UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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| ☐ | Soliciting Material under Rule 14a-12 |
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
(Exact Name of Registrant as Specified In Its Charter)
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4582 SOUTH ULSTER STREET, SUITE 1100
DENVER, COLORADO 80237
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On April 26, 2016
Youare cordially invited to attend the 2016 Annual Meeting of Stockholders (the “Meeting”) ofAPARTMENTINVESTMENT AND MANAGEMENTCOMPANY(“Aimco” or the “Company”) to be held onTuesday,April 26, 2016, at 8:30 a.m. atAimco’scorporate headquarters, 4582 South Ulster Street, Suite 1100, Denver, CO 80237, for the following purposes:
| 1. | Toelecteightdirectors,foratermofoneyeareach,untilthenextAnnualMeetingofStockholdersanduntiltheirsuccessors are elected andqualify; | |
| 2. | Toratify the selection of Ernst &YoungLLP,to serve as independent registered public accounting firm for the Company for the fiscal year ending December 31,2016; | |
| 3. | Toconduct an advisory vote on executive compensation;and | |
| 4. | Totransact such other business as may properly come before the Meeting or any adjournment(s)thereof. |
OnlystockholdersofrecordatthecloseofbusinessonFebruary19,2016,willbeentitledtonoticeof,andtovoteat,theMeeting or any adjournment(s)thereof.
WeareagainpleasedtotakeadvantageofSecuritiesandExchangeCommission(“SEC”)rulesthatallowissuerstofurnishproxy materials to their stockholders on the Internet.Webelieve these rules allow us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of ourMeeting.
OnoraboutMarch11,2016,weintendtomailourstockholdersanoticecontaininginstructionsonhowtoaccessour2016proxy statement(the“ProxyStatement”),AnnualReportonForm10-KfortheyearendedDecember31,2015,and2015CorporateCitizenship Report and vote online. The notice also provides instructions on how you can request a paper copy of these documents if you desire, and how you can enroll in e-delivery. If you received your annual materials via email, the email contains voting instructions and links to these documents on theInternet.
WHETHER OR NOT YOU EXPECT TO BE AT THE MEETING, PLEASE VOTE AS SOON AS POSSIBLE TO ENSURE THAT YOUR SHARES ARE REPRESENTED.
| BY ORDER OF THE BOARD OF DIRECTORS | |
 | |
| Lisa R. Cohn | |
| Secretary | |
| March 7, 2016 |
Important Notice Regarding the Availability of Proxy Materials for
Aimco’s Annual Meeting of Stockholders to be held on April 26, 2016.
This Proxy Statement, Aimco’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and 2015 Corporate Citizenship Report are available free of charge at the following website: www.edocumentview.com/aiv.
Table of Contents
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
4582 SOUTH ULSTER STREET, SUITE 1100
DENVER, COLORADO 80237
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 26, 2016
The Board of Directors (the “Board”) of Apartment Investment and Management Company (“Aimco” or the “Company”) has made these proxy materials available to you on the Internet,or,upon your request, has delivered printed versions of these materials to youbymail.WearefurnishingthisProxyStatementinconnectionwiththesolicitationbyourBoardofproxiestobevotedatour2016 AnnualMeeting(the“Meeting”).TheMeetingwillbeheldonTuesday,April26,2016,at8:30a.m.atAimco’scorporateheadquarters locatedat4582SouthUlsterStreet,Suite1100,Denver,Colorado80237,andatanyandalladjournmentsorpostponementsthereof.
Pursuant to rules adopted by the SEC, we are providing access to our proxy materials over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice”) to each stockholder entitled to vote at the Meeting. The mailing of such Notice is scheduled to begin on or about March11,2016. All stockholders will have the ability to access the proxy materialsovertheInternetandrequesttoreceiveaprintedcopyoftheproxymaterialsbymail.Instructionsonhowtoaccesstheproxy materialsovertheInternetortorequestaprintedcopymaybefoundintheNotice.Inaddition,theNoticeincludesinstructionsonhow stockholders may request proxy materials in printed form by mail or electronically by email on an ongoingbasis.
ThissolicitationismadebymailonbehalfofAimco’sBoard.CostsofthesolicitationwillbebornebyAimco.Furthersolicitation of proxies may be made by telephone, fax or personal interview by the directors, officers and employees of the Company and its affiliates,whowillnotreceiveadditionalcompensationforthesolicitation.TheCompanyhasretainedtheservicesofAllianceAdvisors LLC,foranestimatedfeeof$10,000,plusout-of-pocketexpenses,toassistinthesolicitationofproxiesfrombrokeragehouses,banks, andothercustodiansornomineesholdingstockintheirnamesforothers.TheCompanywillreimbursebanks,brokerage firmsandother custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy material tostockholders.
Holders of record of the Class A Common Stock of the Company (“Common Stock”) as of the close of business on the record date,February19,2016(the“RecordDate”),areentitledtoreceivenoticeof,andtovoteat,theMeeting.EachshareofCommonStock entitles the holder to one vote. At the close of business on the Record Date, there were 156,599,775 shares of Common Stock issued andoutstanding.
Whetheryouarea“stockholderofrecord”orholdyoursharesthroughabrokerornominee(i.e.,in“streetname”)youmaydirect your vote without attending the Meeting inperson.
If you are a stockholder of record, you may vote via the Internet by following the instructions in the Notice. If you request printed copies of the proxy materials by mail, you may also vote by signing your proxy card and returning it by mail or by submitting your vote by telephone.Youshould sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity(forexample,asguardian,executor,trustee,custodian,attorneyorofficerofacorporation),youshouldindicateyournameand title orcapacity.
If you are the beneficial owner of shares held in street name, you may be eligible to vote your shares electronically over the InternetorbytelephonebyfollowingtheinstructionsintheNotice.Ifyourequestprintedcopiesoftheproxymaterialsbymail,youmay also vote by signing the voter instruction card provided by your bank or broker and returning it by mail. If you provide specific voting instructions by mail, telephone or the Internet, your shares will be voted by your broker or nominee as you havedirected.
The persons named as proxies are officers of Aimco. All proxies properly submitted in time to be counted at the Meeting will be voted in accordance with the instructions contained therein. If you submit your proxy without voting instructions, your shares will be voted in accordance with the recommendations of the Board. Proxies may be revoked at any time before voting by filing a notice of revocation with the Corporate Secretary of the Company, by filing a later dated proxy with the Corporate Secretary of the Company or by voting in person at theMeeting.
YouareentitledtoattendtheMeetingonlyifyouwereanAimcostockholderorjointholderasoftheRecordDateorifyouholda validproxyfortheMeeting.Ifyouarenotastockholderofrecordbutholdsharesinstreetname,youshouldprovideproofofbeneficial ownershipasoftheRecordDate,suchasyourmostrecentaccountstatementpriortoFebruary19,2016,acopyofthevotinginstruction card provided by your broker, trustee or nominee, or other similar evidence ofownership.
Brokers holding shares of record for customers generally are not entitled to vote on certain matters unless they receive voting instructionsfromtheircustomers.Ifyouareabeneficialownerofsharesanddonotprovideyourbroker,asstockholderofrecord,with voting instructions, your broker has authority under applicable stock market rules to vote those shares for or against “routine” matters at its discretion. At the Meeting, the following matters are not considered routine: the election of directors and the advisory vote on executive compensation. Where a matter is not considered routine, shares held by your broker will not be voted (a “broker non-vote”) absent specific instruction from you, which means your shares may go unvoted on those matters and not affect the outcome if you do not specify avote.
The principal executive offices of the Company are located at 4582 South Ulster Street, Suite 1100, Denver, Colorado 80237.
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ELECTION OF DIRECTORS
Pursuant toAimco’sArticles of Restatement (the “Charter”) and Amended and Restated Bylaws (the “Bylaws”), directors are elected at each annual meeting of stockholders and hold office for one year, and until their successors are duly elected and qualify.Aimco’sBylawscurrentlyauthorizeaBoardconsistingofnotfewerthanthreenormorethanninepersons.TheBoardcurrentlyconsists of eightdirectors.
The nominees for election to the Board selected by the Nominating and Corporate Governance Committee of the Board and proposed by the Board to be voted upon at the Meeting are:
| James N. Bailey | Robert A. Miller | ||
| Terry Considine | Kathleen M. Nelson | ||
| Thomas L. Keltner | Michael A. Stein | ||
| J. Landis Martin | Nina A. Tran |
Messrs.Bailey,Considine,Keltner,Martin,Miller,andSteinandMs.NelsonwereelectedtotheBoardatthelastAnnualMeeting of Stockholders. Messrs. Bailey, Keltner, Martin, Miller, and Stein and Mses. Nelson and Tran are not employedby,or affiliated with, Aimco, other than by virtue of serving as directors of Aimco. Unless authority to vote for the election of directors has beenspecifically withheld, the persons named in the accompanying proxy intend to vote for the election of Messrs. Bailey, Considine, Keltner, Martin, Miller,andSteinandMses.NelsonandTrantoholdofficeasdirectorsforatermofoneyearuntiltheirsuccessorsareelectedandqualify atthenextAnnualMeetingofStockholders.AllnomineeshaveadvisedtheBoardthattheyareableandwillingtoserveasdirectors.
Ifanynomineebecomesunavailableforanyreason(whichisnotanticipated),thesharesrepresentedbytheproxiesmaybevoted forsuchotherpersonorpersonsasmaybedeterminedbytheholdersoftheproxies(unlessaproxycontainsinstructionstothecontrary). In no event will the proxy be voted for more than eightnominees.
Inanuncontestedelectionatthemeetingofstockholders,anynomineetoserveasadirectoroftheCompanywillbeelectedifthe director receives a vote of the majority of votes cast, which means that the number of shares voted “for” a director exceeds the number ofvotes“against”thatdirector.Withrespecttoacontestedelection,apluralityofallthevotescastatthemeetingofstockholderswillbe sufficienttoelectadirector.Ifanomineewhocurrentlyisservingasadirectorreceivesagreaternumberof“against”votesforhisorher election than votes “for” such election (a “Majority AgainstVote”)in an uncontested election, Maryland law provides that the director wouldcontinuetoserveontheBoardasa“holdoverdirector.”However,underAimco’sBylaws,anynomineeforelectionasadirector in an uncontested election who receives a Majority AgainstVoteis obligated to tender his or her resignation to the Nominating and CorporateGovernanceCommitteeoftheBoardforconsideration.TheNominatingandCorporateGovernanceCommitteewillconsider any resignation and recommend to the Board whether to accept it. The Board is required to take action with respect to the Nominating and Corporate Governance Committee’srecommendation.
Forpurposesoftheelectionofdirectors,abstentionsorbrokernon-votesastotheelectionofdirectorswillnotbecountedasvotes castandwillhavenoeffectontheresultofthevote.Unlessinstructedtothecontraryintheproxy,thesharesrepresentedbytheproxies will be voted FOR the election of the eight nominees named above asdirectors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
EACH OF THE EIGHT NOMINEES.
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RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
ThefirmofErnst&YoungLLP,theCompany’sindependentregisteredpublicaccountingfirmfortheyearendedDecember31,2015, was selected by the Audit Committee to act in the same capacity for the year ending December 31, 2016, subject to ratification byAimco’sstockholders.TheaggregatefeesbilledforservicesrenderedbyErnst&YoungLLPduringtheyearsendedDecember31,2015 and2014,aredescribedbelowundertheheading“PrincipalAccountantFeesandServices.”
In selecting and overseeing the Company’s independent auditor, the Audit Committee considers, among other things:
| ● | Ernst &YoungLLP’shistorical and recent performance on the Aimco audit, including the results of an internal survey of Ernst &YoungLLP’sservice andquality; | |
| ● | External data relating to audit quality and performance, including recent Public Company Accounting Oversight Board (PCAOB) reports on Ernst &YoungLLP and its peerfirms; | |
| ● | The appropriateness of Ernst &YoungLLP’sfees; | |
| ● | Ernst &YoungLLP’stenure asAimco’sindependent auditor and its familiarity withAimco’soperations and business, accounting policies and practices and internal control over financialreporting; | |
| ● | The depths of Ernst &YoungLLP’scapabilities and resources to support our business in the areas of accounting, auditing, internal control over financial reporting, tax and related matters;and | |
| ● | Ernst &YoungLLP’sindependence. |
Basedonthisevaluation,theAuditCommitteebelievesthatErnst&YoungLLPisindependentandthatitisinthebestinterests ofAimcoandourstockholderstoretainErnst&YoungLLPtoserveasourindependentauditorfor2016.
Representatives of Ernst & Young LLP will be present at the Meeting and will be given the opportunity to make a statement if they so desire and to respond to appropriate questions.
TheaffirmativevoteofamajorityofthevotescastregardingtheproposalisrequiredtoratifytheselectionofErnst&YoungLLP.Abstentionsorbrokernon-voteswillnotbecountedasvotescastandwillhavenoeffectontheresultofthevoteontheproposal.Unlessinstructedtothecontraryintheproxy,thesharesrepresentedbytheproxieswillbevoted“for”theproposaltoratifytheselectionofErnst &YoungLLPtoserveastheCompany’sindependentregisteredpublicaccountingfirmforthefiscalyearendingDecember31,2016.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION
OF THE SELECTION OF ERNST & YOUNG LLP.
ADVISORY VOTE ON EXECUTIVE COMPENSATION
PursuanttoSection14AoftheSecuritiesExchangeActof1934,asamended,weprovideourstockholderswiththeopportunityto votetoapprove,onanonbinding,advisorybasis,thecompensationofournamedexecutiveofficers(“NEOs”)asdisclosedinthisproxy statement in accordance with the compensation disclosure rules of the SEC.Aimco’sproxy statement for the 2011 annual meeting of stockholders contained a proposal for stockholders to indicate whether they would prefer that we conduct advisory votes on executive compensation once every one, two, or three years. The Board recommended that stockholders vote “for” an annual advisory vote on executive compensation, as it would allow our stockholders to provide timely, direct input on the Company’s executive compensation philosophy, policies and practices as disclosed in the proxy statement eachyear.A majority of stockholders voted “for” an annual advisoryvoteonexecutivecompensation.Accordingly,theBoarddecideditwillincludeanadvisoryvoteonexecutivecompensationat eachannualmeetingofstockholdersuntilthenextrequiredadvisoryvoteonfrequencyofstockholdervotesonexecutivecompensation, which will occur no later than the 2017 annual meeting ofstockholders.
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AtAimco’s2015 Annual Meeting of Stockholders, approximately 96% of the votes cast in the advisory vote on executive compensationthatwerepresentandentitledtovoteonthematterwereinfavorofthecompensationofAimco’sNEOs(alsocommonly referred to as “Say on Pay”) as disclosed inAimco’s2015 proxy statement. The Compensation and Human Resources Committee (the “Committee”) and management were pleased with these results, and remain committed to extensive engagement with stockholders as part of their ongoing efforts to formulate and implement an executive compensation program designed to align the long-term interests of our executive officers with ourstockholders.
During the third and fourth quarters of 2015 and into 2016, members of management arranged and participated in 15 detailed andsubstantivemeetingswithstockholders(representingover66%ofsharesofCommonStockoutstandingasofSeptember30,2015), including all 10 ofAimco’slargest stockholders as of that date, to solicit feedback onAimco’sexecutive compensation program and governance practices, including the numerous changes Aimco made to its 2015 program based on extensive stockholder feedback received in 2014 and into 2015. These changes were disclosed in detail inAimco’sproxy statement for the 2015 annual meeting of stockholders. Stockholder feedback on the changes was uniformly positive.Specifically:
| ● | With regard toAimco’sshort-term incentive (“STI”) plan, stockholders responded favorably to: the increased disclosure of goals, including an explanation of the objective of each goal and disclosure of threshold, target, and maximum achievement levelsforeachgoal;clarityaroundtheconnectionofeachgoaltoAimco’sstatedbusinessstrategy;areductioninthenumber of goals, from twelve for 2014 to eight for 2015; and an adjustment to the weightings for most goals such that the majority of goals are objective, financial goals, and an even higher percentage of goals are objectivegoals. | |
| ● | Stockholders responded favorably toAimco’snew long-term incentive(“LTI”)plan with the following key elements: performanceshareawardsthatvestbasedonrelativetotalshareholderreturn(“TSR”)ascomparedtotheNAREITApartment Index (60% weighting) and the MSCI US REIT Index (“REIT Index”) (40% weighting) over a forward looking, three-year performance period; requiring outperformance on relative return performance metrics in order to receive target payout; including a “modifier” if, for any three-year performance period, Aimco’s absolute return were negative; and providing for 100% of theCEO’sLTI,and a substantial proportion of theLTItarget for the other NEOs, to be “at risk,” or “performance based,” as opposed to “timebased.” | |
| ● | Stockholders responded favorably to the following governance changes: double trigger change in control provisions for all equity awards; adoption of anti-hedging and anti-pledging policies; a written commitment codifying our long term policies nottoprovidefutureexcisetaxgross-upsandnottorepriceunderwateroptions;andwrittendocumentationofourlongterm clawback policy, which covers all forms of bonus, incentive and equitycompensation. |
As described in detail under the heading “Compensation Discussion & Analysis,” we seek to align closely the interests of our NEOs with the interests of our stockholders. Our compensation program is designed to reward our NEOs for the achievement of short- term and long-term strategic and operational goals and the achievement of TSR greater than peers, while at the same time avoiding the encouragement of unnecessary or excessive risk-taking.
Here are further details of the Aimco program:
| ● | All members of the Committee are independent directors. The Committee has established a thorough process for the review andapprovalofAimco’sexecutivecompensationprogram,includingamountsawardedtoexecutiveofficers.TheCommittee engagesandreceivesadvicefromanindependent,third-partycompensationconsultant.TheCommitteeselectsapeergroup of companies for the purpose of comparingAimco’s compensation of executive officers. | |
| ● | Aimcosetstargettotalcashcompensationandtargettotalcompensationnearthemedianofcorrespondingtargetsamongthe peer group, both as a measure of fairness and also to provide an economic incentive to remain with Aimco. Consistent withAimco’spay-for-performance philosophy, actual compensation is based onAimco’sresults. | |
| ● | Aimco does not provide executives with more than minimal perquisites, such as reserved parkingspaces. | |
| ● | Aimco does not maintain or contribute to any defined benefit pension plan, supplemental pension plan or nonqualified deferredcompensationplanforitsexecutiveofficers.ExecutiveofficersparticipateinAimco’s401(k)planonthesameterms as available to all Aimco teammembers. | |
| ● | Aimcodoesnotmaintainanyemploymentorseveranceagreementswithitsexecutiveofficers(otherthanforMr.Considine, whowasrequiredtohaveanemploymentagreementinconnectionwithAimco’sinitialpublicofferingin1994;theagreement was amended in2008). |
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| ● | Aimco’scompensation program, which, among other things, includes caps on cash compensation, shared performance metrics across the organization, multiple performance metrics that align withAimco’spublicly communicated businessstrategy,the use ofLTIcompensation that is based on TSR, and stock ownership guidelines with required holding periods after vesting, are aligned with the long-term interests of theCompany. | |
| ● | Consistent withAimco’spay-for-performance philosophy,Mr.Considine’s total compensation is highly variable from year to year, determined byAimco’sresults. In some years,Mr.Considine’s total compensation has been comprised of little or no cash compensation.Mr.Considine’s base salary of $600,000 has remained unchanged since 2006 and is well below the median for CEOs of his experience, expertise and tenure. One hundred percent ofMr.Considine’s target STI continues to be at risk. Unlike many other CEOs, there is no subjective, individual performance component toMr.Considine’s incentive compensation.Mr.Considine’s STI is based entirely onAimco’sperformance against its corporate goals, as determined by the Committee.Mr.Considine’s targetLTIcomprises the largest percentage of his target total compensation, comprising nearly two-thirds of his target total compensation. One hundred percent ofMr.Considine’sLTIis also at risk, based on relative returns over a forward looking, three-yearperiod. |
Here is how the Aimco program was applied in 2015:
| ● | Due to strong 2015 results, executive officers were awarded STI amounts that were above targetamounts. | ||
| ● | Aimco’s2015 performance highlights include thefollowing: | ||
| ● | Aimcohad11.2%TSRin2015,aparticularlystrongresultconsideringAimcohad48%TSRin2014,firstamongmulti-familyREITpeers.AimcoTSRoutperformedtheREITIndexandtheStandard&Poor’s500TotalReturnIndex(“S&P 500 Index”) over the one-year period ended December 31, 2015, and Aimco TSR outperformed the REIT Index, the NAREITApartmentIndex,andtheS&PTotalReturnIndexoverthethree-yearperiodendedDecember31,2015. | ||
| ● | AdjustedFundsfromOperations(“AFFO”) pershare,whichisAimco’sprimarymeasureof currentprofitability, wasup 12%year-over-year. | ||
| ● | For the year ended December 31, 2015, consensus Net AssetValue(“NAV”)per share increased by 11%.Aimco’sEconomic Income, a measure of investment return representing the annual change inNAVper share plus cashdividends per share, and how the Company “keeps score,” was $5.28 per share, or a 14% return for theperiod. | ||
| ● | Full-year conventional same-store revenue was up 4.5%, and full-year conventional same-store net operating income (“NOI”) was up5.6%. | ||
| ● | Averagerevenue per apartment home was up 10% over oneyear,and up 46% over four years, to $1,840, reflectingAimco’sexecutionagainstitsportfoliomanagementstrategy–toselleachyearthe5%to10%ofitsportfoliowithlower projected returns, lower operatingmargins,and lower expected future rent growth, and to reinvest thesaleproceeds in apartment communities already in our portfolio, through property upgrades and redevelopment, or through the purchase of apartment communitieswithhigher projected returns and rent growth and, in limitedsituations,the development of apartmentcommunities. | ||
| ● | Investmentofapproximately$118millioninredevelopmentprojects,enhancingsixcommunitieswithatotalofmore than 2,500 apartment homes, and investment of approximately$116million in two developmentprojects. | ||
| ● | Aimcoreducedleverageby11%,toaratioofDebtandPreferredEquitytoEBITDAof6.8x. | ||
| ● | Aimco increased its unencumbered pool of properties to more than $1.8 billion in asset value, increasing financial flexibility. | ||
| ● | The Board declared a quarterly cash dividend of $0.33 per share ofAimco’sCommon Stock for the quarter ended December 31, 2015, an increase of 12% on an annualized basis compared to the dividends paid during2015. | ||
| ● | Reflecting Aimco’s intentional focus on a collaborative and collegial workplace with a specific focus on developing the Aimcocultureasacompetitiveadvantage,Aimcomaintaineditsrecordscoresforteamengagementandwasrecognized by The Denver Post, for a third consecutive year, as one of the top places to work inColorado. | ||
The vote on this resolution is not intended to address any specific element of compensation; rather, the vote relates to the overall compensation of our NEOs, as described in this proxy statement in accordance with the compensation disclosure rules of the SEC.
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The vote is advisory, which means that the vote is not binding on the Company, our Board or the Committee. However, as described above, we take seriously the views of our stockholders, and to the extent there is any significant vote against our executive compensation as disclosed in this proxy statement, the Committee will evaluate whether any actions are necessary to address the concerns of stockholders.
In order to be approved at the Meeting, Proposal 3 must receive the affirmative vote of a majority of the total votes cast at the Annual Meeting. Abstentions and broker non-votes are not considered votes cast and will have no effect on the outcome of the vote.
Weare asking theCompany’s stockholdersto approve, on an advisory basis, the following resolution:RESOLVED,thatthecompensationofthenamedexecutiveofficers,asdisclosedintheCompany’sProxyStatementforthe2016AnnualMeetingofStockholderspursuanttoItem402ofSECRegulationS-K,includingtheCompensationDiscussion&Analysis,the2015SummaryCompensationTableandtheotherrelatedtablesanddisclosure,isherebyAPPROVED.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”APPROVALOF
THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS,
AS DISCLOSED IN THIS PROXY STATEMENT.
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BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
TheexecutiveofficersoftheCompanyandthenomineesforelectionasdirectorsoftheCompany,theirages,datestheywerefirst elected an executive officer or director, and their positions with the Company or on the Board are set forthbelow.
| Name | Age | First Elected | Position | |||||
| Terry Considine | 68 | July 1994 | Chairman of the Board and Chief Executive Officer | |||||
| Paul L. Beldin | 42 | September 2015 | Executive Vice President and Chief Financial Officer | |||||
| John E. Bezzant | 53 | January 2011 | Executive Vice President and Chief Investment Officer | |||||
| Lisa R. Cohn | 47 | December 2007 | Executive Vice President, General Counsel and Secretary | |||||
| Miles Cortez | 72 | August 2001 | Executive Vice President and Chief Administrative Officer | |||||
| Patti K. Fielding | 52 | February 2003 | Executive Vice President – Redevelopment and Debt Financing, Treasurer | |||||
| Keith M. Kimmel | 44 | January 2011 | Executive Vice President, Property Operations | |||||
| James N. Bailey | 69 | June 2000 | Director, Chairman of the Nominating and Corporate Governance Committee | |||||
| Thomas L. Keltner | 69 | April 2007 | Director, Chairman of the Compensation and Human Resources Committee | |||||
| J. Landis Martin | 70 | July 1994 | Director, Lead Independent Director | |||||
| Robert A. Miller | 70 | April 2007 | Director, Chairman of the Redevelopment and Construction Committee | |||||
| Kathleen M. Nelson | 70 | April 2010 | Director | |||||
| Michael A. Stein | 66 | October 2004 | Director, Chairman of the Audit Committee | |||||
| Nina A. Tran | 47 | March 2016 | Director | |||||
The following is a biographical summary of the current directors and executive officers of the Company.
Terry Considine.Mr. Considine has been Chairman of the Board and Chief Executive Officer since July 1994. Mr. Considine also serves on the board of directors of Intrepid Potash, Inc., a publicly held producer of potash. Mr. Considine has over 45 years of experience in the real estate and other industries. Among other real estate ventures, in 1975 Mr. Considine founded and subsequently managed the predecessor companies that became Aimco at its initial public offering in 1994.
PaulL.Beldin.Mr.BeldinjoinedAimcoin2008asSeniorVicePresidentandChiefAccountingOfficer.PriortojoiningAimco, from October 2007 to March 2008,Mr.Beldin served as Chief Financial Officer of APRO Residential Fund. Prior to that, from May 2005toSeptember2007,Mr.BeldinservedasChiefFinancialOfficerofAmericaFirstApartmentInvestors,Inc.,thenapubliclytraded company. From 1996 to 2005,Mr.Beldin was with the firm of Deloitte & Touche,LLP,serving in numerous roles, including Audit SeniorManagerandinthefirm’snationalofficeasanAuditManagerinSECServices.Mr.Beldinisacertifiedpublicaccountant.
JohnE.Bezzant.Mr.BezzantwasappointedExecutiveVicePresidentandChiefInvestmentOfficerinAugust2013.Priortothat, heservedasExecutiveVicePresident,TransactionsbeginninginJanuary2011.HejoinedAimcoasSeniorVicePresident-DevelopmentinJune2006.Mr.Bezzantoverseescapitalinvestments,andisresponsibleforportfoliomanagement,anddispositionandacquisitionactivities.Priorto joining theCompany,Mr.Bezzantspentover 20 yearswith Prologis,Inc. and CatellusDevelopmentCorporation in a variety of executivepositions,includingthosewithresponsibilityfortransactions,fundmanagement,assetmanagement,leasing,andoperations.
LisaR.Cohn.Ms.CohnwasappointedExecutiveVicePresident,GeneralCounselandSecretaryinDecember2007.Inaddition to serving as general counsel, Ms. Cohn has responsibility for insurance and risk management, human resources, compliance and asset quality and service. Ms. Cohn also serves as chairman ofAimco’sinvestment committee. From January 2004 to December 2007, Ms. Cohn served as SeniorVicePresident and Assistant General Counsel. She joined Aimco in July 2002 asVicePresident and Assistant General Counsel. Prior to joining the Company, Ms. Cohn was in private practice with the law firm of Hogan & Hartson LLP with a focus on public and private mergers and acquisitions, venture capital financing, securities and corporategovernance.
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Miles Cortez.Mr.Cortez was appointed ExecutiveVicePresident and Chief Administrative Officer in December 2007. He is responsible for administration, government relations, communications and special projects.Mr.Cortez joined Aimco in August 2001 as ExecutiveVicePresident, General Counsel andSecretary.Prior to joining the Company,Mr.Cortez was the senior partner of Cortez Macaulay Bernhardt & Schuetze LLC, a Denver, Colorado law firm, from December 1997 through September 2001. He served as presidentoftheColoradoBarAssociationfrom1996to1997andtheDenverBarAssociationfrom1982to1983.
Patti K. Fielding.Ms. Fielding was appointed ExecutiveVicePresident — Securities and Debt in February 2003 and Treasurer in January 2005. In late 2014, she assumed responsibility for redevelopment. In addition to redevelopment, she remains responsiblefor debtfinancingandtreasury.FromJanuary2000toFebruary2003,Ms.FieldingservedasSeniorVicePresident—SecuritiesandDebt. Ms. Fielding joined the Company as aVicePresident in February 1997. Prior to joining the Company, Ms. Fielding was with Hanover Capitalfrom1996to1997,andfrom1993to1995shewasViceChairman,SeniorVicePresidentandCo-FounderofCapSourceFunding Corp. She was also a GroupVicePresident with Duff & Phelps Rating Company from 1987 to 1993 and a commercial real estate appraiserwithAmericanAppraisalforthreeyears.
KeithM.Kimmel.Mr.KimmelwasappointedExecutiveVicePresidentofPropertyOperationsinJanuary2011.FromSeptember 2008 to January 2011,Mr.Kimmel served as the AreaVicePresident of property operations for the western region. Prior to that, from March 2006 to September 2008, he served as the RegionalVicePresident of property operations for California. He joined Aimco in March of 2002 as a Regional PropertyManager.Prior to joining Aimco,Mr.Kimmel was with Casden Properties from 1998 through 2002,andwasresponsiblefortheoperationofthenewconstructionandhigh-endproductline.Mr.Kimmelbeganhiscareerinthemulti- family real estate business in 1992 as a leasing consultant and on-sitemanager.
James N. Bailey.Mr.Bailey was first elected as a Director of the Company in June 2000 and is currently Chairman of the Nominating and Corporate Governance Committee. He is also a member of the Audit, Compensation and Human Resources, and Redevelopment and Construction Committees.Mr.Bailey co-founded Cambridge Associates, LLC, an investment consulting firm, in 1973andcurrentlyservesasitsSeniorManagingDirectorandTreasurer.Heisalsoaco-founder,directorandtreasurerofThePlymouth Rock Company and a director of SRB Corporation, Inc., both of which are insurance companies and insurance company affiliates.Mr.Bailey also serves as Chairman of the Board and Manager of Knights Bridge Vineyards LLC and Chairman of the Board of Knights Bridge Winery LLC.Mr.Bailey is a member of the Massachusetts Bar and the American Bar Associations.Mr.Bailey, a long-time entrepreneur, brings particular expertise to the Board in the areas of investment and financial planning, capital markets, evaluation of institutional real estate markets and managers of all propertytypes.
Thomas L.Keltner.Mr.Keltner was first elected as a Director of the Company in April 2007 and is currently chairman of the Compensation and Human Resources Committee. He is also a member of the Audit, Nominating and Corporate Governance, and RedevelopmentandConstructionCommittees.Mr.KeltnerservedasExecutiveVicePresidentandChiefExecutiveOfficer–Americas andGlobalBrandsforHiltonHotelsCorporationfromMarch2007throughMarch2008,whichconcludedthetransitionperiodfollowingHilton’sacquisition by The Blackstone Group.Mr.Keltner joined Hilton Hotels Corporation in 1999 and served in various roles.Mr.Keltner has more than 20 years of experience in the areas of hotel development, acquisition, disposition, franchising and management. Prior to joining Hilton Hotels Corporation, from 1993 to 1999,Mr.Keltner served in several positions with Promus Hotel Corporation, including President, Brand Performance and Development. Before joining Promus Hotel Corporation, he served in various capacities withHolidayInnWorldwide,HolidayInnsInternationalandHolidayInns,Inc.Inaddition,Mr.KeltnerwasPresidentofSaudiMarriott Company, a division of Marriott Corporation, and was a management consultant with Cresap, McCormick and Paget, Inc.Mr.Keltner brings particular expertise to the Board in the areas of property operations, marketing, branding, development and customerservice.
J. Landis Martin.Mr.Martin was first elected as a Director of the Company in July 1994 and serves as the Lead IndependentDirector.Mr.Martin is also a member of the Audit, Compensation and Human Resources, Nominating and Corporate Governance, and Redevelopment and Construction Committees. He is a former chairman of the Compensation and Human Resources Committee.Mr.Martin is the Founder and Managing Director of Platte River Equity LLC, a private equity firm. In November 2005,Mr.Martin retired as Chairman and CEO of Titanium Metals Corporation, a publicly held integrated producer of titanium metals, where he served since January 1994.Mr.Martin served as President and CEO of NL Industries, Inc., a publicly held manufacturer of titanium dioxide chemicals,from1987to2003.Mr.Martinisalsothenon-executivechairmanandadirectorofCrownCastleInternationalCorporation, apubliclyheldwirelesscommunicationscompany.HeisleaddirectorofHalliburtonCompany,apubliclyheldproviderofproductsand servicestotheenergyindustry,andIntrepidPotash,Inc.,apubliclyheldproducerofpotash.AsaformerchiefexecutiveoffourNYSE- listed companies and lawyer,Mr.Martin brings particular expertise to the Board in the areas of operations, finance andgovernance.
Robert A. Miller.Mr. Miller was first elected as a Director of the Company in April 2007 and is currently Chairman of the Redevelopment and Construction Committee. Mr. Miller is also a member of the Audit, Compensation and Human Resources, and Nominating and Corporate Governance Committees. Mr. Miller served as Executive Vice President and Chief Operating Officer,
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International of MarriottVacationsWorldwide Corporation (“MVWC”) from 2011 to 2012, when he retired from this position, and servesasPresidentofRAMCOAdvisorsLLC,aninvestmentadvisoryandbusinessconsultingfirm.Mr.MillerservedasthePresidentof MarriottLeisurefrom1997toNovember2011,whenMarriottInternationalelectedtospin-offitssubsidiaryentity,MarriottOwnership Resorts,Inc.,byforminganewparententity,MVWC,asanewpubliclyheldcompany.PriortohisroleasPresidentofMarriottLeisure, from1984to1988,Mr.MillerservedasExecutiveVicePresident&GeneralManagerofMarriottVacationClubInternationalandthen asitsPresidentfrom1988to1997.In1984,Mr.Millerandapartnersoldtheircompany,AmericanResorts,Inc.,toMarriott.Mr.Miller co-foundedAmericanResorts,Inc.in1978,anditwasthefirstbusinessmodeltoencompassallaspectsoftimeshareresortdevelopment, sales,managementandoperations.PriortofoundingAmericanResorts,Inc.,from1972to1978,Mr.MillerwasChiefFinancialOfficer of Fleetwing Corporation, a regional retail and wholesale petroleum company. Prior to joining Fleetwing,Mr.Miller served for five years as a staff accountant for ArthurYoung& Company.Mr.Miller is past Chairman and currently a director of the American Resort DevelopmentAssociation (“ARDA”) andcurrentlyserves asChairmananddirectorofthe ARDA InternationalFoundation.Mr.Miller also currently serves as a director on the board ofWelkHospitality Group, Inc. As a successful real estate entrepreneur and corporate executive,Mr.MillerbringsparticularexpertisetotheBoardintheareasofoperations,management,marketing,sales,anddevelopment, as well as finance andaccounting.
Kathleen M. Nelson.Ms. Nelson was first elected as a Director of the Company in April 2010 and is currently a member of the Audit,CompensationandHumanResources,NominatingandCorporateGovernance,andRedevelopmentandConstructionCommittees. Ms.Nelsonhasanextensivebackgroundincommercialrealestateandfinancialserviceswithover40yearsofexperience,including36 years at TIAA-CREF. She held the position of Managing Director/Group Leader and Chief Administrative Officer for TIAA-CREF’s mortgage and real estate division. Ms. Nelson developed and staffedTIAA’sreal estate research department. She retired from this positioninDecember2004andfoundedandservesaspresidentofKMNAssociatesLLC,acommercialrealestateinvestmentadvisory and consulting firm. In 2009, Ms. Nelson co-founded and serves as Managing Principal of Bay Hollow Associates, LLC, acommercial realestateconsultingfirm,whichprovidescounseltoinstitutionalinvestors.Ms.NelsonservedastheInternational CouncilofShopping Centers’ chairman for the 2003-04 term and has been an ICSC Trustee since 1991. She also is a member of the ICSC AuditCommittee andisamemberofvariousothercommittees.Ms.NelsonservesontheBoardofDirectorsofCBL&AssociatesProperties,Inc.,which isapubliclyheldREITthatdevelopsandmanagesretailshoppingproperties.Ms.NelsonisalsoontheBoardofDirectorsandamember of the Risk Committee of Dime Community Bankshares, Inc., a publicly traded bank holding company, based in Brooklyn, NewYork.She is a member of Castagna Realty Company Advisory Board and has served as an advisor to the Rand Institute Center for Terrorism RiskManagementPolicyandontheboardoftheGreaterJamaicaDevelopmentCorporation.Ms.NelsonservesontheAdvisoryBoard oftheBeverlyWillis ArchitecturalFoundationand isamemberofthe AngloAmericanRealPropertyInstitute.Ms.Nelsonbringstothe Board particular expertise in the areas of institutional real estate investing, real estate finance andinvestment.
Michael A. Stein.Mr.Stein was first elected as a Director of the Company in October 2004 and is currently the Chairman of the AuditCommittee.Mr.SteinisalsoamemberoftheCompensationandHumanResources,NominatingandCorporateGovernance,and RedevelopmentandConstructionCommittees.FromJanuary2001untilitsacquisitionbyEliLillyinJanuary2007,Mr.Steinservedas SeniorVicePresidentandChiefFinancialOfficerofICOSCorporation,abiotechnologycompanybasedinBothell,Washington.From October1998toSeptember2000,Mr.SteinwasExecutiveVicePresidentandChiefFinancialOfficerofNordstrom,Inc.From1989to September 1998,Mr.Stein served in various capacities with Marriott International, Inc., including ExecutiveVicePresident and Chief FinancialOfficerfrom1993to1998.Mr.SteinpreviouslyservedontheBoardsofDirectorsofNautilus,Inc.andGettyImages,Inc.He presently serves on the Board of Directors of Providence Health & Services, the fourth largest not-for-profit health system in the U.S., operating hospitals and other health care facilities across Alaska, Washington, Montana, Oregon and California. As the former audit committee chairman or audit committee member of two NYSE-listed companies, the former chief financial officer of twoNYSE-listed companiesandaformerpartneratArthurAndersen,Mr.SteinbringsparticularexpertisetotheBoardintheareasofcorporateandreal estate finance, and accounting and auditing for large and complex businessoperations.
Nina A.Tran.Ms. Tran was first elected as a Director of the Company effective in March 2016and is currently a member of the Audit, Compensation and Human Resources, Nominating and Corporate Governance, and Redevelopment and Construction Committees.Ms.Tranhasover25yearsofrealestateandfinancialmanagementexperience,buildingandleadingfinanceandaccounting teams.SinceJanuary2013untilitsmergerwithColonyAmericanHomes,Inc.inJanuary2016,Ms.TranservedastheChiefFinancial Officer of StarwoodWaypointResidential Trust, a leading publicly-traded REIT that owns and operates single-family rental homes. Prior to joining Starwood Waypoint, Ms. Tran spent 18 years at AMB Property Corporation (now Prologis, Inc.), the largest publicly-tradedglobalindustrialREIT.Ms.TranservedasSeniorVicePresidentandChiefAccountingOfficer,andmostrecentlyasChiefGlobal ProcessOfficer,whereshehelpedleadthemergerintegrationbetweenAMBandPrologis.PriortojoiningAMB,Ms.TranwasaSenior Associate with PricewaterhouseCoopers, one of the big four public accounting firms. Ms. Tran is a certified public accountant(CPA)(inactive). Ms. Tran brings particular expertise to the Board in the areas of accounting, financial control and businessprocesses.
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This chart provides a summary overview of Aimco’s governance practices, each of which is described in more detail in the information that follows.
| What Aimco Does |
| Supermajority Independent Board.The only member of management who serves on the Board is the Company’s founder, chairman and chief executive officer. Seven of the eight members of the Board, or 87.5% of the Board members, are independent. |
| Independent Standing Committees.Only independent directors serve on the standing committees, including Audit, Compensation and Human Resources, Nominating and Corporate Governance, and Redevelopment and Construction Services. |
| Each Independent Director Serves on Each Standing Committee.To ensure that each independent director hears all information unfiltered and to ensure the most efficient functioning of the Board, each independent director serves on each standing committee. |
| Lead Independent Director.The Company has a lead independent director who presides over regular independent director executive sessions. |
| Board Refreshment.The Nominating and Corporate Governance Committee has structured the Board such that there are directors of varying tenures and perspectives, with new directors joining the Board every few years, including in 2016, while retaining the institutional memory of longer-tenured directors. Of the original independent directors on the Aimco Board, one remains, and the Company has added a new director roughly every 2.5 to 6 years. |
| Regular Access to and Involvement with Management.In addition to regular access to management during Board and committee meetings, the independent directors have regular and direct access to members of management and to the Aimco business. This includes site visits (e.g., Mr. Miller and Ms. Nelson on redevelopment projects), regular discussion topics (e.g., Mr. Stein on accounting and finance matters, Mr. Keltner on compensation and personnel matters, Mr. Bailey on governance matters, and Mr. Martin on agenda items and board materials). |
| Engaged Board.In addition to regular access to management, the independent directors meet at least quarterly and receive written updates from Mr. Considine at least monthly. |
| Stockholder Engagement.Under the direction of the Board, including the participation of Board members when requested by stockholders, Aimco regularly engages with stockholders on governance, pay and business matters. |
| Director Stock Ownership.By the completion of five years of service, an independent director is expected to own, at a minimum, the lesser of 27,500 shares or shares having a value of at least $550,000. |
| Risk Assessment.The Board conducts an annual risk assessment. Areas involving risk that are reported on by management and considered by the Board, include: operations, liquidity, leverage, finance, financial statements, the financial reporting process, accounting, legal matters, regulatory compliance, compensation and human resources. |
| MajorityVotingwith a Resignation Policy.Since inception,Aimco’sdirectors have been elected annually, and Aimco requires its directors to be elected by a majority of the votes cast. Directors failing to get a majority of the votes cast are expected to tender their resignation. |
| Proxy Access.Following last year’s stockholder vote in favor of proxy access and after extensive engagement with stockholders, the Board amended the Company’s bylaws to provide proxy access. A stockholder or a group of up to 20 stockholders, owning at least 3% of our shares for 3 years, may submit nominees for up to 20% of the Board, or two nominees, whichever is greater, for inclusion in our proxy materials, subject to complying with the requirements contained in our bylaws. |
| What Aimco Does Not Do |
| Related Party Transactions.The Nominating and Corporate Governance Committee maintains a related party transaction policy to ensure that Aimco’s decisions are based on considerations only in the best interests of Aimco and its stockholders. Since the beginning of 2015 and to date, there have been no related person transactions that required review under the policy. |
| Interlocking Directorships.No Aimco director or member of Aimco management serves on a Board or a compensation committee of a company at which an Aimco director is also an employee. |
| Overboard Directors.Aimco’s corporate governance guidelines and committee charters limit the number of other boards and the number of other audit committees on which an Aimco director may serve. |
| Retirement Age or Term Limits.Rather than imposing arbitrary limits on service, the Company regularly (and at least annually) reviews each director’s continued role on the Board and the need for periodic board refreshment. |
| Staggered Board.All Aimco directors have always been elected annually. |
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The Board has determined that to be considered independent, an outside director may not have a direct or indirect material relationshipwithAimcooritssubsidiaries(directlyorasapartner,stockholderorofficerofanorganizationthathasarelationshipwith the Company). A material relationship is one that impairs or inhibits, or has the potential to impair or inhibit, a director’s exercise of critical and disinterested judgment on behalf of Aimco and its stockholders. In determining whether a material relationship exists, the Boardconsidersallrelevantfactsandcircumstances,includingwhetherthedirectororafamilymemberisacurrentorformeremployee oftheCompany,familymemberrelationships,compensation,businessrelationshipsandpayments,andcharitablecontributionsbetween Aimco and an entity with which a director is affiliated (as an executive officer, partner or substantial stockholder). The Board consults withtheCompany’scounseltoensurethatsuchdeterminationsareconsistentwithallrelevant securitiesandotherlawsandregulations regarding the definition of “independent director,” including but not limited to those categorical standards set forth in Section 303A.02 of the listing standards of the NewYorkStock Exchange as in effect from time totime.
Consistent with these considerations,theBoard affirmativelyhasdetermined that Messrs.Bailey,Keltner,Martin,Miller,andSteinandMses. NelsonandTranareindependent directors (collectivelythe“IndependentDirectors”).
The Board held five meetings during the year ended December 31, 2015. During 2015, there were four committees: Audit; Compensation and Human Resources; Nominating and Corporate Governance; and Redevelopment and Construction. During 2015, no director attended fewer than 75% of the total number of meetings of the Board, and, in fact, each director was present at all such meetings.
The Corporate Governance Guidelines, as describedbelow,provide that the Company generally expects that the Chairman of the Board will attend all annual and special meetings of the stockholders. Other members of the Board are not required to attend such meetings.AllofthemembersoftheBoardattendedtheCompany’s2015AnnualMeetingofStockholders,andtheCompanyanticipates that all of the members of the Board will attend the Meeting thisyear.
Below is a table illustrating the current standing committee memberships and chairmen. Additional detail on each committee follows the table.
| Director | Audit Committee | Compensation and Human Resources Committee | Nominating and Corporate Governance Committee | Redevelopment and Construction Committee | ||||||||||||
| James N. Bailey | X | X | † | X | ||||||||||||
| Terry Considine | — | — | — | — | ||||||||||||
| Thomas L. Keltner | X | † | X | X | ||||||||||||
| J. Landis Martin* | X | X | X | X | ||||||||||||
| Robert A. Miller | X | X | X | † | ||||||||||||
| Kathleen M. Nelson | X | X | X | X | ||||||||||||
| Michael A. Stein | † | X | X | X | ||||||||||||
| Nina A. Tran | X | X | X | X |
| X | indicates a member of thecommittee |
| † | indicates the committeechairman |
| * | indicates lead independentdirector |
Audit Committee
The Audit Committee currently consists of the seven Independent Directors.Mr.Stein serves as the chairman of the Audit Committee. The Audit Committee has a written charter that is reviewed annually and was last amended in January 2013. In addition to the work of the Audit Committee,Mr.Stein has regular and recurring conversations withMr.Beldin, Aimco’s Chief Financial Officer (“CFO”),Ms.Cohn,Aimco’sGeneralCounsel,AndrewHigdon,Aimco’sChiefAccountingOfficer,theheadofAimco’sinternalaudit function, and representatives of Ernst &YoungLLP.The Audit Committee’s charter is posted onAimco’swebsite (www.aimco.com) and is also available in print to stockholders, upon written request toAimco’sCorporateSecretary.
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Pursuant to its charter, the Audit Committee is responsible for overseeing Aimco’s accounting and financial reporting processes and audits of Aimco’s financial statements. The Audit Committee is directly responsible for the appointment and oversight of the independent auditors and makes such a determination on the basis of a variety of factors, including those described in Proposal 2. In addition, the Audit Committee also evaluates the performance of the lead audit partner.
Among other matters, the Audit Committee also:
| ● | Reviews the scope, and overall plans for and results of the annual audit and internal auditactivities; | |
| ● | Consults with management and Ernst &YoungLLP with respect toAimco’sprocesses for risk assessment and risk management. Areas involving risk that are reported on by management and considered by the Audit Committee, the other Boardcommittees,ortheBoard,include:operations,liquidity,leverage,finance,financialstatements,thefinancialreporting process, accounting, legal matters, regulatory compliance, and humanresources; | |
| ● | ConsultswithmanagementandErnst&YoungLLPandprovidesoversightforAimco’sfinancialreportingprocess,internal control over financial reporting, the Company’s internal audit function and, in conjunction with the Board, the Company’s enterprise risk managementprocesses; | |
| ● | ReviewsandapprovestheCompany’spolicywithregardtothehiringofformeremployeesofindependentauditorsproviding service to theCompany; | |
| ● | ReviewsandapprovestheCompany’spolicyforthepre-approvalofauditandpermittednon-auditservicesbytheindependent auditor; | |
| ● | Receives reports pursuant to Aimco’s policy for the submission and confidential treatment of communications from team members and others concerning accounting, internal control and auditingmatters; | |
| ● | Reviews and discusses quarterly earnings releases prior to their issuance and quarterly reports on Form 10-Q and annual reports on Form 10-K prior to theirfiling; |
| ● | Reviews with management the scope and effectiveness of the Company’s disclosure controls and procedures, including for purposes of evaluating the accuracy and fair presentation of the Company’s financial statements in connection with the certifications made by the CEO and CFO;and | |
| ● | Meets regularly with members of Aimco management and with Ernst &YoungLLP. |
Inadditiontoitsroutineresponsibilities,inearly2015,theAuditCommitteeandmanagementcommencedarequestforproposal, orRFP,process forAimco’saudit services. The Audit Committee believes it is good practice to periodically evaluate service providers andconsideredavarietyoffactorsindecidingtopursueanRFP.ThosefactorsincludethelengthoftimeErnst&YoungLLPhasserved as Aimco’s independent auditor, the potential benefits of a new perspective on key risk areas, and the approach to and cost of the audit in light of the reductions in both the complexity and scale ofAimco’sbusiness in recent years. The competitive process was guided byMr.Stein with the involvement of a number of members of management. The process included evaluation of written proposals and in- personmeetingswithandpresentationsfromeachofthe“BigFour”auditfirms.Followingthosemeetingsandpresentations,theAudit CommitteeselectedErnst&YoungLLPtocontinueasAimco’sindependentregisteredpublicaccountingfirmforthefiscalyearended December 31,2015.
TheAuditCommitteeheldfivemeetingsduringtheyearendedDecember31,2015.AssetforthintheAuditCommittee’scharter, nodirectormayserveasamemberoftheAuditCommitteeifsuchdirectorservesontheauditcommitteeofmorethantwootherpublic companies,unlesstheBoarddeterminesthatsuchsimultaneousservicewouldnotimpairtheabilityofsuchdirectortoeffectivelyserve ontheAuditCommittee.NomemberoftheAuditCommitteeservesontheauditcommitteeofmorethantwootherpubliccompanies.
Audit Committee Financial Expert
Aimco’s Board has designatedMr.Stein as an “audit committee financial expert.” In addition, all of the members of the audit committeequalifyasauditcommitteefinancialexperts.EachmemberoftheAuditCommitteeisindependent,asthattermisdefinedby Section303AofthelistingstandardsoftheNewYorkStockExchangerelatingtoauditcommittees.
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Compensation and Human Resources Committee
The Compensation and Human Resources Committee currently consists of the seven Independent Directors.Mr.Keltner serves as the chairman of the Compensation and Human Resources Committee.Mr.Keltner meets regularly with Ms. Cohn,Aimco’sGeneral Counsel and with Jennifer Johnson,Aimco’sSeniorVicePresident of Human Resources.Mr.Keltner also has regular conversations withtheCommittee’sindependentcompensationconsultant,BoardAdvisory,LLC(“BoardAdvisory”).TheCompensationandHuman Resources Committee has a written charter that is reviewed annually and was last amended in April 2013. The Compensation and Human Resources Committee’s charter is posted onAimco’swebsite (www.aimco.com) and is also available in print to stockholders, upon written request toAimco’sCorporateSecretary.
The Compensation and Human Resources Committee’s purposes are to:
| ● | Oversee the goals and objectives of the Company’s executive compensationplans; | |
| ● | Annually evaluate the performance of theCEO; | |
| ● | Determine theCEO’scompensation; | |
| ● | Review the decisions made by the CEO as to the compensation of the other executiveofficers; | |
| ● | Approve and grant any equitycompensation; | |
| ● | Consider the results of stockholder advisory votes on executive compensation and take such results into consideration in connection with the review and approval of executive officercompensation; | |
| ● | Review and discuss the Compensation Discussion & Analysis withmanagement; | |
| ● | Reviewcompensationarrangementstoevaluatewhetherincentiveandotherformsofpayencourageunnecessaryorexcessive risk taking; | |
| ● | Review and approve the terms of any compensation “clawback” or similar policy or agreement between the Company and the Company’s executiveofficers; |
| ● | Review periodically the goals and objectives of the Company’s executive compensation plans, and amend, or recommend that the Board amend, these goals and objectives ifappropriate; | |
| ● | Address successionplanning; | |
| ● | Oversee the Company’s talent pipeline process;and | |
| ● | OverseetheCompany’sculture,withaparticularfocusoncollegiality,collaborationandteam-building. |
In particular in 2015, the Compensation and Human Resources Committee focused on executive compensation and succession planning,includinganannualupdateoftheCompany’ssuccessionplan.TheCompanyhashadinplaceatalentpipelineandsuccession planning process since inception, which includes all officer positions including the CEO. At least annually, the Compensation and Human Resources Committee reviews that pipeline and process. For each senior management role, the Compensation and Human Resources Committee knows who the potential candidates are, and each potential candidate has in place a development plan. If and when the need to draw upon that talent pool arises, the Compensation and Human Resources Committee and senior management considertherelevantbusinessneedsoftheorganization,thebusinessenvironment,andthecandidates’fit.Thisprocesswasusedduring thetransitionofchieffinancialofficerandchiefaccountingofficer,bothofwhichoccurredduring2015.
The Compensation and Human Resources Committee held seven meetings during the year ended December 31, 2015.
Nominating and Corporate Governance Committee
TheNominatingandCorporateGovernanceCommitteecurrentlyconsistsofthesevenIndependentDirectors.Mr.Baileyserves asthechairmanoftheNominatingandCorporateGovernanceCommittee.TheNominatingandCorporateGovernanceCommitteehasa writtencharterthatisreviewedannuallyandwaslastamendedinOctober2012.TheCommittee’scharterispostedonAimco’swebsite (www.aimco.com) and is also available in print to stockholders, upon written request toAimco’sCorporateSecretary.
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Among other matters, the Nominating and Corporate Governance Committee:
| ● | Focuses on Board candidates and nominees, andspecifically: |
| ● | Identifies and recommends to the Board individuals qualified to serve on theBoard; | |
| ● | Identifies, recruits, and, if appropriate, interviews candidates to fill positions on the Board, including persons suggested by stockholders or others;and | |
| ● | ReviewseachBoardmember’ssuitabilityforcontinuedserviceasadirectorwhenhisorhertermexpiresandwhenheor she has a change in professional status and recommends whether or not the director should bere-nominated. |
| ● | Focuses on Board composition and procedures as a whole and recommends, if necessary, measures to be taken so that the Board reflects the appropriate balance of knowledge, experience, skills, and expertise required for the Board as awhole; | |
| ● | Develops and recommends to the Board a set of corporate governance principles applicable to Aimco and itsmanagement; | |
| ● | Maintains a related party transaction policy and oversees any potential related partytransactions; | |
| ● | Oversees a systematic and detailed annual evaluation of the Board, committees and individual directors in an effort to continuously improve the function of the Board;and | |
| ● | Considers corporate governance issues that may arise and develops appropriate recommendations, including providing the forum for the Board to consider important matters of public policy and vet stockholder input on a variety ofissues. |
In particular in 2015, the Nominating and Corporate Governance Committee focused on developing an amendment to the Company’sbylawstoprovidefor“proxyaccess”(asdescribedinmoredetailunderthe“ProxyAccess”headingbelow)andinrecruiting a new director to join the Board in 2016. NinaTran’selection to the Board effective in March 2016 and her nomination for re-election attheMeetingaretheresultoftheNominatingandCorporateGovernanceCommittee’seffortsduring2015andinto2016toensurethat theAimcoBoardhasabroadrangeandbalanceofskillsandabilitiesandvaryingtenures,asdescribedinmoredetailunderthe“Board Composition” headingbelow.
The Nominating and Corporate Governance Committee held four meetings during the year ended December 31, 2015.
Redevelopment and Construction Committee
TheRedevelopmentandConstructionCommitteecurrentlyconsistsofthesevenIndependentDirectors.Mr.Millerservesasthe chairmanoftheRedevelopmentandConstructionCommittee.Mr.MillermeetsregularlywithAimco’sredevelopmentandconstruction leadership and tours projects undergoing redevelopment to assess the process of redevelopment and project status. TheRedevelopment andConstructionCommittee’spurposesaretoprovideoversightandguidancetotheCompany’smanagementregardingredevelopment and construction projects by reviewing work process, policies and standards, recommending modifications thereto and directing related analytical and progress reporting. The Redevelopment and Construction Committee held four meetings during the year ended December 31,2015.
Board Composition
TheNominatingandCorporateGovernanceCommitteeselectsnomineesfordirectoronthebasisof,amongotherthings,breadth and depth of experience, knowledge, skills, expertise, integrity, ability to make independent analytical inquiries, understanding ofAimco’sbusinessenvironmentandwillingnesstodevoteadequatetimeandefforttoBoardresponsibilities.Inconsideringnomineesfor director, the Nominating and Corporate Governance Committee seeks to have a diverse range of experience and expertise relevant toAimco’sbusiness.TheNominatingandCorporateGovernanceCommitteeplacesapremiumondirectorswhoworkwellinthecollegial andcollaborativenatureoftheBoard(whichisalsoconsistentwiththeAimcoculture)andyetalsorequiresdirectorswhothinkandact independently,andhavetheabilitytoclearlyandeffectivelycommunicatetheirconvictions.TheNominatingandCorporateGovernance Committee assesses the appropriate balance of criteria required of directors and makes recommendations to theBoard.
The Nominating and Corporate Governance Committee has specifically considered the feedback of some stockholders as well as the discussions of some commentators that suggest that lengthy Board tenure should be balanced with new perspectives. Specific to Aimco,theNominatingandCorporateGovernanceCommitteehasstructuredtheBoardsuchthattherearedirectorsofvaryingtenures, with new directors and perspectives joining the Board every few years while retaining the institutional memory of longer-tenured directors. Longer-tenured directors, balanced with less-tenured directors, enhance the Board’s oversight capabilities.Aimco’sdirectors
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work effectively together, coordinate closely with senior management, comprehendAimco’schallenges and opportunities, and frameAimco’sbusinessstrategy.Aimco’sBoardmembershaveestablishedrelationshipsthatallowtheBoardtoapplyeffectivelyitscollective business savvy in guiding the Aimcoenterprise.
WhenformulatingitsBoardmembershiprecommendations,theNominatingandCorporateGovernanceCommitteealsoconsiders advice and recommendations from others, including stockholders, as it deems appropriate. Such recommendations are evaluated on the basis of the same criteria noted above. The Nominating and Corporate Governance Committee will consider as nominees to the Board for election at next year’s annual meeting of stockholders persons who are recommended by stockholders in writing, marked to the attention ofAimco’sCorporateSecretary,no later than July 1, 2016. During 2015, no Aimco stockholder (other than the existing directors) expressed interest in serving on the Board, or recommended anyone to serve on theBoard.
TheBoardisresponsiblefornominatingmembersforelectiontotheBoardandforfillingvacanciesontheBoardthatmayoccur between annual meetings of stockholders. The Board elected Ms. Tran effective March 1, 2016. Based on recommendations from the Nominating and Corporate Governance Committee, the Board determined to nominate Messrs. Bailey, Considine, Keltner, Martin, Miller,andSteinandMses.NelsonandTranforre-election.
EachindividualbringsspecificcontributionstotheBoardconsistentwithprofessionalandpersonalcharacteristicsnotedaboveas criteriaforselectionforservice.Tosummarize,Mr.Bailey,along-timeentrepreneur,bringsparticularexpertisetotheBoardintheareas of investment and financial planning, capital markets, evaluation of institutional real estate markets and managers of all propertytypes.Mr.KeltnerbringsparticularexpertisetotheBoardintheareasofpropertyoperations,marketing,branding,developmentandcustomer service.AsaformerlawyerandchiefexecutiveoffourNYSE-listedcompanies,Mr.MartinbringsparticularexpertisetotheBoard inthe areasofoperations,financeandgovernance.Asasuccessfulrealestateentrepreneurandcorporateexecutive,Mr.Millerbringsparticular expertise to the Board in the areas of operations, management, marketing, sales, and development, as well as finance and accounting. Ms. Nelson brings to the Board particular expertise in the areas of institutional real estate investing, real estate finance and investment. As the former audit committee chairman or audit committee member of two NYSE-listed companies, the former chief financial officer oftwoNYSE-listedcompaniesandaformerpartneratArthurAndersen,Mr.SteinbringsparticularexpertisetotheBoardintheareasof corporate and real estate finance, and accounting and auditing for large and complex business operations. As the newest member ofthe Board,Ms.TranbringsparticularexpertisetotheBoardintheareasofaccounting,financialcontrolandbusinessprocesses.
Board Leadership Structure
Atthistime,Aimco’sBoardbelievesthatcombiningtheChairmanandCEOroleismosteffectivefortheCompany’sleadership andgovernance.HavingonepersonasChairmanandCEOprovidesunifiedleadershipanddirectiontotheCompanyandstrengthensthe ability of the CEO to develop and implement strategic initiatives and respond efficiently in various situations. The Board also believes the combination of Chairman and CEO positions is appropriate in light of the independent oversight provided by theBoard.
Aimco has a Lead Independent Director, currently Mr. Martin, who in this capacity:
| ● | Presides over executive sessions of independent directors, which are held regularly and not less than four times peryear; | |
| ● | Serves as a liaison between the chairman and independentdirectors; | |
| ● | Helps frame and approves meeting agendas andschedules; | |
| ● | Reviews information sent todirectors; | |
| ● | Regularly calls meetings of independent directors;and | |
| ● | Is available for direct communication withstockholders. |
In addition to the Lead Independent Director, the Board has a majority of independent directors. Seven out of the eight director nominees are independent. All four standing committees (Audit; Compensation and Human Resources; Nominating and Corporate Governance; and Redevelopment and Construction) are composed solely of independent directors.
Separate Sessions of Non-Management Directors and Lead Independent Director
Aimco’sCorporateGovernanceGuidelines(describedbelow)providethatthenon-managementdirectorsshallmeetinexecutive sessionwithoutmanagementonaregularlyscheduledbasis,butnolessthanfourtimesperyear.Thenon-managementdirectors,which groupcurrentlyismadeupofthesevenIndependentDirectors,metinexecutivesessionwithoutmanagementfourtimesduringtheyear ended December 31, 2015.Mr.Martin was the Lead Independent Director who presided at such executive sessions in 2015, and he has been designated as the Lead Independent Director who will preside at such executive sessions in2016.
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The following table sets forth the number of meetings held by the Board and each committee during the year ended December 31,2015.
| Board | Non-Management Directors | Audit Committee | Compensation and Human Resources Committee | Nominating and CorporateGovernanceCommittee | Redevelopment and Construction Committee | |||||||||||||||||||||
| Number of Meetings | 5 | 4 | 5 | 7 | 4 | 4 | ||||||||||||||||||||
Majority Voting for the Election of Directors
In an uncontested election at the meeting of stockholders, any nominee to serve as a director of the Company will be elected if thedirectorreceivesamajorityofvotescast,whichmeansthatthenumberofsharesvoted“for”adirectorexceedsthenumberofshares voted “against” that director. With respect to a contested election, a plurality of all the votes cast at the meeting of stockholders will be sufficient to elect a director. If a nominee who currently is serving as a director receives a greater number of “against” votes for his or her election than votes “for” such election (a “Majority AgainstVote”)in an uncontested election, Maryland law provides that the directorwouldcontinuetoserveontheBoardasa“holdoverdirector.”However,underAimco’sBylaws,anynomineeforelectionasa director in an uncontested election who receives a Majority AgainstVoteis obligated to tender his or her resignation to the Nominating and Corporate Governance Committee for consideration. The Nominating and Corporate Governance Committee will consider any resignation and recommend to the Board whether to accept it. The Board is required to take action with respect to the Nominating and Corporate Governance Committee’s recommendation. Additional details are set out in Article II, Section 2.03 (Election andTenureof Directors; Resignations) ofAimco’sBylaws.
Proxy Access
At our 2015 annual meeting, a proxy access stockholder proposal received the support of a majority of the votes cast. That proposal would require the Board to adopt a bylaw that would require the Company to include in its proxy materials nominees for director proposed by a stockholder or group that owns at least 3% of our outstanding shares for at least three years. Following that meeting,throughthesummerandfallof2015andinto2016,weengagedinextensivestockholderoutreachanddiscussedproxyaccess withstockholdersrepresentingover66%ofsharesofCommonStockoutstandingasofSeptember30,2015,includingall10ofAimco’slargest stockholders as of thatdate.
Althoughourstockholdersexpressedvaryingviewsonproxyaccessgenerally,andonthespecifictermsofaproxyaccessbylaw,many stockholders indicated that they viewed proxy access as an important stockholder right. At the same time, many stockholders expressed concern that stockholders with a small economic interest could abuse proxy access and impose unnecessary costs on the Company. In particular, stockholders expressed support for a reasonable limit on the number of stockholders who could come together to form a nominating group, with a consensus around a 20 stockholder limit, so long as certain related funds were counted as one stockholderforthispurpose.Inaddition,manystockholdersexpressedsupportfortheprinciplethataproxyaccessbylawprovidefora minimumoftwocandidates,withthatprinciplebeingmoremeaningfultostockholdersthanthepercentageoftheboardusedtocalculate the number of permitted proxy accesscandidates.
Stockholders expressed general flexibility concerning most other proxy access terms, including counting directors nominated as accesscandidateswhoareelectedandre-nominatedbytheBoardwhendeterminingthelimitonaccesscandidatesforalimitednumber of years, and eliminating proxy access at the same annual meeting for which a nomination notice outside of proxy access has been submitted by another stockholder. Also, stockholders indicated that post-meeting holding requirements would be considered overly restrictive, but that a statement regarding post-meeting intentions that did not require continued ownership wasacceptable.
The feedback received from stockholders was reported to the Nominating and Corporate Governance Committee and to the Board. Following a review of that feedback, corporate governance best practices and trends and the Company’s particular facts and circumstances, the Board amended the Company’s bylaws to provide a proxy access right to stockholders. As a result, a stockholder or a group of up to 20 stockholders, owning at least 3% of our shares for 3 years, may submit nominees for up to 20% of the Board, or two nominees, whichever is greater, for inclusion in our proxy materials, subject to complying with the requirements contained in our bylaws.
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2015
In formulating its recommendation for director compensation, the Nominating and Corporate Governance Committee reviews director compensation for independent directors of companies in the real estate industry and companies of comparable market capitalization,revenueandassetsandconsiderscompensationtrendsforotherNYSE-listedcompaniesandS&P500companies.Forthe year ended December 31, 2015, Aimco paid the directors serving on the Board during that year asfollows:
| Name | Fees Earnedor Paid in Cash ($)(1) | StockAwards | OptionAwards ($) | Non-Equity Incentive Plan Compensation($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings | All Other | Total ($) | |||||||||||||||||||||
| James N. Bailey | 23,000 | 184,050 | — | — | — | — | 207,050 | |||||||||||||||||||||
| Terry Considine (3) | — | — | — | — | — | — | — | |||||||||||||||||||||
| Thomas L. Keltner (4) | 27,000 | 184,050 | — | — | — | — | 211,050 | |||||||||||||||||||||
| J. Landis Martin | 21,000 | 184,050 | — | — | — | — | 205,050 | |||||||||||||||||||||
| Robert A. Miller (5) | 27,000 | 184,050 | — | — | — | — | 211,050 | |||||||||||||||||||||
| Kathleen M. Nelson (6) | 27,000 | 184,050 | — | — | — | — | 211,050 | |||||||||||||||||||||
| Michael A. Stein | 26,000 | 184,050 | — | — | — | — | 210,050 | |||||||||||||||||||||
| (1) | The Independent Directors each received a cash fee of $1,000 for attendance in person or telephonically at each meeting of the Board, and a cash fee of $1,000 for attendance at each meeting of any Board committee. Joint meetings are sometimesconsidered as a single meeting for purposes of director compensation. |
| (2) | For 2015, Messrs. Bailey, Keltner, Martin, Miller and Stein and Ms. Nelson were each awarded 4,500 shares of Common Stock, which shares were awarded on January 26, 2015. The dollar value shown above represents the aggregate grant date fair value computedinaccordancewithFinancialAccountingStandards Board(“FASB”)Accounting StandardsCodification(“ASC”)Topic718andiscalculatedbasedontheclosingpriceofAimco’sCommonStockontheNewYorkStockExchangeonJanuary26,2015, of $40.90. |
| (3) | Mr.Considine, who is not an Independent Director, does not receive any additional compensation for serving onthe Board. |
| (4) | Mr.Keltner holds an option to acquire 4,429 shares, which is fully vested andexercisable. |
| (5) | Mr.Miller holds an option to acquire 4,429 shares, which is fully vested andexercisable. |
| (6) | Ms. Nelson holds an option to acquire 3,000 shares, which is fully vested andexercisable. |
2016
Compensation for each of the Independent Directors in 2016 is an annual fee of 4,600 shares of Common Stock, which shares wereawardedonJanuary26,2016.TheclosingpriceofAimco’sCommonStockontheNewYorkStockExchangeonJanuary26,2016, was $38.73. The Independent Directors also received a cash fee of $25,000. The Board will not pay meeting fees in2016.
TheBoardhasadoptedacodeofethicsentitled“CodeofBusinessConductandEthics”thatappliestothemembersoftheBoard, allofAimco’sexecutiveofficersandallemployeesofAimcooritssubsidiaries,includingAimco’sprincipalexecutiveofficer,principal financialofficerandprincipalaccountingofficer.TheCodeofBusinessConductandEthicsispostedonAimco’swebsite(www.aimco.com)andisalsoavailableinprinttostockholders,uponwrittenrequesttoAimco’sCorporateSecretary.If,inthefuture,Aimco amends, modifies or waives a provision in the Code of Business Conduct and Ethics, rather than filing a Current Report on Form 8-K, Aimco intends to satisfy any applicable disclosure requirement under Item 5.05 of Form 8-K by posting such information onAimco’swebsite (www.aimco.com), asnecessary.
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Corporate Governance Guidelines and Director Stock Ownership
The Board has adopted and approved Corporate Governance Guidelines. These guidelines are available onAimco’swebsite (www.aimco.com) and are also available in print to stockholders, upon written request toAimco’sCorporateSecretary.In general, the Corporate Governance Guidelines address director qualification standards, director responsibilities, the lead independent director, director access to management and independent advisors, director compensation, director orientation and continuing education, management succession, stock ownership guidelines and retention requirements, and an annual performance evaluation of theBoard.
With respect to stock ownership guidelines for the Independent Directors, the Corporate Governance Guidelines provide that by thecompletionoffiveyearsofservice,anIndependentDirectorisexpectedtoown,ataminimum,thelesserof27,500sharesorshares havingavalueofatleast$550,000.EachoftheIndependentDirectorshasholdingswellinexcessofthisamount,withtheexceptionof Ms. Tran who is new to the Board effective March 1,2016.
Communicating with the Board of Directors
Any interested parties desiring to communicate withAimco’sBoard, the Lead Independent Director, any of the Independent Directors,Aimco’sChairman of the Board, any committee chairman, or any committee member may directly contact such persons by directing such communications in care ofAimco’sCorporateSecretary.All communications received as set forth in the preceding sentence will be opened by the office of Aimco’s General Counsel for the sole purpose of determining whether the contents represent a message toAimco’sdirectors. Any contents that are not in the nature of advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the Board or any group or committee of directors, the General Counsel’s office will make sufficient copies of the contents to send to each director who is a member of the group or committee to which the envelope or e-mail isaddressed.
To contact Aimco’s Corporate Secretary, correspondence should be addressed as follows:
Corporate Secretary
Office of the General Counsel
Apartment Investment and Management Company
4582 South Ulster Street, Suite 1100
Denver, Colorado 80237
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AUDIT COMMITTEE REPORT TO STOCKHOLDERS
The Audit Committee oversees Aimco’s financial reporting process on behalf of the Board. Management has the primary responsibility for the financial statements and the reporting process, including internal control over financial reporting and disclosure controlsandprocedures.AwrittencharterapprovedbytheAuditCommitteeandratifiedbytheBoardgovernstheAuditCommittee.In fulfillingitsoversightresponsibilities,theAuditCommitteereviewedtheauditedfinancialstatementsintheAnnualReportonForm10-K with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financialstatements.
The Audit Committee reviewed with the independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States, its judgmentastothequality,notjusttheacceptability,oftheCompany’saccountingprinciples.TheAuditCommitteealsohasdiscussedwith theindependentregisteredpublicaccountingfirmthemattersrequiredtobediscussedbyAuditingStandardNo.1301,Communications withAuditCommittees,issuedbythePublicCompanyAccountingOversightBoard.Inaddition,theAuditCommitteehasreceivedfrom the independent registered public accounting firm the written disclosures and letter required by Public Company AccountingOversight BoardEthicsandIndependenceRule3526,hasdiscussedwiththeindependentregisteredpublicaccountingfirmits independencefrom the Company and its management, and has considered whether the independent registered public accounting firm’s provision of non- audit services to the Company is compatible with maintaining such firm’sindependence.
The Audit Committee discussed with the Company’s independent registered public accounting firm the overall scope and plans foritsaudit.TheAuditCommitteemeetswiththeindependentregisteredpublicaccountingfirm,withandwithoutmanagementpresent, todiscusstheresultsofitsexamination,itsevaluationoftheCompany’sinternalcontroloverfinancialreporting,andtheoverallquality oftheCompany’sfinancialreporting.TheAuditCommitteeheldfivemeetingsduring2015.
None of the Audit Committee members have a relationship with the Company that might interfere with the exercise of the member’s independence from the Company and its management.
Inrelianceonthereviewsanddiscussionsreferredtoabove,theAuditCommitteerecommendedtotheBoard,andtheBoardhas approved, that the audited financial statements and management’s report on internal control over financial reporting be included in the AnnualReportonForm10-KfortheyearendedDecember31,2015,forfilingwiththeSEC.TheAuditCommitteehasalsodetermined that provision by Ernst &YoungLLP of other non-audit services is compatible with maintaining Ernst &YoungLLP’sindependence. TheAuditCommitteeandtheBoardhavealsorecommended,subjecttostockholderratification,theselectionofErnst&YoungLLPas the Company’s independent registered public accounting firm for the year ending December 31,2016.
Date: February 23, 2016
MICHAEL A. STEIN (CHAIRMAN)
JAMES N. BAILEY
THOMAS L. KELTNER
J. LANDIS MARTIN
ROBERT A. MILLER
KATHLEEN M. NELSON
The above report will not be deemed to be incorporated by reference into any filing by the Company under the Securities Act of 1933,asamended,ortheSecuritiesExchangeActof1934,asamended,excepttotheextentthattheCompanyspecificallyincorporates the same byreference.
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PRINCIPAL ACCOUNTANT FEES AND SERVICES
TheaggregatefeesbilledforservicesrenderedbyErnst&YoungLLPduringtheyearsendedDecember31,2015and2014were approximately $2.49 million and $2.65 million, respectively, and are describedbelow.
Audit Fees
Fees for audit services totaled approximately $1.13 million in 2015 and $1.46 million in 2014. These amounts include fees associated with the annual audit of the financial statements of Aimco, its internal control over financial reporting and the financial statements of certain of its consolidated subsidiaries and unconsolidated investees. Fees for audit services also include fees for the reviews of interim financial statements in Aimco’s Quarterly Reports on Form 10-Q, registration statements filed with the SEC, other SEC filings, equity or debt offerings, comfort letters and consents.
Audit-Related Fees
Fees for audit-related services totaled approximately $0.03 million in each of 2015 and 2014, and related to benefit plan audits.
Tax Fees
Feesbilledfortaxservicestotaledapproximately$1.33millionin2015and$1.16millionin2014.Suchamountsincludedfeesfor taxcomplianceservicesfortheCompanyandsubsidiariesoraffiliatesofapproximately$0.97millionin2015and$1.03millionin2014, including $0.37 million in 2015 and $0.51 million in 2014, for services provided to approximately 75 consolidated and unconsolidated partnerships for which an Aimco subsidiary is the general partner. The portion of the total representing fees for tax planning services amounted to approximately $0.36 million in 2015 and $0.13 million in2014.
All Other Fees
There were no fees billed or incurred in 2015 or 2014 for other services, including financial information systems design and implementation.
Audit Committee Pre-Approval Policies
TheAuditCommitteehasadoptedtheAuditandNon-AuditServicesPre-ApprovalPolicy(the“Pre-approvalPolicy”).ThePre-approval Policy describes the Audit, Audit-related,Taxand Other Permitted services that have the general pre-approval of the Audit Committee, typically subject to a dollar limit of $50,000. The term of any general pre-approval is generally 12 months from the date of pre-approval, unless the Audit Committee considers a different period and states otherwise. At least annually, the Audit Committee will review and pre-approve the services that may be provided by the independent registered public accounting firm without obtaining specific pre-approval from the Audit Committee. In accordance with this review, the Audit Committee may add to or subtract from the list of general pre-approved services or modify the permissible dollar limit associated with pre-approvals. As set forth in the Pre-approvalPolicy,unlessatypeofservicehasreceivedgeneralpre-approvalandisanticipatedtobewithinthedollarlimitassociatedwith thegeneralpre-approval,itwillrequirespecificpre-approvalbytheAuditCommitteeifitistobeprovidedbytheindependentregistered publicaccountingfirm.Forbothtypesofpre-approval,theAuditCommitteewillconsiderwhethersuchservicesareconsistentwiththe rulesonindependentregisteredpublicaccountingfirmindependence.TheAuditCommitteewillalsoconsiderwhethertheindependent registeredpublicaccountingfirmisbestpositionedtoprovidethemosteffectiveandefficientservice,forreasonssuchasitsfamiliarity with Aimco’s business, people, culture, accounting systems, risk profile and other factors, and whether the service might enhanceAimco’sability to manage or control risk or improve audit quality. All such factors will be considered as a whole, and no one factor will necessarily be determinative. All of the services described above were approved pursuant to the annual engagement letter or in accordance with the Pre-approval Policy; none were approved pursuant to Rule 2-01(c)(7)(i)(C) of SEC RegulationS-X.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ThefollowingtablesetsforthcertaininformationavailabletotheCompany,asofMarch1,2016,withrespecttoAimco’sequity securities beneficially owned by (i) each director, the chief executive officer, the chief financial officer and the three other most highly compensated executive officers who were serving as executive officers at the end of the last completed fiscal year, and (ii) all directors andexecutiveofficersasagroup.ThetablealsosetsforthcertaininformationavailabletotheCompany,asofMarch1,2016,withrespect tosharesofCommonStockheldbyeachpersonknowntotheCompanytobethebeneficialownerofmorethan5%ofsuchshares.This tablereflectsoptionsthatareexercisablewithin60days.Unlessotherwiseindicated,eachpersonhassolevotingandinvestmentpower with respect to the securities beneficially owned by that person. The business address of each of the following directors and executive officersis4582SouthUlsterStreet,Suite1100,Denver,Colorado80237,unlessotherwisespecified.Noneofthesecuritiesreflectedin this table are the subject of any hedging transaction or any pledgingarrangement.
| Name and Address of Beneficial Owner | Number of shares of Common Stock (1) | Percentage of Common Stock Outstanding (2) | Number of Partnership Units (3) | Percentage Ownership of the Company (4) | ||||||||||||
| Directors, Director Nominees & Executive Officers: | ||||||||||||||||
| Terry Considine | 1,818,130(5) | 1.15% | 2,439,557(6) | 2.57% | ||||||||||||
| Paul L. Beldin | 59,118(7) | * | — | * | ||||||||||||
| Lisa R. Cohn | 142,334(8) | * | — | * | ||||||||||||
| John E. Bezzant | 115,234(9) | * | * | |||||||||||||
| Keith Kimmel | 79,617 | * | — | * | ||||||||||||
| James N. Bailey | 41,687 | * | — | * | ||||||||||||
| Thomas L. Keltner | 46,751(10) | * | — | * | ||||||||||||
| J. Landis Martin | 50,313(11) | * | 34,646(12) | * | ||||||||||||
| Robert A. Miller | 76,132(13) | * | — | * | ||||||||||||
| Kathleen M. Nelson | 41,850(14) | * | — | * | ||||||||||||
| Michael A. Stein | 52,184 | * | — | * | ||||||||||||
| Nina A. Tran | — | * | — | * | ||||||||||||
| All directors and executive officers as a group (14 persons) | 2,703,702(15) | 1.71% | 2,478,972(16) | 3.13% | ||||||||||||
| 5% or Greater Holders: | ||||||||||||||||
| The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, Pennsylvania 19355 | 25,194,475(17) | 16.09% | — | 15.32% | ||||||||||||
| Cohen & Steers, Inc. 280 Park Avenue New York, New York 10017 | 23,326,228(18) | 14.90% | — | 14.18% | ||||||||||||
| Blackrock, Inc 40 East 52nd Street New York, New York 10022 | 11,552,038(19) | 7.38% | — | 7.02% | ||||||||||||
| Daiwa Asset Management Co., Ltd. Gran Tokyo North Tower 9-1 Marunouchi 1-chome, Chiyoda-ku Tokyo, Japan 100-6753 | 8,693,059(20) | 5.55% | — | 5.29% | ||||||||||||
| State Street Corporation State Street Financial Center One Lincoln Street Boston, Massachusetts 02111 | 7,969,639(21) | 5.09% | — | 4.85% | ||||||||||||
| * | Less than1.0% |
| (1) | Excludes sharesofCommonStockissuableuponredemptionofcommonOPUnitsorClassIHighPerformanceUnits(“HPUs”). |
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| (2) | Represents the number of shares of Common Stock beneficially owned by each person divided by the total number of shares of Common Stock outstanding. Any shares of Common Stock that may be acquired by a person within 60 days upon the exercise of options, warrants, rights or conversion privileges or pursuant to the power to revoke, or the automatic termination of, a trust, discretionary account or similar arrangement are deemed to be beneficially owned by that person and are deemed outstanding for the purpose of computing the percentage of outstanding shares of Common Stock owned by that person, but not any otherperson. |
| (3) | Through wholly-ownedsubsidiaries,AimcoactsasgeneralpartnerofAIMCOProperties,L.P.,theoperatingpartnershipinAimco’sstructure.AsofMarch1,2016,Aimcoheldapproximately95.2%ofthecommonpartnershipinterestsinAIMCOProperties,L.P.InterestsinAIMCOProperties,L.P.thatareheldbylimitedpartnersotherthanAimcoarereferredtoas“OPUnits.”Generallyafter aholdingperiodof12months,commonOPUnitsmaybetenderedforredemptionand,upontender,maybeacquiredbyAimcofor shares of Common Stock at an exchange ratio of one share of Common Stock for each common OP Unit (subject to adjustment). IfAimcoacquired allcommon OP UnitsandHPUsforCommonStock(withoutregardtotheownershiplimit setforthinAimco’sCharter), these shares of Common Stock would constitute approximately 4.8% of the then outstanding shares of Common Stock. OP Units are subject to certain restrictions on transfer. Until 2017 and thereafter, HPUs are generally not redeemable for, or convertible into, CommonStock. |
| (4) | Represents the number of shares of Common Stock beneficially owned, divided by the total number of shares of Common Stock outstanding, assuming, in both cases, that all 5,513,974 OP Units and 2,339,950 HPUs outstanding as of March 1, 2016, are redeemed in exchange for shares of Common Stock (notwithstanding any holding period requirements, Aimco’s ownership limit and, in the case of HPUs, that the units are not redeemed). See note (3) above. Excludes partnership preferred units issued by AIMCO Properties,L.P.and Aimco preferredsecurities. |
| (5) | Includes 507,126shareshelddirectlybyMr.Considineand1,171,258sharessubjecttooptionsthatareexercisablewithin60days. Alsoincludesthefollowingsharesofwhich Mr.Considinedisclaimsbeneficialownership:33,695sharesheldby Mr.Considine’s spouse; and 106,051 shares held by a non-profit foundation in whichMr.Considine has shared voting and investmentpower. |
| (6) | Includes 850,185 common OP Units and 1,589,372 HPUs that represent 15.42% of common OP Units outstanding and 67.92%of HPUsoutstanding,respectively. The850,185commonOPUnitsinclude510,452commonOPUnitshelddirectlybyMr.Considine, 179,735 common OP Units held by an entity in whichMr.Considine has sole voting and investment power, 2,300 common OP Units held by Titahotwo Limited Partnership RLLLP (“Titahotwo”), a registered limited liability limited partnership for whichMr.Considine serves as the general partner and holds a 0.5% ownership interest, and 157,698 common OP Units held byMr.Considine’s spouse, for whichMr.Considine disclaims beneficial ownership. All HPUs are held by Titahotwo. |
| (7) | Includes 3,644 shares subject to options that are exercisable within 60days. |
| (8) | Includes 8,102 shares subject to options that are exercisable within 60days. |
| (9) | Includes 4,180 shares subject to options that are exercisable within 60days. |
| (10) | Includes 4,429 shares subject to options that are exercisable within 60 days. Includes 22,222 shares held by a trust (of whichMr.Keltnerisatrustee)andforwhichMr.Keltnerdisclaimsbeneficialownershipexcepttotheextentofhispecuniaryinteresttherein. |
| (11) | Includes 20,923 shares held directly byMr.Martin and 29,390 shares held by Martin Enterprises LLC.Mr.Martin is the sole manager, andMr.Martin and trusts (of whichMr.Martin is the sole trustee) formed solely for the benefit of his children are the sole members, of Martin EnterprisesLLC. |
| (12) | Includes 280.5 common OP Units, which represent less than 1% of the class outstanding. Also includes 34,365 HPUs held by Martin Enterprises LLC. These HPUs represent 1.47% of the classoutstanding. |
| (13) | Includes 4,429 shares subject to options that are exercisable within 60days. |
| (14) | Includes 3,000 shares subject to options that are exercisable within 60days. |
| (15) | Includes 1,202,398 shares subject to options that are exercisable within 60days. |
| (16) | Includes 850,466commonOPUnitsand1,628,506HPUs,whichrepresent15.42%ofcommonOPUnitsoutstandingand69.60% of HPUs outstanding,respectively. |
| (17) | Beneficial ownershipinformationisbasedoninformationcontainedinanAmendmentNo.13toSchedule13GfiledwiththeSEC on February 10, 2016, by TheVanguardGroup, Inc. According to the schedule, TheVanguardGroup, Inc. has sole voting power with respect to 407,207 shares and sole dispositive power with respect to 24,814,685 of the shares and shared dispositive power with respect to 379,790 of theshares. |
| (18) | Beneficial ownershipinformationisbasedoninformationcontainedinanAmendmentNo.13toSchedule13GfiledwiththeSEC on February 16, 2016, by Cohen & Steers, Inc. on behalf of itself and affiliated entities. According to the schedule, included in thesecuritieslistedaboveasbeneficiallyownedbyCohen&Steers,Inc.are14,508,315sharesand14,279,695sharesoverwhich Cohen & Steers, Inc. and Cohen & Steers Capital Management, Inc. (which is held 100% by Cohen & Steers, Inc.), respectively, have sole voting power and 23,326,228 shares and 22,922,830 shares, respectively, over which such entities have sole dispositive power. Also included in the securities listed above are 228,620 shares over which Cohen & Steers UK Limited has sole voting power and 403,398 shares over which Cohen & Steers UK Limited has sole dispositivepower. |
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| (19) | Beneficial ownershipinformationisbasedoninformationcontainedinanAmendmentNo.6toSchedule13GfiledwiththeSECon January25,2016,byBlackrock,Inc.Accordingtotheschedule,Blackrock,Inc.hassolevotingpowerwithrespectto10,617,956 of the shares. |
| (20) | Beneficial ownership information is based on information contained in an Amendment No. 1 to Schedule 13G filed with the SEC onJanuary27,2016,byDaiwaAssetManagementCo.Ltd.Accordingtotheschedule,DaiwaAssetManagementCo.Ltd.hassole dispositive power over 5,792 of theshares. |
| (21) | Beneficial ownershipinformationisbasedoninformationcontainedinSchedule13GfiledwiththeSEConFebruary13,2015,by State StreetCorporation. |
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COMPENSATION DISCUSSION & ANALYSIS (CD&A)
This CD&A addresses the following:
| ● | Stockholder Engagement Regarding ExecutiveCompensation; | |
| ● | OverviewofAimco’sPay-for-PerformancePhilosophyand2015PerformanceResults; | |
| ● | Summary of Executive Compensation Program and GovernancePractices; | |
| ● | WhatWePay and Why: Components of ExecutiveCompensation; | |
| ● | TotalCompensation for2015; | |
| ● | OtherCompensation; | |
| ● | Post-EmploymentCompensationandSeveranceArrangements; | |
| ● | Other Benefits; PerquisitePhilosophy; | |
| ● | StockOwnershipGuidelinesandRequiredHoldingPeriodsAfterVesting; | |
| ● | Role of OutsideConsultants; | |
| ● | BaseSalary,Incentive Compensation, and Equity GrantPractices; | |
| ● | 2016 CompensationTargets. |
Stockholder Engagement Regarding Executive Compensation
AtAimco’s2015 Annual Meeting of Stockholders, approximately 96% of the votes cast in the advisory vote on executive compensationthatwerepresentandentitledtovoteonthematterwereinfavorofthecompensationofAimco’sNEOs(alsocommonly referred to as “Say on Pay”) as disclosed in Aimco’s 2015 proxy statement. This represents a significant improvement from the voting results for the 2014 Say on Pay proposal (of approximately 56% in favor). The Compensation and Human Resources Committee (the “Committee”) and management were pleased with these results, and remain committed to extensive engagement with stockholders as part of their ongoing efforts to formulate and implement an executive compensation program designed to align the long-term interests of our executive officers with ourstockholders.
During the third and fourth quarters of 2015 and into 2016, members of management arranged and participated in 15 detailed andsubstantivemeetingswithstockholders(representingover66%ofsharesofCommonStockoutstandingasofSeptember30,2015), including all 10 ofAimco’slargest stockholders as of that date, to solicit feedback onAimco’sexecutive compensation program and governance practices, including the numerous changes Aimco made to its 2015 executive compensation program based on extensive stockholder feedback received in 2014 and into 2015. These changes were disclosed in detail inAimco’sproxy statement for the 2015 annualmeetingofstockholders.
As described in last year’s proxy statement, stockholders did not speak with a single voice when it came to their preferences for compensation structures, objectives, goals, time periods, currencies and governance items.Wesought to find the common ground and common themes that would both be responsive to stockholders and fit Aimco’s objectives in attracting, retaining, and incentivizing Aimco’s leaders to drive the success of Aimco.Welooked to find the areas of greatest commonality among the input provided by stockholders and we believe the changes we made were responsive to the feedback we heard and are in the best interests of Aimco and its stockholders. However, because stockholders did not speak with a single voice, it was important to both the Committee and management to solicit feedback from stockholders on the changes that were made toAimco’sexecutive compensation program and governancepractices.Thefollowingchartsummarizesfeedbackweheardfromstockholdersonthechangesmade,aswellasotherinput stockholders provided on executive compensation and governance practices, and what actions we have taken in response. Please note thatfeedbackfromstockholdersongovernancemattersunrelatedtoexecutivecompensationisdescribedundertheheading“Corporate GovernanceMatters.”
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| What Aimco Heard | How Aimco Responded |
| STI Disclosure. Stockholders appreciated the additional disclosure around Aimco’s STI plan in the 2015 proxy statement so investors can better assess the relevance and rigor of goals. | The Company has maintained the increased level of disclosure for each of its corporate goals, providing an explanation of the objective of each goal, disclosure of threshold, target, and maximum achievement levels for each goal, and detailed disclosure on how each goal was measured (see pages 34 through 37). |
| Number of STI Goals. Stockholders responded favorably to the reduction in the number of STI goals from twelve for 2014, to eight for 2015, and the adjustments to the weightings for most goals such that the majority of goals are objective, financial goals, and an even higher percentage of goals are objective goals. | The Company made no changes to its 2015 STI plan from what was disclosed in the 2015 proxy statement (see 2015 STI plan discussion on pages 34 through 37). In addition, having received broad support from stockholders, theCompany has maintained a similar structure for its 2016 STI plan, with eight goals, 75% of which are objective, financial goals, and an even higher percentage of which are objective goals. |
| LTI Structure. Stockholders responded favorably to the Company’s new LTI plan structure, including the following features: ●performance share awards that vest based on two performance metrics consisting of Aimco TSR relative to the NAREIT Apartment Index (60% weighting) andAimco TSR relativetotheREITIndex(40%weighting)overa forward looking, three-year performanceperiod; ●a modifier such that if, for any three-year performance period, Aimco’s absolute return were negative, any proportion ofLTIearned above target would not vest until such time as absolute return is once again positive;and ●no opportunity for target payout for underperformance on relative returns, and outperformance required for targetpayout. | The Company made no changes to its 2015LTIplan from what was disclosed in the 2015 proxy statement (seeLTIplan overview on pages 37 through 38). In addition, having received broad support for its newLTIplan from stockholders, with one stockholder commenting that the new program was “more than responsive” to the stockholder’s concerns, the Company has maintained the sameLTIplan structure and performance metrics for 2016LTIawards. |
| Amount of LTI at Risk. Stockholders appreciated Aimco’s responsiveness in moving from an LTI plan that was primarily time based to an LTI plan in which more pay is “at risk.” Under the Company’s 2015 LTI plan, all of the CEO’s LTI is at risk (i.e., 100% performance based) and 80% of the LTI for all other NEOs is at risk. Thus, if threshold performance levels are not achieved, Mr. Considine will receive no LTI, and the other NEOs will receive only 20% of target LTI. However, some stockholders cautioned that striking the right balance between performance and retention is important, pointing out that retention of key talent is critical. | The Company made no changes to its 2015LTIplan from what was disclosed in the2015proxystatement(seeLTIplanoverviewonpages37through38).Havingreceived broad support from stockholders, the Company is making no change to thecompositionoftheCEO’sLTIawardfor2016.Inotherwords,alloftheCEO’sLTIwill continue to be at risk, or 100% performance based.Tobetterensureretention of key talent, beginning withLTIawards for 2016, one-third of theLTIfortheotherNEOsisforthepurposeofretention,ortimebased,andtwo-thirds oftheLTIfortheotherNEOsisatrisk.Thus,ifthresholdperformancelevelsarenot achieved,Mr.Considine will receive noLTI,and, beginning with 2016LTIawards,theotherNEOswillreceiveonly33%oftargetLTI. |
| Disclosure regarding LTI Plan Transition. Stockholders acknowledged that Aimco’s change from a backward looking LTI plan (ending with LTI awards made in February 2015 for 2014 LTI) to a forward looking LTI plan (beginning with LTI awards made in February 2015 for 2015 LTI) would give the appearance of “double LTI” in the “Summary Compensation Table” for the year 2015, as the LTI awards for the two different compensation years are required to be reported as 2015 compensation pursuant to applicable proxy disclosure rules. Stockholders advised Aimco to provide clear disclosure around the effect of the transition from the backward looking LTI plan to the forward looking LTI plan. | See 2015 NEO compensation charts on pages 39 and 40, disclosure preceding the “Summary Compensation Table” on page 44, and footnotes 1, 6, 7, 9, 10, 12, 14 and 16 to the “Summary Compensation Table” on pages 45 and 46. |
| Compensation Governance Practices. Stockholders responded favorably to the following governance changes implemented by Aimco: ●double trigger vesting for allLTIawards; ●codification in a written statement of the Committee’s long-term policy that (other than with respect to the one legacy limited excise tax gross-up provision) the Company and the Committee will not enter into any other excise tax gross up arrangements; ●adoption of a written clawback policy codifying the Committee’s long standing practice to pursue wrongdoers and recoup ill-gotten gains. Thepolicy covers all forms of bonus, incentiveand equity compensation. ●adoption of a written statement codifying the Committee’s long standing practice and reflecting the legal limitations of the Company’s stock plans that the Company and the Committee will not reprice underwater options without the consent ofstockholders. ●adoption of anti-hedging and anti-pledging policies. | The Company has made no changes to these governance practices from what was disclosed in the 2015 proxy statement (see page 30). |
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At Aimco’s 2011 Annual Meeting of Stockholders, the Board recommended that our stockholders be provided with the opportunity to submit an advisory vote on the compensation of our NEOs every year, which our stockholders also strongly supported. Aimco believes that the outcome of this proposal evidences the commitment of the Committee to open dialogue with our stockholders regarding our executive compensation program, and the Committee has and will continue to consider voting results and stockholder sentiments generally as it formulates and implements an executive compensation program designed to align the long-term interests of our executive officers with our stockholders.
Overview of Aimco’s Pay-for-Performance Philosophy and 2015 Performance Results
Aimco is a pay-for-performance organization. Aimco starts by setting target total compensation near the median of target total compensation for Aimco’s peers as identified on page 32, both as a measure of fairness and also to provide an economic incentive to remainwithAimco.ActualcompensationisdeterminedbasedonAimco’sresults.Everyofficer’sannualcashincentivecompensation, or STI, is based in part on Aimco’s performance against its annual corporate goals. The more senior level the officer, the greater the percentage of his or her STI that is based onAimco’sperformance against its corporate goals. In the case ofMr.Considine, his entire STI is based onAimco’sperformance against its corporate goals.Aimco’sLTIcompensation follows a similar tiered structure. Every officer’sLTIis based in part on relative returns, with executive officers having a greater share of theirLTIbased on relative returns. In the case ofMr.Considine, his entireLTIaward is “at risk” based onAimco’srelative returns.LTIis measured and vests over time, typically a period of four years, so that officers bear longer term exposure to decisions made. Aimco also requires substantial equity holdings by executive officers in order to increase their alignment withstockholders.
Aimcohadastrongyearofperformancein2015.Aimcohad11.2%TSRin2015,aparticularlystrongresultconsideringAimco had48%TSRin2014,firstamongmulti-familyREITpeers.AimcoTSRoutperformedtheREITIndexandtheS&P500Indexoverthe one-yearperiodendedDecember31,2015,andAimcoTSRoutperformedtheREITIndex,theNAREITApartmentIndex,andtheS&P 500 Index over the three-year period ended December 31, 2015, as shown in the followinggraph:
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The following graph compares cumulative total returns forAimco’sCommon Stock, the REIT Index, the S&P 500 Index, and the NAREIT Apartment Index. The graph assumes the investment of $100 inAimco’sCommon Stock and in each index on December 31, 2012, and that all dividends paid have beenreinvested.
| For the fiscal years ended December 31, | ||||||||||||||||
| Index | 2012 | 2013 | 2014 | 2015 | ||||||||||||
| Aimco (1) | $ | 100.00 | $ | 98.95 | $ | 146.49 | $ | 162.81 | ||||||||
| MSCI US REIT Index (1) | 100.00 | 102.47 | 133.60 | 136.97 | ||||||||||||
| S&P 500 Total Return Index (1) | 100.00 | 132.39 | 150.51 | 152.59 | ||||||||||||
| NAREIT Apartment Index (2) | 100.00 | 93.80 | 130.97 | 152.52 | ||||||||||||
| (1) | Source: SNL Financial LC, Charlottesville,VA©2016 | |
| (2) | Source: National AssociationofRealEstateInvestmentTrusts |
Achievements during 2015 included the following:
| ● | AFFOpershare,whichisAimco’sprimarymeasureofcurrentprofitability,wasup12%year-over-year. | |
| ● | For the year ended December 31, 2015, consensusNAVper share increased by 11%.Aimco’sEconomic Income, ameasure of investment return representing the annual change inNAVper share plus cash dividends per share, and how the Company “keeps score,” was $5.28 per share, or a 14% return for theperiod. | |
| ● | Full-yearconventionalsame-storerevenuewasup4.5%,andfull-yearconventionalsame-storeNOIwasup5.6%. | |
| ● | Averagerevenue per apartment home was up 10% over one year, and up 46% over four years, to $1,840, reflectingAimco’sexecution against its portfolio management strategy – to sell each year the 5% to 10% of its portfolio with lower projected returns, lower operating margins, and lower expected future rent growth, and to reinvest the sale proceeds in apartment communities already in our portfolio, through property upgrades and redevelopment, or through the purchase of apartment communities with higher projected returns and rent growth and, in limited situations, the development of apartmentcommunities. |
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| ● | Investment of approximately $118 million in redevelopment projects, enhancing six communities with a total of more than 2,500 apartment homes, and investment of approximately$116million in two developmentprojects. | |
| ● | Aimcoreducedleverageby11%,toaratioofDebtandPreferredEquitytoEBITDAof6.8x. | |
| ● | Aimcoincreaseditsunencumberedpoolofpropertiestomorethan$1.8billioninassetvalue,increasingfinancialflexibility. | |
| ● | TheBoarddeclaredaquarterlycashdividendof$0.33pershareofitsCommonStockforthequarterendedDecember31,2015, an increase of 12% on an annualized basis compared to the dividends paid during2015. | |
| ● | Aimco maintained its record scores for team engagement and was recognized by The Denver Post, for a third consecutive year, as one of the top places to work inColorado. |
Aimco’s cumulative AFFO and dividend growth over the past three years have been strong, as shown in the following graph:
As set forth in detail below beginning on page 35, Aimco outperformed on its corporate goals for 2015, resulting in 2015 cash incentive payouts above target.
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Summary of Executive Compensation Program and Governance Practices
Belowwesummarizecertainexecutivecompensationprogramandgovernancepractices–boththepracticeswehaveimplemented todriveperformanceandthepracticesweavoidbecausewedonotbelievetheywouldserveourstockholders’long-terminterests.
| What Aimco Does |
| Paysforperformance.Asignificantportionofexecutivepayisnotguaranteed,butratherisatriskandtiedtokeyfinancialandvalue creationmetricsthataredisclosedtostockholders.Alloftheincentivecompensation(bothSTIandLTI)forMr.Considineissubjecttotheachievementofvariousperformanceobjectives.FortheotherNEOs,allSTIcompensation,andasubstantialproportionoftargetLTIcompensation,issubjecttotheachievementofvariousperformanceobjectives. |
| Balances short-term and long-term incentives.The incentive programs provide an appropriate balance of annual and longer-term incentives, with LTI compensation comprising a substantial percentage of target total compensation. |
| Uses multiple performance metrics.These mitigate the risk of the undue influence of a single metric by utilizing multi-year vesting for equity awards, multiple performance measures, and different performance measures for STI and LTI. |
| Caps award payouts.Amounts or shares that can be earned under the STI plan and LTI plan are capped. |
| Usesmarket-basedapproachfordeterminingNEOtargetpay.TargetcompensationforNEOsissetnearthemedianforpeer comparators.TheCommitteereviewsthepeercomparatorgroupannually. |
| Maintains share ownership guidelines and holding periods after vesting until ownership guidelines are met.The Company has the following minimum share ownership requirements: CEO – lesser of five times base salary or 150,000 shares; CFO - lesser of five times base salary or 75,000 shares; and other executive officers – lesser of four times base salary or 25,000 shares. All officers meet these requirements except for Mr. Beldin, who was promoted to CFO in September 2015. |
| Includes double-trigger change in control provisions.Equity awards include “double trigger” provisions requiring both a change in control and a subsequent termination of employment for accelerated vesting to occur. |
| Uses an independent compensation consulting firm.The Company engages an independent compensation consulting firm that specializes in the REIT industry. The Committee engages a separate independent compensation consultant. |
| Maintains a clawback policy.The Committee adopted a clawback policy. In the event of a financial restatement resulting from misconduct by an executive, the policy allows the Company to recoup incentive compensation paid to the executive based on the misstated financial information. The policy covers all forms of bonus, incentive and equity compensation. |
| Conducts a risk assessment.The Committee annually conducts a compensation risk assessment to determine whether the compensation policies and practices, or components thereof, create risks that are reasonably likely to have a material adverse effect on the Company. |
| Acts through an independent Compensation Committee.The Committee consists entirely of independent directors. |
| What Aimco Does Not Do |
| Guarantee salary increases, bonuses or equity grants.The Company does not guarantee annual salary increases or bonuses to anyone. The Company has no guaranteed commitments to grant any equity-based awards. |
| Provide excise tax gross-up payments.The Company will not enter into any new contractual agreements that include excise tax gross-up payments. |
| Reprice options.The Company has never repriced or otherwise reduced the per-share exercise price of any outstanding stock options.Repricingofstockoptionsisnotpermittedunderthe2007StockAwardandIncentivePlan(the“2007Plan”)orthe2015 StockAwardand Incentive Plan (the “2015 Plan”) without first obtaining approval from the stockholders of theCompany.The CompanyandtheCommitteewillnotrepriceunderwateroptionswithouttheconsentoftheCompany’sstockholders. |
| Pledging or hedging shares held to satisfy stock ownership requirements.The Company’s insider trading policy places restrictions on the Company’s directors and executive officers regarding entering into hedging transactions with respect to the Company’s securities and from holding the Company’s securities in margin accounts or otherwise pledging such securities as collateral for loans. Pledging or hedging transactions are permitted only in very limited circumstances, and only with respect to shares held in excess of stock ownership requirements. No directors or executive officers have in place any pledges or hedging transactions. |
| Paydividendsordividendequivalentsonunearnedperformanceshares.Performanceshareawardagreementsdonotprovidefor the payment of dividends until the shares are earned. Dividends accrue during the performance period and are paid on earned shares at the time ofvesting. |
| Provide more than minimal personal benefits.The Company does not provide executives with more than minimal perquisites, such as reserved parking spaces. |
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What We Pay and Why: Components of Executive Compensation
Total compensation for Aimco’s executive officers is comprised of the following components:
| ● | Base compensation; | |
| ● | STI compensation, paid in cash;and | |
| ● | LTIcompensation,paidinrestrictedstock,stockoptionsand/ordeferredcash.LTIisbasedonamulti-year,forwardlooking performance period and vests overtime. |
LTI compensation directly ties the interests of executives to the interests of our stockholders, and comprises a substantial proportion of compensation for the NEOs, as follows:
CEO Pay Overview
TheCommitteedeterminesthecompensationforMr.Considine.NoneofMr.Considine’sbasecompensation,targetSTI,ortargetLTIwere increased from 2008 through 2014.Mr.Considine’s target total compensation for 2015 approximated the median for CEOsatAimco’speers as discussed on page 32. However, the Committee has determined that it is important for the Company to have most ofMr.Considine’s compensation at risk. Accordingly,Mr.Considine’s base compensation of $600,000, which has remained unchanged since2006,isbelowthe25thpercentile forpeers,despiteMr.Considinebeingabovethe75thpercentilefor tenureinhisroleascompared to peers. Thus, althoughMr.Considine’s target total compensation is on par with peers, a greater percentage ofMr.Considine’s target total compensation is allocated to incentive compensation – which, in the case ofMr.Considine, is entirely at risk - than peers.
One hundred percent ofMr.Considine’s target STI continues to be at risk. Unlike many other CEOs, there is no subjective, individual performance component toMr.Considine’s incentive compensation.Mr.Considine’s STI is based entirely onAimco’sperformance against its corporate goals, as determined by the Committee.Mr.Considine’sLTIcomprises the largest percentage of his totalcompensation.Nearlytwo-thirdsofMr.Considine’stargetcompensationconsistsofLTI.OnehundredpercentofMr.Considine’sLTIis at risk, based on relative returns over a forward looking, three-year period. Thus,Mr.Considine’s entire incentive compensation is at risk, asfollows:
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How the Committee determines the amount of target total compensation for executive officers
In addition to reviewing the performance of, and determining the compensation for, the CEO, the Committee also reviews the decisions made by the CEO as to the compensation of Aimco’s other executive officers.
Base compensation is determined by reference to the median base compensation paid by peer comparators (discussed further below) for similar positions.
STI is generally targeted to deliver total cash compensation (base compensation plus STI) levels at the median paid by peer comparators,withmeaningfulupsideanddownside.LTIisgenerallytargetedtodelivertotalcompensation(basecompensation,STIandLTI)levels at the median paid by peer comparators, with meaningful upside anddownside.
In general, target total compensation for executives relatively new to their positions is set below the median, and target total compensation for seasoned executives is set near the median.
How peer comparators are identified
AimcoconsidersenterpriseGrossAssetValue(“GAV”),whichisAimco’sestimationofthefairvalueofitsassets,asanimprecise, but reasonable, representation of the complexity of a real estate business and of the responsibilities of its leaders. In addition toGAV,Aimcoalsoreviewsotherfactors,includinggrossrevenues,numberofapartmentcommunities,andnumberofemployees,todetermine ifthesefactorsprovideanyadditionalinsightintothesizeandcomplexityfactorsofitsanalysis.Basedonthisanalysis,Aimcoincluded as “peers” for 2015 compensation the following 20 real estatecompanies:
| Alexandria Real EstateEquities,Inc. | Federal RealtyInvestmentTrust | ||
| BioMed RealtyTrust, Inc. | Home Properties,Inc. | ||
| Brixmor PropertyGroup,Inc. | Kilroy RealtyCorp. | ||
| CamdenPropertyTrust | Liberty PropertyTrust | ||
| CBL & AssociatesProperties,Inc. | Mid-America ApartmentCommunitiesInc. | ||
| DDRCorp. | Realty Income Corp. | ||
| Digital RealtyTrust,Inc. | Regency Centers Corp. | ||
| DouglasEmmett,Inc. | Spirit Realty Capital,Inc. | ||
| DukeRealtyCorp. | Taubman Centers,Inc. | ||
| Extra SpaceStorage,Inc. | UDR,Inc. |
At the time 2015 compensationtargets wereestablished, approximately half of these real estate companies had alargerGAV,and approximately half of these real estate companies had asmallerGAV,thanAimco.ForMr.Kimmel, whoseposition as ExecutiveVicePresident, Property Operations,has no meaningful equivalent outside of the multi-familyindustry,Aimcoincluded as “peers”for2015compensationthefollowingeightmulti-familyrealestatecompanies:AvalonBayCommunities,Inc.,CamdenPropertyTrust,EssexPropertyTrust,EquityResidential,HomeProperties,Inc.,Mid-AmericaApartmentCommunities,Inc.,PostProperties,Inc.,andUDR,Inc.
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How incentive compensation (STI and LTI) serves Aimco’s objectives
Incentive compensation is used primarily to provide total compensation potential that is competitive with pay for comparable positionsinrealestatecompanies.ProvidingincentivecompensationintheformofAimcoequitythatvestsovertime(typicallyaperiod of four years) serves as a retention incentive, aligns executive compensation with stockholder objectives and serves as an incentive to take a longer-term view ofAimco’sperformance. When the equity is in the form of restricted stock, the compensation is linked to performancebecausethefuturevalueoftheequitydependsontheperformanceofAimco’sstock.And,whentheequityisintheformof stockoptions,thevalueofthoseoptionsisderivedsolelyfromstockpriceappreciationinexcessoftheexerciseprice–makingoptions inherently performancebased.
Risk analysis of Aimco’s compensation programs
TheCommitteeconsidersrisk-relatedissueswhenmakingdecisionswithrespecttoexecutivecompensationandhasdetermined thatneitherAimco’sexecutivecompensationprogramnoranyofitsnon-executivecompensationprogramscreaterisk-takingincentives thatarereasonablylikelytohaveamaterialadverseeffectontheorganization.Aimco’scompensationprogramsalignwiththelong-term interests of the Company, asfollows:
| ● | LimitsonSTI.ThecompensationofexecutiveofficersandotherteammembersisnotoverlyweightedtowardSTI.Moreover, STI iscapped. | |
| ● | Use of LTI.LTIis included in target total compensation for all officers and vests over time, typically a period of four years. ThevestingperiodencouragesofficerstofocusonsustainingAimco’slong-termperformance.Executiveofficerswithmore responsibility for strategic and operating decisions have a greater percentage of their target total compensation allocated toLTI.Like STI,LTIiscapped. | |
| ● | Stock ownership guidelines and required holding periods after vesting.Aimco’sstock ownership guidelines require all executive officers to hold a certain amount of Aimco equity. Any executive officer who has not yet satisfied the stock ownership requirements for his or her position must retainLTIafter its vesting until stock ownership requirements are met. Thesepoliciesensureeachexecutiveofficerhasasubstantialamountofpersonalwealthtiedtolong-termholdingsinAimco stock.Asnotedinthesectionbelowtitled“StockOwnershipGuidelinesandRequiredHoldingPeriodsAfterVesting,”allofAimco’sNEOs, exceptMr.Beldin, who was promoted to CFO in September 2015, exceed the ownershiptargets. | |
| ● | Shared performance metrics across the organization.A portion of STI for all officers and corporate team members isbased uponAimco’sperformance against its publicly communicated corporate goals, which are core to the long-term strategy ofAimco’sbusinessandarereviewedandapprovedbytheBoard.OnehundredpercentofMr.Considine’sSTI,and50%ofthe STIfortheotherNEOs,isbaseduponAimco’sperformanceagainstitscorporategoals.Inaddition,havingsharedperformance metrics across the organization is consistent withAimco’sfocus on a collegial and collaborative teamenvironment. | |
| ● | LTI based on TSR.A portion ofLTIfor all officers is based on relative returns.The more senior level the officer, the greater the percentage ofLTIthat is based on relative returns. One hundred percent ofMr.Considine’sLTI,and a substantial proportion of theLTIfor the other NEOs, is based on relativereturns. | |
| ● | Multiple performance metrics.Incentive compensation for Aimco team members is based on many different performance metrics. Aimco had eight corporate goals for 2015. In addition, throughAimco’sperformance management program, Managing Aimco Performance, orMAP,which sets and monitors performance objectives for each team member, each team member has several different individual performance goals that are set at the beginning of the year and approved by management.EachoftheNEOsotherthanMr.Considine(whoseindividualgoalswereidenticaltoAimco’scorporategoals) had an average of eight individual goals for 2015. Having multiple performance metrics inherently reduces excessive or unnecessary risk-taking, as incentive compensation is spread among a number of metrics rather than concentrated in afew. |
Total Compensation for 2015
For 2015, total compensation is the sum of base compensation, STI and LTI.
Base Compensation for 2015
In 2015, Aimco paidMr.Considine’s base compensation of $600,000 in cash. His base compensation of $600,000 has remained unchanged since 2006.
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For 2015, base compensation for all other NEOs was set between $325,000 and $400,000, near the median base compensation paid by peer comparators for similar positions. In connection with his promotion to CFO, Mr. Beldin’s annual base compensation was set at $350,000 effective September 14, 2015.
Short-Term Incentive Compensation for 2015
The Committee determined Mr. Considine’s STI by the extent to which Aimco met eight designated corporate goals, which are described below and are referred to as Aimco’s Key Performance Indicators, or KPI.
FortheotherNEOs,calculationofSTIisdeterminedbythefollowingtwocomponents,eachrepresenting50%ofthetargetSTI: Aimco’sperformanceagainsttheKPI;andeachindividualofficer’sachievementofhisorherMAPgoals.Forexample,ifanexecutive’s targetSTIis$400,000,then50%ofthatamount,or$200,000,variesbasedonKPIresultsand50%ofthatamount,or$200,000,varies based on MAP results. If KPI results are 75%, then the executive receives 75% of $200,000 ($150,000) for that portion of his STI, and if MAP results are 100%, then the executive receives 100% of the $200,000, for a total STI payment of$350,000.
Aimco’s KPI reflect Aimco’s long-standing business strategy around five areas of focus: property operations; portfolio management; redevelopment and development; balance sheet; and business and culture. Said anotherway,Aimco compensates its leadershiponexactlythesamebusinessstrategycommunicatedtostockholdersandanalysts.Specifically,Aimco’sKPIconsistedofthe following eight corporate goals that were reviewed with, and approvedby,the Committee, each weighted asdescribed:
Property Operations (35% of KPI).
| (1) | 30% based on 2015 conventional same-store NOIperformance; | |
| (2) | 5% based on resident satisfactionscores; |
Portfolio Management (12.5% of KPI):
| (3) | 12.5% based on acquisition and salesactivity; |
Redevelopment and Development (12.5% of KPI):
| (4) | 12.5% based on redevelopment and development investment andreturns; |
Balance Sheet (10% of KPI):
| (5) | 5% based on leverageratios; | |
| (6) | 5% based on improving creditratings; |
Business and Culture (30% of KPI):
| (7) | 25% based on AFFO per share;and | |
| (8) | 5% based on team member engagementscores. |
These goals and their expected, successful outcome aligned executive officers with the publicly communicated, long-term goals of the Company without encouraging them to take unnecessary and excessive risks. For most goals, threshold performance paid out at 50%; target performance paid out at 100%; and maximum performance paid out at 200%. Performance below threshold resulted in no payout,andforsomegoals,performancebelowtargetresultedinnopayout.Formostgoals,whereperformancewasbetweenthreshold and target or between target and maximum, the proportion of the award earned wasinterpolated.
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The following is a tabular presentation of the performance criteria and results for 2015, explained in detail in the paragraphs thatfollow:
Performance Measures | Goal Weighing | Sub-Goal Weighting | Threshold | Target | Maximum | Actual | Payout |
| Property Operations | 35% | ||||||
| 2015 Same-Store NOI Achievement | 30% | 3%<Budget | Budget | 3%>Budget | 0.46% Favorable | 34.60% | |
| Resident Satisfaction Scores | 5% | 3.95 | 4.00 | 4.10 | 4.15 | 10.00% | |
| Portfolio Management | 12.5% | ||||||
| Acquisitions and Sales Activity | 12.5% | ||||||
| Property Sales - GAV | 2.5% | $202 million | $269 million | $800 million | $403 million | 3.14% | |
| Acquisition Investment – GAV | 6.0% | $75 million | $100 million | $250 million | $322 million | 12.00% | |
| Average Revenues per Unit | 4.0% | $1,782 | $1,815 | $1,906 | $1,840 | 5.09% | |
| Redevelopment and Development | 12.5% | ||||||
| Redevelopment and Development Investment and Returns | 12.5% | — | Based on ROI and completion on time, on budget | — | Leasing achieved average rents above underwriting for all but one project. Completion of four projects and solid progress on multi-year projects. Projects were largely on time, on budget. | 16.50% | |
| Balance Sheet | 10% | ||||||
| Ratio of Debt and Preferred Equity to EBITDA | 5% | — | 6.9x | 6.6x | 6.8x | 6.67% | |
| Credit Ratings | 5% | — | Investment Grade Rating from One Rating Agency | Investment Grade Rating from Two Rating Agencies | Investment Grade Rating from Two Rating Agencies | 10.00% | |
| Business and Culture | 30% | ||||||
| AFFO Per Share | 25% | $1.77 | $1.87 | $1.97 | $1.871 | 25.00% | |
| Team Member Engagement Scores | 5% | 70% | 80% | 90% | 85.1% | 7.55% | |
| Total | 100% | 130.55% |
For all numeric goals, the target performance metrics wereAimco’s2015 budget goals. Aimco has a rigorous budgeting process that includes an evaluation of prior performance, market data, and peer performance.Aimco’sbudget strategy is to set ambitious, achievable goals.Aimco’s2015 performance – which included conventional same-store revenue and NOI growth of 4.5% and 5.6%, respectively, and 11.2% TSR – are a reflection of Aimco’s effective and successful budgeting strategy.
Anexplanationoftheobjectiveofeachgoalandperformancelevelsandpayoutsforeachgoalissetforthintheparagraphsbelow.
| 1 | Full year AFFO as reported inAimco’sFourth Quarter 2015 Earnings Release dated February 4, 2016, was $1.88 per share.Forpurposes ofAimco’scompensation plan, Aimco made adjustments to AFFO both upward and downward to normalize for certain items not included inAimco’s2015 budget, according to a process Aimco performs each year, overseen by the Committee, with respecttohow AFFOiscalculatedforpurposesofAimco’scompensationplan.Thisprocessresultedinanetdownwardadjustment to reported AFFO for2015. |
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Same-StoreNOIAchievement(30%ofKPI).Theprimaryobjectiveofthisgoalwastomeasuremanagement’sabilitytoincrease conventional same-store NOI. For 2015, the range for the same-store NOI achievement goal was as follows: “Threshold” equated to achievement of three percent unfavorable to 2015 budgeted same-store NOI;“Target”equated to achievement of 2015 budgeted same-storeNOI;and“Maximum”equatedtothreepercentfavorableto2015budgetedsame-storeNOI.Aimco’ssame-storeNOIachievement for2015was0.46%favorabletobudgetedsame-storeNOI.Thisresultedinapayoutonthesame-storeNOIachievementgoalof34.60% for each of theNEOs.
Resident Satisfaction Scores (5% of KPI).The primary objective of this goal was to enhance resident satisfaction, which in turn results in higher resident retention and increased profitability. Every Aimco resident is surveyed at several touch points in the resident lifecycle throughAimco’spartnership with a third-party company that administers resident surveys on behalf of many companies in the real estate industry.Aimco’sresident satisfaction score for the full year consisted of the average score across all surveys covering sixdifferenttouchpointsfor“overallsatisfaction,”onascaleof1to5.For2015,therangefortheresidentsatisfactionscoresgoalwas as follows: “Threshold” equated to a 3.95;“Target”equated to a 4.0; and “Maximum” equated to a 4.10. For 2015,Aimco’sresident satisfaction score, from approximately 77,000 survey responses, was 4.15, resulting in a payout of 10% for each of theNEOs.
Acquisition and Sales Activity (12.5% of KPI).The primary objective of this goal was to continue to improveAimco’sportfolio by selling each year the 5% to 10% of its portfolio with lower projected returns, lower operating margins, and lower expected future rent growth, and reinvesting the sale proceeds in apartment communities already in our portfolio, through property upgrades and redevelopment, or through the purchase of apartment communities with higher projected returns and rent growth and, in limited situations,thedevelopment ofapartmentcommunities.For2015,theacquisitionandsalesactivitygoalwascomprisedofthreesubgoals. The first sub-goal, representing 2.5% of the 12.5% goal weighting, consisted of theGAVof property sales, with “Threshold” equating to $202 million in property sales,“Target”equating to $269 million in property sales, and “Maximum” equating to $800 million in propertysales.For2015,Aimcocompleted$403.9millioninpropertysales,resultinginapayoutof3.14%onthissub-goalforeachof the NEOs. The second sub-goal, representing 6% of the 12.5% goal weighting, consisted of acquisition investment, with “Threshold” equatingto$75 millioninpropertyacquisitions,“Target”equatingto$100millioninpropertyacquisitions,and“Maximum” equatingto $250millioninpropertyacquisitions.For2015,Aimcoinvested$322millioninpropertyacquisitions,2resultingin apayoutof12.00% onthissub-goalforeachoftheNEOs.Thethirdsub-goal,representing4%ofthe12.5%goalweighting,consistedofaveragerevenues per unit as measured for the fourth quarter of 2015 for conventional market-rate communities, with “Threshold” equating to $1,782,“Target”equating to $1,815, and “Maximum” equating to $1,906. For the fourth quarter of 2015,Aimco’saverage revenues per unit were $1,840, resulting in a payout of 5.09% on this sub-goal for each of theNEOs.
Redevelopment and Development Investment and Returns (12.5% of KPI). The primary objective of this goal was to continue to enhanceAimco’sportfolio through redevelopment and selective development activity. Aimco had seven major redevelopment and development projects under construction in 2015. Large and/or complex projects and ongoing projects with known challenges going into 2015 were provided increased weighting toward the total goal weighting of 12.5%, with smaller scale projects and/or projects without known challenges provided lower weighting toward the total goal weighting. Achievement for each project was determined with reference to the 2015 budgeted investment and scope for the project, and was based on the extent to which the project work was completed on time and within budget, as well as returns on investment. For 2015, Aimco completed four redevelopment projects and madesolidprogressonitsmulti-yearredevelopmentanddevelopmentprojects.Theprojectworkwaslargelyontimeandwithinbudget. Redevelopment leasing in 2015 achieved average rents above underwriting for all but one project. This resulted in a payout of 16.50% for each of theNEOs.
Ratio ofDebtandPreferredEquity to EBITDA (5% of KPI).The primary objective of this goal was to measuremanagement’sabilitytocontinuetostrengthenAimco’sbalancesheet,withparticularfocusonloweringleverage,whichincreasesfinancialflexibility.For2015,therangefortheleverageratiogoalwasasfollows:“Target”equatedtoaratioofDebtandPreferredEquitytoEBITDAof6.9x;and“Maximum”equatedtoaratioofDebtandPreferredEquitytoEBITDAof6.6x.No“Threshold”opportunitywassetforthisgoal.Aimco’sratioofDebtandPreferredEquitytoEBITDAfor2015was6.8x.Thisresultedinapayoutontheleverageratiosgoalof6.67%foreach of theNEOs.
| 2 | Inthethirdquarterof2015,Aimcoenteredintoacontracttoacquireanapartmentcommunityunderconstructionin NorthernCalifornia for$320million.Closingoftheacquisitionisexpectedtooccuruponcompletionofconstructioninthesummerof2016. Performance against the acquisitions investment sub-goal includes half of this acquisition amount, or $160 million of the $320 million purchaseprice. |
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Credit Ratings (5% of KPI).The primary objective of this goal was to measure management’s ability to continue to strengthen Aimco’s balance sheet, with particular focus on improving Aimco’s credit ratings, which increases financial flexibility. For 2015, the range for the credit ratings goal was as follows: “Target” equated to the achievement of an investment grade rating from either Fitch or Standard & Poors (“S&P”); and “Maximum” equated to the achievement of an investment grade rating from both rating agencies. No “Threshold” opportunity was set for this sub-goal. For 2015, Aimco achievedinvestment grade ratings from both Fitch and S&P.This resulted in a payout of 10.00% on the credit ratings goal for each of the NEOs.
AFFO Per Share (25% of KPI).The primary objective of the AFFO goal was to measure management’s ability to oversee the financial performance of the Company. Funds from Operations (“FFO”) is a commonly used measure of REIT performance, which the National Association of Real Estate Investment Trusts (“NAREIT”) defines as net income, computed in accordance withGAAP,excludinggainsfromsalesof,andimpairmentlossesrecognizedwithrespectto,depreciableproperty,plusdepreciationandamortization, andafteradjustmentsforunconsolidatedpartnershipsandjointventures.AimcocomputesFFOinaccordancewiththeguidancesetforth byNAREIT.ProformaFFOrepresentsFFOasdefinedabove,excludingpreferredequityredemptionrelatedamounts(adjustedfornon-controllinginterests).Preferredequityredemptionrelatedamounts(gainsorlosses)areitemsthatperiodicallyaffectAimco’soperating results. Aimco excludes preferred equity redemption related amounts (gains or losses) from Pro forma FFO because such amounts are not representative of operating performance. AFFO represents Pro forma FFO reduced by capital replacements (also adjusted for non- controllinginterests).
For 2015, the range for the AFFO goal was as follows: “Threshold” equated to $1.77 per share; “Target” equated to $1.87 per share, the 2015 budgeted amount; and “Maximum” equated to $1.97 per share. Aimco’s AFFO was $1.87 per share.3 This resulted in a payout on the AFFO per share goal of 25.00% for each of the NEOs.
TeamMember Engagement Scores (5% of KPI).The primary objective of this goal was to maintain a highly engaged, satisfied workforce,whichdrivesstrongerresultsacrossallofAimco’sothergoals.Everyteammemberissurveyedviaaninternal,confidential surveyonhisorherannualanniversaryofemployment.Theteammemberengagementscoreconsistsoftheaverageoftheresponsesto the questions that comprise the engagement index for all team members who complete the survey during theyear.For 2015, the range for team member engagement scores was as follows: “Threshold” equated to 70%;“Target”equated to 80%; and “Maximum” equated to 90%. For 2015,Aimco’steam member engagement score was 85.1%, resulting in a payout of 7.55% for each of theNEOs.
DuetoAimco’soutperformanceonmultiplegoals,Aimco’soverallKPIperformancewas130.55%.Accordingly,eachexecutive officer was awarded 130.55% of the portion of his or her target STI attributable toKPI.
Long-Term Incentive Compensation Awards for 2015
Underthe2015LTIprogram,100%oftheLTIawardfortheCEO,and80%oftheLTIawardsfortheotherNEOs,4areperformance based, or at risk, and measured on a forward looking, three-year performance period. The following graphic shows the composition of the 2015LTIawards forNEOs.
| 3 | See Footnote 1. |
| 4 | Mr.Beldin’s 2015LTIwas granted in January 2016 according to the backward lookingLTIplan for officers below theexecutive officerlevel,whichistheplanthatappliedto Mr.BeldinpriortohispromotiontoCFOinSeptember2015. Mr.Beldin’s2015LTIis discussed furtherbelow. |
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The relative metrics under the LTI awards made in 2015 are as follows:
| Metric and Performance Level(1) (relative performance stated as basis points above or below index performance)(2) | |||
| Threshold | Target | Maximum | |
| Relative to NAREIT Apartment Index | -250 bps | +50 bps | +400 bps |
| Relative to MSCI US REIT Index | -350 bps | +50 bps | +500 bps |
| (1) | The relative metrics above reflect the metrics used for the awards made in 2015 for the performance period ending on December 31,2017. | |
| (2) | If absolute TSR were negative, any portion of theLTIaward achieved above target would not begin vesting until absolute TSR is once againpositive. |
Thresholdperformancewillpayoutat50%;targetperformancewillpayoutat100%;andmaximumperformancewillpayoutat 200%. Performance below threshold will result in no payout. The performance-based portion of theLTIawards for Messrs. Considine andKimmelandMs.Cohn(i.e.,theentireLTIawardinthecaseofMr.Considine,and80%oftheLTIawardinthecaseofMr.Kimmel and Ms. Cohn) will be determined solely according to the relative TSR metrics set forth above.Mr.Considine determined thatMr.Bezzant’s 2015LTIwould have two components. Fifty percent of the performance-based portion ofMr.Bezzant’sLTI,or 40% of the overallaward,willbedeterminedaccordingtotherelativeTSRmetricssetforthabove.Fiftypercentoftheperformance-basedportion ofMr.Bezzant’sLTI,or another 40% of the overall award, will be determined according to acquisitions and developmentobjectives.
The LTI awards made in 2015 have a forward looking, three-year performance period, with grants vesting 50% following the end of the three-year performance period (based on attainment of TSR targets), and 50% one year later, for a four-year plan from start to finish, illustrated below.
LTIawardsfor2015weregrantedonFebruary12,2015,intheformofrestrictedstock.Theperformanceshareawardagreements to which the performance-based restricted shares were granted do not provide for the payment of dividends until the shares are earned.Dividends accrue during the performance period and are paid on earned shares at the time ofvesting.
Mr.Beldin’s 2015LTIwas granted on January 26, 2016, according to the backward lookingLTIplan that governsLTIawards for officers below the executive officer level, and was the plan that applied toMr.Beldin prior to his promotion to CFO in September 2015.(Mr.Beldin’s 2016LTIwas also granted in January 2016 according to theLTIplan for executive officers.)Under theLTIplan that governsLTIawards for officers below the executive officer level, at the start of 2015,Mr.Considine determined thatLTIfor 2015 would be based in part on TSR. Specifically, forMr.Beldin, one-third of theLTItarget would be awarded for the purpose of attracting and retaining key talent integral to the success of Aimco.Two-thirdsof theLTItarget would be based on TSR, with half (one-third of thetotalLTItarget)basedonAimco’sone-yearTSRascomparedtotheREITIndex,andhalf(anotherone-thirdofthetotalLTItarget) based onAimco’sthree-year TSR as compared to the REIT Index. Aimco TSR at greater than 110% of the REIT Index would result in a 125% payout of theLTItarget attributable to TSR, and Aimco TSR at less than 90% of the REIT Index would result in a 75% payout of theLTItarget attributable to TSR. Aimco TSR between 90% and 110% of the REIT Index would result in a 100% payout of theLTItarget attributable to TSR. BothAimco’sone-year TSR and three-year TSR were greater than 110% of the REIT Index, resulting in payoutsof125%onthoseportionsoftheLTItargetattributabletoTSR.Accordingly,Mr.Beldinwasawarded116.67%ofhistargetLTI
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(i.e., one-third of the LTI target was for purposes of retention and paid at 100%; one-third of the LTI target was paid at 125% based on outperformance on one-year TSR; and one-third of the LTI target was paid at 125% based on outperformance on three-year TSR; and the net effect of these three components resulted in an overall award of 116.67% of target LTI).
NEO Compensation for 2015
Mr.Considine’s employment agreement provides for target incentive compensation (both STI andLTIcombined) of not less than $3.9 million.Mr.Considine’s STI for 2015 was based entirely onAimco’sperformance against the eight designated corporate goals.Mr.Considine’s STI was calculated by multiplying his STI target of $1.20 million by 130.55%, which wasAimco’soverall performanceontheeightcorporategoals.Mr.Considine’sLTIwasgrantedintheformofrestrictedstockonFebruary12,2015,forthe three-year performance period from January 1, 2015, through December 31, 2017, and is entirely at risk, based on relative returns over the performance period, as described in detail beginning on page 37 above.Mr.Considine’s 2015 target compensation and incentive compensation is summarized asfollows:
| Target Total | 2015 Incentive Compensation | |||||||||||||||||||||||
| Incentive | STI | LTI | ||||||||||||||||||||||
| Target Total | Paid | Compensation | Time-Based | Performance-Based | ||||||||||||||||||||
| Compensation ($) | Base ($) | STI ($) | LTI ($) | ($) | Equity ($) | Equity ($) (1) | ||||||||||||||||||
| 5,125,000 | 600,000 | 1,200,000 | 3,325,000 | 1,566,600 | — | 3,325,000 | ||||||||||||||||||
___________________
| (1) | Amount shown reflects a 100% payout resulting from achieving “target” performance. Actual payout will be in a range of 0% to 200% of this amount depending on performance results over the forward looking, three-year performance period ending December 31,2017. |
Pursuanttotheapplicabledisclosurerules,theSTIshownaboveappearsintheSummaryCompensationTableunderthecolumn headed“Non-EquityIncentivePlanCompensation,”andtheMonteCarlovalueoftheLTIamountshownaboveappearsinthe“Summary CompensationTable”under the column headed “StockAwards”and in the “Grants of Plan-BasedAwardsin 2015”table.
With respect toMr.Considine’sLTI,the number of shares of restricted stock that vest, ifany,will vest 50% following the end of the three-year performance period and 50% one year later, for a four-year vesting period. For the purpose of calculating the number of shares of restricted stock to be granted, the dollar amount allocated to restricted stock was divided by $38.59 per share, which was the average of the closing trading prices of Aimco’s Common Stock on the five trading days up to and including the grant date. The five-day average was used to provide a more fair approximation of the value of the stock at the time of grant by muting the effect of anysingledayspikesordeclines.ProvidingLTIintheformofAimcoequitythatisentirelyatriskbasedonrelativereturns,andwhich vests over time, alignsMr.Considine’s compensation with stockholder objectives and serves as an incentive to take a longer termview ofAimco’sperformance.Mr.Considine’scompensationishighlyvariable,andhaschangedsignificantlywithperformanceoverthepast severalyears.
As noted above, for Ms. Cohn and Messrs. Bezzant and Kimmel, and forMr.Beldin as of the date of his promotion to CFO in September 2015, an allocation of the target STI was made as follows: 50% of the target STI was calculated based onAimco’sperformance against the KPI and 50% of the target STI was calculated based on each executive’s achievement of his or her individual MAPgoals.Asnotedabove,Aimco’sKPIperformancewas130.55%.Accordingly,eachexecutiveofficerwasawarded130.55%ofthe portion of his or her STI attributable to KPI (i.e., 50% of the target STI amount shown below for Ms. Cohn and Messrs. Bezzant and Kimmel;Mr.Beldin’sSTIwasproratedfor2015,asdiscussedfurtherbelow).InMr.Beldin’spreviousroleasSeniorVicePresidentand Chief Accounting Officer, an allocation of the target STI was made as follows: 25% of the target STI was calculated based onAimco’s performance against the KPI and 75% of the target STI was calculated based onMr.Beldin’s achievement of his individual MAP goals. For 2015,Mr.Beldin’s target STI was prorated, and he received two MAP ratings, one for the portion of the year covering his previousrole,andinwhichtheSTIwascalculated25%basedonAimco’sperformanceagainsttheKPIand75%basedonMr.Beldin’s achievement of his individual MAP goals, and the other MAP rating for the portion of the year covering his role as CFO, in which the STI was calculated 50% based onAimco’sperformance against the KPI and 50% based onMr.Beldin’s achievement of his individual MAPgoals.
In determining the MAP achievement component of 2015STI,Mr.Considine determined that:Mr.Beldin’sMAP achievementwouldbe paid at 125% for the portion of the year coveringMr.Beldin’sprevious role, and at 100% for the portion of the year coveringMr.Beldin’srole as CFO, forMr.Beldin’scontributions to finance and accounting and to strengtheningAimco’sbalance sheet;Ms.
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Cohn’s MAP achievementwouldbe paid at 150% for her leadership over legal matters, insurance, risk management, asset qualityandservice,commercial/ancillaryincome,compliance, andhumanresources;Mr.Bezzant’sMAPachievementwouldbepaidat150%forhiscontributions related toAimco’sportfoliostrategy,andparticularly,acquisitions; andMr.Kimmel’sMAP achievementwouldbe paid at 150%forhiscontributionstoAimco’soperatingresults.TheCommitteereviewedMr.Considine’sdeterminations. Asdescribedindetailbeginningonpage 37above,LTIforMs.CohnandMessrs.BezzantandKimmelwasgrantedonFebruary12,2015,andLTIforMr.BeldinwasgrantedonJanuary26,2016.TheLTIawardsfor2015weregrantedintheformofrestrictedstock.Targetcompensationandincentive compensation for2015fortheotherNEOsissummarizedasfollows:
| Target Total | |||||||||||||||||||||||||||
| Incentive | 2015 Incentive Compensation ($) | ||||||||||||||||||||||||||
| Compensation | STI | LTI | |||||||||||||||||||||||||
| Target Total Compensation ($) | Paid Base ($) | STI ($) | LTI ($) | ($) | Time-Based Equity ($) | Performance-Based Equity ($) (1) | |||||||||||||||||||||
| Mr. Beldin | 743,595 | 273,565 | 239,519 | 230,511 | 292,721 | 268,937(2) | — | ||||||||||||||||||||
| Ms. Cohn | 1,500,000 | 400,000 | 400,000 | 700,000 | 561,100 | 140,000(3) | 560,000 | ||||||||||||||||||||
| Mr. Bezzant | 1,500,000 | 400,000 | 400,000 | 700,000 | 561,100 | 140,000(3) | 560,000 | ||||||||||||||||||||
| Mr. Kimmel | 1,000,000 | 325,000 | 250,000 | 425,000 | 350,688 | 85,000(3) | 340,000 | ||||||||||||||||||||
| (1) | Comprises 80% of theLTItarget. Amounts shown reflect a 100% payout of the performance-based shares resulting from achieving“target”performance.Actual payoutswillbeinarangeof0%to200%oftheseamounts,dependingonperformance resultsforthethree-yearperformanceperiod fromJanuary1,2015,throughDecember31,2017.Thenumberofsharesthat vest, ifany,will vest 50% following the end of the three-year performance period and 50% one year later, for a four-year vesting period. |
| (2) | Comprises 116.67% of theLTItarget, vesting ratably over four years. As described in the detail on page 38,Mr.Beldin’s 2015 LTIwasgranted onJanuary26,2016,accordingtothebackwardlooking LTIplanthatgoverns LTIawardsforofficers below the executive officer level, and was the plan that applied toMr.Beldin prior to his promotion to CFO in September 2015. |
| (3) | Comprises20%oftheLTItarget,vestingratablyoverfouryears,andisforthepurposeofattractingandretainingkeytalent integral to the success ofAimco. |
Pursuant to the applicable disclosure rules, the STI shown above appears in the “Summary CompensationTable”under the columnheaded“Non-EquityIncentivePlanCompensation,”andthegrantdatevalueoftheLTIamountsshownaboveforMs.Cohnand Messrs. Bezzant and Kimmel are reflected in the Summary CompensationTableunder the column headed “StockAwards”and in the “Grants of Plan-BasedAwardsin 2015”table.
With respect to LTI, for Ms. Cohn and Messrs. Bezzant and Kimmel, the shares of restricted stock were granted February 12, 2015. For the purpose of calculating the number of shares of restricted stock to be granted, the dollar amounts allocated to restricted stock were divided by $38.59 per share, which was the average of the closing trading prices of Aimco’s Common Stock on the five trading days up to and including the grant date.
Mr.Beldin’sLTIwas granted on January 26, 2016,according to theLTIplan that governsLTIawards for officers below the executiveofficerlevel,andwastheplanthatappliedtoMr.BeldinpriortohispromotiontoCFOinSeptember2015,assetforthabove. The shares of restricted stock vest ratably over four years. BecauseMr.Beldin’s equity award for 2015 incentive compensation was madein2016,pursuanttotheapplicableproxydisclosurerules,suchawardwillbereflectedinthe“SummaryCompensationTable”and “GrantsofPlan-BasedAwardsin2016”tableinAimco’sproxystatement forthe2017annualmeetingofstockholders.Forthepurpose ofcalculatingthe number ofsharesofrestrictedstocktobegranted,thedollaramountsallocatedtorestrictedstockweredividedby $37.61 per share, which was the average of the closing trading prices of Aimco’s Common Stock on the five trading days up to and including the grant date.
Other Compensation
Fromtimetotime,Aimcodeterminestoprovideexecutiveofficerswithadditionalcompensationintheformofdiscretionarycash or equityawards.
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A portion ofMr.Bezzant’s 2015 STI is contingent upon the closing of an acquisition for which Aimco entered into a contract in 2015.Thecontingentportionofthebonusisintheamountof$231,720.Becausethisportionofthebonusiscontingentuponclosingof theacquisition,expectedtooccurin2016,itisnotincludedinthisproxystatementas2015compensation.Ifpaid,theadditionalbonus amount will be reflected in the CD&A and “Summary CompensationTable”in Aimco’s proxy statement for the 2017 annual meeting ofstockholders.
Post-Employment Compensation and Severance Arrangements
401(k)
Aimcoprovidesa401(k)planthatisofferedtoallAimcoteammembers.In2015,Aimcomatched25%ofparticipantcontributions totheextentofthefirst4%oftheparticipant’seligiblecompensation.For2015,themaximummatchbyAimcowas$2,650,whichwas theamountthatAimcomatchedforeachofMessrs.Considine,Beldin,BezzantandKimmelandMs.Cohn’s2015401(k)contributions. Aimcomatched$1,325forMr.Freedman’s2015401(k)contributions.Aimcoprovidedanadditionaldiscretionarymatchintheamount of $650 to all team members in 2016 forAimco’sachievement of greater than 105% on its 2015 corporategoals.
Otherthanthe401(k)plan,Aimcodoesnotprovidepost-employmentbenefits.Aimcodoesnothaveapensionplan,aSupplemental Executive Retirement Plan or any other similararrangements.
Executive Severance Arrangements
Aimco has an executive severance policy that provides that Aimco shall seek stockholder approval or ratification of any future severance agreement for any senior executive officer that provides for benefits, such as lump-sum or future periodic cash payments or new equity awards, in an amount in excess of 2.99 times such executive officer’s base salary and bonus. Compensation and benefits earnedthroughtheterminationdate,thevalueofvestingorpaymentofanyequityawardsoutstandingpriortotheterminationdate,pro rata vesting of any other long-term awards, or benefits provided under plans, programs or arrangements that are applicable to one or moregroupsofemployeesinadditiontoseniorexecutivesarenotsubjecttothepolicy.IthasbeenAimco’slongstandingpracticenotto enter into agreements with senior executives to provide excessive severancearrangements.
Executive Employment Arrangements
On July 29, 1994, as required in connection withAimco’sinitial public offering, Aimco entered into an employment agreement withMr.Considine. On December 29, 2008, Aimco entered into an employment agreement withMr.Considine to replace his 1994 employment agreement and the 2002 non-competition and non-solicitation agreement betweenMr.Considine and Aimco. The 2008 employment agreement was entered into to reflect current practice and update Aimco’s agreement withMr.Considine, which had not been formally revised since the Company’s initial public offering in 1994, and to make the compensation arrangements compliant with certain Internal Revenue Service requirements, primarily Section 409A of the Code, which required documentary compliance by December31,2008.Inconnectionwiththeexecutionoftheemploymentagreement,Mr.Considinedidnotreceiveanyadditionalequity awards or signing bonus. The Committee evaluated the terms ofMr.Considine’s employment agreement in comparison to those of the CEOs ofAimco’speers and other comparablecompanies.
The 2008 employment agreement was for an initial five-year term, with automatic renewal for successive one-year terms until the year in which Mr. Considine reaches age 70, unless earlier terminated. The 2008 employment agreement eliminated the evergreen term in the prior employment agreement.
Mr.Considinecontinuestoreceivehiscurrentbasepayof$600,000,whichhasremainedunchangedsince2006,subjecttofuture increase.Mr.Considine also continues to be eligible to participate inAimco’sperformance-based incentive compensation plan with a target total incentive compensation amount of not less than $3.9 million, which may be paid in cash or inequity.
The employment agreement provides severance payments to Mr. Considine upon his termination of employment by Aimco without cause, by Mr. Considine for good reason and upon a termination for reason of disability.
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Mr.Considine is not entitled to any additional or special payments upon the occurrence of a change in control.Mr.Considine’s “walkright”underthe1994employmentagreement(thatis,hisrighttoseverancepaymentsuponhisterminatingemploymentwiththe Company within two years following a change in control) was eliminated. The definition of “change in control” was also narrowed to increase the required percentage of change in ownership and to require the occurrence of the applicable change in control event, rather than just stockholder approval of suchevent.
UponterminationofhisemploymentbyAimcowithoutcause,byMr.Considineforgoodreason,oruponaterminationforreason ofdisability,Mr.Considineisgenerallyentitledto(a)alumpsumcashpaymentequaltotwotimesthesumofbasesalaryatthetimeof termination and $1.65 million, subject to certain limited reductions, (b) any STI earned but unpaid for a prior fiscal year, (c) a pro-rata portion of a $1.65 million STI amount for the fiscal year in which the termination occurs, and (d) immediate full acceleration of any outstanding unvested stock options and equity awards with certain limitations on the termthereof.
In the event ofMr.Considine’s death, the Company will pay or provide toMr.Considine’s estate any earned but unpaid base salary and vested accrued benefits and any STI earned but unpaid for a prior fiscal year, and all equity-based and otherLTIawards grantedto Mr.Considinewillbecomeimmediatelyfullyvestedandpayable,asapplicable,andalloutstandingstockoptionawardswill remain exercisable subject to certain limitations on the termthereof.
Undertheemploymentagreement,intheeventpaymentsto Mr.ConsidinearesubjecttotheexcisetaximposedbySection4999 of the Code,Mr.Considine is entitled to receive a limited gross-up payment, subject to a maximum of $5 million. If covered payments arelessthan10%overthepermittedlimit,Mr.Considineisrequiredtoreducehispaymentstoavoidtriggeringagross-uppayment.At the time the employment agreement was entered into, the limited gross-up payment was intended to balance the interests ofAimco’sstockholders, eliminate the incentive for the early exercise of stock options and reflect competitivepractice.
The employment agreement also contains customary confidentiality provisions, a limited mutual non-disparagement provision, and non-competition, non-solicitation and no-hire provisions.
None of Messrs. Beldin, Bezzant, or Kimmel or Ms. Cohn has an employment agreement or severance arrangement.
Beginning with equity grants made in 2015 for compensation year 2014, the restricted stock and/or stock option agreements pursuant to which restricted stock and/or stock option awards have been made to Messrs. Considine, Beldin, Bezzant, Kimmel andMs.Cohnprovidethat,uponachangeincontrol,alloutstandingsharesofrestrictedstockshallnotbecomeimmediatelyandfullyvestedand allunvestedstockoptionsshallnotbecomeimmediatelyandfullyvestedandremainexercisable(alongwithalloptionsalreadyvested) fortheremainderofthetermoftheoptionunlessthereisalsoasubsequentqualifyingterminationofemploymentoftheexecutiveofficer.
Other Benefits; Perquisite Philosophy
Aimco’sexecutiveofficerbenefitprogramsaresubstantiallythesameasforallothereligibleofficersandemployees.Aimcodoes not provide executives with more than minimal perquisites, such as reserved parkingplaces.
Stock Ownership Guidelines and Required Holding Periods After Vesting
Aimco believes that it is in the best interest of Aimco’s stockholders for Aimco’s executive officers to own Aimcostock.Every year,theCommitteeandMr.Considinereview Aimco’sstockownershipguidelines,eachexecutiveofficer’sholdingsinlightofthe stockownershipguidelines,andeachexecutiveofficer’saccumulatedrealizedandunrealizedstockoptionandrestrictedstockgains.In itsmostrecentreviewonJanuary25,2016,theCommitteereviewedhowunvestedrestrictedstockwithperformancevestingshouldbe treatedwithinthestockownershipguidelines,anddeterminedthatsuchunvestedperformanceshareswillnotcountasequityownership.
Equityownershipguidelinesforallexecutiveofficersaredeterminedasaminimumofthelesserofamultipleoftheexecutive’s basesalaryorafixednumberofshares.TheCommitteeandmanagementhaveestablishedthefollowingstockownershipguidelinesfor Aimco’s executiveofficers:
| OfficerPosition | OwnershipTarget | |
| ChiefExecutiveOfficer | Lesser of 5x base salary or 150,000shares | |
| ChiefFinancialOfficer | Lesser of 5x base salary or 75,000shares | |
| Other ExecutiveVicePresidents | Lesser of 4x base salary or 25,000shares |
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Anyexecutivewhohasnotsatisfiedthestockownershipguidelinesmust,untilthestockownershipguidelinesaresatisfied,hold 50%ofaftertaxsharesofrestrictedstockforatleastthreeyearsfromthedateofvesting,andhold50%ofsharesacquireduponoption exercises (50% calculated after exercise price plus taxes) for at least three years from the date ofexercise.
Each of Messrs. Considine, Bezzant and Kimmel and Ms. Cohn exceed the ownership targets established inAimco’sstock ownershipguidelines.Mr.Beldin,promotedtoChiefFinancialOfficeronSeptember14,2015,doesnotyetmeettheownershiptargets, with holdings of 26,520shares.
Role of Outside Consultants
The Committee has the authority under its charter to engage the services of outside advisors, experts and others to assist the Committee. In 2015, the Committee engaged Board Advisory as its independent compensation consultant. At the direction of the Committee, Board Advisory coordinated and consulted with Ms. Cohn and Ms. Johnson regarding executive compensation matters. Board Advisory provided the Committee with an independent view of both market data and plan design. Aimco management has engagedFPLAssociates,L.P.(“FPL”)toreviewAimco’sexecutivecompensationplan.NeitherBoardAdvisorynorFPLprovidedother services to the Company. The Committee has assessed the independence of Board Advisory and FPL pursuant to SEC rules and has concluded that there are no conflicts ofinterest.
Base Salary, Incentive Compensation, and Equity Grant Practices
BasesalaryadjustmentstypicallytakeeffectonJanuary1.TheCommittee(forMr.Considine),andMr.Considine,inconsultation with the Committee (for the other executive officers), determine incentive compensation in late January or early February. STI is typically paid in February or March.LTIis awarded on a date determined by the Committee, typically in late January or inFebruary.
Aimcograntsequityinthreescenarios:inconnectionwithincentivecompensation,asdiscussedabove;inconnectionwithcertain new-hire or promotion packages; and for purposes ofretention.
With respect toLTI,the Committee sets the grant date for the restricted stock and stock option grants. The Committee sets grant dates at the time of its final compensation determination, generally in late January or in February. The date of determination and date of award are not selected based on share price. In the case of new-hire packages that include equity awards, grants are made on the employee’s start date or on a date designated in advance based on the passage of a specific number of days after the employee’s start date.Fornon-executiveofficers,asprovidedforinthe2007Planandthe2015Plan,theCommitteehasdelegatedtheauthoritytomake equity awards, up to certain limits, to the Chief Financial Officer(Mr.Beldin) and/or Corporate Secretary (Ms. Cohn). The Committee andMr.BeldinandMs.Cohntimegrantswithoutregardtothesharepriceorthetimingofthereleaseofmaterialnon-publicinformation and do not time grants for the purpose of affecting the value of executive compensation. No such grants were made pursuant to this delegation of authority in2015.
2016 Compensation Targets
BasedoncomparisontocompensationpaidtoCEOsatAimco’speers,theCommitteesetMr.Considine’stargettotalcompensation (basecompensation,STIandLTI)for2016at$5.625million.Mr.Considinesettargettotalcompensation(basecompensation,STIandLTI)for 2016 for the other NEOs as follows:Mr.Beldin — $1.3 million; Ms. Cohn — $1.65 million;Mr.Bezzant — $1.5 million; andMr.Kimmel—$1.4million.Aimcoperformancewilldeterminetheamountspaidfor2016STIandtheportionofLTIawardsthatvest, andsuchamountsmaybelessthan,orinexcessof,thesetargetamounts.STIwillbepaidincash,andLTIwasgrantedinJanuary2016 in the form of restricted stock and/or stockoptions.
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COMPENSATION AND HUMAN RESOURCES COMMITTEE REPORT TO STOCKHOLDERS
The Compensation and Human Resources Committee held seven meetings during fiscal year 2015. The Compensation and Human Resources Committee has reviewed and discussed the Compensation Discussion & Analysis with management. Based upon suchreview,therelateddiscussionsandsuchothermattersdeemedrelevantandappropriatebytheCompensationandHumanResources Committee, the Compensation and Human Resources Committee has recommended to the Board that the Compensation Discussion & AnalysisbeincludedinthisProxyStatementtobedeliveredtostockholders.
Date: February 23, 2016
THOMAS L. KELTNER (CHAIRMAN)
JAMES N. BAILEY
J. LANDIS MARTIN
ROBERT A. MILLER
KATHLEEN M. NELSON
MICHAEL A. STEIN
The above report will not be deemed to be incorporated by reference into any filing by Aimco under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that Aimco specifically incorporates the same by reference.
The table below summarizes the compensation attributable to the principal executive officer, principal financial officer, and the three other most highly compensated executives in 2015, for the years 2015, 2014 and 2013.
Forcompensationyears2013and2014,theamountsshownunderthecolumn“StockAwards”areattributableto LTIfortheprior compensationyear.In 2015, Aimco transitioned from a backward lookingLTIplan in which awards were made for the compensation year in the first quarter of the year that followed, to a forward looking plan in which awards were made in the same compensation year in which the forward looking, three-year performance period began. As a result, due to proxy disclosure rules,LTIawards for both compensation year 2014, under the backward lookingLTIplan in which awards were made in the first quarter of 2015, andLTIawards for compensation year 2015, under the new forward lookingLTIplan in which awards were also made in the first quarter of 2015, are bothshownintheyear2015inthe“SummaryCompensationTable,”givingtheappearanceof“doubleLTI.”Foraclearerviewofactual 2015 compensation, please refer to the NEO compensation charts set forth in the CD&A on pages 39 and40.
| Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Stock Awards ($)(1) | | Option Awards ($)(2) | | Non-Equity Incentive Plan Compensation ($)(3) | | All Other Compensation ($)(4) | | Total ($) | ||||||||||||||||
| Terry Considine — Chairman of the Board of , | 2015 | 600,000 | — | 5,104,785 | (6) | 1,662,554 | (6) | 1,566,600 | 3,835 | 8,937,774 | (7) | |||||||||||||||||||||
| Director, President and Chief Executive Officer (5) | 2014 | 600,000 | — | 2,342,345 | — | 1,339,485 | 2,600 | 4,284,430 | ||||||||||||||||||||||||
| 2013 | 600,000 | — | 3,326,295 | — | 1,094,835 | — | 5,021,130 | |||||||||||||||||||||||||
| Paul Beldin — Executive Vice President and Chief Financial Officer | 2015 | 273,565 | — | 131,520 | (8) | — | 292,721 | 3,835 | 701,641 | |||||||||||||||||||||||
| Lisa R. Cohn — Executive Vice President, General | 2015 | 400,000 | — | 1,337,931 | (9) | — | 561,100 | 3,835 | 2,302,866 | (10) | ||||||||||||||||||||||
| Counsel and Secretary | 2014 | 375,000 | — | 431,508 | — | 433,309 | 2,600 | 1,242,417 | ||||||||||||||||||||||||
| 2013 | 375,000 | — | 612,758 | — | 361,209 | — | 1,348,967 | |||||||||||||||||||||||||
| John Bezzant — Executive Vice President and Chief | 2015 | 400,000 | 150,000 | (11) | 854,901 | (12) | — | 703,663 | (13) | 3,835 | 2,111,749 | (10) | ||||||||||||||||||||
| Investment Officer | 2014 | 350,000 | — | 164,397 | — | 518,123 | 2,600 | 1,035,120 | ||||||||||||||||||||||||
| 2013 | 335,616 | — | 433,524 | — | 325,401 | — | 1,094,541 | |||||||||||||||||||||||||
| Keith Kimmel — Executive Vice President of | 2015 | 325,000 | — | 754,765 | (14) | — | 350,688 | 3,835 | 1,434,288 | (10) | ||||||||||||||||||||||
| Property Operations | 2014 | 300,000 | — | 341,114 | — | 276,081 | 2,600 | 919,795 | ||||||||||||||||||||||||
| Ernest M. Freedman — Former Executive Vice | 2015 | 300,000 | — | 1,808,723 | (16) | — | — | 32,163 | (17) | 2,140,886 | (10) | |||||||||||||||||||||
| President and Chief Financial Officer (15) | 2014 | 375,000 | — | 616,421 | — | 495,210 | 1,300 | 1,487,931 | ||||||||||||||||||||||||
| 2013 | 375,000 | — | 612,758 | — | 440,890 | — | 1,428,648 | |||||||||||||||||||||||||
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| (1) | ThiscolumnrepresentstheaggregategrantdatefairvalueofstockawardsintheyeargrantedcomputedinaccordancewithFASBASCTopic718. Except as otherwise noted, the amounts shown for compensation years 2013 and 2014 are attributable toLTIin respectofthepriorcompensationyear.Exceptasotherwisenoted,theamountsshownforcompensationyear2015areattributabletoLTIinrespectofboththepriorcompensationyearandcompensationyear2015,duetoAimco’stransitionin2015fromabackward lookingLTIplan to a forward lookingLTIplan, as described above. For additional information on the valuation assumptions with respect to the grants reflected in this column, refer to the Share-Based Compensation footnote to Aimco’s consolidated financial statementsinitsAnnualReportonForm10-KfortheyearendedDecember31,2015. |
| (2) | This column represents the aggregate grant date fair value of the option award in the year granted computed in accordance withFASBASCTopic718, although it is attributable to the prior compensationyear.For additional information on the valuation assumptions with respect to the grants reflected in this column, refer to the Share-Based Compensation footnote to Aimco’s consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31,2015. |
| (3) | For 2015, the amounts in this column represent the amounts for non-equity incentive compensation determined by the Committee on January 25, 2016, for which target amounts were established by the Committee on January 26, 2015, as discussed below in the “Grants of Plan-BasedAwardsin 2015” table. For 2015, cash payments were made on February 29,2016. |
| (4) | Except where noted, represents discretionary matching contributions underAimco’s401(k)plan. |
| (5) | Mr.Considine receives compensation pursuant to an employment agreement with Aimco. The base salary under the employment agreement is subject to review and adjustment as may be determined by the Committee from time to time. For 2013, 2014, and 2015, Mr.Considinereceivedhisbasesalaryincash. Mr.ConsidineisalsoeligibleforabonusdeterminedbytheCommittee.The employmentagreementprovides thatMr.Considine’stargetincentive opportunityshallnotbelessthan$3.9million,providedthe applicable achievement targets are met. For 2013 and 2014,Mr.Considine’s target incentive was set at the $3.9 million amount provided for in his employment agreement, and for 2015,Mr.Considine’s target incentive was set at $4.525million. |
| (6) | EquityawardsforMr.Considinein2015includethefollowing:(i)anLTIawardthatwasgrantedin2015basedon2014performance, 50% of which was awarded in time-based restricted stock and 50% of which was awarded in Stock Options, consisting of 43,083 shares of restricted stock, vesting 25% on each anniversary of the grant date and a non-qualified stock option to acquire 238,530 shares; and (ii) 86,163 shares of performance-based restricted stock for the forward looking, three-year performance period from January 1, 2015, through December 31, 2017, with the number of shares that vest, ifany,vesting 50% following the end of the three-year performance period and 50% one year later. The value of the time-based restricted stock award is based solely on the closingpriceofourCommonStockontheNewYorkStockExchange(“NYSE”) onthedateofgrant.Theoptionhasatermoften yearsandwasvaluedatapproximately$6.97perunderlyingshare,basedonacalculationbyathird-partyconsultantusingcertain assumptionsprovidedby AimcoandtheBlack-ScholesOptionPricing Model,whichmodelAimcousestomeasurecompensation costunderFASBASCTopic718.Thevalueoftheperformance-basedrestricted stockawardof$39.72persharewascalculatedby a third-party consultant using a Monte Carlo valuation model. The value of the performance-based award, if earned at maximum and valued at the closing price of our Common Stock on the NYSE on the date of grant, is$6,729,291. |
| (7) | Assetforthintheintroductiontothe“SummaryCompensationTable”aboveandinfootnote6,thetotalcompensationamountforMr.Considineincludes LTIawardsfortwodifferentcompensationyearsduetoproxydisclosurerulesandAimco’stransitionfrom a backwardLTIplan to a forward lookingLTIplan. Thus, the total compensation amount forMr.Considine includes both 2014LTIin the amount of $3,344,945 and 2015LTIin the amount of $3,422,394, the latter of which is entirely at risk. Depending onAimco’srelative returns over the forward looking, three-year performance period ending December 31, 2017,Mr.Considine will earn between 0% to 200% of the 2015LTIaward. |
| (8) | This amount is attributable toLTIin respect of the prior compensationyear.Mr.Beldin’s stock award for 2015 incentive compensation was made in 2016, pursuant to the backward lookingLTIplan that applied toMr.Beldin prior to his promotion to CFO in September 2015. Pursuant to the applicable disclosure rules, such award will be reflected in the “SummaryCompensationTable”and “GrantsofPlan-BasedAwardsin2016”tableinAimco’sproxystatementforthe2017annualmeetingofstockholders. |
| (9) | Stock awards for Ms. Cohn in 2015 include the following: (i) anLTIaward that was granted in 2015 based on 2014 performance, consistingof15,873sharesoftime-basedrestrictedstock,vesting25%oneachanniversaryofthegrantdate;and(ii)an LTIaward granted in 2015 consisting of 3,628 shares of time-based restricted stock, vesting 25% on each anniversary of the grant date; and (iii) 14,512 shares of performance-based restricted stock for the forward looking, three-year performance period from January 1, 2015, through December 31, 2017, with the number of shares that vest, ifany,vesting 50% following the end of the three-year performanceperiodand50%oneyearlater.Thevalueofthetime-basedrestrictedstockawardsisbasedsolelyontheclosingprice |
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| ofourCommonStockontheNYSEonthedateofgrant.Thevalueoftheperformance-basedrestrictedstock awardof$39.72per sharewascalculatedbyathird-partyconsultantusingaMonteCarlovaluationmodel.Thevalueoftheperformance-basedaward, if earned at maximum and valued at the closing price of our Common Stock on the NYSE on the date of grant, is$1,133,387. | |
| (10) | As set forth in the introduction to the “Summary CompensationTable”above and in the footnotes within the column “StockAwards,”the total compensation amount includesLTIawards for two different compensation years due to proxy disclosure rules andAimco’stransitionfromabackwardLTIplantoaforwardlookingLTIplan.Thus,thetotalcompensationamountincludesboth 2014LTIand 2015LTI. |
| (11) | OnJanuary26,2015,Mr.ConsidineawardedMr.Bezzantadiscretionarycashawardintheamountof$150,000forMr.Bezzant’s significantcontributionstoAimco’sportfoliostrategy. |
| (12) | StockawardsforMr.Bezzantin2015includethefollowing:(i)anLTIawardthatwasgrantedin2015basedon2014performance consistingof6,047 sharesoftime-basedrestrictedstock,vesting25%oneachanniversaryofthegrantdate;(ii)anLTIawardgranted in 2015 consisting of 3,628 shares of time-based restricted stock, vesting 25% on each anniversary of the grant date; (iii) 7,256 shares of performance-based restricted stock based on relative TSR performance for the forward looking, three-year performance period from January 1, 2015, through December 31, 2017, with the number of shares that vest, ifany,vesting 50% following the end of the three-year performance period and 50% one year later; and (iv) 7,256 shares of performance-based restricted stock basedontheachievementofacquisitionsanddevelopmentobjectivesfortheforwardlooking,three-yearperformanceperiod from January 1, 2015, through December 31, 2017, with the number of shares that vest, ifany,vesting 50% following the end of the three-year performance period and 50% one year later. The value of the time-based restricted stock awards is based solely on the closing price of our Common Stock on the NYSE on the date of grant. The value of the performance-based restricted stock award based on relative TSR performance of $39.72 per share was calculated by a third-party consultant using a Monte Carlo valuation model. The value of the performance-based restricted stock award based on the achievement of acquisitions and development objectives is based on the probable outcome of the performance conditions calculated in accordance with ASCTopic718, or one-third of the award at maximum (i.e., 4,837 shares) multiplied by the closing price of our Common Stock on the NYSE on the date ofgrant.Thevalueoftheperformance-basedawards, ifearnedatmaximumandvaluedattheclosingpriceofourCommonStock on the NYSE on the date of grant, is$1,133,387. |
| (13) | Ofthisamount,$561,100representsMr.Bezzant’sSTIbonusfor2015,and$142,563representspayoutsin2015pursuanttoprior year long-term cashgrants. |
| (14) | StockawardsforMr.Kimmelin2015includethefollowing:(i)an LTIawardthatwasgrantedin2015basedon2014performance consisting of 8,163 shares of time-based restricted stock, vesting 25% on each anniversary of the grant date; (ii) anLTIaward granted in 2015 consisting of 2,203 shares of time-based restricted stock, vesting 25% on each anniversary of the grant date; and (iii) 8,811 shares of performance-based restricted stock for the forward looking, three-year performance period from January 1, 2015, through December 31, 2017, with the number of shares that vest, ifany,vesting 50% following the end of the three-year performanceperiodand50%oneyearlater.Thevalueofthetime-basedrestrictedstockawardsisbasedsolelyontheclosingprice ofourCommonStockontheNYSEonthedateofgrant.Thevalueoftheperformance-basedrestrictedstockawardof$39.72per sharewascalculatedbyathird-partyconsultantusingaMonteCarlovaluationmodel.Thevalueoftheperformance-basedaward, if earned at maximum and valued at the closing price of our Common Stock on the NYSE on the date of grant, is$688,139. |
| (15) | Mr.Freedman resigned from his employment with Aimco effective October 1,2015. |
| (16) | Stock awards forMr.Freedman in 2015 included the following: (i) anLTIaward that was granted in 2015 based on 2014 performance consisting of 22,675 shares of time-based restricted stock, vesting 25% on each anniversary of the grant date; (ii) anLTIaward granted in 2015 consisting of 4,665 shares of time-based restricted stock, vesting 25% on each anniversary of the grant date; and (iii) 18,658 shares of performance-based restricted stock for the forward looking, three-year performance period from January 1, 2015, through December 31, 2017, with the number of shares that vest, ifany,vesting 50% following the end of the three-year performance period and 50% one year later. The value of the time-based restricted stock awards is based solely on the closing price of our Common Stock on the NYSE on the date of grant. The value of the performance-based restricted stock award of$39.72persharewascalculatedbyathird-partyconsultantusingaMonteCarlovaluationmodel.Thevalueoftheperformance-based award, if earned at maximum and valued at the closing price of our Common Stock on the NYSE on the date of grant, was $1,457,190. Mr. Freedman resigned from his employment with Aimco effective October 1, 2015. In accordance with the terms of the agreements underlying Mr. Freedman’s option and restricted stock awards, all unvested options and shares of restricted stock were forfeited as of October 1, 2015, and outstanding vested options remained exercisable for a period of 90 days following Mr. Freedman’s resignation effective date. |
| (17) | Reflects $1,860 in discretionary matching contributions under Aimco’s 401(k) plan and $30,303 in accrued and unused vacation pay provided toMr.Freedman upon hisseparation. |
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GRANTS OF PLAN-BASED AWARDS IN 2015
The following table provides details regarding plan-based awards granted to the NEOs during the year ended December 31, 2015.
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | All Other Stock Awards: Number of Shares of | All Other Option Awards: Number of Securities Underlying | Exercise or Base Price of Option | Grant Date Fair Value of Stock and Option | |||||||||||||||||||||||||||||||||||||
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Stock or | Options (#)(3) | Awards ($/Sh) | Awards ($)(4) | |||||||||||||||||||||||||||||||
| Terry Considine | 1/26/2015 | 540,000 | 1,200,000 | 2,400,000 | ||||||||||||||||||||||||||||||||||||||
| 2/12/2015 | 43,082 | 86,163 | 172,325 | 3,422,394 | ||||||||||||||||||||||||||||||||||||||
| 2/12/2015 | 43,083 | 1,682,391 | ||||||||||||||||||||||||||||||||||||||||
| 2/12/2015 | 238,530 | 39.05 | 1,662,554 | |||||||||||||||||||||||||||||||||||||||
| Paul Beldin | 1/26/2015 | 59,571 | 239,519 | 394,934 | ||||||||||||||||||||||||||||||||||||||
| 2/12/2015 | 3,368 | 131,520 | ||||||||||||||||||||||||||||||||||||||||
| Lisa R. Cohn | 1/26/2015 | 190,000 | 400,000 | 800,000 | ||||||||||||||||||||||||||||||||||||||
| 2/12/2015 | 7,256 | 14,512 | 29,024 | 576,417 | ||||||||||||||||||||||||||||||||||||||
| 2/12/2015 | 19,501 | 761,514 | ||||||||||||||||||||||||||||||||||||||||
| John Bezzant | 1/26/2015 | 190,000 | 400,000 | 800,000 | ||||||||||||||||||||||||||||||||||||||
| 2/12/2015 | 3,628 | 7,256 | 14,512 | 288,208 | ||||||||||||||||||||||||||||||||||||||
| 2/12/2015 | 3,628 | 7,256 | 14,512 | 188,885 | ||||||||||||||||||||||||||||||||||||||
| 2/12/2015 | 9,675 | 377,808 | ||||||||||||||||||||||||||||||||||||||||
| Keith Kimmel | 1/26/2015 | 118,750 | 250,000 | 500,000 | ||||||||||||||||||||||||||||||||||||||
| 2/12/2015 | 4,406 | 8,811 | 17,622 | 349,973 | ||||||||||||||||||||||||||||||||||||||
| 2/12/2015 | 10,366 | 404,792 | ||||||||||||||||||||||||||||||||||||||||
| Ernest M. Freedman | 1/26/2015 | 237,500 | 500,000 | 1,000,000 | ||||||||||||||||||||||||||||||||||||||
| 2/12/2015 | 9,329 | 18,658 | 37,316 | 741,096 | ||||||||||||||||||||||||||||||||||||||
| 2/12/2015 | 27,340 | 1,067,627 | ||||||||||||||||||||||||||||||||||||||||
| (1) | On January 26, 2015, the Committee made determinations of target total incentive compensation for 2015 based on achievement of Aimco’s eight corporate goals for 2015, and achievement of specific individual objectives.Targettotal incentive compensation amounts were as follows:Mr.Considine — $4.525 million; Ms. Cohn — $1.10 million;Mr.Bezzant — $1.10 million;Mr.Kimmel—$675,000;andMr.Freedman—$1.40million.Theawardsinthiscolumnindicatetheannualcashportionofthesetarget total incentive amounts – at threshold, target and maximum performance levels.Mr.Beldin’s 2015 target incentive compensation of $470,030 includes a proration for the portion of the year he served as Chief Accounting Officer and a proration for the portion oftheyearheservedasCFO.TheequityportionofMr.Beldin’stargettotalincentiveamountwasawardedin2016basedon2015 performance pursuant to the Company’s backward lookingLTIprogram discussed earlier in this proxy; therefore, pursuant to the applicable disclosure rules, such awards will be reflected in this table in Aimco’s proxy statement for the 2017 annual meeting ofstockholders. |
| (2) | The amounts in this column reflect the number of shares of performance restricted stock granted under the forward lookingLTIplan adopted in 2015 that may vest – at threshold, target and maximum performance levels – based on relative TSR (60% of each awardisbasedontheCompany’sTSRrelativetotheNAREITApartmentIndexand40%ofeachawardisbasedontheCompany’s TSR relative to the REIT Index) over a three-year period from January 1, 2015 to December 31, 2017. A vesting portion of each award of performance restricted stock will be determined based on the TSR results, and the restrictions on such vesting portion will lapse as to 50% of the vesting portion on the later of the third anniversary of the grant date and the date the vesting portion is determined (but no later than March 15, 2018) and as to the remaining 50% on the fourth anniversary of the grant date. However, solely with respect toMr.Bezzant, his stock award for 2015 under the forward lookingLTIplan is comprised of two separate awards,thefirstawardofwhichvestsasdescribedaboveandasecondawardofperformance-basedrestrictedstock thatvestsbased |
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| on the achievement of acquisitions and development objectives.Mr.Bezzant’s second award in this column reflects the number of shares of performance restricted stock awards that may vest – at threshold, target and maximum performance levels – based on achievement of such acquisitions and development objectives, over the three-year period from January 1, 2015 to December 31, 2017.Avestingportionofeachawardofperformancerestrictedstockwillbedeterminedbasedontheperformanceresultsineach of the three performance years, and the restrictions on such vesting portion will lapse as to 50% of the vesting portion on the later of the third anniversary of the grant date and the date the vesting portion is determined (but no later than March 15, 2018) and as to the remaining 50% on the fourth anniversary of the grantdate. | |
| (3) | On February 12, 2015, in connection with its review and determination of year-end 2014 performance goals, the Committee approved certain awards forMr.Considine and, in conjunction withMr.Considine, the Committee approved certain awards for Messrs. Beldin, Bezzant, Kimmel and Freedman and Ms. Cohn. Specifically, the Committee granted equity awards as follows:Mr.Considine—43,083sharesofrestrictedstockandanon-qualifiedstockoptiontoacquire238,530shares;Mr.Beldin—3,368 shares of restricted stock; Ms. Cohn — 19,501 shares of restricted stock;Mr.Bezzant —9,675 shares of restricted stock;Mr.Kimmel—10,366sharesofrestrictedstock;andMr.Freedman—27,340sharesofrestrictedstock(allofwhichweresubsequently forfeited uponhisresignation).Alloftheforegoingequityawardsvestratablyoverfouryearsbeginningwiththefirstanniversary of the grant date. The options have a term of ten years and have an exercise price per share of $39.05, which is equal to the fair market value of Aimco’s Common Stock on February 12, 2015 (per the 2007 Plan, “fair market value” is defined as the closing price ofAimco’sCommon Stock on the grant date). The options were valued at approximately $6.97 per underlying share, based on a calculation by a third party consultant using certain assumptions provided by Aimco and the Black-Scholes Option Pricing Model, which model Aimco uses to measure compensation cost underFASBASCTopic718. The number of shares of restricted stockwasdetermined basedontheaverageoftheclosingtradingpricesofAimco’sCommonStockontheNYSEonthefivetrading days up to and including the grant date, or $38.59. Holders of restricted stock are entitled to receive any dividends declared and paid on such shares commencing on the date ofgrant. |
| (4) | ThiscolumnrepresentstheaggregategrantdatefairvalueofstockawardsintheyeargrantedcomputedinaccordancewithFASBASCTopic718. For additional information on the valuation assumptions with respect to the grants reflected in this column, refer totheShare-BasedCompensationfootnotetoAimco’sconsolidatedfinancial statementsinitsAnnualReportonForm10-Kforthe year ended December 31,2015. |
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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2015
ThefollowingtableshowsoutstandingstockoptionawardsclassifiedasexercisableandunexercisableasofDecember31,2015, for the NEOs, other than those awards that have been transferred for value. The table also shows unvested and unearned stock awards assumingamarketvalueof$40.03ashare(theclosingmarketpriceoftheCompany’sCommonStockontheNewYorkStockExchange on December 31,2015).
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
| Name | Number of | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) (1) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) (2) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||||||||||||
| Terry Considine | 238,530(3) | 39.05 | 2/12/2025 | 43,082(4) | 1,724,572 | |||||||||||||||||||||||||||||
| 202,429(5) | 0(5) | 8.92 | 2/3/2019 | 43,083(6) | 1,724,612 | |||||||||||||||||||||||||||||
| 194,451(7) | 0(7) | 28.33 | 1/29/2018 | 66,019(8) | 2,642,741 | |||||||||||||||||||||||||||||
| 368,565(9) | 0(9) | 28.33 | 1/29/2018 | 59,740 | (10) | 2,391,392 | ||||||||||||||||||||||||||||
| 215,546(11) | 0(11) | 42.43 | 2/5/2017 | 29,225 | (12) | 1,169,877 | ||||||||||||||||||||||||||||
| 130,634(13) | 0(13) | 42.43 | 2/5/2017 | |||||||||||||||||||||||||||||||
| Paul Beldin | 3,644(14) | 0(14) | 8.92 | 2/3/2019 | 3,368 | (15) | 134,821 | |||||||||||||||||||||||||||
| 2,506 | (16) | 100,315 | ||||||||||||||||||||||||||||||||
| 2,201 | (17) | 88,106 | ||||||||||||||||||||||||||||||||
| 1,077 | (18) | 43,112 | ||||||||||||||||||||||||||||||||
| Lisa R. Cohn | 8,102(19) | 0(19) | 28.33 | 1/29/2018 | 7,256 | (20) | 290,458 | |||||||||||||||||||||||||||
| 3,628 | (21) | 145,229 | ||||||||||||||||||||||||||||||||
| 15,873 | (22) | 635,396 | ||||||||||||||||||||||||||||||||
| 12,162 | (23) | 486,845 | ||||||||||||||||||||||||||||||||
| 11,005 | (24) | 440,530 | ||||||||||||||||||||||||||||||||
| 4,615 | (25) | 184,738 | ||||||||||||||||||||||||||||||||
| John Bezzant | 4,180(26) | 0(26) | 28.33 | 1/29/2018 | 3,628 | (27) | 145,229 | |||||||||||||||||||||||||||
| 3,628 | (28) | 145,229 | ||||||||||||||||||||||||||||||||
| 3,628 | (21) | 145,229 | ||||||||||||||||||||||||||||||||
| 6,047 | (29) | 242,061 | ||||||||||||||||||||||||||||||||
| 4,634 | (30) | 185,499 | ||||||||||||||||||||||||||||||||
| 3,594 | (31) | 143,868 | ||||||||||||||||||||||||||||||||
| 4,193 | (32) | 167,846 | ||||||||||||||||||||||||||||||||
| 1,026 | (33) | 41,071 | ||||||||||||||||||||||||||||||||
| Keith Kimmel | — | — | — | — | — | 4,406 | (34) | 176,372 | ||||||||||||||||||||||||||
| 2,203 | (35) | 88,186 | ||||||||||||||||||||||||||||||||
| 8,163 | (36) | 326,765 | ||||||||||||||||||||||||||||||||
| 7,413 | (37) | 296,742 | ||||||||||||||||||||||||||||||||
| 4,055 | (38) | 162,322 | ||||||||||||||||||||||||||||||||
| 3,669 | (39) | 146,870 | ||||||||||||||||||||||||||||||||
| 1,539 | (40) | 61,606 | ||||||||||||||||||||||||||||||||
| Ernest M. Freedman (41) | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
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| (1) | Pursuanttotheanti-dilutionprovisionsoftheplanpursuanttowhichtheoptionsweregranted,thenumberofsharessubjecttothe thenoutstandingoptionsandtheexercisepriceofsuchoptionswereadjusted,whereapplicable,toreflectthespecialdividendspaid inJanuary2008,August2008,December2008,andJanuary2009.Thefootnotestoeachoptionawardprovidetheoriginalnumber of shares subject to the option and the original exercise price on the grantdate. |
| (2) | Amounts reflect the number of shares of restricted stock that have not vested multiplied by the market value of $40.03 per share, which was the closing market price ofAimco’sCommon Stock on December 31,2015. |
| (3) | This option was granted for the purchase of 238,530 shares at an exercise price of $39.05 per share and vests 25% on each anniversary of the grant date of February 12, 2015. |
| (4) | This restricted stock award was granted February 12, 2015, for 86,163 shares at target, and vests 50% following the end of the three-yearforwardlookingperformanceperiod,subjecttorelativeTSRmetricssetforthearlierinthisproxy,and50%onthefourth anniversary of the grant date. The amount shown in the table is the award atthreshold. |
| (5) | This option was granted for the purchase of 809,717 shares at an exercise price of $8.92 per share and vested 25% on each anniversaryofthegrantdateofFebruary3,2009;theoptionwasexercisedinpartfor202,430sharesonMay6,2010,for202,429 shares on February 8, 2011, and for 202,429 shares on February 28,2012. |
| (6) | This restricted stock award was granted February 12, 2015, for a total of 43,083 shares and vests 25% on each anniversary of the grant date. |
| (7) | This option was granted for the purchase of 138,249 shares at an exercise price of $39.85 per share and vested 100% on the first anniversary of the grant date of January 29,2008. |
| (8) | This restricted stock award was granted January 27, 2014, for a total of 88,025 shares and vests 25% on each anniversary of the grant date. |
| (9) | This option was granted for the purchase of 599,078 shares at an exercise price of $39.85 per share and vested 25% on each anniversary of the grant date of January 29, 2008; the option was exercised in part for 474,055 shares onAugust 13, 2015. |
| (10) | This restricted stock award was granted January 28, 2013, for a total of 119,479 shares and vests 25% on each anniversary of the grant date. |
| (11) | This option was granted for the purchase of 146,018 shares at an exercise price of $62.63 per share and vested 25% on each anniversary of the grant date of February 5, 2007. |
| (12) | ThisrestrictedstockawardwasgrantedJanuary30,2012,foratotalof116,900sharesandvested25%oneachanniversaryofthe grant date. |
| (13) | This option was granted for the purchase of 88,496 shares at an exercise price of $62.63 per share and vested 20% on each anniversary of the grant date of February 5, 2007. |
| (14) | Thisoptionwasgrantedforthepurchaseof3,644sharesatanexercisepriceof$8.92pershareandvested25%oneachanniversary of the grant date of February 3,2009. |
| (15) | This restricted stock award was granted February 12, 2015, for a total of 3,368 shares and vests 25% on each anniversary of the grant date. |
| (16) | ThisrestrictedstockawardwasgrantedJanuary27,2014,foratotalof3,341sharesandvests25%oneachanniversaryofthegrant date. |
| (17) | This restricted stock award was granted on January 28, 2013, for a total of 4,402 shares and vests 25% on each anniversary of the grant date. |
| (18) | This restricted stock award was granted January 30, 2012, for a total of 4,307 shares and vested 25% on each anniversary of the grant date. |
| (19) | Thisoptionwasgrantedforthepurchaseof5,760sharesatanexercisepriceof$39.85pershareandvested25%oneachanniversary of the grant date of January 29,2008. |
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| (20) | This restricted stock award was granted February 12, 2015, for 14,512 shares at target, and vests 50% following the end of the three-yearforwardlookingperformanceperiod,subjecttorelativeTSRmetricssetforthearlierinthisproxy,and50%onthefourth anniversary of the grant date. The amount shown is the award at threshold. |
| (21) | This restricted stock award was granted February 12, 2015, for a total of 3,628 shares and vests 25% on each anniversary of the grant date. |
| (22) | This restricted stock award was granted February 12, 2015, for a total of 15,873 shares and vests 25% on each anniversary of the grant date. |
| (23) | This restricted stock award was granted January 27, 2014, for a total of 16,216 shares and vests 25% on each anniversary of the grant date. |
| (24) | ThisrestrictedstockawardwasgrantedonJanuary28,2013,foratotalof22,010sharesandvests25%oneachanniversaryofthe grant date. |
| (25) | This restricted stock award was granted January 30, 2012, for a total of 18,458 shares and vested 25% on each anniversary of the grant date. |
| (26) | Thisoptionwasgrantedforthepurchaseof2,972sharesatanexercisepriceof$39.85pershareandvested25%oneachanniversary of the grant date of January 29,2008. |
| (27) | ThisrestrictedstockawardwasgrantedFebruary12,2015,for7,256sharesattarget.Mr.Bezzant’s2015LTIhastwocomponents. Thisawardrepresentsfiftypercentoftheperformance-basedportionofMr.Bezzant’s2015LTI,or40%oftheoverallaward,that will be determined according to the relative TSR metrics set forth earlier in thisproxy.This award vests 50% following the endof thethree-yearforwardlookingperformanceperiod,and50%onthefourthanniversaryofthegrantdate.Theamountshownisthe award atthreshold. |
| (28) | ThisrestrictedstockawardwasgrantedFebruary12,2015,for7,256sharesattarget.Mr.Bezzant’s2015LTIhastwocomponents. Thisawardrepresentsfiftypercentoftheperformance-basedportionofMr.Bezzant’s2015LTI,or40%oftheoverallaward,that will be determined according to acquisition-related objectives set forth earlier in thisproxy.This award vests 50% following the endofthethree-yearforwardlookingperformanceperiod,and50%onthefourthanniversaryofthegrantdate.Theamountshown is the award atthreshold. |
| (29) | This restricted stock award was granted February 12, 2015, for a total of 6,047 shares and vests 25% on each anniversary of the grant date. |
| (30) | This restricted stock award was granted January 27, 2014, for a total of 6,178 shares and vests 25% on each anniversary of the grant date. |
| (31) | This restricted stock award was granted January 28, 2013, for a total of 8,385 shares and vests 25% on each anniversary of the grant date. |
| (32) | This restricted stock award was granted January 28, 2013, for a total of 7,187 shares and vests 25% on each anniversary of the grant date. |
| (33) | This restricted stock award was granted January 30, 2012, for a total of 4,102 shares and vested 25% on each anniversary of the grant date. |
| (34) | ThisrestrictedstockawardwasgrantedFebruary12,2015,for8,811sharesattarget,andvests50%followingtheendofthethree- year forward looking performance period, subject to relative TSR metrics set forth earlier in thisproxy,and 50% on the fourth anniversary of the grant date. The amount shown is the award atthreshold. |
| (35) | This restricted stock award was granted February 12, 2015, for a total of 2,203 shares and vests 25% on each anniversary of the grant date. |
| (36) | This restricted stock award was granted February 12, 2015, for a total of 8,163 shares and vests 25% on each anniversary of the grant date. |
| (37) | This restricted stock award was granted January 27, 2014, for a total of 5,406 shares and vests 25% on each anniversary of the grant date. |
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| (38) | ThisrestrictedstockawardwasgrantedJanuary27,2014,foratotalof7,413sharesandvests50%oneachofAugust1,2017and August 1,2018. |
| (39) | This restricted stock award was granted January 28, 2013, for a total of 7,337 shares and vests 25% on each anniversary of the grant date. |
| (40) | This restricted stock award was granted January 30, 2012, for a total of 6,153 shares and vested 25% on each anniversary of the grant date. |
| (41) | Mr.FreedmanresignedfromhisemploymentwithAimcoeffectiveOctober1,2015.Inaccordancewiththetermsoftheagreements underlyingMr.Freedman’s option and restricted stock awards, all unvested options and shares of restricted stock were forfeited as of October 1, 2015, and outstanding vested options remained exercisable for a period of 90 days followingMr.Freedman’s resignation effective date.Mr.Freedman exercised 2,269 options during this 90-day period. Upon his resignation,Mr.Freedman forfeited 97,650 unvested shares of restrictedstock. |
OPTION EXERCISES AND STOCK VESTED IN 2015
The following table sets forth certain information regarding options and stock awards exercised and vested, respectively, during the year ended December 31, 2015, for the persons named in the Summary Compensation Table above.
| OptionAwards | StockAwards | |||||||||||||||
| Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) (1) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting ($) (2) | ||||||||||||
| Terry Considine | 474,055 | 5,347,340 | 104,058 | 4,205,664 | ||||||||||||
| Paul Beldin | — | N/A | 4,218 | 170,293 | ||||||||||||
| Lisa R. Cohn | — | N/A | 43,360 | 1,719,812 | ||||||||||||
| John Bezzant | — | N/A | 11,504 | 458,142 | ||||||||||||
| Keith Kimmel | — | N/A | 5,362 | 217,285 | ||||||||||||
| Ernest M. Freedman | 2,269 | 25,526 | 45,097 | 1,791,168 | ||||||||||||
| (1) | Amounts reflect the difference between the exercise price of the option and the market price at the time ofexercise. |
| (2) | Amounts reflect the market price of the stock on the day the shares of restricted stockvested. |
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
In the table and discussion that follows, payments and other benefits payable upon early termination and change in control situationsaresetoutasiftheconditionsforpaymentshadoccurredand/ortheterminationstookplaceonDecember31,2015.Insetting out such payments and benefits, amounts that had already been earned as of the termination date are not shown. Also, benefits that are availabletoallfull-timeregularemployeeswhentheiremploymentterminatesarenotshown.Theamountssetforthbelowareestimates of the amounts which could be paid out to the NEOs upon their termination. The actual amounts to be paid out can only be determined atthetimeofsuchNEOs’separationfromAimco.
Mr. Considine’s 2008 Employment Agreement
Under his 2008 employment agreement,Mr.Considine is not entitled to any additional or special payments upon the occurrence of a change in control.Mr.Considine’s “walk right” under the 1994 employment agreement (that is, his right to severance payments upon his terminating employment with the Company within two years following a change in control) was eliminated. The definition of “change in control” was also narrowed to increase the required percentage of change in ownership and to require the occurrence of the applicable change in control event, rather than just stockholder approval of such event.
IntheeventMr.Considine’semploymentisterminatedwithoutcausebyAimco,byMr.Considineforgoodreason,orforreason of disability,Mr.Considine will be entitled to: a lump sum cash payment equal to two times the sum of his base salary at the time of terminationand$1.65million,subjecttocertainlimiteddeductions;theamountofanySTIearnedbutunpaidforthefiscalyearpreceding
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the termination date; a pro-rata portion of a $1.65 million STI amount for the fiscal year in which the termination occurs; continued medical coverage atAimco’sexpense until the earlier of (a) eighteen months following the date of termination, or (b)Mr.Considine becoming eligible for coverage under the medical plans of a subsequent employer, provided that in the eventMr.Considine’s medical coverageterminatespursuantto(a),hewillbeentitledtoalumpsumpaymentequaltosixtimesthemonthlyCOBRApremiumthenin effect; and immediate and full acceleration of any unvested stock awards and outstanding unvested stock options, with all outstanding stock options (along with all options already vested) remaining exercisable until the earliest to occur of the fifth anniversary of thedate of termination or the expiration of the applicable optionterm.
IntheeventofMr.Considine’sdisability,thelumpsumcashpaymentdescribedaboveshallbeoffsetbyanylong-termdisability benefits received under Aimco’s long-term disability insuranceplan.
In the event ofMr.Considine’s death, Aimco will pay or provide toMr.Considine’s estate the amount of any STI earned but unpaid for the prior fiscal year, and all equity-based and other long-term incentive awards granted toMr.Considine will become immediatelyfullyvestedandpayable,asapplicable,andalloutstandingstockoptionawardswillremainexercisableuntiltheearliestto occur of the fifth anniversary of the date of termination or the expiration of the applicable optionterm.
Undertheemploymentagreement,intheeventpaymentsto Mr.ConsidinearesubjecttotheexcisetaximposedbySection4999 of the Code,Mr.Considine is entitled to receive a limited gross-up payment, subject to a maximum of $5 million. If covered payments are less than 10% over the permitted limit,Mr.Considine is required to reduce his payments to avoid triggering a gross-uppayment.
Double Trigger Vesting Upon Change in Control
Beginning with the equity grants made in 2015 for compensation year 2014, the restricted stock and stock option agreements pursuanttowhichrestrictedstockandstockoptionawardshavebeenmadetoMessrs.Considine,Beldin,BezzantandKimmelandMs. Cohnprovidethatuponachangeincontrol,alloutstandingsharesofrestrictedstockshallnotbecomeimmediatelyandfullyvestedand allunvestedstockoptionsshallnotbecomeimmediatelyandfullyvestedandremainexercisable(alongwithalloptionsalreadyvested) fortheremainderofthetermoftheoptionunlessthereisalsoasubsequentterminationofemploymentof theexecutiveofficer.Aimco’sLTIplan provides that performance shares will vest based on the higher of actual or target TSR performance through the truncated performance period ending on the date of the change incontrol.
Accelerated Vesting upon Termination of Employment Due to Death or Disability
Assetforthabove,intheeventMr.Considine’semploymentisterminatedforreasonofdisability,Mr.Considinewillbeentitled to immediate and full acceleration of any unvested stock awards and outstanding unvested stock options, with all outstanding stock options (along with all options already vested) remaining exercisable until the earliest to occur of the fifth anniversary of the date of terminationortheexpirationoftheapplicableoptionterm.Intheeventof Mr.Considine’sdeath,allequity-basedandotherLTIawards granted toMr.Considine will become immediately fully vested and payable, as applicable, and all outstanding stock option awards will remain exercisable until the earliest to occur of the fifth anniversary of the date of termination or the expiration of the applicable option term.
The restricted stock and stock option agreements pursuant to which restricted stock and stock option awards have been made to Messrs. Beldin, Bezzant and Kimmel and Ms. Cohn provide that upon termination of employment due to death or disability, all outstandingsharesofrestrictedstockbecomeimmediatelyandfullyvestedandallunvestedstockoptionsbecomeimmediatelyandfully vested and remain exercisable (along with all options already vested) for the remainder of the term of theoption.
Notwithstanding the foregoing, Aimco’s LTI plan provides that performance shares will vest based on the higher of actual or target TSR performance through the truncated performance period ending on the date of death or disability.
Non-Competition and Non-Solicitation Agreements
Effective in January 2002 forMr.Considine, and in connection with their employment and/or promotions by Aimco for Messrs. Beldin, Bezzant and Kimmel and Ms. Cohn, Aimco entered into certain non-competition and non-solicitation agreements with eachexecutive.Mr.Considine’s2002non-competitionandnon-solicitationagreementwasreplacedbyhisDecember2008employment agreement. Pursuant to the agreements, each of these NEOs agreed that during the term of his or her employment with the Company and for a period of two years following the termination of his or her employment, except in circumstances where there was a change in controloftheCompany,heorshecouldnot(i)beemployedbyacompetitoroftheCompanynamedonascheduletotheagreement,
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(ii) solicit other employees to leave the Company’s employment, or (iii) solicit customers of Aimco to terminate their relationship with the Company. The agreements further required that the NEOs protect Aimco’s trade secrets and confidential information. For Messrs. Beldin, Bezzant and Kimmel and Ms. Cohn, the agreements provide that in order to enforce the above-noted non-competition condition following the executive’s termination of employment by the Company without cause, each such executive will receive, for a period not to extend beyond the earlier of 24 months following such termination or the date of acceptance of employment with a non-competitor, (i) severance pay in an amount, ifany,to be determined by the Company in its sole discretion and (ii) a monthly payment equal to two-thirds (2/3) of such executive’s monthly base salary at the time of termination. For purposes of these agreements, “cause” isdefinedtomean,amongotherthings,theexecutive’s(i)breachoftheagreement,(ii)failuretoperformrequiredemploymentservices, (iii) misappropriationofCompanyfundsorproperty,(iv)indictment,conviction,pleaofguiltyorpleaofnocontesttoacrimeinvolving fraud or moral turpitude, or (v) negligence, fraud, breach of fiduciaryduty,misconduct or violation oflaw.
The following table summarizes the potential payments under various scenarios if they had occurred on December 31, 2015.
| Value of Accelerated Stock and Stock Options ($)(1) | Severance ($) | |||||||||||||||||||||||||||||||||||||||
| Name | Change in Control | Death or Disability | Termination Without Cause | Termination With Good Reason | Change in Control | Death | Disability | Termination Without Cause | Termination For Good Reason | Non-Compete Payments ($)(2) | ||||||||||||||||||||||||||||||
| Terry Considine | 11,611,486 | 11,611,486 | 11,611,486 | 11,611,486 | — | — | 6,171,280(3)(4) | 6,171,280 | (4) | 6,171,280 | (4) | — | ||||||||||||||||||||||||||||
| Paul Beldin | 366,355 | 366,355 | — | — | — | — | — | — | — | 466,667 | ||||||||||||||||||||||||||||||
| Lisa R. Cohn | 2,473,653 | 2,473,653 | — | — | — | — | — | — | — | 533,333 | ||||||||||||||||||||||||||||||
| John Bezzant | 1,506,489 | 1,506,489 | — | — | — | — | — | — | — | 533,333 | ||||||||||||||||||||||||||||||
| Keith Kimmel | 1,435,195 | 1,435,195 | — | — | — | — | — | — | — | 433,333 | ||||||||||||||||||||||||||||||
| (1) | Amountsreflect valueofaccelerated stockandoptionsusingtheclosingmarketpriceonDecember31,2015,of $40.03pershare. |
| (2) | Amountsassume theagreementswereenforcedbytheCompanyandthepaymentsextendedfor24monthsfollowingtheexecutive’s termination of employment by the Company withoutcause. |
| (3) | Amount does not reflect the offset for long-term disability benefit payments in the case of a qualifying disability under Aimco’s long-term disability insuranceplan. |
| (4) | Amount consists of a lump sum cash payment equal to (a) two times the sum of his base salary and $1.65 million, (b) $1.65 million STI for 2015, and (c) 24 months of medical coverage reimbursement at an estimated amount of $21,280. |
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
Information on equity compensation plans as of the end of the 2015 fiscal year under which equity securities of the Company are authorized for issuance is set forth in the following table.
| Plan Category | Number of Securities To Be Issued upon Exercise of Outstanding Options Warrants and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Subject to Outstanding Unexercised Grants) | |||||||||
| Equity compensation plans approved by security holders | 1,155,263 | $29.16 | 1,748,385 | |||||||||
| Equity compensation plans not approved by security holders | — | — | — | |||||||||
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Policies and Procedures for Review, Approval or Ratification of Related Person Transactions
Aimco recognizes that related person transactions can present potential or actual conflicts of interest and create the appearance thatAimco’sdecisionsarebasedonconsiderationsotherthanthebestinterestsofAimcoanditsstockholders.Accordingly, asageneral matter, it isAimco’spreference to avoid related person transactions. Nevertheless, Aimco recognizes that there are situations where related persontransactionsmaybein,ormaynotbeinconsistentwith,thebestinterestsofAimcoanditsstockholders.TheNominating and CorporateGovernanceCommittee,pursuanttoawrittenpolicyapprovedbytheBoard,hasoversightforrelatedpersontransactions. The NominatingandCorporateGovernanceCommitteewillreviewtransactions,arrangements orrelationshipsinwhich(1)theaggregate amountinvolvedwill ormaybeexpectedtoexceed$100,000inanycalendaryear,(2)Aimco(oranyAimcoentity)isaparticipant,and (3) any related party has or will have a direct or indirect interest (other than an interest arising solely as a result of being a director of anothercorporationororganizationthatisapartytothetransactionoralessthan10percentbeneficialownerofanotherentitythatisa partytothetransaction).TheNominatingandCorporateGovernanceCommitteehasalsogivenitsstandingapprovalforcertaintypesof related person transactions such as certain employment arrangements, director compensation, transactions with another entity in which a related person’s interest is only by virtue of a non-executive employment relationship or limited equity position, and transactions in which all stockholders receive pro rata benefits. Since the beginning of 2015, there were no related person transactions that required review under thepolicy.
Section16(a)BeneficialOwnershipReportingCompliance.Section16(a)oftheSecuritiesExchangeActof1934,asamended, requires Aimco’s executive officers and directors, and persons who own more than ten percent of a registered class of Aimco’s equity securities, to file reports (Forms 3, 4 and 5) of stock ownership and changes in ownership with the SEC and the NewYorkStock Exchange. Executive officers, directors and beneficial owners of more than ten percent of Aimco’s registered equity securities are required by SEC regulations to furnish Aimco with copies of all such forms that theyfile.
Based solely onAimco’sreview of the copies of Forms 3, 4 and 5 and the amendments thereto received by it for the year ended December31,2015,orwrittenrepresentationsfromcertainreportingpersonsthatnoForms5wererequiredtobefiledbythosepersons, Aimco believes that during the period ended December 31, 2015, all filing requirements were complied with by its executive officers anddirectors.
Stockholders’ Proposals.Proposals of stockholders intended to be presented atAimco’sAnnual Meeting of Stockholders to be held in 2017 must be received by Aimco, marked to the attention of the CorporateSecretary,no later than November11,2016, to be included inAimco’sproxy statement and form of proxy for that meeting. Proposals must comply with the requirements as to form and substance established by the SEC for proposals in order to be included in the proxy statement. Nominations for directors pursuant to “proxyaccess”providedforintheCompany’sbylawsmustadheretothetermsofthebylawsandwillbeconsidereduntimelyifreceived bytheCompanybeforeOctober10,2016,orafterNovember11,2016.ProposalsofstockholderssubmittedtoAimcoforconsideration atAimco’sannual meeting of stockholders to be held in 2017 outside the processes of Rule 14a-8 (i.e., the procedures for placing a stockholder’sproposalinAimco’sproxymaterials)willbeconsidereduntimelyifreceivedbytheCompanybeforeDecember27,2016, or after January 27,2017.
Other Business.Aimco knows of no other business that will come before the Meeting for action. As to any other business that comes before the Meeting, the persons designated as proxies will have discretionary authority to act in their best judgment.
Available Information.Aimco files annual, quarterly and current reports, proxy statements and other information with theSEC.Youmay read and copy any reports, statements or other information that the Company files at theSEC’spublic reference rooms in Washington, D.C., NewYork,NewYorkand Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the publicreferencerooms.TheCompany’spublicfilingsarealsoavailabletothepublicfromcommercialdocumentretrievalservicesand on the internet site maintained by the SEC at “http://www.sec.gov.” Reports, proxy statements and other information concerning the Company also may be inspected at the offices of the NewYorkStock Exchange, 20 Broad Street, NewYork,NewYork10005.
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TheSECallowsAimcoto“incorporatebyreference”informationintothisProxyStatement,whichmeansthattheCompanycan discloseimportantinformationtoyoubyreferringyoutoanotherdocumentfiledseparatelywiththeSEC.Theinformationincorporated by reference is deemed to be part of this Proxy Statement, except for any information superseded by information contained directly in the Proxy Statement. This Proxy Statement incorporates by reference the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (Commission file No. 1-13232). This document contains important information about the Company and its financialcondition.
AimcoincorporatesbyreferenceadditionaldocumentsthatitmayfilewiththeSECbetweenthedateofthisProxyStatementand the date of the Meeting. These include periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and CurrentReportsonForm8-K,aswellasproxystatements.Aimcohasmailedallinformationcontainedorincorporatedbyreferencein this Proxy Statement tostockholders.
If you are a stockholder, the Company may have sent you some of the documents incorporated by reference, but you can obtain any of them through the Company or the SEC or theSEC’sinternet site described above. Documents incorporated by reference are availablefromtheCompanywithoutcharge,excludingallexhibitsunlessspecificallyincorporatedbyreferenceasexhibitsintheProxy Statement. Stockholders may obtain documents incorporated by reference in this Proxy Statement by requesting them in writing from the Company at the followingaddress:
Corporate Secretary
Apartment Investment and Management Company
4582 South Ulster Street, Suite 1100
Denver, Colorado 80237
If you would like to request documents from the Company, please do so by April 12, 2016, to receive them before the Meeting. If you request any incorporated documents, they will be mailed to you by first-class mail, or other equally prompt means, within one business day of receipt of your request.
YoushouldrelyonlyontheinformationcontainedorincorporatedbyreferenceinthisProxyStatementtovoteyoursharesatthe Meeting.TheCompanyhasnotauthorizedanyonetoprovideyouwithinformationthatisdifferentfromwhatiscontainedinthisProxy Statement.ThisProxyStatementisdatedMarch7,2016.YoushouldnotassumethattheinformationcontainedintheProxyStatement is accurate as of any date other than thatdate.
| THE BOARD OF DIRECTORS | ||
| March 7, 2016 | ||
| Denver, Colorado |
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| IMPORTANT ANNUAL MEETING INFORMATION |
| Electronic Voting Instructions | |
| Available 24 hours a day, 7 days a week! | |
| Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy. | |
| VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. | |
| Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on April 26, 2016. |
| Vote by Internet | |
| • Go towww.envisionreports.com/aiv | |
| • Or scan the QR code with your smartphone | |
| • Follow the steps outlined on the secure website |
| Vote by telephone | ||
| • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone | ||
| • Follow the instructions provided by the recorded message | ||
| Using ablack inkpen, mark your votes with anXas shown in this example. Please do not write outside the designated areas. | x |
| Annual Meeting Proxy Card |  |
▼ IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼
| A | Proposals — The Board of Directors recommends a voteFOR all the nominees listed in Proposal 1 andFOR Proposals 2 and 3. |
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| 1. Election of Directors: | For | Against | Abstain | For | Against | Abstain | For | Against | Abstain | |||||||||||
| 01 - James N. Bailey | o | o | o | 02 - Terry Considine | o | o | o | 03 - Thomas L. Keltner | o | o | o | |||||||||
| 04 - J. Landis Martin | o | o | o | 05 - Robert A. Miller | o | o | o | 06 - Kathleen M. Nelson | o | o | o | |||||||||
| 07 - Michael A. Stein | o | o | o | 08 - Nina A. Tran | o | o | o | |||||||||||||
| For | Against | Abstain | For | Against | Abstain | |||||||||||||||
| 2. Ratification of the selection of Ernst & Young LLP to serve as the independent registered public accounting firm for the year ending December 31, 2016. | o | o | o | 3. Advisory vote on executive compensation. | o | o | o | |||||||||||||
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B | Non-Voting Items |
Change of Address — Please print your new address below. | |
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Comments — Please print your comments below. | |
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C | Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. | |
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Date (mm/dd/yyyy) — Please print date below. |
| Signature 1 — Please keep signature within the box. |
| Signature 2 — Please keep signature within the box. |
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q IF YOU HAVE NOT VOTED VIA THE INTERNETOR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q |
| Proxy — Apartment Investment and Management Company |
PROXY FOR COMMON STOCK
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS — APRIL 26, 2016
The undersigned hereby appoints Terry Considine, Paul L. Beldin and Lisa R. Cohn and each of them the undersigned’s true and lawful attorneys and proxies (with full power of substitution in each) to vote all Common Stock of Apartment Investment and Management Company (“Aimco”), standing in the undersigned’s name, at the Annual Meeting of Stockholders of Aimco to be held at Aimco’s Corporate Office, 4582 S. Ulster Street, Suite 1100, Denver, CO 80237, on Tuesday, April 26, 2016, at 8:30 a.m., and any adjournment or postponement thereof (the “Stockholders’ Meeting”), upon those matters as described in the Proxy Statement for the Stockholders’ Meeting. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Stockholders’ Meeting (including any adjournment or postponement thereof).
IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED “FOR” EACH OF THE EIGHT DIRECTOR NOMINEES IN PROPOSAL 1 AND “FOR” PROPOSALS 2 AND 3.
PLEASE REFER TO THE REVERSE SIDE FOR TELEPHONE AND INTERNET VOTING INSTRUCTIONS.
(Items to be voted appear on reverse side).