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As filed with the Securities and Exchange Commission on
October 27, 2010
Registration
No. 333-169872
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)
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Maryland
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6798
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84-1259577
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(State of other jurisdiction
of
incorporation or organization)
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(Primary standard industrial
classification code number)
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(IRS Employer
Identification Number)
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AIMCO PROPERTIES,
L.P.
(Exact name of registrant as
specified in its charter)
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Delaware
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6513
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84-1275621
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(State of other jurisdiction
of
incorporation or organization)
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(Primary standard industrial
classification code number)
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(IRS Employer
Identification Number)
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4582 South Ulster Street
Parkway, Suite 1100
Denver, Colorado 80237
(303) 757-8101
(Address, including
zip code, and telephone number, including area code, of
registrants 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:
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Jonathan Friedman, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, CA 90071
Telephone:
(213) 687-5396
Fax:
(213) 621-5396
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Joseph Coco, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Telephone: (212) 735-3050
Fax: (917) 777-3050
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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):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company o
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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.
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
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SUBJECT TO COMPLETION, DATED
OCTOBER 27, 2010
INFORMATION
STATEMENT/PROSPECTUS
NATIONAL
PROPERTY INVESTORS III
National Property Investors III, or NPI, plans to enter into an
agreement and plan of merger with AIMCO Properties, L.P., or
Aimco OP. Under the proposed merger agreement:
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(i) |
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First, NPI will be merged with and into Aimco OPs
subsidiary, National Property Investors III, LP, a Delaware
limited partnership, or New NPI, with New NPI as the surviving
entity. New NPI was formed for the purpose of effecting this
merger and does not have any assets or operations. In this
merger, each unit of limited partnership interest in NPI, or NPI
Unit, will be converted into an identical unit of limited
partnership in New NPI, or New NPI Units, and the general
partnership interest in NPI now held by the general partner will
be converted into a general partnership interest in New NPI. All
interests in New NPI outstanding immediately prior to the merger
will be cancelled in the merger; and |
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(iii) |
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Second, Aimco OPs subsidiary, AIMCO NPI III Merger Sub
LLC, a Delaware limited liability company, or the Aimco
Subsidiary, will be merged with and into New NPI, with New NPI
as the surviving entity. The Aimco Subsidiary was formed for the
purpose of effecting this merger and does not have any assets or
operations. In this merger, each NPI Unit will be converted into
the right to receive, at the election of the holder of such
unit, either: |
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$57.24 in cash, or
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$57.24 in partnership common units of Aimco OP, or OP Units.
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The number of OP Units offered for each NPI Unit will be
calculated by dividing $57.24 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 25, 2010, the average closing price
of Aimco common stock over the preceding ten consecutive trading
days was $22.96, which would have resulted in
2.49 OP Units offered for each NPI 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 second merger, Aimco OPs interest in the Aimco
Subsidiary will be converted into New NPI Units. As a result,
after the merger, Aimco OP will be the sole limited partner of
New NPI and will own all of the outstanding New NPI Units.
Within ten days after the mergers, Aimco OP will prepare and
mail to you an election form pursuant to which you can elect to
receive cash or OP Units. You may elect your 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 you before
5:00 p.m., New York time, on the 30th day after the
mergers, you will be deemed to have elected to receive cash. You
may also use the election form to elect to receive, in lieu of
the merger consideration, the appraised valued of your NPI
Units, determined through an arbitration proceeding.
In addition and separate from the merger consideration, you may
elect to receive an additional cash payment of $9.42 in exchange
for executing a waiver and release of certain claims. In order
to receive such additional payment, you 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.
Prior to entering into the merger agreement, the agreement of
limited partnership of NPI will be amended to (i) eliminate
the prohibition on transactions between NPI, on one hand, and
its general partners and their affiliates, on the other, and
(ii) authorize the managing general partner to complete the
mergers described above without any further action by the
limited partners. This amendment must be approved by NPIs
general partner and a majority in interest of the limited
partners. NPIs general partner, NPI Equity Investments,
Inc., or the General Partner, has determined that the amendment
and the transactions contemplated thereby are advisable and in
the best interests of NPI and its limited partners and has
approved the amendment and the transactions. As of
October 25, 2010, there were issued and outstanding 48,039
NPI Units, and Aimco OP and its affiliates owned 37,419 of those
units, or approximately 77.89% of the number of units
outstanding. As more fully described herein, 21,380 of the NPI
Units owned by an affiliate of the General Partner are subject
to a voting restriction, which requires the NPI Units to be
voted in proportion to the votes cast with respect to NPI Units
not subject to this voting restriction. The General
Partners affiliates have indicated that they will vote all
of their NPI Units that are not subject to this restriction,
16,039 Units or approximately 33.39% of the outstanding NPI
Units, in favor of the amendment and the transactions. As a
result, affiliates of the General Partner will vote a total of
28,901 NPI Units, or approximately 60.16% of the outstanding NPI
Units, in favor of the amendment and the transactions.
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 amendment and the
transactions 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 proposed amendment of the limited partnership agreement of
NPI, the proposed merger agreement and the transactions
contemplated thereby and the securities offered hereby, and the
reasons that the General Partner has decided that the
transactions are in the best interests of NPI and its limited
partners. The General Partner has conflicts of interest with
respect to the transactions that are described in greater detail
herein. Please read this information statement/prospectus
carefully, including the section entitled Risk
Factors beginning on page 12. It provides you with
detailed information about the proposed amendment of the limited
partnership agreement of NPI, the proposed merger agreement and
the transactions contemplated thereby and the securities offered
hereby. The proposed merger agreement is attached to this
information statement/prospectus as Annex A. The
proposed amendment of the limited partnership agreement of NPI
is attached to this information statement/prospectus as
Annex F.
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 mergers 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 NPI UNITS THE ABILITY TO ELECT TO RECEIVE OP UNITS IN
CONNECTION WITH THE MERGER. HOWEVER, AT THE PRESENT TIME, IF YOU
ARE A RESIDENT OF ONE OF THE FOLLOWING STATES, YOU ARE NOT
PERMITTED TO ELECT TO RECEIVE OP UNITS IN CONNECTION WITH THE
MERGER:
CALIFORNIA
MASSACHUSETTS
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 88 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 NPI Units in connection with the mergers,
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 by the holder thereof. 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 amendment of the limited partnership agreement of
NPI, the proposed merger agreement and the transactions
contemplated thereby.
TABLE OF
CONTENTS
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ii
SUMMARY
TERM SHEET
This summary term sheet highlights the material information
with respect to the merger agreement, the merger and the other
matters described herein. It may not contain all of the
information that is important to you. You are urged to carefully
read the entire information statement/prospectus and the other
documents referred to in this information statement/prospectus,
including the merger agreement. Aimco, Aimco OP, the General
Partner and Aimcos subsidiaries that may be deemed to
directly or indirectly beneficially own limited partnership
units of USRP are referred to herein, collectively, as the
Aimco Entities.
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Amendment of NPIs Partnership
Agreement. Prior to entering into the proposed
merger agreement, NPIs partnership agreement will be
amended to (i) eliminate the prohibition on transactions
between NPI, on the one hand, and its general partners and their
affiliates, on the other, and (ii) authorize the General
Partner to complete the mergers described below without any
further action by the limited partners. See The
Transactions Amendment to Partnership
Agreement beginning on page 31. A copy of the
proposed amendment to NPI partnership agreement is attached as
Annex F to this information statement/prospectus.
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The Mergers. Following the amendment of
NPIs partnership agreement, NPI plans to enter into a
merger agreement with Aimco OP. The merger agreement
contemplates two merger transactions. First, NPI will be merged
with and into New NPI with New NPI as the surviving entity. In
this merger, each NPI Unit will be converted into an identical
unit of limited partnership in New NPI and the general
partnership interest in NPI now held by the general partner will
be converted into a general partnership interest in New NPI. All
interests in New NPI outstanding immediately prior to the merger
will be cancelled in the merger. NPIs partnership
agreement in effect immediately prior to the merger will be
adopted as the partnership agreement of New NPI, with the
following changes: (i) references therein to the California
Uniform Limited Partnership Act, as amended, or the California
Act, will be amended to refer to the Delaware Revised Uniform
Limited Partnership Act, as amended, or the Delaware Act;
(ii) a description of the merger will be added; and
(iii) the name of the partnership will be National
Property Investors III, LP. Second, the Aimco Subsidiary
will be merged with and into New NPI, with New NPI as the
surviving entity. In this second merger, each NPI Unit will be
converted into the right to receive the merger consideration
described below. A copy of the proposed merger agreement is
attached as Annex A to this information
statement/prospectus. You are encouraged to read the proposed
merger agreement carefully in its entirety because it is the
legal agreement that governs the mergers.
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Merger Consideration: In the second merger,
each NPI Unit will be converted into the right to receive, at
the election of the holder of such NPI Unit, either $57.24 in
cash or equivalent value in OP Units, 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 with respect to each NPI Unit will be
calculated by dividing the $2.76 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
Transactions Determination of Merger
Consideration beginning on page 31.
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Effects of the Transactions: After the
amendment of NPIs partnership agreement and the two
mergers, Aimco OP will be the sole limited partner in New NPI,
and will own all of the outstanding New NPI Units. As a result,
after the transactions, you will cease to have any rights in New
NPI as a limited partner. See Special
Factors Effects of the Transactions, beginning
on page 5.
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Appraisal Rights: Pursuant to the terms of the
proposed merger agreement, Aimco OP will provide each limited
partner with contractual dissenters appraisal rights that
are similar to the dissenters appraisal rights available
to a stockholder of a corporation in a merger under Delaware
law, and which will enable a limited partner to obtain an
appraisal of the value of the limited partners NPI Units
in connection with the transactions. See The
Transactions Appraisal Rights, beginning on
page 34. 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.
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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 $9.42 per NPI 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 NPI, the General
Partner, 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 Transactions Waiver
and Release and Additional Consideration, beginning on
page 32.
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National Property Investors III, or NPI, is a California limited
partnership organized on February 1, 1979 for the purpose
of operating income-producing residential real estate. NPI
presently owns and operates one investment property, Lakeside
Apartments, a 568 unit apartment project located in Lisle,
Illinois. See Information About National Property
Investors III, beginning on page 25. NPIs
principal address is 55 Beattie Place, P.O. Box 1089,
Greenville, South Carolina 29602, and its telephone number is
(864) 239-1000.
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Apartment Investment and Management Company, or Aimco, is a
Maryland corporation that is a self-administered and
self-managed real estate investment trust, or REIT, 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. Aimcos common stock is listed and
traded on the NYSE under the symbol AIV. See
Information about the Aimco Entities, beginning on
page 23.
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AIMCO Properties, L.P., or Aimco OP, is a Delaware limited
partnership which, through its operating divisions and
subsidiaries, holds substantially all of Aimcos assets and
manages the daily operations of Aimcos business and
assets. See Information about the Aimco Entities,
beginning on page 23.
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National Property Investors III, or New NPI, is a Delaware
limited partnership formed on October 8, 2010, for the
purpose of consummating the merger with NPI. New NPIs
general partner is Aimco OP, and its sole limited partner is the
Aimco Subsidiary. See Information about the Aimco
Entities, beginning on page 23.
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AIMCO NPI III Merger Sub LLC, or the Aimco Subsidiary, is a
Delaware limited liability company formed on September 29,
2010, for the purpose of acting as limited partner of New NPI
prior to the merger, and consummating the merger with New NPI.
See Information about the Aimco Entities, beginning
on page 23.
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Reasons for the Transactions: Aimco and
Aimco OP are in the business of acquiring, owning and managing
apartment properties such as the one owned by NPI, and have
decided to proceed with the transactions as a means of acquiring
the property currently owned by NPI in a manner that they
believe (i) provides fair value to limited partners,
(ii) offers limited partners an opportunity to receive
immediate liquidity, or defer recognition of taxable gain
(except where the law of the state or other jurisdiction in
which a limited partner resides would prohibit the issuance of
OP Units in that state or other jurisdiction, or where
registration or qualification would be prohibitively costly),
and (iii) relieves NPI of the expenses associated with a
sale of the property, including marketing and other transaction
costs. The Aimco Entities decided to proceed with the
transactions at this time for the following reasons:
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In the absence of a transaction, NPI limited partners have only
limited options to liquidate their investment in NPI. The NPI
Units are not traded on an exchange or other reporting system,
and transactions in the securities are limited and sporadic.
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The value of the single property owned by NPI is not sufficient
to justify its continued operation as a public company. As a
public company with a significant number of unaffiliated limited
partners, NPI incurs costs associated with preparing audited
annual financial statements, unaudited quarterly financial
statements, tax returns for partners on
schedule K-1,
periodic SEC reports and other expenses. The Aimco Entities
estimate these costs to be approximately $55,000 per year.
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NPI has been operating at a loss for the past
several years. Since 2007, Aimco OP has made loans of
$16,808,000 to NPI to help fund a redevelopment project at as
well as operating expenses, but it is not willing to continue to
make advances to NPI. The Aimco Entities do not believe that NPI
can obtain financing from an independent third party. If the
Aimco Entities acquire 100% ownership of NPI, they will have
greater flexibility in financing and operating its property.
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Fairness of the Merger: Although the Aimco
Entities have interests that may conflict with those of
NPIs unaffiliated limited partners, each of the Aimco
Entities believe that the merger is fair to the unaffiliated
limited partners of NPI. See Special Factors
Fairness of the Transactions beginning on page 6.
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Conflicts of Interest: The General Partner is
indirectly wholly owned by Aimco. Therefore, the General Partner
has a conflict of interest with respect to the transactions. The
General Partner has fiduciary duties to AIMCO/IPT, Inc., the
General Partners sole stockholder and an affiliate of
Aimco, on the one hand, and to NPI and its limited partners, on
the other hand. The duties of the General Partner to NPI and its
limited partners conflict with the duties of the General Partner
to AIMCO/IPT, Inc., which could result in the General Partner
approving a transaction that is more favorable to Aimco than
might be the case absent such conflict of interest. See,
The Transactions Conflicts of Interest,
beginning on page 32.
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Risk Factors: In evaluating the proposed
amendment of NPIs partnership agreement, the proposed
merger agreement and the transactions contemplated thereby, NPI
limited partners should carefully read this information
statement/prospectus and especially consider the factors
discussed in the section entitled Risk Factors
beginning on page 12. Some of the risk factors associated
with the merger are summarized below:
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Aimco owns the General Partner. As a result, the General Partner
has a conflict of interest in the transactions. A transaction
with a third party in the absence of this conflict could result
in better terms or greater consideration to NPI limited partners.
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NPI limited partners who receive cash may recognize taxable gain
in the transactions and that gain could exceed the merger
consideration.
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There are a number of significant differences between NPI 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 NPI Units
and Aimco OP Units, beginning on page 55.
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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 and there is no assurance as to
the value that might be realized upon a future redemption of
OP Units.
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Material United States Federal Income Tax Consequences of the
Transactions: The merger between NPI and New NPI will
generally be treated as a partnership merger for Federal income
tax purposes. In general, NPI will not recognize gain as a
result of contribution of its assets to New NPI, and the merger
between NPI and New NPI will not result in any tax consequences
to the limited partners of NPI. The merger between NPI and the
Aimco Subsidiary will generally be treated as a partnership
merger for Federal income tax purposes. In general, any payment
of cash for NPI Units will be treated as a sale of such NPI
Units by such holder, and any exchange of NPI 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 Taxation of Aimco OP and
OP Unitholders United States Federal Income Tax
Consequences Relating to the Transactions, beginning on
page 60.
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The foregoing is a general discussion of the United States
federal income tax consequences of the transactions. This
summary does not discuss all aspects of federal income taxation
that may be relevant to you in light of your specific
circumstances or if you are subject to special treatment under
the federal income tax laws. The particular tax consequences of
the transactions to you will depend on a number of factors
related to your tax situation. You should review Material
United States Federal Income Tax Matters, herein and
consult your tax advisors for a full understanding of the tax
consequences to you of the transactions.
3
SPECIAL
FACTORS
Purposes,
Alternatives and Reasons for the Transactions
Aimco and Aimco OP are in the business of acquiring, owning and
managing apartment properties such as the one owned by NPI, and
have decided to proceed with the transactions as a means of
acquiring the property currently owned by NPI in a manner that
they believe (i) provides fair value to limited partners,
(ii) offers limited partners an opportunity to receive
immediate liquidity, or defer recognition of taxable gain
(except where the law of the state or other jurisdiction in
which a limited partner resides would prohibit the issuance of
OP Units in that state or other jurisdiction, or where
registration or qualification would be prohibitively costly),
and (iii) relieves NPI of the expenses associated with a
sale of the property, including marketing and other transaction
costs.
The Aimco Entities decided to proceed with the transactions at
this time for the following reasons:
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In the absence of a transaction, NPI limited partners have only
limited options to liquidate their investment in NPI. The NPI
Units are not traded on an exchange or other reporting system,
and transactions in the securities are limited and sporadic.
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The value of the single property owned by NPI is not sufficient
to justify its continued operation as a public company. As a
public company with a significant number of unaffiliated limited
partners, NPI incurs costs associated with preparing audited
annual financial statements, unaudited quarterly financial
statements, tax returns for partners on
schedule K-1,
periodic SEC reports and other expenses. The Aimco Entities
estimate these costs to be approximately $55,000 per year.
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NPI has been operating at a loss for the past
several years. Since 2007, Aimco OP has made loans of
$16,808,000 to NPI to help fund a redevelopment project at as
well as operating expenses, but it is not willing to continue to
make advances to NPI. The Aimco Entities do not believe that NPI
can obtain additional financing from an independent third party.
If the Aimco Entities acquire 100% ownership of NPI, they will
have greater flexibility in financing and operating its property.
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Before deciding to proceed with the transactions, the General
Partner and the other Aimco Entities considered the alternatives
described below:
Continuation of NPI as a Public Company Operating the
Property. As discussed above, the General Partner
and the Aimco Entities did not consider this a viable
alternative primarily because of the costs associated with
preparing financial statements, tax returns, periodic SEC
reports and other expenses, and the inability of NPI to generate
sufficient funds to cover operating expenses without advances
from Aimco OP which would not be available in the future.
Liquidation of NPI. The General Partner and
the other Aimco Entities considered a liquidation of NPI in
which NPIs property would be marketed and sold to a third
party for cash, with any net proceeds remaining, after payment
of all liabilities, distributed to NPIs limited partners.
The primary advantage of such a transaction would be that the
sale price would reflect arms-length negotiations and
might therefore be higher than the appraised value which has
been used to determine the merger consideration. The General
Partner and the other Aimco Entities rejected this alternative
because of: (i) the risk that a third party purchaser might
not be found that would offer a satisfactory price or at all;
(ii) the costs that NPI would incur in connection with
marketing and selling the property; (iii) the fact that
limited partners would recognize taxable gain on the sale; and
(iv) the prepayment penalties that NPI would incur in
repaying its mortgage debt upon a sale of the property.
Contribution of the property to Aimco OP. The
Aimco Entities considered a transaction in which NPIs
property would be contributed to Aimco OP in exchange for
OP Units. The primary advantage of such a transaction would
be that NPI limited partners would not recognize taxable gain.
The Aimco Entities rejected this alternative because it would
not offer an opportunity for immediate liquidity to those
limited partners who desire it.
4
Effects
of the Transactions
The Aimco Entities believe that the transactions will have the
following benefits and detriments to unaffiliated limited
partners, NPI and the Aimco Entities:
Benefits to Unaffiliated Limited Partners. The
transactions are expected to have the following principal
benefits to unaffiliated limited partners:
Option to Defer Taxable Gain. Limited partners
are given a choice of merger consideration, and may elect to
receive either cash or OP Units in the merger, except in
those jurisdictions where the law prohibits the offer of
OP Units (or registration would be prohibitively costly).
Limited partners who receive OP Units in the merger may
defer recognition of taxable gain.
Liquidity. Limited partners who receive the
cash consideration will receive immediate liquidity with respect
to their investment.
Diversification. Limited partners who receive
OP Units in the merger will have the opportunity to
participate in Aimco OP, which has a more diversified property
portfolio than NPI.
Benefits to NPI. The merger is expected to
have the following principal benefits to NPI:
Elimination of Costs Associated with SEC Reporting
Requirements and Multiple Limited Partners. After
the merger, the Aimco Entities will own all of the interests in
NPI, and NPI will terminate its registration and cease filing
periodic reports with the SEC. As a result, NPI will no longer
incur costs associated with preparing audited annual financial
statements, unaudited quarterly financial statements, tax
returns for partners on
schedule K-1,
periodic SEC reports and other expenses. The Aimco Entities
estimate these expenses to be approximately $55,000 per year.
Benefits to the Aimco Entities. The merger is
expected to have the following principal benefits to the Aimco
Entities:
Increased Interest in NPI. Upon completion of
the merger, Aimco OP will be the sole limited partner of
NPI. As a result, the Aimco Entities will receive all of the
benefit from any future appreciation in value of the property
after the merger, and any future property income.
Detriments to Unaffiliated Limited
Partners. The merger is expected to have the
following principal detriments to unaffiliated limited partners:
Taxable Gain. Limited partners who receive
cash consideration may recognize taxable gain in the merger 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.
Risks Related to OP Units. Limited
partners who receive OP Units in the merger will be subject
to the risks related to an investment in OP Units, as
described in greater detail under the heading Risk
Factors Risks Related to an Investment in
OP Units.
Conflicts of Interest; No Separate Representation of
Unaffiliated Limited Partners. The General
Partner is indirectly wholly owned by Aimco. Therefore, the
General Partner has a conflict of interest with respect to the
transactions. The General Partner has fiduciary duties to
AIMCO/IPT, Inc., the Corporate General Partners sole
stockholder and an affiliate of Aimco, on the one hand, and to
NPI and its limited partners, on the other hand. The duties of
the General Partner to NPI and its limited partners conflict
with the duties of the General Partner to AIMCO/IPT, Inc., which
could result in the General Partner approving a transaction that
is more favorable to Aimco than might be the case absent such
conflict of interest. In negotiating the merger agreement, no
one separately represented the interests of the unaffiliated
limited partners. If an independent advisor had been engaged, it
is possible that such advisor could have negotiated better terms
for NPIs unaffiliated limited partners.
Detriments to NPI. The transactions are not
expected to have any detriments to NPI.
5
Detriments to the Aimco Entities. The
transactions are expected to have the following principal
detriments to the Aimco Entities:
Increased Interest in NPI. Upon completion of
the merger, the Aimco Entities interest in the net book
value of NPI will increase from 78.1% to 100%, or from a deficit
of $19,120,000 to a deficit of $24,478,000 as of
December 31, 2009, and their interest in the net losses of
NPI will increase from 78.1% to 100%, or from $2,683,000 to
$3,435,000 for the period ended December 31, 2009. As a
result, Aimco OP will bear the burden of all future operating or
other losses, as well as any decline in the value of NPIs
property.
Burden of Capital Expenditures. Upon
completion of the transactions, the Aimco Entities will have
sole responsibility for providing any funds necessary to pay for
capital expenditures at the property.
Material
United States Federal Income Tax Consequences of the
Transactions
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 Transactions.
Fairness
of the Transactions
Factors in Favor of Fairness
Determination. The Aimco Entities (including the
General Partner) believe that the transactions are fair and in
the best interests of NPI and its unaffiliated limited partners.
In support of such determination, the Aimco Entities considered
the following factors:
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The merger consideration of $57.24 per NPI Unit was based on an
independent third party appraisal of NPIs property by CRA,
an independent valuation firm.
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The merger consideration is equal to the Aimco Entities
estimate of going concern value, calculated as the appraised
value of NPIs property, plus the amount of its other
assets, less the amount of NPIs liabilities, including
mortgage debt (but without deducting any prepayment penalties
thereon).
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The merger consideration is greater than the Aimco
Entities estimate of liquidation value because there was
no deduction for certain amounts that would be payable upon an
immediate sale of the property, such as prepayment penalties on
the mortgage debt, currently estimated to be $6,994,277.
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The merger consideration exceeds the net book value per unit (a
deficit of $538.46 per NPI Unit at June 30, 2010).
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The merger consideration exceeds the price paid by the Aimco
Entities to purchase units of limited partnership interest in
NPI during the past two years ($5.00 per unit in October 2008).
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Limited partners may defer recognition of taxable gain by
electing to receive OP Units in the merger, except in those
jurisdictions where the law prohibits the offer of OP Units
(or registration would be prohibitively costly).
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The number of OP Units issuable to limited partners in the
merger will be determined based on the average closing price of
Aimco common stock, as reported on the NYSE, over the ten
consecutive trading days ending on the second trading day
immediately prior to the consummation of the merger.
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Limited partners who receive cash consideration will achieve
immediate liquidity with respect to their investment.
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If the merger is completed by December 31, 2010, limited
partners who 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 15%, is expected to increase to 20% in 2011.
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Limited partners who receive OP Units in the merger will
have the opportunity to participate in Aimco OP, which has a
more diversified property portfolio than NPI.
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6
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Although limited partners are not entitled to dissenters
appraisal rights under Delaware law, the merger agreement
provides them with contractual dissenters appraisal rights
that are similar to the dissenters appraisal rights that
are available to stockholders in a corporate merger under
Delaware law.
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Although the merger agreement may be terminated by either side
at any time, Aimco OP and the Aimco Subsidiary are very likely
to complete the merger on a timely basis.
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Unlike a typical property sale agreement, the merger agreement
contains no indemnification provisions, so there is no risk of
subsequent reduction of the proceeds.
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In contrast to a sale of the 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.
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The merger consideration is greater than some of the prices at
which NPI Units have historically sold in the secondary market
($5.00 to $300.00 per NPI Unit from January 1, 2008 through
December 31, 2009).
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The merger consideration is greater than some of the prices at
which NPI Units have recently sold in the secondary market
($40.00 to $121.12 per NPI Unit from January 1, 2010
through October 19, 2010).
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Factors Not in Favor of Fairness
Determination. In addition to the foregoing
factors, the Aimco Entities also considered the following
countervailing factors:
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The General Partner has substantial conflicts of interest with
respect to the transactions 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) the fiduciary duties it owes to its
sole stockholder, a subsidiary of Aimco which has an interest in
obtaining the NPI property for the lowest possible consideration.
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The terms of the transactions were not approved by any
independent directors.
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An unaffiliated representative was not retained to act solely on
behalf of the unaffiliated limited partners for purposes of
negotiating the transactions on an independent,
arms-length basis, which might have resulted in better
terms for the unaffiliated limited partners.
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The transactions do not require the approval of any unaffiliated
limited partners.
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No opinion has been obtained from an independent financial
advisor that the transactions are fair to the unaffiliated
limited partners.
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The merger consideration is less than some of the prices at
which NPI Units have recently sold in the secondary market ($40
to $121.12 per NPI Unit from January 1, 2010 through
October 19, 2010).
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The merger consideration is less than some of the prices at
which NPI Units have historically sold in the secondary market
($5 to $300 per NPI Unit from January 1, 2008 through
December 31, 2009).
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Limited partners who receive cash consideration in the merger
may recognize taxable gain and that gain could exceed the merger
consideration.
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Limited partners who receive OP Units in the merger could
recognize taxable gain if Aimco subsequently sells the property.
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Limited partners who receive OP Units in the merger will be
subject to the risks related to an investment in OP Units,
as described in greater detail under the heading Risk
Factors Risks Related to an Investment in
OP Units.
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CRA, the valuation firm that appraised the NPI property, has
performed work for Aimco OP and its affiliates in the past and
this pre-existing relationship could negatively impact
CRAs independence.
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The Aimco Entities did not assign relative weights to the above
factors in making their conclusion that the transactions are
fair to NPI and its unaffiliated limited partners. They relied
primarily on their estimate of value calculated by adding the
value of NPIs property as determined by CRA, an
independent valuation firm, and the
7
value of all of NPIs other assets, and deducting the
amount of its mortgage debt (without deducting any prepayment
penalties associated with that debt) and all other liabilities.
The Aimco Entities were aware of, but did not place much
emphasis on, information regarding prices at which NPI Units may
have sold in the secondary markets because they do not view that
information as a reliable measure of value. The NPI Units are
not traded on an exchange or other reporting system, and
transactions in the securities are very limited and sporadic. In
addition, some of the historical prices are not comparable to
current value because of intervening events, including a
property sale, distribution of proceeds and advances from the
General Partner.
Procedural Fairness. The Aimco Entities
determined that the transactions are fair from a procedural
standpoint despite the absence of any customary procedural
safeguards, such as the engagement of an unaffiliated
representative, the approval of independent directors or
approval by a majority of unaffiliated limited partners. In
making this determination, the Aimco Entities relied primarily
on the dissenters appraisal rights provided to
unaffiliated limited partners under the merger agreement that
are similar to the dissenters appraisal rights available
to stockholders in a corporate merger under Delaware law.
The
Appraisal
Selection and Qualifications of Independent
Appraiser. The General Partner retained the
services of CRA to appraise the market value of NPIs
property. CRA is an experienced independent valuation consulting
firm that has performed appraisal services for Aimco OP and its
affiliates in the past. Aimco OP believes that its relationship
with CRA had no negative impact on its independence in
conducting the appraisal related to the merger.
Factors Considered. CRA performed a complete
appraisal of Lakeside Apartments. CRA has represented that its
reports were prepared in conformity with the Uniform Standards
of Professional Appraisal Practice, as promulgated by the
Appraisal Standards Board of the Appraisal Foundation and the
Code of Professional Ethics and Standards of Professional
Appraisal Practice of the Appraisal Institute. NPI furnished CRA
with all of the necessary information requested by CRA in
connection with the appraisal. The appraisal was not prepared in
conjunction with a request for a specific value or a value
within a given range or predicated upon loan approval. In
preparing its valuation of the property, CRA, among other things:
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Inspected the property and its environs;
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Reviewed demographic and other socioeconomic trends pertaining
to the city and region where the property is located;
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Examined regional apartment market conditions, with special
emphasis on the propertys apartment submarket;
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Investigated lease and sale transactions involving comparable
properties in the influencing market;
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Reviewed the existing rent roll and discussed the leasing status
with the building manager and leasing agent. In addition, CRA
reviewed the propertys recent operating history and those
of competing properties;
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Utilized appropriate appraisal methodology to derive estimates
of value; and
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Reconciled the estimates of value into a single value conclusion.
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Summary of Approaches and Methodologies
Employed. The following summary describes the
approaches and analyses employed by CRA in preparing the
appraisal. CRA principally relied on two approaches to
valuation: (i) the income capitalization approach and
(ii) the sales comparison approach.
The income capitalization approach is based on the premise that
value is derived by converting anticipated benefits into
property value. Anticipated benefits include the present value
of the net income and the present value of the net proceeds
resulting from the re-sale of the property. CRA reported that
the property has an adequate operations history to determine its
income-producing capabilities over the near future. In addition,
performance levels of competitive properties served as an
adequate check as to the reasonableness of the propertys
actual performance. As such, the income capitalization approach
was utilized in the appraisal of the property.
8
As part of the income capitalization approach, CRA used the
direct capitalization method to estimate a value for Lakeside
Apartments. According to CRAs report, the basic steps in
the direct capitalization analysis to valuing the property are
as follows: (i) calculate potential gross income from all
sources that a competent owner could legally generate;
(ii) estimate and deduct an appropriate vacancy and
collection loss factor to arrive at effective gross income;
(iii) estimate and deduct operating expenses that would be
expected during a stabilized year to arrive at a probable net
operating income; (iv) develop an appropriate overall
capitalization rate to apply to the net operating income; and
(v) estimate value by dividing the net operating income by
the overall capitalization rate. In addition, any adjustments to
account for differences between the current conditions and
stabilized conditions are also considered. The assumptions
utilized by CRA with respect to the property are set forth
below. The property-specific assumptions were determined by CRA
to be reasonable based on its review of historical operating and
financial data for the property and comparison of said data to
the operating statistics of similar properties in the
influencing market areas. The capitalization rate for the
property was determined to be reasonable by CRA based on their
review of applicable data ascertained within the market in which
the property is located. The capitalization rate was determined
to be reasonable by CRA based on their review of applicable data
ascertained within the market in which the property is located.
The sales comparison approach is an estimate of value based upon
a process of comparing recent sales of similar properties in the
surrounding or competing areas to the subject property. Inherent
in and central to this approach is the principle of
substitution. This comparative process involves judgment as to
the similarity of the subject property and the comparable sales
with respect to many value factors such as location, contract
rent levels, quality of construction, reputation and prestige,
age and condition, and the interest transferred, among others.
The value estimated through this approach represents the
probable price at which the subject property would be sold by a
willing seller to a willing and knowledgeable buyer as of the
date of value. The reliability of this technique is dependent
upon the availability of comparable sales data, the verification
of the sales data, the degree of comparability and extent of
adjustment necessary for differences, and the absence of
atypical conditions affecting the individual sales prices. CRA
reported that, although the volume of sales activity is down as
a result of market conditions, its research revealed adequate
sales activity to form a reasonable estimation of the subject
propertys market value pursuant to the sales comparison
approach.
For the appraisal, CRA conducted research in the market in an
attempt to locate sales of properties similar to the appraised
property. In the appraisal, numerous sales were uncovered and
the specific sales included in the appraisal report were deemed
representative of the most comparable data available at the time
the appraisal was prepared. Important criteria utilized in
selecting the most comparable data included: conditions under
which the sale occurred (i.e. seller and buyer were typically
motivated); date of sale every attempt was made to
utilize recent sales transactions; sales were selected based on
their physical similarity to the appraised property;
transactions were selected based on the similarity of location
between the comparable and appraised property; and, similarity
of economic characteristics between the comparable and appraised
property. Sales data that may have been uncovered during the
course of research that was not included in the appraisal did
not meet the described criteria
and/or could
not be adequately confirmed.
According to CRAs report, the basic steps in processing
the sales comparison approach are outlined as follows:
(i) research the market for recent sales transactions,
listings, and offers to purchase or sell of properties similar
to the subject property; (ii) select a relevant unit of
comparison and develop a comparative analysis;
(iii) compare comparable sale properties with the subject
property using the elements of comparison and adjust the price
of each comparable to the subject property; and
(iv) reconcile the various value indications produced by
the analysis of the comparables.
The final step in the appraisal process is the reconciliation of
the value indicators into a single final estimate. CRA reviewed
each approach in order to determine its appropriateness relative
to the property. The accuracy of the data available and the
quantity of evidence were weighted in each approach. For the
appraisal of Lakeside Apartments, CRA relied principally on the
income capitalization approach to valuation, and the direct
capitalization method was given greatest consideration in the
conclusion of value under this approach. CRA relied secondarily
on the sales comparison approach, and reported that the value
conclusion derived pursuant to the sales comparison approach is
supportive of the conclusion derived pursuant to the income
capitalization approach.
9
Summary of Independent Appraisal of Lakeside
Apartments. CRA performed a complete appraisal of
Lakeside Apartments. The appraisal report of Lakeside Apartments
is dated May 19, 2010, and provides an estimate of the
propertys market value as of April 21, 2010. The
summary set forth below describes the material conclusions
reached by CRA based on the value determined under the valuation
approaches and subject to the assumptions and limitations
described below. According to CRAs report, the estimated
aggregate market value of Lakeside Apartments is $48,800,000 as
of April 21, 2010. The following is a summary of the
appraisal report dated May 19, 2010:
Valuation Under Income Capitalization
Approach. Using the income capitalization
approach, CRA performed a direct capitalization analysis to
derive a value for Lakeside Apartments.
The direct capitalization analysis resulted in a valuation
conclusion for Lakeside Apartments of approximately $48,800,000.
The assumptions employed by CRA to determine the value of
Lakeside Apartments under the income capitalization approach
using a direct capitalization analysis included:
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potential gross income from apartment unit rentals of $545,422
per month or $6,545,064 for the appraised year;
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a loss to lease allowance of 1.5% of the gross rent potential;
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rent concessions of 1.0% of the gross rent potential;
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a combined vacancy and credit loss allowance of 7.0%;
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estimated utility recovery of $810 per unit;
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other income of $700 per unit;
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projected total expenses (including reserves) of $3,363,869;
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capitalization rate of 7.0%.
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Using a direct capitalization analysis, CRA calculated the value
of Lakeside Apartments by dividing the stabilized net operating
income (including an allowance for reserves) by the concluded
capitalization rate of 7.0%. CRA calculated the value conclusion
of Lakeside Apartments under the income capitalization approach
of approximately $48,800,000 as of April 21, 2010.
Valuation Under Sales Comparison Approach. CRA
estimated the property value of Lakeside Apartments under the
sales comparison approach by analyzing sales from the
influencing market that were most similar to Lakeside Apartments
in terms of age, size, tenant profile and location. CRA reported
that adequate sales existed to formulate a defensible value for
Lakeside Apartments under the sales comparison approach.
The sales comparison approach resulted in a valuation conclusion
for Lakeside Apartments of approximately $48,300,000.
In reaching a valuation conclusion for Lakeside Apartments, CRA
examined and analyzed comparable sales of five properties in the
influencing market. The sales reflected unadjusted sales prices
ranging from $47,222 to $154,068 per unit. After adjustment, the
comparable sales illustrated a value range of $59,028 to $96,797
per unit, with mean and median adjusted sale prices of $82,534
and $82,800 per unit, respectively. CRA reported that two of the
comparable sales required the least adjustment and were accorded
most significance in the analysis, and that the adjusted
indicators exhibited by these two sales ranged from $81,606 to
$96,797 per unit. CRA estimated a value of $85,000 per unit for
Lakeside Apartments. Applied to Lakeside Apartments
586 units, this resulted in CRAs total value estimate
for Lakeside Apartments of approximately $48,300,000.
CRA also performed an EGIM analysis. The EGIM (Effective
Gross Income Multiplier) is the ratio of the sale price of a
property to its effective gross income at the time of sale. The
EGIM is used to compare the income-producing characteristics of
properties. In the appraisal, the indicated EGIM of
approximately 7.1 on a stabilized basis, calculated by dividing
the value concluded for the appraised property via the sale
comparison approach by its projected effective gross income, was
compared to the EGIMs produced by the sales data. In the
appraisal, the
10
EGIM fell within the range of EGIMs produced by the sales data
under analysis and suggests that the value concluded for the
property via comparative analysis was reasonable based on the
income-producing characteristics of Lakeside Apartments.
Reconciliation of Values and Conclusion of
Appraisal. For the appraisal of Lakeside
Apartments, CRA relied principally on the income capitalization
approach to valuation, and the direct capitalization method was
given greatest consideration in the conclusion of value under
this approach. CRA relied secondarily on the sales comparison
approach, and reported that the value conclusion derived
pursuant to the sales comparison approach was supportive of the
conclusion derived pursuant to the income capitalization
approach. The income capitalization approach using a direct
capitalization method resulted in a value of $48,800,000, and
the sales comparison approach resulted in a value of
$48,300,000. CRA concluded that the market value of Lakeside
Apartments as of April 21, 2010 was $48,800,000.
Assumptions, Limitations and Qualifications of CRAs
Valuations. CRAs appraisal report was
subject to the following assumptions and limiting conditions: no
responsibility was assumed for the legal description or for
matters including legal or title considerations, and title to
the property was assumed to be good and marketable unless
otherwise stated; the property was appraised free and clear of
any or all liens or encumbrances unless otherwise stated;
responsible ownership and competent property management were
assumed; the information furnished by others was believed to be
liable, and no warranty was given by CRA for the accuracy of
such information; all engineering was assumed to be correct;
there were no hidden or unapparent conditions of the property,
subsoil, or structures that render it more or less valuable, and
no responsibility was assumed for such conditions or for
arranging for engineering studies that may be required to
discover them; there was full compliance with all applicable
federal, state, and local environmental regulations and laws
unless noncompliance was stated, defined, and considered in the
appraisal report; all applicable zoning and use regulations and
restrictions have been complied with, unless nonconformity had
been stated, defined, and considered in the appraisal report;
all required licenses, certificates of occupancy, consents, or
other legislative or administrative authority from any local,
state, or national government or private entity or organization
have been or can be obtained or renewed for any use on which the
value estimate contained in the appraisal report was based; the
utilization of the land and improvements is within the
boundaries or property lines of the property described and there
is no encroachment or trespass unless noted in the appraisal
report; the distribution, if any, of the total valuation in the
appraisal report between land and improvements applies only
under the stated program of utilization; unless otherwise stated
in the appraisal report, the existence of hazardous substances,
including without limitation, asbestos, polychlorinated
biphenyls, petroleum leakage, or agricultural chemicals, which
may or may not be present on the property, or other
environmental conditions, were not called to the attention of
nor did the appraiser become aware of such during the
appraisers inspection, and the appraiser had no knowledge
of the existence of such materials on or in the property unless
otherwise stated; the appraiser has not made a specific
compliance survey and analysis of the property to determine
whether or not it is in conformity with the various detailed
requirements of the Americans with Disabilities Act; and former
personal property items such as kitchen and bathroom appliances
were, at the time of the appraisal report, either permanently
affixed to the real estate or were implicitly part of the real
estate in that tenants expected the use of such items in
exchange for rent and never gained any of the rights of
ownership, and the intention of the owners was not to remove the
articles which are required under the implied or express
warranty of habitability.
Compensation of Appraiser. CRAs fee for
the appraisal was approximately $7,124. Aimco OP paid for the
costs of the appraisal. In addition to the appraisal performed
in connection with the transactions, during the prior two years,
CRA has been paid approximately $106,669 for appraisal services
by Aimco OP and its affiliates. Except as set forth above,
during the prior two years, no material relationship has existed
between CRA and NPI or Aimco OP or any of their affiliates.
Aimco OP believes that its relationship with CRA had no negative
impact on its independence in conducting the appraisals.
Availability of Appraisal Reports. You may
obtain a full copy of CRAs appraisal upon request, without
charge, by contacting Eagle Rock Proxy Advisors, LLC, by mail at
12 Commerce Drive, Cranford, New Jersey 07016; by fax at
(908) 497-2349;
or by telephone at
(800) 217-9608.
In addition, the appraisal report has been filed with the SEC.
For more information about how to obtain a copy of the appraisal
report see Where You Can Find Additional Information.
11
RISK
FACTORS
Risks
Related to the Transactions
Conflicts of Interest. The General Partner is
indirectly wholly owned by Aimco. Therefore, it has a conflict
of interest with respect to the transactions. The General
Partner has fiduciary duties to its sole stockholder, which is
wholly owned by Aimco, on the one hand, and to NPI and its
limited partners, on the other hand. The duties of the General
Partner to NPI and its limited partners conflict with its duties
to its sole stockholder, which could result in the General
Partner approving a transaction that is more favorable to Aimco
than might be the case absent such conflict of interest. The
General Partners desire to seek the best possible terms
for NPIs limited partners conflicts with Aimcos
interest in obtaining the best possible terms for Aimco OP.
No independent representative was engaged to represent the
unaffiliated limited partners in negotiating the terms of the
transactions. If an independent advisor had been
engaged, it is possible that such advisor could have negotiated
better terms for NPIs unaffiliated limited partners.
The terms of the transactions have not been determined in
arms-length negotiations. The terms of the
transactions, including the merger consideration, were
determined through discussions between officers and directors of
the General Partner, on the one hand, and officers of Aimco, on
the other. All of the officers and directors of the General
Partner are also officers of Aimco. There are no independent
directors of the General Partner. If the terms of the
transactions had been determined through arms-length
negotiations, the terms might be more favorable to NPI and its
limited partners.
The amendment of the partnership agreement and the merger
agreement does not require approval by a majority of the
unaffiliated limited partners. Under the
provisions of the NPI partnership agreement and applicable law,
the amendment of the partnership agreement, the mergers and the
transactions contemplated thereby must be approved by a majority
in interest of the limited partnership units. As of
October 25, 2010, Aimco OP and its affiliates owned
approximately 77.89% of the outstanding NPI Units. Of the NPI
Units owned by affiliates of the General Partner, 21,380 of such
units are subject to a voting restriction, which requires such
units to be voted in proportion to the votes cast with respect
to NPI Units not subject to this restriction. The General
Partner affiliates have indicated that they will vote all
of their NPI Units that are not subject to this restriction,
16,039 NPI Units or approximately 33.39% of the outstanding NPI
Units, in favor of the amendment of the partnership agreement,
the mergers and the transactions contemplated thereby. As a
result, affiliates of the General Partner will vote a total of
28,901 Units, or approximately 60.16% of the outstanding NPI
Units, enabling them to approve the transactions without the
consent or approval of any unaffiliated limited partners.
Alternative valuations of NPIs 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 NPIs
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 NPIs property could exceed
the appraised value that Aimco relied on to determine the merger
consideration. No recent attempt has been made to
market Lakeside Apartments to unaffiliated third parties. There
can be no assurance that Lakeside Apartments 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 limited
partners could obtain for their NPI Units in an open
market. There is no established or regular
trading market for NPI Units, nor is there another reliable
standard for determining the fair market value of the NPI Units.
The merger consideration does not necessarily reflect the price
that NPI limited partners would receive in an open market for
their NPI Units. Such prices could be higher than the aggregate
value of the merger consideration.
12
No opinion has been obtained from an independent financial
advisor that the transactions are fair to unaffiliated limited
partners. While the General Partner and each of
the other Aimco Entities believes that the terms of the
transactions are fair to NPI limited partners unaffiliated with
the General Partner or Aimco for the reasons discussed in
Special Factors Fairness of the
Transactions beginning on page 6, no opinion has been
obtained as to whether the transactions are fair to the limited
partners of NPI unaffiliated with the General Partner or Aimco
from a financial point of view.
Limited partners may recognize taxable gain in connection
with the transactions, and that gain could exceed the merger
consideration. Limited partners who elect to
receive cash in connection with the transactions will recognize
gain or loss equal to the difference between their amount
realized and their adjusted tax basis in the NPI Units
sold. The resulting tax liability could exceed the value of the
cash received in connection with the transactions.
Limited partners in certain jurisdictions will not be able to
elect OP Units. In those states or
jurisdictions where the issuance of the OP Units hereby is
not permitted (or the registration or qualification of
OP Units in that state or jurisdiction would be
prohibitively costly), residents of those states will receive
only the cash consideration in the merger.
Risks
Related to an Investment in Aimco or Aimco OP
For a description of risks related to an investment in Aimco and
Aimco OP, please see the information set forth under
Part I Item 1A. Risk Factors
in the Annual Reports on
Form 10-K
for the year ended December 31, 2009 of each of Aimco and
Aimco OP, which documents are incorporated herein by reference
and are available electronically through the SECs website,
www.sec.gov, or by request to Aimco.
Risks
Related to an Investment in OP Units
There are restrictions on the ability to transfer
OP Units, and there is no public market for Aimco
OP Units. The Aimco OP partnership agreement
restricts the transferability of OP Units. Until the
expiration of a one-year holding period, subject to certain
exceptions, investors may not transfer OP Units without the
consent of Aimco OPs general partner. Thereafter,
investors may transfer such OP Units subject to the
satisfaction of certain conditions, including the general
partners right of first refusal. There is no public market
for the OP Units. Aimco OP has no plans to list any
OP Units on a securities exchange. It is unlikely that any
person will make a market in the OP Units, or that an
active market for the OP Units will develop. If a market
for the OP Units develops and the OP Units are
considered readily tradable on a secondary
market (or the substantial equivalent thereof), Aimco OP
would be classified as a publicly traded partnership for 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 OPs control.
Cash distributions depend primarily on cash flow, including from
reserves, and not on profitability, which is affected by
non-cash items. Therefore, cash distributions may be made during
periods when Aimco OP records losses and may not be made during
periods when it records profits. The Aimco OP partnership
agreement gives the general partner discretion in establishing
reserves for the proper conduct of the partnerships
business that will affect the amount of available cash. Aimco is
required to make reserves for the future payment of principal
and interest under its credit facilities and other indebtedness.
In addition, Aimco OPs credit facility limits its ability
to distribute cash to holders of OP Units. As a result of
these and other factors, there can be no assurance regarding
actual levels of cash distributions on OP Units, and Aimco
13
OPs ability to distribute cash may be limited during the
existence of any events of default under any of its debt
instruments.
Holders of OP Units are limited in their ability to
effect a change of control. The limited partners
of Aimco OP are unable to remove the general partner of Aimco OP
or to vote in the election of Aimcos directors unless they
own shares of Aimco. In order to comply with specific REIT tax
requirements, Aimcos charter has restrictions on the
ownership of its equity securities. As a result, Aimco OP
limited partners and Aimco stockholders are limited in their
ability to effect a change of control of Aimco OP and Aimco,
respectively.
Holders of OP Units have limited voting
rights. Aimco OP is managed and operated by its
general partner. Unlike the holders of common stock in a
corporation, holders of OP Units have only limited voting
rights on matters affecting Aimco OPs business. Such
matters relate to certain amendments of the partnership
agreement and certain transactions such as the institution of
bankruptcy proceedings, an assignment for the benefit of
creditors and certain transfers by the general partner of its
interest in Aimco OP or the admission of a successor general
partner. Holders of OP Units have no right to elect the
general partner on an annual or other continuing basis, or to
remove the general partner. As a result, holders of
OP Units have limited influence on matters affecting the
operation of Aimco OP, and third parties may find it difficult
to attempt to gain control over, or influence the activities of,
Aimco OP.
Holders of OP Units are subject to
dilution. Aimco OP may issue an unlimited number
of additional OP Units or other securities for such
consideration and on such terms as it may establish, without the
approval of the holders of OP Units. Such securities could
have priority over the OP Units as to cash flow,
distributions and liquidation proceeds. The effect of any such
issuance may be to dilute the interests of holders of
OP Units.
Holders of OP Units may not have limited liability in
specific circumstances. The limitations on the
liability of limited partners for the obligations of a limited
partnership have not been clearly established in some states. If
it were determined that Aimco OP had been conducting business in
any state without compliance with the applicable limited
partnership statute, or that the right or the exercise of the
right by the OP Unitholders as a group to make specific
amendments to the agreement of limited partnership or to take
other action under the agreement of limited partnership
constituted participation in the control of Aimco
OPs business, then a holder of OP Units could be held
liable under specific circumstances for Aimco OPs
obligations to the same extent as the general partner.
Aimco may have conflicts of interest with holders of
OP Units. Conflicts of interest have arisen
and could arise in the future as a result of the relationships
between the general partner of Aimco OP and its affiliates
(including Aimco), on the one hand, and Aimco OP or any partner
thereof, on the other. The directors and officers of the general
partner have fiduciary duties to manage the general partner in a
manner beneficial to Aimco, as the sole stockholder of the
general partner. At the same time, as the general partner of
Aimco OP, it has fiduciary duties to manage Aimco OP in a manner
beneficial to Aimco OP and its limited partners. The duties of
the general partner of Aimco OP to Aimco OP and its partners may
therefore come into conflict with the duties of the directors
and officers of the general partner to its sole stockholder,
Aimco. Such conflicts of interest might arise in the following
situations, among others:
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Decisions of the general partner with respect to the amount and
timing of cash expenditures, borrowings, issuances of additional
interests and reserves in any quarter will affect whether or the
extent to which there is available cash to make distributions in
a given quarter.
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Under the terms of the Aimco OP partnership agreement, Aimco OP
will reimburse the general partner and its affiliates for costs
incurred in managing and operating Aimco OP, including
compensation of officers and employees.
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Whenever possible, the general partner seeks to limit Aimco
OPs liability under contractual arrangements to all or
particular assets of Aimco OP, with the other party thereto
having no recourse against the general partner or its assets.
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Any agreements between Aimco OP and the general partner and its
affiliates will not grant to the OP Unitholders, separate
and apart from Aimco OP, the right to enforce the obligations of
the general partner and such affiliates in favor of Aimco OP.
Therefore, the general partner, in its capacity as the general
partner of Aimco OP, will be primarily responsible for enforcing
such obligations.
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14
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Under the terms of the Aimco OP partnership agreement, the
general partner is not restricted from causing Aimco OP to pay
the general partner or its affiliates for any services rendered
on terms that are fair and reasonable to Aimco OP or entering
into additional contractual arrangements with any of such
entities on behalf of Aimco OP. Neither the Aimco OP partnership
agreement nor any of the other agreements, contracts and
arrangements between Aimco OP, on the one hand, and the general
partner of Aimco OP and its affiliates, on the other, are or
will be the result of arms-length negotiations.
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Provisions in the Aimco OP partnership agreement may limit
the ability of a holder of OP Units to challenge actions
taken by the general partner. Delaware law
provides that, except as provided in a partnership agreement, a
general partner owes the fiduciary duties of loyalty and care to
the partnership and its limited partners. The Aimco OP
partnership agreement expressly authorizes the general partner
to enter into, on behalf of Aimco OP, a right of first
opportunity arrangement and other conflict avoidance agreements
with various affiliates of Aimco OP and the general partner, on
such terms as the general partner, in its sole and absolute
discretion, believes are advisable. The latitude given in the
Aimco OP partnership agreement to the general partner in
resolving conflicts of interest may significantly limit the
ability of a holder of OP Units to challenge what might
otherwise be a breach of fiduciary duty. The general partner
believes, however, that such latitude is necessary and
appropriate to enable it to serve as the general partner of
Aimco OP without undue risk of liability.
The Aimco OP partnership agreement limits the liability of the
general partner for actions taken in good faith. Aimco OPs
partnership agreement expressly limits the liability of the
general partner by providing that the general partner, and its
officers and directors, will not be liable or accountable in
damages to Aimco OP, the limited partners or assignees for
errors in judgment or mistakes of fact or law or of any act or
omission if the general partner or such director or officer
acted in good faith. In addition, Aimco OP is required to
indemnify the general partner, its affiliates and their
respective officers, directors, employees and agents to the
fullest extent permitted by applicable law, against any and all
losses, claims, damages, liabilities, joint or several,
expenses, judgments, fines and other actions incurred by the
general partner or such other persons, provided that Aimco OP
will not indemnify for (i) willful misconduct or a knowing
violation of the law or (ii) for any transaction for which
such person received an improper personal benefit in violation
or breach of any provision of the partnership agreement. The
provisions of Delaware law that allow the common law fiduciary
duties of a general partner to be modified by a partnership
agreement have not been resolved in a court of law, and the
general partner has not obtained an opinion of counsel covering
the provisions set forth in the Aimco OP partnership agreement
that purport to waive or restrict the fiduciary duties of the
general partner that would be in effect under common law were it
not for the partnership agreement.
Certain
United States Tax Risks Associated with an Investment in the OP
Units
The following are among the United States Federal income tax
considerations to be taken into account in connection with an
investment in OP Units. For a general discussion of certain
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 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
15
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 such 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 investors tax liability from OP Units could
exceed the cash distributions received on such
OP Units. A holder of OP Units will be
required to pay United States Federal income tax on such
holders allocable share of Aimco OPs income, even if
such holder receives no cash distributions from Aimco OP. No
assurance can be given that a holder of OP Units will
receive cash distributions equal to such holders allocable
share of taxable income from Aimco OP or equal to the tax
liability to such holder resulting from that income. Further,
upon the sale, exchange or redemption of any OP Units, a
reduction in nonrecourse debt, or upon the special allocation at
the liquidation of Aimco OP, an investor may incur a tax
liability in excess of the amount of cash received.
16
SELECTED
SUMMARY HISTORICAL FINANCIAL DATA OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
The following tables set forth Aimcos selected summary
historical financial data as of the dates and for the periods
indicated. Aimcos 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 Aimcos Current Report
on
Form 8-K
filed with the SEC on September 10, 2010. Aimcos
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 Aimcos unaudited
interim Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010.
You should read this information together with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and with the
consolidated financial statements and notes to the consolidated
financial statements included in Aimcos Current Report on
Form 8-K
filed with the SEC on 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.
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For the Six Months
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Ended June 30,
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For the Years Ended December 31,
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2010
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2009(1)
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2009(1)
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2008(1)
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2007(1)
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2006(1)
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2005(1)
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(Unaudited)
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(Dollar amounts in thousands, except per share data)
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Consolidated Statements of Income:
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Total revenues
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$
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584,475
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$
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581,447
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$
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1,165,641
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$
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1,213,170
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$
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1,145,922
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$
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1,057,177
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$
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878,084
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Total operating expenses(2)
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(520,057
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)
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(518,406
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)
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(1,061,474
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)
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|
|
(1,162,893
|
)
|
|
|
(967,670
|
)
|
|
|
(888,390
|
)
|
|
|
(739,863
|
)
|
Operating income(2)
|
|
|
64,418
|
|
|
|
63,041
|
|
|
|
104,167
|
|
|
|
50,277
|
|
|
|
178,252
|
|
|
|
168,787
|
|
|
|
138,221
|
|
Loss from continuing operations(2)
|
|
|
(74,296
|
)
|
|
|
(79,640
|
)
|
|
|
(198,765
|
)
|
|
|
(120,533
|
)
|
|
|
(49,071
|
)
|
|
|
(44,613
|
)
|
|
|
(36,797
|
)
|
Income from discontinued operations, net(3)
|
|
|
47,366
|
|
|
|
39,440
|
|
|
|
153,965
|
|
|
|
747,535
|
|
|
|
174,577
|
|
|
|
331,635
|
|
|
|
162,149
|
|
Net (loss) income
|
|
|
(26,930
|
)
|
|
|
(40,200
|
)
|
|
|
(44,800
|
)
|
|
|
627,002
|
|
|
|
125,506
|
|
|
|
287,022
|
|
|
|
125,352
|
|
Net income attributable to noncontrolling interests
|
|
|
(8,413
|
)
|
|
|
(2,779
|
)
|
|
|
(19,474
|
)
|
|
|
(214,995
|
)
|
|
|
(95,595
|
)
|
|
|
(110,234
|
)
|
|
|
(54,370
|
)
|
Net income attributable to preferred stockholders
|
|
|
(23,050
|
)
|
|
|
(24,643
|
)
|
|
|
(50,566
|
)
|
|
|
(53,708
|
)
|
|
|
(66,016
|
)
|
|
|
(81,132
|
)
|
|
|
(87,948
|
)
|
Net (loss) income attributable to Aimco common stockholders
|
|
|
(58,393
|
)
|
|
|
(67,622
|
)
|
|
|
(114,840
|
)
|
|
|
351,314
|
|
|
|
(40,586
|
)
|
|
|
93,710
|
|
|
|
(21,223
|
)
|
Earnings (loss) per common share basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations attributable to Aimco common
stockholders
|
|
$
|
(0.74
|
)
|
|
$
|
(0.72
|
)
|
|
$
|
(1.74
|
)
|
|
$
|
(2.14
|
)
|
|
$
|
(1.41
|
)
|
|
$
|
(1.48
|
)
|
|
$
|
(1.33
|
)
|
Net (loss) income attributable to Aimco common stockholders
|
|
$
|
(0.50
|
)
|
|
$
|
(0.60
|
)
|
|
$
|
(1.00
|
)
|
|
$
|
3.96
|
|
|
$
|
(0.43
|
)
|
|
$
|
0.98
|
|
|
$
|
(0.23
|
)
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months
|
|
|
|
|
Ended June 30,
|
|
For the Years Ended December 31,
|
|
|
2010
|
|
2009(1)
|
|
2009(1)
|
|
2008(1)
|
|
2007(1)
|
|
2006(1)
|
|
2005(1)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in thousands, except per share data)
|
|
Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, net of accumulated depreciation
|
|
$
|
6,810,113
|
|
|
|
|
|
|
$
|
6,861,247
|
|
|
$
|
7,021,643
|
|
|
$
|
6,797,518
|
|
|
$
|
6,334,853
|
|
|
$
|
5,639,155
|
|
Total assets
|
|
|
7,707,801
|
|
|
|
|
|
|
|
7,906,468
|
|
|
|
9,441,870
|
|
|
|
10,617,681
|
|
|
|
10,292,587
|
|
|
|
10,019,160
|
|
Total indebtedness
|
|
|
5,643,911
|
|
|
|
|
|
|
|
5,602,216
|
|
|
|
5,984,016
|
|
|
|
5,599,523
|
|
|
|
4,905,622
|
|
|
|
4,243,381
|
|
Total equity
|
|
|
1,453,319
|
|
|
|
|
|
|
|
1,534,703
|
|
|
|
1,646,749
|
|
|
|
2,048,546
|
|
|
|
2,650,182
|
|
|
|
3,060,969
|
|
Other Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.40
|
|
|
$
|
7.48
|
|
|
$
|
4.31
|
|
|
$
|
2.40
|
|
|
$
|
3.00
|
|
Total consolidated properties (end of period)
|
|
|
427
|
|
|
|
485
|
|
|
|
426
|
|
|
|
514
|
|
|
|
657
|
|
|
|
703
|
|
|
|
619
|
|
Total consolidated apartment units (end of period)
|
|
|
94,506
|
|
|
|
111,054
|
|
|
|
95,202
|
|
|
|
117,719
|
|
|
|
153,758
|
|
|
|
162,432
|
|
|
|
158,548
|
|
Total unconsolidated properties (end of period)
|
|
|
59
|
|
|
|
82
|
|
|
|
77
|
|
|
|
85
|
|
|
|
94
|
|
|
|
102
|
|
|
|
264
|
|
Total unconsolidated apartment units (end of period)
|
|
|
6,943
|
|
|
|
8,915
|
|
|
|
8,478
|
|
|
|
9,613
|
|
|
|
10,878
|
|
|
|
11,791
|
|
|
|
35,269
|
|
Units managed (end of period)(4)
|
|
|
26,175
|
|
|
|
32,241
|
|
|
|
31,974
|
|
|
|
35,475
|
|
|
|
38,404
|
|
|
|
42,190
|
|
|
|
46,667
|
|
|
|
|
(1) |
|
Certain reclassifications have been made to conform to the
June 30, 2010 financial statement presentation, including
retroactive adjustments to reflect additional properties sold or
classified as held for sale as of June 30, 2010, as
discontinued operations (see Note 3 to the condensed
consolidated financial statements in
Item 1 Financial Statements in
Aimcos Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010, and Note 13 to
the consolidated financial statements in
Item 8 Financial Statements and
Supplementary Data in Aimcos Current Report on
Form 8-K,
filed with the SEC on September 10, 2010, which are
incorporated by reference in this information
statement/prospectus.). |
|
(2) |
|
Total operating expenses, operating income and loss from
continuing operations for the year ended December 31, 2008,
include a $91.1 million pre-tax provision for impairment
losses on real estate development assets, which is discussed
further in Item 7 Managements
Discussion and Analysis of Financial Condition and Results of
Operations in Aimcos Current Report on
Form 8-K
filed with the SEC on September 10, 2010, which is
incorporated by reference in this information
statement/prospectus. |
|
(3) |
|
Income from discontinued operations for the years ended
December 31, 2009, 2008, 2007, 2006 and 2005 includes
$221.8 million, $800.3 million, $117.6 million,
$337.1 million and $162.7 million in gains on
disposition of real estate, respectively. Income from
discontinued operations for 2009, 2008 and 2007 is discussed
further in Item 7 Managements
Discussion and Analysis of Financial Condition and Results of
Operations in Aimcos Current Report on
Form 8-K
filed with the SEC on September 10, 2010, which is
incorporated by reference in this information
statement/prospectus. |
|
(4) |
|
Units managed represents units in properties for which Aimco
provides asset management services only, although in certain
cases Aimco may indirectly own generally less than one percent
of the economic interest in such properties through a
partnership syndication or other fund. |
18
SELECTED
SUMMARY HISTORICAL FINANCIAL DATA OF AIMCO PROPERTIES,
L.P.
The following table sets forth Aimco OPs selected summary
historical financial data as of the dates and for the periods
indicated. Aimco OPs historical consolidated statements of
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 OPs Current
Report on
Form 8-K
filed with the SEC on September 10, 2010. Aimco OPs
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 OPs unaudited
interim Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010.
You should read this information together with
Managements Discussion and Analysis of Financial
Condition and Results of Operations and with the
consolidated financial statements included in Aimco OPs
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months
|
|
|
|
|
Ended June 30,
|
|
For the Years Ended December 31,
|
|
|
2010
|
|
2009(1)
|
|
2009(1)
|
|
2008(1)
|
|
2007(1)
|
|
2006(1)
|
|
2005(1)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in thousands, except per unit data)
|
|
Consolidated Statements of Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
584,475
|
|
|
$
|
581,447
|
|
|
$
|
1,165,641
|
|
|
$
|
1,213,170
|
|
|
$
|
1,145,922
|
|
|
$
|
1,057,177
|
|
|
$
|
878,084
|
|
Total operating expenses(2)
|
|
|
(520,057
|
)
|
|
|
(518,406
|
)
|
|
|
(1,061,474
|
)
|
|
|
(1,162,893
|
)
|
|
|
(967,670
|
)
|
|
|
(888,390
|
)
|
|
|
(739,863
|
)
|
Operating income(2)
|
|
|
64,418
|
|
|
|
63,041
|
|
|
|
104,167
|
|
|
|
50,277
|
|
|
|
178,252
|
|
|
|
168,787
|
|
|
|
138,221
|
|
Loss from continuing operations(2)
|
|
|
(73,870
|
)
|
|
|
(79,232
|
)
|
|
|
(197,945
|
)
|
|
|
(119,747
|
)
|
|
|
(48,322
|
)
|
|
|
(41,653
|
)
|
|
|
(32,339
|
)
|
Income from discontinued operations, net(3)
|
|
|
47,366
|
|
|
|
39,440
|
|
|
|
153,965
|
|
|
|
747,535
|
|
|
|
174,577
|
|
|
|
331,635
|
|
|
|
162,149
|
|
Net (loss) income
|
|
|
(26,504
|
)
|
|
|
(39,792
|
)
|
|
|
(43,980
|
)
|
|
|
627,788
|
|
|
|
126,255
|
|
|
|
289,982
|
|
|
|
129,810
|
|
Net income attributable to noncontrolling interests
|
|
|
(9,418
|
)
|
|
|
(5,411
|
)
|
|
|
(22,442
|
)
|
|
|
(155,749
|
)
|
|
|
(92,138
|
)
|
|
|
(92,917
|
)
|
|
|
(49,064
|
)
|
Net income attributable to preferred unitholders
|
|
|
(26,426
|
)
|
|
|
(27,458
|
)
|
|
|
(56,854
|
)
|
|
|
(61,354
|
)
|
|
|
(73,144
|
)
|
|
|
(90,527
|
)
|
|
|
(98,946
|
)
|
Net (loss) income attributable to the Partnerships common
unitholders
|
|
|
(62,348
|
)
|
|
|
(72,661
|
)
|
|
|
(123,276
|
)
|
|
|
403,700
|
|
|
|
(43,508
|
)
|
|
|
104,592
|
|
|
|
(22,458
|
)
|
Earnings (loss) per common unit basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations attributable to the
Partnerships common unitholders
|
|
$
|
(0.74
|
)
|
|
$
|
(0.72
|
)
|
|
$
|
(1.75
|
)
|
|
$
|
(1.99
|
)
|
|
$
|
(1.40
|
)
|
|
$
|
(1.47
|
)
|
|
$
|
(1.32
|
)
|
Net (loss) income attributable to the Partnerships common
unitholders
|
|
$
|
(0.50
|
)
|
|
$
|
(0.60
|
)
|
|
$
|
(1.00
|
)
|
|
$
|
4.11
|
|
|
$
|
(0.42
|
)
|
|
$
|
0.99
|
|
|
$
|
(0.21
|
)
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months
|
|
|
|
|
Ended June 30,
|
|
For the Years Ended December 31,
|
|
|
2010
|
|
2009(1)
|
|
2009(1)
|
|
2008(1)
|
|
2007(1)
|
|
2006(1)
|
|
2005(1)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollar amounts in thousands, except per unit data)
|
|
Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, net of accumulated depreciation
|
|
$
|
6,810,618
|
|
|
|
|
|
|
$
|
6,861,752
|
|
|
$
|
7,022,148
|
|
|
$
|
6,798,023
|
|
|
$
|
6,335,358
|
|
|
$
|
5,639,660
|
|
Total assets
|
|
|
7,723,898
|
|
|
|
|
|
|
|
7,922,139
|
|
|
|
9,456,721
|
|
|
|
10,631,746
|
|
|
|
10,305,903
|
|
|
|
10,031,761
|
|
Total indebtedness
|
|
|
5,643,911
|
|
|
|
|
|
|
|
5,602,216
|
|
|
|
5,984,016
|
|
|
|
5,599,523
|
|
|
|
4,905,622
|
|
|
|
4,243,381
|
|
Total partners capital
|
|
|
1,469,416
|
|
|
|
|
|
|
|
1,550,374
|
|
|
|
1,661,600
|
|
|
|
2,152,326
|
|
|
|
2,753,617
|
|
|
|
3,164,111
|
|
Other Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions declared per common unit
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.40
|
|
|
$
|
7.48
|
|
|
$
|
4.31
|
|
|
$
|
2.40
|
|
|
$
|
3.00
|
|
Total consolidated properties (end of period)
|
|
|
427
|
|
|
|
485
|
|
|
|
426
|
|
|
|
514
|
|
|
|
657
|
|
|
|
703
|
|
|
|
619
|
|
Total consolidated apartment units (end of period)
|
|
|
94,506
|
|
|
|
111,054
|
|
|
|
95,202
|
|
|
|
117,719
|
|
|
|
153,758
|
|
|
|
162,432
|
|
|
|
158,548
|
|
Total unconsolidated properties (end of period)
|
|
|
59
|
|
|
|
82
|
|
|
|
77
|
|
|
|
85
|
|
|
|
94
|
|
|
|
102
|
|
|
|
264
|
|
Total unconsolidated apartment units (end of period)
|
|
|
6,943
|
|
|
|
8,915
|
|
|
|
8,478
|
|
|
|
9,613
|
|
|
|
10,878
|
|
|
|
11,791
|
|
|
|
35,269
|
|
Units managed (end of period)(4)
|
|
|
26,175
|
|
|
|
32,241
|
|
|
|
31,974
|
|
|
|
35,475
|
|
|
|
38,404
|
|
|
|
42,190
|
|
|
|
46,667
|
|
|
|
|
(1) |
|
Certain reclassifications have been made to conform to the
June 30, 2010 financial statement presentation, including
retroactive adjustments to reflect additional properties sold or
classified as held for sale as of June 30, 2010, as
discontinued operations (see Note 3 to the condensed
consolidated financial statements in
Item 1 Financial Statements in
Aimco OPs Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010, and Note 13 to
the consolidated financial statements in
Item 8 Financial Statements and
Supplementary Data in Aimco OPs Current Report on
Form 8-K,
filed with the SEC on September 10, 2010, which are
incorporated by reference in this information
statement/prospectus.). |
|
(2) |
|
Total operating expenses, operating income and loss from
continuing operations for the year ended December 31, 2008,
include a $91.1 million pre-tax provision for impairment
losses on real estate development assets, which is discussed
further in Item 7 Managements
Discussion and Analysis of Financial Condition and Results of
Operations in Aimco OPs Current Report on
Form 8-K,
filed with the SEC on September 10, 2010, which is
incorporated by reference in this information
statement/prospectus. |
|
(3) |
|
Income from discontinued operations for the years ended
December 31, 2009, 2008, 2007, 2006 and 2005 includes
$221.8 million, $800.3 million, $117.6 million,
$337.1 million and $162.7 million in gains on
disposition of real estate, respectively. Income from
discontinued operations for 2009, 2008 and 2007 is discussed
further in Item 7 Managements
Discussion and Analysis of Financial Condition and Results of
Operations in Aimco OPs Current Report on
Form 8-K,
filed with the SEC on September 10, 2010, which is
incorporated by reference in this information
statement/prospectus. |
|
(4) |
|
Units managed represents units in properties for which Aimco OP
provides asset management services only, although in certain
cases Aimco OP may indirectly own generally less than one
percent of the economic interest in such properties through a
partnership syndication or other fund. |
20
SELECTED
SUMMARY HISTORICAL FINANCIAL DATA OF
NATIONAL PROPERTY INVESTORS III
The following table sets forth NPIs selected summary
historical financial data as of the dates and for the periods
indicated. NPIs 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 NPIs financial statements included in
NPIs Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009. NPIs
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 NPIs unaudited interim Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2010.
You should read this information together with
Managements 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 NPIs Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2009 and Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2010 filed with the SEC on
August 11, 2010, which are attached to this information
statement/prospectus. See Where You Can Find Additional
Information in this information statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months
|
|
|
|
|
Ended June 30,
|
|
For the Years Ended December 31,
|
|
|
2010
|
|
2009
|
|
2009
|
|
2008
|
|
|
(Unaudited)
|
|
|
|
|
|
|
(Dollar amounts in thousands, except per unit data)
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
3,408
|
|
|
$
|
3,312
|
|
|
$
|
6,812
|
|
|
$
|
6,366
|
|
Loss from continuing operations
|
|
|
(1,649
|
)
|
|
|
(1,879
|
)
|
|
|
(3,435
|
)
|
|
|
(3,188
|
)
|
Net loss
|
|
|
(1,649
|
)
|
|
|
(1,879
|
)
|
|
|
(3,435
|
)
|
|
|
(3,188
|
)
|
Net loss per limited partnership unit
|
|
|
(33.97
|
)
|
|
|
(38.71
|
)
|
|
|
(70.78
|
)
|
|
|
(65.68
|
)
|
Distributions per limited partnership unit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit of earnings to fixed charges
|
|
|
(1,649
|
)
|
|
|
(1,878
|
)
|
|
|
(3,418
|
)
|
|
|
(3,372
|
)
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
|
139
|
|
|
|
190
|
|
|
|
194
|
|
|
|
85
|
|
Real Estate, Net of Accumulated Depreciation
|
|
|
18,219
|
|
|
|
21,488
|
|
|
|
19,841
|
|
|
|
23,055
|
|
Total Assets
|
|
|
19,298
|
|
|
|
22,604
|
|
|
|
20,927
|
|
|
|
24,076
|
|
Mortgage Notes Payable
|
|
|
29,233
|
|
|
|
29,493
|
|
|
|
29,375
|
|
|
|
29,608
|
|
Due to Affiliates
|
|
|
14,818
|
|
|
|
14,712
|
|
|
|
14,552
|
|
|
|
13,605
|
|
General Partners Deficit
|
|
|
(260
|
)
|
|
|
(228
|
)
|
|
|
(243
|
)
|
|
|
(209
|
)
|
Limited Partners Deficit
|
|
|
(25,867
|
)
|
|
|
(22,694
|
)
|
|
|
(24,235
|
)
|
|
|
(20,834
|
)
|
Total Partners Deficit
|
|
|
(26,127
|
)
|
|
|
(22,922
|
)
|
|
|
(24,478
|
)
|
|
|
(21,043
|
)
|
Total Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per limited partnership unit
|
|
|
(538.46
|
)
|
|
|
(472.41
|
)
|
|
|
(504.49
|
)
|
|
|
(433.69
|
)
|
Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(55
|
)
|
|
|
105
|
|
|
|
109
|
|
|
|
(170
|
)
|
Net cash provided by operating activities
|
|
|
519
|
|
|
|
425
|
|
|
|
364
|
|
|
|
819
|
|
21
COMPARATIVE
PER SHARE DATA
Aimco common stock trades on the NYSE under the symbol
AIV. The OP Units are not listed on any
securities exchange and do not trade in an active secondary
market. However, as described below, the trading price of Aimco
common stock is considered a reasonable estimate of the fair
market value of an OP Unit.
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 NPI 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 25, 2010 was $22.38.
The NPI 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 NPI Units is
greater than the General Partners estimate of the proceeds
that would be available for distribution to limited partners
(following the repayment of debt and other liabilities of NPI)
if its property was sold at a price equal to its appraised
value, given that the General Partner did not deduct certain
amounts that would be payable upon an immediate sale of the
partnerships property, such as prepayment penalties on the
mortgage debt of such property.
The following tables summarize the historical per share
information for Aimco, Aimco OP and NPI for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
June 30,
|
|
Fiscal Year Ended December 31,
|
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|
Cash dividends declared per share/unit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aimco Common Stock
|
|
$
|
0.10
|
|
|
$
|
0.40
|
|
|
$
|
2.40
|
|
|
$
|
2.40
|
|
Aimco OP Units
|
|
$
|
0.10
|
|
|
$
|
0.40
|
|
|
$
|
2.40
|
|
|
$
|
2.40
|
|
NPI Units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share/unit from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aimco Common Stock
|
|
$
|
(0.74
|
)
|
|
$
|
(1.74
|
)
|
|
$
|
(2.14
|
)
|
|
$
|
(1.41
|
)
|
Aimco OP Units
|
|
$
|
(0.74
|
)
|
|
$
|
(1.75
|
)
|
|
$
|
(1.99
|
)
|
|
$
|
(1.40
|
)
|
NPI Units
|
|
$
|
(33.97
|
)
|
|
$
|
(70.78
|
)
|
|
$
|
(65.68
|
)
|
|
$
|
(9.84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010
|
|
December 31, 2009
|
|
Book value per share/unit
|
|
|
|
|
|
|
|
|
Aimco Common Stock(1)
|
|
$
|
9.74
|
|
|
$
|
10.64
|
|
Aimco OP Units(2)
|
|
|
8.99
|
|
|
|
9.88
|
|
NPI Units
|
|
|
(538.46
|
)
|
|
|
(504.49
|
)
|
|
|
|
(1) |
|
Based on 117.0 million and 116.5 millions shares of
common stock outstanding at June 30, 2010 and
December 31, 2009, respectively. |
|
(2) |
|
Based on 125.4 million and 124.9 million common OP
Units and equivalents outstanding at June 30, 2010 and
December 31, 2009, respectively. |
22
INFORMATION
ABOUT THE AIMCO ENTITIES
Aimco is a Maryland corporation incorporated on January 10,
1994. Aimco is a self-administered and self-managed real estate
investment trust, or REIT, 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. Aimcos apartment
properties are generally financed with property-level,
non-recourse, long-dated, fixed-rate, amortizing debt.
Aimcos 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:
|
|
|
|
|
owned an equity interest in 232 conventional real estate
properties with 71,909 units;
|
|
|
|
owned an equity interest in 254 affordable real estate
properties with 29,540 units; and
|
|
|
|
provided services for or managed 27,901 units in 331
properties, primarily pursuant to long-term asset management
agreements. In certain cases, Aimco may indirectly own generally
less than one percent of the operations of such properties
through a syndication or other fund.
|
Of these properties, Aimco consolidated 230 conventional
properties with 70,605 units and 197 affordable properties
with 23,901 units.
Through its wholly owned subsidiaries, AIMCO-GP, 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 OPs 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 OPs 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).
AIMCO/IPT, Inc. owns all of the outstanding common stock of the
General Partner, and Aimco owns all of the outstanding common
stock of AIMCO/IPT, Inc.
AIMCO/IPT, Inc. holds a 70% interest in AIMCO IPLP, L.P. as its
general partner. AIMCO/IPT, Inc. and AIMCO IPLP, L.P. share
voting and dispositive power over 21,566 NPI Units, or
approximately 44.89% of the outstanding NPI Units. Aimco OP
holds a 30% interest in AIMCO IPLP, L.P. as its limited partner.
National Property Investors III, LP, or New NPI, is a Delaware
limited partnership formed on October 8, 2010, for the
purpose of consummating the merger with NPI. New NPI 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. New NPIs general partner is Aimco OP, and its
sole limited partner is the Aimco Subsidiary.
AIMCO NPI III Merger Sub LLC, or the Aimco Subsidiary, is a
Delaware limited liability company formed on September 29,
2010, for the purpose of consummating the merger with NPI. 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 Aimco Subsidiary is a direct wholly
owned subsidiary of Aimco OP.
The names, positions and business addresses of the directors and
executive officers of Aimco, Aimco OP, AIMCO-GP, AIMCO/IPT,
Inc., AIMCO IPLP, L.P., the General Partner and the Aimco
Subsidiary, as well as a
23
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. During the last five years,
none of Aimco, Aimco-GP, AIMCO/IPT, Inc., AIMCO IPLP, L.P.,
Aimco OP, NPI or the General Partners 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:
24
INFORMATION
ABOUT NATIONAL PROPERTY INVESTORS III
National Property Investors III is a California limited
partnership organized on February 1, 1979. During 1979, NPI
commenced a public offering for the sale of 66,000 limited
partnership units. A total of 48,049 units of the limited
partnership were issued for $500 each, for an aggregate capital
contribution of $24,024,500. In addition, the general partners
contributed a total of $1,000 to NPI. Since its initial
offering, NPI has not received, nor are limited partners
required to make, additional capital contributions. NPIs
partnership agreement provides that the partnership is to
terminate on December 31, 2022 unless terminated prior to
such date. The General Partner is a wholly owned subsidiary of
Aimco.
NPI was organized for the purpose of operating income-producing
residential real estate. At June 30, 2010, NPI owned and
operated one property, Lakeside Apartments, a 568 unit
apartment project located in Lisle, Illinois.
The average annual rental rates for each of the five years ended
December 31, 2009 for the property are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Annual Rental Rates
|
Property
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
Lakeside Apartments
|
|
$
|
11,634/unit
|
|
|
$
|
11,520/unit
|
|
|
$
|
10,505/unit
|
|
|
$
|
9,580/unit
|
|
|
$
|
9,097/unit
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Occupancy
|
|
|
For the Six Months
|
|
|
|
|
Ended June 30,
|
|
For the Years Ended December 31,
|
Property
|
|
2010
|
|
2009
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
Lakeside Apartments
|
|
|
94
|
%
|
|
|
86
|
%
|
|
|
90
|
%
|
|
|
87
|
%
|
|
|
86
|
%
|
|
|
97
|
%
|
|
|
94
|
%
|
The real estate industry is highly competitive. NPIs
property is subject to competition from other residential
apartment complexes in the area. The General Partner believes
that the property is adequately insured. The property is an
apartment complex which leases units for terms of one year or
less. No tenant leases 10% or more of the available rental space.
During 2005 NPI commenced a redevelopment project at Lakeside
Apartments. In August 2006, the scope of the redevelopment
project was significantly expanded and was forecasted to cost
approximately $16,300,000 with the majority of the work started
in October 2006 and to be completed by November 2008. During the
year ended December 31, 2007 the anticipated cost of the
project was increased again by approximately $7,393,000 to a
total project cost of approximately $23,693,000. The project was
completed during the three months ended March 31, 2009 at a
total cost of approximately $22,637,000. The redevelopment
consisted of site, building exterior, common area and unit
interior improvements. The site improvements consisted of
landscape enhancements and replacements, repair of retaining
walls and correction of erosion problems, lighting upgrades and
the addition of patio privacy fences. The building exterior
improvements consisted of rear entrance door replacements,
gutter improvements, foundation work and exterior painting. The
common area improvements consisted of upgrading the leasing
center, replacing the clubhouse with a business center and
conference room, fitness center with locker rooms, and the
addition of a boathouse for lake recreation activities. In
addition, the west clubhouse was upgraded and includes a
social/game room, locker rooms and new decking. The unit
interior improvements consisted of kitchen and bath upgrades,
replacement of original fireplaces and other interior
renovations. NPI funded the redevelopment from operations and
advances from Aimco OP.
NPI regularly evaluates the capital improvement needs of the
property. While NPI has no material commitments for property
improvements and replacements, certain routine capital
expenditures are anticipated during 2010. Such capital
expenditures will depend on the physical condition of the
property as well as insurance proceeds and anticipated cash flow
generated by the property. The property is in good condition,
subject to normal depreciation and deterioration as is typical
for assets of this type and age.
25
The following table sets forth certain information relating to
the mortgages encumbering Lakeside Apartments at June 30,
2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal,
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
|
Balance at
|
|
|
|
|
|
|
|
|
|
|
|
Balance
|
|
|
|
June 30,
|
|
|
Interest
|
|
|
Period
|
|
|
Maturity
|
|
|
Due at
|
|
|
|
2010
|
|
|
Rate(1)
|
|
|
Amortized
|
|
|
Date
|
|
|
Maturity(2)
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
1st mortgage
|
|
$
|
20,251
|
|
|
|
7.14
|
%
|
|
|
360 months
|
|
|
|
01/01/22
|
|
|
$
|
15,791
|
|
2nd mortgage
|
|
|
8,982
|
|
|
|
5.90
|
%
|
|
|
360 months
|
|
|
|
01/01/22
|
|
|
|
7,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
22,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Fixed rate mortgages. |
|
(2) |
|
See Note C Mortgage Notes Payable
to the financial statements included in Item 8.
Financial Statements and Supplementary Data in NPIs
Annual Report on
Form 10-K
for the year ended December 31, 2009 attached hereto as
Annex D for information with respect to NPIs
ability to prepay these mortgages and other specific details
about the mortgages. |
Distributions
to Limited Partners
NPI presently has only NPI Units issued and outstanding. The NPI
Units are entitled to allocations of profit and loss, and
distributions, relating to NPIs interest in Lakeside
Apartments. As of October 25, 2010, there were 48,039 NPI
Units outstanding, and Aimco OP and its affiliates owned 37,419
of those units, or approximately 77.89% of those units.
There were no distributions made by NPI during the years ended
December 31, 2009 and 2008 or during the six months
ended June 30, 2010. Future cash distributions will depend
on the levels of net cash generated from operations, the timing
of debt maturities, property sales and refinancings. NPIs
cash available for distribution is reviewed on a monthly basis.
There can be no assurance, however, that NPI will generate
sufficient funds from operations, after planned capital
improvement expenditures, to permit any distributions to its
partners in subsequent periods.
Certain
Relationships and Related Transactions
NPI has no employees and depends on the General Partner and its
affiliates for the management and administration of all
partnership activities. The NPI partnership agreement provides
that the General Partner and its affiliates receive certain
payments for services and reimbursement of certain expenses
incurred on behalf of NPI.
The NPI partnership agreement also provides that the General
Partner and its affiliates receive 5% of gross receipts from
NPIs property as compensation for providing property
management services. NPI was charged by affiliates approximately
$335,000 and $315,000 for the years ended December 31, 2009
and 2008, respectively, and approximately $172,000 and $164,000
for the six months ended June 30, 2010 and 2009,
respectively.
Affiliates of the General Partner charged NPI for reimbursement
of accountable administrative expenses amounting to
approximately $156,000 and $350,000 for the years ended
December 31, 2009 and 2008, respectively. A portion of
these reimbursements for the years ended December 31, 2009
and 2008 are for construction management services for certain
capital improvement expenditures (not related to the
redevelopment project described in the following sentence)
provided by an affiliate of the General Partner of approximately
$72,000 and $9,000, respectively. In connection with a
redevelopment project at the property, which was completed
during the second quarter of 2009 at a total cost of
approximately $22,637,000, an affiliate of the General Partner
received a redevelopment supervision fee of 4% of the actual
redevelopment costs incurred. NPI was charged approximately
$20,000 and $230,000 in redevelopment supervision fees during
the years ended December 31, 2009 and 2008, respectively.
Affiliates of the General Partner charged NPI for reimbursement
of accountable administrative expenses amounting to
approximately $56,000 and $102,000 for the six months ended
June 30, 2010 and 2009, respectively. A portion of these
reimbursements for the six months ended June 30, 2010 and
2009 are for construction
26
management services for certain capital improvement expenditures
(not related to the redevelopment project) provided by an
affiliate of the General Partner of approximately $23,000 and
$48,000, respectively. In connection with the redevelopment
project completed in 2009, an affiliate of the General Partner
received a redevelopment supervision fee of 4% of the actual
redevelopment costs incurred. NPI was charged approximately
$20,000 in redevelopment supervision fees during the six months
ended June 30, 2009. There were no such redevelopment
supervision fees for the six months ended June 30, 2010. At
June 30, 2010, approximately $233,000 of accountable
administrative expenses were owed to affiliates of the General
Partner.
For services relating to the administration of NPI and operation
of NPIs property, the General Partner is entitled to
receive payment for non-accountable expenses up to a maximum of
$100,000 per year based upon the number of NPI Units sold,
subject to certain limitations. There were no such fees for the
years ended December 31, 2009 and 2008 or the six months
ended June 30, 2010 and 2009, as no operating distributions
were made.
Upon the sale of NPIs property, the General Partner would
be entitled to an Incentive Compensation Fee equal to a
declining percentage of the difference between the total amount
distributed to the limited partners and the appraised value of
their investment at February 1, 1992. The percentage amount
to be realized by the General Partner, if any, would be
dependent upon the year in which the property is sold. Payment
of the Incentive compensation Fee is subordinated to the receipt
by the limited partners, of: (a) distributions from capital
transaction proceeds of an amount equal to their appraised
investment in NPI at February 1, 1992, and
(b) distributions from all sources (capital transactions as
well as cash flow) of an amount equal to six percent (6%) per
annum cumulative, non-compounded, on their appraised investment
in NPI at February 1, 1992.
In March 2008, the General Partner terminated the revolving
credit facility that was established on behalf of NPI and
certain affiliated partnerships to fund deferred maintenance and
working capital needs of NPI and certain other affiliated
partnerships. The General Partner does not have a commitment,
intent or implication to fund cash flow deficits or furnish
other direct or indirect financial assistance to NPI.
NPI may receive advances of funds from Aimco OP, an affiliate of
the General Partner, although Aimco OP is not obligated to fund
such advances. During the years ended December 31, 2009 and
2008, NPI received advances of approximately $2,162,000 and
$5,426,000, respectively, from Aimco OP to fund a rental
achievement escrow, redevelopment capital improvements, real
estate taxes and operations at Lakeside Apartments. Aimco OP
charges interest on advances under the terms permitted by the
NPI partnership agreement. The advances bear interest at the
prime rate plus 2% per annum. Interest expense during the years
ended December 31, 2009 and 2008 was approximately $758,000
and $733,000, respectively. During the year ended
December 31, 2009, NPI made payments of principal and
accrued interest of approximately $2,035,000. There were no
payments made during the year ended December 31, 2008.
During the six months ended June 30, 2010 and 2009, the
Partnership received advances of approximately $358,000 and
$717,000, respectively, from Aimco OP to fund real estate taxes
and redevelopment capital improvements, respectively, at
Lakeside Apartments. The advances bear interest at the prime
rate plus 2% (5.25% at June 30, 2010) per annum.
Interest expense was approximately $372,000 and $358,000 for the
six months ended June 30, 2010 and 2009, respectively.
During the six months ended June 30, 2010, NPI repaid
$500,000 of advances and accrued interest. No such payments were
made during the six months ended June 30, 2009. At
June 30, 2010, the total advances and accrued interest owed
to Aimco OP was approximately $14,585,000. NPI may receive
additional advances of funds from Aimco OP although Aimco OP is
not obligated to provide such advances. For more information on
Aimco OP, see Where You Can Find Additional
Information, beginning on page 86 of this information
statement/prospectus.
NPI 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. NPI
insures its property above the Aimco limits through insurance
policies obtained by Aimco from insurers unaffiliated with the
General Partner. During the years ended December 31, 2009
and 2008, NPI was charged by Aimco and its affiliates
approximately $99,000 and $107,000, respectively, for insurance
coverage and fees associated with policy claims administration.
During the six months ended June 30, 2010, NPI was charged
by Aimco and its affiliates approximately $117,000 for insurance
coverage and fees associated with policy claims
27
administration. Additional charges will be incurred by NPI
during 2010 as other insurance policies renew later in the year.
In addition to its indirect ownership of the general partner
interests in NPI, Aimco and its affiliates owned 37,419 NPI
Units representing approximately 77.89% of the number of NPI
Units outstanding, at October 25, 2010. Pursuant to the NPI
partnership agreement, limited partners holding a majority of
the units are entitled to take action with respect to a variety
of matters that include voting on certain amendments to the NPI
partnership agreement and voting to remove the General Partner.
As a result of its ownership of 77.89% of the outstanding NPI
Units, Aimco and its affiliates are in a position to influence
all such voting decisions with respect to NPI. However, with
respect to the 21,380 NPI Units acquired on January 19,
1996, AIMCO IPLP, L.P., an affiliate of the General Partner and
of Aimco, or AIMCO-IPLP, agreed to vote such NPI Units:
(i) against any increase in compensation payable to the
General Partner or to its affiliates; and (ii) on all other
matters submitted by it or its affiliates, in proportion to the
votes cast with respect to NPI Units not subject to this voting
restriction. Except for the foregoing, no other limitations are
imposed on AIMCO IPLPs, Aimcos or any other
affiliates right to vote each NPI Unit held. Although the
General Partner owes fiduciary duties to NPIs limited
partners, it also owes fiduciary duties to its sole stockholder,
which is wholly owned by Aimco. As a result, the duties of the
General Partner to NPI and its limited partners may come into
conflict with the duties of the General Partner its sole
stockholder.
Directors,
Executive Officers and Corporate Governance
NPI has no directors or executive officers of its own. The names
and ages of, as well as the positions and offices held by, the
present directors and officers of the General Partner as of
June 30, 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. No remuneration was paid to NPI
nor its directors or officers during the year ended
December 31, 2009.
The board of directors of the General Partner does not have a
separate audit committee. As such, the board of directors of the
General Partner fulfills the functions of an audit committee.
The board of directors has determined that Steven D. Cordes
meets the requirement of an audit committee financial
expert.
The directors and officers of the General Partner with authority
over NPI are all employees of subsidiaries of Aimco. Aimco has
adopted a code of ethics that applies to such directors and
officers that is posted on Aimcos website (www.aimco.com).
Aimcos website is not incorporated by reference to this
filing.
Security
Ownership of Certain Beneficial Owners and Management
The General Partner owns all of the outstanding general partner
interests in NPI, which constitute 1% of the total interests in
the partnership. NPI has no directors or executive officers of
its own. The General Partner is a Florida corporation, which is
indirectly wholly owned by Aimco. None of the general partner or
any of its directors or executive officers owns any of the NPI
Units. The following table sets forth certain information as of
October 25, 2010 with respect to the ownership by any
person (including any group, as that term is used in
Section 13(d)(3) of
28
the Exchange Act) known to us to be the beneficial owner of more
than 5% of the units of limited partnership of the partnership.
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
Approximate
|
|
|
Number of
|
|
Percent of
|
Entity Name and Address
|
|
Units
|
|
Class
|
|
Apartment Investment and Management Company(1)
|
|
|
37,419
|
(2)
|
|
|
77.89
|
%
|
4582 South Ulster Street Parkway,
|
|
|
|
|
|
|
|
|
Suite 1100
|
|
|
|
|
|
|
|
|
Denver, CO 80237
|
|
|
|
|
|
|
|
|
AIMCO-GP, Inc.(1)
|
|
|
37,419
|
(2)
|
|
|
77.89
|
%
|
4582 South Ulster Street Parkway,
|
|
|
|
|
|
|
|
|
Suite 1100
|
|
|
|
|
|
|
|
|
Denver, CO 80237
|
|
|
|
|
|
|
|
|
AIMCO Properties, L.P.(1)
|
|
|
37,419
|
(2)
|
|
|
77.89
|
%
|
4582 South Ulster Street Parkway,
|
|
|
|
|
|
|
|
|
Suite 1100
|
|
|
|
|
|
|
|
|
Denver, CO 80237
|
|
|
|
|
|
|
|
|
AIMCO IPLP, L.P.(3)
|
|
|
21,566
|
(4)
|
|
|
44.89
|
%
|
4582 South Ulster Street Parkway,
|
|
|
|
|
|
|
|
|
Suite 1100
|
|
|
|
|
|
|
|
|
Denver, CO 80237
|
|
|
|
|
|
|
|
|
AIMCO/IPT, Inc.(3)
|
|
|
21,566
|
(4)
|
|
|
44.89
|
%
|
4582 South Ulster Street Parkway,
|
|
|
|
|
|
|
|
|
Suite 1100
|
|
|
|
|
|
|
|
|
Denver, CO 80237
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
AIMCO-GP, Inc., a Delaware corporation, is the sole general
partner of AIMCO Properties, L.P., and owns approximately a 1%
general partner interest in AIMCO Properties, L.P. AIMCO-GP,
Inc. is wholly owned by Apartment Investment and Management
Company. As of October 25, 2010, AIMCO-LP Trust, a Delaware
trust wholly owned by Apartment Investment and Management
Company, owns approximately a 92% interest in the OP Units and
equivalents of AIMCO Properties, L.P. |
|
|
|
(2) |
|
AIMCO Properties, L.P., AIMCO-GP, Inc. and Apartment Investment
and Management Company share voting and dispositive power over
37,419 NPI Units, representing approximately 77.89% of the
class. AIMCO-GP, Inc. holds its NPI Units, directly or
indirectly, as nominee for AIMCO Properties, L.P. and so AIMCO
Properties, L.P. may be deemed the beneficial owner of the NPI
Units held by AIMCO-GP, Inc. Apartment Investment and Management
Company may be deemed the beneficial owner of the NPI Units held
by AIMCO Properties, L.P. and AIMCO-GP, Inc. by virtue of its
indirect ownership or control of these entities. |
|
(3) |
|
AIMCO IPLP, L.P. is indirectly wholly owned by Aimco. AIMCO/IPT,
Inc., which is wholly owned by Aimco, holds a 70.0% interest in
AIMCO IPLP, L.P. as its general partner. AIMCO Properties, L.P.
holds a 30% interest in AIMCO IPLP, L.P. as the limited partner. |
|
(4) |
|
AIMCO IPLP, L.P. and AIMCO/IPT, Inc. share voting and
dispositive power over 21,566 NPI Units, representing
approximately 44.89% of the class. |
Additional
Information
For additional information about NPI and its property and
operating data related to this property, see NPIs Annual
Report on
Form 10-K
for the year ended December 31, 2009, attached hereto as
Annex D and NPIs Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010, attached hereto as
Annex E.
29
THE
TRANSACTIONS
Background
of the Transactions
The General Partner regularly evaluates NPIs property by
considering various factors, such as the partnerships
financial position and real estate and capital markets
conditions. The General Partner monitors the propertys
specific locale and
sub-market
conditions (including stability of the surrounding
neighborhood), evaluating current trends, competition, new
construction and economic changes. It oversees the operating
performance of the property and continuously evaluates the
physical improvement requirements. In addition, the financing
structure for the property (including any prepayment penalties),
tax implications to limited partners, availability of attractive
mortgage financing to a purchaser, and the investment climate
are all considered. Any of these factors, and possibly others,
can potentially contribute to any decision by the General
Partner to sell, refinance, upgrade with capital improvements or
hold NPIs property.
In early 2010, the General Partner began to consider strategic
alternatives for NPI and its sole property, Lakeside Apartments.
The General Partner considered the costs of operating NPI,
including audit, tax and SEC reporting costs. The General
Partner looked at these costs, among other things, in light of
Aimcos significant ownership percentage. The General
Partner also considered past loans that had been made by Aimco
OP to NPI, including an aggregate of approximately $16,808,000
between 2005 and 2009, related to a redevelopment project, as
well as operations at Lakeside Apartments. Certain expenses
related to the redevelopment were capitalized and are being
depreciated over the remaining life of the related assets. No
such costs were capitalized during the six months ended
June 30, 2010. Aimco OP has indicated an unwillingness to
make additional advances to NPI.
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 the General Partner, met to discuss
strategic alternatives for the Lakeside Apartments.
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
NPI Units for OP Units.
During March and April 2010, Mr. McCandless sought advice
from representatives of Skadden, Arps, Slate, Meagher &
Fiom, LLP, outside legal and tax counsel, to determine whether a
transaction would be feasible that would result in Aimco
OPs ownership of Lakeside Apartments while also providing
potential tax deferral to the unaffiliated limited partners.
Subsequently, the General Partner decided to obtain an appraisal
to determine the value of Lakeside Apartments and to evaluate
the proceeds and tax consequences to limited partners in such a
transaction.
Also during March and April 2010, Mr. McCandless spoke with
different appraisers regarding the possibility of appraising
Lakeside Apartments for purposes of a potential acquisition by
Aimco OP. On April 13, 2010, the General Partner engaged
CRA to appraise Lakeside Apartments.
On May 21, 2010, CRA informed Mr. McCandless that it
had valued Lakeside Apartments at $48.8 million. During the
following two weeks, Mr. McCandless discussed CRAs
assumptions and valuation with Mr. John Bezzant, Senior
Vice President Transactions of Aimco and a Director
and Senior Vice President of the General Partner and
Mr. Nikhil Venkatesh, Vice President Portfolio
Strategy of Aimco and Vice President of the General Partner.
Mr. Bezzant reviewed the $48.8 million value in light
of fiduciary duties owed to unaffiliated limited partners and
Aimco OPs investment criteria. Aimco OPs investment
criteria was to acquire the property at a price that did not
significantly exceed Aimco OPs estimate of the value of
the property, which it calculated by adding the appraised value
of the property to other assets and deducting therefrom the
amount of liabilities associated with the property, including
mortgage debt (but excluding prepayment penalty).
Mr. Bezzant determined that Aimco OP would pay the
appraised value for Lakeside Apartments.
On October 8, 2010, the General Partners board of
directors held a meeting to discuss the proposed transaction.
The board decided to approve and effect a transaction with Aimco
OP that would give Aimco OP indirect ownership of Lakeside
Apartments. On October 8, 2010, the General Partner
approved and authorized the transactions. The General Partner
and the Aimco Entities considered a number of possible
alternatives to the
30
proposed transactions, as described in greater detail above.
However, the General Partner ultimately determined that the
proposed transactions are in the best interests of NPI and its
limited partners.
Amendment
to Partnership Agreement
Prior to entering into the proposed merger agreement, NPIs
partnership agreement will be amended to (i) eliminate the
prohibition on transactions between NPI, on the one hand, and
its general partners and their affiliates, on the other, and
(ii) authorize the General Partner to complete the mergers
described below without any further action by the limited
partners. The proposed amendment to NPIs partnership
agreement is included in this information statement/prospectus
as Annex F.
Determination
of Merger Consideration
Upon completion of the transactions, limited partners in NPI
will receive, for each NPI Unit outstanding immediately prior to
consummation of the mergers, at the election of the holder,
either $57.24 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
wholly owns the General Partner, the merger consideration has
not been determined in an arms-length negotiation. In
order to arrive at a fair consideration, CRA, an independent
real estate appraisal firm, was engaged to perform a complete
appraisal of NPIs property. For more detailed information
about the independent appraisers determination of the
estimated value of the property, see Special
Factors The Appraisal. The per unit cash
merger consideration payable to each holder of NPI Units is
greater than the General Partners estimate of the proceeds
that would be available for distribution to limited partners
(following the repayment of debt and other liabilities of NPI)
if the property was sold at a price equal to its appraised
value. The General Partner did not deduct certain amounts that
would be payable upon an immediate sale of the
partnerships property, such as prepayment penalties on the
mortgage debt of the property. The estimated prepayment penalty
would have been $6,994,277. The General Partner calculated the
equity of the partnership by (i) adding to the appraised
value the value of any other non-real estate assets of NPI that
would not be included in the appraisal; and (ii) deducting
all liabilities, including mortgage debt, debt owed to the
General Partner or its affiliates, accounts payable and accrued
expenses and certain other costs. The amount of liabilities
deducted includes an estimate of $227,200 for expenses
attributable to the property that would be incurred prior to the
transactions but payable after the transactions. This
calculation, which is summarized below, resulted in per unit
cash merger consideration of $57.24.
|
|
|
|
|
Appraised value of Lakeside Apartments
|
|
$
|
48,800,000
|
|
Plus: Cash and cash equivalents
|
|
|
46,404
|
|
Plus: Other assets
|
|
|
389,694
|
|
Less: Mortgage debt, including accrued interest
|
|
|
(29,367,278
|
)
|
Less: Loans from affiliates of the general partner
|
|
|
(14,610,059
|
)
|
Less: Payables owed to the General Partner and/or affiliates
|
|
|
(279,301
|
)
|
Less: Incentive Compensation Fee allocable to General Partner
|
|
|
(840,600
|
)
|
Less: Accounts payable and accrued expenses owed to third parties
|
|
|
(953,665
|
)
|
Less: Other liabilities
|
|
|
(208,049
|
)
|
Less: Estimated trailing payables
|
|
|
(227,200
|
)
|
|
|
|
|
|
Net partnership equity
|
|
$
|
2,749,946
|
|
Percentage of net partnership equity allocable to limited
partners
|
|
|
100
|
%
|
|
|
|
|
|
Net partnership equity allocable to limited partners
|
|
$
|
2,749,946
|
|
Total number of Units
|
|
|
48,039
|
|
|
|
|
|
|
Cash consideration per unit
|
|
$
|
57.24
|
|
|
|
|
|
|
The number of OP Units offered per NPI 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
mergers.
31
Although there is no public market for OP Units, after a
one-year holding period, each OP Unit is generally
redeemable for cash in an amount equal to the value of one share
of Aimco common stock at the time, subject to Aimcos right
to acquire each OP Unit in exchange for one share of Aimco
common stock (subject to antidilution adjustments). Therefore,
the General Partner considers the trading price of Aimco common
stock to be a reasonable estimate of the fair market value of an
OP Unit. As of October 25, 2010, the average closing
price of Aimco common stock over the preceding ten consecutive
trading days was $22.96, which would have resulted in
OP Unit consideration of 2.49 OP Units per NPI Unit.
Conflicts
of Interest
The General Partner is indirectly wholly owned by Aimco.
Therefore, it has a conflict of interest with respect to the
mergers. The General Partner has fiduciary duties to its sole
stockholder, which is wholly owned by Aimco, on the one hand,
and to NPI and its limited partners, on the other hand. The
duties of the General Partner to NPI and its limited partners
conflict with its duties to its sole stockholder, which could
result in the General Partner approving a transaction that is
more favorable to Aimco than might be the case absent such
conflict of interest. The General Partners desire to seek
the best possible terms for NPIs limited partners
conflicts with Aimcos interest in obtaining the best
possible terms for Aimco OP.
Waiver
and Release and Additional Consideration
The parties to a going private transaction such as the proposed
transaction 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, an additional
payment of $9.42 per NPI 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 $9.42
per unit was determined by dividing $100,000 by the number of
outstanding NPI Units held by unaffiliated limited partners.
This $100,000 amount represents Aimco OPs 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 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 and the
General Partner (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 partners 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
mergers, (c) the ownership of any limited partnership
interest in NPI, including, but not limited to, any and all
claims related to the management of NPI or the properties owned
by NPI (whether currently or previously), the payment of
management fees or other monies to the General Partner and to
affiliates of NPI and prior sales of properties, or (d) the
purchase, acquisition, holding, sale or voting of one or more
limited partnership interests in NPI (collectively, the
Released Claims).
The waiver and release do not apply to claims limited partners
may have under the federal securities laws.
32
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
Claims 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.
Future
Plans for the Property
After the transactions, Aimco OP will be the sole limited
partner in New NPI, and will own all of the outstanding New NPI
Units. The General Partner will continue to be the General
Partner of New NPI after the transactions, and NPIs
partnership agreement in effect immediately prior to the mergers
will be adopted as the partnership agreement of New NPI, with
the following changes: (i) references therein to the
California Act will be amended to refer to the Delaware Act;
(ii) a description of the merger will be added; and
(iii) the name of the partnership will be National
Property Investors III, LP. Aimco OP intends to retain the
New NPI Units after the mergers. After the mergers, Aimco will
evaluate the capital improvement needs of Lakeside Apartments,
and anticipates making certain routine capital expenditures with
respect to the property during the remainder of 2010.
Material
United States Federal Income Tax Consequences of the
Transactions
For a discussion of the material United States federal income
tax consequences of the transactions, see Material United
States Federal Income Tax Matters United States
Federal Income Tax Consequences Relating to the
Transactions.
Regulatory
Matters
No material federal or state regulatory requirements must be
satisfied or approvals obtained in connection with the
transactions, except (1) filing a registration statement
that includes this information statement/prospectus with the SEC
and obtaining the SECs declaration that the registration
statement is effective under the Securities Act,
(2) registration or qualification of the issuance of
OP Units under state securities laws, and (3) filing
certificates of merger with the Secretary of State of the State
of Delaware and the Secretary of State of the State of
California.
33
Accounting
Treatment of the Transactions
Aimco and Aimco OP will treat the transactions as a purchase of
noncontrolling interests for financial accounting purposes. This
means that Aimco and Aimco OP will recognize any difference
between the purchase price for these noncontrolling interests
and the carrying amount of such noncontrolling interests in
Aimco and Aimco OPs consolidated financial statements as
an adjustment to the amounts of consolidated equity and
partners capital attributed to Aimco and Aimco OP,
respectively.
Appraisal
Rights
Limited partners are not entitled to dissenters appraisal
rights under applicable law or NPIs partnership agreement
in connection with the merger. However, pursuant to the terms of
the merger agreement, Aimco OP will provide each limited partner
with contractual dissenters appraisal rights that are
similar to the dissenters appraisal rights available to a
stockholder of a constituent corporation in a merger
reorganization under Delaware law. These contractual appraisal
rights will enable a limited partner to obtain an appraisal of
the value of the limited partners NPI 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.
Expenses
and Fees and Source of Funds
The costs of planning and implementing the mergers, 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 $854,229
(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 mergers with funds on hand or from drawings under
its revolving credit facility. The revolving credit facility is
pursuant to Aimco OPs Amended and Restated Senior Secured
Credit Agreement, as amended, with a syndicate of financial
institutions, with Bank of America, N.A. as administrative
agent, swing line lender and L/C issuer. As of
September 30, 2010, the Credit Agreement consisted of
$300.0 million of revolving loan commitments. Borrowings
under the revolving credit facility bear interest based on a
pricing grid determined by leverage (either at LIBOR plus 4.25%
with a LIBOR floor of 1.50% or, at Aimco OPs option, a
base rate equal to the Prime rate plus a spread of 3.00%). The
revolving credit facility matures May 1, 2013, and may be
extended for an additional year, subject to certain conditions,
including payment of a 35.0 basis point fee on the total
revolving commitments. The amount available under the revolving
credit facility at September 30, 2010, was
$258.7 million (after giving effect to $41.3 million
outstanding for undrawn letters of credit issued under the
revolving credit facility). The proceeds of revolving loans are
generally permitted to be used to fund working capital and for
other corporate purposes.
Approvals
Required
Under applicable law, the amendment of the partnership agreement
of NPI and the transactions contemplated thereby must be
approved by the General Partner and a majority in interest of
the limited partners. The General Partner has determined that
the amendment and the transactions contemplated thereby,
including the mergers, are advisable and in the best interests
of NPI and its limited partners and has approved the amendment
and the transactions. As of October 25, 2010, there were
issued and outstanding 48,039 NPI Units, and Aimco OP and its
affiliates owned 37,419 of those units, or approximately 77.89%
of the outstanding NPI Units. As more fully described herein,
21,380 of the NPI Units owned by an affiliate of the General
Partner are subject to a voting restriction, which requires such
NPI Units to be voted in proportion to the votes cast with
respect to NPI Units not subject to this voting restriction. The
General Partners affiliates have indicated that they will
vote all of their NPI Units that are not subject to this
restriction, 16,039 NPI Units or approximately 33.39% of the
outstanding NPI Units, in favor of the amendment and the
transactions. As a result, affiliates of the General Partner
will vote a total of 28,901 NPI Units, or approximately 60.16%
of the outstanding NPI Units, in favor of the amendment and the
34
transactions. 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 amendment and
the transactions on or
about ,
2010. As a result, approval of the amendment and the
transactions contemplated thereby is assured and your consent is
not required.
35
THE
MERGER AGREEMENT
The following is a summary of the material terms of the
merger agreement and is qualified in its entirety by reference
to the merger agreement, which is attached to this information
statement/prospectus as Annex A. You should read the
merger agreement carefully in its entirety as it is the legal
document that governs this merger.
The
Mergers
The proposed amendment to NPIs partnership agreement
authorizes NPI to enter into an agreement and plan of merger
with New NPI, the Aimco Subsidiary and Aimco OP, which
contemplates the following transactions:
Merger of NPI with and into New NPI. First,
NPI will be merged with and into New NPI with New NPI as the
surviving entity. In this merger, each NPI Unit will be
converted into an identical unit of limited partnership in New
NPI and the general partnership interest in NPI now held by the
general partner will be converted into a general partnership
interest in New NPI. All interests in New NPI outstanding
immediately prior to the merger will be cancelled in the merger.
NPIs partnership agreement in effect immediately prior to
the merger will be adopted as the partnership agreement of New
NPI, with the following changes: (i) references therein to
the California Uniform Limited Partnership Act, as amended, or
the California Act, will be amended to refer to the Delaware
Revised Uniform Limited Partnership Act, as amended, or the
Delaware Act; (ii) a description of the merger will be
added; and (iii) the name of the partnership will be
National Property Investors III, LP.
Merger of the Aimco Subsidiary with and into New
NPI. Second, the Aimco Subsidiary will be merged
with and into New NPI, with New NPI as the surviving entity. In
the merger, each NPI Unit outstanding immediately prior to
consummation of the merger will be converted into the right to
receive, at the election of the holder, either $57.24 in cash or
equivalent value in OP Units (calculated by dividing $57.24
by the average closing price of Aimco common stock, as reported
on the NYSE, over the ten consecutive trading days ending on the
second trading day immediately prior to the consummation of the
merger); provided, however, that if Aimco OP
determines that the law of the state or other jurisdiction in
which a limited partner resides would prohibit the issuance of
Aimco OP Units in that state or other jurisdiction (or that
registration or qualification in that state or jurisdiction
would be prohibitively costly), then such limited partner will
only be entitled to receive $57.24 in cash for each NPI Unit.
In this second merger, Aimco OPs interest in the Aimco
Subsidiary will be converted into New NPI Units. After the
merger, Aimco OP will be the sole limited partner in New NPI,
and will own all of the outstanding New NPI Units. The General
Partner of NPI immediately prior to the merger will continue to
serve as the general partner of the surviving entity. The
agreement of limited partnership of New NPI, as in effect
immediately prior to the consummation of the merger, will be the
agreement of limited partnership of the surviving entity after
the merger, until thereafter amended in accordance with the
provisions thereof and applicable law.
Conditions
to Obligations to Complete the Mergers
None of the parties to the merger agreement are required to
consummate the mergers if any third party consent, authorization
or approval that any of the parties deems necessary or desirable
in connection with the merger agreement, and the consummation of
the transactions contemplated thereby, has not been obtained or
received.
Termination
of the Merger Agreement
The merger agreement may be terminated, and the mergers may be
abandoned, at any time prior to consummation of the mergers,
without liability to any party to the merger agreement, by NPI,
New NPI, 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 NPI or by Aimco OP.
36
Amendment
Subject to applicable law, the merger agreement may be amended,
modified or supplemented by written agreement of the parties at
any time prior to the consummation of the mergers with respect
to any of the terms contained therein.
Governing
Law
The merger agreement is governed by and construed in accordance
with the laws of the State of Delaware, without reference to the
conflict of law provisions thereof.
Appraisal
Rights
Limited partners are not entitled to dissenters appraisal
rights under applicable law or NPIs partnership agreement
in connection with the mergers. However, pursuant to the terms
of the merger agreement, Aimco OP will provide each limited
partner with contractual dissenters appraisal rights that
are similar to the dissenters appraisal rights available
to a stockholder of a constituent corporation in a merger under
Delaware law. These contractual appraisal rights will enable a
limited partner to obtain an appraisal of the value of the
limited partners NPI Units in connection with the mergers.
Prosecution of these contractual appraisal rights will involve
an arbitration proceeding, and the consideration paid to a
limited partner after the prosecution of such contractual
appraisal rights, which will take a period of time that cannot
be predicted with accuracy, will be a cash payment, resulting in
a taxable event to such limited partner. A description of the
appraisal rights being provided, and the procedures that a
limited partner must follow to seek such rights, is attached to
this information statement/prospectus as Annex B.
Election
Forms
Within ten days after the effective time of the mergers, Aimco
OP will prepare and mail to the former holders of NPI Units an
election form pursuant to which such holders can elect to
receive cash or OP Units. Limited partners may also elect
appraisal of their NPI Units pursuant to the election form.
Holders of NPI 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 mergers, the holder will be deemed to have elected to
receive the cash consideration. Former holders of NPI Units may
also use the election form to elect to receive, in lieu of the
merger consideration, the appraised value of their NPI 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 $9.42 per
NPI Unit in exchange for executing a waiver and release of
certain claims. In order to receive such additional
consideration, limited partners must complete 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.
37
DESCRIPTION
OF AIMCO OP UNITS; SUMMARY OF AIMCO OP PARTNERSHIP
AGREEMENT
The following description sets forth some general terms and
provisions of the Aimco OP partnership agreement. The following
description of the Aimco OP partnership agreement is qualified
in its entirety by the terms of the agreement.
General
Aimco OP is a limited partnership organized under the provisions
of the Delaware Revised Uniform Limited Partnership Act, as
amended from time to time, or any successor to such statute, or
the Delaware Act, and upon the terms and subject to the
conditions set forth in its agreement of limited partnership.
AIMCO-GP, a Delaware corporation and wholly owned subsidiary of
Aimco, is the sole general partner of Aimco OP. Another wholly
owned subsidiary of Aimco, AIMCO-LP Trust, a Delaware trust, or
the special limited partner, is a limited partner in Aimco OP.
The term of Aimco OP commenced on May 16, 1994, and will
continue in perpetuity, unless Aimco OP is dissolved sooner
under the provisions of the partnership agreement or as
otherwise provided by law.
Purpose
And Business
The purpose and nature of Aimco OP is to conduct any business,
enterprise or activity permitted by or under the Delaware Act,
including, but not limited to, (i) 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.
Management
By The General Partner
Except as otherwise expressly provided in the Aimco OP
partnership agreement, all management powers over the business
and affairs of Aimco OP are exclusively vested in the general
partner. No limited partner of Aimco OP or any other person to
whom one or more OP Units have been transferred (each, an
assignee) may take part in the operations,
management or control (within the meaning of the Delaware Act)
of Aimco OPs business, transact any business in Aimco
OPs name or have the power to sign documents for or
otherwise bind Aimco OP. The general partner may not be removed
by the limited partners with or without cause, except with the
consent of the general partner. In addition to the powers
granted to a general partner of a limited partnership under
applicable law or that are granted to the general partner under
any other provision of the Aimco OP partnership agreement, the
general partner, subject to the other provisions of the Aimco OP
partnership agreement, has full power and authority to do all
things deemed necessary or desirable by it to conduct the
business of Aimco OP, to exercise all powers of Aimco OP and to
effectuate the purposes of Aimco OP. Aimco OP may incur debt or
enter into other similar credit, guarantee, financing or
refinancing arrangements for any purpose (including, without
limitation, in connection with any acquisition of properties)
upon such terms as the general partner determines to be
appropriate. The general partner is authorized to execute,
deliver and perform specific agreements and transactions on
behalf of Aimco OP without any further act, approval or vote of
the limited partners.
Restrictions on General Partners
Authority. The general partner may not take any
action in contravention of the Aimco OP partnership agreement.
The general partner may not, without the prior consent of the
limited partners, undertake, on behalf of Aimco OP, any of the
following actions or enter into any transaction that would have
the effect of such transactions: (i) except as provided in
the partnership agreement, amend, modify or terminate the
partnership agreement other than to reflect the admission,
substitution, termination or withdrawal of partners;
(ii) make a general assignment for the benefit of creditors
or appoint or acquiesce in the appointment of a custodian,
receiver or trustee for all or any part of the assets of Aimco
OP; (iii) institute any proceeding for bankruptcy on
38
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
partners sole and absolute discretion.
Outstanding
Classes Of Units
As of June 30, 2010, Aimco OP had issued and outstanding
the following partnership interests:
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Liquidation
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Units
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Quarterly Distribution
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Preference
|
Class
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Outstanding
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per Unit
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(per Unit)
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Partnership Common Units (OP Units)
|
|
|
123,030,243
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|
$
|
|
|
|
|
N/A
|
|
Class G Partnership Preferred Units(1)
|
|
|
4,050,000
|
|
|
$
|
0.586
|
|
|
$
|
25.00
|
|
Class T Partnership Preferred Units
|
|
|
6,000,000
|
|
|
$
|
0.50
|
|
|
$
|
25.00
|
|
Class U Partnership Preferred Units
|
|
|
8,000,000
|
|
|
$
|
0.484
|
|
|
$
|
25.00
|
|
Class V Partnership Preferred Units
|
|
|
3,450,000
|
|
|
$
|
0.50
|
|
|
$
|
25.00
|
|
Class Y Partnership Preferred Units
|
|
|
3,450,000
|
|
|
$
|
0.492
|
|
|
$
|
25.00
|
|
Series A CRA Perpetual Partnership Preferred Units(2)
|
|
|
114
|
|
|
$
|
4,274.17
|
(3)
|
|
$
|
500,000.00
|
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Class One Partnership Preferred Units(4)
|
|
|
90,000
|
|
|
$
|
2.00
|
|
|
$
|
91.43
|
|
Class Two Partnership Preferred Units(4)
|
|
|
23,700
|
|
|
$
|
0.115
|
|
|
$
|
25.00
|
|
Class Three Partnership Preferred Units(4)
|
|
|
1,366,771
|
|
|
$
|
0.4923
|
|
|
$
|
25.00
|
|
Class Four Partnership Preferred Units(4)
|
|
|
755,999
|
|
|
$
|
0.50
|
|
|
$
|
25.00
|
|
Class Five Partnership Preferred Units(5)
|
|
|
68,671
|
|
|
$
|
|
|
|
|
N/A
|
|
Class Six Partnership Preferred Units(4)
|
|
|
796,668
|
|
|
$
|
0.53125
|
|
|
$
|
25.00
|
|
Class Seven Partnership Preferred Units(4)
|
|
|
27,960
|
|
|
$
|
0.5938
|
|
|
$
|
25.00
|
|
Class Eight Partnership Preferred Units(5)
|
|
|
6,250
|
|
|
$
|
|
|
|
|
N/A
|
|
Class I High Performance Partnership Units (HPUs)(5)
|
|
|
2,339,950
|
|
|
$
|
|
|
|
|
N/A
|
|
|
|
|
(1) |
|
Includes 10,000 units held by a consolidated subsidiary
that are eliminated in consolidation. |
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(2) |
|
During 2006, Aimco sold 200 shares of its Series A
Community Reinvestment Act Perpetual Preferred Stock,
$0.01 par value per share, or the CRA Preferred Stock, with
a liquidation preference of $500,000 per share, for |
39
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|
|
|
net proceeds of $97.5 million. The Series A Community
Reinvestment Act Perpetual Partnership Preferred Units, or the
CRA Preferred Units, have substantially the same terms as the
CRA Preferred Stock. Holders of the CRA Preferred Units are
entitled to cumulative cash dividends payable quarterly in
arrears on March 31, June 30, September 30, and
December 31 of each year, when and as declared, beginning on
September 30, 2006. For the period from the date of
original issuance through March 31, 2015, the distribution
rate is a variable rate per annum equal to the Three-Month LIBOR
Rate (as defined in the articles supplementary designating the
CRA Preferred Stock) plus 1.25%, calculated as of the beginning
of each quarterly dividend period. The rate at June 30,
2010 was 1.54%. Upon liquidation, holders of the CRA Preferred
Stock are entitled to a preference of $500,000 per share, plus
an amount equal to accumulated, accrued and unpaid dividends,
whether or not earned or declared. The CRA Preferred Units rank
prior to Common OP Units and on the same level as Aimco
OPs other Preferred OP Units, with respect to the payment
of distributions and the distribution of amounts upon
liquidation, dissolution or winding up. The CRA Preferred Units
are not redeemable prior to June 30, 2011, except in
limited circumstances related to Aimcos REIT
qualification. On and after June 30, 2011, the CRA
Preferred Units are redeemable for cash, in whole or from time
to time in part, upon the redemption, at Aimcos option, of
its CRA Preferred Stock at a price per share equal to the
liquidation preference, plus accumulated, accrued and unpaid
distributions, if any, to the redemption date. |
|
(3) |
|
Amount per unit based on 114 units outstanding for the
entire period. 20 units were repurchased in May 2010 and
received $1,980 in dividends through the date of purchase. |
|
(4) |
|
The Class One, Class Two, Class Three,
Class Four, Class Six and Class Seven preferred
OP Units are redeemable, at the holders option. Aimco OP,
at its sole discretion, may settle such redemption requests in
cash or shares of Aimcos Class A Common Stock in a
value equal to the redemption preference. In the event Aimco OP
requires Aimco to issue shares to settle a redemption request,
it would issue to Aimco a corresponding number of common OP
Units. Aimco OP has a redemption policy that requires cash
settlement of redemption requests for the redeemable preferred
OP Units, subject to limited exceptions. |
|
(5) |
|
The holders of Class Five preferred OP Units,
Class Eight preferred OP Units and HPUs receive the same
amount of distributions that are paid to holders of an
equivalent number of Aimco OPs outstanding common OP Units. |
Distributions
Subject to the rights of holders of any outstanding partnership
preferred units, the Aimco OP partnership agreement requires the
general partner to cause Aimco OP to distribute quarterly all,
or such portion as the general partner may in its sole and
absolute discretion determine, of Available Cash (as defined in
the partnership agreement) generated by Aimco OP during such
quarter to the general partner, the special limited partner, the
other holders of OP Units and holders of HPUs on the record
date established by the general partner with respect to such
quarter, in accordance with their respective interests in Aimco
OP on such record date. Holders of any partnership preferred
units issued in the future may have priority over the general
partner, the special limited partner, holders of OP Units
and holders of HPUs with respect to distributions of Available
Cash, distributions upon liquidation or other distributions.
Distributions payable with respect to any interest in Aimco OP
that was not outstanding during the entire quarterly period in
respect of which any distribution is made will be prorated based
on the portion of the period that such interest was outstanding.
The general partner in its sole and absolute discretion may
distribute to the limited partners Available Cash on a more
frequent basis and provide for an appropriate record date. The
partnership agreement requires the general partner to take such
reasonable efforts, as determined by it in its sole and absolute
discretion and consistent with the requirements for
qualification as a REIT, to cause Aimco OP to distribute
sufficient amounts to enable the general partner to transfer
funds to Aimco and enable Aimco to pay stockholder dividends
that will (i) satisfy the requirements, or the REIT
Requirements, for qualifying as a REIT under the 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
40
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.
Allocations
Of Net Income And Net Loss
OP Units and HPUs. Net Income (as defined
in the Aimco OP partnership agreement) and Net Loss (as defined
in the Aimco OP partnership agreement) of Aimco OP will be
determined and allocated with respect to each fiscal year of
Aimco OP as of the end of each such year. Except as otherwise
provided in the Aimco OP partnership agreement, an allocation to
an OP Unitholder of a share of Net Income or Net Loss will
be treated as an allocation of the same share of each item of
income, gain, loss or deduction that is taken into account in
computing Net Income or Net Loss. Except as otherwise provided
in the Aimco OP partnership agreement and subject to the terms
of any outstanding partnership preferred units, Net Income and
Net Loss will be allocated to the holders of OP Units and
holders of HPUs in accordance with their respective interests at
the end of each fiscal year. The Aimco OP 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.
Withholding
Aimco OP is authorized to withhold from or pay on behalf of or
with respect to each limited partner any amount of Federal,
state, local or foreign taxes that the general partner
determines that Aimco OP is required to
41
withhold or pay with respect to any amount distributable or
allocable to such limited partner under the Aimco OP partnership
agreement. The Aimco OP partnership agreement also provides that
any withholding tax amount paid on behalf of or with respect to
a limited partner constitutes a loan by Aimco OP to such limited
partner. This loan is required to be repaid within 15 days
after notice to the limited partner from the general partner,
and each limited partner grants a security interest in its
partnership interest to secure its obligation to pay any
partnership withholding tax amounts paid on its behalf or with
respect to such limited partner. In addition, under the Aimco OP
partnership agreement, the partnership may redeem the
partnership interest of any limited partner who fails to pay
partnership withholding tax amounts paid on behalf of or with
respect to such limited partner. Also, the general partner has
authority to withhold, from any amounts otherwise distributable,
allocable or payable to a limited partner, the general
partners estimate of further taxes required to be paid by
such limited partner.
Return Of
Capital
No partner is entitled to interest on its capital contribution
or on such partners capital account. Except (i) under
the rights of redemption set forth in the Aimco OP partnership
agreement, (ii) as provided by law, or (iii) under the
terms of any outstanding partnership preferred units, no partner
has any right to demand or receive the withdrawal or return of
its capital contribution from Aimco OP, except to the extent of
distributions made under the Aimco OP partnership agreement or
upon termination of Aimco OP. Except to the extent otherwise
expressly provided in the Aimco OP partnership agreement and
subject to the terms of any outstanding partnership preferred
units, no limited partner or assignee will have priority over
any other limited partner or Assignee either as to the return of
capital contributions or as to profits, losses or distributions.
Redemption Rights
Of Qualifying Parties
After the first anniversary of becoming a holder of
OP Units, each OP Unitholder and some assignees have
the right, subject to the terms and conditions set forth in the
Aimco OP partnership agreement, to require Aimco OP to redeem
all or a portion of the OP Units held by such party in
exchange for shares of Aimco common stock or a cash amount equal
to the value of such shares, as Aimco OP may determine. On or
before the close of business on the fifth business day after a
holder of OP Units gives the general partner a notice of
redemption, Aimco OP may, in its sole and absolute discretion
but subject to the restrictions on the ownership of Aimco stock
imposed under Aimcos charter and the transfer restrictions
and other limitations thereof, elect to cause Aimco to acquire
some or all of the tendered OP Units from the tendering
party in exchange for Aimco common stock, based on an exchange
ratio of one share of Aimco common stock for each OP Unit,
subject to adjustment as provided in the Aimco OP partnership
agreement. The Aimco OP partnership agreement does not obligate
Aimco or the general partner to register, qualify or list any
Aimco common stock issued in exchange for OP Units with the
SEC, with any state securities commissioner, department or
agency, or with any stock exchange. Aimco common stock issued in
exchange for OP Units under the Aimco OP partnership
agreement will contain legends regarding restrictions under the
Securities Act and applicable state securities laws as Aimco in
good faith determines to be necessary or advisable in order to
ensure compliance with securities laws. In the event of a change
of control of Aimco, holders of HPUs will have redemption rights
similar to those of holders of OP Units.
Partnership
Right To Call Limited Partner Interests
Notwithstanding any other provision of the Aimco OP partnership
agreement, on and after the date on which the aggregate
percentage interests of the limited partners, other than the
special limited partner, are less than one percent (1%), Aimco
OP will have the right, but not the obligation, from time to
time and at any time to redeem any and all outstanding limited
partner interests (other than the special limited partners
interest) by treating any limited partner as if such limited
partner had tendered for redemption under the Aimco OP
partnership agreement the amount of OP Units specified by
the general partner, in its sole and absolute discretion, by
notice to the limited partner.
Transfers
And Withdrawals
Restrictions On Transfer. The Aimco OP
partnership agreement restricts the transferability of
OP Units. Any transfer or purported transfer of an
OP Unit not made in accordance with the Aimco OP
partnership agreement will
42
be null and void ab initio. Until the expiration of one year
from the date on which an OP Unitholder acquired
OP Units, subject to some exceptions, such
OP Unitholder may not transfer all or any portion of its
OP Units to any transferee without the consent of the
general partner, which consent may be withheld in its sole and
absolute discretion. After the expiration of one year from the
date on which an OP Unitholder acquired OP Units, such
OP Unitholder has the right to transfer all or any portion
of its OP Units to any person, subject to the satisfaction
of specific conditions specified in the Aimco OP partnership
agreement, including the general partners right of first
refusal.
It is a condition to any transfer (whether or not such transfer
is effected before or after the one year holding period) that
the transferee assumes by operation of law or express agreement
all of the obligations of the transferor limited partner under
the Aimco OP partnership agreement with respect to such
OP Units, and no such transfer (other than under a
statutory merger or consolidation wherein all obligations and
liabilities of the transferor partner are assumed by a successor
corporation by operation of law) will relieve the transferor
partner of its obligations under the Aimco OP partnership
agreement without the approval of the general partner, in its
sole and absolute discretion.
In connection with any transfer of OP Units, the general
partner will have the right to receive an opinion of counsel
reasonably satisfactory to it to the effect that the proposed
transfer may be effected without registration under the
Securities Act, and will not otherwise violate any federal or
state securities laws or regulations applicable to Aimco OP or
the OP Units transferred.
No transfer by a limited partner of its OP Units (including
any redemption or any acquisition of OP Units by the
general partner or by Aimco OP) may be made to any person if
(i) in the opinion of legal counsel for Aimco OP, it would
result in Aimco OP being treated as an association taxable as a
corporation, or (ii) such transfer is effectuated through
an established securities market or a
secondary market (or the substantial equivalent
thereof) within the meaning of Section 7704 of the
Code.
HPUs. HPUs are subject to different
restrictions on transfer. Individuals may not transfer HPUs
except to a family member (or a family-owned entity) or in the
event of their death.
Substituted Limited Partners. No limited
partner will have the right to substitute a transferee as a
limited partner in its place. A transferee of the interest of a
limited partner may be admitted as a substituted limited partner
only with the consent of the general partner, which consent may
be given or withheld by the general partner in its sole and
absolute discretion. If the general partner, in its sole and
absolute discretion, does not consent to the admission of any
permitted transferee as a substituted limited partner, such
transferee will be considered an assignee for purposes of the
Aimco OP partnership agreement. An assignee will be entitled to
all the rights of an assignee of a limited partnership interest
under the Delaware Act, including the right to receive
distributions from Aimco OP and the share of Net Income, Net
Losses and other items of income, gain, loss, deduction and
credit of Aimco OP attributable to the OP Units assigned to
such transferee and the rights to transfer the OP Units
provided in the Aimco OP partnership agreement, but will not be
deemed to be a holder of OP Units for any other purpose
under the Aimco OP partnership agreement, and will not be
entitled to effect a consent or vote with respect to such
OP Units on any matter presented to the limited partners
for approval (such right to consent or vote, to the extent
provided in the Aimco OP partnership agreement or under the
Delaware Act, fully remaining with the transferor limited
partner).
Withdrawals. No limited partner may withdraw
from Aimco OP other than as a result of a permitted transfer of
all of such limited partners OP Units in accordance
with the Aimco OP partnership agreement, with respect to which
the transferee becomes a substituted limited partner, or under a
redemption (or acquisition by Aimco) of all of such limited
partners OP Units.
Restrictions on the general partner. The
general partner may not transfer any of its general partner
interest or withdraw from Aimco OP unless (i) the limited
partners consent or (ii) immediately after a merger of the
general partner into another entity, substantially all of the
assets of the surviving entity, other than the general
partnership interest in Aimco OP held by the general partner,
are contributed to Aimco OP as a capital contribution in
exchange for OP Units.
43
Amendment
of the Partnership Agreement
By the General Partner Without the Consent of the Limited
Partners. The general partner has the power,
without the consent of the limited partners, to amend the Aimco
OP partnership agreement as may be required to facilitate or
implement any of the following purposes: (1) to add to the
obligations of the general partner or surrender any right or
power granted to the general partner or any affiliate of the
general partner for the benefit of the limited partners;
(2) to reflect the admission, substitution or withdrawal of
partners or the termination of Aimco OP in accordance with the
partnership agreement; (3) to reflect a change that is of
an inconsequential nature and does not adversely affect the
limited partners in any material respect, or to cure any
ambiguity, correct or supplement any provision in the
partnership agreement not inconsistent with law or with other
provisions, or make other changes with respect to matters
arising under the partnership agreement that will not be
inconsistent with law or with the provisions of the partnership
agreement; (4) to satisfy any requirements, conditions or
guidelines contained in any order, directive, opinion, ruling or
regulation of a federal or state agency or contained in federal
or state law; (5) to reflect such changes as are reasonably
necessary for Aimco to maintain its status as a REIT; and
(6) to modify the manner in which capital accounts are
computed (but only to the extent set forth in the definition of
Capital Account in the Aimco OP partnership
agreement or contemplated by the Code or the Regulations).
With the Consent of the Limited
Partners. Amendments to the Aimco OP partnership
agreement may be proposed by the general partner or by holders
of a majority of the outstanding OP Units and other classes
of units that have the same voting rights as holders of
OP Units, excluding the special limited partner. Following
such proposal, the general partner will submit any proposed
amendment to the limited partners. The general partner will seek
the written consent of a majority in interest of the limited
partners on the proposed amendment or will call a meeting to
vote thereon and to transact any other business that the general
partner may deem appropriate.
Procedures
for Actions and Consents of Partners
Meetings of the partners may be called by the general partner
and will be called upon the receipt by the general partner of a
written request by a majority in interest of the limited
partners. Notice of any such meeting will be given to all
partners not less than seven (7) days nor more than thirty
(30) days prior to the date of such meeting. Partners may
vote in person or by proxy at such meeting. Each meeting of
partners will be conducted by the general partner or such other
person as the general partner may appoint under such rules for
the conduct of the meeting as the general partner or such other
person deems appropriate in its sole and absolute discretion.
Whenever the vote or consent of partners is permitted or
required under the partnership agreement, such vote or consent
may be given at a meeting of partners or may be given by written
consent. Any action required or permitted to be taken at a
meeting of the partners may be taken without a meeting if a
written consent setting forth the action so taken is signed by
partners holding a majority of outstanding OP Units (or
such other percentage as is expressly required by the Aimco OP
partnership agreement for the action in question).
Records
and Accounting; Fiscal Year
The Aimco OP partnership agreement requires the general partner
to keep or cause to be kept at the principal office of Aimco OP
those records and documents required to be maintained by the
Delaware Act and other books and records deemed by the general
partner to be appropriate with respect to Aimco OPs
business. The books of Aimco OP will be maintained, for
financial and tax reporting purposes, on an accrual basis in
accordance with generally accepted accounting principles, or on
such other basis as the general partner determines to be
necessary or appropriate. To the extent permitted by sound
accounting practices and principles, Aimco OP, the general
partner and Aimco may operate with integrated or consolidated
accounting records, operations and principles. The fiscal year
of Aimco OP is the calendar year.
Reports
As soon as practicable, but in no event later than one hundred
and five (105) days after the close of each calendar
quarter and each fiscal year, the general partner will make
available to limited partners (which may be done by filing a
report with the SEC) a report containing financial statements of
Aimco OP, or of Aimco if such statements are prepared solely on
a consolidated basis with Aimco, for such calendar quarter or
fiscal year, as the
44
case may be, presented in accordance with generally accepted
accounting principles, and such other information as may be
required by applicable law or regulation or as the general
partner determines to be appropriate. Statements included in
quarterly reports are not audited. Statements included in annual
reports are audited by a nationally recognized firm of
independent public accountants selected by the general partner.
Tax
Matters Partner
The general partner is the tax matters partner of
Aimco OP for United States Federal income tax purposes. The tax
matters partner is authorized, but not required, to take certain
actions on behalf of Aimco OP with respect to tax matters. In
addition, the general partner will arrange for the preparation
and timely filing of all returns with respect to partnership
income, gains, deductions, losses and other items required of
Aimco OP for United States Federal and state income tax purposes
and will use all reasonable effort to furnish, within ninety
(90) days of the close of each taxable year, the tax
information reasonably required by limited partners for United
States Federal and state income tax reporting purposes. The
limited partners will promptly provide the general partner with
such information as may be reasonably requested by the general
partner from time to time.
Dissolution
and Winding Up
Dissolution. Aimco OP will dissolve, and its
affairs will be wound up, upon the first to occur of any of the
following (each a liquidating event): (i) an
event of withdrawal, as defined in the Delaware Act (including,
without limitation, bankruptcy), of the sole general partner
unless, within ninety (90) days after the withdrawal, a
majority in interest (as such phrase is used in
Section 17-801(3)
of the Delaware Act) of the remaining partners agree in writing,
in their sole and absolute discretion, to continue the business
of Aimco OP and to the appointment, effective as of the date of
withdrawal, of a successor general partner; (ii) an
election to dissolve Aimco OP made by the general partner in its
sole and absolute discretion, with or without the consent of the
limited partners; (iii) entry of a decree of judicial
dissolution of Aimco OP under the provisions of the Delaware
Act; (iv) the occurrence of a Terminating Capital
Transaction; or (v) the redemption (or acquisition by
Aimco, the general partner
and/or the
special limited partner) of all OP Units other than
OP Units held by the general partner or the special limited
partner.
Winding Up. Upon the occurrence of a
liquidating event, Aimco OP will continue solely for the
purposes of winding up its affairs in an orderly manner,
liquidating its assets and satisfying the claims of its
creditors and partners. The general partner (or, in the event
that there is no remaining general partner or the general
partner has dissolved, become bankrupt within the meaning of the
Delaware Act or ceased to operate, any person elected by a
majority in interest of the limited partners) will be
responsible for overseeing the winding up and dissolution of
Aimco OP and will take full account of Aimco OPs
liabilities and property, and Aimco OP property will be
liquidated as promptly as is consistent with obtaining the fair
value thereof, and the proceeds therefrom (which may, to the
extent determined by the general partner, include Aimco stock)
will be applied and distributed in the following order:
(i) first, to the satisfaction of all of Aimco OPs
debts and liabilities to creditors other than the partners and
their assignees (whether by payment or the making of reasonable
provision for payment thereof); (ii) second, to the
satisfaction of all Aimco OPs debts and liabilities to the
general partner (whether by payment or the making of reasonable
provision for payment thereof), including, but not limited to,
amounts due as reimbursements under the partnership agreement;
(ii) third, to the satisfaction of all of Aimco OPs
debts and liabilities to the other partners and any assignees
(whether by payment or the making of reasonable provision for
payment thereof); (iv) fourth, to the satisfaction of all
liquidation preferences of outstanding Partnership Preferred
Units, if any; and (v) the balance, if any, to the general
partner, the limited partners and any assignees in accordance
with and in proportion to their positive capital account
balances, after giving effect to all contributions,
distributions and allocations for all periods. In the event of a
liquidation, holders of HPUs will be specially allocated items
of income and gain in an amount sufficient to cause the capital
account of such holder to be equal to that of a holder of an
equal number of OP Units.
45
DESCRIPTION
OF AIMCO COMMON STOCK
General
Aimcos charter authorizes the issuance of up to
422,157,736 shares of common stock. As of October 20,
2010, 117,033,718 shares were issued and outstanding. The
Aimco common stock is traded on the NYSE under the symbol
AIV. Computershare Limited serves as transfer agent
and registrar of the Aimco common stock. On October 25,
2010, the closing price of the Aimco common stock on the NYSE
was $23.84. The following table shows the high and low reported
sales prices and dividends paid per share of Aimcos common
stock in the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
High
|
|
Low
|
|
Dividends
|
|
December 31, 2010 (through October 25, 2010)
|
|
$
|
24.15
|
|
|
$
|
21.22
|
|
|
$
|
0.00
|
|
September 30, 2010
|
|
|
22.82
|
|
|
|
18.12
|
|
|
|
0.10
|
|
June 30, 2010
|
|
|
24.21
|
|
|
|
18.14
|
|
|
|
0.10
|
|
March 31, 2010
|
|
|
19.17
|
|
|
|
15.01
|
|
|
|
0.00
|
|
December 31, 2009
|
|
|
17.09
|
|
|
|
11.80
|
|
|
|
0.20
|
|
September 30, 2009
|
|
|
15.91
|
|
|
|
7.36
|
|
|
|
0.10
|
|
June 30, 2009
|
|
|
11.10
|
|
|
|
5.18
|
|
|
|
0.10
|
|
March 31, 2009
|
|
|
12.89
|
|
|
|
4.57
|
|
|
|
0.00
|
|
December 31, 2008(1)
|
|
|
43.67
|
|
|
|
7.01
|
|
|
|
3.88
|
|
September 30, 2008(1)
|
|
|
42.28
|
|
|
|
29.25
|
|
|
|
3.00
|
|
June 30, 2008
|
|
|
41.24
|
|
|
|
33.33
|
|
|
|
0.60
|
|
March 31, 2008
|
|
|
41.11
|
|
|
|
29.91
|
|
|
|
0.00
|
|
|
|
|
(1) |
|
During 2008, Aimcos Board of Directors declared special
dividends which were paid part in cash and part in shares of
Common Stock as further discussed in Note 11 to the
consolidated financial statements in Item 8 of Aimcos
Current Report on
Form 8-K,
dated September 10, 2010 and filed with the SEC on
September 10, 2010, which is incorporated herein by
reference. Aimcos Board of Directors declared the
dividends to address taxable gains from 2008 property sales. |
Aimco adopted the Apartment Investment and Management Company
1997 Stock Award and Incentive Plan, or the 1997 Plan, to
attract and retain officers, key employees and independent
directors. The 1997 Plan reserved for issuance a maximum of
20 million shares, which may be in the form of incentive
stock options, non-qualified stock options and restricted stock,
or other types of awards as authorized under the 1997 Plan. The
1997 Plan expired on April 24, 2007. On April 30,
2007, the 2007 Stock Award and Incentive Plan, or the 2007 Plan,
was approved as successor to the 1997 Plan. The 2007 Plan
reserves for issuance a maximum of 4.1 million shares,
which may be in the form of incentive stock options,
non-qualified stock options and restricted stock, or other types
of awards as authorized under the 2007 Plan.
Holders of Aimco common stock are entitled to receive dividends,
when and as declared by Aimcos board of directors, out of
funds legally available therefor. The holders of shares of
common stock, upon any liquidation, dissolution or winding up of
Aimco, are entitled to receive ratably any assets remaining
after payment in full of all liabilities of Aimco and the
liquidation preferences of preferred stock. The shares of common
stock possess ordinary voting rights for the election of
directors and in respect of other corporate matters, each share
entitling the holder thereof to one vote. Holders of shares of
common stock do not have cumulative voting rights in the
election of directors, which means that holders of more than 50%
of the shares of common stock voting for the election of
directors can elect all of the directors if they choose to do so
and the holders of the remaining shares cannot elect any
directors. Holders of shares of common stock do not have
preemptive rights, which means they have no right to acquire any
additional shares of common stock that may be issued by Aimco at
a subsequent date.
46
Outstanding
Classes Of Preferred Stock
Aimcos charter authorizes 84,429,764 shares of
preferred stock with a par value of $0.01 per share. Aimco is
authorized to issue shares of preferred stock in one or more
classes or subclasses, with such designations, preferences,
conversion and other rights, voting powers, restriction,
limitations as to dividends, qualifications and terms and
conditions of redemption, in each case, if any as are permitted
by Maryland law and as the Aimco Board of Directors may
determine by resolution. As of June 30, 2010, Aimco had
issued and outstanding the following classes of preferred stock:
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Quarterly
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Liquidation
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Shares
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Shares
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Dividend
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Preference
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Conversion
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Class
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Authorized
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Outstanding
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per Share
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per Share
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Price
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Class G Cumulative Preferred Stock(1)
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4,050,000
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4,050,000
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$
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0.586
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$
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25
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NA
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Class T Cumulative Preferred Stock
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6,000,000
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6,000,000
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$
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0.50
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$
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25
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NA
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Class U Cumulative Preferred Stock
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8,000,000
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8,000,000
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$
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0.484
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$
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25
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NA
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Class V Cumulative Preferred Stock
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3,450,000
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3,450,000
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$
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0.50
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$
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25
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NA
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Class Y Cumulative Preferred Stock
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3,450,000
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3,450,000
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$
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0.492
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$
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25
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NA
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Series A CRA Perpetual Preferred Stock(2)
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240
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114
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$
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4,274.17
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(3)
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$
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500,000
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NA
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(1) |
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Includes 10,000 shares held by a consolidated subsidiary
that are eliminated in consolidation. |
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(2) |
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During 2006, Aimco sold 200 shares of Series A
Community Reinvestment Act Perpetual Preferred Stock,
$0.01 par value per share, or the CRA Preferred Stock, with
a liquidation preference of $500,000 per share, for net proceeds
of $97.5 million. For the period from the date of original
issuance through March 31, 2015, the dividend rate is a
variable rate per annum equal to the Three-Month LIBOR Rate (as
defined in the articles supplementary designating the CRA
Preferred Stock) plus 1.25%, calculated as of the beginning of
each quarterly dividend period. The rate at June 30, 2010
was 1.54%. Upon liquidation, holders of the CRA Preferred Stock
are entitled to a preference of $500,000 per share, plus an
amount equal to accumulated, accrued and unpaid dividends,
whether or not earned or declared. The CRA Preferred Stock ranks
prior to the Aimco common stock and on the same level as
Aimcos outstanding shares of preferred stock with respect
to the payment of dividends and the distribution of amounts upon
liquidation, dissolution or winding up. The CRA Preferred Stock
is not redeemable prior to June 30, 2011, except in limited
circumstances related to REIT qualification. On and after
June 30, 2011, the CRA Preferred Stock is redeemable for
cash, in whole or from time to time in part, at Aimcos
option, at a price per share equal to the liquidation
preference, plus accumulated, accrued and unpaid dividends, if
any, to the redemption date. |
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(3) |
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Amount per share is based on 114 shares outstanding for the
entire period. 20 shares were repurchased in May 2010 and
received $1,980 in dividends through the date of purchase. |
Ranking. Each authorized class of preferred
stock ranks, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of Aimco, (a) prior
or senior to the common stock and any other class or series of
capital stock of Aimco if the holders of that class of preferred
stock are entitled to the receipt of dividends or amounts
distributable upon liquidation, dissolution or
winding-up
in preference or priority to the holders of shares of such class
or series (Junior Stock); (b) on a parity with
the other authorized classes of preferred stock and any other
class or series of capital stock of Aimco if the holders of such
class or series of stock and that class of preferred stock are
entitled to receive dividends and amounts distributable upon
liquidation, dissolution or
winding-up
in proportion to their respective amounts of accrued and unpaid
dividends per share or liquidation preferences, without
preference or priority of one over the other (Parity
Stock); and (c) junior to any class or series of
capital stock of Aimco if the holders of such class or series
are entitled to receive dividends and amounts distributable upon
liquidation, dissolution or
winding-up
in preference or priority to the holders of that class of
preferred stock (Senior Stock).
Dividends. Holders of each authorized class of
preferred stock are entitled to receive, when and as declared by
Aimcos board of directors, out of funds legally available
for payment, quarterly cash dividends in the amount per share
set forth in the table above under the heading, Quarterly
Dividend Per Share. The dividends are cumulative from the
date of original issue, whether or not in any dividend period or
periods Aimco declares any
47
dividends or have funds legally available for the payment of
such dividend. Holders of preferred stock are not entitled to
receive any dividends in excess of cumulative dividends on the
preferred stock. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or
payments on the preferred stock that may be in arrears.
When dividends are not paid in full upon any class of preferred
stock, or a sum sufficient for such payment is not set apart,
all dividends declared upon that class of preferred stock and
any shares of Parity Stock will be declared ratably in
proportion to the respective amounts of dividends accumulated,
accrued and unpaid on that class of preferred stock and
accumulated, accrued and unpaid on such Parity Stock. Except as
set forth in the preceding sentence, unless dividends on each
class of preferred stock equal to the full amount of
accumulated, accrued and unpaid dividends have been or
contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof has been or contemporaneously
is set apart for such payment, for all past dividend periods, no
dividends may be declared or paid or set apart for payment by
Aimco and no other distribution of cash or other property may be
declared or made, directly or indirectly, by Aimco with respect
to any shares of Parity Stock. Unless dividends equal to the
full amount of all accumulated, accrued and unpaid dividends on
each class of preferred stock have been declared and paid, or
declared and a sum sufficient for the payment thereof has been
set apart for such payment, for all past dividend periods, no
dividends (other than dividends or distributions paid in shares
of Junior Stock or options, warrants or rights to subscribe for
or purchase shares of Junior Stock) may be declared or paid or
set apart for payment by Aimco and no other distribution of cash
or other property may be declared or made, directly or
indirectly, by Aimco with respect to any shares of Junior Stock,
nor may any shares of Junior Stock be redeemed, purchased or
otherwise acquired (other than a redemption, purchase or other
acquisition of common stock made for purposes of an employee
incentive or benefit plan of Aimco or any subsidiary) for any
consideration (or any monies be paid to or made available for a
sinking fund for the redemption of any shares of any such
stock), directly or indirectly, by Aimco (except by conversion
into or exchange for shares of Junior Stock, or options,
warrants or rights to subscribe for or purchase shares of Junior
Stock), nor shall any other cash or other property be paid or
distributed to or for the benefit of holders of shares of Junior
Stock. Notwithstanding the foregoing provisions of this
paragraph, Aimco is not prohibited from (1) declaring or
paying or setting apart for payment any dividend or distribution
on any shares of Parity Stock or (2) redeeming, purchasing
or otherwise acquiring any Parity Stock, in each case, if such
declaration, payment, redemption, purchase or other acquisition
is necessary to maintain Aimcos qualification as a REIT.
Liquidation Preference. Upon any voluntary or
involuntary liquidation, dissolution or winding up of Aimco,
before it makes or sets apart any payment or distribution for
the holders of any shares of Junior Stock, the holders of each
class of preferred stock are entitled to receive a liquidation
preference per share in the amount set forth above under the
heading, Liquidation Preference Per Share, plus an
amount equal to all accumulated, accrued and unpaid dividends
(whether or not formed or declared) to the date of final
distribution to such holders. Holders of each class of preferred
stock are not entitled to any further payment. Until the holders
of each class of preferred stock have been paid their respective
liquidation preferences in full, plus an amount equal to all
accumulated, accrued and unpaid dividends (whether or not earned
or declared) to the date of final distribution to such holders,
no payment may be made to any holder of Junior Stock upon the
liquidation, dissolution or winding up of Aimco. If, upon any
liquidation, dissolution or winding up of Aimco, its assets, or
proceeds thereof, distributable among the holders of preferred
stock are insufficient to pay in full the preference described
above for any class of preferred stock and any liquidating
payments on any other shares of any class or series of Parity
Stock, then such proceeds shall be distributed among the holders
of such class of preferred stock and holders of all other shares
of any class or series of Parity Stock ratably in the same
proportion as the respective amounts that would be payable on
such class of preferred stock and any such Parity Stock if all
amounts payable thereon were paid in full. A voluntary or
involuntary liquidation, dissolution or winding up of Aimco does
not include its consolidation or merger with one or more
corporations, a sale or transfer of all or substantially all of
its assets, or a statutory share exchange. Upon any liquidation,
dissolution or winding up of Aimco, after payment shall have
been made in full to the holders of preferred stock, any other
series or class or classes of Junior Stock shall be entitled to
receive any and all assets remaining to be paid or distributed,
and the holders of each class of preferred stock and any Parity
Stock shall not be entitled to share therein.
48
Redemption. Except as described below and in
certain limited circumstances, including circumstances relating
to maintaining Aimcos ability to qualify as a REIT, Aimco
may not redeem the shares of preferred stock. On or after the
dates set forth in the table below, Aimco may, at its option,
redeem shares of the classes of preferred stock set forth below,
in whole or from time to time in part, at a cash redemption
price equal to the percentage of the liquidation preference for
that class of preferred stock indicated under the heading,
Price, plus all accumulated, accrued and unpaid
dividends, if any, to the date fixed for redemption. The
redemption price for each class of non-convertible preferred
stock (other than any portion thereof consisting of accumulated,
accrued and unpaid dividends) is payable solely with the
proceeds from the sale of equity securities by Aimco or Aimco OP
(whether or not such sale occurs concurrently with such
redemption). For purposes of the preceding sentence,
capital shares means any common stock, preferred
stock, depositary shares, partnership or other interests,
participations or other ownership interests (however designated)
and any rights (other than debt securities convertible into or
exchangeable at the option of the holder for equity securities
(unless and to the extent such debt securities are subsequently
converted into capital stock)) or options to purchase any of the
foregoing securities issued by Aimco or Aimco OP.
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Class
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Date
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Price
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Class G Cumulative Preferred Stock
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|
July 15, 2008
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100
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%
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Class T Cumulative Preferred Stock
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|
July 31, 2008
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100
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%
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Class U Cumulative Preferred Stock
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|
March 24, 2009
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100
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%
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Class V Cumulative Preferred Stock
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September 29, 2009
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100
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%
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Class Y Cumulative Preferred Stock
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|
December 21, 2009
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100
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%
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Series A CRA Perpetual Preferred Stock
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|
June 30, 2011
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100
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%
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Except as otherwise described in this information
statement/prospectus, none of the authorized classes of
preferred stock have any stated maturity or are subject to any
sinking find or mandatory redemption provisions.
Conversion. The shares of convertible
preferred stock are convertible at any time, at the option of
the holder, into a number of shares of common stock obtained by
dividing its liquidation preference (excluding any accumulated,
accrued and unpaid dividends) by the conversion price set forth
in the table above. In the case of shares called for redemption,
conversion rights will terminate at the close of business on the
date fixed for such redemption, unless Aimco defaults in making
such redemption payment. Each conversion will be deemed to have
been effected immediately prior to the close of business on the
date on which the holder surrenders certificates representing
shares of preferred stock and Aimco receives notice and any
applicable instruments of transfer and any required taxes. The
conversion will be at the conversion price in effect at such
time and on such date unless the stock transfer books of Aimco
are closed on that date, in which event such person or persons
will be deemed to have become such holder or holders of record
at the close of business on the next succeeding day on which
such stock transfer books are open, but such conversion will be
at the conversion price in effect on the date on which such
shares were surrendered and such notice received by Aimco. No
fractional shares of common stock or scrip representing
fractions of a share of common stock will be issued upon
conversion of shares of preferred stock. Instead of any
fractional interest in a share of common stock that would
otherwise be deliverable upon the conversion of any share of
preferred stock, Aimco will pay to the holder of such shares an
amount in cash based upon the closing price of the common stock
on the trading day immediately preceding the date of conversion.
If more than one share of preferred stock is surrendered for
conversion at one time by the same holder, the number of full
shares of common stock issuable upon conversion thereof will be
computed on the basis of the aggregate number of shares of
preferred stock so converted. Except as otherwise required,
Aimco will make no payment or allowance for unpaid dividends,
whether or not in arrears, on converted shares or for dividends
(other than dividends on the common stock the record date for
which is after the conversion date and which Aimco shall pay in
the ordinary course to the record holder as of the record date)
on the common stock issued upon such conversion. Holders of
preferred stock at the close of business on a record date for
the payment of dividends on the preferred stock will be entitled
to receive an amount equal to the dividend payable on such
shares on the corresponding dividend payment date
notwithstanding the conversion of such shares following such
record date.
Each conversion price is subject to adjustment upon the
occurrence of certain events, including: (i) if Aimco
(A) pays a dividend or makes a distribution on its capital
stock in shares of common stock, (B) subdivides its
outstanding common stock into a greater number of shares,
(C) combines its outstanding common stock into a
49
smaller number of shares or (D) issues any shares of
capital stock by reclassification of its outstanding common
stock; (ii) if Aimco issues rights, options or warrants to
holders of common stock entitling them to subscribe for or
purchase common stock at a price per share less than the fair
market value thereof; and (iii) if Aimco makes a
distribution on its common stock other than in cash or shares of
common stock.
Conversion of preferred stock will be permitted only to the
extent that such conversion would not result in a violation of
the ownership restrictions set forth in Aimcos charter.
Voting Rights. Holders of shares of the
authorized classes of preferred stock do not have any voting
rights, except as set forth below and except as otherwise
required by applicable law.
If and whenever dividends on any shares of any class of
preferred stock or any series or class of Parity Stock are in
arrears for six or more quarterly periods, whether or not
consecutive, the number of directors then constituting
Aimcos board of directors will be increased by two, if not
already increased by reason of similar types of provisions with
respect to shares of Parity Stock of any other class or series
which is entitled to similar voting rights (the Voting
Preferred Stock), and the holders of shares of that class
of preferred stock, together with the holders of shares of all
other Voting Preferred Stock then entitled to exercise similar
voting rights, voting as a single class regardless of series,
will be entitled to vote for the election of the two additional
directors of Aimco at any annual meeting of stockholders or at a
special meeting of the holders of that class of preferred stock
and of the Voting Preferred Stock called for that purpose.
Whenever dividends in arrears on outstanding shares of Voting
Preferred Stock shall have been paid and dividends thereon for
the current quarterly dividend period have been paid or declared
and set apart for payment, then the right of the holders of the
Voting Preferred Stock to elect the additional two directors
shall cease and the terms of office of the directors shall
terminate and the number of directors constituting Aimcos
board of directors shall be reduced accordingly. Holders of
Class W Cumulative Convertible Preferred Stock, voting as a
single class, are also entitled to elect one director of Aimco
if and whenever (i) for two consecutive quarterly dividend
periods, Aimco fails to pay at least $0.45 per share in
dividends on the common stock or (ii) Aimco fails to pay a
quarterly dividend on that class of preferred stock, whether or
not earned or declared.
The affirmative vote or consent of at least
662/3%
of the votes entitled to be cast by the holders of the
outstanding shares of each class of preferred stock and the
holders of all other classes or series of Parity Stock entitled
to vote on such matters, voting as a single class, will be
required to (1) authorize, create, increase the authorized
amount of, or issue any shares of any class of Senior Stock or
any security convertible into shares of any class of Senior
Stock, or (2) amend, alter or repeal any provision of, or
add any provision to, Aimcos charter or by-laws, if such
action would materially adversely affect the voting powers,
rights or preferences of the holders of that class of preferred
stock or, with respect to the Class W Cumulative
Convertible Preferred Stock, would convert such preferred stock
into cash or any other security other than Preferred Stock with
terms and provisions equivalent to those set forth in the
articles supplementary for such class of preferred stock
(including any amendment, alteration or repeal effected pursuant
to a merger, consolidation, or similar transaction); provided,
however, that no such vote of the holders of that class of
preferred stock shall be required if, at or prior to the time
such amendment, alteration or repeal is to take effect or the
issuance of any such Senior Stock or convertible security is to
be made, as the case may be, provisions are made for the
redemption of all outstanding shares of that class of preferred
stock. The amendment of or supplement to Aimcos charter to
authorize, create, increase or decrease the authorized amount of
or to issue Junior Stock, or any shares of any class of Parity
Stock shall not be deemed to materially adversely affect the
voting powers, rights or preferences of any class of preferred
stock.
Transfer. For Aimco to qualify as a REIT under
the Code, not more than 50% in value of its outstanding capital
stock may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities)
during the last half of a taxable year and the shares of common
stock must be beneficially owned by 100 or more persons during
at least 335 days of a taxable year of 12 months or
during a proportionate part of a shorter taxable year. Because
the Aimco board of directors believes that it is essential for
Aimco to meet the REIT Requirements, the board of directors has
adopted, and the stockholders have approved, provisions of
Aimcos charter restricting the acquisition of shares of
common stock.
Subject to specific exceptions specified in Aimcos
charter, no holder may own, or be deemed to own by virtue of
various attribution and constructive ownership provisions of the
Code and
Rule 13d-3
under the Exchange Act,
50
more than 8.7% (or 15% in the case of specific pension trusts
described in the Code, investment companies registered under the
Investment Company Act of 1940, as amended, and
Mr. Considine) of the outstanding shares of common stock
(the Ownership Limit). The board of directors may
waive the Ownership Limit if evidence satisfactory to the board
of directors and Aimcos tax counsel is presented that such
ownership will not then or in the future jeopardize Aimcos
status as a REIT. However, in no event may such holders
direct or indirect ownership of common stock exceed 9.8% of the
total outstanding shares of common stock. As a condition of such
waiver, the board of directors may require opinions of counsel
satisfactory to it
and/or an
undertaking from the applicant with respect to preserving the
REIT status of Aimco. The foregoing restrictions on
transferability and ownership will not apply if the board of
directors determines that it is no longer in the best interests
of Aimco to attempt to qualify, or to continue to quality as a
REIT and a resolution terminating Aimcos status as a REIT
and amending Aimcos charter to remove the foregoing
restrictions is duly adopted by the board of directors and a
majority of Aimcos stockholders. If shares of common stock
in excess of the Ownership Limit, or shares of common stock
which would cause the REIT to be beneficially owned by fewer
than 100 persons, or which would result in Aimco being
closely held, within the meaning of
Section 856(h) of the Code, or which would otherwise result
in Aimco failing to qualify as a REIT, are issued or transferred
to any person, such issuance or transfer shall be null and void
to the intended transferee, and the intended transferee would
acquire no rights to the stock. Shares of common stock
transferred in excess of the Ownership Limit or other applicable
limitations will automatically be transferred to a trust for the
exclusive benefit of one or more qualifying charitable
organizations to be designated by Aimco. Shares transferred to
such trust will remain outstanding, and the trustee of the trust
will have all voting and dividend rights pertaining to such
shares. The trustee of such trust may transfer such shares to a
person whose ownership of such shares does not violate the
Ownership Limit or other applicable limitation. Upon a sale of
such shares by the trustee, the interest of the charitable
beneficiary will terminate, and the sales proceeds would be
paid, first, to the original intended transferee, to the extent
of the lesser of (a) such transferees original
purchase price (or the original market value of such shares if
purportedly acquired by gift or devise) and (b) the price
received by the trustee, and, second, any remainder to the
charitable beneficiary. In addition, shares of stock held in
such trust are purchasable by Aimco for a 90 day period at
a price equal to the lesser of the price paid for the stock by
the original intended transferee (or the original market value
of such shares if purportedly acquired by gift or devise) and
the market price for the stock on the date that Aimco determines
to purchase the stock. The 90 day period commences on the
date of the violative transfer or the date that the board of
directors determines in good faith that a violative transfer has
occurred, whichever is later. All certificates representing
shares of common stock bear a legend referring to the
restrictions described above.
All persons who own, directly or by virtue of the attribution
provisions of the Code and
Rule 13d-3
under the Exchange Act, more than a specified percentage of the
outstanding shares of common stock must file an affidavit with
Aimco containing the information specified in Aimcos
charter within 30 days after January 1 of each year. In
addition, each stockholder shall upon demand be required to
disclose to Aimco in writing such information with respect to
the direct, indirect and constructive ownership of shares as the
board of directors deems necessary to comply with the provisions
of the Code applicable to a REIT or to comply with the
requirements of any taxing authority or governmental agency.
The ownership limitations may have the effect of precluding
acquisition of control of Aimco by specific parties unless the
board of directors determines that maintenance of REIT status is
no longer in the best interests of Aimco.
51
COMPARISON
OF AIMCO OP UNITS AND AIMCO COMMON STOCK
Set forth below is a comparison of the OP Units to the
Aimco common stock.
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OP Units
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Common Stock
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Nature of Investment
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The OP Units constitute equity interests entitling each holder
to his or her pro rata share of cash distributions made from
Available Cash (as such term is defined in the Aimco OP
partnership agreement) to the partners of Aimco OP, a Delaware
limited partnership.
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The common stock constitutes equity interests in Aimco, a
Maryland corporation.
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Voting Rights
|
Under the Aimco OP partnership agreement, limited partners have
voting rights only with respect to certain limited matters such
as certain amendments of the partnership agreement and certain
transactions such as the institution of bankruptcy proceedings,
an assignment for the benefit of creditors and certain transfers
by the general partner of its interest in Aimco OP or the
admission of a successor general partner.
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|
Each outstanding share of common stock entitles the holder
thereof to one vote on all matters submitted to stockholders for
a vote, including the election of directors. Holders of common
stock have the right to vote on, among other things, a merger of
Aimco, amendments to the Aimco charter and the dissolution of
Aimco. Certain amendments to the Aimco charter require the
affirmative vote of not less than two-thirds of votes entitled
to be cast on the matter. The Aimco charter permits the Aimco
Board of Directors to classify and issue capital stock in one or
more series having voting power which may differ from that of
the common stock.
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Under Maryland law, a consolidation, merger, share exchange or
transfer of all or substantially all of the assets of Aimco
requires the affirmative vote of not less than two-thirds of all
of the votes entitled to be cast on the matter. With respect to
each of these transactions, only the holders of common stock are
entitled to vote on the matters. No approval of the stockholders
is required for the sale of less than all or substantially all
of Aimcos assets.
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Maryland law provides that the Aimco Board of Directors must
obtain the affirmative vote of at least two-thirds of the votes
entitled to be cast on the matter in order to dissolve Aimco.
Only the holders of common stock are entitled to vote on
Aimcos dissolution.
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52
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OP Units
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Common Stock
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Distributions/Dividends
|
Subject to the rights of holders of any outstanding partnership
preferred units, the Aimco OP partnership agreement requires the
general partner to cause Aimco OP to distribute quarterly all,
or such portion as the general partner may in its sole and
absolute discretion determine, of Available Cash (as such term
is defined in the partnership agreement) generated by Aimco OP
during such quarter to the general partner, the Special Limited
Partner and the holders of OP Units and HPUs on the record date
established by the general partner with respect to such quarter,
in accordance with their respective interests in Aimco OP on
such record date. Holders of any Partnership Preferred Units
currently issued and which may be issued in the future may have
priority over the general partner, the special limited partner
and holders of OP Units and HPUs with respect to distributions
of Available Cash, distributions upon liquidation or other
distributions. See Description of OP Units
Distributions. The general partner in its sole and
absolute discretion may distribute to the holders of OP Units
and HPUs Available Cash on a more frequent basis and provide for
an appropriate record date. The partnership agreement requires
the general partner to take such reasonable efforts, as
determined by it in its sole and absolute discretion and
consistent with the REIT Requirements, to cause Aimco OP to
distribute sufficient amounts to enable the general partner to
transfer funds to Aimco and enable Aimco to pay stockholder
dividends that will (i) satisfy the requirements for
qualifying as a REIT under the Code, and the Treasury
Regulations and (ii) avoid any United States Federal income
or excise tax liability of Aimco. See Description of OP
Units Distributions.
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Holders of the common stock are entitled to receive dividends
when and as declared by the Aimco Board of Directors, out of
funds legally available therefor. Under the REIT rules, Aimco is
required to distribute dividends (other than capital gain
dividends) to its stockholders in an amount at least equal to
(A) the sum of (i) 90% of Aimcos REIT taxable
income (computed without regard to the dividends paid
deduction and Aimcos net capital gain) and (ii) 90% of the
net income (after tax), if any, from foreclosure property, minus
(B) the sum of certain items of noncash income. See
Material United States Federal Income Tax Matters.
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OP Units
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Common Stock
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Liquidity and Transferability/Redemption
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There is no public market for the OP Units and the OP Units are
not listed on any securities exchange.
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The common stock is transferable subject to the Ownership Limit
set forth in the Aimco charter. The common stock is listed on
the NYSE.
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Under the Aimco OP partnership agreement, until the expiration
of one year from the date on which a holder acquired OP Units,
subject to certain exceptions, such OP Unitholder may not
transfer all or any portion of its OP Units to any transferee
without the consent of the general partner, which consent may be
withheld in its sole and absolute discretion. After the
expiration of one year, such OP Unitholder has the right to
transfer all or any portion of its OP Units to any person,
subject to the satisfaction of certain conditions specified in
the partnership agreement, including the general partners
right of first refusal. See Description of OP
Units Transfers and Withdrawals. After the
first anniversary of becoming a holder of OP Units, a holder has
the right, subject to the terms and conditions of the
partnership agreement, to require Aimco OP to redeem all or a
portion of such holders OP Units in exchange for shares of
common stock or a cash amount equal to the value of such shares,
as Aimco OP may elect. See Description of OP
Units Redemption Rights of Qualifying
Parties. Upon receipt of a notice of redemption, Aimco OP
may, in its sole and absolute discretion but subject to the
restrictions on the ownership of common stock imposed under the
Aimco charter and the transfer restrictions and other
limitations thereof, elect to cause Aimco to acquire some or all
of the tendered OP Units in exchange for common stock, based on
an exchange ratio of one share of common stock for each OP Unit,
subject to adjustment as provided in the partnership agreement.
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COMPARISON
OF NPI UNITS AND AIMCO OP UNITS
The rights of NPI limited partners are currently governed by the
Uniform Limited Partnership Act of the State of California, as
amended from time to time, and the NPI partnership agreement.
The rights of the limited partners of Aimco OP are currently
governed by the Delaware Act and the Aimco OP partnership
agreement.
The information below highlights a number of the significant
differences between NPI Units and Aimco OP Units. These
comparisons are intended to assist NPI limited partners in
understanding how their investment will be changed after
completion of the merger, if they elect to receive OP Units
in lieu of cash with respect to the merger.
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NPI Units
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OP Units
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Nature of Investment
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The NPI Units constitute equity interests entitling each partner
to his or her pro rata share of distributions to be made to the
partners of NPI.
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The OP Units constitute equity interests entitling each holder
to his or her pro rata share of cash distributions made from
Available Cash (as such term is defined in the partnership
agreement) to the partners of Aimco OP.
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Voting Rights
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With limited exceptions, under the NPI partnership agreement,
upon the vote of a majority in units of all limited partners
(other than the original limited partner), the limited partners
may make amendments to NPIs partnership agreement. Other
than the original limited partner, the limited partners holding
a majority of units may remove the general partner and elect a
successor general partner. If the general partner withdraws or
is otherwise removed, the general partner elected in place
thereof may elect to carry on the business of NPI. An affiliate
of the general partner of NPI currently owns a majority of each
series of NPIs limited partnership units.
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Under the Aimco OP partnership agreement, limited partners have
voting rights only with respect to certain limited matters such
as certain amendments of the partnership agreement and certain
transactions such as the institution of bankruptcy proceedings,
an assignment for the benefit of creditors and certain transfers
by the general partner of its interest in Aimco OP or the
admission of a successor general partner.
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Under the Aimco OP partnership agreement, the general partner
has the power to effect the acquisition, sale, transfer,
exchange or other disposition of any assets of Aimco OP
(including, but not limited to, the exercise or grant of any
conversion, option, privilege or subscription right or any other
right available in connection with any assets at any time held
by Aimco OP) or the merger, consolidation, reorganization or
other combination of Aimco OP with or into another entity, all
without the consent of the OP Unitholders.
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The general partner may cause the dissolution of Aimco OP by an
event of withdrawal, as defined in the Delaware Act
(including, without limitation, bankruptcy), unless, within
90 days after the withdrawal, holders of a majority
in interest, as defined in the Delaware Act, agree in
writing, in their sole and absolute discretion, to continue the
business of Aimco OP and to the appointment of a successor
general partner. The general partner may elect to dissolve Aimco
OP in its sole and absolute discretion, with or without the
consent of the OP Unitholders. OP Unitholders cannot remove the
general partner of Aimco OP with or without cause.
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NPI Units
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OP Units
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Distributions
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Cash from operations, cash from sales or refinancing and cash
from property reserve account will be distributed to each
partner (and, in the case of cash from sales or refinancing and
cash from property reserve account in the order of priority set
forth in the NPI partnership agreement) unless (i) NPI is
restricted from making distributions under the terms of notes,
mortgages or other types of debt obligations which it may issue
or assume in conjunction with borrowed funds, or (ii) the
general partner determines, in its absolute discretion, that a
restriction or suspension of distributions is in the best
interests of NPI. The distributions payable to the partners are
not fixed in amount and depend upon the operating results and
net sales or refinancing proceeds available from the disposition
of NPIs assets.
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Subject to the rights of holders of any outstanding partnership
preferred units, the Aimco OP partnership agreement requires the
general partner to cause Aimco OP to distribute quarterly all,
or such portion as the general partner may in its sole and
absolute discretion determine, of Available Cash (as such term
is defined in the partnership agreement) generated by Aimco OP
during such quarter to the general partner, the special limited
partner and the holders of OP Units and HPUs on the record date
established by the general partner with respect to such quarter,
in accordance with their respective interests in Aimco OP on
such record date. Holders of any partnership preferred units
currently issued and which may be issued in the future may have
priority over the general partner, the special limited partner
and holders of OP Units and HPUs with respect to distributions
of Available Cash, distributions upon liquidation or other
distributions. See Description of OP Units
Distributions. The general partner in its sole and
absolute discretion may distribute to the holders of OP Units
and HPUs Available Cash on a more frequent basis and provide for
an appropriate record date. The partnership agreement requires
the general partner to take such reasonable efforts, as
determined by it in its sole and absolute discretion and
consistent with the REIT requirements, to cause Aimco OP to
distribute sufficient amounts to enable the general partner to
transfer funds to Aimco and enable Aimco to pay stockholder
dividends that will (i) satisfy the requirements for qualifying
as a REIT under the Code, and the Treasury Regulations and (ii)
avoid any United States Federal income or excise tax liability
of Aimco. See Description of OP Units
Distributions.
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NPI Units
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OP Units
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Liquidity and Transferability/Redemption
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There is a limited market for the NPI Units and the NPI Units
are not listed on any securities exchange.
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There is no public market for the OP Units and the OP Units are
not listed on any securities exchange.
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Under the NPI partnership agreement, holders of NPI Units have
the right, subject to certain exceptions, to assign five or more
NPI Units by means of a written instrument, the terms of which
are not in contravention of any of the provisions of the NPI
partnership agreement and which instrument has been duly
executed by the assignor of such NPI Units. Any assignment of
NPI Units must be made in compliance with the then applicable
rules of any applicable governmental authority. Notwithstanding
the above, no partner may make an assignment of any NPI Units if
the NPI Units sought to be assigned, when added to the total of
all other NPI Units assigned within the period of 12 consecutive
months prior to the proposed date of assignment, would result in
the termination of the partnership under the Code. No assignee
of a limited partners interest may become a substituted
limited partner unless (a) a duly executed and acknowledged
written instrument of assignment covering no less than five NPI
Units (subject to certain exceptions) has been filed with NPI,
which instrument specifies the number of NPI Units being
assigned and sets forth the intention of the assignor that the
assignee succeed to the assignors interest as a
substituted limited partner, (b) the assignor and assignee
execute and acknowledge such other instruments as the general
partner deems necessary or desirable to effect the substitution,
including the written acceptance and adoption by the assignee of
the provisions of the NPI partnership agreement and delivery to
the general partner of a special power of attorney, (c) the
written consent of the general partner to the substitution is
obtained, which consent may be granted or denied in the general
partners absolute discretion, (d) a transfer fee not
to exceed $50 has been paid to NPI to cover all reasonable
expenses connected with the substitution, and (e) the
assignment provisions of the NPI partnership agreement have been
complied with. Unauthorized assignments and transfers are
void ab initio. The NPI partnership agreement contains no
redemption rights.
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Under the Aimco OP partnership agreement, until the expiration
of one year from the date on which a holder acquired OP Units,
subject to certain exceptions, such OP Unitholder may not
transfer all or any portion of its OP Units to any transferee
without the consent of the general partner, which consent may be
withheld in its sole and absolute discretion. After the
expiration of one year, such OP Unitholder has the right to
transfer all or any portion of its OP Units to any person,
subject to the satisfaction of certain conditions specified in
the partnership agreement, including the general partners
right of first refusal. See Description of OP
Units Transfers and Withdrawals. After the
first anniversary of becoming a holder of OP Units, a holder has
the right, subject to the terms and conditions of the
partnership agreement, to require Aimco OP to redeem all or a
portion of such holders OP Units in exchange for shares of
common stock or a cash amount equal to the value of such shares,
as Aimco OP may elect. See Description of OP
Units Redemption Rights of Qualifying Parties.
Upon receipt of a notice of redemption, Aimco OP may, in its
sole and absolute discretion but subject to the restrictions on
the ownership of common stock imposed under the Aimco charter
and the transfer restrictions and other limitations thereof,
elect to cause Aimco to acquire some or all of the tendered OP
Units in exchange for common stock, based on an exchange ratio
of one share of common stock for each OP Unit, subject to
adjustment as provided in the partnership agreement.
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NPI Units
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OP Units
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Fiduciary Duty
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California case law provides that, in exercising management functions, a general partner is under a fiduciary duty of good faith and fair dealing towards other partners, but may not be held liable for mistakes or losses incurred in the good faith exercise of reasonable business judgment.
The NPI partnership agreement does not contain any provision that expressly restricts or limits the liability of the General Partner and its affiliates.
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Delaware law provides that, except as provided in a partnership
agreement, a general partner owes the fiduciary duties of
loyalty and care to the partnership and its limited partners.
The Aimco OP partnership agreement expressly authorizes the
general partner to enter into, on behalf of Aimco OP, a right of
first opportunity arrangement and other conflict avoidance
agreements with various affiliates of Aimco OP and the general
partner, on such terms as the general partner, in its sole and
absolute discretion, believes are advisable. The Aimco OP
partnership agreement expressly limits the liability of the
general partner by providing that the general partner, and its
officers and directors, will not be liable or accountable in
damages to Aimco OP, the limited partners or assignees for
errors in judgment or mistakes of fact or law or of any act or
omission if the general partner or such director or officer
acted in good faith.
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Investment Policy
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NPI was organized for the purpose of operating income-producing
residential real estate. In general, the General Partner
regularly evaluates NPIs property by considering various
factors, such as the partnerships financial position and
real estate and capital markets conditions. The General Partner
monitors the propertys specific locale and
sub-market
conditions (including stability of the surrounding
neighborhood), evaluating current trends, competition, new
construction and economic changes. It oversees the operating
performance of the property and evaluates the physical
improvement requirements. In addition, the financing structure
for the property (including any prepayment penalties), tax
implications, availability of attractive mortgage financing to a
purchaser, and the investment climate are all considered. Any of
these factors, and possibly others, could potentially contribute
to any decision by the General Partner to sell, refinance,
upgrade with capital improvements or hold the property.
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Aimco OP was formed to engage in the acquisition, ownership,
management and redevelopment of apartment properties. Although
it holds all of its properties for investment, Aimco OP may sell
properties when they do not meet its investment criteria or are
located in areas that it believes do not justify a continued
investment when compared to alternative uses for capital. Its
portfolio management strategy includes property acquisitions and
dispositions to concentrate its portfolio in its target markets.
It may market for sale certain properties that are inconsistent
with this long-term investment strategy. Additionally, from time
to time, Aimco OP may market certain properties that are
consistent with this strategy but offer attractive returns.
Aimco OP may use its share of the net proceeds from such
dispositions to, among other things, reduce debt, fund capital
expenditures on existing assets, fund acquisitions, and for
other operating needs and corporate purposes.
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Compensation
and Distributions
NPI. NPI has no employees and depends on the
General Partner and its affiliates for the management and
administration of all partnership activities. The NPI
partnership agreement provides that the General Partner and its
affiliates receive 5% of gross receipts from all of NPIs
properties as compensation for providing property management
services, and also provides that the General Partner and its
affiliates receive certain payments for other services and
reimbursement of certain expenses incurred on behalf of NPI.
In addition, under the NPI partnership agreement,
(i) Adjusted Cash From Operations (as defined in the NPI
partnership agreement) is distributed as follows: ninety-nine
percent to the limited partners and one percent to the General
Partner, and (ii) Cash From Sales or Refinancings and Cash
from Property Reserve Account (each as defined in the NPI
partnership agreement) is distributed in the following order of
priority: (x) first, to the holders of NPI Units in
proportion to their interest in NPI, an amount equal to the Net
Tangible Asset Value (as defined in the NPI partnership
agreement); (y) second, to the General Partner in an amount
equal to all or any part of any Incentive
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Compensation Fee (as defined in the NPI partnership agreement)
due and owing as provided in the NPI partnership agreement, and
(z) third, with respect to the remainder, one hundred
percent thereof to the holders of NPI Units. Notwithstanding the
foregoing, NPI may be restricted from making distributions under
the terms of notes, mortgages or other types of debt obligations
which it may issue or assume in conjunction with borrowed funds,
and distributions may also be restricted or suspended in
circumstances when the General Partner determines, in its
absolute discretion, that such action is in the best interests
of NPI.
A description of the compensation paid to the General Partner
and its affiliates during the years ended December 31, 2009
and 2008, and during the six months ended June 30, 2010 and
2009, can be found under the heading Certain Relationships
and Related Transactions in this information
statement/prospectus. In addition, for more information, see
Note B Transactions with Affiliated
Parties in the notes to the financial statements appearing
in NPIs Annual Report on
Form 10-K
for the year ended December 31, 2009, which is included as
Annex D to this information statement/prospectus,
and Note B Transactions with Affiliated
Parties in the notes to the financial statements appearing
in NPIs Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010, which is included as
Annex E to this information statement/prospectus.
Aimco OP. The Aimco OP partnership agreement
provides that Aimco OPs general partner shall not be
compensated for its services as a general partner, other than
the compensation it receives with respect to distributions and
allocations in accordance with the partnership agreement.
Subject to certain provisions of the partnership agreement,
Aimco OP will reimburse the general partner for all sums
expended in connection with the partnerships business.
In addition, subject to the rights of holders of any outstanding
preferred OP Units, the Aimco OP partnership agreement
requires the general partner to cause Aimco OP to distribute
quarterly all, or such portion of, as the general partner may in
its sole and absolute discretion determine, Available Cash (as
such term is defined in the partnership agreement) generated by
Aimco OP during such quarter to the general partner, the special
limited partner and the holders of common OP Units and HPUs
on the record date established by the general partner with
respect to such quarter, in accordance with their respective
interests in Aimco OP on such record date. The partnership
agreement requires the general partner to take such reasonable
efforts, as determined by it in its sole and absolute discretion
and consistent with the REIT Requirements, to cause Aimco OP to
distribute sufficient amounts to enable the general partner to
transfer funds to Aimco and enable Aimco to pay stockholder
dividends that will (i) satisfy the requirements for
qualifying as a REIT under the Code and the Treasury Regulations
and (ii) avoid any United States Federal income or excise
tax liability of Aimco.
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MATERIAL
UNITED STATES FEDERAL INCOME TAX MATTERS
The following is a summary of the Material United States Federal
income tax consequences of the transactions, and an investment
in Aimco OP Units and Aimco stock. This discussion is based
upon the Internal Revenue Code of 1986, as amended (the
Internal Revenue Code), regulations promulgated by
the U.S. Treasury Department (the Treasury
Regulations), rulings issued by the IRS, and judicial
decisions, all in effect as of the date of this information
statement/prospectus and all of which are subject to change or
differing interpretations, possibly with retroactive effect.
This summary is also based on the assumptions that the operation
of Aimco, Aimco OP and the limited liability companies and
limited partnerships in which they own controlling interests
(collectively, the Subsidiary Partnerships) and any
affiliated entities will be in accordance with their respective
organizational documents and partnership agreements. This
summary is for general information only and does not purport to
discuss all aspects of United States Federal income taxation
which may be important to a particular investor, or to certain
types of investors subject to special tax rules (including
financial institutions, broker-dealers, regulated investment
companies, holders that receive Aimco stock through the exercise
of stock options or otherwise as compensation, insurance
companies, persons holding Aimco stock as part of a
straddle, hedge, conversion
transaction, synthetic security or other
integrated investment, and, except to the extent discussed
below, tax-exempt organizations and foreign investors, as
determined for United States Federal income tax purposes). This
summary assumes that investors will hold their OP Units and
Aimco stock as capital assets (generally, property held for
investment). No opinion of counsel or advance ruling from the
IRS has been or will be sought regarding the tax status of Aimco
or Aimco OP, or the tax consequences relating to Aimco or Aimco
OP or an investment in OP Units or Aimco stock. No
assurance can be given that the IRS would not assert, or that a
court would not sustain, a position contrary to any of the tax
aspects set forth below.
THE FEDERAL INCOME TAX TREATMENT OF A PARTICULAR HOLDER DEPENDS
UPON DETERMINATIONS OF FACT AND INTERPRETATIONS OF COMPLEX
PROVISIONS OF UNITED STATES FEDERAL INCOME TAX LAW FOR WHICH NO
CLEAR PRECEDENT OR AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, EACH
HOLDER IS URGED TO CONSULT ITS TAX ADVISOR REGARDING THE
FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE
TRANSACTIONS, OF ACQUIRING, HOLDING, EXCHANGING, OR OTHERWISE
DISPOSING OF OP UNITS AND AIMCO STOCK, AND OF AIMCOS
ELECTION TO BE SUBJECT TO TAX, FOR FEDERAL INCOME TAX PURPOSES,
AS A REAL ESTATE INVESTMENT TRUST.
United
States Federal Income Tax Consequences Relating to the
Transactions
Tax
Consequences of the Merger between NPI and New NPI (the
Redomestication)
The merger of an existing partnership into another partnership
is considered a continuation of the existing partnership if its
partners, who own more than 50% of the profits and capital in
the existing partnership, obtain more than 50% of the profits
and capital in the resulting partnership. Because the partners
of NPI will receive the same number of units of limited
partnership interest in the Delaware partnership, New NPI, as
they had in the California partnership, NPI, the Delaware
partnership will be considered a continuation of the California
partnership for tax purposes. NPI will not recognize gain as a
result of contributing its assets to New NPI. New NPI will have
the same federal identification number as that of NPI and will
have the same tax basis, holding period, and depreciation method
for each of its assets as that of NPI. The partners of NPI will
not recognize any gain from the merger of NPI with and into New
NPI. The bases of the partners in New NPI will be equal to their
bases in the terminated partnership, NPI, and their holding
periods in their units in New NPI will be the same as their
holding periods in the NPI units. Aimco believes that completion
of the Redomestication will not result in any tax consequences
to the limited partners of NPI.
Tax
Consequences of the Merger between New NPI and the Aimco
Subsidiary (the Merger) to NPI and Aimco
OP
When the assets or operations of two partnerships such as New
NPI and Aimco OP are combined in a transaction pursuant to which
one of the partnerships ceases to exist as a partnership (the
terminated partnership)
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for Federal income tax purposes, and the members of the
terminated partnership become members of the surviving
partnership (the resulting partnership), that
combined transaction is generally treated as a partnership
merger.
In general, New NPI would be treated as contributing all of its
assets, and assigning all of its liabilities, to Aimco OP in
exchange for interests in Aimco OP and any other consideration
issued by Aimco OP in connection with the transaction, including
cash or an assumption of liability, which may result in gain
recognition under the rules described below. Immediately
thereafter, New NPI is treated as distributing all of its assets
to its partners in complete liquidation.
Tax
Consequences of the Merger between New NPI and the Aimco
Subsidiary (the Merger) to Aimco and the Aimco
Entities
Aimco and the Aimco Entities (other than Aimco OP, which is
discussed separately, above) are not expected to recognize any
gain or loss on the transaction.
Tax
Consequences of Exchanging NPI Units Solely for
Cash
For Federal income tax purposes, any payment of cash for NPI
Units will be treated as a sale of such NPI Units by such
holder. Each such holder of NPI Units who accepts cash must
explicitly agree and consent to treat the payment of cash for
NPI Units as a sale of such units, in accordance with the terms
of the merger agreement.
If a holder of NPI Units sells such units for cash, such holder
will recognize gain or loss on the sale of his units equal to
the difference between (i) such holders amount
realized on the sale and (ii) such holders
adjusted tax basis in the NPI Units sold. The amount
realized with respect to a NPI Unit will be equal to the
sum of the amount of cash such holder receives for his units
plus the amount of liabilities of New NPI allocable to such NPI
Units as determined under section 752 of the Internal
Revenue Code.
Tax
Consequences of Exchanging NPI Units Solely for OP
Units
Generally, section 721 of the Internal Revenue Code
provides that neither a contributing partner nor the partnership
will recognize a gain or loss, for United States Federal income
tax purposes, upon a contribution of property to such
partnership in exchange for solely OP Units, except to the
extent described below. Each such holder of NPI Units who
accepts OP Units must explicitly agree and consent to such
treatment, in accordance with the terms of the merger agreement.
If a holder of NPI Units contributes such units to Aimco OP in
exchange for solely OP Units, such holder may recognize
gain upon such exchange if, immediately prior to such exchange,
the amount of liabilities of New NPI allocable to the NPI Units
transferred exceeds the amount of the Aimco OP partnership
liabilities allocable to such holder immediately after such
exchange. In that case the excess would be treated as a deemed
distribution of cash to such holder from Aimco OP. This deemed
cash distribution would be treated as a nontaxable return of
capital to the extent such holders adjusted tax basis in
his OP Units and thereafter as taxable gain.
Tax
Consequences of Receipt of Cash Payment for Waiver and
Release
As discussed in The Merger Waiver and
Additional Consideration, each limited partner
unaffiliated with Aimco OP may elect to receive an additional
cash payment in exchange for executing a waiver and release of
certain claims. The United Stated Federal income tax treatment
of such additional cash payment is uncertain. Aimco OP intends
to treat the additional cash payment as a payment made for the
waiver and release of certain claims, and not as additional
Merger Consideration, and intends to report the additional cash
payment accordingly. No assurance can be given that the IRS
would not assert that the additional cash payment should be
treated as part of the Merger Consideration. Holders that elect
to receive the additional cash payment in exchange for executing
a waiver and release should consult their tax advisors
concerning the tax treatment of such payment.
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Information
Reporting Requirements And Backup Withholding
United
States Holders
In general, backup withholding and information reporting will
apply to all payments made to a United States Holder pursuant to
the Merger. A United States Holder will generally be subject to
backup withholding (at a rate of 28%, through 2010) with
respect to payments made pursuant to the Merger unless such
holder, among other conditions, provides a correct taxpayer
identification number, certifies as to no loss of exemption from
backup withholding, and otherwise complies with the applicable
requirements of the backup withholding rules, or otherwise
establishes a basis for exemption from backup withholding.
Exempt United States Holders (including, among others, all
corporations) are not subject to these backup withholding and
information reporting requirements. A holder who does not
provide Aimco OP with his correct taxpayer identification number
also may be subject to penalties imposed by the IRS. Any amount
paid as backup withholding will be creditable against the
holders income tax liability.
Non-United
States Holders
Information reporting may apply to payments made to a
Non-United
States Holder pursuant to the Merger. Copies of information
returns reporting such amounts and any withholding also may be
made available by the IRS to the tax authorities in the country
in which a
Non-United
States Holder is resident under the provision of an applicable
income tax treaty or other agreement.
Non-United
States Holders that receive OP Units as Merger
Consideration should see Taxation of Aimco OP
and OP Unitholders Taxation of Foreign
OP Unitholders, below.
In general, backup withholding will not apply to payments made a
Non-United
States Holder pursuant to the Merger, if, among other
conditions, such
Non-United
States Holder certifies as to its
non-United
States status under penalties of perjury or otherwise
establishes an exemption, provided that neither Aimco OP nor our
withholding agent has actual knowledge, or reason to know, that
the
Non-United
States Holder is a United States person or that the conditions
of any other exemption are not in fact satisfied. In order to
claim an exemption from or reduction of withholding tax, the
Non-United
States Holder must deliver a properly executed IRS
Form W-8ECI,
as applicable, claiming such exemption or reduction. Any amounts
withheld under the backup withholding rules generally will be
allowed as a refund or credit against such
Non-United
States Holders United States Federal income tax liability
if the
Non-United
States Holder follows the required procedures.
Because the tax treatment of the receipt of an additional cash
payment in exchange for executing a waiver and release of
certain claims is unclear under United States Federal income tax
law, Aimco OP intends to withhold United States Federal income
tax at a rate of 30% from any additional cash payment paid to a
Non-U.S. Holder,
unless an exemption from or reduction of withholding tax is
applicable. In order to claim an exemption from or reduction of
withholding tax, the
Non-United
States Holder must deliver a properly executed IRS
Form W-8ECI,
as applicable, claiming such exemption or reduction.
Non-U.S. Holders
are urged to consult their tax advisors regarding the
possibility of claiming a refund with respect to the receipt of
an additional cash payment in exchange for executing a waiver
and release.
Taxation
of Aimco OP and OP Unitholders
Partnership
Status
Aimco believes that Aimco OP is classified as a partnership, and
not as an association taxable as a corporation or as a publicly
traded partnership taxable as a corporation for United States
Federal income tax purposes. 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 Transferor and its owners would result. In
addition, classification of Aimco OP as an association or
publicly traded partnership taxable as a corporation would also
result in the termination of Aimcos status as a REIT for
United States Federal income tax purposes, which would have a
material adverse impact on Aimco. See Material
United States Federal Income Tax Matters Taxation of
Aimco and Aimco Stockholders Tax Aspects of
Aimcos Investments in Partnerships. The following
discussion
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assumes that Aimco OP is, and will continue to be, classified
and taxed as a partnership (and not as a publicly traded
partnership) for United States Federal income tax purposes.
Taxation
Of OP Unitholders
In general, a partnership is treated as a
pass-through entity for United States Federal income
tax purposes and is not itself subject to United States Federal
income taxation. Each partner of a partnership, however, is
subject to tax on his allocable share of partnership tax items,
including partnership income, gains, losses, deductions, and
expenses (Partnership Tax Items) for each taxable
year of the partnership ending within or with such taxable year
of the partner, regardless of whether he receives any actual
distributions from the partnership during the taxable year.
Generally, the characterization of any particular Partnership
Tax Item is determined at the partnership, rather than at the
partner level, and the amount of a partners allocable
share of such item is governed by the terms of the partnership
agreement. An OP Unitholders allocable share of Aimco
OPs taxable income may exceed the cash distributions to
the OP Unitholder for any year if Aimco OP retains its
profits rather than distributing them.
Allocations
Of Aimco OP Profits And Losses
For United States Federal income tax purposes, an
OP Unitholders allocable share of Aimco OPs
Partnership Tax Items will be determined by Aimco OPs
partnership agreement if such allocations either have
substantial economic effect or are determined to be
in accordance with the OP Unitholders interests in
Aimco OP. If the allocations provided by Aimco OPs
agreement of limited partnership were successfully challenged by
the IRS, the redetermination of the allocations to a particular
OP Unitholder for United States Federal income tax purposes
may be less favorable than the allocation set forth in Aimco
OPs agreement of limited partnership.
Tax
Basis Of A Partnership Interest
A partners adjusted tax basis in his partnership interest
is relevant, among other things, for determining (i) gain
or loss upon a taxable disposition of his partnership interest,
(ii) gain upon the receipt of partnership distributions,
and (iii) the limitations imposed on the use of partnership
deductions and losses allocable to such partner. Generally, the
adjusted tax basis of an OP Unitholders interest in
Aimco OP is equal to (A) the sum of the adjusted tax basis
of the property contributed by the OP Unitholder to Aimco
OP in exchange for an interest in Aimco OP and the amount of
cash, if any, contributed by the OP Unitholder to Aimco OP,
(B) reduced, but not below zero, by the
OP Unitholders allocable share of Aimco OP
partnership distributions, deductions, and losses,
(C) increased by the OP Unitholders allocable
share of Aimco OP partnership income and gains, and
(D) increased by the OP Unitholders allocable
share of Aimco OP partnership liabilities and decreased by the
OP Unitholders liabilities assumed by Aimco OP.
Cash
Distributions
Cash distributions received from a partnership do not
necessarily correlate with income earned by the partnership as
determined for United States Federal income tax purposes. Thus,
an OP Unitholders United States Federal income tax
liability in respect of his allocable share of Aimco OP taxable
income for a particular taxable year may exceed the amount of
cash, if any, received by the OP Unitholder from Aimco OP
during such year.
If cash distributions, including a deemed cash
distribution as discussed below, received by an
OP Unitholder in any taxable year exceed his allocable
share of Aimco OP taxable income for the year, the excess will
generally constitute, for United States Federal income tax
purposes, a return of capital to the extent of such
OP Unitholders adjusted tax basis in his Aimco OP
interest. Such return of capital will not be includible in the
taxable income of the OP Unitholder, for United States
Federal income tax purposes, but it will reduce, but not below
zero, the adjusted tax basis of Aimco OP interests held by the
OP Unitholder. If an OP Unitholders tax basis in
his Aimco OP interest is reduced to zero, a subsequent cash
distribution received by the OP Unitholder will be subject
to tax as capital gain
and/or
ordinary income, but only if, and to the extent that, such
distribution exceeds the subsequent positive adjustments, if
any, to the tax basis of the OP Unitholders Aimco OP
interest as determined at the end of the taxable year during
which such distribution is received. A decrease in an
OP Unitholders share of Aimco OP liabilities
resulting from the payment or other settlement, or reallocation
of such liabilities is generally treated, for
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United States Federal income tax purposes, as a deemed cash
distribution. The Transaction documents permit Aimco to make
such debt payments. A decrease in an OP Unitholders
percentage interest in Aimco OP because of the issuance by Aimco
OP of additional OP Units or otherwise, may decrease an
OP Unitholders share of nonrecourse liabilities of
Aimco OP and thus, may result in a corresponding deemed
distribution of cash. A deemed distribution of cash resulting
from the payment, settlement, or other reduction or reallocation
of Aimco OP liabilities formerly allocated to an
OP Unitholder will result in taxable gain to such
OP Unitholder to the extent such deemed distribution of
cash exceeds the OP Unitholders basis in his
OP Units
A non-pro rata distribution (or deemed distribution) of money or
property may result in ordinary income to an OP Unitholder,
regardless of such OP Unitholders tax basis in his
OP Units, if the distribution reduces such
OP Unitholders share of Aimco OPs
Section 751 Assets. Section 751
Assets are defined by the Internal Revenue Code to include
unrealized receivables or inventory
items. Among other things, unrealized
receivables include amounts attributable to previously
claimed depreciation deductions on certain types of property. To
the extent that such a reduction in an OP Unitholders
share of Section 751 Assets occurs, Aimco OP will be deemed
to have distributed a proportionate share of the
Section 751 Assets to the OP Unitholder followed by a
deemed exchange of such assets with Aimco OP in return for the
non-pro rata portion of the actual distribution made to such
OP Unitholder. This deemed exchange will generally result
in the realization of ordinary income by the OP Unitholder.
Such income will equal the excess of (1) the non-pro rata
portion of such distribution over (2) the
OP Unitholders tax basis in such
OP Unitholders share of such Section 751 Assets
deemed relinquished in the exchange.
Tax
Consequences Relating To Contributed Assets and Transferred
Liabilities
Generally, section 721 of the Internal Revenue Code
provides that neither the contributing partner nor Aimco OP will
recognize a gain or loss, for United States Federal income tax
purposes, upon a contribution of property to Aimco OP solely in
exchange for OP Units. If, however, in connection with such
a contribution of property, the investor receives, or is deemed
to receive, cash or other consideration in addition to
OP Units, the receipt or deemed receipt of such cash or
other consideration may be treated as part of a disguised
sale. In that case, the investor would be treated as
having sold, in a taxable transaction, a portion of the
contributed property to Aimco OP in exchange for such cash or
other consideration; the balance of the contributed property
would, however, remain subject to the tax-free contribution
treatment described above. Subject to certain exceptions,
including exceptions that apply to distributions of operating
cash flow, any transfer or deemed transfer (such as a debt pay
down which is permitted under the transaction documents), of
cash by Aimco OP to the contributing partner within two years
before or after such contribution, including cash paid at
closing, will be treated as part of a taxable disguised
sale. In addition, the IRS may assert that any redemption
or exchange transaction involving the OP Units issued in
connection with the Transaction that occurs within several years
after such transaction constitutes an integrated disguised
sale that may result in taxation (without the receipt of
cash) for OP Unitholders who do not dispose of their
OP Units.
The disguised sale rules may also apply, and give
rise to taxable income without a corresponding receipt of cash
where, for example, the NPI unitholder contributes property to
Aimco OP subject to one or more liabilities, where liabilities
are assumed or paid by Aimco OP or where a redemption or
exchange involving the OP Units issued in connection with
the Transaction occurs within several years after the
Transaction. The application of the disguised sale
rules is complex and depends, in part, upon the facts and
circumstances applicable the NPI unitholders, which Aimco has
not undertaken to review. Accordingly, investors are
particularly urged with their tax advisors concerning the extent
to which the disguised sale rules would apply.
If an investor transfers property to Aimco OP in exchange for an
OP Unit, and the adjusted tax basis of such property
differs from its fair market value, Partnership Tax Items must
be allocated in a manner such that the contributing partner is
charged with, or benefits from, the unrealized gain or
unrealized loss associated with such property at the time of the
contribution. This may result in a tax liability without a
corresponding receipt of cash. Where a partner contributes cash
to a partnership that holds appreciated property, Treasury
Regulations provide for a similar allocation of such items to
the other partners. These rules may apply to a contribution by
Aimco to Aimco OP of cash proceeds received by Aimco from the
offering of its stock. Such allocations are solely for United
States Federal income tax purposes and do not affect the book
capital accounts or other economic or legal arrangements
64
among the OP Unitholders. The general purpose underlying
this provision is to specially allocate certain Partnership Tax
Items in order to place both the noncontributing and
contributing partners in the same tax position that they would
have been in had the contributing partner contributed property
with an adjusted tax basis equal to its fair market value.
Treasury Regulations provide Aimco OP with several alternative
methods and allow Aimco OP to adopt any other reasonable method
to make allocations to reduce or eliminate these book-tax
differences. The general partner, in its sole and absolute
discretion and in a manner consistent with Treasury Regulations,
will select and adopt a method of allocating Partnership Tax
Items for purposes of eliminating such disparities. The method
selected by Aimco OP in its sole discretion could cause the
transferor (or its partners) to incur a tax liability without a
corresponding receipt of cash. Each prospective investor is
urged to consult his tax advisor regarding the tax consequences
of any special allocations of Partnership Tax Items resulting
from the contribution of property to Aimco OP.
Disguised
Sales Rules
As described above, if a contributing partner receives or is
deemed to receive for United States Federal income tax purposes,
cash or other consideration in addition to OP Units upon
the contribution of property to Aimco OP or within two years
before or after such consideration (other than certain safe
harbor distributions), the transaction will likely be treated as
part contribution of property and part sale of property under
the disguised sale rules. The disguised
sale rules may also apply where property is transferred to
Aimco OP subject to certain liabilities. In such event, the
contributing partner will recognize gain or loss with respect to
the portion of the property that is deemed to be sold to Aimco
OP. If the disguised sale rules apply, all or a
portion of the liabilities associated with the contributed
property may be treated as consideration received by the
contributing partner in a sale of the property to Aimco OP. The
disguised sale rules may apply if, for example, the
issuance of OP Units to New NPI limited partners in
connection with the merger is integrated with any other
acquisition between Aimco and any OP Unitholder or any
related party. For example, the IRS may assert that any
redemption or exchange for several years between Aimco OP and
any OP Unitholder who receives OP Units in the current
transaction constitutes an integrated disguised sale
that may result in taxation (without receipt of cash) for
OP Unitholders who do not dispose of their OP Units.
No assurances can be given that the IRS would not be successful
in such an assertion. Each prospective investor is urged to
consult his tax advisor regarding the application of the
disguised sale rules.
Limitations
On Deductibility Of Losses
Basis Limitation. To the extent that an
OP Unitholders allocable share of Aimco OP
partnership deductions and losses exceeds his adjusted tax basis
in his Aimco OP interest at the end of the taxable year in which
the losses and deductions flow through, the excess losses and
deductions cannot be utilized, for United States Federal income
tax purposes, by the OP Unitholder in such year. The excess
losses and deductions may, however, be utilized in the first
succeeding taxable year in which, and to the extent that, there
is an increase in the tax basis of Aimco OP interest held by
such OP Unitholder, but only to the extent permitted under
the at risk and passive activity loss
rules discussed below.
At Risk Limitation. Under the
at risk rules of section 465 of the Internal
Revenue Code, a noncorporate taxpayer and a closely held
corporate taxpayer are generally not permitted to claim a
deduction, for United States Federal income tax purposes, in
respect of a loss from an activity, whether conducted directly
by the taxpayer or through an investment in a partnership, to
the extent that the loss exceeds the aggregate dollar amount
which the taxpayer has at risk in such activity at
the close of the taxable year. To the extent that losses are not
permitted to be used in any taxable year, such losses may be
carried over to subsequent taxable years and may be claimed as a
deduction by the taxpayer if, and to the extent that, the amount
which the taxpayer has at risk is increased.
Provided certain requirements are met, a taxpayer is considered
at risk for the taxpayers share of any
nonrecourse financing which is secured by real property used in
any activity that constitutes the holding of real
property, which activity should be the case for a limited
partner of a common OP Unit generally should constitute.
Passive Activity Loss
Limitation. The passive activity loss rules of
section 469 of the Internal Revenue Code limit the use of
losses derived from passive activities, which generally includes
an investment in limited partnership interests such as the
OP Units. If an investment in an OP Unit is treated as
a passive activity, an OP Unitholder who is an individual
investor, as well as certain other types of investors, would not
be able to use
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losses from Aimco OP to offset nonpassive activity income,
including salary, business income, and portfolio income (e.g.,
dividends, interest, royalties, and gain on the disposition of
portfolio investments) received during the taxable year. Passive
activity losses that are disallowed for a particular taxable
year may, however, be carried forward to offset passive activity
income earned by the OP Unitholder in future taxable years.
In addition, such disallowed losses may be claimed as a
deduction, subject to the basis and at risk limitations
discussed above, upon a taxable disposition of an
OP Unitholders entire interest in Aimco OP,
regardless of whether such OP Unitholder has received any
passive activity income during the year of disposition.
If Aimco OP were characterized as a publicly traded partnership,
each OP Unitholder would be required to treat any loss
derived from Aimco OP separately from any income or loss derived
from any other publicly traded partnership, as well as from
income or loss derived from other passive activities. In such
case, any net losses or credits attributable to Aimco OP which
are carried forward may only be offset against future income of
Aimco OP. Moreover, unlike other passive activity losses,
suspended losses attributable to Aimco OP would only be allowed
upon the complete disposition of the OP Unitholders
entire interest in Aimco OP.
Section 754
Election
Aimco OP has made the election permitted by section 754 of
the Internal Revenue Code. Such election is irrevocable without
the consent of the IRS. The election will generally permit a
purchaser of OP Units, such as Aimco when it acquires Aimco
OP Units from OP Unitholders, to adjust its share of
the basis in Aimco OPs properties pursuant to
section 743(b) of the Internal Revenue Code to fair market
value (as reflected by the value of consideration paid for the
OP Units), as if such purchaser had acquired a direct
interest in Aimco OP assets. The section 743(b) adjustment
is attributed solely to a purchaser of OP Units and is not
added to the bases of Aimco OPs assets associated with all
of the OP Unitholders in Aimco OP.
Depreciation
Section 168(i)(7) of the Internal Revenue Code provides
that in the case of property transferred to a partnership in a
section 721 transaction, the transferee shall be treated as
the transferor for purposes of computing the depreciation
deduction with respect to so much of the basis in the hands of
the transferee as does not exceed the adjusted basis in the
hands of the transferor. The effect of this rule would be to
continue the historic basis, placed in service dates and methods
with respect to the depreciation of the properties being
contributed by a Contributing Partner to Aimco OP in exchange
for OP Units. However, an acquirer of OP Units that
obtains a section 743(b) adjustment by reason of such
acquisition (see Section 754 Election, above)
generally will be allowed depreciation with respect to such
adjustment beginning as of the date of the exchange as if it
were new property placed in service as of that date.
Sale,
Redemption, Exchange or Abandonment of OP Units
An OP Unitholder will recognize a gain or loss upon a sale
of an OP Unit, a redemption of an OP Unit for cash, an
exchange of an OP Unit for shares of common stock or other
taxable disposition of an OP Unit. Gain or loss recognized
upon a sale or exchange of an OP Unit will be equal to the
difference between (i) the amount realized in the
transaction (i.e., the sum of the cash and the fair market value
of any property received for the OP Unit plus the amount of
Aimco OP liabilities allocable to the OP Unit at such time)
and (ii) the OP Unitholders tax basis in the
OP Unit disposed of, which tax basis will be adjusted for
the OP Unitholders allocable share of Aimco OPs
income or loss for the taxable year of the disposition. The tax
liability resulting from the gain recognized on a disposition of
an OP Unit could exceed the amount of cash and the fair
market value of property received.
If Aimco OP redeems an OP Unitholders OP Units
for cash (which is not contributed by Aimco to effect the
redemption), the tax consequences generally would be the same as
described in the preceding paragraphs, except that if Aimco OP
redeems less than all of an OP Unitholders
OP Units, the OP Unitholder would recognize taxable
gain only to the extent that the cash, plus the amount of Aimco
OP liabilities allocable to the redeemed OP Units, exceeded
the OP Unitholders adjusted tax basis in all of such
OP Unitholders OP Units immediately before the
redemption.
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Capital gains recognized by individuals and certain other
noncorporate taxpayers upon the sale or disposition of an
OP Unit will be subject to a maximum United States Federal
income tax rate of 15% (through 2010) if the OP Unit
is held for more than 12 months and will be taxed at
ordinary income tax rates if the OP Unit is held for
12 months or less. Generally, gain or loss recognized by an
OP Unitholder on the sale or other taxable disposition of
an OP Unit will be taxable as capital gain or loss.
However, to the extent that the amount realized upon the sale or
other taxable disposition of an OP Unit attributable to an
OP Unitholders share of unrealized
receivables of Aimco OP exceeds the basis attributable to
those assets, such excess will be treated as ordinary income.
Among other things, unrealized receivables include
amounts attributable to previously claimed depreciation
deductions on certain types of property. In addition, the
maximum United States Federal income tax rate for net capital
gains attributable to the sale of depreciable real property
(which may be determined to include an interest in a partnership
such as Aimco OP) held for more than 12 months is currently
25% (rather than 15%) to the extent of previously claimed
depreciation deductions that would not be treated as
unrealized receivables. See also Disguised
Sales Rules above for sales integrated with the
contribution of property for OP Units.
The law is currently uncertain regarding the treatment of an
abandoned interest in a partnership, and whether an abandonment
gives rise to a deductible loss is a question of fact. Even if
an investor were able to successfully abandon his interest in an
OP Unit and thereby recognized loss to the extent of his
basis in such OP Unit, under authority recently issued by
the IRS, it is likely that such loss would be capital, rather
than ordinary, in nature. Prospective investors are urged to
consult their tax advisors regarding the application, effect and
method of abandoning an interest in an OP Unit.
Alternative
Minimum Tax
The Internal Revenue Code contains different sets of minimum tax
rules applicable to corporate and noncorporate investors. The
discussion below relates only to the alternative minimum tax
applicable to noncorporate taxpayers. Accordingly, corporate
investors should consult with their tax advisors with respect to
the effect of the corporate minimum tax provisions that may be
applicable to them. Noncorporate taxpayers are subject to an
alternative minimum tax to the extent the tentative minimum tax
(TMT) exceeds the regular income tax otherwise
payable. In general, alternative minimum taxable income
(AMTI) consists of the taxpayers taxable
income, determined with certain adjustments, plus his items of
tax preference. For example, alternative minimum taxable income
is calculated using an alternative cost recovery (depreciation)
system that is not as favorable as the methods provided for
under section 168 of the Internal Revenue Code which Aimco
OP will use in computing its income for regular United States
Federal income tax purposes. Accordingly, an
OP Unitholders AMTI derived from Aimco OP may be
higher than such OP Unitholders share of Aimco
OPs net taxable income. Prospective investors should
consult their tax advisors as to the impact of an investment in
OP Units on their liability for the alternative minimum tax.
Information
Returns and Audit Procedures
Aimco OP will use all reasonable efforts to furnish to each
OP Unitholder as soon as possible after the close of each
taxable year of Aimco OP, certain tax information, including a
Schedule K-l,
which sets forth each OP Unitholders allocable share
of Aimco OPs Partnership Tax Items. In preparing this
information the general partner will use various accounting and
reporting conventions to determine the respective
OP Unitholders allocable share of Partnership Tax
Items. The general partner cannot assure a current or
prospective OP Unitholder that the IRS will not
successfully contend in court that such accounting and reporting
conventions are impermissible.
No assurance can be given that Aimco OP will not be audited by
the IRS or that tax adjustments will not be made. Further, any
adjustments in Aimco OPs tax returns will lead to
adjustments in OP Unitholders tax returns and may
lead to audits of their returns and adjustments of items
unrelated to Aimco OP. Each OP Unitholder would bear the
cost of any expenses incurred in connection with an examination
of such OP Unitholders personal tax return.
The tax treatment of Partnership Tax Items generally is
determined at the partnership level in a unified partnership
proceeding rather than in separate proceedings with the
partners. The Internal Revenue Code provides for one partner to
be designated as the Tax Matters Partner for these purposes.
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The Tax Matters Partner is authorized, but not required, to take
certain actions on behalf of Aimco OP and OP Unitholders
and can extend the statute of limitations for assessment of tax
deficiencies against OP Unitholders with respect to Aimco
OP Tax Items. The Tax Matters Partner may bind an
OP Unitholder with less than a 1% profits interest in Aimco
OP to a settlement with the IRS, unless such OP Unitholder
elects, by filing a statement with the IRS, not to give such
authority to the Tax Matters Partner. The Tax Matters Partner
may seek judicial review (to which all the OP Unitholders
are bound) of a final partnership administrative adjustment and,
if the Tax Matters Partner fails to seek judicial review, such
review may be sought by any OP Unitholder having at least a
1% interest in the profits of Aimco OP or by OP Unitholders
having in the aggregate at least a 5% profits interest. However,
only one action for judicial review will go forward, and each
OP Unitholder with an interest in the outcome may
participate.
Tax
Return Disclosure and Investor List Requirements
Treasury Regulations require participants in a reportable
transaction to disclose certain information about the
transaction to the IRS with their tax returns and retain certain
information relating to the transaction (the Disclosure
Requirement). In addition, organizers, sellers, and
certain advisors of a reportable transaction are required to
maintain certain records, including lists identifying the
investors in a transaction, and to furnish those records, as
well as detailed information regarding the transaction, to the
IRS upon demand (the List Maintenance Requirement).
While the Disclosure Requirement and the List Maintenance
Requirement are directed towards tax shelters, the
regulations are written quite broadly, and apply to transactions
that would not typically be considered tax shelters. There are
significant penalties for failure to comply with these
requirements.
A transaction may be a reportable transaction based upon any of
several indicia, including, among other things, losses.
Characterization of this transaction as a reportable transaction
could increase the likelihood of an audit by the IRS. You would
be required to attach a completed IRS Form 8886, the
Reportable Transaction Disclosure Statement, to your
tax return for the taxable year of the transaction, as well as
provide a copy of this form to the Office of Tax Shelter
Analysis at the same time that such statement is first filed
with the IRS. You should consult your tax advisors concerning
these disclosure obligations with respect to the receipt or
disposition of Common OP Units, or transactions that might
be undertaken directly or indirectly by Aimco OP. Moreover, you
should be aware that Aimco OP and other participants in the
transactions involving Aimco OP (including their advisors) would
be subject to the Disclosure Requirement
and/or the
List Maintenance Requirement if this transaction were to be
classified as a reportable transaction.
Taxation
Of Foreign OP Unitholders
A
Non-U.S. Holder
(as defined below under Material United States
Federal Income Tax Matters Taxation of Aimco and
Aimco Stockholders Taxation of Foreign Stockholders)
will generally be considered to be engaged in a United States
trade or business on account of its ownership of an
OP Unit. As a result, a
Non-U.S. Holder
will be required to file United States Federal income tax
returns with respect to its allocable share of Aimco OPs
income which is effectively connected to its trade or business.
A
Non-U.S. Holder
that is a corporation may also be subject to United States
branch profit tax at a rate of 30%, in addition to regular
United States Federal income tax, on its allocable share of
such income. Such a tax may be reduced or eliminated by an
income tax treaty between the United States and the country with
respect to which the
Non-U.S. Holder
is resident for tax purposes.
Non-U.S. Holders
are advised to consult their tax advisors regarding the effects
an investment in Aimco OP may have on information return
requirements and other United States and
non-United
States tax matters, including the tax consequences of an
investment in Aimco OP for the country or other jurisdiction of
which such
Non-U.S. Holder
is a citizen or in which such
Non-U.S. Holder
resides or is otherwise located.
Taxation
of Aimco and Aimco Stockholders
Taxation
of Aimco
The REIT provisions of the Internal Revenue Code are highly
technical and complex. The following summary sets forth certain
aspects of the provisions of the Internal Revenue Code that
govern the United States Federal
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income tax treatment of a REIT and its stockholders. This
summary is qualified in its entirety by the applicable Internal
Revenue Code provisions, Treasury Regulations, and
administrative and judicial interpretations thereof, all of
which are subject to change, possibly with retroactive effect.
Aimco has elected to be taxed as a REIT under the Internal
Revenue Code commencing with its taxable year ended
December 31, 1994, and Aimco intends to continue such
election. Although Aimco believes that, commencing with the
Aimcos initial taxable year ended December 31, 1994,
Aimco was organized in conformity with the requirements for
qualification as a REIT, and its actual method of operation has
enabled, and its proposed method of operation will enable, it to
meet the requirements for qualification and taxation as a REIT
under the Internal Revenue Code, no assurance can be given that
Aimco has been or will remain so qualified. Such qualification
and taxation as a REIT depends upon Aimcos ability to
meet, on a continuing basis, through actual annual operating
results, asset ownership, distribution levels, requirements
regard diversity of stock ownership, and the various
qualification tests imposed under the Internal Revenue Code as
discussed below. No assurance can be given that the actual
results of Aimcos operation for any one taxable year will
satisfy such requirements. See Material United States
Federal Income Tax Matters Taxation of Aimco and
Aimco Stockholders Failure to Qualify. No
assurance can be given that the IRS will not challenge
Aimcos eligibility for taxation as a REIT.
Taxation
of REITs in General
Provided Aimco qualifies as a REIT, it will generally be
entitled to a deduction for dividends that it pays and therefore
will not be subject to United States Federal corporate income
tax on its net income that is currently distributed to its
stockholders. This deduction for dividends paid substantially
eliminates the double taxation of corporate income
(i.e., taxation at both the corporate and stockholder levels)
that generally results from investment in a corporation. Rather,
income generated by a REIT is generally taxed only at the
stockholder level upon a distribution of dividends by the REIT.
The rates at which individual stockholders are taxed on
corporate dividends have been reduced from a maximum of 38.6%
(as ordinary income) to a maximum of 15% (the same as long-term
capital gains) through 2010. With limited exceptions, however,
dividends received by stockholders from Aimco or from other
entities that are taxed as REITs are generally not eligible for
the reduced rates, and will continue to be taxed at rates
applicable to ordinary income, which, will be as high as 35%
through 2010. See Taxation of Aimco and Aimco
Stockholders Taxation of Stockholders
Taxation of Taxable Domestic
Stockholders Distributions.
Net operating losses, foreign tax credits and other tax
attributes of a REIT generally do not pass through to the
stockholders of the REIT, subject to special rules for certain
items such as capital gains recognized by REITs. See
Taxation of Aimco and Aimco
Stockholders Taxation of Stockholders.
If Aimco qualifies as a REIT, it will nonetheless be subject to
Federal income tax in the following circumstances:
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Aimco will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net
capital gains.
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A 100% excise tax may be imposed on some items of income and
expense that are directly or constructively paid between Aimco
and its taxable REIT subsidiaries (as described below) if and to
the extent that the IRS successfully asserts that the economic
arrangements between Aimco and its taxable REIT subsidiaries are
not comparable to similar arrangements between unrelated parties.
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If Aimco has net income from prohibited transactions, which are,
in general, sales or other dispositions of property held
primarily for sale to customers in the ordinary course of
business, other than foreclosure property, such income will be
subject to a 100% tax.
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If we elect to treat property that we acquire in connection with
a foreclosure of a mortgage loan or certain leasehold
terminations as foreclosure property, we may thereby
avoid the 100% prohibited transactions tax on gain from a resale
of that property (if the sale would otherwise constitute a
prohibited transaction), but the income from the sale or
operation of the property may be subject to corporate income tax
at the highest applicable rate (currently 35%). We do not
anticipate receiving any income from foreclosure property.
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If Aimco should fail to satisfy the 75% gross income test or the
95% gross income test (as discussed below), but has nonetheless
maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on
an amount based on the magnitude of the failure adjusted to
reflect the profit margin associated with Aimcos gross
income.
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Similarly, if Aimco should fail to satisfy the asset or other
requirements applicable to REITs, as described below, yet
nonetheless maintain its qualification as a REIT because there
is reasonable cause for the failure and other applicable
requirements are met, it may be subject to an excise tax. In
that case, the amount of the tax will be at least $50,000 per
failure, and, in the case of certain asset test failures, will
be determined as the amount of net income generated by the
assets in question multiplied by the highest corporate tax rate
(currently 35%) if that amount exceeds $50,000 per failure.
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If Aimco should fail to distribute during each calendar year at
least the sum of (i) 85% of its REIT ordinary income for
such year, (ii) 95% of its REIT capital gain net income for
such year, and (iii) any undistributed taxable income from
prior periods, Aimco would be required to pay a 4% excise tax on
the excess of the required distribution over the sum of
(a) the amounts actually distributed, plus
(b) retained amounts on which income tax is paid at the
corporate level.
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Aimco may be required to pay monetary penalties to the IRS in
certain circumstances, including if it fails to meet the record
keeping requirements intended to monitor its compliance with
rules relating to the composition of a REITs stockholders,
as described below in Taxation of Aimco and
Aimco Stockholders Requirements for
Qualification General.
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If Aimco acquires appreciated assets from a corporation that is
not a REIT (i.e., a subchapter C corporation) in a
transaction in which the adjusted tax basis of the assets in the
hands of Aimco is determined by reference to the adjusted tax
basis of the assets in the hands of the subchapter C
corporation, Aimco may be subject to tax on such appreciation at
the highest corporate income tax rate then applicable if Aimco
subsequently recognizes gain on the disposition of any such
asset during the ten-year period following its acquisition from
the subchapter C corporation.
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Certain earnings of Aimcos subsidiaries are subchapter C
corporations, the earnings of which could be subject to Federal
corporate income tax.
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Aimco may be subject to the alternative minimum tax
on its items of tax preference, including any deductions of net
operating losses.
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Aimco and its subsidiaries may be subject to a variety of taxes,
including state, local and foreign income taxes, property taxes
and other taxes on their assets and operations. Aimco could also
be subject to tax in situations and on transactions not
presently contemplated.
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Requirements
for Qualification
The Internal Revenue Code defines a REIT as a corporation, trust
or association:
1. that is managed by one or more trustees or directors;
2. the beneficial ownership of which is evidenced by
transferable shares, or by transferable certificates of
beneficial interest;
3. that would be taxable as a domestic corporation, but for
the special Internal Revenue Code provisions applicable to REITs;
4. that is neither a financial institution nor an insurance
company subject to certain provisions of the Internal Revenue
Code;
5. the beneficial ownership of which is held by 100 or more
persons;
6. in which, during the last half of each taxable year, not
more than 50% in value of the outstanding stock is owned,
directly or indirectly, by five or fewer individuals (as defined
in the Internal Revenue Code to include certain
entities); and
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7. that meets other tests described below (including with
respect to the nature of its income and assets).
The Internal Revenue Code provides that conditions
(1) through (4) must be met during the entire taxable
year, and that the condition (5) must be met during at
least 335 days of a taxable year of 12 months, or
during a proportionate part of a shorter taxable year.
Aimco believes that it has been organized, has operated and has
issued sufficient shares of stock to satisfy conditions
(1) through (7) inclusive. Aimcos articles of
incorporation provide certain restrictions regarding transfers
of its shares, which are intended to assist Aimco in satisfying
the share ownership requirements described in conditions
(5) and (6) above. These restrictions, however, may
not ensure that Aimco will, in all cases, be able to satisfy the
share ownership requirements described in (5) and
(6) above.
To monitor Aimcos compliance with the share ownership
requirements, Aimco is generally required to maintain records
regarding the actual ownership of its shares. To do so, Aimco
must demand written statements each year from the record holders
of certain percentages of its stock in which the record holders
are to disclose the actual owners of the shares (i.e., the
persons required to include in gross income the dividends paid
by Aimco). A list of those persons failing or refusing to comply
with this demand must be maintained as part of Aimcos
records. Failure by Aimco to comply with these record keeping
requirements could subject it to monetary penalties. A
stockholder who fails or refuses to comply with the demand is
required by the Treasury Regulations to submit a statement with
its tax return disclosing the actual ownership of the shares and
certain other information.
In addition, a corporation generally may not elect to become a
REIT unless its taxable year is the calendar year. Aimco
satisfies this requirement.
The Internal Revenue Code provides relief from violations of the
REIT gross income requirements, as described below under
Income Tests, in cases where a violation
is due to reasonable cause and not willful neglect, and other
requirements are met, including the payment of a penalty tax
that is based upon the magnitude of the violation. In addition,
the Internal Revenue Code extends similar relief in the case of
certain violations of the REIT asset requirements (see
Asset Tests below) and other REIT
requirements, again provided that the violation is due to
reasonable cause and not willful neglect, and other conditions
are met, including the payment of a penalty tax. If Aimco fails
to satisfy any of the various REIT requirements, there can be no
assurance that these relief provisions would be available to
enable it to maintain its qualification as a REIT, and, if
available, the amount of any resultant penalty tax could be
substantial.
Effect of
Subsidiary Entities
Ownership of Partnership Interests. In the
case of a REIT that is a partner in a partnership, the Treasury
Regulations provide that the REIT is deemed to own its
proportionate share of the partnerships assets and to earn
its proportionate share of the partnerships income for
purposes of the asset and gross income tests applicable to REITs
as described below. Similarly, the assets and gross income of
the partnership are deemed to retain the same character in the
hands of the REIT. Thus, Aimcos proportionate share of the
assets, liabilities and items of income of the Subsidiary
Partnerships will be treated as assets, liabilities and items of
income of Aimco for purposes of applying the REIT requirements
described below. A summary of certain rules governing the
Federal income taxation of partnerships and their partners is
provided below in Taxation of Aimco and Aimco
Stockholders Tax Aspects of Investments in
Affiliated Entities Partnerships.
Disregarded Subsidiaries. Aimcos
indirect interests in Aimco OP and other Subsidiary Partnerships
are held through wholly owned corporate subsidiaries of Aimco
organized and operated as qualified REIT
subsidiaries within the meaning of the Internal Revenue
Code. A qualified REIT subsidiary is any corporation, other than
a taxable REIT subsidiary as described below, that
is wholly owned by a REIT, or by other disregarded subsidiaries,
or by a combination of the two. If a REIT owns a qualified REIT
subsidiary, that subsidiary is disregarded for Federal income
tax purposes, and all assets, liabilities and items of income,
deduction and credit of the subsidiary are treated as assets,
liabilities and items of income, deduction and credit of the
REIT itself, including for purposes of the gross income and
asset tests applicable to REITs as summarized below. Each
qualified REIT subsidiary, therefore, is not subject to Federal
corporate income taxation, although it may be subject to state
or local taxation. Other entities that are wholly owned by a
REIT, including single member limited liability companies, are
also
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generally disregarded as separate entities for Federal income
tax purposes, including for purposes of the REIT income and
asset tests. Disregarded subsidiaries, along with partnerships
in which Aimco holds an equity interest, are sometimes referred
to herein as pass-through subsidiaries.
In the event that a disregarded subsidiary of Aimco ceases to be
wholly owned for example, if any equity interest in
the subsidiary is acquired by a person other than Aimco or
another disregarded subsidiary of Aimco the
subsidiarys separate existence would no longer be
disregarded for Federal income tax purposes. Instead, it would
have multiple owners and would be treated as either a
partnership or a taxable corporation. Such an event could,
depending on the circumstances, adversely affect Aimcos
ability to satisfy the various asset and gross income
requirements applicable to REITs, including the requirement that
REITs generally may not own, directly or indirectly, more than
10% of the securities of another corporation. See
Taxation of Aimco and Aimco
Stockholders Asset Tests and
Taxation of Aimco and Aimco
Stockholders Income Tests.
Taxable Subsidiaries. A REIT, in general, may
jointly elect with subsidiary corporations, whether or not
wholly owned, to treat the subsidiary corporation as a taxable
REIT subsidiary (TRS). A TRS also includes any
corporation, other than a REIT, with respect to which a TRS in
which a REIT owns an interest, owns securities possessing 35% of
the total voting power or total value of the outstanding
securities of such corporation. The separate existence of a TRS
or other taxable corporation, unlike a disregarded subsidiary as
discussed above, is not ignored for Federal income tax purposes.
As a result, a parent REIT is not treated as holding the assets
of a TRS or as receiving any income that the TRS earns. Rather,
the stock issued by the TRS is an asset in the hands of the
parent REIT, and the REIT recognizes as income, the dividends,
if any, that it receives from the subsidiary. This treatment can
affect the income and asset test calculations that apply to the
REIT, as described below. Because a parent REIT does not include
the assets and income of such subsidiary corporations in
determining the parents compliance with the REIT
requirements, such entities may be used by the parent REIT to
indirectly undertake activities that the REIT rules might
otherwise preclude it from doing directly or through
pass-through subsidiaries (for example, activities that give
rise to certain categories of income such as management fees or
foreign currency gains). As a taxable corporation, a TRS is
required to pay regular Federal income tax, and state and local
income tax where applicable.
Certain of Aimcos operations (including certain of its
property management, asset management, risk, etc.) are conducted
through its taxable REIT subsidiaries. Because Aimco is not
required to include the assets and income of such taxable REIT
subsidiaries in determining Aimcos compliance with the
REIT requirements, Aimco uses its taxable REIT subsidiaries to
facilitate its ability to offer services and activities to its
residents that are not generally considered as qualifying REIT
services and activities. If Aimco fails to properly structure
and provide such nonqualifying services and activities through
its taxable REIT subsidiaries, its ability to satisfy the REIT
gross income requirement, and also its REIT status, may be
jeopardized.
A TRS may generally engage in any business except the operation
or management of a lodging or health care facility. The
operation or management of a health care or lodging facility
precludes a corporation from qualifying as a TRS. If any of
Aimcos taxable REIT subsidiaries were deemed to operate or
manage a health care or lodging facility, such taxable REIT
subsidiaries would fail to qualify as taxable REIT subsidiaries,
and Aimco would fail to qualify as a REIT. Aimco believes that
none of its taxable REIT subsidiaries operate or manage any
health care or lodging facilities. However, the statute provides
little guidance as to the definition of a health care or lodging
facility. Accordingly, there can be no assurance that the IRS
will not contend that any of Aimcos taxable REIT
subsidiaries operate or manage a health care or lodging
facility, disqualifying it from treatment as a TRS, thereby
resulting in the disqualification of Aimco as a REIT.
Several provisions of the Internal Revenue Code regarding
arrangements between a REIT and a TRS ensure that a TRS will be
subject to an appropriate level of Federal income taxation. For
example, a TRS is limited in its ability to deduct interest
payments made to its REIT owner. In addition, Aimco would be
obligated to pay a 100% penalty tax on some payments that it
receives from, or on certain expenses deducted by, its taxable
REIT subsidiaries, if the IRS were to successfully assert that
the economic arrangements between Aimco and its taxable REIT
subsidiaries are not comparable to similar arrangements among
unrelated parties. See Taxation of REITs in
General Penalty Tax.
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Income
Tests
In order to maintain qualification as a REIT, Aimco annually
must satisfy two gross income requirements:
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First, at least 75% of Aimcos gross income for each
taxable year, excluding gross income from sales of inventory or
dealer property in prohibited transactions, must be
derived from investments relating to real property or mortgages
on real property, including rents from real
property, dividends received from other REITs, interest
income derived from mortgage loans secured by real property, and
gains from the sale of real estate assets, as well as certain
types of temporary investments.
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Second, at least 95% of Aimcos gross income for each
taxable year, excluding gross income from prohibited
transactions, must be derived from some combination of such
income from investments in real property (i.e., income that
qualifies under the 75% income test described above), as well as
other dividends, interest and gains from the sale or disposition
of stock or securities, which need not have any relation to real
property.
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Rents received by Aimco directly or through the Subsidiary
Partnerships will qualify as rents from real
property in satisfying the gross income requirements
described above, only if several conditions are met, including
the following. If rent is partly attributable to personal
property leased in connection with a lease of real property, the
portion of the total rent attributable to the personal property
will not qualify as rents from real property unless
it constitutes 15% or less of the total rent received under the
lease. Moreover, for rents received to qualify as rents
from real property, the REIT generally must not operate or
manage the property (subject to certain exceptions) or furnish
or render services to the tenants of such property, other than
through an independent contractor from which the
REIT derives no revenue. Aimco and its affiliates are permitted,
however, to directly perform services that are usually or
customarily rendered in connection with the rental of
space for occupancy only and are not otherwise considered
rendered to the occupant of the property. In addition, Aimco and
its affiliates may directly or indirectly provide non-customary
services to tenants of its properties without disqualifying all
of the rent from the property if the payment for such services
does not exceed 1% of the total gross income from the property.
For purposes of this test, the income received from such
non-customary services is deemed to be at least 150% of the
direct cost of providing the services. Moreover, Aimco is
generally permitted to provide services to tenants or others
through a TRS without disqualifying the rental income received
from tenants for purposes of the REIT income requirements.
Aimco manages apartment properties for third parties and
affiliates through its taxable REIT subsidiaries. These taxable
REIT subsidiaries receive management fees and other income. A
portion of such fees and other income accrue to Aimco through
distributions from the taxable REIT subsidiaries that are
classified as dividend income to the extent of the earnings and
profits of the taxable REIT subsidiaries. Such distributions
will generally qualify for purposes of the 95% gross income test
but not for purposes of the 75% gross income test. Any dividends
received by us from a REIT will be qualifying income in our
hands for purposes of both the 95% and 75% income tests.
Any income or gain derived by Aimco directly or through its
Subsidiary Partnerships from instruments that hedge certain
risks, such as the risk of changes in interest rates, will not
constitute gross income for purposes of the 75% or 95% gross
income test, provided that specified requirements are met. Such
requirements include that the instrument hedges risks associated
with indebtedness issued by Aimco or its Subsidiary Partnerships
that is incurred to acquire or carry real estate
assets (as described below under
Taxation of Aimco and Aimco
Stockholders Asset Tests), and the instrument
is properly identified as a hedge, along with the risk that it
hedges, within prescribed time periods.
If Aimco fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify
as a REIT for the year if it is entitled to relief under certain
provisions of the Internal Revenue Code. These relief provisions
will be generally available if Aimcos failure to meet
these tests was due to reasonable cause and not due to willful
neglect, Aimco attaches a schedule of the sources of its income
to its tax return, and any incorrect information on the schedule
was not due to fraud with intent to evade tax. It is not
possible to state whether Aimco would be entitled to the benefit
of these relief provisions in all circumstances. If these relief
provisions are inapplicable to a particular set of circumstances
involving Aimco, Aimco will not qualify as a REIT. As discussed
above under Taxation of Aimco and Aimco
Stockholders Taxation of REITs in General,
even where these
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relief provisions apply, a tax is imposed based upon the amount
by which Aimco fails to satisfy the particular gross income test.
Asset
Tests
Aimco, at the close of each calendar quarter of its taxable
year, must also satisfy four tests relating to the nature of its
assets:
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First, at least 75% of the value of the total assets of Aimco
total assets must be represented by some combination of
real estate assets, cash, cash items,
U.S. government securities, and under some circumstances,
stock or debt instruments purchased with new capital. For this
purpose, real estate assets include interests in
real property, such as land, buildings, leasehold interests in
real property, stock of other corporations that qualify as
REITs, and some kinds of mortgage backed securities and mortgage
loans. Assets that do not qualify for purposes of the 75% test
are subject to the additional asset tests described below.
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Second, not more than 25% of Aimcos total assets may be
represented by securities other than those in the 75% asset
class.
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Third, of the investments included in the 25% asset class, the
value of any one issuers securities owned by Aimco may not
exceed 5% of the value of Aimcos total assets, Aimco may
not own more than 10% of any one issuers outstanding
voting securities, and Aimco may not own more than 10% of the
total value of the outstanding securities of any one issuer. The
5% and 10% asset tests do not apply to securities of taxable
REIT subsidiaries.
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Fourth, the aggregate value of all securities of taxable REIT
subsidiaries held by Aimco may not exceed 25% of the value of
Aimcos total assets.
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Aimco believes that the value of the securities held by Aimco in
its taxable REIT subsidiaries will not exceed, in the aggregate,
25% of the value of Aimcos total assets and that
Aimcos ownership interests in its taxable REIT
subsidiaries qualify under the asset tests set forth above.
Notwithstanding the general rule that a REIT is treated as
owning its share of the underlying assets of a subsidiary
partnership for purposes of the REIT income and asset tests, if
a REIT holds indebtedness issued by a partnership, the
indebtedness will be subject to, and may cause a violation of,
the asset tests, resulting in loss of REIT status, unless it is
a qualifying mortgage asset satisfies the rules for
straight debt, or is sufficiently small so as not to
otherwise cause an asset test violation. Similarly, although
stock of another REIT is a qualifying asset for purposes of the
REIT asset tests, non-mortgage debt held by Aimco that is issued
by another REIT may not so qualify.
The Internal Revenue Code contains a number of provisions
applicable to REITs, including relief provisions that make it
easier for REITs to satisfy the asset requirements, or to
maintain REIT qualification notwithstanding certain violations
of the asset and other requirements.
One such provision allows a REIT which fails one or more of the
asset requirements to nevertheless maintain its REIT
qualification if (a) it provides the IRS with a description
of each asset causing the failure, (b) the failure is due
to reasonable cause and not willful neglect, (c) the REIT
pays a tax equal to the greater of (i) $50,000 per failure,
and (ii) the product of the net income generated by the
assets that caused the failure multiplied by the highest
applicable corporate tax rate (currently 35%), and (d) the
REIT either disposes of the assets causing the failure within
6 months after the last day of the quarter in which it
identifies the failure, or otherwise satisfies the relevant
asset tests within that time frame.
A second relief provision contained in the Internal Revenue Code
applies to de minimis violations of the 10% and 5% asset tests.
A REIT may maintain its qualification despite a violation of
such requirements if (a) the value of the assets causing
the violation do not exceed the lesser of 1% of the REITs
total assets, and $10,000,000, and (b) the REIT either
disposes of the assets causing the failure within 6 months
after the last day of the quarter in which it identifies the
failure, or the relevant tests are otherwise satisfied within
that time frame.
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The Internal Revenue Code also provides that certain securities
will not cause a violation of the 10% value test described
above. Such securities include instruments that constitute
straight debt, which now has an expanded definition
and includes securities having certain contingency features. A
restriction, however, precludes a security from qualifying as
straight debt where a REIT (or a controlled TRS of
the REIT) owns other securities of the issuer of that security
which do not qualify as straight debt, unless the value of those
other securities constitute, in the aggregate, 1% or less of the
total value of that issuers outstanding securities. In
addition to straight debt, the Internal Revenue Code provides
that certain other securities will not violate the 10% value
test. Such securities include (a) any loan made to an
individual or an estate, (b) certain rental agreements in
which one or more payments are to be made in subsequent years
(other than agreements between a REIT and certain persons
related to the REIT), (c) any obligation to pay rents from
real property, (d) securities issued by governmental
entities that are not dependent in whole or in part on the
profits of (or payments made by) a non-governmental entity,
(e) any security issued by another REIT, and (f) any
debt instrument issued by a partnership if the
partnerships income is of a nature that it would satisfy
the 75% gross income test described above under
Income Tests. The Internal Revenue Code
also provides that in applying the 10% value test, a debt
security issued by a partnership is not taken into account to
the extent, if any, of the REITs proportionate equity
interest in that partnership.
Aimco believes that its holding of securities and other assets
comply, and will continue to comply, with the foregoing REIT
asset requirements, and it intends to monitor compliance on an
ongoing basis. No independent appraisals have been obtained,
however, to support Aimcos conclusions as to the value of
its assets, including Aimco OPs total assets and the value
of Aimco OPs interest in the taxable REIT subsidiaries.
Moreover, values of some assets may not be susceptible to a
precise determination, and values are subject to change in the
future. Furthermore, the proper classification of an instrument
as debt or equity for Federal income tax purposes may be
uncertain in some circumstances, which could affect the
application of the REIT asset requirements. Accordingly, there
can be no assurance that the IRS will not contend that
Aimcos interests in its subsidiaries or in the securities
of other issuers will cause a violation of the REIT asset
requirements and loss of REIT status.
If we should fail to satisfy the asset tests at the end of a
calendar quarter, such a failure would not cause us to lose our
REIT status if we (1) satisfied the asset tests at the
close of the preceding calendar quarter and (2) the
discrepancy between the value of our assets and the asset test
requirements was not wholly or partly caused by an acquisition
of non-qualifying assets, but instead arose from changes in the
market value of our assets. If the condition described in
(2) were not satisfied, we still could avoid
disqualification by eliminating any discrepancy within
30 days after the close of the calendar quarter in which it
arose.
Annual
Distribution Requirements
In order for Aimco to qualify as a REIT, Aimco is required to
distribute dividends (other than capital gain dividends) to its
stockholders in an amount at least equal to:
(a) 90% of Aimcos REIT taxable income
(computed without regard to the deduction for dividends paid and
net capital gain of Aimco), and
(b) 90% of the net income, if any, from foreclosure
property (as described below), minus
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the sum of certain items of noncash income.
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These distributions must be paid in the taxable year to which
they relate, or in the following taxable year if they are
declared in October, November, or December of the taxable year,
are payable to stockholders of record on a specified date in any
such month, and are actually paid before the end of January of
the following year. In order for distributions to be counted for
this purpose, and to give rise to a tax deduction by Aimco, they
must not be preferential dividends. A dividend is
not a preferential dividend if it is pro rata among all
outstanding shares of stock within a particular class, and is in
accordance with the preferences among different classes of stock
as set forth in Aimcos organizational documents.
To the extent that Aimco distributes at least 90%, but less than
100%, of its REIT taxable income, as adjusted, it
will be subject to tax thereon at ordinary corporate tax rates.
In any year, Aimco may elect to retain,
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rather than distribute, its net capital gain and pay tax on such
gain. In such a case, Aimcos stockholders would include
their proportionate share of such undistributed long-term
capital gain in income and receive a corresponding credit for
their share of the tax paid by Aimco. Aimcos stockholders
would then increase the adjusted basis of their Aimco shares by
the difference between the designated amounts included in their
long-term capital gains and the tax deemed paid with respect to
their shares.
To the extent that a REIT has available net operating losses
carried forward from prior tax years, such losses may reduce the
amount of distributions that it must make in order to comply
with the REIT distribution requirements. Such losses, however,
will generally not affect the character, in the hands of
stockholders, of any distributions that are actually made by the
REIT, which are generally taxable to stockholders to the extent
that the REIT has current or accumulated earnings and profits.
See Taxation of Aimco and Aimco
Stockholders Taxation of Stockholders
Taxation of Taxable Domestic Stockholders
Distributions.
If Aimco should fail to distribute during each calendar year at
least the sum of:
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85% of its REIT ordinary income for such year,
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(c) 95% of its REIT capital gain net income for such year
(excluding retained net capital gain), and
(d) any undistributed taxable income from prior periods,
Aimco would be subject to a 4% excise tax on the excess of such
required distribution over the sum of (x) the amounts
actually distributed, and (y) the amounts of income
retained on which it has paid corporate income tax.
It is possible that Aimco, from time to time, may not have
sufficient cash to meet the 90% distribution requirement due to
timing differences between (i) the actual receipt of cash
(including receipt of distributions from Aimco OP) and
(ii) the inclusion of certain items in income by Aimco for
Federal income tax purposes. In the event that such timing
differences occur, in order to meet the distribution
requirements, Aimco may find it necessary to arrange for
short-term, or possibly long-term, borrowings, or to pay
dividends in the form of taxable in-kind distributions of
property.
Under certain circumstances, Aimco may be able to rectify a
failure to meet the distribution requirement for a year by
paying deficiency dividends to stockholders in a
later year, which may be included in Aimcos deduction for
dividends paid for the earlier year. In this case, Aimco may be
able to avoid losing its REIT status or being taxed on amounts
distributed as deficiency dividends; however, Aimco will be
required to pay interest and a penalty based on the amount of
any deduction taken for deficiency dividends.
Failure
to Qualify
If Aimco fails to qualify for taxation as a REIT in any taxable
year, and the relief provisions do not apply, Aimco will be
subject to tax, including any applicable alternative minimum
tax, on its taxable income at regular corporate rates.
Distributions to stockholders in any year in which Aimco fails
to qualify will not be deductible by Aimco nor will they be
required to be made. In such event, to the extent of current and
accumulated earnings and profits, all distributions to
stockholders that are individuals will generally be taxable at a
rate of 15% (through 2010) and, subject to certain
limitations of the Internal Revenue Code, corporate distributees
may be eligible for the dividends received deduction. Unless
Aimco is entitled to relief under specific statutory provisions,
Aimco would also be disqualified from re-electing to be taxed as
a REIT for the four taxable years following the year during
which qualification was lost. It is not possible to state
whether, in all circumstances, Aimco would be entitled to this
statutory relief.
Prohibited
Transactions
Net income derived by a REIT from a prohibited transaction is
subject to a 100% excise tax. The term prohibited
transaction generally includes a sale or other disposition
of property (other than foreclosure property) that is held
primarily for sale to customers in the ordinary course of a
trade or business. Aimco intends to conduct its operations so
that no asset owned by Aimco or its pass-through subsidiaries
will be held for sale to customers, and that a sale of any such
asset will not be in the ordinary course of Aimcos
business. Whether property is held primarily for sale to
customers in the ordinary course of a trade or business
depends, however, on the particular
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facts and circumstances. No assurance can be given that any
property sold by Aimco will not be treated as property held for
sale to customers, or that Aimco can comply with certain
safe-harbor provisions of the Internal Revenue Code that would
prevent the imposition of the 100% excise tax. The 100% tax does
not apply to gains from the sale of property that is held
through a TRS or other taxable corporation, although such income
will be subject to tax in the hands of the corporation at
regular corporate rates.
Penalty
Tax
Aimco will be subject to a 100% penalty tax on the amount of
certain non-arms length payments received from, or certain
expenses deducted by, its taxable REIT subsidiaries if the IRS
were to successfully assert that the economic arrangements
between Aimco and its taxable REIT subsidiaries are not
comparable to similar transaction between unrelated parties.
Such amounts may include rents from real property that are
overstated as a result of services furnished by a TRS to tenants
of Aimco and amounts that are deducted by a TRS for payments
made to Aimco that are in excess of the amounts that would have
been charged by an unrelated party.
Aimco believes that the fees paid to its taxable REIT
subsidiaries for tenant services are comparable to the fees that
would be paid to an unrelated third party negotiating at
arms-length. This determination, however, is inherently
factual, and the IRS may assert that the fees paid by Aimco do
not represent arms-length amounts. If the IRS successfully
made such an assertion, Aimco would be required to pay a 100%
penalty tax on the excess of an arms-length fee for tenant
services over the amount actually paid.
Tax
Aspects Of Aimcos Investments In
Partnerships
General
Substantially all of Aimcos investments are held
indirectly through Aimco OP. In general, partnerships are
pass-through entities that are not subject to
Federal income tax. Rather, partners are allocated their
proportionate shares of the items of income, gain, loss,
deduction and credit of a partnership, and are potentially
subject to tax on these items, without regard to whether the
partners receive a distribution from the partnership. Aimco will
include in its income its proportionate share of the foregoing
partnership items for purposes of the various REIT income tests
and in the computation of its REIT taxable income. Moreover, for
purposes of the REIT asset tests, Aimco will include its
proportionate share of assets held by the Subsidiary
Partnerships. See Taxation of Aimco and Aimco
Stockholders Taxation of Aimco Effect of
Subsidiary Entities Ownership of Partnership
Interests.
Entity
Classification.
Aimcos direct and indirect investment in partnerships
involves special tax considerations, including the possibility
of a challenge by the IRS of the tax status of any of the
Subsidiary Partnerships as a partnership, as opposed to as an
association taxable as a corporation, for Federal income tax
purposes. If any of these entities were treated as an
association for Federal income tax purposes, it would be taxable
as a corporation and therefore could be subject to an
entity-level tax on its income. In such a situation, the
character of Aimcos assets and items of gross income would
change and could preclude Aimco from satisfying the REIT asset
tests and gross income tests (see Taxation of
Aimco and Aimco Stockholders Taxation of
Aimco Asset Tests and
Taxation of Aimco and Aimco
Stockholders Taxation of Aimco Income
Tests), and in turn could prevent Aimco from qualifying as
a REIT unless Aimco is eligible for relief from the violation
pursuant to relief provisions described above. See
Taxation of Aimco and Aimco
Stockholders Taxation of Aimco Failure
to Qualify above for a summary of the effect of
Aimcos failure to satisfy the REIT tests for a taxable
year, and of the relief provisions. In addition, any change in
the status of any of the Subsidiary Partnerships for tax
purposes might be treated as a taxable event, in which case
Aimco might incur a tax liability without any related cash
distributions.
Tax
Allocations With Respect To The Properties.
Under the Internal Revenue Code and the Treasury Regulations,
income, gain, loss and deduction attributable to appreciated or
depreciated property that is contributed to a partnership in
exchange for an interest in the partnership must be allocated
for tax purposes in a manner such that the contributing partner
is charged with, or benefits from the unrealized gain or
unrealized loss associated with the property at the time of the
contribution. The
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amount of the unrealized gain or unrealized loss is generally
equal to the difference between the fair market value of the
contributed property at the time of contribution, and the
adjusted tax basis of such property at the time of contribution
(a Book Tax Difference). Such
allocations are solely for Federal income tax purposes and do
not affect the book capital accounts or other economic or legal
arrangements among the partners. Aimco OP was formed by way of
contributions of appreciated property. Consequently, allocations
must be made in a manner consistent with these requirements.
Where a partner contributes cash to a partnership at a time that
the partnership holds appreciated (or depreciated) property, the
Treasury Regulations provide for a similar allocation of these
items to the other (i.e., non-contributing) partners. These
rules apply to the contribution by Aimco to Aimco OP of the cash
proceeds received in any offerings of its stock.
In general, certain unitholders will be allocated lower amounts
of depreciation deductions for tax purposes and increased
taxable income and gain on the sale by Aimco OP or other
Subsidiary Partnerships of the contributed properties. This will
tend to eliminate the Book-Tax Difference over the life of these
partnerships. However, the special allocations do not always
entirely rectify the Book-Tax Difference on an annual basis or
with respect to a specific taxable transaction such as a sale.
Thus, the carryover basis of the contributed properties in the
hands of Aimco OP or other Subsidiary Partnerships may cause
Aimco to be allocated lower depreciation and other deductions,
and possibly greater amounts of taxable income in the event of a
sale of such contributed assets in excess of the economic or
book income allocated to it as a result of such sale. This may
cause Aimco to recognize, over time, taxable income in excess of
cash proceeds, which might adversely affect Aimcos ability
to comply with the REIT distribution requirements. See
Taxation of Aimco and Aimco
Stockholders Taxation of Aimco Annual
Distribution Requirements.
With respect to any property purchased or to be purchased by any
of the Subsidiary Partnerships (other than through the issuance
of units) subsequent to the formation of Aimco, such property
will initially have a tax basis equal to its fair market value
and the special allocation provisions described above will not
apply.
Sale Of
The Properties.
Aimcos share of any gain realized by Aimco OP or any other
Subsidiary Partnership on the sale of any property held as
inventory or primarily for sale to customers in the ordinary
course of business will be treated as income from a prohibited
transaction that is subject to a 100% penalty tax. See
United States Federal Income Taxation of Aimco
and Aimco Stockholder Taxation of Aimco
Prohibited Transactions. Under existing law, whether
property is held as inventory or primarily for sale to customers
in the ordinary course of a partnerships trade or business
is a question of fact that depends on all the facts and
circumstances with respect to the particular transaction. Aimco
OP and the other Subsidiary Partnerships intend to hold their
properties for investment with a view to long-term appreciation,
to engage in the business of acquiring, developing, owning and
operating the properties and to make such occasional sales of
the properties, including peripheral land, as are consistent
with Aimcos investment objectives.
Taxation
of Taxable REIT Subsidiaries
A portion of the amounts to be used to fund distributions to
stockholders may come from distributions made by Aimcos
taxable REIT subsidiaries to Aimco OP, and interest paid by the
taxable REIT subsidiaries on certain notes held by Aimco OP. In
general, taxable REIT subsidiaries pay Federal, state and local
income taxes on their taxable income at normal corporate rates.
Any Federal, state or local income taxes that Aimcos
taxable REIT subsidiaries are required to pay will reduce
Aimcos cash flow from operating activities and its ability
to make payments to holders of its securities.
Taxation
of Stockholders
Taxable
Domestic Stockholders
Distributions. Provided that Aimco qualifies
as a REIT, distributions made to Aimcos taxable domestic
stockholders out of current or accumulated earnings and profits
(and not designated as capital gain dividends) will generally be
taken into account by them as ordinary income (35% maximum
Federal rate through 2010) and will not be eligible for the
dividends received deduction for corporations. With limited
exceptions, dividends received from
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REITs are not eligible for taxation at the preferential income
tax rates (15% maximum Federal rate through 2010) for
qualified dividends received by individuals from taxable C
corporations. Stockholders that are individuals, however, are
taxed at the preferential rates on dividends designated by and
received from REITs to the extent that the dividends are
attributable to (i) income retained by the REIT in the
prior taxable year on which the REIT was subject to corporate
level income tax (less the amount of tax), (ii) dividends
received by the REIT from taxable REIT subsidiaries or other
taxable C corporations, or (iii) income in the prior
taxable year from the sales of built-in gain
property acquired by the REIT from C corporations in carryover
basis transactions (less the amount of corporate tax on such
income).
Distributions (and retained net capital gains) that are
designated as capital gain dividends will generally be taxed to
stockholders as long-term capital gains, to the extent that they
do not exceed Aimcos actual net capital gain for the
taxable year, without regard to the period for which the
stockholder has held its stock. However, corporate stockholders
may be required to treat up to 20% of certain capital gain
dividends as ordinary income. Long-term capital gains are
generally taxable at maximum Federal rates of 15% (through
2010) in the case of stockholders who are individuals, and
35% in the case of stockholders that are corporations. Capital
gains attributable to the sale of depreciable real property held
for more than 12 months are subject to a 25% maximum
Federal income tax rate for taxpayers who are individuals, to
the extent of previously claimed depreciation deductions.
In determining the extent to which a distribution constitutes a
dividend for tax purposes, Aimcos earnings and profits
generally will be allocated first to distributions with respect
to preferred stock prior to allocating any remaining earnings
and profits to distributions on Aimcos common stock. If
Aimco has net capital gains and designates some or all of its
distributions as capital gain dividends to that extent, the
capital gain dividends will be allocated among different classes
of stock in proportion to the allocation of earnings and profits
as described above.
Distributions in excess of current and accumulated earnings and
profits will not be taxable to a stockholder to the extent that
they do not exceed the adjusted basis of the stockholders
shares in respect of which the distributions were made, but
rather will reduce the adjusted basis of such shares. To the
extent that such distributions exceed the adjusted basis of a
stockholders shares, they will be included in income as
long-term capital gain, or short-term capital gain if the shares
have been held for one year or less. In addition, any dividend
declared by Aimco in October, November or December of any year
and payable to a stockholder of record on a specified date in
any such month will be treated as both paid by Aimco and
received by the stockholder on December 31 of such year,
provided that the dividend is actually paid by Aimco
before the end of January of the following calendar year.
To the extent that a REIT has available net operating losses and
capital losses carried forward from prior tax years, such losses
may reduce the amount of distributions that must be made in
order to comply with the REIT distribution requirements. See
Taxation of Aimco and Aimco
Stockholders Taxation of Aimco Annual
Distribution Requirements. Such losses, however, are not
passed through to stockholders and do not offset income of
stockholders from other sources, nor would they affect the
character of any distributions that are actually made by a REIT,
which are generally subject to tax in the hands of stockholders
to the extent that the REIT has current or accumulated earnings
and profits.
Dispositions of Aimco Stock. A stockholder
will realize gain or loss upon the sale, redemption or other
taxable disposition of stock in an amount equal to the
difference between the sum of the fair market value of any
property and cash received in such disposition, and the
stockholders adjusted tax basis in the stock at the time
of the disposition. In general, a stockholders tax basis
will equal the stockholders acquisition cost, increased by
the excess of net capital gains deemed distributed to the
stockholder (as discussed above), less tax deemed paid on such
net capital gains, and reduced by returns of capital. In
general, capital gains recognized by individuals upon the sale
or disposition of shares of Aimco stock will be subject to a
maximum Federal income tax rate of 15% (through 2010) if
the Aimco stock is held for more than 12 months, and will
be taxed at ordinary income rates (of up to 35% through
2010) if the Aimco stock is held for 12 months or
less. Gains recognized by stockholders that are corporations are
subject to Federal income tax at a maximum rate of 35%, whether
or not classified as long-term capital gains. Capital losses
recognized by a stockholder upon the disposition of Aimco stock
held for more than one year at the time of disposition will be
considered long-term capital losses, and are generally available
only to offset capital gain income of the stockholder but not
ordinary income (except in the case of individuals, who may
offset up to $3,000 of ordinary income each year). In addition,
any loss upon a sale or exchange of shares of Aimco stock by a
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stockholder who has held the shares for six months or less,
after applying holding period rules, will be treated as a
long-term capital loss to the extent of distributions received
from Aimco that are required to be treated by the stockholder as
long-term capital gain.
A redemption of Aimco stock (including preferred stock or equity
stock) will be treated under Section 302 of the Internal
Revenue Code as a dividend subject to tax at ordinary income tax
rates (to the extent of Aimcos current or accumulated
earnings and profits), unless the redemption satisfies certain
tests set forth in Section 302(b) of the Internal Revenue
Code enabling the redemption to be treated as a sale or exchange
of the stock. The redemption will satisfy such test if it
(i) is substantially disproportionate with
respect to the holder (which will not be the case if only the
stock is redeemed, since it generally does not have voting
rights), (ii) results in a complete termination
of the holders stock interest in Aimco, or (iii) is
not essentially equivalent to a dividend with
respect to the holder, all within the meaning of
Section 302(b) of the Internal Revenue Code. In determining
whether any of these tests have been met, shares considered to
be owned by the holder by reason of certain constructive
ownership rules set forth in the Internal Revenue Code, as well
as shares actually owned, must generally be taken into account.
Because the determination as to whether any of the alternative
tests of Section 302(b) of the Internal Revenue Code is
satisfied with respect to any particular holder of the stock
will depend upon the facts and circumstances as of the time the
determination is made, prospective investors are advised to
consult their own tax advisors to determine such tax treatment.
If a redemption of the stock is treated as a distribution that
is taxable as a dividend, the amount of the distribution would
be measured by the amount of cash and the fair market value of
any property received by the stockholders. The
stockholders adjusted tax basis in such redeemed stock
would be transferred to the holders remaining
stockholdings in Aimco. If, however, the stockholder has no
remaining stockholdings in Aimco, such basis may, under certain
circumstances, be transferred to a related person or it may be
lost entirely.
If an investor recognizes a loss upon a subsequent disposition
of stock or other securities of Aimco in an amount that exceeds
a prescribed threshold, it is possible that the provisions of
the Treasury Regulations involving reportable
transactions could apply, with a resulting requirement to
separately disclose the loss generating transaction to the IRS.
While these Treasury Regulations are directed towards tax
shelters, they are written quite broadly, and apply to
transactions that would not typically be considered tax
shelters. In addition, the Internal Revenue Code imposes
penalties for failure to comply with these requirements.
Prospective investors should consult your tax advisors
concerning any possible disclosure obligation with respect to
the receipt or disposition of stock or securities of Aimco, or
transactions that might be undertaken directly or indirectly by
Aimco. Moreover, prospective investors should be aware that
Aimco and other participants in the transactions involving Aimco
(including their advisors) might be subject to disclosure or
other requirements pursuant to these Treasury Regulations
Taxation
Of Foreign Stockholders
The following is a summary of certain anticipated
U.S. Federal income and estate tax consequences of the
ownership and disposition of securities applicable to
Non-U.S. Holders
of securities. A
Non-U.S. Holder
is generally any person other than (i) a citizen or
resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under
the laws of the United States or of any state thereof or the
District of Columbia, (iii) an estate whose income is
includable in gross income for U.S. Federal income tax
purposes regardless of its source or (iv) a trust if a
United States court is able to exercise primary supervision over
the administration of such trust and one or more United States
fiduciaries have the authority to control all substantial
decisions of such trust. The discussion is based on current law
and is for general information only. The discussion addresses
only certain and not all aspects of U.S. Federal income and
estate taxation.
Ordinary Dividends. The portion of dividends
received by
Non-U.S. Holders
payable out of Aimcos earnings and profits which are not
attributable to capital gains of Aimco and which are not
effectively connected with a U.S. trade or business of the
Non-U.S. Holder
will be subject to U.S. withholding tax at the rate of 30%
(unless reduced by treaty and the
Non-U.S. Holder
provides appropriate documentation regarding its eligibility for
treaty benefits). In general,
Non-U.S. Holders
will not be considered engaged in a U.S. trade or business
solely as a result of their ownership of securities. In cases
where the dividend income from a
Non-U.S. Holders
investment in securities is, or is treated as, effectively
connected with the
Non-U.S. Holders
conduct of a U.S. trade or business, the
Non-U.S. Holder
generally will be subject to U.S. tax at graduated rates,
in the same manner as domestic
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stockholders are taxed with respect to such dividends, such
income must generally be reported on a U.S. income tax
return filed by or on behalf of the
non-U.S. holder,
and the income may also be subject to the 30% branch profits tax
in the case of a
Non-U.S. Holder
that is a corporation.
Non-Dividend Distributions. Unless Aimco stock
constitutes a United States real property interest (a
USRPI) within the meaning of the Foreign Investment
in Real Property Tax Act of 1980 (FIRPTA),
distributions by Aimco which are not dividends out of the
earnings and profits of Aimco will not be subject to
U.S. income tax. If it cannot be determined at the time at
which a distribution is made whether or not the distribution
will exceed current and accumulated earnings and profits, the
distribution will be subject to withholding at the rate
applicable to dividends. However, the
Non-U.S. Holder
may seek a refund from the IRS of any amounts withheld if it is
subsequently determined that the distribution was, in fact, in
excess of current and accumulated earnings and profits of Aimco.
If Aimco stock constitutes a USRPI, distributions by Aimco in
excess of the sum of its earnings and profits plus the
stockholders basis in its Aimco stock will be taxed under
the FIRPTA at the rate of tax, including any applicable capital
gains rates, that would apply to a domestic stockholder of the
same type (e.g., an individual or a corporation, as the case may
be), and the collection of the tax will be enforced by a
refundable withholding at a rate of 10% of the amount by which
the distribution exceeds the stockholders share of
Aimcos earnings and profits.
Capital Gain Dividends. Under FIRPTA, a
distribution made by Aimco to a
Non-U.S. Holder,
to the extent attributable to gains from dispositions of USRPIs
held by Aimco directly or through pass-through subsidiaries
(USRPI Capital Gains), will, except as described
below, be considered effectively connected with a
U.S. trade or business of the
Non-U.S. Holder
and will be subject to U.S. income tax at the rates
applicable to U.S. individuals or corporations, without
regard to whether the distribution is designated as a capital
gain dividend. In addition, Aimco will be required to withhold
tax equal to 35% of the amount of dividends to the extent such
dividends constitute USRPI Capital Gains. Distributions subject
to FIRPTA may also be subject to a 30% branch profits tax in the
hands of a
Non-U.S. Holder
that is a corporation. A distribution is not a USRPI capital
gain if Aimco held the underlying asset solely as a creditor.
Capital gain dividends received by a
non-U.S. holder
from a REIT that are attributable to dispositions by that REIT
of assets other then USRPIs are generally not subject to
U.S. income or withholding tax.
A capital gain dividend by Aimco that would otherwise have been
treated as a USRPI capital gain will not be so treated or be
subject to FIRPTA, will generally not be treated as income that
is effectively connected with a U.S. trade or business, and
will instead be treated the same as an ordinary dividend from
Aimco (see Taxation of Foreign
Stockholders Ordinary Dividends), provided
that (1) the capital gain dividend is received with respect
to a class of stock that is regularly traded on an established
securities market located in the United States, and (2) the
recipient
non-U.S. holder
does not own more than 5% of that class of stock at any time
during the one year period ending on the date on which the
capital gain dividend is received.
Dispositions of Aimco Stock. Unless Aimco
stock constitutes a USRPI, a sale of the stock by a
Non-U.S. Holder
generally will not be subject to U.S. taxation under
FIRPTA. The stock will be treated as a USRPI if 50% or more of
Aimcos assets throughout a prescribed testing period
consist of interests in real property located within the
United States, excluding, for this purpose, interests in
real property solely in a capacity as a creditor. Even if the
foregoing test is met, Aimco stock nonetheless will not
constitute a USRPI if Aimco is a domestically controlled
qualified investment entity. A domestically controlled
qualified investment entity is a REIT in which, at all times
during a specified testing period, less than 50% in value of its
shares is held directly or indirectly by
Non-U.S. Holders.
Aimco believes that it is, and it expects to continue to be, a
domestically controlled qualified investment entity. If Aimco
is, and continues to be, a domestically controlled qualified
investment entity, the sale of Aimco stock should not be subject
to taxation under FIRPTA. Because most classes of stock of Aimco
are publicly traded, however, no assurance can be given that
Aimco is or will continue to be a domestically controlled
qualified investment entity.
Even if Aimco does not constitute a domestically controlled
qualified investment entity, a
Non-U.S. Holders
sale of stock generally nonetheless will generally not be
subject to tax under FIRPTA as a sale of a USRPI provided that:
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the stock is of a class that is regularly traded (as
defined by applicable Treasury Regulations) on an established
securities market (e.g., the NYSE, on which Aimco stock is
listed), and
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the selling
Non-U.S. Holder
held 5% or less of such class of Aimcos outstanding stock
at all times during a specified testing period.
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If gain on the sale of stock of Aimco were subject to taxation
under FIRPTA, the
Non-U.S. Holder
would be subject to the same treatment as a
U.S. stockholder with respect to such gain (subject to
applicable alternative minimum tax and a special alternative
minimum tax in the case of nonresident alien individuals) and
the purchaser of the stock could be required to withhold 10% of
the purchase price and remit such amount to the IRS.
Gain from the sale of Aimco stock that would not otherwise be
subject to taxation under FIRPTA will nonetheless be taxable in
the United States to a
Non-U.S. Holder
in two cases. First, if the
Non-U.S. Holders
investment in the Aimco stock is effectively connected with a
U.S. trade or business conducted by such
Non-U.S. Holder,
the
Non-U.S. Holder
will be subject to the same treatment as a U.S. stockholder
with respect to such gain. Second, if the
Non-U.S. Holder
is a nonresident alien individual who was present in the United
States for 183 days or more during the taxable year and has
a tax home in the United States, the nonresident
alien individual will be subject to a 30% tax on the
individuals capital gain.
Estate
Tax
Aimco stock owned or treated as owned by an individual who is
not a citizen or resident (as specially defined for
U.S. Federal estate tax purposes) of the United States at
the time of death will be includible in the individuals
gross estate for U.S. Federal estate tax purposes, unless
an applicable estate tax treaty provides otherwise. Such
individuals estate may be subject to U.S. Federal
estate tax on the property includible in the estate for
U.S. Federal estate tax purposes.
Information
Reporting Requirements And Backup Withholding
Aimco will report to its U.S. stockholders and to the IRS
the amount of distributions paid during each calendar year, and
the amount of tax withheld, if any. Under the backup withholding
rules, a stockholder may be subject to backup withholding at the
rate of 28% (through 2010) with respect to distributions
paid unless such holder (i) is a corporation or comes
within certain other exempt categories and, when required,
demonstrates this fact or (ii) provides a taxpayer
identification number, certifies as to no loss of exemption from
backup withholding, and otherwise complies with the applicable
requirements of the backup withholding rules. A stockholder who
does not provide Aimco with his correct taxpayer identification
number also may be subject to penalties imposed by the IRS. Any
amount paid as backup withholding will be creditable against the
stockholders income tax liability. In addition, Aimco may
be required to withhold a portion of capital gain distributions
to any
Non-U.S. Holders.
The IRS has issued final Treasury Regulations regarding the
withholding, backup withholding and information reporting rules
as applied to
Non-U.S. Holders.
Prospective investors in securities should consult their tax
advisors regarding the application of these Treasury Regulations.
Tax
Return Disclosure and Investor List Requirements
Treasury Regulations require participants in a reportable
transaction to disclose certain information about the
transaction to the IRS with their tax returns and retain certain
information relating to the transaction (the Disclosure
Requirement). In addition, organizers, sellers, and
certain advisors of a reportable transaction are required to
maintain certain records, including lists identifying the
investors in a transaction, and to furnish those records, as
well as detailed information regarding the transaction, to the
IRS upon demand (the List Maintenance Requirement).
While the Disclosure Requirement and the List Maintenance
Requirement are directed towards tax shelters, the
regulations are written quite broadly, and apply to transactions
that would not typically be considered tax shelters. There are
significant penalties for failure to comply with these
requirements.
A transaction may be a reportable transaction based upon any of
several indicia, including, among other things, if it could
result in tax losses or book-tax differences in excess of
prescribed thresholds. The transaction contemplated herein may
result in book-tax differences in excess of prescribed
thresholds and as such, could be a reportable transaction under
the Treasury Regulations involving tax shelters.
Characterization of this
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transaction as a reportable transaction could increase the
likelihood of an audit by the IRS. If this transaction were to
be classified as a reportable transaction, you would be required
to attach a completed IRS Form 8886, the Reportable
Transaction Disclosure Statement, to your tax return for
the taxable year of the transaction, as well as provide a copy
of this form to the Office of Tax Shelter Analysis at the same
time that such statement is first filed with the IRS. You should
consult your tax advisors concerning these disclosure
obligations with respect to the receipt or disposition of Aimco
Stock, or transactions that might be undertaken directly or
indirectly by the Aimco. Moreover, you should be aware that
Aimco and other participants in the transactions involving Aimco
(including their advisors) would be subject to the Disclosure
Requirement
and/or the
List Maintenance Requirement if this transaction were to be
classified as a reportable transaction.
Taxation
of Tax-Exempt Stockholders
Tax-exempt entities, including qualified employee pension and
profit sharing trusts and individual retirement accounts,
generally are exempt from Federal income taxation. However, they
are subject to taxation on their unrelated business taxable
income (UBTI). While many investments in real estate
may generate UBTI, the IRS has ruled that dividend distributions
from a REIT to a tax-exempt entity do not constitute UBTI. Based
on that ruling, and provided that (1) a tax-exempt
stockholder has not held its Aimco stock as debt financed
property within the meaning of the Internal Revenue Code
(i.e., where the acquisition or holding of the property is
financed through a borrowing by the tax-exempt stockholder), and
(2) the Aimco stock is not otherwise used in an unrelated
trade or business, Aimco believe that distributions from Aimco
and income from the sale of the Aimco stock should not give rise
to UBTI to a tax-exempt stockholder.
Tax-exempt stockholder that are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts,
and qualified group legal services plans that are exempt from
taxation under paragraphs (7), (9), (17) and (20),
respectively, of Section 501(c) of the Internal Revenue
Code are subject to different UBTI rules, which generally will
require them to characterize distributions from Aimco as UBTI.
In addition, in certain circumstances, a pension trust that owns
more than 10% of Aimcos stock could be required to treat a
percentage of the dividends from Aimco as UBTI (the UBTI
Percentage). The UBTI Percentage is the gross income
derived by Aimco from an unrelated trade or business (determined
as if Aimco were a pension trust) divided by the gross income of
Aimco for the year in which the dividends are paid. The UBTI
rule applies to a pension trust holding more than 10% of
Aimcos stock only if:
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the UBTI Percentage is at least 5%,
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Aimco qualifies as a REIT by reason of the modification of the
5/50
Rule that allows the beneficiaries of the pension trust to be
treated as holding shares of Aimco in proportion to their
actuarial interest in the pension trust, and
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either (A) one pension trust owns more than 25% of the
value of Aimcos stock or (B) a group of pension
trusts each individually holding more than 10% of the value of
Aimcos stock collectively owns more than 50% of the value
of Aimcos stock.
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The restrictions on ownership and transfer of Aimcos stock
should prevent an Exempt Organization from owning more than 10%
of the value of Aimcos stock.
Other Tax
Consequences
Legislative
or Other Actions Affecting REITs
The rules dealing with Federal income taxation are constantly
under review by persons involved in the legislative process and
by the IRS and the U.S. Treasury Department. For example,
Congress is considering proposals that would delay the scheduled
increase in the maximum tax rates applicable to individual
taxpayers on qualified dividend income and long term capital
gains, for taxable years beginning after December 31, 2010,
to 39.6% and 20% respectively. In addition, for taxable years
beginning after December 31, 2012, certain
U.S. holders who are individuals, estates or trusts and
whose income exceeds certain thresholds will be required to pay
a 3.8% Medicare tax on dividend and other income, including
capital gains from the sale or other disposition of our stock.
83
No assurance can be given as to whether, or in what form, the
proposals described above (or any other proposals affecting
REITs or their stockholders) will be enacted. Changes to the
Federal laws and interpretations thereof could adversely affect
an investment in Aimco or Aimco OP.
Recently enacted legislation will require, after
December 31, 2012, withholding at a rate of 30% on
dividends in respect of, and gross proceeds from the sale of,
our common stock held by or through certain foreign financial
institutions (including investment funds), unless such
institution enters into an agreement with the Secretary of the
Treasury to report, on an annual basis, information with respect
to shares in the institution held by certain United States
persons and by certain non-US entities that are wholly or
partially owned by United States persons. Accordingly, the
entity through which our common stock is held will affect the
determination of whether such withholding is required.
Similarly, dividends in respect of, and gross proceeds from the
sale of, our common stock held by an investor that is a
non-financial non-US entity will be subject to withholding at a
rate of 30%, unless such entity either (i) certifies to us
that such entity does not have any substantial United
States owners or (ii) provides certain information
regarding the entitys substantial United States
owners, which we will in turn provide to the Secretary of
the Treasury.
Non-United
States stockholders are encouraged to consult with their tax
advisors regarding the possible implications of the legislation
on their investment in our common stock.
State,
Local And Foreign Taxes
Aimco OP, OP Unitholders, Aimco and Aimco stockholders may
be subject to state, local or foreign taxation in various
jurisdictions, including those in which it or they transact
business, own property or reside. It should be noted that Aimco
OP owns properties located in a number of states and local
jurisdictions, and Aimco OP and OP Unitholders may be
required to file income tax returns in some or all of those
jurisdictions. The state, local or foreign tax treatment of
Aimco OP and OP Unitholders and of Aimco and its
stockholders may not conform to the United States Federal income
tax consequences discussed above. Consequently, prospective
investors are urged to consult their tax advisors regarding the
application and effect of state, local foreign tax laws on an
investment in Aimco OP or Aimco.
84
FEES AND
EXPENSES
The costs of planning and implementing the mergers, including
the preparation of this information statement/prospectus, will
be borne by Aimco OP without regard to whether the mergers are
effectuated. Except as set forth in this information
statement/prospectus, Aimco OP will not pay any fees or
commissions to any broker, dealer or other person in connection
with the mergers. The General Partner has retained Eagle Rock
Proxy Advisors, LLC, or the Information Agent, to act as the
information agent in connection with the mergers. The
Information Agent may contact holders of NPI Units by mail,
e-mail,
telephone, telex, telegraph and in person and may request
brokers, dealers and other nominee limited partners to forward
materials relating to the mergers to the beneficial owners of
NPI Units. Aimco OP will pay the Information Agent reasonable
and customary compensation for its services in connection with
the mergers, plus reimbursement for
out-of-pocket
expenses, and will indemnify it against certain liabilities and
expenses in connection therewith, including liabilities under
the United States Federal securities laws. Aimco OP will also
pay all costs and expenses of filing, printing and mailing the
information statement/prospectus as well as any related legal
fees and expenses.
Below is an itemized list of the estimated expenses incurred and
to be incurred in connection with preparing and delivering this
information statement/prospectus:
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Information Agent Fees
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$
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7,500
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Printing Fees
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2,400
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Postage Fees
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4,500
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Tax and Accounting Fees
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25,000
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Appraisal Fees
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6,900
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Legal Fees
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100,000
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Total
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$
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146,300
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LEGAL
MATTERS
Certain tax matters will be passed upon for Aimco by Skadden,
Arps, Slate, Meagher & Flom LLP. The validity of the
Aimco Class A Common Stock issuable upon redemption of the
OP Units will be passed upon by DLA Piper LLP (US). The
validity of the OP Units offered by this information
statement/prospectus will be passed upon by Skadden, Arps,
Slate, Meagher & Flom LLP.
86
EXPERTS
The consolidated financial statements of Aimco for the year
ended December 31, 2009 appearing in Aimcos Current
Report on
Form 8-K
dated September 10, 2010 (including the schedule appearing
therein), and the effectiveness of Aimcos internal control
over financial reporting appearing in Aimcos Annual Report
on
Form 10-K
for the year ended December 31, 2009 have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their reports thereon, included
therein, and incorporated herein by reference. Such consolidated
financial statements and Aimco managements assessment of
the effectiveness of internal control over financial reporting
as of December 31, 2009 are incorporated herein by
reference in reliance upon such reports given on the authority
of such firm as experts in accounting and auditing.
The consolidated financial statements of Aimco OP for the year
ended December 31, 2009 appearing in Aimco OPs
Current Report on
Form 8-K
dated September 10, 2010 (including the schedule appearing
therein), and the effectiveness of Aimco OPs internal
control over financial reporting appearing in Aimco OPs
Annual Report on
Form 10-K
for the year ended December 31, 2009 have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their reports thereon, included
therein, and incorporated herein by reference. Such consolidated
financial statements and Aimco OP managements assessment
of the effectiveness of internal control over financial
reporting as of December 31, 2009 are incorporated herein
by reference in reliance upon such reports given on the
authority of such firm as experts in accounting and auditing.
The financial statements of NPI appearing in NPIs Annual
Report on
Form 10-K
for the year ended December 31, 2009 have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their report thereon, included
therein, and included in Annex D of this information
statement/prospectus. Such financial statements are included in
reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
87
WHERE YOU
CAN FIND ADDITIONAL INFORMATION
Aimco, Aimco OP and NPI are subject to the informational
requirements of the Exchange Act, and, in accordance therewith,
file reports, proxy statements and other information with the
SEC. You may read and copy any document so filed at the
SECs public reference rooms in Washington, D.C.; New
York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330
for further information on the public reference rooms.
Aimcos, Aimco OPs and NPIs filings are also
available to the public at the SECs web site at
http://www.sec.gov.
The information that Aimco and Aimco OP file with the SEC is
incorporated by reference, which means that important
information is being disclosed to you by referring you to those
documents. The information incorporated by reference is
considered to be part of this information statement/prospectus.
The documents listed below are incorporated by reference along
with all documents filed by us with the SEC pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
(i) after the date of the initial registration statement of
which this information statement/prospectus is a part, and prior
to effectiveness of such registration statement, and
(ii) after the date of this information
statement/prospectus and prior to the completion of the offering
of securities described in this information statement/prospectus.
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Proxy Statement for the 2010 Annual Meeting of Stockholders of
Aimco;
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Aimcos Annual Report on
Form 10-K
for the year ended December 31, 2009;
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Aimcos Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010;
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Aimcos Current Reports on
Form 8-K,
dated February 2, 2010 (filed February 4, 2010), dated
February 3, 2010 (filed February 5, 2010), dated
April 26, 2010 (filed April 29, 2010), dated
May 24, 2010 (filed May 24, 2010), dated July 30,
2010 (filed July 30, 2010), dated September 1, 2010
(filed September 3, 2010), dated September 7, 2010
(filed September 7, 2010), dated September 10, 2010
(filed September 10, 2010), and dated September 29,
2010 (filed September 30, 2010);
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Aimco OPs Annual Report on
Form 10-K
for the year ended December 31, 2009;
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Aimco OPs Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010;
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Aimco OPs Current Reports on
Form 8-K,
dated February 3, 2010 (filed February 5, 2010),
May 24, 2010 (filed May 24, 2010) dated
September 1, 2010 (filed September 3, 2010), dated
September 10, 2010 (filed September 10, 2010), and
dated September 29, 2010 (filed September 30, 2010).
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You may request a copy of these filings, at no cost, by writing
or calling Aimco at the following address and telephone number:
ISTC Corporation
P.O. Box 2347
Greenville, South Carolina 29602
(864) 239-1029
NPIs Annual Report on
Form 10-K
for the year ended December 31, 2009 is included as
Annex D to this information statement/prospectus.
NPIs Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010 is included as
Annex E to this information statement/prospectus.
You should rely only on the information included or incorporated
by reference in this information statement/prospectus. No person
is authorized to provide you with different information. You
should not assume that the information in this information
statement/prospectus is accurate as of any date other than the
date on the front of the document.
References to the safe-harbor provisions of the Private
Securities Litigation Reform Act of 1995 are included in
NPIs Annual Report on
Form 10-K
for the year ended December 31, 2009 which is included as
Annex D to this information statement/prospectus; in
NPIs Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010, which is included as
Annex E to this information statement/prospectus; in
Aimcos Annual Report on
Form 10-K
for the year ended December 31, 2009 and Quarterly Report
on
Form 10-Q
for the quarter ended June 30, 2010, which are incorporated
by reference in this information statement/prospectus; and in
Aimco OPs Annual Report on
88
Form 10-K
for the year ended December 31, 2009 and Quarterly Report
on
Form 10-Q
for the quarter ended June 30, 2010, which are incorporated
by reference in this information statement/prospectus. However,
because the merger is a going private transaction,
those safe-harbor provisions do not apply to any forward-looking
statements NPI, Aimco or Aimco OP make in connection with the
merger.
89
ANNEX A
Agreement
and Plan of Merger
AGREEMENT AND PLAN OF MERGER (this
Agreement), dated as
of ,
2010, by and among NATIONAL PROPERTY INVESTORS III, a California
limited partnership (NPI), NATIONAL PROPERTY
INVESTORS III, LP, a Delaware limited partnership (New
NPI), AIMCO NPI III MERGER SUB LLC, a Delaware limited
liability company (the Aimco Subsidiary), and
AIMCO PROPERTIES, L.P., a Delaware limited partnership
(Aimco OP).
WHEREAS, NPI Equity Investments, Inc., the managing general
partner of NPI and New NPI (NPI Equity), has
determined that the merger of NPI with and into New NPI, with
New NPI as the surviving entity, and the subsequent merger of
the Aimco Subsidiary with and into New NPI, with New NPI as the
surviving entity, in each case, on the terms set forth herein,
are advisable and in the best interests of NPI and New NPI and
their respective partners; and
WHEREAS, Aimco OP is the sole member of the Aimco Subsidiary and
the sole limited partner of New NPI; and
WHEREAS the Board of Directors of AIMCO-GP, Inc., the general
partner of Aimco OP (AIMCO-GP), has
determined that the merger of NPI with and into New NPI, with
New NPI as the surviving entity, and the subsequent merger of
the Aimco Subsidiary with and into New NPI, with New AP NPI as
the surviving entity, in each case, on the terms as set forth
herein, are advisable and in the best interests of Aimco OP and
its partners, and the Aimco Subsidiary; and
WHEREAS, a majority in interest of the limited partners of NPI
have approved this Agreement and the transactions contemplated
hereby; and
WHEREAS, the parties desire to enter this Agreement to evidence
the terms, provisions, representations, warranties, covenants
and conditions upon which the Mergers (as defined below) will be
consummated.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants set forth herein, and for other good and valuable
consideration, the adequacy, sufficiency, and receipt of which
are hereby acknowledged, the parties hereby agree as follows:
Section 1. The
First Merger. Subject to the terms and conditions
set forth herein, NPI shall be merged with and into New NPI (the
First Merger), with New NPI as the surviving
entity (the First Surviving Entity). As soon
as practicable after all of the conditions to the First Merger
set forth herein have been satisfied, NPI and New NPI shall
(i) execute a certificate of merger and cause such
certificate to be filed with the Secretary of State of the State
of California and (ii) execute a certificate of merger and
cause such certificate to be filed with the Secretary of State
of the State of Delaware. The First Merger shall become
effective upon the filing of such certificates (the
First Effective Time). At the First Effective
Time, the First Merger shall have the effect provided by
applicable law and this Agreement, including, but not limited
to, the following consequences:
(a) Certificate of Limited
Partnership. The certificate of limited
partnership of New NPI in effect immediately prior to the First
Effective Time shall be the certificate of limited partnership
of the First Surviving Entity unless and until subsequently
amended.
(b) Partnership Agreement. The
limited partnership agreement of NPI in effect immediately prior
to the First Effective Time, as amended as set forth on
Exhibit A hereto, shall be the partnership agreement
of the First Surviving Entity unless and until subsequently
amended. The general partners and each limited partner of the
First Surviving Entity shall have the rights under, be bound by
and be subject to the terms and conditions of, such partnership
agreement.
(c) General Partner. NPI Equity
shall be the managing general partner of the First Surviving
Entity.
A-1
(d) Conversion of Equity Interests.
(i) Interests in NPI. Each general
partnership interest of NPI outstanding immediately prior to the
First Effective Time and held by a general partner shall be
converted into an equivalent general partnership interest in the
First Surviving Entity (each new general partnership interest, a
New NPI GP Interest). Each unit of limited
partnership interest of NPI outstanding immediately prior to the
First Effective Time shall be converted into an equivalent unit
of limited partnership interest in the First Surviving Entity (a
New NPI Unit).
(ii) Interests in New NPI. The
interest of each partner in New NPI immediately prior to the
First Effective Time shall be cancelled.
Section 2. The
Second Merger. Subject to the terms and
conditions set forth herein, immediately following the First
Effective Time, the Aimco Subsidiary shall be merged with and
into New NPI (the Second Merger and, together
with the First Merger, the Mergers), with New
NPI as the surviving entity (the Second Surviving
Entity). As soon as practicable after all of the
conditions to the Second Merger set forth herein have been
satisfied, New NPI shall cause to be filed a certificate of
merger with respect to the Second Merger with the Secretary of
State of the State of Delaware. The Second Merger shall become
effective upon the filing of such certificate (the
Second Effective Time). At the Second
Effective Time, the Second Merger shall have the effect provided
by applicable law and this Agreement, including, but not limited
to, the following consequences:
(a) Certificate of Limited
Partnership. The certificate of limited
partnership of New NPI in effect immediately prior to the Second
Effective Time shall be the certificate of limited partnership
of the Second Surviving Entity unless and until subsequently
amended.
(b) Partnership Agreement. The
limited partnership agreement of New NPI in effect immediately
prior to the Second Effective Time shall be the partnership
agreement of the Second Surviving Entity (the
Partnership Agreement) unless and until
subsequently amended. The general partners and each limited
partner of the Second Surviving Entity shall have the rights
under, be bound by and be subject to the terms and conditions
of, the Partnership Agreement.
(c) General Partners. NPI Equity
shall be the managing general partner of the Second Surviving
Entity.
(d) Treatment of Limited Partners Interests in New
NPI.
(i) In connection with the Second Merger and in accordance
with the procedures set forth in Section 2(d)(iii) hereto,
each New NPI Unit outstanding immediately prior to the Second
Effective Time, except New NPI Units held by limited partners
who have perfected their appraisal rights pursuant to
Exhibit B hereto, shall be converted into the right
to receive, at the election of the holder thereof, either
(x) $57.24 in cash (the Cash
Consideration) or (y) a number of partnership
common units (OP Units) of Aimco OP
calculated by dividing $57.24 by the average closing price of
Apartment Investment and Management Company common stock, as
reported on the NYSE, over the ten consecutive trading days
ending on the second trading day immediately prior to the date
of the Second Effective Time (the OP Unit
Consideration, and, together with the Cash
Consideration, the Merger Consideration).
(ii) Notwithstanding Section 2(d)(i), if Aimco OP
determines that the law of the state or other jurisdiction in
which a holder of New NPI Units resides would prohibit the
issuance of OP Units in that state or jurisdiction, or that
the registration in that state or other jurisdiction would be
prohibitively costly (each such state or jurisdiction, a
Specified Jurisdiction), then such holder
will only be entitled to receive the Cash Consideration for each
New NPI Unit.
(iii) Aimco OP shall prepare a form of election (the
Election Form) describing the Second Merger,
pursuant to which each holder of New NPI Units will have the
right to elect to receive either the Cash Consideration or the
OP Unit Consideration (subject to Section 2(d)(ii)). Aimco
OP shall mail or cause to be mailed an Election Form to each
holder of New NPI Units, together with any other materials that
Aimco OP determines to be necessary or prudent, no later than
ten (10) days after the Second Effective Time. An election
to receive the Cash Consideration or the OP Unit
Consideration shall be effective only if a properly executed
Election Form is received by Aimco OP or its designees prior to
5:00 p.m., Eastern Time on the day that is thirty
(30) days after the
A-2
mailing of such Election Form by Aimco OP. If a holder New NPI
Units fails to return a duly completed Election Form within the
time period specified in the Election Form, such holder shall be
deemed to have elected to receive the Cash Consideration. In
addition, each holder of New NPI Units that resides in a
Specified Jurisdiction will be deemed to have elected the Cash
Consideration. NPI, New NPI, the Aimco Subsidiary and Aimco OP
agree that holders of New NPI Units shall have the right to
revoke any election made in connection with the Second Merger at
any time prior to the expiration of the time period stated in
the Election Form. Aimco OP and NPI Equity, by mutual agreement,
shall have the right to make rules, not inconsistent with the
terms of this Agreement, governing the validity of Election
Forms and the issuance and delivery of the Merger Consideration,
as applicable.
(e) Treatment of General Partners
Interests. Each New NPI GP Interest
outstanding immediately prior to consummation of the Second
Merger shall remain outstanding and unchanged, with all of the
rights set forth in the Partnership Agreement.
(f) Treatment of Interests in the Aimco
Subsidiary. The entire membership interest in
the Aimco Subsidiary immediately prior to the Second Effective
Time shall be converted into one hundred (100) New NPI
Units of the Second Surviving Entity.
Section 3. Appraisal
Rights. In connection with the First Merger, none
of the partners in NPI or New NPI will have any dissenters
appraisal rights. In connection with the Second Merger, the
holders of New NPI Units immediately prior to the Second Merger
shall have the appraisal rights set forth in
Exhibit B hereto.
Section 4. Covenants. Aimco
OP agrees to pay for, or reimburse NPI and New NPI for, all
expenses incurred by NPI and New NPI in connection with the
Mergers and the transactions contemplated hereby. Aimco OP
agrees to pay cash or issue and deliver OP Units to the
former holders of New NPI Units, in accordance with
Section 2(d) of this Agreement.
Section 5. Conditions
to the Mergers. Notwithstanding any provisions of
this Agreement to the contrary, none of the parties hereto shall
be required to consummate the transactions contemplated hereby
if any third-party consent, authorization or approval that any
of the parties hereto deem necessary or desirable in connection
with this Agreement, or the consummation of the transactions
contemplated hereby, has not been obtained or received.
Section 6. Tax
Treatment.
(a) First Merger. The parties
hereto acknowledge and agree that for federal income tax
purposes, the First Merger will be treated as follows:
(i) NPI will be deemed to have obtained as a result of the
First Merger an initial capital account balance in the First
Surviving Entity reflecting the tax bases of the assets so
treated as contributed by NPI to the First Surviving Entity.
(ii) Each partner in the First Surviving Entity will have
an initial capital account balance in the First Surviving Entity
equal to its proportionate share of such initial capital account
balance so deemed obtained by NPI.
(iii) In accordance with the foregoing, the respective
initial capital account balances of the general partners and
limited partners of the First Surviving Entity immediately
following the First Effective Time shall be the same as those of
the general partners and the limited partners of NPI immediately
prior to the First Effective Time.
(iv) The First Merger should not be treated as a
realization event and, in accordance with the foregoing, the
First Surviving Entity shall be treated as the continuation of
NPI for federal income tax purposes.
(b) Second Merger. The parties
hereto intend and agree that, for Federal income tax purposes,
(i) any payment of cash for New NPI Units shall be treated
as a sale of such New NPI Units by such holder and a purchase of
such New NPI Units by Aimco OP for the cash so paid under the
terms of this Agreement in accordance with the guidelines set
forth in Treas. Reg.
Sections 1.708-1(c)(3)
and 1.708-1(c)(4), and (ii) each such holder of New NPI
Units who accepts cash explicitly agrees and consents to such
treatment. Furthermore, the parties hereto intend and agree
that, for Federal income tax purposes, (i) any exchange of
New NPI Units for OP Units under the terms of this
Agreement shall be treated in accordance with Sections 721
and 731 of the Internal Revenue Code of 1986, as
A-3
amended, and (ii) each such holder of New NPI Units who
accepts OP Units explicitly agrees and consents to such
treatment. Any cash
and/or
OP Units to which a holder of New NPI Units is entitled
pursuant to this Agreement shall be paid only after the receipt
of a consent from such holder that, for Federal income tax
purposes, the receipt of cash
and/or
OP Units shall be treated as described in this
Section 6(b).
Section 7. Further
Assurances.
(a) From time to time, as and when required by the First
Surviving Entity or by its successors and assigns, there shall
be executed and delivered on behalf of NPI such deeds and other
instruments, and there shall be taken or caused to be taken by
NPI all such further actions, as shall be appropriate or
necessary in order to vest, perfect or confirm, of record or
otherwise, in the First Surviving Entity the title to and
possession of all property, interests, assets, rights,
privileges, immunities, powers, franchises and authority of NPI,
and otherwise to carry out the purposes of this Agreement, and
the officers and directors of NPI Equity are fully authorized in
the name and on behalf NPI or otherwise to take any and all such
action and to execute and deliver any and all such deeds and
other instruments.
(b) From time to time, as and when required by the Second
Surviving Entity or by its successors and assigns, there shall
be executed and delivered on behalf of the Aimco Subsidiary such
deeds and other instruments, and there shall be taken or caused
to be taken by the Aimco Subsidiary all such further actions, as
shall be appropriate or necessary in order to vest, perfect or
confirm, of record or otherwise, in the Second Surviving Entity
title to and possession of all property, interests, assets,
rights, privileges, immunities, powers, franchises and authority
of the Aimco Subsidiary, and otherwise to carry out the purposes
of this Agreement, and the officers and directors of NPI Equity
are fully authorized in the name and on behalf of Aimco
Subsidiary or otherwise to take any and all such action and to
execute and deliver any and all such deeds and other instruments.
Section 8. Amendment. Subject
to applicable law, this Agreement may be amended, modified or
supplemented by written agreement of the parties hereto at any
time prior to the consummation of the Mergers with respect to
any of the terms contained herein.
Section 9. Abandonment. At
any time prior to consummation of the Mergers, this Agreement
may be terminated and the Mergers may be abandoned without
liability to any party hereto by any of the Aimco Subsidiary,
Aimco OP, NPI or New NPI, in each case, acting in its sole
discretion and for any reason or for no reason, notwithstanding
approval of this Agreement by any of the members of the Aimco
Subsidiary, the partners of NPI or the general partner of Aimco
OP.
Section 10. Governing
Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware,
without reference to the conflict of law provisions thereof.
Section 11. No
Third-Party Beneficiaries. No provision of this
Agreement is intended to confer upon any person, entity, or
organization other than the parties hereto any rights or
remedies hereunder, other than the appraisal rights given to
holders of New NPI Units pursuant to Section 3.
A-4
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
NATIONAL PROPERTY INVESTORS III
Its Managing General Partner
Name:
Title:
NATIONAL PROPERTY INVESTORS III, LP
Its Managing General Partner
Name:
Title:
AIMCO NPI III MERGER SUB LLC
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By:
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Aimco Properties, L.P.,
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Its Sole Member
Its General Partner
Name:
Title:
AIMCO PROPERTIES, L.P.
Its General Partner
Name:
Title:
[Signature Page Merger Agreement]
A-5
EXHIBIT A
AMENDMENT
TO
PARTNERSHIP AGREEMENT
OF
NATIONAL PROPERTY INVESTORS III
This AMENDMENT TO THE PARTNERSHIP AGREEMENT OF NATIONAL PROPERTY
INVESTORS III (this Amendment) is
entered into as
of ,
2010 by and among NPI Equity Investments, Inc., a Florida
corporation, in its capacity as managing general partner (the
Managing General Partner), and each of the
Limited Partners. All capitalized terms used in this Amendment
but not otherwise defined herein shall have the respective
meanings given to them in the Partnership Agreement (as defined
below).
Recitals
WHEREAS, National Property Investors III, a California limited
partnership (the Partnership), is
governed pursuant to the terms of that certain Partnership
Agreement, dated as of February 1, 1979, as amended and
restated July 1, 1979 and as further amended to date (the
Partnership Agreement);
WHEREAS, the Partnership and National Property Investors III,
LP, a Delaware limited partnership (the Delaware
Partnership), are parties to an Agreement and Plan of
Merger, dated as of
[ ],
2010 (the Merger Agreement);
WHEREAS, pursuant to the Merger Agreement, the Partnership will
be merged with and into the Delaware Partnership, with the
Delaware Partnership as the surviving entity;
WHEREAS, pursuant to the Merger Agreement, at the effective time
of the merger, the Partnership Agreement, as further amended by
this Amendment, will become the partnership agreement of the
Delaware Partnership; and
WHEREAS, the merger will be effected upon the approval or
consent of (i) the managing general partner of each of the
Partnership and the Delaware Partnership, and (ii) a
majority in interest of the limited partners of each of the
Partnership and the Delaware Partnership.
NOW, THEREFORE, in consideration of the premises, the agreement
of the parties herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged and confessed, the parties hereby agree as follows:
1. Amendments to the Partnership
Agreement. At the effective time of the
Merger, the Partnership Agreement shall be amended as follows:
(a) In the first paragraph of the Partnership Agreement,
the following words are deleted: pursuant to the Uniform
Limited Partnership Act of the State of California.
(b) All other references therein to the Uniform Limited
Partnership Act of the State of California or to the Uniform
Limited Partnership Act of California shall be deemed to refer
to the Delaware Revised Uniform Limited Partnership Act.
(c) Section 1 of the Partnership Agreement is hereby
amended and restated to read in its entirety as follows:
1.1 The name of the Partnership is National Property
Investors III, LP, and its principal place of business is 55
Beattie Place, P.O. Box 1089, Greenville, South
Carolina 29602 and thereafter such other place or places as the
Managing General Partner may from time to time determine.
1.2 National Property Investors III was originally
formed as a limited partnership (the California
Partnership) pursuant to the provisions of the California
Uniform Limited Partnership Act, upon the
A-6
terms and conditions set forth in an agreement made as of
February 1, 1979. Pursuant to an Agreement and Plan of
Merger, dated as
of ,
2010, by and between the California Partnership and National
Property Investors III, LP, a Delaware limited partnership (the
Delaware Partnership), the California Partnership
was merged with and into the Delaware Partnership, with the
Delaware Partnership as the surviving entity (the
Surviving Entity) in the merger (the
Merger). At the effective time of the Merger (the
Effective Time), the Merger had the effect provided
by applicable law, and the following consequences: (a) the
certificate of limited partnership of the Delaware Partnership
in effect immediately prior to the Effective Time became the
certificate of limited partnership of the Surviving Entity;
(b) the limited partnership agreement of the California
Partnership in effect immediately prior to the Effective Time,
as amended as set forth on Annex A to the Merger
Agreement, became the partnership agreement of the Surviving
Entity (as so amended, the Partnership Agreement);
(c) NPI Equity Investments, Inc., a Florida corporation,
remained as sole Managing General Partner of the Surviving
Entity, and its interest in the California Partnership
immediately prior to the Effective Time was converted into an
equivalent interest in the Surviving Entity; (d) the
interests of the general partner in the Delaware Partnership
immediately prior to the Effective Time was cancelled;
(e) each limited partner in the California Partnership
became a limited partner in the Surviving Entity, with an
interest in the Surviving Entity equivalent to the interest such
limited partner had in the California Partnership immediately
prior to the Effective Time; (f) the interest of each
limited partner in the Delaware Partnership immediately prior to
the Effective Time was cancelled. References herein to the
Partnership are to the California Partnership prior
to the Merger and to the Delaware Partnership, as the Surviving
Entity in the Merger, from and after the Effective Time.
(d) Section 2.1.15 of the Partnership Agreement is
hereby amended and restated to read in its entirety as follows:
2.1.15 General Partner shall refer to NPI
Equity Investments, Inc., a Florida corporation, or to any other
person or entity who succeeds it in such capacity.
(e) Section 2.1.22 of the Partnership Agreement is
hereby amended and restated to read in its entirety as follows:
2.1.22 Managing General Partner shall
refer to NPI Equity Investments, Inc., or to any other person or
entity who succeeds in such capacity.
(f) Section 2.1.32 of the Partnership Agreement is
hereby amended to delete such section in its entirety.
(g) Section 16.5 of the Partnership Agreement is
hereby amended by deleting the last sentence thereof.
(h) Section 20.1.1 of the Partnership Agreement is
hereby amended by deleting everything after the word
foregoing.
(i) Section 22.7 of the Partnership Agreement is
hereby amended and restated to read in its entirety as follows:
The name and address of the Managing General Partners is:
NPI Equity Investments, Inc.
4582 S. Ulster St., Suite 1100
Denver, CO 80237
(j) Section 22.9 of the Partnership Agreement is
hereby amended and restated to read in its entirety as follows:
22.9 Notwithstanding the place where this Agreement
may be executed by any of the parties hereto, the parties
expressly agree that all the terms and provisions of hereof
shall be construed under the laws of the State of Delaware and
that the Delaware Revised Uniform Limited Partnership Act as now
adopted or as may be hereafter amended shall govern the
partnership aspects of this Agreement.
A-7
2. Miscellaneous.
(a) Effect of Amendment. In the
event of any inconsistency between the terms of the Partnership
Agreement and the terms of this Amendment, the terms of this
Amendment shall prevail. In the event of any conflict of
apparent conflict between any of the provisions of the
Partnership Agreement as amended by this Amendment, such
conflicting provisions shall be reconciled and construed to give
effect to the terms and intent of this Amendment.
(b) Ratification. Except as
otherwise expressly modified hereby, the Partnership Agreement
shall remain in full force and effect, and all of the terms and
provisions of the Partnership Agreement, as herein modified, are
hereby ratified and reaffirmed.
(c) Governing Law. THIS AMENDMENT
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE.
[Remainder
of page intentionally left blank.]
A-8
IN WITNESS WHEREOF, the parties have executed this Amendment as
of the date first set forth above.
The Managing General Partner:
NPI EQUITY INVESTMENTS, INC.
a Florida corporation
Name:
Title:
The Limited Partners:
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By:
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NPI Equity Investments, Inc.
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attorney-in-fact
Name:
Title:
A-9
EXHIBIT B
Appraisal
Rights of Limited Partners
Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Agreement and Plan
of Merger, dated as
of ,
2010 (the Merger Agreement), by and among
National Property Investors III, a California limited
partnership (NPI), National Property
Investors III, LP, a Delaware limited partnership (New
NPI), AIMCO NPI III Merger Sub LLC, a Delaware limited
liability company (the Aimco Subsidiary), and
AIMCO Properties, L.P., a Delaware limited partnership
(Aimco OP). In connection with the Second
Merger, limited partners of New NPI shall have the following
appraisal rights:
(a) Any limited partner who holds New NPI Units on the
effective date of the Second Merger who has not consented to the
Second Merger (the Nonconsenting Limited
Partners) and who has otherwise complied with
paragraph (b) hereof shall be entitled to an appraisal by
arbitration of the fair value of the Nonconsenting Limited
Partners New NPI Units. This arbitration shall be
conducted in Denver, Colorado, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association by a
panel of three arbitrators selected by Aimco OP. Any arbitration
award shall be appealable in the Federal District Court located
in Denver, Colorado.
(b) Within 10 days after the effective date of the
Second Merger, Aimco OP shall notify each of the Nonconsenting
Limited Partners of the consummation of the Second Merger, the
effective date of the Second Merger and that appraisal rights
are available for any or all New NPI Units held by Nonconsenting
Limited Partners, and shall include in such notice a copy of
this Exhibit. Such notice shall include an Election Form
pursuant to which Nonconsenting Limited Partners may elect an
appraisal by arbitration of the fair value of their New NPI
Units pursuant to paragraph (a) hereof. Any limited partner
who holds New NPI Units on the effective date of the Second
Merger and who has not consented to the Second Merger shall be
entitled to receive such notice and may, within 30 days
after the date of mailing of such notice (such 30th day
being the Election Deadline), demand from
Aimco OP the appraisal of his or her New NPI Units by making the
appropriate election in the Election Form in accordance with the
instructions thereto. Each completed Election Form must be
delivered to the address, and within the time period, specified
in the instructions to the Election Form. If a Nonconsenting
Limited Partner fails to properly complete an Election Form or
return it to the correct address within the specified time
period, such Nonconsenting Limited Partner shall be deemed to
have elected not to seek an appraisal of his or her New NPI
Units, and will be deemed to have elected the Cash Consideration.
(c) At any time prior to the Election Deadline, any
Nonconsenting Limited Partner who has made a demand for
appraisal of his or her New NPI Units shall have the right to
withdraw his or her demand for appraisal and to accept the Cash
Consideration payable pursuant to the Merger Agreement.
Nonconsenting Limited Partners who wish to withdraw their
demands must do so in writing delivered to Aimco Properties,
L.P.,
c/o Eagle
Rock Proxy Advisors, LLC, by mail at 12 Commerce Drive,
Cranford, New Jersey, 07016, or by fax at
(908) 497-2349.
At any time prior to 20 days after the Election Deadline,
any Nonconsenting Limited Partner who has complied with the
requirements of subsections (a) and (b) hereof, upon
written request, shall be entitled to receive from Aimco OP a
statement setting forth the aggregate number of New NPI Units
with respect to which Nonconsenting Limited Partners have made
demands for appraisal and the aggregate number of holders of
such New NPI Units. Such written statement shall be mailed to
the Nonconsenting Limited Partner within 10 days after such
Nonconsenting Limited Partners written request for such a
statement is received by Aimco OP or within 20 days after
the Election Deadline, whichever is later.
(d) Upon the submission of any such demand by a
Nonconsenting Limited Partner, Aimco OP shall, within
40 days after the Election Deadline, submit to the
arbitration panel a duly verified list containing the names and
addresses of all Nonconsenting Limited Partners who have
demanded payment for their New NPI Units and with whom
agreements as to the value of their New NPI Units have not been
reached with Aimco OP. The arbitration panel shall give notice
of the time and place fixed for the hearing of such demand by
registered or certified mail to Aimco OP and to the
Nonconsenting Limited Partners shown on the list at the
addresses
A-10
therein stated. The forms of the notices shall be approved by
the panel, and the costs thereof shall be borne by Aimco OP.
(e) At the hearing on such demand, the panel shall
determine the Nonconsenting Limited Partners who have become
entitled to appraisal rights hereunder.
(f) After determining the Nonconsenting Limited Partners
entitled to an appraisal, the panel shall appraise the New NPI
Units, determining their fair value exclusive of any element of
value arising from the accomplishment or expectation of the
Second Merger, together with interest, if any, to be paid upon
the amount determined to be the fair value. In determining such
fair value, the panel shall take into account all relevant
factors. Unless the panel in its discretion determines otherwise
for good cause shown, interest from the effective date of the
Second Merger through the date of payment of the judgment shall
be compounded quarterly and shall accrue at 5% over the Federal
Reserve discount rate (including any surcharge), as established
from time to time during the period between the effective date
of the Second Merger and the date of payment of the judgment.
Upon application by Aimco OP or by any Nonconsenting Limited
Partner entitled to participate in the appraisal proceeding, the
panel may, in its discretion, proceed with the appraisal prior
to the final determination of the Nonconsenting Limited Partners
entitled to an appraisal. Any Nonconsenting Limited Partner
whose name appears on the list submitted by Aimco OP pursuant to
paragraph (d) hereof may participate fully in all
proceedings until it is finally determined that such
Nonconsenting Limited Partner is not entitled to appraisal
rights hereunder.
(g) The panel shall direct the payment of the fair value of
the New NPI Units, together with interest, if any, by Aimco OP
to the Nonconsenting Limited Partners entitled thereto. Payment
shall be so made to each such Nonconsenting Limited Partner upon
the receipt by Aimco OP of the written consent from such
Nonconsenting Limited Partner that, for federal income tax
purposes, the issuance of cash for the New NPI Units shall be
treated as a sale of the New NPI Units by the owner and a
purchase of such New NPI Units by Aimco OP for the cash
consideration so paid under the terms of the Merger Agreement in
accordance with the guidelines set forth in Treas. Reg.
Sections 1.708-1(c)(3)
and 1.708-1(c)(4).
(h) The costs of the proceeding may be determined by the
panel and taxed upon the parties as the panel deems equitable in
the circumstances. Upon application of a Nonconsenting Limited
Partner, the panel may order all or a portion of the expenses
incurred by any Nonconsenting Limited Partner in connection with
the appraisal proceeding, including, without limitation,
reasonable attorneys fees and the fees and expenses of
experts, to be charged pro rata against the value of all the
interests entitled to an appraisal.
(i) From and after the effective date of the Second Merger,
no Nonconsenting Limited Partner who has demanded appraisal
rights as provided in paragraph (b) hereof shall be
entitled to vote such New NPI Units for any purpose or to
receive payment of distributions on such interests (except
distributions payable as of a record date prior to the effective
date of the Second Merger); provided, however,
that if such Nonconsenting Limited Partner shall deliver to
Aimco Properties, L.P.,
c/o Eagle
Rock Proxy Advisors, LLC, by mail at 12 Commerce Drive,
Cranford, New Jersey, 07016, or by fax at
(908) 497-2349,
a written withdrawal of such Nonconsenting Limited
Partners demand for an appraisal and an acceptance of the
Cash Consideration payable pursuant to the Merger Agreement,
either as provided in paragraph (c) hereof or thereafter
with the written approval of Aimco OP, then the right of such
Nonconsenting Limited Partner to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding before
the panel shall be dismissed as to any Nonconsenting Limited
Partner without the approval of the panel, and such approval may
be conditioned upon such terms as the panel deems just.
A-11
ANNEX B
Appraisal
Rights of Limited Partners
Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Agreement and Plan
of Merger, dated as of October [ ], 2010 (the
Merger Agreement), by and among National
Property Investors III, a California limited partnership
(NPI), National Property Investors III,
LP, a Delaware limited partnership (New NPI),
AIMCO NPI III Merger Sub LLC, a Delaware limited liability
company (the Aimco Subsidiary), and AIMCO
Properties, L.P., a Delaware limited partnership (Aimco
OP). In connection with the Second Merger, limited
partners of New NPI shall have the following appraisal rights:
(a) Any limited partner who holds New NPI Units on the
effective date of the Second Merger who has not consented to the
Second Merger (the Nonconsenting Limited
Partners) and who has otherwise complied with
paragraph (b) hereof shall be entitled to an appraisal by
arbitration of the fair value of the Nonconsenting Limited
Partners New NPI Units. This arbitration shall be
conducted in Denver, Colorado, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association by a
panel of three arbitrators selected by Aimco OP. Any arbitration
award shall be appealable in the Federal District Court located
in Denver, Colorado.
(b) Within 10 days after the effective date of the
Second Merger, Aimco OP shall notify each of the Nonconsenting
Limited Partners of the consummation of the Second Merger, the
effective date of the Second Merger and that appraisal rights
are available for any or all New NPI Units held by Nonconsenting
Limited Partners, and shall include in such notice a copy of
this Exhibit. Such notice shall include an Election Form
pursuant to which Nonconsenting Limited Partners may elect an
appraisal by arbitration of the fair value of their New NPI
Units pursuant to paragraph (a) hereof. Any limited partner
who holds New NPI Units on the effective date of the Second
Merger and who has not consented to the Second Merger shall be
entitled to receive such notice and may, within 30 days
after the date of mailing of such notice (such 30th day
being the Election Deadline), demand from
Aimco OP the appraisal of his or her New NPI Units by making the
appropriate election in the Election Form in accordance with the
instructions thereto. Each completed Election Form must be
delivered to the address, and within the time period, specified
in the instructions to the Election Form. If a Nonconsenting
Limited Partner fails to properly complete an Election Form or
return it to the correct address within the specified time
period, such Nonconsenting Limited Partner shall be deemed to
have elected not to seek an appraisal of his or her New NPI
Units, and will be deemed to have elected the Cash Consideration.
(c) At any time prior to the Election Deadline, any
Nonconsenting Limited Partner who has made a demand for
appraisal of his or her New NPI Units shall have the right to
withdraw his or her demand for appraisal and to accept the Cash
Consideration payable pursuant to the Merger Agreement.
Nonconsenting Limited Partners who wish to withdraw their
demands must do so in writing delivered to Aimco Properties,
L.P.,
c/o Eagle
Rock Proxy Advisors, LLC, by mail at 12 Commerce Drive,
Cranford, New Jersey, 07016, or by fax at
(908) 497-2349.
At any time prior to 20 days after the Election Deadline,
any Nonconsenting Limited Partner who has complied with the
requirements of subsections (a) and (b) hereof, upon
written request, shall be entitled to receive from Aimco OP a
statement setting forth the aggregate number of New NPI Units
with respect to which Nonconsenting Limited Partners have made
demands for appraisal and the aggregate number of holders of
such New NPI Units. Such written statement shall be mailed to
the Nonconsenting Limited Partner within 10 days after such
Nonconsenting Limited Partners written request for such a
statement is received by Aimco OP or within 20 days after
the Election Deadline, whichever is later.
(d) Upon the submission of any such demand by a
Nonconsenting Limited Partner, Aimco OP shall, within
40 days after the Election Deadline, submit to the
arbitration panel a duly verified list containing the names and
addresses of all Nonconsenting Limited Partners who have
demanded payment for their New NPI Units and with whom
agreements as to the value of their New NPI Units have not been
reached with Aimco OP. The arbitration panel shall give notice
of the time and place fixed for the hearing of such demand by
registered or certified mail to Aimco OP and to the
Nonconsenting Limited Partners shown on the list at the
addresses
B-1
therein stated. The forms of the notices shall be approved by
the panel, and the costs thereof shall be borne by Aimco OP.
(e) At the hearing on such demand, the panel shall
determine the Nonconsenting Limited Partners who have become
entitled to appraisal rights hereunder.
(f) After determining the Nonconsenting Limited Partners
entitled to an appraisal, the panel shall appraise the New NPI
Units, determining their fair value exclusive of any element of
value arising from the accomplishment or expectation of the
Second Merger, together with interest, if any, to be paid upon
the amount determined to be the fair value. In determining such
fair value, the panel shall take into account all relevant
factors. Unless the panel in its discretion determines otherwise
for good cause shown, interest from the effective date of the
Second Merger through the date of payment of the judgment shall
be compounded quarterly and shall accrue at 5% over the Federal
Reserve discount rate (including any surcharge), as established
from time to time during the period between the effective date
of the Second Merger and the date of payment of the judgment.
Upon application by Aimco OP or by any Nonconsenting Limited
Partner entitled to participate in the appraisal proceeding, the
panel may, in its discretion, proceed with the appraisal prior
to the final determination of the Nonconsenting Limited Partners
entitled to an appraisal. Any Nonconsenting Limited Partner
whose name appears on the list submitted by Aimco OP pursuant to
paragraph (d) hereof may participate fully in all
proceedings until it is finally determined that such
Nonconsenting Limited Partner is not entitled to appraisal
rights hereunder.
(g) The panel shall direct the payment of the fair value of
the New NPI Units, together with interest, if any, by Aimco OP
to the Nonconsenting Limited Partners entitled thereto. Payment
shall be so made to each such Nonconsenting Limited Partner upon
the receipt by Aimco OP of the written consent from such
Nonconsenting Limited Partner that, for federal income tax
purposes, the issuance of cash for the New NPI Units shall be
treated as a sale of the New NPI Units by the owner and a
purchase of such New NPI Units by Aimco OP for the cash
consideration so paid under the terms of the Merger Agreement in
accordance with the guidelines set forth in Treas. Reg.
Sections 1.708-1(c)(3)
and 1.708-1(c)(4).
(h) The costs of the proceeding may be determined by the
panel and taxed upon the parties as the panel deems equitable in
the circumstances. Upon application of a Nonconsenting Limited
Partner, the panel may order all or a portion of the expenses
incurred by any Nonconsenting Limited Partner in connection with
the appraisal proceeding, including, without limitation,
reasonable attorneys fees and the fees and expenses of
experts, to be charged pro rata against the value of all the
interests entitled to an appraisal.
(i) From and after the effective date of the Second Merger,
no Nonconsenting Limited Partner who has demanded appraisal
rights as provided in paragraph (b) hereof shall be
entitled to vote such New NPI Units for any purpose or to
receive payment of distributions on such interests (except
distributions payable as of a record date prior to the effective
date of the Second Merger); provided, however,
that if such Nonconsenting Limited Partner shall deliver to
Aimco Properties, L.P.,
c/o Eagle
Rock Proxy Advisors, LLC, by mail at 12 Commerce Drive,
Cranford, New Jersey, 07016, or by fax at
(908) 497-2349,
a written withdrawal of such Nonconsenting Limited
Partners demand for an appraisal and an acceptance of the
Cash Consideration payable pursuant to the Merger Agreement,
either as provided in paragraph (c) hereof or thereafter
with the written approval of Aimco OP, then the right of such
Nonconsenting Limited Partner to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding before
the panel shall be dismissed as to any Nonconsenting Limited
Partner without the approval of the panel, and such approval may
be conditioned upon such terms as the panel deems just.
B-2
ANNEX C
OFFICERS
AND DIRECTORS
NPI, New NPI, Aimco OP and the Aimco Subsidiary do not have
directors, officers or significant employees of their own. The
names and positions of the executive officers and directors of
Aimco, AIMCO-GP and NPI Equity Investments, Inc, the general
partner of NPI, or NPI Equity, are set forth below. The business
address of each executive officer and director is 4582 South
Ulster Street Parkway, Suite 1100, Denver, Colorado 80237.
Each executive officer and director is a citizen of the United
States of America.
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Name (Age)
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Position
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Terry Considine(62)
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Chairman of the Board of Directors and Chief Executive Officer
of Aimco; Director, Chief Executive Officer and President of
AIMCO-GP.
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Timothy Beaudin(51)
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President and Chief Operating Officer of Aimco,
AIMCO-GP and
NPI Equity.
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Lisa R. Cohn(41)
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Executive Vice President, General Counsel and Secretary of
Aimco, AIMCO-GP and NPI Equity.
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Miles Cortez(66)
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Executive Vice President and Chief Administrative Officer of
Aimco and AIMCO-GP.
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Ernest M. Freedman(39)
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Executive Vice President and Chief Financial Officer of Aimco,
AIMCO-GP and NPI Equity.
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Steven D. Cordes(38)
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Senior Vice President of Aimco, AIMCO-GP and NPI Equity;
Director of NPI Equity.
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John Bezzant(47)
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Senior Vice President of Aimco, AIMCO-GP and NPI Equity;
Director of NPI Equity.
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Paul Beldin(36)
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Senior Vice President and Chief Accounting Officer of Aimco,
AIMCO-GP and NPI Equity.
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Stephen B. Waters(48)
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Senior Director of Partnership Accounting of Aimco, AIMCO-GP and
NPI Equity.
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James N. Bailey(63)
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Director of Aimco
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Richard S. Ellwood(78)
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Director of Aimco
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Thomas L. Keltner(63)
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Director of Aimco
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J. Landis Martin(64)
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Director of Aimco
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Robert A. Miller(64)
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Director of Aimco
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Michael A. Stein(56)
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Director of Aimco
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Kathleen M. Nelson(64)
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Director of Aimco
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Name
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Biographical Summary of Current Directors and Officers
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Terry Considine
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Mr. Considine has been Chairman of the Board of Directors and
Chief Executive Officer of Aimco and AIMCO-GP, Inc. since July
1994. Mr. Considine also serves on the board of directors of
Intrepid Potash, Inc. a publicly held producer of potash, and,
until its acquisition in early 2009, Mr. Considine served
as Chairman of the Board and Chief Executive Officer of American
Land Lease, Inc. Mr. Considine has over 40 years of
experience in the real estate and other industries. Among other
real estate ventures, in 1975, Mr. Considine founded and managed
the predecessor companies that became Aimco at its initial
public offering in 1994.
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C-1
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Name
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Biographical Summary of Current Directors and Officers
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Timothy Beaudin
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Mr. Beaudin was appointed President and Chief Operating Officer
of Aimco, AIMCO-GP and NPI Equity in February 2009. He joined
the companies as Executive Vice President and Chief Development
Officer in October 2005 and was appointed Executive Vice
President and Chief Property Operating Officer in October 2008.
Mr. Beaudin oversees conventional and affordable property
operations, transactions, asset management, and redevelopment
and construction services. Prior to joining Aimco and beginning
in 1995, Mr. Beaudin was with Catellus Development Corporation,
a San Francisco, California-based real estate investment
trust. During his last five years at Catellus, Mr. Beaudin
served as Executive Vice President, with management
responsibility for development, construction and asset
management.
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Lisa R. Cohn
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Lisa R. Cohn was appointed Executive Vice President, General
Counsel and Secretary of Aimco, AIMCO-GP and NPI Equity in
December 2007. In addition to serving as general counsel, Ms.
Cohn has executive responsibility for insurance and risk
management as well as human resources. From January 2004 to
December 2007, Ms. Cohn served as Senior Vice President and
Assistant General Counsel. She joined Aimco in July 2002 as Vice
President and Assistant General Counsel. Prior to joining Aimco,
Ms. Cohn was in private practice with the law firm of Hogan
& Hartson LLP with a focus on public and private mergers
and acquisitions, venture capital financing, securities and
corporate governance.
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Miles Cortez
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Mr. Cortez was appointed Executive Vice President and Chief
Administrative Officer in December 2007. He is responsible for
administration, government relations, communications and special
projects. Mr. Cortez joined Aimco in August 2001 as Executive
Vice President, General Counsel and Secretary. Prior to joining
the Company, Mr. Cortez was the senior partner of Cortez
Macaulay Bernhardt & Schuetze LLC, a Denver, Colorado law
firm, from December 1997 through September 2001. He served as
president of the Colorado Bar Association from 1996 to 1997 and
the Denver Bar Association from 1982 to 1983.
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Ernest M. Freedman
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Ernest M. Freedman was appointed Executive Vice President and
Chief Financial Officer of Aimco, AIMCO-GP and NPI Equity
effective November 1, 2009. Mr. Freedman joined Aimco in
2007 as Senior Vice President of Financial Planning and Analysis
and has served as Senior Vice President of Finance since
February 2009, responsible for financial planning, tax,
accounting and related areas. From 2004 to 2007,
Mr. Freedman served as Chief Financial Officer of HEI
Hotels and Resorts. From 2000 to 2004, Mr. Freedman was at GE
Real Estate in a number of capacities, including operations
controller and finance manager for investments and acquisitions.
From 1993 to 2000, Mr. Freedman was with Ernst &
Young, LLP, including one year as a senior manager in the real
estate practice. Mr. Freedman is a certified public accountant.
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C-2
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Name
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Biographical Summary of Current Directors and Officers
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Steven D. Cordes
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Steven D. Cordes was appointed as a Director of NPI Equity
effective March 2, 2009. Mr. Cordes has been a Senior Vice
President of Aimco, AIMCO-GP and NPI Equity since May 2007. Mr.
Cordes joined Aimco in 2001 as a Vice President of Capital
Markets with responsibility for Aimcos joint ventures and
equity capital markets activity. Prior to joining Aimco, Mr.
Cordes was a manager in the financial consulting practice of
PricewaterhouseCoopers. Effective March 2009, Mr. Cordes was
appointed to serve as the equivalent of the chief executive
officer of NPI.
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John Bezzant
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John Bezzant was appointed as a Director of NPI Equity effective
December 16, 2009. Mr. Bezzant has been a Senior Vice President
of NPI Equity and Aimco since joining Aimco in June 2006. Prior
to joining Aimco, from 2005 to June 2006, Mr. Bezzant was a
First Vice President at Prologis, a Denver, Colorado-based real
estate investment trust, and from 1986 to 2005, Mr. Bezzant
served as Vice President, Asset Management at Catellus
Development Corporation.
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Paul Beldin
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Paul Beldin joined Aimco in Macy 2008 and has served as Senior
Vice President and Chief Accounting Officer of Aimco and NPI
Equity since that time. Prior to joining Aimco, Mr. Beldin
served as controller and then as chief financial officer of
America First Apartment Investors, Inc., a publicly traded
multifamily real estate investment trust, from May 2005 to
September 2007 when the company was acquired by Sentinel Real
Estate Corporation. Prior to joining America First Apartment
Investors, Inc., Mr. Beldin was a senior manager at
Deloitte and Touche LLP, where he was employed from August 1996
to May 2005, including two years as an audit manager in SEC
services at Deloittes national office.
|
Stephen B. Waters
|
|
Stephen B. Waters was appointed Senior Director of Partnership
Accounting of Aimco and NPI Equity in June 2009. Mr. Waters has
responsibility for partnership accounting with Aimco and serves
as the principal financial officer of NPI Equity. Mr. Waters
joined Aimco as a Director of Real Estate Accounting in
September 1999 and was appointed Vice President of NPI Equity
and Aimco in April 2004. Prior to joining Aimco, Mr. Waters was
a senior manager at Ernst & Young LLP.
|
James N. Bailey
|
|
Mr. Bailey was first elected as a director of Aimco in June 2000
and is currently Chairman of the Nominating and Corporate
Governance Committee and a member of the Audit and Compensation
and Human Resources Committees. Mr. Bailey co-founded Cambridge
Associates, LLC, an investment consulting firm, in 1973 and
currently serves as its Senior Managing Director and Treasurer.
He is also a co-founder, director and treasurer of The Plymouth
Rock Company, and a director of SRB Corporation, Inc. and
Homeowners Direct Company, all three of which are insurance
companies and insurance company affiliates. He also serves as an
Overseer for the New England Aquarium, and is on its audit and
investment committees. Mr. Bailey is a member of the
Massachusetts Bar and the American Bar Associations. Mr. Bailey,
a long-time entrepreneur, brings particular expertise to the
board in the areas of investment and financial planning, capital
markets, evaluation of institutional real estate markets and
managers of all property types.
|
C-3
|
|
|
Name
|
|
Biographical Summary of Current Directors and Officers
|
|
Richard S. Ellwood
|
|
Mr. Ellwood was first elected as a director of Aimco in July
1994. Mr. Ellwood is currently a member of the Audit,
Compensation and Human Resources, and Nominating and Corporate
Governance Committees. Mr. Ellwood was the founder and President
of R.S. Ellwood & Co., Incorporated, which he operated as a
real estate investment banking firm through 2004. Prior to
forming his firm, Mr. Ellwood had 31 years experience on
Wall Street as an investment banker, serving as: Managing
Director and senior banker at Merrill Lynch Capital Markets from
1984 to 1987; Managing Director at Warburg Paribas Becker from
1978 to 1984; general partner and then Senior Vice President and
a director at White, Weld & Co. from 1968 to 1978; and in
various capacities at J.P. Morgan & Co. from 1955 to
1968. Mr. Ellwood served as a director of Felcor Lodging Trust,
Incorporated, a publicly held company, from 1994 to 2009. He is
as a trustee of the Diocesan Investment Trust of the Episcopal
Diocese of New Jersey and is chairman of the diocesan audit
committee. As one of the first real estate investment bankers,
Mr. Ellwood brings particular expertise in real estate finance
through corporate securities in both public and private markets
as well as in direct property financings through mortgage
placements, limited partnerships and joint ventures.
|
Thomas L. Keltner
|
|
Mr. Keltner was first elected as a director of Aimco in April
2007 and is currently a member of the Audit, Compensation and
Human Resources, and Nominating and Corporate Governance
Committees. Mr. Keltner served as Executive Vice President and
Chief Executive Officer Americas and Global Brands
for Hilton Hotels Corporation from March 2007 through March
2008, which concluded the transition period following
Hiltons acquisition by The Blackstone Group. Mr. Keltner
joined Hilton Hotels Corporation in 1999 and served in various
roles. Mr. Keltner has more than 20 years of experience in
the areas of hotel development, acquisition, disposition,
franchising and management. Prior to joining Hilton Hotels
Corporation, from 1993 to 1999, Mr. Keltner served in several
positions with Promus Hotel Corporation, including President,
Brand Performance and Development. Before joining Promus Hotel
Corporation, he served in various capacities with Holiday Inn
Worldwide, Holiday Inns International and Holiday Inns, Inc. In
addition, Mr. Keltner was President of Saudi Marriott Company, a
division of Marriott Corporation, and was a management
consultant with Cresap, McCormick and Paget, Inc. Mr. Keltner
brings particular expertise to the board in the areas of
property operations, marketing, branding, development and
customer service.
|
C-4
|
|
|
Name
|
|
Biographical Summary of Current Directors and Officers
|
|
J. Landis Martin
|
|
Mr. Martin was first elected as a director of Aimco in July 1994
and is currently Chairman of the Compensation and Human
Resources Committee. Mr. Martin is also a member of the Audit
and Nominating and Corporate Governance Committees and serves as
the Lead Independent Director of Aimcos Board. Mr. Martin
is the Founder and Managing Director of Platte River Ventures
LLC, a private equity firm. In November 2005, Mr. Martin retired
as Chairman and CEO of Titanium Metals Corporation, a publicly
held integrated producer of titanium metals, where he served
since January 1994. Mr. Martin served as President and CEO of NL
Industries, Inc., a publicly held manufacturer of titanium
dioxide chemicals, from 1987 to 2003. Mr. Martin is also a
director of Crown Castle International Corporation, a publicly
held wireless communications company, Halliburton Company, a
publicly held provider of products and services to the energy
industry, and Intrepid Potash, Inc., a publicly held producer of
potash. As a former chief executive of four NYSE-listed
companies, Mr. Martin brings particular expertise to the board
in the areas of operations, finance and governance.
|
Robert A. Miller
|
|
Mr. Miller was first elected as a director of Aimco in April
2007 and is currently a member of the Audit, Compensation and
Human Resources, and Nominating and Corporate Governance
Committees. Mr. Miller has served as the President of Marriott
Leisure since 1997. Prior to joining Marriott Leisure, from 1984
to 1988, Mr. Miller served as Executive Vice President &
General Manager of Marriott Vacation Club International and then
as its President from 1988 to 1997. In 1984, Mr. Miller and a
partner sold their company, American Resorts, Inc., to Marriott.
Mr. Miller co-founded American Resorts, Inc. in 1978, and it was
the first business model to encompass all aspects of timeshare
resort development, sales, management and operations. Prior to
founding American Resorts, Inc., from 1972 to 1978, Mr. Miller
was Chief Financial Officer of Fleetwing Corporation, a regional
retail and wholesale petroleum company. Prior to joining
Fleetwing, Mr. Miller served for five years as a staff
accountant for Arthur Young & Company. Mr. Miller is past
Chairman and currently a director of the American Resort
Development Association (ARDA) and currently serves
as Chairman and director of the ARDA International Foundation.
As a successful real estate entrepreneur, Mr. Miller brings
particular expertise to the board in the areas of operations,
management, marketing, sales, and development, as well as
finance and accounting.
|
C-5
|
|
|
Name
|
|
Biographical Summary of Current Directors and Officers
|
|
Michael A. Stein
|
|
Mr. Stein was first elected as a director of Aimco in October
2004 and is currently the Chairman of the Audit Committee. Mr.
Stein is also a member of the Compensation and Human Resources
and Nominating and Corporate Governance Committees. From January
2001 until its acquisition by Eli Lilly in January 2007, Mr.
Stein served as Senior Vice President and Chief Financial
Officer of ICOS Corporation, a biotechnology company based in
Bothell, Washington. From October 1998 to September 2000, Mr.
Stein was Executive Vice President and Chief Financial Officer
of Nordstrom, Inc. From 1989 to September 1998, Mr. Stein served
in various capacities with Marriott International, Inc.,
including Executive Vice President and Chief Financial Officer
from 1993 to 1998. Mr. Stein serves on the Board of Directors of
Nautilus, Inc., which is a publicly held fitness company, and
the Board of Directors of Providence Health & Services, a
not-for-profit health system operating hospitals and other
health care facilities across Alaska, Washington, Montana,
Oregon and California. As the former chief financial officer of
two NYSE-listed companies and a former partner at Arthur
Andersen, Mr. Stein brings particular expertise to the board in
the areas of corporate and real estate finance, and accounting
and auditing for large and complex business operations.
|
Kathleen M. Nelson
|
|
Ms. Nelson was first elected as a director of Aimco in April
2010, and currently serves on the Audit, Compensation and Human
Resources, and Nominating and Corporate Governance Committees.
Ms. Nelson has an extensive background in commercial real estate
and financial services with over 40 years of experience
including 36 years at TIAA-CREF. She held the position of
Managing Director/Group Leader and Chief Administrative Officer
for TIAA-CREFs mortgage and real estate division. Ms.
Nelson developed and staffed TIAAs real estate research
department. She retired from this position in December 2004 and
founded and serves as president of KMN Associates LLC, a
commercial real estate investment advisory and consulting firm.
In 2009, Ms. Nelson co-founded and serves as Managing
Principal of Bay Hollow Associates, LLC, a commercial real
estate consulting firm, which provides counsel to institutional
investors. Ms. Nelson served as the International Council of
Shopping Centers chairman for the 2003-04 term and has
been an ICSC Trustee since 1991. She also is the chairman of the
ICSC Audit Committee and is a member of various other
committees. Ms. Nelson serves on the Board of Directors of CBL
& Associates Properties, Inc., which is a publicly held
REIT that develops and manages retail shopping properties. She
is a member of Castagna Realty Company Advisory Board and has
served as an advisor to the Rand Institute Center for Terrorism
Risk Management Policy and on the board of the Greater Jamaica
Development Corporation. Ms. Nelson serves on the Advisory Board
of the Beverly Willis Architectural Foundation and is a member
of the Anglo American Real Property Institute. Ms. Nelson brings
to the board particular expertise in the areas of real estate
finance and investment.
|
C-6
ANNEX D
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, DC
20549
Form 10-K
|
|
|
(Mark One)
|
|
|
þ
|
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
|
|
For the fiscal year ended
December 31, 2009
|
or
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
|
|
For the transition period
from to
|
Commission file number 0-9567
NATIONAL PROPERTY INVESTORS
III
(Exact name of registrant as
specified in its charter)
|
|
|
California
(State or other jurisdiction
of
incorporation or organization)
|
|
13-2974428
(I.R.S. Employer
Identification No.)
|
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal
executive offices)
Registrants telephone number, including area code
(864) 239-1000
Securities registered pursuant to Section 12(b) of the
Act:
None
Securities registered pursuant to Section 12(g) of the
Act:
Units of Limited Partnership
(Title of Class)
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to
submit and post such
files). Yes o No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(229.405 of this chapter) is not contained herein, and will not
be contained, to the best of the registrants knowledge in
definitive proxy or information statements incorporated by
reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
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):
|
|
|
|
|
|
|
Large accelerated
filer o
|
|
Accelerated
filer o
|
|
Non-accelerated
filer o
|
|
Smaller reporting
company þ
|
|
|
(Do not check if a smaller reporting
company)
|
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
State the aggregate market value of the voting and non-voting
partnership interests held by non-affiliates computed by
reference to the price at which the partnership interests were
last sold, or the average bid and asked price of such
partnership interests as of the last business day of the
registrants most recently completed second fiscal quarter.
No market exists for the limited partnership interests of the
Registrant, and, therefore, no aggregate market value can be
determined.
DOCUMENTS
INCORPORATED BY REFERENCE
None
D-1
FORWARD-LOOKING
STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a
safe harbor for forward-looking statements in
certain circumstances. Certain information included in this
Annual Report contains or may contain information that is
forward-looking within the meaning of the federal securities
laws, including, without limitation, statements regarding the
effect of redevelopments, the Partnerships future
financial performance, including the Partnerships ability
to maintain current or meet projected occupancy and rent levels,
and the effect of government regulations. Actual results may
differ materially from those described in these forward-looking
statements and, in addition, will be affected by a variety of
risks and factors some of which are beyond the
Partnerships control including, without limitation:
financing risks, including the availability and cost of
financing and the risk that the Partnerships cash flows
from operations may be insufficient to meet required payments of
principal and interest; natural disasters and severe weather
such as hurricanes; national and local economic conditions; the
general level of interest rates; energy costs; the terms of
governmental regulations that affect the Partnerships
property and interpretations of those regulations; the
competitive environment in which the Partnership operates; real
estate risks, including fluctuations in real estate values and
the general economic climate in local markets and competition
for residents in such markets; insurance risk, including the
cost of insurance; development risks; litigation, including
costs associated with prosecuting or defending claims and any
adverse outcomes; and possible environmental liabilities,
including costs, fines or penalties that may be incurred due to
necessary remediation of contamination of properties presently
owned or previously owned by the Partnership. Readers should
carefully review the Partnerships financial statements and
the notes thereto, as well as the other documents the
Partnership files from time to time with the Securities and
Exchange Commission.
PART I
National Property Investors III (the
Partnership or Registrant) was organized
under the Uniform Limited Partnership Laws of California on
February 1, 1979 for the purpose of operating
income-producing residential real estate. The general partner is
NPI Equity Investments, Inc. (NPI Equity or the
Managing General Partner). The Managing General
Partner is a wholly owned subsidiary of Apartment Investment and
Management Company (AIMCO), a publicly traded real
estate investment trust. A total of 48,049 units of the
limited partnership (Units) were issued for $500
each, for an aggregate capital contribution of $24,024,500. In
addition, the general partner contributed a total of $1,000 to
the Partnership. The Partnership will terminate on
December 31, 2022, or sooner, in accordance with the terms
of the Partnership Agreement. Since its initial offering, the
Partnership has not received, nor are the limited partners
required to make, additional capital contributions.
In 1980, during its acquisition phase, the Partnership acquired
six existing apartment properties. The Partnership continues to
own and operate one of these properties (see Item 2.
Property).
The Partnership has no employees. Management and administrative
services are provided by the Managing General Partner and by
agents retained by the Managing General Partner. These services
were provided by affiliates of the Managing General Partner for
the years ended December 31, 2009 and 2008.
A further description of the Partnerships business is
included in Item 7. Managements Discussion and
Analysis of Financial Condition and Results of Operations
included in this
Form 10-K.
The following table sets forth the Partnerships investment
in property:
|
|
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Date of
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Property
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Purchase
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Type of Ownership
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Use
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Lakeside Apartments
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12/18/80
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Fee ownership subject to
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Apartment
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Lisle, Illinois
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|
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1st and 2nd mortgages
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568 units
|
D-2
Schedule
of Property
Set forth below for the Partnerships property is the gross
carrying value, accumulated depreciation, depreciable life,
method of depreciation, and Federal tax basis.
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Gross
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Method
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Carrying
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Accumulated
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Depreciable
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of
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Federal
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Property
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Value
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Depreciation
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Life
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Depreciation
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Tax Basis
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(In thousands)
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(In thousands)
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Lakeside Apartments
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$
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49,117
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$
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29,276
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5-40 yrs
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S/L
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$
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15,808
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See Note A Organization and Summary of
Significant Accounting Policies to the financial
statements included in Item 8. Financial Statements
and Supplementary Data for a description of the
Partnerships capitalization and depreciation policies.
Schedule
of Property Indebtedness
The following table sets forth certain information relating to
the loans encumbering the Partnerships property.
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Principal
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Principal
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Balance At
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Balance
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December 31,
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Interest
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Period
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Maturity
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Due At
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Property
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2009
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Rate
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Amortized
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Date
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Maturity(3)
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(In thousands)
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(In thousands)
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|
Lakeside Apartments
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1st mortgage
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$
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20,375
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7.14
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%(1)
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30 yrs
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01/01/22
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$
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15,791
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2nd mortgage
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9,000
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5.90
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%(2)
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30 yrs
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01/01/22
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7,185
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Total
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$
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29,375
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$
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22,976
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(1) |
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Fixed rate mortgage. |
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(2) |
|
Monthly payments of interest only through May 1, 2010.
Monthly payments of principal and interest commence June 1,
2010. |
|
(3) |
|
See Item 8. Financial Statements and Supplementary
Data Note C for information with respect
to the Partnerships ability to prepay the loans and other
details about the loans. |
Schedule
of Rental Rates and Occupancy
Average annual rental rate and occupancy for 2009 and 2008 for
the property:
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Average Annual
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Rental Rate
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Average Annual
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(per unit)
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Occupancy
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Properties
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2009
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2008
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2009
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2008
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Lakeside Apartments
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$
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11,634
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$
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11,520
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90
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%
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87
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%
|
The Managing General Partner attributes the increase in
occupancy at Lakeside Apartments to the completion of the
redevelopment of the property, resulting in more units available
for rent.
The real estate industry is highly competitive. The
Partnerships property is subject to competition from other
residential apartment complexes in the area. The Managing
General Partner believes that the property is adequately
insured. The property is an apartment complex which leases units
for terms of one year or less. No tenant leases 10% or more of
the available rental space. The property is in good condition,
subject to normal depreciation and deterioration as is typical
for assets of this type and age.
D-3
Schedule
of Real Estate Taxes and Rate
Real estate taxes and rate in 2009 for the property were:
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2009
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2009
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Billing
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Rate
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(In thousands)
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Lakeside Apartments
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$
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727
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6.09
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%
|
Capital
Improvements
Lakeside
Apartments
The Partnership completed approximately $1,016,000 in capital
expenditures at Lakeside Apartments during the year ended
December 31, 2009, consisting primarily of redevelopment
costs, air conditioning and sewer upgrades, fire safety
equipment, floor covering replacements and construction related
to the casualties discussed in Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of Operations. These improvements were funded
from operating cash flow, insurance proceeds and advances from
AIMCO Properties, L.P., an affiliate of the Managing General
Partner, although AIMCO Properties, L.P. is not obligated to
fund such advances. During 2005 the Partnership commenced with a
$1,500,000 redevelopment project at Lakeside Apartments.
Approximately $832,000 was completed at December 31, 2005.
In August 2006, the scope of the redevelopment project was
significantly expanded and was planned to be approximately
$16,300,000 with the majority of the work started in October
2006 and to be completed by November 2008. During the year ended
December 31, 2006, an additional $377,000 was incurred.
During the year ended December 31, 2007, the anticipated
cost of the project was increased by approximately $7,393,000 to
a total project cost of approximately $23,693,000. During the
year ended December 31, 2007, approximately $16,544,000 was
expended. During the year ended December 31, 2008,
approximately $4,532,000 was expended. During 2009,
approximately $352,000 was expended. The project was completed
during the second quarter of 2009 at a total cost of
approximately $22,637,000. The redevelopment consisted of site,
building exterior, common area and unit interior improvements.
The site improvements consisted of landscape enhancements and
replacements, repair of retaining walls and correction of
erosion problems, lighting upgrades and the addition of patio
privacy fences. The building exterior improvements consisted of
rear entrance door replacements, gutter improvements, foundation
work and exterior painting. The common area improvements
consisted of upgrading the leasing center, replacing the current
clubhouse with a business center and conference room, fitness
center with locker rooms, and addition of a boathouse for lake
recreation activities. In addition, the west clubhouse was
upgraded and includes a social/game room, locker rooms and new
decking. The unit interior improvements consisted of kitchen and
bath upgrades, replacement of original fireplaces and other
interior renovations. The Partnership funded the redevelopment
from operations and advances from AIMCO Properties, L.P. During
the construction period, certain expenses have been capitalized
and are being depreciated over the remaining life of the related
assets. For the years ended December 31, 2009 and 2008,
these amounts included approximately $3,000 and $24,000,
respectively, of construction period taxes, approximately $9,000
and $167,000, respectively, of construction period interest and
approximately $5,000 and $7,000, respectively, of construction
period operating costs. The Partnership regularly evaluates the
capital improvement needs of the property. While the Partnership
has no material commitments for property improvements and
replacements, certain routine capital expenditures are
anticipated during 2010. Such capital expenditures will depend
on the physical condition of the property as well as insurance
proceeds and anticipated cash flow generated by the property.
Capital expenditures will be incurred only if cash is available
from operations, Partnership reserves or advances from AIMCO
Properties, L.P., an affiliate of the Managing General Partner,
although AIMCO Properties, L.P. is not obligated to provide such
advances. To the extent that capital improvements are completed,
the Partnerships distributable cash flow, if any, may be
adversely affected at least in the short term.
|
|
Item 3.
|
Legal
Proceedings
|
As previously disclosed, AIMCO Properties, L.P. and NHP
Management Company, both affiliates of the Managing General
Partner, were defendants in a lawsuit, filed as a collective
action in August 2003 in the United States District Court
for the District of Columbia, alleging that they willfully
violated the Fair Labor
D-4
Standards Act (FLSA) by failing to pay maintenance
workers overtime for time worked in excess of 40 hours per
week (overtime claims). The plaintiffs also
contended that AIMCO Properties, L.P. and NHP Management Company
(the Defendants) failed to compensate maintenance
workers for time that they were required to be
on-call (on-call claims). In March 2007,
the court in the District of Columbia decertified the collective
action. In July 2007, plaintiffs counsel filed individual
cases in Federal court in 22 jurisdictions. In the second
quarter of 2008, AIMCO Properties, L.P. settled the overtime
cases involving 652 plaintiffs and established a framework for
resolving the 88 remaining on-call claims and the
attorneys fees claimed by plaintiffs counsel. As a
result, the lawsuits asserted in the 22 Federal courts have been
dismissed. During the fourth quarter of 2008, the Partnership
paid approximately $5,000 for settlement amounts for alleged
unpaid overtime to employees who had worked at the
Partnerships investment property. At this time, the 88
remaining on-call claims and the attorneys
fees claimed by plaintiffs counsel are not resolved. The
parties have selected six on-call claims that will
proceed forward through the arbitration process and have
selected arbitrators. After those arbitrations have been
completed, the parties will revisit settling the on-call claims.
The first two arbitrations took place in December 2009 and the
Defendants received a defense verdict against the first two
claimants, and plaintiffs dismissed the claims of the next two
claimants. The remaining two arbitrations will take place in
April 2010. The Managing General Partner is uncertain as to the
amount of any additional loss that may be allocable to the
Partnership. Therefore, the Partnership cannot estimate whether
any additional loss will occur or a potential range of loss.
PART II
|
|
Item 5.
|
Market
for the Registrants Common Equity, Related Security Holder
Matters and Issuer Purchases of Equity
Securities
|
The Partnership, a publicly-held limited partnership, offered
and sold 48,049 Limited Partnership Units (the
Units) aggregating $24,024,500. As of December 31,
2009, the Partnership had 48,039 Units outstanding held by 759
limited partners of record. Affiliates of the Managing General
Partner owned 37,419 Units or 77.89% at December 31, 2009.
No public trading market has developed for the Units, and it is
not anticipated that such a market will develop in the future.
There were no distributions made by the Partnership 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 maturity, property sale
and/or
refinancing. The Partnerships cash available for
distribution is reviewed on a monthly basis. In light of the
amounts accrued and payable to affiliates of the Managing
General Partner, it is unlikely that the Partnership will
generate sufficient funds from operations after required capital
expenditures to permit any distributions to its partners in 2010
or subsequent periods. See Item 2.
Property Capital Improvements for information
relating to capital expenditures at the property.
In addition to its indirect ownership of the general partner
interests in the Partnership, AIMCO and its affiliates owned
37,419 Units in the Partnership representing 77.89% of the
outstanding Units at December 31, 2009. A number of these
Units were acquired pursuant to tender offers made by AIMCO or
its affiliates. It is possible that AIMCO or its affiliates will
acquire additional Units in exchange for cash or a combination
of cash and units in AIMCO Properties, L.P., the operating
partnership of AIMCO, either through private purchases or tender
offers. Pursuant to the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with
respect to a variety of matters that include, but are not
limited to, voting on certain amendments to the Partnership
Agreement and voting to remove the Managing General Partner. As
a result of its ownership of 77.89% of the outstanding Units,
AIMCO and its affiliates are in a position to influence all
voting decisions with respect to the Partnership. However, with
respect to the 21,380 Units acquired on January 19, 1996,
AIMCO IPLP, L.P., an affiliate of the Managing General Partner
and of AIMCO, agreed to vote such Units: (i) against any
increase in compensation payable to the Managing General Partner
or to its affiliates; and (ii) on all other matters
submitted by it or its affiliates, in proportion to the vote
cast by third party unitholders. Except for the foregoing, no
other limitations are imposed on AIMCO IPLP, L.P.s,
AIMCOs or any other affiliates right to vote each
Unit held. Although the Managing General Partner owes fiduciary
duties to the limited partners of the Partnership, the Managing
General Partner also owes fiduciary duties to AIMCO as its sole
stockholder. As a result, the duties of the Managing General
Partner, as managing general partner, to the Partnership and its
limited partners may come into conflict with the duties of the
Managing General Partner to AIMCO as its sole stockholder.
D-5
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
This item should be read in conjunction with the financial
statements and other items contained elsewhere in this report.
The Partnerships financial results depend upon a number of
factors including the ability to attract and maintain tenants at
the investment property, interest rates on mortgage loans, costs
incurred to operate the investment property, general economic
conditions and weather. As part of the ongoing business plan of
the Partnership, the Managing General Partner monitors the
rental market environment of its investment property to assess
the feasibility of increasing rents, maintaining or increasing
occupancy levels and protecting the Partnership from increases
in expenses. As part of this plan, the Managing General Partner
attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, the
Managing General Partner may use rental concessions and rental
rate reductions to offset softening market conditions,
accordingly, there is no guarantee that the Managing General
Partner will be able to sustain such a plan. Further, a number
of factors that are outside the control of the Partnership, such
as the local economic climate and weather, can adversely or
positively affect the Partnerships financial results.
Results
of Operations
The Partnership recognized net losses of approximately
$3,435,000 and $3,188,000 for the years ended December 31,
2009 and 2008, respectively. The increase in net loss for the
year ended December 31, 2009 was due to an increase in
total expenses, partially offset by an increase in total
revenues and the recognition of casualty gains in 2009.
Total expenses increased for the year ended December 31,
2009 due to increases in depreciation, interest and property tax
expenses, partially offset by decreases in operating and general
and administrative expenses. Depreciation expense increased due
to property improvements and replacements placed into service
related to the redevelopment at Lakeside Apartments during the
past twelve months, which are now being depreciated. Interest
expense increased primarily due to a decrease in interest
capitalized in connection with the redevelopment of Lakeside
Apartments. Property tax expense increased due to an anticipated
increase in the propertys assessed value for 2009. The
property tax expense for Lakeside Apartments is recorded based
upon an estimate of the anticipated annual amount as Lakeside
Apartments property taxes are billed a year in arrears.
Property tax expense for 2009 was also impacted by an adjustment
to reduce property tax expense of approximately $53,000 for the
2008 taxes as a result of the successful appeal of the 2008
assessed value of Lakeside Apartments. During 2008, the
Partnership recorded an adjustment to reduce property tax
expense of approximately $105,000 for the 2007 taxes as a result
of the successful appeal of the 2007 assessed value of Lakeside
Apartments. Operating expenses decreased primarily due to the
receipt of insurance proceeds to cover
clean-up
costs related to the casualties discussed below and a decrease
in property expenses due to a decrease in utility costs and
payroll related benefits, partially offset by an increase in
hazard and general liability insurance expenses and resident
eviction costs at Lakeside Apartments.
The decrease in general and administrative expenses for the year
ended December 31, 2009 is primarily due to a decrease in
management reimbursements to an affiliate of the Managing
General Partner as allowed under the Partnership Agreement. Also
included in general and administrative expenses for the years
ended December 31, 2009 and 2008 are costs associated with
the quarterly and annual communications with investors and
regulatory agencies and the annual audit required by the
Partnership Agreement.
Total revenues increased for the year ended December 31,
2009 due to increases in both rental and other income. Rental
income increased due to increases in the average rental rate and
occupancy, partially offset by an increase in bad debt expense
at Lakeside Apartments. Other income increased due to increases
in late fees, application fees and resident utility
reimbursements at Lakeside Apartments.
During September 2008, the Partnership incurred fire and water
damage to one of the apartment buildings at Lakeside Apartments.
The damages were approximately $469,000, including clean up
costs of approximately $214,000. The clean up costs were
included in operating expense for the year ended
December 31, 2008. During the year ended December 31,
2009, the Partnership received approximately $452,000 of
insurance proceeds related to this event, of which approximately
$197,000 was for clean up costs. During the year ended
December 31, 2009, the
D-6
Partnership recognized a casualty gain of approximately $22,000
due to the receipt of insurance proceeds, net of the write-off
of undepreciated damaged assets of approximately $233,000. For
the year ended December 31, 2009, the proceeds received to
cover clean up costs are reflected as a reduction of operating
expenses. The Partnership expects to receive approximately
$24,000 of additional insurance proceeds related to this event.
During September 2008, the Partnership incurred damages to
several apartment units as a result of a gas leak. The damages
were approximately $78,000, including clean up costs of
approximately $49,000. During the year ended December 31,
2009, the Partnership received approximately $68,000 of
insurance proceeds related to this event, of which approximately
$39,000 was for clean up costs. The clean up costs and
associated insurance proceeds were included in operating expense
for the year ended December 31, 2008. The Partnership
recognized a casualty gain of approximately $2,000 during the
year ended December 31, 2009, due to the receipt of
insurance proceeds, net of the write off of undepreciated assets
of approximately $27,000.
Liquidity
and Capital Resources
At December 31, 2009, the Partnership had cash and cash
equivalents of approximately $194,000 compared to approximately
$85,000 at December 31, 2008. Cash and cash equivalents
increased approximately $109,000 from December 31, 2008 due
to approximately $1,006,000 and $364,000 of cash provided by
financing and operating activities, respectively, partially
offset by approximately $1,261,000 of cash used in investing
activities. Cash provided by financing activities consisted of
advances received from an affiliate of the Managing General
Partner partially offset by principal payments made on the first
mortgage encumbering Lakeside Apartments and repayment of
advances from an affiliate of the Managing General Partner. Cash
used in investing activities consisted of property improvements
and replacements, partially offset by insurance proceeds
received.
On March 18, 2008, the Managing General Partner terminated
the revolving credit facility (the Partnership
Revolver) that was established on behalf of the
Partnership and certain affiliated partnerships to fund deferred
maintenance and working capital needs of the Partnership and
certain other affiliated partnerships in the National Property
Investors Partnership Series. The Managing General Partner does
not have a commitment, intent or implication to fund cash flow
deficits or furnish other direct or indirect financial
assistance to the Partnership. The Partnership may receive
advances of funds from AIMCO Properties, L.P., an affiliate of
the Managing General Partner and the holder of a majority of the
beneficial interest of the Partnership, although AIMCO
Properties, L.P., is not obligated to fund such advances. For
more information on AIMCO Properties, L.P., including copies of
its audited balance sheet, please see its reports filed with the
Securities and Exchange Commission. During the years ended
December 31, 2009 and 2008, the Partnership received
advances of approximately $2,162,000 and $5,426,000,
respectively, from AIMCO Properties, L.P., to fund a rental
achievement escrow, redevelopment capital improvements, real
estate taxes and operations at Lakeside Apartments. The advances
bear interest at the prime rate plus 2% (5.25% at
December 31, 2009) per annum. Interest expense during
the years ended December 31, 2009 and 2008 was
approximately $758,000 and $733,000, respectively. During the
year ended December 31, 2009, the Partnership made payments
of principal and accrued interest of approximately $2,035,000.
There were no payments made during the year ended
December 31, 2008. At December 31, 2009 and 2008, the
amount of the outstanding advances and accrued interest due to
AIMCO Properties, L.P. was approximately $14,355,000 and
$13,470,000, respectively, and is included in due to affiliates.
The sufficiency of existing liquid assets to meet future
liquidity and capital expenditure requirements is directly
related to the level of capital expenditures required at the
property to adequately maintain the physical assets and other
operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. The Managing
General Partner monitors developments in the area of legal and
regulatory compliance. The Partnership regularly evaluates the
capital improvement needs of the property. While the Partnership
has no material commitments for property improvements and
replacements, certain routine capital expenditures are
anticipated during 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 advances from AIMCO Properties, L.P.,
although AIMCO Properties, L.P. does not have an obligation to
fund such advances. To the extent that capital improvements are
completed, the Partnerships distributable cash flow, if
any, may be adversely affected at least in the short term.
D-7
The Partnerships assets are thought to be generally
sufficient for any near-term needs (exclusive of capital
improvements and repayment of amounts owed to affiliates) of the
Partnership. The mortgage indebtedness encumbering Lakeside
Apartments of approximately $29,375,000 matures in January 2022,
at which time balloon payments of approximately $22,976,000 will
be due. The Managing General Partner will attempt to refinance
such indebtedness
and/or sell
the property prior to such maturity dates. If the property
cannot be refinanced or sold for a sufficient amount, the
Partnership will risk losing such property through foreclosure.
There were no distributions made by the Partnership during the
years ended December 31, 2009 and 2008. Future cash
distributions will depend on the levels of cash generated from
operations, the timing of debt maturity, property sale
and/or
refinancing. The Partnerships cash available for
distribution is reviewed on a monthly basis. In light of the
amounts accrued and payable to affiliates of the Managing
General Partner, it is unlikely that the Partnership will
generate sufficient funds from operations after required capital
expenditures to permit any distributions to its partners in 2010
or subsequent periods.
Other
In addition to its indirect ownership of the general partner
interests in the Partnership, AIMCO and its affiliates owned
37,419 Units in the Partnership representing 77.89% of the
outstanding Units at December 31, 2009. A number of these
Units were acquired pursuant to tender offers made by AIMCO or
its affiliates. It is possible that AIMCO or its affiliates will
acquire additional Units in exchange for cash or a combination
of cash and units in AIMCO Properties, L.P., the operating
partnership of AIMCO, either through private purchases or tender
offers. Pursuant to the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with
respect to a variety of matters that include, but are not
limited to, voting on certain amendments to the Partnership
Agreement and voting to remove the Managing General Partner. As
a result of its ownership of 77.89% of the outstanding Units,
AIMCO and its affiliates are in a position to influence all
voting decisions with respect to the Partnership. However, with
respect to the 21,380 Units acquired on January 19, 1996,
AIMCO IPLP, L.P., an affiliate of the Managing General Partner
and of AIMCO, agreed to vote such Units: (i) against any
increase in compensation payable to the Managing General Partner
or to its affiliates; and (ii) on all other matters
submitted by it or its affiliates, in proportion to the vote
cast by third party unitholders. Except for the foregoing, no
other limitations are imposed on AIMCO IPLP, L.P.s,
AIMCOs or any other affiliates right to vote each
Unit held. Although the Managing General Partner owes fiduciary
duties to the limited partners of the Partnership, the Managing
General Partner also owes fiduciary duties to AIMCO as its sole
stockholder. As a result, the duties of the Managing General
Partner, as managing general partner, to the Partnership and its
limited partners may come into conflict with the duties of the
Managing General Partner to AIMCO as its sole stockholder.
Critical
Accounting Policies and Estimates
A summary of the Partnerships significant accounting
policies is included in Note A
Organization and Summary of Significant Accounting
Policies which is included in the financial statements in
Item 8. Financial Statements and Supplementary
Data. The Managing General Partner believes that the
consistent application of these policies enables the Partnership
to provide readers of the financial statements with useful and
reliable information about the Partnerships operating
results and financial condition. The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States requires the Partnership to make
estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities at the
date of the financial statements as well as reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from these estimates. Judgments and
assessments of uncertainties are required in applying the
Partnerships accounting policies in many areas. The
Partnership believes that of its significant accounting
policies, the following may involve a higher degree of judgment
and complexity.
Impairment
of Long-Lived Asset
Investment property is recorded at cost, less accumulated
depreciation, unless the carrying amount of the asset is not
recoverable. If events or circumstances indicate that the
carrying amount of the property may not be recoverable, the
Partnership will make an assessment of its recoverability by
comparing the carrying amount to the Partnerships estimate
of the undiscounted future cash flows, excluding interest
charges, of the property. If the
D-8
carrying amount exceeds the estimated aggregate undiscounted
future cash flows, the Partnership would recognize an impairment
loss to the extent the carrying amount exceeds the estimated
fair value of the property.
Real property investment is subject to varying degrees of risk.
Several factors may adversely affect the economic performance
and value of the Partnerships investment property. These
factors include, but are not limited to, general economic
climate; competition from other apartment communities and other
housing options; local conditions, such as loss of jobs or an
increase in the supply of apartments that might adversely affect
apartment occupancy or rental rates; changes in governmental
regulations and the related cost of compliance; increases in
operating costs (including real estate taxes) due to inflation
and other factors, which may not be offset by increased rents;
changes in tax laws and housing laws, including the enactment of
rent control laws or other laws regulating multi-family housing;
and changes in interest rates and the availability of financing.
Any adverse changes in these and other factors could cause an
impairment of the Partnerships asset.
Capitalized
Costs Related to Redevelopment and Construction
Projects
The Partnership capitalizes costs incurred in connection with
capital expenditure activities, including redevelopment and
construction projects. Costs including interest, property taxes
and operating costs associated with redevelopment and
construction projects are capitalized during periods in which
redevelopment and construction projects are in progress.
Included in these capitalized costs are payroll costs associated
with time spent by site employees in connection with the
planning, execution and control of all capital expenditure
activities at the property level.
Revenue
Recognition
The Partnership generally leases apartment units for
twelve-month terms or less. The Partnership will offer rental
concessions during particularly slow months or in response to
heavy competition from other similar complexes in the area.
Rental income attributable to leases, net of any concessions, is
recognized on a straight-line basis over the term of the lease.
The Partnership evaluates all accounts receivable from residents
and establishes an allowance, after the application of security
deposits, for accounts greater than 30 days past due on
current tenants and all receivables due from former tenants.
D-9
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
NATIONAL
PROPERTY INVESTORS III
LIST OF FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
D-11
|
|
|
|
|
D-12
|
|
|
|
|
D-13
|
|
|
|
|
D-14
|
|
|
|
|
D-15
|
|
|
|
|
D-16
|
|
D-10
Report of
Independent Registered Public Accounting Firm
The Partners
National Property Investors III
We have audited the accompanying balance sheets of National
Property Investors III as of December 31, 2009 and
2008, and the related statements of operations, changes in
partners deficit, and cash flows for each of the two years
in the period ended December 31, 2009. These financial
statements are the responsibility of the Partnerships
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Partnerships internal control over financial
reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Partnerships internal control over financial
reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of National Property Investors III at December 31,
2009 and 2008, and the results of its operations and its cash
flows for each of the two years in the period ended
December 31, 2009, in conformity with U.S. generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Greenville, South Carolina
March 29, 2010
D-11
NATIONAL
PROPERTY INVESTORS III
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except unit data)
|
|
|
ASSETS
|
Cash and cash equivalents
|
|
$
|
194
|
|
|
$
|
85
|
|
Receivables and deposits
|
|
|
345
|
|
|
|
315
|
|
Other assets
|
|
|
547
|
|
|
|
621
|
|
Investment property (Notes C, D and E)
|
|
|
|
|
|
|
|
|
Land
|
|
|
2,093
|
|
|
|
2,093
|
|
Buildings and related personal property
|
|
|
47,024
|
|
|
|
46,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,117
|
|
|
|
48,375
|
|
Less accumulated depreciation
|
|
|
(29,276
|
)
|
|
|
(25,320
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
19,841
|
|
|
|
23,055
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,927
|
|
|
$
|
24,076
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS DEFICIT
|
Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
79
|
|
|
$
|
670
|
|
Tenant security deposit liabilities
|
|
|
122
|
|
|
|
97
|
|
Accrued property taxes
|
|
|
877
|
|
|
|
780
|
|
Other liabilities
|
|
|
400
|
|
|
|
359
|
|
Due to affiliates (Note B)
|
|
|
14,552
|
|
|
|
13,605
|
|
Mortgage notes payable (Note C)
|
|
|
29,375
|
|
|
|
29,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,405
|
|
|
|
45,119
|
|
|
|
|
|
|
|
|
|
|
Partners Deficit
|
|
|
|
|
|
|
|
|
General partner
|
|
|
(243
|
)
|
|
|
(209
|
)
|
Limited partners (48,039 units issued and outstanding)
|
|
|
(24,235
|
)
|
|
|
(20,834
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,478
|
)
|
|
|
(21,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,927
|
|
|
$
|
24,076
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Financial Statements
D-12
NATIONAL
PROPERTY INVESTORS III
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except per unit data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
5,798
|
|
|
$
|
5,557
|
|
Other income
|
|
|
1,014
|
|
|
|
809
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
6,812
|
|
|
|
6,366
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Operating
|
|
|
2,474
|
|
|
|
2,856
|
|
General and administrative
|
|
|
123
|
|
|
|
195
|
|
Depreciation
|
|
|
3,970
|
|
|
|
3,232
|
|
Interest
|
|
|
2,874
|
|
|
|
2,627
|
|
Property taxes
|
|
|
830
|
|
|
|
644
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
10,271
|
|
|
|
9,554
|
|
|
|
|
|
|
|
|
|
|
Casualty gains (Note G)
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss (Note F)
|
|
$
|
(3,435
|
)
|
|
$
|
(3,188
|
)
|
|
|
|
|
|
|
|
|
|
Net loss allocated to general partner (1%)
|
|
$
|
(34
|
)
|
|
$
|
(32
|
)
|
Net loss allocated to limited partners (99%)
|
|
|
(3,401
|
)
|
|
|
(3,156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(3,435
|
)
|
|
$
|
(3,188
|
)
|
|
|
|
|
|
|
|
|
|
Net loss per limited partnership unit
|
|
$
|
(70.78
|
)
|
|
$
|
(65.68
|
)
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Financial Statements
D-13
NATIONAL
PROPERTY INVESTORS III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership
|
|
|
General
|
|
|
Limited
|
|
|
|
|
|
|
Units
|
|
|
Partner
|
|
|
Partners
|
|
|
Total
|
|
|
|
(In thousands, except unit data)
|
|
|
Original capital contributions
|
|
|
48,049
|
|
|
$
|
1
|
|
|
$
|
24,024
|
|
|
$
|
24,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners deficit at December 31, 2007
|
|
|
48,049
|
|
|
$
|
(177
|
)
|
|
$
|
(17,678
|
)
|
|
$
|
(17,855
|
)
|
Net loss for the year ended December 31, 2008
|
|
|
|
|
|
|
(32
|
)
|
|
|
(3,156
|
)
|
|
|
(3,188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners deficit at December 31, 2008
|
|
|
48,049
|
|
|
|
(209
|
)
|
|
|
(20,834
|
)
|
|
|
(21,043
|
)
|
Abandonment of units (Note A)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended December 31, 2009
|
|
|
|
|
|
|
(34
|
)
|
|
|
(3,401
|
)
|
|
|
(3,435
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners deficit at December 31, 2009
|
|
|
48,039
|
|
|
$
|
(243
|
)
|
|
$
|
(24,235
|
)
|
|
$
|
(24,478
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Financial Statements
D-14
NATIONAL
PROPERTY INVESTORS III
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,435
|
)
|
|
$
|
(3,188
|
)
|
Adjustments to reconcile net loss to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Amortization of loan costs
|
|
|
39
|
|
|
|
39
|
|
Depreciation
|
|
|
3,970
|
|
|
|
3,232
|
|
Casualty gains
|
|
|
(24
|
)
|
|
|
|
|
Bad debt expense
|
|
|
136
|
|
|
|
106
|
|
Change in accounts:
|
|
|
|
|
|
|
|
|
Receivables and deposits
|
|
|
(166
|
)
|
|
|
(122
|
)
|
Other assets
|
|
|
35
|
|
|
|
11
|
|
Accounts payable
|
|
|
(62
|
)
|
|
|
20
|
|
Tenant security deposit liabilities
|
|
|
25
|
|
|
|
(12
|
)
|
Accrued property taxes
|
|
|
97
|
|
|
|
(48
|
)
|
Other liabilities
|
|
|
41
|
|
|
|
(62
|
)
|
Due to affiliates
|
|
|
(292
|
)
|
|
|
843
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
364
|
|
|
|
819
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Insurance proceeds received
|
|
|
284
|
|
|
|
|
|
Property improvements and replacements
|
|
|
(1,545
|
)
|
|
|
(6,198
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(1,261
|
)
|
|
|
(6,198
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Advances from affiliate
|
|
|
2,162
|
|
|
|
5,426
|
|
Payments on advances from affiliate
|
|
|
(923
|
)
|
|
|
|
|
Payments on mortgage note payable
|
|
|
(233
|
)
|
|
|
(217
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
1,006
|
|
|
|
5,209
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
109
|
|
|
|
(170
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
85
|
|
|
|
255
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
194
|
|
|
$
|
85
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest, net of capitalized interest
|
|
$
|
3,119
|
|
|
$
|
1,834
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash activity:
|
|
|
|
|
|
|
|
|
Property improvements and replacements included in accounts
payable
|
|
$
|
|
|
|
$
|
529
|
|
|
|
|
|
|
|
|
|
|
Included in property improvements and replacements for the year
ended December 31, 2008 are approximately $2,103,000 of
property improvements and replacements which were included in
accounts payable at December 31, 2007.
See Accompanying Notes to Financial Statements
D-15
NATIONAL
PROPERTY INVESTORS III
December 31,
2009
|
|
Note A
|
Organization
and Summary of Significant Accounting Policies
|
Organization
National Property Investors III (the Partnership) was
organized under the Uniform Limited Partnership Laws of
California on February 1, 1979 for the purpose of operating
income-producing residential real estate. The general partner is
NPI Equity Investments, Inc. (NPI Equity or the
Managing General Partner). The Managing General
Partner is a wholly owned subsidiary of Apartment Investment and
Management Company (AIMCO), a publicly traded real
estate investment trust. A total of 48,049 units of the
limited partnership were issued for $500 each, for an aggregate
capital contribution of $24,024,500. In addition, the general
partner contributed a total of $1,000 to the Partnership. The
Partnership will terminate on December 31, 2022, or sooner,
in accordance with the terms of the Partnership Agreement. The
Partnership commenced operations in the beginning of 1980 and
completed its acquisition of apartment properties by the end of
1980. The Partnership operates one apartment property located in
the Midwest at December 31, 2009.
Basis
of Presentation
Certain reclassifications have been made to the 2008 balances to
conform to the 2009 presentation.
Subsequent
Events
The Partnerships management evaluated subsequent events
through the time this Annual Report on
Form 10-K
was filed.
Recent
Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting
Standards No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
Principles a replacement of FASB Statement
No. 162, or SFAS No. 168, which is effective
for financial statements issued for interim and annual periods
ending after September 15, 2009. Upon the effective date of
SFAS No. 168, the FASB Accounting Standards
Codification, or the FASB ASC, became the single source of
authoritative GAAP recognized by the FASB to be applied by
nongovernmental entities. Rules and interpretive releases of the
Securities and Exchange Commission, or SEC, under authority of
federal securities laws are also sources of authoritative GAAP
for SEC registrants. The FASB ASC superseded all then-existing
non-SEC accounting and reporting standards, and all other
non-grandfathered non-SEC accounting literature not included in
the FASB ASC is now non-authoritative. Subsequent to the
effective date of SFAS No. 168, the FASB will issue
Accounting Standards Updates that serve to update the FASB ASC.
Cash
and Cash Equivalents
Cash and cash equivalents consist of cash on hand and in banks.
At certain times, the amount of cash deposited at a bank may
exceed the limit on insured deposits.
Cash balances included approximately $27,000 and zero at
December 31, 2009 and 2008, respectively, that are
maintained by an affiliated management company on behalf of
affiliated entities in cash concentration accounts.
Security
Deposits
The Partnership requires security deposits from lessees for the
duration of the lease and such deposits are included in
receivables and deposits on the balance sheet. Deposits are
refunded when the tenant vacates, provided the tenant has not
damaged the space and is current on rental payments.
D-16
NATIONAL
PROPERTY INVESTORS III
NOTES TO
FINANCIAL STATEMENTS (Continued)
Restricted
Escrow
In September 2009, pursuant to the terms of the
Partnerships rental achievement escrow agreement with the
mortgage lender, the Partnership made a deposit of approximately
$1,281,000 into an escrow account maintained by the mortgage
lender. The Partnership funded this escrow account with an
advance received from AIMCO Properties, L.P. The Partnership may
withdraw from the escrow account once the following conditions
are met 1) the Partnership maintains 92% occupancy at
Lakeside Apartments; 2) the net monthly rent is
approximately $428,000. These two conditions must be met for
three consecutive months. During the fourth quarter of 2009,
these conditions were met and the escrow deposit was returned to
the Partnership.
Investment
Property
Investment property consists of one apartment complex and is
stated at cost, less accumulated depreciation, unless the
carrying amount of the asset is not recoverable. The Partnership
capitalizes costs incurred in connection with capital
expenditure activities, including redevelopment and construction
projects, other tangible property improvements and replacements
of existing property components. Costs including interest,
property taxes and operating costs associated with redevelopment
and construction projects are capitalized during periods in
which redevelopment and construction projects are in progress.
Costs incurred in connection with capital projects are
capitalized where the costs of the project exceed $250. Included
in these capitalized costs are payroll costs associated with
time spent by site employees in connection with the planning,
execution and control of all capital expenditure activities at
the property level. The Partnership capitalized costs related to
interest, property taxes and operating costs during the year
ended December 31, 2009 of approximately $9,000, $3,000 and
$5,000, respectively. The Partnership capitalized costs related
to interest, property taxes and operating costs during the year
ended December 31, 2008 of approximately $167,000, $24,000
and $7,000, respectively. Capitalized costs are depreciated over
the useful life of the asset. Expenditures for ordinary repairs,
maintenance and apartment turnover costs are expensed as
incurred.
If events or circumstances indicate that the carrying amount of
the property may not be recoverable, the Partnership will make
an assessment of its recoverability by comparing the carrying
amount to the Partnerships estimate of the undiscounted
future cash flows, excluding interest charges, of the property.
If the carrying amount exceeds the estimated aggregate
undiscounted future cash flows, the Partnership would recognize
an impairment loss to the extent the carrying amount exceeds the
estimated fair value of the property. No adjustments for
impairment of value were necessary for the years ending
December 31, 2009 and 2008.
Depreciation
Depreciation is provided by the straight-line method over the
estimated life of the apartment property and related personal
property. For Federal income tax purposes, the modified
accelerated cost recovery method is used for depreciation of
(1) real property additions over 27.5 years and
(2) personal property additions over 5 years.
Leases
The Partnership generally leases apartment units for
twelve-month terms or less. The Partnership will offer rental
concessions during particularly slow months or in response to
heavy competition from other similar complexes in the area.
Rental income attributable to leases, net of any concessions, is
recognized on a straight-line basis over the term of the lease.
The Partnership evaluates all accounts receivable from residents
and establishes an allowance, after the application of security
deposits, for accounts greater than 30 days past due on
current tenants and all receivables due from former tenants.
D-17
NATIONAL
PROPERTY INVESTORS III
NOTES TO
FINANCIAL STATEMENTS (Continued)
Advertising
Costs
Advertising costs of approximately $111,000 and $103,000 during
the years ended December 31, 2009 and 2008, respectively,
were charged to expense as incurred and are included in
operating expenses.
Deferred
Costs
At both December 31, 2009 and 2008, loan costs of
approximately $752,000 are included in other assets in the
accompanying balance sheets and are amortized over the term of
the related loan agreements. At December 31, 2009 and 2008,
accumulated amortization is approximately $275,000 and $236,000,
respectively. Amortization of loan costs is included in interest
expense in the accompanying statements of operations and was
approximately $39,000 for each of the years ended
December 31, 2009 and 2008. Amortization expense is
expected to be approximately $39,000 for each of the years 2010
through 2014.
Leasing commissions and other direct costs incurred in
connection with successful leasing efforts are deferred and
amortized over the terms of the related leases. Amortization of
these costs is included in operating expenses.
Fair
Value of Financial Instruments
FASB ASC Topic 825, Financial Instruments, requires
disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for
which it is practicable to estimate fair value. Fair value is
defined as the amount at which the instruments could be
exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. The Partnership
believes that the carrying amount of its financial instruments
(except for long-term debt) approximates their fair value due to
the short-term maturity of these instruments. The Partnership
estimates the fair value of its long-term debt by discounting
future cash flows using a discount rate commensurate with that
currently believed to be available to the Partnership for
similar term, long-term debt. At December 31, 2009, the
fair value of the Partnerships long-term debt at the
Partnerships incremental borrowing rate was approximately
$31,194,000.
Abandoned
Units
During 2009, the number of limited partnership units (the
Units) decreased by 10 Units due to limited partners
abandoning their Units. In abandoning his or her Units, a
limited partner relinquishes all right, title and interest in
the Partnership as of the date of the abandonment. There were no
interests abandoned during 2008.
Net
Loss Per Limited Partnership Unit
Net loss per Unit is computed by dividing net loss allocated to
the Limited Partners by the number of Units outstanding at the
beginning of the fiscal year. Per Unit information has been
computed based on 48,049 units outstanding for 2009 and
2008.
Allocation
of Income, Loss and Distributions
Net income, loss and distributions of cash of the Partnership
are allocated between the general and limited partners in
accordance with the provisions of the Partnership Agreement.
Use
of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
D-18
NATIONAL
PROPERTY INVESTORS III
NOTES TO
FINANCIAL STATEMENTS (Continued)
Segment
Reporting
FASB ASC Topic
280-10,
Segment Reporting, established standards for the way
that public business enterprises report information about
operating segments in annual financial statements and requires
that those enterprises report selected information about
operating segments in interim financial reports. FASB ASC Topic
280-10 also
established standards for related disclosures about products and
services, geographic areas, and major customers. As defined in
FASB ASC Topic
280-10, the
Partnership has only one reportable segment.
|
|
Note B
|
Transactions
with Affiliated Parties
|
The Partnership has no employees and depends on the Managing
General Partner and its affiliates for the management and
administration of all Partnership activities. The Partnership
Agreement provides for payments to affiliates for services and
as reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership.
Affiliates of the Managing General Partner receive 5% of gross
receipts from the Partnerships property as compensation
for providing property management services.
The Partnership paid to such affiliates approximately $335,000
and $315,000 for the years ended December 31, 2009 and
2008, respectively, which is included in operating expenses. At
December 31, 2008, approximately $2,000 of property
management fees were owed and are included in due to affiliates.
No such amounts were owed at December 31, 2009.
Affiliates of the Managing General Partner charged the
Partnership reimbursement of accountable administrative expenses
amounting to approximately $156,000 and $350,000 for the years
ended December 31, 2009 and 2008, respectively, which is
included in general and administrative expenses and investment
property. The portion of these reimbursements included in
investment property for the years ended December 31, 2009
and 2008 are construction management services for certain
capital improvement expenditures (not related to the
redevelopment project) provided by an affiliate of the Managing
General Partner of approximately $72,000 and $9,000,
respectively. In connection with the redevelopment project (as
discussed in Note E), an affiliate of the
Managing General Partner received a redevelopment supervision
fee of 4% of the actual redevelopment costs incurred. The
Partnership was charged approximately $20,000 and $230,000 in
redevelopment supervision fees during the years ended
December 31, 2009 and 2008, respectively, which are
included in investment property. At December 31, 2009 and
2008, approximately $197,000 and $133,000 of accountable
administrative expenses were owed and are included in due to
affiliates.
For services relating to the administration of the Partnership
and operation of the Partnerships property, the Managing
General Partner is entitled to receive payment for
non-accountable expenses up to a maximum of $100,000 per year
based upon the number of Partnership units sold, subject to
certain limitations. This fee is included in general and
administrative expense. There were no such fees for the years
ended December 31, 2009 and 2008 as no operating
distributions were made.
Upon the sale of the Partnerships property, NPI Equity
will be entitled to an Incentive Compensation Fee equal to a
declining percentage of the difference between the total amount
distributed to limited partners and the appraised value of their
investment at February 1, 1992. The percentage amount to be
realized by NPI Equity, if any, will be dependent upon the year
in which the property is sold. Payment of the Incentive
Compensation Fee is subordinated to the receipt by the limited
partners, of: (a) distributions from capital transaction
proceeds of an amount equal to their appraised investment in the
Partnership at February 1, 1992, and (b) distributions
from all sources (capital transactions as well as cash flow) of
an amount equal to six percent (6%) per annum cumulative,
non-compounded, on their appraised investment in the Partnership
at February 1, 1992.
On March 18, 2008, the Managing General Partner terminated
the revolving credit facility (the Partnership
Revolver) that was established on behalf of the
Partnership and certain affiliated partnerships to fund deferred
maintenance and working capital needs of the Partnership and
certain other affiliated partnerships in the National
D-19
NATIONAL
PROPERTY INVESTORS III
NOTES TO
FINANCIAL STATEMENTS (Continued)
Property Investors Partnership Series. The Managing General
Partner does not have a commitment, intent or implication to
fund cash flow deficits or furnish other direct or indirect
financial assistance to the Partnership. The Partnership may
receive advances of funds from AIMCO Properties, L.P., an
affiliate of the Managing General Partner and the holder of a
majority of the beneficial interest of the Partnership, although
AIMCO Properties, L.P., is not obligated to fund such advances.
For more information on AIMCO Properties, L.P., including copies
of its audited balance sheet, please see its reports filed with
the Securities and Exchange Commission. During the years ended
December 31, 2009 and 2008, the Partnership received
advances of approximately $2,162,000 and $5,426,000,
respectively, from AIMCO Properties, L.P., to fund a rental
achievement escrow (as discussed in Note A),
redevelopment capital improvements, real estate taxes and
operations at Lakeside Apartments. The advances bear interest at
the prime rate plus 2% (5.25% at December 31,
2009) per annum. Interest expense during the years ended
December 31, 2009 and 2008 was approximately $758,000 and
$733,000, respectively. During the year ended December 31,
2009, the Partnership made payments of principal and accrued
interest of approximately $2,035,000. There were no payments
made during the year ended December 31, 2008. At
December 31, 2009 and 2008, the amount of the outstanding
advances and accrued interest due to AIMCO Properties, L.P. was
approximately $14,355,000 and $13,470,000, respectively, and is
included in due to affiliates.
The Partnership 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. The Partnership insures its property above
the AIMCO limits through insurance policies obtained by AIMCO
from insurers unaffiliated with the Managing General Partner.
During the years ended December 31, 2009 and 2008, the
Partnership was charged by AIMCO and its affiliates
approximately $99,000 and $107,000, respectively, for insurance
coverage and fees associated with policy claims administration.
In addition to its indirect ownership of the general partner
interests in the Partnership, AIMCO and its affiliates owned
37,419 Units in the Partnership representing 77.89% of the
outstanding Units at December 31, 2009. A number of these
Units were acquired pursuant to tender offers made by AIMCO or
its affiliates. It is possible that AIMCO or its affiliates will
acquire additional Units in exchange for cash or a combination
of cash and units in AIMCO Properties, L.P., the operating
partnership of AIMCO, either through private purchases or tender
offers. Pursuant to the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with
respect to a variety of matters that include, but are not
limited to, voting on certain amendments to the Partnership
Agreement and voting to remove the Managing General Partner. As
a result of its ownership of 77.89% of the outstanding Units,
AIMCO and its affiliates are in a position to influence all
voting decisions with respect to the Partnership. However, with
respect to the 21,380 Units acquired on January 19, 1996,
AIMCO IPLP, L.P., an affiliate of the Managing General Partner
and of AIMCO, agreed to vote such Units: (i) against any
increase in compensation payable to the Managing General Partner
or to its affiliates; and (ii) on all other matters
submitted by it or its affiliates, in proportion to the vote
cast by third party unitholders. Except for the foregoing, no
other limitations are imposed on AIMCO IPLP, L.P.s,
AIMCOs or any other affiliates right to vote each
Unit held. Although the Managing General Partner owes fiduciary
duties to the limited partners of the Partnership, the Managing
General Partner also owes fiduciary duties to AIMCO as its sole
stockholder. As a result, the duties of the Managing General
Partner, as managing general partner, to the Partnership and its
limited partners may come into conflict with the duties of the
Managing General Partner to AIMCO as its sole stockholder.
D-20
NATIONAL
PROPERTY INVESTORS III
NOTES TO
FINANCIAL STATEMENTS (Continued)
|
|
Note C
|
Mortgage
Notes Payable
|
The terms of mortgage notes payable are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
Monthly
|
|
|
|
|
|
|
|
|
Principal
|
|
|
|
Balance at
|
|
|
Payment
|
|
|
Stated
|
|
|
|
|
|
Balance
|
|
|
|
December 31,
|
|
|
Including
|
|
|
Interest
|
|
|
Maturity
|
|
|
Due at
|
|
Property
|
|
2009
|
|
|
2008
|
|
|
Interest
|
|
|
Rate
|
|
|
Date
|
|
|
Maturity
|
|
|
|
(In thousands)
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Lakeside
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apartments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1st mortgage
|
|
$
|
20,375
|
|
|
$
|
20,608
|
|
|
$
|
141
|
|
|
|
7.14
|
%
|
|
|
01/01/22
|
|
|
$
|
15,791
|
|
2nd mortgage
|
|
|
9,000
|
|
|
|
9,000
|
|
|
|
44
|
|
|
|
5.90
|
%
|
|
|
01/01/22
|
|
|
|
7,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
29,375
|
|
|
$
|
29,608
|
|
|
$
|
185
|
|
|
|
|
|
|
|
|
|
|
$
|
22,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The mortgage notes payable are fixed rate mortgages that are
non-recourse and are secured by a pledge of the
Partnerships rental property and by pledge of revenues
from the rental property. Further, the property may not be sold
subject to existing indebtedness.
Scheduled principal payments of the mortgage notes payable
subsequent to December 31, 2009 are as follows (in
thousands):
|
|
|
|
|
2010
|
|
$
|
315
|
|
2011
|
|
|
387
|
|
2012
|
|
|
412
|
|
2013
|
|
|
441
|
|
2014
|
|
|
472
|
|
Thereafter
|
|
|
27,348
|
|
|
|
|
|
|
|
|
$
|
29,375
|
|
|
|
|
|
|
|
|
Note D
|
Investment
Property and Accumulated Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Cost
|
|
|
|
|
|
|
to Partnership
|
|
|
|
|
|
|
|
|
Buildings
|
|
Net Costs
|
|
|
|
|
|
|
and Related
|
|
Capitalized
|
|
|
|
|
|
|
Personal
|
|
Subsequent to
|
Description
|
|
Encumbrance
|
|
Land
|
|
Property
|
|
Acquisition
|
|
|
|
|
(In thousands)
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
(In thousands)
|
|
Lakeside Apartments
|
|
$
|
29,375
|
|
|
$
|
2,087
|
|
|
$
|
15,363
|
|
|
$
|
31,667
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Amount at Which Carried
|
|
|
|
|
|
|
|
|
|
|
at December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Related
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal
|
|
|
|
Accumulated
|
|
Date of
|
|
Date
|
|
Depreciable
|
Description
|
|
Land
|
|
Property
|
|
Total
|
|
Depreciation
|
|
Construction
|
|
Acquired
|
|
Life
|
|
|
(In thousands)
|
|
(In thousands)
|
|
|
|
|
|
|
|
Lakeside Apartments
|
|
$
|
2,093
|
|
|
$
|
47,024
|
|
|
$
|
49,117
|
|
|
$
|
29,276
|
|
|
|
1973/1975
|
|
|
|
12/80
|
|
|
|
5-40 yrs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D-21
NATIONAL
PROPERTY INVESTORS III
NOTES TO
FINANCIAL STATEMENTS (Continued)
Reconciliation of Investment Property and Accumulated
Depreciation:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Investment Property
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
48,375
|
|
|
$
|
43,751
|
|
Property improvements and replacements
|
|
|
1,016
|
|
|
|
4,624
|
|
Disposition of property
|
|
|
(274
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
49,117
|
|
|
$
|
48,375
|
|
|
|
|
|
|
|
|
|
|
Accumulated Depreciation
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
25,320
|
|
|
$
|
22,088
|
|
Additions charged to expense
|
|
|
3,970
|
|
|
|
3,232
|
|
Disposition of property
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
29,276
|
|
|
$
|
25,320
|
|
|
|
|
|
|
|
|
|
|
The aggregate cost of the real estate for Federal income tax
purposes at December 31, 2009 and 2008 is approximately
$48,665,000 and $47,783,000, respectively. The accumulated
depreciation taken for Federal income tax purposes at
December 31, 2009 and 2008 is approximately $32,857,000 and
$28,514,000, respectively.
During 2005 the Partnership commenced with a $1,500,000
redevelopment project at Lakeside Apartments. Approximately
$832,000 was completed at December 31, 2005. In August
2006, the scope of the redevelopment project was significantly
expanded and was planned to be approximately $16,300,000 with
the majority of the work started in October 2006 and to be
completed by November 2008. During the year ended
December 31, 2006 an additional $377,000 was incurred.
During the year ended December 31, 2007 the anticipated
cost of the project was increased by approximately $7,393,000 to
a total project cost of approximately $23,693,000. During the
year ended December 31, 2007, approximately $16,544,000 was
expended. During the year ended December 31, 2008,
approximately $4,532,000 was expended. During 2009,
approximately $352,000 was expended. The project was completed
during the second quarter of 2009 at a total cost of
approximately $22,637,000. The redevelopment consisted of site,
building exterior, common area and unit interior improvements.
The site improvements consisted of landscape enhancements and
replacements, repair of retaining walls and correction of
erosion problems, lighting upgrades and the addition of patio
privacy fences. The building exterior improvements consisted of
rear entrance door replacements, gutter improvements, foundation
work and exterior painting. The common area improvements
consisted of upgrading the leasing center, replacing the current
clubhouse with a business center and conference room, fitness
center with locker rooms, and addition of a boathouse for lake
recreation activities. In addition, the west clubhouse was
upgraded and includes a social/game room, locker rooms and new
decking. The unit interior improvements consisted of kitchen and
bath upgrades, replacement of original fireplaces and other
interior renovations. The Partnership funded the redevelopment
from operations and advances from AIMCO Properties, L.P. During
the construction period, certain expenses have been capitalized
and are being depreciated over the remaining life of the related
assets. For the years ended December 31, 2009 and 2008,
these amounts included approximately $3,000 and $24,000,
respectively, of construction period taxes, approximately $9,000
and $167,000, respectively, of construction period interest and
approximately $5,000 and $7,000, respectively, of construction
period operating costs.
D-22
NATIONAL
PROPERTY INVESTORS III
NOTES TO
FINANCIAL STATEMENTS (Continued)
Taxable income or loss of the Partnership is reported in the
income tax returns of its partners. No provision for income
taxes is made in the financial statements of the Partnership.
The Partnership files its tax returns on an accrual basis and
has computed depreciation for tax purposes using accelerated
methods, which are not in accordance with generally accepted
accounting principles. A reconciliation of net loss from the
financial statements to the net taxable loss to partners is as
follows (in thousands, except per unit data):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
Net loss as reported
|
|
$
|
(3,435
|
)
|
|
$
|
(3,188
|
)
|
Prepaid rent
|
|
|
(29
|
)
|
|
|
50
|
|
Depreciation differences
|
|
|
(373
|
)
|
|
|
(1,675
|
)
|
Other
|
|
|
171
|
|
|
|
(174
|
)
|
Casualty
|
|
|
(22
|
)
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
Federal taxable loss
|
|
$
|
(3,688
|
)
|
|
$
|
(5,020
|
)
|
|
|
|
|
|
|
|
|
|
Federal taxable (loss) income per limited partnership unit
|
|
$
|
(68.43
|
)
|
|
$
|
14.49
|
|
|
|
|
|
|
|
|
|
|
For 2009 and 2008 allocations under the Internal Revenue Code
section 704(b) result in the limited partners being
allocated a non-pro rata amount of taxable (loss) income.
The following is a reconciliation between the Partnerships
reported amounts and Federal tax basis of net liabilities (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Net liabilities as reported
|
|
$
|
(24,478
|
)
|
|
$
|
(21,043
|
)
|
Land and buildings
|
|
|
(452
|
)
|
|
|
(592
|
)
|
Accumulated depreciation
|
|
|
(3,581
|
)
|
|
|
(3,194
|
)
|
Syndication and distribution costs
|
|
|
2,727
|
|
|
|
2,727
|
|
Prepaid rent
|
|
|
14
|
|
|
|
114
|
|
Other
|
|
|
203
|
|
|
|
108
|
|
|
|
|
|
|
|
|
|
|
Net liabilities Federal tax basis
|
|
$
|
(25,567
|
)
|
|
$
|
(21,880
|
)
|
|
|
|
|
|
|
|
|
|
During September 2008, the Partnership incurred fire and water
damage to one of the apartment buildings at Lakeside Apartments.
The damages were approximately $469,000, including clean up
costs of approximately $214,000. The clean up costs were
included in operating expense for the year ended
December 31, 2008. During the year ended December 31,
2009, the Partnership received approximately $452,000 of
insurance proceeds related to this event, of which approximately
$197,000 was for clean up costs. During the year ended
December 31, 2009, the Partnership recognized a casualty
gain of approximately $22,000 due to the receipt of insurance
proceeds, net of the write-off of undepreciated damaged assets
of approximately $233,000. For the year ended December 31,
2009, the proceeds received to cover clean up costs are
reflected as a reduction of operating expenses. The Partnership
expects to receive approximately $24,000 of additional insurance
proceeds related to this event.
During September 2008, the Partnership incurred damages to
several apartment units as a result of a gas leak. The damages
were approximately $78,000, including clean up costs of
approximately $49,000. During the year ended December 31,
2009, the Partnership received approximately $68,000 of
insurance proceeds related to this
D-23
NATIONAL
PROPERTY INVESTORS III
NOTES TO
FINANCIAL STATEMENTS (Continued)
event, of which approximately $39,000 was for clean up costs.
The clean up costs and associated insurance proceeds were
included in operating expense for the year ended
December 31, 2008. The Partnership recognized a casualty
gain of approximately $2,000 during the year ended
December 31, 2009, due to the receipt of insurance
proceeds, net of the write off of undepreciated assets of
approximately $27,000.
As previously disclosed, AIMCO Properties, L.P. and NHP
Management Company, both affiliates of the Managing General
Partner, were defendants in a lawsuit, filed as a collective
action in August 2003 in the United States District Court
for the District of Columbia, alleging that they willfully
violated the Fair Labor Standards Act (FLSA) by
failing to pay maintenance workers overtime for time worked in
excess of 40 hours per week (overtime claims).
The plaintiffs also contended that AIMCO Properties, L.P. and
NHP Management Company (the Defendants) failed to
compensate maintenance workers for time that they were required
to be
on-call
(on-call claims). In March 2007, the court in the
District of Columbia decertified the collective action. In July
2007, plaintiffs counsel filed individual cases in Federal
court in 22 jurisdictions. In the second quarter of 2008, AIMCO
Properties, L.P. settled the overtime cases involving 652
plaintiffs and established a framework for resolving the 88
remaining on-call claims and the attorneys
fees claimed by plaintiffs counsel. As a result, the
lawsuits asserted in the 22 Federal courts have been dismissed.
During the fourth quarter of 2008, the Partnership paid
approximately $5,000 for settlement amounts for alleged unpaid
overtime to employees who had worked at the Partnerships
investment property. At this time, the 88 remaining
on-call claims and the attorneys fees claimed
by plaintiffs counsel are not resolved. The parties have
selected six on-call claims that will proceed
forward through the arbitration process and have selected
arbitrators. After those arbitrations have been completed, the
parties will revisit settling the on-call claims. The first two
arbitrations took place in December 2009 and the Defendants
received a defense verdict against the first two claimants, and
plaintiffs dismissed the claims of the next two claimants. The
remaining two arbitrations will take place in April 2010. The
Managing General Partner is uncertain as to the amount of any
additional loss that may be allocable to the Partnership.
Therefore, the Partnership cannot estimate whether any
additional loss will occur or a potential range of loss.
The Partnership is unaware of any other pending or outstanding
litigation matters involving it or its investment property that
are not of a routine nature arising in the ordinary course of
business.
Environmental
Various Federal, state and local laws subject property owners or
operators to liability for management, and the costs of removal
or remediation, of certain hazardous substances present on a
property, including lead-based paint. Such laws often impose
liability without regard to whether the owner or operator knew
of, or was responsible for, the release or presence of the
hazardous substances. The presence of, or the failure to manage
or remedy properly, hazardous substances may adversely affect
occupancy at affected apartment communities and the ability to
sell or finance affected properties. In addition to the costs
associated with investigation and remediation actions brought by
government agencies, and potential fines or penalties imposed by
such agencies in connection therewith, the presence of hazardous
substances on a property could result in claims by private
plaintiffs for personal injury, disease, disability or other
infirmities. Various laws also impose liability for the cost of
removal, remediation or disposal of hazardous substances through
a licensed disposal or treatment facility. Anyone who arranges
for the disposal or treatment of hazardous substances is
potentially liable under such laws. These laws often impose
liability whether or not the person arranging for the disposal
ever owned or operated the disposal facility. In connection with
the ownership, operation and management of its property, the
Partnership could potentially be liable for environmental
liabilities or costs associated with its property.
D-24
NATIONAL
PROPERTY INVESTORS III
NOTES TO
FINANCIAL STATEMENTS (Continued)
Mold
The Partnership is aware of lawsuits against owners and managers
of multifamily properties asserting claims of personal injury
and property damage caused by the presence of mold, some of
which have resulted in substantial monetary judgments or
settlements. The Partnership has only limited insurance coverage
for property damage loss claims arising from the presence of
mold and for personal injury claims related to mold exposure.
Affiliates of the Managing General Partner have implemented
policies, procedures, third-party audits and training and the
Managing General Partner believes that these measures will
prevent or eliminate mold exposure and will minimize the effects
that mold may have on residents. To date, the Partnership has
not incurred any material costs or liabilities relating to
claims of mold exposure or to abate mold conditions. Because the
law regarding mold is unsettled and subject to change the
Managing General Partner can make no assurance that liabilities
resulting from the presence of or exposure to mold will not have
a material adverse effect on the Partnerships financial
condition or results of operations.
D-25
|
|
ITEM 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None.
|
|
Item 9A(T).
|
Controls
and Procedures
|
|
|
(a)
|
Disclosure
Controls and Procedures
|
The Partnerships management, with the participation of the
principal executive officer and principal financial officer of
the Managing General Partner, who are the equivalent of the
Partnerships principal executive officer and principal
financial officer, respectively, has evaluated the effectiveness
of the Partnerships disclosure controls and procedures (as
defined in
Rules 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934, as amended (the
Exchange Act)) as of the end of the period covered
by this report. Based on such evaluation, the principal
executive officer and principal financial officer of the
Managing General Partner, who are the equivalent of the
Partnerships principal executive officer and principal
financial officer, respectively, have concluded that, as of the
end of such period, the Partnerships disclosure controls
and procedures are effective.
Managements
Report on Internal Control Over Financial
Reporting
The Partnerships management is responsible for
establishing and maintaining adequate internal control over
financial reporting. Internal control over financial reporting
is defined in Rule
13a-15(f)
and
15d-15(f)
under the Exchange Act as a process designed by, or under the
supervision of, the principal executive and principal financial
officers of the Managing General Partner, who are the equivalent
of the Partnerships principal executive officer and
principal financial officer, respectively, and effected by the
Partnerships management and other personnel to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures
that:
|
|
|
|
|
pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions
of assets;
|
|
|
|
provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that receipts and expenditures are being made only in accordance
with authorizations of the Partnerships
management; and
|
|
|
|
provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of
assets that could have a material effect on the financial
statements.
|
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods
are subject to the risks that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
The Partnerships management assessed the effectiveness of
the Partnerships internal control over financial reporting
as of December 31, 2009. In making this assessment, the
Partnerships management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control Integrated
Framework.
Based on their assessment, the Partnerships management
concluded that, as of December 31, 2009, the
Partnerships internal control over financial reporting is
effective.
This annual report does not include an attestation report of the
Partnerships registered public accounting firm regarding
internal control over financial reporting. Managements
report was not subject to the attestation by the
D-26
Partnerships registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that
permit the Partnership to provide only managements report
in this annual report.
(b) Changes
in Internal Control Over Financial Reporting.
There has been no change in the Partnerships internal
control over financial reporting (as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) during the fourth quarter of 2009 that
has materially affected, or is reasonably likely to materially
affect, the Partnerships internal control over financial
reporting.
|
|
Item 9B.
|
Other
Information
|
None.
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
National Property Investors III (the
Partnership) has no directors or officers. NPI
Equity Investments (NPI Equity or the Managing
General Partner) manages substantially all of the
Partnerships affairs and has general responsibility in all
matters affecting its business. The names and ages of, as well
as the positions and offices held by, the present directors and
officers of the Managing General Partner are set forth below.
There are no family relationships between or among any officers
or directors.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Steven D. Cordes
|
|
|
38
|
|
|
Director and Senior Vice President
|
John Bezzant
|
|
|
47
|
|
|
Director and Senior Vice President
|
Timothy J. Beaudin
|
|
|
51
|
|
|
President and Chief Operating Officer
|
Ernest M. Freedman
|
|
|
39
|
|
|
Executive Vice President and Chief Financial Officer
|
Lisa R. Cohn
|
|
|
41
|
|
|
Executive Vice President, General Counsel and Secretary
|
Paul Beldin
|
|
|
36
|
|
|
Senior Vice President and Chief Accounting Officer
|
Stephen B. Waters
|
|
|
48
|
|
|
Senior Director
|
Steven D. Cordes was appointed as a Director of the
Managing General Partner effective March 2, 2009.
Mr. Cordes has been a Senior Vice President of the Managing
General Partner and AIMCO since May 2007. Mr. Cordes joined
AIMCO in 2001 as a Vice President of Capital Markets with
responsibility for AIMCOs joint ventures and equity
capital markets activity. Prior to joining AIMCO,
Mr. Cordes was a manager in the financial consulting
practice of PricewaterhouseCoopers. Effective March 2009,
Mr. Cordes was appointed to serve as the equivalent of the
chief executive officer of the Partnership. Mr. Cordes
brings particular expertise to the Board in the areas of asset
management as well as finance and accounting.
John Bezzant was appointed as a Director of the Managing
General Partner effective December 16, 2009.
Mr. Bezzant has been a Senior Vice President of the
Managing General Partner and AIMCO since joining AIMCO in June
2006. Prior to joining AIMCO, from 2005 to June 2006,
Mr. Bezzant was a First Vice President at Prologis, a
Denver, Colorado-based real estate investment trust, and from
1986 to 2005, Mr. Bezzant served as Vice President, Asset
Management at Catellus Development Corporation, a
San Francisco, California-based real estate investment
trust. Mr. Bezzant brings particular expertise to the Board
in the areas of real estate finance, property operations, sales
and development.
Timothy J. Beaudin was appointed President and Chief
Operating Officer of AIMCO and the Managing General Partner in
February 2009. He joined AIMCO and the Managing General Partner
as Executive Vice President and Chief Development Officer in
October 2005 and was appointed Executive Vice President and
Chief Property Operating Officer of the Managing General Partner
and AIMCO in October 2008. Mr. Beaudin oversees
conventional and affordable property operations, transactions,
asset management, and redevelopment and construction services
for AIMCO and the Managing General Partner. Prior to joining
AIMCO and beginning in 1995,
D-27
Mr. Beaudin was with Catellus Development Corporation.
During his last five years at Catellus, Mr. Beaudin served
as Executive Vice President, with management responsibility for
development, construction and asset management.
Ernest M. Freedman was appointed Executive Vice President
and Chief Financial Officer of the Managing General Partner and
AIMCO in November 2009. Mr. Freedman joined AIMCO in 2007
as Senior Vice President of Financial Planning and Analysis and
has served as Senior Vice President of Finance since February
2009, responsible for financial planning, tax, accounting and
related areas. Prior to joining AIMCO, from 2004 to 2007,
Mr. Freedman served as chief financial officer of HEI
Hotels and Resorts.
Lisa R. Cohn was appointed Executive Vice President,
General Counsel and Secretary of the Managing General Partner
and AIMCO in December 2007. From January 2004 to December 2007,
Ms. Cohn served as Senior Vice President and Assistant
General Counsel of AIMCO. Ms. Cohn joined AIMCO in July
2002 as Vice President and Assistant General Counsel. Prior to
joining AIMCO, Ms. Cohn was in private practice with the
law firm of Hogan and Hartson LLP.
Paul Beldin joined AIMCO in May 2008 and has served as
Senior Vice President and Chief Accounting Officer of AIMCO and
the Managing General Partner since that time. Prior to joining
AIMCO, Mr. Beldin served as controller and then as chief
financial officer of America First Apartment Investors, Inc., a
publicly traded multifamily real estate investment trust, from
May 2005 to September 2007 when the company was acquired by
Sentinel Real Estate Corporation. Prior to joining America First
Apartment Investors, Inc., Mr. Beldin was a senior manager
at Deloitte and Touche LLP, where he was employed from August
1996 to May 2005, including two years as an audit manager in SEC
services at Deloittes national office.
Stephen B. Waters was appointed Senior Director of
Partnership Accounting of AIMCO and the Managing General Partner
in June 2009. Mr. Waters has responsibility for partnership
accounting with AIMCO and serves as the principal financial
officer of the Managing General Partner. Mr. Waters joined
AIMCO as a Director of Real Estate Accounting in September 1999
and was appointed Vice President of the Managing General Partner
and AIMCO in April 2004. Prior to joining AIMCO, Mr. Waters
was a senior manager at Ernst & Young LLP.
The Registrant is not aware of the involvement in any legal
proceedings with respect to the directors and executive officers
listed in this Item 10.
One or more of the above 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
Securities Exchange Act of 1934, or are subject to the reporting
requirements of Section 15(d) of such Act. Further, one or
more of the above persons are also officers of Apartment
Investment and Management Company and the general partner of
AIMCO Properties, L.P., entities that have a class of securities
registered pursuant to Section 12(g) of the Securities
Exchange Act of 1934, or are subject to the reporting
requirements of Section 15 (d) of such Act.
The board of directors of the Managing General Partner does not
have a separate audit committee. As such, the board of directors
of the Managing General Partner fulfills the functions of an
audit committee. The board of directors has determined that
Steven D. Cordes meets the requirement of an audit
committee financial expert.
The directors and officers of the Managing General Partner with
authority over the Partnership are all employees of subsidiaries
of AIMCO. AIMCO has adopted a code of ethics that applies to
such directors and officers that is posted on AIMCOs
website (www.AIMCO.com). AIMCOs website is not
incorporated by reference to this filing.
|
|
Item 11.
|
Executive
Compensation
|
Neither the directors nor officers received any remuneration
from the Managing General Partner during the years ended
December 31, 2009 and 2008.
D-28
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
Except as noted below, as of December 31, 2009, no person
or entity was known to own of record or beneficially more than
five percent of the Units of the Partnership.
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Number of
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Units
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Percentage
|
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AIMCO IPLP, L.P.
|
|
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21,566
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44.89
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%
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(an affiliate of AIMCO)
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AIMCO Properties, L.P.
|
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15,853
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33.00
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%
|
(an affiliate of AIMCO)
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|
AIMCO IPLP, L.P. is indirectly ultimately owned by AIMCO. Its
business address is 55 Beattie Place, Greenville, South Carolina
29601.
AIMCO Properties, L.P. is indirectly ultimately controlled by
AIMCO. Its business address is 4582 S. Ulster St.,
Suite 1100, Denver, Colorado 80237.
No director or officer of the Managing General Partner owns any
Units.
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|
Item 13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The Partnership has no employees and depends on the Managing
General Partner and its affiliates for the management and
administration of all Partnership activities. The Partnership
Agreement provides for payments to affiliates for services and
as reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership.
Affiliates of the Managing General Partner receive 5% of gross
receipts from the Partnerships property as compensation
for providing property management services. The Partnership paid
to such affiliates approximately $335,000 and $315,000 for the
years ended December 31, 2009 and 2008, respectively, which
is included in operating expenses. No such amounts were owed at
December 31, 2009.
Affiliates of the Managing General Partner charged the
Partnership reimbursement of accountable administrative expenses
amounting to approximately $156,000 and $350,000 for the years
ended December 31, 2009 and 2008, respectively, which is
included in general and administrative expenses and investment
property on the financial statements included in
Item 8. Financial Statements and Supplementary
Data. The portion of these reimbursements included in
investment property for the years ended December 31, 2009
and 2008 are construction management services for certain
capital improvement expenditures (not related to the
redevelopment project) provided by an affiliate of the Managing
General Partner of approximately $72,000 and $9,000,
respectively. In connection with the redevelopment project (as
discussed in Item 8. Financial Statements and
Supplementary Data Note E), an
affiliate of the Managing General Partner is to receive a
redevelopment supervision fee of 4% of the actual redevelopment
costs incurred. The Partnership was charged approximately
$20,000 and $230,000 in redevelopment supervision fees during
the years ended December 31, 2009 and 2008, respectively,
which are included in investment property. At December 31,
2009 and 2008, approximately $197,000 and $133,000 of
accountable administrative expenses were owed and are included
in due to affiliates on the balance sheets included in
Item 8. Financial Statements and Supplementary
Data.
For services relating to the administration of the Partnership
and operation of the Partnerships property, the Managing
General Partner is entitled to receive payment for
non-accountable expenses up to a maximum of $100,000 per year
based upon the number of Partnership units sold, subject to
certain limitations. There were no such fees for the years ended
December 31, 2009 and 2008 as no operating distributions
were made.
Upon the sale of the Partnerships property, NPI Equity
will be entitled to an Incentive Compensation Fee equal to a
declining percentage of the difference between the total amount
distributed to limited partners and the appraised value of their
investment at February 1, 1992. The percentage amount to be
realized by NPI Equity, if any, will be dependent upon the year
in which the property is sold. Payment of the Incentive
Compensation Fee is subordinated to the receipt by the limited
partners, of: (a) distributions from capital transaction
proceeds of an amount equal to their appraised investment in the
Partnership at February 1, 1992, and (b) distributions
from all
D-29
sources (capital transactions as well as cash flow) of an amount
equal to six percent (6%) per annum cumulative, non-compounded,
on their appraised investment in the Partnership at
February 1, 1992.
On March 18, 2008, the Managing General Partner terminated
the revolving credit facility (the Partnership
Revolver) that was established on behalf of the
Partnership and certain affiliated partnerships to fund deferred
maintenance and working capital needs of the Partnership and
certain other affiliated partnerships in the National Property
Investors Partnership Series. The Managing General Partner does
not have a commitment, intent or implication to fund cash flow
deficits or furnish other direct or indirect financial
assistance to the Partnership. The Partnership may receive
advances of funds from AIMCO Properties, L.P., an affiliate of
the Managing General Partner and the holder of a majority of the
beneficial interest of the Partnership, although AIMCO
Properties, L.P., is not obligated to fund such advances. For
more information on AIMCO Properties, L.P., including copies of
its audited balance sheet, please see its reports filed with the
Securities and Exchange Commission. During the years ended
December 31, 2009 and 2008, the Partnership received
advances of approximately $2,162,000 and $5,426,000,
respectively, from AIMCO Properties, L.P., to fund a rental
achievement escrow, redevelopment capital improvements, real
estate taxes and operations at Lakeside Apartments. The advances
bear interest at the prime rate plus 2% (5.25% at
December 31, 2009) per annum. Interest expense during
the years ended December 31, 2009 and 2008 was
approximately $758,000 and $733,000, respectively. During the
year ended December 31, 2009, the Partnership made payments
of principal and accrued interest of approximately $2,035,000.
There were no payments made during the year ended
December 31, 2008. At December 31, 2009 and 2008, the
amount of the outstanding advances and accrued interest due to
AIMCO Properties, L.P. was approximately $14,355,000 and
$13,470,000, respectively, and is included in due to affiliates
on the balance sheets included in Item 8. Financial
Statements and Supplementary Data.
The Partnership 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. The Partnership insures its property above
the AIMCO limits through insurance policies obtained by AIMCO
from insurers unaffiliated with the Managing General Partner.
During the years ended December 31, 2009 and 2008, the
Partnership was charged by AIMCO and its affiliates
approximately $99,000 and $107,000, respectively, for insurance
coverage and fees associated with policy claims administration.
In addition to its indirect ownership of the general partner
interests in the Partnership, AIMCO and its affiliates owned
37,419 Units in the Partnership representing 77.89% of the
outstanding Units at December 31, 2009. A number of these
Units were acquired pursuant to tender offers made by AIMCO or
its affiliates. It is possible that AIMCO or its affiliates will
acquire additional Units in exchange for cash or a combination
of cash and units in AIMCO Properties, L.P., the operating
partnership of AIMCO, either through private purchases or tender
offers. Pursuant to the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with
respect to a variety of matters that include, but are not
limited to, voting on certain amendments to the Partnership
Agreement and voting to remove the Managing General Partner. As
a result of its ownership of 77.89% of the outstanding Units,
AIMCO and its affiliates are in a position to influence all
voting decisions with respect to the Partnership. However, with
respect to the 21,380 Units acquired on January 19, 1996,
AIMCO IPLP, L.P., an affiliate of the Managing General Partner
and of AIMCO, agreed to vote such Units: (i) against any
increase in compensation payable to the Managing General Partner
or to its affiliates; and (ii) on all other matters
submitted by it or its affiliates, in proportion to the vote
cast by third party unitholders. Except for the foregoing, no
other limitations are imposed on AIMCO IPLP, L.P.s,
AIMCOs or any other affiliates right to vote each
Unit held. Although the Managing General Partner owes fiduciary
duties to the limited partners of the Partnership, the Managing
General Partner also owes fiduciary duties to AIMCO as its sole
stockholder. As a result, the duties of the Managing General
Partner, as managing general partner, to the Partnership and its
limited partners may come into conflict with the duties of the
Managing General Partner to AIMCO as its sole stockholder.
Neither of the Managing General Partners directors is
independent under the independence standards established for New
York Stock Exchange listed companies as both directors are
employed by the parent of the Managing General Partner.
D-30
|
|
Item 14.
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Principal
Accounting Fees and Services
|
The Managing General Partner has reappointed Ernst &
Young LLP as independent auditors to audit the financial
statements of the Partnership for 2010. The aggregate fees
billed for services rendered by Ernst & Young LLP for
2009 and 2008 are described below.
Audit Fees. Fees for audit services
totaled approximately $38,000 and $43,000 for 2009 and 2008,
respectively. Fees for audit services also include fees for the
reviews of the Partnerships Quarterly Reports on
Form 10-Q.
Tax Fees. Fees for tax services totaled
approximately $6,000 for both 2009 and 2008.
PART IV
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Item 15.
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Exhibits,
Financial Statement Schedules
|
(a) The following financial statements of the Registrant
are included in Item 8:
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|
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Balance Sheets at December 31, 2009 and 2008.
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|
|
D-12
|
|
Statements of Operations for the years ended December 31,
2009 and 2008.
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|
|
D-13
|
|
Statements of Changes in Partners Deficit for the years
ended December 31, 2009 and 2008.
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|
|
D-14
|
|
Statements of Cash Flows for the years ended December 31,
2009 and 2008.
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|
|
D-15
|
|
Notes to Financial Statements.
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|
|
D-16
|
|
Schedules are omitted for the reason that they are inapplicable
or equivalent information has been included elsewhere herein.
(b) Exhibits:
See Exhibit index
The agreements included as exhibits to this
Form 10-K
contain representations and warranties by each of the parties to
the applicable agreement. These representations and warranties
have been made solely for the benefit of the other parties to
the applicable agreement and:
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|
|
|
|
should not in all instances be treated as categorical statements
of fact, but rather as a way of allocating the risk to one of
the parties if those statements prove to be inaccurate;
|
|
|
|
have been qualified by disclosures that were made to the other
party in connection with the negotiation of the applicable
agreement, which disclosures are not necessarily reflected in
the agreement;
|
|
|
|
may apply standards of materiality in a way that is different
from what may be viewed as material to an investor; and
|
|
|
|
were made only as of the date of the applicable agreement or
such other date or dates as may be specified in the agreement
and are subject to more recent developments.
|
Accordingly, these representations and warranties may not
describe the actual state of affairs as of the date they were
made or at any other time. The Partnership acknowledges that,
notwithstanding the inclusion of the foregoing cautionary
statements, it is responsible for considering whether additional
specific disclosures of material information regarding material
contractual provisions are required to make the statements in
this
Form 10-K
not misleading. Additional information about the Partnership may
be found elsewhere in this
Form 10-K
and the Partnerships other public filings, which are
available without charge through the SECs website at
http://www.sec.gov.
D-31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NATIONAL PROPERTY INVESTORS III
|
|
|
|
By:
|
NPI EQUITY INVESTMENTS, INC.
|
Managing General Partner
Steven D. Cordes
Senior Vice President
|
|
|
|
By:
|
/s/ Stephen
B. Waters
|
Stephen B. Waters
Senior Director of Partnership Accounting
Date: March 29, 2010
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
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|
|
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|
|
|
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/s/ John
Bezzant
John
Bezzant
|
|
Director and Senior Vice President
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|
Date: March 29, 2010
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|
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|
/s/ Steven
D. Cordes
Steven
D. Cordes
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|
Director and Senior Vice President
|
|
Date: March 29, 2010
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|
|
|
|
|
/s/ Stephen
B. Waters
Stephen
B. Waters
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|
Senior Director of Partnership Accounting
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|
Date: March 29, 2010
|
D-32
NATIONAL
PROPERTY INVESTORS III
EXHIBIT INDEX
|
|
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|
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Exhibit
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|
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2
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.1
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|
NPI, Inc. Stock Purchase Agreement dated as of August 17, 1995,
incorporated by reference to Exhibit 2 to the Partnerships
Current Report on Form 8-K dated August 17, 1995.
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3
|
.4(a)
|
|
Agreement of Limited Partnership incorporated by reference to
Exhibit A to the Prospectus of the Partnership dated October 24,
1979 contained in the Partnerships Registration Statement
on
Form S-11
(Reg. No. 2-63733).
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3
|
.4(b)
|
|
Amendments to Agreement of Limited Partnership dated as of
November 25, 1980 incorporated by reference to Exhibits 3 and 4
to the Partnerships Annual Report on Form 10-K for the
year ended December 31, 1981.
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3
|
.4(c)
|
|
Amendments to the Agreement of Limited Partnership incorporated
by reference to the Definitive Proxy Statement of the
Partnership dated April 3, 1981.
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3
|
.4(d)
|
|
Amendments to the Agreement of Limited Partnership incorporated
by reference to the Statement Furnished in Connection With The
Solicitation of Consents of the Partnership dated August 28,
1992.
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3
|
.4(e)
|
|
Amendment to the Limited Partnership Agreement dated December
22, 2005 incorporated by reference to the Registrants Form
10-KSB dated December 31, 2005.
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|
10
|
.11
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Form Of Amended and Restated Multifamily Mortgage, Assignment
of Rents and Security Agreement between Federal Home Loan
Mortgage Corporation and National Property Investors III, a
California limited partnership, dated March 30, 2007.
Incorporated by reference to the Registrants Current
Report on Form 8-K dated March 30, 2007.
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10
|
.12
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Form of Amended and Restated Multifamily Note (Recast
Transaction) between Federal Home Loan Mortgage Corporation and
National Property Investors III, a California limited
partnership, dated March 30, 2007. Incorporated by
reference to the Registrants Current Report on Form 8-K
dated March 30, 2007.
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10
|
.13
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Form of Amended and Restated Guaranty (Recast Transaction)
between AIMCO Properties, L.P., a Delaware limited partnership
and Federal Home Loan Mortgage Corporation, dated March 30,
2007. Incorporated by reference to the Registrants Current
Report on Form 8-K dated March 30, 2007.
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10
|
.14
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Form of Multifamily Mortgage, Assignment of Rents and Security
Agreement between Capmark Bank and National Property Investors
III, a California limited partnership, dated March 30, 2007.
Incorporated by reference to the Registrants Current
Report on Form 8-K dated March 30, 2007.
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10
|
.15
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Form of Multifamily Note between Capmark Bank and National
Property Investors III, a California limited partnership, dated
March 30, 2007. Incorporated by reference to the
Registrants Current Report on
Form 8-K
dated March 30, 2007.
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10
|
.16
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Form of Guaranty between AIMCO Properties, L.P., a Delaware
limited partnership and Capmark Bank, dated March 30, 2007.
Incorporated by reference to the Registrants Current
Report on Form 8-K dated March 30, 2007.
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10
|
.17
|
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Form of Rehabilitation Agreement between National Property
Investors III, a California limited partnership and Capmark
Bank, dated March 30, 2007. Incorporated by reference to the
Registrants Current Report on Form 8-K dated March 30,
2007.
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|
31
|
.1
|
|
Certification of equivalent of Chief Executive Officer pursuant
to Securities Exchange Act Rules
13a-14(a)/15d-14(a),
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
31
|
.2
|
|
Certification of equivalent of Chief Financial Officer pursuant
to Securities Exchange Act Rules
13a-14(a)/15d-14(a),
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
32
|
.1
|
|
Certification of the equivalent of the Chief Executive Officer
and Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
D-33
Exhibit 31.1
CERTIFICATION
I, Steven D. Cordes, certify that:
1. I have reviewed this annual report on
Form 10-K
of National Property Investors III;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
and internal control over financial reporting (as defined in
Exchange Act Rules
13a-15(f)
and
15d-15(f)),
for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial
reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the
registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an
annual report) that has materially affected or is reasonably
likely to materially affect, the registrants internal
control over financial reporting; and
5. The registrants other certifying officer(s) and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of the registrants board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial reporting.
Steven D. Cordes
Senior Vice President of NPI Equity Investments,
Inc., equivalent of the chief executive officer of
the Partnership
Date: March 29, 2010
D-34
Exhibit 31.2
CERTIFICATION
I, Stephen B. Waters, certify that:
1. I have reviewed this annual report on
Form 10-K
of National Property Investors III;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
and internal control over financial reporting (as defined in
Exchange Act Rules
13a-15(f)
and
15d-15(f)),
for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial
reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the
registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an
annual report) that has materially affected or is reasonably
likely to materially affect, the registrants internal
control over financial reporting; and
5. The registrants other certifying officer(s) and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of the registrants board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial reporting.
Stephen B. Waters
Senior Director of Partnership Accounting of NPI
Equity Investments, Inc., equivalent of the chief
financial officer of the Partnership
Date: March 29, 2010
D-35
Exhibit 32.1
Certification
of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on
Form 10-K
of National Property Investors III (the
Partnership), for the fiscal year ended
December 31, 2009 as filed with the Securities and Exchange
Commission on the date hereof (the Report), Steven
D. Cordes, as the equivalent of the Chief Executive Officer of
the Partnership, and Stephen B. Waters, as the
equivalent of the Chief Financial Officer of the Partnership,
each hereby certifies, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, that, to the best of his
knowledge:
(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition and
results of operations of the Partnership.
Name: Steven D. Cordes
Date: March 29, 2010
Name: Stephen B. Waters
Date: March 29, 2010
This certification is furnished with this Report pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 and shall not
be deemed filed by the Partnership for purposes of
Section 18 of the Securities Exchange Act of 1934, as
amended.
D-36
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
|
|
|
(Mark One)
|
|
|
þ
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
|
|
For the quarterly period ended
June 30, 2010
|
or
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
|
|
For the transition period
from to
|
Commission file number 0-9567
NATIONAL PROPERTY INVESTORS
III
(Exact name of registrant as
specified in its charter)
|
|
|
California
|
|
13-2974428
|
(State or other jurisdiction
of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive
offices)
(864) 239-1000
(Issuers telephone number)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to
submit and post such
files). Yes o No 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):
|
|
|
|
|
|
|
Large accelerated
filer o
|
|
Accelerated
filer o
|
|
Non-accelerated
filer o
|
|
Smaller reporting
company þ
|
|
|
(Do not check if a smaller reporting
company)
|
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
E-1
PART I
FINANCIAL INFORMATION
|
|
ITEM 1.
|
FINANCIAL
STATEMENTS
|
NATIONAL
PROPERTY INVESTORS III
BALANCE
SHEETS
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
(Note)
|
|
|
|
(In thousands, except unit data)
|
|
|
ASSETS
|
Cash and cash equivalents
|
|
$
|
139
|
|
|
$
|
194
|
|
Receivables and deposits
|
|
|
272
|
|
|
|
345
|
|
Other assets
|
|
|
668
|
|
|
|
547
|
|
Investment property:
|
|
|
|
|
|
|
|
|
Land
|
|
|
2,093
|
|
|
|
2,093
|
|
Buildings and related personal property
|
|
|
47,410
|
|
|
|
47,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,503
|
|
|
|
49,117
|
|
Less accumulated depreciation
|
|
|
(31,284
|
)
|
|
|
(29,276
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
18,219
|
|
|
|
19,841
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,298
|
|
|
$
|
20,927
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS DEFICIT
|
Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
128
|
|
|
$
|
79
|
|
Tenant security deposit liabilities
|
|
|
132
|
|
|
|
122
|
|
Accrued property taxes
|
|
|
744
|
|
|
|
877
|
|
Other liabilities
|
|
|
370
|
|
|
|
400
|
|
Due to affiliates (Note B)
|
|
|
14,818
|
|
|
|
14,552
|
|
Mortgage notes payable
|
|
|
29,233
|
|
|
|
29,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,425
|
|
|
|
45,405
|
|
|
|
|
|
|
|
|
|
|
Partners Deficit
|
|
|
|
|
|
|
|
|
General partner
|
|
|
(260
|
)
|
|
|
(243
|
)
|
Limited partners (48,039 units issued and outstanding)
|
|
|
(25,867
|
)
|
|
|
(24,235
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,127
|
)
|
|
|
(24,478
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,298
|
|
|
$
|
20,927
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: |
The balance sheet at December 31, 2009 has been derived
from the audited financial statements at that date but does not
include all the information and footnotes required by generally
accepted accounting principles for complete financial statements.
|
See Accompanying Notes to Financial Statements
E-2
NATIONAL
PROPERTY INVESTORS III
STATEMENTS
OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands, except per unit data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
1,426
|
|
|
$
|
1,453
|
|
|
$
|
2,924
|
|
|
$
|
2,824
|
|
Other income
|
|
|
223
|
|
|
|
206
|
|
|
|
484
|
|
|
|
488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
1,649
|
|
|
|
1,659
|
|
|
|
3,408
|
|
|
|
3,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
672
|
|
|
|
663
|
|
|
|
1,388
|
|
|
|
1,378
|
|
General and administrative
|
|
|
32
|
|
|
|
28
|
|
|
|
61
|
|
|
|
68
|
|
Depreciation
|
|
|
1,006
|
|
|
|
996
|
|
|
|
2,011
|
|
|
|
1,983
|
|
Interest
|
|
|
695
|
|
|
|
717
|
|
|
|
1,388
|
|
|
|
1,402
|
|
Property taxes
|
|
|
2
|
|
|
|
167
|
|
|
|
217
|
|
|
|
383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
2,407
|
|
|
|
2,571
|
|
|
|
5,065
|
|
|
|
5,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casualty gains (Note D)
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(758
|
)
|
|
$
|
(912
|
)
|
|
$
|
(1,649
|
)
|
|
$
|
(1,879
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss allocated to general partner (1%)
|
|
$
|
(8
|
)
|
|
$
|
(9
|
)
|
|
$
|
(17
|
)
|
|
$
|
(19
|
)
|
Net loss allocated to limited partners (99%)
|
|
|
(750
|
)
|
|
|
(903
|
)
|
|
|
(1,632
|
)
|
|
|
(1,860
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(758
|
)
|
|
$
|
(912
|
)
|
|
$
|
(1,649
|
)
|
|
$
|
(1,879
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per limited partnership unit
|
|
$
|
(15.61
|
)
|
|
$
|
(18.79
|
)
|
|
$
|
(33.97
|
)
|
|
$
|
(38.71
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Financial Statements
E-3
NATIONAL
PROPERTY INVESTORS III
STATEMENT
OF CHANGES IN PARTNERS DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership
|
|
|
General
|
|
|
Limited
|
|
|
|
|
|
|
Units
|
|
|
Partner
|
|
|
Partners
|
|
|
Total
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands, except unit data)
|
|
|
Original capital contributions
|
|
|
48,049
|
|
|
$
|
1
|
|
|
$
|
24,024
|
|
|
$
|
24,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners deficit at December 31, 2009
|
|
|
48,039
|
|
|
$
|
(243
|
)
|
|
$
|
(24,235
|
)
|
|
$
|
(24,478
|
)
|
Net loss for the six months ended June 30, 2010
|
|
|
|
|
|
|
(17
|
)
|
|
|
(1,632
|
)
|
|
|
(1,649
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners deficit at June 30, 2010
|
|
|
48,039
|
|
|
$
|
(260
|
)
|
|
$
|
(25,867
|
)
|
|
$
|
(26,127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Accompanying Notes to Financial Statements
E-4
NATIONAL
PROPERTY INVESTORS III
STATEMENTS
OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,649
|
)
|
|
$
|
(1,879
|
)
|
Adjustments to reconcile net loss to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
2,011
|
|
|
|
1,983
|
|
Amortization of loan costs
|
|
|
20
|
|
|
|
19
|
|
Casualty gains
|
|
|
(8
|
)
|
|
|
(23
|
)
|
Bad debt expense
|
|
|
51
|
|
|
|
75
|
|
Change in accounts:
|
|
|
|
|
|
|
|
|
Receivables and deposits
|
|
|
22
|
|
|
|
(11
|
)
|
Other assets
|
|
|
(141
|
)
|
|
|
(73
|
)
|
Accounts payable
|
|
|
31
|
|
|
|
(101
|
)
|
Tenant security deposit liabilities
|
|
|
10
|
|
|
|
21
|
|
Accrued property taxes
|
|
|
(133
|
)
|
|
|
22
|
|
Other liabilities
|
|
|
(30
|
)
|
|
|
2
|
|
Due to affiliates
|
|
|
335
|
|
|
|
390
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
519
|
|
|
|
425
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Property improvements and replacements
|
|
|
(371
|
)
|
|
|
(1,201
|
)
|
Insurance proceeds received
|
|
|
8
|
|
|
|
279
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(363
|
)
|
|
|
(922
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Advances received from affiliate
|
|
|
358
|
|
|
|
717
|
|
Payments on advances from affiliate
|
|
|
(427
|
)
|
|
|
|
|
Payments on mortgage notes payable
|
|
|
(142
|
)
|
|
|
(115
|
)
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(211
|
)
|
|
|
602
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(55
|
)
|
|
|
105
|
|
Cash and cash equivalents at beginning of period
|
|
|
194
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
139
|
|
|
$
|
190
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest, net of capitalized interest
|
|
$
|
1,065
|
|
|
$
|
1,015
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash activity:
|
|
|
|
|
|
|
|
|
Property improvements and replacements included in accounts
payable
|
|
$
|
18
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2008, approximately $529,000 of property
improvements and replacements were included in accounts payable
which are included in property improvements and replacements for
the six months ended June 30, 2009.
See Accompanying Notes to Financial Statements
E-5
NATIONAL
PROPERTY INVESTORS III
NOTES TO
FINANCIAL STATEMENTS
(Unaudited)
|
|
Note A
|
Basis of
Presentation
|
The accompanying unaudited financial statements of National
Property Investors III (the Partnership or
Registrant) have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to
Form 10-Q
and
Article 8-03
of
Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of NPI Equity
Investments, Inc. (NPI Equity or the Managing
General Partner) all adjustments (consisting of normal
recurring items) considered necessary for a fair presentation
have been included. Operating results for the three and six
month periods ended June 30, 2010 are not necessarily
indicative of the results that may be expected for the fiscal
year ending December 31, 2010. For further information,
refer to the financial statements and footnotes thereto included
in the Partnerships Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009. The Managing
General Partner is an affiliate of Apartment Investment and
Management Company (AIMCO), a publicly traded real
estate investment trust.
The Partnerships management evaluated subsequent events
through the time this Quarterly Report on
Form 10-Q
was filed.
|
|
Note B
|
Transactions
with Affiliated Parties
|
The Partnership has no employees and depends on the Managing
General Partner and its affiliates for the management and
administration of all Partnership activities. The Partnership
Agreement provides for payments to affiliates for services and
reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership.
Affiliates of the Managing General Partner receive 5% of gross
receipts from the Partnerships property as compensation
for providing property management services. The Partnership paid
to such affiliates approximately $172,000 and $164,000 for the
six months ended June 30, 2010 and 2009, respectively,
which are included in operating expenses.
Affiliates of the Managing General Partner charged the
Partnership for reimbursement of accountable administrative
expenses amounting to approximately $56,000 and $102,000 for the
six months ended June 30, 2010 and 2009, respectively,
which is included in general and administrative expenses and
investment property. The portion of these reimbursements
included in investment property for the six months ended
June 30, 2010 and 2009 are construction management services
for certain capital improvement expenditures (not related to the
redevelopment project) provided by an affiliate of the Managing
General Partner of approximately $23,000 and $48,000,
respectively. In connection with the redevelopment project
completed in 2009 (as discussed in Note C), an
affiliate of the Managing General Partner received a
redevelopment supervision fee of 4% of the actual redevelopment
costs incurred. The Partnership was charged approximately
$20,000 in redevelopment supervision fees during the six months
ended June 30, 2009, which is included in investment
property. There were no such redevelopment supervision fees for
the six months ended June 30, 2010. At June 30, 2010
and December 31, 2009, approximately $233,000 and $197,000,
respectively, of accountable administrative expenses were owed
and are included in due to affiliates.
For services relating to the administration of the Partnership
and operation of the Partnerships property, the Managing
General Partner is entitled to receive payment for
non-accountable expenses up to a maximum of $100,000 per year
based upon the number of Partnership units sold, subject to
certain limitations. There were no such fees for the six months
ended June 30, 2010 and 2009, as no operating distributions
were made.
Upon the sale of the Partnerships property, NPI Equity
will be entitled to an Incentive Compensation Fee equal to a
declining percentage of the difference between the total amount
distributed to limited partners and the appraised value of their
investment at February 1, 1992. The percentage amount to be
realized by NPI Equity, if any, will be dependent upon the year
in which the property is sold. Payment of the Incentive
Compensation Fee is subordinated to the receipt by the limited
partners, of: (a) distributions from capital transaction
proceeds of an
E-6
NATIONAL
PROPERTY INVESTORS III
NOTES TO
FINANCIAL STATEMENTS (Continued)
amount equal to their appraised investment in the Partnership at
February 1, 1992, and (b) distributions from all
sources (capital transactions as well as cash flow) of an amount
equal to six percent (6%) per annum cumulative, non-compounded,
on their appraised investment in the Partnership at
February 1, 1992.
The Partnership may receive advances of funds from AIMCO
Properties, L.P., an affiliate of the Managing General Partner
and the holder of a majority of the beneficial interest of the
Partnership. During the six months ended June 30, 2010 and
2009, the Partnership received advances of approximately
$358,000 and $717,000, respectively, from AIMCO Properties, L.P.
to fund real estate taxes and redevelopment capital
improvements, respectively, at Lakeside Apartments. AIMCO
Properties, L.P. charges interest on advances under the terms
permitted by the Partnership Agreement. The advances bear
interest at the prime rate plus 2% (5.25% at June 30,
2010) per annum. Interest expense was approximately
$372,000 and $358,000 for the six months ended June 30,
2010 and 2009, respectively. During the six months ended
June 30, 2010, the Partnership repaid $500,000 of advances
and accrued interest. No such payments were made during the six
months ended June 30, 2009. At June 30, 2010 and
December 31, 2009, the total advances and accrued interest
owed to AIMCO Properties, L.P. were approximately $14,585,000
and $14,355,000, respectively, and are included in due to
affiliates. The Partnership may receive additional advances of
funds from AIMCO Properties, L.P. although AIMCO Properties,
L.P. is not obligated to provide such advances. For more
information on AIMCO Properties, L.P., including copies of its
audited balance sheet, please see its reports filed with the
Securities and Exchange Commission.
The Partnership 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. The Partnership insures its property
above the AIMCO limits through insurance policies obtained by
AIMCO from insurers unaffiliated with the Managing General
Partner. During the six months ended June 30, 2010, the
Partnership was charged by AIMCO and its affiliates
approximately $117,000 for insurance coverage and fees
associated with policy claims administration. Additional charges
will be incurred by the Partnership during 2010 as other
insurance policies renew later in the year. The Partnership was
charged by AIMCO and its affiliates approximately $99,000 for
insurance coverage and fees associated with policy claims
administration during the year ended December 31, 2009.
During 2005 the Partnership commenced with a redevelopment
project at Lakeside Apartments. The project was completed during
the second quarter of 2009 at a total cost of approximately
$22,637,000, including approximately $352,000 expended during
2009. The Partnership funded the redevelopment from operations
and advances from AIMCO Properties, L.P. During the construction
period, certain expenses were capitalized and are being
depreciated over the remaining life of the related assets. For
the six months ended June 30, 2009, these amounts included
approximately $5,000 of construction period interest,
approximately $3,000 of construction period taxes, and
approximately $5,000 of construction period operating costs. No
such costs were capitalized during the six months ended
June 30, 2010.
During September 2009, the Partnership incurred water damage to
one apartment unit as a result of a burst pipe. The damages were
approximately $24,000, including clean up costs of approximately
$17,000. The clean up costs were included in operating expenses
for the year ended December 31, 2009. During the six months
ended June 30, 2010, the Partnership received approximately
$7,000 to cover clean up costs. After writing off the fully
depreciated cost of the damaged assets, the Partnership
recognized a casualty gain of approximately $8,000 during the
six months ended June 30, 2010 due to the receipt of
insurance proceeds of approximately $8,000 during the six months
ended June 30, 2010.
During September 2008, the Partnership incurred fire and water
damage to one of the apartment buildings at Lakeside Apartments.
The damages were approximately $469,000, including clean up
costs of approximately
E-7
NATIONAL
PROPERTY INVESTORS III
NOTES TO
FINANCIAL STATEMENTS (Continued)
$214,000. The clean up costs were included in operating expense
for the year ended December 31, 2008. During the six months
ended June 30, 2009, the Partnership received approximately
$250,000 of insurance proceeds related to this event and
received additional proceeds during the remainder of 2009.
During the six months ended June 30, 2009, the Partnership
recognized a casualty gain of approximately $21,000 due to the
receipt of insurance proceeds, net of the write-off of
undepreciated damaged assets of approximately $229,000. During
the six months ended June 30, 2010, the Partnership
received approximately $15,000 of insurance proceeds for lost
rents which are included in rental income and approximately
$4,000 in clean up costs, which are included in operating
expense. The Partnership expects to receive approximately $5,000
of additional insurance proceeds related to this event.
During September 2008, the Partnership incurred damages to
several apartment units as a result of a gas leak. The damages
were approximately $78,000, including clean up costs of
approximately $49,000. During the six months ended June 30,
2009, the Partnership received approximately $68,000 of
insurance proceeds related to this event, of which approximately
$39,000 was for clean up costs. The clean up costs and
associated insurance proceeds were included in operating expense
for the year ended December 31, 2008. The Partnership
recognized a casualty gain of approximately $2,000 during the
six months ended June 30, 2009, due to the receipt of
insurance proceeds, net of the write off of undepreciated
damaged assets of approximately $27,000.
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Note E
|
Fair
Value of Financial Instruments
|
FASB ASC Topic 825, Financial Instruments, requires
disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for
which it is practicable to estimate fair value. Fair value is
defined as the amount at which the instruments could be
exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. The Partnership
believes that the carrying amount of its financial instruments
(except for mortgage notes payable) approximates their fair
value due to the short-term maturity of these instruments. The
Partnership estimates the fair value of its mortgage notes
payable by discounting future cash flows using a discount rate
commensurate with that currently believed to be available to the
Partnership for similar term, mortgage notes payable. At
June 30, 2010, the fair value of the Partnerships
mortgage notes payable at the Partnerships incremental
borrowing rate was approximately $32,256,000.
As previously disclosed, AIMCO Properties, L.P. and NHP
Management Company, both affiliates of the Managing General
Partner, were defendants in a lawsuit, filed as a collective
action in August 2003 in the United States District Court
for the District of Columbia, alleging that they willfully
violated the Fair Labor Standards Act (FLSA) by
failing to pay maintenance workers overtime for time worked in
excess of 40 hours per week (overtime claims).
The plaintiffs also contended that AIMCO Properties, L.P. and
NHP Management Company (the Defendants) failed to
compensate maintenance workers for time that they were required
to be
on-call
(on-call claims). In March 2007, the court in the
District of Columbia decertified the collective action. In July
2007, plaintiffs counsel filed individual cases in Federal
court in 22 jurisdictions. In the second quarter of 2008, AIMCO
Properties, L.P. settled the overtime cases involving 652
plaintiffs and established a framework for resolving the 88
remaining on-call claims and the attorneys
fees claimed by plaintiffs counsel. As a result, the
lawsuits asserted in the 22 Federal courts have been dismissed.
During the fourth quarter of 2008, the Partnership paid
approximately $5,000 for settlement amounts for alleged unpaid
overtime to employees who had worked at the Partnerships
investment property. At this time, the 88 remaining
on-call claims and the attorneys fees claimed
by plaintiffs counsel are not resolved. Pursuant to the
global settlement agreement, the parties selected six test
on-call
cases to be arbitrated. The parties arbitrated four
on-call claims and obtained defense verdicts on all
four. Two additional on-call claims were dismissed
with prejudice. The process now calls for the parties to attempt
to mediate the remaining on-call claims and
plaintiffs attorneys fees. Such mediation has not
yet been scheduled. The Managing General Partner is uncertain as
to the amount of any additional loss that may be allocable to
the Partnership. Therefore, the Partnership cannot estimate
whether any additional loss will occur or a potential range of
loss.
E-8
NATIONAL
PROPERTY INVESTORS III
NOTES TO
FINANCIAL STATEMENTS (Continued)
The Partnership is unaware of any other pending or outstanding
litigation matters involving it or its investment property that
are not of a routine nature arising in the ordinary course of
business.
Environmental
Various Federal, state and local laws subject property owners or
operators to liability for management, and the costs of removal
or remediation, of certain hazardous substances present on a
property, including lead-based paint. Such laws often impose
liability without regard to whether the owner or operator knew
of, or was responsible for, the release or presence of the
hazardous substances. The presence of, or the failure to manage
or remedy properly, hazardous substances may adversely affect
occupancy at affected apartment communities and the ability to
sell or finance affected properties. In addition to the costs
associated with investigation and remediation actions brought by
government agencies, and potential fines or penalties imposed by
such agencies in connection therewith, the presence of hazardous
substances on a property could result in claims by private
plaintiffs for personal injury, disease, disability or other
infirmities. Various laws also impose liability for the cost of
removal, remediation or disposal of hazardous substances through
a licensed disposal or treatment facility. Anyone who arranges
for the disposal or treatment of hazardous substances is
potentially liable under such laws. These laws often impose
liability whether or not the person arranging for the disposal
ever owned or operated the disposal facility. In connection with
the ownership, operation and management of its property, the
Partnership could potentially be liable for environmental
liabilities or costs associated with its property.
Mold
The Partnership is aware of lawsuits against owners and managers
of multifamily properties asserting claims of personal injury
and property damage caused by the presence of mold, some of
which have resulted in substantial monetary judgments or
settlements. The Partnership has only limited insurance coverage
for property damage loss claims arising from the presence of
mold and for personal injury claims related to mold exposure.
Affiliates of the Managing General Partner have implemented
policies, procedures, third-party audits and training and the
Managing General Partner believes that these measures will
prevent or eliminate mold exposure and will minimize the effects
that mold may have on residents. To date, the Partnership has
not incurred any material costs or liabilities relating to
claims of mold exposure or to abate mold conditions. Because the
law regarding mold is unsettled and subject to change the
Managing General Partner can make no assurance that liabilities
resulting from the presence of or exposure to mold will not have
a material adverse effect on the Partnerships financial
condition or results of operations.
E-9
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|
ITEM 2.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The Private Securities Litigation Reform Act of 1995 provides a
safe harbor for forward-looking statements in
certain circumstances. Certain information included in this
Quarterly Report contains or may contain information that is
forward-looking within the meaning of the federal securities
laws, including, without limitation, statements regarding the
effect of redevelopments, the Partnerships future
financial performance, including the Partnerships ability
to maintain current or meet projected occupancy and rent levels,
and the effect of government regulations. Actual results may
differ materially from those described in the forward-looking
statements and, in addition, will be affected by a variety of
risks and factors some of which are beyond the
Partnerships control including, without limitation:
financing risks, including the availability and cost of
financing and the risk that the Partnerships cash flows
from operations may be insufficient to meet required payments of
principal and interest; natural disasters and severe weather
such as hurricanes; national and local economic conditions; the
general level of interest rates; energy costs; the terms of
governmental regulations that affect the Partnerships
property and interpretations of those regulations; the
competitive environment in which the Partnership operates; real
estate risks, including fluctuations in real estate values and
the general economic climate in local markets and competition
for residents in such markets; insurance risk, including the
cost of insurance; development risks; litigation, including
costs associated with prosecuting or defending claims and any
adverse outcomes; and possible environmental liabilities,
including costs, fines or penalties that may be incurred due to
necessary remediation of contamination of properties presently
owned or previously owned by the Partnership. Readers should
carefully review the Partnerships financial statements and
the notes thereto, as well as the other documents the
Partnership files from time to time with the Securities and
Exchange Commission.
The Partnerships investment property consists of one
apartment complex, Lakeside Apartments, located in Lisle,
Illinois. The average occupancy of the property for the six
months ended June 30, 2010 and 2009 was 94% and 86%,
respectively. The Managing General Partner attributes the
increase in occupancy at Lakeside Apartments to the completion
of the redevelopment of the property, resulting in more units
available for rent.
The Partnerships financial results depend upon a number of
factors including the ability to attract and maintain tenants at
the investment property, interest rates on mortgage loans, costs
incurred to operate the investment property, general economic
conditions and weather. As part of the ongoing business plan of
the Partnership, the Managing General Partner monitors the
rental market environment of its investment property to assess
the feasibility of increasing rents, maintaining or increasing
occupancy levels and protecting the Partnership from increases
in expenses. As part of this plan, the Managing General Partner
attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, the
Managing General Partner may use rental concessions and rental
rate reductions to offset softening market conditions;
accordingly, there is no guarantee that the Managing General
Partner will be able to sustain such a plan. Further, a number
of factors that are outside the control of the Partnership, such
as the local economic climate and weather, can adversely or
positively affect the Partnerships financial results.
Results
of Operations
The Partnerships net loss for the three and six months
ended June 30, 2010 was approximately $758,000 and
$1,649,000, respectively, compared to net loss of approximately
$912,000 and $1,879,000 for the corresponding periods in 2009.
The decrease in net loss for the three months ended
June 30, 2010 is due to a decrease in total expenses,
partially offset by a decrease in total revenues. The decrease
in net loss for the six months ended June 30, 2010 is due
to a decrease in total expenses and an increase in total
revenues, partially offset by a decrease in casualty gain.
Total revenues decreased for the three months ended
June 30, 2010 due to a decrease in rental income, partially
offset by an increase in other income. Total revenues increased
for the six months ended June 30, 2010 due to an increase
in rental income. Other income remained relatively constant for
the six months ended June 30, 2010. Rental income decreased
for the three months ended June 30, 2010 due to an increase
in bad debt expense and a decrease in the average rental rate,
partially offset by an increase in occupancy at Lakeside
Apartments. Rental income increased for the six months ended
June 30, 2010 due to an increase in occupancy and a
decrease in bad debt
E-10
expense, partially offset by a decrease in the average rental
rate at Lakeside Apartments. Other income increased for the
three months ended June 30, 2010 due to an increase in
resident utility reimbursements and cleaning and damage fees,
partially offset by a decrease in lease cancellation fees.
Total expenses decreased for the three months ended
June 30, 2010 due to decreases in property tax and interest
expenses, partially offset by increases in operating and
depreciation expenses. General and administrative expenses
remained relatively constant for the three and six months ended
June 30, 2010. Total expenses decreased for the six months
ended June 30, 2010 due to decreases in property tax,
interest and general and administrative expenses, partially
offset by increases in operating and depreciation expenses.
Property tax expense decreased for both periods due to
adjustments recorded during both the second quarter of 2010 and
2009 related to property taxes due for the prior year. The
property tax expense for Lakeside Apartments is recorded based
upon an estimate of the anticipated annual amount as Lakeside
Apartments property taxes are billed a year in arrears.
For the 2009 tax year, the Partnership had recorded property tax
expense based on an expected increase in the propertys
assessed value over the 2008 value. During the second quarter of
2010, the Partnership recorded an adjustment to reduce property
tax expense by approximately $162,000 for the 2009 taxes as a
result of the successful appeal of the 2009 assessed value of
Lakeside Apartments. During the second quarter of 2009, the
Partnership recorded an adjustment to reduce property tax
expense of approximately $53,000 for the 2008 taxes as a result
of the successful appeal of the 2008 assessed value of Lakeside
Apartments. Operating expenses increased for both periods due to
increases in hazard insurance premiums and contract services due
to tree pruning, partially offset by a decrease in utilities due
to less gas usage at Lakeside Apartments. Operating expenses
also increased for the six months ended June 30, 2010 due
to an increase in roofing repairs at Lakeside Apartments.
Depreciation expense increased for both periods due to property
improvements and replacements placed into service at Lakeside
Apartments during the past twelve months, which are now being
depreciated. Interest expense decreased for both periods
primarily due to the payment of interest incurred in connection
with the escheatment of unclaimed distributions during 2009 and
due to scheduled principal payments on the mortgages encumbering
Lakeside Apartments, partially offset by an increase in the
interest on advances from AIMCO Properties, L.P. due to a higher
average advance balance.
Included in general and administrative expenses for the three
and six months ended June 30, 2010 and 2009 are management
reimbursements charged by the Managing General Partner as
allowed under the Partnership Agreement, costs associated with
the quarterly and annual communications with investors and
regulatory agencies and the annual audit required by the
Partnership Agreement.
During September 2009, the Partnership incurred water damage to
one apartment unit as a result of a burst pipe. The damages were
approximately $24,000, including clean up costs of approximately
$17,000. The clean up costs were included in operating expenses
for the year ended December 31, 2009. During the six months
ended June 30, 2010, the Partnership received approximately
$7,000 to cover clean up costs. After writing off the fully
depreciated cost of the damaged assets, the Partnership
recognized a casualty gain of approximately $8,000 during the
six months ended June 30, 2010 due to the receipt of
insurance proceeds of approximately $8,000 during the six months
ended June 30, 2010.
During September 2008, the Partnership incurred fire and water
damage to one of the apartment buildings at Lakeside Apartments.
The damages were approximately $469,000, including clean up
costs of approximately $214,000. The clean up costs were
included in operating expense for the year ended
December 31, 2008. During the six months ended
June 30, 2009, the Partnership received approximately
$250,000 of insurance proceeds related to this event and
received additional proceeds during the remainder of 2009.
During the six months ended June 30, 2009, the Partnership
recognized a casualty gain of approximately $21,000 due to the
receipt of insurance proceeds, net of the write-off of
undepreciated damaged assets of approximately $229,000. During
the six months ended June 30, 2010, the Partnership
received approximately $15,000 of insurance proceeds for lost
rents which are included in rental income and approximately
$4,000 in clean up costs, which are included in operating
expense. The Partnership expects to receive approximately $5,000
of additional insurance proceeds related to this event.
During September 2008, the Partnership incurred damages to
several apartment units as a result of a gas leak. The damages
were approximately $78,000, including clean up costs of
approximately $49,000. During the six months ended June 30,
2009, the Partnership received approximately $68,000 of
insurance proceeds related to this event, of which approximately
$39,000 was for clean up costs. The clean up costs and
associated insurance proceeds
E-11
were included in operating expense for the year ended
December 31, 2008. The Partnership recognized a casualty
gain of approximately $2,000 during the six months ended
June 30, 2009, due to the receipt of insurance proceeds,
net of the write off of undepreciated damaged assets of
approximately $27,000.
Liquidity
And Capital Resources
At June 30, 2010, the Partnership had cash and cash
equivalents of approximately $139,000 compared to approximately
$194,000 at December 31, 2009. Cash and cash equivalents
decreased approximately $55,000 due to approximately $363,000
and $211,000 of cash used in investing and financing activities,
respectively, partially offset by approximately $519,000 of cash
provided by operating activities. Cash used in investing
activities consisted of property improvements and replacements,
partially offset by insurance proceeds received. Cash used in
financing activities consisted of payments on advances from
AIMCO Properties, L.P. and principal payments on the mortgages
encumbering the Partnerships investment property,
partially offset by advances from AIMCO Properties, L.P.
The Partnership may receive advances of funds from AIMCO
Properties, L.P., an affiliate of the Managing General Partner
and the holder of a majority of the beneficial interest of the
Partnership. During the six months ended June 30, 2010 and
2009, the Partnership received advances of approximately
$358,000 and $717,000, respectively, from AIMCO Properties, L.P.
to fund real estate taxes and redevelopment capital
improvements, respectively, at Lakeside Apartments. AIMCO
Properties, L.P. charges interest on advances under the terms
permitted by the Partnership Agreement. The advances bear
interest at the prime rate plus 2% (5.25% at June 30,
2010) per annum. Interest expense was approximately
$372,000 and $358,000 for the six months ended June 30,
2010 and 2009, respectively. During the six months ended
June 30, 2010, the Partnership repaid $500,000 of advances
and accrued interest. No such payments were made during the six
months ended June 30, 2009. At June 30, 2010 and
December 31, 2009, the total advances and accrued interest
owed to AIMCO Properties, L.P. were approximately $14,585,000
and $14,355,000, respectively, and are included in due to
affiliates. The Partnership may receive additional advances of
funds from AIMCO Properties, L.P. although AIMCO Properties,
L.P. is not obligated to provide such advances. For more
information on AIMCO Properties, L.P., including copies of its
audited balance sheet, please see its reports filed with the
Securities and Exchange Commission.
The sufficiency of existing liquid assets to meet future
liquidity and capital expenditure requirements is directly
related to the level of capital expenditures required at the
property to adequately maintain the physical assets and other
operating needs of the Partnership and to comply with Federal,
state, and local legal and regulatory requirements. The Managing
General Partner monitors developments in the area of legal and
regulatory compliance. Capital improvements planned for the
Partnerships property are detailed below.
During the six months ended June 30, 2010, the Partnership
completed approximately $389,000 of capital improvements at
Lakeside Apartments, consisting primarily of building
improvements, bath upgrades, water heater, air conditioning unit
and floor covering replacements. These improvements were funded
from operating cash flow and insurance proceeds. The Partnership
regularly evaluates the capital improvement needs of the
property. While the Partnership has no material commitments for
property improvements and replacements, certain routine capital
expenditures are anticipated during 2010. Such capital
expenditures will depend on the physical condition of the
property as well as cash flow generated by the property.
Capital expenditures will be incurred only if cash is available
from operations, Partnership reserves or advances from AIMCO
Properties, L.P., although AIMCO Properties, L.P. is not
obligated to fund such advances. To the extent that such capital
improvements are completed, the Partnerships distributable
cash flow, if any, may be adversely affected at least in the
short term.
The Partnerships assets are thought to be generally
sufficient for any near-term needs (exclusive of capital
improvements and repayment of amounts owed to affiliates) of the
Partnership. The mortgage indebtedness encumbering Lakeside
Apartments of approximately $29,233,000 matures in January 2022,
at which time balloon payments of approximately $22,976,000 will
be due. The Managing General Partner will attempt to refinance
such indebtedness
and/or sell
the property prior to such maturity dates. If the property
cannot be refinanced or sold for a sufficient amount, the
Partnership will risk losing such property through foreclosure.
E-12
There were no distributions during the six months ended
June 30, 2010 and 2009. Future cash distributions will
depend on the levels of net cash generated from operations, the
timing of debt maturities, property sale
and/or
refinancings. The Partnerships cash available for
distribution is reviewed on a monthly basis. In light of the
amounts accrued and payable to affiliates of the Managing
General Partner, it is unlikely that the Partnership will
generate sufficient funds from operations after capital
expenditures to permit any distributions to its partners in 2010
or subsequent periods.
Other
In addition to its indirect ownership of the general partner
interests in the Partnership, AIMCO and its affiliates owned
37,419 limited partnership units (the Units) in the
Partnership representing 77.89% of the outstanding Units at
June 30, 2010. A number of these Units were acquired
pursuant to tender offers made by AIMCO or its affiliates. It is
possible that AIMCO or its affiliates will acquire additional
Units in exchange for cash or a combination of cash and units in
AIMCO Properties, L.P., the operating partnership of AIMCO,
either through private purchases or tender offers. Pursuant to
the Partnership Agreement, Unit holders holding a majority of
the Units are entitled to take action with respect to a variety
of matters that include, but are not limited to, voting on
certain amendments to the Partnership Agreement and voting to
remove the Managing General Partner. As a result of its
ownership of 77.89% of the outstanding Units, AIMCO and its
affiliates are in a position to influence all voting decisions
with respect to the Partnership. However, with respect to the
21,380 Units acquired on January 19, 1996, AIMCO IPLP,
L.P., an affiliate of the Managing General Partner and of AIMCO,
agreed to vote such Units: (i) against any increase in
compensation payable to the Managing General Partner or to its
affiliates; and (ii) on all other matters submitted by it
or its affiliates, in proportion to the vote cast by third party
unitholders. Except for the foregoing, no other limitations are
imposed on AIMCO IPLP, L.P.s, AIMCOs or any other
affiliates right to vote each Unit held. Although the
Managing General Partner owes fiduciary duties to the limited
partners of the Partnership, the Managing General Partner also
owes fiduciary duties to AIMCO as its sole stockholder. As a
result, the duties of the Managing General Partner, as managing
general partner, to the Partnership and its limited partners may
come into conflict with the duties of the Managing General
Partner to AIMCO as its sole stockholder.
Critical
Accounting Policies and Estimates
The financial statements are prepared in accordance with
accounting principles generally accepted in the United States,
which require the Partnership to make estimates and assumptions.
The Partnership believes that of its significant accounting
policies, the following may involve a higher degree of judgment
and complexity.
Impairment
of Long-Lived Asset
Investment property is recorded at cost, less accumulated
depreciation, unless the carrying amount of the asset is not
recoverable. If events or circumstances indicate that the
carrying amount of the property may not be recoverable, the
Partnership will make an assessment of its recoverability by
comparing the carrying amount to the Partnerships estimate
of the undiscounted future cash flows, excluding interest
charges, of the property. If the carrying amount exceeds the
estimated aggregate undiscounted future cash flows, the
Partnership would recognize an impairment loss to the extent the
carrying amount exceeds the estimated fair value of the property.
Real property investment is subject to varying degrees of risk.
Several factors may adversely affect the economic performance
and value of the Partnerships investment property. These
factors include, but are not limited to, general economic
climate; competition from other apartment communities and other
housing options; local conditions, such as loss of jobs or an
increase in the supply of apartments that might adversely affect
apartment occupancy or rental rates; changes in governmental
regulations and the related cost of compliance; increases in
operating costs (including real estate taxes) due to inflation
and other factors, which may not be offset by increased rents;
and changes in tax laws and housing laws, including the
enactment of rent control laws or other laws regulating
multi-family housing; and changes in interest rates and the
availability of financing. Any adverse changes in these and
other factors could cause an impairment of the
Partnerships asset.
E-13
Capitalized
Costs Related to Redevelopment and Construction Projects
The Partnership capitalizes costs incurred in connection with
capital expenditure activities, including redevelopment and
construction projects. Costs including interest, property taxes
and operating costs associated with redevelopment and
construction projects are capitalized during periods in which
redevelopment and construction projects are in progress.
Included in these capitalized costs are payroll costs associated
with time spent by site employees in connection with the
planning, execution and control of all capital expenditure
activities at the property level.
Revenue
Recognition
The Partnership generally leases apartment units for
twelve-month terms or less. The Partnership will offer rental
concessions during particularly slow months or in response to
heavy competition from other similar complexes in the area.
Rental income attributable to leases, net of any concessions, is
recognized on a straight-line basis over the term of the lease.
The Partnership evaluates all accounts receivable from residents
and establishes an allowance, after the application of security
deposits, for accounts greater than 30 days past due on
current tenants and all receivables due from former tenants.
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ITEM 4T.
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CONTROLS
AND PROCEDURES
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(a) Disclosure
Controls and Procedures.
The Partnerships management, with the participation of the
principal executive officer and principal financial officer of
the Managing General Partner, who are the equivalent of the
Partnerships principal executive officer and principal
financial officer, respectively, has evaluated the effectiveness
of the Partnerships disclosure controls and procedures (as
defined in
Rules 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934, as amended (the
Exchange Act)) as of the end of the period covered
by this report. Based on such evaluation, the principal
executive officer and principal financial officer of the
Managing General Partner, who are the equivalent of the
Partnerships principal executive officer and principal
financial officer, respectively, have concluded that, as of the
end of such period, the Partnerships disclosure controls
and procedures are effective.
(b) Changes
in Internal Control Over Financial Reporting.
There has been no change in the Partnerships internal
control over financial reporting (as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) during the fiscal quarter to which this
report relates that has materially affected, or is reasonably
likely to materially affect, the Partnerships internal
control over financial reporting.
E-14
PART II
OTHER INFORMATION
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ITEM 1.
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LEGAL
PROCEEDINGS
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As previously disclosed, AIMCO Properties, L.P. and NHP
Management Company, both affiliates of the Managing General
Partner, were defendants in a lawsuit, filed as a collective
action in August 2003 in the United States District Court
for the District of Columbia, alleging that they willfully
violated the Fair Labor Standards Act (FLSA) by
failing to pay maintenance workers overtime for time worked in
excess of 40 hours per week (overtime claims).
The plaintiffs also contended that AIMCO Properties, L.P. and
NHP Management Company (the Defendants) failed to
compensate maintenance workers for time that they were required
to be
on-call
(on-call claims). In March 2007, the court in the
District of Columbia decertified the collective action. In July
2007, plaintiffs counsel filed individual cases in Federal
court in 22 jurisdictions. In the second quarter of 2008, AIMCO
Properties, L.P. settled the overtime cases involving 652
plaintiffs and established a framework for resolving the 88
remaining on-call claims and the attorneys
fees claimed by plaintiffs counsel. As a result, the
lawsuits asserted in the 22 Federal courts have been dismissed.
During the fourth quarter of 2008, the Partnership paid
approximately $5,000 for settlement amounts for alleged unpaid
overtime to employees who had worked at the Partnerships
investment property. At this time, the 88 remaining
on-call claims and the attorneys fees claimed
by plaintiffs counsel are not resolved. Pursuant to the
global settlement agreement, the parties selected six test
on-call
cases to be arbitrated. The parties arbitrated four
on-call claims and obtained defense verdicts on all
four. Two additional on-call claims were dismissed
with prejudice. The process now calls for the parties to attempt
to mediate the remaining on-call claims and
plaintiffs attorneys fees. Such mediation has not
yet been scheduled. The Managing General Partner is uncertain as
to the amount of any additional loss that may be allocable to
the Partnership. Therefore, the Partnership cannot estimate
whether any additional loss will occur or a potential range of
loss.
See Exhibit Index.
The agreements included as exhibits to this
Form 10-Q
contain representations and warranties by each of the parties to
the applicable agreement. These representations and warranties
have been made solely for the benefit of the other parties to
the applicable agreement and:
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should not in all instances be treated as categorical statements
of fact, but rather as a way of allocating the risk to one of
the parties if those statements prove to be inaccurate;
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have been qualified by disclosures that were made to the other
party in connection with the negotiation of the applicable
agreement, which disclosures are not necessarily reflected in
the agreement;
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may apply standards of materiality in a way that is different
from what may be viewed as material to an investor; and
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were made only as of the date of the applicable agreement or
such other date or dates as may be specified in the agreement
and are subject to more recent developments.
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Accordingly, these representations and warranties may not
describe the actual state of affairs as of the date they were
made or at any other time. The Partnership acknowledges that,
notwithstanding the inclusion of the foregoing cautionary
statements, it is responsible for considering whether additional
specific disclosures of material information regarding material
contractual provisions are required to make the statements in
this
Form 10-Q
not misleading. Additional information about the Partnership may
be found elsewhere in this
Form 10-Q
and the Partnerships other public filings, which are
available without charge through the SECs website at
http://www.sec.gov.
E-15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
NATIONAL PROPERTY INVESTORS III
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By:
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NPI EQUITY INVESTMENTS, INC.
Managing General Partner
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Steven D. Cordes
Senior Vice President
Date: August 11, 2010
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By:
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/s/ Stephen
B. Waters
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Stephen B. Waters
Senior Director of Partnership Accounting
Date: August 11, 2010
E-16
NATIONAL
PROPERTY INVESTORS III
EXHIBIT INDEX
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Exhibit
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Description of Exhibit
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2
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.1
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NPI, Inc. Stock Purchase Agreement dated as of August 17, 1995,
incorporated by reference to Exhibit 2 to the Partnerships
Current Report on Form 8-K dated August 17, 1995.
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3
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.4
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(a) Agreement of Limited Partnership incorporated by reference
to Exhibit A to the Prospectus of the Partnership dated October
24, 1979 contained in the Partnerships Registration
Statement on
Form S-11
(Reg. No. 2-63733).
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3
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.4
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(b) Amendments to Agreement of Limited Partnership dated as of
November 25, 1980 incorporated by reference to Exhibits 3 and 4
to the Partnerships Annual Report on Form 10-K for the
year ended December 31, 1981.
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3
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.4
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(c) Amendments to the Agreement of Limited Partnership
incorporated by reference to the Definitive Proxy Statement of
the Partnership dated April 3, 1981.
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3
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.4
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(d) Amendments to the Agreement of Limited Partnership
incorporated by reference to the Statement Furnished in
Connection With The Solicitation of Consents of the Partnership
dated August 28, 1992.
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3
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.4
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(e) Amendment to the Limited Partnership Agreement dated
December 22, 2005 incorporated by reference to the
Registrants Annual Report on Form 10-KSB dated December
31, 2005.
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10
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.11
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Form Of Amended and Restated Multifamily Mortgage, Assignment of
Rents and Security Agreement between Federal Home Loan Mortgage
Corporation and National Property Investors III, a California
limited partnership, dated March 30, 2007. Incorporated by
reference to the Registrants Current Report on Form 8-K
dated March 30, 2007.
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10
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.12
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Form of Amended and Restated Multifamily Note (Recast
Transaction) between Federal Home Loan Mortgage Corporation and
National Property Investors III, a California limited
partnership, dated March 30, 2007. Incorporated by
reference to the Registrants Current Report on Form 8-K
dated March 30, 2007.
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10
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.13
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Form of Amended and Restated Guaranty (Recast Transaction)
between AIMCO Properties, L.P., a Delaware limited partnership
and Federal Home Loan Mortgage Corporation, dated March 30,
2007. Incorporated by reference to the Registrants Current
Report on Form 8-K dated March 30, 2007.
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10
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.14
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Form of Multifamily Mortgage, Assignment of Rents and Security
Agreement between Capmark Bank and National Property Investors
III, a California limited partnership, dated March 30, 2007.
Incorporated by reference to the Registrants Current
Report on Form 8-K dated March 30, 2007.
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10
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.15
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Form of Multifamily Note between Capmark Bank and National
Property Investors III, a California limited partnership, dated
March 30, 2007. Incorporated by reference to the
Registrants Current Report on Form 8-K dated March 30,
2007.
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10
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.16
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Form of Guaranty between AIMCO Properties, L.P., a Delaware
limited partnership and Capmark Bank, dated March 30, 2007.
Incorporated by reference to the Registrants Current
Report on Form 8-K dated March 30, 2007.
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10
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.17
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Form of Rehabilitation Agreement between National Property
Investors III, a California limited partnership and Capmark
Bank, dated March 30, 2007. Incorporated by reference to the
Registrants Current Report on Form 8-K dated March 30,
2007.
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31
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.1
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Certification of equivalent of Chief Executive Officer pursuant
to Securities Exchange Act Rules
13a-14(a)/15d-14(a),
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
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31
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.2
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Certification of equivalent of Chief Financial Officer pursuant
to Securities Exchange Act Rules
13a-14(a)/15d-14(a),
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
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32
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.1
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Certification of the equivalent of the Chief Executive Officer
and Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
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E-17
Exhibit 31.1
CERTIFICATION
I, Steven D. Cordes, certify that:
1. I have reviewed this quarterly report on
Form 10-Q
of National Property Investors III;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
and internal control over financial reporting (as defined in
Exchange Act Rules
13a-15(f)
and
15d-15(f)),
for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial
reporting, or caused internal control over financial reporting
to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the
registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an
annual report) that has materially affected or is reasonably
likely to materially affect, the registrants internal
control over financial reporting; and
5. The registrants other certifying officer(s) and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of the registrants board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial reporting.
Steven D. Cordes
Senior Vice President of NPI Equity Investments, Inc.,
equivalent of the chief executive officer of the
Partnership
Date: August 11, 2010
E-18
Exhibit 31.2
CERTIFICATION
I, Stephen B. Waters, certify that:
1. I have reviewed this quarterly report on
Form 10-Q
of National Property Investors III;
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and
other financial information included in this report, fairly
present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
and internal control over financial reporting (as defined in
Exchange Act Rules
13a-15(f)
and
15d-15(f)),
for the registrant and have:
(a) Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information
relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial
reporting, or caused internal control over financial reporting
to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the
registrants internal control over financial reporting that
occurred during the registrants most recent fiscal quarter
(the registrants fourth fiscal quarter in the case of an
annual report) that has materially affected or is reasonably
likely to materially affect, the registrants internal
control over financial reporting; and
5. The registrants other certifying officer(s) and I
have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants
auditors and the audit committee of the registrants board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in
the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrants ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial reporting.
Stephen B. Waters
Senior Director of Partnership Accounting of NPI Equity
Investments, Inc., equivalent of the chief financial officer of
the Partnership
Date: August 11, 2010
E-19
Exhibit 32.1
Certification
of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on
Form 10-Q
of National Property Investors III (the
Partnership), for the quarterly period ended
June 30, 2010 as filed with the Securities and Exchange
Commission on the date hereof (the Report), Steven
D. Cordes, as the equivalent of the Chief Executive Officer of
the Partnership, and Stephen B. Waters, as the equivalent of the
Chief Financial Officer of the Partnership, each hereby
certifies, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition and
results of operations of the Partnership.
Name: Steven D. Cordes
Date: August 11, 2010
Name: Stephen B. Waters
Date: August 11, 2010
This certification is furnished with this Report pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 and shall not
be deemed filed by the Partnership for purposes of
Section 18 of the Securities Exchange Act of 1934, as
amended.
E-20
ANNEX F
AMENDMENT
TO
PARTNERSHIP AGREEMENT
OF
NATIONAL PROPERTY INVESTORS III
This AMENDMENT TO THE PARTNERSHIP AGREEMENT OF NATIONAL PROPERTY
INVESTORS III (this Amendment) is
entered into as
of ,
2010, by and among NPI Equity Investments, Inc., a Florida
corporation, in its capacity as managing general partner (the
Managing General Partner), and each of
the Limited Partners. All capitalized terms used in this
Amendment but not otherwise defined herein shall have the
respective meanings given to them in the Partnership Agreement
(as defined below).
Recitals
WHEREAS, National Property Investors III, a California limited
partnership (the Partnership), is
governed pursuant to the terms of that certain Partnership
Agreement, dated as of February 1, 1979, as amended and
restated July 1, 1979 and as further amended to date (the
Partnership Agreement);
WHEREAS, the Managing General Partner has obtained consents of
the requisite
percentage-in-interest
of the Limited Partners (i.e., Limited Partners who own more
than 50% of the outstanding Units), necessary to amend the
Partnership Agreement as provided in this Amendment.
NOW, THEREFORE, in consideration of the premises, the agreement
of the parties herein contained, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged and confessed, the parties hereby agree as follows:
1. Amendments to the Partnership
Agreement. The Partnership Agreement is
hereby amended to delete Section 15.3.27 thereof.
2. Miscellaneous.
(a) Effect of Amendment. In the
event of any inconsistency between the terms of the Partnership
Agreement and the terms of this Amendment, the terms of this
Amendment shall prevail. In the event of any conflict of
apparent conflict between any of the provisions of the
Partnership Agreement as amended by this Amendment, such
conflicting provisions shall be reconciled and construed to give
effect to the terms and intent of this Amendment.
(b) Ratification. Except as
otherwise expressly modified hereby, the Partnership Agreement
shall remain in full force and effect, and all of the terms and
provisions of the Partnership Agreement, as herein modified, are
hereby ratified and reaffirmed.
(c) Governing Law. THIS AMENDMENT
SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT
TO ITS PRINCIPLES OF CONFLICTS OF LAW.
[Remainder
of page intentionally left blank.]
F-1
IN WITNESS WHEREOF, the parties have executed this Amendment as
of the date first set forth above.
The Managing General Partner:
NPI EQUITY INVESTMENTS, INC.
a Florida corporation
Name:
Title:
The Limited Partners:
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By:
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NPI Equity Investments, Inc.
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attorney-in-fact
Name:
Title:
F-2
ANNEX G
SUMMARY
OF APPRAISALS TABLE
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Lakeside Apartments
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Valuation Methodology
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Appraised Value
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Material Assumptions
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(as of April 21,
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2010)
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Income Capitalization Approach Direct
Capitalization Analysis
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$
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48,800,000
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potential gross income from apartment
unit rentals of $545,422 per month or $6,545,064 for the
appraised year;
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a loss to lease allowance of 1.5% of the
gross rent potential;
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rent concessions of 1.0% of the gross
rent potential;
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a combined vacancy and credit loss
allowance of 7.0%;
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estimated utility recovery of $810 per
unit;
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other income of $700 per unit;
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projected total expenses (including
reserves) of $3,363,869;
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capitalization rate of 7.0%.
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Sales Comparison Approach
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$
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48,300,000
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CRA examined and analyzed comparable
sales of five properties in the influencing market.
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The sales reflected unadjusted sales
prices ranging from $47,222 to $154,068 per unit. After
adjustment, the comparable sales illustrated a value range of
$59,028 to $96,797 per unit, with mean and median adjusted sale
prices of $82,534 and $82,800 per unit, respectively.
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The two comparable sales which required
the least adjustment were accorded most significance in the
analysis. The adjusted indicators exhibited by these two sales
ranged from $81,606 to $96,797 per unit.
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CRA estimated a value of $85,000 per
unit for Lakeside Apartments.
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Applied to the Lakeside Apartments
586 units, this resulted in CRAs total value estimate
for Lakeside Apartments of approximately $48,300,000.
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G-1
PART II
INFORMATION
NOT REQUIRED IN THE PROSPECTUS
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Item 20.
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Indemnification
of Directors and Officers.
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Aimcos charter limits the liability of Aimcos
directors and officers to Aimco and its stockholders to the
fullest extent permitted from time to time by Maryland law.
Maryland law presently permits the liability of directors and
officers to a corporation or its stockholders for money damages
to be limited, except (i) to the extent that it is proved
that the director or officer actually received an improper
benefit or profit in money, property or services for the amount
of the benefit or profit in money, property or services actually
received, or (ii) to the extent that a judgment or other
final adjudication adverse to the director or officer is entered
in a proceeding based on a finding that the directors or
officers action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause
of action adjudicated in the proceeding. This provision does not
limit the ability of Aimco or its stockholders to obtain other
relief, such as an injunction or rescission.
Aimcos charter and bylaws require Aimco to indemnify its
directors and officers and permits Aimco to indemnify certain
other parties to the fullest extent permitted from time to time
by Maryland law. Maryland law permits a corporation to indemnify
its directors, officers and certain other parties against
judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to
which they may be made a party by reason of their service to or
at the request of the corporation, unless it is established that
(i) the act or omission of the indemnified party was
material to the matter giving rise to the proceeding and was
committed in bad faith or was the result of active and
deliberate dishonesty, (ii) the indemnified party actually
received an improper personal benefit in money, property or
services or (iii) in the case of any criminal proceeding,
the indemnified party had reasonable cause to believe that the
act or omission was unlawful. Indemnification may be made
against judgments, penalties, fines, settlements and reasonable
expenses actually incurred by the director or officer in
connection with the proceeding; provided, however, that if the
proceeding is one by or in the right of the corporation,
indemnification may not be made with respect to any proceeding
in which the director or officer has been adjudged to be liable
to the corporation. In addition, a director or officer may not
be indemnified with respect to any proceeding charging improper
personal benefit to the director or officer, whether or not
involving action in the directors or officers
official capacity, in which the director or officer was adjudged
to be liable on the basis that personal benefit was improperly
received. The termination of any proceeding by conviction, or
upon a plea of nolo contendere or its equivalent, or an entry of
any order of probation prior to judgment, creates a rebuttable
presumption that the director or officer did not meet the
requisite standard of conduct required for indemnification to be
permitted. It is the position of the SEC that indemnification of
directors and officers for liabilities arising under the
Securities Act is against public policy and is unenforceable
pursuant to Section 14 of the Securities Act.
Aimco has entered into agreements with certain of its officers,
pursuant to which Aimco has agreed to indemnify such officers to
the fullest extent permitted by applicable law.
Section 10.6 of Apartment Investment and Management Company
2007 Stock Award and Incentive Plan, or the 2007 Plan,
specifically provides that, to the fullest extent permitted by
law, each of the members of the Board of Directors of Aimco, the
Compensation Committee of the board of directors and each of the
directors, officers and employees of Aimco, any Aimco
subsidiary, Aimco OP and any subsidiary of the Aimco OP shall be
held harmless and indemnified by Aimco for any liability, loss
(including amounts paid in settlement), damages or expenses
(including reasonable attorneys fees) suffered by virtue
of any determinations, acts or failures to act, or alleged acts
or failures to act, in connection with the administration of the
2007 Plan, so long as such person is not determined by a final
adjudication to be guilty of willful misconduct with respect to
such determination, action or failure to act.
The Aimco OP partnership agreement requires Aimco OP to
indemnify its directors and officers to the fullest extent
authorized by applicable law against any and all losses, claims,
damages, liabilities, joint or several, expenses (including,
without limitation, attorneys fees and other legal fees
and expenses), judgments, fines, settlements and other amounts
arising from any and all claims, demands, actions, suits or
proceedings, civil, criminal, administrative or investigative,
that relate to the operations of Aimco OP. Such indemnification
continues after the director or officer ceases to be a director
or officer. The right to indemnification includes the right to
be paid by Aimco OP the expenses incurred in defending any
proceeding in advance of its final disposition upon the delivery
of an
II-1
undertaking by or on behalf of the indemnitee to repay all
amounts advanced if a final judicial decision is rendered that
such indemnitee did not meet the standard of conduct permitting
indemnification under the Aimco OP partnership agreement or
applicable law.
Aimco OP maintains insurance, at its expense, to protect against
any liability or loss, regardless of whether any director or
officer is entitled to indemnification under the Aimco OP
partnership agreement or applicable law.
Directors and officers of the General Partner are also officers
of Aimco, and as such, are entitled to indemnification as
described above with respect to the directors and officers of
Aimco.
(a) Exhibits. An index to exhibits
appears below and is incorporated herein by reference. The
agreements included as exhibits to this registration statement
constitute disclosure under the federal securities laws.
However, some of the agreements contain representations and
warranties by of the parties thereto which have been made for
the benefit of other parties thereto and:
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should not in all instances be treated as categorical statements
of fact, but rather as a way of allocating the risk to one of
the parties if those statements prove to be inaccurate;
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have been qualified by disclosures that were made to the other
party in connection with the negotiation of the applicable
agreement, which disclosures are not necessarily reflected in
the agreement;
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may apply standards of materiality in a way that is different
from what may be viewed as material to you or other
investors; and
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were made only as of the date of the applicable agreement or
such other date or dates as may be specified in the agreement
and are subject to more recent developments.
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Accordingly, these representations and warranties may not
describe the actual state of affairs as of the date they were
made or at any other time. Aimco and Aimco OP acknowledge that,
notwithstanding the inclusion of the foregoing cautionary
statements, they are responsible for considering whether
additional specific disclosures of material information
regarding material contractual provisions are required to make
the statements in this registration statement not misleading.
Additional information about Aimco and Aimco OP may be found
elsewhere in this registration statement and Aimcos and
Aimco OPs other public filings, which are available
without charge through the SECs website at
http://www.sec.gov.
See Where You Can Find Additional Information in the
information statement/prospectus that forms a part of this
registration statement.
(b) Financial Statement Schedules. None
required.
(c) Reports, Opinions or
Appraisals. Appraisal report by Cogent Realty
Advisors, LLC related to Lakeside Apartments is filed as an
exhibit to the registration statement filed with the SEC.
(a) Each of the undersigned registrants hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by
section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than a
II-2
20% change in the maximum aggregate offering price set forth in
the Calculation of Registration Fee table in the
effective registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under
the Securities Act of 1933 to any purchaser, the undersigned
registrant undertakes that each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an
offering, other than registration statements relying on
Rule 430B or other than prospectuses filed in reliance on
Rule 430A (§ 230.430A of this chapter), shall be
deemed to be part of and included in the registration statement
as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in
a document incorporated or deemed incorporated by reference into
the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or
prospectus that was part of the registration statement or made
in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability of the
registrant under the Securities Act to any purchaser in the
initial distribution of the securities:
The undersigned registrant undertakes that in a primary offering
of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method
used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a
seller to the purchaser and will be considered to offer or sell
such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the
undersigned registrant relating to the offering required to be
filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used
or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus
relating to the offering containing material information about
the undersigned registrant or its securities provided by or on
behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the
offering made by the undersigned registrant to the purchaser.
(6) That for purposes of determining any liability under
the Securities Act of 1933, each filing of the Registrants
annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plans
annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(7) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information
II-3
called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the
applicable form.
(8) That every prospectus (i) that is filed pursuant
to paragraph (7) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of
the Securities Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(9) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
(10) To respond to requests for information that is
incorporated by reference into the information
statement/prospectus pursuant to Item 4, 10(b), 11, or 13
of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the
request.
(11) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, State of Colorado,
October 27, 2010.
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
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|
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By:
|
/s/ Ernest
M. Freedman
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Name: Ernest M. Freedman
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|
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Title:
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Executive Vice President, Chief Financial Officer
|
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the dates indicated.
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Signature
|
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Title
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Date
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*
Terry
Considine
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|
Chairman of the Board and Chief Executive Officer (principal
executive officer)
|
|
October 27, 2010
|
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|
|
|
|
/s/ Ernest
M. Freedman
Ernest
M. Freedman
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|
Executive Vice President and Chief Financial Officer (principal
financial officer)
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|
October 27, 2010
|
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|
|
|
*
Paul
Beldin
|
|
Senior Vice President and Chief Accounting Officer (principal
accounting officer)
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|
October 27, 2010
|
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|
|
|
|
*
James
N. Bailey
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Director
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|
October 27, 2010
|
|
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|
|
*
Richard
S. Ellwood
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Director
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|
October 27, 2010
|
|
|
|
|
|
*
Thomas
L. Keltner
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Director
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|
October 27, 2010
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|
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|
*
J.
Landis Martin
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Director
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October 27, 2010
|
|
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|
|
*
Robert
A. Miller
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Director
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|
October 27, 2010
|
|
|
|
|
|
*
Michael
A. Stein
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Director
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|
October 27, 2010
|
II-5
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Signature
|
|
Title
|
|
Date
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|
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|
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*
Kathleen
M. Nelson
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Director
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|
October 27, 2010
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|
|
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|
*By:
|
|
/s/ Ernest
M. Freedman
Ernest
M. Freedman
Attorney-in-Fact
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|
|
|
October 27, 2010
|
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Denver, State of Colorado,
October 27, 2010.
AIMCO PROPERTIES, L.P.
By: AIMCO-GP, Inc., its General Partner
|
|
|
|
By:
|
/s/ ERNEST
M. FREEDMAN
|
Name: Ernest M. Freedman
|
|
|
|
Title:
|
Executive Vice President, Chief Financial Officer
|
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons
in the capacities and on the dates indicated.
|
|
|
|
|
|
|
Signature
|
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Title
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Date
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|
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|
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*
Terry
Considine
|
|
Chairman of the Board and Chief Executive Officer of the
registrants general partner (principal executive officer)
|
|
October 27, 2010
|
|
|
|
|
|
*
Miles
Cortez
|
|
Director, Executive Vice President and Chief Administrative
Officer of the registrants general partner
|
|
October 27, 2010
|
|
|
|
|
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/s/ Ernest
M. Freedman
Ernest
M. Freedman
|
|
Executive Vice President and Chief Financial Officer of the
registrants general partner (principal financial officer)
|
|
October 27, 2010
|
|
|
|
|
|
*
Paul
Beldin
|
|
Senior Vice President and Chief Accounting Officer of the
registrants general partner (principal accounting officer)
|
|
October 27, 2010
|
|
|
|
|
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|
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*By:
|
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/s/ Ernest
M. Freedman
Ernest
M. Freedman
Attorney-in-Fact
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|
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October 27, 2010
|
II-7
INDEX TO
EXHIBITS(1)(2)
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Exhibit
|
|
|
Number
|
|
Description
|
|
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3
|
.1
|
|
Charter of Apartment Investment and Management Company
(Exhibit 3.1 to Aimcos Annual Report on
Form 10-K
for the year ended December 31, 2008, is incorporated
herein by this reference)
|
|
3
|
.2
|
|
Amended and Restated Bylaws of Apartment Investment and
Management Company (Exhibit 3.2 to Aimcos Current
Report on
Form 8-K
dated February 4, 2010, is incorporated herein by this
reference)
|
|
3
|
.3
|
|
Fourth Amended and Restated Agreement of Limited Partnership of
AIMCO Properties, L.P., dated as of July 29, 1994, as
amended and restated as of February 28, 2007
(Exhibit 10.1 to Aimcos Annual Report on
Form 10-K
for the year ended December 31, 2006, is incorporated
herein by this reference)
|
|
3
|
.4
|
|
First Amendment to Fourth Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
December 31, 2007 (Exhibit 10.1 to Aimcos
Current Report on
Form 8-K,
dated December 31, 2007, is incorporated herein by this
reference)
|
|
3
|
.5
|
|
Second Amendment to the Fourth Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
July 30, 2009 (Exhibit 10.1 to Aimcos Quarterly
Report on
Form 10-Q
for the quarterly period ended June 30, 2009, is
incorporated herein by this reference)
|
|
3
|
.6
|
|
Third Amendment to Fourth Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of
December 31, 2007 (Exhibit 10.1 to Aimcos
Current Report on
Form 8-K,
dated September 3, 2010, is incorporated herein by this
reference)
|
|
5
|
.1
|
|
Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding the validity of the Common OP Units being
registered.
|
|
5
|
.2
|
|
Opinion of DLA Piper regarding the validity of the Class A
Common Stock issuable upon redemption of the Common OP
Units
|
|
8
|
.1
|
|
Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
regarding certain tax matters
|
|
10
|
.1
|
|
Amended and Restated Secured Credit Agreement, dated as of
November 2, 2004, by and among Aimco, AIMCO Properties,
L.P., AIMCO/Bethesda Holdings, Inc., and NHP Management Company
as the borrowers and Bank of America, N.A., Keybank National
Association, and the Lenders listed therein (Exhibit 4.1 to
Aimcos Quarterly Report on
Form 10-Q
for the quarterly period ended September 30, 2004, is
incorporated herein by this reference)
|
|
10
|
.2
|
|
First Amendment to Amended and Restated Secured Credit
Agreement, dated as of June 16, 2005, by and among Aimco,
AIMCO Properties, L.P., AIMCO/Bethesda Holdings, Inc., and NHP
Management Company as the borrowers and Bank of America, N.A.,
Keybank National Association, and the Lenders listed therein
(Exhibit 10.1 to Aimcos Current Report on
Form 8-K,
dated June 16, 2005, is incorporated herein by this
reference)
|
|
10
|
.3
|
|
Second Amendment to Amended and Restated Senior Secured Credit
Agreement, dated as of March 22, 2006, by and among Aimco,
AIMCO Properties, L.P., and AIMCO/Bethesda Holdings, Inc., as
the borrowers, and Bank of America, N.A., Keybank National
Association, and the lenders listed therein (Exhibit 10.1
to Aimcos Current Report on
Form 8-K,
dated March 22, 2006, is incorporated herein by this
reference)
|
|
10
|
.4
|
|
Third Amendment to Senior Secured Credit Agreement, dated as of
August 31, 2007, by and among Apartment Investment and
Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda
Holdings, Inc., as the Borrowers, the pledgors and guarantors
named therein, Bank of America, N.A., as administrative agent
and Bank of America, N.A., Keybank National Association and the
other lenders listed therein (Exhibit 10.1 to Aimcos
Current Report on
Form 8-K,
dated August 31, 2007, is incorporated herein by this
reference)
|
|
10
|
.5
|
|
Fourth Amendment to Senior Secured Credit Agreement, dated as of
September 14, 2007, by and among Apartment Investment and
Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda
Holdings, Inc., as the Borrowers, the pledgors and guarantors
named therein, Bank of America, N.A., as administrative agent
and Bank of America, N.A., Keybank National Association and the
other lenders listed therein (Exhibit 10.1 to Aimcos
Current Report on
Form 8-K,
dated September 14, 2007, is incorporated herein by this
reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.6
|
|
Fifth Amendment to Senior Secured Credit Agreement, dated as of
September 9, 2008, by and among Apartment Investment and
Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda
Holdings, Inc., as the Borrowers, the pledgors and guarantors
named therein, Bank of America, N.A., as administrative agent
and Bank of America, N.A., Keybank National Association and the
other lenders listed therein (Exhibit 10.1 to Aimcos
Current Report on
Form 8-K,
dated September 11, 2008, is incorporated herein by this
reference)
|
|
10
|
.7
|
|
Sixth Amendment to Senior Secured Credit Agreement, dated as of
May 1, 2009, by and among Apartment Investment and
Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda
Holdings, Inc., as the Borrowers, the pledgors and guarantors
named therein, Bank of America, N.A., as administrative agent
and Bank of America, N.A., Keybank National Association and the
other lenders listed therein (Exhibit 10.1 to Aimcos
Quarterly Report on
Form 10-Q
for the quarterly period ended March 31, 2009, is
incorporated herein by this reference)
|
|
10
|
.8
|
|
Seventh Amendment to Senior Secured Credit Agreement, dated as
of August 4, 2009, by and among Apartment Investment and
Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda
Holdings, Inc., as the Borrowers, the pledgors and guarantors
named therein and the lenders party thereto (Exhibit 10.1
to Aimcos Current Report on
Form 8-K,
dated August 6, 2009, is incorporated herein by this
reference)
|
|
10
|
.9
|
|
Eighth Amendment to Senior Secured Credit Agreement, dated as of
February 3, 2010, by and among Apartment Investment and
Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda
Holdings, Inc., as the Borrowers, the pledgors and guarantors
named therein and the lenders party thereto (Exhibit 10.1
to Aimcos Current Report on
Form 8-K,
dated February 5, 2010, is incorporated herein by this
reference)
|
|
10
|
.10
|
|
Ninth Amendment to Amended and Restated Senior Secured Credit
Agreement, dated as of May 14, 2010, by and among Apartment
Investment and Management Company, AIMCO Properties, L.P., and
AIMCO/Bethesda Holdings, Inc., as the borrowers, the guarantors
and the pledgors named therein and the lenders party thereto
(Exhibit 10.1 to Aimcos Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2009, is
incorporated herein by this reference)
|
|
10
|
.11
|
|
Tenth Amendment to Senior Secured Credit Agreement, dated as of
September 29, 2010, by and among Apartment Investment and
Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda
Holdings, Inc., as the Borrowers, the pledgors and guarantors
named therein, Bank of America, N.A., as administrative agent,
swing line lender and L/C issuer, and the lenders party thereto
(Exhibit 10.1 to Aimcos Current Report on
Form 8-K,
dated September 29, 2010, is incorporated herein by
reference).
|
|
10
|
.12
|
|
Master Indemnification Agreement, dated December 3, 2001,
by and among Apartment Investment and Management Company, AIMCO
Properties, L.P., XYZ Holdings LLC, and the other parties
signatory thereto (Exhibit 2.3 to Aimcos Current
Report on
Form 8-K,
dated December 6, 2001, is incorporated herein by this
reference)
|
|
10
|
.13
|
|
Tax Indemnification and Contest Agreement, dated
December 3, 2001, by and among Apartment Investment and
Management Company, National Partnership Investments, Corp., and
XYZ Holdings LLC and the other parties signatory thereto
(Exhibit 2.4 to Aimcos Current Report on
Form 8-K,
dated December 6, 2001, is incorporated herein by this
reference)
|
|
10
|
.14
|
|
Limited Liability Company Agreement of AIMCO JV Portfolio #1,
LLC dated as of December 30, 2003 by and among AIMCO
BRE I, LLC, AIMCO BRE II, LLC and SRV-AJVP#1, LLC
(Exhibit 10.54 to Aimcos Annual Report on
Form 10-K
for the year ended December 31, 2003, is incorporated
herein by this reference)
|
|
10
|
.15
|
|
Employment Contract executed on December 29, 2008, by and
between AIMCO Properties, L.P. and Terry Considine
(Exhibit 10.1 to Aimcos Current Report on
Form 8-K,
dated December 29, 2008, is incorporated herein by this
reference)*
|
|
10
|
.16
|
|
Apartment Investment and Management Company 1997 Stock Award and
Incentive Plan (October 1999) (Exhibit 10.26 to
Aimcos Annual Report on
Form 10-K
for the year ended December 31, 1999, is incorporated
herein by this reference)*
|
|
10
|
.17
|
|
Form of Restricted Stock Agreement (1997 Stock Award and
Incentive Plan) (Exhibit 10.11 to Aimcos Quarterly
Report on
Form 10-Q
for the quarterly period ended September 30, 1997, is
incorporated herein by this reference)*
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.18
|
|
Form of Incentive Stock Option Agreement (1997 Stock Award and
Incentive Plan) (Exhibit 10.42 to Aimcos Annual
Report on
Form 10-K
for the year ended December 31, 1998, is incorporated
herein by this reference)*
|
|
10
|
.19
|
|
2007 Stock Award and Incentive Plan (incorporated by reference
to Appendix A to Aimcos Proxy Statement on
Schedule 14A filed with the Securities and Exchange
Commission on March 20, 2007)*
|
|
10
|
.20
|
|
Form of Restricted Stock Agreement (Exhibit 10.2 to
Aimcos Current Report on
Form 8-K,
dated April 30, 2007, is incorporated herein by this
reference)*
|
|
10
|
.21
|
|
Form of Non-Qualified Stock Option Agreement (Exhibit 10.3
to Aimcos Current Report on
Form 8-K,
dated April 30, 2007, is incorporated herein by this
reference)*
|
|
10
|
.22
|
|
2007 Employee Stock Purchase Plan (incorporated by reference to
Appendix B to Aimcos Proxy Statement on
Schedule 14A filed with the Securities and Exchange
Commission on March 20, 2007)*
|
|
21
|
.1
|
|
List of Subsidiaries (Exhibit 21.1 to Aimcos Annual
Report of
Form 10-K
for the year ended December 31, 2009 is incorporated herein
by this reference)
|
|
23
|
.1
|
|
Consent of Independent Registered Public Accounting Firm
|
|
23
|
.2
|
|
Consent of Independent Registered Public Accounting Firm
|
|
23
|
.3
|
|
Consent of Independent Registered Public Accounting Firm
|
|
23
|
.4
|
|
Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1)
|
|
23
|
.5
|
|
Consent of DLA Piper (included in Exhibit 5.2)
|
|
23
|
.6
|
|
Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8.1)
|
|
23
|
.7
|
|
Consent of Cogent Realty Advisors, LLC
|
|
24
|
.1
|
|
Power of Attorney
|
|
99
|
.1
|
|
Appraisal Report, dated as of May 19, 2010, by Cogent
Realty Advisors, LLC, related to Lakeside Apartments
|
|
|
|
(1) |
|
Schedules and supplemental materials to the exhibits have been
omitted but will be provided to the Securities and Exchange
Commission upon request. |
|
(2) |
|
The file reference number for all exhibits is
001-13232,
and all such exhibits remain available pursuant to the Records
Control Schedule of the Securities and Exchange Commission. |
|
* |
|
Indicates a management contract or compensatory plan or
arrangement. |
|
|
|
|
|
Previously filed with the Registration Statement on
Form S-4, File No. 333-169872, filed by Aimco and
Aimco OP on October 12, 2010. |