UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ][X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JuneSEPTEMBER 30, 1997
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to
------------------------- -------------------------from _________________ TO _______________________
Commission File Number 1-13232
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MarylandMARYLAND 84-1259577
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1873 S. Bellaire Street, SuiteBELLAIRE STREET, SUITE 1700, Denver, ColoradoDENVER, COLORADO 80222-4348
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(Address of principal executive offices) (Zip Code)
(303) 757-8101
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(Registrant's telephone number, including area code)
Not applicable
- --------------------------------------------------------------------------------NOT APPLICABLE
(Former name, former address, and former fiscal year, if changed since
last report)
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 thanthat the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes X/X/ No ----- -----/ /
The number of shares of Class A Common Stock outstanding as of
August 8,November 7, 1997: 23,147,33635,594,939
The number of shares of Class B Common Stock outstanding as of
August 8,November 7, 1997: 325,000
The number of shares of Class B Cumulative Convertible Preferred Stock
outstanding1
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Consolidated Balance Sheets as of August 8, 1997: 750,000
Items 1September 30, 1997
(unaudited) and 2December 31, 1996 3
Consolidated Statements of Part I have been omitted in reliance on Rule 12b-25.
Part I. FINANCIAL INFORMATIONIncome for the Three and Nine
Months Ended September 30, 1997 and 1996 (unaudited) 4
Consolidated Statements of Cash Flow for the Nine
Months Ended September 30, 1997 and 1996 (unaudited) 5
Notes to Consolidated Financial Statements
(unaudited) 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures about Market Risk Not applicable.
Part28
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 28
Item 2. Changes in Securities 29
Item 5. Other Information 30
Item 6. Exhibits and Reports on Form 8-K 30
Signatures 35
2
PART I. FINANCIAL INFORMATION.
ITEM 1. FINANCIAL STATEMENTS.
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
SEPTEMBER 30, DECEMBER 31,
1997 1996
---- ----
ASSETS (Unaudited)
Real estate, net of accumulated depreciation of $142,694
and $120,077 $1,107,545 $745,145
Property held for sale 25,580 6,769
Investments held for sale 25,025 -
Investments in and notes receivable from unconsolidated subsidiaries 19,960 -
Investment in and notes receivable from real estate partnerships 174,777 -
Investment in NHP Incorporated 123,078 -
Cash and cash equivalents 45,775 13,170
Restricted cash 22,019 15,831
Accounts receivable 24,328 4,344
Deferred financing costs 7,682 11,053
Other assets 32,426 31,361
---------- --------
Total assets $1,608,195 $827,673
---------- --------
---------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Secured notes payable $492,977 $242,110
Secured tax-exempt bond financing 74,441 75,497
Secured short-term financing 94,297 192,039
Unsecured short-term financing - 12,500
---------- --------
Total indebtedness 661,715 522,146
---------- --------
Accounts payable, accrued and other liabilities 72,533 16,299
Accrued management contract liability 106,615 -
Resident security deposits and prepaid rents 8,919 4,316
---------- --------
Total liabilities 849,782 542,761
---------- --------
Commitments and contingencies - -
Minority interest in other partnerships 19,355 10,386
Minority interest in Operating Partnership 111,632 58,777
Stockholders' equity:
Unrealized gain on investments 1,175 -
Class A Common Stock, $.01 par value, 150,000,000 shares
authorized, 28,274,739 and 12,346,812 shares issued
and outstanding 283 150
Class B Common Stock, $.01 par value, 425,000 shares
authorized, 325,000 shares issued and outstanding 3 3
Non-voting Preferred Stock, $0.01 par value, 9,250,000
shares authorized, none issued and outstanding - -
Class B Cumulative Convertible Preferred stock, $.01 par value,
750,000 shares authorized, issued and outstanding 75,000 -
Additional paid-in capital 606,799 236,791
Distributions in excess of earnings (25,375) (14,055)
Notes due on Common Stock purchases (30,459) (7,140)
---------- --------
Total stockholders' equity 627,426 215,749
---------- --------
Total liabilities and stockholders' equity $1,608,195 $827,673
---------- --------
---------- --------
See accompanying notes to consolidated financial statements.
3
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Data)
(Unaudited)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
-------------------------------------- --------------------------------------
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
------------------ ------------------ ------------------ ------------------
RENTAL PROPERTY OPERATIONS
Rental and other property revenues $47,364 $24,140 $127,083 $70,392
Property operating expenses (19,577) (8,960) (50,737) (27,111)
Owned property management expense (1,610) (658) (4,344) (1,999)
------- ------- -------- -------
Income from property operations before depreciation 26,177 14,522 72,002 41,282
Depreciation (8,802) (4,656) (23,848) (13,716)
------- ------- -------- -------
Income from property operations 17,375 9,866 48,154 27,566
------- ------- -------- -------
------- ------- -------- -------
SERVICE COMPANY BUSINESS
Management fees and other income 3,568 1,717 9,173 5,442
Management and other expenses (2,386) (990) (5,029) (3,449)
Corporate overhead allocation (147) (147) (441) (443)
Amortization of management company goodwill (237) (114) (711) (344)
Other assets depreciation and amortization (75) (62) (236) (154)
------- ------- -------- -------
Income from service company business 723 404 2,756 1,052
Minority interests in service company business 50 (3) 48 (10)
------- ------- -------- -------
------- ------- -------- -------
Company's share of income from service company business 773 401 2,804 1,042
------- ------- -------- -------
GENERAL AND ADMINISTRATIVE EXPENSES (624) (394) (1,408) (943)
INTEREST EXPENSE (12,755) (5,850) (33,359) (16,775)
INTEREST INCOME 3,117 31 4,458 242
MINORITY INTEREST IN OTHER PARTNERSHIPS (212) - (777) -
EQUITY IN LOSSES OF UNCONSOLIDATED PARTNERSHIPS (84) - (463) -
EQUITY IN EARNINGS OF UNCONSOLIDATED SUBSIDIARIES 542 - 456 -
------- ------- -------- -------
INCOME BEFORE EXTRAORDINARY ITEM, GAIN (LOSS) ON DISPOSITION
OF PROPERTIES AND MINORITY INTEREST IN OPERATING
PARTNERSHIP 8,132 4,054 19,865 11,132
Extraordinary item - early extinguishment of debt - - (269) -
Gain (loss) on disposition of properties (169) 64 (169) 64
------- ------- -------- -------
INCOME BEFORE MINORITY INTEREST IN OPERATING PARTNERSHIP 7,963 4,118 19,427 11,196
Minority interest in Operating Partnership (996) (722) (2,612) (1,845)
------- ------- -------- -------
NET INCOME $6,967 $3,396 $16,815 $9,351
------- ------- -------- -------
------- ------- -------- -------
Net income attributable to preferred stockholder $835 - $835 -
------- ------- -------- -------
------- ------- -------- -------
Net income attributable to common stockholders $6,132 $3,396 $15,980 $9,351
------- ------- -------- -------
------- ------- -------- -------
NET INCOME PER COMMON SHARE AND COMMON
SHARE EQUIVALENT
Income before extraordinary item, gain (loss) on
disposition of properties net of minority interest
in Operating Partnership and income attributable to
preferred stockholder $0.26 $0.26 $0.79 $0.76
Extraordinary item - early extinguishment of debt - - (0.01) -
Gain (loss) on disposition of properties (0.01) 0.01 (0.01) 0.01
------- ------- -------- -------
Net Income $0.25 $0.27 $0.77 $0.77
------- ------- -------- -------
------- ------- -------- -------
DIVIDENDS PAID PER COMMON SHARE $0.4625 $0.425 $1.3875 $1.275
------- ------- -------- -------
------- ------- -------- -------
WEIGHTED AVERAGE SHARES AND COMMON SHARE
EQUIVALENTS OUTSTANDING 24,609 12,398 20,629 12,127
------- ------- -------- -------
------- ------- -------- -------
See accompanying notes to consolidated financial statements.
4
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOW
(In Thousands)
(Unaudited)
For the For the
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 16,815 $ 9,351
--------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 26,595 14,801
Loss (gain) on disposition of properties 169 (64)
Minority interest in Operating Partnership 2,612 1,845
Minority interests in other partnerships 777 -
Equity in losses of unconsolidated partnerships 463 -
Equity in earnings of unconsolidated subsidiary (456) -
Extraordinary loss on early extinguishment of debt 269 -
(Increase) decrease from changes in operating assets:
Restricted cash (137) 9,039
Accounts receivable (7,241) (580)
Other assets (7,308) (3,299)
Increase (decrease) from changes in operating liabilities:
Accounts payable, accrued and other liabilities 17,299 (707)
Resident security deposits and prepaid rents 3,578 479
--------- --------
Total adjustments 36,620 21,514
--------- --------
Net cash provided by operating activities 53,435 30,865
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate - 17,167
Purchase of real estate (86,205) (10,998)
Purchase of note receivable - (2,893)
Purchase of general and limited partnership interests (67,393) -
Additions to property held for sale (139) -
Capital replacements (5,166) (4,008)
Initial capital expenditures (5,650) (3,681)
Construction in progress and capital enhancements (6,143) (6,475)
Purchase of office equipment and leasehold improvements (1,113) (300)
Proceeds from sale of property held for sale 231 -
Purchase of NHP mortgage loans (39,918) -
Purchase of NHP common stock (121,437) -
Purchase of Ambassador common stock (19,881) -
Dividends received 38,000 -
--------- --------
Net cash used in investing activities (314,814) (11,188)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of Class A Common Stock,
net of underwriting and offering costs 268,960 45
Principal repayments received on notes due from
Officers on Class A Common Stock purchases 10,323 -
Proceeds from issuance of Class B Preferred Stock 75,000 -
Repurchase of common stock - (3,543)
Proceeds from secured notes payable borrowings 94,111 -
Proceeds from secured tax-exempt bond financing - 58,010
Net borrowings on Credit Facility 153,180 -
Repayments from unsecured short-term financing (12,500) -
Net proceeds from secured short-term financing - 23,300
Principal repayments on secured notes payable (4,451) (28,599)
Principal repayments on secured tax-exempt bond financing (1,056) (48,363)
Principal repayments on secured short-term financing (258,922) -
Payment of loan costs, net of proceeds from interest
rate hedge 1,346 (3,022)
Payment of common stock dividends (28,135) (15,456)
Payment of distributions to minority interest in
Operating Partnership (3,872) (2,656)
Payment of additional offering costs related to 1995
common stock offering, dividend reinvestment plan
and stock option plan - (657)
--------- --------
Net cash provided by (used in) financing activities 293,984 (20,941)
--------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 32,605 (1,264)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,170 2,379
--------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 45,775 $ 1,115
--------- --------
--------- --------
See accompanying notes to consolidated financial statements.
5
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Consolidated Statements of Cash Flow
(In Thousands Except Share and Operating Partnership Unit Data)
NON CASH INVESTING AND FINANCING ACTIVITIES
PURCHASE OF REAL ESTATE
Secured notes payable assumed in connection
with purchase of real estate $ 63,446
Real estate purchased in exchange for
1,897,794 Operating Partnership Units 55,906
--------
$119,352
--------
--------
PURCHASE OF 53.3% INTEREST IN NHP INCORPORATED In May 1997, the Company
acquired 2,866,071 shares of NHP Incorporated's ("NHP") common stock in
exchange for 2,142,857 shares of AIMCO Class A Common Stock with a recorded
value of $57,321. Subsequent to the purchase, the Company contributed the NHP
common stock to AIMCO/NHP Holdings, Inc. ("ANHI"), an unconsolidated
subsidiary formed in April 1997, in exchange for all of the shares of ANHI's
nonvoting preferred stock, representing a 95% economic interest in ANHI.
Concurrent with this contribution, ANHI obtained a loan in the amount of
$72,600, and used the proceeds from the loan to purchase 3,630,002 additional
shares of NHP common stock. In August and September 1997, AIMCO purchased
5,717,000 shares of NHP common stock from ANHI for an aggregate purchase price
of $114,397, and purchased an additional 434,049 shares from third parties,
pursuant to the stock purchase agreement. Upon the completion of these
transactions, AIMCO and ANHI owned a combined total of 6,930,122 shares of NHP
common stock, representing 53.3% of NHP's outstanding common stock as of
September 30, 1997 (see Note 8).
PURCHASE OF GENERAL AND LIMITED PARTNERSHIP INTERESTS, CAPTIVE INSURANCE
SUBSIDIARY AND OTHER ASSETS
The historical cost of the assets and the liabilities assumed in connection
with the purchase of NHP Partners, Inc., NHP Partners Two Limited Partners
and their subsidiaries (the NHP Real Estate Companies) (see Note 7) were as
follows:
Real estate, net $ 174,545
Investment in real estate partnerships 89,526
Restricted cash 6,051
Accounts receivable 12,743
Other assets 3,347
Secured notes payable (140,270)
Accounts payable, accrued and other liabilities (50,153)
Accrued management contract liability (106,615)
Resident security deposits and prepaid rent (1,025)
REDEMPTION OF OPERATING PARTNERSHIP UNITS
During the nine months ended September 30, 1997, 558,601 Operating
Partnership units with a recorded value of $8,555 were redeemed in exchange
for an equal number of shares of Class A Common Stock.
PROPERTY HELD FOR SALE
In the third quarter of 1997, the Company entered into contracts to sell five
apartment communities with a net book value of $19.1 million. These assets,
which were reclassified to Property held for sale (see Note 4), were sold in
October 1997 (see Note 18).
ISSUANCE OF NOTES RECEIVABLE DUE FROM OFFICERS
During the nine months ended September 30, 1997, the Company issued notes
receivable from officers for a total of $33.7 million in connection with the
purchase of 1,125,000 shares of Class A Common Stock.
OTHER
During the nine months ended September 30, 1997, the Company reclassified
$1,323 of Other assets to Real estate as a purchase price allocation
adjustment. In addition, the Company wrote off $4,065 of Other assets
allocable to limited partners in partnerships controlled by the Company, to
Minority interest in other partnerships.
During the nine months ended September 30, 1997, the Operating Partnership
issued an additional 198,218 Operating Partnership units with a recorded value
of $6,653 in connection with the purchase of certain partnership interests.
During the nine months ended September 30, 1997 the Company recorded
unrealized gains on investments held for sale of $1,175.
See accompanying notes to consolidated financial statements.
6
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
NOTE 1 - ORGANIZATION
Apartment Investment and Management Company, a Maryland corporation
incorporated on January 10, 1994 ("AIMCO" and together with its
subsidiaries and other controlled entities, the "Company") acts as
sole general partner of AIMCO Properties, L.P. (the "Operating
Partnership") through AIMCO-GP, Inc. and AIMCO-LP, Inc., wholly-owned
subsidiaries which hold all of the Company's general and limited
partnership interests in and a majority ownership of the Operating
Partnership.
At September 30, 1997, AIMCO had 28,274,739 shares of Class A Common
Stock outstanding and the Operating Partnership had 4,936,230
Partnership Common Units ("OP Units") outstanding, for a combined
total of 33,210,969 shares and OP Units in the Operating Partnership.
The Company held an 85% interest in the Operating Partnership as of
September 30, 1997.
As of September 30, 1997, the Company, through its subsidiaries,
owned or controlled 28,773 units in 109 apartment communities and had
an equity interest in 87,182 units in 526 apartment communities. In
addition, the Company manages 71,038 units in 394 apartment
communities for third parties and affiliates, bringing the total owned
and managed portfolio to 186,993 units in 1,029 apartment communities.
The apartment communities are located in 42 states, the District of
Columbia and Puerto Rico.
NOTE 2 - BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of AIMCO, the Operating Partnership, majority owned
subsidiaries and controlled real estate limited partnerships. The
Company operates its service company business through Property Asset
Management Services, L.P. ("PAMS, L.P."). The Operating Partnership
owns a 1% general partnership interest in PAMS, L.P., which provides
the Operating Partnership with control of PAMS, L.P. The 99% limited
partner of PAMS, L.P. is Property Asset Management Services, Inc.
("PAMS, Inc."). The Operating Partnership owns all of the non-voting
preferred stock of PAMS, Inc., representing a 95% economic interest.
As a result of the control held by the Operating Partnership in PAMS,
L.P., the service company business is consolidated.
Interests held by holders of OP Units are reflected as Minority
interest in Operating Partnership. Interests held by limited partners
in real estate partnerships controlled by the Company are reflected as
Minority interest in other partnerships.
AIMCO/NHP Holdings, Inc. ("ANHI") is an unconsolidated subsidiary of
the Company which owns 779,073 shares of common stock of NHP
Incorporated ("NHP"), representing 6.0% of the shares outstanding as
of September 30, 1997 (see Note 6). The Operating Partnership owns a
95% economic interest in ANHI through its ownership of 100% of the
non-voting preferred stock of ANHI (the "ANHI Preferred Stock").
Certain directors and officers of AIMCO own a 5% economic interest in
ANHI through their ownership of all of its outstanding shares of
common stock. As a result of the controlling ownership interest in
ANHI held by such directors and officers, the Company accounts for its
interest in ANHI on the equity method.
7
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 2 - BASIS OF PRESENTATION (CONTINUED)
In connection with the purchase of the NHP Real Estate Companies, and
through the acceptance of tender offers made to various limited
partners, the Company purchased controlling interests in 3,176 units
located in 14 apartment communities, which are presented on a
consolidated basis (see Notes 3 and 7). In addition, the Company
purchased non-controlling interests in partnerships which own 84,483
units in 520 apartment communities (see Note 7). The Company believes
that it does not possess the power to control these partnerships in
which it holds a general partner interest but owns less than a 50%
interest in the partnership. The terms of these partnership
agreements specify that the general partner must obtain the prior
approval of a majority of the limited partners in order to implement
major decisions regarding the disposal of real estate owned by the
partnership. Therefore, the Company uses the equity method of
accounting for these partnerships. The Company's interest in these
properties is reflected as Investment in real estate partnerships.
The acquisition of the NHP Real Estate Companies was accounted for as
a purchase whereby the assets and liabilities were adjusted to
estimated fair market value, based upon preliminary estimates, which
are subject to change as additional information is obtained.
The accompanying unaudited consolidated financial statements of the
Company as of September 30, 1997 and for the three and nine months
ended September 30, 1997 and 1996 have been prepared in accordance
with generally accepted accounting principles for interim financial
information. 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 management, all
adjustments considered necessary for a fair presentation have been
included and all such adjustments are of a recurring nature.
The consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto
included in the Annual Report on Form 10-K for the year ended December
31, 1996. It should be understood that accounting measurements at
interim dates inherently involve greater reliance on estimates than at
year end. The results of operations for the interim periods presented
are not necessarily indicative of the results for the entire year.
Certain reclassifications have been made in the December 31, 1996
balance sheet to conform to the current period presentation.
NOTE 3 - REAL ESTATE
During the nine months ended September 30, 1997, the Company purchased
or acquired control of 21 apartment communities as described below.
The cash portions of the acquisitions were funded with short-term
unsecured financings, borrowings under the Company's Credit Facility
or with working capital.
The Company acquired the following apartment communities in unrelated
transactions during the nine months ended September 30, 1997. The
aggregate consideration paid by the Company of $191.5 million
consisted of $72.2 million in cash, 1,897,794 OP Units with a total
recorded value of $55.9 million and the assumption of $63.4 million of
secured long-term indebtedness.
8
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 3 - REAL ESTATE (CONTINUED)
Date Number
Acquired Property Location of Units
-------- -------- -------- --------
4/97 Bay Club Aventura, FL 702
6/97 Stonebrook Orlando, FL 244
6/97 Tustin Woods/Californian* Tustin, CA 292
6/97 The Vinings at the Waterways Aventura, FL 180
7/97 Sawgrass Orlando, FL 208
9/97 Los Arboles Chandler, AZ 232
9/97 Morton Towers Miami Beach, FL 1,277
-----
3,135
-----
-----
*The Company acquired a 45,000 square foot retail complex as part of
the Tustin Woods/Californian acquisition.
In connection with the acquisition of the NHP Real Estate Companies
(see Note 7) and the acceptance of subsequent tender offers to limited
partners, the Company acquired a controlling interest in 14
partnerships (the "Controlled NHP Partnerships"), which own 3,176
units located in 14 apartment communities. The portion of the
aggregate purchase price for the NHP Real Estate Companies allocated
to these general and limited partnership interests was approximately
$174.5 million, including the assumption of approximately $140.3
million of mortgage indebtedness. Through its ownership, the Company
has the ability to refinance or sell the properties held by the
Controlled NHP Partnerships.
Date Number
Acquired Property Location of Units
-------- -------- -------- --------
5/97 Elm Creek Chicago, IL 372
5/97 Arbor Crossing Atlanta, GA 240
5/97 Sandpiper Cove West Palm Beach, FL 416
5/97 Lake Crossing Atlanta, GA 300
5/97 Tara Bridge Atlanta, GA 220
5/97 Cambridge Heights Natchez, MS 94
5/97 Newberry Park Chicago, IL 84
5/97 Pride Gardens Jackson, MS 76
5/97 Summer Chase Fort Smith, AR 72
5/97 Lakehaven I Carol Stream, IL 144
5/97 Lakehaven II Carol Stream, IL 348
5/97 Point West Lenexa, KS 172
5/97 Greens of Naperville Naperville, IL 400
5/97 100 Forest Place Oak Park, IL 238
-----
3,176
-----
-----
NOTE 4 - PROPERTY HELD FOR SALE
Property held for sale primarily represents five apartment communities
with a net book value of $19.1 million, which were under contract for
sale as of September 30, 1997, and $6.5 million of other assets.
These properties were classified as Real Estate in the prior year.
Property held for sale is recorded at the lower of cost or fair value
less estimated selling costs. The five apartment communities were sold
during October 1997 for $22.7 million, resulting in a net gain after
closing costs of $2.8 million (See Note 18).
9
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 5 - INVESTMENTS HELD FOR SALE
In September 1997, the Company acquired 886,600 shares of Ambassador
Apartments, Inc. ("Ambassador") common stock, a publicly traded real
estate investment trust ("REIT"), for $19.8 million in cash. The
shares acquired represent 8.45% of the Ambassador shares outstanding,
as reported in Ambassador's Form 10-Q for the quarter ended June 30,
1997. The shares are being held for investment purposes, and are
carried at their estimated market value as of September 30, 1997 and
includes an unrealized gain of $1.2 million, which is included as a
component of Stockholders' equity.
NOTE 6 - INVESTMENT IN UNCONSOLIDATED SUBSIDIARY
In May 1997, the Company acquired 2,866,073 shares of NHP common stock
from Demeter Holdings ("Demeter"), Capricorn Investors, L.P.
("Capricorn") and certain of Capricorn's limited partners
(collectively, the "NHP Sellers") in exchange for 2,142,857 shares of
the Company's Class A Common Stock with a recorded value of $57.3
million. Subsequent to the purchase, the Company contributed the NHP
common stock to ANHI, in exchange for all of the shares of ANHI's
non-voting preferred stock, representing a 95% economic interest in
ANHI. Concurrently, ANHI obtained a loan in the amount of $72.6
million (the "ANHI Credit Facility") and used the proceeds from the
loan to purchase 3,630,000 additional shares of NHP common stock from
the NHP Sellers. Upon the completion of this transaction, ANHI owned
6,496,073 shares of NHP common stock, representing 51.3% of NHP's
outstanding common stock as of May 31, 1997.
In two separate transactions, occurring in August and September 1997,
ANHI sold to AIMCO 5,717,000 shares of NHP common stock for an
aggregate purchase price of $114.4 million. ANHI used $74.3 million
of the proceeds from the sale to repay the principal and accrued
interest outstanding under the ANHI Credit Facility and distributed
$40.0 million to the Operating Partnership and other shareholders. As
of September 30, 1997, ANHI owns 779,073 shares of NHP common stock,
which represents 6.0% of the NHP common stock outstanding.
Summarized balance sheet and statement of operations information for
ANHI as of September 30, 1997 and for the period from April 14, 1997
(inception) through September 30, 1997 (representing operations for
the period from May 3, 1997, the date of purchase of 51.3% of NHP
common stock to September 30, 1997) follows (in thousands):
SUMMARIZED BALANCE SHEET INFORMATION SEPTEMBER 30, 1997
------------------
Total assets $20,464
Stockholders' equity 20,464
10
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 6 - INVESTMENT IN UNCONSOLIDATED SUBSIDIARY (Continued)
FOR THE PERIOD FROM
APRIL 14 (INCEPTION) TO
SUMMARIZED STATEMENT OF OPERATIONS SEPTEMBER 30, 1997
-----------------------
Income from property operations $1,654
Income from property management activities 7,450
Interest expense, net of interest income (5,079)
------
Income before income taxes and minority interest 4,025
Income tax provision (1,882)
Minority interest in NHP (2,819)
------
Loss from continuing operations (676)
Discontinued operations, net of tax 602
------
Net loss $(74)
------
------
Loss attributable to preferred stockholder $(70)
------
------
Loss attributable to common stockholders $(4)
------
------
NOTE 7 - INVESTMENT IN AND NOTES RECEIVABLE FROM REAL ESTATE PARTNERSHIPS
In June 1997, the Company completed the acquisition of the NHP Real
Estate Companies from entities owned by Demeter, Phemus Corporation
(an affiliate of Demeter), Capricorn and Mr. J. Roderick Heller, III,
the Chairman, President and CEO of NHP, for $54.8 million in cash and
warrants to purchase 399,999 shares of AIMCO Class A Common Stock at
an exercise price of $36 per share. The NHP Real Estate Companies own
interests in partnerships that own 87,659 conventional and affordable
units in 534 apartment communities (the "NHP Properties"), a captive
insurance company and other related assets. A substantial majority of
the NHP Properties are currently managed by NHP pursuant to a long-term
agreement.
During the nine months ended September 30, 1997, the Company has made
offers to the limited partners of 25 NHP partnerships to acquire their
limited partnerships interests for cash or OP units. The Company
has accepted tenders from certain limited partners, in exchange for
$26.0 million and 198,218 OP units, valued at $6.7 million, resulting
in the Company having a weighted average ownership in these
partnerships of 47% as of September 30, 1997. In addition, during
September 1997, the Company purchased the existing mortgages on three
properties for an aggregate purchase price of $39.9 million, and land
leases for two properties for $12.6 million. As a result of these
transactions, 3,176 units located in 14 apartment communities are
presented on a consolidated basis due to the control held by the
Company. The remaining 84,483 units, located in 520 apartment
communities, are presented under the equity method.
The purchase price of the NHP Real Estate Companies includes the
assumption of an unfavorable contract allocating cash flow to NHP in
the event the property management contracts between NHP and the
general partners of the property-owning partnerships are modified or
terminated prior to maturity (see Note 12).
The Company is currently engaged in a reorganization of its interests
in the NHP Real Estate Companies, which will result in the majority of
the assets of the NHP Real Estate Companies being owned by an
unconsolidated limited partnership, in which the Operating Partnership
will hold a 99% limited partnership interest, and certain directors and
officers of AIMCO will, directly or indirectly, hold a 1% general
partnership interest.
11
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 8 - INVESTMENT IN NHP INCORPORATED
In two separate transactions, occurring in August and September 1997,
the Company purchased 5,717,000 shares of NHP common stock from ANHI
for an aggregate purchase price of $114.4 million. In a separate
transaction, occurring in September 1997, the Company acquired an
additional 434,049 shares of NHP common stock for $7.0 million in
cash and the issuance of 61,364 shares of AIMCO Class A Common Stock,
bringing the aggregate number of shares of NHP common stock owned by
AIMCO to 6,151,049, which represents a 47.3% ownership interest
in NHP as of September 30, 1997.
NOTE 9 - SECURED LONG-TERM FINANCING
In April 1997, 23 partnerships controlled by the Company completed a
$108 million refinancing of its secured, short-term, floating rate
indebtedness with secured, 20-year, all-in fixed interest rate of
7.6%, fully amortizing debt (see Note 10). The loans are secured by
27 multifamily apartment communities owned by such partnerships. In
connection with this refinancing, the Company received proceeds of
$3.4 million from two interest rate swaps accounted for as a hedge.
The gain on the swaps was deferred and will be amortized over the 20
year life of the debt.
During the nine months ended September 30, 1997, the Company assumed
$63.4 million in notes payable secured by first trust deeds in
connection with the purchases of the Bay Club, Stonebrook and The
Vinings apartments.
In connection with the acquisition of the NHP Real Estate Companies,
the Company has consolidated long-term indebtedness totaling $105.7
million, which is secured by 14 properties held by partnerships in
which the Company purchased a controlling interest. The indebtedness
bears interest at fixed rates ranging from 6.05% to 9.50% and matures
at various dates through 2029.
NOTE 10 - SECURED SHORT-TERM FINANCING
The Company utilizes a variety of secured short-term financing
instruments to manage its working capital needs and to fund real
estate investments, including a variable rate revolving credit
facility with Bank of America (the "Credit Facility") as well as
various fixed and floating rate term loans. As of December 31, 1996,
the Company has secured short-term borrowings outstanding totaling
$192.0 million. During the nine months ended September 30, 1997, the
Company borrowed an additional $174.0 million and repaid $271.7
million under these borrowing arrangements, resulting in $94.3 million
of secured short-term borrowings outstanding as of September 30, 1997,
of which $74.0 million were repaid in October 1997 with proceeds from
the issuance of AIMCO Class A Common Stock (see Note 13).
In May 1997, the Company increased its maximum amount available under
the Credit Facility from $50 million to $100 million. The interest
rate is LIBOR plus 1.45% unless borrowings exceed 60% of the aggregate
collateral value, in which case, the interest rate is LIBOR plus
1.70%. The Credit Facility matures in August 1998 and, subject to
certain customary conditions, the outstanding balance may be converted
to a three year term loan. As borrowings exceeded 60% of the
aggregate collateral value during the quarter ended September 30,
1997, the interest rate charged on the outstanding borrowings was
LIBOR plus 1.70% (7.33% at September 30, 1997). The outstanding
balance under the Credit Facility as of September 30, 1997 was $74.0
million which, as noted above, was repaid in October 1997 with
proceeds received from the sale of 7,000,000 shares of Class A Common
Stock (see Note 13).
12
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 10 - SECURED SHORT-TERM FINANCING (Continued)
In March 1997, the Company entered into an interest rate swap
agreement with a major investment banking company, having a
notional principal amount of $100 million, in anticipation of
refinancing certain floating rate indebtedness to expected 15 year
fixed-rate indebtedness in the fourth quarter of 1997. A second
interest rate swap agreement was executed in September 1997, having
a notional principal amount of $75 million. The interest rate
swap agreements mature on December 3, 1997 and fix the twelve and
ten year treasury rates at 7.019% and 6.179%, respectively. Based
on the fair value of the interest rate swaps at September 30, 1997,
the Company has a potential loss of approximately $7.9 million, which
is expected to be amortized over the life of the refinanced debt.
NOTE 11 - UNSECURED SHORT-TERM FINANCING
The Company repaid $12.5 million incurred in connection with the
1996 purchase of interests in limited partnerships with proceeds
from a public offering of shares of Class A Common Stock completed in
February 1997 (see Note 13).
NOTE 12 - ACCRUED MANAGEMENT CONTRACT LIABILITY
Pursuant to a Master Property Management Agreement among NHP and
certain NHP Real Estate Companies, the NHP Real Estate Companies have
agreed to cause NHP to be retained as property manager for most of the
NHP Properties throughout the 25 year term of the Master Property
Management Agreement. As a result, the Master Property Management
Agreement contractually allocates the cash flow stream of the
underlying properties. If NHP is not retained as manager for any
property, the NHP Real Estate Companies are generally obligated to
pay a termination fee equal to 200% of the annualized fees previously
received by NHP from the property. Therefore, in recording the
acquisition of the NHP Real Estate Companies, the Company has accrued
a liability for the management contract in the amount of $106,615 as
of September 30, 1997, which is fully offset by increases in Real
estate and Investments in and notes receivable from real estate
partnerships.
NOTE 13 - STOCKHOLDERS' EQUITY
In February 1997, the Company completed a public offering of 2,015,000
shares of AIMCO Class A Common Stock (including 15,000 shares subject
to the underwriter's overallotment option) at a public offering price
of $26.75 per share. The net proceeds of approximately $51.0 million
were used to repay a portion of the Company's indebtedness incurred in
connection with acquisitions completed in November and December 1996.
In March 1997, certain executive officers of the Company (or entities
controlled by them) repaid $11.4 million of their $18.6 million in
notes payable to the Company which were executed for the purchase in
1996 of 895,250 shares of AIMCO Class A Common Stock by these
executive officers.
In May 1997, the Company sold 2,300,000 million shares of AIMCO Class
A Common Stock at an average price of $28 per share in two public
offerings. The net proceeds of approximately $63.0 million were used
to repay the then outstanding indebtedness under the Company's Credit
Facility of $56 million and to provide working capital of $7 million.
13
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 13 - STOCKHOLDERS' EQUITY (Continued)
In July 1997, the Company sold 1,100,000 newly issued shares of AIMCO
Class A Common Stock at a price of $30 per share, the closing price of
the stock on the date of purchase, to certain members of the Company's
senior management. In payment for the stock, such members of senior
management executed notes payable to AIMCO totaling $33.0 million (of
which, $9.9 million has been repaid), bearing interest at 7.25% per
annum, payable quarterly, and due in ten years. The stock purchase
notes are secured by the stock purchased and are recourse as to 25% of
the original amount borrowed.
In August 1997, the Company sold 750,000 shares of newly issued AIMCO
Class B Cumulative Convertible Preferred Stock ("AIMCO Class B
Preferred Stock") for gross proceeds of $75.0 million in cash to
an institutional investor, in a private transaction. Holders of the
AIMCO Class B Preferred Stock are entitled to receive, when, as and if
declared by the Board of Directors, quarterly cash dividends per share
equal to the greater of $1.78125 or the cash dividends declared on the
number of shares of AIMCO Class A Common Stock into which one share of
AIMCO Class B Preferred Stock is convertible. Each share of AIMCO
Class B Preferred Stock is convertible at the option of the holder,
beginning in August 1998, into 3.28407 shares of AIMCO Class A Common
Stock, subject to certain anti-dilution adjustments. The AIMCO Class
B Preferred Stock is senior to the AIMCO Class A Common Stock as to
dividends and liquidation. The proceeds from the sale of the AIMCO
Class B Preferred Stock were used to repay borrowings outstanding
under the Credit Facility and to provide working capital.
In August and September 1997, the Company issued an aggregate of
5,052,418 shares of AIMCO Class A Common Stock to institutional
investors for aggregate net proceeds of approximately $156.9 million.
AIMCO used $114.4 million of such proceeds to purchase 5,717,000
shares of NHP Common Stock from ANHI, used $7.0 million to purchase
351,974 additional shares of NHP Common Stock from a third party
pursuant to a stock purchase agreement, and contributed the remaining
$35.5 million to the Operating Partnership. An additional 61,364
shares of AIMCO Class A Common Stock were issued in exchange for
82,074 shares of NHP common stock.
An additional 7,000,000 shares of AIMCO Class A Common Stock were
issued during October 1997, at a price of $36.50 per share, resulting
in net proceeds of $242.5 million (See Note 18).
NOTE 14 - EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("Statement 128") which specifies the computation, presentation
and disclosure requirements for basic earnings per share and diluted
earnings per share.
Management believes that adoption of Statement 128 will not have a
material effect on earnings per share of the Company.
NOTE 15 - REGISTRATION STATEMENTS
In April 1997, AIMCO filed a shelf registration statement with the
Securities and Exchange Commission ("the "SEC") which provides for the
offering on a delayed or continuous basis of debt securities,
preferred stock and AIMCO Class A Common Stock with an aggregate value
of up to $1 billion. The shelf registration statement was declared
effective in May 1997. Subsequent to the shelf registration, the
Company has issued 14,352,418 shares of newly issued AIMCO Class A
Common Stock in exchange for cash proceeds of $462.4 million.
14
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 16 - COMMITMENTS
On April 21, 1997, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with NHP and AIMCO/NHP Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of AIMCO
("Merger Sub"). Pursuant to the Merger Agreement, the Merger Sub will
be merged with and into NHP (the "Merger"), with NHP being the
surviving corporation after the Merger and becoming a wholly owned
subsidiary of the Company. Upon consummation of the Merger, each
outstanding share of NHP common stock, other than the NHP common stock
held by NHP, the Company or Merger Sub, will be converted into the
right to receive, at the election of the holder, either: (i) 0.74766
shares of AIMCO Class A Common Stock ("Stock Consideration"); or
(ii) a combination of 0.37383 shares of AIMCO Class A Common Stock
and $10 in cash ("Mixed Consideration"). The Merger requires the
affirmative vote of: (i) a majority of the outstanding shares of NHP
common stock and (ii) at least 66 2/3% of the outstanding shares of
NHP common stock, excluding shares deemed to be owned by the Company
or its affiliates. In addition, under the rules of the New York
Stock Exchange, the issuance of shares of AIMCO Class A Common Stock
in the Merger requires the affirmative vote of a majority of the
votes cast at a meeting of the Company at which the total votes cast
represent over 50% of all shares of AIMCO Class A Common Stock
entitled to vote thereon. A special meeting of shareholders to
approve the merger with NHP has been scheduled for December 8, 1997.
In accordance with the Merger Agreement, on May 9, 1997, NHP
distributed to each stockholder of record as of May 2, 1997, one right
("Right") for each outstanding share of NHP common stock. Each Right
entitles the holder thereof to receive, subject to certain conditions,
on the earlier of the effective time of the Merger or December 1,
1997, if the Merger has not yet occurred, subject to deferral if any
required consents, filings or approvals have not yet been obtained
(the "Maturity Time"), one third of a share of the WMF Group, Ltd., a
wholly-owned subsidiary of NHP ("WMF") (the "WMF Spin-off"). If the
distribution of WMF stock has not occurred by December 1, 1997, the
holders of the Rights may receive an additional cash amount equal to
$3.05 for each share of NHP common stock held by them.
The Merger Agreement provides that NHP will contribute cash to WMF,
forgive indebtedness of WMF or any combination thereof, in an
aggregate amount equal to NHP's best estimate (subject to AIMCO's
reasonable approval) of the amount, if any, by which (i) NHP's
earnings before interest, taxes, depreciation and amortization,
less the amount of cash payments made or obligated to be made in
respect of taxes and interest during the period from February 1, 1997
to the Maturity Time and less $500,000 per month (or a ratable
portion thereof) included in such period, exceeds (ii) the
termination, severance and transaction costs incurred by NHP with
respect to the Merger and the WMF Spin-Off during that same period.
NOTE 17 - PRO FORMA FINANCIAL STATEMENTS
During the nine months ended September 30, 1997, the Company purchased
the NHP Real Estate Companies and, together with an unconsolidated
subsidiary, purchased a 53.3% interest in NHP. The following
unaudited Pro Forma Condensed Consolidated Statements of Operations
for the nine months ended September 30, 1997 and 1996 have been
prepared as if the above described transactions had occurred at the
beginning of the periods being reported. The following Pro Forma
Financial Information is based, in part, on the following historical
financial statements:
15
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 17 - PRO FORMA FINANCIAL STATEMENTS (Continued)
(i) the unaudited financial data of the Company for the nine months
ended September 30, 1997 and 1996; (ii) the unaudited Consolidated
Financial Statements of NHP for the nine months ended September 30,
1997 and 1996 (which have been restated to reflect NHP's
subsidiary, WMF Group, Ltd., as a discontinued operation); and
(iii) the unaudited Combined Financial Statements of the NHP Real
Estate Companies for the five months ended May 31, 1997 and the nine
months ended September 30, 1996.
The pro forma financial statements are not necessarily indicative
of what the Company's results of operations would have been
assuming the completion of the described transactions at the
beginning of the periods indicated, nor does it purport to project
the Company's results of operations for any future period.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
RENTAL PROPERTY OPERATIONS
Rental and other property revenues $133,742 $82,281
Property operating expenses (53,679) (33,560)
Owned property management expense (4,626) (2,493)
-------- -------
Income from property operations before
depreciation 75,437 46,228
Depreciation (25,194) (16,010)
-------- -------
Income from property operations 50,243 30,218
-------- -------
SERVICE COMPANY BUSINESS
Management fees and other income 10,578 10,711
Management and other expenses (7,950) (9,718)
Corporate overhead allocation (441) (443)
Amortization of management company goodwill (711) (344)
Other assets depreciation and amortization (236) (154)
-------- -------
Income from service company business 1,240 52
Minority interests in service company business 48 (10)
-------- -------
Company's share of income from service
company business 1,288 42
-------- -------
GENERAL AND ADMINISTRATIVE EXPENSES (1,408) (943)
INTEREST EXPENSE (38,381) (25,572)
INTEREST INCOME 4,998 1,312
MINORITY INTEREST IN OTHER
PARTNERSHIPS (777) 3,774
EQUITY IN LOSSES OF UNCONSOLIDATED
PARTNERSHIPS (3,683) (3,882)
EQUITY IN EARNINGS OF UNCONSOLIDATED
SUBSIDIARY 1,169 176
-------- -------
INCOME BEFORE EXTRAORDINARY ITEM AND
MINORITY INTEREST IN OPERATING PARTNERSHIP 13,449 5,125
Extraordinary item - early extinguishment of
debt (269) -
Gain (loss) on disposition of properties (169) 64
-------- -------
INCOME BEFORE MINORITY INTEREST IN OPERATING
PARTNERSHIP 13,011 5,189
Minority interest in Operating Partnership (1,735) (732)
-------- -------
NET INCOME $11,276 $4,457
-------- -------
-------- -------
Net income attributable to preferred stockholder $ 835 $ -
-------- -------
-------- -------
Net income attributable to common stockholders $10,441 $4,457
-------- -------
-------- -------
NET INCOME PER COMMON SHARE AND COMMON SHARE
EQUIVALENT $0.48 $0.31
-------- -------
-------- -------
WEIGHTED AVERAGE COMMON SHARES AND COMMON
SHARE EQUIVALENTS OUTSTANDING 21,625 14,332
-------- -------
-------- -------
16
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
Notes to Consolidated Financial Statements (continued)
NOTE 18 - SUBSEQUENT EVENTS
INVESTMENT IN REAL ESTATE
On October 3, 1997, the Company purchased the debt secured by the
first lien deed of trust on the Elm Creek property for $20.7 million
in cash.
PURCHASE OF WINDWARD APARTMENTS
On October 15, 1997, the Company purchased Windward at the Villages
Apartments, a 196-unit apartment community located in West Palm
Beach, Florida, for $10.8 million in cash.
DIVIDEND DECLARED
On October 24, 1997, the AIMCO Board of Directors declared a cash
dividend of $0.4625 per share of AIMCO Class A Common Stock for the
quarter ended September 30, 1997, payable on November 14, 1997 to
stockholders of record on November 7, 1997.
SALE OF COMMON STOCK
The Company issued 7,000,000 million shares of AIMCO Class A Common
Stock on October 27, 1997 under its existing shelf registration
(see Note 15). The net proceeds from the sale totaled $242.5
million, which were used to fund certain property acquisitions, as
discussed below, repay the $74.0 million outstanding balance on the
Credit Facility and provide working capital.
PURCHASE OF WINTHROP PORTFOLIO
On October 31, 1997, the Company purchased 8,175 units in 35
apartment communities from sellers affiliated with Winthrop
Financial Associates. The aggregate purchase price of
approximately $263.5 million (including $10.0 million of
transaction costs) was comprised of $255.2 million in cash and the
assumption of $8.3 million in existing mortgage indebtedness. The
purchase price was based on arms-length negotiations between the
Company and the sellers. The Company financed a portion of the cash
purchase price through the issuance of 33 mortgage notes to GMAC
Commercial Mortgage Corporation, in an aggregate amount of $120.0
million, each of which is secured by one of the properties acquired,
and $19.1 million in bridge loan financing from GMAC Commercial
Mortgage Corporation, secured by one of the properties. None of the 33
mortgage notes or bridge financing is cross collateralized or subject
to any cross default provisions. The apartment communities acquired
are income generating apartment properties. The Company intends to
continue to utilize the assets acquired in the same manner as they
were employed prior to the acquisition.
SALE OF PROPERTIES
In October 1997, the Company sold five apartment communities
totaling 916 apartment units for $22.7 million in cash, resulting
in a $2.8 million gain. These properties are classified as
Property held for sale on the September 30, 1997 consolidated
balance sheet.
17
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
OVERVIEW
As of September 30, 1997, the Company owned or managed 186,993 apartment
units, comprised of 28,773 units in 109 apartment communities owned or
controlled by the Company (the "Owned Properties"), 87,182 units in 526
apartment communities in which the Company has an equity interest and 71,038
units in 394 apartment communities which the Company manages for third parties
and affiliates. The apartment communities are located in 42 states, the
District of Columbia and Puerto Rico.
On April 21, 1997, the Company entered into a Merger Agreement with NHP,
pursuant to which the Company and NHP have agreed to merge. In May 1997, the
Company acquired 2,866,073 shares of NHP common stock in exchange for
2,142,857 shares of the Company's Class A Common Stock. Subsequent to the
purchase, the Company contributed the NHP common stock to ANHI in exchange
for all of the shares of ANHI's non-voting Preferred Stock. Concurrently,
ANHI obtained a loan in the amount of $72.6 million and used the proceeds to
purchase 3,630,000 additional shares of NHP common stock. Upon the
completion of this transaction, ANHI owned 6,496,073 shares of NHP common
stock representing 51.3% of NHP's outstanding common stock as of May 31, 1997.
In two separate transactions, occurring in August and September 1997, the
Company purchased 5,717,000 shares of NHP common stock from ANHI, for an
aggregate purchase price of $114.4 million. ANHI used $74.3 million of the
proceeds from the sale to repay the principal and accrued interest outstanding
under the ANHI Credit Facility and distributed $40.0 million to the Operating
Partnership and other shareholders. In September 1997, the Company acquired
an additional 434,049 shares of NHP common stock pursuant to the purchase
agreement, bringing the aggregate number of shares of NHP common stock owned
by the Company and ANHI at September 30, 1997 to 6,930,122, which represents a
53.3% ownership interest in NHP.
NHP provides a broad array of real estate services, including property
management and asset management as well as a group of related services
including equity investments, purchasing, risk management and home health
care. NHP also has controlling interests in partnerships which own 2,905
units in 12 apartment communities.
In June 1997, the Company acquired the NHP Real Estate Companies, which own
general and limited partnership interests in 534 conventional and affordable
multifamily apartment communities containing 87,659 apartment units, a captive
insurance subsidiary and certain related assets, for $54.8 million in cash and
warrants to purchase 399,999 shares of AIMCO Class A Common Stock at an
exercise price of $36 per share. Subsequent to the purchase, the Company has
tendered for the unaffiliated limited partnership interests in certain
partnerships in which the Company itself, or through its purchase of the NHP
Real Estate Companies, holds general or limited partnership interests. As of
September 30, 1997, the Company has a weighted average ownership interest of
47% in the real estate partnerships. As a result of these transactions, the
Company consolidates the results of operations of 14 of these partnerships,
which own 14 apartment properties, consisting of 3,176 apartment units, due to
the extent of the Company's control over these partnerships. The operations
of the remaining 520 apartment communities consisting of 84,483 units are
presented using the equity method.
The following discussion contains forward-looking statements that are subject
to significant risks and uncertainties. There are several important factors
that could cause actual results to differ materially from the results
anticipated by the forward-looking statements contained in the following
discussion. Such factors and risks include, but are not limited to:
financing risks, including the risk that the Company's cash flow from
operations may be insufficient to meet required payments of principal and
interest on its debt; real estate risks, including variations of real estate
values and the general economic climate in local markets
18
and competition for tenants in such markets; acquisition and development
risks, including failure of such acquisitions to perform in accordance with
projections; and possible environmental liabilities, including costs which may
be incurred due to necessary remediation of contamination of properties
presently owned or previously owned by the Company. In addition, the
Company's continued qualification as a REIT involves the application of highly
technical and complex provisions of the Internal Revenue Code. Readers should
carefully review the financial statements and the notes thereto, as well as
the risk factors described in documents the Company files from time to time
with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1997 TO THE NINE MONTHS
ENDED SEPTEMBER 30, 1996
NET INCOME
The Company recognized net income of $16,815,000 for the nine months ended
September 30, 1997 compared to $9,351,000 for the nine months ended
September 30, 1996. The increase in net income of $7,464,000, or 79.8%, was
primarily the result of the following:
- - the acquisition of 9,909 units located in 40 apartment communities during
the period from April 1996 to December 1996 (the "1996 Acquisitions");
- - the acquisition of 3,135 units located in seven apartment communities in
the second and third quarters of 1997 (the "1997 Acquisitions);
- - the acquisition, through an unconsolidated subsidiary, of 53.3% of the
shares of common stock of NHP in May 1997; and
- - the acquisition of the NHP Real Estate Companies in June 1997, and
subsequent third quarter tender offers.
The increase in net income is partially offset by the sale of four properties
in August 1996 (the "1996 Sold Properties"), increased real estate
depreciation and increased interest expense associated with indebtedness
which was assumed or incurred in connection with the 1996 Acquisitions, the
1997 Acquisitions and the acquisition of the NHP Real Estate Companies.
These factors are discussed in more detail in the following paragraphs.
RENTAL PROPERTY OPERATIONS
Rental and other property revenues from the Company's Owned Properties
totaled $127,083,000 for the nine months ended September 30, 1997, compared to
$70,392,000 for the nine months ended September 30, 1996, an increase of
$56,691,000, or 80.5%. Rental and other property revenues consisted of the
following (in thousands):
Nine months Nine months
ended ended
September 30, September 30,
1997 1996
------------- -------------
"Same store" properties $59,558 $57,611
1996 Acquisitions 51,273 5,752
1997 Acquisitions 6,141 -
Controlled NHP Partnerships acquired in
connection with the acquisition of the NHP
Real Estate Companies 5,234 -
Properties in lease-up after the completion
of an expansion or renovation 4,877 3,666
1996 Sold Properties - 3,363
-------- -------
Total $127,083 $70,392
-------- -------
-------- -------
19
Average monthly rent per occupied unit for the same store properties at
September 30, 1997 and 1996 was $557 and $562, respectively, reflecting a
decrease of 0.9%. Weighted average physical occupancy for the properties
decreased to 94.85% at September 30, 1997 from 94.95% at September 30, 1996,
reflecting a decrease of 0.1%.
Property operating expenses, consisting of on-site payroll costs, utilities
(net of reimbursements received from tenants), contract services, turnover
costs, repairs and maintenance, advertising and marketing, property taxes and
insurance, totaled $50,737,000 for the nine months ended September 30, 1997,
compared to $27,111,000 for the nine months ended September 30, 1996, an
increase of $23,626,000 or 87.1%. Operating expenses consisted of the
following (in thousands):
Nine months Nine months
ended ended
September 30, September 30,
1997 1996
------------- -------------
"Same store" properties $23,029 $22,465
1996 Acquisitions 21,308 1,639
1997 Acquisitions 2,268 -
Controlled NHP Partnerships acquired in
connection with the acquisition
of the NHP Real Estate Companies 2,252 -
Properties in lease-up after the completion
of an expansion or renovation 1,880 1,218
1996 Sold Properties - 1,789
-------- -------
Total $50,737 $27,111
-------- -------
-------- -------
Owned property management expenses, representing the costs of managing the
Company's Owned Properties, totaled $4,344,000 for the nine months ended
September 30, 1997, compared to $1,999,000 for the nine months ended September
30, 1996, an increase of $2,345,000, or 117.3%. The increase resulted from
the acquisition of properties in 1996 and 1997 and the acquisition of the NHP
Real Estate Companies.
SERVICE COMPANY BUSINESS
The Company's share of income from the Service Company Business was
$2,804,000 for the nine months ended September 30, 1997, compared to
$1,042,000 for the nine months ended September 30, 1996. The increase of
$1,762,000 is due to the acquisition by the Company of property management
businesses in August and November 1996, the acquisition of partnership
interests which provide for certain partnership and administrative fees, and
a captive insurance subsidiary acquired in connection with the acquisition of
the NHP Real Estate Companies in June 1997, offset by decreased commercial
asset management revenues. The commercial asset management contracts expired
on March 31, 1997.
INTEREST EXPENSE
Interest expense totaled $33,359,000 for the nine months ended September 30,
1997, compared to $16,775,000 for the nine months ended September 30, 1996.
Interest expense, which includes amortization of deferred financing costs,
for the nine months ended September 30, 1997, increased by $16,584,000, or
98.9%, from the nine months ended September 30, 1996. The increase consists
of the following (in thousands):
20
Interest expense on secured short-term and long-term
indebtedness incurred in connection with the 1996
Acquisitions $8,839
Interest expense on secured and unsecured short-term
and long-term indebtedness incurred in connection
with the 1997 Acquisitions 3,042
Interest expense on secured and unsecured short-term
and long-term indebtedness incurred in connection
with the acquisition of the NHP Real Estate Companies 2,588
Write-off of unamortized loan costs upon the
prepayment of bridge financing incurred in connection
with the 1996 Acquisitions 623
Increase in interest expense on the Credit Facility
due to borrowings used in connection with the
refinancing of short-term indebtedness in April 1997
and the purchase of the NHP Real Estate Companies in
June 1997, net of decreased interest expense on
existing indebtedness due to principal amortization 1,492
-------
Total increase $16,584
-------
-------
INTEREST INCOME
Interest income totaled $4,458,000 for the nine months ended September 30,
1997, compared to $242,000 for the nine months ended September 30, 1996. The
increase of $4,216,000 is primarily due to interest earned on notes receivable
from certain partnerships acquired in connection with the 1996 Acquisitions
and the acquisition of the NHP Real Estate Companies in June 1997.
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1997 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1996
NET INCOME
The Company recognized net income of $6,967,000 for the three months ended
September 30, 1997, compared to $3,396,000 for the three months ended
September 30, 1996. The increase in net income of $3,571,000, or 105.2% was
primarily the result of the 1996 Acquisitions, the 1997 Acquisitions, the
acquisition of 53.3% of the common stock of NHP in May and September 1997 and
the acquisition of the NHP Real Estate Companies.
The increase in net income is partially offset by the sale of the 1996 Sold
Properties in August 1996, increased real estate depreciation and increased
interest expense associated with indebtedness which was assumed or incurred
in connection with the acquisitions described above. These factors are
discussed in more detail in the following paragraphs.
RENTAL PROPERTY OPERATIONS
Rental and other property revenues from the Company's Owned Properties
totaled $47,364,000 for the three months ended September 30, 1997, compared
to $24,140,000 for the three months ended September 30, 1996, an increase of
$23,224,000, or 96.2%. Rental and other property revenues consisted of the
following (in thousands):
21
Three months Three months
ended ended
September 30, September 30,
1997 1996
------------- --------------
"Same store" properties $20,054 $19,564
1996 Acquisitions 17,587 2,767
1997 Acquisitions 4,177 -
Controlled NHP Partnerships acquired in
connection with the acquisition of the
NHP Real Estate Companies 3,918 -
Properties in lease-up after the
completion of an expansion or renovation 1,628 1,321
1996 Sold Properties - 488
------- -------
Total $47,364 $24,140
------- -------
------- -------
Property operating expenses, consisting of on-site payroll costs, utilities
(net of reimbursements received from tenants), contract services, turnover
costs, repairs and maintenance, advertising and marketing, property taxes and
insurance, totaled $19,577,000 for the three months ended September 30, 1997,
compared to $8,960,000 for the three months ended September 30, 1996, an
increase of $10,617,000 or 118.5%. Operating expenses consisted of the
following (in thousands):
Three months Three months
ended ended
September 30, September 30,
1997 1996
------------- -------------
"Same store" properties $8,144 $7,619
1996 Acquisitions 7,554 691
1997 Acquisitions 1,451 -
Controlled NHP Partnerships acquired in
connection with the acquisition of the NHP
Real Estate Companies 1,689 -
Properties in lease-up after the completion
of an expansion or renovation 739 420
1996 Sold Properties - 230
------- ------
Total $19,577 $8,960
------- ------
------- ------
Owned property management expenses, representing the costs of managing the
Company's Owned Properties, totaled $1,610,000 for the three months ended
September 30, 1997, compared to $658,000 for the three months ended September
30, 1996, an increase of $952,000, or 144.7%. The increase resulted from the
acquisition of properties in 1996 and 1997 and the acquisition of the NHP
Real Estate Companies.
SERVICE COMPANY BUSINESS
The Company's share of income from the service company business was $773,000
for the three months ended September 30, 1997, compared to $401,000 for the
three months ended September 30, 1996. The increase in income of $372,000
was due to increased revenues from the acquisition by the Company of property
management businesses in August and November 1996, the acquisition of
partnership interests, which provide for certain partnership and
administrative fees, and the acquisition of a captive insurance subsidiary in
connection with the acquisition of the NHP Real Estate Companies in June
1997. The increase in revenues was offset by the loss of commercial asset
management revenues as a result of the scheduled termination of asset
management contracts at March 31, 1997.
22
INTEREST EXPENSE
Interest expense totaled $12,755,000 for the three months ended September 30,
1997, compared to $5,850,000 for the three months ended September 30, 1996.
Interest expense, which includes amortization of deferred financing costs, for
the three months ended September 30, 1997, increased by $6,905,000, or 118.0%,
from the three months ended September 30, 1996. The increase consists of the
following (in thousands):
Interest expense on secured short-term and long-term
indebtedness incurred in connection with the 1996
Acquisitions $2,755
Interest expense on secured and unsecured short-term and
long-term indebtedness incurred in connection with the
1997 Acquisitions 1,821
Interest expense on secured and unsecured short-term and
long-term indebtedness incurred in connection with the
acquisition of the NHP Real Estate Companies 1,849
Increase in interest expense on the Credit Facility due to
borrowings used in connection with the refinancing of
short-term indebtedness in April 1997 and the purchase of
the NHP Real Estate Companies in June 1997, net of
decreased interest expense on existing indebtedness due to
principal amortization 480
------
Total increase $6,905
------
------
INTEREST INCOME
Interest income totaled $3,117,000 for the three months ended September 30,
1997, compared to $31,000 for the three months ended September 30, 1996. The
increase of $3,086,000, is primarily due to interest earned on notes
receivable from certain partnerships acquired in connection with the 1996
Acquisitions and the acquisition of the NHP Real Estate Companies in June
1997.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had $45,775,000 in cash and cash
equivalents. In addition, the Company had $22,019,000 of restricted cash
primarily consisting of reserves and impounds held by lenders for capital
expenditures, property taxes and insurance. The Company's principal demands
for liquidity include normal operating activities, payments of principal and
interest on outstanding debt, capital improvements, acquisitions of or
investments in properties, dividends paid to its stockholders and
distributions paid to minority limited partners in the Operating Partnership.
The Company considers its cash provided by operating activities, and funds
available under its Credit Facility, to be adequate to meet short-term
liquidity demands. The Company utilizes the Credit Facility for general
corporate purposes and to fund investments on an interim basis. In May 1997,
the Company increased the maximum amount available under the Credit Facility
from $50 million to $100 million. The outstanding borrowings under the
Credit Facility bear interest at LIBOR plus 1.45%, if the outstanding
borrowings do not exceed 60% of the collateral value, or LIBOR plus 1.70%, if
outstanding borrowings are greater than 60% of the collateral value. The
Credit Facility matures in August 1998 and, subject to certain customary
conditions, the outstanding balance may be converted to a three year term
loan. As borrowings made during the quarter
23
ended September 30, 1997 exceeded 60% of the collateral value, the interest
rate charged on the outstanding borrowings was LIBOR plus 1.70% (7.33% at
September 30, 1997). The Company had outstanding borrowings under the Credit
Facility at September 30, 1997 of $74.0 million, which were repaid in October
1997 with proceeds received from the sale of 7,000,000 shares of AIMCO Class
A Common Stock.
During the nine months ended September 30, 1997, the Company repaid $25.6
million of secured short-term indebtedness, $12.5 million of unsecured
short-term indebtedness and $125.2 million of the balance outstanding from
time to time under the Credit Facility with proceeds from private offerings
of AIMCO Class A Common Stock, funds received in connection with the
repayment of notes due to the Company from certain executive officers of the
Company (or entities controlled by them) related to their purchase of AIMCO
Class A Common Stock and the private placement of AIMCO Class B Preferred
Stock.
In March 1997, the Company entered into an interest rate swap agreement with
a major investment banking company, having a notional principal amount of
$100 million, in anticipation of refinancing certain floating rate
indebtedness to expected 15 year fixed-rate indebtedness in the fourth quarter
of 1997. A second interest swap agreement was executed in September 1997,
having a notional principal amount of $75 million. The interest rate swap
agreements mature on December 3, 1997 and fix the twelve and ten year
treasury rates at 7.019% and 6.179% respectively. Unrealized losses of
approximately $7.9 million relating to the hedges have been deferred, and
will be amortized over the life of the refinanced debt.
In April 1997, 23 partnerships controlled by the Company borrowed an aggregate
of $108 million from an institutional lender on a fully amortizing, fixed rate
basis with a term of 20 years. The loans have a weighted average effective
interest rate of 7.6% per year. The loans are secured by 27 apartment
communities owned by such partnerships. The net proceeds of the borrowings,
and $7.5 million of additional borrowings under the Company's Credit Facility,
were used to repay approximately $115.5 million of secured, short term debt.
Pursuant to the Merger Agreement, if all NHP stockholders other than AHNI elect
to receive Stock Consideration and all NHP Stock Options are exercised, the
number of shares of AIMCO Class A Common Stock to be issued in the Merger
would be approximately 5.4 million shares of AIMCO Class A Common Stock
(including 291,240 shares issued to ANHI), and the Company will pay
approximately $7.8 million in cash to ANHI. If all of the NHP stockholders
elect to receive the Mixed Consideration and all NHP stock options are
exercised, the number of shares of AIMCO Class A Common Stock to be issued in
the Merger would be approximately 3.2 million shares (including 291,240
shares issued to ANHI) and the Company would pay approximately $7.8 million
in cash to ANHI and $60.7 million in cash to the other NHP stockholders.
From time to time, the Company has offered to acquire and, in the future, may
offer to acquire the unaffiliated limited partnership interests in
certain limited partnerships whose general partnership interests were acquired
by the Company, including certain partnerships acquired in 1996 and certain
partnerships in which the NHP Real Estate Companies own interests. Any such
acquisitions will require funds to pay the purchase price for such interests.
Cash payments made in connection with such acquisitions totaled $26.0 for
the nine months ended September 30, 1997.
The Company expects to meet its short-term liquidity requirements, including
the proposed Merger with NHP as well as property acquisitions, refinancings
of short-term debt, and tender offers, with long-term, fixed rate, fully
amortizing debt, secured or unsecured indebtedness, the issuance of debt
securities, OP Units or equity securities and cash generated from operations.
In April 1997, the Company filed a shelf registration statement with the SEC
which registered $1 billion of securities for sale on a delayed or continuous
basis. The shelf registration statement was declared effective in May 1997.
Since that time, the Company has issued 14,352,418 shares of Class A common
stock, and received net proceeds of $462.4 million.
24
As of September 30, 1997, the Company had consolidated outstanding
indebtedness totaling $661.7 million including $493.0 million of secured
long-term financing, $20.3 million in secured short-term financing, $74.4
million of secured tax-exempt bonds and $74.0 million outstanding under its
Credit Facility. At September 30, 1997 the weighted average interest rate on
the Company's long-term secured notes payable and secured tax-exempt
financing was 8.0% with a weighted average maturity of 10 years. The
weighted average interest rate on the Company's secured and unsecured
short-term financing was 7.6%.
At September 30, 1997, NHP had outstanding indebtedness totaling $134.0
million, consisting of $62.9 million of unsecured indebtedness under NHP's
credit facility (the "NHP Credit Facility") and other short-term indebtedness
and $71.1 million of indebtedness secured by real estate wholly owned by NHP.
The NHP Credit Facility bears interest at a rate which ranges from LIBOR plus
75 basis points to LIBOR plus 125 basis points, depending on NHP's ratio of
debt to income from continuing operations before interest expense, income
taxes, depreciation and amortization ("EBITDA"). The weighted average interest
rate on the NHP unsecured short-term financing at September 30, 1997 was 6.7%.
The indebtedness secured by real estate wholly owned by NHP bears interest at
fixed rates ranging from 7.95% to 12.6% and mature at various dates through
2016.
CAPITAL EXPENDITURES
For the nine months ended September 30, 1997, the Company spent $5.2 million
for capital replacements and $5.7 million for initial capital expenditures.
In addition, in the nine months ended September 30, 1997, the Company spent an
aggregate $6.2 million for capital enhancements and the renovation of two
properties owned by the Company. These expenditures were funded by working
capital reserves, borrowings under the Credit Facility and net cash provided
by operating activities. The Company budgets for capital replacements of $300
per apartment unit per annum, or $5.6 million, for the nine months ended
September 30, 1997. The Company has $0.8 million of budgeted but unspent
amounts remaining from prior periods that can be used for future capital
replacements. The Company expects to incur initial capital expenditures and
capital enhancements (spending to increase a property's revenue potential
including renovations, developments and expansions) of approximately $4.0
million during the balance of the year ended December 31, 1997. Initial
capital expenditures and capital enhancements are expected to be funded with
cash from operating activities and borrowings under the Credit Facility.
FUNDS FROM OPERATIONS
The Company measures its economic profitability based on Funds From Operations
("FFO"). The Company intends to pay regular dividends to its stockholders
based on several primary factors, including FFO and the annual REIT
distribution requirements. Retained FFO is also available to make new
investments, make reinvestments in existing properties, repay debt and
repurchase shares of the Company's Stock. The Company believes that the
presentation of Funds From Operations, as hereafter defined, when considered
with the financial data determined in accordance with generally accepted
accounting principles, provide a useful measure of the Company's performance.
However, FFO does not represent cash flow and is not necessarily indicative of
cash flow or liquidity available to the Company, nor should it be considered
as an alternative of net income or as an indicator of operating performance.
The Board of Governors of the National Association of Real Estate Investment
Trusts ("NAREIT") defines FFO as net income (loss), computed in accordance
with generally accepted accounting principles, excluding gains and losses from
debt restructuring and sales of property, plus real estate depreciation and
amortization (excluding amortization of financing costs), and after
adjustments for unconsolidated partnerships and joint ventures. In addition,
the Company adjusts FFO for minority interest in the Operating Partnership,
amortization of management company goodwill and the non-cash deferred portion
of the income tax provision for unconsolidated subsidiaries.
25
The Company believes that presentation of FFO provides investors with an
industry-accepted measurement which helps facilitate understanding of the
Company's ability to meet required dividend payments, capital expenditures,
and principal payments on its debt. There can be no assurance that the
Company's basis for computing FFO is comparable with that of other real
estate investment trusts.
For the three and nine months ended September 30, 1997 and 1996, FFO was as
follows (amounts in thousands):
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
OPERATING ACTIVITIES
Income before minority interest in Operating
Partnership $7,963 $4,118 $19,427 $11,196
Extraordinary item - - 269 -
(Gain) loss on disposition of properties 169 (64) 169 (64)
Real estate depreciation, net of minority
interests in other partnerships 7,802 4,656 21,052 13,716
Amortization of management company goodwill 237 114 711 344
Equity in earnings of other partnerships:
Real estate depreciation 2,084 - 2,781 -
Equity in earnings of unconsolidated
subsidiaries:
Real estate depreciation 1,426 - 2,689 -
Deferred income taxes 1,290 - 2,164 -
Amortization of recoverable amount of
management contracts 280 - 430 -
------- ------ ------- -------
Funds From Operations (FFO) $21,251 $8,824 $49,692 $25,192
------- ------ ------- -------
------- ------ ------- -------
Weighted average common shares, common share
equivalents, preferred stock convertible into
common stock and OP Units outstanding 29,679 15,035 24,347 14,517
------- ------ ------- -------
------- ------ ------- -------
For the nine months ended September 30, 1997 and 1996, net cash flow were as
follows (amounts in thousands):
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
Cash provided by operating activities $ 53,435 $ 30,865
Cash provided by (used for) investing activities (314,814) (11,188)
Cash provided by (used for) financing activities 293,984 (20,941)
--------- ---------
Net cash flow $ 32,605 $ (1,264)
--------- ---------
--------- ---------
CONTINGENCIES
Certain of the Company's Owned Properties are, and some of the other
properties managed by the Company or NHP may be, located on or near properties
that have contained underground storage tanks or on which activities have
occurred which could have released hazardous substances into the soil or
groundwater. There can be no assurances that such hazardous substances have
not been released or have not migrated, or in the future will not be released
or will not migrate, onto the properties. Such hazardous substances have been
released at certain Owned Properties and, in at least one case, have migrated
from an off-site location onto an Owned Property. In addition, the Company's
Montecito property in Austin, Texas, is located adjacent to, and may be
partially on, land that was used as a landfill. Low levels of methane and
other landfill gas have been detected at Montecito. The City of Austin (the
"City"), the former landfill operator, has assumed responsibility for
conducting all remedial activities to date associated with the methane and
other landfill gas. The remediation of the landfill gas is now substantially
complete and the Texas Natural Resources Conservation Commission ("TNRCC") has
preliminarily approved the methane gas remediation efforts. Final approval of
the site and the remediation process is contingent upon the results of
continued methane gas monitors to confirm the effectiveness of the remediation
efforts. Should further actionable levels of methane gas be detected, a
proposed contingency plan of passive methane gas venting may be implemented by
the City. The City has also conducted testing at Monetcito to determine
whether, and to what extent, groundwater has been impacted. Based on test
reports received to date by the Company, the groundwater does not appear to be
contaminated at actionable levels. The Company has not
26
incurred, and does not expect to incur, liability for the landfill
investigation and remediation; however, the Company has relocated some of its
tenants and has installed a venting system according to the TNRCC's
specifications under the buildings slabs, in connection with raising four of
its buildings in order to install stabilizing piers thereunder, at an
estimated total cost of approximately $573,000, which is primarily the cost for
the restabilization. The Company anticipates that the restabilization will be
completed in January 1998. The City will be responsible for monitoring the
conditions of Montecito.
LEGISLATIVE ACTION REGARDING PROPOSED HUD REORGANIZATION AND RESTRUCTURING OF
HUD PROGRAMS
The Company, primarily through NHP, manages approximately 44,000 units that
are subsidized under Section 8 of the United States Housing Act of 1937, as
amended ("Section 8"). These subsidies are generally provided pursuant to
project-based contracts with the owners of the properties or, with respect to
a limited number of units managed by NHP, pursuant to vouchers received by
tenants. A substantial number of the Section 8 subsidies are scheduled to
expire prior to 2005, unless renewed. On October 27, 1997, The President
signed into law the Multifamily Assisted Housing Reform and Affordability Act
of 1997 (the "1997 Housing Act"). Under the 1997 Housing Act, certain
properties assisted under Section 8, with rents above market levels and
financed with mortgage loans insured by the United States Department of
Housing and Urban Development ("HUD") will be restructured by reducing
subsidized rents to market levels, thereby reducing rent subsidies and
lowering required debt service costs as needed to ensure financial viability
at the reduced rents and rent subsidies. The 1997 Housing Act retains
project-based subsidies for most properties (properties in tight rental
markets, properties serving the elderly and certain other properties). The
1997 Housing Act phases out project-based subsidies on selected properties
serving families not located in the rental markets with limited supply,
converting such subsidies to a tenant-based subsidy. Under a tenant based
system, rent vouchers would be issued to qualified tenants who then could
elect to reside at a property of their choice, provided the tenant has the
financial ability to pay the difference between the selected property's
monthly rent and the value of the voucher, which would be established based
on HUD's regulated fair market rent for the relevant geographical areas. The
1997 Housing Act provides that properties will begin the restructuring
process in federal fiscal year 1999 (beginning October 1, 1998), and that HUD
will issue final regulations implementing the 1997 Housing Act on or before
October 27, 1998. With respect to Housing Assistance Payments Contracts
("HAP Contracts") expiring on or before October 1, 1998, Congress has elected
to renew expiring HAP Contracts for one year terms, generally at existing
rents, so long as the properties remain in compliance with the HAP Contracts.
While the Company does not expect the provisions of the 1997 Housing Act to
result in a significant number of tenants relocating from properties managed
by the Company, there can be no assurance that the provisions will not
significantly affect the Company's management portfolio. Furthermore, there
can be no assurance that other changes in Federal housing subsidy will not
occur. Any such changes could have an adverse effect on the Company's
property management revenues.
INFLATION
Substantially all of the leases at the Company's apartment properties are for
a period of six months or less, allowing, at the time of renewal, for
adjustments in the rental rate and the opportunity to re-lease the apartment
unit at the prevailing market rate. The short term nature of these leases
generally serves to minimize the risk to the Company of the adverse effect of
inflation and the Company does not believe that inflation has had a material
adverse impact on its revenues.
LITIGATION
See PART II. OTHER INFORMATION - ITEM 1. LEGAL PROCEEDINGS elsewhere in this
Report for a discussion of certain legal proceedings.
In addition, the Company is a party to various legal actions resulting from
its operating activities. These actions are routine litigation and
administrative proceedings arising in the ordinary course of business, some
of which are covered by liability insurance, and none of which are expected
to have a material adverse effect on the consolidated financial condition or
results of operations of the Company.
27
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In November 1996, Apartment Investment and Management Company, a
Maryland corporationCorporation ("AIMCO") and together with its subsidiaries and
other controlled entities, the "Company"), acquired (the "English
Acquisition") certain partnershippartnerships interests, real estate and related
assets owned by J.W. English, a Houston, Texas-based real estate
syndicator and developer, and certain affiliated entities
(collectively, the "J.W. English Companies"). In the English
Acquisition, the Company purchased all of the general and limited
partnership interests in 22 limited partnerships which act as the
general partner to 31 limited partnerships (the "English
Partnerships") that own 22 multifamilymulitfamily apartment properties and other
assets and interestsinterest related to the J.W. English Companies and assumed
management of the properties owned by the English Partnerships. The
Company made separate tender offers (the "English Tender Offers") to
the limited partners of 25 of the English Partnerships (the "Tender
Offer English Partnerships").
In November 1996, purported limited partners of certain of the Tender
Offer English Partnerships filed a purported class action lawsuit
against the Company and J.W. English in the U.S. District Court for
the Northern District of California (the "Federal Action"), alleging,
among other things, that the Company conspired with J.W. English to
breach his fiduciary duty to the plaintiffs, and that the offering
materials used by the Company in connection with the English Tender
Offers contained misleading statements or omissions. The plaintiffs
in the Federal Action have filed a motion to voluntarily dismiss the
Federal Action, without prejudice, in favor of another purported class
action. The Federal Action was dismissed without prejudice in July
1997.
In May 1997, limited partners of certain of the Tender Offer English Partnerships
and the six additionalremaining English Partnerships filed two complaints in the
Superior Court of the State of California (the "California Actions")
against the Company, and the J.W. English Companies and Houlihan, Lukey, Howard
and Zukin, Inc. alleging, among other things, that the consideration
the Company offered in the English Tender Offers was inadequate and
designed to benefit the J.W. English Companies at the expense of the
limited partners, that certain misrepresentations and omissions were
made in connection with the English Tender Offers, that the Company
receives excessive fees in connection with its management of the
properties owned by the English Partnerships,Partnerships', that the Company
continues to refuse to liquidate the English Partnerships and that the
English Acquisition violated the partnershippartnerships agreements governing the
English Partnerships and constituted a breach of fiduciary duty. The
California Actions seek monetary damages and injunctive and
declarative relief. In addition to such monetary damages, the
complaints seek an accounting, a constructive trust of the assets and
monies acquired by the J.W. English Companies in connection with the
English Acquisition, a court order removing the Company from
management of the English Partnerships and/or ordering the sale of the
properties and attorney's fees, expert fees and other costs.
28
The Company believes all of the foregoing allegations against it are
without merit and intends to vigorously defend itself in connection
with these actions. The Company believes it is entitled to indemnity
from the J.W. English Companies, subject to certain exceptions. On
August 4, 1997, the Company filed demurrers to both complaints in the
California Actions. A hearing on the demurrers is scheduledwas rescheduled for
October 17,December 19, 1997.
ItemITEM 2. Change in SecuritiesCHANGE IN SECURITIES
On August 4, 1997, AIMCO issued 750,000 shares of its Class B
Cumulative Convertible Preferred Stock, parPar value $.01 per share (the
"Class B Preferred Stock"), to an institutional investor (the
"Preferred Share Investor") for $75 million in a private transaction
exempt from registration under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to Section 4(2) thereof. The Class B
Preferred Stock ranks prior to AIMCO's Class A Common Stock par value $.01 per share (the "Common Stock"), with
respect to dividends, liquidation, dissolution, and winding-up, and
has an aggregate liquidation value of $75,000,000. Holders of the
Class B Preferred Stock are entitled to receive, when, as and if
declared by AIMCO's Board of Directors, quarterly cash dividends per
share equal to the greater of (i) $1.78125 (the "Base Rate") and (ii)
the cash dividends declared on the number of shares of Class A Common
Stock into which one share of Class B Preferred Stock is convertible.
On or after August 4, 1998, each share of Class B Preferred Stock may
be converted at the option of the holder into the number of shares of
Class A Common Stock determined by dividing the $100 liquidation
preference per share by $30.45, subject to certain anti-dilution
adjustments. AIMCO may redeem any or all of the Class B Preferred
Stock on or after August 4, 2002, at a redemption price of $100 per
share, plus unpaid dividends accrued on the shares redeemed.
Holders of Class B Preferred Stock, voting as a class with the holders
of all AIMCO capital stock that ranks on a parity with the Class B
Preferred Stock with respect to the payment of dividends or upon
liquidation, dissolution, winding up or otherwise ("Parity Stock"),
will be entitled to elect (i) two directors of AIMCO if six quarterly
dividends (whether or not consecutive) on the Class B Preferred Stock
or any Parity Stock are in arrears, and (ii) one director of AIMCO if
for two consecutive quarterly dividend periods AIMCO fails to pay at
least $0.4625 in dividends on the Class A Common Stock. The
affirmative vote of the holders of 66-2/3% of the outstanding shares
of Class B Preferred Stock will be required to amend AIMCO's Charter
in any manner that would adversely affect the rights of the holders of
Class B Preferred Stock, and to approve the issuance of any capital
stock that ranks senior to the Class B Preferred Stock with respect to
payment of dividends or upon liquidation, dissolution, winding up or
otherwise. If the Internal Revenue Service were to make a final
determination that AIMCO does not qualify as a real estate investment
trust in accordance with SectionsSection 856 through 860 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Base Rate for
quarterly cash dividends on the Class B Preferred Stock would be
increased to $3.03125 per share. 2
The terms of the Class B Preferred
Stock are set forth in AIMCO's Articles of Incorporation,Charter, which is included as Exhibit
3.1 to this Report and incorporated herein by this reference.
The agreement pursuant to which AIMCO issued the Class B Preferred
Stock (the "Preferred Share Purchase Agreement)Agreement") provides that the
Preferred Share Investor may require AIMCO to repurchase such
investor's Class B Preferred Stock in whole or in part at a price of
$105 per share, plus accrued and unpaid dividends on the purchased
shares, if (i) AIMCO shall fail to continue to be taxed as a real
estate investment trust pursuant to Sections 856 through 860 of the
Code, or (ii) upon the occurrence of a change of control (as defined
in the Preferred Share Purchase Agreement). The Preferred Share
Purchase Agreement also provides that, so long as the Preferred Share
Investor owns Class B Preferred Stock with an aggregate liquidation
preference of at least $18.75 million, neither AIMCO, AIMCO
Properties, L.P. nor any subsidiary of AIMCO may issue preferred
securities or incur indebtedness for borrowed money if immediately
following
29
such issuance and after givinggiven effect thereto and the application
of the net proceeds therefrom, AIMCO's ratio of (i) aggregate
consolidated earnings before incomeinterest, taxes, depreciation
and amortization, to (ii) aggregate consolidated fixed charges,
(earnings before income taxes depreciation and amortization) for
the four fiscal quarters immediately preceding such issuance would be
less than 1.5 to 1.
3
On May 5,ITEM 5. OTHER INFORMATION.
Effective November 4, 1997, AIMCO issued 2,142,857 sharesAIMCO's Board of Common Stock to Demeter
Holdings Corporation, a Massachusetts corporation, Phemus Corporation, a
Massachusetts corporation ("Phemus"), Capricorn Investors, L.P., a Delaware
limited partnership ("Capricorn"),Directors appointed
Troy D. Butts Senior Vice President and certainChief Financial Officer,
replacing Leeann Morein, who became Senior Vice President of Capricorn's limited
partners as consideration for the purchase of 2,866,073 shares of common
stock, par value $.01 per share, of NHP Incorporated, a Delaware corporation
("NHP"). The shares of Common Stock were issued in a transaction not
involving any public offering in reliance on the exemption from registration
contained in Section 4(2) of the Securities Act.
On June 3, 1997, AIMCO issued warrants (the "Warrants") to purchase
399,999 shares of Common Stock to NHP Partners Limited Partnership, a
Delaware limited partnership, Phemus, Mr. J. Roderick Heller III, Capricorn
and NHP Partners Two LLC, a Delaware limited liability company. The Warrants
were issued as partial consideration for the acquisition by the Company of
all the outstanding capital stock of NHP Partners, Inc. and all of the
outstanding limited partnership interests in NHP Partners Two Limited
Partnership. The Warrants have an exercise price of $36 per share and expire
in June 2002. The Warrants were issued in a transaction not involving any
public offering in reliance on the exemption from registration contained in
Section 4(2) of the Securities Act.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its annual meeting of stockholders on April 24, 1997.
At the meeting, the stockholders approved the four proposals set forth below:
1. Proposal to elect six directors, for a term of one year each, until
the next annual meeting of stockholders and until their successors are
elected and qualify:
Votes Votes
For Withheld
---------- --------
Terry Considine 14,067,058 104,303
Richard S. Ellwood 14,067,058 104,303
Peter K. Kompaniez 14,067,058 104,303
J. Landis Martin 14,067,058 104,303
Thomas L. Rhodes 14,067,058 104,303
John D. Smith 14,067,058 104,303
2. Proposal to ratify the selection of Ernst & Young LLP, to serve as
independent auditors for the Company for the calendar year ending December
31, 1997:
Votes Votes Broker
For Against Abstentions Non Votes
---------- ------- ----------- ---------
14,081,325 29,858 60,178 0
3. Proposal to approve the Apartment Investment and Management Company
1997 Stock Award and Incentive Plan:
Votes Votes Broker
For Against Abstentions Non Votes
---------- ------- ----------- ---------
7,521,212 1,767,313 148,935 0
4. Proposal to approve and ratify (i) the Amended and Restated Apartment
Investment and Management Company Non-Qualified Stock Option Plan, and (ii)
the issuance and sale of 515,500 shares of AIMCO Class A Common Stock to
certain of the Company's executive officers:
Votes Votes Broker
For Against Abstentions Non Votes
---------- ------- ----------- ---------
8,421,824 826,523 189,114 0
4
ItemInvestor
Services.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.8-K
(a) The following exhibits are filed with this report(1)report (1):
Exhibit
Number Description
- ------- -----------
2.1 Real Estate Acquisition1.1 Underwriting Agreement, dated as of MayOctober 22, 1997, by and among
Apartment Investment and Management Company, AIMCO Properties L.P.,
Demeter Holdings Corporation, Phemus Corporation, Capricorn
Investors, L.P.Smith Barney Inc., J. Roderick Heller, IIIBT Alex Brown Incorporated, Lehman Brothers Inc.,
Merrill Lynch, Pierce Fenner & Smith Incorporated, Raymond James &
Associates, Inc., and NHP Partnersthe Robinson-Humphrey Company LLC, (2)
2.2 Amendment No. 1 to Real Estate Acquisition Agreement, dated as
Representatives of June 13, 1997, by and among Apartment Investment and Management
Company, AIMCO Properties, L.P., Demeter Holdings Corporation,
Phemus Corporation, Capricorn Investors, L.P., J. Roderick Heller,
III and NHP Partners LLC
2.3the Several Underwriters named in Schedule I
thereto
2.1 Amendment No. 2 to Real Estate Acquisition Agreement, dated as of
July 14, 1997, by and among Apartment Investment and Management
Company, AIMCO Properties, L.P., Demeter Holdings Corporation
("Demeter"), Phemus Corporation ("Phemus"), Capricorn Investors L.P.
("Capricorn"), J. Roderick Heller, III ("Heller"), and NHP
Partners Two LLC 2.4 Stock Purchase(together with Demeter, Phemus, Capricorn, and
Heller, the "Sellers") (Exhibit 2.3 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1997,
is incorporated herein by this reference)
2.2 Amendment No. 3 to Real Estate Acquisition Agreement, dated as of
April 16,August 14, 1997, by and among Apartment Investment and Management
Company, Demeter Holdings
CoporationAIMCO Properties, L.P., and Capricorn Investors, L.P. (3)
3.1 Articles of Incorporation
3.2 Amended and Restated Bylaws
10.1the Sellers
2.3 Amendment No. 4 to Real Estate Acquisition Agreement, and Plan of Merger, dated as of
April 21,September 4, 1997, by and among Apartment Investment and Management
Company, AIMCO/NHPAIMCO Properties, L.P., and the Sellers
2.4 Amendment No. 5 to Real Estate Acquisition Corp. and NHP Incorporated (3)
5
Exhibit
Number Description
------- -----------
10.2 Amended and Restated Credit Agreement, (Secured Revolver-to-Term
Facility), dated May 5,as of
September 11, 1997, by and among AIMCO Properties, L.P., a
Delaware limited partnership, Bank of America National Trust and
Savings Association, as Agent, and Bank of America National Trust
and Savings Association, as initial Lender (4)
10.3 Amended and Restated Credit Agreement (Bridge Loan Facility), dated
May 5, 1997, by and among AIMCO Properties, L.P., a Delaware limited
partnership, Bank of America National Trust and Savings Association,
as Agent, and Bank of America National Trust and Savings
Association, as one of the Lenders (4)
10.4 Promissory Note, dated May 5, 1997, by AIMCO Properties, L.P., a
Delaware limited partnership, in favor of Bank of America National
Trust and Savings Association (4)
10.5 Credit Agreement, dated May 5, 1997, by and among AIMCO/NHP
Holdings, Inc., the lenders from time to time party thereto, Bank of
America National Trust and Savings Association, as one of the
Lenders, and Bank of America National Trust and Savings Association,
as Agent (4)
10.6 Promissory Note, dated May 5, 1997, by AIMCO/NHP Holdings, Inc., a
Delaware corporation, in favor of Bank of America National Trust and
Savings Association (4)
10.7 Promissory Note, dated May 5, 1997, by AIMCO/NHP Holdings, Inc., a
Delaware corporation, in favor of Smith Barney Mortgage Capital
Group, Inc. (4)
10.8 Payment Guaranty (Acquisition Sub Facility), dated May 5, 1997, by Apartment Investment and Management
Company, a Maryland corporation
and AIMCO Properties, L.P., a Delaware limited partnership, to Bank
of America National Trust and Savings Association, as Agent, for
benefit of Bank of America National Trust and Savings Association
and Smith Barney Mortgage Capital Group, Inc. (4)
6
Exhibit
Number Description
------- -----------
10.9 Pledge Agreement, dated as of May 5, 1997, by AIMCO Properties, L.P.
and Terry Considine and Peter K. Kompaniez and the Bank of America
National Trust and Savings Association, as Agent, for Bank of
America National Trust and Savings Association and Smith Barney
Mortgage Capital Group, Inc. (4)
10.10 Multifamily Note, dated as of April 18, 1997, by Copperfield
Partners, Ltd., a Texas limited partnership ("Copperfield"), payable
to GMAC Commercial Mortgage Corporation, a California corporation
("GMAC"), in the principal sum of $3,577,000
10.11 Multifamily Deed of Trust, Assignment of Rents and Security
Agreement, dated as of April 18, 1997, by Copperfield to J.C. Paxton
for the benefit of GMAC
10.12 Exceptions to Non-Recourse Guaranty, dated as of April 18, 1997, by
Apartment Investment and Management Company, a Maryland corporation
and AIMCO Properties, L.P., with respect to Copperfield
10.13 Exceptions to Non-Recourse Guaranty with Respect to Yield
Maintenance, dated as of April 18, 1997, by AIMCO and AIMCO
Properties, L.P., with respect to Copperfield
10.14 Pledge and Security Agreement, dated as of April 18, 1997, by AIMCO
Properties, L.P. in favor of GMAC
10.15 Purchase Agreement by and among Williamsberry Development
Corporation, Colley Williamsberry Limited Partnership, Williamsberry
Development Corp II, Colley Williamsberry L-2 Limited Partnership,
Colbro Development L-2 B Corp., Colley Williamsberry L-2 Limited
Partnership, AIMCO Bay Club, L.P. and AIMCO Holdings, L.P.
10.16 Acquisition and Contribution Agreement and Joint Escrow
Instructions, dated April 11, 1997, by and between AIMCO Properties,
L.P. and The Morton Towers Partnership
7
Exhibit
Number Description
------- -----------
10.17Sellers
3.1 Charter
3.2 Bylaws
10.1 Second Amended and Restated Agreement of Limited Partnership of AIMCO
Properties, L.P., dated as of July 29, 1994, among AIMCO-GP, Inc., as
general partner, AIMCO-LP, Inc., as special limited partner , and
AIMCO-GP, Inc., as attorney-in-fact for the limited partners
10.18(Exhibit 10.17 to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1997, is incorporated herein by
this reference)
10.2 First Amendment to the Second Amended and Restated Agreement of
Limited Partnership of AIMCO Properties, L.P., dated as of July 29,
1997, by AIMCO-GP, Inc. (Exhibit 10.18 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 1997, is
incorporated herein by this reference)
10.3 Common Stock Purchase Agreement made as of August 26, 1997, by and
between Apartment Investment and Management Company, a Maryland
corporation, and ABKB/LaSalle Securities Limited Partnership, a
registered investment advisor (Exhibit 99.1 to the Company's
Current Report on Form 8-K, dated August 26, 1997, is incorporated
herein by this reference)
10.4 Purchase and Sale Agreement and Joint Escrow Instructions, made and
entered into as of August 22, 1997, by and between AIMCO Properties,
L.P., and each of the parties identified on Exhibit "A" attached
thereto (collectively, the "Winthrop Sellers") (Exhibit 99.3 to the
Company's Current Report on Form 8-K, dated October 15, 1997, is
incorporated herein by this reference)
10.5 Letter Agreement, dated October 6, 1997, by and between AIMCO
Properties, L.P. and the Winthrop Sellers (Exhibit 99.4 to the
Company's Current Report on Form 8-K, dated October 15, 1997, is
incorporated herein by this reference)
30
10.6 Letter Agreement, dated October 13, 1997, by and between AIMCO
Properties, L.P. and the Winthrop Sellers (Exhibit 99.5 to the
Company's Current Report on Form 8-K dated October 15, 1997, is
incorporated herein by this reference)
10.7 Letter Agreement, dated October 15, 1997, by and between AIMCO
Properties, L.P. and the Winthrop Sellers (Exhibit 99.6 to the
Company's Current Report on Form 8-K dated October 15, 1997, is
incorporated herein by this reference)
10.8 Multifamily Note, dated as of October 31, 1997, by AIMCO/Wickertree,
L.P., a Delaware limited partnership ("Wickertree"), payable to GMAC
Commercial Mortgage Corporation, a California corporation ("GMAC"), in
the principal sum of $4,231,700
10.9 Multifamily Deed of Trust, Assignment of Rents and Security Agreement,
dated as of October 31, 1997, by Wickertree to Transnation Title
Insurance Company for the benefit of GMAC
10.10 Exceptions to Non-Recourse Guaranty, dated as of October 31, 1997, by
Apartment Investment and Management Company and AIMCO Properties,
L.P., with respect to Wickertree
10.11 Restricted Stock Agreement (1997 Stock Award and Incentive Plan)
dated as of July 25, 1997, by and between Apartment Investment and
Management Company, and R. Scott Wesson
27.1 Financial Data Schedule
(1) Schedules and supplemental materials to the exhibits have been
omitted but will be provided to the SEC upon request.
(2) Incorporated by reference from the Company's Current Report on Form
8-K, dated June 3, 1997.
(3) Incorporated by reference from the Company's Current Report on Form
8-K, dated April 16, 1997.
(4) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 1997.
(b) Reports on Form 8-K During the quarter for which this report is filed, the Company filed the
following Reports on Form 8-K:
31
Current Report on Form 8-K, dated April 16,August 26, 1997, and Amendment
1 thereto, relating to the proposed
merger of NHP Incorporated into the Company or one of itsthe Company's subsidiaries; and the
acquisition of
Stonebrook Apartments by the Company or one of its subsidiaries
and the refinancing of the debt of 23 of the Company's
affiliates, including the following financial statementscommon stock of NHP Incorporated: Consolidated Statements of Operations for the years
ended December 31, 1996, 1995 and 1994, the Consolidated Balance
Sheets as of December 31, 1996 and 1995, the Consolidated
Statements of Cash Flows for the years ended December 31, 1996,
8
1995 and 1994 and the Consolidated Statements of Shareholders'
Equity (Deficit) for the years ended December 31, 1996, 1995,
1994.Incorporated.
Current Report on Form 8-K, dated May 5,September 19, 1997, relating to the
acquisition by the Company of common stock of NHP Incorporated,Incorporated; the
acquisition by the Company of the Morton Towers apartments and adjacent
land through two subsidiary limited partnerships; the probable acquisition
by the Company of a multifamily residential apartment property for an
aggregate cash purchase price of approximately $260 million; the potential
sale by the Company of its interests in the Hall Properties to unaffiliated
joint venture partners; and the completion by the Company of the acquisition
of the Los Arboles Apartments located in Chandler, Arizona, including
certain pro forma financial information and the following financial statementsHistorical Summary of NHP Incorporated: Consolidated
StatementsGross
Income and Direct Operating Expenses of OperationsMorton Towers for the yearsyear ended
December 31, 1996 1995 and 1994, the Consolidated Balance Sheets as of December 31,
1996 and 1995, the Consolidated Statements of Cash Flows for the
years ended December 31, 1996, 1995 and 1994 and the Consolidated
Statements of Shareholders' Equity (Deficit) for the yearssix months ended December 31, 1996, 1995, 1994.June 30, 1997 (unaudited).
Current Report on Form 8-K, dated June 3,October 15, 1997, and Amendment 1
thereto, relating to the acquisition by the Company of all of the
outstanding common stock of NHP Partners, Inc. and all of the
outstanding partnership interests of NHP Partners Two Limited
Partnership; the acquisition by the Company of the Vinings at the
Waterways;35 multifamily
residential properties located in seven states from 27 limited partnerships
affiliated with Winthrop Financial Associates, including certain pro forma
financial information and the acquisition by the CompanyCombined Statement of two apartment
communities located in Tustin, California, including the Combined
Balance Sheets of NHP Real Estate Companies, as of December 31,
1996 and 1995 and March 31, 1997, the Balance Sheets of NHP
Southwest Partners, L.P. as of December 31, 1996 and 1995, the
Combined Balance Sheets of NHP New LP Entities as of December 31,
1996 and 1995, the Combined Balance Sheets of NHP Borrower
Entities as of December 31, 1996 and 1995, and the Historical
Summary of Gross IncomeRevenues and Certain
Expenses (Summary) of The Bay
Club at Aventurathe Thirty-five Acquisition Properties for the year ended
December 31, 1996 and the threesix months ended March 31,June 30, 1997 (unaudited).
9During the quarter for which this report is filed, the Company filed
the following Amendments to its Current Report on Form 8-K, dated
June 3, 1997: Amendment No. 2, filed August 14, 1997; Amendment No. 3,
filed September 5, 1997; Amendment No. 4, filed October 6, 1997; and
Amendment No. 5, filed October 22, 1997.
During the quarter for which this report is filed, the Company filed
the following Amendments to its Current Report on Form 8-K, dated
April 16, 1997: Amendment No. 1, filed April 30, 1997; and Amendment
No. 2, filed October 6, 1997; and Amendment No. 3, filed October 22,
1997.
32
SCHEDULE 1
Documents substantially identical to Exhibits 10.1010.8 through 10.14,10.10, except as
to the borrower, loan amount and the subject property, have been omitted in
reliance on Rule 12b-31 under the Securities Exchange Act of 1934. Set forth
below are the material details in which such documents differ from Exhibits
10.1010.8 through 10.14.10.10.
BORROWER SUBJECT PROPERTY LOAN AMOUNT
- -------- ---------------- -----------
Ashford Apartments $7,559,000
Coventry Square Apartments $3,116,000
Crows Nest Apartments $2,958,000
CypressAIMCO/Grovetree, L.P Grovetree (The Arbors) $3,916,538
AIMCO/Blossomtree, L.P. Blossomtree 2,147,420
AIMCO/Colonnade, L.P. Colonnade 2,901,250
AIMCO/Hazeltree, L.P. Hazeltree 4,140,761
AIMCO/Orchidtree, L.P. Orchidtree 7,417,850
AIMCO/Quailtree, L.P. Quailtree 2,256,308
AIMCO/Shadetree, L.P. Shadetree 2,102,161
AIMCO/Silktree, L.P. Silktree 1,587,911
AIMCO/Timbertree, L.P. Timbertree 8,050,350
AIMCO/Foxtree, L.P. Foxtree 9,079,651
AIMCO/Foothills, L.P. Foothills 3,936,350
AIMCO/Fox Bay, L.P. Fox Bay 3,260,278
AIMCO/Rivercrest, L.P. Rivercrest 2,874,703
AIMCO/Twinbridge, L.P. Twinbridge 1,160,988
AIMCO/Brant Rock, L.P. Brant Rock 1,241,625
AIMCO/Sand Castles, L.P. Sand Castles 3,162,500
AIMCO/Tall Timbers, L.P. Tall Timbers 4,188,250
AIMCO/Woodhollow, L.P. Woodhollow 2,137,086
AIMCO/Olmos, L.P. Olmos Club 1,274,814
AIMCO/Polo Park, L.P. Polo Park 2,328,419
AIMCO/Wildflower, L.P. Wildflower 2,119,735
AIMCO/Wydewood, L.P. Wydewood 1,674,017
AIMCO/Sand Pebble, L.P. Sand Pebble 2,761,550
AIMCO/Surrey Oaks, L.P. Surrey Oaks 2,350,700
AIMCO/Freedom Place, L.P. Freedom Place Club 7,118,100
AIMCO/Beacon Hill, L.P. Beacon Hill 3,685,000
AIMCO/Windsor Landing, Apartments $4,433,000
Easton Village Apartments $2,969,000
Fisherman's Wharf Apartments $3,627,000
Greentree Apartments $7,631,000
Hampton Hill Apartments $4,240,000
Hastings Place Apartments $2,723,000
Highland Park Apartments $9,614,000
Las Brisas Apartments $3,425,000
Meadows Apartments $2,138,000
Oak Falls Apartments $2,802,000
Randol Crossing Apartments $2,517,000
Ridgecrest Apartments $2,538,000
Riverwalk Apartments $5,761,000
Signature Point Apartments $7,565,000
Snug Harbor Apartments $2,103,000
10L.P. Windsor Landing 5,564,448
AIMCO/Islandtree, L.P. Island Tree 4,301,550
AIMCO/Yorktree, L.P. Yorktree 6,778,609
AIMCO/Hiddentree, L.P. Hiddentree 4,505,728
AIMCO/Pine Creek, L.P. Pine Creek 2,442,550
AIMCO/Shadow Lake, L.P. Shadow Lake 3,301,100
33
Southridge Apartments $2,160,000
Stoney Brook Apartments $750,000
Sunbury Downs $2,523,000
Swiss Village Apartments $4,655,000
The Waterford Apartments $4,120,000
Woodhill Apartments $5,976,000
Woodland Apartments $2,136,000
Woodland-Tyler Apartments $4,310,000
11SCHEDULE 2
Documents substantially identical to Exhibit 10.11, except as to the
recipient, the number of shares, the borrower and the note amount, have been
omitted in reliance on Rule 12b-31 under the Securities Exchange Act of 1934.
Set forth below are the material details in which such documents differ from
Exhibit 10.11.
Recipient And Borrower Number Of Shares Note Amount
- ---------------------- ---------------- -----------
Terry Considine (Titahothree
Limited Partnership RLLLP) 691,578 $20,747,340
Peter Kompaniez 210,526 6,315,780
Tom Toomey 52,632 1,578,960
Steven Ira 52,632 1,578,960
David Williams 52,632 1,578,960
Harry Alcock 10,000 300,000
Martha Carlin 10,000 300,000
Leann Morein 4,000 120,000
Patricia Heath 4,000 120,000
Carla Stoner 3,000 90,000
34
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
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.
REGISTRANT:
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
Date: November 14, 1997 /s/ TROY D. BUTTS
-------------------------------
Troy D. Butts
Senior Vice President and
Chief Financial Officer
(duly authorized officer and principal
financial officer)
/s/ PATRICIA K. HEATH
---------------------
Patricia K. Heath
Vice President and
Chief Accounting Officer
(principal accounting officer)
35