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November 5, 2020 | BEIJING BRUSSELS FRANKFURT HONG KONG LONDON MOSCOW MUNICH PARIS SÃO PAULO SEOUL SHANGHAI SINGAPORE TOKYO TORONTO | |||
VIA EDGAR TRANSMISSION AND HAND DELIVERY
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
| Attn: | Mr. Jonathan Burr |
Ms. Erin E. Martin |
| Re: | Apartment Income REIT Corp. (f/k/a Aimco-LP, Inc.) Amendment No. 1 to Draft Registration Statement on Form 10 Submitted September 30, 2020 (CIK No. 0001820877) |
Dear Mr. Burr and Ms. Martin:
On behalf of our client, Apartment Investment and Management Company (“Our Client”), we hereby provide responses to comments received from the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) by letter dated October 21, 2020 (the “Comment Letter”) with respect to the above-referenced Amendment No. 1 to the Draft Registration Statement on Form 10 confidentially submitted by Apartment Income REIT Corp., formerly known as Aimco-LP, Inc. (a subsidiary of Our Client, the “Company” or “AIR”), to the Commission on September 30, 2020.
Concurrently with the submission of this letter, the Company is filing, through the Commission’s Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system, the Registration Statement on Form 10 (the “Registration Statement”), which Registration Statement includes an amended Information Statement as Exhibit 99.1, in response to the Staff’s comments and to reflect certain other changes.
The headings and paragraph numbers in this letter correspond to those contained in the Comment Letter and, to facilitate the Staff’s review, we have reproduced the text of the Staff’s comments in italics below. Capitalized terms used but not defined herein have the meanings given to them in the Registration Statement. All references to page numbers and captions (other than those in the Staff’s comments and unless otherwise stated) correspond to the page numbers and captions in the Registration Statement.
* * * * *
Mr. Jonathan Burr
Securities and Exchange Commission
November 5, 2020
Page 2
Amendment No. 1 to Draft Registration Statement on Form 10 submitted September 30, 2020
Summary
Our Company, page 1
| 1. | We note that you will retain a portfolio of 98 multifamily properties and that Aimco and the New OP will hold a portfolio of development and redevelopment properties in addition to a portfolio of 11 stabilized properties and certain other assets, which will provide revenue to help meet on-going liquidity needs. Please provide more detail to as to how these specific assets were selected and clarify any methodology used to allocate such assets. |
Response: The Company respectfully advises the Staff that the Company has included the following detail as to how these specific assets were selected in its submission of the Registration Statement on page ii:
The assets that will be allocated to AIR and Aimco, as applicable, were selected based on the go-forward business plans of each company. Assets that are allocated to AIR are primarily stabilized multifamily properties located in varying geographies that are intended to provide AIR with the blend and balance of assets to support its strategic goals. Assets that are allocated to Aimco are primarily either undergoing redevelopment, development, or lease-up, or are expected to provide stabilized income to help meet Aimco’s ongoing liquidity needs.
Reasons for the Spin-Off, page 9
| 2. | Please briefly describe the material negative factors that the board considered when determining whether to engage in the spin-off transaction. |
Response: The Company respectfully advises the Staff that the Company has included the following expanded discussion of material negative factors in its submission of the Registration Statement on page 53:
The board of directors of Aimco also considered a number of potentially negative factors in evaluating the Separation, including the following:
| • | Anticipated benefits of the Separation may not be realized. Following the Separation, AIR and Aimco will be two, focused and independent companies. AIR and/or Aimco may not be able to achieve some or all of the benefits that it expects to achieve as a company independent from the other in the time it expects, if at all. For instance, it may take longer than anticipated for AIR to, or AIR may never, succeed in growing its business through the acquisition of new stabilized apartment communities or through AIR’s active management strategies. |
| • | There may be disruptions to the business as a result of the Separation. The actions required to separate AIR and Aimco could disrupt AIR and Aimco’s operations after the Separation. |
Mr. Jonathan Burr
Securities and Exchange Commission
November 5, 2020
Page 3
| • | One-time costs of the Separation. AIR and Aimco will incur costs in connection with the transition to being separate public companies that may include accounting, tax, legal and other professional service costs, recruiting and relocation costs associated with hiring or reassigning personnel, costs to separate information systems, and, in the case of AIR, costs related to establishing a new brand identity in the market place. |
| • | There may be conflicts between AIR and Aimco. There may be, or there may be the appearance of, conflicts of interest in AIR’s relationship with Aimco. Mr. Considine, along with Messrs. Miller and Stein, will serve on both AIR’s and Aimco’s boards of directors, however, such directors will recuse themselves from voting as members of either board of directors during the approval or disapproval of any transactions between the two companies. The agreements between Aimco and us generally will not limit or restrict Aimco or its affiliates from engaging in any business or managing other entities that engage in business of the type conducted by us. Actual, potential, or perceived conflicts could give rise to investor dissatisfaction, settlements with stockholders, litigation, or regulatory inquiries or enforcement actions. |
| • | The Separation as structured is expected to result in certain tax liabilities for Aimco stockholders. In general, Aimco expects that the Separation will be treated as a taxable transaction for U.S. federal income tax purposes. As more specifically described in “The Separation—U.S. Federal Income Tax Consequences of the Separation” and “U.S. Federal Income Tax Considerations,” an amount equal to the fair market value of the AIR Common Stock stockholders receive on the distribution date will generally be treated as a taxable dividend to the extent of each stockholder’s ratable share of any current or accumulated earnings and profits of Aimco (including gain recognized by Aimco in connection with the Separation). The excess will be treated as a non-taxable return of capital to the extent of each stockholder’s tax basis in shares of Aimco Common Stock and any remaining excess will be treated as capital gain. Aimco will not be able to advise stockholders of the amount of earnings and profits of Aimco until after the end of the calendar year in which the Separation occurs. |
Conditions to the Spin-Off, page 65
| 3. | We note your statement that the Aimco board of directors can, in their sole discretion, waive certain conditions to the spin-off, including that: (i) all actions and filings necessary under federal or state securities laws related to the transaction shall have been taken; (ii) the acceptance of AIR’s common stock for listing; (iii) any material government authorizations necessary to consummate the spin-off shall have been obtained; (iv) the receipt of a tax opinion from counsel that AIR will be organized in conformity with the requirements for qualification as a REIT; and (v) no preliminary or permanent injunction shall be in effect that prevents the consummation of the Spin-Off. Please update your disclosure to discuss to potential consequences to stockholders if the Aimco board of directors waives such conditions and proceeds with the spin-off. |
Response: The Company respectfully advises the Staff that the Company has included the following expanded discussion of the potential consequences of waiver of conditions to the Separation in its submission of the Registration Statement on page 68:
Mr. Jonathan Burr
Securities and Exchange Commission
November 5, 2020
Page 4
We cannot assure you that all of the conditions will be satisfied or waived. In addition, if the Separation is completed and Aimco’s board of directors waives any such condition, such waiver could have a material adverse effect on Aimco’s and AIR’s respective business, financial condition, or results of operations, including, without limitation, as a result of illiquid trading due to the failure of AIR Common Stock to be accepted for listing, litigation relating to any preliminary or permanent injunctions that sought to prevent the consummation of the Separation, or the failure of Aimco or AIR to obtain any required regulatory approvals. As of the date hereof, the board of directors of Aimco does not intend to waive any of the conditions described herein and would only consider such a waiver if it determined that such action was in the best interests of Aimco and its stockholders.
Notes to Unaudited Pro Forma Combined Financial Statements, page 76
| 4. | We note your adjustment (C) to the Unaudited Pro Forma Consolidated Balance Sheet does not appear to reflect the repaid property debt for the joint venture transaction. We further note your adjustment (C) to the Unaudited Pro Forma Consolidated Statements of Operations appears to reflect the repaid property debt for the joint venture transaction. Please tell us how you determined it was appropriate to reflect this repaid property debt on the Unaudited Pro Forma Consolidated Statements of Operations but not on Unaudited Pro Forma Consolidated Balance Sheet. Reference is made to Article 11 of Regulation S-X. |
Response: The Company respectfully advises the Staff that the Company has revised its adjustment (C) to the Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2020 to reflect the payment of property debt.
| 5. | We note your adjustment (H) to your Unaudited Pro Forma Consolidated Statements of Operations. Please disclose the terms of the note receivable due from New OP. |
Response: The Company respectfully advises the Staff that the terms of the note receivable are described on page 212 of the Registration Statement.
| 6. | It appears that you revised your pro forma financial information to remove an adjustment for the master services agreement. Please tell us how you determined it was unnecessary to reflect an adjustment for this agreement. |
Response: The Company respectfully advises the Staff that the fee income described in adjustment (F) comprises a 3% fee pursuant to the Property Management Agreement and a fee of other services provided pursuant to the Master Services Agreement, including information technology and human resource related services, which approximates 1% of revenue based on the expected level of services provided to Aimco OP L.P., formerly known as Durango OP, LP. The Company has revised the disclosure on page 78 of the Registration Statement to clarify.
Mr. Jonathan Burr
Securities and Exchange Commission
November 5, 2020
Page 5
Non-GAAP Measures, page 92
| 7. | We note your response to comment 7. Please address the following: |
| • | Please elaborate on how you determined Economic Income provides a measure of return to your shareholders given that shareholders can only monetize their return through the receipt of dividends and through selling their shares in the public markets. |
| • | Please tell us how you derived Economic Income of 6.8% for 2019 and of 10% compounded annual return over the last five years as of December 31, 2019. |
| • | Please tell us how Economic Income compares to the actual return a stockholder realized during 2019. |
Response: The Company respectfully advises the Staff that the discussion of Economic Income has been removed from the Registration Statement.
Management’s Discussion and Analysis of Financial Condition and Results of Operations Liquidity, page 108
| 8. | We note your response to comment 5 and your revisions to your filing that the estimated fair market value of your unencumbered communities is calculated in the same manner as GAV. Please tell us if the assumptions underlying the calculations of the estimated fair value of your unencumbered communities are materially different from the assumptions underlying total GAV. To the extent they are materially different, please tell us how you determined it was unnecessary to disclose the assumptions underlying the calculations of the estimated fair value of your unencumbered communities. |
Response: The Company respectfully advises the Staff that the calculation of the estimated fair market value of its unencumbered communities is similar to the calculation of GAV. There are no differences in the assumptions underlying the calculations.
We thank you for your prompt attention to this letter responding to the Comment Letter and look forward to hearing from you at your earliest convenience. If you have any questions regarding this filing, please contact Joseph A. Coco at (212) 735-3050; Blair T. Thetford at (212) 735-2082; or Michelle Gasaway at (213) 687-5122.
Sincerely, |
/s/ Michelle Gasaway |
Michelle Gasaway |
Skadden, Arps, Slate, Meagher & Flom LLP |