As filed with the Securities and Exchange Commission on October 27, 2010

Registration No. 333-169869

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

Amendment No. 1 to

 

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

(Exact name of registrant as specified in its charter)

 

 

 

AIMCO PROPERTIES, L.P.

(Exact name of registrant as specified in its charter)

 

 

4582 South Ulster Street Parkway, Suite 1100

Denver, Colorado 80237

(303) 757-8101

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

John Bezzant

Senior Vice President

Apartment Investment and Management Company

4582 South Ulster Street Parkway, Suite 1100

Denver, Colorado 80237

(303) 757-8101

(Name, address, including zip code and telephone number, including area code of agent for service)

 

Copies to:

 

Gregory M. Chait

Paul J. Nozick

Alston & Bird LLP

One Atlantic Center

1201 West Peachtree Street

Atlanta, GA 30309

(404) 881-7000

 

 

 

 

Approximate date of commencement of proposed sale to the public:  As soon as practicable after this Registration Statement is declared effective and all other conditions to the merger as described in the enclosed information statement/prospectus are satisfied or waived.

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:  o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

(Do not check if a smaller reporting company)

 

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

 

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)         o

 

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  o

 

 

 

 

 

The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants will file a further amendment which specifically states that this Registration Statement will thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement will become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

SUBJECT TO COMPLETION, DATED OCTOBER 27, 2010

 

INFORMATION STATEMENT/PROSPECTUS

 

FOX STRATEGIC HOUSING INCOME PARTNERS

 

Fox Strategic Housing Income Partners, or Fox, has entered into an agreement and plan of merger with AIMCO Fox Merger Sub LLC, or the Aimco Subsidiary, a wholly owned subsidiary of Aimco Properties, L.P., or Aimco OP. Under the merger agreement, the Aimco Subsidiary, will be merged with and into Fox, with Fox 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 limited partnership unit of Fox, or Limited Partnership Units, will be converted into the right to receive, at the election of the holder of such unit, either:

 

 

The number of OP Units offered for each Limited Partnership Unit will be calculated by dividing $4.84 by the average closing price of common stock of Apartment Investment and Management Company, or Aimco, as reported on the New York Stock Exchange, over the ten consecutive trading days ending on the second trading day immediately prior to the consummation of the merger. For example, as of October 26, 2010, the average closing price of Aimco common stock over the preceding ten consecutive trading days was $23.08, which would have resulted in 0.21 OP Units offered for each Limited Partnership 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.

 

In the merger, Aimco OP’s interest in the Aimco Subsidiary will be converted into Fox limited partnership units. As a result, after the merger, Aimco OP will be the sole limited partner of Fox and will own all of the outstanding Fox limited partnership units. Within ten days after the effective time of the merger, Aimco OP will prepare and mail to the former limited partners of Fox an election form with which they can elect to receive cash or OP Units. Fox limited partners 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 merger, the limited partner will be deemed to have elected to receive cash. Former limited partners may also use the election form to elect to receive, in lieu of the merger consideration, the appraised value of their Limited Partnership Units, determined through an arbitration proceeding.

 

In addition, limited partners who are not affiliated with Aimco OP may elect to receive an additional cash payment of $4.03 per Limited Partnership Unit in exchange for executing a waiver and release of certain claims. In order to receive this additional payment, limited partners must complete the relevant section of the election form, execute the waiver and release that is attached to the election form and return both the election form and the executed waiver and release to the information agent as described above.

 

Under California law, the merger must be approved by Fox’s general partner and a majority in interest of the Limited Partnership Units. The general partner has determined that the merger is advisable and in the best interests of Fox and its limited partners and has approved the merger and the merger agreement. As of October 20, 2010, there were issued and outstanding 26,111 Limited Partnership Units, and Aimco OP and its affiliates owned 13,719 of those units, or approximately 52.54% of the total Limited Partnership 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 [ • ], 2010. 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 Fox general partner has decided that the merger is in the best interests of Fox and its limited partners. Fox’s 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 11. 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 or determined if this information statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

This information statement/prospectus is dated, [ • ] 2010, and is first being mailed to limited partners on or about [ • ],2010.

 

WE ARE CURRENTLY SEEKING QUALIFICATION TO ALLOW ALL HOLDERS OF LIMITED PARTNERSHIP UNITS OF FOX 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

NEW YORK

 

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 and Aimco OP from documents that they have filed with the Securities and Exchange Commission 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 86 of this information statement/prospectus.

 

Aimco will provide you with copies of such documents relating to Aimco and Aimco OP (excluding all exhibits unless Aimco or Aimco OP 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 Securities and Exchange Commission 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 Fox Limited Partnership 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

 

 

SUMMARY TERM SHEET

	•	The Merger:  Fox 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 Fox, with Fox 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.

	•	Merger Consideration:  In the merger, each Limited Partnership Unit will be converted into the right to receive, at the election of the holder of such Limited Partnership Unit, either $4.84 in cash or equivalent value in OP Units. The number of OP Units issuable with respect to each Limited Partnership Unit will be calculated by dividing the $4.84 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. For a full description of the determination of the merger consideration, see “The Merger — Determination of Merger Consideration” beginning on page 29.

	•	Effects of the Merger:  After the merger, Aimco OP will be the sole limited partner in Fox, and will own all of the outstanding Limited Partnership Units. As a result, after the merger, you will cease to have any rights in Fox as a limited partner. See “Special Factors — Effects of the Merger,” beginning on page 5.

	•	Appraisal Rights:  Although the limited partners of Fox are not entitled to dissenters’ appraisal rights generally applicable to limited partnerships under California law, because Fox was formed prior to the date on which such appraisal rights apply, the merger agreement provides them with contractual dissenters’ appraisal rights that are similar to the dissenters’ appraisal rights that are available to limited partners in a California limited partnership formed after such date. These contractual dissenters’ appraisal rights will enable a limited partner to obtain an appraisal of the value of the limited partner’s Limited Partnership Units in connection with the merger. See “The Merger — Appraisal Rights,” beginning on page 32. 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.

	•	Additional Payment for Waiver and Release:  In addition to the merger consideration, each limited partner unaffiliated with Aimco OP or its affiliates may elect to receive an additional cash payment of $4.03 per Limited Partnership Unit in exchange for executing a waiver and release of potential claims such unaffiliated limited partner may have had in the past, may now have or may have in the future (through and including the date of the consummation of the merger) against Fox, Fox GP, Aimco OP or its affiliates and certain other persons and entities, including but not limited to claims related to the merger agreement and the transactions contemplated thereby, but excluding claims limited partners may have under federal securities laws. See “The Merger — Waiver and Release and Additional Consideration,” beginning on page 31.

	•	Parties Involved:

	•	Fox Strategic Housing Income Partners, or Fox, is a California limited partnership formed on June 29, 1984. Its general partner is Fox Partners VIII, or Fox GP, a California general partnership. Fox GP’s managing general partner is Fox Capital Management Corporation, or FCMC, a California corporation and an indirect subsidiary of Aimco. Fox’s primary business and only industry segment is real estate related operations. Fox presently owns one investment property, The Views at Vinings Mountain Apartments, a 180 unit apartment project located in Atlanta, Georgia. See “Information about Fox” beginning on page 23. Fox’s principal address is 55 Beattie Place, P.O. Box 1089, Greenville, South Carolina 29602 and its telephone number is (864) 239-1000

	•	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, focused on the ownership and management of quality apartment communities located in the 20 largest markets in the United States. Aimco is one of the largest owners and operators of apartment properties in the United States. Aimco’s common stock is listed and traded on the NYSE under the symbol “AIV.” See “Information about the Aimco Entities,” beginning on page 22.

	•	AIMCO Properties, L.P., or Aimco OP, is a Delaware limited partnership which, through its operating divisions and subsidiaries, holds substantially all of Aimco’s assets and manages the daily operations of Aimco’s business and assets. See “Information about the Aimco Entities,” beginning on page 22.

	•	AIMCO Fox Merger Sub LLC, or the Aimco Subsidiary, is a California limited liability company formed for the purpose of consummating the merger with Fox. The Aimco Subsidiary is a direct wholly-owned subsidiary of Aimco OP. See “Information about the Aimco Entities,” beginning on page 22.

	•	Reasons for the Merger:  The Aimco Entities decided to proceed with the merger at this time for the following reasons:

	•	In the absence of a transaction, Fox limited partners have only limited options to liquidate their investment in Fox. The Limited Partnership Units are not traded on an exchange or other reporting system, and transactions in the securities are limited and sporadic.

	•	The value of the single property owned by Fox is not sufficient to justify its continued operation as a public company. As a public company with a significant number of unaffiliated limited partners, Fox incurs costs associated with preparing audited annual financial statements, unaudited quarterly financial statements, tax returns for partners on schedule K-1 and periodic SEC reports and other costs associated with having multiple limited partners. The Aimco Entities estimate these costs to be approximately $47,000 per year.

	•	Fox has been operating at a loss for the past several years. From January 1, 2007 through September 30, 2010, Aimco OP made loans of approximately $10,951,000 to Fox to help fund the redevelopment of the property and operating expenses, but it is not likely to continue to make advances to Fox. Fox has made some payments on the loans, most significantly $8,620,000 from refinancing proceeds during 2008. The Aimco Entities believe that it is unlikely that Fox can obtain financing from an independent third party. If the Aimco Entities acquire 100% ownership of Fox, they will have greater flexibility in financing and operating its property.

	•	Fairness of the Merger:  Although the Aimco Entities have interests that may conflict with those of Fox’s unaffiliated limited partners, each of the Aimco Entities believe that the merger is fair to the unaffiliated limited partners of Fox. See “Special Factors — Fairness of the Transaction” beginning on page 6.

	•	Conflicts of Interest:  Fox’s general partner, Fox GP, is a general partnership, the managing general partner of which is wholly-owned and controlled by Aimco. Therefore, Fox GP has a conflict of interest with respect to the merger. Fox GP, or the beneficial owners of its managing general partner, has fiduciary duties to Aimco, on the one hand, and Fox GP has fiduciary duties to the limited partners of Fox, on the other hand. The duties of Fox GP to the limited partners of Fox conflict with the duties of Fox GP to its general partners, which could result in Fox GP approving a transaction that is more favorable to Aimco than might be the case absent such conflict of interest. As the general partner of Fox, Fox GP seeks the best possible terms for Fox’s limited partners. This conflicts with Aimco’s interest in obtaining the best possible terms for Aimco OP. See, “The Merger — Conflicts of Interest,” beginning on page 30.

	•	Risk Factors:  In evaluating the merger agreement and the merger, Fox limited partners should carefully read this information statement/prospectus and especially consider the factors discussed in the section

		entitled “Risk Factors” beginning on page 11. Some of the risk factors associated with the merger are summarized below:

	•	Aimco owns Fox GP, the general partner of Fox. As a result, Fox GP 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 Fox limited partners.

	•	Fox limited partners who receive cash may recognize taxable gain in the merger and that gain could exceed the merger consideration.

	•	There are a number of significant differences between Fox Limited Partnership 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 Fox Limited Partnership Units and Aimco OP Units,” beginning on page 53.

	•	Fox 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.

	•	Material United States Federal Income Tax Consequences of the Merger: The merger will generally be treated as a partnership merger for Federal income tax purposes. In general, any payment of cash for Limited Partnership Units will be treated as a sale of such Limited Partnership Units by such holder, and any exchange of Limited Partnership Units for OP Units under the terms of the merger agreement will be treated, in accordance with Sections 721 and 731 of the Internal Revenue Code of 1986, as amended, or the Code, as a tax free transaction, except to the extent described in “Material United States Federal Income Tax Matters — United States Federal Income Tax Consequences Relating to the Merger,” beginning on page 58.

 

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 one owned by Fox, and have decided to proceed with the merger as a means of acquiring the property currently owned by Fox in a manner they and the other Aimco Entities 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 Fox 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:

 

 

 

 

Before deciding to proceed with the merger, Fox GP and the other Aimco Entities considered the alternatives described below:

 

Liquidation of Fox.  Fox GP and the other Aimco Entities considered selling Fox’s property to a third party for cash and distributing the net cash proceeds to Fox’s limited partners. The primary advantage of such transactions would be that the sale prices would reflect arm’s-length negotiations and might therefore be higher than the appraised value which has been used to determine the merger consideration. Fox GP and the other Aimco Entities rejected this alternative because of: (i) the risk that a third party might not be found at a satisfactory price or at all; (ii) the costs imposed on Fox in connection with marketing and selling the property; and (iii) the fact that limited partners would recognize taxable gain on the sales without the option of deferring that gain. Further, Fox GP and the other Aimco Entities recently evaluated a sale of the property to a third party but determined that a third party buyer would be unwilling to buy the property at a price that would repay Fox’s outstanding indebtedness and the penalty associated with prepayment of the loan secured by the property.

 

Contribution of the property to Aimco.  Fox GP and the other Aimco Entities considered a contribution of Fox’s property to Aimco OP in exchange for OP Units. The primary advantage of such a transaction would be that Fox limited partners would not recognize taxable gain. Fox GP and the other Aimco Entities rejected this alternative because it would not offer an opportunity for immediate liquidity to the limited partners that desire such an alternative.

	•	The merger consideration of $4.84 per Limited Partnership Unit was based on an independent third party appraisal of the property by KTR, an independent valuation firm.

	•	The merger consideration exceeds the Aimco Entities’ estimate of liquidation value ($0 per Limited Partnership Unit at June 30, 2010), calculated as the aggregate appraised value of the property, plus the amount of any other assets, less the amount of Fox’s liabilities, including mortgage debt (taking into account prepayment penalties thereon, currently estimated to be $1,832,770).

	•	The merger consideration exceeds the Aimco Entities’ estimate of going concern value ($0 per Limited Partnership Unit at June 30, 2010), calculated as the appraised value of the property, plus the amount of any other assets of Fox, less the amount of Fox’s liabilities, including mortgage debt (but without taking into account prepayment penalties thereon).

	•	The merger consideration exceeds the net book value per unit (a deficit of $160.97 per Limited Partnership Unit at June 30, 2010).

	•	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 would be prohibitively costly).

	•	The number of OP Units issuable to limited partners in the merger was 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.

	•	Limited partners who receive cash consideration will achieve immediate liquidity with respect to their investment.

	•	If the merger is completed by December 31, 2010, limited partners who elect to receive cash consideration and who recognize taxable gain in the merger will be taxed at current capital gains rates. The maximum long term federal capital gains rate, currently at 15%, is scheduled to increase to 20% in 2011.

	•	Limited partners who elect to receive OP Units in the merger will have the opportunity to participate in Aimco OP, which has a more diversified property portfolio than Fox.

	•	Although the limited partners of Fox are not entitled to dissenters’ appraisal rights generally applicable to limited partnerships under California law, because Fox was formed prior to the date on which such appraisal rights apply, the merger agreement provides them with contractual dissenters’ appraisal rights that are similar to the dissenters’ appraisal rights that are available to limited partners in a California limited partnership formed after such date.

	•	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.

	•	Unlike a typical property sale agreement, the merger agreement contains no indemnification provisions, so there is no risk of subsequent reduction of the proceeds.

	•	In contrast to a sale of the property to a third party, which would involve marketing and other transaction costs, Aimco OP has agreed to pay all expenses associated with the merger.

	•	Fox’s general partner, Fox GP, is a general partnership, the managing general partner of which is wholly-owned and controlled by Aimco. Therefore, Fox GP has substantial conflicts of interest with respect to the merger as a result of (i) the fiduciary duties it owes to unaffiliated limited partners, who have an interest in receiving the highest possible consideration, and (ii), and the fiduciary duties that the beneficial owners of its managing general partner have to Aimco, which has an interest in Aimco OP obtaining the property for the lowest possible consideration.

	•	The terms of the merger were not approved by any independent directors.

	•	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, arm’s-length basis, which might have resulted in better terms for the unaffiliated limited partners.

	•	The merger agreement does not require the approval of any unaffiliated limited partners.

	•	No opinion has been obtained from an independent financial advisor that the merger is fair to the unaffiliated limited partners.

	•	The merger consideration is less than the prices ($100.00 to $102.00 per Limited Partnership Unit) at which Limited Partnership Units have recently sold in the secondary market (from January 1, 2010 through October 19, 2010).

	•	The merger consideration is less than the prices ($100.00 to $190.00 per Limited Partnership Unit) at which Limited Partnership Units have historically sold in the secondary market (from January 1, 2008 through December 31, 2009).

	•	Limited partners who receive cash consideration in the merger may recognize taxable gain and that gain could exceed the merger consideration.

	•	Limited partners who receive OP Units in the merger could recognize taxable gain if Aimco subsequently sells the property.

	•	Limited partners who elect to 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.”

	•	KTR, the valuation firm that appraised the property, has performed work for Aimco OP and its affiliates in the past and this pre-existing relationship could negatively impact KTR’s independence.

The Appraisal

	•	Inspected the property and its environs;

	•	Reviewed demographic and other socioeconomic trends pertaining to the city and region where the property is located;

	•	Examined regional apartment market conditions, with special emphasis on the property’s apartment submarket;

	•	Investigated lease and sale transactions involving comparable properties in the influencing market;

	•	Reviewed the existing rent roll and discussed the leasing status with the building manager and leasing agent. In addition, KTR reviewed the property’s recent operating history and those of competing properties;

	•	Utilized appropriate appraisal methodology to derive estimates of value; and

	•	Reconciled the estimates of value into a single value conclusion.

	•	A potential gross income from apartment unit rentals of $175,720 per month or $2,108,640 for the appraised year;

	•	A loss to lease allowance of 5.0% of gross potential rent;

	•	A rent concession of 4.0% of the gross rent potential;

	•	A stabilized vacancy and credit loss of 5.0% of the gross rent potential;

	•	Other income of $940 per unit;

	•	Total expenses of $909,941, or $5,055 per unit; and

	•	A capitalization rate of 7.0%.

 

 

Conflicts of Interest.  Fox’s general partner, Fox GP, is a general partnership, the managing general partner of which is wholly-owned and controlled by Aimco. Therefore, Fox GP has a conflict of interest with respect to the merger. Fox GP, or the beneficial owners of its managing general partner, has fiduciary duties to Aimco, on the one hand, and Fox GP has fiduciary duties to the limited partners of Fox, on the other hand. The duties of Fox GP to the limited partners of Fox conflict with the duties of Fox GP to its general partners, which could result in Fox GP approving a transaction that is more favorable to Aimco than might be the case absent such conflict of interest. As the general partner of Fox, Fox GP seeks the best possible terms for Fox’s limited partners. This conflicts with Aimco’s 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 Fox’s limited partners.

 

The terms of the merger have not been determined in arm’s-length negotiations.  The terms of the merger, including the merger consideration, were determined through discussions between officers and directors of the managing general partner of Fox GP, on one hand, and officers of Aimco, on the other. All of the officers and directors of the managing general partner of Fox GP are also officers of Aimco. Thus, none of the directors of the managing general partner of Fox GP are independent. If the terms of the merger had been determined through arm’s-length negotiations, the terms might be more favorable to Fox and its limited partners.

 

The merger agreement does not require approval of the merger by a majority of the limited partners unaffiliated with Fox GP or Aimco OP.  Under the provisions of the Fox partnership agreement and applicable California law, the merger must be approved by a majority in interest of the Limited Partnership Units. As of October 20, 2010, Aimco OP and its affiliates owned approximately 52.54% of the outstanding Fox Limited Partnership Units, enabling them to approve the merger without the consent or approval of any unaffiliated limited partners.

 

Alternative valuations of Fox’s property might exceed the appraised value relied on to determine the merger consideration.  Aimco determined the merger consideration in reliance on the appraised value of Fox’s property. See, “Special Factors — The Appraisal,” beginning on page 8, for more information about the appraisal. Although an independent appraiser was engaged to perform a complete appraisal of the property, 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.

 

The actual sales price of Fox’s property could exceed the appraised value that Aimco relied on to determine the merger consideration.  No recent attempt has been made to market the property to unaffiliated third parties. Accordingly, there can be no assurance that the 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 a property of this type.

 

The merger consideration may not represent the price unaffiliated limited partners could obtain for their Limited Partnership Units in an open market.  There is no established or regular trading market for Limited Partnership Units, nor is there another reliable standard for determining the fair market value of the Limited Partnership Units. The merger consideration does not necessarily reflect the price that Fox limited partners would receive in an open market for their Limited Partnership Units. Such price could be higher than the value of the merger consideration.

 

No opinion has been obtained from an independent financial advisor that the merger is fair to unaffiliated limited partners.  While Fox GP and each of the other Aimco Entities believe that the terms of the merger are fair to Fox limited partners unaffiliated with Fox GP or Aimco for the reasons discussed in “Special Factors — Fairness of the Transaction,” beginning on page 6, no opinion has been obtained as to whether the merger is fair to the limited partners of Fox unaffiliated with Fox GP or Aimco from a financial point of view.

 

Fox limited partners may recognize taxable gain in the merger and that gain 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 Limited Partnership 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 (or the registration or qualification of OP Units in that state or would be prohibitively costly), residents of those states will receive only the cash consideration in the merger.

 

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, 2009 of each of Aimco and Aimco OP, which documents are incorporated herein by reference and are available electronically through the SEC’s website, www.sec.gov, or by request to Aimco.

 

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 OP’s general partner. Thereafter, investors may transfer such OP Units subject to the satisfaction of certain conditions, including the general partner’s 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 United States 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 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 OP’s 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 partnership’s 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 OP’s 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 OP’s 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 Aimco’s directors unless they own shares of Aimco. In order to comply with specific REIT tax requirements, Aimco’s 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 OP’s 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 OP’s business, then a holder of OP Units could be held liable under specific circumstances for Aimco OP’s 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 officers of the general partner to its sole stockholder, Aimco. Such conflicts of interest might arise in the following situations, among others:

 

 

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 OP’s 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.

 

The following are among the United States Federal income tax considerations to be taken into account in connection with an investment in OP Units. For a general discussion of material United States Federal income tax consequences resulting from acquiring, holding, exchanging, and otherwise disposing of OP Units, see “Material United States Federal Income Tax Matters — 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 United States Federal income tax purposes, material adverse consequences to the partners and their owners would result. In addition, Aimco would not qualify as a REIT for United States 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” or 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 United States Federal income tax purposes.

 

The limited partners may recognize gain on the transaction.  If a Fox limited partner 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 would be taxable to the limited partner either as “boot” or under the “disguised sale” rules. 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), including cash paid at closing, within two years before or after a contribution of property that has an adjusted tax basis in excess of its fair market value, 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 (and its owners), which Aimco has not undertaken to review. Accordingly, limited partners and their owners 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 United States Federal income tax purposes, in a manner chosen by Aimco OP such that the contributing partner is charged with and must recognize 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 is likely to 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 certain tax elections made 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 investor’s 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 United States Federal income tax on such holder’s allocable share of Aimco OP’s 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 holder’s 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.

 

The following tables set forth Aimco’s selected summary historical financial data as of the dates and for the periods indicated. Aimco’s historical consolidated statements of income data set forth below for each of the five fiscal years in the period ended December 31, 2009 and the historical consolidated balance sheet data for each of the five fiscal year-ends in the period ended December 31, 2009, are derived from information included in Aimco’s Current Report on Form 8-K filed with the SEC on September 10, 2010. Aimco’s historical consolidated statements of income data set forth below for each of the six months ended June 30, 2010 and 2009, and the historical consolidated balance sheet data as of June 30, 2010, are derived from Aimco’s unaudited interim Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.

 

You should read this information together with “Management’s 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’s Current Report on Form 8-K filed with the SEC on September 10, 2010 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, filed with the SEC on July 30, 2010, which are incorporated by reference in this information statement/prospectus. See “Where You Can Find Additional Information” in this information statement/prospectus.

 

 

 

The following table sets forth Aimco OP’s selected summary historical financial data as of the dates and for the periods indicated. Aimco OP’s historical consolidated statements of income data set forth below for each of the five fiscal years in the period ended December 31, 2009 and the historical consolidated balance sheet data for each of the five fiscal year-ends in the period ended December 31, 2009, are derived from information included in Aimco OP’s Current Report on Form 8-K filed with the SEC on September 10, 2010. Aimco OP’s historical consolidated statements of income data set forth below for each of the six months ended June 30, 2010 and 2009, and the historical consolidated balance sheet data as of June 30, 2010, are derived from Aimco OP’s unaudited interim Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.

 

You should read this information together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the consolidated financial statements included in Aimco OP’s Current Report on Form 8-K filed with the SEC on September 10, 2010, and Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, filed with the SEC on July 30, 2010, which are incorporated by reference in this information statement/prospectus. See “Where You Can Find Additional Information” in this information statement/prospectus.

 

 

 

The following table sets forth Fox’s selected summary historical financial data as of the dates and for the periods indicated. Fox’s historical statements of income and cash flow data set forth below for each of the two fiscal years in the period ended December 31, 2009 and the historical balance sheet data as of December 31, 2009 and 2008, are derived from Fox’s financial statements included in Fox’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009. Fox’s historical statements of income and cash flow data set forth below for each of the six months ended June 30, 2010 and 2009, and the historical balance sheet data as of June 30, 2010, are derived from Fox’s unaudited interim Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.

 

You should read this information together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the financial statements and notes to the financial statements for the fiscal year ended December 31, 2009 included in Fox’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed with the SEC on March 29, 2010 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 filed with the SEC on August 13, 2010, which are attached to this information statement/prospectus. See “Where You Can Find Additional Information” in this information statement/prospectus.

 

 

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.

 

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. The number of OP Units offered in the merger with respect to each Limited Partnership 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 October 7, 2010, the last trading day before the merger agreement was entered into, was $22.38.

 

The Limited Partnership 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 Limited Partnership Units is greater than Fox GP’s estimate of the proceeds that would be available for distribution to limited partners of Fox if its property was sold at a price equal to its appraised value.

 

The following tables summarize the historical per share information for Aimco, Aimco OP and Fox for the periods indicated:

 

 

 

 

 

Aimco is a Maryland corporation incorporated on January 10, 1994. Aimco is a self-administered and self-managed real estate investment trust, or REIT, focused on the ownership and management of quality apartment communities located in the 20 largest markets in the United States (as measured by total market capitalization, which is the total market value of institutional-grade apartment properties in a particular market). Aimco upgrades the quality of its portfolio through the sale of communities with rents below average market rents and the reinvestment of capital within these 20 target markets through redevelopment and acquisitions. Aimco’s apartment properties are generally financed with property-level, non-recourse, long-dated, fixed-rate, amortizing debt. Aimco’s common stock is listed and traded on the NYSE under the symbol “AIV.” As of June 30, 2010, Aimco owned or managed 817 apartment properties containing 129,350 units located in 43 states, the District of Columbia and Puerto Rico. Aimco is one of the largest owners and operators of apartment properties in the United States.

 

As of June 30, 2010, Aimco:

 

 

Of these properties, Aimco consolidated 230 conventional properties with 70,605 units and 197 affordable properties with 23,901 units.

 

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 June 30, 2010, Aimco held approximately 93% of the common partnership units and equivalents 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 partnership common units or OP Units, partnership preferred units and high performance partnership units, or HPUs. Aimco OP’s income is allocated to holders of OP Units and equivalents based on the weighted average number of OP Units and equivalents outstanding during the period. The holders of the 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 OP’s option, Aimco common stock. Partnership preferred units entitle the holders thereof to a preference with respect to distributions or upon liquidation. At June 30, 2010, after elimination of shares held by consolidated subsidiaries, 117,039,659 shares of Aimco common stock were outstanding and Aimco OP had 8,330,534 OP Units and equivalents outstanding for a combined total of 125,370,193 shares of Aimco common stock and Aimco OP Units outstanding (excluding partnership preferred units).

 

Through its wholly owned subsidiary, AIMCO/IPT, Inc., a Delaware corporation, Aimco owns all of the outstanding common stock of FCMC, the managing general partner of Fox GP. Fox GP is the general partner of Fox.

 

AIMCO/IPT, Inc. 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 as the limited partner. AIMCO/IPT, Inc. and AIMCO IPLP, L.P. share voting and dispositive power over 4,132 Limited Partnership Units, or approximately 15.83% of the outstanding Limited Partnership Units.

 

AIMCO IPLP L.P. is the sole member of IPLP Acquisition I, L.L.C. IPLP Acquisition I, L.L.C., AIMCO IPLP, L.P. and AIMCO/IPT, Inc. share voting and dispositive power over 3,919 Limited Partnership Units held by IPLP Acquisition I, L.L.C., representing approximately 15.01% of the class. AIMCO IPLP, L.P. and AIMCO/IPT, Inc. also share voting and dispositive power over 213 Limited Partnership Units held by AIMCO IPLP, L.P, representing approximately 0.82% of the class.

 

AIMCO Fox Merger Sub LLC, or the Aimco Subsidiary, is a California limited liability company formed on September 30, 2010, for the purpose of consummating the merger with Fox. 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., FCMC 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 on Annex C attached hereto and are incorporated in this information statement/prospectus by reference. None of AIMCO IPLP, IPLP Acquisition I, L.L.C. or Fox GP has any directors or officers. During the last five years, none of Aimco, Aimco-GP, AIMCO/IPT, AIMCO IPLP, L.P., IPLP Acquisition I, L.L.C., Aimco OP, Fox, Fox GP or FCMC nor, to the best of their knowledge, any of the persons listed in Annex C 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 and Aimco OP is included in documents incorporated by reference into this information statement/prospectus. See “Where You Can Find Additional Information.”

 

The following chart represents the organizational structure of the Aimco Entities:

 

 

Fox is a California limited partnership formed on June 29, 1984. Its general partner is Fox GP, a California general partnership. The managing general partner of Fox GP is FCMC, a California corporation and an indirect

subsidiary of Aimco. Fox’s partnership agreement provides that Fox is to terminate on December 31, 2025 unless terminated earlier in accordance with the terms of the partnership agreement.

 

Fox registered its Limited Partnership Units pursuant to a registration statement filed under the Securities Act of 1933, as amended, (File No. 33-8481), which was declared effective on March 24, 1987. Beginning in April 1987, Fox offered $100,000,000 in Limited Partnership Units. The offering closed in January 1989 with 26,111 units sold for $1,000 each, resulting in gross proceeds to Fox of $26,111,000. Fox used the net proceeds of this offering to acquire one mobile home park and two apartment complexes. As of December 31, 2003, Fox had sold the mobile home park and one of the apartment complexes. Fox continues to hold and operate the remaining apartment complex, The Views at Vinings Mountain Apartments, or the property, a 180 unit apartment project located in Atlanta, Georgia. Since its initial offering, Fox has not received, nor are limited partners required to make, additional capital contributions.

 

Fox’s primary business and only industry segment is real estate related operations. Fox GP is vested with full authority as to the general management and supervision of the business and affairs of Fox. Limited partners have no right to participate in the management or conduct of such business and affairs. An affiliate of the Fox GP provides day-to-day property management services at the property, as Fox has no employees.

 

The average annual rental rates for each of the five years ended December 31, 2009 for the property are as follows:

 

 

The average occupancy for each of the five years ended December 31, 2009 and for the six months ended June 30, 2010 and 2009 for the property is as follows:

 

 

The real estate industry is highly competitive. The property is subject to competition from other residential apartment complexes. Fox GP believes that the property is adequately insured. The property leases apartments for terms of one year or less. No tenant leases 10% or more of the available rental space. The property is in good physical condition, subject to normal depreciation and deterioration as is typical for assets of this type and age.

 

In November 2006, Fox began a major redevelopment project at the property in order for it to remain competitive with other properties in the Atlanta area. The redevelopment was completed in June 2009 at a total cost of approximately $11,222,000. The redevelopment consisted of the addition of a controlled access entrance gate, an amenity building, clubhouse renovations, swimming pool upgrades, roof replacement, HVAC upgrades, major landscaping, lighting upgrades, exterior and interior building improvements, sidewalk and parking area upgrades, signage, and kitchen, bathroom, and appliance upgrades to each unit. Fox funded the redevelopment from operating cash flow and loans from Aimco OP.

 

During the six months ended June 30, 2010, Fox completed approximately $37,000 of capital improvements at the property, consisting primarily of interior improvements and floor covering replacement. These improvements were funded from operating cash flow. Fox regularly evaluates the capital improvement needs of the property. While Fox has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during the remainder of 2010. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.

 

Capital expenditures will be incurred only if cash is available from operations, partnership reserves or loans from Aimco OP, although Aimco OP is not obligated to fund such loans, and has indicated that it will not do so. To the extent that capital improvements are completed, Fox’s distributable cash flow, if any, may be adversely affected at least in the short term.

The following table sets forth certain information relating to the mortgage encumbering the property at June 30, 2010.

 

 

 

 

Other than the general partner interest held by Fox GP, Fox presently has only Limited Partnership Units issued and outstanding. The Limited Partnership Units are entitled to allocations of profit and loss, and distributions. As of October 20, 2010, there were 26,111 Limited Partnership Units outstanding, and Aimco OP and its affiliates owned 13,719, or approximately 52.54%, of those units.

 

There were no distributions to the partners during the six months ended June 30, 2010 or during the years ended December 31, 2009 and 2008. Future cash distributions will depend on the levels of net cash generated from operations, the timing of debt maturities, property sales and refinancing. Fox’s cash available for distribution is reviewed on a monthly basis.

 

Fox has no employees and depends on Fox GP and its affiliates for the management and administration of all partnership activities. The Fox partnership agreement provides for payments to affiliates for services and reimbursement of certain expenses incurred by affiliates on behalf of Fox.

 

Affiliates of Fox GP receive 5% of gross receipts from Fox’s investment property as compensation for providing property management services. Fox paid to such affiliates approximately $53,000 and $49,000 for the six months ended June 30, 2010 and 2009, respectively, and $101,000 and $74,000 for the years ended December 31, 2009 and 2008, respectively.

 

Affiliates of Fox GP charged Fox for reimbursement of accountable administrative expenses amounting to approximately $14,000 for each of the six months ended June 30, 2010 and 2009, and $27,000 and $47,000 for the years ended December 31, 2009 and 2008, respectively. In connection with the redevelopment project completed in June of 2009, an affiliate of Fox GP received a redevelopment supervision fee of 4% of the actual redevelopment costs. Fox was charged approximately $23,000 in redevelopment supervision fees during the six months ended June 30, 2009. Fox was charged approximately $25,000 and $227,000 in redevelopment supervision fees during the years ended December 31, 2009 and 2008, respectively. At June 30, 2010, approximately $14,000 of these accountable administrative expenses were unpaid.

 

Aimco OP loaned Fox approximately $250,000 and $6,398,000 to fund the redevelopment project, a rate lock deposit associated with the September 2008 refinancing at the property, real estate taxes, capital improvements and operating expenses during the years ended December 31, 2009 and 2008, respectively. There were no such loans made during the six months ended June 30, 2010 and 2009. Interest is charged at the prime rate plus 2% (5.25% at June 30, 2010). Interest expense amounted to approximately $95,000 and $89,000 for the six months ended June 30, 2010 and 2009, respectively, and $180,000 and $447,000 for the years ended December 31, 2009 and 2008, respectively. During the years ended December 31, 2009 and 2008, Fox made payments on the outstanding loans and accrued interest of approximately $245,000 and $8,620,000, from cash from operations and proceeds from the refinancing of the mortgage encumbering the property, respectively. During the six months ended June 30, 2009, Fox made payments on the outstanding loans and accrued interest of approximately $138,000. No such payments

were made during the six months ended June 30, 2010. At December 31, 2008 and 2009, and at June 30, 2010, the amount of the outstanding loans and accrued interest was approximately, $3,407,000, $3,592,000 and $3,687,000, respectively. Fox may receive additional loans from Aimco OP although Aimco OP is not obligated to provide such loans and Aimco OP is currently unwilling to do so. For more information on Aimco OP, including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission.

 

In accordance with the Fox partnership agreement, Fox GP is entitled to earn partnership management fees on distributions from operations. There were no partnership management fees earned during six months ended June 30, 2010 and 2009 or the years ended December 31, 2009 and 2008, as there were no operating distributions during such periods. The Fox partnership agreement requires that 62.5% of the fees earned be subordinated to the limited partners’ annual receipt of 8% of adjusted invested capital as defined in the Fox partnership agreement. The cumulative subordinated fees owed to an affiliate of Fox GP at June 30, 2010, amounted to approximately $272,000.

 

Fox insures its property 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. Fox insures its property above the Aimco limits through insurance policies obtained by Aimco from insurers unaffiliated with Fox GP. During the years ended December 31, 2009 and 2008, Fox was charged by Aimco and its affiliates approximately $24,000 and $37,000, respectively, for insurance coverage and fees associated with policy claims administration. During the six months ended June 30, 2010, Fox was charged by Aimco and its affiliates approximately $21,000 for insurance coverage and fees associated with policy claims administration. Additional charges will be incurred by Fox during 2010 as other insurance policies renew later in the year.

 

In addition to its indirect ownership of the general partner interest in Fox, Aimco and its affiliates own 13,719 Limited Partnership Units in Fox representing approximately 52.54% of the outstanding Limited Partnership Units at October 20, 2010. A number of these units were acquired pursuant to tender offers made by Aimco or its affiliates. Pursuant to the Fox partnership agreement, limited partners holding a majority of the Limited Partnership Units are entitled to take action with respect to a variety of matters that include voting on certain amendments to the Fox partnership agreement and voting to remove the general partner. As a result of its ownership of approximately 52.54% of the outstanding Limited Partnership Units, Aimco and its affiliates are in a position to control all voting decisions with respect to Fox. Although Fox GP owes fiduciary duties to the limited partners of Fox, Fox GP also owes fiduciary duties to its general partners, which in turn owe fiduciary duties to their partners and stockholders. Aimco is the sole stockholder of the managing general partner of Fox GP.

 

Neither Fox nor Fox GP has any directors or executive officers of its own. The general partners of Fox GP are FCMC and Fox Realty Investors. FCMC is the managing general partner of Fox GP. The names and ages of, as well as the positions and offices held by, the present directors and officers of FCMC, as of October 20, 2010, are set forth in Annex C 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. None of the directors or officers of FCMC received remuneration from Fox during the year ended December 31, 2009 or during the six months ended June 30, 2010.

 

The board of directors of FCMC does not have a separate audit committee. As such, the board of directors of FCMC 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 FCMC, which have authority over FCMC, and indirectly over Fox GP and Fox, 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 Aimco’s website (www.aimco.com). Aimco’s website is not incorporated by reference to this filing.

 

Fox GP is the general partner of Fox and owns all of the outstanding general partner interests in Fox, which constitute 2% of the total interests in the partnership. Fox has no directors or executive officers of its own. Fox GP is a California general partnership, which is indirectly beneficially owned by Aimco. None of Fox GP, FCMC, or any of the directors or executive officers of FCMC, owns any of the limited partnership interests of Fox. The following table sets forth certain information as of October 20, 2010 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 units of limited partnership interest of the partnership.

 

 

 

 

 

 

For additional information about Fox and its property and operating data related to its property, see Fox’s Annual Report on Form 10-K for the year ended December 31, 2009, attached hereto as Annex D and Fox’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, attached hereto as Annex E.

 

On March 10, 2010, Mr. Terry Considine, Chairman and Chief Executive Officer of Aimco, and Mr. Derek McCandless, Senior Vice President, Assistant General Counsel and Assistant Secretary of Aimco and of FCMC, the managing general partner of Fox GP, met to discuss Fox’s operations and ongoing capital needs.

 

Fox began a redevelopment project in late 2006 that was completed in June of 2009. Based on information known to it at the beginning of the redevelopment project, Fox estimated that the cost of the project would be $7,900,000 and that it would repay the indebtedness incurred to finance the project by the end of the third quarter of 2011.

 

The actual cost of the project rose to approximately $11,222,000, and due to macroeconomic factors, occupancy and rental rates at the property were not as high as originally forecasted. In addition, Messrs. Considine and McCandless noted that Fox had recognized a loss during each of the years ending December 31, 2009, 2008 and 2007. In light of these factors, they concluded that Fox’s planned repayment of all indebtedness to Aimco OP in the third quarter of 2011 was not likely to occur.

 

In light of these facts, Messrs. Considine and McCandless also discussed strategic alternatives for Fox at the meeting. They considered the costs of maintaining Fox’s current ownership structure, including audit, tax and SEC filing costs, given Aimco OP’s ownership of a majority of the Limited Partnership Units and the sizeable debts, both secured and unsecured, owed to third party lenders and to Aimco OP, respectively. While recent operations appeared to have stabilized, Fox GP noted that Fox had no equity value, which would severely limit its ability to obtain loans in the future. After considering these factors, Messrs Considine and McCandless agreed to explore the possibility of Aimco OP acquiring the property through a transaction that would provide the unaffiliated limited partners with the opportunity to defer tax gain through an exchange of Fox Limited Partnership Units for Aimco OP units.

 

During March and April of 2010, Mr. McCandless sought advice from outside legal and tax counsel to determine whether a transaction would be feasible that would result in Aimco OP’s ownership of the property while also providing potential tax deferral to limited partners that are unaffiliated with Aimco OP. At the same time, he spoke with appraisers regarding the possibility of appraising the property for purposes of evaluating a potential transaction with Aimco OP. Fox GP engaged KTR on April 30, 2010 to appraise the property.

 

On June 3, 2010, KTR delivered the appraisal, pursuant to which it valued the property at $15.3 million. Over the following weeks, Mr. Bezzant and Mr. Nikhil Venkatesh, Vice President — Portfolio Strategy of Aimco and Vice President of FCMC, reviewed the appraisal report and discussed both KTR’s assumptions and its valuation of the property, and determined that KTR’s assumptions were reasonable and the valuation appropriate. As part of their review, they considered the fiduciary duties owed by Fox GP to unaffiliated limited partners, as well as the property’s appraised worth, the amount of indebtedness secured by the property, which at June 30, 2010 was approximately $13.7 million, and other indebtedness of Fox, which at June 30, 2010 was approximately $4.3 million.

 

On October 8, 2010, the board of directors of FCMC considered the proposed merger. The board decided to approve and effect a transaction with Aimco OP that would give Aimco OP ownership of Fox and, indirectly, its property. Fox GP and the Aimco Entities considered a number of possible alternatives to the proposed merger with the Aimco Subsidiary, as described in greater detail below. However, Fox GP and the Aimco Entities ultimately determined that the proposed merger with the Aimco Subsidiary is in the best interests of Fox and its unaffiliated limited partners.

 

In the merger, each Limited Partnership 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 Limited Partnership Unit, either $4.84 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 would be prohibitively costly). Because Aimco indirectly owns Fox GP, which is the general partner of Fox, the merger consideration has not been determined in an arm’s-length negotiation. In order to arrive at a fair consideration, KTR, an independent real estate appraisal firm, was engaged

to perform a complete appraisal of Fox’s property. For more detailed information about the independent appraiser’s determination of the estimated values of the property, see “The Merger — The Appraisal.”

 

Using KTR’s appraised value of $15.3 million for the property, Fox GP calculated the value of the equity of Fox by adding the property’s appraised value to the value of Fox’s non-real estate assets and deducting Fox’s liabilities and certain other costs, including an estimate for expenses that would be incurred prior to the merger but payable after the merger. Because Fox GP valued Fox on a going-concern basis, it did not deduct the estimated $1,832,770 prepayment penalty associated with the mortgage secured by the property that Fox would incur if the property were sold to a third party. Because the liabilities attributable to the partnership and the property (including mortgage debt and amounts owed to affiliates of Fox GP) exceed the appraised value of the property and the value of other partnership assets, Fox GP determined that there was zero equity in Fox. Thus, if the property was sold at its appraised value and Fox was dissolved and wound-up in accordance with applicable law and its partnership agreement, all net proceeds would be distributed in satisfaction of Fox’s liabilities and none would be available for distribution to limited partners. Nevertheless, Aimco and Fox GP determined that unaffiliated limited partners would receive an aggregate of $60,000 in the merger. This amount was deemed sufficient to make the merger consideration to unaffiliated limited partners a non-trivial amount and facilitate their ability to exchange their Limited Partnership Units for OP Units. However, it was not so large that it would make the transaction economically undesirable for Aimco OP. In order to determine the per unit merger consideration, Fox GP divided this amount by the number of outstanding Limited Partnership Units held by limited partners unaffiliated with Aimco OP. This calculation, which is summarized below, resulted in per unit cash merger consideration of $4.84.

 

 

 

 

The number of OP Units issuable with respect to each Limited Partnership Unit will be calculated by dividing the $4.84 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 a share of Aimco common stock at the time, subject to Aimco’s right to acquire the OP Unit in exchange for one share of Aimco common stock (subject to antidilution adjustments). Therefore, the trading price of Aimco common stock is considered a reasonable estimate of the fair market value of an OP Unit. As of October 26, 2010, the average closing price of Aimco common stock over the preceding ten consecutive trading days was $23.08, which would have resulted in OP Unit consideration of 0.21 OP Units per Limited Partnership Unit.

 

Fox’s general partner, Fox GP, is a general partnership, the managing general partner of which is wholly-owned and controlled by Aimco. Therefore, Fox GP has a conflict of interest with respect to the merger. Fox GP, or the beneficial

owners of its managing general partner, has fiduciary duties to Aimco, on the one hand, and Fox GP has fiduciary duties to the limited partners of Fox, on the other hand. The duties of Fox GP to the limited partners of Fox conflict with the duties of Fox GP to its general partners, which could result in Fox GP approving a transaction that is more favorable to Aimco than might be the case absent such conflict of interest. As the general partner of Fox, Fox GP seeks the best possible terms for Fox’s limited partners. This conflicts with Aimco’s interest in obtaining the best possible terms for Aimco OP.

 

Parties to going private transactions such as the merger are often subject to claims alleging that the transaction is unfair to unaffiliated security holders. Litigation in these situations can arise even if the transaction is ultimately found to be fair to the unaffiliated security holders. In order to attempt to reduce the probability of any such claims, and the related costs of defending against any such claims, Aimco OP has decided to offer unaffiliated limited partners, in addition to the merger consideration, a payment of $4.03 per Limited Partnership Unit in exchange for executing a waiver and release of potential claims the limited partner may have against the Releasees (as defined below). The amount of $4.03 per unit was determined by dividing $50,000 by the number of outstanding Limited Partnership Units held by unaffiliated limited partners. This $50,000 amount represents Aimco OP’s estimate of the value of such a release in potentially reducing its costs to defend against such claims. Unaffiliated limited partners may elect to receive the additional consideration by completing the election form, executing the waiver and release that is attached to the election form as an exhibit and returning the election form and the executed waiver and release in accordance with the instructions provided. In executing the waiver and release, the limited partner, on behalf of himself, his heirs, estate, executor, administrator, successors and assigns, will release Aimco OP and its predecessors, successors and assigns and its present and former parents, subsidiaries, affiliates, investors, insurers, reinsurers, officers, directors, employees, agents, administrators, auditors, attorneys, accountants, information and solicitation agents, investment bankers, and other representatives, including but not limited to Aimco, Fox GP, and FCMC (collectively, the “Releasees”), from any and all claims and causes of action, whether brought individually, on behalf of a class, or derivatively, demands, rights, or liabilities, including, but not limited to, claims for negligence, gross negligence, fraud, breach of fiduciary duty (including, but not limited to, duties of care, loyalty or candor), mismanagement, corporate waste, misrepresentation, whether intentional or negligent, misstatements and omissions to disclose, breach of contract, violations of any state or federal statutes, rules or regulations, whether known claims or unknown claims, whether past claims, present claims or future claims through and including the date of the consummation of the merger, including, but not limited to, those claims that have arisen or arise, directly or indirectly, out of or relate, directly or indirectly, to (a) the merger agreement and the transactions contemplated thereby (excluding only such unaffiliated limited partner’s rights, if any, under the merger agreement), (b) any other circumstance, agreement, activity, action, omission, event or matter occurring or existing on or prior to the date of the consummation of the merger, (c) the ownership of any limited partnership interest in Fox, including but not limited to, any and all claims related to the management of Fox or the property owned by Fox (whether currently or previously), the payment of management fees or other monies to Fox GP and to affiliates of Fox and prior sales of property, or (d) the purchase, acquisition, holding, sale or voting of one or more limited partnership interests in Fox (collectively, the “Released Claims”).

 

The waiver and release do not apply to claims limited partners may have under the federal securities laws.

 

Each unaffiliated limited partner who elects to execute the waiver and release and to receive the additional cash payment will expressly waive and relinquish, to the fullest extent permitted by law and consistent with the release, the provisions, rights and benefits of Section 1542 of the Civil Code of California, or Section 1542, which provides:

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN ITS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

 

Each unaffiliated limited partner who elects to execute the waiver and release and to receive the additional cash payment will waive any and all provisions, rights and benefits conferred by any law of any state or territory of the United States, or principle of common law, that is similar, comparable or equivalent to Section 1542. Each unaffiliated limited partner who elects to execute the waiver and release and to receive the additional cash payment will acknowledge and agree that he may later discover facts in addition to or different from those which he or she now knows or believes to be true with respect to the subject matter of the released

claims, but such unaffiliated limited partner will be deemed to have fully, finally and forever settled and released any and all released claims, known or unknown, suspected or unsuspected, contingent or non-contingent, that now exist or may arise in the future through and including the date of the consummation of the merger under any theory of law or equity now existing, including, but not limited to, conduct that is negligent, intentional, with malice, or a breach of any duty, law or rule, without regard to the subsequent discovery of the existence of such different or additional facts.

 

Each unaffiliated limited partner who elects to execute the waiver and release and to receive the additional cash payment will agree that the release is intended to include the Released Clams discussed above, which such unaffiliated limited partner may have and which such unaffiliated limited partner does not know or suspect to exist in its favor against the Releasees and that the release extinguishes those claims. Each unaffiliated limited partner who elects to execute the waiver and release and to receive the additional cash payment will represent and warrant to the Releasees that such unaffiliated limited partner has not assigned or otherwise transferred or subrogated any interest in the Released Claims.

 

After the merger, Aimco OP will be the sole limited partner in Fox, and will own all of the outstanding Limited Partnership Units. Fox GP will continue to be the sole general partner of Fox after the merger, and Fox’s partnership agreement in effect immediately prior to the merger will remain unchanged after the merger. Aimco OP intends to retain the Limited Partnership Units after the merger. Following completion of the merger, the Limited Partnership Units will be deregistered under the Exchange Act, and Fox’s obligation to file reports under Section 15(d) of the Exchange Act will be suspended.

 

Aimco anticipates owning and operating the property following the merger with a view towards eventually recouping the amounts loaned to Fox by Aimco OP. Aimco also anticipates making certain routine capital expenditures with respect to the property during the remainder of 2010.

 

For a discussion of the material United States federal income tax consequences of the merger, see “Material United States Federal Income Tax Matters — United States Federal Income Tax Consequences Relating to the Merger.”

 

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 SEC’s 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 California.

 

Aimco and Aimco OP will treat the merger as a purchase of noncontrolling interests for financial accounting purposes. This means that Aimco and the 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 OP’s consolidated financial statements as an adjustment to the amounts of consolidated equity and partners’ capital attributed to Aimco and Aimco OP, respectively.

 

Fox limited partners are not entitled to dissenters’ appraisal rights under California law in connection with the merger, because Fox was formed prior to the date on which such appraisal rights became applicable to limited partnerships formed under the laws of California and because the limited partnership agreement of Fox does not provide for such rights. However, pursuant to the terms of the merger agreement, Aimco OP will provide each Fox

limited partner with contractual dissenters’ appraisal rights that are similar to the dissenters’ appraisal rights otherwise available to a limited partner of a constituent limited partnership in a merger under California law. These contractual appraisal rights will enable a limited partner to obtain an appraisal of the value of the limited partner’s Limited Partnership 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.

 

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 $465,900 (assuming all limited partners elect to receive the cash merger consideration and all limited partners unaffiliated with Aimco OP elect to receive an additional cash payment in exchange for executing a waiver and release). 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 OP’s 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 2.00% or, at Aimco OP’s 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 an additional year, subject to certain conditions.

 

Under California law, the merger must be approved by the Fox general partner and a majority in interest of the Limited Partnership Units. The general partner has determined that the merger is advisable and in the best interests of Fox and its limited partners and has approved the merger and the merger agreement. As of October 20, 2010, there were issued and outstanding 26,111 Limited Partnership Units, and Aimco OP and its affiliates owned 13,719 of those units, or approximately 52.54% of the number outstanding units. 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 [ • ], 2010.

 

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.

 

Fox has entered into an agreement and plan of merger with the Aimco Subsidiary and Aimco OP. The Aimco Subsidiary is a wholly owned subsidiary of Aimco OP, and was formed for the purpose of effecting the merger with Fox. Aimco owns Fox’s general partner, Fox GP, and, together with its affiliates, owns a majority of Fox’s outstanding Limited Partnership Units.

 

Under the merger agreement, at the effective time of the merger, the Aimco Subsidiary will be merged with and into Fox, with Fox as the surviving entity. In the merger, each Limited Partnership Unit of Fox outstanding immediately prior to consummation of the merger will be converted into the right to receive, at the election of the holder of such Limited Partnership Unit, either $4.84 in cash or equivalent value in Aimco OP Units (calculated by dividing $4.84 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 Fox GP determines that the law of the state or other jurisdiction in which a limited partner resides would prohibit the issuance of Aimco OP Units in that state or other jurisdiction, then such limited partner will only be entitled to receive $4.84 in cash for each Limited Partnership Unit. Aimco OP’s interest in the Aimco Subsidiary will be converted into Fox limited partnership units. As a result, after the merger, Aimco OP will be the sole limited partner of Fox and will own all of the outstanding Limited Partnership Units.

 

The agreement of limited partnership of Fox as in effect immediately prior to the consummation of the merger will be the agreement of limited partnership of Fox after the merger, until thereafter amended in accordance with the provisions thereof and applicable law.

 

Fox.  Under the merger agreement, each Limited Partnership Unit of Fox outstanding immediately prior to consummation of the merger will be converted into the right to receive, at the election of the holder of such Limited Partnership Unit, either $4.84 in cash or equivalent value in Aimco OP Units (calculated by dividing $4.84 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 would be prohibitively costly). Fox GP will continue to be the sole general partner of Fox after the merger, and its current general partner interest 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 Limited Partnership Units of Fox after the merger.

 

Under California law, the merger must be approved by Fox GP, as the general partner of Fox, and a majority in interest of the Limited Partnership Units. Fox GP has determined that the merger is advisable and in the best interests of Fox and its limited partners and has approved the merger and the merger agreement. As of October 20, 2010, there were issued and outstanding 26,111 Limited Partnership Units and Aimco and Aimco OP owned 13,719 of those units, or approximately 52.54% of the number 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 [ • ], 2010. 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.

 

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.

 

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 Fox, 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 Fox or the member of the Aimco Subsidiary.

 

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.

 

The merger agreement is governed by and construed in accordance with the laws of the State of California, without reference to the conflict of law provisions thereof.

 

Fox limited partners are not entitled to dissenters’ appraisal rights under California law in connection with the merger, because Fox was formed prior to the date on which such appraisal rights became applicable to limited partnerships formed under the laws of California and because the limited partnership agreement of Fox does not provide for such rights. However, pursuant to the terms of the merger agreement, Aimco OP will provide each Fox limited partner with contractual dissenters’ appraisal rights that are similar to the dissenters’ appraisal rights otherwise available to a limited partner of a constituent limited partnership in a merger under California law. These contractual appraisal rights will enable a limited partner to obtain an appraisal of the value of the limited partner’s Limited Partnership 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.

 

Within 10 days after the effective time of the merger, Aimco OP will prepare and mail to the former holders of Limited Partnership Units an election form with which they can elect to receive cash or OP Units. Limited partners may also elect appraisal of their Limited Partnership Units pursuant to the election form. Holders of Limited Partnership 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 merger, the holder will be deemed to have elected to receive the cash consideration. Former holders of Limited Partnership Units may also use the election form to elect to receive, in lieu of the merger consideration, the appraised value of their Limited Partnership Units, determined through an arbitration proceeding.

 

In addition, limited partners who are not affiliated with Aimco OP may elect to receive an additional cash payment of $4.03 per Limited Partnership Unit in exchange for executing a waiver and release of certain claims. In order to receive this additional consideration, limited partners must complete the election form, execute the waiver and release that is attached to the election form as an exhibit and return both the election form and the executed waiver and release to the information agent as described above.

 

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.

 

Aimco OP is a limited partnership organized under the provisions of the Delaware Revised Uniform Limited Partnership Act, or, 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.

 

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) to conduct the business of ownership, construction, development and operation of multifamily rental apartment communities, (ii) to enter 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) to conduct 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) to do 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.

 

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 OP’s business, transact any business in Aimco OP’s 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 Partner’s 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

behalf of Aimco OP; or (iv) subject to specific exceptions, approve or acquiesce to the transfer of Aimco OP interest of the general partner, 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 partner’s sole and absolute discretion.

 

As of June 30, 2010, Aimco OP had issued and outstanding the following partnership interests:

 

 

 

 

 

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 Code and the applicable Treasury Regulations and (ii) avoid any United States 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 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.

 

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 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 United States Federal income tax purposes under the 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.

 

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 partner’s estimate of further taxes required to be paid by such limited partner.

 

No partner is entitled to interest on its capital contribution or on such partner’s 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.

 

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 sole and absolute discretion but subject to the restrictions on the ownership of Aimco stock imposed under Aimco’s 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.

 

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 partner’s 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.

 

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 partner’s 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.