Washington, D.C. 20549

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

 

 

4582 SOUTH ULSTER STREET PARKWAY, SUITE 1100
DENVER, COLORADO 80237

 

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On April 27, 2009

 

 

You are cordially invited to attend the 2009 Annual Meeting of Stockholders (the “Meeting”) of APARTMENT INVESTMENT AND MANAGEMENT COMPANY (“Aimco” or the “Company”) to be held on Monday, April 27, 2009, at 8:00 a.m. at the Four Seasons Hotel, One Logan Square, Philadelphia, PA 19103, for the following purposes:

 

1. To elect seven directors, for a term of one year each, until the next Annual Meeting of Stockholders and until their successors are elected and qualify;

 

2. To ratify the selection of Ernst & Young LLP, to serve as independent registered public accounting firm for the Company for the fiscal year ending December 31, 2009;

 

3. To consider and vote on a stockholder proposal described in the accompanying proxy statement, if this proposal is presented at the meeting; and

 

4. To transact such other business as may properly come before the Meeting or any adjournment(s) thereof.

 

Only stockholders of record at the close of business on February 27, 2009, will be entitled to notice of, and to vote at, the Meeting or any adjournment(s) thereof.

 

For the second year, we are pleased to take advantage of Securities and Exchange Commission (“SEC”) rules that allow issuers to furnish proxy materials to their stockholders on the Internet. We believe these rules allow us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our Meeting.

 

On or about March 9, 2009, we intend to mail our stockholders a notice containing instructions on how to access our 2009 proxy statement (the “Proxy Statement”), Annual Report on Form 10-K for the year ended December 31, 2008, and 2008 Corporate Citizenship Report and vote online. The notice also provides instructions on how you can request a paper copy of these documents if you desire, and how you can enroll in e-delivery. If you received your annual materials via email, the email contains voting instructions and links to these documents on the Internet.

 

WHETHER OR NOT YOU EXPECT TO BE AT THE MEETING, PLEASE VOTE AS SOON AS POSSIBLE TO ENSURE THAT YOUR SHARES ARE REPRESENTED.

 

BY ORDER OF THE BOARD OF DIRECTORS

 

Lisa R. Cohn

Secretary

 

March 5, 2009

 

Important Notice Regarding the Availability of Proxy Materials for
Aimco’s Annual Meeting of Stockholders to be held on April 27, 2009.

 

This Proxy Statement, Aimco’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, and 2008 Corporate Citizenship Report are available free of charge at the following website: www.edocumentview.com/aiv.

Table of Contents

 

 

 

 

 

PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 27, 2009

 

 

 

 

The Board of Directors (the “Board”) of Apartment Investment and Management Company (“Aimco” or the “Company”) has made these proxy materials available to you on the Internet, or, upon your request, has delivered printed versions of these materials to you by mail. We are furnishing this Proxy Statement in connection with the solicitation by our Board of proxies to be voted at our 2009 Annual Meeting (the “Meeting”). The Meeting will be held on Monday, April 27, 2009, at 8:00 a.m. at the Four Seasons Hotel, One Logan Square, Philadelphia, PA 19103, and at any and all adjournments or postponements thereof.

 

Pursuant to rules recently adopted by the SEC, we are providing access to our proxy materials over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice”) to each stockholder entitled to vote at the Meeting. The mailing of such Notice is scheduled to begin on or about March 9, 2009. All stockholders will have the ability to access the proxy materials over the Internet and request to receive a printed copy of the proxy materials by mail. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found in the Notice. In addition, the Notice includes instructions on how stockholders may request proxy materials in printed form by mail or electronically by email on an ongoing basis.

 

This solicitation is made by mail on behalf of Aimco’s Board. Costs of the solicitation will be borne by Aimco. Further solicitation of proxies may be made by telephone, fax or personal interview by the directors, officers and employees of the Company and its affiliates, who will not receive additional compensation for the solicitation. The Company has retained the services of The Altman Group, Inc., for an estimated fee of $6,000, plus out-of-pocket expenses, to assist in the solicitation of proxies from brokerage houses, banks, and other custodians or nominees holding stock in their names for others. The Company will reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy material to stockholders.

 

Holders of record of the Class A Common Stock of the Company (“Common Stock”) as of the close of business on the record date, February 27, 2009 (the “Record Date”), are entitled to receive notice of, and to vote at, the Meeting. Each share of Common Stock entitles the holder to one vote. At the close of business on the Record Date, there were 117,298,253 shares of Common Stock issued and outstanding.

 

Whether you are a “stockholder of record” or hold your shares through a broker or nominee (i.e., in “street name”), you may direct your vote without attending the Meeting in person.

 

If you are a stockholder of record, you may vote via the Internet by following the instructions on the Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing and submitting your proxy card and returning by mail or by submitting your vote by telephone. You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), you should indicate your name and title or capacity.

 

If you are the beneficial owner of shares held in street name, you may be eligible to vote your shares electronically over the Internet or by telephone by following the instructions on the Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing the voter instruction card provided by your bank or broker and returning it by mail. If you provide specific voting instructions by mail, telephone or the Internet, your shares will be voted by your broker or nominee as you have directed.

The persons named as proxies are officers of Aimco. All proxies properly submitted in time to be counted at the Meeting will be voted in accordance with the instructions contained therein. If you submit your proxy without voting instructions, your shares will be voted in accordance with the recommendations of the Board. Proxies may be revoked at any time before voting by filing a notice of revocation with the Corporate Secretary of the Company, by filing a later dated proxy with the Corporate Secretary of the Company or by voting in person at the Meeting.

 

You are entitled to attend the Meeting only if you were an Aimco stockholder or joint holder as of the Record Date or you hold a valid proxy for the Meeting. If you are not a stockholder of record but hold shares in street name, you should provide proof of beneficial ownership as of the Record Date, such as your most recent account statement prior to February 27, 2009, a copy of the voting instruction card provided by your broker, trustee or nominee, or other similar evidence of ownership.

 

The principal executive offices of the Company are located at 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237.

 

ELECTION OF DIRECTORS

 

Pursuant to Aimco’s Articles of Restatement (the “Charter”) and Amended and Restated Bylaws (the “Bylaws”), directors are elected at each annual meeting of stockholders and hold office for one year, and until their successors are duly elected and qualify. Aimco’s Bylaws currently authorize a Board consisting of not fewer than three nor more than nine persons. The Board currently consists of eight directors. Thomas L. Rhodes has notified us of his decision not to stand for reelection to the Board at the Meeting, which decision is not the result of any disagreement with the Company. Immediately following the retirement of Mr. Rhodes from the Board at the time of the Meeting, the size of the Board will be reduced to seven.

 

The nominees for election to the seven positions on the Board selected by the Nominating and Corporate Governance Committee of the Board and proposed by the Board to be voted upon at the Meeting are:

 

James N. Bailey

Terry Considine

Richard S. Ellwood

Thomas L. Keltner

J. Landis Martin

Robert A. Miller

Michael A. Stein

 

Messrs. Bailey, Considine, Ellwood, Keltner, Martin, Miller, and Stein were elected to the Board at the last Annual Meeting of Stockholders. Messrs. Bailey, Ellwood, Keltner, Martin, Miller, and Stein are not employed by, or affiliated with, Aimco, other than by virtue of serving as directors of Aimco. Unless authority to vote for the election of directors has been specifically withheld, the persons named in the accompanying proxy intend to vote for the election of Messrs. Bailey, Considine, Ellwood, Keltner, Martin, Miller, and Stein to hold office as directors for a term of one year until their successors are elected and qualify at the next Annual Meeting of Stockholders. All nominees have advised the Board that they are able and willing to serve as directors.

 

If any nominee becomes unavailable for any reason (which is not anticipated), the shares represented by the proxies may be voted for such other person or persons as may be determined by the holders of the proxies (unless a proxy contains instructions to the contrary). In no event will the proxy be voted for more than seven nominees.

 

The vote of a plurality of all the votes cast at the Meeting at which a quorum is present is sufficient for the election of a director. For purposes of the election of directors, abstentions or broker non-votes as to the election of directors will not be counted as votes cast and will have no effect on the result of the vote. Unless instructed to the contrary in the proxy, the shares represented by the proxies will be voted FOR the election of the seven nominees named above as directors.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH
OF THE SEVEN NOMINEES.

 

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

 

The firm of Ernst & Young LLP, the Company’s independent registered public accounting firm for the year ended December 31, 2008, was selected by the Audit Committee to act in the same capacity for the fiscal year ending December 31, 2009, subject to ratification by Aimco’s stockholders. The aggregate fees billed for services rendered by Ernst & Young LLP during the years ended December 31, 2008 and 2007, are described below under the caption “Principal Accountant Fees and Services.”

 

Representatives of Ernst & Young LLP will be present at the Meeting and will be given the opportunity to make a statement if they so desire and to respond to appropriate questions.

 

The affirmative vote of a majority of the votes cast regarding the proposal is required to ratify the selection of Ernst & Young LLP. Abstentions or broker non-votes will not be counted as votes cast and will have no effect on the

result of the vote on the proposal. Unless instructed to the contrary in the proxy, the shares represented by the proxies will be voted FOR the proposal to ratify the selection of Ernst & Young LLP to serve as independent registered public accounting firm for the Company for the fiscal year ending December 31, 2009.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION
OF THE SELECTION OF ERNST & YOUNG LLP.

 

A stockholder has submitted the following proposal. The proposal will be voted on at the Meeting if the proponent is present at the Meeting and submits the proposal for a vote.

 

In accordance with federal securities law regulations, Aimco includes the stockholder proposal and the related supporting statements as submitted by the proponents, without editing by Aimco. To easily distinguish between material provided by the proponent and information the Board would like you to consider, Aimco has put a box around material provided by the proponent.

 

The United Brotherhood of Carpenters Pension Fund, 101 Constitution Avenue, N.W., Washington, D.C. 20001, who is the beneficial owner of 1,596 shares of Common Stock, has given notice that it intends to introduce the following resolution at the Meeting.

 

 

 

STATEMENT OF BOARD OF DIRECTORS

 

The Board has considered the proposal set forth above relating to majority voting in uncontested director elections and has determined not to oppose the proposal and to make no voting recommendation to stockholders. The proposal, which is advisory in nature, would constitute a recommendation to the Board if approved by stockholders.

 

The Board has been mindful of recent governance developments on the subject of majority-voting in the election of directors and has examined the issue very closely. Since Aimco’s initial public offering in 1994, each Director nominee has typically received the affirmative vote of more than 90% of the shares voted at the annual meeting of stockholders (and only in one instance did a single director nominee receive less — and he still was elected by a clear majority). As a result, majority voting would have had no effect on the outcome of our election process during the past 15 years.

 

Moreover, the Board has historically been comprised of highly qualified Directors, substantially all of whom have been “independent” within the meaning of standards adopted by the New York Stock Exchange. Each of these Directors was elected without majority voting. Because our stockholders have a history of electing highly qualified, independent Directors, the Board does not believe that a change to a majority voting standard would necessarily improve our corporate governance processes.

 

The Board recognizes that majority voting in the election of directors is a relatively new corporate governance development and that there are valid arguments on both sides of the issue. Accordingly, the Board wants to use this proposal as an opportunity for stockholders to express their views on this subject without being influenced by any recommendation that the Board might make.

 

The affirmative vote of a majority of the votes cast regarding the proposal is required to adopt the proposal. Abstentions or broker non-votes will not be counted as votes cast and will have no effect on the result of the vote on the proposal. If stockholders return a validly executed proxy solicited by the Board, the shares represented by the proxy will be voted on this proposal in the manner specified by the stockholder. If stockholders do not specify the manner in which their shares represented by a validly executed proxy solicited by the Board are to be voted on this proposal, such shares will be counted as abstentions.

 

THE BOARD OF DIRECTORS IS NOT OPPOSING THIS PROPOSAL AND MAKES
NO VOTING RECOMMENDATION TO STOCKHOLDERS.

 

The executive officers of the Company and the nominees for election as directors of the Company, their ages, dates they were first elected an executive officer or director, and their positions with the Company or on the Board are set forth below.

 

 

The following is a biographical summary for at least the past five years of the current directors and executive officers of the Company, other than Mr. Rhodes who has notified us of his decision not to stand for reelection to the Board at the Meeting, which decision is not the result of any disagreement with the Company.

 

Terry Considine.  Mr. Considine has been Chairman of the Board and Chief Executive Officer since July 1994. Mr. Considine also serves on the board of directors of Intrepid Potash, Inc, a publicly held producer of potash.

 

Timothy J. Beaudin.  Mr. Beaudin was appointed President and Chief Operating Officer in February 2009. He joined Aimco as Chief Development Officer in October 2005 and was appointed Executive Vice President and Chief Property Operating Officer in October 2008. Mr. Beaudin oversees conventional and affordable property operations and information technology, in addition to redevelopment and construction services. He also is responsible for asset management for conventional properties. Prior to joining Aimco and beginning in 1995, Mr. Beaudin was with Catellus Development Corporation, a San Francisco, California-based real estate investment trust. During his last five years at Catellus, Mr. Beaudin served as Executive Vice President, with management responsibility for development, construction and asset management.

 

Lisa R. Cohn.  Ms. Cohn was appointed Executive Vice President, General Counsel and Secretary in December 2007. From January 2004 to December 2007, Ms. Cohn served as Senior Vice President and Assistant General Counsel. She joined Aimco in July 2002 as Vice President and Assistant General Counsel. Prior to joining the Company, Ms. Cohn was in private practice with the law firm of Hogan & Hartson LLP.

 

Miles Cortez.  Mr. Cortez was appointed Executive Vice President and Chief Administrative Officer in December 2007. Mr. Cortez joined Aimco in August 2001 as Executive Vice President, General Counsel and Secretary. Prior to joining the Company, Mr. Cortez was the senior partner of Cortez Macaulay Bernhardt & Schuetze LLC, a Denver, Colorado law firm, from December 1997 through September 2001. He served as president of the Colorado Bar Association from 1996 to 1997 and the Denver Bar Association from 1982 to 1983.

James G. Purvis.  Mr. Purvis was appointed Executive Vice President — Human Resources in February 2003. Prior to joining Aimco, from October 2000 to February 2003, Mr. Purvis served as the Vice President of Human Resources at SomaLogic, Inc., a privately held biotechnology company in Boulder, Colorado.

 

David Robertson.  Mr. Robertson was appointed President and Chief Investment Officer in February 2009, and on March 1, 2009, he also became Chief Financial Officer. Mr. Robertson joined Aimco as Executive Vice President in February 2002 and has served as Chief Investment Officer since March 2007. In addition to serving as Aimco’s chief financial officer, Mr. Robertson is responsible for portfolio strategy, capital allocation, investments, joint ventures, asset management and transaction activities. Since February 1996, Mr. Robertson has served as Chairman of Robeks Corporation, a 150-unit privately held chain of specialty food stores that he founded.

 

James N. Bailey.  Mr. Bailey was first elected as a Director of the Company in June 2000 and is currently Chairman of the Nominating and Corporate Governance Committee and a member of the Audit and Compensation and Human Resources Committees. Mr. Bailey co-founded Cambridge Associates, LLC, an investment consulting firm, in 1973 and currently serves as its Senior Managing Director and Treasurer. He is also a director of The Plymouth Rock Company, SRB Corporation, Inc., Direct Response Corporation and Homeowners Direct Company, all four of which are insurance companies and insurance company affiliates. He also serves as an Overseer for the New England Aquarium. Mr. Bailey is a member of the Massachusetts Bar and the American Bar Associations.

 

Richard S. Ellwood.  Mr. Ellwood was first elected as a Director of the Company in July 1994. Mr. Ellwood is currently a member of the Audit, Compensation and Human Resources, and Nominating and Corporate Governance Committees. Mr. Ellwood was the founder and President of R.S. Ellwood & Co., Incorporated, which he operated as a real estate investment banking firm until December 31, 2004. Prior to forming his firm, Mr. Ellwood had 31 years experience on Wall Street as an investment banker, serving as: Managing Director and senior banker at Merrill Lynch Capital Markets from 1984 to 1987; Managing Director at Warburg Paribas Becker from 1978 to 1984; general partner and then Senior Vice President and a director at White, Weld & Co. from 1968 to 1978; and in various capacities at J.P. Morgan & Co. from 1955 to 1968. Mr. Ellwood currently serves as a director of Felcor Lodging Trust, Incorporated, a publicly held company. He also serves as a trustee of the Diocesan Investment Trust of the Episcopal Diocese of New Jersey and is chairman of the diocesan audit committee.

 

Thomas L. Keltner.  Mr. Keltner was first elected as a Director of the Company in April 2007 and is currently a member of the Audit, Compensation and Human Resources, and Nominating and Corporate Governance Committees. Mr. Keltner served as Executive Vice President and Chief Executive Officer — Americas and Global Brands for Hilton Hotels Corporation from March 2007 through March 2008, which concluded the transition period following Hilton’s acquisition by The Blackstone Group. He currently serves as Senior Advisor to the chief executive officer of Hilton Hotels Corporation. Mr. Keltner joined Hilton Hotels Corporation in 1999 and served in various roles. Mr. Keltner has more than 20 years of experience in the areas of hotel development, acquisition, disposition, franchising and management. Prior to joining Hilton Hotels Corporation, from 1993 to 1999 Mr. Keltner served in several positions with Promus Hotel Corporation, including President, Brand Performance and Development. Before joining Promus Hotel Corporation, he served in various capacities with Holiday Inn Worldwide, Holiday Inns International and Holiday Inns, Inc. In addition, Mr. Keltner was President of Saudi Marriott Company, a division of Marriott Corporation, and was a management consultant with Cresap, McCormick and Paget, Inc.

 

J. Landis Martin.  Mr. Martin was first elected as a Director of the Company in July 1994 and is currently Chairman of the Compensation and Human Resources Committee. Mr. Martin is also a member of the Audit and Nominating and Corporate Governance Committees and serves as the Lead Independent Director of Aimco’s Board. Mr. Martin is the Founder and Managing Director of Platte River Ventures LLC, a private equity firm. In November 2005, Mr. Martin retired as Chairman and CEO of Titanium Metals Corporation, a publicly held integrated producer of titanium metals, where he served since January 1994. Mr. Martin served as President and CEO of NL Industries, Inc., a publicly held manufacturer of titanium dioxide chemicals, from 1987 to 2003. Mr. Martin is also a director of Crown Castle International Corporation, a publicly held wireless communications company, Halliburton Company, a publicly held provider of products and services to the energy industry, and Intrepid Potash, Inc., a publicly held producer of potash.

Robert A. Miller.  Mr. Miller was first elected as a Director of the Company in April 2007 and is currently a member of the Audit, Compensation and Human Resources, and Nominating and Corporate Governance Committees. Mr. Miller has served as the President of Marriott Leisure since 1997. Prior to joining Marriott Leisure, from 1984 to 1988, Mr. Miller served as Executive Vice President & General Manager of Marriott Vacation Club International and then as its President from 1988 to 1997. In 1984, Mr. Miller and a partner sold their company, American Resorts, Inc., to Marriott. Mr. Miller co-founded American Resorts, Inc. in 1978, and it was the first business model to encompass all aspects of timeshare resort development, sales, management and operations. Prior to founding American Resorts, Inc., from 1972 to 1978 Mr. Miller was Chief Financial Officer of Fleetwing Corporation, a regional retail and wholesale petroleum company. Prior to joining Fleetwing, Mr. Miller served for five years as a staff accountant for Arthur Young & Company. Mr. Miller is past Chairman and currently a director of the American Resort Development Association (ARDA) and currently serves as Chairman and director of the ARDA International Foundation.

 

Michael A. Stein.  Mr. Stein was first elected as a Director of the Company in October 2004 and is currently the Chairman of the Audit Committee. Mr. Stein is also a member of the Compensation and Human Resources and Nominating and Corporate Governance Committees. From January 2001 until its acquisition by Eli Lilly in January 2007, Mr. Stein served as Senior Vice President and Chief Financial Officer of ICOS Corporation, a biotechnology company based in Bothell, Washington. From October 1998 to September 2000, Mr. Stein was Executive Vice President and Chief Financial Officer of Nordstrom, Inc. From 1989 to September 1998, Mr. Stein served in various capacities with Marriott International, Inc., including Executive Vice President and Chief Financial Officer from 1993 to 1998. Mr. Stein serves on the Board of Directors of Nautilus, Inc., which is a publicly held fitness company, and the Board of Directors of Providence Health & Services, a not-for-profit health system operating hospitals and other health care facilities across Alaska, Washington, Montana, Oregon and California.

 

As a result of changes in roles and responsibilities among its officers, for 2008, Aimco has determined that certain officers who were listed as executive officers in the proxy statement for the Company’s 2008 annual meeting of stockholders no longer satisfy the criteria set forth in the applicable disclosure rules, and therefore are not included in this Proxy Statement.

 

The Board has determined that to be considered independent, an outside director may not have a direct or indirect material relationship with Aimco or its subsidiaries (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). A material relationship is one that impairs or inhibits — or has the potential to impair or inhibit — a director’s exercise of critical and disinterested judgment on behalf of Aimco and its stockholders. In determining whether a material relationship exists, the Board considers all relevant facts and circumstances, for example, whether the director or a family member is a current or former employee of the Company, family member relationships, compensation, business relationships and payments, and charitable contributions between Aimco and an entity with which a director is affiliated (as an executive officer, partner or substantial stockholder). In addition to the factors mentioned, the Board previously evaluated a potential investment relationship between a Considine family partnership and a fund managed by Mr. Martin, which investment later was made on the same terms as those offered to other investors. The Board consults with the Company’s counsel to ensure that such determinations are consistent with all relevant securities and other laws and regulations regarding the definition of “independent director,” including but not limited to those categorical standards set forth in Section 303A.02 of the listing standards of the New York Stock Exchange as in effect from time to time.

 

Consistent with these considerations, the Board affirmatively has determined that Messrs. Bailey, Ellwood, Keltner, Martin, Miller, Rhodes and Stein are independent directors (collectively the “Independent Directors”).

 

The Board held five meetings during the year ended December 31, 2008. The Board has established standing Audit, Compensation and Human Resources, and Nominating and Corporate Governance committees. During

2008, no director attended fewer than 75% of the total number of meetings of the Board and any committees of the Board upon which he served.

 

The Corporate Governance Guidelines, as described below, provide that the Company generally expects that the Chairman of the Board will attend all annual and special meetings of the stockholders. Other members of the Board are not required to attend such meetings. All of the members of the Board attended the Company’s 2008 annual meeting of stockholders, and the Company anticipates that all of the members of the Board will attend the Meeting.

 

Below is a table illustrating the standing committee memberships and chairmen, and additional detail on each committee follows the table.

 

 

 

 

Audit Committee.

 

The Audit Committee currently consists of the seven Independent Directors, and the Audit Committee Chairman is Mr. Stein. The Audit Committee makes determinations concerning the engagement of the independent registered public accounting firm, reviews with the independent registered public accounting firm the plans and results of the audit engagement (including the audit of the Company’s financial statements and the Company’s internal control over financial reporting), reviews the independence of the independent registered public accounting firm and considers the range of audit and non-audit fees. The Audit Committee also provides oversight for the Company’s financial reporting process, internal control over financial reporting and the Company’s internal audit function.

 

The Audit Committee held six meetings during the year ended December 31, 2008. The Audit Committee has a written charter that is posted on Aimco’s website (www.aimco.com) and is also available in print to stockholders, upon written request to Aimco’s Corporate Secretary. As set forth in the Audit Committee’s charter, no director may serve as a member of the Audit Committee if such director serves on the audit committee of more than two other public companies, unless the Board determines that such simultaneous service would not impair the ability of such director to effectively serve on the Audit Committee. No member of the Audit Committee serves on the audit committee of more than two other public companies.

 

Audit Committee Financial Expert

 

Aimco’s Board has determined that the Company has at least one audit committee financial expert serving on the Audit Committee, and has designated Mr. Stein as an “audit committee financial expert.” Each member of the

Audit Committee is independent, as that term is defined by Section 303A of the listing standards of the New York Stock Exchange relating to audit committees.

 

Compensation and Human Resources Committee.

 

The Compensation and Human Resources Committee currently consists of the seven Independent Directors, and the Compensation and Human Resources Committee Chairman is Mr. Martin. The Compensation and Human Resources Committee’s purposes are to: oversee the Company’s compensation and employee benefit plans and practices, including its executive compensation plans and its incentive-compensation and equity-based plans; to review and discuss with management the Compensation Discussion & Analysis; and to direct the preparation of, and approve, a report on executive compensation to be included in the Company’s proxy statement for its annual meeting of stockholders or Annual Report on Form 10-K filed with the SEC. The Compensation and Human Resources Committee held nine meetings during the year ended December 31, 2008. The Compensation and Human Resources Committee has a written charter that is posted on Aimco’s website (www.aimco.com) and is also available in print to stockholders, upon written request to Aimco’s Corporate Secretary.

 

Nominating and Corporate Governance Committee.

 

The Nominating and Corporate Governance Committee currently consists of the seven Independent Directors, and the Nominating and Corporate Governance Committee Chairman is Mr. Bailey. The Nominating and Corporate Governance Committee’s purposes are to: identify and recommend to the Board individuals qualified to serve on the Board; advise the Board with respect to Board composition, procedures and committees; develop and recommend to the Board a set of corporate governance principles applicable to Aimco and its management; and oversee evaluation of the Board and management (in conjunction with the Compensation and Human Resources Committee). The Nominating and Corporate Governance Committee held six meetings during the year ended December 31, 2008. The Nominating and Corporate Governance Committee has a written charter that is posted on Aimco’s website (www.aimco.com) and is also available in print to stockholders, upon written request to Aimco’s Corporate Secretary.

 

The Nominating and Corporate Governance Committee selects nominees for director on the basis of, among other things, experience, knowledge, skills, expertise, integrity, ability to make independent analytical inquiries, understanding of Aimco’s business environment and willingness to devote adequate time and effort to Board responsibilities. The Nominating and Corporate Governance Committee assesses the appropriate balance of criteria required of directors and makes recommendations to the Board.

 

When formulating its Board membership recommendations, the Nominating and Corporate Governance Committee also considers advice and recommendations from others, including stockholders, as it deems appropriate. Such recommendations are evaluated on the basis of the same criteria noted above. The Nominating and Corporate Governance Committee will consider as nominees to the Board for election at next year’s annual meeting of stockholders persons who are recommended by stockholders in writing, marked to the attention of Aimco’s Corporate Secretary, no later than July 1, 2009. During 2008, no such recommendations were received.

 

The Board is responsible for nominating members for election to the Board and for filling vacancies on the Board that may occur between annual meetings of stockholders. Based on recommendations from the Nominating and Corporate Governance Committee, the Board determined to nominate Messrs. Bailey, Considine, Ellwood, Keltner, Martin, Miller, and Stein for re-election. As previously noted, Mr. Rhodes has notified us of his decision not to stand for reelection at the Meeting, which decision is not the result of any disagreement with the Company.

 

Separate Sessions of Non-Management Directors and Lead Independent Director.

 

Aimco’s Corporate Governance Guidelines (described below) provide that the non-management directors shall meet in executive session without management on a regularly scheduled basis, but no less than four times per year. The non-management directors, which group currently is made up of the seven Independent Directors, met in executive session without management five times during the year ended December 31, 2008. Mr. Martin was the Lead Independent Director who presided at such executive sessions in 2008, and he has been designated as the Lead Independent Director who will preside at such executive sessions in 2009.

The following table sets forth the number of meetings held by the Board and each committee during the year ended December 31, 2008.

 

 

In formulating its recommendation for director compensation, the Nominating and Corporate Governance Committee reviews director compensation for independent directors of companies in the real estate industry and companies of comparable market capitalization, revenue and assets. For the year ended December 31, 2008, Aimco paid the directors serving on the Board as follows:

 

 

 

 

Compensation for each of the Independent Directors in 2009 is an annual fee of 5,920 shares of Common Stock, which shares were awarded on February 3, 2009. The number of shares was determined based on the historic practice of awarding 4,000 shares as adjusted for the special dividends paid by Aimco in January 2008, August 2008, December 2008 and January 2009. The Independent Directors will also receive a fee of $1,000 for attendance in person or telephonically at each meeting of the Board, and a fee of $1,000 for attendance at each meeting of any Board committee.

 

The Board has adopted a code of ethics entitled “Code of Business Conduct and Ethics” that applies to the members of the Board, all of Aimco’s executive officers and all employees of Aimco or its subsidiaries, including Aimco’s principal executive officer, principal financial officer and principal accounting officer. The Code of Business Conduct and Ethics is posted on Aimco’s website (www.aimco.com) and is also available in print to stockholders, upon written request to Aimco’s Corporate Secretary. If, in the future, Aimco amends, modifies or waives a provision in the Code of Business Conduct and Ethics, rather than filing a Current Report on Form 8-K, Aimco intends to satisfy any applicable disclosure requirement under Item 5.05 of Form 8-K by posting such information on Aimco’s website (www.aimco.com), as necessary.

 

The Board has adopted and approved Corporate Governance Guidelines. These guidelines are available on Aimco’s website (www.aimco.com) and are also available in print to stockholders, upon written request to Aimco’s Corporate Secretary. In general, the Corporate Governance Guidelines address director qualification standards, director responsibilities, the lead independent director, director access to management and independent advisors, director compensation, director orientation and continuing education, management succession, and an annual performance evaluation of the Board.

 

Any interested parties desiring to communicate with Aimco’s Board, the Lead Independent Director, any of the Independent Directors, Aimco’s Chairman of the Board, any committee chairman, or any committee member may directly contact such persons by directing such communications in care of Aimco’s Corporate Secretary. All communications received as set forth in the preceding sentence will be opened by the office of Aimco’s General Counsel for the sole purpose of determining whether the contents represent a message to Aimco’s directors. Any contents that are not in the nature of advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the Board or any group or committee of directors, the General Counsel’s office will make sufficient copies of the contents to send to each director who is a member of the group or committee to which the envelope or e-mail is addressed.

 

To contact Aimco’s Corporate Secretary, correspondence should be addressed as follows:

 

Corporate Secretary
Office of the General Counsel
Apartment Investment and Management Company
4582 South Ulster Street Parkway, Suite 1100
Denver, Colorado 80237

 

The Audit Committee oversees Aimco’s financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting process, including internal control over financial reporting and disclosure controls and procedures. In fulfilling its oversight responsibilities, the Audit Committee reviewed the audited financial statements in the Annual Report on Form 10-K with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. A written charter approved by the Audit Committee and ratified by the Board governs the Audit Committee.

 

The Audit Committee reviewed with the independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States, its judgment as to the quality, not just the acceptability, of the Company’s accounting principles. The Audit Committee also has discussed with the independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T. In addition, the Audit Committee has received from the independent registered public accounting firm the written disclosures and letter required by Public Company Accounting Oversight Board Ethics and Independence Rule 3526, and has discussed with the independent registered public accounting firm its independence from the Company and its management, and has considered whether the independent registered public accounting firm’s provision of non-audit services to the Company is compatible with maintaining such firm’s independence.

 

The Audit Committee discussed with the Company’s independent registered public accounting firm the overall scope and plans for its audit. The Audit Committee meets with the independent registered public accounting firm, with and without management present, to discuss the results of its examination, its evaluation of the Company’s internal control over financial reporting, and the overall quality of the Company’s financial reporting. The Audit Committee held six meetings during fiscal year 2008.

 

None of the Audit Committee members have a relationship with the Company that might interfere with the exercise of his independence from the Company and its management.

 

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board has approved, that the audited financial statements and management’s report on internal control over financial reporting be included in the Annual Report on Form 10-K for the year ended December 31, 2008, for filing with the SEC. The Audit Committee has also determined that provision by Ernst & Young LLP of other non-audit services is compatible with maintaining Ernst & Young LLP’s independence. The Audit Committee and the Board have also recommended, subject to stockholder ratification, the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2009.

 

Date: March 5, 2009

 

MICHAEL A. STEIN (CHAIRMAN)
JAMES N. BAILEY
RICHARD S. ELLWOOD
THOMAS L. KELTNER
J. LANDIS MARTIN
ROBERT A. MILLER
THOMAS L. RHODES

 

The above report will not be deemed to be incorporated by reference into any filing by the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates the same by reference.

 

The aggregate fees billed for services rendered by Ernst & Young LLP during the years ended December 31, 2008 and 2007 were approximately $8.28 million and $8.73 million, respectively, and are described below.

 

Audit Fees

 

Fees for audit services totaled approximately $4.91 million in 2008 and approximately $5.33 million in 2007. These amounts include fees associated with the annual audit of the financial statements of Aimco, its internal control over financial reporting and the financial statements of certain of its consolidated subsidiaries and unconsolidated investees. Fees for audit services also include fees for the reviews of interim financial statements in Aimco’s Quarterly Reports on Form 10-Q, registration statements filed with the SEC, other SEC filings, equity or debt offerings, comfort letters and consents.

 

Audit-Related Fees

 

Fees for audit-related services totaled approximately $0.18 million in 2008 and approximately $0.29 million in 2007. Audit-related services principally include various audit and attest work not required by statute or regulation, benefit plan audits, and accounting consultations.

 

Tax Fees

 

Fees billed for tax services totaled $3.19 million in 2008 and $3.12 million in 2007. Such amounts included fees for tax compliance services for approximately 228 subsidiaries or affiliates of the Company of $2.41 million in 2008 and $2.74 million in 2007. The portion of the total representing fees for tax planning services amounted to approximately $0.77 million in 2008 and approximately $0.38 million in 2007.

 

All Other Fees

 

Fees for all other services not included above were zero in 2008 and in 2007. There were no fees billed or incurred in 2008 and 2007 related to financial information systems design and implementation.

 

Included in the fees above are audit and tax compliance fees of $4.39 million and $4.68 million for 2008 and 2007, respectively, for services provided to consolidated and unconsolidated partnerships for which an Aimco subsidiary is the general partner. Audit services were provided to approximately 80 such partnerships, and tax compliance services were provided to approximately 228 such partnerships during 2008.

 

The Audit Committee has adopted the Audit and Non-Audit Services Pre-Approval Policy (the “Pre-approval Policy”). The Pre-approval Policy describes the Audit, Audit-related, Tax and Other Permitted services that have the general pre-approval of the Audit Committee, typically subject to a dollar limit of $50,000. The term of any general pre-approval is generally 12 months from the date of pre-approval, unless the Audit Committee considers a different period and states otherwise. At least annually, the Audit Committee will review and pre-approve the services that may be provided by the independent registered public accounting firm without obtaining specific pre-approval from the Audit Committee. In accordance with this review, the Audit Committee may add to or subtract from the list of general pre-approved services or modify the permissible dollar limit associated with pre-approvals. As set forth in the Pre-approval Policy, unless a type of service has received general pre-approval and is anticipated to be within the dollar limit associated with the general pre-approval, it will require specific pre-approval by the Audit Committee if it is to be provided by the independent registered public accounting firm. For both types of pre-approval, the Audit Committee will consider whether such services are consistent with the rules on independent registered public accounting firm independence. The Audit Committee will also consider whether the independent registered public accounting firm is best positioned to provide the most effective and efficient service, for reasons such as its familiarity with Aimco’s business, people, culture, accounting systems, risk profile and other factors, and

whether the service might enhance Aimco’s ability to manage or control risk or improve audit quality. All such factors will be considered as a whole, and no one factor will necessarily be determinative. All of the services described above were approved pursuant to the annual engagement letter or in accordance with the Pre-approval Policy; none were approved pursuant to Rule 2-01(c)(7)(i)(C) of SEC Regulation S-X.

 

The following table sets forth certain information available to the Company, as of March 2, 2009, with respect to Aimco’s equity securities beneficially owned by (i) each director and director nominee, the chief executive officer, the chief financial officer and the three other most highly compensated executive officers who were serving as of March 2, 2009, and (ii) all directors and executive officers as a group. The table also sets forth certain information available to the Company, as of March 2, 2009, with respect to shares of Common Stock held by each person known to the Company to be the beneficial owner of more than 5% of such shares. This table reflects options that are exercisable within 60 days. Unless otherwise indicated, each person has sole voting and investment power with respect to the securities beneficially owned by that person. The business address of each of the following directors and executive officers is 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237, unless otherwise specified.

 

 

 

 

 

 

This CD&A addresses the following:

 

 

Aimco’s Executive Compensation Philosophy

 

Aimco’s philosophy in setting compensation for executive officers is to provide total compensation that is competitive with that paid by a group of Aimco’s peers as identified below, both as a measure of fairness and also to limit any economic incentive to leave Aimco. Aimco ties pay in part to individual performance and in part to Aimco’s results and measures performance over one year. Aimco defers the vesting of some portion of compensation so that executives bear longer term exposure to decisions made and to create “switching costs.” Aimco also requires substantial equity holdings by senior executives in order to increase their alignment with stockholders.

 

Components of Executive Compensation

 

Total compensation for Aimco’s executive officers is comprised of the following components:

 

 

How the Committee determines the amount of target total compensation for executive officers.

 

The Compensation and Human Resources Committee (the “Committee”) reviews the performance of, and determines the compensation for, the Chief Executive Officer. The Committee also reviews the decisions made by the Chief Executive Officer as to the compensation of Aimco’s other executive officers.

 

Target total compensation for the CEO and executive officers is established using peer comparator data and market replacement data to determine the “target total compensation range” according to the following methodology:

 

 

 

Once the target total compensation range is set, Aimco builds the annual executive officer compensation program with the components set forth above, i.e., base compensation, STI and LTI.

 

How peer comparators are identified.

 

Aimco considers enterprise Gross Asset Value (“GAV”) as an imprecise but reasonable representation of the complexity of a real estate business and of the responsibilities of its leaders. In addition to GAV, Aimco also reviews other factors, including gross revenues, number of properties and number of employees, to determine if these factors provide any additional insight into the size and complexity factors of its analysis. Based on this analysis, Aimco includes as “peers” the following 22 real estate companies: AMB Property Corp., AvalonBay Communities Inc., Boston Properties, Inc., Brookfield Property Corp., CBL & Associates Properties, Inc., Camden Property Trust, Developers Diversified Realty Corp., Douglas Emmett, Inc., Duke Realty Corp., Equity Residential, HCP, Inc., Host Hotels & Resorts, Inc., Kimco Realty Corp., Liberty Property Trust, Macerich Co., Public Storage, Inc., Regency Centers Corp., SL Green Realty Corp., Taubman Centers, Inc., UDR, Inc., Ventas, Inc., and Weingarten Realty Investors. Approximately half of these real estate companies have a larger GAV, and the remaining companies have a smaller GAV, than Aimco.

 

How the Committee determines the allocation of Mr. Considine’s target total compensation between base compensation, STI and LTI.

 

Once the Committee determines target total compensation for Mr. Considine, it is split approximately 50%/50% between total annual cash compensation (base compensation plus STI) and LTI. Compared to the other named executive officers, the allocation between total annual cash compensation (base compensation plus STI) and LTI for Mr. Considine is weighted more heavily towards LTI because Mr. Considine has greater responsibility for, and influence over, the long-term performance of the Company.

 

The Committee’s philosophy with respect to Mr. Considine’s base compensation is to set a fixed base compensation amount to provide a level of base compensation that is competitive with pay for comparable chief executive officer positions in real estate companies and companies in other industries with similar revenue size and management complexity. Prior to 2006, Mr. Considine’s base compensation was paid in cash. For 2006 and 2007, Mr. Considine’s base compensation was in the form of a stock option subject to vesting based on achievement of a performance threshold. In 2006, the performance threshold was satisfied. In 2007, the performance threshold was not satisfied, and the option granted for such year expired prior to becoming exercisable. For 2008, the Committee and Mr. Considine concluded that Mr. Considine’s base compensation is more appropriately paid without performance targets. Accordingly, for 2008, Mr. Considine’s base compensation was in the form of a stock option that vested on the first anniversary of the grant date. In 2009, Mr. Considine’s base compensation will be paid in cash.

 

How Aimco determines the allocation of target total compensation for executive officers (other than the CEO) between base compensation, STI and LTI.

 

Once the CEO, in consultation with the Committee, determines target total compensation, it is split approximately 65%/35% between total annual cash compensation (base compensation plus STI) and LTI.

 

Base compensation amounts are generally the same for officers with comparable levels of responsibility to provide internal equity and consistency among executive officers. Executive officer base compensation is paid in cash. In some cases, base compensation varies from that of the market median or from that of officers with comparable levels of responsibility because of the current recruiting or retention market for a particular position, or because of the tenure of a particular officer in his position.

How incentive compensation (STI and LTI) serves Aimco’s objectives.

 

Incentive compensation is used primarily to provide total compensation potential that is competitive with pay for comparable positions in real estate companies and companies in other industries with similar revenue size and management complexity. Discretionary incentive amounts above target incentive compensation amounts reward and therefore encourage outstanding individual and Company performance. Providing incentive compensation in the form of Aimco equity that vests over time (typically a period of four years) serves as a retention incentive, aligns executive compensation with stockholder objectives and serves as an incentive to take a longer-term view of Aimco’s performance. With respect to the equity portion of incentive compensation, Aimco permits the CEO to select up to 100% of such equity compensation in stock options, and other executive officers to select up to approximately 25% of such equity compensation in stock options with the remainder in restricted stock or deferred cash. Aimco permits this individual election in order to give each executive officer the opportunity to receive a mix of restricted stock, options and/or deferred cash that best suits each individual’s investment preferences. When the equity is in the form of stock options, the currency is inherently performance based because the optionee only receives a benefit if and to the extent Aimco’s stock price rises after the date the option is granted. When the equity is in the form of restricted stock, the compensation is also linked to performance because the future value of the equity depends on the performance of Aimco’s stock.

 

Total compensation for 2008

 

For 2008, total compensation is the sum of base compensation, STI and LTI.

 

Base Compensation for 2008

 

Mr. Considine’s Base Compensation

 

Mr. Considine’s base compensation of $600,000 has remained the same since 2006; however, instead of paying Mr. Considine a $600,000 cash base salary, on January 29, 2008, the Committee awarded Mr. Considine a non-qualified stock option for 138,249 shares at an exercise price equal to fair market value on the date of grant ($39.85). For the purpose of calculating the number of shares subject to the stock option to be granted, the foregone $600,000 cash salary amount was divided by $4.34, which price was calculated by a nationally recognized independent investment bank using certain assumptions provided by Aimco and the Black-Scholes Option Pricing Model, which model Aimco uses to measure compensation cost under Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (“SFAS 123R”). This option grant is reflected in the Summary Compensation Table — see note 6 thereto. The information with respect to this stock option as presented in the Compensation Discussion & Analysis has not been adjusted to reflect special dividends paid in August 2008, December 2008, and January 2009. For such information, please refer to the “Outstanding Equity Awards at Fiscal Year End 2008” table.

 

Other Executive Officer Base Compensation

 

For 2008, base compensation for all other executive officers was set between $300,000 and $500,000. Effective January 1, 2008, Mr. Beaudin received an increase in base compensation of $150,000. Effective July 1, 2008, Messrs. Herzog and Robertson each received an increase in base compensation of $100,000. These base salary changes were made to make base compensation more consistent with comparable positions in real estate companies and companies in other industries with similar revenue size and management complexity.

 

Incentive Compensation for 2008

 

Aimco determined STI payment based on each executive officer’s achievement of specific individual objectives as detailed in our performance management program, Managing Aimco Performance, or MAP, which sets and monitors performance objectives for each executive officer. The Committee (in the case of Mr. Considine), or Mr. Considine, in consultation with the Committee (in the case of the other executive officers), also had discretion to adjust the final STI amount based on assessments of performance factors outside of the MAP process.

 

Aimco determined LTI payment based on achievement of corporate goals for 2008, which were reviewed and approved by the Board. These goals and their expected successful outcome aligned executive officers with the long-

term goals of the Company without encouraging them to take unnecessary and excessive risks. The corporate goals for 2008 were as follows:

 

 

Mr. Considine and the Committee evaluated the results achieved against these objectives. Each executive officer was awarded approximately 66% of his LTI target.

 

The Committee set Mr. Considine’s total compensation for 2008 below the low end of his target total compensation range. In making this determination, the Committee considered Mr. Considine’s achievement of his MAP objectives, Aimco’s performance against its LTI goals, the current economic conditions and the decline in Aimco’s share price. This resulted in the following:

 

 

Mr. Considine’s STI was paid in cash and his LTI was in the form of a ten-year non-qualified stock option to acquire 809,717 shares, which option vests ratably over four years. The option was granted February 3, 2009. Because the equity award for 2008 LTI was made in 2009, pursuant to the applicable disclosure rules, such award will be reflected in the “Summary Compensation Table” and “Grants of Plan-Based Awards in 2008” table in Aimco’s proxy statement for the 2010 annual meeting of stockholders. In determining the form of Mr. Considine’s LTI, the Committee considered Aimco’s “burn rate” and discussed with Mr. Considine his preference for the form in which his equity is awarded and gave Mr. Considine latitude in making the determination. Mr. Considine prefers the risk and potential upside inherent in stock options and therefore selected all of his equity compensation in stock options. The Committee and Mr. Considine believe that it is in the stockholders’ best interest to motivate and reward Mr. Considine in this highly entrepreneurial manner. Providing LTI in the form of Aimco equity that vests over time serves as a retention incentive, aligns Mr. Considine’s compensation with stockholder objectives and serves as an incentive to take a longer term view of Aimco’s performance. Mr. Considine’s compensation is highly variable, and has fluctuated over the past five years.

 

Mr. Considine, in consultation with the Committee, set 2008 total compensation for the other named executive officers at or below the low end of each person’s target total compensation range. This determination was based on each named executive officer’s achievement of his MAP objectives, Aimco’s performance against its LTI goals, the current economic conditions and the decline in Aimco’s share price. In determining the 2008 STI, Mr. Considine and the Committee noted that: Mr. Herzog provided leadership in efficiently managing Aimco’s accounting and financial reporting functions; Mr. Robertson provided leadership in the disposition of approximately $2.6 billion in assets; Mr. Beaudin provided leadership over Aimco’s redevelopment activity and assumed responsibility for all property operations; and Mr. Cortez provided leadership over large challenged assets in the portfolio.

 

 

Pursuant to the applicable disclosure rules, the STI shown above appears in the Summary Compensation Table under the column headed “Non-Equity Incentive Plan Compensation.”

 

With respect to LTI, both the shares of restricted stock and the stock options were granted February 3, 2009, and vest ratably over four years. Because the equity awards for 2008 incentive compensation were made in 2009, pursuant to the applicable disclosure rules, such awards will be reflected in the “Summary Compensation Table” and “Grants of Plan-Based Awards in 2008” table in Aimco’s proxy statement for the 2010 annual meeting of stockholders. For the purpose of calculating the number of shares of restricted stock to be granted, the dollars allocated to restricted stock were divided by $9.33 per share, which was the average of the closing trading prices of Aimco’s Common Stock on the five trading days up to and including the grant date. The five-day average was used to provide a more fair approximation of the value of the stock at the time of grant by muting the effect of any single day spikes or declines. For the purpose of calculating the number of shares subject to the stock options to be granted, the dollars allocated to stock options were divided by $2.47, which price was calculated by the Committee’s independent compensation consultant using certain assumptions provided by Aimco and the Black-Scholes Option Pricing Model, which model Aimco uses to measure compensation cost under SFAS 123R. The stock options have an exercise price per share of $8.92, which is equal to the fair market value of Aimco’s Common Stock on February 3, 2009 (pursuant to Aimco’s 2007 Stock Award and Incentive Plan (the “2007 Plan”), “fair market value” is defined as the closing price of Aimco’s Common Stock on the grant date).

 

Other Compensation

 

From time to time, Aimco determines to provide executive officers with additional compensation in the form of discretionary cash or equity awards. No such additional compensation was provided to the named executive officers in 2008.

 

Post-Employment Compensation and Severance Arrangements

 

401(k)

 

Aimco provides a 401(k) plan that is offered to all Aimco team members. In 2008, Aimco matched 100% of participant contributions to the extent of the first 3% of the participant’s eligible compensation and 50% of participant contributions to the extent of the next 2% of the participant’s eligible compensation. For 2008, the maximum match by Aimco was $9,200, which is the amount that Aimco matched for each of Messrs. Herzog, Robertson, Beaudin, and Cortez’s 2008 401(k) contributions. Because Mr. Considine’s base compensation for 2008 was not paid in cash, he did not have taxable wages in 2008 and thus was not eligible for the employer matching contribution.

 

Effective January 29, 2009, Aimco suspended the employer matching contribution. As a result, participant contributions made on or after January 29, 2009, will not be matched with an employer contribution. Aimco may resume employer matching contributions on a discretionary basis at any time.

 

Other than the 401(k) plan, Aimco does not provide post-employment benefits. Aimco does not have a pension plan, a SERP or any similar arrangements.

 

Executive Employment and Severance Arrangements

 

In response to a stockholder proposal seeking certain limitations regarding executive severance arrangements, in July 2004, the Committee adopted an executive severance policy. That policy provides that Aimco shall seek

stockholder approval or ratification of any future severance agreement for any senior executive officer that provides for benefits, such as lump-sum or future periodic cash payments or new equity awards, in an amount in excess of 2.99 times such executive officer’s base salary and bonus. Compensation and benefits earned through the termination date, the value of vesting or payment of any equity awards outstanding prior to the termination date, pro rata vesting of any other long-term awards, or benefits provided under plans, programs or arrangements that are applicable to one or more groups of employees in addition to senior executives are not subject to the policy. Even prior to the Committee’s response to the stockholder proposal, it had been Aimco’s longstanding practice not to enter into agreements with senior executives to provide excessive severance arrangements.

 

On December 29, 2008, Aimco entered into an employment agreement with Mr. Considine to replace his July 29, 1994, employment agreement and the 2002 non-competition and non-solicitation agreement between Mr. Considine and Aimco. The employment agreement was entered into to reflect current practice and update Aimco’s agreement with Mr. Considine, which had not been formally revised since the Company’s initial public offering in 1994, and to make the compensation arrangements compliant with certain Internal Revenue Service requirements, primarily Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), which required documentary compliance by December 31, 2008. In connection with the execution of the employment agreement, Mr. Considine did not receive any additional equity awards or signing bonus. The Committee evaluated the terms of Mr. Considine’s employment agreement in comparison to those of the CEOs of Aimco’s peers and other comparable companies.

 

The employment agreement is for an initial five-year term, with automatic renewal for successive one-year terms until the year in which Mr. Considine reaches age 70, unless earlier terminated. The employment agreement eliminates the evergreen term in the prior employment agreement.

 

Mr. Considine continues to receive his current base pay of $600,000, subject to future increase. Mr. Considine also continues to be eligible to participate in Aimco’s performance-based incentive compensation plan with a target total incentive compensation amount of not less than $3.9 million, which may be paid in cash or in equity.

 

The employment agreement continues the current practice of providing severance payments to Mr. Considine upon his termination of employment by Aimco without cause, by Mr. Considine for good reason and upon a termination for reason of disability. The payments under the prior non-competition and non-solicitation agreement have either been eliminated or included in the severance payments payable under the employment agreement, depending upon the circumstances.

 

Mr. Considine is not entitled to any additional or special payments upon the occurrence of a change in control. Mr. Considine’s “walk right” under the 1994 employment agreement (that is, his right to severance payments upon his terminating employment with the Company within two years following a change in control) was eliminated. The definition of change in control was also narrowed to increase the required percentage of change in ownership and to require the occurrence of the applicable change in control event, as opposed to shareholder approval of such event.

 

Upon his termination of employment by Aimco without cause, by Mr. Considine for good reason, or upon a termination for reason of disability, Mr. Considine is generally entitled to (a) a lump sum cash payment equal to two times the sum of base salary at the time of termination and $1.65 million, subject to certain limited reductions, (b) any STI earned but unpaid for a prior fiscal year, (c) a pro-rata portion of a $1.65 million STI amount for the fiscal year in which the termination occurs, and (d) immediate full acceleration of any outstanding unvested stock options and equity awards with certain limitations on the term thereof.

 

In the event of Mr. Considine’s death, the Company will pay or provide to Mr. Considine’s estate any earned but unpaid base salary and vested accrued benefits and any STI earned but unpaid for a prior fiscal year, and all equity-based and other long-term incentive awards granted to Mr. Considine will become immediately fully vested and payable, as applicable, and all outstanding stock option awards will remain exercisable subject to certain limitations on the term thereof.

 

Under the employment agreement, in the event payments to Mr. Considine are subject to the excise tax imposed by Section 4999 of the Code, Mr. Considine is entitled to receive a limited gross-up payment, subject to a maximum of $5 million. If covered payments are less than 10% over the permitted limit, Mr. Considine is required to reduce his payments to avoid triggering a gross-up payment. The limited gross-up payment is intended to balance

the interests of Aimco’s stockholders, eliminate the incentive for the early exercise of stock options and reflect competitive practice.

 

The employment agreement also contains customary confidentiality provisions, a limited mutual non-disparagement provision, and non-competition, non-solicitation and no-hire provisions.

 

None of Messrs. Herzog, Robertson or Cortez has an employment agreement or severance arrangement. As agreed to in connection with the recruitment of Mr. Beaudin, if Mr. Beaudin’s employment is terminated other than for cause, Mr. Beaudin is entitled to a separation payment in an amount equal to his base salary of $500,000 and accelerated vesting of certain restricted stock grants. Messrs. Herzog and Robertson had certain grants that provided for accelerated vesting if such executive’s employment is terminated other than for cause; such grants became fully vested in 2008. The restricted stock and stock option agreements pursuant to which restricted stock and stock option awards have been made to Messrs. Considine, Herzog, Robertson, Beaudin and Cortez provide that upon a change of control, all outstanding shares of restricted stock become immediately and fully vested and all unvested stock options become immediately and fully vested and remain exercisable (along with all options already vested) for the remainder of the term of the option. Upon Mr. Herzog’s resignation from Aimco, which became effective March 1, 2009, he forfeited all unvested restricted stock and unvested stock options.

 

Other Benefits; Perquisite Philosophy

 

Aimco’s executive officer benefit programs are substantially the same as for all other eligible officers and employees. Aimco does not provide executives with more than minimal perquisites, such as reserved parking places.

 

Stock Ownership Guidelines

 

Aimco believes that it is in the best interest of Aimco’s stockholders for Aimco’s executive officers to own Aimco stock. The Committee and management have established stock ownership guidelines for Aimco’s executive officers. Equity ownership guidelines for all executive officers are determined as a minimum of the lesser of a multiple of the executive’s base salary or a fixed number of shares. The Committee and Mr. Considine reviewed each executive officer’s holdings in light of the stock ownership guidelines and each executive officer’s accumulated realized and unrealized stock option and restricted stock gains.

 

Aimco’s stock ownership guidelines require the following:

 

 

Each of Messrs. Considine, Herzog, Robertson, Beaudin and Cortez exceed the ownership targets established in Aimco’s stock ownership guidelines.

 

Role of Outside Consultants and Executive Officers

 

The Committee has the authority under its charter to engage the services of outside advisors, experts and others to assist the Committee. The Committee has engaged Aon Consulting (“Aon”), as its independent compensation consultant. At the direction of the Committee, Aon coordinates and consults with James G. Purvis, Executive Vice President of Human Resources, and his executive compensation team, regarding executive compensation matters. Aon provides the Committee with an independent view of both market data and plan design. Aon did not provide any other services for Aimco in 2008. Aimco has engaged Ferguson Partners to assist in designing Aimco’s executive compensation plan. The Committee also engaged Frederick W. Cook & Co., Inc. and the law firm of Proskauer Rose LLP to advise the Committee concerning Mr. Considine’s 2008 employment agreement.

Base Salary, Incentive Compensation, and Equity Grant Practices

 

Base salary adjustments typically take effect on July 1. The Committee (for Mr. Considine), and Mr. Considine, in consultation with the Committee (for the other executive officers), determine incentive compensation in late January or early February. STI is typically paid in February or March. LTI is awarded on a date determined by the Committee, typically in late January or early February.

 

Aimco grants equity in two scenarios: in connection with incentive compensation, as discussed above; and in connection with certain new-hire packages.

 

With respect to LTI, the Committee sets the grant date for the stock option and restricted stock grants. The Committee sets grant dates at the time of its final compensation determination in late January or early February. The date of determination and date of award are not selected based on share price. In the case of new-hire packages that include equity awards, option grants are made on the employee’s start date or on a date designated in advance based on the passage of a specific number of days after the employee’s start date. For non-executive officers, as provided for in the 2007 Plan, the Committee has delegated the authority to make equity awards, up to certain limits, to the Chief Financial Officer (David Robertson) and/or Corporate Secretary (Lisa R. Cohn). The Committee and Mr. Robertson and Ms. Cohn time grants without regard to the share price or the timing of the release of material non-public information and do not time grants for the purpose of affecting the value of executive compensation.

 

In 2008, other than with respect to year-end incentive compensation for 2007, Aimco made no equity awards, either as part of new-hire packages or as additional compensation.

 

2009 Compensation

 

The Committee has made determinations of target total compensation (base compensation, STI and LTI) for 2009, which will be based on achievement of the objectives of Aimco’s 2009 approved operating plan and achievement of specific individual objectives. Target total compensation ranges for the named executive officers are as follows: Mr. Considine — $3.04 million to $4.05 million; Mr. Robertson — $1.9 million to $2.5 million; Mr. Beaudin — $1.9 million to $2.5 million; and Mr. Cortez — $550,000 to $700,000. Both Aimco and individual performance will determine the amount paid for 2009 incentive compensation, and such amounts may be less than, or in excess of, these target amounts. STI will be paid in cash, and LTI will be paid in the form of restricted stock, stock options and/or deferred cash.

 

The Compensation and Human Resources Committee held nine meetings during fiscal year 2008. The Compensation and Human Resources Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon such review, the related discussions and such other matters deemed relevant and appropriate by the Compensation and Human Resources Committee, the Compensation and Human Resources Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement to be delivered to stockholders.

 

Date: March 5, 2009

 

J. LANDIS MARTIN (CHAIRMAN)
JAMES N. BAILEY
RICHARD S. ELLWOOD
THOMAS L. KELTNER
ROBERT A. MILLER
THOMAS L. RHODES
MICHAEL A. STEIN

 

The above report will not be deemed to be incorporated by reference into any filing by Aimco under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that Aimco specifically incorporates the same by reference.

 

 

 

 

 

The following table provides details regarding plan-based awards granted to the named executive officers during the year ended December 31, 2008. The information on the restricted stock grants shown below reflects the grants as made and does not reflect additional shares received as a result of special dividends paid in August 2008 and December 2008. Those adjustments are reflected in the “Outstanding Equity Awards at Fiscal Year-End 2008” table below (see note 2 thereto). The information on the option grants shown below also reflects the grants as made and does not reflect the adjustments made pursuant to the anti-dilution provisions of the plans pursuant to which the options were granted as a result of the special dividends paid in August 2008, December 2008, and January 2009. Those adjustments are reflected in the “Outstanding Equity Awards at Fiscal Year-End 2008” table below (see note 1, thereto).

 

 

 

 

 

The following table shows outstanding stock option awards classified as exercisable and unexercisable as of December 31, 2008, for the named executive officers, other than those awards that have been transferred for value. The table also shows unvested and unearned stock awards assuming a market value of $11.55 a share (the closing market price of the Company’s Common Stock on the New York Stock Exchange on December 31, 2008).