-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WE0Z9mdXKbB2/BZmb2i/a8EGkI6Q9EdZOsLQhjLn4D3moLzn5FPY0o0TMsmksV4O orBKWTqRucoP4rbpLiyOfg== 0000950134-00-004724.txt : 20000517 0000950134-00-004724.hdr.sgml : 20000517 ACCESSION NUMBER: 0000950134-00-004724 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APARTMENT INVESTMENT & MANAGEMENT CO CENTRAL INDEX KEY: 0000922864 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 841259577 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13232 FILM NUMBER: 636740 BUSINESS ADDRESS: STREET 1: COLORADO CENTER TOWER TWO STREET 2: 2000 S COLORADO BLVD STE 2-1000 CITY: DENVER STATE: CO ZIP: 80222-4348 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: COLORADO CENTER TOWER TWO STREET 2: 2000 S COLORADO BLVD STE 2-1000 CITY: DENVER STATE: CO ZIP: 80222 10-Q 1 FORM 10-Q FOR QUARTER ENDED MARCH 31, 2000 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO --------------------- COMMISSION FILE NUMBER 1-13232 --------------------- APARTMENT INVESTMENT AND MANAGEMENT COMPANY (Exact name of registrant as specified in its charter) MARYLAND 84-1259577 (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification No.) 2000 SOUTH COLORADO BOULEVARD TOWER TWO, SUITE 2-1000 DENVER, COLORADO 80222-4348 (Address of principal executive offices) (Zip Code)
(303) 757-8101 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name, former address, and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] --------------------- The number of shares of Class A Common Stock outstanding as of April 30, 2000: 67,163,247 ================================================================================ 2 APARTMENT INVESTMENT AND MANAGEMENT COMPANY FORM 10-Q INDEX
PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of March 31, 2000 (unaudited) and December 31, 1999..................................... 3 Consolidated Statements of Income for the Three Months Ended March 31, 2000 and 1999 (unaudited)....................... 4 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and 1999 (unaudited)................. 5 Notes to Consolidated Financial Statements (unaudited)...... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 18 Item 3. Quantitative and Qualitative Disclosures about Market Risk.... 24 PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds..................... 24 Item 6. Exhibits and Reports on Form 8-K.............................. 24 Signatures.................................................. 26
2 3 APARTMENT INVESTMENT AND MANAGEMENT COMPANY CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
MARCH 31, DECEMBER 31, 2000 1999 ----------- ------------ (UNAUDITED) ASSETS Real estate, net of accumulated depreciation of $488,480 and $416,497.................................................. $4,507,406 $4,092,038 Property held for sale...................................... 4,376 4,162 Investments in unconsolidated real estate partnerships...... 813,627 891,449 Investments in unconsolidated subsidiaries.................. 49,247 44,921 Notes receivable from unconsolidated real estate partnerships.............................................. 119,698 142,828 Notes receivable from unconsolidated subsidiaries........... 89,633 88,754 Cash and cash equivalents................................... 136,890 101,604 Restricted cash............................................. 92,803 84,595 Other assets................................................ 204,829 234,600 ---------- ---------- Total assets...................................... $6,018,509 $5,684,951 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Secured notes payable....................................... $2,323,336 $1,954,259 Secured tax-exempt bond financing........................... 406,514 420,830 Unsecured short-term financing.............................. 277,200 209,200 ---------- ---------- Total indebtedness................................ 3,007,050 2,584,289 Accounts payable, accrued and other liabilities............. 188,909 271,627 Resident security deposits and deferred rental revenue...... 26,797 22,793 ---------- ---------- Total liabilities................................. 3,222,756 2,878,709 ---------- ---------- Commitments and contingencies............................... -- -- Company-obligated mandatory redeemable convertible preferred securities of a subsidiary trust.......................... 149,500 149,500 Minority interest in other entities......................... 147,186 168,533 Minority interest in operating partnership.................. 226,383 225,381 Stockholders' equity: Preferred Stock........................................... 671,250 641,250 Class A Common Stock, $.01 par value, 474,337,500 shares and 474,121,284 shares authorized, 67,164,211 and 66,802,886 shares issued and outstanding, respectively........................................... 679 668 Additional paid-in capital................................ 1,898,261 1,885,424 Notes receivable on common stock purchases................ (52,685) (51,619) Distributions in excess of earnings....................... (244,821) (212,895) ---------- ---------- Total stockholders' equity........................ 2,272,684 2,262,828 ---------- ---------- Total liabilities and stockholders' equity........ $6,018,509 $5,684,951 ========== ==========
See accompanying notes to consolidated financial statements. 3 4 APARTMENT INVESTMENT AND MANAGEMENT COMPANY CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
FOR THE THREE MONTHS ENDED --------------------- MARCH 31, MARCH 31, 2000 1999 --------- --------- RENTAL PROPERTY OPERATIONS: Rental and other property revenues.......................... $224,320 $112,586 Property operating expenses................................. (90,751) (43,170) Owned property management expense........................... (7,816) (3,502) Depreciation................................................ (64,690) (27,112) -------- -------- Income from property operations............................. 61,063 38,802 -------- -------- SERVICE COMPANY BUSINESS: Management fees and other income............................ 13,310 8,556 Management and other expenses............................... (4,957) (8,902) -------- -------- Income (loss) from service company business................. 8,353 (346) -------- -------- General and administrative expenses......................... (3,211) (3,081) Interest expense............................................ (56,224) (31,330) Interest income............................................. 13,004 9,758 Equity in earnings of unconsolidated real estate partnerships.............................................. 2,445 816 Equity in earnings of unconsolidated subsidiaries........... 3,215 2,372 Minority interest in other entities......................... (3,721) 111 Amortization................................................ (1,575) (1,942) -------- -------- Income from operations...................................... 23,349 15,160 Gain on disposition of properties........................... 5,105 15 -------- -------- Income before minority interest in operating partnership.... 28,454 15,175 Minority interest in operating partnership, Common.......... (989) (1,219) Minority interest in operating partnership, Preferred....... (1,583) -- -------- -------- Net income.................................................. $ 25,882 $ 13,956 ======== ======== Net income attributable to preferred stockholders........... $ 14,515 $ 13,620 -------- -------- Net income attributable to common stockholders.............. $ 11,367 $ 336 ======== ======== Basic earnings per common share............................. $ 0.17 $ 0.01 ======== ======== Diluted earnings per common share........................... $ 0.17 $ 0.01 ======== ======== Cash dividends declared..................................... $ 0.70 $ 0.6250 ======== ========
See accompanying notes to consolidated financial statements. 4 5 APARTMENT INVESTMENT AND MANAGEMENT COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
FOR THE THREE MONTHS ENDED --------------------- MARCH 31, MARCH 31, 2000 1999 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income................................................ $ 25,882 $ 13,956 --------- --------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......................... 67,720 33,381 Gain on disposition of properties...................... (5,105) (15) Minority interest in operating partnership............. 2,572 1,219 Minority interest in other entities.................... 3,862 (111) Equity in (earnings) of unconsolidated real estate partnerships.......................................... (2,445) (816) Equity in earnings of unconsolidated subsidiaries...... (3,215) (2,372) Changes in operating assets and operating liabilities........................................... (19,714) 19,180 --------- --------- Total adjustments................................. 43,675 50,466 --------- --------- Net cash provided by operating activities......... 69,557 64,422 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of real estate................................... (91) -- Additions to real estate.................................. (39,298) (19,708) Proceeds from sale of property held for sale.............. 16,953 3,845 Cash from newly consolidated properties................... 14,179 -- Purchase of notes receivable, general limited partnerships interests and other assets............................. (102,814) (33,517) Purchase of/additions to notes receivable................. (21,114) -- Proceeds from sale of notes receivable.................... -- 17,788 Proceeds from repayment of notes receivable............... 8,684 6,444 Cash received in connection with acquisitions............. -- -- Cash paid for merger related costs........................ (4,679) (54,907) Distributions received from investments in real estate partnerships........................................... 18,976 17,860 --------- --------- Net cash used in investing activities............. (109,204) (62,195) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from secured notes payable borrowings............ 82,762 175,963 Principal repayments on secured notes payable............. (38,082) (32,686) Proceeds from secured tax-exempt bond financing........... -- 7,500 Principal repayments on secured tax-exempt bond financing.............................................. (1,572) (1,172) Repayments on secured short-term financing................ -- -- Net borrowings (paydowns) on revolving credit facilities............................................. 68,000 (236,000) Payment of loan costs, including proceeds and costs from interest rate hedge.................................... (3,603) (5,697) Proceeds from issuance of common and preferred stock, exercise of options/ warrants.......................... 35,720 114,907 Principal repayments received on notes due from officers on Class A Common Stock purchases...................... 3,526 2,230 Repurchase of Class A Common Stock........................ (2,515) -- Payment of common stock dividends......................... (45,642) (35,141) Payment of distributions to minority interest in operating partnership............................................ (4,686) (4,365) Payment of distributions to minority interest in other entities............................................... (7,512) (7,710) Payment of preferred stock dividends...................... (11,463) (12,800) --------- --------- Net cash provided by financing activities......... 74,933 (34,971) --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 35,286 (32,744) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 101,604 71,305 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 136,890 $ 38,561 ========= =========
See accompanying notes to consolidated financial statements. 5 6 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 (UNAUDITED) NOTE 1 -- ORGANIZATION Apartment Investment and Management Company ("AIMCO" together with its consolidated subsidiaries "the Company"), a Maryland corporation formed on January 10, 1994, is a self-administered, self-managed REIT engaged in the ownership, acquisition, development, expansion and management of multi-family apartment properties. AIMCO owns a majority of the ownership interests in the AIMCO operating partnership through its wholly owned subsidiaries, AIMCO-GP, Inc. and AIMCO-LP, Inc. The Company held an approximate 92% interest in the AIMCO operating partnership as of March 31, 2000. AIMCO-GP, Inc. is the sole general partner of the AIMCO operating partnership. As of March 31, 2000, the Company owned or managed 352,519 apartment units in 1,834 properties located in 48 states, the District of Columbia and Puerto Rico. Based on apartment unit data compiled by the National Multi-Housing Council, we believe that, as of March 31, 2000, the Company was the largest owner and manager of multi-family apartment properties in the United States. As of March 31, 2000, AIMCO: - owned or controlled 121,449 units in 439 apartment properties; - held an equity interest in 115,951 units in 671 apartment properties; and - managed 115,119 units in 724 apartment properties for third party owners and affiliates of which 53,627 units have management agreements that are cancelable in 30 days and 61,492 units with management agreements in excess of one year. At March 31, 2000, AIMCO had 67,164,211 shares of Class A Common Stock outstanding and the AIMCO operating partnership had 6,319,460 Partnership Common Units ("Common OP Units") outstanding (excluding units held by the Company), for a combined total of 73,483,671 shares of Class A Common Stock and Common OP Units outstanding. NOTE 2 -- BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. For further information, refer to the statements and notes thereto included in the AIMCO annual report on Form 10-K for the year ended December 31, 1999. Certain financial statement amounts have been reclassified to conform to the 2000 presentation. The accompanying consolidated financial statements include the accounts of AIMCO, the AIMCO operating partnership, majority owned subsidiaries and controlled real estate partnerships. Interests held by limited partners in real estate partnerships controlled by the Company and interests held by the shareholders of Insignia Properties Trust (through February 26, 1999) are reflected as minority interest in other entities. All significant intercompany balances and transactions have been eliminated in consolidation. Minority interest in limited partnerships represents the non-controlling partners' share of the underlying net assets of the Company's controlled limited partnerships. With regard to such partnerships, losses in excess of the bases of the minority interests ($3.4 million for first quarter 2000) have been charged to operations and classified with real estate structural depreciation expense by the Company. The assets of property owning limited 6 7 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) partnerships and limited liability companies owned or controlled by AIMCO or the AIMCO operating partnership are generally not available to pay creditors of AIMCO or the AIMCO operating partnership. NOTE 3 -- ACQUISITIONS During the three months ended March 31, 2000 the Company purchased: - for $18 million limited partnership interests in 122 partnerships (which own 379 properties) where AIMCO serves as general partner; - one apartment community with details below:
NUMBER PURCHASE DATE ACQUIRED LOCATION OF UNITS PRICE - ------------- ---------------- -------- ----------- January 2000................................. Falls Church, VA 159 $12 million
NOTE 4 -- INTEREST INCOME RECOGNITION FOR NOTES RECEIVABLE AND INVESTMENTS As of March 31, 2000 the Company holds $52 million of par value notes, plus accrued interest net of intercompany par value notes of $85 million ("general partner par value notes"), for which management believes the collectibility of such amounts is both probable and estimable. Interest income for all general partner par value notes receivable, notes receivable from officers and others as well as money market and interest bearing accounts is generally recognized as it is earned. Interest income from such notes and investments for the three months ended March 31, 2000, totaled approximately $6.8 million. As of March 31, 2000, the Company held discounted notes, with a carrying value including accrued interest, of $67 million which were made by predecessors whose positions have been acquired by the Company at a discount and are carried at the acquisition amount using the cost recovery method ("discounted notes"). The total face value plus accrued interest of these notes was $142 million. In general, interest income from the discounted notes is not recognized as it is accrued under the note instrument because the timing and amounts of cash flows are not probable and estimable. Under the cost recovery method, the discounted notes are carried at the acquisition amount, less subsequent cash collections, until such time as collectibility is probable and the timing and amounts are estimable. Based upon closed or pending transactions (including sales activity), market conditions, and improved operations of the obligor, among other things, certain notes and the related discounts have been determined to be collectible. Accordingly, interest income that had previously been deferred and portions of the related discounts were recognized as interest income during the period. For the three months ended March 31, 2000, the Company recognized deferred interest income and discounts of approximately $6 million ($0.08 per basic and $0.08 per diluted share). NOTE 5 -- COMMITMENTS AND CONTINGENCIES Legal The Company is a party to various legal actions resulting from its operating activities. These actions are routine litigation and administrative proceedings arising in the ordinary course of business, some of which are covered by liability insurance, and none of which are expected to have a material adverse effect on the consolidated financial condition or results of operations of the Company and its subsidiaries taken as a whole. Limited Partnerships In connection with the Company's offers to purchase interests in limited partnerships that own properties, the Company and its affiliates are sometimes subject to legal actions, including allegations that such activities may involve breaches of fiduciary duties to the limited partners of such partnerships or violations of the relevant partnership agreements. The Company believes it complies with its fiduciary obligations and relevant 7 8 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) partnership agreements, and does not expect such legal actions to have a material adverse effect on the consolidated financial condition or results of operations of the Company and its subsidiaries taken as a whole. Pending Investigations of HUD Management Arrangements In July 1999, NHP received a grand jury subpoena requesting documents relating to NHP's management of HUD-assisted or HUD-insured multi-family projects and NHP's operation of a group purchasing program created by NHP, known as Buyers Access. The subpoena relates to the same subject matter as subpoenas NHP received in October and December of 1997 from the HUD Inspector General. To date, neither the HUD Inspector General nor the grand jury has initiated any action against NHP or AIMCO or, to NHP's or AIMCO's knowledge, any owner of a HUD property managed by NHP. AIMCO believes that NHP's operations and programs are in compliance, in all material respects, with all laws, rules and regulations relating to HUD-assisted or HUD-insured properties. AIMCO is cooperating with the investigation and does not believe that the investigations will result in a material adverse effect on the financial condition of the Company. However, as with any similar investigation, there can be no assurance that these will not result in material fines, penalties or other costs that may impact the Company's future results of operations or cash flows in a particular quarter. Environmental The Company is subject to various Federal, state and local laws that impose liability on property owners or operators for the costs of removal or remediation of certain hazardous substances present on a property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of the hazardous substances. The presence of, or the failure to properly remediate, hazardous substances may adversely affect occupancy at contaminated apartment communities and our ability to sell or borrow against contaminated properties. In addition to the costs associated with investigation and remediation actions brought by governmental agencies, the presence of hazardous wastes on a property could result in personal injury or similar claims by private plaintiffs. The Company is also subject to various laws that impose liability for the cost of removal or remediation of hazardous substances at the disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous or toxic substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of our properties, the Company could potentially be liable for environmental liabilities or costs associated with properties or properties it acquires or manages in the future. 8 9 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 6 -- STOCKHOLDERS' EQUITY Preferred Stock At March 31, 2000 and December 31, 1999, the Company had the following classes of preferred stock outstanding:
2000 1999 -------- -------- (IN THOUSANDS) Class B Cumulative Convertible Preferred Stock, $.01 par value, 750,000 shares authorized, 750,000 and 750,000 shares issued and outstanding............................. $ 75,000 $ 75,000 Class C Cumulative Preferred Stock, $.01 par value, 2,400,000 shares authorized, 2,400,000 and 2,400,000 shares issued and outstanding; dividends payable at 9.0%, per annum................................................. 60,000 60,000 Class D Cumulative Preferred Stock, $.01 par value, 4,200,000 shares authorized, 4,200,000 and 4,200,000 shares issued and outstanding; dividends payable at 8.75%, per annum................................................. 105,000 105,000 Class G Cumulative Preferred Stock, $.01 par value, 4,050,000 shares authorized, 4,050,000 and 4,050,000 shares issued and outstanding; dividends payable at 9.375%, per annum......................................... 101,250 101,250 Class H Cumulative Preferred Stock, $.01 par value, 2,000,000 shares authorized, 2,000,000 and 2,000,000 shares issued and outstanding; dividends payable at 9.5%, per annum................................................. 50,000 50,000 Class K Convertible Cumulative Preferred Stock, $.01 par value, 5,000,000 shares authorized, 5,000,000 and 5,000,000 shares issued and outstanding................... 125,000 125,000 Class L Convertible Cumulative Preferred Stock, $.01 par value, 5,000,000 shares authorized, 5,000,000 and 5,000,000 shares issued and outstanding................... 125,000 125,000 Class M Cumulative Convertible Preferred Stock, $.01 par value, 1,600,000 shares authorized, 1,200,000 and no shares issued and outstanding............................. 30,000 -- -------- -------- $671,250 $641,250 ======== ========
In January 2000, AIMCO issued 1,200,000 shares of newly created Class M Convertible Cumulative Preferred Stock, par value $.01 per share ("Class M Preferred Stock"), in a direct placement. The proceeds of $30.0 million were used to repay certain indebtedness and for working capital. For the period beginning January 13, 2000 through and including January 13, 2003, the holder of the Class M Preferred Stock is entitled to receive, when and as declared by the Board of Directors, annual cash dividends in an amount per share equal to the greater of (i) $2.125 per year (equivalent to 8.5% of the liquidation preference), or (ii) the cash dividends payable on the number of shares of Class A Common Stock into which a share of Class M Preferred Stock is convertible. Beginning with the third anniversary of the date of original issuance, the holder of Class M Preferred Stock will be entitled to receive an amount per share equal to the greater of (i) $2.3125 per year (equivalent to 9.25% of the liquidation preference), or (ii) the cash dividends payable on the number of shares of Class A Common Stock into which a share of Class M Preferred Stock is convertible. The Class M Preferred Stock is senior to the Class A Common Stock as to dividends and liquidation. Upon any liquidation, dissolution or winding up of the Company, before payments or distributions by the Company are made to any holders of Class A Common Stock, the holder of the Class M Preferred Stock is entitled to receive a liquidation preference of $25 per share, plus accumulated, accrued and unpaid dividends. 9 10 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 7 -- EARNINGS PER SHARE The following table illustrates the calculation of basic and diluted earnings per share for the three months ended March 31, 2000 and 1999 (in thousands, except per share data):
THREE MONTHS ENDED --------------------- MARCH 31, MARCH 31, 2000 1999 --------- --------- NUMERATOR: Net income................................................ $ 25,882 $ 13,956 Preferred stock dividends................................. (14,515) (13,620) -------- -------- Numerator for basic and diluted earnings per share -- income attributable to common stockholders... $ 11,367 $ 336 ======== ======== DENOMINATOR: Denominator for basic earnings per share -- weighted average number of shares of common stock outstanding... 65,947 56,468 Effect of dilutive securities: Dilutive potential common shares, options and warrants.... 368 1,944 -------- -------- Denominator for dilutive earnings per share............... 66,315 58,412 ======== ======== Basic earnings per common share: Operations............................................. $ 0.09 $ 0.01 Gain on disposition of properties...................... 0.08 -- -------- -------- Total............................................. $ 0.17 $ 0.01 ======== ======== Diluted earnings per common share: Operations............................................. $ 0.09 $ 0.01 Gain on disposition of properties...................... 0.08 -- -------- -------- Total............................................. $ 0.17 $ 0.01 ======== ========
NOTE 8 -- INDUSTRY SEGMENTS The Company owns and operates multi-family apartment communities throughout the United States including Puerto Rico, which generate rental and other property-related income through the leasing of apartment units. The Company separately evaluates the performance of each of its apartment communities. However, because the apartment communities have similar economic characteristics, facilities, services and tenants, the apartment communities have been aggregated into a single apartment communities segment. All segment disclosures are included in or can be derived from the Company's consolidated financial statements. All revenues are from external customers and no revenues are generated from transactions with other segments. There are no tenants who contributed 10% or more of the Company's total revenues during the three months ended March 31, 2000 or March 31, 1999. Although the Company operates in only one segment, there are different components of the multi-family business for which management considers disclosure to be useful. The following table presents the contribution (separated between consolidated and unconsolidated activity) to the Company's Free Cash Flow for the three months ended March 31, 2000, from the components of the Company and a reconciliation of Free Cash Flow to Earnings Before Structural Depreciation, to Net Income, and to Funds From Operations, less a reserve for capital replacements, (in thousands, except equivalent units (ownership effected and period weighted) and monthly rents): 10 11 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATED UNCONSOLIDATED TOTAL % ------------ -------------- -------- ----- REAL ESTATE Conventional Average monthly rent greater than $800 per unit (15,369 equivalent units)......................... $ 25,460 $ 3,860 $ 29,320 19.1% Average monthly rent $700 to $800 per unit (10,671 equivalent units)................................. 10,232 2,705 12,937 8.4% Average monthly rent $600 to $700 per unit (32,658 equivalent units)................................. 26,716 5,025 31,741 20.7% Average monthly rent $500 to $600 per unit (46,053 equivalent units)................................. 33,806 4,982 38,788 25.3% Average monthly rent less than $500 per unit (26,549 equivalent units)................................. 13,907 1,999 15,906 10.4% -------- ------- -------- ----- Subtotal conventional real estate contribution to Free Cash Flow............. 110,121 18,571 128,692 83.8% Affordable (13,521 equivalent units).................. 2,809 8,449 11,258 7.3% College housing (average rent of $663 per month) (3.962 equivalent units)............................ 3,256 340 3,596 2.3% Other Properties...................................... 440 665 1,105 0.7% Resident services..................................... 1,407 159 1,566 1.0% Minority interest..................................... (18,696) -- (18,696) (12.2)% -------- ------- -------- ----- Total real estate contribution to Free Cash Flow....................................... 99,337 28,184 127,521 83.1% SERVICE BUSINESSES Management contracts (property and asset management) Controlled properties............................... 6,702 4,289 10,991 7.2% Third party with terms in excess of one year........ -- 2,185 2,185 1.4% Third party cancelable in 30 days................... -- 257 257 0.2% -------- ------- -------- ----- Subtotal management contracts contribution to Free Cash Flow............................. 6,702 6,731 13,433 8.7% Buyers Access......................................... -- 472 472 0.3% Other service businesses.............................. 532 670 1,202 0.8% -------- ------- -------- ----- Total service businesses contribution to Free Cash Flow.................................. 7,234 7,873 15,107 9.8% INTEREST INCOME General partner loan interest......................... 3,815 -- 3,815 2.5% Notes receivable from officers........................ 169 -- 169 0.1% Other notes receivable................................ 296 -- 296 0.2% Money market and interest bearing accounts............ 2,532 -- 2,532 1.6% -------- ------- -------- ----- Subtotal interest income..................... 6,812 -- 6,812 4.4% Accretion of loan discount............................ 6,191 -- 6,191 4.0% -------- ------- -------- ----- Total interest income contribution to Free Cash Flow.................................. 13,003 -- 13,003 8.5% FEE INCOME Disposition Fees...................................... 916 -- 916 0.6% Refinancing Fees...................................... 203 -- 203 0.1% -------- ------- -------- ----- Total fee income contribution to Free Cash Flow....................................... 1,119 -- 1,119 0.7% -------- ------- -------- ----- General and Administrative Expense.................... (3,211) -- (3,211) (2.1)% -------- ------- -------- ----- Free Cash Flow(1)..................................... 117,482 36,057 153,539 100.0% ======== ======= ======== =====
11 12 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
BASIC ---------------------------------------- CONSOLIDATED UNCONSOLIDATED TOTAL ------------ -------------- -------- FREE CASH FLOW.............................................. 117,482 36,057 153,539 COST OF SENIOR CAPITAL Interest expense: Secured debt Long-term, fixed rate.............................. (40,968) (9,945) (50,913) Long-term, variable rate........................... (176) (431) (607) Short-term......................................... (10,850) (811) (11,661) Lines of credit and other unsecured debt.................. (5,778) (248) (6,026) Interest expense on convertible debt...................... (2,429) -- (2,429) Interest capitalized...................................... 1,994 1,165 3,159 Minority interest share of interest expense............... 7,940 -- 7,940 -------- -------- -------- Total interest expense after minority interest..... (50,267) (10,270) (60,537) Dividends on preferred equity securities.................... (16,776) -- (16,776) -------- -------- -------- Contribution before non-cash charges and ownership adjustments.......................................... 50,439 25,787 76,226 Non-structural depreciation, net of capital replacements.... (851) (950) (1,801) Amortization of intangible assets........................... (1,575) (508) (2,083) Gain (loss) on sales of real estate......................... 5,105 -- 5,105 Deferred tax provision...................................... -- (852) (852) -------- -------- -------- Earnings Before Structural Depreciation (EBSD)(1)........................................ 53,118 23,477 76,595 Structural depreciation, net of minority interest in other entities.................................................. (48,405) (15,834) (64,239) -------- -------- -------- Net income(a)...................................... 4,713 7,643 12,356 Gain (loss) on sales of real estate......................... (5,105) -- (5,105) Non-structural depreciation, net of minority interest in other entities............................................ 8,572 3,128 11,700 Amortization of intangible assets........................... 1,575 508 2,083 Deferred tax provision...................................... -- 852 852 Structural depreciation, net of minority interest in other entities.................................................. 48,405 15,834 64,239 -------- -------- -------- Funds from Operations (FFO)(1)..................... 58,160 27,965 86,125 Capital replacement reserve................................. (7,721) (2,178) (9,899) -------- -------- -------- Adjusted Funds From Operations (AFFO)(1)........... $ 50,439 $ 25,787 $ 76,226 ======== ======== ========
- --------------- (a) Represents net income of the AIMCO operating partnership. The REIT's share of this net income is 92%, or $11,367. 12 13 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EARNINGS EARNINGS SHARES PER SHARE -------- ------- --------- EBSD Basic................................................ $76,595 72,307 Diluted.............................................. 88,592 87,150 Net Income Basic................................................ 12,356 72,307 $0.17 Diluted.............................................. 12,356 72,675 $0.17 FFO Basic................................................ 86,125 72,307 Diluted.............................................. 98,122 87,150 AFFO Basic................................................ 76,226 72,307 Diluted.............................................. 88,223 87,150
- --------------- (1) "Free Cash Flow", "Earnings Before Structural Depreciation", "Funds From Operations", and "Adjusted Funds From Operations" are measurement standards used by the Company's management. These should not be considered alternatives to net income or net cash flow from operating activities, as determined in accordance with GAAP, as an indication of the Company's performance or as a measure of liquidity. - Free Cash Flow is defined by the Company as net operating income minus the capital spending required to maintain the related assets. It measures profitability prior to the cost of capital. - Earning Before Structural Depreciation ("EBSD") is defined by the Company as Net Income, determined in accordance with GAAP, plus "structural depreciation", i.e. depreciation of buildings and land improvements whose useful lives exceed 20 years. - Funds From Operations ("FFO") is defined by the Board Governors of the National Association of Real Estate Investment Trusts ("NAREIT") as net income (loss), computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains and losses from debt restructuring and sales of property, plus real estate related depreciation and amortization (excluding amortization of financing costs), and after adjustments for unconsolidated partnerships and joint ventures. The Company calculates FFO based on the NAREIT definition, as adjusted for minority interest in the AIMCO operating partnership, amortization, the non-cash deferred portion of the income tax provision for unconsolidated subsidiaries and less the payment of dividends on preferred stock. There can be no assurance that the Company's basis for computing FFO is comparable with that of other real estate investment trusts. - Adjusted Funds From Operations ("AFFO") is defined by the Company as FFO less a charge for Capital Replacements equal to $300 per apartment unit. NOTE 9 -- HIGH PERFORMANCE UNITS In January 1998, AIMCO's operating partnership sold an aggregate of 15,000 of its Class I High Performance Partnership Units (the "High Performance Units") to a joint venture comprised of twelve members of AIMCO's senior management and to three of its independent directors for a total of $2.1 million in cash. The High Performance Units have nominal value unless the Company's total return over the three year period ending December 31, 2000, is at least 30% and exceeds the industry average, as determined by a peer group index, by at least 15%. At the conclusion of the three year period, if the Company's Total Return satisfies these criteria, the holders of the High Performance Units will receive distributions and allocations of income and loss from the AIMCO operating partnership in the same amounts and at the same times as would 13 14 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) holders of a number of Common OP Units equal to the quotient obtained by dividing (i) the product of (a) 15% of the amount by which the Company's cumulative Total Return over the three year period exceeds the greater of 115% of a peer group index or 30% (such excess being the "Excess Return"), multiplied by (b) the weighted average market value of the Company's outstanding Class A Common Stock and Common OP Units, by (ii) the market value of one share of Class A Common Stock at the end of the three year period. The three year measurement period will be shortened in the event of a change of control of the Company. Unlike Common OP Units, the High Performance Units are not redeemable or convertible into Class A Common Stock unless a change of control of the Company occurs. Because there is substantial uncertainty that the High Performance Units will have more than nominal value due to the required Total Return over the three year term, the Company has not recorded any value to the High Performance Units in the consolidated financial statements as of March 31, 2000. The Company includes any dilutive effect of the High Performance Units in its AFFO earnings. The Morgan Stanley REIT Index is being used as the peer group index for purposes of the High Performance Units. The Morgan Stanley REIT Index is a capitalization-weighted index (with dividends reinvested) of the most actively traded real estate investment trusts. The Morgan Stanley REIT Index is comprised of over 100 real estate investment trusts selected by Morgan Stanley & Co. Incorporated. The Board of Directors of the Company has selected this index because it believes that it is the real estate investment trust index most widely reported and accepted among institutional investors. "Total return" means, for any security and for any period, the cumulative total return for such security over such period, as measured by (i) the sum of (a) the cumulative amount of dividends paid in respect of such security for such period (assuming that all cash dividends are reinvested in such security as of the payment date for such dividend based on the security price on the dividend payment date), and (b) an amount equal to (x) the security price at the end of such period, minus (y) the security price at the beginning of such period, divided by (ii) the security price at the beginning of the measurement period; provided, however, that if the foregoing calculation results in a negative number, the "total return" shall be equal to zero. For purposes of calculating the Total return of the AIMCO Class A Common Stock, the security price at the end of the period will be based on an average of the volume-weighted average daily trading price of the AIMCO Class A Common Stock for the 20 trading days immediately preceding the end of the period. The High Performance Units are not convertible into AIMCO Class A Common Stock. However, in the event of a change of control of the Company, holders of High Performance Units will have redemption rights similar to those of holders of Common OP Units. Upon the occurrence of a change of control, any holder of High Performance Units may, subject to certain restrictions, require the AIMCO operating partnership to redeem all or a portion of the High Performance Units held by such party in exchange for a cash payment per unit equal to the market value of a share of AIMCO Common Stock at the time of redemption. However, in the event that any High Performance Units are tendered for redemption, the AIMCO operating partnership's obligation to pay the redemption price is subject to the prior right of the Company to acquire such High Performance Units in exchange for an equal number of shares of AIMCO Class A Common Stock (subject to certain adjustments). If AIMCO's total return over the measurement period exceeds 115% of the total return of the Morgan Stanley REIT Index and exceeds the minimum return (30% over three years), then the holders of High Performance Units could be entitled to a significant percentage of future distributions made by the AIMCO Operating Partnership. This could have a dilutive effect on future earnings per share of AIMCO Class A Common Stock, and on AIMCO's equity ownership in the AIMCO Operating Partnership after the three year measurement period. The following table illustrates the value of the 15,000 High Performance Units at the end of the three year measurement period, assuming a range of different prices for the AIMCO Class A Common Stock at the end of the measurement period. For the period from January 1, 1998 to March 31, 2000, the cumulative total 14 15 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) return of the Morgan Stanley REIT Index was (18.58)% and the cumulative total return of the AIMCO Class A Common Stock was 19.93%. As a result, for purposes of the illustration, we have assumed that the cumulative total return of the AIMCO Class A Common Stock will exceed 115% of the cumulative total return of the peer group index. This implies that the High Performance Units will only have value if the cumulative total return on the AIMCO Class A Common Stock from January 1, 1998 to January 1, 2001 exceeds 30%. We have also assumed, for purposes of the illustration, that the weighted average market value of outstanding equity (AIMCO Class A Common Stock and Common OP Units) during the measurement period is $2,377,769,040, which was the amount as of March 31, 2000. Please note that the table below is for illustrative purposes only and there can be no assurance that actual outcomes will be within the ranges used. Some of the factors that could affect the results set forth in the table are the total return of the AIMCO Class A Common Stock relative to the total return of the Morgan Stanley REIT Index, and the market value of the average outstanding equity of the Company during the measurement period. These factors may be affected by general economic conditions, local real estate conditions and the dividend policy of the Company.
CASH VALUE OF OP UNIT PROCEEDS AVERAGE EXCESS HIGH DILUTION AS TO COMPANY MARKET SHAREHOLDER PERFORMANCE OP UNIT A % OF TOTAL FROM INITIAL STOCK AIMCO MINIMUM RETURN CAPITALIZATION VALUE ADDED UNITS DILUTION DILUTED SHARES INVESTMENT PRICE TOTAL RETURN EXCESS (THOUSANDS) (THOUSANDS) (THOUSANDS) (THOUSANDS) OUTSTANDING (THOUSANDS) (12/31/00) RETURN (1) (2) (3) (4) (5) (6) (7) (8) - ---------- ------ ------- ------ -------------- ----------- ----------- ----------- -------------- ------------ $38.00 26.04% 30.00% 0.00% $2,377,769 $ -- $ 6 -- 0.00% 2,064 38.50 27.65 30.00 0.00 2,377,769 -- 6 -- 0.00 2,064 39.00 29.26 30.00 0.00 2,377,769 -- 6 -- 0.00 2,064 39.41 30.58 30.00 0.58 2,377,769 13,791 2,070 52 0.06 2,064 39.50 30.87 30.00 0.87 2,377,769 20,687 3,103 79 0.09 2,064 40.00 32.48 30.00 2.48 2,377,769 58,969 8,845 221 0.25 2,064 41.00 35.69 30.00 5.69 2,377,769 135,295 20,294 495 0.57 2,064 42.00 38.90 30.00 8.90 2,377,769 211,621 31,743 756 0.87 2,064 43.00 42.11 30.00 12.11 2,377,769 287,948 43,192 1,004 1.15 2,064 44.00 45.32 30.00 15.32 2,377,769 364,274 54,641 1,242 1.42 2,064 45.00 48.53 30.00 18.53 2,377,769 440,601 66,090 1,469 1.69 2,064 46.00 51.74 30.00 21.74 2,377,769 516,927 77,539 1,686 1.93 2,064 47.00 54.94 30.00 24.94 2,377,769 593,016 88,952 1,893 2.17 2,064 48.00 58.15 30.00 28.15 2,377,769 669,342 100,401 2,092 2.40 2,064
- --------------- (1) Assumes that the AIMCO total return will exceed that of the peer group by at least 15%. (2) "Excess Return" is the amount, if any, by which the total return of the AIMCO Class A Common Stock over the measurement period exceeds the minimum return. (3) Assumes the market value of outstanding equity (AIMCO Class A Common Stock and Common OP Units) at March 31, 2000 throughout the measurement period. (4) "Excess Shareholder Value Added" is calculated by multiplying the Excess Return by the average market capitalization. (5) The "Value of High Performance Units" is calculated by multiplying the Excess Shareholder Value Added by 15%. If "Excess Shareholder Return" is 0, the "Value of High Performance Units" is calculated by multiplying the stock price by 150 OP Units. The initial investment of $2,070,000 will continue to be treated as contributed equity on the balance sheet of the AIMCO Operating Partnership. (6) The "OP Unit Dilution" is calculated by dividing the Value of High Performance Units by the stock price at the end of the period. (7) "OP Unit Dilution as a % of total diluted shares outstanding" is calculated by dividing the OP Unit Dilution by the total weighted-average diluted shares outstanding as of March 31, 2000. (8) If "Excess Shareholder Return" is 0, the "Cash Proceeds to Company from Initial Investment" is calculated by subtracting the "Value of High Performance Units" from $2,070,000, which is the purchase price of 15,000 high performance units. 15 16 APARTMENT INVESTMENT AND MANAGEMENT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes the status of the High Performance Units as of December 31, 1999 and March 31, 2000:
AIMCO AVERAGE EXCESS VALUE OF HIGH TOTAL MORGAN STANLEY MINIMUM EXCESS MARKET SHAREHOLDER PERFORMANCE OP UNITS AS OF RETURN REIT INDEX RETURN EXCEEDED CAPITALIZATION VALUE ADDED(1) UNITS(2) DILUTED - ----- ------ -------------- ------- -------- -------------- -------------- ------------- -------- December 31, 1999..... 22.71% (20.69)% 19.11% 3.60% 2,327,728,992 83,798,244 12,569,737 340,096(3) March 31, 2000........ 19.93% (18.58)% 21.75% 0.00% 2,377,770,912 -- -- --
- --------------- (1) Return exceeded multiplied by average market capitalization (2) Excess Shareholder Value added multiplied by 15% (3) OP Unit calculation based on trailing 20-day average stock price of $36.96 NOTE 10 -- PORTFOLIOS HELD FOR SALE The Company is currently marketing for sale certain real estate properties. Approximately 5,811 units with an approximate carrying value of $133 million are included with real estate in the consolidated financial statements and approximately 23,379 units with an approximate carrying value of $117 million are included with investments in unconsolidated real estate partnerships in the consolidated financial statements. The Company does not expect to incur any material losses with respect to the sales of the properties. 16 17 APARTMENT INVESTMENT AND MANAGEMENT COMPANY ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW As of March 31, 2000, the Company owned or managed 352,519 apartment units, comprised of 121,449 units in 439 apartment communities owned or controlled by the Company (the "Owned Properties"), 115,951 units in 671 apartment communities in which the Company has an equity interest (the "Equity Properties") and 115,119 units in 724 apartment communities which the Company manages for third parties and affiliates (the "Managed Properties" and together with the Owned Properties and the Equity Properties, the "AIMCO Properties"). The apartment communities are located in 48 states, the District of Columbia and Puerto Rico. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements in certain circumstances. Certain information included in this Report contains or may contain information that is forward looking, including, without limitation, statements regarding the effect of acquisitions, the company's future financial performance and the effect of government regulations. Actual results may differ materially from those described in the forward looking statements and will be affected by a variety of risks and factors including, without limitation, national and local economic conditions, the general level of interest rates, terms of governmental regulations that affect the company and interpretations of those regulations, the competitive environment in which the company operates, financing risks, including the risk that the company's cash flows from operations may be insufficient to meet required payments of principal and interest, real estate risks, including variations of real estate values and the general economic climate in local markets and competition for tenants in such markets, acquisition and development risks, including failure of such acquisitions to perform in accordance with projections, and possible environmental liabilities, including costs which may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the Company. In addition, the Company's current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code and depends on its ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distributions levels and diversity of stock ownership. Readers should carefully review the company's financial statements and the notes thereto, as well as the risk factors described in documents the Company files from time to time with the Securities and Exchange Commission. RESULTS OF OPERATIONS Comparison of the Three Months Ended March 31, 2000 to the Three Months Ended March 31, 1999 NET INCOME The Company recognized net income of $25.9 million for the three months ended March 31, 2000, compared to $14.0 million for the three months ended March 31, 1999. The increase in net income of $11.9 million, or 85.5%, was primarily the result of: an increase in net "same store" property results; the acquisition of 28 properties during 1999; the completion of the merger of Insignia Properties Trust into AIMCO; the purchase of $271 million in limited partnership interests from unaffiliated third parties in 1999; and an increase in interest income on notes receivable from unconsolidated real estate partnerships in 2000. The effect of the above on net income was partially offset by the sale of eight properties during 1999 and thirteen properties in 2000. These factors are discussed in more detail in the following paragraphs. CONSOLIDATED RENTAL PROPERTY OPERATIONS Rental and other property revenues from the consolidated Owned Properties totaled $224.3 million for the three months ended March 31, 2000, compared to $112.6 million for the three months ended March 31, 1999, an increase of $111.7 million, or 99.2%. The increase in rental and other property revenues was primarily due to: an increase in "same store" sales revenue of 3%; the purchase of 28 properties; the acquisition of controlling interests in partnerships owning 183 properties; the subsequent consolidation of the purchased and newly controlled entities; and the sale of 13 properties. 17 18 Property operating expenses for the consolidated Owned Properties, consisting of: on-site payroll costs; utilities (net of reimbursements received from tenants); contract services; turnover costs; repairs and maintenance; advertising and marketing; property taxes and insurance; totaled $90.8 million for the three months ended March 31, 2000, compared to $43.2 million for the three months ended March 31, 1999, an increase of $47.6 million or 110%. The increase in property operating expenses was primarily due to: an increase in "same store" expenses of 1%; the purchase of 28 properties; the acquisition of controlling interests in partnerships owning 183 properties; the subsequent consolidation of the purchased and newly controlled entities; and the sale of 13 properties. SERVICE COMPANY BUSINESS The Company's share of income from the service company business was $8.4 million for the three months ended March 31, 2000, compared to ($0.3) million for the three months ended March 31, 1999. The increase in service company business income of $8.7 million was primarily due to a reduction in the allocation of management contract expense between the consolidated service company and the unconsolidated subsidiaries. The allocation of such expense will remain constant on a year to year comparison, and the core business operations remained unchanged between the periods. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses increased from $3.1 million for the three months ended March 31, 1999 to $3.2 million for the three months ended March 31, 2000, a 3.2% increase. The increase of $0.1 million is primarily due to the growth of the Company, as well as increased levels of personnel in the accounting and finance departments. INTEREST EXPENSE Interest expense, which includes the amortization of deferred financing costs, totaled $59.1 million for the three months ended March 31, 2000, compared to $31.3 million for the three months ended March 31, 1999, an increase of $27.8 million, or 88.8%. The increase was primarily due to the Company acquiring controlling interests in partnerships owning 183 properties and the subsequent consolidation of these properties. The Company had also drawn $277 million on its credit facility with Bank of America as of March 31, 2000 compared to $124 million at March 31, 1999 which incurred interest at a weighted average interest rate of 8.55% and 7.67% , during the respective three month periods then ended. INTEREST INCOME Interest income totaled $15.9 million for the three months ended March 31, 2000, compared to $9.8 million for the three months ended March 31, 1999. The increase of $6.1 million is primarily due to the recognition of interest income on discounted notes. 18 19 FUNDS FROM OPERATIONS
THREE MONTHS ENDED ------------------------------- MARCH 31, 2000 MARCH 31, 1999 -------------- -------------- Income before minority interest in operating partnership.... $28,454 $ 15,175 Gain on disposition of properties......................... (5,105) (15) Real estate depreciation, net of minority interest........ 56,977 25,700 Real estate depreciation related to unconsolidated entities............................................... 18,962 21,115 Amortization of intangibles............................... 2,083 12,999 Deferred Taxes benefit.................................... 852 2,456 Preferred stock dividend.................................. (7,208) (10,347) Expenses associated with convertible preferred securities............................................. 2,429 -- Preferred OP Unit distributions........................... 678 (858) ------- -------- Funds From Operations..................................... $98,122 $ 66,225 ======= ========
Funds From Operations increased from $66 million for the three months ended March 31, 1999 to $98 million for the three months ended March 31, 2000 primarily due to: an increase of 5% in "same store" property operations; the acquisition and subsequent consolidation of newly controlled entities and controlling interests in partnerships owning 183 properties; the purchase of 28 properties and resultant sale of 13 properties. LIQUIDITY AND CAPITAL RESOURCES For the three months ended March 31, 2000 and 1999, net cash flows were as follows (dollars in thousands):
2000 1999 --------- -------- Cash flow provided by operating activities.................. $ 69,557 $ 64,422 Cash flow (used in) investing activities.................... (109,204) (62,195) Cash flow provided by financing activities.................. 74,933 (34,971)
During the three months ended March 31, 2000, the Company closed $119 million of long-term fixed-rate, fully amortizing notes payable with a weighted average interest rate of 8.3%. Each of the notes is individually secured by one of twelve properties with no cross-collateralization. The Company used the net proceeds totaling $117.5 million after transaction costs to repay existing debt. During the three months ended March 31, 2000, the Company also assumed a $7 million long-term fixed rate, fully amortizing note payable with an interest rate of 8.37% in connection with the acquisition of one property. The note is secured by the acquired property. In August 1999, the Company closed a $300 million revolving credit facility arranged by Bank of America, N.A. BankBoston, N.A. and First Union National Bank with a syndicate comprised of a total of nine lender participants. Effective March 15, 2000 the credit facility was expanded by $45 million with the potential to expand it by another $55 million to a total of $400 million. On April 14, 2000, the credit facility was expanded by $5 million to $350 million. The obligations under the credit facility are secured by certain non-real estate assets of the Company. The credit facility including the $50 million expansion is available for general corporate purposes and has a two-year term with two one-year extensions. The annual interest rate under the credit facility is based on either LIBOR or a base rate which is the higher of Bank of America's reference rate or 0.5% over the federal funds rate, plus, in either case, an applicable margin. The margin ranges between 2.05% and 2.55%, in the case of LIBOR-based loans, and between 0.55% and 1.05%, in the case of base rate loans, based upon a fixed charge coverage ratio. The weighted average interest rate at March 31, 2000 and 1999 was 8.55% and 7.67% respectively. The amount available under the credit facility at March 31, 2000 and 1999 was $72.8 million and $75.7 million respectively. 19 20 The Company expects to meets its short-term liquidity requirements including property acquisitions, tender offers and refinancing of short-term debt with long-term, fixed rate, fully amortizing debt, secured or unsecured short-term debt, the issuance of debt or equity securities in public offerings or private placements, and cash generated from operations. On January 11, 2000, AIMCO completed a direct placement of 681,818 shares of Class A Common Stock into which 1,200,000 shares of Class M Convertible Cumulative Preferred Stock are convertible to AEW Targeted Securities Fund II, L.P. The net proceeds of approximately $30 million was used to repay indebtedness and for working capital. On March 3, 2000 AIMCO filed a shelf registration statement with the Securities and Exchange Commission with respect to an aggregate of 681,818 shares of Class A Common Stock into which 1,200,000 shares of Class M Convertible Cumulative Preferred Stock are convertible. The registration statement was declared effective by the SEC on March 31, 2000. At March 31, 2000 the Company had $137 million in cash and cash equivalents. In addition, the Company had $93 million of restricted cash, primarily consisting of reserves and impounds held by lenders for capital expenditures, property taxes and insurance. The Company's principal demands for liquidity include normal operating activities, payments of principal and interest on outstanding debt, capital improvements, acquisitions of or investments in properties, dividends paid to its stockholders and distributions paid to minority limited partners in the AIMCO operating partnership. The Company considers its cash provided by operating activities, and funds available under its credit facilities, to be adequate to meet short-term liquidity demands. The Company utilizes its revolving credit facility for general corporate purposes and to fund investments on an interim basis. From time to time, the Company has offered to acquire and, in the future, may offer to acquire the interests held by third party investors in certain limited partnerships for which the Company acts as general partner. Any such acquisitions will require funds to pay the cash purchase price for such interest. During the three months ended March 31, 2000, the Company made separate offers to the limited partners of 122 partnerships to acquire their limited partnership interests. The Company purchased approximately $18 million (including transaction costs) of limited partnership interests. RETURN ON ASSETS AND RETURN ON EQUITY The Company's Return On Assets and Return On Equity for the three months ended March 31, 2000 and 1999 are as follows:
BASED ON BASED ON AFFO FFO ------------- ------------- THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, MARCH 31, ------------- ------------- 2000 1999 2000 1999 ----- ----- ----- ----- Return on Assets (a)....................................... 10.2% 9.5% 10.7% 10.0% Return on Equity Basic (b)................................................ 14.4% 14.1% 15.8% 15.3% Diluted (c).............................................. 13.0% 11.6% 14.1% 12.6%
- --------------- (a) The Company defines Return on Assets (AFFO) as (i) Free Cash Flow divided by (ii) Average Assets. Average assets are total assets, plus accumulated depreciation, less accumulated Capital Replacements ($68,189), and less all current liabilities. "Average Assets" are computed by averaging the sum of Assets at the beginning and the end of the period. The Company defines Return on Assets (FFO) as (i) Free Cash Flow plus Capital Replacements; divided by (ii) Average Assets plus accumulated Capital Replacements. (b) The Company defines Return on Equity-Basic (AFFO) as (i) AFFO-Basic; divided by (ii) Average Equity. "Equity" is total stockholders' equity, plus accumulated depreciation, less accumulated Capital 20 21 Replacements ($68,189), less preferred stock, and plus minority interest in Operating Partnership, net of preferred OP unit interests ($103,759). "Average Equity" is computed by averaging the sum of Equity at the beginning and the end of the period. The Company defines Return on Equity-Basic (FFO) as (i) AFFO-Basic plus Capital Replacements; divided by (ii) Average Equity plus accumulated Capital Replacements. (c) The Company defines Return on Equity-Diluted (AFFO) and Return on Equity-Diluted (FFO) assuming conversion of debt and preferred securities whose conversion is dilutive. The increase in Return On Assets (AFFO) and (FFO) from the 1999 period to the 2000 period is the result of higher returns on acquired properties, as well as the additional properties consolidated in the fourth quarter of 1999 and the first quarter of 2000. The increase in Return On Equity-Basic (AFFO) and (FFO) and Return On Equity -- Diluted (AFFO) and (FFO) from the 1999 period to the 2000 period is primarily due to increased return on assets. LITIGATION The Company is a party to various legal actions resulting from its operating activities. These actions are routine litigation and administrative proceedings arising in the ordinary course of business, some of which are covered by liability insurance, and none of which are expected to have a material adverse effect on the consolidated financial condition or results of operations of the Company and its subsidiaries taken as a whole. In connection with the Company's offers to purchase interests in limited partnerships that own properties, the Company and its affiliates are sometimes subject to legal actions, including allegations that such activities may involve breaches of fiduciary duties to the limited partners of such partnerships or violations of the relevant partnership agreements. The Company believes it complies with its fiduciary obligations and relevant partnership agreements, and does not expect such legal actions to have a material adverse effect on the consolidated financial condition or results of operations of the Company and its subsidiaries taken as a whole. CONTINGENCIES Pending Investigations of HUD Management Arrangements In July 1999, NHP received a grand jury subpoena requesting documents relating to NHP's management of HUD-assisted or HUD-insured multi-family projects and NHP's operation of a group purchasing program created by NHP, known as Buyers Access. The subpoena relates to the same subject matter as subpoenas NHP received in October and December of 1997 from the HUD Inspector General. To date, neither the HUD Inspector General nor the grand jury has initiated any action against NHP or AIMCO or, to NHP's or AIMCO's knowledge, any owner of a HUD property managed by NHP. AIMCO believes that NHP's operation and program are in compliance, in all material respects, with all laws, rules and regulations relating to HUD-assisted or HUD-insured properties. AIMCO is cooperating with the investigation and does not believe that the investigations will result in a material adverse impact on its operations. However, as with any similar investigation, there can be no assurance that these will not result in material fines, penalties or other costs. Environmental Various Federal, state and local laws subject property owners or operators to liability for the costs of removal or remediation of certain hazardous substances present on a property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of the hazardous substances. The presence of, or the failure to properly remediate, hazardous substances may adversely affect occupancy at contaminated apartment communities and our ability to sell or borrow against contaminated properties. In addition to the costs associated with investigation and remediation actions brought by governmental agencies, the presence of hazardous wastes on a property could result in personal injury or similar claims by private plaintiffs. Various laws also impose liability for the cost of removal or remediation of 21 22 hazardous substances at the disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous or toxic substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of our properties, we could potentially be liable for environmental liabilities or costs associated with our properties or properties we may acquire or manage in the future. YEAR 2000 DISCLOSURE The Year 2000 (Y2K) issue is the result of computer programs being written using two digits rather than four digits to define the applicable year. Any of the Company's computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Company has funded Y2K compliance efforts from cash flow from operations and has not incurred any significant costs to date related to Y2K issues. To date, there has been no material negative impact on the Company's results of operations or financial condition as a result of the Y2K issue or its Y2K compliance efforts. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's primary market risk exposure relates to changes in interest rates. The Company is not subject to any foreign currency exchange rate risk or commodity price risk, or any other material market rate or price risks. The Company uses predominantly long-term, fixed-rate and self-amortizing non-recourse debt in order to avoid the refunding or repricing risks of short-term borrowings. The Company uses short-term debt financing and working capital primarily to fund acquisitions and generally expects to refinance such borrowings with proceeds from equity offerings or long term debt financings. The Company had $366 million of variable rate debt outstanding at March 31, 2000, which represents 12.2% of the Company's total outstanding debt. Based on this level of debt, an increase in interest rates of 1% would result in the Company's income and cash flows being reduced by $3.7 million on an annual basis. The estimated aggregate fair value of the Company's cash and cash equivalents, receivables, payables and short-term secured and unsecured debt as of March 31, 2000 is assumed to approximate their carrying value due to their relatively short terms. Management further believes that, after consideration of interest rate agreements, the fair market value of the Company's secured tax-exempt bond debt and secured long-term debt approximates their carrying value, based on market comparisons to similar types of debt instruments having similar maturities. PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS From time to time during the quarter, AIMCO issued shares of Class A Common Stock in exchange for Common OP Units tendered to the AIMCO operating partnership for redemption in accordance with the terms and provisions of the agreement of limited partnership of the AIMCO operating partnership. Such shares are issued based on an exchange ratio of one share for each Common OP Unit. The shares are issued in exchange for Common OP Units in private transactions exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Section 4(2) thereof. During the three months ended March 31, 2000, 133,732 shares of Class A Common Stock were issued in exchange for Common OP Units. As disclosed in AIMCO's Current Report on Form 8-K, dated January 13, 2000, on January 13, 2000 AIMCO sold 1,200,000 shares of Class M Convertible Cumulative Preferred Stock to an institutional investor 22 23 for $30 million. The shares were issued in a private placement transaction exempt from registration under the Securities Act pursuant to Section 4(2) thereof. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The following exhibits are filed with this report(1):
EXHIBIT NO. DESCRIPTION ------- ----------- 3.1 -- Charter (Exhibit 3.1 to AIMCO's Annual Report on Form 10-K for the fiscal year 1999, is incorporated herein by this reference) 3.2 -- Bylaws (Exhibit 3.2 to AIMCO's Annual Report on Form 10-K for the fiscal year 1999, is incorporated herein by this reference) 10.1 -- Eleventh Amendment to the Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of January 13, 2000 (Exhibit 10.12 to AIMCO's Annual Report on Form 10-K for the fiscal year 1999, is incorporated herein by this reference) 10.2 -- Twelfth Amendment to the Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of April 19, 2000 10.3 -- Amended and Restated Credit Agreement, dated as of March 15, 2000, among AIMCO Properties, L.P., the lenders listed therein, Bank of America, N.A., Fleet National Bank (as successor in interest to BankBoston, N.A.), and First Union National Bank (Exhibit 10.20 to AIMCO Properties, L.P.'s Annual Report on Form 10-K for the fiscal year 1999, is incorporated herein by this reference) 10.4 -- First Amendment to $345,000,000 Amended and Restated Credit Agreement, dated as of April 14, 2000, among AIMCO Properties, L.P., Bank of America, N.A. and U.S. Bank National Association 27.1 -- Financial Data Schedule 99.1 -- Agreement re: disclosure of long-term debt instruments
- --------------- (1) Schedules and supplemental materials to the exhibits have been omitted but will be provided to the Securities and Exchange Commission upon request. (b) Reports on Form 8-K for the quarter ended March 31, 2000: During the quarter for which this report is filed, Apartment Investment and Management Company filed its Current Report on Form 8-K, dated December 15, 1999, relating to AIMCO Properties L.P.'s acquisition of residential communities and certain interests from Dreyfuss Brothers, Inc.; its Current Report on Form 8-K dated January 13, 2000, relating to the sale of an aggregate of 1,200,000 shares of Class M Convertible Cumulative Preferred Stock of Apartment Investment and Management Company; its Current Report on Form 8-K, dated January 20, 2000, relating to an increase in Apartment Investment and Management Company's measure of economic profitability for the fourth quarter of 1999, compared to the quarter ended December 31, 1998; its Current Report on Form 8-K, dated March 14, 2000, relating to Apartment Investment and Management Company's letter to stockholders for fiscal year 1999. 23 24 APARTMENT INVESTMENT AND MANAGEMENT COMPANY SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: /s/ PAUL J. MCAULIFFE ---------------------------------- Paul J. McAuliffe Executive Vice President, Chief Financial Officer (duly authorized officer and principal financial officer) Date: May 10, 2000 24 25 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION ------- ----------- 3.1 -- Charter (Exhibit 3.1 to AIMCO's Annual Report on Form 10-K for the fiscal year 1999, is incorporated herein by this reference) 3.2 -- Bylaws (Exhibit 3.2 to AIMCO's Annual Report on Form 10-K for the fiscal year 1999, is incorporated herein by this reference) 10.1 -- Eleventh Amendment to the Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of January 13, 2000 (Exhibit 10.12 to AIMCO's Annual Report on Form 10-K for the fiscal year 1999, is incorporated herein by this reference) 10.2 -- Twelfth Amendment to the Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of April 19, 2000 10.3 -- Amended and Restated Credit Agreement, dated as of March 15, 2000, among AIMCO Properties, L.P., the lenders listed therein, Bank of America, N.A., Fleet National Bank (as successor in interest to BankBoston, N.A.), and First Union National Bank (Exhibit 10.20 to AIMCO Properties, L.P.'s Annual Report on Form 10-K for the fiscal year 1999, is incorporated herein by this reference) 10.4 -- First Amendment to $345,000,000 Amended and Restated Credit Agreement, dated as of April 14, 2000, among AIMCO Properties, L.P., Bank of America, N.A. and U.S. Bank National Association 27.1 -- Financial Data Schedule 99.1 -- Agreement re: disclosure of long-term debt instruments
- --------------- (1) Schedules and supplemental materials to the exhibits have been omitted but will be provided to the Securities and Exchange Commission upon request. EX-10.2 2 12TH AMEND TO 3RD AMENDED/RESTATED AGMNT OF LP 1 EXHIBIT 10.2 TWELFTH AMENDMENT TO THE THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P. This TWELFTH AMENDMENT TO THE THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF AIMCO PROPERTIES, L.P., dated as of April 19, 2000 (this "Amendment"), is being executed by AIMCO-GP, Inc., a Delaware corporation (the "General Partner"), as the general partner of AIMCO Properties, L.P., a Delaware limited partnership (the "Partnership"), pursuant to the authority conferred on the General Partner by the Third Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of July 29, 1994 (the "Agreement"). Capitalized terms used, but not otherwise defined herein, shall have the respective meanings ascribed thereto in the Agreement. WHEREAS, pursuant to Exhibit K of the Agreement, the Partnership Unit Designation of the Class I High Performance Partnership Units of AIMCO Properties, L.P. ("Partnership Unit Designation"), the General Partner determined the designations, preferences and relative, participating, optional or other special rights, powers and duties of the Class I High Performance Partnership Units; WHEREAS, the General Partner and the holders of the outstanding Class I High Performance Partnership Units wish to (i) clarify an ambiguity in the definition of "AIMCO Total Return" in the Partnership Unit Designation, and (ii) prevent the possibility of market manipulation distorting the calculation of "Excess Return," as defined in the Partnership Unit Designation; and WHEREAS, the holders of all of the outstanding Class I High Performance Partnership Units have consented to this amendment to the Agreement. NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. The definition of "AIMCO Total Return" in Section 2 of the Partnership Unit Designation is hereby amended to read in its entirety as follows: "AIMCO Total Return" shall mean the Total Return of the REIT Shares for the Measurement Period; provided, however, that, for purposes of calculating the security price of the REIT Shares at the end of the Measurement Period, such price shall be the average of the daily market prices for twenty (20) consecutive 2 trading days ending immediately prior to the Class I High Performance Valuation Date. The market price for any such trading day shall be: (i) if the REIT Shares are listed or admitted to trading on any securities exchange or The Nasdaq Stock Market's National Market System, the volume-weighted average of trading prices on such day, as reported by Bloomberg Financial Markets (or another reliable source selected by the General Partner), or if no trade takes place on such day, the average of the closing bid and asked prices on such day, as reported in the principal consolidated transaction reporting system; (ii) if the REIT Shares are not listed or admitted to trading on any securities exchange or The Nasdaq Stock Market's National Market System, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the General Partner; or (iii) if the REIT Shares are not listed or admitted to trading on any securities exchange or The Nasdaq Stock Market's National Market System and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices on such day, as reported by a reliable quotation source designated by the General Partner, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten (10) days prior to the date in question) for which prices have been so reported; provided, however, that, if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the market price of the REIT Shares shall be determined by the General Partner acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. 2. Except as specifically amended hereby, the terms, covenants, provisions and conditions of the Agreement and the Partnership Unit Designation shall remain unmodified and continue in full force and effect and, except as amended hereby, all of the terms, covenants, provisions and conditions of the Agreement are hereby ratified and confirmed in all respects. 2 3 IN WITNESS WHEREOF, this Amendment has been executed as of the date first written above. GENERAL PARTNER: AIMCO-GP, INC. By: /s/ PETER KOMPANIEZ ---------------------------------- Name: Peter Kompaniez Title: President and Vice Chairman EX-10.4 3 1ST AMENDMENT TO AMENDED/RESTATED CREDIT AGREEMENT 1 EXHIBIT 10.4 FIRST AMENDMENT TO $345,000,000 AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF APRIL 14, 2000 BY AND AMONG AIMCO PROPERTIES, L.P., AS BORROWER, BANK OF AMERICA, N.A., AS ADMINISTRATIVE AGENT U.S. BANK NATIONAL ASSOCIATION, AS A LENDER 1 2 FIRST AMENDMENT TO $345,000,000 AMENDED AND RESTATED CREDIT AGREEMENT This FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this "AMENDMENT") is dated as of April 14, 2000 (the "AMENDMENT EFFECTIVE DATE") and entered into by and among AIMCO PROPERTIES, L.P. a Delaware limited partnership ("BORROWER"), BANK OF AMERICA, N.A. ("BANK OF AMERICA"), as Administrative Agent (in such capacity, "ADMINISTRATIVE AGENT") and U.S. BANK NATIONAL ASSOCIATION ("U.S. BANK"), as a Lender, and is made with reference to that certain Credit Agreement dated as of August 16, 1999, as amended by that certain Amended and Restated Credit Agreement dated as of March 15, 2000 (as amended by this Amendment, the "CREDIT AGREEMENT"), by and among Borrower, Lenders and Administrative Agent. Capitalized terms used in this Amendment shall have the meanings set forth in the Credit Agreement unless otherwise defined. The Guarantor Subsidiaries set forth on pages S-4 through S-12 are only parties to this Amendment for purposes of Section 4 and are not a party to the Credit Agreement. RECITAL WHEREAS, Borrower and Administrative Agent desire to amend the Credit Agreement to increase the Combined Commitments by $5,000,000 to an aggregate total of $350,000,000 as of the date hereof; WHEREAS, each of the Lenders has acknowledged and agreed that its consent to any increase in the Combined Commitments up to a maximum of $400,000,000 is not required so long as Administrative Agent and Borrower have consented in writing to such increase; WHEREAS, U.S. Bank, Administrative Agent and Borrower hereby consent to the increase in the Commitments of U.S. Bank from $40,000,000 to $45,000,000; NOW, THEREFORE, in consideration of the agreements, provisions and covenants contained herein, the parties agree as follows: AMENDMENTS TO THE CREDIT AGREEMENT AMENDMENT TO SUBSECTION 1.01: DEFINED TERMS. Subsection 1.01 of the Credit Agreement is hereby further amended by deleting, in their entirety, the definitions of the terms listed below and inserting the following in lieu thereof: "COMBINED COMMITMENTS" has the meaning assigned to such term in the definition of "Commitment". The Combined Commitments are $350,000,000, and are subject to increase in accordance with Section 2.14. 2 3 "PRO RATA SHARE" means, with respect to each Lender, the percentage of the Combined Commitments set forth opposite the name of that Lender on Schedule 2.01, as may be amended from time to time. AMENDMENT TO SCHEDULES. Schedule 2.01 shall be deleted in its entirety and replaced with that attached hereto. CONDITIONS TO EFFECTIVENESS This Amendment shall become effective on the Amendment Effective Date, if each of the following conditions are satisfied: Borrower and U.S. Bank have delivered to Lenders (or to Administrative Agent for Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel) executed copies of this Amendment dated as of the Amendment Effective Date; Guarantor Subsidiaries have executed this Amendment with respect to Section 4; Borrower shall have executed a new Committed Loan Note for U.S. Bank dated as of the Amendment Effective Date and in an amount equal to U.S. Bank's Commitment; On or before the Amendment Effective Date, Borrower has paid to Administrative Agent a commitment fee in the amount of $18,750; Borrower shall have delivered a certificate, satisfactory to Agent, signed by a Responsible Officer stating that (i) the representations and warranties contained in Section 5 are true and correct on and as of the Amendment Effective Date, and (ii) no Default or Event of Default then exists, and no Default or Event of Default will result from the consummation of the transactions contemplated by this Amendment; If required by Administrative Agent, Lenders and their respective counsel shall have received originally executed copies of one or more favorable written opinions of counsel for Borrower and the Guarantor Subsidiaries in form and substance reasonably satisfactory to Administrative Agent and its counsel, dated as of the Amendment Effective Date, with respect to the validity, binding effect and enforceability of this Amendment, and due authorization, execution and delivery thereof, and as to such other matters as Administrative Agent acting on behalf of Lenders may reasonably request; and Borrower shall have paid the reasonable fees, costs and expenses of Administrative Agent's counsel in connection with this Amendment. BORROWER'S REPRESENTATIONS AND WARRANTIES In order to induce Lenders to enter into this Amendment and to amend the Credit Agreement in the manner provided herein, Borrower represents and warrants to each Lender that the following statements are true, correct and complete: 3 4 CORPORATE POWER AND AUTHORITY. Borrower has all requisite corporate power and authority to enter into this Amendment and any other agreements, guaranties or other operative documents to be delivered pursuant to this Amendment, to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement. Each of the Borrower, the REIT and the Guarantor Subsidiaries are in good standing in the respective states of their organization on the Amendment Effective Date. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this Amendment and the performance of the Credit Agreement have been duly authorized by all necessary corporate action on the part of Borrower and the other parties delivering any of such documents, as the case may be. The organizational documents of the Borrower, the REIT and the Guarantor Subsidiaries have not been modified in any material respect since August 16, 1999. NO CONFLICT. The execution and delivery by Borrower and the Guarantor Subsidiaries of this Amendment and the performance by Borrower of the Credit Agreement by Borrower do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Borrower or any of its Subsidiaries, their respective Organization Documents or any order, judgment or decree of any court or other agency of government binding on Borrower, the REIT or any of their Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Contractual Obligation of Borrower, the REIT or any of their Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Borrower, the REIT or any of their Subsidiaries, or (iv) require any approval of stockholders or any approval or consent of any Person under any Contractual Obligation of Borrower, the REIT or any of their Subsidiaries. GOVERNMENTAL CONSENTS. The execution and delivery by Borrower and the Guarantor Subsidiaries of this Amendment and the performance by Borrower and the Guarantor Subsidiaries under the Credit Agreement do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body. BINDING OBLIGATION. The Credit Agreement, as amended by this Amendment, has been duly executed and delivered by Borrower and the Guarantor Subsidiaries, as applicable, and is enforceable against Borrower and/or the Guarantor Subsidiaries, as applicable, in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT AGREEMENT. The representations and warranties contained in Section 5 of the Credit Agreement are and will be true, correct and complete in all material respects on and as of the Amendment Effective Date to 4 5 the same extent as though made on and as of such date, except representations and warranties solely to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. ACKNOWLEDGEMENT AND CONSENT Guarantor Subsidiaries are party to that certain Payment Guaranty of REIT and of Preferred Stock Subsidiaries dated August 16, 1999 and that certain Payment Guaranty of Non-Preferred Stock Subsidiaries dated August 16, 1999, in each case as amended by the Amended and Restated Credit Agreement dated March 15, 2000 and as amended at even date herewith, pursuant to which Guarantor Subsidiaries have guarantied the Obligations. Nothing in this Section 4 shall be construed to make the Guarantor Subsidiaries a party to the Credit Agreement or to create any obligation in respect thereof except pursuant to each Guaranty. Each Guarantor Subsidiary hereby acknowledges that it has reviewed the terms and provisions of the Credit Agreement and this Amendment and consents to the amendment of the Credit Agreement effected pursuant to this Amendment. Each Guarantor Subsidiary hereby confirms that each Guaranty to which it is a party or otherwise bound will continue to guaranty or secure, as the case may be, to the fullest extent possible the payment and performance of all of the "Indebtedness" (as defined in the applicable Guaranty), including without limitation the payment and performance of all such "Indebtedness," as the case may be, with respect to the Obligations of Borrower now or hereafter existing under or in respect of the Credit Agreement (as amended hereby) and the Notes defined therein. Each Guarantor Subsidiary acknowledges and agrees that any Guaranty to which it is a party or otherwise bound shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Amendment. Each Guarantor Subsidiary represents and warrants that all representations and warranties contained in the Credit Agreement and the Guaranty to which it is a party or otherwise bound are true, correct and complete in all material respects on and as of the Amendment Effective Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case they were true, correct and complete in all material respects on and as of such earlier date. Each Guarantor Subsidiary acknowledges and agrees that (i) notwithstanding the conditions to effectiveness set forth in this Amendment, such Guarantor Subsidiary is not required by the terms of the Credit Agreement or any other Loan Document to consent to the amendments to the Credit Agreement effected pursuant to this Amendment and (ii) nothing in the Credit Agreement, this Amendment or any other Loan Document shall be deemed to require the consent of such Guarantor Subsidiary to any future amendments to the Credit Agreement. 5 6 MISCELLANEOUS REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS. On and after the Amendment Effective Date, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement, as amended by this Amendment. Except as specifically amended by this Amendment, the Credit Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed. The execution, delivery and performance of this Amendment shall not, except as expressly provided herein, constitute a waiver of any provision of, or operate as a waiver of any right, power or remedy of Administrative Agent or any Lender under, the Credit Agreement or any of the other Loan Documents. FEES AND EXPENSES. Borrower acknowledges that all reasonable costs, fees and expenses incurred by Administrative Agent and its counsel with respect to this Amendment and the documents and transactions contemplated hereby shall be for the account of Borrower. HEADINGS. Section and subsection headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose or be given any substantive effect. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Amendment shall become effective upon the execution of a counterpart hereof by Borrower and the Requisite Lenders, and receipt by Borrower and Administrative Agent of written, facsimile or telephonic notification of such execution and authorization of delivery thereof. [Signatures on Attached Pages S-1 through S-3] 6 7 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first written above. BORROWER AIMCO PROPERTIES, L.P., a Delaware limited partnership By: AIMCO - GP, INC., a Delaware corporation, its general partner By: /s/ PETER K. KOMPANIEZ -------------------------------------------- Peter K. Kompaniez President Notices to be sent to: 2000 South Colorado Boulevard Tower 2, Suite 2-1000 Denver, Colorado 80222 Attention: Paul McAuliffe Executive Vice President & Chief Financial Officer Facsimile: (303) 691-4317 7 8 BANK OF AMERICA BANK OF AMERICA, N.A., as Administrative Agent By: /s/ ROBERT N. ALLEN ------------------------------------------- Name: Robert N. Allen Title: Vice President 8 9 U.S. BANK NATIONAL ASSOCIATION U.S. BANK NATIONAL ASSOCIATION, as a Lender By: /s/ CYD D. PETRE --------------------------------------------- Name: Cyd D. Petre Title: Vice President 9 10 The undersigned Guarantor Subsidiaries hereby execute this Amendment solely for the purposes of acknowledging the same and consenting thereto in accordance with Section 4 thereof. REIT AND PREFERRED STOCK SUBSIDIARIES: APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: /s/ PETER K. KOMPANIEZ ------------------------------- Peter K. Kompaniez President AIMCO/NHP HOLDINGS, INC. By: /s/ PETER K. KOMPANIEZ ------------------------------- Peter K. Kompaniez President NHP A&R SERVICES, INC. By: /s/ PETER K. KOMPANIEZ ------------------------------- Peter K. Kompaniez President NHP MANAGEMENT COMPANY By: /s/ THOMAS TOOMEY ------------------------------ Thomas Toomey President 10 11 NON-PREFERRED STOCK SUBSIDIARIES AIMCO Anchorage, L.P. AIMCO Bay Club, L.P. AIMCO Bridgewater, L.P. AIMCO Copperfield, L.P. AIMCO Crows Nest, L.P. AIMCO Group, L.P. AIMCO Hampton Hill, L.P. AIMCO Hastings Place, L.P. AIMCO LT, L.P. AIMCO Oak Falls, L.P. AIMCO Park at Cedar Lawn, L.P. AIMCO Peppermill Place, L.P. AIMCO Recovery Fund, L.P. AIMCO Seaside Point, L.P. AIMCO Signature Point, L.P. AIMCO Stirling Court, L.P. AIMCO Sunbury, L.P. AIMCO Township at Highlands, L.P. AIMCO UT, L.P. AIMCO West Trails, L.P. By: AIMCO Holdings, L.P., as their general partner By: AIMCO Holdings QRS, Inc., its general partner By: /s/ PETER K. KOMPANIEZ ---------------------- Peter K. Kompaniez President 11 12 AIMCO Bay Club II, L.P. By: AIMCO Bay Club, L.P., its general partner By: AIMCO Holdings, L.P., as their general partner By: AIMCO Holdings QRS, Inc., its general partner By: /s/ PETER K. KOMPANIEZ ---------------------- Peter K. Kompaniez President AIMCO Holdings, L.P. By: AIMCO Holdings QRS, Inc., its general partner By: /s/ PETER K. KOMPANIEZ ---------------------- Peter K. Kompaniez President Ambassador CRM Florida Partners, L.P. By: Ambassador Florida Partners Limited Partnership, as its general partner By: Ambassador Florida Partners, Inc., as its general partner By: /s/ PETER K. KOMPANIEZ ---------------------- Peter K. Kompaniez President 12 13 Ambassador I, L.P. By: Ambassador I, Inc., its general partner By: /s/ PETER K. KOMPANIEZ ---------------------- Peter K. Kompaniez President Ambassador II, L.P. By: Ambassador II, Inc., its general partner By: /s/ PETER K. KOMPANIEZ ---------------------- Peter K. Kompaniez President Ambassador VIII, L.P. By: Ambassador VIII, Inc., its general partner By: /s/ PETER K. KOMPANIEZ ---------------------- Peter K. Kompaniez President Ambassador IX, L.P. By: Ambassador IX, Inc., its general partner By: /s/ PETER K. KOMPANIEZ ---------------------- Peter K. Kompaniez President 13 14 Ambassador Apartments, L.P. Property Asset Management Services, L.P. By: AIMCO Properties, L.P., as their general partner By: AIMCO-GP, Inc., its general partner By: /s/ PETER K. KOMPANIEZ ---------------------- Peter K. Kompaniez President Ambassador X, L.P. By: Ambassador X, Inc., its general partner By: /s/ PETER K. KOMPANIEZ ---------------------- Peter K. Kompaniez President Williamsburg L.P. By: Ambassador IX, L.P.., its general partner By: Ambassador IX, Inc., its general partner By: /s/ PETER K. KOMPANIEZ ---------------------- Peter K. Kompaniez President 14 15 Property Asset Management Services-California, LLC By: Property Asset Management Services, L.P., its managing general partner By: AIMCO Properties, L.P., its general partner By: AIMCO-GP, Inc., its general partner By: /s/ PETER K. KOMPANIEZ ---------------------- Peter K. Kompaniez President NHP Congress Management L.P. By: NHP-HG Six, Inc., its general partner By: /s/ PETER K. KOMPANIEZ ---------------------- Peter K. Kompaniez President NPI-AP Management, L.P. By: NPI Property Management Corporation, its general partner By: /s/ PETER K. KOMPANIEZ ---------------------- Peter K. Kompaniez President 15 16 AIMCO Residential Group, L.P. By: AG Management, L.L.C., its general partner By: NHP Management Company, its managing member By: /s/ THOMAS TOOMEY ----------------- Thomas Toomey President Insignia Properties, L.P. By: AIMCO/IPT, Inc., its general partner By: /s/ PETER K. KOMPANIEZ ---------------------- Peter K. Kompaniez President AIMCO Calhoun, Inc. AIMCO Holdings QRS, Inc. AIMCO LJ Tucson, Inc. AIMCO Properties Finance Corp. AIMCO Somerset, Inc. AIMCO/Brant Rock, Inc. AIMCO/Beacon Hill, Inc. AIMCO/Blossomtree, Inc. AIMCO/Colonnade, Inc. AIMCO/Foothills, Inc. AIMCO/Foxbay, Inc. AIMCO/Foxtree, Inc. AIMCO/Freedom Place, Inc. AIMCO/Grovetree, Inc. AIMCO/Hazeltree, Inc. AIMCO/Hiddentree, Inc. AIMCO/IPT, Inc. AIMCO/Islandtree, Inc. AIMCO/Olmos, Inc. AIMCO/Orchidtree, Inc. AIMCO/OTC QRS, Inc. AIMCO/Pine Creek, Inc. AIMCO/Polo Park, Inc. 16 17 AIMCO/Quailtree, Inc. AIMCO/Rivercrest, Inc. AIMCO/Sand Castles, Inc. AIMCO/Sand Pebble, Inc. AIMCO/Shadetree, Inc. AIMCO/Shadow Lake, Inc. AIMCO/Silktree, Inc. AIMCO/Surrey Oaks, Inc. AIMCO/Tall Timbers, Inc. AIMCO/The Hills, Inc. AIMCO/Timbertree, Inc. AIMCO/Twinbridge, Inc. AIMCO/Wickertree, Inc. AIMCO/Wildflower, Inc. AIMCO/Windsor Landing, Inc. AIMCO/Woodhollow, Inc. AIMCO/Wydewood, Inc. AIMCO/Yorktree, Inc. AIMCO-LP, Inc. AIMCO-GP, Inc. Ambassador I, Inc. Ambassador II, Inc. Ambassador IV, Inc. Ambassador V, Inc. Ambassador VIII, Inc. Ambassador Texas, Inc. Ambassador X, Inc. Ambassador XI, Inc. Ambassador Florida Partners Inc. Angeles Realty Corporation II NHP Multi-Family Capital Corporation NHP Real Estate Corporation A.J. Two, Inc. AIMCO Equity Services, Inc. NHP Texas Management Company NHP Puerto Rico Management Company NHP Florida Management Company NHP Maintenance Services Company NHP-HDV Ten, Inc. NHP-HDV Fourteen, Inc. NHP-HDV Sixteen, Inc. NHP-HDV 20, Inc. NHP-HS Two, Inc. 17 18 Broadstreet Management, Inc. Rescorp Realty, Inc. Preferred Home Health, Inc. Security Management, Inc. Insignia Residential Group of Alabama, Inc. Insignia Residential Group of California, Inc. Insignia Residential Group of Texas, Inc. DBL Properties Corporation Colony of Springdale Properties, Inc. SF General, Inc. CPF XIV/St. Charleston, Inc. CPF XIV/Torrey Pines, Inc. CPF XIV/Sun River, Inc. CPF XIV/Lakeside Place, Inc. ConCap CCP/IV Stratford Place Properties, Inc. ConCap CCP/IV River's Edge Properties, Inc. ConCap Equities, Inc. ConCap Holdings, Inc. PRA, Inc. National Property Investors, Inc. By: /s/ PETER K. KOMPANIEZ ---------------------- Peter K. Kompaniez President 18 19 Address Where Notices are to be Sent: To Guarantor: 2000 South Colorado Boulevard Tower 2, Suite 2-1000 Denver, Colorado 80222 To Administrative Agent: BANK OF AMERICA, N.A. CA9-706-06-02 555 South Flower Street, 6th Floor Los Angeles, California 90071 Attention: Manager - Unit #1313 To Lenders: Per the Credit Agreement 19 EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 229,693 0 0 0 0 0 4,995,886 488,480 6,018,509 0 3,007,050 149,500 671,250 679 1,600,755 6,018,509 237,630 253,520 168,214 173,000 0 0 59,110 28,454 0 28,454 0 0 0 28,454 0.17 0.17
EX-99.1 5 AGREEMENT-DISCLOSURE OF LONG-TERM DEBT INVESTMENTS 1 EXHIBIT 99.1 Agreement Regarding Disclosure of Long-Term Debt Instruments In reliance upon Item 601(b) (4) (iii) (A), of Regulation S-K, Apartment Investment and Management Company, a Maryland corporation (the "Company") has not filed as an exhibit to its Quarterly Report on Form 10-Q for the quarterly period ending March 31, 2000, any instrument with respect to long-term debt not being registered where the total amount of securities authorized thereunder does not exceed 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis. Pursuant to Item 601(b) (4) (iii) (A), of Regulation S-K, the Company hereby agrees to furnish a copy of any such agreement to the Securities Exchange Commission upon request. APARTMENT INVESTMENT AND MANAGEMENT COMPANY By: /s/ PETER KOMPANIEZ -------------------------------- Peter Kompaniez President -----END PRIVACY-ENHANCED MESSAGE-----