
the taxpayer has at risk in such activity at the
close of the taxable year. To the extent that losses are not
permitted to be used in any taxable year, such losses may be
carried over to subsequent taxable years and may be claimed as a
deduction by the taxpayer if, and to the extent that, the amount
which the taxpayer has at risk is increased.
Provided certain requirements are met, a taxpayer is considered
at risk for the taxpayers share of any
nonrecourse financing secured by real property where the real
property is used in the taxpayers activity of
holding real property; the holding of an
OP Unit generally would constitute such an activity.
Passive Activity Loss
Limitation. The passive activity loss rules of
section 469 of the Internal Revenue Code limit the use of
losses derived from passive activities, which generally includes
an investment in limited partnership interests such as the
OP Units. If an investment in an OP Unit is treated as
a passive activity, an OP Unitholder who is an individual
investor, as well as certain other types of investors, would not
be able to use losses from Aimco OP to offset nonpassive
activity income, including salary, business income, and
portfolio income (e.g., dividends, interest, royalties, and gain
on the disposition of portfolio investments) received during the
taxable year. Passive activity losses that are disallowed for a
particular taxable year may, however, be carried forward to
offset passive activity income earned by the OP Unitholder
in future taxable years. In addition, such disallowed losses may
be claimed as a deduction, subject to the basis and at risk
limitations discussed above, upon a taxable disposition of an
OP Unitholders entire interest in Aimco OP,
regardless of whether such OP Unitholder has received any
passive activity income during the year of disposition.
If Aimco OP were characterized as a publicly traded partnership,
each OP Unitholder would be required to treat any loss
derived from Aimco OP separately from any income or loss derived
from any other publicly traded partnership, as well as from
income or loss derived from other passive activities. In such
case, any net losses or
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credits attributable to Aimco OP which are carried forward may
only be offset against future income of Aimco OP. Moreover,
unlike other passive activity losses, suspended losses
attributable to Aimco OP would only be allowed upon the complete
disposition of the OP Unitholders entire
interest in Aimco OP.
Section 754
Election
Aimco OP has made the election permitted by section 754 of
the Internal Revenue Code. Such election is irrevocable without
the consent of the IRS. The election will generally permit a
purchaser of OP Units, such as Aimco when it acquires
OP Units from OP Unitholders, to adjust its share of
the basis in Aimco OPs properties pursuant to
section 743(b) of the Internal Revenue Code to fair market
value (as reflected by the value of consideration paid for the
OP Units), as if such purchaser had acquired a direct
interest in Aimco OPs assets. The section 743(b)
adjustment is attributed solely to a purchaser of OP Units
and is not added to the bases of Aimco OPs assets
associated with all of the OP Unitholders in Aimco OP.
Depreciation
Section 168(i)(7) of the Internal Revenue Code provides
that in the case of property transferred to a partnership in a
section 721 transaction, the transferee shall be treated as
the transferor for purposes of computing the depreciation
deduction with respect to so much of the basis in the hands of
the transferee as does not exceed the adjusted basis in the
hands of the transferor. The effect of this rule would be to
continue the historic basis, placed in service dates and methods
with respect to the depreciation of any properties contributed
to Aimco OP in exchange for OP Units. However, an acquirer
of OP Units that obtains a section 743(b) adjustment
by reason of such acquisition (see Section 754
Election, above) generally will be allowed depreciation
with respect to such adjustment beginning as of the date of the
exchange as if it were new property placed in service as of that
date.
Sale,
Redemption, Exchange or Abandonment of OP Units
An OP Unitholder will recognize a gain or loss upon a sale
of an OP Unit, a redemption of an OP Unit for cash, an
exchange of an OP Unit for shares of common stock or other
taxable disposition of an OP Unit. Gain or loss recognized
upon a sale or exchange of an OP Unit will be equal to the
difference between (i) the amount realized in the
transaction (i.e., the sum of the cash and the fair market value
of any property received for the OP Unit plus the amount of
Aimco OP liabilities allocable to the OP Unit at such time)
and (ii) the OP Unitholders tax basis in the
OP Unit disposed of, which tax basis will be adjusted for
the OP Unitholders allocable share of Aimco OPs
income or loss for the taxable year of the disposition. The tax
liability resulting from the gain recognized on a disposition of
an OP Unit could exceed the amount of cash and the fair
market value of property received. If Aimco OP redeems less than
all of an OP Unitholders OP Units, the
OP Unitholder would recognize taxable gain only to the
extent that the cash, plus the amount of Aimco OP liabilities
allocable to the redeemed OP Units, exceeded the
OP Unitholders adjusted tax basis in all of such
OP Unitholders OP Units immediately before the
redemption.
Capital gains recognized by individuals and certain other
noncorporate taxpayers upon the sale or disposition of an
OP Unit will be subject to taxation at long-term capital
gains rates if the OP Unit is held for more than
12 months and will be taxed at ordinary income tax rates if
the OP Unit is held for 12 months or less. Generally,
gain or loss recognized by an OP Unitholder on the sale or
other taxable disposition of an OP Unit will be taxable as
capital gain or loss. However, to the extent that the amount
realized upon the sale or other taxable disposition of an
OP Unit attributable to an OP Unitholders share
of unrealized receivables of Aimco OP exceeds the
basis attributable to those assets, such excess will be treated
as ordinary income. In addition, the maximum U.S. federal
income tax rate for net capital gains attributable to the sale
of depreciable real property (which may be determined to include
an interest in a partnership such as Aimco OP) held for more
than 12 months is currently 25% (rather than 15%) to the
extent of previously claimed depreciation deductions that would
not be treated as unrealized receivables. See also
Disguised Sale Rules above for sales
integrated with the contribution of property for OP Units.
The law is currently uncertain regarding the treatment of an
abandoned interest in a partnership, and whether an abandonment
gives rise to a deductible loss is a question of fact.
Prospective investors are urged to consult their tax advisors
regarding the application, effect and method of abandoning an
interest in an OP Unit.
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Alternative
Minimum Tax
The Internal Revenue Code contains different sets of minimum tax
rules applicable to corporate and noncorporate investors. The
discussion below relates only to the alternative minimum tax
applicable to noncorporate taxpayers. Accordingly, corporate
investors should consult with their tax advisors with respect to
the effect of the corporate minimum tax provisions that may be
applicable to them. Noncorporate taxpayers are subject to an
alternative minimum tax to the extent the tentative minimum tax
exceeds the regular income tax otherwise payable. In general,
alternative minimum taxable income (AMTI) consists
of the taxpayers taxable income, determined with certain
adjustments, plus his items of tax preference. For example,
alternative minimum taxable income is calculated using an
alternative cost recovery (depreciation) system that is not as
favorable as the methods provided for under section 168 of
the Internal Revenue Code which Aimco OP will use in computing
its income for regular U.S. federal income tax purposes.
Accordingly, an OP Unitholders AMTI derived from
Aimco OP may be higher than such OP Unitholders share
of Aimco OPs net taxable income. Prospective investors
should consult their tax advisors as to the impact of an
investment in OP Units on their liability for the
alternative minimum tax.
Information
Returns and Audit Procedures
Aimco OP will use all reasonable efforts to furnish to each
OP Unitholder as soon as possible after the close of each
taxable year of Aimco OP, certain tax information, including a
Schedule K-l,
which sets forth each OP Unitholders allocable share
of Aimco OPs Partnership Tax Items. In preparing this
information the general partner will use various accounting and
reporting conventions to determine the respective
OP Unitholders allocable share of Partnership Tax
Items. The general partner cannot assure a current or
prospective OP Unitholder that the IRS will not
successfully contend in court that such accounting and reporting
conventions are impermissible.
No assurance can be given that Aimco OP will not be audited by
the IRS or that tax adjustments will not be made. Further, any
adjustments in Aimco OPs tax returns will lead to
adjustments in OP Unitholders tax returns and may
lead to audits of their returns and adjustments of items
unrelated to Aimco OP. Each OP Unitholder would bear the
cost of any expenses incurred in connection with an examination
of such OP Unitholders personal tax return.
The tax treatment of Partnership Tax Items generally is
determined at the partnership level in a unified partnership
proceeding rather than in separate proceedings with the
partners. The Internal Revenue Code provides for one partner to
be designated as the Tax Matters Partner for these purposes.
The Tax Matters Partner is authorized, but not required, to take
certain actions on behalf of Aimco OP and the
OP Unitholders and can extend the statute of limitations
for assessment of tax deficiencies against OP Unitholders
with respect to Aimco OP Partnership Tax Items. The Tax Matters
Partner may bind an OP Unitholder with less than a l%
profits interest in Aimco OP to a settlement with the IRS,
unless such OP Unitholder elects, by filing a statement
with the IRS, not to give such authority to the Tax Matters
Partner. The Tax Matters Partner may seek judicial review (to
which all the OP Unitholders are bound) of a final
partnership administrative adjustment; if the Tax Matters
Partner fails to seek judicial review, such review may be sought
by any OP Unitholder having at least a 1% interest in the
profits of Aimco OP or by OP Unitholders having in the
aggregate at least a 5% profits interest. However, only one
action for judicial review will go forward, and each
OP Unitholder with an interest in the outcome may
participate.
Taxation
of Foreign OP Unitholders
A
Non-U.S. OP Unitholder
(see the definition of
Non-U.S. stockholder
below under Taxation of Aimco and Aimco
Stockholders Taxation of Stockholders
Taxation of Foreign Stockholders) will generally be
considered to be engaged in a United States trade or business on
account of its ownership of an OP Unit. As a result, a
Non-U.S. OP Unitholder
will be required to file U.S. federal income tax returns
with respect to its allocable share of Aimco OPs income. A
Non-U.S. OP Unitholder
that is a corporation may also be subject to United States
branch profit tax at a rate of 30%, in addition to regular
U.S. federal income tax, on its allocable share of such
income. Such a tax may be reduced or eliminated by an income tax
treaty between the United States and the country with respect to
which the
Non-U.S. OP Unitholder
is resident for tax purposes.
Non-U.S. OP Unitholders
are advised to consult their tax advisors regarding the effects
an investment in Aimco OP may have on information return
requirements
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and other United States and
non-United
States tax matters, including the tax consequences of an
investment in Aimco OP for the country or other jurisdiction of
which such
Non-U.S. Holder
is a citizen or in which such
Non-U.S. Holder
resides or is otherwise located.
Taxation
of Aimco and Aimco Stockholders
Taxation
of Aimco
The REIT provisions of the Internal Revenue Code are highly
technical and complex. The following summary sets forth certain
aspects of the provisions of the Internal Revenue Code that
govern the U.S. federal income tax treatment of a REIT and
its stockholders. This summary is qualified in its entirety by
the applicable Internal Revenue Code provisions, Treasury
Regulations, and administrative and judicial interpretations
thereof, all of which are subject to change, possibly with
retroactive effect.
Aimco has elected to be taxed as a REIT under the Internal
Revenue Code commencing with its taxable year ended
December 31, 1994, and Aimco intends to continue such
election. Although Aimco believes that, commencing with
Aimcos initial taxable year ended December 31, 1994,
Aimco was organized in conformity with the requirements for
qualification as a REIT, and its actual method of operation has
enabled, and its proposed method of operation will enable, it to
meet the requirements for qualification and taxation as a REIT
under the Internal Revenue Code, no assurance can be given that
Aimco has been or will remain so qualified. Such qualification
and taxation as a REIT depends upon Aimcos ability to
meet, on a continuing basis, through actual annual operating
results, asset ownership, distribution levels, and diversity of
stock ownership, the various qualification tests imposed under
the Internal Revenue Code as discussed below. No assurance can
be given that the actual results of Aimcos operation for
any one taxable year will satisfy such requirements. See
Failure to Qualify. No assurance can be
given that the IRS will not challenge Aimcos eligibility
for taxation as a REIT.
Taxation
of REITs in General
Provided Aimco qualifies as a REIT, it will generally be
entitled to a deduction for dividends that it pays and therefore
will not be subject to U.S. federal corporate income tax on
its net income that is currently distributed to its
stockholders. This deduction for dividends paid substantially
eliminates the double taxation of corporate income
(i.e., taxation at both the corporate and stockholder levels)
that generally results from investment in a corporation. Rather,
income generated by a REIT is generally taxed only at the
stockholder level upon a distribution of dividends by the REIT.
For tax years through 2012, most domestic stockholders that are
individuals, trusts or estates are taxed on corporate dividends
at a maximum rate of 15% (the same as long-term capital gains).
With limited exceptions, however, dividends received by
stockholders from Aimco or from other entities that are taxed as
REITs are generally not eligible for this rate, and will
continue to be taxed at rates applicable to ordinary income. See
Taxation of Stockholders Taxation
of Taxable Domestic Stockholders Distributions.
Net operating losses, foreign tax credits and other tax
attributes of a REIT generally do not pass through to the
stockholders of the REIT, subject to special rules for certain
items such as capital gains recognized by REITs. See
Taxation of Stockholders.
If Aimco qualifies as a REIT, it will nonetheless be subject to
U.S. federal income tax in the following circumstances:
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Aimco will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net
capital gains.
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A 100% excise tax may be imposed on some items of income and
expense that are directly or constructively paid between Aimco
and its taxable REIT subsidiaries (as described below) if and to
the extent that the IRS successfully asserts that the economic
arrangements between Aimco and its taxable REIT subsidiaries are
not comparable to similar arrangements between unrelated parties.
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If Aimco has net income from prohibited transactions, which are,
in general, sales or other dispositions of property held
primarily for sale to customers in the ordinary course of
business, other than foreclosure property, such income will be
subject to a 100% tax.
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If we elect to treat property that we acquire in connection with
a foreclosure of a mortgage loan or certain leasehold
terminations as foreclosure property, we may thereby
avoid the 100% prohibited transactions tax on gain from a resale
of that property (if the sale would otherwise constitute a
prohibited transaction), but the income from the sale or
operation of the property may be subject to corporate income tax
at the highest applicable rate. We do not anticipate receiving
any income from foreclosure property.
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If Aimco should fail to satisfy the 75% gross income test or the
95% gross income test (as discussed below), but nonetheless
maintains its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on
an amount based on the magnitude of the failure adjusted to
reflect the profit margin associated with Aimcos gross
income.
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Similarly, if Aimco should fail to satisfy the asset test or
other requirements applicable to REITs, as described below, yet
nonetheless maintain its qualification as a REIT because there
is reasonable cause for the failure and other applicable
requirements are met, it may be subject to an excise tax. In
that case, the amount of the tax will be at least $50,000 per
failure, and, in the case of certain asset test failures, will
be determined as the amount of net income generated by the
assets in question multiplied by the highest corporate tax rate
if that amount exceeds $50,000 per failure.
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If Aimco should fail to distribute during each calendar year at
least the sum of (i) 85% of its REIT ordinary income for
such year, (ii) 95% of its REIT capital gain net income for
such year, and (iii) any undistributed taxable income from
prior periods, Aimco will be required to pay a 4% excise tax on
the excess of the required distribution over the sum of
(a) the amounts actually distributed, plus
(b) retained amounts on which income tax is paid at the
corporate level.
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Aimco may be required to pay monetary penalties to the IRS in
certain circumstances, including if it fails to meet the record
keeping requirements intended to monitor its compliance with
rules relating to the composition of a REITs stockholders,
as described below in Requirements for
Qualification General.
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If Aimco acquires appreciated assets from a corporation that is
not a REIT (i.e., a subchapter C corporation) in a
transaction in which the adjusted tax basis of the assets in the
hands of Aimco is determined by reference to the adjusted tax
basis of the assets in the hands of the subchapter C
corporation, Aimco may be subject to tax on such appreciation at
the highest corporate income tax rate then applicable if Aimco
subsequently recognizes gain on the disposition of any such
asset during the ten-year period following its acquisition from
the subchapter C corporation.
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Certain of Aimcos subsidiaries are subchapter C
corporations, the earnings of which could be subject to
U.S. federal corporate income tax.
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Aimco may be subject to the alternative minimum tax
on its items of tax preference, including any deductions of net
operating losses.
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Aimco and its subsidiaries may be subject to a variety of taxes,
including state, local and foreign income taxes, property taxes
and other taxes on their assets and operations. Aimco could also
be subject to tax in situations and on transactions not
presently contemplated.
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Requirements
for Qualification
The Internal Revenue Code defines a REIT as a corporation, trust
or association:
(1) that is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by
transferable shares, or by transferable certificates of
beneficial interest;
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(3) that would be taxable as a domestic corporation, but
for the special Internal Revenue Code provisions applicable to
REITs;
(4) that is neither a financial institution nor an
insurance company subject to certain provisions of the Internal
Revenue Code;
(5) the beneficial ownership of which is held by 100 or
more persons;
(6) in which, during the last half of each taxable year,
not more than 50% in value of the outstanding stock is owned,
directly or indirectly, by five or fewer individuals (as defined
in the Internal Revenue Code to include certain entities and as
determined by applying certain attribution rules); and
(7) that meets other tests described below (including with
respect to the nature of its income and assets).
The Internal Revenue Code provides that conditions
(1) through (4) must be met during the entire taxable
year, and that the condition (5) must be met during at
least 335 days of a taxable year of 12 months, or
during a proportionate part of a shorter taxable year.
Aimco believes that it has been organized, has operated and has
issued sufficient shares of stock to satisfy conditions
(1) through (7) inclusive. Aimcos articles of
incorporation provide certain restrictions regarding transfers
of its shares, which are intended to assist Aimco in satisfying
the share ownership requirements described in conditions
(5) and (6) above. These restrictions, however, may
not ensure that Aimco will, in all cases, be able to satisfy the
share ownership requirements described in (5) and
(6) above.
To monitor Aimcos compliance with the share ownership
requirements, Aimco is generally required to maintain records
regarding the actual ownership of its shares. To do so, Aimco
must demand written statements each year from the record holders
of certain percentages of its stock in which the record holders
are to disclose the actual owners of the shares (i.e., the
persons required to include in gross income the dividends paid
by Aimco). A list of those persons failing or refusing to comply
with this demand must be maintained as part of Aimcos
records. Failure by Aimco to comply with these record keeping
requirements could subject it to monetary penalties. A
stockholder who fails or refuses to comply with the demand is
required by the Treasury Regulations to submit a statement with
its tax return disclosing the actual ownership of the shares and
certain other information.
In addition, a corporation generally may not elect to become a
REIT unless its taxable year is the calendar year. Aimco
satisfies this requirement.
Effect of
Subsidiary Entities
Ownership of Partnership Interests. In the
case of a REIT that is a partner in a partnership, the Treasury
Regulations provide that the REIT is deemed to own its
proportionate share of the partnerships assets and to earn
its proportionate share of the partnerships income for
purposes of the asset and gross income tests applicable to REITs
as described below. Similarly, the assets and gross income of
the partnership are deemed to retain the same character in the
hands of the REIT. Thus, Aimcos proportionate share of the
assets, liabilities and items of income of Aimco OP and the
Subsidiary Partnerships will be treated as assets, liabilities
and items of income of Aimco for purposes of applying the REIT
requirements described below. A summary of certain rules
governing the U.S. federal income taxation of partnerships
and their partners is provided below in
Tax Aspects of Aimcos Investments
in Partnerships.
Disregarded Subsidiaries. Aimcos
indirect interests in Aimco OP and other Subsidiary Partnerships
are held through wholly-owned corporate subsidiaries of Aimco
organized and operated as qualified REIT
subsidiaries within the meaning of the Internal Revenue
Code. A qualified REIT subsidiary is any corporation, other than
a taxable REIT subsidiary as described below, that is
wholly-owned by a REIT, or by other disregarded subsidiaries, or
by a combination of the two. If a REIT owns a qualified REIT
subsidiary, that subsidiary is disregarded for U.S. federal
income tax purposes, and all assets, liabilities and items of
income, deduction and credit of the subsidiary are treated as
assets, liabilities and items of income, deduction and credit of
the REIT itself, including for purposes of the gross income and
asset tests applicable to REITs as summarized below. Each
qualified REIT subsidiary, therefore, is not subject to
U.S. federal corporate income taxation, although it may be
subject to state or local taxation. Other entities that are
wholly-owned by a REIT, including single member limited
liability
78
companies, are also generally disregarded as separate entities
for U.S. federal income tax purposes, including for
purposes of the REIT income and asset tests. Disregarded
subsidiaries, along with partnerships in which Aimco holds an
equity interest, are sometimes referred to herein as
pass-through subsidiaries.
In the event that a disregarded subsidiary of Aimco ceases to be
wholly-owned for example, if any equity interest in
the subsidiary is acquired by a person other than Aimco or
another disregarded subsidiary of Aimco the
subsidiarys separate existence would no longer be
disregarded for U.S. federal income tax purposes. Instead,
it would have multiple owners and would be treated as either a
partnership or a taxable corporation. Such an event could,
depending on the circumstances, adversely affect Aimcos
ability to satisfy the various asset and gross income
requirements applicable to REITs, including the requirement that
REITs generally may not own, directly or indirectly, more than
10% of the securities of another corporation. See
Asset Tests and Income
Tests.
Taxable Subsidiaries. A REIT, in general, may
jointly elect with a subsidiary corporation, whether or not
wholly-owned, to treat the subsidiary corporation as a taxable
REIT subsidiary (TRS). A TRS also includes any
corporation, other than a REIT, with respect to which a TRS in
which a REIT owns an interest owns securities possessing 35% of
the total voting power or total value of the outstanding
securities of such corporation. The separate existence of a TRS
or other taxable corporation, unlike a disregarded subsidiary as
discussed above, is not ignored for U.S. federal income tax
purposes. As a result, a parent REIT is not treated as holding
the assets of a TRS or as receiving any income that the TRS
earns. Rather, the stock issued by the TRS is an asset in the
hands of the parent REIT, and the REIT recognizes as income the
dividends, if any, that it receives from the subsidiary. This
treatment can affect the income and asset test calculations that
apply to the REIT, as described below. Because a parent REIT
does not include the assets and income of such subsidiary
corporations in determining the parents compliance with
the REIT requirements, such entities may be used by the parent
REIT to indirectly undertake activities that the REIT rules
might otherwise preclude it from doing directly or through
pass-through subsidiaries (for example, activities that give
rise to certain categories of income such as management fees or
foreign currency gains). As a taxable corporation, a TRS is
required to pay regular U.S. federal income tax, and state
and local income tax where applicable.
Certain of Aimcos operations (including certain of its
property management, asset management, risk management, etc.)
are conducted through its TRSs. Because Aimco is not required to
include the assets and income of such TRSs in determining
Aimcos compliance with the REIT requirements, Aimco uses
its TRSs to facilitate its ability to offer services and
activities to its residents that are not generally considered as
qualifying REIT services and activities. If Aimco fails to
properly structure and provide such nonqualifying services and
activities through its TRSs, its ability to satisfy the REIT
gross income requirement, and also its REIT status, may be
jeopardized.
A TRS may generally engage in any business except the operation
or management of a lodging or health care facility. The
operation or management of a health care or lodging facility
precludes a corporation from qualifying as a TRS. If any of
Aimcos TRSs were deemed to operate or manage a health care
or lodging facility, such TRSs would fail to qualify as taxable
REIT subsidiaries, and Aimco would fail to qualify as a REIT.
Aimco believes that none of its TRSs operate or manage any
health care or lodging facilities. However, the statute provides
little guidance as to the definition of a health care or lodging
facility. Accordingly, there can be no assurance that the IRS
will not contend that an Aimco TRS operates or manages a health
care or lodging facility, disqualifying it from treatment as a
TRS, and thereby resulting in the disqualification of Aimco as a
REIT.
Several provisions of the Internal Revenue Code regarding
arrangements between a REIT and a TRS seek to ensure that a TRS
will be subject to an appropriate level of U.S. federal
income taxation. For example, a TRS is limited in its ability to
deduct interest payments made to its REIT owner. In addition,
Aimco would be obligated to pay a 100% penalty tax on certain
payments that it receives from, or on certain expenses deducted
by, a TRS if the IRS were to successfully assert that the
economic arrangements between Aimco and the taxable REIT
subsidiary were not comparable to similar arrangements among
unrelated parties.
A portion of the amounts to be used to fund distributions to
stockholders may come from distributions made by Aimcos
TRSs to Aimco OP, and interest paid by the TRSs on certain notes
held by Aimco OP. In general, TRSs pay federal, state and local
income taxes on their taxable income at normal corporate rates.
Any federal, state or local
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income taxes that Aimcos TRSs are required to pay will
reduce Aimcos cash flow from operating activities and its
ability to make payments to holders of its securities.
Income
Tests
In order to maintain qualification as a REIT, Aimco annually
must satisfy two gross income requirements:
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First, at least 75% of Aimcos gross income for each
taxable year, excluding gross income from sales of inventory or
dealer property in prohibited transactions, must be
derived from investments relating to real property or mortgages
on real property, including rents from real
property, dividends received from other REITs, interest
income derived from mortgage loans secured by real property, and
gains from the sale of real estate assets, as well as certain
types of temporary investments.
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Second, at least 95% of Aimcos gross income for each
taxable year, excluding gross income from prohibited
transactions, must be derived from some combination of such
income from investments in real property (i.e., income that
qualifies under the 75% income test described above), as well as
other dividends, interest and gains from the sale or disposition
of stock or securities, which need not have any relation to real
property.
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Rents received by Aimco directly or through Aimco OP or the
Subsidiary Partnerships will qualify as rents from real
property in satisfying the gross income requirements
described above, only if several conditions are met. If rent is
partly attributable to personal property leased in connection
with a lease of real property, the portion of the total rent
attributable to the personal property will not qualify as
rents from real property unless it constitutes 15%
or less of the total rent received under the lease. Moreover,
the REIT generally must not operate or manage the property
(subject to certain exceptions) or furnish or render services to
the tenants of such property, other than through an
independent contractor from which the REIT derives
no revenue. Aimco and its affiliates are permitted, however, to
directly perform services that are usually or customarily
rendered in connection with the rental of space for
occupancy only and are not otherwise considered rendered to the
occupant of the property. In addition, Aimco and its affiliates
may directly or indirectly provide non-customary services to
tenants of its properties without disqualifying all of the rent
from the property if the payment for such services does not
exceed 1% of the total gross income from the property. For
purposes of this test, the income received from such
non-customary services is deemed to be at least 150% of the
direct cost of providing the services. Moreover, Aimco is
generally permitted to provide services to tenants or others
through a TRS without disqualifying the rental income received
from tenants for purposes of the REIT income requirements.
Aimco manages apartment properties for third parties and
affiliates through its TRSs. These TRSs receive management fees
and other income. A portion of such fees and other income accrue
to Aimco through distributions from the TRSs that are classified
as dividend income to the extent of the earnings and profits of
the TRSs. Such distributions will generally qualify for purposes
of the 95% gross income test but not for purposes of the 75%
gross income test. Any dividend Aimco receives from a REIT,
however, will be qualifying income in Aimcos hands for
purposes of both the 95% and 75% income tests.
Any income or gain derived by Aimco directly or through Aimco OP
or the Subsidiary Partnerships from instruments that hedge
certain risks, such as the risk of changes in interest rates,
will not constitute gross income for purposes of the 75% or 95%
gross income tests, provided that specified requirements are
met. Such requirements include that the instrument hedge risks
associated with indebtedness issued by Aimco, Aimco OP or the
Subsidiary Partnerships that is incurred to acquire or carry
real estate assets (as described below under
Asset Tests), and the instrument is
properly identified as a hedge, along with the risk that it
hedges, within prescribed time periods.
If Aimco fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify
as a REIT for the year if it is entitled to relief under certain
provisions of the Internal Revenue Code. These relief provisions
will be generally available if Aimcos failure to meet
these tests was due to reasonable cause and not due to willful
neglect, and Aimco attaches a schedule of the sources of its
income to its tax return. It is not possible to state whether
Aimco would be entitled to the benefit of these relief
provisions in all circumstances. If these relief provisions are
inapplicable to a particular set of circumstances involving
Aimco, Aimco will not qualify as a REIT. Even where these relief
provisions apply, the Internal Revenue Code imposes a tax based
upon the amount by which Aimco fails to satisfy the particular
gross income test.
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Asset
Tests
Aimco, at the close of each calendar quarter of its taxable
year, must also satisfy four tests relating to the nature of its
assets:
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First, at least 75% of the value of the total assets of Aimco
must be represented by some combination of real estate
assets, cash, cash items, U.S. government securities,
and under some circumstances, stock or debt instruments
purchased with new capital. For this purpose, real estate
assets include interests in real property, such as land,
buildings, leasehold interests in real property, stock of other
corporations that qualify as REITs, and some kinds of mortgage
backed securities and mortgage loans. Assets that do not qualify
for purposes of the 75% test are subject to the additional asset
tests described below.
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Second, not more than 25% of Aimcos total assets may be
represented by securities other than those in the 75% asset
class.
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Third, of the investments included in the 25% asset class, the
value of any one issuers securities owned by Aimco may not
exceed 5% of the value of Aimcos total assets, Aimco may
not own more than 10% of any one issuers outstanding
voting securities, and, subject to certain exceptions, Aimco may
not own more than 10% of the total value of the outstanding
securities of any one issuer. The 5% and 10% asset tests do not
apply to securities of TRSs.
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Fourth, the aggregate value of all securities of TRSs held by
Aimco may not exceed 25% of the value of Aimcos total
assets.
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Aimco believes that the value of the securities held by Aimco in
its TRSs will not exceed, in the aggregate, 25% of the value of
Aimcos total assets and that Aimcos ownership
interests in its TRSs qualify under the asset tests set forth
above.
Notwithstanding the general rule that a REIT is treated as
owning its share of the underlying assets of a subsidiary
partnership for purposes of the REIT income and asset tests, if
a REIT holds indebtedness issued by a partnership, the
indebtedness will be subject to, and may cause a violation of,
the asset tests, resulting in loss of REIT status, unless it is
a qualifying mortgage asset satisfying the rules for
straight debt, or is sufficiently small so as not to
otherwise cause an asset test violation. Similarly, although
stock of another REIT is a qualifying asset for purposes of the
REIT asset tests, non-mortgage debt held by Aimco that is issued
by another REIT may not so qualify.
Certain securities will not cause a violation of the 10% value
test described above. Such securities include instruments that
constitute straight debt, which includes, among
other things, securities having certain contingency features. A
security does not qualify as straight debt where a
REIT (or a controlled TRS of the REIT) owns other securities of
the same issuer which do not qualify as straight debt, unless
the value of those other securities constitute, in the
aggregate, 1% or less of the total value of that issuers
outstanding securities. In addition to straight debt, the
Internal Revenue Code provides that certain other securities
will not violate the 10% value test. Such securities include
(a) any loan made to an individual or an estate,
(b) certain rental agreements in which one or more payments
are to be made in subsequent years (other than agreements
between a REIT and certain persons related to the REIT),
(c) any obligation to pay rents from real property,
(d) securities issued by governmental entities that are not
dependent in whole or in part on the profits of (or payments
made by) a non-governmental entity, (e) any security issued
by another REIT, and (f) any debt instrument issued by a
partnership if the partnerships income is of a nature that
it would satisfy the 75% gross income test described above under
Income Tests. In applying the 10% value
test, a debt security issued by a partnership is not taken into
account to the extent, if any, of the REITs proportionate
equity interest in that partnership.
Aimco believes that its holdings of securities and other assets
comply, and will continue to comply, with the foregoing REIT
asset requirements, and it intends to monitor compliance on an
ongoing basis. No independent appraisals have been obtained,
however, to support Aimcos conclusions as to the value of
its assets, including Aimco OPs total assets and the value
of Aimco OPs interest in the TRSs. Moreover, values of
some assets may not be susceptible to a precise determination,
and values are subject to change in the future. Furthermore, the
proper classification of an instrument as debt or equity for
U.S. federal income tax purposes may be uncertain in some
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circumstances, which could affect the application of the REIT
asset requirements. Accordingly, there can be no assurance that
the IRS will not contend that Aimcos interests in its
subsidiaries or in the securities of other issuers will cause a
violation of the REIT asset requirements and loss of REIT status.
Certain relief provisions are available to allow REITs to
satisfy the asset requirements or to maintain REIT qualification
notwithstanding certain violations of the asset and other
requirements. One such provision allows a REIT which fails one
or more of the asset tests to nevertheless maintain its REIT
qualification if (a) it provides the IRS with a description
of each asset causing the failure, (b) the failure is due
to reasonable cause and not willful neglect, (c) the REIT
pays a tax equal to the greater of (i) $50,000 per failure,
and (ii) the product of the net income generated by the
assets that caused the failure multiplied by the highest
applicable corporate tax rate, and (d) the REIT either
disposes of the assets causing the failure within 6 months
after the last day of the quarter in which it identifies the
failure, or otherwise satisfies the relevant asset tests within
that time frame.
A second relief provision contained in the Internal Revenue Code
applies to de minimis violations of the 10% and 5% asset tests.
A REIT may maintain its qualification despite a violation of
such requirements if (a) the value of the assets causing
the violation do not exceed the lesser of 1% of the REITs
total assets, and $10,000,000, and (b) the REIT either
disposes of the assets causing the failure within 6 months
after the last day of the quarter in which it identifies the
failure, or the relevant tests are otherwise satisfied within
that time frame.
If we should fail to satisfy the asset tests at the end of a
calendar quarter, such a failure would not cause us to lose our
REIT status if we (1) satisfied the asset tests at the
close of the preceding calendar quarter and (2) the
discrepancy between the value of our assets and the asset test
requirements was not wholly or partly caused by an acquisition
of non-qualifying assets, but instead arose from changes in the
market value of our assets. If the condition described in
(2) were not satisfied, we still could avoid
disqualification by eliminating any discrepancy within
30 days after the close of the calendar quarter in which it
arose.
Annual
Distribution Requirements
In order for Aimco to qualify as a REIT, Aimco is required to
distribute dividends, other than capital gain dividends, to its
stockholders in an amount at least equal to:
(a) 90% of Aimcos REIT taxable income, computed
without regard to the deduction for dividends paid and net
capital gain of Aimco, and
(b) 90% of the net income, if any, from foreclosure
property (as described below), minus
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the sum of certain items of noncash income.
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These distributions must be paid in the taxable year to which
they relate, or in the following taxable year if they are
declared in October, November, or December of the taxable year,
are payable to stockholders of record on a specified date in any
such month, and are actually paid before the end of January of
the following year. In order for distributions to be counted for
this purpose, and to give rise to a tax deduction by Aimco, they
must not be preferential dividends. A dividend is
not a preferential dividend if it is pro rata among all
outstanding shares of stock within a particular class, and is in
accordance with the preferences among different classes of stock
as set forth in Aimcos organizational documents.
To the extent that Aimco distributes at least 90%, but less than
100%, of its REIT taxable income, as adjusted, it will be
subject to tax thereon at ordinary corporate tax rates. In any
year, Aimco may elect to retain, rather than distribute, its net
capital gain and pay tax on such gain. In such a case,
Aimcos stockholders would include their proportionate
share of such undistributed long-term capital gain in income and
receive a corresponding credit for their share of the tax paid
by Aimco. Aimcos stockholders would then increase the
adjusted basis of their Aimco shares by the difference between
the designated amounts included in their long-term capital gains
and the tax deemed paid with respect to their shares.
To the extent that a REIT has available net operating losses
carried forward from prior tax years, such losses may reduce the
amount of distributions that it must make in order to comply
with the REIT distribution
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requirements. Such losses, however, will generally not affect
the character, in the hands of stockholders, of any
distributions that are actually made by the REIT, which are
generally taxable to stockholders to the extent that the REIT
has current or accumulated earnings and profits. See
Taxation of Stockholders Taxable
Domestic Stockholders Distributions.
If Aimco should fail to distribute during each calendar year at
least the sum of:
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85% of its REIT ordinary income for such year,
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95% of its REIT capital gain net income for such year (excluding
retained net capital gain), and
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any undistributed taxable income from prior periods,
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Aimco would be subject to a 4% excise tax on the excess of such
required distribution over the sum of (x) the amounts
actually distributed, and (y) the amounts of income
retained on which it has paid corporate income tax.
It is possible that Aimco, from time to time, may not have
sufficient cash to meet the 90% distribution requirement due to
timing differences between (i) the actual receipt of cash
(including receipt of distributions from Aimco OP) and
(ii) the inclusion of certain items in income by Aimco for
U.S. federal income tax purposes. In the event that such
timing differences occur, in order to meet the distribution
requirements Aimco may find it necessary to arrange for
short-term, or possibly long-term, borrowings, or to pay
dividends in the form of taxable in-kind distributions of
property.
Under certain circumstances, Aimco may be able to rectify a
failure to meet the distribution requirement for a year by
paying deficiency dividends to stockholders in a
later year, which may be included in Aimcos deduction for
dividends paid for the earlier year. In this case, Aimco may be
able to avoid losing its REIT status or being taxed on amounts
distributed as deficiency dividends; however, Aimco will be
required to pay interest and a penalty based on the amount of
any deduction taken for deficiency dividends.
Prohibited
Transactions
Net income derived by a REIT from a prohibited transaction is
subject to a 100% excise tax. The term prohibited
transaction generally includes a sale or other disposition
of property (other than foreclosure property) that is held
primarily for sale to customers in the ordinary course of a
trade or business. Aimco intends to conduct its operations so
that no asset owned by Aimco or its pass-through subsidiaries
will be held for sale to customers, and that a sale of any such
asset will not be in the ordinary course of Aimcos
business. Whether property is held primarily for sale to
customers in the ordinary course of a trade or business
depends, however, on the particular facts and circumstances. No
assurance can be given that no property sold by Aimco will be
treated as property held for sale to customers, or that Aimco
can comply with certain safe-harbor provisions of the Internal
Revenue Code that would prevent the imposition of the 100%
excise tax. The 100% tax does not apply to gains from the sale
of property that is held through a TRS or other taxable
corporation, although such income will be subject to tax in the
hands of the corporation at regular corporate rates.
Penalty
Tax
Aimco will be subject to a 100% penalty tax on the amount of
certain non-arms length payments received from, or certain
expenses deducted by, a TRS if the IRS were to successfully
assert that the economic arrangements between Aimco and such TRS
are not comparable to similar transaction between unrelated
parties. Such amounts may include rents from real property that
are overstated as a result of services furnished by a TRS to
tenants of Aimco and amounts that are deducted by a TRS for
payments made to Aimco that are in excess of the amounts that
would have been charged by an unrelated party.
Aimco believes that the fees paid to its TRSs for tenant
services are comparable to the fees that would be paid to an
unrelated third party negotiating at arms-length. This
determination, however, is inherently factual, and the IRS may
assert that the fees paid by Aimco do not represent
arms-length amounts. If the IRS successfully made such an
assertion, Aimco would be required to pay a 100% penalty tax on
the excess of an arms-length fee for tenant services over
the amount actually paid.
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Failure
to Qualify
If Aimco fails to qualify for taxation as a REIT in any taxable
year, and the relief provisions do not apply, Aimco will be
subject to tax, including any applicable alternative minimum
tax, on its taxable income at regular corporate rates.
Distributions to stockholders in any year in which Aimco fails
to qualify will not be deductible by Aimco nor will they be
required to be made. In such event, to the extent of current and
accumulated earnings and profits, all distributions to
stockholders that are individuals will generally be taxable at
the preferential income tax rates (i.e., the 15% maximum federal
rate through 2012) for qualified dividends. In addition,
subject to the limitations of the Internal Revenue Code,
corporate distributees may be eligible for the dividends
received deduction. Unless Aimco is entitled to relief under
specific statutory provisions, Aimco would also be disqualified
from re-electing to be taxed as a REIT for the four taxable
years following the year during which qualification was lost. It
is not possible to state whether, in all circumstances, Aimco
would be entitled to this statutory relief.
Tax
Aspects of Aimcos Investments in
Partnerships
General
Substantially all of Aimcos investments are held
indirectly through Aimco OP. In general, partnerships are
pass-through entities that are not subject to
U.S. federal income tax. Rather, partners are allocated
their proportionate shares of the items of income, gain, loss,
deduction and credit of a partnership, and are potentially
subject to tax on these items, without regard to whether the
partners receive a distribution from the partnership. Aimco will
include in its income its proportionate share of the foregoing
partnership items for purposes of the various REIT income tests
and in the computation of its REIT taxable income. Moreover, for
purposes of the REIT asset tests, Aimco will include its
proportionate share of assets held by Aimco OP and the
Subsidiary Partnerships. See Effect of
Subsidiary Entities Ownership of Partnership
Interests.
Entity
Classification
Aimcos direct and indirect investment in partnerships
involves special tax considerations, including the possibility
of a challenge by the IRS of the tax status of Aimco OP or any
of the Subsidiary Partnerships as a partnership for
U.S. federal income tax purposes. If any of these entities
were treated as an association or a publicly traded partnership
taxable as a corporation for U.S. federal income tax
purposes, it would be subject to an entity-level tax on its
income. In such a situation, the character of Aimcos
assets and items of gross income would change and could preclude
Aimco from satisfying the REIT asset tests and gross income
tests (see Asset Tests and
Income Tests), and in turn could prevent
Aimco from qualifying as a REIT unless Aimco is eligible for
relief from the violation pursuant to relief provisions
described above. See Failure to Qualify
above for a summary of the effect of Aimcos failure to
satisfy the REIT tests for a taxable year, and of the relief
provisions. In addition, any change in the status of any of the
Subsidiary Partnerships for tax purposes might be treated as a
taxable event, in which case Aimco might incur a tax liability
without any related cash distributions.
Tax
Allocations With Respect to the Properties
Under the Internal Revenue Code and the Treasury Regulations,
income, gain, loss and deduction attributable to appreciated or
depreciated property that is contributed to a partnership in
exchange for an interest in the partnership must be allocated
for tax purposes in a manner such that the contributing partner
is charged with, or benefits from the unrealized gain or
unrealized loss associated with the property at the time of the
contribution. The amount of the unrealized gain or unrealized
loss is generally equal to the difference between the fair
market value of the contributed property at the time of
contribution, and the adjusted tax basis of such property at the
time of contribution (a Book-Tax Difference). Such
allocations are solely for U.S. federal income tax purposes
and do not affect the book capital accounts or other economic or
legal arrangements among the partners. Aimco OP was formed by
way of contributions of appreciated property. Consequently,
allocations must be made in a manner consistent with these
requirements. Where a partner contributes cash to a partnership
at a time that the partnership holds appreciated (or
depreciated) property, the Treasury Regulations provide for a
similar allocation of these items to the other (i.e.,
non-contributing) partners. These rules apply to the
contribution by Aimco to Aimco OP of the cash proceeds received
in any offerings of its stock.
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In general, certain unitholders will be allocated lower amounts
of depreciation deductions for tax purposes and increased
taxable income and gain on the sale by Aimco OP or other
Subsidiary Partnerships of the contributed properties. This will
tend to eliminate the Book-Tax Difference over the life of these
partnerships. However, the special allocations do not always
entirely rectify the Book-Tax Difference on an annual basis or
with respect to a specific taxable transaction such as a sale.
Thus, the carryover basis of the contributed properties in the
hands of Aimco OP or other Subsidiary Partnerships may cause
Aimco to be allocated lower depreciation and other deductions,
and possibly greater amounts of taxable income in the event of a
sale of such contributed assets in excess of the economic or
book income allocated to it as a result of such sale. This may
cause Aimco to recognize, over time, taxable income in excess of
cash proceeds, which might adversely affect Aimcos ability
to comply with the REIT distribution requirements. See
Taxation of Aimco Annual
Distribution Requirements.
With respect to any property purchased or to be purchased by any
of the Subsidiary Partnerships (other than through the issuance
of units) subsequent to the formation of Aimco, such property
will initially have a tax basis equal to its fair market value
and the special allocation provisions described above will not
apply.
Sale of
the Properties
Aimcos share of any gain realized by Aimco OP or any other
Subsidiary Partnership on the sale of any property held as
inventory or primarily for sale to customers in the ordinary
course of business will be treated as income from a prohibited
transaction that is subject to a 100% penalty tax. See
Prohibited Transactions. Under existing
law, whether property is held as inventory or primarily for sale
to customers in the ordinary course of a partnerships
trade or business is a question of fact that depends on all the
facts and circumstances with respect to the particular
transaction. Aimco OP and the other Subsidiary Partnerships
intend to hold their properties for investment with a view to
long-term appreciation, to engage in the business of acquiring,
developing, owning and operating the properties and to make such
occasional sales of the properties, including peripheral land,
as are consistent with Aimcos investment objectives.
Taxation
of Stockholders
Taxable
Domestic Stockholders
Distributions. Provided that Aimco qualifies
as a REIT, distributions made to Aimcos taxable domestic
stockholders out of current or accumulated earnings and profits
(and not designated as capital gain dividends) will generally be
taken into account by them as ordinary income and will not be
eligible for the dividends received deduction for corporations.
With limited exceptions, dividends received from REITs are not
eligible for taxation at the preferential income tax rates for
qualified dividends received by individuals from taxable C
corporations. Stockholders that are individuals, however, are
taxed at the preferential rates on dividends designated by and
received from REITs to the extent that the dividends are
attributable to (i) income retained by the REIT in the
prior taxable year on which the REIT was subject to corporate
level income tax (less the amount of tax), (ii) dividends
received by the REIT from TRSs or other taxable C corporations,
or (iii) income in the prior taxable year from the sales of
built-in gain property acquired by the REIT from C
corporations in carryover basis transactions (less the amount of
corporate tax on such income).
Distributions (and retained net capital gains) that are
designated as capital gain dividends will generally be taxed to
stockholders as long-term capital gains, to the extent that they
do not exceed Aimcos actual net capital gain for the
taxable year, without regard to the period for which the
stockholder has held its stock. However, corporate stockholders
may be required to treat up to 20% of certain capital gain
dividends as ordinary income. Long-term capital gains are
generally taxable at maximum federal rates of 15% through 2012
in the case of stockholders who are individuals, and 35% in the
case of stockholders that are corporations. Capital gains
attributable to the sale of depreciable real property held for
more than 12 months are subject to a 25% maximum
U.S. federal income tax rate for taxpayers who are
individuals, to the extent of previously claimed depreciation
deductions.
Aimco may elect to retain and pay taxes on some or all of its
net long term capital gain, in which case U.S. stockholders
will be treated as having received, solely for U.S. federal
income tax purposes, Aimcos undistributed capital gain as
well as a corresponding credit or refund, as the case may be,
for taxes that Aimco paid on such undistributed capital gain.
See Taxation of Aimco Annual
Distribution Requirements.
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In determining the extent to which a distribution constitutes a
dividend for tax purposes, Aimcos earnings and profits
generally will be allocated first to distributions with respect
to preferred stock prior to allocating any remaining earnings
and profits to distributions on Aimcos common stock. If
Aimco has net capital gains and designates some or all of its
distributions as capital gain dividends to that extent, the
capital gain dividends will be allocated among different classes
of stock in proportion to the allocation of earnings and profits
as described above.
Distributions in excess of current and accumulated earnings and
profits will not be taxable to a stockholder to the extent that
they do not exceed the adjusted basis of the stockholders
shares in respect of which the distributions were made, but
rather will reduce the adjusted basis of such shares. To the
extent that such distributions exceed the adjusted basis of a
stockholders shares, they will be included in income as
long-term capital gain, or short-term capital gain if the shares
have been held for one year or less. In addition, any dividend
declared by Aimco in October, November or December of any year
and payable to a stockholder of record on a specified date in
any such month will be treated as both paid by Aimco and
received by the stockholder on December 31 of such year,
provided that the dividend is actually paid by Aimco
before the end of January of the following calendar year.
To the extent that a REIT has available net operating losses and
capital losses carried forward from prior tax years, such losses
may reduce the amount of distributions that must be made in
order to comply with the REIT distribution requirements. See
Taxation of Aimco Annual
Distribution Requirements. Such losses, however, are not
passed through to stockholders and do not offset income of
stockholders from other sources, nor would they affect the
character of any distributions that are actually made by a REIT,
which are generally subject to tax in the hands of stockholders
to the extent that the REIT has current or accumulated earnings
and profits.
Dispositions of Aimco Stock. A stockholder
will realize gain or loss upon the sale, redemption or other
taxable disposition of stock in an amount equal to the
difference between the sum of the fair market value of any
property and cash received in such disposition, and the
stockholders adjusted tax basis in the stock at the time
of the disposition. In general, a stockholders tax basis
will equal the stockholders acquisition cost, increased by
the excess of net capital gains deemed distributed to the
stockholder (as discussed above), less tax deemed paid on such
net capital gains, and reduced by returns of capital. In
general, capital gains recognized by individuals upon the sale
or disposition of shares of Aimco stock will be subject to a
taxation at long term capital gains rates if the Aimco stock is
held for more than 12 months, and will be taxed at ordinary
income rates if the Aimco stock is held for 12 months or
less. Gains recognized by stockholders that are corporations are
currently subject to U.S. federal income tax at a maximum
rate of 35%, whether or not classified as long-term capital
gains. Capital losses recognized by a stockholder upon the
disposition of Aimco stock held for more than one year at the
time of disposition will be considered long-term capital losses,
and are generally available only to offset capital gain income
of the stockholder but not ordinary income (except in the case
of individuals, who may offset up to $3,000 of ordinary income
each year). In addition, any loss upon a sale or exchange of
shares of Aimco stock by a stockholder who has held the shares
for six months or less, after applying holding period rules,
will be treated as a long-term capital loss to the extent of
distributions received from Aimco that are required to be
treated by the stockholder as long-term capital gain.
A redemption of Aimco stock (including preferred stock or equity
stock) will be treated under section 302 of the Internal
Revenue Code as a dividend subject to tax at ordinary income tax
rates (to the extent of Aimcos current or accumulated
earnings and profits), unless the redemption satisfies certain
tests set forth in section 302(b) of the Internal Revenue
Code enabling the redemption to be treated as a sale or exchange
of the stock. The redemption will satisfy such test if it
(i) is substantially disproportionate with
respect to the holder (which will not be the case if only the
preferred stock is redeemed, since it generally does not have
voting rights), (ii) results in a complete
termination of the holders stock interest in Aimco,
or (iii) is not essentially equivalent to a
dividend with respect to the holder, all within the
meaning of section 302(b) of the Internal Revenue Code. In
determining whether any of these tests have been met, shares
considered to be owned by the holder by reason of certain
constructive ownership rules set forth in the Internal Revenue
Code, as well as shares actually owned, must generally be taken
into account. Because the determination as to whether any of the
alternative tests of section 302(b) of the Internal Revenue
Code is satisfied with respect to any particular holder of the
stock will depend upon the facts and circumstances as of the
time the determination is made, prospective investors are
advised to consult their own tax advisors to determine such tax
treatment. If a redemption of the stock is treated as a
distribution that is taxable as a dividend, the amount of the
distribution would be measured by the amount of cash and the
fair market value of any property received by the
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stockholders. The stockholders adjusted tax basis in such
redeemed stock would be transferred to the holders
remaining stockholdings in Aimco. If, however, the stockholder
has no remaining stockholdings in Aimco, such basis may, under
certain circumstances, be transferred to a related person or it
may be lost entirely.
If an investor recognizes a loss upon a subsequent disposition
of stock or other securities of Aimco in an amount that exceeds
a prescribed threshold, it is possible that the provisions of
the Treasury Regulations involving reportable
transactions could apply, with a resulting requirement to
separately disclose the loss generating transaction to the IRS.
While these Treasury Regulations are directed towards tax
shelters, they are written quite broadly, and apply to
transactions that would not typically be considered tax
shelters. In addition, the Internal Revenue Code imposes
penalties for failure to comply with these requirements.
Prospective investors should consult their tax advisors
concerning any possible disclosure obligation with respect to
the receipt or disposition of stock or securities of Aimco, or
transactions that might be undertaken directly or indirectly by
Aimco. Moreover, prospective investors should be aware that
Aimco and other participants in the transactions involving Aimco
(including their advisors) might be subject to disclosure or
other requirements pursuant to these Treasury Regulations.
Taxation
of Foreign Stockholders
The following is a summary of certain anticipated
U.S. federal income and estate tax consequences of the
ownership and disposition of Aimco stock applicable to
Non-U.S. stockholders.
A
Non-U.S. stockholder
is generally any person other than (i) a citizen or
resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under
the laws of the United States or of any state thereof or the
District of Columbia, (iii) an estate whose income is
includable in gross income for U.S. federal income tax
purposes regardless of its source or (iv) a trust if a
United States court is able to exercise primary supervision over
the administration of such trust and one or more United States
fiduciaries have the authority to control all substantial
decisions of such trust. The discussion is based on current law
and is for general information only. The discussion addresses
only certain and not all aspects of U.S. federal income and
estate taxation.
Ordinary Dividends. The portion of dividends
received by
Non-U.S. stockholders
payable out of Aimcos earnings and profits which are not
attributable to capital gains of Aimco and which are not
effectively connected with a U.S. trade or business of the
Non-U.S. stockholder
will be subject to U.S. withholding tax at the rate of 30%
(unless reduced by treaty and the
Non-U.S. stockholder
provides appropriate documentation regarding its eligibility for
treaty benefits). In general,
Non-U.S. stockholders
will not be considered engaged in a U.S. trade or business
solely as a result of their ownership of Aimco stock. In cases
where the dividend income from a
Non-U.S. stockholders
investment in Aimco stock is, or is treated as, effectively
connected with the
Non-U.S. stockholders
conduct of a U.S. trade or business, the
Non-U.S. stockholder
generally will be subject to U.S. tax at graduated rates,
in the same manner as domestic stockholders are taxed with
respect to such dividends, such income must generally be
reported on a U.S. income tax return filed by or on behalf
of the
Non-U.S. stockholder,
and the income may also be subject to the 30% branch profits tax
in the case of a
Non-U.S. stockholder
that is a corporation.
Non-Dividend Distributions. Unless Aimco stock
constitutes a United States real property interest (a
USRPI) within the meaning of the Foreign Investment
in Real Property Tax Act of 1980 (FIRPTA),
distributions by Aimco which are not dividends out of the
earnings and profits of Aimco will not be subject to
U.S. income tax. If it cannot be determined at the time at
which a distribution is made whether or not the distribution
will exceed current and accumulated earnings and profits, the
distribution will be subject to withholding at the rate
applicable to dividends. However, the
Non-U.S. stockholder
may seek a refund from the IRS of any amounts withheld if it is
subsequently determined that the distribution was, in fact, in
excess of current and accumulated earnings and profits of Aimco.
If Aimco stock constitutes a USRPI, distributions by Aimco in
excess of the sum of its earnings and profits plus the
stockholders basis in its Aimco stock will be taxed under
FIRPTA at the rate of tax, including any applicable capital
gains rates, that would apply to a domestic stockholder of the
same type (e.g., an individual or a corporation, as the case may
be), and the collection of the tax will be enforced by a
refundable withholding at a rate of 10% of the amount by which
the distribution exceeds the stockholders share of
Aimcos earnings and profits.
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Capital Gain Dividends. Under FIRPTA, a
distribution made by Aimco to a
Non-U.S. stockholder,
to the extent attributable to gains from dispositions of USRPIs
held by Aimco directly or through pass-through subsidiaries
(USRPI Capital Gains), will, except as described
below, be considered effectively connected with a
U.S. trade or business of the
Non-U.S. stockholder
and will be subject to U.S. income tax at the rates
applicable to U.S. individuals or corporations, without
regard to whether the distribution is designated as a capital
gain dividend. In addition, Aimco will be required to withhold
tax equal to 35% of the amount of the distribution to the extent
such distribution constitutes USRPI Capital Gains. Distributions
subject to FIRPTA may also be subject to a 30% branch profits
tax in the hands of a
Non-U.S. stockholder
that is a corporation. A distribution is not a USRPI Capital
Gain if Aimco held the underlying asset solely as a creditor.
Capital gain dividends received by a
Non-U.S. stockholder
from a REIT that are attributable to dispositions by that REIT
of assets other then USRPIs are generally not subject to
U.S. income or withholding tax.
A capital gain dividend by Aimco that would otherwise have been
treated as a USRPI Capital Gain will not be so treated or be
subject to FIRPTA, will generally not be treated as income that
is effectively connected with a U.S. trade or business, and
will instead be treated the same as an ordinary dividend from
Aimco (see Taxation of Foreign
Stockholders Ordinary Dividends), provided
that (1) the capital gain dividend is received with respect
to a class of stock that is regularly traded on an established
securities market located in the United States, and (2) the
recipient
Non-U.S. stockholder
does not own more than 5% of that class of stock at any time
during the one year period ending on the date on which the
capital gain dividend is received.
Dispositions of Aimco Stock. Unless Aimco
stock constitutes a USRPI, a sale of Aimco stock by a
Non-U.S. stockholder
generally will not be subject to U.S. taxation. The stock
will be treated as a USRPI if 50% or more of Aimcos assets
throughout a prescribed testing period consist of interests in
real property located within the United States, excluding, for
this purpose, interests in real property solely in a capacity as
a creditor. Even if the foregoing test is met, Aimco stock
nonetheless will not constitute a USRPI if Aimco is a
domestically controlled qualified investment entity.
A domestically controlled qualified investment entity is a REIT
in which, at all times during a specified testing period, less
than 50% in value of its shares is held directly or indirectly
by
Non-U.S. stockholders.
Aimco believes that it is, and it expects to continue to be, a
domestically controlled qualified investment entity. If Aimco
is, and continues to be, a domestically controlled qualified
investment entity, the sale of Aimco stock should not be subject
to U.S. taxation. Because most classes of stock of Aimco
are publicly traded, however, no assurance can be given that
Aimco is or will continue to be a domestically controlled
qualified investment entity.
Even if Aimco does not constitute a domestically controlled
qualified investment entity, a
Non-U.S. stockholders
sale of stock nonetheless generally will not be subject to tax
under FIRPTA as a sale of a USRPI provided that:
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the stock is of a class that is regularly traded (as
defined by applicable Treasury Regulations) on an established
securities market (e.g., the NYSE, on which Aimco stock is
listed), and
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the selling
Non-U.S. stockholder
held 5% or less of such class of Aimcos outstanding stock
at all times during a specified testing period.
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If gain on the sale of stock of Aimco were subject to taxation
under FIRPTA, the
Non-U.S. stockholder
would be subject to the same treatment as a
U.S. stockholder with respect to such gain (subject to
applicable alternative minimum tax and a special alternative
minimum tax in the case of nonresident alien individuals) and
the purchaser of the stock could be required to withhold 10% of
the purchase price and remit such amount to the IRS.
Gain from the sale of Aimco stock that would not otherwise be
subject to taxation under FIRPTA will nonetheless be taxable in
the United States to a
Non-U.S. stockholder
in two cases. First, if the
Non-U.S. stockholders
investment in the Aimco stock is effectively connected with a
U.S. trade or business conducted by such
Non-U.S. stockholder,
the
Non-U.S. stockholder
will be subject to the same treatment as a U.S. stockholder
with respect to such gain. Second, if the
Non-U.S. stockholder
is a nonresident alien individual who was present in the United
States for 183 days or more during the taxable year and has
a tax home in the United States, the nonresident
alien individual will be subject to a 30% tax on the
individuals capital gain.
88
Estate
Tax
Aimco stock owned or treated as owned by an individual who is
not a citizen or resident (as specially defined for
U.S. Federal estate tax purposes) of the United States at
the time of death will be includible in the individuals
gross estate for U.S. Federal estate tax purposes, unless
an applicable estate tax treaty provides otherwise. Such
individuals estate may be subject to U.S. Federal
estate tax on the property includible in the estate for
U.S. Federal estate tax purposes.
Taxation
of Tax-Exempt Stockholders
Tax-exempt entities, including qualified employee pension and
profit sharing trusts and individual retirement accounts,
generally are exempt from U.S. federal income taxation.
However, they are subject to taxation on their unrelated
business taxable income (UBTI). While many
investments in real estate may generate UBTI, the IRS has ruled
that dividend distributions from a REIT to a tax-exempt entity
do not constitute UBTI. Based on that ruling, and provided that
(1) a tax-exempt stockholder has not held its Aimco stock
as debt financed property within the meaning of the
Internal Revenue Code (i.e., where the acquisition or holding of
the property is financed through a borrowing by the tax-exempt
stockholder), and (2) the Aimco stock is not otherwise used
in an unrelated trade or business, Aimco believes that
distributions from Aimco and income from the sale of the Aimco
stock should not give rise to UBTI to a tax-exempt stockholder.
Tax-exempt stockholders that are social clubs, voluntary
employee benefit associations, supplemental unemployment benefit
trusts, and qualified group legal services plans that are exempt
from taxation under paragraphs (7), (9), (17) and (20),
respectively, of Section 501(c) of the Internal Revenue
Code are subject to different UBTI rules, which generally will
require them to characterize distributions from Aimco as UBTI.
In certain circumstances, a pension trust that owns more than
10% of our stock could be required to treat a percentage of the
dividends as UBTI if we are a pension-held REIT. We
will not be a pension-held REIT unless (1) we are required
to look through one or more of our pension trust
stockholders in order to satisfy the REIT
closely-held test, and (2) either (i) one
pension trust owns more than 25% of the value of our stock, or
(ii) one or more pension trusts, each individually holding
more than 10% of the value of our stock, collectively owns more
than 50% of the value of our stock. Certain restrictions on
ownership and transfer of Aimcos stock generally should
prevent a tax-exempt entity from owning more than 10% of the
value of our stock and generally should prevent us from becoming
a pension-held REIT.
Other Tax
Consequences
Legislative
or Other Actions Affecting REITs
The present federal income tax treatment of REITs may be
modified, possibly with retroactive effect, by legislative,
judicial or administrative action at any time. The REIT rules
are constantly under review by persons involved in the
legislative process and by the IRS and the U.S. Treasury
Department which may result in statutory changes as well as
revisions to regulations and interpretations. Changes to the
federal tax laws and interpretations thereof could adversely
affect an investment in our common stock.
Under recently enacted legislation, for taxable years beginning
after December 31, 2012, certain U.S. holders who are
individuals, estates or trusts and whose income exceeds certain
thresholds will be required to pay a 3.8% Medicare tax on
dividend and other income, including capital gains from the sale
or other disposition of Aimco common stock.
Recently enacted legislation will require, after
December 31, 2013, withholding at a rate of 30% on
dividends in respect of, and, after December 31, 2014,
gross proceeds from the sale of, Aimco common stock held by or
through certain foreign financial institutions (including
investment funds), unless such institution enters into an
agreement with the Secretary of the Treasury to report, on an
annual basis, information with respect to shares in the
institution held by certain U.S. persons and by certain
non-U.S. entities
that are wholly or partially owned by U.S. persons.
Accordingly, the entity through which Aimco common stock is held
will affect the determination of whether such withholding is
required. Similarly, dividends in respect of, and gross proceeds
from the sale of, Aimco common stock held by an investor that is
a non-financial
non-U.S. entity
will be subject to withholding at a rate of
89
30%, unless such entity either (i) certifies to Aimco that
such entity does not have any substantial United States
owners or (ii) provides certain information regarding
the entitys substantial United States owners,
which Aimco will in turn provide to the Secretary of the
Treasury.
Non-U.S. stockholders
are encouraged to consult with their tax advisors regarding the
possible implications of the legislation on their investment in
Aimco common stock.
State,
Local And Foreign Taxes
Aimco, Aimco OP, Aimco stockholders and OP Unitholders may
be subject to state, local or foreign taxation in various
jurisdictions, including those in which it or they transact
business, own property or reside. It should be noted that Aimco
OP owns properties located in a number of states and local
jurisdictions, and OP Unitholders may be required to file
income tax returns in some or all of those jurisdictions. The
state, local or foreign tax treatment of Aimco, Aimco OP, Aimco
stockholders and OP Unitholders may not conform to the
U.S. federal income tax consequences discussed above.
Consequently, prospective investors are urged to consult their
tax advisors regarding the application and effect of state,
local and foreign tax laws on an investment in Aimco.
90
FEES AND
EXPENSES
The costs of planning and implementing the merger, including the
preparation of this information statement/prospectus, will be
borne by Aimco OP without regard to whether the merger is
effectuated. Except as set forth in this information
statement/prospectus, Aimco OP will not pay any fees or
commissions to any broker, dealer or other person in connection
with the merger. The Managing General Partner has retained Eagle
Rock Proxy Advisors, LLC, or the Information Agent, to act as
the information agent in connection with the merger. The
Information Agent may contact holders of AP XII Units by mail,
e-mail,
telephone, telex, telegraph and in person and may request
brokers, dealers and other nominee limited partners to forward
materials relating to the merger to beneficial owners of the AP
XII Units. Aimco OP will pay the Information Agent reasonable
and customary compensation for its services in connection with
the merger, plus reimbursement for
out-of-pocket
expenses, and will indemnify it against certain liabilities and
expenses in connection therewith, including liabilities under
the U.S. federal securities laws. Aimco OP will also pay
all costs and expenses of filing, printing and mailing the
information statement/prospectus as well as any related legal
fees and expenses.
Below is an itemized list of the estimated expenses incurred and
to be incurred in connection with preparing and delivering this
information statement/prospectus:
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Information Agent Fees
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$
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7,500
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Printing Fees
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188,400
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Postage Fees
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7,800
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Tax and Accounting Fees
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100,000
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Appraisal Fees
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41,800
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Financial Advisor Fees
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49,420
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Legal Fees
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270,770
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Total
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$
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665,690
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LEGAL
MATTERS
Certain tax matters will be passed upon for Aimco by Skadden,
Arps, Slate, Meagher & Flom LLP. The validity of the
Aimco Class A Common Stock issuable upon redemption of the
OP Units will be passed upon by DLA Piper LLP (US). The
validity of the OP Units offered by this information
statement/prospectus will be passed upon by Skadden, Arps,
Slate, Meagher & Flom LLP.
92
EXPERTS
The consolidated financial statements of Aimco for the year
ended December 31, 2010 appearing in Aimcos Current
Report on
Form 8-K
dated November 15, 2011 (including the schedule appearing
therein) and the effectiveness of Aimcos internal control
over financial reporting appearing in Aimcos Annual Report
on
Form 10-K
for the year ended December 31, 2010 have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their reports thereon, included
therein, and incorporated herein by reference. Such consolidated
financial statements and Aimco managements assessment of
the effectiveness of internal control over financial reporting
as of December 31, 2010 are incorporated herein by
reference in reliance upon such reports given on the authority
of such firm as experts in accounting and auditing.
The consolidated financial statements of Aimco OP for the year
ended December 31, 2010 appearing in Aimco OPs
Current Report on
Form 8-K
dated November 15, 2011 (including the schedule appearing
therein) and the effectiveness of Aimco OPs internal
control over financial reporting appearing in Aimco OPs
Annual Report on
Form 10-K
for the year ended December 31, 2010 have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their reports thereon, included
therein, and included in Annex J and
Annex H to this information statement/prospectus.
Such consolidated financial statements and Aimco OP
managements assessment of the effectiveness of internal
control over financial reporting as of December 31, 2010
are included herein in reliance upon such reports given on the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of AP XII appearing in AP
XIIs Annual Report on
Form 10-K
for the year ended December 31, 2010 have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their report thereon, included
therein, and included in Annex F of this information
statement/prospectus. Such consolidated financial statements are
included in reliance upon such report given on the authority of
such firm as experts in accounting and auditing.
93
WHERE YOU
CAN FIND ADDITIONAL INFORMATION
Information
Incorporated by Reference
Aimco, Aimco OP and AP XII are subject to the informational
requirements of the Exchange Act, and, in accordance therewith,
file reports, proxy statements and other information with the
SEC. You may read and copy any document so filed at the
SECs public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330
for further information on the public reference rooms. Aimco,
Aimco OP and AP XIIs filings are also available to the
public at the SECs web site at
http://www.sec.gov.
The information that Aimco files with the SEC is incorporated by
reference, which means that important information is being
disclosed to you by referring you to those documents. The
information incorporated by reference is considered to be part
of this information statement/prospectus. The documents listed
below are incorporated by reference along with all documents
filed by us with the SEC pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act (i) after the date of the
initial registration statement and prior to effectiveness of the
registration statement and (ii) after the date of this
prospectus and before the completion of the offering of the
shares described in this prospectus.
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Proxy Statement for the 2011 Annual Meeting of Stockholders of
Aimco (filed March 14, 2011);
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Aimcos Annual Report on
Form 10-K
for the year ended December 31, 2010 (filed
February 25, 2011);
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Aimcos Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2011 (filed
October 28, 2011); and
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Aimcos Current Reports on
Form 8-K,
dated January 10, 2011 (filed January 11, 2011),
April 14, 2011 (filed April 14,
2011), July 26, 2011 (filed July 27, 2011),
July 28, 2011 (filed July 28, 2011), August 24,
2011 (filed August 24, 2011), September 2, 2011 (filed
September 2, 2011) and November 15, 2011 (filed
November 15, 2011).
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You may request a copy of these filings, at no cost, by writing
or calling Aimco at the following address and telephone number:
ISTC Corporation
P.O. Box 2347
Greenville, South Carolina 29602
(864) 239-1029
You should rely only on the information included or incorporated
by reference in this information statement/prospectus. No person
is authorized to provide you with different information. You
should not assume that the information in this information
statement/prospectus is accurate as of any date other than the
date on the front of the document.
Information
Included in the Annexes to this Information
Statement/Prospectus
Important information is also included in the Annexes attached
hereto, including the following:
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Annex A Amended and Restated Agreement and Plan
of Merger;
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Annex B Appraisal Rights of Limited Partners;
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Annex C Opinion of Duff & Phelps, LLC;
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Annex D Officers and Directors;
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Annex E Summary of Appraisals Table;
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Annex F AP XIIs Annual Report on
Form 10-K
for the year ended December 31, 2010;
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Annex G AP XIIs Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2011;
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Annex H Aimco OPs Annual Report on
Form 10-K
for the year ended December 31, 2010 (excluding the report
of the independent registered public accounting firm, the
financial statements and the notes thereto);
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Annex I Aimco OPs Quarterly Report on
Form 10-Q
for the quarter ended September 30, 2011; and
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Annex J Aimco OPs Current Report on
Form 8-K,
filed with the SEC on November 15, 2011, which includes
Aimco OPs Selected Financial Data, Managements
Discussion and Analysis of Financial Condition and Results of
Operations and Financial Statements and Supplementary Data from
its Annual Report on
Form 10-K
for the year ended December 31, 2010, revised to reflect
additional discontinued operations through September 30,
2011.
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References to the safe-harbor provisions of the Private
Securities Litigation Reform Act of 1995 are included in AP
XIIs Annual Report on
Form 10-K
for the year ended December 31, 2010, which is included as
Annex F to this information statement/prospectus;
and in Aimcos Annual Report on
Form 10-K
for the year ended December 31, 2010, which is incorporated
by reference in this information statement/prospectus. However,
because the merger is a going private transaction,
those safe-harbor provisions do not apply to any forward-looking
statements AP XII or Aimco make in connection with the merger.
95
ANNEX A
AMENDED
AND RESTATED
AGREEMENT AND PLAN OF MERGER
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this
Agreement), dated as of November 15,
2011, is by and among ANGELES PARTNERS XII, LP, a Delaware
limited partnership (AP XII), AIMCO AP
XII MERGER SUB LLC, a Delaware limited liability company (the
Aimco Subsidiary), and AIMCO PROPERTIES,
L.P., a Delaware limited partnership (Aimco
OP).
WHEREAS, AP XII, the Aimco Subsidiary and Aimco OP have entered
into that certain Agreement and Plan of Merger (the
Prior Agreement), dated as of July 28,
2011;
WHEREAS, each of AP XII, the Aimco Subsidiary and Aimco OP has
determined that it is advisable to amend and restate the Prior
Agreement as set forth herein;
WHEREAS, Angeles Realty Corporation II, the managing general
partner of AP XII (Angeles Realty), and AIMCO
Angeles GP, LLC, the non-managing general partner of AP XII
(Aimco Angeles), have determined that the
Merger (as defined below) of the Aimco Subsidiary with and into
AP XII, with AP XII as the surviving entity, is advisable, fair
to and in the best interests of AP XII and its partners;
WHEREAS, Aimco OP, the sole member of the Aimco Subsidiary, has
determined that the Merger of the Aimco Subsidiary with and into
AP XII, with AP XII as the surviving entity, is advisable, fair
to and in the best interests of the Aimco Subsidiary and its
member;
WHEREAS the Board of Directors of AIMCO-GP, Inc., the general
partner of Aimco OP (AIMCO-GP), has
determined that the Merger of the Aimco Subsidiary with and into
AP XII, with AP XII as the surviving entity, is advisable, fair
to and in the best interests of Aimco OP and its
partners; and
WHEREAS, AP XII, the Aimco Subsidiary and Aimco OP desire to
enter into this Agreement to evidence the terms, provisions,
representations, warranties, covenants and conditions upon which
the Merger will be consummated.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants set forth herein, and for other good and valuable
consideration, the adequacy, sufficiency, and receipt of which
are hereby acknowledged, AP XII, the Aimco Subsidiary and Aimco
OP hereby agree to amend and restate the Prior Agreement as
follows:
Section 1. The
Merger. Subject to the terms and conditions set
forth herein, the Aimco Subsidiary shall be merged with and into
AP XII (the Merger), and AP XII shall be the
surviving entity of the Merger (the Surviving
Entity). The Merger will have the effects specified in
this Agreement,
section 17-211
of the Delaware Revised Uniform Limited Partnership Act, as
amended (the DRULPA), and
section 18-209
of the Delaware Limited Liability Company Act, as amended (the
DLLCA).
Section 2. General
Partner. Angeles Realty will be the managing
general partner of the Surviving Entity, and Aimco Angeles will
be the non-managing general partner of the Surviving Entity.
Section 3. Certificate. As
soon as practicable after the approval of this Agreement by a
majority in interest of the limited partnership interests of AP
XII, AP XII shall cause to be filed a certificate of merger with
respect to the Merger (the Certificate of
Merger) with the Office of the Secretary of State of
the State of Delaware pursuant to
section 17-211
of the DRULPA and
section 18-209
of the DLLCA. The Merger shall become effective at such time as
the Certificate of Merger has been accepted for record by the
Secretary of State of the State of Delaware (the
Effective Time).
Section 4. Limited
Partnership Agreement. The agreement of limited
partnership of AP XII as in effect immediately prior to the
consummation of the Merger (the Partnership
Agreement) shall be the agreement of limited
partnership of the Surviving Entity until thereafter amended in
accordance with the provisions thereof and applicable law. The
general partner and each limited partner of the Surviving Entity
shall have the rights under, be bound by and be subject to the
terms and conditions of, the Partnership Agreement, as a general
partner or limited partner, as applicable.
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Section 5. Treatment
of Interests in AP XII.
(a) Limited Partners Interests.
(i) In connection with the Merger and in accordance with
the procedures set forth in Section 5(a)(iii) of this
Agreement, each unit of limited partnership interest of AP XII
(each a Unit) outstanding immediately prior
to the Effective Time and held by limited partners of AP XII,
except Units held by limited partners who have perfected their
appraisal rights pursuant to Exhibit A hereto, shall
be converted into the right to receive, at the election of the
limited partner, either (x) $483.14 in cash (the
Cash Consideration) or (y) a number of
partnership common units of Aimco OP calculated by dividing
$483.14 by the average closing price of Apartment Investment and
Management Company common stock, as reported on the New York
Stock Exchange, over the ten consecutive trading days ending on
the second trading day immediately prior to the Effective Time
(the OP Unit Consideration and, together
with the Cash Consideration, the Merger
Consideration).
(ii) Notwithstanding Section 5(a)(i) of this
Agreement, if Aimco OP determines that the law of the state or
other jurisdiction in which a limited partner resides would
prohibit the issuance of partnership common units of Aimco OP in
that state or other jurisdiction (or that the registration or
qualification in that state or jurisdiction would be
prohibitively costly), then such limited partner will only be
entitled to receive the Cash Consideration for each Unit.
(iii) Aimco OP shall prepare a form of election (the
Election Form) describing the Merger and
pursuant to which each limited partner of AP XII will have the
right to elect to receive either the Cash Consideration or the
OP Unit Consideration (subject to Section 5(a)(ii) of
this Agreement) with respect to all of the Units held by such
limited partner. Each limited partner of AP XII must make the
same election with respect to all of his or her Units. Aimco OP
shall mail, or cause to be mailed, an Election Form to each
limited partner, together with any other materials that Aimco OP
determines to be necessary or prudent, no later than ten
(10) days after the Effective Time. An election to receive
the Cash Consideration or the OP Unit Consideration shall
be effective only if a properly executed Election Form is
received by Aimco OP or its designees prior to 5:00 p.m.,
New York time, on the day that is thirty (30) days after
the mailing of such Election Form by Aimco OP. If a limited
partner fails to return a duly completed Election Form within
the time period specified in the Election Form, such holder
shall be deemed to have elected to receive the Cash
Consideration. In addition, each limited partner that resides in
a state or other jurisdiction that Aimco OP determines would
prohibit the issuance of partnership common units of Aimco OP
(or in which registration or qualification would be
prohibitively costly) will be deemed to have elected the Cash
Consideration. AP XII, the Aimco Subsidiary and Aimco OP agree
that limited partners shall have the right to revoke any
election made in connection with the Merger at any time prior to
the expiration of the time period stated in the Election Form.
Aimco OP and Angeles Realty, by mutual agreement, shall have the
right to make rules, not inconsistent with the terms of this
Agreement, governing the validity of Election Forms and the
issuance and delivery of the Merger Consideration, as applicable.
(b) General Partners
Interests. Each general partner interest of
AP XII outstanding immediately prior to consummation of the
Merger shall remain outstanding and unchanged, with all of the
rights set forth in the Partnership Agreement.
Section 6. Treatment
of Interests in Aimco Subsidiary. The entire
membership interest in the Aimco Subsidiary immediately prior to
the Effective Time shall be converted into all of the Units of
the Surviving Entity.
Section 7. Appraisal
Rights. In connection with the Merger, the
holders of Units immediately prior to the Merger shall have the
appraisal rights set forth in Exhibit A hereto.
Section 8. Covenants. Aimco
OP agrees to pay for, or reimburse AP XII for, all expenses
incurred by AP XII in connection with the Merger. Aimco OP
agrees to pay cash or issue and deliver common units of Aimco OP
to the former holders of Units, in accordance with
Section 5(a) of this Agreement.
Section 9. Conditions
to the Merger.
(a) The Merger shall not occur unless and until the Merger
has been approved or consented to by a majority in interest of
limited partnership interests of AP XII.
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(b) Notwithstanding any provisions of this Agreement to the
contrary, none of the parties hereto shall be required to
consummate the transactions contemplated hereby if any
third-party consent, authorization or approval that any of the
parties hereto deem necessary or desirable in connection with
this Agreement, or the consummation of the transactions
contemplated hereby, has not been obtained or received.
Section 10. Tax
Treatment. The parties hereto intend and agree
that, for Federal income tax purposes, (i) any payment of
cash for Units shall be treated as a sale of such Units by such
holder and a purchase of such Units by Aimco OP for the cash so
paid under the terms of this Agreement in accordance with the
guidelines set forth in Treas. Reg.
Sections 1.708-1(c)(3)
and 1.708-1(c)(4), and (ii) each such holder of Units who
accepts cash explicitly agrees and consents to such treatment.
Furthermore, the parties hereto intend and agree that, for
Federal income tax purposes, (x) any holder of Units
receiving partnership common units of Aimco OP under the terms
of this Agreement shall be treated as receiving the partnership
common units of Aimco OP pursuant to a distribution in complete
liquidation of such holders interest in AP XII, and
(y) each such holder of Units who accepts partnership
common units of Aimco OP explicitly agrees and consents to such
treatment. Any cash
and/or
partnership common units of Aimco OP to which a holder of Units
is entitled pursuant to this Agreement shall be paid only after
the receipt of a consent from such holder that, for Federal
income tax purposes, the receipt of cash
and/or
partnership common units of Aimco OP shall be treated as
described in this Section 10.
Section 11. Further
Assurances. From time to time, as and when
required by the Surviving Entity or by its successors and
assigns, there shall be executed and delivered on behalf of the
Aimco Subsidiary such deeds and other instruments, and there
shall be taken or caused to be taken by the Aimco Subsidiary all
such further actions, as shall be appropriate or necessary in
order to vest, perfect or confirm, of record or otherwise, in
the Surviving Entity the title to and possession of all
property, interests, assets, rights, privileges, immunities,
powers, franchises and authority of the Aimco Subsidiary, and
otherwise to carry out the purposes of this Agreement, and the
officers and directors of Angeles Realty are fully authorized in
the name and on behalf of Aimco Subsidiary or otherwise to take
any and all such action and to execute and deliver any and all
such deeds and other instruments.
Section 12. Amendment. Subject
to applicable law, this Agreement may be amended, modified or
supplemented by written agreement of the parties hereto at any
time prior to the consummation of the Merger with respect to any
of the terms contained herein.
Section 13. Abandonment. At
any time prior to consummation of the Merger, this Agreement may
be terminated and the Merger may be abandoned without liability
to any party hereto by any of the Aimco Subsidiary, Aimco OP or
AP XII, in each case, acting in its sole discretion and for any
reason or for no reason, notwithstanding approval of this
Agreement by any of the members of the Aimco Subsidiary, the
partners of AP XII or the general partner of Aimco OP.
Section 14. Governing
Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware,
without reference to the conflict of law provisions thereof.
Section 15. No
Third-Party Beneficiaries. No provision of this
Agreement is intended to confer upon any person, entity, or
organization other than the parties hereto any rights or
remedies hereunder, other than the appraisal rights given to
holders of Units pursuant to Section 7 of this Agreement.
A-3
IN WITNESS WHEREOF, AP XII, the Aimco Subsidiary and
Aimco OP have caused this Agreement to be signed by their
respective duly authorized officers as of the date first above
written.
ANGELES PARTNERS XII, LP
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By:
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Angeles Realty Corporation II,
Its Managing General Partner
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Name: Trent A. Johnson
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Title:
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Vice President and
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Assistant General Counsel
AIMCO AP XII MERGER SUB LLC
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By:
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AIMCO Properties, L.P.,
Its Sole Member
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By:
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AIMCO-GP, Inc.,
Its General Partner
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Name: Trent A. Johnson
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Title:
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Vice President and
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Assistant General Counsel
AIMCO PROPERTIES, L.P.
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By:
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AIMCO-GP, Inc.,
Its General Partner
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Name: Trent A. Johnson
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Title:
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Vice President and
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Assistant General Counsel
A-4
EXHIBIT A
Appraisal
Rights of Limited Partners
Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Amended and Restated
Agreement and Plan of Merger, dated as of November 15, 2011
(the Merger Agreement), by and among Angeles
Partners XII, LP, a Delaware limited partnership (AP
XII), AIMCO AP XII Merger Sub LLC, a Delaware limited
liability company (the Aimco Subsidiary), and
AIMCO Properties, L.P., a Delaware limited partnership
(Aimco OP), pursuant to which the Aimco
Subsidiary shall be merged with and into AP XII, with AP XII
surviving (the Merger). In connection with
the Merger, limited partners of AP XII shall have the following
appraisal rights:
(a) Any limited partner who holds Units on the effective
date of the Merger who has not consented to the Merger (the
Nonconsenting Limited Partners) and who has
otherwise complied with paragraph (b) hereof shall be
entitled to an appraisal by arbitration of the fair value of the
Nonconsenting Limited Partners Units. This arbitration
shall be conducted in Denver, Colorado, in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association (AAA), excluding the Procedures
for Large, Complex Commercial Disputes, by a single arbitrator
selected by Aimco OP from a panel of AAA arbitrators who are
qualified to value investment interests in commercial real
estate. Any action for judicial review or enforcement of the
arbitration award shall be brought in a court of competent
jurisdiction located in Denver, Colorado.
(b) Within 10 days after the effective date of the
Merger, Aimco OP shall notify each of the Nonconsenting Limited
Partners of the consummation of the Merger, the effective date
of the Merger and that appraisal rights are available for any or
all Units held by Nonconsenting Limited Partners, and shall
include in such notice a copy of this Exhibit A.
Such notice shall include an Election Form pursuant to which
Nonconsenting Limited Partners may elect an appraisal by
arbitration of the fair value of their Units pursuant to
paragraph (a) hereof. Any limited partn