S-4

As filed with the Securities and Exchange Commission on October 12, 2010

Registration No. 333-      

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

APARTMENT INVESTMENT AND MANAGEMENT COMPANY

(Exact name of registrant as specified in its charter)

Maryland	6798	84-1259577
(State of other jurisdiction of incorporation or organization)	(Primary standard industrial classification code number)	(IRS Employer Identification Number)

AIMCO PROPERTIES, L.P.

(Exact name of registrant as specified in its charter)

Delaware	6513	84-1275621
(State of other jurisdiction of incorporation or organization)	(Primary standard industrial classification code number)	(IRS Employer Identification Number)

4582 South Ulster Street Parkway, Suite 1100
Denver, Colorado 80237
(303) 757-8101
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

John Bezzant
Senior Vice President
Apartment Investment and Management Company
4582 South Ulster Street Parkway, Suite 1100
Denver, Colorado 80237
(303) 757-8101
(Name, address, including zip code and telephone number, including area code of agent for service)
Copies to:

Jonathan Friedman, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, CA 90071
Telephone: (213) 687-5396
Fax: (213) 621-5396 Joseph Coco, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Telephone: (212) 735-3050
Fax: (917) 777-3050

Approximate date of commencement of proposed sale to the public:  As soon as practicable after this Registration Statement is declared effective and all other conditions to the merger as described in the enclosed information statement/prospectus are satisfied or waived.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:  o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  o

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  o

CALCULATION OF REGISTRATION FEE

		Proposed Maximum	Proposed Maximum	Amount of
Title of Each Class of	Amount to be	Offering	Aggregate	Registration
Securities to be Registered	Registered(1)	Price per Unit(1)	Offering Price(2)	Fee
Partnership Common Units of Aimco Properties, L.P.			$607,888.80	$43.34
Common Stock of Apartment Investment and Management Company(2)

(1)	Omitted in reliance on Rule 457(o) under the Securities Act of 1933.
(2)	Represents shares of Common Stock issuable upon redemption of Partnership Common Units issued hereunder.

The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants will file a further amendment which specifically states that this Registration Statement will thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement will become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED OCTOBER 12, 2010

INFORMATION STATEMENT/PROSPECTUS

NATIONAL PROPERTY INVESTORS III

National Property Investors III, or NPI, plans to enter into an agreement and plan of merger with AIMCO Properties, L.P., or Aimco OP. Under the proposed merger agreement:

(i) First, NPI will be merged with and into Aimco OP’s subsidiary, National Property Investors III, LP, a Delaware limited partnership, or New NPI, with New NPI as the surviving entity. New NPI was formed for the purpose of effecting this merger and does not have any assets or operations. In this merger, each unit of limited partnership interest in NPI, or NPI Unit, will be converted into an identical unit of limited partnership in New NPI, or New NPI Units, and the general partnership interest in NPI now held by the general partner will be converted into a general partnership interest in New NPI. All interests in New NPI outstanding immediately prior to the merger will be cancelled in the merger; and

(iii) Second, Aimco OP’s subsidiary, AIMCO NPI III Merger Sub LLC, a Delaware limited liability company, or the Aimco Subsidiary, will be merged with and into New NPI, with New NPI as the surviving entity. The Aimco Subsidiary was formed for the purpose of effecting this merger and does not have any assets or operations. In this merger, each NPI Unit will be converted into the right to receive, at the election of the holder of such unit, either:

•  $57.24 in cash, or

•  $57.24 in partnership common units of Aimco OP, or OP Units.

The number of OP Units offered for each NPI Unit will be calculated by dividing $57.24 by the average closing price of common stock of Apartment Investment and Management Company, or Aimco, as reported on the New York Stock Exchange, over the ten consecutive trading days ending on the second trading day immediately prior to the consummation of the merger. For example, as of October 6, 2010, the average closing price of Aimco common stock over the preceding ten consecutive trading days was $21.65, which would have resulted in 2.64 OP Units offered for each NPI Unit. However, if Aimco OP determines that the law of the state or other jurisdiction in which a limited partner resides would prohibit the issuance of OP Units in that state or other jurisdiction (or that registration or qualification in that state or jurisdiction would be prohibitively costly), then such limited partner will not be entitled to elect OP Units, and will receive cash.

In the second merger, Aimco OP’s interest in the Aimco Subsidiary will be converted into New NPI Units. As a result, after the merger, Aimco OP will be the sole limited partner of New NPI and will own all of the outstanding New NPI Units.

Within ten days after the mergers, Aimco OP will prepare and mail to you an election form pursuant to which you can elect to receive cash or OP Units. You may elect your form of consideration by completing and returning the election form in accordance with its instructions. If the information agent does not receive a properly completed election form from you before 5:00 p.m., New York time, on the 30th day after the mergers, you will be deemed to have elected to receive cash. You may also use the election form to elect to receive, in lieu of the merger consideration, the appraised valued of your NPI Units, determined through an arbitration proceeding.

In addition and separate from the merger consideration, you may elect to receive an additional cash payment of $9.42 in exchange for executing a waiver and release of certain claims. In order to receive such additional payment, you must complete the relevant section of the election form, execute the waiver and release that is attached to the election form and return both the election form and the executed waiver and release to the information agent as described above.

Prior to entering into the merger agreement, the agreement of limited partnership of NPI will be amended to (i) eliminate the prohibition on transactions between NPI, on one hand, and its general partners and their affiliates, on the other, and (ii) authorize the managing general partner to complete the mergers described above without any further action by the limited partners. This amendment must be approved by NPI’s general partner and a majority in interest of the limited partners. NPI’s general partner, NPI Equity Investments, Inc., or the General Partner, has determined that the amendment and the transactions contemplated thereby are advisable and in the best interests of NPI and its limited partners and has approved the amendment and the transactions. As of October 7, 2010, there were issued and outstanding 48,039 NPI Units, and Aimco OP and its affiliates owned 37,419 of those units, or approximately 77.89% of the number of units outstanding. As more fully described herein, 21,380 of the NPI Units owned by an affiliate of the General Partner are subject to a voting restriction, which requires the NPI Units to be voted in proportion to the votes cast with respect to NPI Units not subject to this voting restriction. The General Partner’s affiliates have indicated that they will vote all of their NPI Units that are not subject to this restriction, 16,039 Units or approximately 33.39% of the outstanding NPI Units, in favor of the amendment and the transactions. As a result, affiliates of the General Partner will vote a total of 28,901 NPI Units, or approximately 60.16% of the outstanding NPI Units, in favor of the amendment and the transactions.

Aimco OP and its affiliates have indicated that they intend to take action by written consent, as permitted under the partnership agreement, to approve the amendment and the transactions on or about          , 2010. As a result, approval of the merger is assured, and your consent to the merger is not required.

WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY

This information statement/prospectus contains information about the proposed amendment of the limited partnership agreement of NPI, the proposed merger agreement and the transactions contemplated thereby and the securities offered hereby, and the reasons that the General Partner has decided that the transactions are in the best interests of NPI and its limited partners. The General Partner has conflicts of interest with respect to the transactions that are described in greater detail herein. Please read this information statement/prospectus carefully, including the section entitled “Risk Factors” beginning on page 7. It provides you with detailed information about the proposed amendment of the limited partnership agreement of NPI, the proposed merger agreement and the transactions contemplated thereby and the securities offered hereby. The proposed merger agreement is attached to this information statement/prospectus as Annex A. The proposed amendment of the limited partnership agreement of NPI is attached to this information statement/prospectus as Annex F.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the mergers or determined if this information statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

This information statement/prospectus is dated,          2010, and is first being mailed to limited partners on or about          , 2010.

WE ARE CURRENTLY SEEKING QUALIFICATION TO ALLOW ALL HOLDERS OF NPI UNITS THE ABILITY TO ELECT TO RECEIVE OP UNITS IN CONNECTION WITH THE MERGER. HOWEVER, AT THE PRESENT TIME, IF YOU ARE A RESIDENT OF ONE OF THE FOLLOWING STATES, YOU ARE NOT PERMITTED TO ELECT TO RECEIVE OP UNITS IN CONNECTION WITH THE MERGER:

CALIFORNIA

MASSACHUSETTS

NEW YORK

THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

ADDITIONAL INFORMATION

This information statement/prospectus incorporates important business and financial information about Aimco and Aimco OP from documents that they have filed with the Securities and Exchange Commission but that have not been included in or delivered with this information statement/prospectus. For a listing of documents incorporated by reference into this information statement/prospectus, please see “Where You Can Find Additional Information” beginning on page 86 of this information statement/prospectus.

Aimco will provide you with copies of such documents relating to Aimco and Aimco OP (excluding all exhibits unless Aimco or Aimco OP has specifically incorporated by reference an exhibit in this information statement/prospectus), without charge, upon written or oral request to:

ISTC Corporation
P.O. Box 2347
Greenville, South Carolina 29602
(864) 239-1029

If you have any questions or require any assistance, please contact our information agent, Eagle Rock Proxy Advisors, LLC, by mail at 12 Commerce Drive, Cranford, New Jersey 07016; by fax at (908) 497-2349; or by telephone at (800) 217-9608.

ABOUT THIS INFORMATION STATEMENT/PROSPECTUS

This information statement/prospectus, which forms a part of a registration statement on Form S-4 filed with the Securities and Exchange Commission by Aimco and Aimco OP, constitutes a prospectus of Aimco OP under Section 5 of the Securities Act of 1933, as amended, or the Securities Act, with respect to the OP Units that may be issued to holders of NPI Units in connection with the mergers, and a prospectus of Aimco under Section 5 of the Securities Act with respect to shares of Aimco common stock that may be issued in exchange for such OP Units tendered for redemption by the holder thereof. This document also constitutes an information statement under Section 14(c) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, with respect to the action to be taken by written consent to approve the amendment of the limited partnership agreement of NPI, the proposed merger agreement and the transactions contemplated thereby.

TABLE OF CONTENTS

	Page
SUMMARY		1
Information about Aimco, Aimco OP, New NPI and the Aimco Subsidiary (page 18)		1
Information about National Property Investors III (page 19)		2
Comparison of NPI Units and Aimco OP Units (page 53)		2
Background and Reasons for the Transactions (page 24)		2
The Transactions (page 24)		3
Determination of Merger Consideration (page 27)		3
Risk Factors (page 7)		4
Fairness of the Transactions (page 25)		4
Conflicts of Interest (page 28)		5
Waiver and Release and Additional Consideration (page 28)		5
Regulatory Matters (page 32)		5
Appraisal Rights (page 33)		6
Termination of the Merger Agreement (page 34)		6
Summary of Material United States Federal Income Tax Consequences of the Transactions (page 58)		6
Accounting Treatment of the Transactions (page 33)		6
RISK FACTORS		7
Risks Related to the Transactions		7
Risks Related to an Investment in Aimco or Aimco OP		8
Risks Related to an Investment in OP Units		8
Certain United States Tax Risks Associated with an Investment in the OP Units		10
SELECTED SUMMARY HISTORICAL FINANCIAL DATA OF APARTMENT INVESTMENT AND MANAGEMENT COMPANY		12
SELECTED SUMMARY HISTORICAL FINANCIAL DATA OF AIMCO PROPERTIES, L.P.		14
SELECTED SUMMARY HISTORICAL FINANCIAL DATA OF NATIONAL PROPERTY INVESTORS III		16
COMPARATIVE PER SHARE DATA		17
INFORMATION ABOUT AIMCO, AIMCO OP, NEW NPI AND THE AIMCO SUBSIDIARY		18
INFORMATION ABOUT NATIONAL PROPERTY INVESTORS III		19
Distributions to Limited Partners		20
Certain Relationships and Related Transactions		20
Directors, Executive Officers and Corporate Governance		22
Security Ownership of Certain Beneficial Owners and Management		22
Additional Information		23
THE TRANSACTIONS		24
Background and Reasons for the Transactions		24
Alternatives Considered		25
Amendment to Partnership Agreement		25
Reasons for the Transactions; Fairness of the Transactions		25
Determination of Merger Consideration		27
Conflicts of Interest		28
Waiver and Release and Additional Consideration		28
The Appraisal		29

	Page
Future Plans for the Property		32
Material United States Federal Income Tax Consequences of the Transactions		32
Regulatory Matters		32
Accounting Treatment of the Transactions		33
Appraisal Rights		33
Expenses and Fees and Source of Funds		33
Approvals Required		33
THE MERGER AGREEMENT		34
The Mergers		34
Conditions to Obligations to Complete the Transactions		34
Termination of the Merger Agreement		34
Amendment		35
Governing Law		35
Appraisal Rights		35
Election Forms		35
DESCRIPTION OF AIMCO OP UNITS; SUMMARY OF AIMCO OP PARTNERSHIP AGREEMENT		36
General		36
Purpose And Business		36
Management By The General Partner		36
Outstanding Classes Of Units		37
Distributions		38
Allocations Of Net Income And Net Loss		39
Withholding		39
Return Of Capital		40
Redemption Rights Of Qualifying Parties		40
Partnership Right To Call Limited Partner Interests		40
Transfers And Withdrawals		40
Amendment of the Partnership Agreement		42
Procedures for Actions and Consents of Partners		42
Records and Accounting; Fiscal Year		42
Reports		42
Tax Matters Partner		43
Dissolution and Winding Up		43
DESCRIPTION OF AIMCO COMMON STOCK		44
General		44
Outstanding Classes Of Preferred Stock		45
COMPARISON OF AIMCO OP UNITS AND AIMCO COMMON STOCK		50
COMPARISON OF NPI UNITS AND AIMCO OP UNITS		53
Compensation and Distributions		56

ii

	Page
CERTAIN UNITED STATES FEDERAL INCOME TAX MATTERS		58
United States Federal Income Tax Consequences Relating to the Transactions		58
Taxation of Aimco OP and OP Unitholders		60
Taxation of Aimco and Aimco Stockholders		66
Other Tax Consequences		81
FEES AND EXPENSES		83
LEGAL MATTERS		84
EXPERTS		85
WHERE YOU CAN FIND ADDITIONAL INFORMATION		86
Annexes
Annex A Agreement and Plan of Merger		A-1
Annex B Appraisal Rights of Limited Partners		B-1
Annex C Officers and Directors		C-1
Annex D NPI’s Annual Report on Form 10-K for the year ended December 31, 2009		D-1
Annex E NPI’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010		E-1
Annex F Amendment to Partnership Agreement		F-1
EX-5.1
EX-5.2
EX-8.1
EX-23.1
EX-23.2
EX-23.3
EX-23.7
EX-99.1

iii

SUMMARY

This summary highlights selected information from this information statement/prospectus. It may not contain all of the information that is important to you. You are urged to carefully read the entire information statement/prospectus and the other documents referred to in this information statement/prospectus, including the merger agreement, because the information in this section does not provide all the information that might be important to you with respect to the merger agreement, the merger and the other matters described herein. For more information about Aimco, Aimco OP and NPI, see “Where You Can Find Additional Information” beginning on page 86. Each item in this summary refers to the pages of this information statement/prospectus on which that subject is discussed in more detail.

Information about Aimco, Aimco OP, New NPI and the Aimco Subsidiary (page 86)

Apartment Investment and Management Company

4582 South Ulster Street Parkway, Suite 1100

Denver, Colorado 80237

(303) 757-8101

Apartment Investment and Management Company, or Aimco, is a Maryland corporation incorporated on January 10, 1994. Aimco is a self-administered and self-managed real estate investment trust, or REIT, focused on the ownership and management of quality apartment communities located in the 20 largest markets in the United States (as measured by total market capitalization, which is the total market value of institutional-grade apartment properties in a particular market). Aimco upgrades the quality of its portfolio through the sale of communities with rents below average market rents and the reinvestment of capital within these 20 target markets through redevelopment and acquisitions. Aimco’s apartment properties are generally financed with property-level, non-recourse, long-dated, fixed-rate, amortizing debt. Aimco’s common stock is listed and traded on the New York Stock Exchange, or NYSE, under the symbol “AIV.” Aimco is one of the largest owners and operators of apartment properties in the United States. As of June 30, 2010, Aimco owned or managed 817 apartment properties containing 129,350 units located in 43 states, the District of Columbia and Puerto Rico. Additional information about Aimco and its subsidiaries is included in documents incorporated by reference into this information statement/prospectus. See “Where You Can Find Additional Information” beginning on page 86.

AIMCO Properties, L.P.

4582 South Ulster Street Parkway, Suite 1100

Denver, Colorado 80237

(303) 757-8101

AIMCO Properties, L.P., or Aimco OP, is a Delaware limited partnership formed on May 16, 1994, to act as Aimco’s operating partnership. Aimco OP, through its operating divisions and subsidiaries, holds substantially all of Aimco’s assets and manages the daily operations of Aimco’s business and assets. Under the Aimco OP partnership agreement, Aimco is required to contribute all proceeds from offerings of its securities to Aimco OP. In addition, substantially all of Aimco’s assets must be owned through Aimco OP. Therefore, Aimco generally is required to contribute all assets acquired to Aimco OP. Through its wholly owned subsidiaries, AIMCO-GP, Inc., the general partner of Aimco OP, or AIMCO-GP, and AIMCO-LP Trust, Aimco owns a majority of the ownership interests in, Aimco OP. As of June 30, 2010, Aimco held approximately 93% of the outstanding partnership common units of Aimco OP, or OP Units, and equivalents. Additional information about Aimco OP and its subsidiaries is included in documents incorporated by reference into this information statement/prospectus. See “Where You Can Find Additional Information” beginning on page 86.

National Property Investors III, LP

4582 South Ulster Street Parkway, Suite 1100

Denver, Colorado 80237

(303) 757-8101

1

National Property Investors III, LP, or New NPI, is a Delaware limited partnership formed on October 8, 2010, for the purpose of consummating the merger with NPI. New NPI has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement. New NPI’s general partner is Aimco OP, and its sole limited partner is the Aimco Subsidiary.

AIMCO NPI III Merger Sub LLC

4582 South Ulster Street Parkway, Suite 1100

Denver, Colorado 80237

(303) 757-8101

AIMCO NPI III Merger Sub LLC, or the Aimco Subsidiary, is a Delaware limited liability company formed on September 29, 2010, for the purpose of acting as limited partner of New NPI prior to the merger, and consummating the merger with New NPI. The Aimco Subsidiary has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement.

Information about National Property Investors III (page 19)

National Property Investors III

55 Beattie Place, P.O. Box 1089

Greenville, South Carolina 29602

(864) 239-1000

National Property Investors III, or NPI, is a California limited partnership organized on February 1, 1979 for the purpose of operating income-producing residential real estate. NPI presently owns and operates one investment property, Lakeside Apartments, a 568 unit apartment project located in Lisle, Illinois. Additional information about NPI is included in documents included in this information statement/prospectus. See “Where You Can Find Additional Information” beginning on page 86.

Comparison of NPI Units and Aimco OP Units (page 53)

There are a number of significant differences between NPI Units and Aimco OP Units relating to, among other things, the nature of the investment, voting rights, distributions and liquidity and transferability/redemption. Aimco OP has a more diversified property portfolio than NPI, which currently owns only one property. In addition, limited partners of NPI have certain voting rights that are not afforded to Aimco OP limited partners. Limited partners of NPI holding a majority of the outstanding units of limited partnership may remove the General Partner, although Aimco OP and its affiliates owned approximately 77.89% of the number of units outstanding as of October 7, 2010. Holders of Aimco OP Units cannot remove the general partner of Aimco OP. Moreover, the process for making distributions to limited partners is different for each partnership. See “Comparison of NPI Units and Aimco OP Units” beginning on page 53 for more information.

Background and Reasons for the Transactions (page 24)

In early 2010, the General Partner began to consider strategic alternatives for NPI and its remaining property, Lakeside Apartments. The General Partner considered the costs of operating NPI, including audit, tax and SEC reporting costs. The General Partner looked at these costs, among other things, in light of Aimco’s significant ownership percentage. The General Partner also considered past loans that had been made by Aimco OP to NPI, including an aggregate of approximately $16,808,000 between 2005 and 2009, related to a redevelopment project, as well as operations at Lakeside Apartments. Aimco OP has indicated an unwillingness to make additional advances to NPI.

In March 10, 2010, officers of Aimco and the General Partner met to discuss strategic alternatives for Lakeside Apartments and agreed to explore the possibility of Aimco OP acquiring the property through a transaction that would provide the unaffiliated limited partners with the opportunity to defer tax gain through an exchange of NPI Units for OP Units. The General Partner decided to obtain an appraisal to determine the value of Lakeside

2

Apartments and to evaluate the proceeds and tax consequences to limited partners in such a transaction. In April, 2010, the General Partner engaged Cogent Realty Advisors, LLC, or CRA, an independent real estate appraisal firm, to appraise Lakeside Apartments. In October, 2010, after receiving an appraisal of Lakeside Apartments, the General Partner’s board of directors held a meeting and decided to approve and effect a transaction with Aimco OP that would give Aimco OP indirect ownership of Lakeside Apartments. The General Partner considered a number of possible alternatives to the proposed transaction with Aimco OP, as described in greater detail below. However, the General Partner ultimately determined that the proposed transaction with Aimco OP is in the best interests of NPI and its limited partners.

The Transactions (page 24)

Amendment of NPI’s Partnership Agreement.  Prior to entering into the proposed merger agreement, NPI’s partnership agreement will be amended to (i) eliminate the prohibition on transactions between NPI, on the one hand, and its general partners and their affiliates, on the other, and (ii) authorize the General Partner to complete the mergers described below without any further action by the limited partners. A copy of the proposed amendment to NPI partnership agreement is attached as Annex F to this information statement/prospectus.

Following the amendment of NPI’s partnership agreement, NPI plans to enter into a merger agreement with Aimco OP. The merger agreement contemplates the following transactions:

Merger of NPI with and into New NPI.  First, NPI will be merged with and into New NPI with New NPI as the surviving entity. In this merger, each NPI Unit will be converted into an identical unit of limited partnership in New NPI and the general partnership interest in NPI now held by the general partner will be converted into a general partnership interest in New NPI. All interests in New NPI outstanding immediately prior to the merger will be cancelled in the merger. NPI’s partnership agreement in effect immediately prior to the merger will be adopted as the partnership agreement of New NPI, with the following changes: (i) references therein to the California Uniform Limited Partnership Act, as amended, or the California Act, will be amended to refer to the Delaware Revised Uniform Limited Partnership Act, as amended, or the Delaware Act; (ii) a description of the merger will be added; and (iii) the name of the partnership will be “National Property Investors III, LP”.

Merger of the Aimco Subsidiary with and into New NPI.  Second, the Aimco Subsidiary will be merged with and into New NPI, with New NPI as the surviving entity. In the merger, each New NPI Unit outstanding immediately prior to consummation of the merger will be converted into the right to receive, at the election of the holder, either $57.24 in cash or equivalent value in OP Units, except in those jurisdictions where the law prohibits the offer of OP Units (or registration would be prohibitively costly).

In this second merger, Aimco OP’s interests in the Aimco Subsidiary will be converted into New NPI Units. After the merger, Aimco OP will be the sole limited partner in New NPI, and will own all of the outstanding New NPI Units. The General Partner and New NPI’s partnership agreement in effect immediately prior to the merger will remain unchanged after the merger.

A copy of the proposed merger agreement is attached as Annex A to this information statement/prospectus. You are encouraged to read the proposed merger agreement carefully in its entirety because it is the legal agreement that governs the mergers.

Determination of Merger Consideration (page 27)

Through the mergers, each NPI Unit will be converted into the right to receive, at the election of the holder of such NPI Unit, either $57.24 in cash or equivalent value in OP Units. Because Aimco indirectly wholly owns the General Partner, the merger consideration has not been determined in an arm’s-length negotiation. In order to arrive at a fair consideration, Cogent Realty Advisors, LLC, or CRA, an independent real estate appraisal firm, was engaged to perform an appraisal of Lakeside Apartments. The per unit cash merger consideration is greater than the General Partner’s estimate of the proceeds that would be available for distribution to limited partners (following the repayment of debt and other liabilities) if the property was sold at a price equal to its appraised value, given that the

3

General Partner did not deduct certain amounts that would be payable upon an immediate sale of the partnership’s property, such as prepayment penalties on the mortgage debt of such property.

The number of OP Units issuable with respect to each NPI Unit will be calculated by dividing the $57.24 per unit cash merger consideration by the average closing price of Aimco common stock, as reported on the NYSE, over the ten consecutive trading days ending on the second trading day immediately prior to the consummation of the mergers. Although there is no public market for OP Units, after a one year holding period, each OP Unit is generally redeemable at the option of the holder for cash in an amount equal to the value of a share of Aimco common stock at the time, subject to Aimco’s right to acquire the OP Unit in exchange for one share of Aimco common stock (subject to antidilution adjustments). Therefore, the trading price of Aimco common stock is considered a reasonable estimate of the fair market value of an OP Unit. As of October 6, 2010, the average closing price of Aimco common stock over the preceding ten consecutive trading days was $21.65, which would have resulted in the issuances of 2.64 OP Units per NPI Unit.

For a full description of the determination of the merger consideration, see “The Transactions — Determination of Merger Consideration” beginning on page 27.

Risk Factors (page 7)

In evaluating the merger agreement and the mergers, limited partners should carefully read this information statement/prospectus and especially consider the factors discussed in the section entitled “Risk Factors” beginning on page 7. Some of the risk factors associated with the transactions are summarized below:

•  There are a number of significant differences between NPI Units and Aimco OP Units relating to, among other things, the nature of the investment, voting rights, distributions and liquidity and transferability/redemption. For more information regarding those differences, see “Comparison of NPI Units and Aimco OP Units,” beginning on page 53.

•  Aimco indirectly wholly owns the General Partner. As a result, the General Partner has a conflict of interest. A transaction with a third party in the absence of this conflict could result in better terms or greater consideration to the limited partners.

•  Limited partners may elect to receive OP Units as merger consideration, and there are risks related to an investment in OP Units, including the fact that there are restrictions on transferability of OP Units; there is no public market for OP Units; and there is no assurance as to the value that might be realized upon a future redemption by a holder of OP Units.

Fairness of the Transactions (page 25)

The General Partner believes the transactions are fair to all of the limited partners of NPI in view of a number of factors, including, but not limited to:

•  The cash merger consideration is greater than the General Partner’s estimate of the proceeds that would be available for distribution to limited partners (following the repayment of debt and other liabilities) if the Lakeside Apartments was sold at a price equal to its appraised value, given that the General Partner did not deduct certain amounts that would be payable upon an immediate sale of the property, such as prepayment penalties associated with the mortgage debt of such property, currently estimated to be $6,994,277.

•  Limited partners are given a choice of merger consideration, and may elect to receive either cash or OP Units in connection with the transactions, except in those jurisdictions where the law prohibits the offer of OP Units (or registration would be prohibitively costly). Accordingly, limited partners may elect the merger consideration they deem most beneficial to them.

•  Limited partners who elect to receive cash consideration will receive $57.24 per NPI Unit, which will provide immediate liquidity with respect to their investment.

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•  Limited partners who elect to receive cash consideration and who recognize taxable gain in the transactions will be taxed at current capital gains rates. The maximum long term federal capital gains rate, currently at 15%, is scheduled to increase to 20% in 2011.

•  Limited partners may defer recognition of taxable gain by electing to receive OP Units in connection with the transactions.

•  Limited partners who elect to receive OP Units in connection with the transactions will have the opportunity to participate in Aimco OP, which has a more diversified property portfolio than NPI.

•  Although limited partners are not entitled to dissenters’ appraisal rights under applicable law, the merger agreement provides them with contractual dissenters’ appraisal rights that are similar to the dissenters’ appraisal rights that are available to stockholders in a corporate merger under Delaware law.

•  The cash consideration payable to limited partners in connection with the transactions was determined based on an independent third party appraisal of the Lakeside Apartments.

•  The number of OP Units issuable to limited partners in connection with the transactions was determined based on the average closing price of Aimco common stock, as reported on the NYSE, over the ten consecutive trading days ending on the second trading day immediately prior to the consummation of the mergers.

•  Although the merger agreement may be terminated by either side at any time, the General Partner determined that Aimco OP, NPI, New NPI and the Aimco Subsidiary are likely to complete the transactions on a timely basis.

•  Unlike a typical property sale agreement, the merger agreement contains no indemnification provisions, so there is no risk of reduction of the proceeds to limited partners.

•  In contrast to a sale of the property to a third party, which would involve costs associated with marketing and documenting the transaction, Aimco OP has agreed to pay all expenses associated with the merger.

Conflicts of Interest (page 28)

The General Partner is indirectly wholly owned by Aimco. Therefore, it has a conflict of interest with respect to the transactions. The General Partner has fiduciary duties to its sole stockholder, which is wholly owned by Aimco, on the one hand, and to NPI and its limited partners, on the other hand. The duties of the General Partner to NPI and its limited partners conflict with its duties to its sole stockholder, which could result in the General Partner approving a transaction that is more favorable to Aimco than might be the case absent such conflict of interest. The General Partner’s desire to seek the best possible terms for NPI’s limited partners conflicts with Aimco’s interest in obtaining the best possible terms for Aimco OP.

Waiver and Release and Additional Consideration (page 28)

In addition to and separate from the merger consideration, each limited partner unaffiliated with Aimco OP or its affiliates may elect to receive an additional cash payment of $9.42 per NPI Unit in exchange for executing a waiver and release of potential claims such unaffiliated limited partner may have had in the past, may now have or may have in the future (through and including the date of the consummation of the mergers) against NPI, the General Partner, Aimco OP or its affiliates and certain other persons and entities, including but not limited to claims related to the merger agreement and the transactions contemplated thereby.

Regulatory Matters (page 32)

No material federal or state regulatory requirements must be satisfied or approvals obtained in connection with the transactions, except (1) filing a registration statement that includes this information statement/prospectus with the SEC and obtaining the SEC’s declaration that the registration statement is effective under the Securities Act, (2) registration or qualification of the issuance of OP Units under state securities laws, and (3) filing a certificate of merger with the Secretary of State of the State of Delaware and the Secretary of State of the State of California.

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Appraisal Rights (page 33)

Limited partners are not entitled to dissenters’ appraisal rights under applicable law or NPI’s partnership agreement in connection with the transactions. However, pursuant to the terms of the merger agreement, Aimco OP will provide each limited partner with contractual dissenters’ appraisal rights that are similar to the dissenters’ appraisal rights available to a stockholder of a corporation in a merger under Delaware law. These contractual appraisal rights will enable a limited partner to obtain an appraisal of the value of the limited partner’s NPI Units in connection with the transactions. Prosecution of these contractual appraisal rights will involve an arbitration proceeding, and the consideration paid to a limited partner after the prosecution of such contractual appraisal rights, which will take a period of time that cannot be predicted with accuracy, will be a cash payment, resulting in a taxable event to such limited partner. A description of the appraisal rights being provided, and the procedures that a limited partner must follow to seek such rights, is attached to this information statement/prospectus as Annex B.

Termination of the Merger Agreement (page 34)

The merger agreement may be terminated, and the transactions may be abandoned, at any time prior to consummation of the mergers, without liability to any party to the merger agreement, by NPI, New NPI, Aimco OP or the Aimco Subsidiary, in each case, acting in its sole discretion and for any reason or for no reason, notwithstanding the approval of the merger agreement by any of the partners of NPI or by Aimco OP.

Summary of Material United States Federal Income Tax Consequences of the Transactions (page 58)

The merger between NPI and New NPI will generally be treated as a partnership merger for Federal income tax purposes. In general, NPI will not recognize gain as a result of contribution of its assets to New NPI, and the merger between NPI and New NPI will not result in any tax consequences to the limited partners of NPI. The merger between NPI and the Aimco Subsidiary will generally be treated as a partnership merger for Federal income tax purposes. In general, any payment of cash for NPI Units will be treated as a sale of such NPI Units by such holder, and any exchange of NPI Units for OP Units under the terms of the merger agreement will be treated, in accordance with Sections 721 and 731 of the Internal Revenue Code of 1986, as amended, or the Code, as a tax free transaction, except to the extent described in “Certain United States Federal Income Tax Matters — Taxation of Aimco OP and OP Unitholders — United States Federal Income Tax Consequences Relating to the Transactions.”

The foregoing is a general discussion of the United Stated federal income tax consequences of the transactions. This summary does not discuss all aspects of federal income taxation that may be relevant to you in light of your specific circumstances or if you are subject to special treatment under the federal income tax laws. The particular tax consequences of the transactions to you will depend on a number of factors related to your tax situation. You should review “Certain United States Federal Income Tax Matters,” herein and consult your tax advisors for a full understanding of the tax consequences to you of the transactions.

Accounting Treatment of the Mergers (page 33)

Aimco and Aimco OP will treat the transactions as a purchase of noncontrolling interests for financial accounting purposes. This means that Aimco and Aimco OP will recognize any difference between the purchase price for these noncontrolling interests and the carrying amount of such noncontrolling interests in Aimco’s and Aimco OP’s consolidated financial statements as an adjustment to the amounts of consolidated equity and partners’ capital attributed to Aimco and Aimco OP, respectively.

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RISK FACTORS

Risks Related to the Transactions

Conflicts of Interest.  The General Partner is indirectly wholly owned by Aimco. Therefore, it has a conflict of interest with respect to the transactions. The General Partner has fiduciary duties to its sole stockholder, which is wholly owned by Aimco, on the one hand, and to NPI and its limited partners, on the other hand. The duties of the General Partner to NPI and its limited partners conflict with its duties to its sole stockholder, which could result in the General Partner approving a transaction that is more favorable to Aimco than might be the case absent such conflict of interest. The General Partner’s desire to seek the best possible terms for NPI’s limited partners conflicts with Aimco’s interest in obtaining the best possible terms for Aimco OP.

No independent representative was engaged to represent the limited partners of NPI in negotiating the terms of the transactions.  If an independent advisor had been engaged, it is possible that such advisor could have negotiated better terms for NPI’s limited partners.

The terms of the transactions have not been determined in arm’s-length negotiations.  The terms of the transactions, including the merger consideration, were determined through discussions between officers and directors of NPI, on the one hand, and officers of Aimco, on the other. All of the officers and directors of NPI are also officers of Aimco. If the terms of the transactions had been determined through arm’s-length negotiations, the terms might be more favorable to NPI and its limited partners.

Alternative valuations of NPI’s property might exceed the appraised value relied on to determine the merger consideration.  Aimco determined the merger consideration in reliance on the appraised value of NPI’s property. See, “The Transactions — The Appraisal,” beginning on page 29, for more information about the appraisal. Although an independent appraiser was engaged to perform a complete appraisal of the property, valuation is not an exact science. There are a number of other methods available to value real estate, each of which may result in different valuations of a property. Also, others using the same valuation methodology could make different assumptions and judgments, and obtain different results.

The actual sales price of NPI’s property could exceed the appraised value that Aimco relied on to determine the merger consideration.  No recent attempt has been made to market Lakeside Apartments to unaffiliated third parties. There can be no assurance that Lakeside Apartments could not be sold for a value higher than the appraised value used to determine the merger consideration if it was marketed to third-party buyers interested in a property of this type.

The merger consideration may not represent the price NPI limited partners could obtain for their NPI Units in an open market.  There is no established or regular trading market for NPI Units, nor is there another reliable standard for determining the fair market value of the NPI Units. The merger consideration does not necessarily reflect the price that NPI limited partners would receive in an open market for their NPI Units. Such prices could be higher than the aggregate value of the merger consideration.

No opinion has been obtained from an independent financial advisor that the transactions are fair to NPI limited partners.  While the General Partner believes that the terms of the transactions are fair to NPI limited partners for the reasons discussed in “The Transactions — Fairness of the Transactions” beginning on page 25, the General Partner has not obtained an opinion as to whether the transactions are fair to the limited partners of NPI from a financial point of view.

NPI limited partners may recognize taxable gain in connection with the transactions, and that gain could exceed the merger consideration.  Limited partners who elect to receive cash in connection with the transactions will recognize gain or loss equal to the difference between their “amount realized” and their adjusted tax basis in the NPI Units sold. The resulting tax liability could exceed the value of the cash received in connection with the transactions.

The amendment of the partnership agreement does not require approval by a majority of the limited partners unaffiliated with the General Partner or Aimco OP.  Under the provisions of the NPI partnership agreement and applicable law, the amendment of the partnership agreement and the transactions contemplated thereby must be

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approved by a majority in interest of the limited partnership units. As of October 7, 2010, Aimco OP and its affiliates owned approximately 77.89% of the outstanding NPI Units. Of the NPI Units owned by affiliates of the General Partner, 21,380 of such units are subject to a voting restriction, which requires such units to be voted in proportion to the votes cast with respect to NPI Units not subject to this restriction. The General Partner’ affiliates have indicated that they will vote all of their NPI Units that are not subject to this restriction, 16,039 NPI Units or approximately 33.39% of the outstanding NPI Units, in favor of the amendment of the partnership agreement and the transactions contemplated thereby. As a result, affiliates of the General Partner will vote a total of 28,901 Units, or approximately 60.16% of the outstanding NPI Units, enabling them to approve the transactions without the consent or approval of any unaffiliated limited partners.

Limited partners in certain jurisdictions will not be able to elect OP Units.  In those states or jurisdictions where the issuance of the OP Units hereby is not permitted (or the registration or qualification of OP Units in that state or jurisdiction would be prohibitively costly), residents of those states will receive only the cash consideration in the merger.

Risks Related to an Investment in Aimco or Aimco OP

For a description of risks related to an investment in Aimco and Aimco OP, please see the information set forth under “Part I — Item 1A. Risk Factors” in the Annual Reports on Form 10-K for the year ended December 31, 2009 of each of Aimco and Aimco OP, which documents are incorporated herein by reference and are available electronically through the SEC’s website, www.sec.gov, or by request to Aimco.

Risks Related to an Investment in OP Units

There are restrictions on the ability to transfer OP Units, and there is no public market for Aimco OP Units.  The Aimco OP partnership agreement restricts the transferability of OP Units. Until the expiration of a one-year holding period, subject to certain exceptions, investors may not transfer OP Units without the consent of Aimco OP’s general partner. Thereafter, investors may transfer such OP Units subject to the satisfaction of certain conditions, including the general partner’s right of first refusal. There is no public market for the OP Units. Aimco OP has no plans to list any OP Units on a securities exchange. It is unlikely that any person will make a market in the OP Units, or that an active market for the OP Units will develop. If a market for the OP Units develops and the OP Units are considered “readily tradable” on a “secondary market (or the substantial equivalent thereof),” Aimco OP would be classified as a publicly traded partnership for United States Federal income tax purposes, which could have a material adverse effect on Aimco OP.

Cash distributions by Aimco OP are not guaranteed and may fluctuate with partnership performance.  Aimco OP makes quarterly distributions to holders of OP Units (on a per unit basis) that generally are equal to dividends paid on the Aimco common stock (on a per share basis). However, such distributions will not necessarily continue to be equal to such dividends. Although Aimco OP makes quarterly distributions on its OP Units, there can be no assurance regarding the amounts of available cash that Aimco OP will generate or the portion that its general partner will choose to distribute. The actual amounts of available cash will depend upon numerous factors, including profitability of operations, required principal and interest payments on our debt, the cost of acquisitions (including related debt service payments), its issuance of debt and equity securities, fluctuations in working capital, capital expenditures, adjustments in reserves, prevailing economic conditions and financial, business and other factors, some of which may be beyond Aimco OP’s control. Cash distributions depend primarily on cash flow, including from reserves, and not on profitability, which is affected by non-cash items. Therefore, cash distributions may be made during periods when Aimco OP records losses and may not be made during periods when it records profits. The Aimco OP partnership agreement gives the general partner discretion in establishing reserves for the proper conduct of the partnership’s business that will affect the amount of available cash. Aimco is required to make reserves for the future payment of principal and interest under its credit facilities and other indebtedness. In addition, Aimco OP’s credit facility limits its ability to distribute cash to holders of OP Units. As a result of these and other factors, there can be no assurance regarding actual levels of cash distributions on OP Units, and Aimco OP’s ability to distribute cash may be limited during the existence of any events of default under any of its debt instruments.

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Holders of OP Units are limited in their ability to effect a change of control.  The limited partners of Aimco OP are unable to remove the general partner of Aimco OP or to vote in the election of Aimco’s directors unless they own shares of Aimco. In order to comply with specific REIT tax requirements, Aimco’s charter has restrictions on the ownership of its equity securities. As a result, Aimco OP limited partners and Aimco stockholders are limited in their ability to effect a change of control of Aimco OP and Aimco, respectively.

Holders of OP Units have limited voting rights.  Aimco OP is managed and operated by its general partner. Unlike the holders of common stock in a corporation, holders of OP Units have only limited voting rights on matters affecting Aimco OP’s business. Such matters relate to certain amendments of the partnership agreement and certain transactions such as the institution of bankruptcy proceedings, an assignment for the benefit of creditors and certain transfers by the general partner of its interest in Aimco OP or the admission of a successor general partner. Holders of OP Units have no right to elect the general partner on an annual or other continuing basis, or to remove the general partner. As a result, holders of OP Units have limited influence on matters affecting the operation of Aimco OP, and third parties may find it difficult to attempt to gain control over, or influence the activities of, Aimco OP.

Holders of OP Units are subject to dilution.  Aimco OP may issue an unlimited number of additional OP Units or other securities for such consideration and on such terms as it may establish, without the approval of the holders of OP Units. Such securities could have priority over the OP Units as to cash flow, distributions and liquidation proceeds. The effect of any such issuance may be to dilute the interests of holders of OP Units.

Holders of OP Units may not have limited liability in specific circumstances.  The limitations on the liability of limited partners for the obligations of a limited partnership have not been clearly established in some states. If it were determined that Aimco OP had been conducting business in any state without compliance with the applicable limited partnership statute, or that the right or the exercise of the right by the OP Unitholders as a group to make specific amendments to the agreement of limited partnership or to take other action under the agreement of limited partnership constituted participation in the “control” of Aimco OP’s business, then a holder of OP Units could be held liable under specific circumstances for Aimco OP’s obligations to the same extent as the general partner.

Aimco may have conflicts of interest with holders of OP Units.  Conflicts of interest have arisen and could arise in the future as a result of the relationships between the general partner of Aimco OP and its affiliates (including Aimco), on the one hand, and Aimco OP or any partner thereof, on the other. The directors and officers of the general partner have fiduciary duties to manage the general partner in a manner beneficial to Aimco, as the sole stockholder of the general partner. At the same time, as the general partner of Aimco OP, it has fiduciary duties to manage Aimco OP in a manner beneficial to Aimco OP and its limited partners. The duties of the general partner of Aimco OP to Aimco OP and its partners may therefore come into conflict with the duties of the directors and officers of the general partner to its sole stockholder, Aimco. Such conflicts of interest might arise in the following situations, among others:

•  Decisions of the general partner with respect to the amount and timing of cash expenditures, borrowings, issuances of additional interests and reserves in any quarter will affect whether or the extent to which there is available cash to make distributions in a given quarter.

•  Under the terms of the Aimco OP partnership agreement, Aimco OP will reimburse the general partner and its affiliates for costs incurred in managing and operating Aimco OP, including compensation of officers and employees.

•  Whenever possible, the general partner seeks to limit Aimco OP’s liability under contractual arrangements to all or particular assets of Aimco OP, with the other party thereto having no recourse against the general partner or its assets.

•  Any agreements between Aimco OP and the general partner and its affiliates will not grant to the OP Unitholders, separate and apart from Aimco OP, the right to enforce the obligations of the general partner and such affiliates in favor of Aimco OP. Therefore, the general partner, in its capacity as the general partner of Aimco OP, will be primarily responsible for enforcing such obligations.

•  Under the terms of the Aimco OP partnership agreement, the general partner is not restricted from causing Aimco OP to pay the general partner or its affiliates for any services rendered on terms that are fair and

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reasonable to Aimco OP or entering into additional contractual arrangements with any of such entities on behalf of Aimco OP. Neither the Aimco OP partnership agreement nor any of the other agreements, contracts and arrangements between Aimco OP, on the one hand, and the general partner of Aimco OP and its affiliates, on the other, are or will be the result of arm’s-length negotiations.

Provisions in the Aimco OP partnership agreement may limit the ability of a holder of OP Units to challenge actions taken by the general partner.  Delaware law provides that, except as provided in a partnership agreement, a general partner owes the fiduciary duties of loyalty and care to the partnership and its limited partners. The Aimco OP partnership agreement expressly authorizes the general partner to enter into, on behalf of Aimco OP, a right of first opportunity arrangement and other conflict avoidance agreements with various affiliates of Aimco OP and the general partner, on such terms as the general partner, in its sole and absolute discretion, believes are advisable. The latitude given in the Aimco OP partnership agreement to the general partner in resolving conflicts of interest may significantly limit the ability of a holder of OP Units to challenge what might otherwise be a breach of fiduciary duty. The general partner believes, however, that such latitude is necessary and appropriate to enable it to serve as the general partner of Aimco OP without undue risk of liability.

The Aimco OP partnership agreement limits the liability of the general partner for actions taken in good faith. Aimco OP’s partnership agreement expressly limits the liability of the general partner by providing that the general partner, and its officers and directors, will not be liable or accountable in damages to Aimco OP, the limited partners or assignees for errors in judgment or mistakes of fact or law or of any act or omission if the general partner or such director or officer acted in good faith. In addition, Aimco OP is required to indemnify the general partner, its affiliates and their respective officers, directors, employees and agents to the fullest extent permitted by applicable law, against any and all losses, claims, damages, liabilities, joint or several, expenses, judgments, fines and other actions incurred by the general partner or such other persons, provided that Aimco OP will not indemnify for (i) willful misconduct or a knowing violation of the law or (ii) for any transaction for which such person received an improper personal benefit in violation or breach of any provision of the partnership agreement. The provisions of Delaware law that allow the common law fiduciary duties of a general partner to be modified by a partnership agreement have not been resolved in a court of law, and the general partner has not obtained an opinion of counsel covering the provisions set forth in the Aimco OP partnership agreement that purport to waive or restrict the fiduciary duties of the general partner that would be in effect under common law were it not for the partnership agreement.

Certain United States Tax Risks Associated with an Investment in the OP Units

The following are among the United States Federal income tax considerations to be taken into account in connection with an investment in OP Units. For a general discussion of certain United States Federal income tax consequences resulting from acquiring, holding, exchanging, and otherwise disposing of OP Units, see “Certain United States Federal Income Tax Matters — Taxation of Aimco OP and OP Unitholders.”

Aimco OP may be treated as a “publicly traded partnership” taxable as a corporation.  If Aimco OP were treated as a “publicly traded partnership” taxed as a corporation for United States Federal income tax purposes, material adverse consequences to the partners and their owners would result. In addition, Aimco would not qualify as a REIT for United States Federal income tax purposes, which would have a material adverse impact on Aimco and its shareholders. Aimco believes and intends to take the position that Aimco OP should not be treated as a “publicly traded partnership” or taxable as a corporation. No assurances can be given that the Internal Revenue Service, or the IRS, would not assert, or that a court would not sustain a contrary position. Accordingly, each prospective investor is urged to consult his tax advisor regarding the classification and treatment of Aimco OP as a “partnership” for United States Federal income tax purposes.

The limited partners may recognize gain on the transaction.  If a limited partner receives or is deemed to receive cash or consideration other than OP Units in connection with the merger, the receipt of such cash or other consideration would be taxable to the limited partner either as “boot” or under the “disguised sale” rules. Subject to certain exceptions, including exceptions applicable to periodic distributions of operating cash flow, any transfer or deemed transfer of cash by Aimco OP to the limited partner (or its owners), including cash paid at closing, within two years before or after such a contribution of property that has an adjusted tax basis in excess of its fair market

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value, will generally be treated as part of a “disguised sale.” The application of the “disguised sale” rules is complex and depends, in part, upon the facts and circumstances applicable to the limited partner (and its owners), which Aimco has not undertaken to review. Accordingly, limited partners and their owners are particularly urged to consult with their tax advisors concerning the extent to which the “disguised sale” rules would apply.

A contribution of appreciated or depreciated property may result in special allocations to the contributing partner.  If property is contributed to Aimco OP, and the adjusted tax basis of the property differs from its fair market value, then Aimco OP tax items must be specially allocated, for United States Federal income tax purposes, in a manner chosen by Aimco OP such that the contributing partner is charged with and must recognize the unrealized gain, or benefits from the unrealized loss, associated with the property at the time of the contribution. As a result of such special allocations, the amount of net taxable income allocated to a contributing partner is likely to exceed the amount of cash distributions, if any, to which such contributing partner is entitled.

The Aimco OP general partner could take actions that would impose tax liability on a contributing partner.  There are a variety of transactions that Aimco OP may in its sole discretion undertake following a property contribution that could cause the transferor (or its partners) to incur a tax liability without a corresponding receipt of cash. Such transactions include, but are not limited to, the sale or distribution of a particular property and a reduction in nonrecourse debt, or certain tax elections made by Aimco OP. In addition, future economic, market, legal, tax or other considerations may cause Aimco OP to dispose of the contributed property or to reduce its debt. As permitted by the Aimco OP partnership agreement, the general partner intends to make decisions in its capacity as general partner of Aimco OP so as to maximize the profitability of Aimco OP as a whole, independent of the tax effects on individual holders of OP Units.

An investor’s tax liability from OP Units could exceed the cash distributions received on such OP Units.  A holder of OP Units will be required to pay United States Federal income tax on such holder’s allocable share of Aimco OP’s income, even if such holder receives no cash distributions from Aimco OP. No assurance can be given that a holder of OP Units will receive cash distributions equal to such holder’s allocable share of taxable income from Aimco OP or equal to the tax liability to such holder resulting from that income. Further, upon the sale, exchange or redemption of any OP Units, a reduction in nonrecourse debt, or upon the special allocation at the liquidation of Aimco OP, an investor may incur a tax liability in excess of the amount of cash received.

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SELECTED SUMMARY HISTORICAL FINANCIAL DATA OF
APARTMENT INVESTMENT AND MANAGEMENT COMPANY

The following tables set forth Aimco’s selected summary historical financial data as of the dates and for the periods indicated. Aimco’s historical consolidated statements of income data set forth below for each of the five fiscal years in the period ended December 31, 2009 and the historical consolidated balance sheet data for each of the five fiscal year-ends in the period ended December 31, 2009, are derived from information included in Aimco’s Current Report on Form 8-K filed with the SEC on September 10, 2010. Aimco’s historical consolidated statements of income data set forth below for each of the six months ended June 30, 2010 and 2009, and the historical consolidated balance sheet data as of June 30, 2010, are derived from Aimco’s unaudited interim Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.

You should read this information together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the consolidated financial statements and notes to the consolidated financial statements included in Aimco’s Current Report on Form 8-K filed with the SEC on September 10, 2010 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, filed with the SEC on July 30, 2010, which are incorporated by reference in this information statement/prospectus. See “Where You Can Find Additional Information” in this information statement/prospectus.

	For the Six Months
	Ended June 30,						For the Years Ended December 31,
	2010			2009(1)			2009(1)			2008(1)			2007(1)			2006(1)			2005(1)
	(Unaudited)
	(Dollar amounts in thousands, except per share data)
Consolidated Statements of Income:
Total revenues	$	584,475		$	581,447		$	1,165,641		$	1,213,170		$	1,145,922		$	1,057,177		$	878,084
Total operating expenses(2)		(520,057	)		(518,406	)		(1,061,474	)		(1,162,893	)		(967,670	)		(888,390	)		(739,863	)
Operating income(2)		64,418			63,041			104,167			50,277			178,252			168,787			138,221
Loss from continuing operations(2)		(74,296	)		(79,640	)		(198,765	)		(120,533	)		(49,071	)		(44,613	)		(36,797	)
Income from discontinued operations, net(3)		47,366			39,440			153,965			747,535			174,577			331,635			162,149
Net (loss) income		(26,930	)		(40,200	)		(44,800	)		627,002			125,506			287,022			125,352
Net income attributable to noncontrolling interests		(8,413	)		(2,779	)		(19,474	)		(214,995	)		(95,595	)		(110,234	)		(54,370	)
Net income attributable to preferred stockholders		(23,050	)		(24,643	)		(50,566	)		(53,708	)		(66,016	)		(81,132	)		(87,948	)
Net (loss) income attributable to Aimco common stockholders		(58,393	)		(67,622	)		(114,840	)		351,314			(40,586	)		93,710			(21,223	)
Earnings (loss) per common share — basic and diluted:
Loss from continuing operations attributable to Aimco common stockholders	$	(0.74	)	$	(0.72	)	$	(1.74	)	$	(2.14	)	$	(1.41	)	$	(1.48	)	$	(1.33	)
Net (loss) income attributable to Aimco common stockholders	$	(0.50	)	$	(0.60	)	$	(1.00	)	$	3.96		$	(0.43	)	$	0.98		$	(0.23	)

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	For the Six Months
	Ended June 30,				For the Years Ended December 31,
	2010		2009(1)		2009(1)		2008(1)		2007(1)		2006(1)		2005(1)
	(Unaudited)
	(Dollar amounts in thousands, except per share data)
Consolidated Balance Sheets:
Real estate, net of accumulated depreciation	$	6,810,113		—	$	6,861,247	$	7,021,643	$	6,797,518	$	6,334,853	$	5,639,155
Total assets		7,707,801		—		7,906,468		9,441,870		10,617,681		10,292,587		10,019,160
Total indebtedness		5,643,911		—		5,602,216		5,984,016		5,599,523		4,905,622		4,243,381
Total equity		1,453,319		—		1,534,703		1,646,749		2,048,546		2,650,182		3,060,969
Other Information:
Dividends declared per common share	$	0.10	$	0.10	$	0.40	$	7.48	$	4.31	$	2.40	$	3.00
Total consolidated properties (end of period)		427		485		426		514		657		703		619
Total consolidated apartment units (end of period)		94,506		111,054		95,202		117,719		153,758		162,432		158,548
Total unconsolidated properties (end of period)		59		82		77		85		94		102		264
Total unconsolidated apartment units (end of period)		6,943		8,915		8,478		9,613		10,878		11,791		35,269
Units managed (end of period)(4)		26,175		32,241		31,974		35,475		38,404		42,190		46,667

(1)	Certain reclassifications have been made to conform to the June 30, 2010 financial statement presentation, including retroactive adjustments to reflect additional properties sold or classified as held for sale as of June 30, 2010, as discontinued operations (see Note 3 to the condensed consolidated financial statements in “Item 1 — Financial Statements” in Aimco’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, and Note 13 to the consolidated financial statements in “Item 8 — Financial Statements and Supplementary Data” in Aimco’s Current Report on Form 8-K, filed with the SEC on September 10, 2010, which are incorporated by reference in this information statement/prospectus.).
(2)	Total operating expenses, operating income and loss from continuing operations for the year ended December 31, 2008, include a $91.1 million pre-tax provision for impairment losses on real estate development assets, which is discussed further in “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Aimco’s Current Report on Form 8-K filed with the SEC on September 10, 2010, which is incorporated by reference in this information statement/prospectus.
(3)	Income from discontinued operations for the years ended December 31, 2009, 2008, 2007, 2006 and 2005 includes $221.8 million, $800.3 million, $117.6 million, $337.1 million and $162.7 million in gains on disposition of real estate, respectively. Income from discontinued operations for 2009, 2008 and 2007 is discussed further in “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Aimco’s Current Report on Form 8-K filed with the SEC on September 10, 2010, which is incorporated by reference in this information statement/prospectus.
(4)	Units managed represents units in properties for which Aimco provides asset management services only, although in certain cases Aimco may indirectly own generally less than one percent of the economic interest in such properties through a partnership syndication or other fund.

13

SELECTED SUMMARY HISTORICAL FINANCIAL DATA OF AIMCO PROPERTIES, L.P.

The following table sets forth Aimco OP’s selected summary historical financial data as of the dates and for the periods indicated. Aimco OP’s historical consolidated statements of income data set forth below for each of the five fiscal years in the period ended December 31, 2009 and the historical consolidated balance sheet data for each of the five fiscal year-ends in the period ended December 31, 2009, are derived from information included in Aimco OP’s Current Report on Form 8-K filed with the SEC on September 10, 2010. Aimco OP’s historical consolidated statements of income data set forth below for each of the six months ended June 30, 2010 and 2009, and the historical consolidated balance sheet data as of June 30, 2010, are derived from Aimco OP’s unaudited interim Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.

You should read this information together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the consolidated financial statements included in Aimco OP’s Current Report on Form 8-K filed with the SEC on September 10, 2010, and Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, filed with the SEC on July 30, 2010, which are incorporated by reference in this information statement/prospectus. See “Where You Can Find Additional Information” in this information statement/prospectus.

	For the Six Months
	Ended June 30,						For the Years Ended December 31,
	2010			2009(1)			2009(1)			2008(1)			2007(1)			2006(1)			2005(1)
	(Unaudited)
	(Dollar amounts in thousands, except per unit data)
Consolidated Statements of Income:
Total revenues	$	584,475		$	581,447		$	1,165,641		$	1,213,170		$	1,145,922		$	1,057,177		$	878,084
Total operating expenses(2)		(520,057	)		(518,406	)		(1,061,474	)		(1,162,893	)		(967,670	)		(888,390	)		(739,863	)
Operating income(2)		64,418			63,041			104,167			50,277			178,252			168,787			138,221
Loss from continuing operations(2)		(73,870	)		(79,232	)		(197,945	)		(119,747	)		(48,322	)		(41,653	)		(32,339	)
Income from discontinued operations, net(3)		47,366			39,440			153,965			747,535			174,577			331,635			162,149
Net (loss) income		(26,504	)		(39,792	)		(43,980	)		627,788			126,255			289,982			129,810
Net income attributable to noncontrolling interests		(9,418	)		(5,411	)		(22,442	)		(155,749	)		(92,138	)		(92,917	)		(49,064	)
Net income attributable to preferred unitholders		(26,426	)		(27,458	)		(56,854	)		(61,354	)		(73,144	)		(90,527	)		(98,946	)
Net (loss) income attributable to the Partnership’s common unitholders		(62,348	)		(72,661	)		(123,276	)		403,700			(43,508	)		104,592			(22,458	)
Earnings (loss) per common unit — basic and diluted:
Loss from continuing operations attributable to the Partnership’s common unitholders	$	(0.74	)	$	(0.72	)	$	(1.75	)	$	(1.99	)	$	(1.40	)	$	(1.47	)	$	(1.32	)
Net (loss) income attributable to the Partnership’s common unitholders	$	(0.50	)	$	(0.60	)	$	(1.00	)	$	4.11		$	(0.42	)	$	0.99		$	(0.21	)

14

	For the Six Months
	Ended June 30,				For the Years Ended December 31,
	2010		2009(1)		2009(1)		2008(1)		2007(1)		2006(1)		2005(1)
	(Unaudited)
	(Dollar amounts in thousands, except per unit data)
Consolidated Balance Sheets:
Real estate, net of accumulated depreciation	$	6,810,618		—	$	6,861,752	$	7,022,148	$	6,798,023	$	6,335,358	$	5,639,660
Total assets		7,723,898		—		7,922,139		9,456,721		10,631,746		10,305,903		10,031,761
Total indebtedness		5,643,911		—		5,602,216		5,984,016		5,599,523		4,905,622		4,243,381
Total partners’ capital		1,469,416		—		1,550,374		1,661,600		2,152,326		2,753,617		3,164,111
Other Information:
Distributions declared per common unit	$	0.10	$	0.10	$	0.40	$	7.48	$	4.31	$	2.40	$	3.00
Total consolidated properties (end of period)		427		485		426		514		657		703		619
Total consolidated apartment units (end of period)		94,506		111,054		95,202		117,719		153,758		162,432		158,548
Total unconsolidated properties (end of period)		59		82		77		85		94		102		264
Total unconsolidated apartment units (end of period)		6,943		8,915		8,478		9,613		10,878		11,791		35,269
Units managed (end of period)(4)		26,175		32,241		31,974		35,475		38,404		42,190		46,667

(1)	Certain reclassifications have been made to conform to the June 30, 2010 financial statement presentation, including retroactive adjustments to reflect additional properties sold or classified as held for sale as of June 30, 2010, as discontinued operations (see Note 3 to the condensed consolidated financial statements in “Item 1 — Financial Statements” in Aimco OP’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, and Note 13 to the consolidated financial statements in “Item 8 — Financial Statements and Supplementary Data” in Aimco OP’s Current Report on Form 8-K, filed with the SEC on September 10, 2010, which are incorporated by reference in this information statement/prospectus.).
(2)	Total operating expenses, operating income and loss from continuing operations for the year ended December 31, 2008, include a $91.1 million pre-tax provision for impairment losses on real estate development assets, which is discussed further in “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Aimco OP’s Current Report on Form 8-K, filed with the SEC on September 10, 2010, which is incorporated by reference in this information statement/prospectus.
(3)	Income from discontinued operations for the years ended December 31, 2009, 2008, 2007, 2006 and 2005 includes $221.8 million, $800.3 million, $117.6 million, $337.1 million and $162.7 million in gains on disposition of real estate, respectively. Income from discontinued operations for 2009, 2008 and 2007 is discussed further in “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Aimco OP’s Current Report on Form 8-K, filed with the SEC on September 10, 2010, which is incorporated by reference in this information statement/prospectus.
(4)	Units managed represents units in properties for which Aimco OP provides asset management services only, although in certain cases Aimco OP may indirectly own generally less than one percent of the economic interest in such properties through a partnership syndication or other fund.

15

SELECTED SUMMARY HISTORICAL FINANCIAL DATA OF
NATIONAL PROPERTY INVESTORS III

The following table sets forth NPI’s selected summary historical financial data as of the dates and for the periods indicated. NPI’s historical statements of income and cash flow data set forth below for each of the two fiscal years in the period ended December 31, 2009 and the historical balance sheet data as of December 31, 2009 and 2008, are derived from NPI’s financial statements included in NPI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009. NPI’s historical statements of income and cash flow data set forth below for each of the six months ended June 30, 2010 and 2009, and the historical balance sheet data as of June 30, 2010, are derived from NPI’s unaudited interim Quarterly Report on Form 10-Q for the quarter ended June 30, 2010.

You should read this information together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with the financial statements and notes to the financial statements for the fiscal year ended December 31, 2009 included in NPI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 filed with the SEC on August 11, 2010, which are attached to this information statement/prospectus. See “Where You Can Find Additional Information” in this information statement/prospectus.

	For the Six Months
	Ended June 30,						For the Years Ended December 31,
	2010			2009			2009			2008
	(Unaudited)
	(Dollar amounts in thousands, except per unit data)
Operating Data:
Total revenues	$	3,408		$	3,312		$	6,812		$	6,366
Loss from continuing operations		(1,649	)		(1,879	)		(3,435	)		(3,188	)
Net loss		(1,649	)		(1,879	)		(3,435	)		(3,188	)
Net loss per limited partnership unit		(33.97	)		(38.71	)		(70.78	)		(65.68	)
Distributions per limited partnership unit		—			—			—			—
Deficit of earnings to fixed charges		(1,649	)		(1,878	)		(3,418	)		(3,372	)
Balance Sheet Data:
Cash and Cash Equivalents		139			190			194			85
Real Estate, Net of Accumulated Depreciation		18,219			21,488			19,841			23,055
Total Assets		19,298			22,604			20,927			24,076
Mortgage Notes Payable		29,233			29,493			29,375			29,608
Due to Affiliates		14,818			14,712			14,552			13,605
General Partners’ Deficit		(260	)		(228	)		(243	)		(209	)
Limited Partners’ Deficit		(25,867	)		(22,694	)		(24,235	)		(20,834	)
Total Partners’ Deficit		(26,127	)		(22,922	)		(24,478	)		(21,043	)
Total Distributions		—			—			—			—
Book value per limited partnership unit		(538.46	)		(472.41	)		(504.49	)		(433.69	)
Cash Flow Data:
Net (decrease) increase in cash and cash equivalents		(55	)		105			109			(170	)
Net cash provided by operating activities		519			425			364			819

16

COMPARATIVE PER SHARE DATA

Aimco common stock trades on the NYSE under the symbol “AIV.” The OP Units are not listed on any securities exchange and do not trade in an active secondary market. However, as described below, the trading price of Aimco common stock is considered a reasonable estimate of the fair market value of an OP Unit.

The OP Units are not listed on any securities exchange nor do they trade in an active secondary market. However, after a one-year holding period, OP Units are redeemable for shares of Aimco common stock (on a one-for-one basis) or cash equal to the value of such shares, as Aimco elects. As a result, the trading price of Aimco common stock is considered a reasonable estimate of the fair market value of an OP Unit. The number of OP Units offered in the merger with respect to each NPI Unit was calculated by dividing the per unit cash merger consideration by the average closing price of Aimco common stock, as reported on the NYSE over the ten consecutive trading days ending on the second trading day immediately prior to the consummation of the merger. The closing price of Aimco common stock as reported on the NYSE on October 7, 2010 was $22.38.

The NPI Units are not listed on any securities exchange nor do they trade in an active secondary market. The per unit cash merger consideration payable to each holder of NPI Units is greater than the General Partner’s estimate of the proceeds that would be available for distribution to limited partners (following the repayment of debt and other liabilities of NPI) if its property was sold at a price equal to its appraised value, given that the General Partner did not deduct certain amounts that would be payable upon an immediate sale of the partnership’s property, such as prepayment penalties on the mortgage debt of such property.

The following tables summarize the historical per share information for Aimco, Aimco OP and NPI for the periods indicated:

	Six Months Ended
	June 30,			Fiscal Year Ended December 31,
	2010			2009			2008			2007
Cash dividends declared per share/unit
Aimco Common Stock	$	0.10		$	0.40		$	2.40		$	2.40
Aimco OP Units	$	0.10		$	0.40		$	2.40		$	2.40
NPI Units		—			—			—			—
Loss per common share/unit from continuing operations
Aimco Common Stock	$	(0.74	)	$	(1.74	)	$	(2.14	)	$	(1.41	)
Aimco OP Units	$	(0.74	)	$	(1.75	)	$	(1.99	)	$	(1.40	)
NPI Units	$	(33.97	)	$	(70.78	)	$	(65.68	)	$	(9.84	)

	June 30, 2010			December 31, 2009
Book value per share/unit
Aimco Common Stock(1)	$	9.74		$	10.64
Aimco OP Units(2)		8.99			9.88
NPI Units		(538.46	)		(504.49	)

(1)	Based on 117.0 million and 116.5 millions shares of common stock outstanding at June 30, 2010 and December 31, 2009, respectively.
(2)	Based on 125.4 million and 124.9 million common OP Units and equivalents outstanding at June 30, 2010 and December 31, 2009, respectively.

17

INFORMATION ABOUT AIMCO, AIMCO OP, NEW NPI AND THE AIMCO SUBSIDIARY

Aimco is a Maryland corporation incorporated on January 10, 1994. Aimco is a self-administered and self-managed real estate investment trust, or REIT, focused on the ownership and management of quality apartment communities located in the 20 largest markets in the United States (as measured by total market capitalization, which is the total market value of institutional-grade apartment properties in a particular market). Aimco upgrades the quality of its portfolio through the sale of communities with rents below average market rents and the reinvestment of capital within these 20 target markets through redevelopment and acquisitions. Aimco’s apartment properties are generally financed with property-level, non-recourse, long-dated, fixed-rate, amortizing debt. Aimco’s common stock is listed and traded on the NYSE under the symbol “AIV.” As of June 30, 2010, Aimco owned or managed 817 apartment properties containing 129,350 units located in 43 states, the District of Columbia and Puerto Rico. Aimco is one of the largest owners and operators of apartment properties in the United States.

As of June 30, 2010, Aimco:

•  owned an equity interest in 232 conventional real estate properties with 71,909 units;

•  owned an equity interest in 254 affordable real estate properties with 29,540 units; and

•  provided services for or managed 27,901 units in 331 properties, primarily pursuant to long-term asset management agreements. In certain cases, Aimco may indirectly own generally less than one percent of the operations of such properties through a syndication or other fund.

Of these properties, Aimco consolidated 230 conventional properties with 70,605 units and 197 affordable properties with 23,901 units.

Through its wholly owned subsidiaries, AIMCO-GP, the general partner of Aimco OP, and AIMCO-LP Trust, Aimco owns a majority of the ownership interests in Aimco OP. As of June 30, 2010, Aimco held approximately 93% of the common partnership units and equivalents of Aimco OP. Aimco conducts substantially all of its business and owns substantially all of its assets through Aimco OP. Interests in Aimco OP that are held by limited partners other than Aimco include partnership common units or OP Units, partnership preferred units and high performance partnership units, or HPUs. Aimco OP’s income is allocated to holders of OP Units and equivalents based on the weighted average number of OP Units and equivalents outstanding during the period. The holders of the OP Units receive distributions, prorated from the date of issuance, in an amount equivalent to the dividends paid to holders of Aimco common stock. Holders of OP Units may redeem such units for cash or, at Aimco OP’s option, Aimco common stock. Partnership preferred units entitle the holders thereof to a preference with respect to distributions or upon liquidation. At June 30, 2010, after elimination of shares held by consolidated subsidiaries, 117,039,659 shares of Aimco common stock were outstanding and Aimco OP had 8,330,534 OP Units and equivalents outstanding for a combined total of 125,370,193 shares of Aimco common stock and Aimco OP Units outstanding (excluding partnership preferred units).

Aimco owns all of the outstanding common stock of the General Partner.

National Property Investors III, LP, or New NPI, is a Delaware limited partnership formed on October 8, 2010, for the purpose of consummating the merger with NPI. New NPI has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement. New NPI’s general partner is Aimco OP, and its sole limited partner is the Aimco Subsidiary.

AIMCO NPI III Merger Sub LLC, or the Aimco Subsidiary, is a Delaware limited liability company formed on September 29, 2010, for the purpose of consummating the merger with NPI. The Aimco Subsidiary has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement. The Aimco Subsidiary is a direct wholly owned subsidiary of Aimco OP.

The names, positions and business addresses of the directors and executive officers of Aimco, Aimco OP, AIMCO-GP, the General Partner and the Aimco Subsidiary, as well as a biographical summary of the experience of such persons for the past five years or more, are set forth on Annex C attached hereto and are incorporated in this information statement/prospectus by reference. Additional information about Aimco and Aimco OP is included in documents incorporated by reference into this information statement/prospectus. See “Where You Can Find Additional Information.”

18

INFORMATION ABOUT NATIONAL PROPERTY INVESTORS III

National Property Investors III is a California limited partnership organized on February 1, 1979. During 1979, NPI commenced a public offering for the sale of 66,000 limited partnership units. A total of 48,049 units of the limited partnership were issued for $500 each, for an aggregate capital contribution of $24,024,500. In addition, the general partners contributed a total of $1,000 to NPI. Since its initial offering, NPI has not received, nor are limited partners required to make, additional capital contributions. NPI’s partnership agreement provides that the partnership is to terminate on December 31, 2022 unless terminated prior to such date. The General Partner is a wholly owned subsidiary of Aimco.

NPI was organized for the purpose of operating income-producing residential real estate. At June 30, 2010, NPI owned and operated one property, Lakeside Apartments, a 568 unit apartment project located in Lisle, Illinois.

The average annual rental rates for each of the five years ended December 31, 2009 for the property are as follows:

	Average Annual Rental Rates
Property	2009		2008		2007		2006		2005
Lakeside Apartments	$	11,634/unit	$	11,520/unit	$	10,505/unit	$	9,580/unit	$	9,097/unit

The average occupancy for each of the five years ended December 31, 2009 and for the six months ended June 30, 2010 and 2009 for the property is as follows:

	Average Occupancy
	For the Six Months
	Ended June 30,						For the Years Ended December 31,
Property	2010			2009			2009			2008			2007			2006			2005
Lakeside Apartments		94	%		86	%		90	%		87	%		86	%		97	%		94	%

The real estate industry is highly competitive. NPI’s property is subject to competition from other residential apartment complexes in the area. The General Partner believes that the property is adequately insured. The property is an apartment complex which leases units for terms of one year or less. No tenant leases 10% or more of the available rental space.

During 2005 NPI commenced a redevelopment project at Lakeside Apartments. In August 2006, the scope of the redevelopment project was significantly expanded and was forecasted to cost approximately $16,300,000 with the majority of the work started in October 2006 and to be completed by November 2008. During the year ended December 31, 2007 the anticipated cost of the project was increased again by approximately $7,393,000 to a total project cost of approximately $23,693,000. The project was completed during the three months ended March 31, 2009 at a total cost of approximately $22,637,000. The redevelopment consisted of site, building exterior, common area and unit interior improvements. The site improvements consisted of landscape enhancements and replacements, repair of retaining walls and correction of erosion problems, lighting upgrades and the addition of patio privacy fences. The building exterior improvements consisted of rear entrance door replacements, gutter improvements, foundation work and exterior painting. The common area improvements consisted of upgrading the leasing center, replacing the clubhouse with a business center and conference room, fitness center with locker rooms, and the addition of a boathouse for lake recreation activities. In addition, the west clubhouse was upgraded and includes a social/game room, locker rooms and new decking. The unit interior improvements consisted of kitchen and bath upgrades, replacement of original fireplaces and other interior renovations. NPI funded the redevelopment from operations and advances from Aimco OP.

NPI regularly evaluates the capital improvement needs of the property. While NPI has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2010. Such capital expenditures will depend on the physical condition of the property as well as insurance proceeds and anticipated cash flow generated by the property. The property is in good condition, subject to normal depreciation and deterioration as is typical for assets of this type and age.

19

The following table sets forth certain information relating to the mortgages encumbering Lakeside Apartments at June 30, 2010.

	Principal,									Principal
	Balance at									Balance
	June 30,		Interest			Period		Maturity		Due at
	2010		Rate(1)			Amortized		Date		Maturity(2)
	(In thousands)									(In thousands)
1st mortgage	$	20,251		7.14	%		360 months		01/01/22	$	15,791
2nd mortgage		8,982		5.90	%		360 months		01/01/22		7,185
	$	29,233								$	22,976

(1)	Fixed rate mortgages.
(2)	See “Note C — Mortgage Notes Payable’ to the financial statements included in “Item 8. Financial Statements and Supplementary Data’ in NPI’s Annual Report on Form 10-K for the year ended December 31, 2009 attached hereto as Annex D for information with respect to NPI’s ability to prepay these mortgages and other specific details about the mortgages.

Distributions to Limited Partners

NPI presently has only NPI Units issued and outstanding. The NPI Units are entitled to allocations of profit and loss, and distributions, relating to NPI’s interest in Lakeside Apartments. As of October 7, 2010, there were 48,039 NPI Units outstanding, and Aimco OP and its affiliates owned 37,419 of those units, or approximately 77.89% of those units.

There were no distributions made by NPI during the years ended December 31, 2009 and 2008 or during the six months ended June 30, 2010. Future cash distributions will depend on the levels of net cash generated from operations, the timing of debt maturities, property sales and refinancings. NPI’s cash available for distribution is reviewed on a monthly basis. There can be no assurance, however, that NPI will generate sufficient funds from operations, after planned capital improvement expenditures, to permit any distributions to its partners in subsequent periods.

Certain Relationships and Related Transactions

NPI has no employees and depends on the General Partner and its affiliates for the management and administration of all partnership activities. The NPI partnership agreement provides that the General Partner and its affiliates receive certain payments for services and reimbursement of certain expenses incurred on behalf of NPI.

The NPI partnership agreement also provides that the General Partner and its affiliates receive 5% of gross receipts from NPI’s property as compensation for providing property management services. NPI was charged by affiliates approximately $335,000 and $315,000 for the years ended December 31, 2009 and 2008, respectively, and approximately $172,000 and $164,000 for the six months ended June 30, 2010 and 2009, respectively.

Affiliates of the General Partner charged NPI for reimbursement of accountable administrative expenses amounting to approximately $156,000 and $350,000 for the years ended December 31, 2009 and 2008, respectively. A portion of these reimbursements for the years ended December 31, 2009 and 2008 are for construction management services for certain capital improvement expenditures (not related to the redevelopment project described in the following sentence) provided by an affiliate of the General Partner of approximately $72,000 and $9,000, respectively. In connection with a redevelopment project at the property, which was completed during the second quarter of 2009 at a total cost of approximately $22,637,000, an affiliate of the General Partner received a redevelopment supervision fee of 4% of the actual redevelopment costs incurred. NPI was charged approximately $20,000 and $230,000 in redevelopment supervision fees during the years ended December 31, 2009 and 2008, respectively.

Affiliates of the General Partner charged NPI for reimbursement of accountable administrative expenses amounting to approximately $56,000 and $102,000 for the six months ended June 30, 2010 and 2009, respectively. A portion of these reimbursements for the six months ended June 30, 2010 and 2009 are for construction

20

management services for certain capital improvement expenditures (not related to the redevelopment project) provided by an affiliate of the General Partner of approximately $23,000 and $48,000, respectively. In connection with the redevelopment project completed in 2009, an affiliate of the General Partner received a redevelopment supervision fee of 4% of the actual redevelopment costs incurred. NPI was charged approximately $20,000 in redevelopment supervision fees during the six months ended June 30, 2009. There were no such redevelopment supervision fees for the six months ended June 30, 2010. At June 30, 2010, approximately $233,000 of accountable administrative expenses were owed to affiliates of the General Partner.

For services relating to the administration of NPI and operation of NPI’s property, the General Partner is entitled to receive payment for non-accountable expenses up to a maximum of $100,000 per year based upon the number of NPI Units sold, subject to certain limitations. There were no such fees for the years ended December 31, 2009 and 2008 or the six months ended June 30, 2010 and 2009, as no operating distributions were made.

Upon the sale of NPI’s property, the General Partner would be entitled to an Incentive Compensation Fee equal to a declining percentage of the difference between the total amount distributed to the limited partners and the appraised value of their investment at February 1, 1992. The percentage amount to be realized by the General Partner, if any, would be dependent upon the year in which the property is sold. Payment of the Incentive compensation Fee is subordinated to the receipt by the limited partners, of: (a) distributions from capital transaction proceeds of an amount equal to their appraised investment in NPI at February 1, 1992, and (b) distributions from all sources (capital transactions as well as cash flow) of an amount equal to six percent (6%) per annum cumulative, non-compounded, on their appraised investment in NPI at February 1, 1992.

In March 2008, the General Partner terminated the revolving credit facility that was established on behalf of NPI and certain affiliated partnerships to fund deferred maintenance and working capital needs of NPI and certain other affiliated partnerships. The General Partner does not have a commitment, intent or implication to fund cash flow deficits or furnish other direct or indirect financial assistance to NPI.

NPI may receive advances of funds from Aimco OP, an affiliate of the General Partner, although Aimco OP is not obligated to fund such advances. During the years ended December 31, 2009 and 2008, NPI received advances of approximately $2,162,000 and $5,426,000, respectively, from Aimco OP to fund a rental achievement escrow, redevelopment capital improvements, real estate taxes and operations at Lakeside Apartments. Aimco OP charges interest on advances under the terms permitted by the NPI partnership agreement. The advances bear interest at the prime rate plus 2% per annum. Interest expense during the years ended December 31, 2009 and 2008 was approximately $758,000 and $733,000, respectively. During the year ended December 31, 2009, NPI made payments of principal and accrued interest of approximately $2,035,000. There were no payments made during the year ended December 31, 2008.

During the six months ended June 30, 2010 and 2009, the Partnership received advances of approximately $358,000 and $717,000, respectively, from Aimco OP to fund real estate taxes and redevelopment capital improvements, respectively, at Lakeside Apartments. The advances bear interest at the prime rate plus 2% (5.25% at June 30, 2010) per annum. Interest expense was approximately $372,000 and $358,000 for the six months ended June 30, 2010 and 2009, respectively. During the six months ended June 30, 2010, NPI repaid $500,000 of advances and accrued interest. No such payments were made during the six months ended June 30, 2009. At June 30, 2010, the total advances and accrued interest owed to Aimco OP was approximately $14,585,000. NPI may receive additional advances of funds from Aimco OP although Aimco OP is not obligated to provide such advances. For more information on Aimco OP, see “Where You Can Find Additional Information,” beginning on page 86 of this information statement/prospectus.

NPI insures its property up to certain limits through coverage provided by Aimco, which is generally self-insured for a portion of losses and liabilities related to workers’ compensation, property casualty, general liability and vehicle liability. NPI insures its property above the Aimco limits through insurance policies obtained by Aimco from insurers unaffiliated with the General Partner. During the years ended December 31, 2009 and 2008, NPI was charged by Aimco and its affiliates approximately $99,000 and $107,000, respectively, for insurance coverage and fees associated with policy claims administration. During the six months ended June 30, 2010, NPI was charged by Aimco and its affiliates approximately $117,000 for insurance coverage and fees associated with policy claims

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administration. Additional charges will be incurred by NPI during 2010 as other insurance policies renew later in the year.

In addition to its indirect ownership of the general partner interests in NPI, Aimco and its affiliates owned 37,419 NPI Units representing approximately 77.89% of the number of NPI Units outstanding, at October 7, 2010. Pursuant to the NPI partnership agreement, limited partners holding a majority of the units are entitled to take action with respect to a variety of matters that include voting on certain amendments to the NPI partnership agreement and voting to remove the General Partner. As a result of its ownership of 77.89% of the outstanding NPI Units, Aimco and its affiliates are in a position to influence all such voting decisions with respect to NPI. However, with respect to the 21,380 NPI Units acquired on January 19, 1996, AIMCO IPLP, L.P., an affiliate of the General Partner and of Aimco, or AIMCO-IPLP, agreed to vote such NPI Units: (i) against any increase in compensation payable to the General Partner or to its affiliates; and (ii) on all other matters submitted by it or its affiliates, in proportion to the votes cast with respect to NPI Units not subject to this voting restriction. Except for the foregoing, no other limitations are imposed on AIMCO IPLP’s, Aimco’s or any other affiliates’ right to vote each NPI Unit held. Although the General Partner owes fiduciary duties to NPI’s limited partners, it also owes fiduciary duties to its sole stockholder, which is wholly owned by Aimco. As a result, the duties of the General Partner to NPI and its limited partners may come into conflict with the duties of the General Partner its sole stockholder.

Directors, Executive Officers and Corporate Governance

NPI has no directors or executive officers of its own. The names and ages of, as well as the positions and offices held by, the present directors and officers of the General Partner as of June 30, 2010 are set forth in Annex C to this information statement/prospectus. One or more of those persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Exchange Act, or are subject to the reporting requirements of Section 15(d) of the Exchange Act. Further, one or more of those persons are also officers of Aimco and the general partner of Aimco OP, entities that have a class of securities registered pursuant to Section 12(g) of the Exchange Act, or are subject to the reporting requirements of Section 15(d) of the Exchange Act. There are no family relationships between or among any officers or directors. No remuneration was paid to NPI nor its directors or officers during the year ended December 31, 2009.

The board of directors of the General Partner does not have a separate audit committee. As such, the board of directors of the General Partner fulfills the functions of an audit committee. The board of directors has determined that Steven D. Cordes meets the requirement of an “audit committee financial expert.”

The directors and officers of the General Partner with authority over NPI are all employees of subsidiaries of Aimco. Aimco has adopted a code of ethics that applies to such directors and officers that is posted on Aimco’s website (www.aimco.com). Aimco’s website is not incorporated by reference to this filing.

Security Ownership of Certain Beneficial Owners and Management

The General Partner owns all of the outstanding general partner interests in NPI, which constitute 1% of the total interests in the partnership. NPI has no directors or executive officers of its own. The General Partner is a Florida corporation, which is indirectly wholly owned by Aimco. None of the general partner or any of its directors or executive officers owns any of the NPI Units. The following table sets forth certain information as of October 7, 2010 with respect to the ownership by any person (including any “group,” as that term is used in Section 13(d)(3) of the

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Exchange Act) known to us to be the beneficial owner of more than 5% of the units of limited partnership of the partnership.

	Approximate			Approximate
	Number of			Percent of
Entity Name and Address	Units			Class
Apartment Investment and Management Company(1)		37,419	(2)		77.89	%
4582 South Ulster Street Parkway,
Suite 1100
Denver, CO 80237
AIMCO-GP, Inc.(1)		37,419	(2)		77.89	%
4582 South Ulster Street Parkway,
Suite 1100
Denver, CO 80237
AIMCO Properties, L.P.(1)		37,419	(2)		77.89	%
4582 South Ulster Street Parkway,
Suite 1100
Denver, CO 80237
AIMCO IPLP, L.P.(3)		21,566	(4)		44.89	%
4582 South Ulster Street Parkway,
Suite 1100
Denver, CO 80237
AIMCO/IPT, Inc.(3)		21,566	(4)		44.89	%
4582 South Ulster Street Parkway,
Suite 1100
Denver, CO 80237

(1)	AIMCO-GP, Inc., a Delaware corporation, is the sole general partner of AIMCO Properties, L.P., and owns approximately a 1% general partner interest in AIMCO Properties, L.P. AIMCO-GP, Inc. is wholly owned by Apartment Investment and Management Company. As of October 7, 2010, AIMCO-LP Trust, a Delaware trust wholly owned by Apartment Investment and Management Company, owns approximately a 92% interest in the OP Units and equivalents of AIMCO Properties, L.P.
(2)	AIMCO Properties, L.P., AIMCO-GP, Inc. and Apartment Investment and Management Company share voting and dispositive power over 37,419 NPI Units, representing approximately 77.89% of the class. AIMCO-GP, Inc. holds its NPI Units, directly or indirectly, as nominee for AIMCO Properties, L.P. and so AIMCO Properties, L.P. may be deemed the beneficial owner of the NPI Units held by AIMCO-GP, Inc. Apartment Investment and Management Company may be deemed the beneficial owner of the NPI Units held by AIMCO Properties, L.P. and AIMCO-GP, Inc. by virtue of its indirect ownership or control of these entities.
(3)	AIMCO IPLP, L.P. is indirectly wholly owned by Aimco. AIMCO/IPT, Inc., which is wholly owned by Aimco, holds a 70.0% interest in AIMCO IPLP, L.P. as its general partner. AIMCO Properties, L.P. holds a 30% interest in AIMCO IPLP, L.P. as the limited partner.
(4)	AIMCO IPLP, L.P. and AIMCO/IPT, Inc. share voting and dispositive power over 21,566 NPI Units, representing approximately 44.89% of the class.

Additional Information

For additional information about NPI and its property and operating data related to this property, see NPI’s Annual Report on Form 10-K for the year ended December 31, 2009, attached hereto as Annex D and NPI’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, attached hereto as Annex E.

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THE TRANSACTIONS

Background and Reasons for the Transactions

The General Partner regularly evaluates NPI’s property by considering various factors, such as the partnership’s financial position and real estate and capital markets conditions. The General Partner monitors the property’s specific locale and sub-market conditions (including stability of the surrounding neighborhood), evaluating current trends, competition, new construction and economic changes. It oversees the operating performance of the property and continuously evaluates the physical improvement requirements. In addition, the financing structure for the property (including any prepayment penalties), tax implications to limited partners, availability of attractive mortgage financing to a purchaser, and the investment climate are all considered. Any of these factors, and possibly others, can potentially contribute to any decision by the General Partner to sell, refinance, upgrade with capital improvements or hold NPI’s property.

In early 2010, the General Partner began to consider strategic alternatives for NPI and its sole property, Lakeside Apartments. The General Partner considered the costs of operating NPI, including audit, tax and SEC reporting costs. The General Partner looked at these costs, among other things, in light of Aimco’s significant ownership percentage. The General Partner also considered past loans that had been made by Aimco OP to NPI, including an aggregate of approximately $16,808,000 between 2005 and 2009, related to a redevelopment project, as well as operations at Lakeside Apartments. Certain expenses related to the redevelopment were capitalized and are being depreciated over the remaining life of the related assets. No such costs were capitalized during the six months ended June 30, 2010. Aimco OP has indicated an unwillingness to make additional advances to NPI.

On March 10, 2010, Mr. Terry Considine, Chairman and Chief Executive Officer of Aimco, and Mr. Derek McCandless, Senior Vice President, Assistant General Counsel and Assistant Secretary of Aimco and the General Partner, met to discuss strategic alternatives for the Lakeside Apartments. Messrs. Considine and McCandless agreed to explore the possibility of Aimco OP acquiring the property through a transaction that would provide the unaffiliated limited partners with the opportunity to defer tax gain through an exchange of NPI Units for OP Units.

During March and April 2010, Mr. McCandless sought advice from outside legal and tax counsel to determine whether a transaction would be feasible that would result in Aimco OP’s ownership of Lakeside Apartments while also providing potential tax deferral to the unaffiliated limited partners. Subsequently, the General Partner decided to obtain an appraisal to determine the value of Lakeside Apartments and to evaluate the proceeds and tax consequences to limited partners in such a transaction.

Also during March and April 2010, Mr. McCandless spoke with different appraisers regarding the possibility of appraising Lakeside Apartments for purposes of a potential acquisition by Aimco OP. On April 13, 2010, the General Partner engaged CRA to appraise Lakeside Apartments.

On May 21, 2010, CRA informed Mr. McCandless that it had valued Lakeside Apartments at $48.8 million. During the following two weeks, Mr. McCandless discussed CRA’s assumptions and valuation with Mr. John Bezzant, Senior Vice President — Transactions of Aimco and a Director and Senior Vice President of the General Partner and Mr. Nikhil Venkatesh, Vice President — Portfolio Strategy of Aimco and Vice President of the General Partner. Mr. Bezzant reviewed the $48.8 million value in light of fiduciary duties owed to unaffiliated limited partners and Aimco OP’s investment criteria. Mr. Bezzant determined that Aimco OP would pay the appraised value for Lakeside Apartments.

On October 8, 2010, the General Partner’s board of directors held a meeting to discuss the proposed transaction. The board decided to approve and effect a transaction with Aimco OP that would give Aimco OP indirect ownership of Lakeside Apartments. On October 8, 2010, the General Partner approved and authorized the transactions. The General Partner considered a number of possible alternatives to the proposed transactions, as described in greater detail below. However, the General Partner ultimately determined that the proposed transactions are in the best interests of NPI and its limited partners.

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Alternatives Considered

The General Partner considered the alternatives to the transactions described below, but ultimately determined that the proposed mergers with New NPI and the Aimco Subsidiary is in the best interests of NPI and its limited partners.

Sale of the property to a third party for cash.  The General Partner considered selling NPI’s property to a third party or third parties for cash, and distributing the net cash proceeds to NPI’s limited partners. The primary advantage of such a transaction would be that the sale price would reflect arm’s-length negotiations and might therefore be higher than the appraised value which has been used to determine the merger consideration. The General Partner rejected this alternative because of: (i) the risk that a third party might not be found at a satisfactory price or at all; (ii) the costs imposed on NPI in connection with marketing and selling the property; (iii) the fact that limited partners would recognize taxable gain on the sale without the option of deferring that gain, and (iv) prepayment penalty upon a sale.

Contribution of the property to Aimco.  The General Partner considered a contribution of NPI’s property to Aimco OP in exchange for OP Units. The primary advantage of such a transaction would be that NPI limited partners would not recognize taxable gain. The General Partner rejected this alternative because it would not offer an opportunity for immediate liquidity to the limited partners.

Amendment to Partnership Agreement

Prior to entering into the proposed merger agreement, NPI’s partnership agreement will be amended to (i) eliminate the prohibition on transactions between NPI, on the one hand, and its general partners and their affiliates, on the other, and (ii) authorize the General Partner to complete the mergers described below without any further action by the limited partners. The proposed amendment to NPI’s partnership agreement is included in this information statement/prospectus as Annex F.

Reasons for the Transactions; Fairness of the Transactions

The General Partner considered the above alternatives to the transactions and determined that the proposed mergers are in the best interests of NPI and its limited partners. The General Partner took into account a number of positive considerations in determining to proceed with the mergers, including those described below:

•  The cash merger consideration is greater than the General Partner’s estimate of the proceeds that would be available for distribution to limited partners (following the repayment of debt and other liabilities) if Lakeside Apartments was sold at a price equal to its appraised value, given that the General Partner did not deduct certain amounts that would be payable upon an immediate sale of the property, such as prepayment penalties associated with the mortgage debt of such property, currently estimated to be $6,994,277.

•  Limited partners are given a choice of merger consideration, and may elect to receive either cash or OP Units in connection with the transactions, except in those jurisdictions where the law prohibits the offer of OP Units (or registration would be prohibitively costly). Accordingly, limited partners may elect the merger consideration they deem most beneficial to them.

•  Limited partners who elect to receive cash consideration will receive $57.24 per NPI Unit, which will provide immediate liquidity with respect to their investment.

•  Limited partners who elect to receive cash consideration and who recognize taxable gain in the transactions will be taxed at current capital gains rates. The maximum long term federal capital gains rate, currently at 15%, is scheduled to increase to 20% in 2011.

•  Limited partners may defer recognition of taxable gain by electing to receive OP Units in connection with the transactions.

•  Limited partners who elect to receive OP Units in connection with the transactions will have the opportunity to participate in Aimco OP, which has a more diversified property portfolio than NPI.

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•  Although limited partners are not entitled to dissenters’ appraisal rights under applicable law, the merger agreement provides them with contractual dissenters’ appraisal rights that are similar to the dissenters’ appraisal rights that are available to stockholders in a corporate merger under Delaware law.

•  The cash consideration payable to limited partners in connection with the transactions was determined based on an independent third party appraisal of the Lakeside Apartments.

•  The number of OP Units issuable to limited partners in connection with the transactions was determined based on the average closing price of Aimco common stock, as reported on the NYSE, over the ten consecutive trading days ending on the second trading day immediately prior to the consummation of the mergers.

•  Although the merger agreement may be terminated by either side at any time, the General Partner determined that Aimco OP, NPI, New NPI and the Aimco Subsidiary are likely to complete the transactions on a timely basis.

•  Unlike a typical property sale, the merger agreement contains no indemnification provisions, so there is no risk of reduction of the proceeds to limited partners.

•  In contrast to a sale of the property to a third party, which would involve costs associated with marketing and documenting the transaction, Aimco OP has agreed to pay all expenses associated with the mergers.

The General Partner also considered, and balanced against the foregoing factors, a number of countervailing factors concerning the merger, including those described below:

•  The General Partner is an indirect wholly owned subsidiary of Aimco and therefore has conflicts of interest. The terms of the mergers were determined without an arm’s-length negotiation. Limited partners might obtain greater consideration in a sale of NPI’s property to a third party or parties in arm’s-length negotiations.

•  In negotiating the merger agreement, no one separately represented the interests of the limited partners. The General Partner did not appoint, or ask the limited partners to appoint, a third party to represent only their interests. If an independent advisor had been engaged, it is possible that such advisor could have negotiated better terms for NPI’s limited partners.

•  Limited partners who elect to receive OP Units in connection with the transactions will be subject to the risks related to an investment in OP Units, as described in greater detail under the heading “Risk Factors — Risks Related to an Investment in OP Units.”

•  The merger agreement was not approved by a majority of the NPI limited partners not affiliated with the General Partner or Aimco OP.

•  No opinion has been obtained from an independent financial advisor that the transactions are fair to the NPI limited partners.

•  Limited partners who elect to receive cash consideration may recognize taxable gain in connection with the transactions and that gain could exceed the merger consideration.

•  The fact that CRA has performed work for Aimco OP and its affiliates in the past and that this pre-existing relationship between CRA and Aimco OP could negatively impact CRA’s independence.

•  Limited partners who receive OP Units in connection with the transactions could recognize taxable gain if Aimco subsequently sells the property.

The General Partner took into account all of the foregoing considerations and concluded that the proposed transactions are fair to the NPI limited partners from a substantive and procedural perspective.

The foregoing discussion of the factors considered by the General Partner is not intended to be exhaustive, but rather includes the material factors considered by the General Partner. The General Partner did not assign relative weights to the above factors or the other factors it considered. In addition, the General Partner did not reach any specific conclusion on each factor considered but conducted an overall review of these factors.

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Determination of Merger Consideration

Upon completion of the transactions, limited partners in NPI will receive, for each NPI Unit outstanding immediately prior to consummation of the mergers, at the election of the holder, either $57.24 in cash or equivalent value in Aimco OP Units, except in those jurisdictions where the law prohibits the offer of OP Units in this transaction (or registration would be prohibitively costly). Because Aimco wholly owns the General Partner, the merger consideration has not been determined in an arm’s-length negotiation. In order to arrive at a fair consideration, CRA, an independent real estate appraisal firm, was engaged to perform a complete appraisal of NPI’s property. For more detailed information about the independent appraiser’s determination of the estimated value of the property, see “The Merger — The Appraisal.” The per unit cash merger consideration payable to each holder of NPI Units is greater than the General Partner’s estimate of the proceeds that would be available for distribution to limited partners (following the repayment of debt and other liabilities of NPI) if the property was sold at a price equal to its appraised value. The General Partner did not deduct certain amounts that would be payable upon an immediate sale of the partnership’s property, such as prepayment penalties on the mortgage debt of the property. The estimated prepayment penalty would have been $6,994,277. The General Partner calculated the equity of the partnership by (i) adding to the appraised value the value of any other non-real estate assets of NPI that would not be included in the appraisal; and (ii) deducting all liabilities, including mortgage debt, debt owed to the General Partner or its affiliates, accounts payable and accrued expenses and certain other costs. The amount of liabilities deducted includes an estimate of $227,200 for expenses attributable to the property that would be incurred prior to the transactions but payable after the transactions. This calculation, which is summarized below, resulted in per unit cash merger consideration of $57.24.

Appraised value of Lakeside Apartments	$	48,800,000
Plus: Cash and cash equivalents		46,404
Plus: Other assets		389,694
Less: Mortgage debt, including accrued interest		(29,367,278	)
Less: Loans from affiliates of the general partner		(14,610,059	)
Less: Payables owed to the General Partner and/or affiliates		(279,301	)
Less: Incentive Compensation Fee allocable to General Partner		(840,600	)
Less: Accounts payable and accrued expenses owed to third parties		(953,665	)
Less: Other liabilities		(208,049	)
Less: Estimated trailing payables		(227,200	)
Net partnership equity	$	2,749,946
Percentage of net partnership equity allocable to limited partners		100	%
Net partnership equity allocable to limited partners	$	2,749,946
Total number of Units		48,039
Cash consideration per unit	$	57.24

The number of OP Units offered per NPI Unit was calculated by dividing the per unit cash merger consideration by the average closing price of Aimco common stock, as reported on the NYSE, over the ten consecutive trading days ending on the second trading day immediately prior to the consummation of the mergers. Although there is no public market for OP Units, after a one-year holding period, each OP Unit is generally redeemable for cash in an amount equal to the value of one share of Aimco common stock at the time, subject to Aimco’s right to acquire each OP Unit in exchange for one share of Aimco common stock (subject to antidilution adjustments). Therefore, the General Partner considers the trading price of Aimco common stock to be a reasonable estimate of the fair market value of an OP Unit. As of October 6, 2010, the average closing price of Aimco common stock over the preceding ten consecutive trading days was $21.65, which would have resulted in OP Unit consideration of 2.64 OP Units per NPI Unit.

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Conflicts of Interest

The General Partner is indirectly wholly owned by Aimco. Therefore, it has a conflict of interest with respect to the mergers. The General Partner has fiduciary duties to its sole stockholder, which is wholly owned by Aimco, on the one hand, and to NPI and its limited partners, on the other hand. The duties of the General Partner to NPI and its limited partners conflict with its duties to its sole stockholder, which could result in the General Partner approving a transaction that is more favorable to Aimco than might be the case absent such conflict of interest. The General Partner’s desire to seek the best possible terms for NPI’s limited partners conflicts with Aimco’s interest in obtaining the best possible terms for Aimco OP.

Waiver and Release and Additional Consideration

In addition to and separate from the merger consideration, each limited partner unaffiliated with Aimco OP may elect to receive an additional cash payment of $9.42 per unit in exchange for executing a waiver and release of potential claims such limited partner may have against the Releasees (as defined below). Unaffiliated limited partners may elect to receive the additional consideration by completing the election form, executing the waiver and release that is attached to the election form and returning the election form and the executed waiver and release in accordance with the instructions provided. In executing the waiver and release, the limited partner, on behalf of himself, his heirs, estate, executor, administrator, successors and assigns, will release Aimco OP and its predecessors, successors and assigns and its present and former parents, subsidiaries, affiliates, investors, insurers, reinsurers, officers, directors, employees, agents, administrators, auditors, attorneys, accountants, information and solicitation agents, investment bankers, and other representatives, including, but not limited to, Aimco and the General Partner (collectively, the “Releasees”), from any and all claims and causes of action, whether brought individually, on behalf of a class, or derivatively, demands, rights, or liabilities, including, but not limited to, claims for negligence, gross negligence, fraud, breach of fiduciary duty (including, but not limited to, duties of care, loyalty or candor), mismanagement, corporate waste, misrepresentation, whether intentional or negligent, misstatements and omissions to disclose, breach of contract, violations of any state or federal statutes, rules or regulations, whether known claims or unknown claims, whether past claims, present claims or future claims through and including the date of the consummation of the merger, including, but not limited to, those claims that have arisen or arise, directly or indirectly, out of or relate, directly or indirectly, to (a) the merger agreement and the transactions contemplated thereby (excluding only such unaffiliated limited partner’s rights, if any, under the merger agreement), (b) any other circumstance, agreement, activity, action, omission, event or matter occurring or existing on or prior to the date of the consummation of the mergers, (c) the ownership of any limited partnership interest in NPI, including, but not limited to, any and all claims related to the management of NPI or the properties owned by NPI (whether currently or previously), the payment of management fees or other monies to the General Partner and to affiliates of NPI and prior sales of properties, or (d) the purchase, acquisition, holding, sale or voting of one or more limited partnership interests in NPI (collectively, the “Released Claims”).

Each unaffiliated limited partner who elects to execute the waiver and release and to receive the additional cash payment will expressly waive and relinquish, to the fullest extent permitted by law and consistent with the release, the provisions, rights and benefits of Section 1542 of the Civil Code of California, or Section 1542, which provides:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN ITS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

Each unaffiliated limited partner who elects to execute the waiver and release and to receive the additional cash payment will waive any and all provisions, rights and benefits conferred by any law of any state or territory of the United States, or principle of common law, that is similar, comparable or equivalent to Section 1542. Each unaffiliated limited partner who elects to execute the waiver and release and to receive the additional cash payment will acknowledge and agree that he may later discover facts in addition to or different from those which he or she now knows or believes to be true with respect to the subject matter of the Released Claims, but such unaffiliated limited partner will be deemed to have fully, finally and forever settled and released any and all Released Claims, known or unknown, suspected or unsuspected, contingent or non-contingent, that now exist or may arise in the

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future through and including the date of the consummation of the merger under any theory of law or equity now existing, including, but not limited to, conduct that is negligent, intentional, with malice, or a breach of any duty, law or rule, without regard to the subsequent discovery of the existence of such different or additional facts.

Each unaffiliated limited partner who elects to execute the waiver and release and to receive the additional cash payment will agree that the release is intended to include the Released Claims which such unaffiliated limited partner may have and which such unaffiliated limited partner does not know or suspect to exist in its favor against the Releasees, and that the release extinguishes those claims. Each unaffiliated limited partner who elects to execute the waiver and release and to receive the additional cash payment will represent and warrant to the Releasees that such unaffiliated limited partner has not assigned or otherwise transferred or subrogated any interest in the Released Claims.

The Appraisal

Selection and Qualifications of Independent Appraiser.  The General Partner retained the services of CRA to appraise the market value of NPI’s property. CRA is an experienced independent valuation consulting firm that has performed appraisal services for Aimco OP and its affiliates in the past. Aimco OP believes that its relationship with CRA had no negative impact on its independence in conducting the appraisal related to the merger.

Factors Considered.  CRA performed a complete appraisal of Lakeside Apartments. CRA has represented that its report was prepared in conformity with the Uniform Standards of Professional Appraisal Practice as promulgated by the Appraisal Standards Board of the Appraisal Foundation and in accordance with the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. NPI furnished CRA with all of the necessary information requested by CRA in connection with the appraisal. The appraisal was not prepared in conjunction with a request for a specific value or a value within a given range or predicated upon loan approval. In preparing its valuation of the property, CRA, among other things:

•  Inspected the property and its environs;

•  Reviewed demographic and other socioeconomic trends pertaining to the city and region where the property is located;

•  Examined regional apartment market conditions, with special emphasis on the property’s apartment submarket;

•  Investigated lease and sale transactions involving comparable properties in the influencing market;

•  Reviewed the existing rent roll and discussed the leasing status with the building manager and leasing agent. In addition, CRA reviewed the property’s recent operating history and those of competing properties;

•  Utilized appropriate appraisal methodology to derive estimates of value; and

•  Reconciled the estimates of value into a single value conclusion.

Summary of Approaches and Methodologies Employed.  The following summary describes the approaches and analyses employed by CRA in preparing the appraisal. CRA principally relied on two approaches to valuation: (i) the income capitalization approach and (ii) the sales comparison approach.

The income capitalization approach is based on the premise that value is derived by converting anticipated benefits into property value. Anticipated benefits include the present value of the net income and the present value of the net proceeds resulting from the re-sale of the property. CRA reported that the property has an adequate operations history to determine its income-producing capabilities over the near future. In addition, performance levels of competitive properties served as an adequate check as to the reasonableness of the property’s actual performance. As such, the income capitalization approach was utilized in the appraisal of the property.

As part of the income capitalization approach, CRA used the direct capitalization method to estimate a value for Lakeside Apartments. According to CRA’s report, the basic steps in the direct capitalization analysis to valuing the property are as follows: (i) calculate potential gross income from all sources that a competent owner could legally generate; (ii) estimate and deduct an appropriate vacancy and collection loss factor to arrive at effective

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gross income; (iii) estimate and deduct operating expenses that would be expected during a stabilized year to arrive at a probable net operating income; (iv) develop an appropriate overall capitalization rate to apply to the net operating income; and (v) estimate value by dividing the net operating income by the overall capitalization rate. In addition, any adjustments to account for differences between the current conditions and stabilized conditions are also considered.

The sales comparison approach is an estimate of value based upon a process of comparing recent sales of similar properties in the surrounding or competing areas to the subject property. Inherent in and central to this approach is the principle of substitution. This comparative process involves judgment as to the similarity of the subject property and the comparable sales with respect to many value factors such as location, contract rent levels, quality of construction, reputation and prestige, age and condition, and the interest transferred, among others. The value estimated through this approach represents the probable price at which the subject property would be sold by a willing seller to a willing and knowledgeable buyer as of the date of value. The reliability of this technique is dependent upon the availability of comparable sales data, the verification of the sales data, the degree of comparability and extent of adjustment necessary for differences, and the absence of atypical conditions affecting the individual sales prices. CRA reported that, although the volume of sales activity is down as a result of market conditions, its research revealed adequate sales activity to form a reasonable estimation of the subject property’s market value pursuant to the sales comparison approach. According to CRA’s report, the basic steps in processing the sales comparison approach are as follows: (i) research the market for recent sales transactions, listings, and offers to purchase or sell of properties similar to the subject property; (ii) select a relevant unit of comparison and develop a comparative analysis; (iii) compare comparable sale properties with the subject property using the elements of comparison and adjust the price of each comparable to the subject property; and (iv) reconcile the various value indications produced by the analysis of the comparables.

The final step in the appraisal process is to reconcile the various value indicators into a single final estimate. CRA reviewed each approach in order to determine its appropriateness relative to the property. The accuracy of the data available and the quantity of evidence were weighted in each approach. For the appraisal of Lakeside Apartments, CRA relied principally on the income capitalization approach to valuation, and the direct capitalization method was given greatest consideration in the conclusion of value under this approach. CRA relied secondarily on the sales comparison approach, and reported that the value conclusion derived pursuant to the sales comparison approach was supportive of the conclusion derived pursuant to the income capitalization approach.

Summary of Independent Appraisal of Lakeside Apartments.  CRA performed a complete appraisal of Lakeside Apartments. The appraisal report of Lakeside Apartments was dated in May 19, 2010 and provides an estimate of the property’s market value as of April 21, 2010. The summary set forth below describes the material conclusions reached by CRA based on the value determined under the valuation approaches and subject to the assumptions and limitations described below. According to CRA’s report, the estimated aggregate market value of Lakeside Apartments was $48,800,000 as of April 21, 2010. The following is a summary of the appraisal report dated May 19, 2010:

Valuation Under Income Capitalization Approach.  Using the income capitalization approach, CRA performed a direct capitalization analysis to derive a value for Lakeside Apartments.

The direct capitalization analysis resulted in a valuation conclusion for Lakeside Apartments of approximately $48,800,000.

The assumptions employed by CRA to determine the value of Lakeside Apartments under the income capitalization approach using a direct capitalization analysis included:

•  potential gross income from apartment unit rentals of $545,422 per month or $6,545,064 for the appraised year;

•  a loss to lease allowance of 1.5% of the gross rent potential;

•  rent concessions of 1.0% of the gross rent potential;

•  a combined vacancy and credit loss allowance of 7.0%;

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•  estimated utility recovery of $810 per unit;

•  other income of $700 per unit;

•  projected total expenses (including reserves) of $3,363,869;

•  capitalization rate of 7.0%.

Using a direct capitalization analysis, CRA calculated the value of Lakeside Apartments by dividing the stabilized net operating income (including an allowance for reserves) by the concluded capitalization rate of 7.0%.

CRA calculated the value conclusion of Lakeside Apartments under the income capitalization approach of approximately $48,800,000 as of April 21, 2010.

Valuation Under Sales Comparison Approach.  CRA estimated the property value of Lakeside Apartments under the sales comparison approach by analyzing sales from the influencing market that were most similar to Lakeside Apartments in terms of age, size, tenant profile and location. CRA reported that adequate sales existed to formulate a defensible value for Lakeside Apartments under the sales comparison approach.

The sales comparison approach resulted in a valuation conclusion for Lakeside Apartments of approximately $48,300,000.

In reaching a valuation conclusion for Lakeside Apartments, CRA examined and analyzed comparable sales of five properties in the influencing market. The sales reflected unadjusted sales prices ranging from $47,222 to $154,068 per unit. After adjustment, the comparable sales illustrated a value range of $59,028 to $96,797 per unit, with mean and median adjusted sale prices of $82,534 and $82,800 per unit, respectively. CRA reported that two of the comparable sales required the least adjustment and were accorded most significance in the analysis, and that the adjusted indicators exhibited by these two sales ranged from $81,606 to $96,797 per unit. CRA estimated a value of $85,000 per unit for Lakeside Apartments. Applied to Lakeside Apartment’s 586 units, this resulted in CRA’s total value estimate for Lakeside Apartments of approximately $48,300,000.

CRA also performed an effective gross income multiplier (EGIM) analysis, which resulted in an indicated EGIM of approximately 7.1 on a stabilized basis. CRA reported that that indicated EGIM was within the range of 5.1 to 8.8 produced by the comparable transactions, and that the indicator suggests that the value concluded for the property via comparative analysis was reasonable based on the income-producing characteristics of Lakeside Apartments.

Reconciliation of Values and Conclusion of Appraisal.  For the appraisal of Lakeside Apartments, CRA relied principally on the income capitalization approach to valuation, and the direct capitalization method was given greatest consideration in the conclusion of value under this approach. CRA relied secondarily on the sales comparison approach, and reported that the value conclusion derived pursuant to the sales comparison approach was supportive of the conclusion derived pursuant to the income capitalization approach. The income capitalization approach using a direct capitalization method resulted in a value of $48,800,000, and the sales comparison approach resulted in a value of $48,300,000. CRA concluded that the market value of Lakeside Apartments as of April 21, 2010 was $48,800,000.

Assumptions, Limitations and Qualifications of CRA’s Valuation.  CRA’s appraisal report was subject to the following assumptions and limiting conditions: no responsibility was assumed for the legal description or for matters including legal or title considerations, and title to the property was assumed to be good and marketable unless otherwise stated; the property was appraised free and clear of any or all liens or encumbrances unless otherwise stated; responsible ownership and competent property management were assumed; the information furnished by others was believed to be liable, and no warranty was given by CRA for the accuracy of such information; all engineering was assumed to be correct; there were no hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable, and no responsibility was assumed for such conditions or for arranging for engineering studies that may be required to discover them; there was full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance was stated, defined, and considered in the appraisal report; all applicable zoning and use regulations and restrictions have been complied with, unless nonconformity had been stated, defined, and considered in the appraisal report; all required

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licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in the appraisal report was based; the utilization of the land and improvements is within the boundaries or property lines of the property described and there is no encroachment or trespass unless noted in the appraisal report; the distribution, if any, of the total valuation in the appraisal report between land and improvements applies only under the stated program of utilization; unless otherwise stated in the appraisal report, the existence of hazardous substances, including without limitation, asbestos, polychlorinated biphenyls, petroleum leakage, or agricultural chemicals, which may or may not be present on the property, or other environmental conditions, were not called to the attention of nor did the appraiser become aware of such during the appraiser’s inspection, and the appraiser had no knowledge of the existence of such materials on or in the property unless otherwise stated; the appraiser has not made a specific compliance survey and analysis of the property to determine whether or not it is in conformity with the various detailed requirements of the Americans with Disabilities Act; and former personal property items such as kitchen and bathroom appliances were, at the time of the appraisal report, either permanently affixed to the real estate or were implicitly part of the real estate in that tenants expected the use of such items in exchange for rent and never gained any of the rights of ownership, and the intention of the owners was not to remove the articles which are required under the implied or express warranty of habitability.

Compensation of Appraiser.  CRA’s fee for the appraisal was approximately $7,124. Aimco OP paid for the costs of the appraisal. In addition to the appraisal performed in connection with the merger, during the prior two years, CRA has been paid approximately $106,669 for appraisal services by Aimco OP and its affiliates. Except as set forth above, during the prior two years, no material relationship has existed between CRA and NPI or Aimco OP or any of their affiliates. Aimco OP believes that its relationship with CRA had no negative impact on its independence in conducting the appraisals.

Availability of Appraisal Reports.  You may obtain a full copy of CRA’s appraisal upon request, without charge, by contacting Eagle Rock Proxy Advisors, LLC, by mail at 12 Commerce Drive, Cranford, New Jersey 07016; by fax at (908) 497-2349; or by telephone at (800) 217-9608. In addition, the appraisal report has been filed with the SEC. For more information about how to obtain a copy of the appraisal report see “Where You Can Find Additional Information.”

Future Plans for the Property

After the transactions, Aimco OP will be the sole limited partner in New NPI, and will own all of the outstanding New NPI Units. The General Partner will continue to be the General Partner of New NPI after the transactions, and NPI’s partnership agreement in effect immediately prior to the mergers will be adopted as the partnership agreement of New NPI, with the following changes: (i) references therein to the California Act will be amended to refer to the Delaware Act; (ii) a description of the merger will be added; and (iii) the name of the partnership will be “National Property Investors III, LP”. Aimco OP intends to retain the New NPI Units after the mergers. After the mergers, Aimco will evaluate the capital improvement needs of Lakeside Apartments, and anticipates making certain routine capital expenditures with respect to the property during the remainder of 2010.

Material United States Federal Income Tax Consequences of the Transactions

For a discussion of the material United States federal income tax consequences of the transactions, see “Certain United States Federal Income Tax Matters — United States Federal Income Tax Consequences Relating to the Transactions.”

Regulatory Matters

No material federal or state regulatory requirements must be satisfied or approvals obtained in connection with the transactions, except (1) filing a registration statement that includes this information statement/prospectus with the SEC and obtaining the SEC’s declaration that the registration statement is effective under the Securities Act, (2) registration or qualification of the issuance of OP Units under state securities laws, and (3) filing certificates of merger with the Secretary of State of the State of Delaware and the Secretary of State of the State of California.

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Accounting Treatment of the Transactions

Aimco and Aimco OP will treat the transactions as a purchase of noncontrolling interests for financial accounting purposes. This means that Aimco and Aimco OP will recognize any difference between the purchase price for these noncontrolling interests and the carrying amount of such noncontrolling interests in Aimco and Aimco OP’s consolidated financial statements as an adjustment to the amounts of consolidated equity and partners’ capital attributed to Aimco and Aimco OP, respectively.

Appraisal Rights

Limited partners are not entitled to dissenters’ appraisal rights under applicable law or NPI’s partnership agreement in connection with the merger. However, pursuant to the terms of the merger agreement, Aimco OP will provide each limited partner with contractual dissenters’ appraisal rights that are similar to the dissenters’ appraisal rights available to a stockholder of a constituent corporation in a merger reorganization under Delaware law. These contractual appraisal rights will enable a limited partner to obtain an appraisal of the value of the limited partner’s NPI Units in connection with the merger. Prosecution of these contractual appraisal rights will involve an arbitration proceeding, and the consideration paid to a limited partner after the prosecution of such contractual appraisal rights, which will take a period of time that cannot be predicted with accuracy, will be a cash payment, resulting in a taxable event to such limited partner. A description of the appraisal rights being provided, and the procedures that a limited partner must follow to seek such rights, is attached to this information statement/prospectus as Annex B.

Expenses and Fees and Source of Funds

The costs of planning and implementing the mergers, including the cash merger consideration and the preparation of this information statement/prospectus, will be borne by Aimco OP without regard to whether the merger is effectuated. The estimated amount of these costs is approximately $854,229 (assuming all limited partners elect to receive the cash merger consideration and all limited partners unaffiliated with Aimco OP elect to receive an additional cash payment in exchange for executing a waiver and release). Aimco OP is paying for the costs of the mergers with funds on hand or from drawings under its revolving credit facility.

Approvals Required

Under applicable law, the amendment of the partnership agreement of NPI and the transactions contemplated thereby must be approved by the General Partner and a majority in interest of the limited partners. The General Partner has determined that the amendment and the transactions contemplated thereby, including the mergers, are advisable and in the best interests of NPI and its limited partners and has approved the amendment and the transactions. As of October 7, 2010, there were issued and outstanding 48,039 NPI Units, and Aimco OP and its affiliates owned 37,419 of those units, or approximately 77.89% of the outstanding NPI Units. As more fully described herein, 21,380 of the NPI Units owned by an affiliate of the General Partner are subject to a voting restriction, which requires such NPI Units to be voted in proportion to the votes cast with respect to NPI Units not subject to this voting restriction. The General Partner’s affiliates have indicated that they will vote all of their NPI Units that are not subject to this restriction, 16,039 NPI Units or approximately 33.39% of the outstanding NPI Units, in favor of the amendment and the transactions. As a result, affiliates of the General Partner will vote a total of 28,901 NPI Units, or approximately 60.16% of the outstanding NPI Units, in favor of the amendment and the transactions. Aimco OP and its affiliates have indicated that they intend to take action by written consent, as permitted under the partnership agreement, to approve the amendment and the transactions on or about          , 2010. As a result, approval of the amendment and the transactions contemplated thereby is assured and your consent is not required.

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THE MERGER AGREEMENT

The following is a summary of the material terms of the merger agreement and is qualified in its entirety by reference to the merger agreement, which is attached to this information statement/prospectus as Annex A. You should read the merger agreement carefully in its entirety as it is the legal document that governs this merger.

The Mergers

The proposed amendment to NPI’s partnership agreement authorizes NPI to enter into an agreement and plan of merger with New NPI, the Aimco Subsidiary and Aimco OP, which contemplates the following transactions:

Merger of NPI with and into New NPI.  First, NPI will be merged with and into New NPI with New NPI as the surviving entity. In this merger, each NPI Unit will be converted into an identical unit of limited partnership in New NPI and the general partnership interest in NPI now held by the general partner will be converted into a general partnership interest in New NPI. All interests in New NPI outstanding immediately prior to the merger will be cancelled in the merger. NPI’s partnership agreement in effect immediately prior to the merger will be adopted as the partnership agreement of New NPI, with the following changes: (i) references therein to the California Uniform Limited Partnership Act, as amended, or the California Act, will be amended to refer to the Delaware Revised Uniform Limited Partnership Act, as amended, or the Delaware Act; (ii) a description of the merger will be added; and (iii) the name of the partnership will be “National Property Investors III, LP”.

Merger of the Aimco Subsidiary with and into New NPI.  Second, the Aimco Subsidiary will be merged with and into New NPI, with New NPI as the surviving entity. In the merger, each NPI Unit outstanding immediately prior to consummation of the merger will be converted into the right to receive, at the election of the holder, either $57.24 in cash or equivalent value in OP Units (calculated by dividing $57.24 by the average closing price of Aimco common stock, as reported on the NYSE, over the ten consecutive trading days ending on the second trading day immediately prior to the consummation of the merger); provided, however, that if Aimco OP determines that the law of the state or other jurisdiction in which a limited partner resides would prohibit the issuance of Aimco OP Units in that state or other jurisdiction (or that registration or qualification in that state or jurisdiction would be prohibitively costly), then such limited partner will only be entitled to receive $57.24 in cash for each NPI Unit.

In this second merger, Aimco OP’s interest in the Aimco Subsidiary will be converted into New NPI Units. After the merger, Aimco OP will be the sole limited partner in New NPI, and will own all of the outstanding New NPI Units. The General Partner of NPI immediately prior to the merger will continue to serve as the general partner of the surviving entity. The agreement of limited partnership of New NPI, as in effect immediately prior to the consummation of the merger, will be the agreement of limited partnership of the surviving entity after the merger, until thereafter amended in accordance with the provisions thereof and applicable law.

Conditions to Obligations to Complete the Mergers

None of the parties to the merger agreement are required to consummate the mergers if any third party consent, authorization or approval that any of the parties deems necessary or desirable in connection with the merger agreement, and the consummation of the transactions contemplated thereby, has not been obtained or received.

Termination of the Merger Agreement

The merger agreement may be terminated, and the mergers may be abandoned, at any time prior to consummation of the mergers, without liability to any party to the merger agreement, by NPI, New NPI, Aimco OP or the Aimco Subsidiary, in each case, acting in its sole discretion and for any reason or for no reason, notwithstanding the approval of the merger agreement by any of the partners of NPI or by Aimco OP.

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Amendment

Subject to applicable law, the merger agreement may be amended, modified or supplemented by written agreement of the parties at any time prior to the consummation of the mergers with respect to any of the terms contained therein.

Governing Law

The merger agreement is governed by and construed in accordance with the laws of the State of Delaware, without reference to the conflict of law provisions thereof.

Appraisal Rights

Limited partners are not entitled to dissenters’ appraisal rights under applicable law or NPI’s partnership agreement in connection with the mergers. However, pursuant to the terms of the merger agreement, Aimco OP will provide each limited partner with contractual dissenters’ appraisal rights that are similar to the dissenters’ appraisal rights available to a stockholder of a constituent corporation in a merger under Delaware law. These contractual appraisal rights will enable a limited partner to obtain an appraisal of the value of the limited partner’s NPI Units in connection with the mergers. Prosecution of these contractual appraisal rights will involve an arbitration proceeding, and the consideration paid to a limited partner after the prosecution of such contractual appraisal rights, which will take a period of time that cannot be predicted with accuracy, will be a cash payment, resulting in a taxable event to such limited partner. A description of the appraisal rights being provided, and the procedures that a limited partner must follow to seek such rights, is attached to this information statement/prospectus as Annex B.

Election Forms

Within ten days after the effective time of the mergers, Aimco OP will prepare and mail to the former holders of NPI Units an election form pursuant to which such holders can elect to receive cash or OP Units. Limited partners may also elect appraisal of their NPI Units pursuant to the election form. Holders of NPI Units may elect their form of consideration by completing and returning the election form in accordance with its instructions. If the information agent does not receive a properly completed election form from a holder before 5:00 p.m., New York time on the 30th day after the mergers, the holder will be deemed to have elected to receive the cash consideration. Former holders of NPI Units may also use the election form to elect to receive, in lieu of the merger consideration, the appraised value of their NPI Units, determined through an arbitration proceeding.

In addition, limited partners who are not affiliated with Aimco OP may elect to receive an additional cash payment of $9.42 per NPI Unit in exchange for executing a waiver and release of certain claims. In order to receive such additional consideration, limited partners must complete the election form, execute the waiver and release that is attached to the election form and return both the election form and the executed waiver and release to the information agent as described above.

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DESCRIPTION OF AIMCO OP UNITS; SUMMARY OF AIMCO OP PARTNERSHIP AGREEMENT

The following description sets forth some general terms and provisions of the Aimco OP partnership agreement. The following description of the Aimco OP partnership agreement is qualified in its entirety by the terms of the agreement.

General

Aimco OP is a limited partnership organized under the provisions of the Delaware Revised Uniform Limited Partnership Act, as amended from time to time, or any successor to such statute, or the Delaware Act, and upon the terms and subject to the conditions set forth in its agreement of limited partnership. AIMCO-GP, a Delaware corporation and wholly owned subsidiary of Aimco, is the sole general partner of Aimco OP. Another wholly owned subsidiary of Aimco, AIMCO-LP Trust, a Delaware trust, or the special limited partner, is a limited partner in Aimco OP. The term of Aimco OP commenced on May 16, 1994, and will continue in perpetuity, unless Aimco OP is dissolved sooner under the provisions of the partnership agreement or as otherwise provided by law.

Purpose And Business

The purpose and nature of Aimco OP is to conduct any business, enterprise or activity permitted by or under the Delaware Act, including, but not limited to, (i) to conduct the business of ownership, construction, development and operation of multifamily rental apartment communities, (ii) to enter into any partnership, joint venture, business trust arrangement, limited liability company or other similar arrangement to engage in any business permitted by or under the Delaware Act, or to own interests in any entity engaged in any business permitted by or under the Delaware Act, (iii) to conduct the business of providing property and asset management and brokerage services, whether directly or through one or more partnerships, joint ventures, subsidiaries, business trusts, limited liability companies or other similar arrangements, and (iv) to do anything necessary or incidental to the foregoing; provided, however, such business and arrangements and interests may be limited to and conducted in such a manner as to permit Aimco, in the sole and absolute discretion of the general partner, at all times to be classified as a REIT.

Management By The General Partner

Except as otherwise expressly provided in the Aimco OP partnership agreement, all management powers over the business and affairs of Aimco OP are exclusively vested in the general partner. No limited partner of Aimco OP or any other person to whom one or more OP Units have been transferred (each, an “assignee”) may take part in the operations, management or control (within the meaning of the Delaware Act) of Aimco OP’s business, transact any business in Aimco OP’s name or have the power to sign documents for or otherwise bind Aimco OP. The general partner may not be removed by the limited partners with or without cause, except with the consent of the general partner. In addition to the powers granted to a general partner of a limited partnership under applicable law or that are granted to the general partner under any other provision of the Aimco OP partnership agreement, the general partner, subject to the other provisions of the Aimco OP partnership agreement, has full power and authority to do all things deemed necessary or desirable by it to conduct the business of Aimco OP, to exercise all powers of Aimco OP and to effectuate the purposes of Aimco OP. Aimco OP may incur debt or enter into other similar credit, guarantee, financing or refinancing arrangements for any purpose (including, without limitation, in connection with any acquisition of properties) upon such terms as the general partner determines to be appropriate. The general partner is authorized to execute, deliver and perform specific agreements and transactions on behalf of Aimco OP without any further act, approval or vote of the limited partners.

Restrictions on General Partner’s Authority.  The general partner may not take any action in contravention of the Aimco OP partnership agreement. The general partner may not, without the prior consent of the limited partners, undertake, on behalf of Aimco OP, any of the following actions or enter into any transaction that would have the effect of such transactions: (i) except as provided in the partnership agreement, amend, modify or terminate the partnership agreement other than to reflect the admission, substitution, termination or withdrawal of partners; (ii) make a general assignment for the benefit of creditors or appoint or acquiesce in the appointment of a custodian, receiver or trustee for all or any part of the assets of Aimco OP; (iii) institute any proceeding for bankruptcy on

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behalf of Aimco OP; or (iv) subject to specific exceptions, approve or acquiesce to the transfer of Aimco OP interest of the general partner, or admit into Aimco OP any additional or successor general partners.

Additional Limited Partners.  The general partner is authorized to admit additional limited partners to Aimco OP from time to time, on terms and conditions and for such capital contributions as may be established by the general partner in its reasonable discretion. The net capital contribution need not be equal for all partners. No action or consent by the limited partners is required in connection with the admission of any additional limited partner. The general partner is expressly authorized to cause Aimco OP to issue additional interests (i) upon the conversion, redemption or exchange of any debt, OP Units or other securities issued by Aimco OP, (ii) for less than fair market value, so long as the general partner concludes in good faith that such issuance is in the best interests of the general partner and Aimco OP, and (iii) in connection with any merger of any other entity into Aimco OP if the applicable merger agreement provides that persons are to receive interests in Aimco OP in exchange for their interests in the entity merging into Aimco OP. Subject to Delaware law, any additional partnership interests may be issued in one or more classes, or one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties as shall be determined by the general partner, in its sole and absolute discretion without the approval of any limited partner, and set forth in a written document thereafter attached to and made an exhibit to the partnership agreement. Without limiting the generality of the foregoing, the general partner has authority to specify (a) the allocations of items of partnership income, gain, loss, deduction and credit to each such class or series of partnership interests; (b) the right of each such class or series of partnership interests to share in distributions; (c) the rights of each such class or series of partnership interests upon dissolution and liquidation of Aimco OP; (d) the voting rights, if any, of each such class or series of partnership interests; and (e) the conversion, redemption or exchange rights applicable to each such class or series of partnership interests. No person may be admitted as an additional limited partner without the consent of the general partner, which consent may be given or withheld in the general partner’s sole and absolute discretion.

Outstanding Classes Of Units

As of June 30, 2010, Aimco OP had issued and outstanding the following partnership interests:

						Liquidation
	Units		Quarterly Distribution			Preference
Class	Outstanding		per Unit			(per Unit)
Partnership Common Units (OP Units)		123,030,243	$	—			N/A
Class G Partnership Preferred Units(1)		4,050,000	$	0.586		$	25.00
Class T Partnership Preferred Units		6,000,000	$	0.50		$	25.00
Class U Partnership Preferred Units		8,000,000	$	0.484		$	25.00
Class V Partnership Preferred Units		3,450,000	$	0.50		$	25.00
Class Y Partnership Preferred Units		3,450,000	$	0.492		$	25.00
Series A CRA Perpetual Partnership Preferred Units(2)		114	$	4,274.17	(3)	$	500,000.00
Class One Partnership Preferred Units(4)		90,000	$	2.00		$	91.43
Class Two Partnership Preferred Units(4)		23,700	$	0.115		$	25.00
Class Three Partnership Preferred Units(4)		1,366,771	$	0.4923		$	25.00
Class Four Partnership Preferred Units(4)		755,999	$	0.50		$	25.00
Class Five Partnership Preferred Units(5)		68,671	$	—			N/A
Class Six Partnership Preferred Units(4)		796,668	$	0.53125		$	25.00
Class Seven Partnership Preferred Units(4)		27,960	$	0.5938		$	25.00
Class Eight Partnership Preferred Units(5)		6,250	$	—			N/A
Class I High Performance Partnership Units (HPUs)(5)		2,339,950	$	—			N/A

(1)	Includes 10,000 units held by a consolidated subsidiary that are eliminated in consolidation.
(2)	During 2006, Aimco sold 200 shares of its Series A Community Reinvestment Act Perpetual Preferred Stock, $0.01 par value per share, or the CRA Preferred Stock, with a liquidation preference of $500,000 per share, for

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	net proceeds of $97.5 million. The Series A Community Reinvestment Act Perpetual Partnership Preferred Units, or the CRA Preferred Units, have substantially the same terms as the CRA Preferred Stock. Holders of the CRA Preferred Units are entitled to cumulative cash dividends payable quarterly in arrears on March 31, June 30, September 30, and December 31 of each year, when and as declared, beginning on September 30, 2006. For the period from the date of original issuance through March 31, 2015, the distribution rate is a variable rate per annum equal to the Three-Month LIBOR Rate (as defined in the articles supplementary designating the CRA Preferred Stock) plus 1.25%, calculated as of the beginning of each quarterly dividend period. The rate at June 30, 2010 was 1.54%. Upon liquidation, holders of the CRA Preferred Stock are entitled to a preference of $500,000 per share, plus an amount equal to accumulated, accrued and unpaid dividends, whether or not earned or declared. The CRA Preferred Units rank prior to Common OP Units and on the same level as Aimco OP’s other Preferred OP Units, with respect to the payment of distributions and the distribution of amounts upon liquidation, dissolution or winding up. The CRA Preferred Units are not redeemable prior to June 30, 2011, except in limited circumstances related to Aimco’s REIT qualification. On and after June 30, 2011, the CRA Preferred Units are redeemable for cash, in whole or from time to time in part, upon the redemption, at Aimco’s option, of its CRA Preferred Stock at a price per share equal to the liquidation preference, plus accumulated, accrued and unpaid distributions, if any, to the redemption date.
(3)	Amount per unit based on 114 units outstanding for the entire period. 20 units were repurchased in May 2010 and received $1,980 in dividends through the date of purchase.
(4)	The Class One, Class Two, Class Three, Class Four, Class Six and Class Seven preferred OP Units are redeemable, at the holders’ option. Aimco OP, at its sole discretion, may settle such redemption requests in cash or shares of Aimco’s Class A Common Stock in a value equal to the redemption preference. In the event Aimco OP requires Aimco to issue shares to settle a redemption request, it would issue to Aimco a corresponding number of common OP Units. Aimco OP has a redemption policy that requires cash settlement of redemption requests for the redeemable preferred OP Units, subject to limited exceptions.
(5)	The holders of Class Five preferred OP Units, Class Eight preferred OP Units and HPUs receive the same amount of distributions that are paid to holders of an equivalent number of Aimco OP’s outstanding common OP Units.

Distributions

Subject to the rights of holders of any outstanding partnership preferred units, the Aimco OP partnership agreement requires the general partner to cause Aimco OP to distribute quarterly all, or such portion as the general partner may in its sole and absolute discretion determine, of Available Cash (as defined in the partnership agreement) generated by Aimco OP during such quarter to the general partner, the special limited partner, the other holders of OP Units and holders of HPUs on the record date established by the general partner with respect to such quarter, in accordance with their respective interests in Aimco OP on such record date. Holders of any partnership preferred units issued in the future may have priority over the general partner, the special limited partner, holders of OP Units and holders of HPUs with respect to distributions of Available Cash, distributions upon liquidation or other distributions.

Distributions payable with respect to any interest in Aimco OP that was not outstanding during the entire quarterly period in respect of which any distribution is made will be prorated based on the portion of the period that such interest was outstanding. The general partner in its sole and absolute discretion may distribute to the limited partners Available Cash on a more frequent basis and provide for an appropriate record date. The partnership agreement requires the general partner to take such reasonable efforts, as determined by it in its sole and absolute discretion and consistent with the requirements for qualification as a REIT, to cause Aimco OP to distribute sufficient amounts to enable the general partner to transfer funds to Aimco and enable Aimco to pay stockholder dividends that will (i) satisfy the requirements, or the REIT Requirements, for qualifying as a REIT under the Code and the applicable Treasury Regulations and (ii) avoid any United States Federal income or excise tax liability of Aimco.

While some of the debt instruments to which Aimco OP is a party, including its credit facilities, contain restrictions on the payment of distributions to OP Unitholders, the debt instruments allow Aimco OP to distribute sufficient amounts to enable the general partner and special limited partner to transfer funds to Aimco which are

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then used to pay stockholder dividends thereby allowing Aimco to meet the requirements for qualifications as a REIT under the Code.

Distributions in Kind.  No OP Unitholder has any right to demand or receive property other than cash as provided in the partnership agreement. The general partner may determine, in its sole and absolute discretion, to make a distribution in kind of partnership assets to the OP Unitholders, and such assets will be distributed in such a fashion as to ensure that the fair market value is distributed and allocated in accordance with the Aimco OP partnership agreement.

Distributions Upon Liquidation.  Subject to the rights of holders of any outstanding partnership preferred units, net proceeds from the sale or other disposition of all or substantially all of its assets in a transaction that will lead to a liquidation of Aimco OP or a related series of transactions that, taken together, result in the sale or other disposition of all or substantially all of the assets of Aimco OP, or a Terminating Capital Transaction, and any other cash received or reductions in reserves made after commencement of the liquidation of Aimco OP, will be distributed to the OP Unitholders in accordance with the Aimco OP partnership agreement.

Restricted Distributions.  The Aimco OP partnership agreement prohibits Aimco OP and the general partner, on behalf of Aimco OP, from making a distribution to any OP Unitholder on account of its interest in OP Units if such distribution would violate Section 17-607 of the Delaware Act or other applicable law.

Allocations Of Net Income And Net Loss

OP Units and HPUs.  Net Income (as defined in the Aimco OP partnership agreement) and Net Loss (as defined in the Aimco OP partnership agreement) of Aimco OP will be determined and allocated with respect to each fiscal year of Aimco OP as of the end of each such year. Except as otherwise provided in the Aimco OP partnership agreement, an allocation to an OP Unitholder of a share of Net Income or Net Loss will be treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing Net Income or Net Loss. Except as otherwise provided in the Aimco OP partnership agreement and subject to the terms of any outstanding partnership preferred units, Net Income and Net Loss will be allocated to the holders of OP Units and holders of HPUs in accordance with their respective interests at the end of each fiscal year. The Aimco OP partnership agreement contains provisions for special allocations intended to comply with certain regulatory requirements, including the requirements of Treasury Regulations Sections 1.704-1(b) and 1.704-2. Except as otherwise provided in the Aimco OP partnership agreement and subject to the terms of any outstanding partnership preferred units, for United States Federal income tax purposes under the Code and the Treasury Regulations, each partnership item of income, gain, loss and deduction will be allocated among the OP Unitholders in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated under the Aimco OP partnership agreement.

Partnership Preferred Units.  Net income will be allocated to the holders of partnership preferred units for any fiscal year (and, if necessary, subsequent fiscal years) to the extent that the holders of partnership preferred units receive a distribution on any partnership preferred units (other than an amount included in any redemption of partnership preferred units). If any partnership preferred units are redeemed, for the fiscal year that includes such redemption (and, if necessary, for subsequent fiscal years) (i) gross income and gain (in such relative proportions as the general partner in its discretion will determine) will be allocated to the holders of partnership preferred units to the extent that the redemption amounts paid or payable with respect to the partnership preferred units so redeemed exceeds the aggregate capital contributions (net of liabilities assumed or taken subject to by Aimco OP) per partnership preferred units allocable to the partnership preferred units so redeemed and (ii) deductions and losses (in such relative proportions as the general partner in its discretion will determine) will be allocated to the holders of partnership preferred units to the extent that the aggregate capital contributions (net of liabilities assumed or taken subject to by Aimco OP) per partnership preferred units allocable to the partnership preferred units so redeemed exceeds the redemption amount paid or payable with respect to the partnership preferred units so redeemed.

Withholding

Aimco OP is authorized to withhold from or pay on behalf of or with respect to each limited partner any amount of Federal, state, local or foreign taxes that the general partner determines that Aimco OP is required to

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withhold or pay with respect to any amount distributable or allocable to such limited partner under the Aimco OP partnership agreement. The Aimco OP partnership agreement also provides that any withholding tax amount paid on behalf of or with respect to a limited partner constitutes a loan by Aimco OP to such limited partner. This loan is required to be repaid within 15 days after notice to the limited partner from the general partner, and each limited partner grants a security interest in its partnership interest to secure its obligation to pay any partnership withholding tax amounts paid on its behalf or with respect to such limited partner. In addition, under the Aimco OP partnership agreement, the partnership may redeem the partnership interest of any limited partner who fails to pay partnership withholding tax amounts paid on behalf of or with respect to such limited partner. Also, the general partner has authority to withhold, from any amounts otherwise distributable, allocable or payable to a limited partner, the general partner’s estimate of further taxes required to be paid by such limited partner.

Return Of Capital

No partner is entitled to interest on its capital contribution or on such partner’s capital account. Except (i) under the rights of redemption set forth in the Aimco OP partnership agreement, (ii) as provided by law, or (iii) under the terms of any outstanding partnership preferred units, no partner has any right to demand or receive the withdrawal or return of its capital contribution from Aimco OP, except to the extent of distributions made under the Aimco OP partnership agreement or upon termination of Aimco OP. Except to the extent otherwise expressly provided in the Aimco OP partnership agreement and subject to the terms of any outstanding partnership preferred units, no limited partner or assignee will have priority over any other limited partner or Assignee either as to the return of capital contributions or as to profits, losses or distributions.

Redemption Rights Of Qualifying Parties

After the first anniversary of becoming a holder of OP Units, each OP Unitholder and some assignees have the right, subject to the terms and conditions set forth in the Aimco OP partnership agreement, to require Aimco OP to redeem all or a portion of the OP Units held by such party in exchange for shares of Aimco common stock or a cash amount equal to the value of such shares, as Aimco OP may determine. On or before the close of business on the fifth business day after a holder of OP Units gives the general partner a notice of redemption, Aimco OP may, in its sole and absolute discretion but subject to the restrictions on the ownership of Aimco stock imposed under Aimco’s charter and the transfer restrictions and other limitations thereof, elect to cause Aimco to acquire some or all of the tendered OP Units from the tendering party in exchange for Aimco common stock, based on an exchange ratio of one share of Aimco common stock for each OP Unit, subject to adjustment as provided in the Aimco OP partnership agreement. The Aimco OP partnership agreement does not obligate Aimco or the general partner to register, qualify or list any Aimco common stock issued in exchange for OP Units with the SEC, with any state securities commissioner, department or agency, or with any stock exchange. Aimco common stock issued in exchange for OP Units under the Aimco OP partnership agreement will contain legends regarding restrictions under the Securities Act and applicable state securities laws as Aimco in good faith determines to be necessary or advisable in order to ensure compliance with securities laws. In the event of a change of control of Aimco, holders of HPUs will have redemption rights similar to those of holders of OP Units.

Partnership Right To Call Limited Partner Interests

Notwithstanding any other provision of the Aimco OP partnership agreement, on and after the date on which the aggregate percentage interests of the limited partners, other than the special limited partner, are less than one percent (1%), Aimco OP will have the right, but not the obligation, from time to time and at any time to redeem any and all outstanding limited partner interests (other than the special limited partner’s interest) by treating any limited partner as if such limited partner had tendered for redemption under the Aimco OP partnership agreement the amount of OP Units specified by the general partner, in its sole and absolute discretion, by notice to the limited partner.

Transfers And Withdrawals

Restrictions On Transfer.  The Aimco OP partnership agreement restricts the transferability of OP Units. Any transfer or purported transfer of an OP Unit not made in accordance with the Aimco OP partnership agreement will

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be null and void ab initio. Until the expiration of one year from the date on which an OP Unitholder acquired OP Units, subject to some exceptions, such OP Unitholder may not transfer all or any portion of its OP Units to any transferee without the consent of the general partner, which consent may be withheld in its sole and absolute discretion. After the expiration of one year from the date on which an OP Unitholder acquired OP Units, such OP Unitholder has the right to transfer all or any portion of its OP Units to any person, subject to the satisfaction of specific conditions specified in the Aimco OP partnership agreement, including the general partner’s right of first refusal.

It is a condition to any transfer (whether or not such transfer is effected before or after the one year holding period) that the transferee assumes by operation of law or express agreement all of the obligations of the transferor limited partner under the Aimco OP partnership agreement with respect to such OP Units, and no such transfer (other than under a statutory merger or consolidation wherein all obligations and liabilities of the transferor partner are assumed by a successor corporation by operation of law) will relieve the transferor partner of its obligations under the Aimco OP partnership agreement without the approval of the general partner, in its sole and absolute discretion.

In connection with any transfer of OP Units, the general partner will have the right to receive an opinion of counsel reasonably satisfactory to it to the effect that the proposed transfer may be effected without registration under the Securities Act, and will not otherwise violate any federal or state securities laws or regulations applicable to Aimco OP or the OP Units transferred.

No transfer by a limited partner of its OP Units (including any redemption or any acquisition of OP Units by the general partner or by Aimco OP) may be made to any person if (i) in the opinion of legal counsel for Aimco OP, it would result in Aimco OP being treated as an association taxable as a corporation, or (ii) such transfer is effectuated through an “established securities market” or a “secondary market (or the substantial equivalent thereof)” within the meaning of Section 7704 of the Code.

HPUs.  HPUs are subject to different restrictions on transfer. Individuals may not transfer HPUs except to a family member (or a family-owned entity) or in the event of their death.

Substituted Limited Partners.  No limited partner will have the right to substitute a transferee as a limited partner in its place. A transferee of the interest of a limited partner may be admitted as a substituted limited partner only with the consent of the general partner, which consent may be given or withheld by the general partner in its sole and absolute discretion. If the general partner, in its sole and absolute discretion, does not consent to the admission of any permitted transferee as a substituted limited partner, such transferee will be considered an assignee for purposes of the Aimco OP partnership agreement. An assignee will be entitled to all the rights of an assignee of a limited partnership interest under the Delaware Act, including the right to receive distributions from Aimco OP and the share of Net Income, Net Losses and other items of income, gain, loss, deduction and credit of Aimco OP attributable to the OP Units assigned to such transferee and the rights to transfer the OP Units provided in the Aimco OP partnership agreement, but will not be deemed to be a holder of OP Units for any other purpose under the Aimco OP partnership agreement, and will not be entitled to effect a consent or vote with respect to such OP Units on any matter presented to the limited partners for approval (such right to consent or vote, to the extent provided in the Aimco OP partnership agreement or under the Delaware Act, fully remaining with the transferor limited partner).

Withdrawals.  No limited partner may withdraw from Aimco OP other than as a result of a permitted transfer of all of such limited partner’s OP Units in accordance with the Aimco OP partnership agreement, with respect to which the transferee becomes a substituted limited partner, or under a redemption (or acquisition by Aimco) of all of such limited partner’s OP Units.

Restrictions on the general partner.  The general partner may not transfer any of its general partner interest or withdraw from Aimco OP unless (i) the limited partners consent or (ii) immediately after a merger of the general partner into another entity, substantially all of the assets of the surviving entity, other than the general partnership interest in Aimco OP held by the general partner, are contributed to Aimco OP as a capital contribution in exchange for OP Units.

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Amendment of the Partnership Agreement

By the General Partner Without the Consent of the Limited Partners.  The general partner has the power, without the consent of the limited partners, to amend the Aimco OP partnership agreement as may be required to facilitate or implement any of the following purposes: (1) to add to the obligations of the general partner or surrender any right or power granted to the general partner or any affiliate of the general partner for the benefit of the limited partners; (2) to reflect the admission, substitution or withdrawal of partners or the termination of Aimco OP in accordance with the partnership agreement; (3) to reflect a change that is of an inconsequential nature and does not adversely affect the limited partners in any material respect, or to cure any ambiguity, correct or supplement any provision in the partnership agreement not inconsistent with law or with other provisions, or make other changes with respect to matters arising under the partnership agreement that will not be inconsistent with law or with the provisions of the partnership agreement; (4) to satisfy any requirements, conditions or guidelines contained in any order, directive, opinion, ruling or regulation of a federal or state agency or contained in federal or state law; (5) to reflect such changes as are reasonably necessary for Aimco to maintain its status as a REIT; and (6) to modify the manner in which capital accounts are computed (but only to the extent set forth in the definition of “Capital Account” in the Aimco OP partnership agreement or contemplated by the Code or the Regulations).

With the Consent of the Limited Partners.  Amendments to the Aimco OP partnership agreement may be proposed by the general partner or by holders of a majority of the outstanding OP Units and other classes of units that have the same voting rights as holders of OP Units, excluding the special limited partner. Following such proposal, the general partner will submit any proposed amendment to the limited partners. The general partner will seek the written consent of a majority in interest of the limited partners on the proposed amendment or will call a meeting to vote thereon and to transact any other business that the general partner may deem appropriate.

Procedures for Actions and Consents of Partners

Meetings of the partners may be called by the general partner and will be called upon the receipt by the general partner of a written request by a majority in interest of the limited partners. Notice of any such meeting will be given to all partners not less than seven (7) days nor more than thirty (30) days prior to the date of such meeting. Partners may vote in person or by proxy at such meeting. Each meeting of partners will be conducted by the general partner or such other person as the general partner may appoint under such rules for the conduct of the meeting as the general partner or such other person deems appropriate in its sole and absolute discretion. Whenever the vote or consent of partners is permitted or required under the partnership agreement, such vote or consent may be given at a meeting of partners or may be given by written consent. Any action required or permitted to be taken at a meeting of the partners may be taken without a meeting if a written consent setting forth the action so taken is signed by partners holding a majority of outstanding OP Units (or such other percentage as is expressly required by the Aimco OP partnership agreement for the action in question).

Records and Accounting; Fiscal Year

The Aimco OP partnership agreement requires the general partner to keep or cause to be kept at the principal office of Aimco OP those records and documents required to be maintained by the Delaware Act and other books and records deemed by the general partner to be appropriate with respect to Aimco OP’s business. The books of Aimco OP will be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with generally accepted accounting principles, or on such other basis as the general partner determines to be necessary or appropriate. To the extent permitted by sound accounting practices and principles, Aimco OP, the general partner and Aimco may operate with integrated or consolidated accounting records, operations and principles. The fiscal year of Aimco OP is the calendar year.

Reports

As soon as practicable, but in no event later than one hundred and five (105) days after the close of each calendar quarter and each fiscal year, the general partner will make available to limited partners (which may be done by filing a report with the SEC) a report containing financial statements of Aimco OP, or of Aimco if such statements are prepared solely on a consolidated basis with Aimco, for such calendar quarter or fiscal year, as the

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case may be, presented in accordance with generally accepted accounting principles, and such other information as may be required by applicable law or regulation or as the general partner determines to be appropriate. Statements included in quarterly reports are not audited. Statements included in annual reports are audited by a nationally recognized firm of independent public accountants selected by the general partner.

Tax Matters Partner

The general partner is the “tax matters partner” of Aimco OP for United States Federal income tax purposes. The tax matters partner is authorized, but not required, to take certain actions on behalf of Aimco OP with respect to tax matters. In addition, the general partner will arrange for the preparation and timely filing of all returns with respect to partnership income, gains, deductions, losses and other items required of Aimco OP for United States Federal and state income tax purposes and will use all reasonable effort to furnish, within ninety (90) days of the close of each taxable year, the tax information reasonably required by limited partners for United States Federal and state income tax reporting purposes. The limited partners will promptly provide the general partner with such information as may be reasonably requested by the general partner from time to time.

Dissolution and Winding Up

Dissolution.  Aimco OP will dissolve, and its affairs will be wound up, upon the first to occur of any of the following (each a “liquidating event”): (i) an event of withdrawal, as defined in the Delaware Act (including, without limitation, bankruptcy), of the sole general partner unless, within ninety (90) days after the withdrawal, a “majority in interest” (as such phrase is used in Section 17-801(3) of the Delaware Act) of the remaining partners agree in writing, in their sole and absolute discretion, to continue the business of Aimco OP and to the appointment, effective as of the date of withdrawal, of a successor general partner; (ii) an election to dissolve Aimco OP made by the general partner in its sole and absolute discretion, with or without the consent of the limited partners; (iii) entry of a decree of judicial dissolution of Aimco OP under the provisions of the Delaware Act; (iv) the occurrence of a Terminating Capital Transaction; or (v) the redemption (or acquisition by Aimco, the general partner and/or the special limited partner) of all OP Units other than OP Units held by the general partner or the special limited partner.

Winding Up.  Upon the occurrence of a liquidating event, Aimco OP will continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets and satisfying the claims of its creditors and partners. The general partner (or, in the event that there is no remaining general partner or the general partner has dissolved, become bankrupt within the meaning of the Delaware Act or ceased to operate, any person elected by a majority in interest of the limited partners) will be responsible for overseeing the winding up and dissolution of Aimco OP and will take full account of Aimco OP’s liabilities and property, and Aimco OP property will be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the general partner, include Aimco stock) will be applied and distributed in the following order: (i) first, to the satisfaction of all of Aimco OP’s debts and liabilities to creditors other than the partners and their assignees (whether by payment or the making of reasonable provision for payment thereof); (ii) second, to the satisfaction of all Aimco OP’s debts and liabilities to the general partner (whether by payment or the making of reasonable provision for payment thereof), including, but not limited to, amounts due as reimbursements under the partnership agreement; (ii) third, to the satisfaction of all of Aimco OP’s debts and liabilities to the other partners and any assignees (whether by payment or the making of reasonable provision for payment thereof); (iv) fourth, to the satisfaction of all liquidation preferences of outstanding Partnership Preferred Units, if any; and (v) the balance, if any, to the general partner, the limited partners and any assignees in accordance with and in proportion to their positive capital account balances, after giving effect to all contributions, distributions and allocations for all periods. In the event of a liquidation, holders of HPUs will be specially allocated items of income and gain in an amount sufficient to cause the capital account of such holder to be equal to that of a holder of an equal number of OP Units.

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DESCRIPTION OF AIMCO COMMON STOCK

General

Aimco’s charter authorizes the issuance of up to 422,157,736 shares of common stock. As of October 6, 2010, 117,033,718 shares were issued and outstanding. The Aimco common stock is traded on the NYSE under the symbol “AIV.” Computershare Limited serves as transfer agent and registrar of the Aimco common stock. On October 6, 2010, the closing price of the Aimco common stock on the NYSE was $22.26. The following table shows the high and low reported sales prices and dividends paid per share of Aimco’s common stock in the periods indicated.

Quarter Ended	High		Low		Dividends
December 31, 2010 (through October 6, 2010)	$	22.46	$	21.22	$	0.00
September 30, 2010		22.82		18.12		0.10
June 30, 2010		24.21		18.14		0.10
March 31, 2010		19.17		15.01		0.00
December 31, 2009		17.09		11.80		0.20
September 30, 2009		15.91		7.36		0.10
June 30, 2009		11.10		5.18		0.10
March 31, 2009		12.89		4.57		0.00
December 31, 2008(1)		43.67		7.01		3.88
September 30, 2008(1)		42.28		29.25		3.00
June 30, 2008		41.24		33.33		0.60
March 31, 2008		41.11		29.91		0.00

(1) During 2008, Aimco’s Board of Directors declared special dividends which were paid part in cash and part in shares of Common Stock as further discussed in Note 11 to the consolidated financial statements in Item 8 of Aimco’s Current Report on Form 8-K, dated September 10, 2010 and filed with the SEC on September 10, 2010, which is incorporated herein by reference. Aimco’s Board of Directors declared the dividends to address taxable gains from 2008 property sales.

Aimco adopted the Apartment Investment and Management Company 1997 Stock Award and Incentive Plan, or the 1997 Plan, to attract and retain officers, key employees and independent directors. The 1997 Plan reserved for issuance a maximum of 20 million shares, which may be in the form of incentive stock options, non-qualified stock options and restricted stock, or other types of awards as authorized under the 1997 Plan. The 1997 Plan expired on April 24, 2007. On April 30, 2007, the 2007 Stock Award and Incentive Plan, or the 2007 Plan, was approved as successor to the 1997 Plan. The 2007 Plan reserves for issuance a maximum of 4.1 million shares, which may be in the form of incentive stock options, non-qualified stock options and restricted stock, or other types of awards as authorized under the 2007 Plan.

Holders of Aimco common stock are entitled to receive dividends, when and as declared by Aimco’s board of directors, out of funds legally available therefor. The holders of shares of common stock, upon any liquidation, dissolution or winding up of Aimco, are entitled to receive ratably any assets remaining after payment in full of all liabilities of Aimco and the liquidation preferences of preferred stock. The shares of common stock possess ordinary voting rights for the election of directors and in respect of other corporate matters, each share entitling the holder thereof to one vote. Holders of shares of common stock do not have cumulative voting rights in the election of directors, which means that holders of more than 50% of the shares of common stock voting for the election of directors can elect all of the directors if they choose to do so and the holders of the remaining shares cannot elect any directors. Holders of shares of common stock do not have preemptive rights, which means they have no right to acquire any additional shares of common stock that may be issued by Aimco at a subsequent date.

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Outstanding Classes Of Preferred Stock

Aimco’s charter authorizes 84,429,764 shares of preferred stock with a par value of $0.01 per share. Aimco is authorized to issue shares of preferred stock in one or more classes or subclasses, with such designations, preferences, conversion and other rights, voting powers, restriction, limitations as to dividends, qualifications and terms and conditions of redemption, in each case, if any as are permitted by Maryland law and as the Aimco Board of Directors may determine by resolution. As of June 30, 2010, Aimco had issued and outstanding the following classes of preferred stock:

					Quarterly			Liquidation
	Shares		Shares		Dividend			Preference		Conversion
Class	Authorized		Outstanding		per Share			per Share		Price
Class G Cumulative Preferred Stock(1)		4,050,000		4,050,000	$	0.586		$	25		NA
Class T Cumulative Preferred Stock		6,000,000		6,000,000	$	0.50		$	25		NA
Class U Cumulative Preferred Stock		8,000,000		8,000,000	$	0.484		$	25		NA
Class V Cumulative Preferred Stock		3,450,000		3,450,000	$	0.50		$	25		NA
Class Y Cumulative Preferred Stock		3,450,000		3,450,000	$	0.492		$	25		NA
Series A CRA Perpetual Preferred Stock(2)		240		114	$	4,274.17	(3)	$	500,000		NA

(1)	Includes 10,000 shares held by a consolidated subsidiary that are eliminated in consolidation.
(2)	During 2006, Aimco sold 200 shares of Series A Community Reinvestment Act Perpetual Preferred Stock, $0.01 par value per share, or the CRA Preferred Stock, with a liquidation preference of $500,000 per share, for net proceeds of $97.5 million. For the period from the date of original issuance through March 31, 2015, the dividend rate is a variable rate per annum equal to the Three-Month LIBOR Rate (as defined in the articles supplementary designating the CRA Preferred Stock) plus 1.25%, calculated as of the beginning of each quarterly dividend period. The rate at June 30, 2010 was 1.54%. Upon liquidation, holders of the CRA Preferred Stock are entitled to a preference of $500,000 per share, plus an amount equal to accumulated, accrued and unpaid dividends, whether or not earned or declared. The CRA Preferred Stock ranks prior to the Aimco common stock and on the same level as Aimco’s outstanding shares of preferred stock with respect to the payment of dividends and the distribution of amounts upon liquidation, dissolution or winding up. The CRA Preferred Stock is not redeemable prior to June 30, 2011, except in limited circumstances related to REIT qualification. On and after June 30, 2011, the CRA Preferred Stock is redeemable for cash, in whole or from time to time in part, at Aimco’s option, at a price per share equal to the liquidation preference, plus accumulated, accrued and unpaid dividends, if any, to the redemption date.
(3)	Amount per share is based on 114 shares outstanding for the entire period. 20 shares were repurchased in May 2010 and received $1,980 in dividends through the date of purchase.

Ranking.  Each authorized class of preferred stock ranks, with respect to dividend rights and rights upon liquidation, dissolution or winding up of Aimco, (a) prior or senior to the common stock and any other class or series of capital stock of Aimco if the holders of that class of preferred stock are entitled to the receipt of dividends or amounts distributable upon liquidation, dissolution or winding-up in preference or priority to the holders of shares of such class or series (“Junior Stock”); (b) on a parity with the other authorized classes of preferred stock and any other class or series of capital stock of Aimco if the holders of such class or series of stock and that class of preferred stock are entitled to receive dividends and amounts distributable upon liquidation, dissolution or winding-up in proportion to their respective amounts of accrued and unpaid dividends per share or liquidation preferences, without preference or priority of one over the other (“Parity Stock”); and (c) junior to any class or series of capital stock of Aimco if the holders of such class or series are entitled to receive dividends and amounts distributable upon liquidation, dissolution or winding-up in preference or priority to the holders of that class of preferred stock (“Senior Stock”).

Dividends.  Holders of each authorized class of preferred stock are entitled to receive, when and as declared by Aimco’s board of directors, out of funds legally available for payment, quarterly cash dividends in the amount per share set forth in the table above under the heading, “Quarterly Dividend Per Share.” The dividends are cumulative from the date of original issue, whether or not in any dividend period or periods Aimco declares any

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dividends or have funds legally available for the payment of such dividend. Holders of preferred stock are not entitled to receive any dividends in excess of cumulative dividends on the preferred stock. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the preferred stock that may be in arrears.

When dividends are not paid in full upon any class of preferred stock, or a sum sufficient for such payment is not set apart, all dividends declared upon that class of preferred stock and any shares of Parity Stock will be declared ratably in proportion to the respective amounts of dividends accumulated, accrued and unpaid on that class of preferred stock and accumulated, accrued and unpaid on such Parity Stock. Except as set forth in the preceding sentence, unless dividends on each class of preferred stock equal to the full amount of accumulated, accrued and unpaid dividends have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof has been or contemporaneously is set apart for such payment, for all past dividend periods, no dividends may be declared or paid or set apart for payment by Aimco and no other distribution of cash or other property may be declared or made, directly or indirectly, by Aimco with respect to any shares of Parity Stock. Unless dividends equal to the full amount of all accumulated, accrued and unpaid dividends on each class of preferred stock have been declared and paid, or declared and a sum sufficient for the payment thereof has been set apart for such payment, for all past dividend periods, no dividends (other than dividends or distributions paid in shares of Junior Stock or options, warrants or rights to subscribe for or purchase shares of Junior Stock) may be declared or paid or set apart for payment by Aimco and no other distribution of cash or other property may be declared or made, directly or indirectly, by Aimco with respect to any shares of Junior Stock, nor may any shares of Junior Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of common stock made for purposes of an employee incentive or benefit plan of Aimco or any subsidiary) for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any shares of any such stock), directly or indirectly, by Aimco (except by conversion into or exchange for shares of Junior Stock, or options, warrants or rights to subscribe for or purchase shares of Junior Stock), nor shall any other cash or other property be paid or distributed to or for the benefit of holders of shares of Junior Stock. Notwithstanding the foregoing provisions of this paragraph, Aimco is not prohibited from (1) declaring or paying or setting apart for payment any dividend or distribution on any shares of Parity Stock or (2) redeeming, purchasing or otherwise acquiring any Parity Stock, in each case, if such declaration, payment, redemption, purchase or other acquisition is necessary to maintain Aimco’s qualification as a REIT.

Liquidation Preference.  Upon any voluntary or involuntary liquidation, dissolution or winding up of Aimco, before it makes or sets apart any payment or distribution for the holders of any shares of Junior Stock, the holders of each class of preferred stock are entitled to receive a liquidation preference per share in the amount set forth above under the heading, “Liquidation Preference Per Share,” plus an amount equal to all accumulated, accrued and unpaid dividends (whether or not formed or declared) to the date of final distribution to such holders. Holders of each class of preferred stock are not entitled to any further payment. Until the holders of each class of preferred stock have been paid their respective liquidation preferences in full, plus an amount equal to all accumulated, accrued and unpaid dividends (whether or not earned or declared) to the date of final distribution to such holders, no payment may be made to any holder of Junior Stock upon the liquidation, dissolution or winding up of Aimco. If, upon any liquidation, dissolution or winding up of Aimco, its assets, or proceeds thereof, distributable among the holders of preferred stock are insufficient to pay in full the preference described above for any class of preferred stock and any liquidating payments on any other shares of any class or series of Parity Stock, then such proceeds shall be distributed among the holders of such class of preferred stock and holders of all other shares of any class or series of Parity Stock ratably in the same proportion as the respective amounts that would be payable on such class of preferred stock and any such Parity Stock if all amounts payable thereon were paid in full. A voluntary or involuntary liquidation, dissolution or winding up of Aimco does not include its consolidation or merger with one or more corporations, a sale or transfer of all or substantially all of its assets, or a statutory share exchange. Upon any liquidation, dissolution or winding up of Aimco, after payment shall have been made in full to the holders of preferred stock, any other series or class or classes of Junior Stock shall be entitled to receive any and all assets remaining to be paid or distributed, and the holders of each class of preferred stock and any Parity Stock shall not be entitled to share therein.

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Redemption.  Except as described below and in certain limited circumstances, including circumstances relating to maintaining Aimco’s ability to qualify as a REIT, Aimco may not redeem the shares of preferred stock. On or after the dates set forth in the table below, Aimco may, at its option, redeem shares of the classes of preferred stock set forth below, in whole or from time to time in part, at a cash redemption price equal to the percentage of the liquidation preference for that class of preferred stock indicated under the heading, “Price,” plus all accumulated, accrued and unpaid dividends, if any, to the date fixed for redemption. The redemption price for each class of non-convertible preferred stock (other than any portion thereof consisting of accumulated, accrued and unpaid dividends) is payable solely with the proceeds from the sale of equity securities by Aimco or Aimco OP (whether or not such sale occurs concurrently with such redemption). For purposes of the preceding sentence, “capital shares” means any common stock, preferred stock, depositary shares, partnership or other interests, participations or other ownership interests (however designated) and any rights (other than debt securities convertible into or exchangeable at the option of the holder for equity securities (unless and to the extent such debt securities are subsequently converted into capital stock)) or options to purchase any of the foregoing securities issued by Aimco or Aimco OP.

Class	Date	Price
Class G Cumulative Preferred Stock	July 15, 2008		100	%
Class T Cumulative Preferred Stock	July 31, 2008		100	%
Class U Cumulative Preferred Stock	March 24, 2009		100	%
Class V Cumulative Preferred Stock	September 29, 2009		100	%
Class Y Cumulative Preferred Stock	December 21, 2009		100	%
Series A CRA Perpetual Preferred Stock	June 30, 2011		100	%

Except as otherwise described in this information statement/prospectus, none of the authorized classes of preferred stock have any stated maturity or are subject to any sinking find or mandatory redemption provisions.

Conversion.  The shares of convertible preferred stock are convertible at any time, at the option of the holder, into a number of shares of common stock obtained by dividing its liquidation preference (excluding any accumulated, accrued and unpaid dividends) by the conversion price set forth in the table above. In the case of shares called for redemption, conversion rights will terminate at the close of business on the date fixed for such redemption, unless Aimco defaults in making such redemption payment. Each conversion will be deemed to have been effected immediately prior to the close of business on the date on which the holder surrenders certificates representing shares of preferred stock and Aimco receives notice and any applicable instruments of transfer and any required taxes. The conversion will be at the conversion price in effect at such time and on such date unless the stock transfer books of Aimco are closed on that date, in which event such person or persons will be deemed to have become such holder or holders of record at the close of business on the next succeeding day on which such stock transfer books are open, but such conversion will be at the conversion price in effect on the date on which such shares were surrendered and such notice received by Aimco. No fractional shares of common stock or scrip representing fractions of a share of common stock will be issued upon conversion of shares of preferred stock. Instead of any fractional interest in a share of common stock that would otherwise be deliverable upon the conversion of any share of preferred stock, Aimco will pay to the holder of such shares an amount in cash based upon the closing price of the common stock on the trading day immediately preceding the date of conversion. If more than one share of preferred stock is surrendered for conversion at one time by the same holder, the number of full shares of common stock issuable upon conversion thereof will be computed on the basis of the aggregate number of shares of preferred stock so converted. Except as otherwise required, Aimco will make no payment or allowance for unpaid dividends, whether or not in arrears, on converted shares or for dividends (other than dividends on the common stock the record date for which is after the conversion date and which Aimco shall pay in the ordinary course to the record holder as of the record date) on the common stock issued upon such conversion. Holders of preferred stock at the close of business on a record date for the payment of dividends on the preferred stock will be entitled to receive an amount equal to the dividend payable on such shares on the corresponding dividend payment date notwithstanding the conversion of such shares following such record date.

Each conversion price is subject to adjustment upon the occurrence of certain events, including: (i) if Aimco (A) pays a dividend or makes a distribution on its capital stock in shares of common stock, (B) subdivides its outstanding common stock into a greater number of shares, (C) combines its outstanding common stock into a

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smaller number of shares or (D) issues any shares of capital stock by reclassification of its outstanding common stock; (ii) if Aimco issues rights, options or warrants to holders of common stock entitling them to subscribe for or purchase common stock at a price per share less than the fair market value thereof; and (iii) if Aimco makes a distribution on its common stock other than in cash or shares of common stock.

Conversion of preferred stock will be permitted only to the extent that such conversion would not result in a violation of the ownership restrictions set forth in Aimco’s charter.

Voting Rights.  Holders of shares of the authorized classes of preferred stock do not have any voting rights, except as set forth below and except as otherwise required by applicable law.

If and whenever dividends on any shares of any class of preferred stock or any series or class of Parity Stock are in arrears for six or more quarterly periods, whether or not consecutive, the number of directors then constituting Aimco’s board of directors will be increased by two, if not already increased by reason of similar types of provisions with respect to shares of Parity Stock of any other class or series which is entitled to similar voting rights (the “Voting Preferred Stock”), and the holders of shares of that class of preferred stock, together with the holders of shares of all other Voting Preferred Stock then entitled to exercise similar voting rights, voting as a single class regardless of series, will be entitled to vote for the election of the two additional directors of Aimco at any annual meeting of stockholders or at a special meeting of the holders of that class of preferred stock and of the Voting Preferred Stock called for that purpose. Whenever dividends in arrears on outstanding shares of Voting Preferred Stock shall have been paid and dividends thereon for the current quarterly dividend period have been paid or declared and set apart for payment, then the right of the holders of the Voting Preferred Stock to elect the additional two directors shall cease and the terms of office of the directors shall terminate and the number of directors constituting Aimco’s board of directors shall be reduced accordingly. Holders of Class W Cumulative Convertible Preferred Stock, voting as a single class, are also entitled to elect one director of Aimco if and whenever (i) for two consecutive quarterly dividend periods, Aimco fails to pay at least $0.45 per share in dividends on the common stock or (ii) Aimco fails to pay a quarterly dividend on that class of preferred stock, whether or not earned or declared.

The affirmative vote or consent of at least 662/3% of the votes entitled to be cast by the holders of the outstanding shares of each class of preferred stock and the holders of all other classes or series of Parity Stock entitled to vote on such matters, voting as a single class, will be required to (1) authorize, create, increase the authorized amount of, or issue any shares of any class of Senior Stock or any security convertible into shares of any class of Senior Stock, or (2) amend, alter or repeal any provision of, or add any provision to, Aimco’s charter or by-laws, if such action would materially adversely affect the voting powers, rights or preferences of the holders of that class of preferred stock or, with respect to the Class W Cumulative Convertible Preferred Stock, would convert such preferred stock into cash or any other security other than Preferred Stock with terms and provisions equivalent to those set forth in the articles supplementary for such class of preferred stock (including any amendment, alteration or repeal effected pursuant to a merger, consolidation, or similar transaction); provided, however, that no such vote of the holders of that class of preferred stock shall be required if, at or prior to the time such amendment, alteration or repeal is to take effect or the issuance of any such Senior Stock or convertible security is to be made, as the case may be, provisions are made for the redemption of all outstanding shares of that class of preferred stock. The amendment of or supplement to Aimco’s charter to authorize, create, increase or decrease the authorized amount of or to issue Junior Stock, or any shares of any class of Parity Stock shall not be deemed to materially adversely affect the voting powers, rights or preferences of any class of preferred stock.

Transfer.  For Aimco to qualify as a REIT under the Code, not more than 50% in value of its outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) during the last half of a taxable year and the shares of common stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. Because the Aimco board of directors believes that it is essential for Aimco to meet the REIT Requirements, the board of directors has adopted, and the stockholders have approved, provisions of Aimco’s charter restricting the acquisition of shares of common stock.

Subject to specific exceptions specified in Aimco’s charter, no holder may own, or be deemed to own by virtue of various attribution and constructive ownership provisions of the Code and Rule 13d-3 under the Exchange Act,

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more than 8.7% (or 15% in the case of specific pension trusts described in the Code, investment companies registered under the Investment Company Act of 1940, as amended, and Mr. Considine) of the outstanding shares of common stock (the “Ownership Limit”). The board of directors may waive the Ownership Limit if evidence satisfactory to the board of directors and Aimco’s tax counsel is presented that such ownership will not then or in the future jeopardize Aimco’s status as a REIT. However, in no event may such holder’s direct or indirect ownership of common stock exceed 9.8% of the total outstanding shares of common stock. As a condition of such waiver, the board of directors may require opinions of counsel satisfactory to it and/or an undertaking from the applicant with respect to preserving the REIT status of Aimco. The foregoing restrictions on transferability and ownership will not apply if the board of directors determines that it is no longer in the best interests of Aimco to attempt to qualify, or to continue to quality as a REIT and a resolution terminating Aimco’s status as a REIT and amending Aimco’s charter to remove the foregoing restrictions is duly adopted by the board of directors and a majority of Aimco’s stockholders. If shares of common stock in excess of the Ownership Limit, or shares of common stock which would cause the REIT to be beneficially owned by fewer than 100 persons, or which would result in Aimco being “closely held,” within the meaning of Section 856(h) of the Code, or which would otherwise result in Aimco failing to qualify as a REIT, are issued or transferred to any person, such issuance or transfer shall be null and void to the intended transferee, and the intended transferee would acquire no rights to the stock. Shares of common stock transferred in excess of the Ownership Limit or other applicable limitations will automatically be transferred to a trust for the exclusive benefit of one or more qualifying charitable organizations to be designated by Aimco. Shares transferred to such trust will remain outstanding, and the trustee of the trust will have all voting and dividend rights pertaining to such shares. The trustee of such trust may transfer such shares to a person whose ownership of such shares does not violate the Ownership Limit or other applicable limitation. Upon a sale of such shares by the trustee, the interest of the charitable beneficiary will terminate, and the sales proceeds would be paid, first, to the original intended transferee, to the extent of the lesser of (a) such transferee’s original purchase price (or the original market value of such shares if purportedly acquired by gift or devise) and (b) the price received by the trustee, and, second, any remainder to the charitable beneficiary. In addition, shares of stock held in such trust are purchasable by Aimco for a 90 day period at a price equal to the lesser of the price paid for the stock by the original intended transferee (or the original market value of such shares if purportedly acquired by gift or devise) and the market price for the stock on the date that Aimco determines to purchase the stock. The 90 day period commences on the date of the violative transfer or the date that the board of directors determines in good faith that a violative transfer has occurred, whichever is later. All certificates representing shares of common stock bear a legend referring to the restrictions described above.

All persons who own, directly or by virtue of the attribution provisions of the Code and Rule 13d-3 under the Exchange Act, more than a specified percentage of the outstanding shares of common stock must file an affidavit with Aimco containing the information specified in Aimco’s charter within 30 days after January 1 of each year. In addition, each stockholder shall upon demand be required to disclose to Aimco in writing such information with respect to the direct, indirect and constructive ownership of shares as the board of directors deems necessary to comply with the provisions of the Code applicable to a REIT or to comply with the requirements of any taxing authority or governmental agency.

The ownership limitations may have the effect of precluding acquisition of control of Aimco by specific parties unless the board of directors determines that maintenance of REIT status is no longer in the best interests of Aimco.

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COMPARISON OF AIMCO OP UNITS AND AIMCO COMMON STOCK

Set forth below is a comparison of the OP Units to the Aimco common stock.

OP Units	Common Stock
Nature of Investment
The OP Units constitute equity interests entitling each holder to his or her pro rata share of cash distributions made from Available Cash (as such term is defined in the Aimco OP partnership agreement) to the partners of Aimco OP, a Delaware limited partnership.	The common stock constitutes equity interests in Aimco, a Maryland corporation.
Voting Rights
Under the Aimco OP partnership agreement, limited partners have voting rights only with respect to certain limited matters such as certain amendments of the partnership agreement and certain transactions such as the institution of bankruptcy proceedings, an assignment for the benefit of creditors and certain transfers by the general partner of its interest in Aimco OP or the admission of a successor general partner.	Each outstanding share of common stock entitles the holder thereof to one vote on all matters submitted to stockholders for a vote, including the election of directors. Holders of common stock have the right to vote on, among other things, a merger of Aimco, amendments to the Aimco charter and the dissolution of Aimco. Certain amendments to the Aimco charter require the affirmative vote of not less than two-thirds of votes entitled to be cast on the matter. The Aimco charter permits the Aimco Board of Directors to classify and issue capital stock in one or more series having voting power which may differ from that of the common stock.
	Under Maryland law, a consolidation, merger, share exchange or transfer of all or substantially all of the assets of Aimco requires the affirmative vote of not less than two-thirds of all of the votes entitled to be cast on the matter. With respect to each of these transactions, only the holders of common stock are entitled to vote on the matters. No approval of the stockholders is required for the sale of less than all or substantially all of Aimco’s assets.
	Maryland law provides that the Aimco Board of Directors must obtain the affirmative vote of at least two-thirds of the votes entitled to be cast on the matter in order to dissolve Aimco. Only the holders of common stock are entitled to vote on Aimco’s dissolution.

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OP Units	Common Stock
Distributions/Dividends
Subject to the rights of holders of any outstanding partnership preferred units, the Aimco OP partnership agreement requires the general partner to cause Aimco OP to distribute quarterly all, or such portion as the general partner may in its sole and absolute discretion determine, of Available Cash (as such term is defined in the partnership agreement) generated by Aimco OP during such quarter to the general partner, the Special Limited Partner and the holders of OP Units and HPUs on the record date established by the general partner with respect to such quarter, in accordance with their respective interests in Aimco OP on such record date. Holders of any Partnership Preferred Units currently issued and which may be issued in the future may have priority over the general partner, the special limited partner and holders of OP Units and HPUs with respect to distributions of Available Cash, distributions upon liquidation or other distributions. See “Description of OP Units — Distributions.” The general partner in its sole and absolute discretion may distribute to the holders of OP Units and HPUs Available Cash on a more frequent basis and provide for an appropriate record date. The partnership agreement requires the general partner to take such reasonable efforts, as determined by it in its sole and absolute discretion and consistent with the REIT Requirements, to cause Aimco OP to distribute sufficient amounts to enable the general partner to transfer funds to Aimco and enable Aimco to pay stockholder dividends that will (i) satisfy the requirements for qualifying as a REIT under the Code, and the Treasury Regulations and (ii) avoid any United States Federal income or excise tax liability of Aimco. See “Description of OP Units — Distributions.”	Holders of the common stock are entitled to receive dividends when and as declared by the Aimco Board of Directors, out of funds legally available therefor. Under the REIT rules, Aimco is required to distribute dividends (other than capital gain dividends) to its stockholders in an amount at least equal to (A) the sum of (i) 90% of Aimco’s “REIT taxable income” (computed without regard to the dividends paid deduction and Aimco’s net capital gain) and (ii) 90% of the net income (after tax), if any, from foreclosure property, minus (B) the sum of certain items of noncash income. See “Certain United States Federal Income Tax Matters.”

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OP Units	Common Stock
Liquidity and Transferability/Redemption
There is no public market for the OP Units and the OP Units are not listed on any securities exchange.	The common stock is transferable subject to the Ownership Limit set forth in the Aimco charter. The common stock is listed on the NYSE.
Under the Aimco OP partnership agreement, until the expiration of one year from the date on which a holder acquired OP Units, subject to certain exceptions, such OP Unitholder may not transfer all or any portion of its OP Units to any transferee without the consent of the general partner, which consent may be withheld in its sole and absolute discretion. After the expiration of one year, such OP Unitholder has the right to transfer all or any portion of its OP Units to any person, subject to the satisfaction of certain conditions specified in the partnership agreement, including the general partner’s right of first refusal. See “Description of OP Units — Transfers and Withdrawals.” After the first anniversary of becoming a holder of OP Units, a holder has the right, subject to the terms and conditions of the partnership agreement, to require Aimco OP to redeem all or a portion of such holder’s OP Units in exchange for shares of common stock or a cash amount equal to the value of such shares, as Aimco OP may elect. See “Description of OP Units — Redemption Rights of Qualifying Parties.” Upon receipt of a notice of redemption, Aimco OP may, in its sole and absolute discretion but subject to the restrictions on the ownership of common stock imposed under the Aimco charter and the transfer restrictions and other limitations thereof, elect to cause Aimco to acquire some or all of the tendered OP Units in exchange for common stock, based on an exchange ratio of one share of common stock for each OP Unit, subject to adjustment as provided in the partnership agreement.

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COMPARISON OF NPI UNITS AND AIMCO OP UNITS

The rights of NPI limited partners are currently governed by the Uniform Limited Partnership Act of the State of California, as amended from time to time, and the NPI partnership agreement. The rights of the limited partners of Aimco OP are currently governed by the Delaware Act and the Aimco OP partnership agreement.

The information below highlights a number of the significant differences between NPI Units and Aimco OP Units. These comparisons are intended to assist NPI limited partners in understanding how their investment will be changed after completion of the merger, if they elect to receive OP Units in lieu of cash with respect to the merger.

NPI Units	OP Units
Nature of Investment
The NPI Units constitute equity interests entitling each partner to his or her pro rata share of distributions to be made to the partners of NPI.	The OP Units constitute equity interests entitling each holder to his or her pro rata share of cash distributions made from Available Cash (as such term is defined in the partnership agreement) to the partners of Aimco OP.
Voting Rights
With limited exceptions, under the NPI partnership agreement, upon the vote of a majority in units of all limited partners (other than the original limited partner), the limited partners may make amendments to NPI’s partnership agreement. Other than the original limited partner, the limited partners holding a majority of units may remove the general partner and elect a successor general partner. If the general partner withdraws or is otherwise removed, the general partner elected in place thereof may elect to carry on the business of NPI. An affiliate of the general partner of NPI currently owns a majority of each series of NPI’s limited partnership units.	Under the Aimco OP partnership agreement, limited partners have voting rights only with respect to certain limited matters such as certain amendments of the partnership agreement and certain transactions such as the institution of bankruptcy proceedings, an assignment for the benefit of creditors and certain transfers by the general partner of its interest in Aimco OP or the admission of a successor general partner.
	Under the Aimco OP partnership agreement, the general partner has the power to effect the acquisition, sale, transfer, exchange or other disposition of any assets of Aimco OP (including, but not limited to, the exercise or grant of any conversion, option, privilege or subscription right or any other right available in connection with any assets at any time held by Aimco OP) or the merger, consolidation, reorganization or other combination of Aimco OP with or into another entity, all without the consent of the OP Unitholders.
	The general partner may cause the dissolution of Aimco OP by an “event of withdrawal,” as defined in the Delaware Act (including, without limitation, bankruptcy), unless, within 90 days after the withdrawal, holders of a “majority in interest,” as defined in the Delaware Act, agree in writing, in their sole and absolute discretion, to continue the business of Aimco OP and to the appointment of a successor general partner. The general partner may elect to dissolve Aimco OP in its sole and absolute discretion, with or without the consent of the OP Unitholders. OP Unitholders cannot remove the general partner of Aimco OP with or without cause.

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NPI Units	OP Units
Distributions
Cash from operations, cash from sales or refinancing and cash from property reserve account will be distributed to each partner (and, in the case of cash from sales or refinancing and cash from property reserve account in the order of priority set forth in the NPI partnership agreement) unless (i) NPI is restricted from making distributions under the terms of notes, mortgages or other types of debt obligations which it may issue or assume in conjunction with borrowed funds, or (ii) the general partner determines, in its absolute discretion, that a restriction or suspension of distributions is in the best interests of NPI. The distributions payable to the partners are not fixed in amount and depend upon the operating results and net sales or refinancing proceeds available from the disposition of NPI’s assets.	Subject to the rights of holders of any outstanding partnership preferred units, the Aimco OP partnership agreement requires the general partner to cause Aimco OP to distribute quarterly all, or such portion as the general partner may in its sole and absolute discretion determine, of Available Cash (as such term is defined in the partnership agreement) generated by Aimco OP during such quarter to the general partner, the special limited partner and the holders of OP Units and HPUs on the record date established by the general partner with respect to such quarter, in accordance with their respective interests in Aimco OP on such record date. Holders of any partnership preferred units currently issued and which may be issued in the future may have priority over the general partner, the special limited partner and holders of OP Units and HPUs with respect to distributions of Available Cash, distributions upon liquidation or other distributions. See “Description of OP Units — Distributions.” The general partner in its sole and absolute discretion may distribute to the holders of OP Units and HPUs Available Cash on a more frequent basis and provide for an appropriate record date. The partnership agreement requires the general partner to take such reasonable efforts, as determined by it in its sole and absolute discretion and consistent with the REIT requirements, to cause Aimco OP to distribute sufficient amounts to enable the general partner to transfer funds to Aimco and enable Aimco to pay stockholder dividends that will (i) satisfy the requirements for qualifying as a REIT under the Code, and the Treasury Regulations and (ii) avoid any United States Federal income or excise tax liability of Aimco. See “Description of OP Units — Distributions.”

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NPI Units	OP Units
Liquidity and Transferability/Redemption
There is a limited market for the NPI Units and the NPI Units are not listed on any securities exchange.	There is no public market for the OP Units and the OP Units are not listed on any securities exchange.
Under the NPI partnership agreement, holders of NPI Units have the right, subject to certain exceptions, to assign five or more NPI Units by means of a written instrument, the terms of which are not in contravention of any of the provisions of the NPI partnership agreement and which instrument has been duly executed by the assignor of such NPI Units. Any assignment of NPI Units must be made in compliance with the then applicable rules of any applicable governmental authority. Notwithstanding the above, no partner may make an assignment of any NPI Units if the NPI Units sought to be assigned, when added to the total of all other NPI Units assigned within the period of 12 consecutive months prior to the proposed date of assignment, would result in the termination of the partnership under the Code. No assignee of a limited partner’s interest may become a substituted limited partner unless (a) a duly executed and acknowledged written instrument of assignment covering no less than five NPI Units (subject to certain exceptions) has been filed with NPI, which instrument specifies the number of NPI Units being assigned and sets forth the intention of the assignor that the assignee succeed to the assignor’s interest as a substituted limited partner, (b) the assignor and assignee execute and acknowledge such other instruments as the general partner deems necessary or desirable to effect the substitution, including the written acceptance and adoption by the assignee of the provisions of the NPI partnership agreement and delivery to the general partner of a special power of attorney, (c) the written consent of the general partner to the substitution is obtained, which consent may be granted or denied in the general partner’s absolute discretion, (d) a transfer fee not to exceed $50 has been paid to NPI to cover all reasonable expenses connected with the substitution, and (e) the assignment provisions of the NPI partnership agreement have been complied with. Unauthorized assignments and transfers are void ab initio. The NPI partnership agreement contains no redemption rights.	Under the Aimco OP partnership agreement, until the expiration of one year from the date on which a holder acquired OP Units, subject to certain exceptions, such OP Unitholder may not transfer all or any portion of its OP Units to any transferee without the consent of the general partner, which consent may be withheld in its sole and absolute discretion. After the expiration of one year, such OP Unitholder has the right to transfer all or any portion of its OP Units to any person, subject to the satisfaction of certain conditions specified in the partnership agreement, including the general partner’s right of first refusal. See “Description of OP Units — Transfers and Withdrawals.” After the first anniversary of becoming a holder of OP Units, a holder has the right, subject to the terms and conditions of the partnership agreement, to require Aimco OP to redeem all or a portion of such holder’s OP Units in exchange for shares of common stock or a cash amount equal to the value of such shares, as Aimco OP may elect. See “Description of OP Units — Redemption Rights of Qualifying Parties.” Upon receipt of a notice of redemption, Aimco OP may, in its sole and absolute discretion but subject to the restrictions on the ownership of common stock imposed under the Aimco charter and the transfer restrictions and other limitations thereof, elect to cause Aimco to acquire some or all of the tendered OP Units in exchange for common stock, based on an exchange ratio of one share of common stock for each OP Unit, subject to adjustment as provided in the partnership agreement.

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NPI Units	OP Units
Fiduciary Duty
California case law provides that, in exercising management functions, a general partner is under a fiduciary duty of good faith and fair dealing towards other partners, but may not be held liable for mistakes or losses incurred in the good faith exercise of reasonable business judgment. The NPI partnership agreement does not contain any provision that expressly restricts or limits the liability of the General Partner and its affiliates.	Delaware law provides that, except as provided in a partnership agreement, a general partner owes the fiduciary duties of loyalty and care to the partnership and its limited partners. The Aimco OP partnership agreement expressly authorizes the general partner to enter into, on behalf of Aimco OP, a right of first opportunity arrangement and other conflict avoidance agreements with various affiliates of Aimco OP and the general partner, on such terms as the general partner, in its sole and absolute discretion, believes are advisable. The Aimco OP partnership agreement expressly limits the liability of the general partner by providing that the general partner, and its officers and directors, will not be liable or accountable in damages to Aimco OP, the limited partners or assignees for errors in judgment or mistakes of fact or law or of any act or omission if the general partner or such director or officer acted in good faith.
Investment Policy
NPI was organized for the purpose of operating income-producing residential real estate. In general, the General Partner regularly evaluates NPI’s property by considering various factors, such as the partnership’s financial position and real estate and capital markets conditions. The General Partner monitors the property’s specific locale and sub-market conditions (including stability of the surrounding neighborhood), evaluating current trends, competition, new construction and economic changes. It oversees the operating performance of the property and evaluates the physical improvement requirements. In addition, the financing structure for the property (including any prepayment penalties), tax implications, availability of attractive mortgage financing to a purchaser, and the investment climate are all considered. Any of these factors, and possibly others, could potentially contribute to any decision by the General Partner to sell, refinance, upgrade with capital improvements or hold the property.	Aimco OP was formed to engage in the acquisition, ownership, management and redevelopment of apartment properties. Although it holds all of its properties for investment, Aimco OP may sell properties when they do not meet its investment criteria or are located in areas that it believes do not justify a continued investment when compared to alternative uses for capital. Its portfolio management strategy includes property acquisitions and dispositions to concentrate its portfolio in its target markets. It may market for sale certain properties that are inconsistent with this long-term investment strategy. Additionally, from time to time, Aimco OP may market certain properties that are consistent with this strategy but offer attractive returns. Aimco OP may use its share of the net proceeds from such dispositions to, among other things, reduce debt, fund capital expenditures on existing assets, fund acquisitions, and for other operating needs and corporate purposes.

Compensation and Distributions

NPI.  NPI has no employees and depends on the General Partner and its affiliates for the management and administration of all partnership activities. The NPI partnership agreement provides that the General Partner and its affiliates receive 5% of gross receipts from all of NPI’s properties as compensation for providing property management services, and also provides that the General Partner and its affiliates receive certain payments for other services and reimbursement of certain expenses incurred on behalf of NPI.

In addition, under the NPI partnership agreement, (i) Adjusted Cash From Operations (as defined in the NPI partnership agreement) is distributed as follows: ninety-nine percent to the limited partners and one percent to the General Partner, and (ii) Cash From Sales or Refinancings and Cash from Property Reserve Account (each as defined in the NPI partnership agreement) is distributed in the following order of priority: (x) first, to the holders of NPI Units in proportion to their interest in NPI, an amount equal to the Net Tangible Asset Value (as defined in the NPI partnership agreement); (y) second, to the General Partner in an amount equal to all or any part of any Incentive

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Compensation Fee (as defined in the NPI partnership agreement) due and owing as provided in the NPI partnership agreement, and (z) third, with respect to the remainder, one hundred percent thereof to the holders of NPI Units. Notwithstanding the foregoing, NPI may be restricted from making distributions under the terms of notes, mortgages or other types of debt obligations which it may issue or assume in conjunction with borrowed funds, and distributions may also be restricted or suspended in circumstances when the General Partner determines, in its absolute discretion, that such action is in the best interests of NPI.

A description of the compensation paid to the General Partner and its affiliates during the years ended December 31, 2009 and 2008, and during the six months ended June 30, 2010 and 2009, can be found under the heading “Certain Relationships and Related Transactions” in this information statement/prospectus. In addition, for more information, see “Note B — Transactions with Affiliated Parties” in the notes to the financial statements appearing in NPI’s Annual Report on Form 10-K for the year ended December 31, 2009, which is included as Annex D to this information statement/prospectus, and “Note B — Transactions with Affiliated Parties” in the notes to the financial statements appearing in NPI’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, which is included as Annex E to this information statement/prospectus.

Aimco OP.  The Aimco OP partnership agreement provides that Aimco OP’s general partner shall not be compensated for its services as a general partner, other than the compensation it receives with respect to distributions and allocations in accordance with the partnership agreement. Subject to certain provisions of the partnership agreement, Aimco OP will reimburse the general partner for all sums expended in connection with the partnership’s business.

In addition, subject to the rights of holders of any outstanding preferred OP Units, the Aimco OP partnership agreement requires the general partner to cause Aimco OP to distribute quarterly all, or such portion of, as the general partner may in its sole and absolute discretion determine, Available Cash (as such term is defined in the partnership agreement) generated by Aimco OP during such quarter to the general partner, the special limited partner and the holders of common OP Units and HPUs on the record date established by the general partner with respect to such quarter, in accordance with their respective interests in Aimco OP on such record date. The partnership agreement requires the general partner to take such reasonable efforts, as determined by it in its sole and absolute discretion and consistent with the REIT Requirements, to cause Aimco OP to distribute sufficient amounts to enable the general partner to transfer funds to Aimco and enable Aimco to pay stockholder dividends that will (i) satisfy the requirements for qualifying as a REIT under the Code and the Treasury Regulations and (ii) avoid any United States Federal income or excise tax liability of Aimco.

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CERTAIN UNITED STATES FEDERAL INCOME TAX MATTERS

The following is a summary of certain United States Federal income tax consequences of the transactions, and an investment in Aimco OP Units and Aimco stock. This discussion is based upon the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), regulations promulgated by the U.S. Treasury Department (the “Treasury Regulations”), rulings issued by the IRS, and judicial decisions, all in effect as of the date of this information statement/prospectus and all of which are subject to change or differing interpretations, possibly with retroactive effect. This summary is also based on the assumptions that the operation of Aimco, Aimco OP and the limited liability companies and limited partnerships in which they own controlling interests (collectively, the “Subsidiary Partnerships”) and any affiliated entities will be in accordance with their respective organizational documents and partnership agreements. This summary is for general information only and does not purport to discuss all aspects of United States Federal income taxation which may be important to a particular investor, or to certain types of investors subject to special tax rules (including financial institutions, broker-dealers, regulated investment companies, holders that receive Aimco stock through the exercise of stock options or otherwise as compensation, insurance companies, persons holding Aimco stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or other integrated investment, and, except to the extent discussed below, tax-exempt organizations and foreign investors, as determined for United States Federal income tax purposes). This summary assumes that investors will hold their OP Units and Aimco stock as capital assets (generally, property held for investment). No opinion of counsel or advance ruling from the IRS has been or will be sought regarding the tax status of Aimco or Aimco OP, or the tax consequences relating to Aimco or Aimco OP or an investment in OP Units or Aimco stock. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax aspects set forth below.

THE FEDERAL INCOME TAX TREATMENT OF A PARTICULAR HOLDER DEPENDS UPON DETERMINATIONS OF FACT AND INTERPRETATIONS OF COMPLEX PROVISIONS OF UNITED STATES FEDERAL INCOME TAX LAW FOR WHICH NO CLEAR PRECEDENT OR AUTHORITY MAY BE AVAILABLE. ACCORDINGLY, EACH HOLDER IS URGED TO CONSULT ITS TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE TRANSACTIONS, OF ACQUIRING, HOLDING, EXCHANGING, OR OTHERWISE DISPOSING OF OP UNITS AND AIMCO STOCK, AND OF AIMCO’S ELECTION TO BE SUBJECT TO TAX, FOR FEDERAL INCOME TAX PURPOSES, AS A REAL ESTATE INVESTMENT TRUST.

United States Federal Income Tax Consequences Relating to the Transactions

Tax Consequences of the Merger between NPI and New NPI (the “Redomestication”)

The merger of an existing partnership into another partnership is considered a continuation of the existing partnership if its partners, who own more than 50% of the profits and capital in the existing partnership, obtain more than 50% of the profits and capital in the resulting partnership. Because the partners of NPI will receive the same number of units of limited partnership interest in the Delaware partnership, New NPI, as they had in the California partnership, NPI, the Delaware partnership will be considered a continuation of the California partnership for tax purposes. NPI will not recognize gain as a result of contributing its assets to New NPI. New NPI will have the same federal identification number as that of NPI and will have the same tax basis, holding period, and depreciation method for each of its assets as that of NPI. The partners of NPI will not recognize any gain from the merger of NPI with and into New NPI. The bases of the partners in New NPI will be equal to their bases in the terminated partnership, NPI, and their holding periods in their units in New NPI will be the same as their holding periods in the NPI units. Aimco believes that completion of the Redomestication will not result in any tax consequences to the limited partners of NPI.

Tax Consequences of the Merger between New NPI and the Aimco Subsidiary (the “Merger”) to NPI, Aimco, and Aimco OP

When the assets or operations of two partnerships such as New NPI and Aimco OP are combined in a transaction pursuant to which one of the partnerships ceases to exist as a partnership (the “terminated partnership”)

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for Federal income tax purposes, and the members of the terminated partnership become members of the surviving partnership (the “resulting partnership”), that combined transaction is generally treated as a partnership merger.

In general, New NPI would be treated as contributing all of its assets, and assigning all of its liabilities, to Aimco OP in exchange for interests in Aimco OP and any other consideration issued by Aimco OP in connection with the transaction, including cash or an assumption of liability, which may result in gain recognition under the rules described below. Immediately thereafter, New NPI is treated as distributing all of its assets to its partners in complete liquidation.

Aimco is not expected to recognize any gain or loss on the transaction.

Tax Consequences of Exchanging NPI Units Solely for Cash

For Federal income tax purposes, any payment of cash for NPI Units will be treated as a sale of such NPI Units by such holder. Each such holder of NPI Units who accepts cash must explicitly agree and consent to treat the payment of cash for NPI Units as a sale of such units, in accordance with the terms of the merger agreement.

If a holder of NPI Units sells such units for cash, such holder will recognize gain or loss on the sale of his units equal to the difference between (i) such holder’s “amount realized” on the sale and (ii) such holder’s adjusted tax basis in the NPI Units sold. The “amount realized” with respect to a NPI Unit will be equal to the sum of the amount of cash such holder receives for his units plus the amount of liabilities of New NPI allocable to such NPI Units as determined under section 752 of the Internal Revenue Code.

Tax Consequences of Exchanging NPI Units Solely for OP Units

Generally, section 721 of the Internal Revenue Code provides that neither a contributing partner nor the partnership will recognize a gain or loss, for United States Federal income tax purposes, upon a contribution of property to such partnership in exchange for solely OP Units, except to the extent described below. Each such holder of NPI Units who accepts OP Units must explicitly agree and consent to such treatment, in accordance with the terms of the merger agreement.

If a holder of NPI Units contributes such units to Aimco OP in exchange for solely OP Units, such holder may recognize gain upon such exchange if, immediately prior to such exchange, the amount of liabilities of New NPI allocable to the NPI Units transferred exceeds the amount of the Aimco OP partnership liabilities allocable to such holder immediately after such exchange. In that case the excess would be treated as a deemed distribution of cash to such holder from Aimco OP. This deemed cash distribution would be treated as a nontaxable return of capital to the extent such holder’s adjusted tax basis in his OP Units and thereafter as taxable gain.

Tax Consequences of Receipt of Cash Payment for Waiver and Release

As discussed in “The Merger — Waiver and Additional Consideration,” each limited partner unaffiliated with Aimco OP may elect to receive an additional cash payment in exchange for executing a waiver and release of certain claims. The United Stated Federal income tax treatment of such additional cash payment is uncertain. Aimco OP intends to treat the additional cash payment as a payment made for the waiver and release of certain claims, and not as additional Merger Consideration, and intends to report the additional cash payment accordingly. No assurance can be given that the IRS would not assert that the additional cash payment should be treated as part of the Merger Consideration. Holders that elect to receive the additional cash payment in exchange for executing a waiver and release should consult their tax advisors concerning the tax treatment of such payment.

Information Reporting Requirements And Backup Withholding

United States Holders

In general, backup withholding and information reporting will apply to all payments made to a United States Holder pursuant to the Merger. A United States Holder will generally be subject to backup withholding (at a rate of 28%, through 2010) with respect to payments made pursuant to the Merger unless such holder, among other conditions, provides a correct taxpayer identification number, certifies as to no loss of exemption from backup

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withholding, and otherwise complies with the applicable requirements of the backup withholding rules, or otherwise establishes a basis for exemption from backup withholding. Exempt United States Holders (including, among others, all corporations) are not subject to these backup withholding and information reporting requirements. A holder who does not provide Aimco OP with his correct taxpayer identification number also may be subject to penalties imposed by the IRS. Any amount paid as backup withholding will be creditable against the holder’s income tax liability.

Non-United States Holders

Information reporting may apply to payments made to a Non-United States Holder pursuant to the Merger. Copies of information returns reporting such amounts and any withholding also may be made available by the IRS to the tax authorities in the country in which a Non-United States Holder is resident under the provision of an applicable income tax treaty or other agreement. Non-United States Holders that receive OP Units as Merger Consideration should see “— Taxation of Aimco OP and OP Unitholders — Taxation of Foreign OP Unitholders,” below.

In general, backup withholding will not apply to payments made a Non-United States Holder pursuant to the Merger, if, among other conditions, such Non-United States Holder certifies as to its non-United States status under penalties of perjury or otherwise establishes an exemption, provided that neither Aimco OP nor our withholding agent has actual knowledge, or reason to know, that the Non-United States Holder is a United States person or that the conditions of any other exemption are not in fact satisfied. In order to claim an exemption from or reduction of withholding tax, the Non-United States Holder must deliver a properly executed IRS Form W-8ECI, as applicable, claiming such exemption or reduction. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or credit against such Non-United States Holder’s United States Federal income tax liability if the Non-United States Holder follows the required procedures.

Because the tax treatment of the receipt of an additional cash payment in exchange for executing a waiver and release of certain claims is unclear under United States Federal income tax law, Aimco OP intends to withhold United States Federal income tax at a rate of 30% from any additional cash payment paid to a Non-U.S. Holder, unless an exemption from or reduction of withholding tax is applicable. In order to claim an exemption from or reduction of withholding tax, the Non-United States Holder must deliver a properly executed IRS Form W-8ECI, as applicable, claiming such exemption or reduction. Non-U.S. Holders are urged to consult their tax advisors regarding the possibility of claiming a refund with respect to the receipt of an additional cash payment in exchange for executing a waiver and release.

Taxation of Aimco OP and OP Unitholders

Partnership Status

Aimco believes that Aimco OP is classified as a partnership, and not as an association taxable as a corporation or as a publicly traded partnership taxable as a corporation for United States Federal income tax purposes. If Aimco OP were treated as a “publicly traded partnership” taxed as a corporation for United States Federal income tax purposes, material adverse consequences to the Transferor and its owners would result. In addition, classification of Aimco OP as an association or publicly traded partnership taxable as a corporation would also result in the termination of Aimco’s status as a REIT for United States Federal income tax purposes, which would have a material adverse impact on Aimco. See “— Certain United States Federal Income Tax Matters — Taxation of Aimco and Aimco Stockholders — Tax Aspects of Aimco’s Investments in Partnerships.” The following discussion assumes that Aimco OP is, and will continue to be, classified and taxed as a partnership (and not as a publicly traded partnership) for United States Federal income tax purposes.

Taxation Of OP Unitholders

In general, a partnership is treated as a “pass-through” entity for United States Federal income tax purposes and is not itself subject to United States Federal income taxation. Each partner of a partnership, however, is subject to tax on his allocable share of partnership tax items, including partnership income, gains, losses, deductions, and expenses (“Partnership Tax Items”) for each taxable year of the partnership ending within or with such taxable year

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of the partner, regardless of whether he receives any actual distributions from the partnership during the taxable year. Generally, the characterization of any particular Partnership Tax Item is determined at the partnership, rather than at the partner level, and the amount of a partner’s allocable share of such item is governed by the terms of the partnership agreement. An OP Unitholder’s allocable share of Aimco OP’s taxable income may exceed the cash distributions to the OP Unitholder for any year if Aimco OP retains its profits rather than distributing them.

Allocations Of Aimco OP Profits And Losses

For United States Federal income tax purposes, an OP Unitholder’s allocable share of Aimco OP’s Partnership Tax Items will be determined by Aimco OP’s partnership agreement if such allocations either have “substantial economic effect” or are determined to be in accordance with the OP Unitholder’s interests in Aimco OP. If the allocations provided by Aimco OP’s agreement of limited partnership were successfully challenged by the IRS, the redetermination of the allocations to a particular OP Unitholder for United States Federal income tax purposes may be less favorable than the allocation set forth in Aimco OP’s agreement of limited partnership.

Tax Basis Of A Partnership Interest

A partner’s adjusted tax basis in his partnership interest is relevant, among other things, for determining (i) gain or loss upon a taxable disposition of his partnership interest, (ii) gain upon the receipt of partnership distributions, and (iii) the limitations imposed on the use of partnership deductions and losses allocable to such partner. Generally, the adjusted tax basis of an OP Unitholder’s interest in Aimco OP is equal to (A) the sum of the adjusted tax basis of the property contributed by the OP Unitholder to Aimco OP in exchange for an interest in Aimco OP and the amount of cash, if any, contributed by the OP Unitholder to Aimco OP, (B) reduced, but not below zero, by the OP Unitholder’s allocable share of Aimco OP partnership distributions, deductions, and losses, (C) increased by the OP Unitholder’s allocable share of Aimco OP partnership income and gains, and (D) increased by the OP Unitholder’s allocable share of Aimco OP partnership liabilities and decreased by the OP Unitholder’s liabilities assumed by Aimco OP.

Cash Distributions

Cash distributions received from a partnership do not necessarily correlate with income earned by the partnership as determined for United States Federal income tax purposes. Thus, an OP Unitholder’s United States Federal income tax liability in respect of his allocable share of Aimco OP taxable income for a particular taxable year may exceed the amount of cash, if any, received by the OP Unitholder from Aimco OP during such year.

If cash distributions, including a “deemed” cash distribution as discussed below, received by an OP Unitholder in any taxable year exceed his allocable share of Aimco OP taxable income for the year, the excess will generally constitute, for United States Federal income tax purposes, a return of capital to the extent of such OP Unitholder’s adjusted tax basis in his Aimco OP interest. Such return of capital will not be includible in the taxable income of the OP Unitholder, for United States Federal income tax purposes, but it will reduce, but not below zero, the adjusted tax basis of Aimco OP interests held by the OP Unitholder. If an OP Unitholder’s tax basis in his Aimco OP interest is reduced to zero, a subsequent cash distribution received by the OP Unitholder will be subject to tax as capital gain and/or ordinary income, but only if, and to the extent that, such distribution exceeds the subsequent positive adjustments, if any, to the tax basis of the OP Unitholder’s Aimco OP interest as determined at the end of the taxable year during which such distribution is received. A decrease in an OP Unitholder’s share of Aimco OP liabilities resulting from the payment or other settlement, or reallocation of such liabilities is generally treated, for United States Federal income tax purposes, as a deemed cash distribution. The Transaction documents permit Aimco to make such debt payments. A decrease in an OP Unitholder’s percentage interest in Aimco OP because of the issuance by Aimco OP of additional OP Units or otherwise, may decrease an OP Unitholder’s share of nonrecourse liabilities of Aimco OP and thus, may result in a corresponding deemed distribution of cash. A deemed distribution of cash resulting from the payment, settlement, or other reduction or reallocation of Aimco OP liabilities formerly allocated to an OP Unitholder will result in taxable gain to such OP Unitholder to the extent such deemed distribution of cash exceeds the OP Unitholder’s basis in his OP Units

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A non-pro rata distribution (or deemed distribution) of money or property may result in ordinary income to an OP Unitholder, regardless of such OP Unitholder’s tax basis in his OP Units, if the distribution reduces such OP Unitholder’s share of Aimco OP’s “Section 751 Assets.” “Section 751 Assets” are defined by the Internal Revenue Code to include “unrealized receivables” or “inventory items.” Among other things, “unrealized receivables” include amounts attributable to previously claimed depreciation deductions on certain types of property. To the extent that such a reduction in an OP Unitholder’s share of Section 751 Assets occurs, Aimco OP will be deemed to have distributed a proportionate share of the Section 751 Assets to the OP Unitholder followed by a deemed exchange of such assets with Aimco OP in return for the non-pro rata portion of the actual distribution made to such OP Unitholder. This deemed exchange will generally result in the realization of ordinary income by the OP Unitholder. Such income will equal the excess of (1) the non-pro rata portion of such distribution over (2) the OP Unitholder’s tax basis in such OP Unitholder’s share of such Section 751 Assets deemed relinquished in the exchange.

Tax Consequences Relating To Contributed Assets and Transferred Liabilities

Generally, section 721 of the Internal Revenue Code provides that neither the contributing partner nor Aimco OP will recognize a gain or loss, for United States Federal income tax purposes, upon a contribution of property to Aimco OP solely in exchange for OP Units. If, however, in connection with such a contribution of property, the investor receives, or is deemed to receive, cash or other consideration in addition to OP Units, the receipt or deemed receipt of such cash or other consideration may be treated as part of a “disguised sale.” In that case, the investor would be treated as having sold, in a taxable transaction, a portion of the contributed property to Aimco OP in exchange for such cash or other consideration; the balance of the contributed property would, however, remain subject to the tax-free contribution treatment described above. Subject to certain exceptions, including exceptions that apply to distributions of operating cash flow, any transfer or deemed transfer (such as a debt pay down which is permitted under the transaction documents), of cash by Aimco OP to the contributing partner within two years before or after such contribution, including cash paid at closing, will be treated as part of a taxable “disguised sale.” In addition, the IRS may assert that any redemption or exchange transaction involving the OP Units issued in connection with the Transaction that occurs within several years after such transaction constitutes an “integrated disguised sale” that may result in taxation (without the receipt of cash) for OP Unitholders who do not dispose of their OP Units.

The “disguised sale” rules may also apply, and give rise to taxable income without a corresponding receipt of cash where, for example, the NPI unitholder contributes property to Aimco OP subject to one or more liabilities, where liabilities are assumed or paid by Aimco OP or where a redemption or exchange involving the OP Units issued in connection with the Transaction occurs within several years after the Transaction. The application of the “disguised sale” rules is complex and depends, in part, upon the facts and circumstances applicable the NPI unitholders, which Aimco has not undertaken to review. Accordingly, investors are particularly urged with their tax advisors concerning the extent to which the “disguised sale” rules would apply.

If an investor transfers property to Aimco OP in exchange for an OP Unit, and the adjusted tax basis of such property differs from its fair market value, Partnership Tax Items must be allocated in a manner such that the contributing partner is charged with, or benefits from, the unrealized gain or unrealized loss associated with such property at the time of the contribution. This may result in a tax liability without a corresponding receipt of cash. Where a partner contributes cash to a partnership that holds appreciated property, Treasury Regulations provide for a similar allocation of such items to the other partners. These rules may apply to a contribution by Aimco to Aimco OP of cash proceeds received by Aimco from the offering of its stock. Such allocations are solely for United States Federal income tax purposes and do not affect the book capital accounts or other economic or legal arrangements among the OP Unitholders. The general purpose underlying this provision is to specially allocate certain Partnership Tax Items in order to place both the noncontributing and contributing partners in the same tax position that they would have been in had the contributing partner contributed property with an adjusted tax basis equal to its fair market value. Treasury Regulations provide Aimco OP with several alternative methods and allow Aimco OP to adopt any other reasonable method to make allocations to reduce or eliminate these “book-tax differences.” The general partner, in its sole and absolute discretion and in a manner consistent with Treasury Regulations, will select and adopt a method of allocating Partnership Tax Items for purposes of eliminating such disparities. The method

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selected by Aimco OP in its sole discretion could cause the transferor (or its partners) to incur a tax liability without a corresponding receipt of cash. Each prospective investor is urged to consult his tax advisor regarding the tax consequences of any special allocations of Partnership Tax Items resulting from the contribution of property to Aimco OP.

Disguised Sales Rules

As described above, if a contributing partner receives or is deemed to receive for United States Federal income tax purposes, cash or other consideration in addition to OP Units upon the contribution of property to Aimco OP or within two years before or after such consideration (other than certain safe harbor distributions), the transaction will likely be treated as part contribution of property and part sale of property under the “disguised sale” rules. The “disguised sale” rules may also apply where property is transferred to Aimco OP subject to certain liabilities. In such event, the contributing partner will recognize gain or loss with respect to the portion of the property that is deemed to be sold to Aimco OP. If the “disguised sale” rules apply, all or a portion of the liabilities associated with the contributed property may be treated as consideration received by the contributing partner in a sale of the property to Aimco OP. The “disguised sale” rules may apply if, for example, the issuance of OP Units to New NPI limited partners in connection with the merger is integrated with any other acquisition between Aimco and any OP Unitholder or any related party. For example, the IRS may assert that any redemption or exchange for several years between Aimco OP and any OP Unitholder who receives OP Units in the current transaction constitutes an “integrated disguised sale” that may result in taxation (without receipt of cash) for OP Unitholders who do not dispose of their OP Units. No assurances can be given that the IRS would not be successful in such an assertion. Each prospective investor is urged to consult his tax advisor regarding the application of the “disguised sale” rules.

Limitations On Deductibility Of Losses

Basis Limitation.  To the extent that an OP Unitholder’s allocable share of Aimco OP partnership deductions and losses exceeds his adjusted tax basis in his Aimco OP interest at the end of the taxable year in which the losses and deductions flow through, the excess losses and deductions cannot be utilized, for United States Federal income tax purposes, by the OP Unitholder in such year. The excess losses and deductions may, however, be utilized in the first succeeding taxable year in which, and to the extent that, there is an increase in the tax basis of Aimco OP interest held by such OP Unitholder, but only to the extent permitted under the “at risk” and “passive activity loss” rules discussed below.

“At Risk” Limitation.  Under the “at risk” rules of section 465 of the Internal Revenue Code, a noncorporate taxpayer and a closely held corporate taxpayer are generally not permitted to claim a deduction, for United States Federal income tax purposes, in respect of a loss from an activity, whether conducted directly by the taxpayer or through an investment in a partnership, to the extent that the loss exceeds the aggregate dollar amount which the taxpayer has “at risk” in such activity at the close of the taxable year. To the extent that losses are not permitted to be used in any taxable year, such losses may be carried over to subsequent taxable years and may be claimed as a deduction by the taxpayer if, and to the extent that, the amount which the taxpayer has “at risk” is increased. Provided certain requirements are met, a taxpayer is considered “at risk” for the taxpayer’s share of any nonrecourse financing which is secured by real property used in any activity that constitutes “the holding of real property,” which activity should be the case for a limited partner of a common OP Unit generally should constitute.

“Passive Activity Loss” Limitation.  The passive activity loss rules of section 469 of the Internal Revenue Code limit the use of losses derived from passive activities, which generally includes an investment in limited partnership interests such as the OP Units. If an investment in an OP Unit is treated as a passive activity, an OP Unitholder who is an individual investor, as well as certain other types of investors, would not be able to use losses from Aimco OP to offset nonpassive activity income, including salary, business income, and portfolio income (e.g., dividends, interest, royalties, and gain on the disposition of portfolio investments) received during the taxable year. Passive activity losses that are disallowed for a particular taxable year may, however, be carried forward to offset passive activity income earned by the OP Unitholder in future taxable years. In addition, such disallowed losses may be claimed as a deduction, subject to the basis and at risk limitations discussed above, upon a taxable disposition of an OP Unitholder’s entire interest in Aimco OP, regardless of whether such OP Unitholder has received any passive activity income during the year of disposition.

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If Aimco OP were characterized as a publicly traded partnership, each OP Unitholder would be required to treat any loss derived from Aimco OP separately from any income or loss derived from any other publicly traded partnership, as well as from income or loss derived from other passive activities. In such case, any net losses or credits attributable to Aimco OP which are carried forward may only be offset against future income of Aimco OP. Moreover, unlike other passive activity losses, suspended losses attributable to Aimco OP would only be allowed upon the complete disposition of the OP Unitholder’s “entire interest” in Aimco OP.

Section 754 Election

Aimco OP has made the election permitted by section 754 of the Internal Revenue Code. Such election is irrevocable without the consent of the IRS. The election will generally permit a purchaser of OP Units, such as Aimco when it acquires Aimco OP Units from OP Unitholders, to adjust its share of the basis in Aimco OP’s properties pursuant to section 743(b) of the Internal Revenue Code to fair market value (as reflected by the value of consideration paid for the OP Units), as if such purchaser had acquired a direct interest in Aimco OP assets. The section 743(b) adjustment is attributed solely to a purchaser of OP Units and is not added to the bases of Aimco OP’s assets associated with all of the OP Unitholders in Aimco OP.

Depreciation

Section 168(i)(7) of the Internal Revenue Code provides that in the case of property transferred to a partnership in a section 721 transaction, the transferee shall be treated as the transferor for purposes of computing the depreciation deduction with respect to so much of the basis in the hands of the transferee as does not exceed the adjusted basis in the hands of the transferor. The effect of this rule would be to continue the historic basis, placed in service dates and methods with respect to the depreciation of the properties being contributed by a Contributing Partner to Aimco OP in exchange for OP Units. However, an acquirer of OP Units that obtains a section 743(b) adjustment by reason of such acquisition (see “Section 754 Election,” above) generally will be allowed depreciation with respect to such adjustment beginning as of the date of the exchange as if it were new property placed in service as of that date.

Sale, Redemption, Exchange or Abandonment of OP Units

An OP Unitholder will recognize a gain or loss upon a sale of an OP Unit, a redemption of an OP Unit for cash, an exchange of an OP Unit for shares of common stock or other taxable disposition of an OP Unit. Gain or loss recognized upon a sale or exchange of an OP Unit will be equal to the difference between (i) the amount realized in the transaction (i.e., the sum of the cash and the fair market value of any property received for the OP Unit plus the amount of Aimco OP liabilities allocable to the OP Unit at such time) and (ii) the OP Unitholder’s tax basis in the OP Unit disposed of, which tax basis will be adjusted for the OP Unitholder’s allocable share of Aimco OP’s income or loss for the taxable year of the disposition. The tax liability resulting from the gain recognized on a disposition of an OP Unit could exceed the amount of cash and the fair market value of property received.

If Aimco OP redeems an OP Unitholder’s OP Units for cash (which is not contributed by Aimco to effect the redemption), the tax consequences generally would be the same as described in the preceding paragraphs, except that if Aimco OP redeems less than all of an OP Unitholder’s OP Units, the OP Unitholder would recognize taxable gain only to the extent that the cash, plus the amount of Aimco OP liabilities allocable to the redeemed OP Units, exceeded the OP Unitholder’s adjusted tax basis in all of such OP Unitholder’s OP Units immediately before the redemption.

Capital gains recognized by individuals and certain other noncorporate taxpayers upon the sale or disposition of an OP Unit will be subject to a maximum United States Federal income tax rate of 15% (through 2010) if the OP Unit is held for more than 12 months and will be taxed at ordinary income tax rates if the OP Unit is held for 12 months or less. Generally, gain or loss recognized by an OP Unitholder on the sale or other taxable disposition of an OP Unit will be taxable as capital gain or loss. However, to the extent that the amount realized upon the sale or other taxable disposition of an OP Unit attributable to an OP Unitholder’s share of “unrealized receivables” of Aimco OP exceeds the basis attributable to those assets, such excess will be treated as ordinary income. Among other things, “unrealized receivables” include amounts attributable to previously claimed depreciation deductions

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on certain types of property. In addition, the maximum United States Federal income tax rate for net capital gains attributable to the sale of depreciable real property (which may be determined to include an interest in a partnership such as Aimco OP) held for more than 12 months is currently 25% (rather than 15%) to the extent of previously claimed depreciation deductions that would not be treated as “unrealized receivables.” See also “Disguised Sales Rules” above for sales integrated with the contribution of property for OP Units.

The law is currently uncertain regarding the treatment of an abandoned interest in a partnership, and whether an abandonment gives rise to a deductible loss is a question of fact. Even if an investor were able to successfully abandon his interest in an OP Unit and thereby recognized loss to the extent of his basis in such OP Unit, under authority recently issued by the IRS, it is likely that such loss would be capital, rather than ordinary, in nature. Prospective investors are urged to consult their tax advisors regarding the application, effect and method of abandoning an interest in an OP Unit.

Alternative Minimum Tax

The Internal Revenue Code contains different sets of minimum tax rules applicable to corporate and noncorporate investors. The discussion below relates only to the alternative minimum tax applicable to noncorporate taxpayers. Accordingly, corporate investors should consult with their tax advisors with respect to the effect of the corporate minimum tax provisions that may be applicable to them. Noncorporate taxpayers are subject to an alternative minimum tax to the extent the tentative minimum tax (“TMT”) exceeds the regular income tax otherwise payable. In general, alternative minimum taxable income (“AMTI”) consists of the taxpayer’s taxable income, determined with certain adjustments, plus his items of tax preference. For example, alternative minimum taxable income is calculated using an alternative cost recovery (depreciation) system that is not as favorable as the methods provided for under section 168 of the Internal Revenue Code which Aimco OP will use in computing its income for regular United States Federal income tax purposes. Accordingly, an OP Unitholder’s AMTI derived from Aimco OP may be higher than such OP Unitholder’s share of Aimco OP’s net taxable income. Prospective investors should consult their tax advisors as to the impact of an investment in OP Units on their liability for the alternative minimum tax.

Information Returns and Audit Procedures

Aimco OP will use all reasonable efforts to furnish to each OP Unitholder as soon as possible after the close of each taxable year of Aimco OP, certain tax information, including a Schedule K-l, which sets forth each OP Unitholder’s allocable share of Aimco OP’s Partnership Tax Items. In preparing this information the general partner will use various accounting and reporting conventions to determine the respective OP Unitholder’s allocable share of Partnership Tax Items. The general partner cannot assure a current or prospective OP Unitholder that the IRS will not successfully contend in court that such accounting and reporting conventions are impermissible.

No assurance can be given that Aimco OP will not be audited by the IRS or that tax adjustments will not be made. Further, any adjustments in Aimco OP’s tax returns will lead to adjustments in OP Unitholders’ tax returns and may lead to audits of their returns and adjustments of items unrelated to Aimco OP. Each OP Unitholder would bear the cost of any expenses incurred in connection with an examination of such OP Unitholder’s personal tax return.

The tax treatment of Partnership Tax Items generally is determined at the partnership level in a unified partnership proceeding rather than in separate proceedings with the partners. The Internal Revenue Code provides for one partner to be designated as the Tax Matters Partner for these purposes.

The Tax Matters Partner is authorized, but not required, to take certain actions on behalf of Aimco OP and OP Unitholders and can extend the statute of limitations for assessment of tax deficiencies against OP Unitholders with respect to Aimco OP Tax Items. The Tax Matters Partner may bind an OP Unitholder with less than a 1% profits interest in Aimco OP to a settlement with the IRS, unless such OP Unitholder elects, by filing a statement with the IRS, not to give such authority to the Tax Matters Partner. The Tax Matters Partner may seek judicial review (to which all the OP Unitholders are bound) of a final partnership administrative adjustment and, if the Tax Matters Partner fails to seek judicial review, such review may be sought by any OP Unitholder having at least a 1% interest in the profits of Aimco OP or by OP Unitholders having in the aggregate at least a 5% profits interest. However, only

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one action for judicial review will go forward, and each OP Unitholder with an interest in the outcome may participate.

Tax Return Disclosure and Investor List Requirements

Treasury Regulations require participants in a “reportable transaction” to disclose certain information about the transaction to the IRS with their tax returns and retain certain information relating to the transaction (the “Disclosure Requirement”). In addition, organizers, sellers, and certain advisors of a reportable transaction are required to maintain certain records, including lists identifying the investors in a transaction, and to furnish those records, as well as detailed information regarding the transaction, to the IRS upon demand (the “List Maintenance Requirement”). While the Disclosure Requirement and the List Maintenance Requirement are directed towards “tax shelters,” the regulations are written quite broadly, and apply to transactions that would not typically be considered tax shelters. There are significant penalties for failure to comply with these requirements.

A transaction may be a reportable transaction based upon any of several indicia, including, among other things, losses. Characterization of this transaction as a reportable transaction could increase the likelihood of an audit by the IRS. You would be required to attach a completed IRS Form 8886, the “Reportable Transaction Disclosure Statement,” to your tax return for the taxable year of the transaction, as well as provide a copy of this form to the Office of Tax Shelter Analysis at the same time that such statement is first filed with the IRS. You should consult your tax advisors concerning these disclosure obligations with respect to the receipt or disposition of Common OP Units, or transactions that might be undertaken directly or indirectly by Aimco OP. Moreover, you should be aware that Aimco OP and other participants in the transactions involving Aimco OP (including their advisors) would be subject to the Disclosure Requirement and/or the List Maintenance Requirement if this transaction were to be classified as a reportable transaction.

Taxation Of Foreign OP Unitholders

A Non-U.S. Holder (as defined below under “— Certain United States Federal Income Tax Matters — Taxation of Aimco and Aimco Stockholders — Taxation of Foreign Stockholders) will generally be considered to be engaged in a United States trade or business on account of its ownership of an OP Unit. As a result, a Non-U.S. Holder will be required to file United States Federal income tax returns with respect to its allocable share of Aimco OP’s income which is effectively connected to its trade or business. A Non-U.S. Holder that is a corporation may also be subject to United States branch profit tax at a rate of 30%, in addition to regular United States Federal income tax, on its allocable share of such income. Such a tax may be reduced or eliminated by an income tax treaty between the United States and the country with respect to which the Non-U.S. Holder is resident for tax purposes. Non-U.S. Holders are advised to consult their tax advisors regarding the effects an investment in Aimco OP may have on information return requirements and other United States and non-United States tax matters, including the tax consequences of an investment in Aimco OP for the country or other jurisdiction of which such Non-U.S. Holder is a citizen or in which such Non-U.S. Holder resides or is otherwise located.

Taxation of Aimco and Aimco Stockholders

Taxation of Aimco

The REIT provisions of the Internal Revenue Code are highly technical and complex. The following summary sets forth certain aspects of the provisions of the Internal Revenue Code that govern the United States Federal income tax treatment of a REIT and its stockholders. This summary is qualified in its entirety by the applicable Internal Revenue Code provisions, Treasury Regulations, and administrative and judicial interpretations thereof, all of which are subject to change, possibly with retroactive effect.

Aimco has elected to be taxed as a REIT under the Internal Revenue Code commencing with its taxable year ended December 31, 1994, and Aimco intends to continue such election. Although Aimco believes that, commencing with the Aimco’s initial taxable year ended December 31, 1994, Aimco was organized in conformity with the requirements for qualification as a REIT, and its actual method of operation has enabled, and its proposed method of operation will enable, it to meet the requirements for qualification and taxation as a REIT under the

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Internal Revenue Code, no assurance can be given that Aimco has been or will remain so qualified. Such qualification and taxation as a REIT depends upon Aimco’s ability to meet, on a continuing basis, through actual annual operating results, asset ownership, distribution levels, requirements regard diversity of stock ownership, and the various qualification tests imposed under the Internal Revenue Code as discussed below. No assurance can be given that the actual results of Aimco’s operation for any one taxable year will satisfy such requirements. See “— Certain United States Federal Income Tax Matters — Taxation of Aimco and Aimco Stockholders — Failure to Qualify.” No assurance can be given that the IRS will not challenge Aimco’s eligibility for taxation as a REIT.

Taxation of REITs in General

Provided Aimco qualifies as a REIT, it will generally be entitled to a deduction for dividends that it pays and therefore will not be subject to United States Federal corporate income tax on its net income that is currently distributed to its stockholders. This deduction for dividends paid substantially eliminates the “double taxation” of corporate income (i.e., taxation at both the corporate and stockholder levels) that generally results from investment in a corporation. Rather, income generated by a REIT is generally taxed only at the stockholder level upon a distribution of dividends by the REIT.

The rates at which individual stockholders are taxed on corporate dividends have been reduced from a maximum of 38.6% (as ordinary income) to a maximum of 15% (the same as long-term capital gains) through 2010. With limited exceptions, however, dividends received by stockholders from Aimco or from other entities that are taxed as REITs are generally not eligible for the reduced rates, and will continue to be taxed at rates applicable to ordinary income, which, will be as high as 35% through 2010. See “— Taxation of Aimco and Aimco Stockholders — Taxation of Stockholders — Taxation of Taxable Domestic Stockholders — Distributions.”

Net operating losses, foreign tax credits and other tax attributes of a REIT generally do not pass through to the stockholders of the REIT, subject to special rules for certain items such as capital gains recognized by REITs. See “— Taxation of Aimco and Aimco Stockholders — Taxation of Stockholders.”

If Aimco qualifies as a REIT, it will nonetheless be subject to Federal income tax in the following circumstances:

•  Aimco will be taxed at regular corporate rates on any undistributed REIT taxable income, including undistributed net capital gains.

•  A 100% excise tax may be imposed on some items of income and expense that are directly or constructively paid between Aimco and its taxable REIT subsidiaries (as described below) if and to the extent that the IRS successfully asserts that the economic arrangements between Aimco and its taxable REIT subsidiaries are not comparable to similar arrangements between unrelated parties.

•  If Aimco has net income from prohibited transactions, which are, in general, sales or other dispositions of property held primarily for sale to customers in the ordinary course of business, other than foreclosure property, such income will be subject to a 100% tax.

•  If we elect to treat property that we acquire in connection with a foreclosure of a mortgage loan or certain leasehold terminations as “foreclosure property,” we may thereby avoid the 100% prohibited transactions tax on gain from a resale of that property (if the sale would otherwise constitute a prohibited transaction), but the income from the sale or operation of the property may be subject to corporate income tax at the highest applicable rate (currently 35%). We do not anticipate receiving any income from foreclosure property.

•  If Aimco should fail to satisfy the 75% gross income test or the 95% gross income test (as discussed below), but has nonetheless maintained its qualification as a REIT because certain other requirements have been met, it will be subject to a 100% tax on an amount based on the magnitude of the failure adjusted to reflect the profit margin associated with Aimco’s gross income.

•  Similarly, if Aimco should fail to satisfy the asset or other requirements applicable to REITs, as described below, yet nonetheless maintain its qualification as a REIT because there is reasonable cause for the failure and other applicable requirements are met, it may be subject to an excise tax. In that case, the amount of the tax will be at least $50,000 per failure, and, in the case of certain asset test failures, will be determined as the

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amount of net income generated by the assets in question multiplied by the highest corporate tax rate (currently 35%) if that amount exceeds $50,000 per failure.

•  If Aimco should fail to distribute during each calendar year at least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain net income for such year, and (iii) any undistributed taxable income from prior periods, Aimco would be required to pay a 4% excise tax on the excess of the required distribution over the sum of (a) the amounts actually distributed, plus (b) retained amounts on which income tax is paid at the corporate level.

•  Aimco may be required to pay monetary penalties to the IRS in certain circumstances, including if it fails to meet the record keeping requirements intended to monitor its compliance with rules relating to the composition of a REIT’s stockholders, as described below in “— Taxation of Aimco and Aimco Stockholders — Requirements for Qualification — General.”

•  If Aimco acquires appreciated assets from a corporation that is not a REIT (i.e., a “subchapter C corporation”) in a transaction in which the adjusted tax basis of the assets in the hands of Aimco is determined by reference to the adjusted tax basis of the assets in the hands of the subchapter C corporation, Aimco may be subject to tax on such appreciation at the highest corporate income tax rate then applicable if Aimco subsequently recognizes gain on the disposition of any such asset during the ten-year period following its acquisition from the subchapter C corporation.

•  Certain earnings of Aimco’s subsidiaries are subchapter C corporations, the earnings of which could be subject to Federal corporate income tax.

•  Aimco may be subject to the “alternative minimum tax” on its items of tax preference, including any deductions of net operating losses.

•  Aimco and its subsidiaries may be subject to a variety of taxes, including state, local and foreign income taxes, property taxes and other taxes on their assets and operations. Aimco could also be subject to tax in situations and on transactions not presently contemplated.

Requirements for Qualification

The Internal Revenue Code defines a REIT as a corporation, trust or association:

1. that is managed by one or more trustees or directors;

2. the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest;

3. that would be taxable as a domestic corporation, but for the special Internal Revenue Code provisions applicable to REITs;

4. that is neither a financial institution nor an insurance company subject to certain provisions of the Internal Revenue Code;

5. the beneficial ownership of which is held by 100 or more persons;

6. in which, during the last half of each taxable year, not more than 50% in value of the outstanding stock is owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities); and

7. that meets other tests described below (including with respect to the nature of its income and assets).

The Internal Revenue Code provides that conditions (1) through (4) must be met during the entire taxable year, and that the condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a shorter taxable year.

Aimco believes that it has been organized, has operated and has issued sufficient shares of stock to satisfy conditions (1) through (7) inclusive. Aimco’s articles of incorporation provide certain restrictions regarding transfers of its shares, which are intended to assist Aimco in satisfying the share ownership requirements described

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in conditions (5) and (6) above. These restrictions, however, may not ensure that Aimco will, in all cases, be able to satisfy the share ownership requirements described in (5) and (6) above.

To monitor Aimco’s compliance with the share ownership requirements, Aimco is generally required to maintain records regarding the actual ownership of its shares. To do so, Aimco must demand written statements each year from the record holders of certain percentages of its stock in which the record holders are to disclose the actual owners of the shares (i.e., the persons required to include in gross income the dividends paid by Aimco). A list of those persons failing or refusing to comply with this demand must be maintained as part of Aimco’s records. Failure by Aimco to comply with these record keeping requirements could subject it to monetary penalties. A stockholder who fails or refuses to comply with the demand is required by the Treasury Regulations to submit a statement with its tax return disclosing the actual ownership of the shares and certain other information.

In addition, a corporation generally may not elect to become a REIT unless its taxable year is the calendar year. Aimco satisfies this requirement.

The Internal Revenue Code provides relief from violations of the REIT gross income requirements, as described below under “— Income Tests,” in cases where a violation is due to reasonable cause and not willful neglect, and other requirements are met, including the payment of a penalty tax that is based upon the magnitude of the violation. In addition, the Internal Revenue Code extends similar relief in the case of certain violations of the REIT asset requirements (see ‘‘— Asset Tests” below) and other REIT requirements, again provided that the violation is due to reasonable cause and not willful neglect, and other conditions are met, including the payment of a penalty tax. If Aimco fails to satisfy any of the various REIT requirements, there can be no assurance that these relief provisions would be available to enable it to maintain its qualification as a REIT, and, if available, the amount of any resultant penalty tax could be substantial.

Effect of Subsidiary Entities

Ownership of Partnership Interests.  In the case of a REIT that is a partner in a partnership, the Treasury Regulations provide that the REIT is deemed to own its proportionate share of the partnership’s assets and to earn its proportionate share of the partnership’s income for purposes of the asset and gross income tests applicable to REITs as described below. Similarly, the assets and gross income of the partnership are deemed to retain the same character in the hands of the REIT. Thus, Aimco’s proportionate share of the assets, liabilities and items of income of the Subsidiary Partnerships will be treated as assets, liabilities and items of income of Aimco for purposes of applying the REIT requirements described below. A summary of certain rules governing the Federal income taxation of partnerships and their partners is provided below in “— Taxation of Aimco and Aimco Stockholders — Tax Aspects of Investments in Affiliated Entities — Partnerships.”

Disregarded Subsidiaries.  Aimco’s indirect interests in Aimco OP and other Subsidiary Partnerships are held through wholly owned corporate subsidiaries of Aimco organized and operated as “qualified REIT subsidiaries” within the meaning of the Internal Revenue Code. A qualified REIT subsidiary is any corporation, other than a “taxable REIT subsidiary” as described below, that is wholly owned by a REIT, or by other disregarded subsidiaries, or by a combination of the two. If a REIT owns a qualified REIT subsidiary, that subsidiary is disregarded for Federal income tax purposes, and all assets, liabilities and items of income, deduction and credit of the subsidiary are treated as assets, liabilities and items of income, deduction and credit of the REIT itself, including for purposes of the gross income and asset tests applicable to REITs as summarized below. Each qualified REIT subsidiary, therefore, is not subject to Federal corporate income taxation, although it may be subject to state or local taxation. Other entities that are wholly owned by a REIT, including single member limited liability companies, are also generally disregarded as separate entities for Federal income tax purposes, including for purposes of the REIT income and asset tests. Disregarded subsidiaries, along with partnerships in which Aimco holds an equity interest, are sometimes referred to herein as “pass-through subsidiaries.”

In the event that a disregarded subsidiary of Aimco ceases to be wholly owned — for example, if any equity interest in the subsidiary is acquired by a person other than Aimco or another disregarded subsidiary of Aimco — the subsidiary’s separate existence would no longer be disregarded for Federal income tax purposes. Instead, it would have multiple owners and would be treated as either a partnership or a taxable corporation. Such an event could, depending on the circumstances, adversely affect Aimco’s ability to satisfy the various asset and gross

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income requirements applicable to REITs, including the requirement that REITs generally may not own, directly or indirectly, more than 10% of the securities of another corporation. See “— Taxation of Aimco and Aimco Stockholders — Asset Tests” and “— Taxation of Aimco and Aimco Stockholders — Income Tests.”

Taxable Subsidiaries.  A REIT, in general, may jointly elect with subsidiary corporations, whether or not wholly owned, to treat the subsidiary corporation as a taxable REIT subsidiary (“TRS”). A TRS also includes any corporation, other than a REIT, with respect to which a TRS in which a REIT owns an interest, owns securities possessing 35% of the total voting power or total value of the outstanding securities of such corporation. The separate existence of a TRS or other taxable corporation, unlike a disregarded subsidiary as discussed above, is not ignored for Federal income tax purposes. As a result, a parent REIT is not treated as holding the assets of a TRS or as receiving any income that the TRS earns. Rather, the stock issued by the TRS is an asset in the hands of the parent REIT, and the REIT recognizes as income, the dividends, if any, that it receives from the subsidiary. This treatment can affect the income and asset test calculations that apply to the REIT, as described below. Because a parent REIT does not include the assets and income of such subsidiary corporations in determining the parent’s compliance with the REIT requirements, such entities may be used by the parent REIT to indirectly undertake activities that the REIT rules might otherwise preclude it from doing directly or through pass-through subsidiaries (for example, activities that give rise to certain categories of income such as management fees or foreign currency gains). As a taxable corporation, a TRS is required to pay regular Federal income tax, and state and local income tax where applicable.

Certain of Aimco’s operations (including certain of its property management, asset management, risk, etc.) are conducted through its taxable REIT subsidiaries. Because Aimco is not required to include the assets and income of such taxable REIT subsidiaries in determining Aimco’s compliance with the REIT requirements, Aimco uses its taxable REIT subsidiaries to facilitate its ability to offer services and activities to its residents that are not generally considered as qualifying REIT services and activities. If Aimco fails to properly structure and provide such nonqualifying services and activities through its taxable REIT subsidiaries, its ability to satisfy the REIT gross income requirement, and also its REIT status, may be jeopardized.

A TRS may generally engage in any business except the operation or management of a lodging or health care facility. The operation or management of a health care or lodging facility precludes a corporation from qualifying as a TRS. If any of Aimco’s taxable REIT subsidiaries were deemed to operate or manage a health care or lodging facility, such taxable REIT subsidiaries would fail to qualify as taxable REIT subsidiaries, and Aimco would fail to qualify as a REIT. Aimco believes that none of its taxable REIT subsidiaries operate or manage any health care or lodging facilities. However, the statute provides little guidance as to the definition of a health care or lodging facility. Accordingly, there can be no assurance that the IRS will not contend that any of Aimco’s taxable REIT subsidiaries operate or manage a health care or lodging facility, disqualifying it from treatment as a TRS, thereby resulting in the disqualification of Aimco as a REIT.

Several provisions of the Internal Revenue Code regarding arrangements between a REIT and a TRS ensure that a TRS will be subject to an appropriate level of Federal income taxation. For example, a TRS is limited in its ability to deduct interest payments made to its REIT owner. In addition, Aimco would be obligated to pay a 100% penalty tax on some payments that it receives from, or on certain expenses deducted by, its taxable REIT subsidiaries, if the IRS were to successfully assert that the economic arrangements between Aimco and its taxable REIT subsidiaries are not comparable to similar arrangements among unrelated parties. See “Taxation of REITs in General — Penalty Tax.”

Income Tests

In order to maintain qualification as a REIT, Aimco annually must satisfy two gross income requirements:

•  First, at least 75% of Aimco’s gross income for each taxable year, excluding gross income from sales of inventory or dealer property in “prohibited transactions,” must be derived from investments relating to real property or mortgages on real property, including “rents from real property,” dividends received from other REITs, interest income derived from mortgage loans secured by real property, and gains from the sale of real estate assets, as well as certain types of temporary investments.

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•  Second, at least 95% of Aimco’s gross income for each taxable year, excluding gross income from prohibited transactions, must be derived from some combination of such income from investments in real property (i.e., income that qualifies under the 75% income test described above), as well as other dividends, interest and gains from the sale or disposition of stock or securities, which need not have any relation to real property.

Rents received by Aimco directly or through the Subsidiary Partnerships will qualify as “rents from real property” in satisfying the gross income requirements described above, only if several conditions are met, including the following. If rent is partly attributable to personal property leased in connection with a lease of real property, the portion of the total rent attributable to the personal property will not qualify as “rents from real property” unless it constitutes 15% or less of the total rent received under the lease. Moreover, for rents received to qualify as “rents from real property,” the REIT generally must not operate or manage the property (subject to certain exceptions) or furnish or render services to the tenants of such property, other than through an “independent contractor” from which the REIT derives no revenue. Aimco and its affiliates are permitted, however, to directly perform services that are “usually or customarily rendered” in connection with the rental of space for occupancy only and are not otherwise considered rendered to the occupant of the property. In addition, Aimco and its affiliates may directly or indirectly provide non-customary services to tenants of its properties without disqualifying all of the rent from the property if the payment for such services does not exceed 1% of the total gross income from the property. For purposes of this test, the income received from such non-customary services is deemed to be at least 150% of the direct cost of providing the services. Moreover, Aimco is generally permitted to provide services to tenants or others through a TRS without disqualifying the rental income received from tenants for purposes of the REIT income requirements.

Aimco manages apartment properties for third parties and affiliates through its taxable REIT subsidiaries. These taxable REIT subsidiaries receive management fees and other income. A portion of such fees and other income accrue to Aimco through distributions from the taxable REIT subsidiaries that are classified as dividend income to the extent of the earnings and profits of the taxable REIT subsidiaries. Such distributions will generally qualify for purposes of the 95% gross income test but not for purposes of the 75% gross income test. Any dividends received by us from a REIT will be qualifying income in our hands for purposes of both the 95% and 75% income tests.

Any income or gain derived by Aimco directly or through its Subsidiary Partnerships from instruments that hedge certain risks, such as the risk of changes in interest rates, will not constitute gross income for purposes of the 75% or 95% gross income test, provided that specified requirements are met. Such requirements include that the instrument hedges risks associated with indebtedness issued by Aimco or its Subsidiary Partnerships that is incurred to acquire or carry “real estate assets” (as described below under “— Taxation of Aimco and Aimco Stockholders — Asset Tests”), and the instrument is properly identified as a hedge, along with the risk that it hedges, within prescribed time periods.

If Aimco fails to satisfy one or both of the 75% or 95% gross income tests for any taxable year, it may nevertheless qualify as a REIT for the year if it is entitled to relief under certain provisions of the Internal Revenue Code. These relief provisions will be generally available if Aimco’s failure to meet these tests was due to reasonable cause and not due to willful neglect, Aimco attaches a schedule of the sources of its income to its tax return, and any incorrect information on the schedule was not due to fraud with intent to evade tax. It is not possible to state whether Aimco would be entitled to the benefit of these relief provisions in all circumstances. If these relief provisions are inapplicable to a particular set of circumstances involving Aimco, Aimco will not qualify as a REIT. As discussed above under “— Taxation of Aimco and Aimco Stockholders — Taxation of REITs in General,” even where these relief provisions apply, a tax is imposed based upon the amount by which Aimco fails to satisfy the particular gross income test.

Asset Tests

Aimco, at the close of each calendar quarter of its taxable year, must also satisfy four tests relating to the nature of its assets:

•  First, at least 75% of the value of the total assets of Aimco total assets must be represented by some combination of “real estate assets,” cash, cash items, U.S. government securities, and under some

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circumstances, stock or debt instruments purchased with new capital. For this purpose, “real estate assets” include interests in real property, such as land, buildings, leasehold interests in real property, stock of other corporations that qualify as REITs, and some kinds of mortgage backed securities and mortgage loans. Assets that do not qualify for purposes of the 75% test are subject to the additional asset tests described below.

•  Second, not more than 25% of Aimco’s total assets may be represented by securities other than those in the 75% asset class.

•  Third, of the investments included in the 25% asset class, the value of any one issuer’s securities owned by Aimco may not exceed 5% of the value of Aimco’s total assets, Aimco may not own more than 10% of any one issuer’s outstanding voting securities, and Aimco may not own more than 10% of the total value of the outstanding securities of any one issuer. The 5% and 10% asset tests do not apply to securities of taxable REIT subsidiaries.

•  Fourth, the aggregate value of all securities of taxable REIT subsidiaries held by Aimco may not exceed 25% of the value of Aimco’s total assets.

Aimco believes that the value of the securities held by Aimco in its taxable REIT subsidiaries will not exceed, in the aggregate, 25% of the value of Aimco’s total assets and that Aimco’s ownership interests in its taxable REIT subsidiaries qualify under the asset tests set forth above.

Notwithstanding the general rule that a REIT is treated as owning its share of the underlying assets of a subsidiary partnership for purposes of the REIT income and asset tests, if a REIT holds indebtedness issued by a partnership, the indebtedness will be subject to, and may cause a violation of, the asset tests, resulting in loss of REIT status, unless it is a qualifying mortgage asset satisfies the rules for “straight debt,” or is sufficiently small so as not to otherwise cause an asset test violation. Similarly, although stock of another REIT is a qualifying asset for purposes of the REIT asset tests, non-mortgage debt held by Aimco that is issued by another REIT may not so qualify.

The Internal Revenue Code contains a number of provisions applicable to REITs, including relief provisions that make it easier for REITs to satisfy the asset requirements, or to maintain REIT qualification notwithstanding certain violations of the asset and other requirements.

One such provision allows a REIT which fails one or more of the asset requirements to nevertheless maintain its REIT qualification if (a) it provides the IRS with a description of each asset causing the failure, (b) the failure is due to reasonable cause and not willful neglect, (c) the REIT pays a tax equal to the greater of (i) $50,000 per failure, and (ii) the product of the net income generated by the assets that caused the failure multiplied by the highest applicable corporate tax rate (currently 35%), and (d) the REIT either disposes of the assets causing the failure within 6 months after the last day of the quarter in which it identifies the failure, or otherwise satisfies the relevant asset tests within that time frame.

A second relief provision contained in the Internal Revenue Code applies to de minimis violations of the 10% and 5% asset tests. A REIT may maintain its qualification despite a violation of such requirements if (a) the value of the assets causing the violation do not exceed the lesser of 1% of the REIT’s total assets, and $10,000,000, and (b) the REIT either disposes of the assets causing the failure within 6 months after the last day of the quarter in which it identifies the failure, or the relevant tests are otherwise satisfied within that time frame.

The Internal Revenue Code also provides that certain securities will not cause a violation of the 10% value test described above. Such securities include instruments that constitute “straight debt,” which now has an expanded definition and includes securities having certain contingency features. A restriction, however, precludes a security from qualifying as “straight debt” where a REIT (or a controlled TRS of the REIT) owns other securities of the issuer of that security which do not qualify as straight debt, unless the value of those other securities constitute, in the aggregate, 1% or less of the total value of that issuer’s outstanding securities. In addition to straight debt, the Internal Revenue Code provides that certain other securities will not violate the 10% value test. Such securities include (a) any loan made to an individual or an estate, (b) certain rental agreements in which one or more payments are to be made in subsequent years (other than agreements between a REIT and certain persons related to the REIT),

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(c) any obligation to pay rents from real property, (d) securities issued by governmental entities that are not dependent in whole or in part on the profits of (or payments made by) a non-governmental entity, (e) any security issued by another REIT, and (f) any debt instrument issued by a partnership if the partnership’s income is of a nature that it would satisfy the 75% gross income test described above under “— Income Tests.” The Internal Revenue Code also provides that in applying the 10% value test, a debt security issued by a partnership is not taken into account to the extent, if any, of the REIT’s proportionate equity interest in that partnership.

Aimco believes that its holding of securities and other assets comply, and will continue to comply, with the foregoing REIT asset requirements, and it intends to monitor compliance on an ongoing basis. No independent appraisals have been obtained, however, to support Aimco’s conclusions as to the value of its assets, including Aimco OP’s total assets and the value of Aimco OP’s interest in the taxable REIT subsidiaries. Moreover, values of some assets may not be susceptible to a precise determination, and values are subject to change in the future. Furthermore, the proper classification of an instrument as debt or equity for Federal income tax purposes may be uncertain in some circumstances, which could affect the application of the REIT asset requirements. Accordingly, there can be no assurance that the IRS will not contend that Aimco’s interests in its subsidiaries or in the securities of other issuers will cause a violation of the REIT asset requirements and loss of REIT status.

If we should fail to satisfy the asset tests at the end of a calendar quarter, such a failure would not cause us to lose our REIT status if we (1) satisfied the asset tests at the close of the preceding calendar quarter and (2) the discrepancy between the value of our assets and the asset test requirements was not wholly or partly caused by an acquisition of non-qualifying assets, but instead arose from changes in the market value of our assets. If the condition described in (2) were not satisfied, we still could avoid disqualification by eliminating any discrepancy within 30 days after the close of the calendar quarter in which it arose.

Annual Distribution Requirements

In order for Aimco to qualify as a REIT, Aimco is required to distribute dividends (other than capital gain dividends) to its stockholders in an amount at least equal to:

•  the sum of

(a) 90% of Aimco’s “REIT taxable income” (computed without regard to the deduction for dividends paid and net capital gain of Aimco), and

(b) 90% of the net income, if any, from foreclosure property (as described below), minus

•  the sum of certain items of noncash income.

These distributions must be paid in the taxable year to which they relate, or in the following taxable year if they are declared in October, November, or December of the taxable year, are payable to stockholders of record on a specified date in any such month, and are actually paid before the end of January of the following year. In order for distributions to be counted for this purpose, and to give rise to a tax deduction by Aimco, they must not be “preferential dividends.” A dividend is not a preferential dividend if it is pro rata among all outstanding shares of stock within a particular class, and is in accordance with the preferences among different classes of stock as set forth in Aimco’s organizational documents.

To the extent that Aimco distributes at least 90%, but less than 100%, of its “REIT taxable income,” as adjusted, it will be subject to tax thereon at ordinary corporate tax rates. In any year, Aimco may elect to retain, rather than distribute, its net capital gain and pay tax on such gain. In such a case, Aimco’s stockholders would include their proportionate share of such undistributed long-term capital gain in income and receive a corresponding credit for their share of the tax paid by Aimco. Aimco’s stockholders would then increase the adjusted basis of their Aimco shares by the difference between the designated amounts included in their long-term capital gains and the tax deemed paid with respect to their shares.

To the extent that a REIT has available net operating losses carried forward from prior tax years, such losses may reduce the amount of distributions that it must make in order to comply with the REIT distribution requirements. Such losses, however, will generally not affect the character, in the hands of stockholders, of any distributions that are actually made by the REIT, which are generally taxable to stockholders to the extent that

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the REIT has current or accumulated earnings and profits. See “— Taxation of Aimco and Aimco Stockholders — Taxation of Stockholders — Taxation of Taxable Domestic Stockholders — Distributions.”

If Aimco should fail to distribute during each calendar year at least the sum of:

•  85% of its REIT ordinary income for such year,

(c) 95% of its REIT capital gain net income for such year (excluding retained net capital gain), and

(d) any undistributed taxable income from prior periods,

Aimco would be subject to a 4% excise tax on the excess of such required distribution over the sum of (x) the amounts actually distributed, and (y) the amounts of income retained on which it has paid corporate income tax.

It is possible that Aimco, from time to time, may not have sufficient cash to meet the 90% distribution requirement due to timing differences between (i) the actual receipt of cash (including receipt of distributions from Aimco OP) and (ii) the inclusion of certain items in income by Aimco for Federal income tax purposes. In the event that such timing differences occur, in order to meet the distribution requirements, Aimco may find it necessary to arrange for short-term, or possibly long-term, borrowings, or to pay dividends in the form of taxable in-kind distributions of property.

Under certain circumstances, Aimco may be able to rectify a failure to meet the distribution requirement for a year by paying “deficiency dividends” to stockholders in a later year, which may be included in Aimco’s deduction for dividends paid for the earlier year. In this case, Aimco may be able to avoid losing its REIT status or being taxed on amounts distributed as deficiency dividends; however, Aimco will be required to pay interest and a penalty based on the amount of any deduction taken for deficiency dividends.

Failure to Qualify

If Aimco fails to qualify for taxation as a REIT in any taxable year, and the relief provisions do not apply, Aimco will be subject to tax, including any applicable alternative minimum tax, on its taxable income at regular corporate rates. Distributions to stockholders in any year in which Aimco fails to qualify will not be deductible by Aimco nor will they be required to be made. In such event, to the extent of current and accumulated earnings and profits, all distributions to stockholders that are individuals will generally be taxable at a rate of 15% (through 2010) and, subject to certain limitations of the Internal Revenue Code, corporate distributees may be eligible for the dividends received deduction. Unless Aimco is entitled to relief under specific statutory provisions, Aimco would also be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year during which qualification was lost. It is not possible to state whether, in all circumstances, Aimco would be entitled to this statutory relief.

Prohibited Transactions

Net income derived by a REIT from a prohibited transaction is subject to a 100% excise tax. The term “prohibited transaction” generally includes a sale or other disposition of property (other than foreclosure property) that is held primarily for sale to customers in the ordinary course of a trade or business. Aimco intends to conduct its operations so that no asset owned by Aimco or its pass-through subsidiaries will be held for sale to customers, and that a sale of any such asset will not be in the ordinary course of Aimco’s business. Whether property is held “primarily for sale to customers in the ordinary course of a trade or business” depends, however, on the particular facts and circumstances. No assurance can be given that any property sold by Aimco will not be treated as property held for sale to customers, or that Aimco can comply with certain safe-harbor provisions of the Internal Revenue Code that would prevent the imposition of the 100% excise tax. The 100% tax does not apply to gains from the sale of property that is held through a TRS or other taxable corporation, although such income will be subject to tax in the hands of the corporation at regular corporate rates.

Penalty Tax

Aimco will be subject to a 100% penalty tax on the amount of certain non-arm’s length payments received from, or certain expenses deducted by, its taxable REIT subsidiaries if the IRS were to successfully assert that the

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economic arrangements between Aimco and its taxable REIT subsidiaries are not comparable to similar transaction between unrelated parties. Such amounts may include rents from real property that are overstated as a result of services furnished by a TRS to tenants of Aimco and amounts that are deducted by a TRS for payments made to Aimco that are in excess of the amounts that would have been charged by an unrelated party.

Aimco believes that the fees paid to its taxable REIT subsidiaries for tenant services are comparable to the fees that would be paid to an unrelated third party negotiating at arm’s-length. This determination, however, is inherently factual, and the IRS may assert that the fees paid by Aimco do not represent arm’s-length amounts. If the IRS successfully made such an assertion, Aimco would be required to pay a 100% penalty tax on the excess of an arm’s-length fee for tenant services over the amount actually paid.

Tax Aspects Of Aimco’s Investments In Partnerships

General

Substantially all of Aimco’s investments are held indirectly through Aimco OP. In general, partnerships are “pass-through” entities that are not subject to Federal income tax. Rather, partners are allocated their proportionate shares of the items of income, gain, loss, deduction and credit of a partnership, and are potentially subject to tax on these items, without regard to whether the partners receive a distribution from the partnership. Aimco will include in its income its proportionate share of the foregoing partnership items for purposes of the various REIT income tests and in the computation of its REIT taxable income. Moreover, for purposes of the REIT asset tests, Aimco will include its proportionate share of assets held by the Subsidiary Partnerships. See “— Taxation of Aimco and Aimco Stockholders — Taxation of Aimco — Effect of Subsidiary Entities — Ownership of Partnership Interests.”

Entity Classification.

Aimco’s direct and indirect investment in partnerships involves special tax considerations, including the possibility of a challenge by the IRS of the tax status of any of the Subsidiary Partnerships as a partnership, as opposed to as an association taxable as a corporation, for Federal income tax purposes. If any of these entities were treated as an association for Federal income tax purposes, it would be taxable as a corporation and therefore could be subject to an entity-level tax on its income. In such a situation, the character of Aimco’s assets and items of gross income would change and could preclude Aimco from satisfying the REIT asset tests and gross income tests (see “— Taxation of Aimco and Aimco Stockholders — Taxation of Aimco — Asset Tests” and “— Taxation of Aimco and Aimco Stockholders — Taxation of Aimco — Income Tests”), and in turn could prevent Aimco from qualifying as a REIT unless Aimco is eligible for relief from the violation pursuant to relief provisions described above. See “— Taxation of Aimco and Aimco Stockholders — Taxation of Aimco — Failure to Qualify” above for a summary of the effect of Aimco’s failure to satisfy the REIT tests for a taxable year, and of the relief provisions. In addition, any change in the status of any of the Subsidiary Partnerships for tax purposes might be treated as a taxable event, in which case Aimco might incur a tax liability without any related cash distributions.

Tax Allocations With Respect To The Properties.

Under the Internal Revenue Code and the Treasury Regulations, income, gain, loss and deduction attributable to appreciated or depreciated property that is contributed to a partnership in exchange for an interest in the partnership must be allocated for tax purposes in a manner such that the contributing partner is charged with, or benefits from the unrealized gain or unrealized loss associated with the property at the time of the contribution. The amount of the unrealized gain or unrealized loss is generally equal to the difference between the fair market value of the contributed property at the time of contribution, and the adjusted tax basis of such property at the time of contribution (a “Book — Tax Difference”). Such allocations are solely for Federal income tax purposes and do not affect the book capital accounts or other economic or legal arrangements among the partners. Aimco OP was formed by way of contributions of appreciated property. Consequently, allocations must be made in a manner consistent with these requirements. Where a partner contributes cash to a partnership at a time that the partnership holds appreciated (or depreciated) property, the Treasury Regulations provide for a similar allocation of these items to the other (i.e., non-contributing) partners. These rules apply to the contribution by Aimco to Aimco OP of the cash proceeds received in any offerings of its stock.

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In general, certain unitholders will be allocated lower amounts of depreciation deductions for tax purposes and increased taxable income and gain on the sale by Aimco OP or other Subsidiary Partnerships of the contributed properties. This will tend to eliminate the Book-Tax Difference over the life of these partnerships. However, the special allocations do not always entirely rectify the Book-Tax Difference on an annual basis or with respect to a specific taxable transaction such as a sale. Thus, the carryover basis of the contributed properties in the hands of Aimco OP or other Subsidiary Partnerships may cause Aimco to be allocated lower depreciation and other deductions, and possibly greater amounts of taxable income in the event of a sale of such contributed assets in excess of the economic or book income allocated to it as a result of such sale. This may cause Aimco to recognize, over time, taxable income in excess of cash proceeds, which might adversely affect Aimco’s ability to comply with the REIT distribution requirements. See ‘‘— Taxation of Aimco and Aimco Stockholders — Taxation of Aimco — Annual Distribution Requirements.”

With respect to any property purchased or to be purchased by any of the Subsidiary Partnerships (other than through the issuance of units) subsequent to the formation of Aimco, such property will initially have a tax basis equal to its fair market value and the special allocation provisions described above will not apply.

Sale Of The Properties.

Aimco’s share of any gain realized by Aimco OP or any other Subsidiary Partnership on the sale of any property held as inventory or primarily for sale to customers in the ordinary course of business will be treated as income from a prohibited transaction that is subject to a 100% penalty tax. See “— United States Federal Income Taxation of Aimco and Aimco Stockholder — Taxation of Aimco — Prohibited Transactions.” Under existing law, whether property is held as inventory or primarily for sale to customers in the ordinary course of a partnership’s trade or business is a question of fact that depends on all the facts and circumstances with respect to the particular transaction. Aimco OP and the other Subsidiary Partnerships intend to hold their properties for investment with a view to long-term appreciation, to engage in the business of acquiring, developing, owning and operating the properties and to make such occasional sales of the properties, including peripheral land, as are consistent with Aimco’s investment objectives.

Taxation of Taxable REIT Subsidiaries

A portion of the amounts to be used to fund distributions to stockholders may come from distributions made by Aimco’s taxable REIT subsidiaries to Aimco OP, and interest paid by the taxable REIT subsidiaries on certain notes held by Aimco OP. In general, taxable REIT subsidiaries pay Federal, state and local income taxes on their taxable income at normal corporate rates. Any Federal, state or local income taxes that Aimco’s taxable REIT subsidiaries are required to pay will reduce Aimco’s cash flow from operating activities and its ability to make payments to holders of its securities.

Taxation of Stockholders

Taxable Domestic Stockholders

Distributions.  Provided that Aimco qualifies as a REIT, distributions made to Aimco’s taxable domestic stockholders out of current or accumulated earnings and profits (and not designated as capital gain dividends) will generally be taken into account by them as ordinary income (35% maximum Federal rate through 2010) and will not be eligible for the dividends received deduction for corporations. With limited exceptions, dividends received from REITs are not eligible for taxation at the preferential income tax rates (15% maximum Federal rate through 2010) for qualified dividends received by individuals from taxable C corporations. Stockholders that are individuals, however, are taxed at the preferential rates on dividends designated by and received from REITs to the extent that the dividends are attributable to (i) income retained by the REIT in the prior taxable year on which the REIT was subject to corporate level income tax (less the amount of tax), (ii) dividends received by the REIT from taxable REIT subsidiaries or other taxable C corporations, or (iii) income in the prior taxable year from the sales of “built-in gain” property acquired by the REIT from C corporations in carryover basis transactions (less the amount of corporate tax on such income).

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Distributions (and retained net capital gains) that are designated as capital gain dividends will generally be taxed to stockholders as long-term capital gains, to the extent that they do not exceed Aimco’s actual net capital gain for the taxable year, without regard to the period for which the stockholder has held its stock. However, corporate stockholders may be required to treat up to 20% of certain capital gain dividends as ordinary income. Long-term capital gains are generally taxable at maximum Federal rates of 15% (through 2010) in the case of stockholders who are individuals, and 35% in the case of stockholders that are corporations. Capital gains attributable to the sale of depreciable real property held for more than 12 months are subject to a 25% maximum Federal income tax rate for taxpayers who are individuals, to the extent of previously claimed depreciation deductions.

In determining the extent to which a distribution constitutes a dividend for tax purposes, Aimco’s earnings and profits generally will be allocated first to distributions with respect to preferred stock prior to allocating any remaining earnings and profits to distributions on Aimco’s common stock. If Aimco has net capital gains and designates some or all of its distributions as capital gain dividends to that extent, the capital gain dividends will be allocated among different classes of stock in proportion to the allocation of earnings and profits as described above.

Distributions in excess of current and accumulated earnings and profits will not be taxable to a stockholder to the extent that they do not exceed the adjusted basis of the stockholder’s shares in respect of which the distributions were made, but rather will reduce the adjusted basis of such shares. To the extent that such distributions exceed the adjusted basis of a stockholder’s shares, they will be included in income as long-term capital gain, or short-term capital gain if the shares have been held for one year or less. In addition, any dividend declared by Aimco in October, November or December of any year and payable to a stockholder of record on a specified date in any such month will be treated as both paid by Aimco and received by the stockholder on December 31 of such year, provided that the dividend is actually paid by Aimco before the end of January of the following calendar year.

To the extent that a REIT has available net operating losses and capital losses carried forward from prior tax years, such losses may reduce the amount of distributions that must be made in order to comply with the REIT distribution requirements. See “— Taxation of Aimco and Aimco Stockholders — Taxation of Aimco — Annual Distribution Requirements.” Such losses, however, are not passed through to stockholders and do not offset income of stockholders from other sources, nor would they affect the character of any distributions that are actually made by a REIT, which are generally subject to tax in the hands of stockholders to the extent that the REIT has current or accumulated earnings and profits.

Dispositions of Aimco Stock.  A stockholder will realize gain or loss upon the sale, redemption or other taxable disposition of stock in an amount equal to the difference between the sum of the fair market value of any property and cash received in such disposition, and the stockholder’s adjusted tax basis in the stock at the time of the disposition. In general, a stockholder’s tax basis will equal the stockholder’s acquisition cost, increased by the excess of net capital gains deemed distributed to the stockholder (as discussed above), less tax deemed paid on such net capital gains, and reduced by returns of capital. In general, capital gains recognized by individuals upon the sale or disposition of shares of Aimco stock will be subject to a maximum Federal income tax rate of 15% (through 2010) if the Aimco stock is held for more than 12 months, and will be taxed at ordinary income rates (of up to 35% through 2010) if the Aimco stock is held for 12 months or less. Gains recognized by stockholders that are corporations are subject to Federal income tax at a maximum rate of 35%, whether or not classified as long-term capital gains. Capital losses recognized by a stockholder upon the disposition of Aimco stock held for more than one year at the time of disposition will be considered long-term capital losses, and are generally available only to offset capital gain income of the stockholder but not ordinary income (except in the case of individuals, who may offset up to $3,000 of ordinary income each year). In addition, any loss upon a sale or exchange of shares of Aimco stock by a stockholder who has held the shares for six months or less, after applying holding period rules, will be treated as a long-term capital loss to the extent of distributions received from Aimco that are required to be treated by the stockholder as long-term capital gain.

A redemption of Aimco stock (including preferred stock or equity stock) will be treated under Section 302 of the Internal Revenue Code as a dividend subject to tax at ordinary income tax rates (to the extent of Aimco’s current or accumulated earnings and profits), unless the redemption satisfies certain tests set forth in Section 302(b) of the Internal Revenue Code enabling the redemption to be treated as a sale or exchange of the stock. The redemption will satisfy such test if it (i) is “substantially disproportionate” with respect to the holder (which will not be the case if

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only the stock is redeemed, since it generally does not have voting rights), (ii) results in a “complete termination” of the holder’s stock interest in Aimco, or (iii) is “not essentially equivalent to a dividend” with respect to the holder, all within the meaning of Section 302(b) of the Internal Revenue Code. In determining whether any of these tests have been met, shares considered to be owned by the holder by reason of certain constructive ownership rules set forth in the Internal Revenue Code, as well as shares actually owned, must generally be taken into account. Because the determination as to whether any of the alternative tests of Section 302(b) of the Internal Revenue Code is satisfied with respect to any particular holder of the stock will depend upon the facts and circumstances as of the time the determination is made, prospective investors are advised to consult their own tax advisors to determine such tax treatment. If a redemption of the stock is treated as a distribution that is taxable as a dividend, the amount of the distribution would be measured by the amount of cash and the fair market value of any property received by the stockholders. The stockholder’s adjusted tax basis in such redeemed stock would be transferred to the holder’s remaining stockholdings in Aimco. If, however, the stockholder has no remaining stockholdings in Aimco, such basis may, under certain circumstances, be transferred to a related person or it may be lost entirely.

If an investor recognizes a loss upon a subsequent disposition of stock or other securities of Aimco in an amount that exceeds a prescribed threshold, it is possible that the provisions of the Treasury Regulations involving “reportable transactions” could apply, with a resulting requirement to separately disclose the loss generating transaction to the IRS. While these Treasury Regulations are directed towards “tax shelters,” they are written quite broadly, and apply to transactions that would not typically be considered tax shelters. In addition, the Internal Revenue Code imposes penalties for failure to comply with these requirements. Prospective investors should consult your tax advisors concerning any possible disclosure obligation with respect to the receipt or disposition of stock or securities of Aimco, or transactions that might be undertaken directly or indirectly by Aimco. Moreover, prospective investors should be aware that Aimco and other participants in the transactions involving Aimco (including their advisors) might be subject to disclosure or other requirements pursuant to these Treasury Regulations

Taxation Of Foreign Stockholders

The following is a summary of certain anticipated U.S. Federal income and estate tax consequences of the ownership and disposition of securities applicable to Non-U.S. Holders of securities. A “Non-U.S. Holder” is generally any person other than (i) a citizen or resident of the United States, (ii) a corporation or partnership created or organized in the United States or under the laws of the United States or of any state thereof or the District of Columbia, (iii) an estate whose income is includable in gross income for U.S. Federal income tax purposes regardless of its source or (iv) a trust if a United States court is able to exercise primary supervision over the administration of such trust and one or more United States fiduciaries have the authority to control all substantial decisions of such trust. The discussion is based on current law and is for general information only. The discussion addresses only certain and not all aspects of U.S. Federal income and estate taxation.

Ordinary Dividends.  The portion of dividends received by Non-U.S. Holders payable out of Aimco’s earnings and profits which are not attributable to capital gains of Aimco and which are not effectively connected with a U.S. trade or business of the Non-U.S. Holder will be subject to U.S. withholding tax at the rate of 30% (unless reduced by treaty and the Non-U.S. Holder provides appropriate documentation regarding its eligibility for treaty benefits). In general, Non-U.S. Holders will not be considered engaged in a U.S. trade or business solely as a result of their ownership of securities. In cases where the dividend income from a Non-U.S. Holder’s investment in securities is, or is treated as, effectively connected with the Non-U.S. Holder’s conduct of a U.S. trade or business, the Non-U.S. Holder generally will be subject to U.S. tax at graduated rates, in the same manner as domestic stockholders are taxed with respect to such dividends, such income must generally be reported on a U.S. income tax return filed by or on behalf of the non-U.S. holder, and the income may also be subject to the 30% branch profits tax in the case of a Non-U.S. Holder that is a corporation.

Non-Dividend Distributions.  Unless Aimco stock constitutes a United States real property interest (a “USRPI”) within the meaning of the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”), distributions by Aimco which are not dividends out of the earnings and profits of Aimco will not be subject to U.S. income tax. If it cannot be determined at the time at which a distribution is made whether or not the distribution will exceed current and accumulated earnings and profits, the distribution will be subject to withholding at the rate

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applicable to dividends. However, the Non-U.S. Holder may seek a refund from the IRS of any amounts withheld if it is subsequently determined that the distribution was, in fact, in excess of current and accumulated earnings and profits of Aimco. If Aimco stock constitutes a USRPI, distributions by Aimco in excess of the sum of its earnings and profits plus the stockholder’s basis in its Aimco stock will be taxed under the FIRPTA at the rate of tax, including any applicable capital gains rates, that would apply to a domestic stockholder of the same type (e.g., an individual or a corporation, as the case may be), and the collection of the tax will be enforced by a refundable withholding at a rate of 10% of the amount by which the distribution exceeds the stockholder’s share of Aimco’s earnings and profits.

Capital Gain Dividends.  Under FIRPTA, a distribution made by Aimco to a Non-U.S. Holder, to the extent attributable to gains from dispositions of USRPIs held by Aimco directly or through pass-through subsidiaries (“USRPI Capital Gains”), will, except as described below, be considered effectively connected with a U.S. trade or business of the Non-U.S. Holder and will be subject to U.S. income tax at the rates applicable to U.S. individuals or corporations, without regard to whether the distribution is designated as a capital gain dividend. In addition, Aimco will be required to withhold tax equal to 35% of the amount of dividends to the extent such dividends constitute USRPI Capital Gains. Distributions subject to FIRPTA may also be subject to a 30% branch profits tax in the hands of a Non-U.S. Holder that is a corporation. A distribution is not a USRPI capital gain if Aimco held the underlying asset solely as a creditor. Capital gain dividends received by a non-U.S. holder from a REIT that are attributable to dispositions by that REIT of assets other then USRPIs are generally not subject to U.S. income or withholding tax.

A capital gain dividend by Aimco that would otherwise have been treated as a USRPI capital gain will not be so treated or be subject to FIRPTA, will generally not be treated as income that is effectively connected with a U.S. trade or business, and will instead be treated the same as an ordinary dividend from Aimco (see “— Taxation of Foreign Stockholders — Ordinary Dividends”), provided that (1) the capital gain dividend is received with respect to a class of stock that is regularly traded on an established securities market located in the United States, and (2) the recipient non-U.S. holder does not own more than 5% of that class of stock at any time during the one year period ending on the date on which the capital gain dividend is received.

Dispositions of Aimco Stock.  Unless Aimco stock constitutes a USRPI, a sale of the stock by a Non-U.S. Holder generally will not be subject to U.S. taxation under FIRPTA. The stock will be treated as a USRPI if 50% or more of Aimco’s assets throughout a prescribed testing period consist of interests in real property located within the United States, excluding, for this purpose, interests in real property solely in a capacity as a creditor. Even if the foregoing test is met, Aimco stock nonetheless will not constitute a USRPI if Aimco is a “domestically controlled qualified investment entity.” A domestically controlled qualified investment entity is a REIT in which, at all times during a specified testing period, less than 50% in value of its shares is held directly or indirectly by Non-U.S. Holders. Aimco believes that it is, and it expects to continue to be, a domestically controlled qualified investment entity. If Aimco is, and continues to be, a domestically controlled qualified investment entity, the sale of Aimco stock should not be subject to taxation under FIRPTA. Because most classes of stock of Aimco are publicly traded, however, no assurance can be given that Aimco is or will continue to be a domestically controlled qualified investment entity.

Even if Aimco does not constitute a domestically controlled qualified investment entity, a Non-U.S. Holder’s sale of stock generally nonetheless will generally not be subject to tax under FIRPTA as a sale of a USRPI provided that:

•  the stock is of a class that is “regularly traded” (as defined by applicable Treasury Regulations) on an established securities market (e.g., the NYSE, on which Aimco stock is listed), and

•  the selling Non-U.S. Holder held 5% or less of such class of Aimco’s outstanding stock at all times during a specified testing period.

If gain on the sale of stock of Aimco were subject to taxation under FIRPTA, the Non-U.S. Holder would be subject to the same treatment as a U.S. stockholder with respect to such gain (subject to applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals) and the purchaser of the stock could be required to withhold 10% of the purchase price and remit such amount to the IRS.

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Gain from the sale of Aimco stock that would not otherwise be subject to taxation under FIRPTA will nonetheless be taxable in the United States to a Non-U.S. Holder in two cases. First, if the Non-U.S. Holder’s investment in the Aimco stock is effectively connected with a U.S. trade or business conducted by such Non-U.S. Holder, the Non-U.S. Holder will be subject to the same treatment as a U.S. stockholder with respect to such gain. Second, if the Non-U.S. Holder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a “tax home” in the United States, the nonresident alien individual will be subject to a 30% tax on the individual’s capital gain.

Estate Tax

Aimco stock owned or treated as owned by an individual who is not a citizen or resident (as specially defined for U.S. Federal estate tax purposes) of the United States at the time of death will be includible in the individual’s gross estate for U.S. Federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. Such individual’s estate may be subject to U.S. Federal estate tax on the property includible in the estate for U.S. Federal estate tax purposes.

Information Reporting Requirements And Backup Withholding

Aimco will report to its U.S. stockholders and to the IRS the amount of distributions paid during each calendar year, and the amount of tax withheld, if any. Under the backup withholding rules, a stockholder may be subject to backup withholding at the rate of 28% (through 2010) with respect to distributions paid unless such holder (i) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact or (ii) provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with the applicable requirements of the backup withholding rules. A stockholder who does not provide Aimco with his correct taxpayer identification number also may be subject to penalties imposed by the IRS. Any amount paid as backup withholding will be creditable against the stockholder’s income tax liability. In addition, Aimco may be required to withhold a portion of capital gain distributions to any Non-U.S. Holders. The IRS has issued final Treasury Regulations regarding the withholding, backup withholding and information reporting rules as applied to Non-U.S. Holders. Prospective investors in securities should consult their tax advisors regarding the application of these Treasury Regulations.

Tax Return Disclosure and Investor List Requirements

Treasury Regulations require participants in a “reportable transaction” to disclose certain information about the transaction to the IRS with their tax returns and retain certain information relating to the transaction (the “Disclosure Requirement”). In addition, organizers, sellers, and certain advisors of a reportable transaction are required to maintain certain records, including lists identifying the investors in a transaction, and to furnish those records, as well as detailed information regarding the transaction, to the IRS upon demand (the “List Maintenance Requirement”).

While the Disclosure Requirement and the List Maintenance Requirement are directed towards “tax shelters,” the regulations are written quite broadly, and apply to transactions that would not typically be considered tax shelters. There are significant penalties for failure to comply with these requirements.

A transaction may be a reportable transaction based upon any of several indicia, including, among other things, if it could result in tax losses or book-tax differences in excess of prescribed thresholds. The transaction contemplated herein may result in book-tax differences in excess of prescribed thresholds and as such, could be a reportable transaction under the Treasury Regulations involving tax shelters. Characterization of this transaction as a reportable transaction could increase the likelihood of an audit by the IRS. If this transaction were to be classified as a reportable transaction, you would be required to attach a completed IRS Form 8886, the “Reportable Transaction Disclosure Statement,” to your tax return for the taxable year of the transaction, as well as provide a copy of this form to the Office of Tax Shelter Analysis at the same time that such statement is first filed with the IRS. You should consult your tax advisors concerning these disclosure obligations with respect to the receipt or disposition of Aimco Stock, or transactions that might be undertaken directly or indirectly by the Aimco. Moreover, you should be aware that Aimco and other participants in the transactions involving Aimco (including

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their advisors) would be subject to the Disclosure Requirement and/or the List Maintenance Requirement if this transaction were to be classified as a reportable transaction.

Taxation of Tax-Exempt Stockholders

Tax-exempt entities, including qualified employee pension and profit sharing trusts and individual retirement accounts, generally are exempt from Federal income taxation. However, they are subject to taxation on their unrelated business taxable income (“UBTI”). While many investments in real estate may generate UBTI, the IRS has ruled that dividend distributions from a REIT to a tax-exempt entity do not constitute UBTI. Based on that ruling, and provided that (1) a tax-exempt stockholder has not held its Aimco stock as “debt financed property” within the meaning of the Internal Revenue Code (i.e., where the acquisition or holding of the property is financed through a borrowing by the tax-exempt stockholder), and (2) the Aimco stock is not otherwise used in an unrelated trade or business, Aimco believe that distributions from Aimco and income from the sale of the Aimco stock should not give rise to UBTI to a tax-exempt stockholder.

Tax-exempt stockholder that are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans that are exempt from taxation under paragraphs (7), (9), (17) and (20), respectively, of Section 501(c) of the Internal Revenue Code are subject to different UBTI rules, which generally will require them to characterize distributions from Aimco as UBTI.

In addition, in certain circumstances, a pension trust that owns more than 10% of Aimco’s stock could be required to treat a percentage of the dividends from Aimco as UBTI (the “UBTI Percentage”). The UBTI Percentage is the gross income derived by Aimco from an unrelated trade or business (determined as if Aimco were a pension trust) divided by the gross income of Aimco for the year in which the dividends are paid. The UBTI rule applies to a pension trust holding more than 10% of Aimco’s stock only if:

•  the UBTI Percentage is at least 5%,

•  Aimco qualifies as a REIT by reason of the modification of the 5/50 Rule that allows the beneficiaries of the pension trust to be treated as holding shares of Aimco in proportion to their actuarial interest in the pension trust, and

•  either (A) one pension trust owns more than 25% of the value of Aimco’s stock or (B) a group of pension trusts each individually holding more than 10% of the value of Aimco’s stock collectively owns more than 50% of the value of Aimco’s stock.

The restrictions on ownership and transfer of Aimco’s stock should prevent an Exempt Organization from owning more than 10% of the value of Aimco’s stock.

Other Tax Consequences

Legislative or Other Actions Affecting REITs

The rules dealing with Federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. For example, Congress is considering proposals that would delay the scheduled increase in the maximum tax rates applicable to individual taxpayers on qualified dividend income and long term capital gains, for taxable years beginning after December 31, 2010, to 39.6% and 20% respectively. In addition, for taxable years beginning after December 31, 2012, certain U.S. holders who are individuals, estates or trusts and whose income exceeds certain thresholds will be required to pay a 3.8% Medicare tax on dividend and other income, including capital gains from the sale or other disposition of our stock. No assurance can be given as to whether, or in what form, the proposals described above (or any other proposals affecting REITs or their stockholders) will be enacted. Changes to the Federal laws and interpretations thereof could adversely affect an investment in Aimco or Aimco OP.

Recently enacted legislation will require, after December 31, 2012, withholding at a rate of 30% on dividends in respect of, and gross proceeds from the sale of, our common stock held by or through certain foreign financial institutions (including investment funds), unless such institution enters into an agreement with the Secretary of the Treasury to report, on an annual basis, information with respect to shares in the institution held by certain United

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States persons and by certain non-US entities that are wholly or partially owned by United States persons. Accordingly, the entity through which our common stock is held will affect the determination of whether such withholding is required. Similarly, dividends in respect of, and gross proceeds from the sale of, our common stock held by an investor that is a non-financial non-US entity will be subject to withholding at a rate of 30%, unless such entity either (i) certifies to us that such entity does not have any “substantial United States owners” or (ii) provides certain information regarding the entity’s “substantial United States owners,” which we will in turn provide to the Secretary of the Treasury. Non-United States stockholders are encouraged to consult with their tax advisors regarding the possible implications of the legislation on their investment in our common stock.

State, Local And Foreign Taxes

Aimco OP, OP Unitholders, Aimco and Aimco stockholders may be subject to state, local or foreign taxation in various jurisdictions, including those in which it or they transact business, own property or reside. It should be noted that Aimco OP owns properties located in a number of states and local jurisdictions, and Aimco OP and OP Unitholders may be required to file income tax returns in some or all of those jurisdictions. The state, local or foreign tax treatment of Aimco OP and OP Unitholders and of Aimco and its stockholders may not conform to the United States Federal income tax consequences discussed above. Consequently, prospective investors are urged to consult their tax advisors regarding the application and effect of state, local foreign tax laws on an investment in Aimco OP or Aimco.

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FEES AND EXPENSES

The costs of planning and implementing the mergers, including the preparation of this information statement/prospectus, will be borne by Aimco OP without regard to whether the mergers are effectuated. Except as set forth in this information statement/prospectus, Aimco OP will not pay any fees or commissions to any broker, dealer or other person in connection with the mergers. The General Partner has retained Eagle Rock Proxy Advisors, LLC, or the Information Agent, to act as the information agent in connection with the mergers. The Information Agent may contact holders of NPI Units by mail, e-mail, telephone, telex, telegraph and in person and may request brokers, dealers and other nominee limited partners to forward materials relating to the mergers to the beneficial owners of NPI Units. Aimco OP will pay the Information Agent reasonable and customary compensation for its services in connection with the mergers, plus reimbursement for out-of-pocket expenses, and will indemnify it against certain liabilities and expenses in connection therewith, including liabilities under the United States Federal securities laws. Aimco OP will also pay all costs and expenses of filing, printing and mailing the information statement/prospectus as well as any related legal fees and expenses.

Below is an itemized list of the estimated expenses incurred and to be incurred in connection with preparing and delivering this information statement/prospectus:

Information Agent Fees	$	7,500
Printing Fees		2,400
Postage Fees		4,500
Tax and Accounting Fees		25,000
Appraisal Fees		6,900
Legal Fees		100,000
Total	$	146,300

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LEGAL MATTERS

Certain tax matters will be passed upon for Aimco by Skadden, Arps, Slate, Meagher & Flom LLP. The validity of the Aimco Class A Common Stock issuable upon redemption of the OP Units will be passed upon by DLA Piper LLP (US). The validity of the OP Units offered by this information statement/prospectus will be passed upon by Skadden, Arps, Slate, Meagher & Flom LLP.

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EXPERTS

The consolidated financial statements of Aimco for the year ended December 31, 2009 appearing in Aimco’s Current Report on Form 8-K dated September 10, 2010 (including the schedule appearing therein), and the effectiveness of Aimco’s internal control over financial reporting appearing in Aimco’s Annual Report on Form 10-K for the year ended December 31, 2009 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon, included therein, and incorporated herein by reference. Such consolidated financial statements and Aimco management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2009 are incorporated herein by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

The consolidated financial statements of Aimco OP for the year ended December 31, 2009 appearing in Aimco OP’s Current Report on Form 8-K dated September 10, 2010 (including the schedule appearing therein), and the effectiveness of Aimco OP’s internal control over financial reporting appearing in Aimco OP’s Annual Report on Form 10-K for the year ended December 31, 2009 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon, included therein, and incorporated herein by reference. Such consolidated financial statements and Aimco OP management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2009 are incorporated herein by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

The financial statements of NPI appearing in NPI’s Annual Report on Form 10-K for the year ended December 31, 2009 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon, included therein, and included in Annex D of this information statement/prospectus. Such financial statements are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

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WHERE YOU CAN FIND ADDITIONAL INFORMATION

Aimco, Aimco OP and NPI are subject to the informational requirements of the Exchange Act, and, in accordance therewith, file reports, proxy statements and other information with the SEC. You may read and copy any document so filed at the SEC’s public reference rooms in Washington, D.C.; New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Aimco’s, Aimco OP’s and NPI’s filings are also available to the public at the SEC’s web site at http://www.sec.gov.

The information that Aimco and Aimco OP file with the SEC is incorporated by reference, which means that important information is being disclosed to you by referring you to those documents. The information incorporated by reference is considered to be part of this information statement/prospectus. The documents listed below are incorporated by reference along with all documents filed by us with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (i) after the date of the initial registration statement of which this information statement/prospectus is a part, and prior to effectiveness of such registration statement, and (ii) after the date of this information statement/prospectus and prior to the completion of the offering of securities described in this information statement/prospectus.

•  Proxy Statement for the 2010 Annual Meeting of Stockholders of Aimco;

•  Aimco’s Annual Report on Form 10-K for the year ended December 31, 2009;

•  Aimco’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010;

•  Aimco’s Current Reports on Form 8-K, dated February 2, 2010 (filed February 4, 2010), dated February 3, 2010 (filed February 5, 2010), dated April 26, 2010 (filed April 29, 2010), dated May 24, 2010 (filed May 24, 2010), dated July 30, 2010 (filed July 30, 2010), dated September 1, 2010 (filed September 3, 2010), dated September 7, 2010 (filed September 7, 2010), dated September 10, 2010 (filed September 10, 2010), and dated September 29, 2010 (filed September 30, 2010);

•  Aimco OP’s Annual Report on Form 10-K for the year ended December 31, 2009;

•  Aimco OP’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010;

•  Aimco OP’s Current Reports on Form 8-K, dated February 3, 2010 (filed February 5, 2010), May 24, 2010 (filed May 24, 2010) dated September 1, 2010 (filed September 3, 2010), dated September 10, 2010 (filed September 10, 2010), and dated September 29, 2010 (filed September 30, 2010).

You may request a copy of these filings, at no cost, by writing or calling Aimco at the following address and telephone number:

ISTC Corporation
P.O. Box 2347
Greenville, South Carolina 29602
(864) 239-1029

NPI’s Annual Report on Form 10-K for the year ended December 31, 2009 is included as Annex D to this information statement/prospectus. NPI’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 is included as Annex E to this information statement/prospectus.

You should rely only on the information included or incorporated by reference in this information statement/prospectus. No person is authorized to provide you with different information. You should not assume that the information in this information statement/prospectus is accurate as of any date other than the date on the front of the document.

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ANNEX A

Agreement and Plan of Merger

AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of          , 2010, by and among NATIONAL PROPERTY INVESTORS III, a California limited partnership (“NPI”), NATIONAL PROPERTY INVESTORS III, LP, a Delaware limited partnership (“New NPI”), AIMCO NPI III MERGER SUB LLC, a Delaware limited liability company (the “Aimco Subsidiary”), and AIMCO PROPERTIES, L.P., a Delaware limited partnership (“Aimco OP”).

WHEREAS, NPI Equity Investments, Inc., the managing general partner of NPI and New NPI (“NPI Equity”), has determined that the merger of NPI with and into New NPI, with New NPI as the surviving entity, and the subsequent merger of the Aimco Subsidiary with and into New NPI, with New NPI as the surviving entity, in each case, on the terms set forth herein, are advisable and in the best interests of NPI and New NPI and their respective partners; and

WHEREAS, Aimco OP is the sole member of the Aimco Subsidiary and the sole limited partner of New NPI; and

WHEREAS the Board of Directors of AIMCO-GP, Inc., the general partner of Aimco OP (“AIMCO-GP”), has determined that the merger of NPI with and into New NPI, with New NPI as the surviving entity, and the subsequent merger of the Aimco Subsidiary with and into New NPI, with New AP NPI as the surviving entity, in each case, on the terms as set forth herein, are advisable and in the best interests of Aimco OP and its partners, and the Aimco Subsidiary; and

WHEREAS, a majority in interest of the limited partners of NPI have approved this Agreement and the transactions contemplated hereby; and

WHEREAS, the parties desire to enter this Agreement to evidence the terms, provisions, representations, warranties, covenants and conditions upon which the Mergers (as defined below) will be consummated.

NOW, THEREFORE, in consideration of the mutual agreements and covenants set forth herein, and for other good and valuable consideration, the adequacy, sufficiency, and receipt of which are hereby acknowledged, the parties hereby agree as follows:

Section 1.  The First Merger.  Subject to the terms and conditions set forth herein, NPI shall be merged with and into New NPI (the “First Merger”), with New NPI as the surviving entity (the “First Surviving Entity”). As soon as practicable after all of the conditions to the First Merger set forth herein have been satisfied, NPI and New NPI shall (i) execute a certificate of merger and cause such certificate to be filed with the Secretary of State of the State of California and (ii) execute a certificate of merger and cause such certificate to be filed with the Secretary of State of the State of Delaware. The First Merger shall become effective upon the filing of such certificates (the “First Effective Time”). At the First Effective Time, the First Merger shall have the effect provided by applicable law and this Agreement, including, but not limited to, the following consequences:

(a) Certificate of Limited Partnership.  The certificate of limited partnership of New NPI in effect immediately prior to the First Effective Time shall be the certificate of limited partnership of the First Surviving Entity unless and until subsequently amended.

(b) Partnership Agreement.  The limited partnership agreement of NPI in effect immediately prior to the First Effective Time, as amended as set forth on Exhibit A hereto, shall be the partnership agreement of the First Surviving Entity unless and until subsequently amended. The general partners and each limited partner of the First Surviving Entity shall have the rights under, be bound by and be subject to the terms and conditions of, such partnership agreement.

(c) General Partner.  NPI Equity shall be the managing general partner of the First Surviving Entity.

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(d) Conversion of Equity Interests.

(i) Interests in NPI.  Each general partnership interest of NPI outstanding immediately prior to the First Effective Time and held by a general partner shall be converted into an equivalent general partnership interest in the First Surviving Entity (each new general partnership interest, a “New NPI GP Interest”). Each unit of limited partnership interest of NPI outstanding immediately prior to the First Effective Time shall be converted into an equivalent unit of limited partnership interest in the First Surviving Entity (a “New NPI Unit”).

(ii) Interests in New NPI.  The interest of each partner in New NPI immediately prior to the First Effective Time shall be cancelled.

Section 2.  The Second Merger.  Subject to the terms and conditions set forth herein, immediately following the First Effective Time, the Aimco Subsidiary shall be merged with and into New NPI (the “Second Merger” and, together with the First Merger, the “Mergers”), with New NPI as the surviving entity (the “Second Surviving Entity”). As soon as practicable after all of the conditions to the Second Merger set forth herein have been satisfied, New NPI shall cause to be filed a certificate of merger with respect to the Second Merger with the Secretary of State of the State of Delaware. The Second Merger shall become effective upon the filing of such certificate (the “Second Effective Time”). At the Second Effective Time, the Second Merger shall have the effect provided by applicable law and this Agreement, including, but not limited to, the following consequences:

(a) Certificate of Limited Partnership.  The certificate of limited partnership of New NPI in effect immediately prior to the Second Effective Time shall be the certificate of limited partnership of the Second Surviving Entity unless and until subsequently amended.

(b) Partnership Agreement.  The limited partnership agreement of New NPI in effect immediately prior to the Second Effective Time shall be the partnership agreement of the Second Surviving Entity (the “Partnership Agreement”) unless and until subsequently amended. The general partners and each limited partner of the Second Surviving Entity shall have the rights under, be bound by and be subject to the terms and conditions of, the Partnership Agreement.

(c) General Partners.  NPI Equity shall be the managing general partner of the Second Surviving Entity.

(d) Treatment of Limited Partners Interests in New NPI.

(i) In connection with the Second Merger and in accordance with the procedures set forth in Section 2(d)(iii) hereto, each New NPI Unit outstanding immediately prior to the Second Effective Time, except New NPI Units held by limited partners who have perfected their appraisal rights pursuant to Exhibit B hereto, shall be converted into the right to receive, at the election of the holder thereof, either (x) $57.24 in cash (the “Cash Consideration”) or (y) a number of partnership common units (“OP Units”) of Aimco OP calculated by dividing $57.24 by the average closing price of Apartment Investment and Management Company common stock, as reported on the NYSE, over the ten consecutive trading days ending on the second trading day immediately prior to the date of the Second Effective Time (the “OP Unit Consideration”, and, together with the Cash Consideration, the “Merger Consideration”).

(ii) Notwithstanding Section 2(d)(i), if Aimco OP determines that the law of the state or other jurisdiction in which a holder of New NPI Units resides would prohibit the issuance of OP Units in that state or jurisdiction, or that the registration in that state or other jurisdiction would be prohibitively costly (each such state or jurisdiction, a “Specified Jurisdiction”), then such holder will only be entitled to receive the Cash Consideration for each New NPI Unit.

(iii) Aimco OP shall prepare a form of election (the “Election Form”) describing the Second Merger, pursuant to which each holder of New NPI Units will have the right to elect to receive either the Cash Consideration or the OP Unit Consideration (subject to Section 2(d)(ii)). Aimco OP shall mail or cause to be mailed an Election Form to each holder of New NPI Units, together with any other materials that Aimco OP determines to be necessary or prudent, no later than ten (10) days after the Second Effective Time. An election to receive the Cash Consideration or the OP Unit Consideration shall be effective only if a properly executed Election Form is received by Aimco OP or its designees prior to 5:00 p.m., Eastern Time on the day that is thirty (30) days after the

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mailing of such Election Form by Aimco OP. If a holder New NPI Units fails to return a duly completed Election Form within the time period specified in the Election Form, such holder shall be deemed to have elected to receive the Cash Consideration. In addition, each holder of New NPI Units that resides in a Specified Jurisdiction will be deemed to have elected the Cash Consideration. NPI, New NPI, the Aimco Subsidiary and Aimco OP agree that holders of New NPI Units shall have the right to revoke any election made in connection with the Second Merger at any time prior to the expiration of the time period stated in the Election Form. Aimco OP and NPI Equity, by mutual agreement, shall have the right to make rules, not inconsistent with the terms of this Agreement, governing the validity of Election Forms and the issuance and delivery of the Merger Consideration, as applicable.

(e) Treatment of General Partners’ Interests.  Each New NPI GP Interest outstanding immediately prior to consummation of the Second Merger shall remain outstanding and unchanged, with all of the rights set forth in the Partnership Agreement.

(f) Treatment of Interests in the Aimco Subsidiary.  The entire membership interest in the Aimco Subsidiary immediately prior to the Second Effective Time shall be converted into one hundred (100) New NPI Units of the Second Surviving Entity.

Section 3.  Appraisal Rights.  In connection with the First Merger, none of the partners in NPI or New NPI will have any dissenters’ appraisal rights. In connection with the Second Merger, the holders of New NPI Units immediately prior to the Second Merger shall have the appraisal rights set forth in Exhibit B hereto.

Section 4.  Covenants.  Aimco OP agrees to pay for, or reimburse NPI and New NPI for, all expenses incurred by NPI and New NPI in connection with the Mergers and the transactions contemplated hereby. Aimco OP agrees to pay cash or issue and deliver OP Units to the former holders of New NPI Units, in accordance with Section 2(d) of this Agreement.

Section 5.  Conditions to the Mergers.  Notwithstanding any provisions of this Agreement to the contrary, none of the parties hereto shall be required to consummate the transactions contemplated hereby if any third-party consent, authorization or approval that any of the parties hereto deem necessary or desirable in connection with this Agreement, or the consummation of the transactions contemplated hereby, has not been obtained or received.

Section 6.  Tax Treatment.

(a) First Merger.  The parties hereto acknowledge and agree that for federal income tax purposes, the First Merger will be treated as follows:

(i) NPI will be deemed to have obtained as a result of the First Merger an initial capital account balance in the First Surviving Entity reflecting the tax bases of the assets so treated as contributed by NPI to the First Surviving Entity.

(ii) Each partner in the First Surviving Entity will have an initial capital account balance in the First Surviving Entity equal to its proportionate share of such initial capital account balance so deemed obtained by NPI.

(iii) In accordance with the foregoing, the respective initial capital account balances of the general partners and limited partners of the First Surviving Entity immediately following the First Effective Time shall be the same as those of the general partners and the limited partners of NPI immediately prior to the First Effective Time.

(iv) The First Merger should not be treated as a realization event and, in accordance with the foregoing, the First Surviving Entity shall be treated as the continuation of NPI for federal income tax purposes.

(b) Second Merger.  The parties hereto intend and agree that, for Federal income tax purposes, (i) any payment of cash for New NPI Units shall be treated as a sale of such New NPI Units by such holder and a purchase of such New NPI Units by Aimco OP for the cash so paid under the terms of this Agreement in accordance with the guidelines set forth in Treas. Reg. Sections 1.708-1(c)(3) and 1.708-1(c)(4), and (ii) each such holder of New NPI Units who accepts cash explicitly agrees and consents to such treatment. Furthermore, the parties hereto intend and agree that, for Federal income tax purposes, (i) any exchange of New NPI Units for OP Units under the terms of this Agreement shall be treated in accordance with Sections 721 and 731 of the Internal Revenue Code of 1986, as

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amended, and (ii) each such holder of New NPI Units who accepts OP Units explicitly agrees and consents to such treatment. Any cash and/or OP Units to which a holder of New NPI Units is entitled pursuant to this Agreement shall be paid only after the receipt of a consent from such holder that, for Federal income tax purposes, the receipt of cash and/or OP Units shall be treated as described in this Section 6(b).

Section 7.  Further Assurances.

(a) From time to time, as and when required by the First Surviving Entity or by its successors and assigns, there shall be executed and delivered on behalf of NPI such deeds and other instruments, and there shall be taken or caused to be taken by NPI all such further actions, as shall be appropriate or necessary in order to vest, perfect or confirm, of record or otherwise, in the First Surviving Entity the title to and possession of all property, interests, assets, rights, privileges, immunities, powers, franchises and authority of NPI, and otherwise to carry out the purposes of this Agreement, and the officers and directors of NPI Equity are fully authorized in the name and on behalf NPI or otherwise to take any and all such action and to execute and deliver any and all such deeds and other instruments.

(b) From time to time, as and when required by the Second Surviving Entity or by its successors and assigns, there shall be executed and delivered on behalf of the Aimco Subsidiary such deeds and other instruments, and there shall be taken or caused to be taken by the Aimco Subsidiary all such further actions, as shall be appropriate or necessary in order to vest, perfect or confirm, of record or otherwise, in the Second Surviving Entity title to and possession of all property, interests, assets, rights, privileges, immunities, powers, franchises and authority of the Aimco Subsidiary, and otherwise to carry out the purposes of this Agreement, and the officers and directors of NPI Equity are fully authorized in the name and on behalf of Aimco Subsidiary or otherwise to take any and all such action and to execute and deliver any and all such deeds and other instruments.

Section 8.  Amendment.  Subject to applicable law, this Agreement may be amended, modified or supplemented by written agreement of the parties hereto at any time prior to the consummation of the Mergers with respect to any of the terms contained herein.

Section 9.  Abandonment.  At any time prior to consummation of the Mergers, this Agreement may be terminated and the Mergers may be abandoned without liability to any party hereto by any of the Aimco Subsidiary, Aimco OP, NPI or New NPI, in each case, acting in its sole discretion and for any reason or for no reason, notwithstanding approval of this Agreement by any of the members of the Aimco Subsidiary, the partners of NPI or the general partner of Aimco OP.

Section 10.  Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to the conflict of law provisions thereof.

Section 11.  No Third-Party Beneficiaries.  No provision of this Agreement is intended to confer upon any person, entity, or organization other than the parties hereto any rights or remedies hereunder, other than the appraisal rights given to holders of New NPI Units pursuant to Section 3.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written.

NATIONAL PROPERTY INVESTORS III

By:  NPI Equity, Inc.,

Its Managing General Partner

By: 

Name:     

Title:

NATIONAL PROPERTY INVESTORS III, LP

By:  NPI Equity, Inc.,

Its Managing General Partner

By: 

Name:     

Title:

AIMCO NPI III MERGER SUB LLC

By:  Aimco Properties, L.P.,

Its Sole Member

By:  AIMCO-GP, Inc.

Its General Partner

By: 

Name:     

Title:

AIMCO PROPERTIES, L.P.

By:  AIMCO-GP, Inc.,

Its General Partner

By: 

Name:     

Title:

[Signature Page — Merger Agreement]

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EXHIBIT A

AMENDMENT
TO
PARTNERSHIP AGREEMENT
OF
NATIONAL PROPERTY INVESTORS III

This AMENDMENT TO THE PARTNERSHIP AGREEMENT OF NATIONAL PROPERTY INVESTORS III (this ‘‘Amendment”) is entered into as of          , 2010 by and among NPI Equity Investments, Inc., a Florida corporation, in its capacity as managing general partner (the “Managing General Partner”), and each of the Limited Partners. All capitalized terms used in this Amendment but not otherwise defined herein shall have the respective meanings given to them in the Partnership Agreement (as defined below).

Recitals

WHEREAS, National Property Investors III, a California limited partnership (the ‘‘Partnership”), is governed pursuant to the terms of that certain Partnership Agreement, dated as of February 1, 1979, as amended and restated July 1, 1979 and as further amended to date (the “Partnership Agreement”);

WHEREAS, the Partnership and National Property Investors III, LP, a Delaware limited partnership (the “Delaware Partnership”), are parties to an Agreement and Plan of Merger, dated as of [          ], 2010 (the “Merger Agreement”);

WHEREAS, pursuant to the Merger Agreement, the Partnership will be merged with and into the Delaware Partnership, with the Delaware Partnership as the surviving entity;

WHEREAS, pursuant to the Merger Agreement, at the effective time of the merger, the Partnership Agreement, as further amended by this Amendment, will become the partnership agreement of the Delaware Partnership; and

WHEREAS, the merger will be effected upon the approval or consent of (i) the managing general partner of each of the Partnership and the Delaware Partnership, and (ii) a majority in interest of the limited partners of each of the Partnership and the Delaware Partnership.

NOW, THEREFORE, in consideration of the premises, the agreement of the parties herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the parties hereby agree as follows:

1. Amendments to the Partnership Agreement.  At the effective time of the Merger, the Partnership Agreement shall be amended as follows:

(a) In the first paragraph of the Partnership Agreement, the following words are deleted: “pursuant to the Uniform Limited Partnership Act of the State of California.”

(b) All other references therein to the Uniform Limited Partnership Act of the State of California or to the Uniform Limited Partnership Act of California shall be deemed to refer to the Delaware Revised Uniform Limited Partnership Act.

(c) Section 1 of the Partnership Agreement is hereby amended and restated to read in its entirety as follows:

“1.1 The name of the Partnership is National Property Investors III, LP, and its principal place of business is 55 Beattie Place, P.O. Box 1089, Greenville, South Carolina 29602 and thereafter such other place or places as the Managing General Partner may from time to time determine.

1.2 National Property Investors III was originally formed as a limited partnership (the “California Partnership”) pursuant to the provisions of the California Uniform Limited Partnership Act, upon the

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terms and conditions set forth in an agreement made as of February 1, 1979. Pursuant to an Agreement and Plan of Merger, dated as of          , 2010, by and between the California Partnership and National Property Investors III, LP, a Delaware limited partnership (the “Delaware Partnership”), the California Partnership was merged with and into the Delaware Partnership, with the Delaware Partnership as the surviving entity (the “Surviving Entity”) in the merger (the “Merger”). At the effective time of the Merger (the “Effective Time”), the Merger had the effect provided by applicable law, and the following consequences: (a) the certificate of limited partnership of the Delaware Partnership in effect immediately prior to the Effective Time became the certificate of limited partnership of the Surviving Entity; (b) the limited partnership agreement of the California Partnership in effect immediately prior to the Effective Time, as amended as set forth on Annex A to the Merger Agreement, became the partnership agreement of the Surviving Entity (as so amended, the “Partnership Agreement”); (c) NPI Equity Investments, Inc., a Florida corporation, remained as sole Managing General Partner of the Surviving Entity, and its interest in the California Partnership immediately prior to the Effective Time was converted into an equivalent interest in the Surviving Entity; (d) the interests of the general partner in the Delaware Partnership immediately prior to the Effective Time was cancelled; (e) each limited partner in the California Partnership became a limited partner in the Surviving Entity, with an interest in the Surviving Entity equivalent to the interest such limited partner had in the California Partnership immediately prior to the Effective Time; (f) the interest of each limited partner in the Delaware Partnership immediately prior to the Effective Time was cancelled. References herein to the “Partnership” are to the California Partnership prior to the Merger and to the Delaware Partnership, as the Surviving Entity in the Merger, from and after the Effective Time.”

(d) Section 2.1.15 of the Partnership Agreement is hereby amended and restated to read in its entirety as follows:

“2.1.15 “General Partner” shall refer to NPI Equity Investments, Inc., a Florida corporation, or to any other person or entity who succeeds it in such capacity.”

(e) Section 2.1.22 of the Partnership Agreement is hereby amended and restated to read in its entirety as follows:

“2.1.22 “Managing General Partner” shall refer to NPI Equity Investments, Inc., or to any other person or entity who succeeds in such capacity.”

(f) Section 2.1.32 of the Partnership Agreement is hereby amended to delete such section in its entirety.

(g) Section 16.5 of the Partnership Agreement is hereby amended by deleting the last sentence thereof.

(h) Section 20.1.1 of the Partnership Agreement is hereby amended by deleting everything after the word “foregoing.”

(i) Section 22.7 of the Partnership Agreement is hereby amended and restated to read in its entirety as follows:

“The name and address of the Managing General Partners is:

NPI Equity Investments, Inc.

4582 S. Ulster St., Suite 1100

Denver, CO 80237”

(j) Section 22.9 of the Partnership Agreement is hereby amended and restated to read in its entirety as follows:

“22.9 Notwithstanding the place where this Agreement may be executed by any of the parties hereto, the parties expressly agree that all the terms and provisions of hereof shall be construed under the laws of the State of Delaware and that the Delaware Revised Uniform Limited Partnership Act as now adopted or as may be hereafter amended shall govern the partnership aspects of this Agreement.”

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2. Miscellaneous.

(a) Effect of Amendment.  In the event of any inconsistency between the terms of the Partnership Agreement and the terms of this Amendment, the terms of this Amendment shall prevail. In the event of any conflict of apparent conflict between any of the provisions of the Partnership Agreement as amended by this Amendment, such conflicting provisions shall be reconciled and construed to give effect to the terms and intent of this Amendment.

(b) Ratification.  Except as otherwise expressly modified hereby, the Partnership Agreement shall remain in full force and effect, and all of the terms and provisions of the Partnership Agreement, as herein modified, are hereby ratified and reaffirmed.

(c) Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.

[Remainder of page intentionally left blank.]

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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first set forth above.

The Managing General Partner:

NPI EQUITY INVESTMENTS, INC.
a Florida corporation

By: 

Name:     

Title:

The Limited Partners:

By:  NPI Equity Investments, Inc.

attorney-in-fact

By: 

Name:     

Title:

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EXHIBIT B

Appraisal Rights of Limited Partners

Capitalized terms used but not defined herein shall have the respective meanings ascribed thereto in the Agreement and Plan of Merger, dated as of          , 2010 (the “Merger Agreement”), by and among National Property Investors III, a California limited partnership (“NPI”), National Property Investors III, LP, a Delaware limited partnership (“New NPI”), AIMCO NPI III Merger Sub LLC, a Delaware limited liability company (the “Aimco Subsidiary”), and AIMCO Properties, L.P., a Delaware limited partnership (“Aimco OP”). In connection with the Second Merger, limited partners of New NPI shall have the following appraisal rights:

(a) Any limited partner who holds New NPI Units on the effective date of the Second Merger who has not consented to the Second Merger (the “Nonconsenting Limited Partners”) and who has otherwise complied with paragraph (b) hereof shall be entitled to an appraisal by arbitration of the fair value of the Nonconsenting Limited Partner’s New NPI Units. This arbitration shall be conducted in Denver, Colorado, in accordance with the Commercial Arbitration Rules of the American Arbitration Association by a panel of three arbitrators selected by Aimco OP. Any arbitration award shall be appealable in the Federal District Court located in Denver, Colorado.

(b) Within 10 days after the effective date of the Second Merger, Aimco OP shall notify each of the Nonconsenting Limited Partners of the consummation of the Second Merger, the effective date of the Second Merger and that appraisal rights are available for any or all New NPI Units held by Nonconsenting Limited Partners, and shall include in such notice a copy of this Exhibit. Such notice shall include an Election Form pursuant to which Nonconsenting Limited Partners may elect an appraisal by arbitration of the fair value of their New NPI Units pursuant to paragraph (a) hereof. Any limited partner who holds New NPI Units on the effective date of the Second Merger and who has not consented to the Second Merger shall be entitled to receive such notice and may, within 30 days after the date of mailing of such notice (such 30th day being the “Election Deadline”), demand from Aimco OP the appraisal of his or her New NPI Units by making the appropriate election in the Election Form in accordance with the instructions thereto. Each completed Election Form must be delivered to the address, and within the time period, specified in the instructions to the Election Form. If a Nonconsenting Limited Partner fails to properly complete an Election Form or return it to the correct address within the specified time period, such Nonconsenting Limited Partner shall be deemed to have elected not to seek an appraisal of his or her New NPI Units, and will be deemed to have elected the Cash Consideration.

(c) At any time prior to the Election Deadline, any Nonconsenting Limited Partner who has made a demand for appraisal of his or her New NPI Units shall have the right to withdraw his or her demand for appraisal and to accept the Cash Consideration payable pursuant to the Merger Agreement. Nonconsenting Limited Partners who wish to withdraw their demands must do so in writing delivered to Aimco Properties, L.P., c/o Eagle Rock Proxy Advisors, LLC, by mail at 12 Commerce Drive, Cranford, New Jersey, 07016, or by fax at (908) 497-2349. At any time prior to 20 days after the Election Deadline, any Nonconsenting Limited Partner who has complied with the requirements of subsections (a) and (b) hereof, upon written request, shall be entitled to receive from Aimco OP a statement setting forth the aggregate number of New NPI Units with respect to which Nonconsenting Limited Partners have made demands for appraisal and the aggregate number of holders of such New NPI Units. Such written statement shall be mailed to the Nonconsenting Limited Partner within 10 days after such Nonconsenting Limited Partner’s written request for such a statement is received by Aimco OP or within 20 days after the Election Deadline, whichever is later.

(d) Upon the submission of any such demand by a Nonconsenting Limited Partner, Aimco OP shall, within 40 days after the Election Deadline, submit to the arbitration panel a duly verified list containing the names and addresses of all Nonconsenting Limited Partners who have demanded payment for their New NPI Units and with whom agreements as to the value of their New NPI Units have not been reached with Aimco OP. The arbitration panel shall give notice of the time and place fixed for the hearing of such demand by registered or certified mail to Aimco OP and to the Nonconsenting Limited Partners shown on the list at the addresses

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therein stated. The forms of the notices shall be approved by the panel, and the costs thereof shall be borne by Aimco OP.

(e) At the hearing on such demand, the panel shall determine the Nonconsenting Limited Partners who have become entitled to appraisal rights hereunder.

(f) After determining the Nonconsenting Limited Partners entitled to an appraisal, the panel shall appraise the New NPI Units, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the Second Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the panel shall take into account all relevant factors. Unless the panel in its discretion determines otherwise for good cause shown, interest from the effective date of the Second Merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge), as established from time to time during the period between the effective date of the Second Merger and the date of payment of the judgment. Upon application by Aimco OP or by any Nonconsenting Limited Partner entitled to participate in the appraisal proceeding, the panel may, in its discretion, proceed with the appraisal prior to the final determination of the Nonconsenting Limited Partners entitled to an appraisal. Any Nonconsenting Limited Partner whose name appears on the list submitted by Aimco OP pursuant to paragraph (d) hereof may participate fully in all proceedings until it is finally determined that such Nonconsenting Limited Partner is not entitled to appraisal rights hereunder.

(g) The panel shall direct the payment of the fair value of the New NPI Units, together with interest, if any, by Aimco OP to the Nonconsenting Limited Partners entitled thereto. Payment shall be so made to each such Nonconsenting Limited Partner upon the receipt by Aimco OP of the written consent from such Nonconsenting Limited Partner that, for federal income tax purposes, the issuance of cash for the New NPI Units shall be treated as a sale of the New NPI Units by the owner and a purchase of such New NPI Units by Aimco OP for the cash consideration so paid under the terms of the Merger Agreement in accordance with the guidelines set forth in Treas. Reg. Sections 1.708-1(c)(3) and 1.708-1(c)(4).

(h) The costs of the proceeding may be determined by the panel and taxed upon the parties as the panel deems equitable in the circumstances. Upon application of a Nonconsenting Limited Partner, the panel may order all or a portion of the expenses incurred by any Nonconsenting Limited Partner in connection with the appraisal proceeding, including, without limitation, reasonable attorney’s fees and the fees and expenses of experts, to be charged pro rata against the value of all the interests entitled to an appraisal.

(i) From and after the effective date of the Second Merger, no Nonconsenting Limited Partner who has demanded appraisal rights as provided in paragraph (b) hereof shall be entitled to vote such New NPI Units for any purpose or to receive payment of distributions on such interests (except distributions payable as of a record date prior to the effective date of the Second Merger); provided, however, that if such Nonconsenting Limited Partner shall deliver to Aimco Properties, L.P., c/o Eagle Rock Proxy Advisors, LLC, by mail at 12 Commerce Drive, Cranford, New Jersey, 07016, or by fax at (908) 497-2349, a written withdrawal of such Nonconsenting Limited Partner’s demand for an appraisal and an acceptance of the Cash Consideration payable pursuant to the Merger Agreement, either as provided in paragraph (c) hereof or thereafter with the written approval of Aimco OP, then the right of such Nonconsenting Limited Partner to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding before the panel shall be dismissed as to any Nonconsenting Limited Partner without the approval of the panel, and such approval may be conditioned upon such terms as the panel deems just.

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ANNEX B

Appraisal Rights of Limited Partners

Capitalized terms used but not defined herein shall have the respective meanings ascribed thereto in the Agreement and Plan of Merger, dated as of October [  ], 2010 (the “Merger Agreement”), by and among National Property Investors III, a California limited partnership (“NPI”), National Property Investors III, LP, a Delaware limited partnership (“New NPI”), AIMCO NPI III Merger Sub LLC, a Delaware limited liability company (the “Aimco Subsidiary”), and AIMCO Properties, L.P., a Delaware limited partnership (“Aimco OP”). In connection with the Second Merger, limited partners of New NPI shall have the following appraisal rights:

(a) Any limited partner who holds New NPI Units on the effective date of the Second Merger who has not consented to the Second Merger (the “Nonconsenting Limited Partners”) and who has otherwise complied with paragraph (b) hereof shall be entitled to an appraisal by arbitration of the fair value of the Nonconsenting Limited Partner’s New NPI Units. This arbitration shall be conducted in Denver, Colorado, in accordance with the Commercial Arbitration Rules of the American Arbitration Association by a panel of three arbitrators selected by Aimco OP. Any arbitration award shall be appealable in the Federal District Court located in Denver, Colorado.

(b) Within 10 days after the effective date of the Second Merger, Aimco OP shall notify each of the Nonconsenting Limited Partners of the consummation of the Second Merger, the effective date of the Second Merger and that appraisal rights are available for any or all New NPI Units held by Nonconsenting Limited Partners, and shall include in such notice a copy of this Exhibit. Such notice shall include an Election Form pursuant to which Nonconsenting Limited Partners may elect an appraisal by arbitration of the fair value of their New NPI Units pursuant to paragraph (a) hereof. Any limited partner who holds New NPI Units on the effective date of the Second Merger and who has not consented to the Second Merger shall be entitled to receive such notice and may, within 30 days after the date of mailing of such notice (such 30th day being the “Election Deadline”), demand from Aimco OP the appraisal of his or her New NPI Units by making the appropriate election in the Election Form in accordance with the instructions thereto. Each completed Election Form must be delivered to the address, and within the time period, specified in the instructions to the Election Form. If a Nonconsenting Limited Partner fails to properly complete an Election Form or return it to the correct address within the specified time period, such Nonconsenting Limited Partner shall be deemed to have elected not to seek an appraisal of his or her New NPI Units, and will be deemed to have elected the Cash Consideration.

(c) At any time prior to the Election Deadline, any Nonconsenting Limited Partner who has made a demand for appraisal of his or her New NPI Units shall have the right to withdraw his or her demand for appraisal and to accept the Cash Consideration payable pursuant to the Merger Agreement. Nonconsenting Limited Partners who wish to withdraw their demands must do so in writing delivered to Aimco Properties, L.P., c/o Eagle Rock Proxy Advisors, LLC, by mail at 12 Commerce Drive, Cranford, New Jersey, 07016, or by fax at (908) 497-2349. At any time prior to 20 days after the Election Deadline, any Nonconsenting Limited Partner who has complied with the requirements of subsections (a) and (b) hereof, upon written request, shall be entitled to receive from Aimco OP a statement setting forth the aggregate number of New NPI Units with respect to which Nonconsenting Limited Partners have made demands for appraisal and the aggregate number of holders of such New NPI Units. Such written statement shall be mailed to the Nonconsenting Limited Partner within 10 days after such Nonconsenting Limited Partner’s written request for such a statement is received by Aimco OP or within 20 days after the Election Deadline, whichever is later.

(d) Upon the submission of any such demand by a Nonconsenting Limited Partner, Aimco OP shall, within 40 days after the Election Deadline, submit to the arbitration panel a duly verified list containing the names and addresses of all Nonconsenting Limited Partners who have demanded payment for their New NPI Units and with whom agreements as to the value of their New NPI Units have not been reached with Aimco OP. The arbitration panel shall give notice of the time and place fixed for the hearing of such demand by registered or certified mail to Aimco OP and to the Nonconsenting Limited Partners shown on the list at the addresses

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therein stated. The forms of the notices shall be approved by the panel, and the costs thereof shall be borne by Aimco OP.

(e) At the hearing on such demand, the panel shall determine the Nonconsenting Limited Partners who have become entitled to appraisal rights hereunder.

(f) After determining the Nonconsenting Limited Partners entitled to an appraisal, the panel shall appraise the New NPI Units, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the Second Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the panel shall take into account all relevant factors. Unless the panel in its discretion determines otherwise for good cause shown, interest from the effective date of the Second Merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any surcharge), as established from time to time during the period between the effective date of the Second Merger and the date of payment of the judgment. Upon application by Aimco OP or by any Nonconsenting Limited Partner entitled to participate in the appraisal proceeding, the panel may, in its discretion, proceed with the appraisal prior to the final determination of the Nonconsenting Limited Partners entitled to an appraisal. Any Nonconsenting Limited Partner whose name appears on the list submitted by Aimco OP pursuant to paragraph (d) hereof may participate fully in all proceedings until it is finally determined that such Nonconsenting Limited Partner is not entitled to appraisal rights hereunder.

(g) The panel shall direct the payment of the fair value of the New NPI Units, together with interest, if any, by Aimco OP to the Nonconsenting Limited Partners entitled thereto. Payment shall be so made to each such Nonconsenting Limited Partner upon the receipt by Aimco OP of the written consent from such Nonconsenting Limited Partner that, for federal income tax purposes, the issuance of cash for the New NPI Units shall be treated as a sale of the New NPI Units by the owner and a purchase of such New NPI Units by Aimco OP for the cash consideration so paid under the terms of the Merger Agreement in accordance with the guidelines set forth in Treas. Reg. Sections 1.708-1(c)(3) and 1.708-1(c)(4).

(h) The costs of the proceeding may be determined by the panel and taxed upon the parties as the panel deems equitable in the circumstances. Upon application of a Nonconsenting Limited Partner, the panel may order all or a portion of the expenses incurred by any Nonconsenting Limited Partner in connection with the appraisal proceeding, including, without limitation, reasonable attorney’s fees and the fees and expenses of experts, to be charged pro rata against the value of all the interests entitled to an appraisal.

(i) From and after the effective date of the Second Merger, no Nonconsenting Limited Partner who has demanded appraisal rights as provided in paragraph (b) hereof shall be entitled to vote such New NPI Units for any purpose or to receive payment of distributions on such interests (except distributions payable as of a record date prior to the effective date of the Second Merger); provided, however, that if such Nonconsenting Limited Partner shall deliver to Aimco Properties, L.P., c/o Eagle Rock Proxy Advisors, LLC, by mail at 12 Commerce Drive, Cranford, New Jersey, 07016, or by fax at (908) 497-2349, a written withdrawal of such Nonconsenting Limited Partner’s demand for an appraisal and an acceptance of the Cash Consideration payable pursuant to the Merger Agreement, either as provided in paragraph (c) hereof or thereafter with the written approval of Aimco OP, then the right of such Nonconsenting Limited Partner to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding before the panel shall be dismissed as to any Nonconsenting Limited Partner without the approval of the panel, and such approval may be conditioned upon such terms as the panel deems just.

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ANNEX C

OFFICERS AND DIRECTORS

NPI, New NPI, Aimco OP and the Aimco Subsidiary do not have directors, officers or significant employees of their own. The names and positions of the executive officers and directors of Aimco, AIMCO-GP and NPI Equity Investments, Inc, the general partner of NPI, or NPI Equity, are set forth below. The business address of each executive officer and director is 4582 South Ulster Street Parkway, Suite 1100, Denver, Colorado 80237. Each executive officer and director is a citizen of the United States of America.

Name (Age)	Position
Terry Considine(62)	Chairman of the Board of Directors and Chief Executive Officer of Aimco; Director, Chief Executive Officer and President of AIMCO-GP.
Timothy Beaudin(51)	President and Chief Operating Officer of Aimco, AIMCO-GP and NPI Equity.
Lisa R. Cohn(41)	Executive Vice President, General Counsel and Secretary of Aimco, AIMCO-GP and NPI Equity.
Miles Cortez(66)	Executive Vice President and Chief Administrative Officer of Aimco and AIMCO-GP.
Ernest M. Freedman(39)	Executive Vice President and Chief Financial Officer of Aimco, AIMCO-GP and NPI Equity.
Steven D. Cordes(38)	Senior Vice President of Aimco, AIMCO-GP and NPI Equity; Director of NPI Equity.
John Bezzant(47)	Senior Vice President of Aimco, AIMCO-GP and NPI Equity; Director of NPI Equity.
Paul Beldin(36)	Senior Vice President and Chief Accounting Officer of Aimco, AIMCO-GP and NPI Equity.
Stephen B. Waters(48)	Senior Director of Partnership Accounting of Aimco, AIMCO-GP and NPI Equity.
James N. Bailey(63)	Director of Aimco
Richard S. Ellwood(78)	Director of Aimco
Thomas L. Keltner(63)	Director of Aimco
J. Landis Martin(64)	Director of Aimco
Robert A. Miller(64)	Director of Aimco
Michael A. Stein(56)	Director of Aimco
Kathleen M. Nelson(64)	Director of Aimco

Name

Biographical Summary of Current Directors and Officers

Terry Considine

Mr. Considine has been Chairman of the Board of Directors and Chief Executive Officer of Aimco and AIMCO-GP, Inc. since July 1994. Mr. Considine also serves on the board of directors of Intrepid Potash, Inc. a publicly held producer of potash, and, until its acquisition in early 2009, Mr. Considine served as Chairman of the Board and Chief Executive Officer of American Land Lease, Inc. Mr. Considine has over 40 years of experience in the real estate and other industries. Among other real estate ventures, in 1975, Mr. Considine founded and managed the predecessor companies that became Aimco at its initial public offering in 1994.

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Name	Biographical Summary of Current Directors and Officers
Timothy Beaudin	Mr. Beaudin was appointed President and Chief Operating Officer of Aimco, AIMCO-GP and NPI Equity in February 2009. He joined the companies as Executive Vice President and Chief Development Officer in October 2005 and was appointed Executive Vice President and Chief Property Operating Officer in October 2008. Mr. Beaudin oversees conventional and affordable property operations, transactions, asset management, and redevelopment and construction services. Prior to joining Aimco and beginning in 1995, Mr. Beaudin was with Catellus Development Corporation, a San Francisco, California-based real estate investment trust. During his last five years at Catellus, Mr. Beaudin served as Executive Vice President, with management responsibility for development, construction and asset management.
Lisa R. Cohn	Lisa R. Cohn was appointed Executive Vice President, General Counsel and Secretary of Aimco, AIMCO-GP and NPI Equity in December 2007. In addition to serving as general counsel, Ms. Cohn has executive responsibility for insurance and risk management as well as human resources. From January 2004 to December 2007, Ms. Cohn served as Senior Vice President and Assistant General Counsel. She joined Aimco in July 2002 as Vice President and Assistant General Counsel. Prior to joining Aimco, Ms. Cohn was in private practice with the law firm of Hogan & Hartson LLP with a focus on public and private mergers and acquisitions, venture capital financing, securities and corporate governance.
Miles Cortez	Mr. Cortez was appointed Executive Vice President and Chief Administrative Officer in December 2007. He is responsible for administration, government relations, communications and special projects. Mr. Cortez joined Aimco in August 2001 as Executive Vice President, General Counsel and Secretary. Prior to joining the Company, Mr. Cortez was the senior partner of Cortez Macaulay Bernhardt & Schuetze LLC, a Denver, Colorado law firm, from December 1997 through September 2001. He served as president of the Colorado Bar Association from 1996 to 1997 and the Denver Bar Association from 1982 to 1983.
Ernest M. Freedman	Ernest M. Freedman was appointed Executive Vice President and Chief Financial Officer of Aimco, AIMCO-GP and NPI Equity effective November 1, 2009. Mr. Freedman joined Aimco in 2007 as Senior Vice President of Financial Planning and Analysis and has served as Senior Vice President of Finance since February 2009, responsible for financial planning, tax, accounting and related areas. From 2004 to 2007, Mr. Freedman served as Chief Financial Officer of HEI Hotels and Resorts. From 2000 to 2004, Mr. Freedman was at GE Real Estate in a number of capacities, including operations controller and finance manager for investments and acquisitions. From 1993 to 2000, Mr. Freedman was with Ernst & Young, LLP, including one year as a senior manager in the real estate practice. Mr. Freedman is a certified public accountant.

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Name	Biographical Summary of Current Directors and Officers
Steven D. Cordes	Steven D. Cordes was appointed as a Director of NPI Equity effective March 2, 2009. Mr. Cordes has been a Senior Vice President of Aimco, AIMCO-GP and NPI Equity since May 2007. Mr. Cordes joined Aimco in 2001 as a Vice President of Capital Markets with responsibility for Aimco’s joint ventures and equity capital markets activity. Prior to joining Aimco, Mr. Cordes was a manager in the financial consulting practice of PricewaterhouseCoopers. Effective March 2009, Mr. Cordes was appointed to serve as the equivalent of the chief executive officer of NPI.
John Bezzant	John Bezzant was appointed as a Director of NPI Equity effective December 16, 2009. Mr. Bezzant has been a Senior Vice President of NPI Equity and Aimco since joining Aimco in June 2006. Prior to joining Aimco, from 2005 to June 2006, Mr. Bezzant was a First Vice President at Prologis, a Denver, Colorado-based real estate investment trust, and from 1986 to 2005, Mr. Bezzant served as Vice President, Asset Management at Catellus Development Corporation.
Paul Beldin	Paul Beldin joined Aimco in Macy 2008 and has served as Senior Vice President and Chief Accounting Officer of Aimco and NPI Equity since that time. Prior to joining Aimco, Mr. Beldin served as controller and then as chief financial officer of America First Apartment Investors, Inc., a publicly traded multifamily real estate investment trust, from May 2005 to September 2007 when the company was acquired by Sentinel Real Estate Corporation. Prior to joining America First Apartment Investors, Inc., Mr. Beldin was a senior manager at Deloitte and Touche LLP, where he was employed from August 1996 to May 2005, including two years as an audit manager in SEC services at Deloitte’s national office.
Stephen B. Waters	Stephen B. Waters was appointed Senior Director of Partnership Accounting of Aimco and NPI Equity in June 2009. Mr. Waters has responsibility for partnership accounting with Aimco and serves as the principal financial officer of NPI Equity. Mr. Waters joined Aimco as a Director of Real Estate Accounting in September 1999 and was appointed Vice President of NPI Equity and Aimco in April 2004. Prior to joining Aimco, Mr. Waters was a senior manager at Ernst & Young LLP.
James N. Bailey	Mr. Bailey was first elected as a director of Aimco in June 2000 and is currently Chairman of the Nominating and Corporate Governance Committee and a member of the Audit and Compensation and Human Resources Committees. Mr. Bailey co-founded Cambridge Associates, LLC, an investment consulting firm, in 1973 and currently serves as its Senior Managing Director and Treasurer. He is also a co-founder, director and treasurer of The Plymouth Rock Company, and a director of SRB Corporation, Inc. and Homeowners Direct Company, all three of which are insurance companies and insurance company affiliates. He also serves as an Overseer for the New England Aquarium, and is on its audit and investment committees. Mr. Bailey is a member of the Massachusetts Bar and the American Bar Associations. Mr. Bailey, a long-time entrepreneur, brings particular expertise to the board in the areas of investment and financial planning, capital markets, evaluation of institutional real estate markets and managers of all property types.

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Name	Biographical Summary of Current Directors and Officers
Richard S. Ellwood	Mr. Ellwood was first elected as a director of Aimco in July 1994. Mr. Ellwood is currently a member of the Audit, Compensation and Human Resources, and Nominating and Corporate Governance Committees. Mr. Ellwood was the founder and President of R.S. Ellwood & Co., Incorporated, which he operated as a real estate investment banking firm through 2004. Prior to forming his firm, Mr. Ellwood had 31 years experience on Wall Street as an investment banker, serving as: Managing Director and senior banker at Merrill Lynch Capital Markets from 1984 to 1987; Managing Director at Warburg Paribas Becker from 1978 to 1984; general partner and then Senior Vice President and a director at White, Weld & Co. from 1968 to 1978; and in various capacities at J.P. Morgan & Co. from 1955 to 1968. Mr. Ellwood served as a director of Felcor Lodging Trust, Incorporated, a publicly held company, from 1994 to 2009. He is as a trustee of the Diocesan Investment Trust of the Episcopal Diocese of New Jersey and is chairman of the diocesan audit committee. As one of the first real estate investment bankers, Mr. Ellwood brings particular expertise in real estate finance through corporate securities in both public and private markets as well as in direct property financings through mortgage placements, limited partnerships and joint ventures.
Thomas L. Keltner	Mr. Keltner was first elected as a director of Aimco in April 2007 and is currently a member of the Audit, Compensation and Human Resources, and Nominating and Corporate Governance Committees. Mr. Keltner served as Executive Vice President and Chief Executive Officer — Americas and Global Brands for Hilton Hotels Corporation from March 2007 through March 2008, which concluded the transition period following Hilton’s acquisition by The Blackstone Group. Mr. Keltner joined Hilton Hotels Corporation in 1999 and served in various roles. Mr. Keltner has more than 20 years of experience in the areas of hotel development, acquisition, disposition, franchising and management. Prior to joining Hilton Hotels Corporation, from 1993 to 1999, Mr. Keltner served in several positions with Promus Hotel Corporation, including President, Brand Performance and Development. Before joining Promus Hotel Corporation, he served in various capacities with Holiday Inn Worldwide, Holiday Inns International and Holiday Inns, Inc. In addition, Mr. Keltner was President of Saudi Marriott Company, a division of Marriott Corporation, and was a management consultant with Cresap, McCormick and Paget, Inc. Mr. Keltner brings particular expertise to the board in the areas of property operations, marketing, branding, development and customer service.

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Name	Biographical Summary of Current Directors and Officers
J. Landis Martin	Mr. Martin was first elected as a director of Aimco in July 1994 and is currently Chairman of the Compensation and Human Resources Committee. Mr. Martin is also a member of the Audit and Nominating and Corporate Governance Committees and serves as the Lead Independent Director of Aimco’s Board. Mr. Martin is the Founder and Managing Director of Platte River Ventures LLC, a private equity firm. In November 2005, Mr. Martin retired as Chairman and CEO of Titanium Metals Corporation, a publicly held integrated producer of titanium metals, where he served since January 1994. Mr. Martin served as President and CEO of NL Industries, Inc., a publicly held manufacturer of titanium dioxide chemicals, from 1987 to 2003. Mr. Martin is also a director of Crown Castle International Corporation, a publicly held wireless communications company, Halliburton Company, a publicly held provider of products and services to the energy industry, and Intrepid Potash, Inc., a publicly held producer of potash. As a former chief executive of four NYSE-listed companies, Mr. Martin brings particular expertise to the board in the areas of operations, finance and governance.
Robert A. Miller	Mr. Miller was first elected as a director of Aimco in April 2007 and is currently a member of the Audit, Compensation and Human Resources, and Nominating and Corporate Governance Committees. Mr. Miller has served as the President of Marriott Leisure since 1997. Prior to joining Marriott Leisure, from 1984 to 1988, Mr. Miller served as Executive Vice President & General Manager of Marriott Vacation Club International and then as its President from 1988 to 1997. In 1984, Mr. Miller and a partner sold their company, American Resorts, Inc., to Marriott. Mr. Miller co-founded American Resorts, Inc. in 1978, and it was the first business model to encompass all aspects of timeshare resort development, sales, management and operations. Prior to founding American Resorts, Inc., from 1972 to 1978, Mr. Miller was Chief Financial Officer of Fleetwing Corporation, a regional retail and wholesale petroleum company. Prior to joining Fleetwing, Mr. Miller served for five years as a staff accountant for Arthur Young & Company. Mr. Miller is past Chairman and currently a director of the American Resort Development Association (“ARDA”) and currently serves as Chairman and director of the ARDA International Foundation. As a successful real estate entrepreneur, Mr. Miller brings particular expertise to the board in the areas of operations, management, marketing, sales, and development, as well as finance and accounting.

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Name	Biographical Summary of Current Directors and Officers
Michael A. Stein	Mr. Stein was first elected as a director of Aimco in October 2004 and is currently the Chairman of the Audit Committee. Mr. Stein is also a member of the Compensation and Human Resources and Nominating and Corporate Governance Committees. From January 2001 until its acquisition by Eli Lilly in January 2007, Mr. Stein served as Senior Vice President and Chief Financial Officer of ICOS Corporation, a biotechnology company based in Bothell, Washington. From October 1998 to September 2000, Mr. Stein was Executive Vice President and Chief Financial Officer of Nordstrom, Inc. From 1989 to September 1998, Mr. Stein served in various capacities with Marriott International, Inc., including Executive Vice President and Chief Financial Officer from 1993 to 1998. Mr. Stein serves on the Board of Directors of Nautilus, Inc., which is a publicly held fitness company, and the Board of Directors of Providence Health & Services, a not-for-profit health system operating hospitals and other health care facilities across Alaska, Washington, Montana, Oregon and California. As the former chief financial officer of two NYSE-listed companies and a former partner at Arthur Andersen, Mr. Stein brings particular expertise to the board in the areas of corporate and real estate finance, and accounting and auditing for large and complex business operations.
Kathleen M. Nelson	Ms. Nelson was first elected as a director of Aimco in April 2010, and currently serves on the Audit, Compensation and Human Resources, and Nominating and Corporate Governance Committees. Ms. Nelson has an extensive background in commercial real estate and financial services with over 40 years of experience including 36 years at TIAA-CREF. She held the position of Managing Director/Group Leader and Chief Administrative Officer for TIAA-CREF’s mortgage and real estate division. Ms. Nelson developed and staffed TIAA’s real estate research department. She retired from this position in December 2004 and founded and serves as president of KMN Associates LLC, a commercial real estate investment advisory and consulting firm. In 2009, Ms. Nelson co-founded and serves as Managing Principal of Bay Hollow Associates, LLC, a commercial real estate consulting firm, which provides counsel to institutional investors. Ms. Nelson served as the International Council of Shopping Centers’ chairman for the 2003-04 term and has been an ICSC Trustee since 1991. She also is the chairman of the ICSC Audit Committee and is a member of various other committees. Ms. Nelson serves on the Board of Directors of CBL & Associates Properties, Inc., which is a publicly held REIT that develops and manages retail shopping properties. She is a member of Castagna Realty Company Advisory Board and has served as an advisor to the Rand Institute Center for Terrorism Risk Management Policy and on the board of the Greater Jamaica Development Corporation. Ms. Nelson serves on the Advisory Board of the Beverly Willis Architectural Foundation and is a member of the Anglo American Real Property Institute. Ms. Nelson brings to the board particular expertise in the areas of real estate finance and investment.

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ANNEX D

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2009
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission file number 0-9567

NATIONAL PROPERTY INVESTORS III

(Exact name of registrant as specified in its charter)

California
(State or other jurisdiction of
incorporation or organization) 13-2974428
(I.R.S. Employer
Identification No.)

55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)

Registrant’s telephone number, including area code (864) 239-1000

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Units of Limited Partnership

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes o     No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company þ
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o     No þ

State the aggregate market value of the voting and non-voting partnership interests held by non-affiliates computed by reference to the price at which the partnership interests were last sold, or the average bid and asked price of such partnership interests as of the last business day of the registrant’s most recently completed second fiscal quarter. No market exists for the limited partnership interests of the Registrant, and, therefore, no aggregate market value can be determined.

DOCUMENTS INCORPORATED BY REFERENCE

None

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FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Annual Report contains or may contain information that is forward-looking within the meaning of the federal securities laws, including, without limitation, statements regarding the effect of redevelopments, the Partnership’s future financial performance, including the Partnership’s ability to maintain current or meet projected occupancy and rent levels, and the effect of government regulations. Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors some of which are beyond the Partnership’s control including, without limitation: financing risks, including the availability and cost of financing and the risk that the Partnership’s cash flows from operations may be insufficient to meet required payments of principal and interest; natural disasters and severe weather such as hurricanes; national and local economic conditions; the general level of interest rates; energy costs; the terms of governmental regulations that affect the Partnership’s property and interpretations of those regulations; the competitive environment in which the Partnership operates; real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for residents in such markets; insurance risk, including the cost of insurance; development risks; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the Partnership. Readers should carefully review the Partnership’s financial statements and the notes thereto, as well as the other documents the Partnership files from time to time with the Securities and Exchange Commission.

PART I

Item 1.   Business

National Property Investors III (the “Partnership” or “Registrant”) was organized under the Uniform Limited Partnership Laws of California on February 1, 1979 for the purpose of operating income-producing residential real estate. The general partner is NPI Equity Investments, Inc. (“NPI Equity” or the “Managing General Partner”). The Managing General Partner is a wholly owned subsidiary of Apartment Investment and Management Company (“AIMCO”), a publicly traded real estate investment trust. A total of 48,049 units of the limited partnership (“Units”) were issued for $500 each, for an aggregate capital contribution of $24,024,500. In addition, the general partner contributed a total of $1,000 to the Partnership. The Partnership will terminate on December 31, 2022, or sooner, in accordance with the terms of the Partnership Agreement. Since its initial offering, the Partnership has not received, nor are the limited partners required to make, additional capital contributions.

In 1980, during its acquisition phase, the Partnership acquired six existing apartment properties. The Partnership continues to own and operate one of these properties (see “Item 2. Property”).

The Partnership has no employees. Management and administrative services are provided by the Managing General Partner and by agents retained by the Managing General Partner. These services were provided by affiliates of the Managing General Partner for the years ended December 31, 2009 and 2008.

A further description of the Partnership’s business is included in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Form 10-K.

Item 2.   Property

The following table sets forth the Partnership’s investment in property:

	Date of
Property	Purchase	Type of Ownership	Use
Lakeside Apartments	12/18/80	Fee ownership subject to	Apartment
Lisle, Illinois		1st and 2nd mortgages	568 units

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Schedule of Property

Set forth below for the Partnership’s property is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation, and Federal tax basis.

	Gross						Method
	Carrying		Accumulated		Depreciable		of		Federal
Property	Value		Depreciation		Life		Depreciation		Tax Basis
	(In thousands)								(In thousands)
Lakeside Apartments	$	49,117	$	29,276		5-40 yrs		S/L	$	15,808

See “Note A — Organization and Summary of Significant Accounting Policies” to the financial statements included in “Item 8. Financial Statements and Supplementary Data” for a description of the Partnership’s capitalization and depreciation policies.

Schedule of Property Indebtedness

The following table sets forth certain information relating to the loans encumbering the Partnership’s property.

	Principal									Principal
	Balance At									Balance
	December 31,		Interest			Period		Maturity		Due At
Property	2009		Rate			Amortized		Date		Maturity(3)
	(In thousands)									(In thousands)
Lakeside Apartments
1st mortgage	$	20,375		7.14	%(1)		30 yrs		01/01/22	$	15,791
2nd mortgage		9,000		5.90	%(2)		30 yrs		01/01/22		7,185
Total	$	29,375								$	22,976

(1)	Fixed rate mortgage.
(2)	Monthly payments of interest only through May 1, 2010. Monthly payments of principal and interest commence June 1, 2010.
(3)	See “Item 8. Financial Statements and Supplementary Data — Note C” for information with respect to the Partnership’s ability to prepay the loans and other details about the loans.

Schedule of Rental Rates and Occupancy

Average annual rental rate and occupancy for 2009 and 2008 for the property:

	Average Annual
	Rental Rate				Average Annual
	(per unit)				Occupancy
Properties	2009		2008		2009			2008
Lakeside Apartments	$	11,634	$	11,520		90	%		87	%

The Managing General Partner attributes the increase in occupancy at Lakeside Apartments to the completion of the redevelopment of the property, resulting in more units available for rent.

The real estate industry is highly competitive. The Partnership’s property is subject to competition from other residential apartment complexes in the area. The Managing General Partner believes that the property is adequately insured. The property is an apartment complex which leases units for terms of one year or less. No tenant leases 10% or more of the available rental space. The property is in good condition, subject to normal depreciation and deterioration as is typical for assets of this type and age.

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Schedule of Real Estate Taxes and Rate

Real estate taxes and rate in 2009 for the property were:

	2009		2009
	Billing		Rate
	(In thousands)
Lakeside Apartments	$	727		6.09	%

Capital Improvements

Lakeside Apartments

The Partnership completed approximately $1,016,000 in capital expenditures at Lakeside Apartments during the year ended December 31, 2009, consisting primarily of redevelopment costs, air conditioning and sewer upgrades, fire safety equipment, floor covering replacements and construction related to the casualties discussed in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”. These improvements were funded from operating cash flow, insurance proceeds and advances from AIMCO Properties, L.P., an affiliate of the Managing General Partner, although AIMCO Properties, L.P. is not obligated to fund such advances. During 2005 the Partnership commenced with a $1,500,000 redevelopment project at Lakeside Apartments. Approximately $832,000 was completed at December 31, 2005. In August 2006, the scope of the redevelopment project was significantly expanded and was planned to be approximately $16,300,000 with the majority of the work started in October 2006 and to be completed by November 2008. During the year ended December 31, 2006, an additional $377,000 was incurred. During the year ended December 31, 2007, the anticipated cost of the project was increased by approximately $7,393,000 to a total project cost of approximately $23,693,000. During the year ended December 31, 2007, approximately $16,544,000 was expended. During the year ended December 31, 2008, approximately $4,532,000 was expended. During 2009, approximately $352,000 was expended. The project was completed during the second quarter of 2009 at a total cost of approximately $22,637,000. The redevelopment consisted of site, building exterior, common area and unit interior improvements. The site improvements consisted of landscape enhancements and replacements, repair of retaining walls and correction of erosion problems, lighting upgrades and the addition of patio privacy fences. The building exterior improvements consisted of rear entrance door replacements, gutter improvements, foundation work and exterior painting. The common area improvements consisted of upgrading the leasing center, replacing the current clubhouse with a business center and conference room, fitness center with locker rooms, and addition of a boathouse for lake recreation activities. In addition, the west clubhouse was upgraded and includes a social/game room, locker rooms and new decking. The unit interior improvements consisted of kitchen and bath upgrades, replacement of original fireplaces and other interior renovations. The Partnership funded the redevelopment from operations and advances from AIMCO Properties, L.P. During the construction period, certain expenses have been capitalized and are being depreciated over the remaining life of the related assets. For the years ended December 31, 2009 and 2008, these amounts included approximately $3,000 and $24,000, respectively, of construction period taxes, approximately $9,000 and $167,000, respectively, of construction period interest and approximately $5,000 and $7,000, respectively, of construction period operating costs. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2010. Such capital expenditures will depend on the physical condition of the property as well as insurance proceeds and anticipated cash flow generated by the property.

Capital expenditures will be incurred only if cash is available from operations, Partnership reserves or advances from AIMCO Properties, L.P., an affiliate of the Managing General Partner, although AIMCO Properties, L.P. is not obligated to provide such advances. To the extent that capital improvements are completed, the Partnership’s distributable cash flow, if any, may be adversely affected at least in the short term.

Item 3.   Legal Proceedings

As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the Managing General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor

D-4

Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company (“the Defendants”) failed to compensate maintenance workers for time that they were required to be “on-call” (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts have been dismissed. During the fourth quarter of 2008, the Partnership paid approximately $5,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment property. At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. The parties have selected six “on-call” claims that will proceed forward through the arbitration process and have selected arbitrators. After those arbitrations have been completed, the parties will revisit settling the on-call claims. The first two arbitrations took place in December 2009 and the Defendants received a defense verdict against the first two claimants, and plaintiffs dismissed the claims of the next two claimants. The remaining two arbitrations will take place in April 2010. The Managing General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership. Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.

PART II

Item 5.   Market for the Registrant’s Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities

The Partnership, a publicly-held limited partnership, offered and sold 48,049 Limited Partnership Units (“the Units”) aggregating $24,024,500. As of December 31, 2009, the Partnership had 48,039 Units outstanding held by 759 limited partners of record. Affiliates of the Managing General Partner owned 37,419 Units or 77.89% at December 31, 2009. No public trading market has developed for the Units, and it is not anticipated that such a market will develop in the future.

There were no distributions made by the Partnership during the years ended December 31, 2009 and 2008. Future cash distributions will depend on the levels of net cash generated from operations, the timing of debt maturity, property sale and/or refinancing. The Partnership’s cash available for distribution is reviewed on a monthly basis. In light of the amounts accrued and payable to affiliates of the Managing General Partner, it is unlikely that the Partnership will generate sufficient funds from operations after required capital expenditures to permit any distributions to its partners in 2010 or subsequent periods. See “Item 2. Property — Capital Improvements” for information relating to capital expenditures at the property.

In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 37,419 Units in the Partnership representing 77.89% of the outstanding Units at December 31, 2009. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 77.89% of the outstanding Units, AIMCO and its affiliates are in a position to influence all voting decisions with respect to the Partnership. However, with respect to the 21,380 Units acquired on January 19, 1996, AIMCO IPLP, L.P., an affiliate of the Managing General Partner and of AIMCO, agreed to vote such Units: (i) against any increase in compensation payable to the Managing General Partner or to its affiliates; and (ii) on all other matters submitted by it or its affiliates, in proportion to the vote cast by third party unitholders. Except for the foregoing, no other limitations are imposed on AIMCO IPLP, L.P.’s, AIMCO’s or any other affiliates’ right to vote each Unit held. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder.

D-5

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

This item should be read in conjunction with the financial statements and other items contained elsewhere in this report.

The Partnership’s financial results depend upon a number of factors including the ability to attract and maintain tenants at the investment property, interest rates on mortgage loans, costs incurred to operate the investment property, general economic conditions and weather. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of its investment property to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, the Managing General Partner may use rental concessions and rental rate reductions to offset softening market conditions, accordingly, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Further, a number of factors that are outside the control of the Partnership, such as the local economic climate and weather, can adversely or positively affect the Partnership’s financial results.

Results of Operations

The Partnership recognized net losses of approximately $3,435,000 and $3,188,000 for the years ended December 31, 2009 and 2008, respectively. The increase in net loss for the year ended December 31, 2009 was due to an increase in total expenses, partially offset by an increase in total revenues and the recognition of casualty gains in 2009.

Total expenses increased for the year ended December 31, 2009 due to increases in depreciation, interest and property tax expenses, partially offset by decreases in operating and general and administrative expenses. Depreciation expense increased due to property improvements and replacements placed into service related to the redevelopment at Lakeside Apartments during the past twelve months, which are now being depreciated. Interest expense increased primarily due to a decrease in interest capitalized in connection with the redevelopment of Lakeside Apartments. Property tax expense increased due to an anticipated increase in the property’s assessed value for 2009. The property tax expense for Lakeside Apartments is recorded based upon an estimate of the anticipated annual amount as Lakeside Apartments’ property taxes are billed a year in arrears. Property tax expense for 2009 was also impacted by an adjustment to reduce property tax expense of approximately $53,000 for the 2008 taxes as a result of the successful appeal of the 2008 assessed value of Lakeside Apartments. During 2008, the Partnership recorded an adjustment to reduce property tax expense of approximately $105,000 for the 2007 taxes as a result of the successful appeal of the 2007 assessed value of Lakeside Apartments. Operating expenses decreased primarily due to the receipt of insurance proceeds to cover clean-up costs related to the casualties discussed below and a decrease in property expenses due to a decrease in utility costs and payroll related benefits, partially offset by an increase in hazard and general liability insurance expenses and resident eviction costs at Lakeside Apartments.

The decrease in general and administrative expenses for the year ended December 31, 2009 is primarily due to a decrease in management reimbursements to an affiliate of the Managing General Partner as allowed under the Partnership Agreement. Also included in general and administrative expenses for the years ended December 31, 2009 and 2008 are costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement.

Total revenues increased for the year ended December 31, 2009 due to increases in both rental and other income. Rental income increased due to increases in the average rental rate and occupancy, partially offset by an increase in bad debt expense at Lakeside Apartments. Other income increased due to increases in late fees, application fees and resident utility reimbursements at Lakeside Apartments.

During September 2008, the Partnership incurred fire and water damage to one of the apartment buildings at Lakeside Apartments. The damages were approximately $469,000, including clean up costs of approximately $214,000. The clean up costs were included in operating expense for the year ended December 31, 2008. During the year ended December 31, 2009, the Partnership received approximately $452,000 of insurance proceeds related to this event, of which approximately $197,000 was for clean up costs. During the year ended December 31, 2009, the

D-6

Partnership recognized a casualty gain of approximately $22,000 due to the receipt of insurance proceeds, net of the write-off of undepreciated damaged assets of approximately $233,000. For the year ended December 31, 2009, the proceeds received to cover clean up costs are reflected as a reduction of operating expenses. The Partnership expects to receive approximately $24,000 of additional insurance proceeds related to this event.

During September 2008, the Partnership incurred damages to several apartment units as a result of a gas leak. The damages were approximately $78,000, including clean up costs of approximately $49,000. During the year ended December 31, 2009, the Partnership received approximately $68,000 of insurance proceeds related to this event, of which approximately $39,000 was for clean up costs. The clean up costs and associated insurance proceeds were included in operating expense for the year ended December 31, 2008. The Partnership recognized a casualty gain of approximately $2,000 during the year ended December 31, 2009, due to the receipt of insurance proceeds, net of the write off of undepreciated assets of approximately $27,000.

Liquidity and Capital Resources

At December 31, 2009, the Partnership had cash and cash equivalents of approximately $194,000 compared to approximately $85,000 at December 31, 2008. Cash and cash equivalents increased approximately $109,000 from December 31, 2008 due to approximately $1,006,000 and $364,000 of cash provided by financing and operating activities, respectively, partially offset by approximately $1,261,000 of cash used in investing activities. Cash provided by financing activities consisted of advances received from an affiliate of the Managing General Partner partially offset by principal payments made on the first mortgage encumbering Lakeside Apartments and repayment of advances from an affiliate of the Managing General Partner. Cash used in investing activities consisted of property improvements and replacements, partially offset by insurance proceeds received.

On March 18, 2008, the Managing General Partner terminated the revolving credit facility (the “Partnership Revolver”) that was established on behalf of the Partnership and certain affiliated partnerships to fund deferred maintenance and working capital needs of the Partnership and certain other affiliated partnerships in the National Property Investors Partnership Series. The Managing General Partner does not have a commitment, intent or implication to fund cash flow deficits or furnish other direct or indirect financial assistance to the Partnership. The Partnership may receive advances of funds from AIMCO Properties, L.P., an affiliate of the Managing General Partner and the holder of a majority of the beneficial interest of the Partnership, although AIMCO Properties, L.P., is not obligated to fund such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission. During the years ended December 31, 2009 and 2008, the Partnership received advances of approximately $2,162,000 and $5,426,000, respectively, from AIMCO Properties, L.P., to fund a rental achievement escrow, redevelopment capital improvements, real estate taxes and operations at Lakeside Apartments. The advances bear interest at the prime rate plus 2% (5.25% at December 31, 2009) per annum. Interest expense during the years ended December 31, 2009 and 2008 was approximately $758,000 and $733,000, respectively. During the year ended December 31, 2009, the Partnership made payments of principal and accrued interest of approximately $2,035,000. There were no payments made during the year ended December 31, 2008. At December 31, 2009 and 2008, the amount of the outstanding advances and accrued interest due to AIMCO Properties, L.P. was approximately $14,355,000 and $13,470,000, respectively, and is included in due to affiliates.

The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the property to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. The Managing General Partner monitors developments in the area of legal and regulatory compliance. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2010. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property. Capital expenditures will be incurred only if cash is available from operations, Partnership reserves or advances from AIMCO Properties, L.P., although AIMCO Properties, L.P. does not have an obligation to fund such advances. To the extent that capital improvements are completed, the Partnership’s distributable cash flow, if any, may be adversely affected at least in the short term.

D-7

The Partnership’s assets are thought to be generally sufficient for any near-term needs (exclusive of capital improvements and repayment of amounts owed to affiliates) of the Partnership. The mortgage indebtedness encumbering Lakeside Apartments of approximately $29,375,000 matures in January 2022, at which time balloon payments of approximately $22,976,000 will be due. The Managing General Partner will attempt to refinance such indebtedness and/or sell the property prior to such maturity dates. If the property cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing such property through foreclosure.

There were no distributions made by the Partnership during the years ended December 31, 2009 and 2008. Future cash distributions will depend on the levels of cash generated from operations, the timing of debt maturity, property sale and/or refinancing. The Partnership’s cash available for distribution is reviewed on a monthly basis. In light of the amounts accrued and payable to affiliates of the Managing General Partner, it is unlikely that the Partnership will generate sufficient funds from operations after required capital expenditures to permit any distributions to its partners in 2010 or subsequent periods.

Other

In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 37,419 Units in the Partnership representing 77.89% of the outstanding Units at December 31, 2009. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 77.89% of the outstanding Units, AIMCO and its affiliates are in a position to influence all voting decisions with respect to the Partnership. However, with respect to the 21,380 Units acquired on January 19, 1996, AIMCO IPLP, L.P., an affiliate of the Managing General Partner and of AIMCO, agreed to vote such Units: (i) against any increase in compensation payable to the Managing General Partner or to its affiliates; and (ii) on all other matters submitted by it or its affiliates, in proportion to the vote cast by third party unitholders. Except for the foregoing, no other limitations are imposed on AIMCO IPLP, L.P.’s, AIMCO’s or any other affiliates’ right to vote each Unit held. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder.

Critical Accounting Policies and Estimates

A summary of the Partnership’s significant accounting policies is included in “Note A — Organization and Summary of Significant Accounting Policies” which is included in the financial statements in “Item 8. Financial Statements and Supplementary Data”. The Managing General Partner believes that the consistent application of these policies enables the Partnership to provide readers of the financial statements with useful and reliable information about the Partnership’s operating results and financial condition. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires the Partnership to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Judgments and assessments of uncertainties are required in applying the Partnership’s accounting policies in many areas. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity.

Impairment of Long-Lived Asset

Investment property is recorded at cost, less accumulated depreciation, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of the property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnership’s estimate of the undiscounted future cash flows, excluding interest charges, of the property. If the

D-8

carrying amount exceeds the estimated aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.

Real property investment is subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of the Partnership’s investment property. These factors include, but are not limited to, general economic climate; competition from other apartment communities and other housing options; local conditions, such as loss of jobs or an increase in the supply of apartments that might adversely affect apartment occupancy or rental rates; changes in governmental regulations and the related cost of compliance; increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents; changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing; and changes in interest rates and the availability of financing. Any adverse changes in these and other factors could cause an impairment of the Partnership’s asset.

Capitalized Costs Related to Redevelopment and Construction Projects

The Partnership capitalizes costs incurred in connection with capital expenditure activities, including redevelopment and construction projects. Costs including interest, property taxes and operating costs associated with redevelopment and construction projects are capitalized during periods in which redevelopment and construction projects are in progress. Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital expenditure activities at the property level.

Revenue Recognition

The Partnership generally leases apartment units for twelve-month terms or less. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants.

D-9

Item 8.   Financial Statements and Supplementary Data

NATIONAL PROPERTY INVESTORS III

LIST OF FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	D-11
Balance Sheets — Years ended December 31, 2009 and 2008	D-12
Statements of Operations — Years ended December 31, 2009 and 2008	D-13
Statements of Changes in Partners’ Deficit — Years ended December 31, 2009 and 2008	D-14
Statements of Cash Flows — Years ended December 31, 2009 and 2008	D-15
Notes to Financial Statements	D-16

D-10

Report of Independent Registered Public Accounting Firm

The Partners

National Property Investors III

We have audited the accompanying balance sheets of National Property Investors III as of December 31, 2009 and 2008, and the related statements of operations, changes in partners’ deficit, and cash flows for each of the two years in the period ended December 31, 2009. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of National Property Investors III at December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

Greenville, South Carolina

March 29, 2010

D-11

NATIONAL PROPERTY INVESTORS III

BALANCE SHEETS

	December 31,
	2009			2008
	(In thousands, except unit data)
ASSETS
Cash and cash equivalents	$	194		$	85
Receivables and deposits		345			315
Other assets		547			621
Investment property (Notes C, D and E)
Land		2,093			2,093
Buildings and related personal property		47,024			46,282
		49,117			48,375
Less accumulated depreciation		(29,276	)		(25,320	)
		19,841			23,055
	$	20,927		$	24,076
LIABILITIES AND PARTNERS’ DEFICIT
Liabilities
Accounts payable	$	79		$	670
Tenant security deposit liabilities		122			97
Accrued property taxes		877			780
Other liabilities		400			359
Due to affiliates (Note B)		14,552			13,605
Mortgage notes payable (Note C)		29,375			29,608
		45,405			45,119
Partners’ Deficit
General partner		(243	)		(209	)
Limited partners (48,039 units issued and outstanding)		(24,235	)		(20,834	)
		(24,478	)		(21,043	)
	$	20,927		$	24,076

See Accompanying Notes to Financial Statements

D-12

NATIONAL PROPERTY INVESTORS III

STATEMENTS OF OPERATIONS

	Years Ended December 31,
	2009			2008
	(In thousands, except per unit data)
Revenues:
Rental income	$	5,798		$	5,557
Other income		1,014			809
Total revenues		6,812			6,366
Expenses:
Operating		2,474			2,856
General and administrative		123			195
Depreciation		3,970			3,232
Interest		2,874			2,627
Property taxes		830			644
Total expenses		10,271			9,554
Casualty gains (Note G)		24			—
Net loss (Note F)	$	(3,435	)	$	(3,188	)
Net loss allocated to general partner (1%)	$	(34	)	$	(32	)
Net loss allocated to limited partners (99%)		(3,401	)		(3,156	)
	$	(3,435	)	$	(3,188	)
Net loss per limited partnership unit	$	(70.78	)	$	(65.68	)

See Accompanying Notes to Financial Statements

D-13

NATIONAL PROPERTY INVESTORS III

STATEMENTS OF CHANGES IN PARTNERS’ DEFICIT

	Limited
	Partnership			General			Limited
	Units			Partner			Partners			Total
	(In thousands, except unit data)
Original capital contributions		48,049		$	1		$	24,024		$	24,025
Partners’ deficit at December 31, 2007		48,049		$	(177	)	$	(17,678	)	$	(17,855	)
Net loss for the year ended December 31, 2008		—			(32	)		(3,156	)		(3,188	)
Partners’ deficit at December 31, 2008		48,049			(209	)		(20,834	)		(21,043	)
Abandonment of units (Note A)		(10	)		—			—			—
Net loss for the year ended December 31, 2009		—			(34	)		(3,401	)		(3,435	)
Partners’ deficit at December 31, 2009		48,039		$	(243	)	$	(24,235	)	$	(24,478	)

See Accompanying Notes to Financial Statements

D-14

NATIONAL PROPERTY INVESTORS III

STATEMENTS OF CASH FLOWS

	Years Ended
	December 31,
	2009			2008
	(In thousands)
Cash flows from operating activities:
Net loss	$	(3,435	)	$	(3,188	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization of loan costs		39			39
Depreciation		3,970			3,232
Casualty gains		(24	)		—
Bad debt expense		136			106
Change in accounts:
Receivables and deposits		(166	)		(122	)
Other assets		35			11
Accounts payable		(62	)		20
Tenant security deposit liabilities		25			(12	)
Accrued property taxes		97			(48	)
Other liabilities		41			(62	)
Due to affiliates		(292	)		843
Net cash provided by operating activities		364			819
Cash flows from investing activities:
Insurance proceeds received		284			—
Property improvements and replacements		(1,545	)		(6,198	)
Net cash used in investing activities		(1,261	)		(6,198	)
Cash flows from financing activities:
Advances from affiliate		2,162			5,426
Payments on advances from affiliate		(923	)		—
Payments on mortgage note payable		(233	)		(217	)
Net cash provided by financing activities		1,006			5,209
Net increase (decrease) in cash and cash equivalents		109			(170	)
Cash and cash equivalents at beginning of period		85			255
Cash and cash equivalents at end of period	$	194		$	85
Supplemental disclosure of cash flow information:
Cash paid for interest, net of capitalized interest	$	3,119		$	1,834
Supplemental disclosure of non-cash activity:
Property improvements and replacements included in accounts payable	$	—		$	529

Included in property improvements and replacements for the year ended December 31, 2008 are approximately $2,103,000 of property improvements and replacements which were included in accounts payable at December 31, 2007.

See Accompanying Notes to Financial Statements

D-15

NATIONAL PROPERTY INVESTORS III

NOTES TO FINANCIAL STATEMENTS

December 31, 2009

Note A — Organization and Summary of Significant Accounting Policies

Organization

National Property Investors III (the “Partnership) was organized under the Uniform Limited Partnership Laws of California on February 1, 1979 for the purpose of operating income-producing residential real estate. The general partner is NPI Equity Investments, Inc. (“NPI Equity” or the “Managing General Partner”). The Managing General Partner is a wholly owned subsidiary of Apartment Investment and Management Company (“AIMCO”), a publicly traded real estate investment trust. A total of 48,049 units of the limited partnership were issued for $500 each, for an aggregate capital contribution of $24,024,500. In addition, the general partner contributed a total of $1,000 to the Partnership. The Partnership will terminate on December 31, 2022, or sooner, in accordance with the terms of the Partnership Agreement. The Partnership commenced operations in the beginning of 1980 and completed its acquisition of apartment properties by the end of 1980. The Partnership operates one apartment property located in the Midwest at December 31, 2009.

Basis of Presentation

Certain reclassifications have been made to the 2008 balances to conform to the 2009 presentation.

Subsequent Events

The Partnership’s management evaluated subsequent events through the time this Annual Report on Form 10-K was filed.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162, or SFAS No. 168, which is effective for financial statements issued for interim and annual periods ending after September 15, 2009. Upon the effective date of SFAS No. 168, the FASB Accounting Standards Codification, or the FASB ASC, became the single source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission, or SEC, under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB ASC superseded all then-existing non-SEC accounting and reporting standards, and all other non-grandfathered non-SEC accounting literature not included in the FASB ASC is now non-authoritative. Subsequent to the effective date of SFAS No. 168, the FASB will issue Accounting Standards Updates that serve to update the FASB ASC.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and in banks. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits.

Cash balances included approximately $27,000 and zero at December 31, 2009 and 2008, respectively, that are maintained by an affiliated management company on behalf of affiliated entities in cash concentration accounts.

Security Deposits

The Partnership requires security deposits from lessees for the duration of the lease and such deposits are included in receivables and deposits on the balance sheet. Deposits are refunded when the tenant vacates, provided the tenant has not damaged the space and is current on rental payments.

D-16

NATIONAL PROPERTY INVESTORS III

NOTES TO FINANCIAL STATEMENTS — (Continued)

Restricted Escrow

In September 2009, pursuant to the terms of the Partnership’s rental achievement escrow agreement with the mortgage lender, the Partnership made a deposit of approximately $1,281,000 into an escrow account maintained by the mortgage lender. The Partnership funded this escrow account with an advance received from AIMCO Properties, L.P. The Partnership may withdraw from the escrow account once the following conditions are met 1) the Partnership maintains 92% occupancy at Lakeside Apartments; 2) the net monthly rent is approximately $428,000. These two conditions must be met for three consecutive months. During the fourth quarter of 2009, these conditions were met and the escrow deposit was returned to the Partnership.

Investment Property

Investment property consists of one apartment complex and is stated at cost, less accumulated depreciation, unless the carrying amount of the asset is not recoverable. The Partnership capitalizes costs incurred in connection with capital expenditure activities, including redevelopment and construction projects, other tangible property improvements and replacements of existing property components. Costs including interest, property taxes and operating costs associated with redevelopment and construction projects are capitalized during periods in which redevelopment and construction projects are in progress. Costs incurred in connection with capital projects are capitalized where the costs of the project exceed $250. Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital expenditure activities at the property level. The Partnership capitalized costs related to interest, property taxes and operating costs during the year ended December 31, 2009 of approximately $9,000, $3,000 and $5,000, respectively. The Partnership capitalized costs related to interest, property taxes and operating costs during the year ended December 31, 2008 of approximately $167,000, $24,000 and $7,000, respectively. Capitalized costs are depreciated over the useful life of the asset. Expenditures for ordinary repairs, maintenance and apartment turnover costs are expensed as incurred.

If events or circumstances indicate that the carrying amount of the property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnership’s estimate of the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the estimated aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property. No adjustments for impairment of value were necessary for the years ending December 31, 2009 and 2008.

Depreciation

Depreciation is provided by the straight-line method over the estimated life of the apartment property and related personal property. For Federal income tax purposes, the modified accelerated cost recovery method is used for depreciation of (1) real property additions over 27.5 years and (2) personal property additions over 5 years.

Leases

The Partnership generally leases apartment units for twelve-month terms or less. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants.

D-17

NATIONAL PROPERTY INVESTORS III

NOTES TO FINANCIAL STATEMENTS — (Continued)

Advertising Costs

Advertising costs of approximately $111,000 and $103,000 during the years ended December 31, 2009 and 2008, respectively, were charged to expense as incurred and are included in operating expenses.

Deferred Costs

At both December 31, 2009 and 2008, loan costs of approximately $752,000 are included in other assets in the accompanying balance sheets and are amortized over the term of the related loan agreements. At December 31, 2009 and 2008, accumulated amortization is approximately $275,000 and $236,000, respectively. Amortization of loan costs is included in interest expense in the accompanying statements of operations and was approximately $39,000 for each of the years ended December 31, 2009 and 2008. Amortization expense is expected to be approximately $39,000 for each of the years 2010 through 2014.

Leasing commissions and other direct costs incurred in connection with successful leasing efforts are deferred and amortized over the terms of the related leases. Amortization of these costs is included in operating expenses.

Fair Value of Financial Instruments

FASB ASC Topic 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amount of its financial instruments (except for long-term debt) approximates their fair value due to the short-term maturity of these instruments. The Partnership estimates the fair value of its long-term debt by discounting future cash flows using a discount rate commensurate with that currently believed to be available to the Partnership for similar term, long-term debt. At December 31, 2009, the fair value of the Partnership’s long-term debt at the Partnership’s incremental borrowing rate was approximately $31,194,000.

Abandoned Units

During 2009, the number of limited partnership units (the “Units”) decreased by 10 Units due to limited partners abandoning their Units. In abandoning his or her Units, a limited partner relinquishes all right, title and interest in the Partnership as of the date of the abandonment. There were no interests abandoned during 2008.

Net Loss Per Limited Partnership Unit

Net loss per Unit is computed by dividing net loss allocated to the Limited Partners by the number of Units outstanding at the beginning of the fiscal year. Per Unit information has been computed based on 48,049 units outstanding for 2009 and 2008.

Allocation of Income, Loss and Distributions

Net income, loss and distributions of cash of the Partnership are allocated between the general and limited partners in accordance with the provisions of the Partnership Agreement.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

D-18

NATIONAL PROPERTY INVESTORS III

NOTES TO FINANCIAL STATEMENTS — (Continued)

Segment Reporting

FASB ASC Topic 280-10, “Segment Reporting”, established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. FASB ASC Topic 280-10 also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in FASB ASC Topic 280-10, the Partnership has only one reportable segment.

Note B — Transactions with Affiliated Parties

The Partnership has no employees and depends on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership.

Affiliates of the Managing General Partner receive 5% of gross receipts from the Partnership’s property as compensation for providing property management services.

The Partnership paid to such affiliates approximately $335,000 and $315,000 for the years ended December 31, 2009 and 2008, respectively, which is included in operating expenses. At December 31, 2008, approximately $2,000 of property management fees were owed and are included in due to affiliates. No such amounts were owed at December 31, 2009.

Affiliates of the Managing General Partner charged the Partnership reimbursement of accountable administrative expenses amounting to approximately $156,000 and $350,000 for the years ended December 31, 2009 and 2008, respectively, which is included in general and administrative expenses and investment property. The portion of these reimbursements included in investment property for the years ended December 31, 2009 and 2008 are construction management services for certain capital improvement expenditures (not related to the redevelopment project) provided by an affiliate of the Managing General Partner of approximately $72,000 and $9,000, respectively. In connection with the redevelopment project (as discussed in “Note E”), an affiliate of the Managing General Partner received a redevelopment supervision fee of 4% of the actual redevelopment costs incurred. The Partnership was charged approximately $20,000 and $230,000 in redevelopment supervision fees during the years ended December 31, 2009 and 2008, respectively, which are included in investment property. At December 31, 2009 and 2008, approximately $197,000 and $133,000 of accountable administrative expenses were owed and are included in due to affiliates.

For services relating to the administration of the Partnership and operation of the Partnership’s property, the Managing General Partner is entitled to receive payment for non-accountable expenses up to a maximum of $100,000 per year based upon the number of Partnership units sold, subject to certain limitations. This fee is included in general and administrative expense. There were no such fees for the years ended December 31, 2009 and 2008 as no operating distributions were made.

Upon the sale of the Partnership’s property, NPI Equity will be entitled to an Incentive Compensation Fee equal to a declining percentage of the difference between the total amount distributed to limited partners and the appraised value of their investment at February 1, 1992. The percentage amount to be realized by NPI Equity, if any, will be dependent upon the year in which the property is sold. Payment of the Incentive Compensation Fee is subordinated to the receipt by the limited partners, of: (a) distributions from capital transaction proceeds of an amount equal to their appraised investment in the Partnership at February 1, 1992, and (b) distributions from all sources (capital transactions as well as cash flow) of an amount equal to six percent (6%) per annum cumulative, non-compounded, on their appraised investment in the Partnership at February 1, 1992.

On March 18, 2008, the Managing General Partner terminated the revolving credit facility (the “Partnership Revolver”) that was established on behalf of the Partnership and certain affiliated partnerships to fund deferred maintenance and working capital needs of the Partnership and certain other affiliated partnerships in the National

D-19

NATIONAL PROPERTY INVESTORS III

NOTES TO FINANCIAL STATEMENTS — (Continued)

Property Investors Partnership Series. The Managing General Partner does not have a commitment, intent or implication to fund cash flow deficits or furnish other direct or indirect financial assistance to the Partnership. The Partnership may receive advances of funds from AIMCO Properties, L.P., an affiliate of the Managing General Partner and the holder of a majority of the beneficial interest of the Partnership, although AIMCO Properties, L.P., is not obligated to fund such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission. During the years ended December 31, 2009 and 2008, the Partnership received advances of approximately $2,162,000 and $5,426,000, respectively, from AIMCO Properties, L.P., to fund a rental achievement escrow (as discussed in “Note A”), redevelopment capital improvements, real estate taxes and operations at Lakeside Apartments. The advances bear interest at the prime rate plus 2% (5.25% at December 31, 2009) per annum. Interest expense during the years ended December 31, 2009 and 2008 was approximately $758,000 and $733,000, respectively. During the year ended December 31, 2009, the Partnership made payments of principal and accrued interest of approximately $2,035,000. There were no payments made during the year ended December 31, 2008. At December 31, 2009 and 2008, the amount of the outstanding advances and accrued interest due to AIMCO Properties, L.P. was approximately $14,355,000 and $13,470,000, respectively, and is included in due to affiliates.

The Partnership insures its property up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty, general liability and vehicle liability. The Partnership insures its property above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the years ended December 31, 2009 and 2008, the Partnership was charged by AIMCO and its affiliates approximately $99,000 and $107,000, respectively, for insurance coverage and fees associated with policy claims administration.

In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 37,419 Units in the Partnership representing 77.89% of the outstanding Units at December 31, 2009. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 77.89% of the outstanding Units, AIMCO and its affiliates are in a position to influence all voting decisions with respect to the Partnership. However, with respect to the 21,380 Units acquired on January 19, 1996, AIMCO IPLP, L.P., an affiliate of the Managing General Partner and of AIMCO, agreed to vote such Units: (i) against any increase in compensation payable to the Managing General Partner or to its affiliates; and (ii) on all other matters submitted by it or its affiliates, in proportion to the vote cast by third party unitholders. Except for the foregoing, no other limitations are imposed on AIMCO IPLP, L.P.’s, AIMCO’s or any other affiliates’ right to vote each Unit held. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder.

D-20

NATIONAL PROPERTY INVESTORS III

NOTES TO FINANCIAL STATEMENTS — (Continued)

Note C — Mortgage Notes Payable

The terms of mortgage notes payable are as follows:

	Principal				Monthly							Principal
	Balance at				Payment		Stated					Balance
	December 31,				Including		Interest			Maturity		Due at
Property	2009		2008		Interest		Rate			Date		Maturity
	(In thousands)				(In thousands)							(In thousands)
Lakeside
Apartments
1st mortgage	$	20,375	$	20,608	$	141		7.14	%		01/01/22	$	15,791
2nd mortgage		9,000		9,000		44		5.90	%		01/01/22		7,185
Total	$	29,375	$	29,608	$	185						$	22,976

The mortgage notes payable are fixed rate mortgages that are non-recourse and are secured by a pledge of the Partnership’s rental property and by pledge of revenues from the rental property. Further, the property may not be sold subject to existing indebtedness.

Scheduled principal payments of the mortgage notes payable subsequent to December 31, 2009 are as follows (in thousands):

2010	$	315
2011		387
2012		412
2013		441
2014		472
Thereafter		27,348
	$	29,375

Note D — Investment Property and Accumulated Depreciation

			Initial Cost
			to Partnership
					Buildings		Net Costs
					and Related		Capitalized
					Personal		Subsequent to
Description	Encumbrance		Land		Property		Acquisition
			(In thousands)
	(In thousands)						(In thousands)
Lakeside Apartments	$	29,375	$	2,087	$	15,363	$	31,667

Gross Amount at Which Carried

at December 31, 2009

Buildings

and Related

Personal

Accumulated

Date of

Date

Depreciable

Description

Land

Property

Total

Depreciation

Construction

Acquired

Life

(In thousands)

(In thousands)

Lakeside Apartments

$

2,093

$

47,024

$

49,117

$

29,276

1973/1975

12/80

5-40 yrs

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NATIONAL PROPERTY INVESTORS III

NOTES TO FINANCIAL STATEMENTS — (Continued)

Reconciliation of “Investment Property and Accumulated Depreciation”:

	December 31,
	2009			2008
	(In thousands)
Investment Property
Balance at beginning of year	$	48,375		$	43,751
Property improvements and replacements		1,016			4,624
Disposition of property		(274	)		—
Balance at end of year	$	49,117		$	48,375
Accumulated Depreciation
Balance at beginning of year	$	25,320		$	22,088
Additions charged to expense		3,970			3,232
Disposition of property		(14	)		—
Balance at end of year	$	29,276		$	25,320

The aggregate cost of the real estate for Federal income tax purposes at December 31, 2009 and 2008 is approximately $48,665,000 and $47,783,000, respectively. The accumulated depreciation taken for Federal income tax purposes at December 31, 2009 and 2008 is approximately $32,857,000 and $28,514,000, respectively.

Note E —  Redevelopment

During 2005 the Partnership commenced with a $1,500,000 redevelopment project at Lakeside Apartments. Approximately $832,000 was completed at December 31, 2005. In August 2006, the scope of the redevelopment project was significantly expanded and was planned to be approximately $16,300,000 with the majority of the work started in October 2006 and to be completed by November 2008. During the year ended December 31, 2006 an additional $377,000 was incurred. During the year ended December 31, 2007 the anticipated cost of the project was increased by approximately $7,393,000 to a total project cost of approximately $23,693,000. During the year ended December 31, 2007, approximately $16,544,000 was expended. During the year ended December 31, 2008, approximately $4,532,000 was expended. During 2009, approximately $352,000 was expended. The project was completed during the second quarter of 2009 at a total cost of approximately $22,637,000. The redevelopment consisted of site, building exterior, common area and unit interior improvements. The site improvements consisted of landscape enhancements and replacements, repair of retaining walls and correction of erosion problems, lighting upgrades and the addition of patio privacy fences. The building exterior improvements consisted of rear entrance door replacements, gutter improvements, foundation work and exterior painting. The common area improvements consisted of upgrading the leasing center, replacing the current clubhouse with a business center and conference room, fitness center with locker rooms, and addition of a boathouse for lake recreation activities. In addition, the west clubhouse was upgraded and includes a social/game room, locker rooms and new decking. The unit interior improvements consisted of kitchen and bath upgrades, replacement of original fireplaces and other interior renovations. The Partnership funded the redevelopment from operations and advances from AIMCO Properties, L.P. During the construction period, certain expenses have been capitalized and are being depreciated over the remaining life of the related assets. For the years ended December 31, 2009 and 2008, these amounts included approximately $3,000 and $24,000, respectively, of construction period taxes, approximately $9,000 and $167,000, respectively, of construction period interest and approximately $5,000 and $7,000, respectively, of construction period operating costs.

D-22

NATIONAL PROPERTY INVESTORS III

NOTES TO FINANCIAL STATEMENTS — (Continued)

Note F —  Income Taxes

Taxable income or loss of the Partnership is reported in the income tax returns of its partners. No provision for income taxes is made in the financial statements of the Partnership.

The Partnership files its tax returns on an accrual basis and has computed depreciation for tax purposes using accelerated methods, which are not in accordance with generally accepted accounting principles. A reconciliation of net loss from the financial statements to the net taxable loss to partners is as follows (in thousands, except per unit data):

	December 31,
	2009			2008
Net loss as reported	$	(3,435	)	$	(3,188	)
Prepaid rent		(29	)		50
Depreciation differences		(373	)		(1,675	)
Other		171			(174	)
Casualty		(22	)		(33	)
Federal taxable loss	$	(3,688	)	$	(5,020	)
Federal taxable (loss) income per limited partnership unit	$	(68.43	)	$	14.49

For 2009 and 2008 allocations under the Internal Revenue Code section 704(b) result in the limited partners being allocated a non-pro rata amount of taxable (loss) income.

The following is a reconciliation between the Partnership’s reported amounts and Federal tax basis of net liabilities (in thousands):

	2009			2008
Net liabilities as reported	$	(24,478	)	$	(21,043	)
Land and buildings		(452	)		(592	)
Accumulated depreciation		(3,581	)		(3,194	)
Syndication and distribution costs		2,727			2,727
Prepaid rent		14			114
Other		203			108
Net liabilities — Federal tax basis	$	(25,567	)	$	(21,880	)

Note G —  Casualty Gains

During September 2008, the Partnership incurred fire and water damage to one of the apartment buildings at Lakeside Apartments. The damages were approximately $469,000, including clean up costs of approximately $214,000. The clean up costs were included in operating expense for the year ended December 31, 2008. During the year ended December 31, 2009, the Partnership received approximately $452,000 of insurance proceeds related to this event, of which approximately $197,000 was for clean up costs. During the year ended December 31, 2009, the Partnership recognized a casualty gain of approximately $22,000 due to the receipt of insurance proceeds, net of the write-off of undepreciated damaged assets of approximately $233,000. For the year ended December 31, 2009, the proceeds received to cover clean up costs are reflected as a reduction of operating expenses. The Partnership expects to receive approximately $24,000 of additional insurance proceeds related to this event.

During September 2008, the Partnership incurred damages to several apartment units as a result of a gas leak. The damages were approximately $78,000, including clean up costs of approximately $49,000. During the year ended December 31, 2009, the Partnership received approximately $68,000 of insurance proceeds related to this

D-23

NATIONAL PROPERTY INVESTORS III

NOTES TO FINANCIAL STATEMENTS — (Continued)

event, of which approximately $39,000 was for clean up costs. The clean up costs and associated insurance proceeds were included in operating expense for the year ended December 31, 2008. The Partnership recognized a casualty gain of approximately $2,000 during the year ended December 31, 2009, due to the receipt of insurance proceeds, net of the write off of undepreciated assets of approximately $27,000.

Note H —  Contingencies

As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the Managing General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company (“the Defendants”) failed to compensate maintenance workers for time that they were required to be “on-call” (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts have been dismissed. During the fourth quarter of 2008, the Partnership paid approximately $5,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment property. At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. The parties have selected six “on-call” claims that will proceed forward through the arbitration process and have selected arbitrators. After those arbitrations have been completed, the parties will revisit settling the on-call claims. The first two arbitrations took place in December 2009 and the Defendants received a defense verdict against the first two claimants, and plaintiffs dismissed the claims of the next two claimants. The remaining two arbitrations will take place in April 2010. The Managing General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership. Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.

The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment property that are not of a routine nature arising in the ordinary course of business.

Environmental

Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain hazardous substances present on a property, including lead-based paint. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of the hazardous substances. The presence of, or the failure to manage or remedy properly, hazardous substances may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, and potential fines or penalties imposed by such agencies in connection therewith, the presence of hazardous substances on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of hazardous substances through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of its property, the Partnership could potentially be liable for environmental liabilities or costs associated with its property.

D-24

NATIONAL PROPERTY INVESTORS III

NOTES TO FINANCIAL STATEMENTS — (Continued)

Mold

The Partnership is aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements. The Partnership has only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure. Affiliates of the Managing General Partner have implemented policies, procedures, third-party audits and training and the Managing General Partner believes that these measures will prevent or eliminate mold exposure and will minimize the effects that mold may have on residents. To date, the Partnership has not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions. Because the law regarding mold is unsettled and subject to change the Managing General Partner can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on the Partnership’s financial condition or results of operations.

D-25

ITEM 9.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A(T).   Controls and Procedures

(a)   Disclosure Controls and Procedures

The Partnership’s management, with the participation of the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.

Management’s Report on Internal Control Over Financial Reporting

The Partnership’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the principal executive and principal financial officers of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, and effected by the Partnership’s management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

•  pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets;

•  provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the Partnership’s management; and

•  provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Partnership’s management assessed the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2009. In making this assessment, the Partnership’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework.

Based on their assessment, the Partnership’s management concluded that, as of December 31, 2009, the Partnership’s internal control over financial reporting is effective.

This annual report does not include an attestation report of the Partnership’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to the attestation by the

D-26

Partnership’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Partnership to provide only management’s report in this annual report.

(b) Changes in Internal Control Over Financial Reporting.

There has been no change in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2009 that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

Item 9B.   Other Information

None.

PART III

Item 10.   Directors, Executive Officers and Corporate Governance

National Property Investors III (the “Partnership”) has no directors or officers. NPI Equity Investments (“NPI Equity” or the “Managing General Partner”) manages substantially all of the Partnership’s affairs and has general responsibility in all matters affecting its business. The names and ages of, as well as the positions and offices held by, the present directors and officers of the Managing General Partner are set forth below. There are no family relationships between or among any officers or directors.

Name	Age		Position
Steven D. Cordes		38	Director and Senior Vice President
John Bezzant		47	Director and Senior Vice President
Timothy J. Beaudin		51	President and Chief Operating Officer
Ernest M. Freedman		39	Executive Vice President and Chief Financial Officer
Lisa R. Cohn		41	Executive Vice President, General Counsel and Secretary
Paul Beldin		36	Senior Vice President and Chief Accounting Officer
Stephen B. Waters		48	Senior Director

Steven D. Cordes was appointed as a Director of the Managing General Partner effective March 2, 2009. Mr. Cordes has been a Senior Vice President of the Managing General Partner and AIMCO since May 2007. Mr. Cordes joined AIMCO in 2001 as a Vice President of Capital Markets with responsibility for AIMCO’s joint ventures and equity capital markets activity. Prior to joining AIMCO, Mr. Cordes was a manager in the financial consulting practice of PricewaterhouseCoopers. Effective March 2009, Mr. Cordes was appointed to serve as the equivalent of the chief executive officer of the Partnership. Mr. Cordes brings particular expertise to the Board in the areas of asset management as well as finance and accounting.

John Bezzant was appointed as a Director of the Managing General Partner effective December 16, 2009. Mr. Bezzant has been a Senior Vice President of the Managing General Partner and AIMCO since joining AIMCO in June 2006. Prior to joining AIMCO, from 2005 to June 2006, Mr. Bezzant was a First Vice President at Prologis, a Denver, Colorado-based real estate investment trust, and from 1986 to 2005, Mr. Bezzant served as Vice President, Asset Management at Catellus Development Corporation, a San Francisco, California-based real estate investment trust. Mr. Bezzant brings particular expertise to the Board in the areas of real estate finance, property operations, sales and development.

Timothy J. Beaudin was appointed President and Chief Operating Officer of AIMCO and the Managing General Partner in February 2009. He joined AIMCO and the Managing General Partner as Executive Vice President and Chief Development Officer in October 2005 and was appointed Executive Vice President and Chief Property Operating Officer of the Managing General Partner and AIMCO in October 2008. Mr. Beaudin oversees conventional and affordable property operations, transactions, asset management, and redevelopment and construction services for AIMCO and the Managing General Partner. Prior to joining AIMCO and beginning in 1995,

D-27

Mr. Beaudin was with Catellus Development Corporation. During his last five years at Catellus, Mr. Beaudin served as Executive Vice President, with management responsibility for development, construction and asset management.

Ernest M. Freedman was appointed Executive Vice President and Chief Financial Officer of the Managing General Partner and AIMCO in November 2009. Mr. Freedman joined AIMCO in 2007 as Senior Vice President of Financial Planning and Analysis and has served as Senior Vice President of Finance since February 2009, responsible for financial planning, tax, accounting and related areas. Prior to joining AIMCO, from 2004 to 2007, Mr. Freedman served as chief financial officer of HEI Hotels and Resorts.

Lisa R. Cohn was appointed Executive Vice President, General Counsel and Secretary of the Managing General Partner and AIMCO in December 2007. From January 2004 to December 2007, Ms. Cohn served as Senior Vice President and Assistant General Counsel of AIMCO. Ms. Cohn joined AIMCO in July 2002 as Vice President and Assistant General Counsel. Prior to joining AIMCO, Ms. Cohn was in private practice with the law firm of Hogan and Hartson LLP.

Paul Beldin joined AIMCO in May 2008 and has served as Senior Vice President and Chief Accounting Officer of AIMCO and the Managing General Partner since that time. Prior to joining AIMCO, Mr. Beldin served as controller and then as chief financial officer of America First Apartment Investors, Inc., a publicly traded multifamily real estate investment trust, from May 2005 to September 2007 when the company was acquired by Sentinel Real Estate Corporation. Prior to joining America First Apartment Investors, Inc., Mr. Beldin was a senior manager at Deloitte and Touche LLP, where he was employed from August 1996 to May 2005, including two years as an audit manager in SEC services at Deloitte’s national office.

Stephen B. Waters was appointed Senior Director of Partnership Accounting of AIMCO and the Managing General Partner in June 2009. Mr. Waters has responsibility for partnership accounting with AIMCO and serves as the principal financial officer of the Managing General Partner. Mr. Waters joined AIMCO as a Director of Real Estate Accounting in September 1999 and was appointed Vice President of the Managing General Partner and AIMCO in April 2004. Prior to joining AIMCO, Mr. Waters was a senior manager at Ernst & Young LLP.

The Registrant is not aware of the involvement in any legal proceedings with respect to the directors and executive officers listed in this Item 10.

One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act. Further, one or more of the above persons are also officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act.

The board of directors of the Managing General Partner does not have a separate audit committee. As such, the board of directors of the Managing General Partner fulfills the functions of an audit committee. The board of directors has determined that Steven D. Cordes meets the requirement of an “audit committee financial expert”.

The directors and officers of the Managing General Partner with authority over the Partnership are all employees of subsidiaries of AIMCO. AIMCO has adopted a code of ethics that applies to such directors and officers that is posted on AIMCO’s website (www.AIMCO.com). AIMCO’s website is not incorporated by reference to this filing.

Item 11.   Executive Compensation

Neither the directors nor officers received any remuneration from the Managing General Partner during the years ended December 31, 2009 and 2008.

D-28

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Except as noted below, as of December 31, 2009, no person or entity was known to own of record or beneficially more than five percent of the Units of the Partnership.

	Number of
	Units		Percentage
AIMCO IPLP, L.P.		21,566		44.89	%
(an affiliate of AIMCO)
AIMCO Properties, L.P.		15,853		33.00	%
(an affiliate of AIMCO)

AIMCO IPLP, L.P. is indirectly ultimately owned by AIMCO. Its business address is 55 Beattie Place, Greenville, South Carolina 29601.

AIMCO Properties, L.P. is indirectly ultimately controlled by AIMCO. Its business address is 4582 S. Ulster St., Suite 1100, Denver, Colorado 80237.

No director or officer of the Managing General Partner owns any Units.

Item 13.   Certain Relationships and Related Transactions, and Director Independence

The Partnership has no employees and depends on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership.

Affiliates of the Managing General Partner receive 5% of gross receipts from the Partnership’s property as compensation for providing property management services. The Partnership paid to such affiliates approximately $335,000 and $315,000 for the years ended December 31, 2009 and 2008, respectively, which is included in operating expenses. No such amounts were owed at December 31, 2009.

Affiliates of the Managing General Partner charged the Partnership reimbursement of accountable administrative expenses amounting to approximately $156,000 and $350,000 for the years ended December 31, 2009 and 2008, respectively, which is included in general and administrative expenses and investment property on the financial statements included in “Item 8. Financial Statements and Supplementary Data”. The portion of these reimbursements included in investment property for the years ended December 31, 2009 and 2008 are construction management services for certain capital improvement expenditures (not related to the redevelopment project) provided by an affiliate of the Managing General Partner of approximately $72,000 and $9,000, respectively. In connection with the redevelopment project (as discussed in “Item 8. Financial Statements and Supplementary Data — Note E”), an affiliate of the Managing General Partner is to receive a redevelopment supervision fee of 4% of the actual redevelopment costs incurred. The Partnership was charged approximately $20,000 and $230,000 in redevelopment supervision fees during the years ended December 31, 2009 and 2008, respectively, which are included in investment property. At December 31, 2009 and 2008, approximately $197,000 and $133,000 of accountable administrative expenses were owed and are included in due to affiliates on the balance sheets included in “Item 8. Financial Statements and Supplementary Data”.

For services relating to the administration of the Partnership and operation of the Partnership’s property, the Managing General Partner is entitled to receive payment for non-accountable expenses up to a maximum of $100,000 per year based upon the number of Partnership units sold, subject to certain limitations. There were no such fees for the years ended December 31, 2009 and 2008 as no operating distributions were made.

Upon the sale of the Partnership’s property, NPI Equity will be entitled to an Incentive Compensation Fee equal to a declining percentage of the difference between the total amount distributed to limited partners and the appraised value of their investment at February 1, 1992. The percentage amount to be realized by NPI Equity, if any, will be dependent upon the year in which the property is sold. Payment of the Incentive Compensation Fee is subordinated to the receipt by the limited partners, of: (a) distributions from capital transaction proceeds of an amount equal to their appraised investment in the Partnership at February 1, 1992, and (b) distributions from all

D-29

sources (capital transactions as well as cash flow) of an amount equal to six percent (6%) per annum cumulative, non-compounded, on their appraised investment in the Partnership at February 1, 1992.

On March 18, 2008, the Managing General Partner terminated the revolving credit facility (the “Partnership Revolver”) that was established on behalf of the Partnership and certain affiliated partnerships to fund deferred maintenance and working capital needs of the Partnership and certain other affiliated partnerships in the National Property Investors Partnership Series. The Managing General Partner does not have a commitment, intent or implication to fund cash flow deficits or furnish other direct or indirect financial assistance to the Partnership. The Partnership may receive advances of funds from AIMCO Properties, L.P., an affiliate of the Managing General Partner and the holder of a majority of the beneficial interest of the Partnership, although AIMCO Properties, L.P., is not obligated to fund such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission. During the years ended December 31, 2009 and 2008, the Partnership received advances of approximately $2,162,000 and $5,426,000, respectively, from AIMCO Properties, L.P., to fund a rental achievement escrow, redevelopment capital improvements, real estate taxes and operations at Lakeside Apartments. The advances bear interest at the prime rate plus 2% (5.25% at December 31, 2009) per annum. Interest expense during the years ended December 31, 2009 and 2008 was approximately $758,000 and $733,000, respectively. During the year ended December 31, 2009, the Partnership made payments of principal and accrued interest of approximately $2,035,000. There were no payments made during the year ended December 31, 2008. At December 31, 2009 and 2008, the amount of the outstanding advances and accrued interest due to AIMCO Properties, L.P. was approximately $14,355,000 and $13,470,000, respectively, and is included in due to affiliates on the balance sheets included in “Item 8. Financial Statements and Supplementary Data”.

The Partnership insures its property up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty, general liability and vehicle liability. The Partnership insures its property above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the years ended December 31, 2009 and 2008, the Partnership was charged by AIMCO and its affiliates approximately $99,000 and $107,000, respectively, for insurance coverage and fees associated with policy claims administration.

In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 37,419 Units in the Partnership representing 77.89% of the outstanding Units at December 31, 2009. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 77.89% of the outstanding Units, AIMCO and its affiliates are in a position to influence all voting decisions with respect to the Partnership. However, with respect to the 21,380 Units acquired on January 19, 1996, AIMCO IPLP, L.P., an affiliate of the Managing General Partner and of AIMCO, agreed to vote such Units: (i) against any increase in compensation payable to the Managing General Partner or to its affiliates; and (ii) on all other matters submitted by it or its affiliates, in proportion to the vote cast by third party unitholders. Except for the foregoing, no other limitations are imposed on AIMCO IPLP, L.P.’s, AIMCO’s or any other affiliates’ right to vote each Unit held. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder.

Neither of the Managing General Partner’s directors is independent under the independence standards established for New York Stock Exchange listed companies as both directors are employed by the parent of the Managing General Partner.

D-30

Item 14.   Principal Accounting Fees and Services

The Managing General Partner has reappointed Ernst & Young LLP as independent auditors to audit the financial statements of the Partnership for 2010. The aggregate fees billed for services rendered by Ernst & Young LLP for 2009 and 2008 are described below.

Audit Fees.  Fees for audit services totaled approximately $38,000 and $43,000 for 2009 and 2008, respectively. Fees for audit services also include fees for the reviews of the Partnership’s Quarterly Reports on Form 10-Q.

Tax Fees.  Fees for tax services totaled approximately $6,000 for both 2009 and 2008.

PART IV

Item 15.   Exhibits, Financial Statement Schedules

(a) The following financial statements of the Registrant are included in Item 8:

Balance Sheets at December 31, 2009 and 2008.	D-12
Statements of Operations for the years ended December 31, 2009 and 2008.	D-13
Statements of Changes in Partners’ Deficit for the years ended December 31, 2009 and 2008.	D-14
Statements of Cash Flows for the years ended December 31, 2009 and 2008.	D-15
Notes to Financial Statements.	D-16

Schedules are omitted for the reason that they are inapplicable or equivalent information has been included elsewhere herein.

(b) Exhibits:

See Exhibit index

The agreements included as exhibits to this Form 10-K contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

•  should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

•  have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

•  may apply standards of materiality in a way that is different from what may be viewed as material to an investor; and

•  were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. The Partnership acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 10-K not misleading. Additional information about the Partnership may be found elsewhere in this Form 10-K and the Partnership’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

D-31

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NATIONAL PROPERTY INVESTORS III

By:  NPI EQUITY INVESTMENTS, INC.

Managing General Partner

By:  /s/  Steven D. Cordes

Steven D. Cordes

Senior Vice President

By:  /s/  Stephen B. Waters

Stephen B. Waters

Senior Director of Partnership Accounting

Date: March 29, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/  John Bezzant John Bezzant	Director and Senior Vice President	Date: March 29, 2010
/s/  Steven D. Cordes Steven D. Cordes	Director and Senior Vice President	Date: March 29, 2010
/s/  Stephen B. Waters Stephen B. Waters	Senior Director of Partnership Accounting	Date: March 29, 2010

D-32

NATIONAL PROPERTY INVESTORS III

EXHIBIT INDEX

Exhibit
	2	.1	NPI, Inc. Stock Purchase Agreement dated as of August 17, 1995, incorporated by reference to Exhibit 2 to the Partnership’s Current Report on Form 8-K dated August 17, 1995.
	3	.4(a)	Agreement of Limited Partnership incorporated by reference to Exhibit A to the Prospectus of the Partnership dated October 24, 1979 contained in the Partnership’s Registration Statement on Form S-11 (Reg. No. 2-63733).
	3	.4(b)	Amendments to Agreement of Limited Partnership dated as of November 25, 1980 incorporated by reference to Exhibits 3 and 4 to the Partnership’s Annual Report on Form 10-K for the year ended December 31, 1981.
	3	.4(c)	Amendments to the Agreement of Limited Partnership incorporated by reference to the Definitive Proxy Statement of the Partnership dated April 3, 1981.
	3	.4(d)	Amendments to the Agreement of Limited Partnership incorporated by reference to the Statement Furnished in Connection With The Solicitation of Consents of the Partnership dated August 28, 1992.
	3	.4(e)	Amendment to the Limited Partnership Agreement dated December 22, 2005 incorporated by reference to the Registrant’s Form 10-KSB dated December 31, 2005.
	10	.11	Form Of Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement between Federal Home Loan Mortgage Corporation and National Property Investors III, a California limited partnership, dated March 30, 2007. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 30, 2007.
	10	.12	Form of Amended and Restated Multifamily Note (Recast Transaction) between Federal Home Loan Mortgage Corporation and National Property Investors III, a California limited partnership, dated March 30, 2007. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 30, 2007.
	10	.13	Form of Amended and Restated Guaranty (Recast Transaction) between AIMCO Properties, L.P., a Delaware limited partnership and Federal Home Loan Mortgage Corporation, dated March 30, 2007. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 30, 2007.
	10	.14	Form of Multifamily Mortgage, Assignment of Rents and Security Agreement between Capmark Bank and National Property Investors III, a California limited partnership, dated March 30, 2007. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 30, 2007.
	10	.15	Form of Multifamily Note between Capmark Bank and National Property Investors III, a California limited partnership, dated March 30, 2007. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 30, 2007.
	10	.16	Form of Guaranty between AIMCO Properties, L.P., a Delaware limited partnership and Capmark Bank, dated March 30, 2007. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 30, 2007.
	10	.17	Form of Rehabilitation Agreement between National Property Investors III, a California limited partnership and Capmark Bank, dated March 30, 2007. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 30, 2007.
	31	.1	Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	Certification of the equivalent of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

D-33

Exhibit 31.1

CERTIFICATION

I, Steven D. Cordes, certify that:

1. I have reviewed this annual report on Form 10-K of National Property Investors III;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Steven D. Cordes

Steven D. Cordes

Senior Vice President of NPI Equity Investments,

Inc., equivalent of the chief executive officer of

the Partnership

Date: March 29, 2010

D-34

Exhibit 31.2

CERTIFICATION

I, Stephen B. Waters, certify that:

1. I have reviewed this annual report on Form 10-K of National Property Investors III;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Stephen B. Waters

Stephen B. Waters

Senior Director of Partnership Accounting of NPI

Equity Investments, Inc., equivalent of the chief

financial officer of the Partnership

Date: March 29, 2010

D-35

Exhibit 32.1

Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of National Property Investors III (the “Partnership”), for the fiscal year ended December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Steven D. Cordes, as the equivalent of the Chief Executive Officer of the Partnership, and Stephen B. Waters, as the equivalent of the Chief Financial Officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

/s/  Steven D. Cordes

Name: Steven D. Cordes

Date: March 29, 2010

/s/  Stephen B. Waters

Name: Stephen B. Waters

Date: March 29, 2010

This certification is furnished with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

D-36

ANNEX E

­ ­

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2010
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission file number 0-9567

NATIONAL PROPERTY INVESTORS III

(Exact name of registrant as specified in its charter)

California	13-2974428
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

55 Beattie Place, PO Box 1089

Greenville, South Carolina 29602

(Address of principal executive offices)

(864) 239-1000

(Issuer’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company þ
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o     No þ

E-1

PART I — FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

NATIONAL PROPERTY INVESTORS III

BALANCE SHEETS

	June 30,			December 31,
	2010			2009
	(Unaudited)			(Note)
	(In thousands, except unit data)
ASSETS
Cash and cash equivalents	$	139		$	194
Receivables and deposits		272			345
Other assets		668			547
Investment property:
Land		2,093			2,093
Buildings and related personal property		47,410			47,024
		49,503			49,117
Less accumulated depreciation		(31,284	)		(29,276	)
		18,219			19,841
	$	19,298		$	20,927
LIABILITIES AND PARTNERS’ DEFICIT
Liabilities
Accounts payable	$	128		$	79
Tenant security deposit liabilities		132			122
Accrued property taxes		744			877
Other liabilities		370			400
Due to affiliates (Note B)		14,818			14,552
Mortgage notes payable		29,233			29,375
		45,425			45,405
Partners’ Deficit
General partner		(260	)		(243	)
Limited partners (48,039 units issued and outstanding)		(25,867	)		(24,235	)
		(26,127	)		(24,478	)
	$	19,298		$	20,927

Note:  The balance sheet at December 31, 2009 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.

See Accompanying Notes to Financial Statements

E-2

NATIONAL PROPERTY INVESTORS III

STATEMENTS OF OPERATIONS

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
	(Unaudited)
	(In thousands, except per unit data)
Revenues:
Rental income	$	1,426		$	1,453		$	2,924		$	2,824
Other income		223			206			484			488
Total revenues		1,649			1,659			3,408			3,312
Expenses:
Operating		672			663			1,388			1,378
General and administrative		32			28			61			68
Depreciation		1,006			996			2,011			1,983
Interest		695			717			1,388			1,402
Property taxes		2			167			217			383
Total expenses		2,407			2,571			5,065			5,214
Casualty gains (Note D)		—			—			8			23
Net loss	$	(758	)	$	(912	)	$	(1,649	)	$	(1,879	)
Net loss allocated to general partner (1%)	$	(8	)	$	(9	)	$	(17	)	$	(19	)
Net loss allocated to limited partners (99%)		(750	)		(903	)		(1,632	)		(1,860	)
	$	(758	)	$	(912	)	$	(1,649	)	$	(1,879	)
Net loss per limited partnership unit	$	(15.61	)	$	(18.79	)	$	(33.97	)	$	(38.71	)

See Accompanying Notes to Financial Statements

E-3

NATIONAL PROPERTY INVESTORS III

STATEMENT OF CHANGES IN PARTNERS’ DEFICIT

	Limited
	Partnership		General			Limited
	Units		Partner			Partners			Total
	(Unaudited)
	(In thousands, except unit data)
Original capital contributions		48,049	$	1		$	24,024		$	24,025
Partners’ deficit at December 31, 2009		48,039	$	(243	)	$	(24,235	)	$	(24,478	)
Net loss for the six months ended June 30, 2010		—		(17	)		(1,632	)		(1,649	)
Partners’ deficit at June 30, 2010		48,039	$	(260	)	$	(25,867	)	$	(26,127	)

See Accompanying Notes to Financial Statements

E-4

NATIONAL PROPERTY INVESTORS III

STATEMENTS OF CASH FLOWS

	Six Months Ended
	June 30,
	2010			2009
	(Unaudited)
	(In thousands)
Cash flows from operating activities:
Net loss	$	(1,649	)	$	(1,879	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		2,011			1,983
Amortization of loan costs		20			19
Casualty gains		(8	)		(23	)
Bad debt expense		51			75
Change in accounts:
Receivables and deposits		22			(11	)
Other assets		(141	)		(73	)
Accounts payable		31			(101	)
Tenant security deposit liabilities		10			21
Accrued property taxes		(133	)		22
Other liabilities		(30	)		2
Due to affiliates		335			390
Net cash provided by operating activities		519			425
Cash flows from investing activities:
Property improvements and replacements		(371	)		(1,201	)
Insurance proceeds received		8			279
Net cash used in investing activities		(363	)		(922	)
Cash flows from financing activities:
Advances received from affiliate		358			717
Payments on advances from affiliate		(427	)		—
Payments on mortgage notes payable		(142	)		(115	)
Net cash (used in) provided by financing activities		(211	)		602
Net (decrease) increase in cash and cash equivalents		(55	)		105
Cash and cash equivalents at beginning of period		194			85
Cash and cash equivalents at end of period	$	139		$	190
Supplemental disclosure of cash flow information:
Cash paid for interest, net of capitalized interest	$	1,065		$	1,015
Supplemental disclosure of non-cash activity:
Property improvements and replacements included in accounts payable	$	18		$	—

At December 31, 2008, approximately $529,000 of property improvements and replacements were included in accounts payable which are included in property improvements and replacements for the six months ended June 30, 2009.

See Accompanying Notes to Financial Statements

E-5

NATIONAL PROPERTY INVESTORS III

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

Note A — Basis of Presentation

The accompanying unaudited financial statements of National Property Investors III (the “Partnership” or “Registrant”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of NPI Equity Investments, Inc. (“NPI Equity” or the “Managing General Partner”) all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2010 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2010. For further information, refer to the financial statements and footnotes thereto included in the Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009. The Managing General Partner is an affiliate of Apartment Investment and Management Company (“AIMCO”), a publicly traded real estate investment trust.

The Partnership’s management evaluated subsequent events through the time this Quarterly Report on Form 10-Q was filed.

Note B — Transactions with Affiliated Parties

The Partnership has no employees and depends on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for payments to affiliates for services and reimbursement of certain expenses incurred by affiliates on behalf of the Partnership.

Affiliates of the Managing General Partner receive 5% of gross receipts from the Partnership’s property as compensation for providing property management services. The Partnership paid to such affiliates approximately $172,000 and $164,000 for the six months ended June 30, 2010 and 2009, respectively, which are included in operating expenses.

Affiliates of the Managing General Partner charged the Partnership for reimbursement of accountable administrative expenses amounting to approximately $56,000 and $102,000 for the six months ended June 30, 2010 and 2009, respectively, which is included in general and administrative expenses and investment property. The portion of these reimbursements included in investment property for the six months ended June 30, 2010 and 2009 are construction management services for certain capital improvement expenditures (not related to the redevelopment project) provided by an affiliate of the Managing General Partner of approximately $23,000 and $48,000, respectively. In connection with the redevelopment project completed in 2009 (as discussed in “Note C”), an affiliate of the Managing General Partner received a redevelopment supervision fee of 4% of the actual redevelopment costs incurred. The Partnership was charged approximately $20,000 in redevelopment supervision fees during the six months ended June 30, 2009, which is included in investment property. There were no such redevelopment supervision fees for the six months ended June 30, 2010. At June 30, 2010 and December 31, 2009, approximately $233,000 and $197,000, respectively, of accountable administrative expenses were owed and are included in due to affiliates.

For services relating to the administration of the Partnership and operation of the Partnership’s property, the Managing General Partner is entitled to receive payment for non-accountable expenses up to a maximum of $100,000 per year based upon the number of Partnership units sold, subject to certain limitations. There were no such fees for the six months ended June 30, 2010 and 2009, as no operating distributions were made.

Upon the sale of the Partnership’s property, NPI Equity will be entitled to an Incentive Compensation Fee equal to a declining percentage of the difference between the total amount distributed to limited partners and the appraised value of their investment at February 1, 1992. The percentage amount to be realized by NPI Equity, if any, will be dependent upon the year in which the property is sold. Payment of the Incentive Compensation Fee is subordinated to the receipt by the limited partners, of: (a) distributions from capital transaction proceeds of an

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NOTES TO FINANCIAL STATEMENTS — (Continued)

amount equal to their appraised investment in the Partnership at February 1, 1992, and (b) distributions from all sources (capital transactions as well as cash flow) of an amount equal to six percent (6%) per annum cumulative, non-compounded, on their appraised investment in the Partnership at February 1, 1992.

The Partnership may receive advances of funds from AIMCO Properties, L.P., an affiliate of the Managing General Partner and the holder of a majority of the beneficial interest of the Partnership. During the six months ended June 30, 2010 and 2009, the Partnership received advances of approximately $358,000 and $717,000, respectively, from AIMCO Properties, L.P. to fund real estate taxes and redevelopment capital improvements, respectively, at Lakeside Apartments. AIMCO Properties, L.P. charges interest on advances under the terms permitted by the Partnership Agreement. The advances bear interest at the prime rate plus 2% (5.25% at June 30, 2010) per annum. Interest expense was approximately $372,000 and $358,000 for the six months ended June 30, 2010 and 2009, respectively. During the six months ended June 30, 2010, the Partnership repaid $500,000 of advances and accrued interest. No such payments were made during the six months ended June 30, 2009. At June 30, 2010 and December 31, 2009, the total advances and accrued interest owed to AIMCO Properties, L.P. were approximately $14,585,000 and $14,355,000, respectively, and are included in due to affiliates. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission.

The Partnership insures its property up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers’ compensation, property casualty, general liability and vehicle liability. The Partnership insures its property above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the Managing General Partner. During the six months ended June 30, 2010, the Partnership was charged by AIMCO and its affiliates approximately $117,000 for insurance coverage and fees associated with policy claims administration. Additional charges will be incurred by the Partnership during 2010 as other insurance policies renew later in the year. The Partnership was charged by AIMCO and its affiliates approximately $99,000 for insurance coverage and fees associated with policy claims administration during the year ended December 31, 2009.

Note C — Redevelopment

During 2005 the Partnership commenced with a redevelopment project at Lakeside Apartments. The project was completed during the second quarter of 2009 at a total cost of approximately $22,637,000, including approximately $352,000 expended during 2009. The Partnership funded the redevelopment from operations and advances from AIMCO Properties, L.P. During the construction period, certain expenses were capitalized and are being depreciated over the remaining life of the related assets. For the six months ended June 30, 2009, these amounts included approximately $5,000 of construction period interest, approximately $3,000 of construction period taxes, and approximately $5,000 of construction period operating costs. No such costs were capitalized during the six months ended June 30, 2010.

Note D — Casualty Gains

During September 2009, the Partnership incurred water damage to one apartment unit as a result of a burst pipe. The damages were approximately $24,000, including clean up costs of approximately $17,000. The clean up costs were included in operating expenses for the year ended December 31, 2009. During the six months ended June 30, 2010, the Partnership received approximately $7,000 to cover clean up costs. After writing off the fully depreciated cost of the damaged assets, the Partnership recognized a casualty gain of approximately $8,000 during the six months ended June 30, 2010 due to the receipt of insurance proceeds of approximately $8,000 during the six months ended June 30, 2010.

During September 2008, the Partnership incurred fire and water damage to one of the apartment buildings at Lakeside Apartments. The damages were approximately $469,000, including clean up costs of approximately

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NATIONAL PROPERTY INVESTORS III

NOTES TO FINANCIAL STATEMENTS — (Continued)

$214,000. The clean up costs were included in operating expense for the year ended December 31, 2008. During the six months ended June 30, 2009, the Partnership received approximately $250,000 of insurance proceeds related to this event and received additional proceeds during the remainder of 2009. During the six months ended June 30, 2009, the Partnership recognized a casualty gain of approximately $21,000 due to the receipt of insurance proceeds, net of the write-off of undepreciated damaged assets of approximately $229,000. During the six months ended June 30, 2010, the Partnership received approximately $15,000 of insurance proceeds for lost rents which are included in rental income and approximately $4,000 in clean up costs, which are included in operating expense. The Partnership expects to receive approximately $5,000 of additional insurance proceeds related to this event.

During September 2008, the Partnership incurred damages to several apartment units as a result of a gas leak. The damages were approximately $78,000, including clean up costs of approximately $49,000. During the six months ended June 30, 2009, the Partnership received approximately $68,000 of insurance proceeds related to this event, of which approximately $39,000 was for clean up costs. The clean up costs and associated insurance proceeds were included in operating expense for the year ended December 31, 2008. The Partnership recognized a casualty gain of approximately $2,000 during the six months ended June 30, 2009, due to the receipt of insurance proceeds, net of the write off of undepreciated damaged assets of approximately $27,000.

Note E — Fair Value of Financial Instruments

FASB ASC Topic 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amount of its financial instruments (except for mortgage notes payable) approximates their fair value due to the short-term maturity of these instruments. The Partnership estimates the fair value of its mortgage notes payable by discounting future cash flows using a discount rate commensurate with that currently believed to be available to the Partnership for similar term, mortgage notes payable. At June 30, 2010, the fair value of the Partnership’s mortgage notes payable at the Partnership’s incremental borrowing rate was approximately $32,256,000.

Note F — Contingencies

As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the Managing General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company (“the Defendants”) failed to compensate maintenance workers for time that they were required to be “on-call” (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts have been dismissed. During the fourth quarter of 2008, the Partnership paid approximately $5,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment property. At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. Pursuant to the global settlement agreement, the parties selected six test “on-call” cases to be arbitrated. The parties arbitrated four “on-call” claims and obtained defense verdicts on all four. Two additional “on-call” claims were dismissed with prejudice. The process now calls for the parties to attempt to mediate the remaining “on-call” claims and plaintiffs’ attorneys’ fees. Such mediation has not yet been scheduled. The Managing General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership. Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.

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NOTES TO FINANCIAL STATEMENTS — (Continued)

The Partnership is unaware of any other pending or outstanding litigation matters involving it or its investment property that are not of a routine nature arising in the ordinary course of business.

Environmental

Various Federal, state and local laws subject property owners or operators to liability for management, and the costs of removal or remediation, of certain hazardous substances present on a property, including lead-based paint. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of the hazardous substances. The presence of, or the failure to manage or remedy properly, hazardous substances may adversely affect occupancy at affected apartment communities and the ability to sell or finance affected properties. In addition to the costs associated with investigation and remediation actions brought by government agencies, and potential fines or penalties imposed by such agencies in connection therewith, the presence of hazardous substances on a property could result in claims by private plaintiffs for personal injury, disease, disability or other infirmities. Various laws also impose liability for the cost of removal, remediation or disposal of hazardous substances through a licensed disposal or treatment facility. Anyone who arranges for the disposal or treatment of hazardous substances is potentially liable under such laws. These laws often impose liability whether or not the person arranging for the disposal ever owned or operated the disposal facility. In connection with the ownership, operation and management of its property, the Partnership could potentially be liable for environmental liabilities or costs associated with its property.

Mold

The Partnership is aware of lawsuits against owners and managers of multifamily properties asserting claims of personal injury and property damage caused by the presence of mold, some of which have resulted in substantial monetary judgments or settlements. The Partnership has only limited insurance coverage for property damage loss claims arising from the presence of mold and for personal injury claims related to mold exposure. Affiliates of the Managing General Partner have implemented policies, procedures, third-party audits and training and the Managing General Partner believes that these measures will prevent or eliminate mold exposure and will minimize the effects that mold may have on residents. To date, the Partnership has not incurred any material costs or liabilities relating to claims of mold exposure or to abate mold conditions. Because the law regarding mold is unsettled and subject to change the Managing General Partner can make no assurance that liabilities resulting from the presence of or exposure to mold will not have a material adverse effect on the Partnership’s financial condition or results of operations.

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ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Quarterly Report contains or may contain information that is forward-looking within the meaning of the federal securities laws, including, without limitation, statements regarding the effect of redevelopments, the Partnership’s future financial performance, including the Partnership’s ability to maintain current or meet projected occupancy and rent levels, and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and, in addition, will be affected by a variety of risks and factors some of which are beyond the Partnership’s control including, without limitation: financing risks, including the availability and cost of financing and the risk that the Partnership’s cash flows from operations may be insufficient to meet required payments of principal and interest; natural disasters and severe weather such as hurricanes; national and local economic conditions; the general level of interest rates; energy costs; the terms of governmental regulations that affect the Partnership’s property and interpretations of those regulations; the competitive environment in which the Partnership operates; real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for residents in such markets; insurance risk, including the cost of insurance; development risks; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the Partnership. Readers should carefully review the Partnership’s financial statements and the notes thereto, as well as the other documents the Partnership files from time to time with the Securities and Exchange Commission.

The Partnership’s investment property consists of one apartment complex, Lakeside Apartments, located in Lisle, Illinois. The average occupancy of the property for the six months ended June 30, 2010 and 2009 was 94% and 86%, respectively. The Managing General Partner attributes the increase in occupancy at Lakeside Apartments to the completion of the redevelopment of the property, resulting in more units available for rent.

The Partnership’s financial results depend upon a number of factors including the ability to attract and maintain tenants at the investment property, interest rates on mortgage loans, costs incurred to operate the investment property, general economic conditions and weather. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of its investment property to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, the Managing General Partner may use rental concessions and rental rate reductions to offset softening market conditions; accordingly, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Further, a number of factors that are outside the control of the Partnership, such as the local economic climate and weather, can adversely or positively affect the Partnership’s financial results.

Results of Operations

The Partnership’s net loss for the three and six months ended June 30, 2010 was approximately $758,000 and $1,649,000, respectively, compared to net loss of approximately $912,000 and $1,879,000 for the corresponding periods in 2009. The decrease in net loss for the three months ended June 30, 2010 is due to a decrease in total expenses, partially offset by a decrease in total revenues. The decrease in net loss for the six months ended June 30, 2010 is due to a decrease in total expenses and an increase in total revenues, partially offset by a decrease in casualty gain.

Total revenues decreased for the three months ended June 30, 2010 due to a decrease in rental income, partially offset by an increase in other income. Total revenues increased for the six months ended June 30, 2010 due to an increase in rental income. Other income remained relatively constant for the six months ended June 30, 2010. Rental income decreased for the three months ended June 30, 2010 due to an increase in bad debt expense and a decrease in the average rental rate, partially offset by an increase in occupancy at Lakeside Apartments. Rental income increased for the six months ended June 30, 2010 due to an increase in occupancy and a decrease in bad debt

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expense, partially offset by a decrease in the average rental rate at Lakeside Apartments. Other income increased for the three months ended June 30, 2010 due to an increase in resident utility reimbursements and cleaning and damage fees, partially offset by a decrease in lease cancellation fees.

Total expenses decreased for the three months ended June 30, 2010 due to decreases in property tax and interest expenses, partially offset by increases in operating and depreciation expenses. General and administrative expenses remained relatively constant for the three and six months ended June 30, 2010. Total expenses decreased for the six months ended June 30, 2010 due to decreases in property tax, interest and general and administrative expenses, partially offset by increases in operating and depreciation expenses. Property tax expense decreased for both periods due to adjustments recorded during both the second quarter of 2010 and 2009 related to property taxes due for the prior year. The property tax expense for Lakeside Apartments is recorded based upon an estimate of the anticipated annual amount as Lakeside Apartment’s property taxes are billed a year in arrears. For the 2009 tax year, the Partnership had recorded property tax expense based on an expected increase in the property’s assessed value over the 2008 value. During the second quarter of 2010, the Partnership recorded an adjustment to reduce property tax expense by approximately $162,000 for the 2009 taxes as a result of the successful appeal of the 2009 assessed value of Lakeside Apartments. During the second quarter of 2009, the Partnership recorded an adjustment to reduce property tax expense of approximately $53,000 for the 2008 taxes as a result of the successful appeal of the 2008 assessed value of Lakeside Apartments. Operating expenses increased for both periods due to increases in hazard insurance premiums and contract services due to tree pruning, partially offset by a decrease in utilities due to less gas usage at Lakeside Apartments. Operating expenses also increased for the six months ended June 30, 2010 due to an increase in roofing repairs at Lakeside Apartments. Depreciation expense increased for both periods due to property improvements and replacements placed into service at Lakeside Apartments during the past twelve months, which are now being depreciated. Interest expense decreased for both periods primarily due to the payment of interest incurred in connection with the escheatment of unclaimed distributions during 2009 and due to scheduled principal payments on the mortgages encumbering Lakeside Apartments, partially offset by an increase in the interest on advances from AIMCO Properties, L.P. due to a higher average advance balance.

Included in general and administrative expenses for the three and six months ended June 30, 2010 and 2009 are management reimbursements charged by the Managing General Partner as allowed under the Partnership Agreement, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement.

During September 2009, the Partnership incurred water damage to one apartment unit as a result of a burst pipe. The damages were approximately $24,000, including clean up costs of approximately $17,000. The clean up costs were included in operating expenses for the year ended December 31, 2009. During the six months ended June 30, 2010, the Partnership received approximately $7,000 to cover clean up costs. After writing off the fully depreciated cost of the damaged assets, the Partnership recognized a casualty gain of approximately $8,000 during the six months ended June 30, 2010 due to the receipt of insurance proceeds of approximately $8,000 during the six months ended June 30, 2010.

During September 2008, the Partnership incurred fire and water damage to one of the apartment buildings at Lakeside Apartments. The damages were approximately $469,000, including clean up costs of approximately $214,000. The clean up costs were included in operating expense for the year ended December 31, 2008. During the six months ended June 30, 2009, the Partnership received approximately $250,000 of insurance proceeds related to this event and received additional proceeds during the remainder of 2009. During the six months ended June 30, 2009, the Partnership recognized a casualty gain of approximately $21,000 due to the receipt of insurance proceeds, net of the write-off of undepreciated damaged assets of approximately $229,000. During the six months ended June 30, 2010, the Partnership received approximately $15,000 of insurance proceeds for lost rents which are included in rental income and approximately $4,000 in clean up costs, which are included in operating expense. The Partnership expects to receive approximately $5,000 of additional insurance proceeds related to this event.

During September 2008, the Partnership incurred damages to several apartment units as a result of a gas leak. The damages were approximately $78,000, including clean up costs of approximately $49,000. During the six months ended June 30, 2009, the Partnership received approximately $68,000 of insurance proceeds related to this event, of which approximately $39,000 was for clean up costs. The clean up costs and associated insurance proceeds

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were included in operating expense for the year ended December 31, 2008. The Partnership recognized a casualty gain of approximately $2,000 during the six months ended June 30, 2009, due to the receipt of insurance proceeds, net of the write off of undepreciated damaged assets of approximately $27,000.

Liquidity And Capital Resources

At June 30, 2010, the Partnership had cash and cash equivalents of approximately $139,000 compared to approximately $194,000 at December 31, 2009. Cash and cash equivalents decreased approximately $55,000 due to approximately $363,000 and $211,000 of cash used in investing and financing activities, respectively, partially offset by approximately $519,000 of cash provided by operating activities. Cash used in investing activities consisted of property improvements and replacements, partially offset by insurance proceeds received. Cash used in financing activities consisted of payments on advances from AIMCO Properties, L.P. and principal payments on the mortgages encumbering the Partnership’s investment property, partially offset by advances from AIMCO Properties, L.P.

The Partnership may receive advances of funds from AIMCO Properties, L.P., an affiliate of the Managing General Partner and the holder of a majority of the beneficial interest of the Partnership. During the six months ended June 30, 2010 and 2009, the Partnership received advances of approximately $358,000 and $717,000, respectively, from AIMCO Properties, L.P. to fund real estate taxes and redevelopment capital improvements, respectively, at Lakeside Apartments. AIMCO Properties, L.P. charges interest on advances under the terms permitted by the Partnership Agreement. The advances bear interest at the prime rate plus 2% (5.25% at June 30, 2010) per annum. Interest expense was approximately $372,000 and $358,000 for the six months ended June 30, 2010 and 2009, respectively. During the six months ended June 30, 2010, the Partnership repaid $500,000 of advances and accrued interest. No such payments were made during the six months ended June 30, 2009. At June 30, 2010 and December 31, 2009, the total advances and accrued interest owed to AIMCO Properties, L.P. were approximately $14,585,000 and $14,355,000, respectively, and are included in due to affiliates. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances. For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission.

The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the property to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. The Managing General Partner monitors developments in the area of legal and regulatory compliance. Capital improvements planned for the Partnership’s property are detailed below.

During the six months ended June 30, 2010, the Partnership completed approximately $389,000 of capital improvements at Lakeside Apartments, consisting primarily of building improvements, bath upgrades, water heater, air conditioning unit and floor covering replacements. These improvements were funded from operating cash flow and insurance proceeds. The Partnership regularly evaluates the capital improvement needs of the property. While the Partnership has no material commitments for property improvements and replacements, certain routine capital expenditures are anticipated during 2010. Such capital expenditures will depend on the physical condition of the property as well as cash flow generated by the property.

Capital expenditures will be incurred only if cash is available from operations, Partnership reserves or advances from AIMCO Properties, L.P., although AIMCO Properties, L.P. is not obligated to fund such advances. To the extent that such capital improvements are completed, the Partnership’s distributable cash flow, if any, may be adversely affected at least in the short term.

The Partnership’s assets are thought to be generally sufficient for any near-term needs (exclusive of capital improvements and repayment of amounts owed to affiliates) of the Partnership. The mortgage indebtedness encumbering Lakeside Apartments of approximately $29,233,000 matures in January 2022, at which time balloon payments of approximately $22,976,000 will be due. The Managing General Partner will attempt to refinance such indebtedness and/or sell the property prior to such maturity dates. If the property cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing such property through foreclosure.

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There were no distributions during the six months ended June 30, 2010 and 2009. Future cash distributions will depend on the levels of net cash generated from operations, the timing of debt maturities, property sale and/or refinancings. The Partnership’s cash available for distribution is reviewed on a monthly basis. In light of the amounts accrued and payable to affiliates of the Managing General Partner, it is unlikely that the Partnership will generate sufficient funds from operations after capital expenditures to permit any distributions to its partners in 2010 or subsequent periods.

Other

In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 37,419 limited partnership units (the “Units”) in the Partnership representing 77.89% of the outstanding Units at June 30, 2010. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will acquire additional Units in exchange for cash or a combination of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO, either through private purchases or tender offers. Pursuant to the Partnership Agreement, Unit holders holding a majority of the Units are entitled to take action with respect to a variety of matters that include, but are not limited to, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 77.89% of the outstanding Units, AIMCO and its affiliates are in a position to influence all voting decisions with respect to the Partnership. However, with respect to the 21,380 Units acquired on January 19, 1996, AIMCO IPLP, L.P., an affiliate of the Managing General Partner and of AIMCO, agreed to vote such Units: (i) against any increase in compensation payable to the Managing General Partner or to its affiliates; and (ii) on all other matters submitted by it or its affiliates, in proportion to the vote cast by third party unitholders. Except for the foregoing, no other limitations are imposed on AIMCO IPLP, L.P.’s, AIMCO’s or any other affiliates’ right to vote each Unit held. Although the Managing General Partner owes fiduciary duties to the limited partners of the Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as its sole stockholder. As a result, the duties of the Managing General Partner, as managing general partner, to the Partnership and its limited partners may come into conflict with the duties of the Managing General Partner to AIMCO as its sole stockholder.

Critical Accounting Policies and Estimates

The financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Partnership to make estimates and assumptions. The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity.

Impairment of Long-Lived Asset

Investment property is recorded at cost, less accumulated depreciation, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of the property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnership’s estimate of the undiscounted future cash flows, excluding interest charges, of the property. If the carrying amount exceeds the estimated aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.

Real property investment is subject to varying degrees of risk. Several factors may adversely affect the economic performance and value of the Partnership’s investment property. These factors include, but are not limited to, general economic climate; competition from other apartment communities and other housing options; local conditions, such as loss of jobs or an increase in the supply of apartments that might adversely affect apartment occupancy or rental rates; changes in governmental regulations and the related cost of compliance; increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents; and changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing; and changes in interest rates and the availability of financing. Any adverse changes in these and other factors could cause an impairment of the Partnership’s asset.

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Capitalized Costs Related to Redevelopment and Construction Projects

The Partnership capitalizes costs incurred in connection with capital expenditure activities, including redevelopment and construction projects. Costs including interest, property taxes and operating costs associated with redevelopment and construction projects are capitalized during periods in which redevelopment and construction projects are in progress. Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital expenditure activities at the property level.

Revenue Recognition

The Partnership generally leases apartment units for twelve-month terms or less. The Partnership will offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Rental income attributable to leases, net of any concessions, is recognized on a straight-line basis over the term of the lease. The Partnership evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for accounts greater than 30 days past due on current tenants and all receivables due from former tenants.

ITEM 4T.   CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures.

The Partnership’s management, with the participation of the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the principal executive officer and principal financial officer of the Managing General Partner, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.

(b) Changes in Internal Control Over Financial Reporting.

There has been no change in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

As previously disclosed, AIMCO Properties, L.P. and NHP Management Company, both affiliates of the Managing General Partner, were defendants in a lawsuit, filed as a collective action in August 2003 in the United States District Court for the District of Columbia, alleging that they willfully violated the Fair Labor Standards Act (“FLSA”) by failing to pay maintenance workers overtime for time worked in excess of 40 hours per week (“overtime claims”). The plaintiffs also contended that AIMCO Properties, L.P. and NHP Management Company (“the Defendants”) failed to compensate maintenance workers for time that they were required to be “on-call” (“on-call claims”). In March 2007, the court in the District of Columbia decertified the collective action. In July 2007, plaintiffs’ counsel filed individual cases in Federal court in 22 jurisdictions. In the second quarter of 2008, AIMCO Properties, L.P. settled the overtime cases involving 652 plaintiffs and established a framework for resolving the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel. As a result, the lawsuits asserted in the 22 Federal courts have been dismissed. During the fourth quarter of 2008, the Partnership paid approximately $5,000 for settlement amounts for alleged unpaid overtime to employees who had worked at the Partnership’s investment property. At this time, the 88 remaining “on-call” claims and the attorneys’ fees claimed by plaintiffs’ counsel are not resolved. Pursuant to the global settlement agreement, the parties selected six test “on-call” cases to be arbitrated. The parties arbitrated four “on-call” claims and obtained defense verdicts on all four. Two additional “on-call” claims were dismissed with prejudice. The process now calls for the parties to attempt to mediate the remaining “on-call” claims and plaintiffs’ attorneys’ fees. Such mediation has not yet been scheduled. The Managing General Partner is uncertain as to the amount of any additional loss that may be allocable to the Partnership. Therefore, the Partnership cannot estimate whether any additional loss will occur or a potential range of loss.

ITEM 6.   EXHIBITS

See Exhibit Index.

The agreements included as exhibits to this Form 10-Q contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

•  should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

•  have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

•  may apply standards of materiality in a way that is different from what may be viewed as material to an investor; and

•  were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. The Partnership acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 10-Q not misleading. Additional information about the Partnership may be found elsewhere in this Form 10-Q and the Partnership’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

E-15

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NATIONAL PROPERTY INVESTORS III

By: NPI EQUITY INVESTMENTS, INC.
Managing General Partner

By:  /s/  Steven D. Cordes

Steven D. Cordes

Senior Vice President

Date: August 11, 2010

By:  /s/  Stephen B. Waters

Stephen B. Waters

Senior Director of Partnership Accounting

Date: August 11, 2010

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NATIONAL PROPERTY INVESTORS III

EXHIBIT INDEX

Exhibit			Description of Exhibit
	2	.1	NPI, Inc. Stock Purchase Agreement dated as of August 17, 1995, incorporated by reference to Exhibit 2 to the Partnership’s Current Report on Form 8-K dated August 17, 1995.
	3	.4	(a) Agreement of Limited Partnership incorporated by reference to Exhibit A to the Prospectus of the Partnership dated October 24, 1979 contained in the Partnership’s Registration Statement on Form S-11 (Reg. No. 2-63733).
	3	.4	(b) Amendments to Agreement of Limited Partnership dated as of November 25, 1980 incorporated by reference to Exhibits 3 and 4 to the Partnership’s Annual Report on Form 10-K for the year ended December 31, 1981.
	3	.4	(c) Amendments to the Agreement of Limited Partnership incorporated by reference to the Definitive Proxy Statement of the Partnership dated April 3, 1981.
	3	.4	(d) Amendments to the Agreement of Limited Partnership incorporated by reference to the Statement Furnished in Connection With The Solicitation of Consents of the Partnership dated August 28, 1992.
	3	.4	(e) Amendment to the Limited Partnership Agreement dated December 22, 2005 incorporated by reference to the Registrant’s Annual Report on Form 10-KSB dated December 31, 2005.
	10	.11	Form Of Amended and Restated Multifamily Mortgage, Assignment of Rents and Security Agreement between Federal Home Loan Mortgage Corporation and National Property Investors III, a California limited partnership, dated March 30, 2007. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 30, 2007.
	10	.12	Form of Amended and Restated Multifamily Note (Recast Transaction) between Federal Home Loan Mortgage Corporation and National Property Investors III, a California limited partnership, dated March 30, 2007. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 30, 2007.
	10	.13	Form of Amended and Restated Guaranty (Recast Transaction) between AIMCO Properties, L.P., a Delaware limited partnership and Federal Home Loan Mortgage Corporation, dated March 30, 2007. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 30, 2007.
	10	.14	Form of Multifamily Mortgage, Assignment of Rents and Security Agreement between Capmark Bank and National Property Investors III, a California limited partnership, dated March 30, 2007. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 30, 2007.
	10	.15	Form of Multifamily Note between Capmark Bank and National Property Investors III, a California limited partnership, dated March 30, 2007. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 30, 2007.
	10	.16	Form of Guaranty between AIMCO Properties, L.P., a Delaware limited partnership and Capmark Bank, dated March 30, 2007. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 30, 2007.
	10	.17	Form of Rehabilitation Agreement between National Property Investors III, a California limited partnership and Capmark Bank, dated March 30, 2007. Incorporated by reference to the Registrant’s Current Report on Form 8-K dated March 30, 2007.
	31	.1	Certification of equivalent of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2	Certification of equivalent of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	Certification of the equivalent of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

E-17

Exhibit 31.1

CERTIFICATION

I, Steven D. Cordes, certify that:

1. I have reviewed this quarterly report on Form 10-Q of National Property Investors III;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Steven D. Cordes

Steven D. Cordes

Senior Vice President of NPI Equity Investments, Inc.,

equivalent of the chief executive officer of the

Partnership

Date: August 11, 2010

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Exhibit 31.2

CERTIFICATION

I, Stephen B. Waters, certify that:

1. I have reviewed this quarterly report on Form 10-Q of National Property Investors III;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/  Stephen B. Waters

Stephen B. Waters

Senior Director of Partnership Accounting of NPI Equity Investments, Inc., equivalent of the chief financial officer of the Partnership

Date: August 11, 2010

E-19

Exhibit 32.1

Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of National Property Investors III (the “Partnership”), for the quarterly period ended June 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Steven D. Cordes, as the equivalent of the Chief Executive Officer of the Partnership, and Stephen B. Waters, as the equivalent of the Chief Financial Officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

/s/  Steven D. Cordes

Name:     Steven D. Cordes

Date: August 11, 2010

/s/  Stephen B. Waters

Name:     Stephen B. Waters

Date: August 11, 2010

This certification is furnished with this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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ANNEX F

AMENDMENT
TO
PARTNERSHIP AGREEMENT
OF
NATIONAL PROPERTY INVESTORS III

This AMENDMENT TO THE PARTNERSHIP AGREEMENT OF NATIONAL PROPERTY INVESTORS III (this ‘‘Amendment”) is entered into as of          , 2010, by and among NPI Equity Investments, Inc., a Florida corporation, in its capacity as managing general partner (the ‘‘Managing General Partner”), and each of the Limited Partners. All capitalized terms used in this Amendment but not otherwise defined herein shall have the respective meanings given to them in the Partnership Agreement (as defined below).

Recitals

WHEREAS, National Property Investors III, a California limited partnership (the ‘‘Partnership”), is governed pursuant to the terms of that certain Partnership Agreement, dated as of February 1, 1979, as amended and restated July 1, 1979 and as further amended to date (the “Partnership Agreement”);

WHEREAS, the Managing General Partner has obtained consents of the requisite percentage-in-interest of the Limited Partners (i.e., Limited Partners who own more than 50% of the outstanding Units), necessary to amend the Partnership Agreement as provided in this Amendment.

NOW, THEREFORE, in consideration of the premises, the agreement of the parties herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, the parties hereby agree as follows:

1. Amendments to the Partnership Agreement.  The Partnership Agreement is hereby amended to delete Section 15.3.27 thereof.

2. Miscellaneous.

(a) Effect of Amendment.  In the event of any inconsistency between the terms of the Partnership Agreement and the terms of this Amendment, the terms of this Amendment shall prevail. In the event of any conflict of apparent conflict between any of the provisions of the Partnership Agreement as amended by this Amendment, such conflicting provisions shall be reconciled and construed to give effect to the terms and intent of this Amendment.

(b) Ratification.  Except as otherwise expressly modified hereby, the Partnership Agreement shall remain in full force and effect, and all of the terms and provisions of the Partnership Agreement, as herein modified, are hereby ratified and reaffirmed.

(c) Governing Law.  THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OF CONFLICTS OF LAW.

[Remainder of page intentionally left blank.]

F-1

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first set forth above.

The Managing General Partner:

NPI EQUITY INVESTMENTS, INC.
a Florida corporation

By: 

Name:     

Title:

The Limited Partners:

By:  NPI Equity Investments, Inc.

attorney-in-fact

By: 

Name:     

Title:

F-2

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 20.   Indemnification of Directors and Officers.

Aimco’s charter limits the liability of Aimco’s directors and officers to Aimco and its stockholders to the fullest extent permitted from time to time by Maryland law. Maryland law presently permits the liability of directors and officers to a corporation or its stockholders for money damages to be limited, except (i) to the extent that it is proved that the director or officer actually received an improper benefit or profit in money, property or services for the amount of the benefit or profit in money, property or services actually received, or (ii) to the extent that a judgment or other final adjudication adverse to the director or officer is entered in a proceeding based on a finding that the director’s or officer’s action, or failure to act, was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding. This provision does not limit the ability of Aimco or its stockholders to obtain other relief, such as an injunction or rescission.

Aimco’s charter and bylaws require Aimco to indemnify its directors and officers and permits Aimco to indemnify certain other parties to the fullest extent permitted from time to time by Maryland law. Maryland law permits a corporation to indemnify its directors, officers and certain other parties against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made a party by reason of their service to or at the request of the corporation, unless it is established that (i) the act or omission of the indemnified party was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, (ii) the indemnified party actually received an improper personal benefit in money, property or services or (iii) in the case of any criminal proceeding, the indemnified party had reasonable cause to believe that the act or omission was unlawful. Indemnification may be made against judgments, penalties, fines, settlements and reasonable expenses actually incurred by the director or officer in connection with the proceeding; provided, however, that if the proceeding is one by or in the right of the corporation, indemnification may not be made with respect to any proceeding in which the director or officer has been adjudged to be liable to the corporation. In addition, a director or officer may not be indemnified with respect to any proceeding charging improper personal benefit to the director or officer, whether or not involving action in the director’s or officer’s official capacity, in which the director or officer was adjudged to be liable on the basis that personal benefit was improperly received. The termination of any proceeding by conviction, or upon a plea of nolo contendere or its equivalent, or an entry of any order of probation prior to judgment, creates a rebuttable presumption that the director or officer did not meet the requisite standard of conduct required for indemnification to be permitted. It is the position of the SEC that indemnification of directors and officers for liabilities arising under the Securities Act is against public policy and is unenforceable pursuant to Section 14 of the Securities Act.

Aimco has entered into agreements with certain of its officers, pursuant to which Aimco has agreed to indemnify such officers to the fullest extent permitted by applicable law.

Section 10.6 of Apartment Investment and Management Company 2007 Stock Award and Incentive Plan, or the 2007 Plan, specifically provides that, to the fullest extent permitted by law, each of the members of the Board of Directors of Aimco, the Compensation Committee of the board of directors and each of the directors, officers and employees of Aimco, any Aimco subsidiary, Aimco OP and any subsidiary of the Aimco OP shall be held harmless and indemnified by Aimco for any liability, loss (including amounts paid in settlement), damages or expenses (including reasonable attorneys’ fees) suffered by virtue of any determinations, acts or failures to act, or alleged acts or failures to act, in connection with the administration of the 2007 Plan, so long as such person is not determined by a final adjudication to be guilty of willful misconduct with respect to such determination, action or failure to act.

The Aimco OP partnership agreement requires Aimco OP to indemnify its directors and officers to the fullest extent authorized by applicable law against any and all losses, claims, damages, liabilities, joint or several, expenses (including, without limitation, attorney’s fees and other legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of Aimco OP. Such indemnification continues after the director or officer ceases to be a director or officer. The right to indemnification includes the right to be paid by Aimco OP the expenses incurred in defending any proceeding in advance of its final disposition upon the delivery of an

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undertaking by or on behalf of the indemnitee to repay all amounts advanced if a final judicial decision is rendered that such indemnitee did not meet the standard of conduct permitting indemnification under the Aimco OP partnership agreement or applicable law.

Aimco OP maintains insurance, at its expense, to protect against any liability or loss, regardless of whether any director or officer is entitled to indemnification under the Aimco OP partnership agreement or applicable law.

Directors and officers of the General Partner are also officers of Aimco, and as such, are entitled to indemnification as described above with respect to the directors and officers of Aimco.

Item 21.   Exhibits.

(a) Exhibits.  An index to exhibits appears below and is incorporated herein by reference. The agreements included as exhibits to this registration statement contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

•  should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

•  have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

•  may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

•  were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Aimco and Aimco OP acknowledge that, notwithstanding the inclusion of the foregoing cautionary statements, they are responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this registration statement not misleading. Additional information about Aimco and Aimco OP may be found elsewhere in this registration statement and Aimco’s and Aimco OP’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov. See “Where You Can Find Additional Information” in the information statement/prospectus that forms a part of this registration statement.

(b) Financial Statement Schedules.  None required.

(c) Reports, Opinions or Appraisals.  Appraisal report by Cogent Realty Advisors, LLC related to Lakeside Apartments is filed as an exhibit to the registration statement filed with the SEC.

Item 22.   Undertakings.

(a) Each of the undersigned registrants hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a

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20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, the undersigned registrant undertakes that each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§ 230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(5) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities:

The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(6) That for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant’s annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(7) That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information

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called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form.

(8) That every prospectus (i) that is filed pursuant to paragraph (7) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(9) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(10) To respond to requests for information that is incorporated by reference into the information statement/prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

(11) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Denver, State of Colorado, October 12, 2010.

APARTMENT INVESTMENT AND
MANAGEMENT COMPANY

By:  /s/  TERRY CONSIDINE

Name:     Terry Considine

Title:  Chairman of the Board, Chief Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below authorizes Terry Considine and Ernest M. Freedman, and each of them, each of whom may act without joinder of the other, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and reconstitution, for him or her and in his or her name, place and stead, in any and all capacities to execute in the name of each such person who is then an officer or director of Aimco, and to file any amendments (including post effective amendments) to this Registration Statement and any registration statement for the same offering filed pursuant to Rule 462 under the Securities Act of 1933, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney’s-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  TERRY CONSIDINE Terry Considine	Chairman of the Board and Chief Executive Officer (principal executive officer)	October 12, 2010
/s/  ERNEST M. FREEDMAN Ernest M. Freedman	Executive Vice President and Chief Financial Officer (principal financial officer)	October 12, 2010
/s/  PAUL BELDIN Paul Beldin	Senior Vice President and Chief Accounting Officer (principal accounting officer)	October 12, 2010
/s/  JAMES N. BAILEY James N. Bailey	Director	October 12, 2010
/s/  RICHARD S. ELLWOOD Richard S. Ellwood	Director	October 12, 2010

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Signature	Title	Date
/s/  THOMAS L. KELTNER Thomas L. Keltner	Director	October 12, 2010
/s/  J. LANDIS MARTIN J. Landis Martin	Director	October 12, 2010
/s/  ROBERT A. MILLER Robert A. Miller	Director	October 12, 2010
/s/  MICHAEL A. STEIN Michael A. Stein	Director	October 12, 2010
/s/  KATHLEEN M. NELSON Kathleen M. Nelson	Director	October 12, 2010

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Denver, State of Colorado, October 12, 2010.

AIMCO PROPERTIES, L.P.

By: AIMCO-GP, Inc., its General Partner

By:  /s/  TERRY CONSIDINE

Name: Terry Considine

Title:  Chairman of the Board and Chief

Executive Officer

POWER OF ATTORNEY

Each person whose signature appears below authorizes Terry Considine and Ernest M. Freedman, and each of them, each of whom may act without joinder of the other, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and reconstitution, for him or her and in his or her name, place and stead, in any and all capacities to execute in the name of each such person who is then an officer or director of Aimco, and to file any amendments (including post effective amendments) to this Registration Statement and any registration statement for the same offering filed pursuant to Rule 462 under the Securities Act of 1933, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing appropriate or necessary to be done, as fully and for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney’s-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  TERRY CONSIDINE Terry Considine	Chairman of the Board and Chief Executive Officer of the registrant’s general partner (principal executive officer)	October 12, 2010
/s/  MILES CORTEZ Miles Cortez	Director, Executive Vice President and Chief Administrative Officer of the registrant’s general partner	October 12, 2010
/s/  ERNEST M. FREEDMAN Ernest M. Freedman	Executive Vice President and Chief Financial Officer of the registrant’s general partner (principal financial officer)	October 12, 2010
/s/  PAUL BELDIN Paul Beldin	Senior Vice President and Chief Accounting Officer of the registrant’s general partner (principal accounting officer)	October 12, 2010

II-7

INDEX TO EXHIBITS(1)(2)

Exhibit
Number			Description
	3	.1	Charter of Apartment Investment and Management Company (Exhibit 3.1 to Aimco’s Annual Report on Form 10-K for the year ended December 31, 2008, is incorporated herein by this reference)
	3	.2	Amended and Restated Bylaws of Apartment Investment and Management Company (Exhibit 3.2 to Aimco’s Current Report on Form 8-K dated February 4, 2010, is incorporated herein by this reference)
	3	.3	Fourth Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of July 29, 1994, as amended and restated as of February 28, 2007 (Exhibit 10.1 to Aimco’s Annual Report on Form 10-K for the year ended December 31, 2006, is incorporated herein by this reference)
	3	.4	First Amendment to Fourth Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of December 31, 2007 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated December 31, 2007, is incorporated herein by this reference)
	3	.5	Second Amendment to the Fourth Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of July 30, 2009 (Exhibit 10.1 to Aimco’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, is incorporated herein by this reference)
	3	.6	Third Amendment to Fourth Amended and Restated Agreement of Limited Partnership of AIMCO Properties, L.P., dated as of December 31, 2007 (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated September 3, 2010, is incorporated herein by this reference)
	5	.1	Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding the validity of the Common OP Units being registered.
	5	.2	Opinion of DLA Piper regarding the validity of the Class A Common Stock issuable upon redemption of the Common OP Units
	8	.1	Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding certain tax matters
	10	.1	Amended and Restated Secured Credit Agreement, dated as of November 2, 2004, by and among Aimco, AIMCO Properties, L.P., AIMCO/Bethesda Holdings, Inc., and NHP Management Company as the borrowers and Bank of America, N.A., Keybank National Association, and the Lenders listed therein (Exhibit 4.1 to Aimco’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004, is incorporated herein by this reference)
	10	.2	First Amendment to Amended and Restated Secured Credit Agreement, dated as of June 16, 2005, by and among Aimco, AIMCO Properties, L.P., AIMCO/Bethesda Holdings, Inc., and NHP Management Company as the borrowers and Bank of America, N.A., Keybank National Association, and the Lenders listed therein (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated June 16, 2005, is incorporated herein by this reference)
	10	.3	Second Amendment to Amended and Restated Senior Secured Credit Agreement, dated as of March 22, 2006, by and among Aimco, AIMCO Properties, L.P., and AIMCO/Bethesda Holdings, Inc., as the borrowers, and Bank of America, N.A., Keybank National Association, and the lenders listed therein (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated March 22, 2006, is incorporated herein by this reference)
	10	.4	Third Amendment to Senior Secured Credit Agreement, dated as of August 31, 2007, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda Holdings, Inc., as the Borrowers, the pledgors and guarantors named therein, Bank of America, N.A., as administrative agent and Bank of America, N.A., Keybank National Association and the other lenders listed therein (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated August 31, 2007, is incorporated herein by this reference)
	10	.5	Fourth Amendment to Senior Secured Credit Agreement, dated as of September 14, 2007, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda Holdings, Inc., as the Borrowers, the pledgors and guarantors named therein, Bank of America, N.A., as administrative agent and Bank of America, N.A., Keybank National Association and the other lenders listed therein (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated September 14, 2007, is incorporated herein by this reference)

Exhibit
Number			Description
	10	.6	Fifth Amendment to Senior Secured Credit Agreement, dated as of September 9, 2008, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda Holdings, Inc., as the Borrowers, the pledgors and guarantors named therein, Bank of America, N.A., as administrative agent and Bank of America, N.A., Keybank National Association and the other lenders listed therein (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated September 11, 2008, is incorporated herein by this reference)
	10	.7	Sixth Amendment to Senior Secured Credit Agreement, dated as of May 1, 2009, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda Holdings, Inc., as the Borrowers, the pledgors and guarantors named therein, Bank of America, N.A., as administrative agent and Bank of America, N.A., Keybank National Association and the other lenders listed therein (Exhibit 10.1 to Aimco’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009, is incorporated herein by this reference)
	10	.8	Seventh Amendment to Senior Secured Credit Agreement, dated as of August 4, 2009, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda Holdings, Inc., as the Borrowers, the pledgors and guarantors named therein and the lenders party thereto (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated August 6, 2009, is incorporated herein by this reference)
	10	.9	Eighth Amendment to Senior Secured Credit Agreement, dated as of February 3, 2010, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda Holdings, Inc., as the Borrowers, the pledgors and guarantors named therein and the lenders party thereto (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated February 5, 2010, is incorporated herein by this reference)
	10	.10	Ninth Amendment to Amended and Restated Senior Secured Credit Agreement, dated as of May 14, 2010, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., and AIMCO/Bethesda Holdings, Inc., as the borrowers, the guarantors and the pledgors named therein and the lenders party thereto (Exhibit 10.1 to Aimco’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2009, is incorporated herein by this reference)
	10	.11	Master Indemnification Agreement, dated December 3, 2001, by and among Apartment Investment and Management Company, AIMCO Properties, L.P., XYZ Holdings LLC, and the other parties signatory thereto (Exhibit 2.3 to Aimco’s Current Report on Form 8-K, dated December 6, 2001, is incorporated herein by this reference)
	10	.12	Tax Indemnification and Contest Agreement, dated December 3, 2001, by and among Apartment Investment and Management Company, National Partnership Investments, Corp., and XYZ Holdings LLC and the other parties signatory thereto (Exhibit 2.4 to Aimco’s Current Report on Form 8-K, dated December 6, 2001, is incorporated herein by this reference)
	10	.13	Limited Liability Company Agreement of AIMCO JV Portfolio #1, LLC dated as of December 30, 2003 by and among AIMCO BRE I, LLC, AIMCO BRE II, LLC and SRV-AJVP#1, LLC (Exhibit 10.54 to Aimco’s Annual Report on Form 10-K for the year ended December 31, 2003, is incorporated herein by this reference)
	10	.14	Employment Contract executed on December 29, 2008, by and between AIMCO Properties, L.P. and Terry Considine (Exhibit 10.1 to Aimco’s Current Report on Form 8-K, dated December 29, 2008, is incorporated herein by this reference)*
	10	.15	Apartment Investment and Management Company 1997 Stock Award and Incentive Plan (October 1999) (Exhibit 10.26 to Aimco’s Annual Report on Form 10-K for the year ended December 31, 1999, is incorporated herein by this reference)*
	10	.16	Form of Restricted Stock Agreement (1997 Stock Award and Incentive Plan) (Exhibit 10.11 to Aimco’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1997, is incorporated herein by this reference)*
	10	.17	Form of Incentive Stock Option Agreement (1997 Stock Award and Incentive Plan) (Exhibit 10.42 to Aimco’s Annual Report on Form 10-K for the year ended December 31, 1998, is incorporated herein by this reference)*
	10	.18	2007 Stock Award and Incentive Plan (incorporated by reference to Appendix A to Aimco’s Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on March 20, 2007)*

Exhibit
Number			Description
	10	.19	Form of Restricted Stock Agreement (Exhibit 10.2 to Aimco’s Current Report on Form 8-K, dated April 30, 2007, is incorporated herein by this reference)*
	10	.20	Form of Non-Qualified Stock Option Agreement (Exhibit 10.3 to Aimco’s Current Report on Form 8-K, dated April 30, 2007, is incorporated herein by this reference)*
	10	.21	2007 Employee Stock Purchase Plan (incorporated by reference to Appendix B to Aimco’s Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on March 20, 2007)*
	21	.1	List of Subsidiaries (Exhibit 21.1 to Aimco’s Annual Report of Form 10-K for the year ended December 31, 2009 is incorporated herein by this reference)
	23	.1	Consent of Independent Registered Public Accounting Firm
	23	.2	Consent of Independent Registered Public Accounting Firm
	23	.3	Consent of Independent Registered Public Accounting Firm
	23	.4	Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1)
	23	.5	Consent of DLA Piper (included in Exhibit 5.2)
	23	.6	Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 8.1)
	23	.7	Consent of Cogent Realty Advisors, LLC
	24	.1	Power of Attorney (included in the signature pages to the Registration Statement)
	99	.1	Appraisal Report, dated as of May 19, 2010, by Cogent Realty Advisors, LLC, related to Lakeside Apartments

(1)	Schedules and supplemental materials to the exhibits have been omitted but will be provided to the Securities and Exchange Commission upon request.
(2)	The file reference number for all exhibits is 001-13232, and all such exhibits remain available pursuant to the Records Control Schedule of the Securities and Exchange Commission.
*	Indicates a management contract or compensatory plan or arrangement.

EX-5.1

Exhibit 5.1

[SASM&F LETTERHEAD]

October 12, 2010

AIMCO Properties, L.P.
4582 South Ulster Street Parkway
Suite 1100
Denver, Colorado 80237

Re:	Apartment Investment and Management Company
	AIMCO Properties, L.P.
	Registration Statement on Form S-4

Ladies and Gentlemen:

          We have acted as special counsel to AIMCO Properties, L.P., a Delaware limited partnership (the “Partnership”), and are delivering this opinion in connection with the Registration Statement on Form S-4 (together with all exhibits thereto, the “Registration Statement”) being filed by the Partnership and Apartment Investment and Management Company, a Maryland corporation, with the Securities and Exchange Commission (the “Commission”) on the date hereof for the purpose of registering under the Securities Act of 1933 (the “Securities Act”), up to 33,000 partnership common units (the “Common Units”) of the Partnership, issuable upon consummation of the mergers (the “Mergers”) of (i) National Property Investors III, a California limited partnership (“NPI”), with and into National Property Investors III, LP, a Delaware limited partnership (“New NPI”), and (ii) AIMCO NPI III Merger Sub LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Partnership (“Merger Sub”), with and into New NPI, pursuant to the terms of an Agreement and Plan of Merger to be entered into by and among NPI, New NPI, Merger Sub and the Partnership (the “Merger Agreement”).

          This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act.

          In connection with this opinion, we have examined and relied on originals or copies, certified or otherwise identified to our satisfaction, of the following:

AIMCO Properties, L.P.
October 12, 2010
Page 2

     (i) the Registration Statement;

     (ii) the form of the Merger Agreement proposed to be entered into by and among NPI, New NPI, Merger Sub and the Partnership, filed as an annex to the information statement/prospectus included in the Registration Statement;

     (iii) the Certificate of Limited Partnership of the Partnership, as certified by the Secretary of State of the State of Delaware;

     (iv) the Fourth Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”) of Aimco Properties, L.P., dated as of July 29, 1994 and restated as of February 28, 2007, as amended by the First Amendment thereto, dated as of December 31, 2007, the Second Amendment thereto, dated as of July 30, 2009, and the Third Amendment thereto, dated as of September 2, 2010;

     (v) the Certificate of Incorporation of AIMCO-GP, Inc., a Delaware corporation and the general partner of the Partnership (the “General Partner”), as certified by the Secretary of State of the State of Delaware;

     (vi) the Bylaws of the General Partner, as certified by the Senior Vice President of the General Partner; and

     (vii) certain resolutions of the Board of Directors of the General Partner relating to the approval of the Merger Agreement and the transactions contemplated thereby, including the issuance of the Common Units, the filing of the Registration Statement and related matters.

          We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such records of the Partnership and such agreements, certificates and receipts of public officials, certificates of officers or other representatives of the Partnership and others, and such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinions set forth below.

          In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, including endorsements, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as facsimile, electronic, certified, conformed or photostatic copies, and the authenticity of the originals of such copies. In making our examination of executed documents or documents to be executed, we have assumed that the parties thereto, other than the Partnership, had or will have the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, and the execution and delivery by such parties of such documents and the validity and binding effect thereof on such parties. As to any facts material to the opinions expressed herein which were not

AIMCO Properties, L.P.
October 12, 2010
Page 3

independently established or verified, we have relied upon oral or written statements and representations of officers and other representatives of the Partnership and others.

          Our opinions set forth herein are limited to the limited partnership laws of the State of Delaware that, in our experience, are normally applicable to transactions of the type contemplated by the Merger Agreement and, to the extent that judicial or regulatory orders or decrees or consents, approvals, licenses, authorizations, validations, filings, recordings or registrations with governmental authorities are relevant, to those required under such laws (all of the foregoing being referred to as “Applicable Law”). We do not express any opinion with respect to the law of any jurisdiction other than Applicable Law or as to the effect of the law of any jurisdiction other than Applicable Law on the opinions herein stated. The Common Units may be offered from time to time on a delayed or continuous basis, and this opinion is limited to the laws, including the rules and regulations, as in effect on the date hereof, which laws are subject to change with possible retroactive effect.

          Based upon and subject to the foregoing and the limitations, qualifications, exceptions and assumptions set forth herein, we are of the opinion that the Common Units have been duly authorized for issuance and, when the Merger Agreement has been duly executed and delivered and the Common Units have been issued in accordance with the Merger Agreement, will be validly issued, and the holders of such Common Units shall not be obligated personally for the debts, obligations or liabilities of the Partnership solely by reason of being a limited partner of the Partnership.

          We hereby consent to the filing of this opinion with the Commission as an Exhibit to the Registration Statement. We also consent to the reference to our firm under the caption “Legal Matters” in the prospectus which forms a part of the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission. This opinion is expressed as of the date hereof unless otherwise expressly stated, and we disclaim any undertaking to advise you of any subsequent changes in the facts stated or assumed herein or of any subsequent changes in applicable laws.

Very truly yours,

/s/ Skadden, Arps, Slate, Meagher & Flom LLP

EX-5.2

Exhibit 5.2

DLA Piper llp (us)
The Marbury Building
6225 Smith Avenue
Baltimore, Maryland 21209-3600
www.dlapiper.com

T 410.580.3000
F 410.580.3001

October 12, 2010

Apartment Investment and Management Company
4582 S. Ulster Street Parkway, Suite 1100
Denver, CO 80237

Ladies and Gentlemen:

     We serve as special Maryland counsel to Apartment Investment and Management Company, a Maryland corporation (the “Company”), in connection with the registration under the Securities Act of 1933, as amended (the “Act”), on a Registration Statement of the Company on Form S-4 (the “Registration Statement”) to be filed with the Securities and Exchange Commission (the “Commission”) on October 12, 2010 of shares (the “Shares”) of Class A Common Stock, par value $.01 per share (the “Common Stock”), of the Company issuable upon exchange of Partnership Common Units (the “OP Units”) of AIMCO Properties L.P., a Delaware limited partnership (the “Operating Partnership”) registered pursuant to the Registration Statement. This opinion is being provided at your request in connection with the filing of the Registration Statement.

     In rendering the opinion expressed below, we have reviewed originals or copies, certified or otherwise identified to our satisfaction, of the following documents (the “Documents”):

     (a) the Registration Statement;

     (b) the charter of the Company (the “Charter”), certified by the State Department of Assessments and Taxation of the State of Maryland (the “SDAT”);

     (c) the By-Laws of the Company, as amended and restated and in effect on the date hereof;

     (d) the Agreement of Limited Partnership of the Operating Partnership, as amended to date (the “OP Partnership Agreement”);

     (e) the proceedings of the Board of Directors of the Company or a committee thereof relating to the authorization and issuance of the Shares;

     (f) a certificate executed by an officer of the Company (the “Certificate”), dated as of the date hereof, as to certain factual matters;

     (g) a certificate of the SDAT as to the good standing of the Company, dated as of a recent date; and

     (h) such other documents as we have considered necessary to the rendering of the opinion expressed below;

     In examining the Documents, and in rendering the opinion set forth below, we have assumed the following: (a) each of the parties to the Documents has duly and validly executed and delivered each of the Documents and each instrument, agreement, and other document executed in connection with the Documents to which such party is a signatory and each such party’s obligations set forth in the Documents, are its legal, valid and binding obligations, enforceable in accordance with their respective

Apartment Investment and Management Company
October 12, 2010
Page Two

terms; (b) each person executing any such instrument, agreement or other document on behalf of any such party is duly authorized to do so; (c) each natural person executing any such instrument, agreement or other document is legally competent to do so; (d) the Documents accurately describe and contain the mutual understandings of the parties, there are no oral or written modifications of or amendments or supplements to the Documents and there has been no waiver of any of the provisions of the Documents by actions or conduct of the parties or otherwise; and (e) all documents submitted to us as originals are authentic, all documents submitted to us as certified or photostatic copies or telecopies or portable document file (“.PDF”) copies conform to the original documents (and the authenticity of the originals of such copies), all signatures on all documents submitted to us for examination (and including signatures on photocopies, telecopies and .PDF copies) are genuine, and all public records reviewed are accurate and complete. As to certain factual matters we have relied on the Certificate as to the factual matters set forth therein, which we assume to be accurate and complete.

     Based upon the foregoing, subject to the additional assumptions, qualifications, and limitations below, having regard for such legal considerations as we deem relevant, and limited in all respects to applicable Maryland law, we are of the opinion and advise you that the Shares have been duly authorized and, upon issuance of the Shares in exchange for OP Units in accordance with the terms of the OP Partnership Agreement and issuance and delivery of stock certificates representing the Shares, will be validly issued, fully paid and non-assessable.

     In addition to the qualifications set forth above, the opinion set forth herein is subject to additional assumptions, qualifications, and limitations as follows:

     (a) This opinion concerns only the effect of the laws (exclusive of the principles of conflict of laws) of the State of Maryland as currently in effect. We assume no obligation to supplement this opinion if any applicable laws change after the date hereof or if any facts or circumstances come to our attention after the date hereof that might change this opinion.

     (b) We have made no investigation of, and we express no opinion as to, the laws of any jurisdiction other than the laws of the State of Maryland. To the extent that any documents referred to herein are governed by the laws of a jurisdiction other than Maryland, we have assumed that the laws of such jurisdiction are the same as the laws of Maryland.

     (c) We express no opinion as to compliance with the securities (or “blue sky”) laws or the real estate syndication laws of the State of Maryland.

     (d) We assume that (i) the OP Units will be validly issued by the OP Partnership and (ii) the issuance of the Shares will not cause (A) the Company to issue shares of Common Stock in excess of the number of shares of such class authorized by the Charter and the Board of Directors of the Company at the time of issuance of the Shares and (B) any person to violate any of the Initial Holder Limit, the Look-Through Ownership Limit, or the Ownership Limit provisions of the Charter.

     (e) This opinion is limited to the matters set forth herein, and no other opinion should be inferred beyond the matters expressly stated.

Apartment Investment and Management Company
October 12, 2010
Page Three

     We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the heading “Legal Matters” in the Prospectus included in the Registration Statement. In giving our consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder.

Very truly yours,

/s/ DLA Piper LLP (US)

EX-8.1

Exhibit 8.1

[SASM&F Letterhead]

October 12, 2010

Apartment Investment and Management Company
4582 S. Ulster Street Parkway
Suite 1100
Denver, Colorado 80237

Re: Certain Federal Income Tax Consequences

Ladies and Gentlemen:

     You have requested our opinion concerning certain Federal income tax considerations in connection with the filing by Apartment Investment and Management Company, a Maryland corporation (“AIMCO”), of a registration statement on Form S-4, dated October 12, 2010 (together with the prospectus filed therewith, the “Registration Statement”), with the Securities and Exchange Commission (the “Commission”) on October 12, 2010. All capitalized terms used herein, unless otherwise specified, shall have the meanings assigned to them in the Registration Statement.

     In connection with the filing of the Registration Statement, we have acted as counsel to AIMCO, and we have assisted in the preparation of the Registration Statement and certain other documents. In formulating our opinion, we have examined and relied on originals or copies, certified or otherwise identified to our satisfaction, of the Registration Statement and such other documentation and information provided by you as is relevant and necessary to prepare the Registration Statement or as we have deemed necessary or appropriate as a basis for the opinion set forth herein. In addition, you have provided us with certain representations and covenants of officers of AIMCO relating to, among other things, properties, assets, income, distributions, stockholder ownership, organizational structure and other requirements, and the past, present and future conduct of AIMCO’s business operations. We have assumed that such statements,

Apartment Investment and Management Company
October 12, 2010
Page 2

representations and covenants are true as of the date hereof, and will continue to be true, without regard to any qualification as to knowledge and belief. For purposes of our opinion, we have not assumed any responsibility for investigating or independently verifying the facts and representations set forth in such documents, the partnership agreements and organizational documents for each of the corporations, partnerships and limited liability companies in which AIMCO holds a direct or indirect interest (the “Subsidiaries”), the Registration Statement, or any other document, and we have not undertaken any independent review of such information. We have, consequently, assumed and relied on AIMCO’s representations that the information presented in such documents or otherwise furnished to us accurately and completely describes all material facts relevant to our opinion. We have also relied upon the opinion of Altheimer & Gray dated May 8, 1998, with respect to the qualification of Ambassador Apartments, Inc., a Maryland corporation, as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), for its taxable year ended December 31, 1994 and all subsequent taxable years ending on or before May 8, 1998 (including the short taxable year ending on May 8, 1998). In addition, we have assumed the qualification of Insignia Properties Trust as a REIT under the Code and have relied upon the opinion of Akin, Gump, Strauss, Hauer & Feld, L.L.P. dated August 4, 1998, in this regard.

     In rendering our opinion, we have assumed that the transactions contemplated by the foregoing documents have been or will be consummated in accordance with the operative documents, and that such documents accurately reflect the material facts of such transactions. In addition, our opinion is based on the correctness of the assumption that there have been no changes in the applicable laws of the State of Maryland or any other state under the laws of which any of the Subsidiaries have been formed. In rendering our opinion, we have also considered and relied upon the Code, the regulations promulgated thereunder (the “Regulations”), administrative rulings and the other interpretations of the Code and the Regulations by the courts and the Internal Revenue Service, all as they exist as of the date hereof. With respect to the assumption, it should be noted that the Code, Regulations, judicial decisions, and administrative interpretations are subject to change at any time (possibly with retroactive effect). Any change which is made after the date hereof in any of the foregoing bases for our opinion could affect our conclusions herein. There can be no assurances, moreover, that any of the opinions expressed herein will be accepted by the Internal Revenue Service or, if challenged, by a court.

     Based upon and subject to the foregoing, for Federal income tax purposes we are of the opinion that, commencing with AIMCO’s initial taxable year ended December 31, 1994, AIMCO was organized in conformity with the requirements for qualification as a REIT under the Code, and its actual method of operation has enabled, and its proposed method of operation will enable, AIMCO to meet the requirements for qualification and taxation as a REIT under the Code. AIMCO’s qualification and taxation as a REIT depend upon its ability to meet, through actual annual operating

Apartment Investment and Management Company
October 12, 2010
Page 3

results, certain requirements including requirements relating to distribution levels and diversity of stock ownership, and the various qualification tests imposed under the Code, the results of which are not reviewed by us. Accordingly, no assurance can be given that the actual results of AIMCO’s operation for any particular taxable year satisfy the requirements for taxation of a REIT under the Code.

     Other than as expressly stated above, we express no opinion on any issue relating to AIMCO or to any investment therein.

     This opinion has been prepared for you in connection with the filing of the Registration Statement. It may not be relied upon by anyone else without our prior written consent. We consent to AIMCO filing this opinion with the Commission as an exhibit to the Registration Statement and to the reference to Skadden, Arps, Slate, Meagher & Flom LLP under the caption “Legal Matters” in the Registration Statement. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Commission. This opinion is expressed as of the date hereof, and we are under no obligation to supplement or revise our opinion to reflect any legal developments or factual matters arising subsequent to the date hereof, or the impact of any information, document, certificate, record, statement, representation, covenant, or assumption relied upon herein that becomes incorrect or untrue.

Very truly yours,

/s/ Skadden, Arps, Slate, Meagher & Flom LLP

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the reference to our firm under the caption “Experts” in the Registration Statement (Form S-4) and the related Information Statement/Prospectus of Apartment Investment and Management Company and to the incorporation by reference therein of our report dated February 26, 2010 (except for Notes 13 and 17, as to which the date is September 10, 2010), with respect to the consolidated financial statements and schedule of Apartment Investment and Management Company included in its Current Report on Form 8-K dated September 10, 2010, and our report dated February 26, 2010 with respect to the effectiveness of internal control over financial reporting of Apartment Investment and Management Company, included in its Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange Commission.

/s/Ernst & Young LLP

Denver, Colorado
October 12, 2010

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the reference to our firm under the caption “Experts” in the Registration Statement (Form S-4) and the related Information Statement/Prospectus of AIMCO Properties, L.P. and to the incorporation by reference therein of our report dated February 26, 2010 (except for Notes 13 and 17, as to which the date is September 10, 2010), with respect to the consolidated financial statements and schedule of AIMCO Properties, L.P. included in its Current Report on Form 8-K dated September 10, 2010, and our report dated February 26, 2010 with respect to the effectiveness of internal control over financial reporting of AIMCO Properties, L.P., included in its Annual Report on Form 10-K for the year ended December 31, 2009, filed with the Securities and Exchange Commission.

/s/Ernst & Young LLP

Denver, Colorado
October 12, 2010

EX-23.3

Exhibit 23.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated March 29, 2010, included in the Information Statement/Prospectus of National Property Investors III that is made part of the Registration Statement (Form S-4 ) and Prospectus of Apartment Investment and Management Company and Aimco Properties, L.P.

/s/Ernst & Young LLP

Greenville, SC
October 12, 2010

EX-23.7

Exhibit 23.7

[Letterhead of COGENT Realty Advisors, LLC]

October 8, 2010

NPI Equity Investments, Inc., as
General Partner of National Property Investors III
4582 S. Ulster St., Suite 1100
Denver, CO 802372

          Re:       Appraisal of Lakeside Apartments (Lisle, Illinois) dated as of May 19, 2010.

Ladies and Gentlemen:

     We hereby consent to the filing with the Securities and Exchange Commission of our appraisal report, in its entirety, referenced above (the “Appraisal Report”) with the Registration Statement on Form S-4 (the “Registration Statement”) filed by AIMCO-Properties, L.P. and its affiliates (“Aimco”) and the Transaction Statement on Schedule 13E-3 (the “Schedule 13E-3”) filed by Aimco. We also consent to (i) the distribution of copies of the Appraisal Report, in its entirety, to the limited partners of National Property Investors III (“NPI III”) upon their request in connection with the mergers involving NPI III, as described in the Registration Statement (the “Mergers”), and (ii) the reference to our firm and the description of the Appraisal Report in the Registration Statement, including any amendments and/or supplements thereto, that may be filed with the SEC. We further acknowledge that the Appraisal Report, in its entirety, will be generally available to the public through the filings with the Securities Exchange Commission.

     Aimco agrees to indemnify and hold harmless the undersigned and its affiliates including, without limitation, Cogent Realty Advisors, LLC and its owners, directors, officers and employees (collectively, “CRA”), from and against all damages, expenses, claims and costs (each, a “Loss”), including reasonable attorneys’ fees, incurred in investigating and/or defending any claim arising from or in connection with the use of, or reliance upon, the Appraisal Report by any person or entity, other than Aimco, in connection with the Mergers; provided, however, that Aimco shall not be liable in respect of any Loss resulting from the willful misconduct, gross negligence or bad faith of CRA or from a material factual error in the Appraisal Report or summary descriptions thereof which have been previously approved by CRA for inclusion in the Registration Statement.

COGENT REALTY ADVISORS, LLC
By:	/s/ Steven Goldberg
	Name:	Steven Goldberg
	Title:	Managing Partner

1

EX-99.1

Exhibit 99.1

COGENT Realty Advisors, LLC
Valuation, Consultation, Due Diligence

Appraisal of

Lakeside Apartments
4800 Lake Trail Drive
Lisle, Illinois

May 19, 2010

Mr. Derek McCandless
NPI Equity Investments, Inc.
4582 S. Ulster St., Suite 1100
Denver, CO 80237

Re: Appraisal of Lakeside Apartments
4800 Lake Trail Drive
Lisle, Illinois 60532

Dear Mr. McCandless:

Cogent Realty Advisors LLC (“CRA”) has completed an appraisal of the above-referenced property as requested by our April 13, 2010 engagement letter. The purpose of this assignment is to estimate the Market Value of the Fee Simple Interest in the subject property, free and clear of mortgage financing as of April 21, 2010, the date the property was last inspected by the appraiser. The report has been prepared for NPI Equity Investments, Inc. for client’s use in asset evaluation and financial reporting purposes.

Situated as noted above, the subject property consists of a 27.62-acre site improved with a 568-unit garden-style apartment complex. The subject was developed in 1974 and contains 480,184 square feet of rentable area. Additional site improvements include a management/leasing office, asphalt paved driveways and surface parking areas, concrete walkways, fitness center, business center, two outdoor swimming pools, tennis courts, clubhouse, game room, laundry facilities, and mature landscaping. The complex, locally known as the Lakeside Apartments, is classified as a Class B apartment community by local market standards. The property is currently 92.1% occupied and is in average physical condition. The subject property is more fully described, legally and physically, within the attached report.

Based on the analysis contained in the attached report, the Market Value of the Fee Simple Interest in the subject property, free and clear of mortgage financing, as of April 21, 2010, is:

FORTY-EIGHT MILLION EIGHT HUNDRED THOUSAND DOLLARS
($48,800,000)

This letter must remain attached to the following report, which contains the pages found in the Table of Contents on Page i. The attached report was prepared in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP) as set forth by the Appraisal Foundation and in accordance with the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. Please also refer to the Basic Assumptions and Limiting Conditions section of the report that includes Extraordinary Conditions/Special Assumptions that were considered in the valuation of the subject property.

COGENT Realty Advisors, LLC
Commercial Real Estate Valuation, Consultation, Due Diligence
5307 E. Mockingbird Lane, Suite 1050, Dallas, Texas 75206
Tel: 214.363.3373 Fax: 214.369.4388

Mr. Derek McCandless	May 19, 2010
NPI Equity Investments, Inc.	Page 2

It has been a pleasure to be of service to you. Please do not hesitate to call with any questions you may have regarding our assumptions, observations or conclusions.

Respectfully submitted,

COGENT REALTY ADVISORS, LLC

By:	Steven J. Goldberg, MAI, CCIM	By:	Robert T. Don
	Managing Partner		Senior Appraiser

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page i

INTRODUCTION

Title Page
Letter of Transmittal
Table of Contents	i
Certificate of Appraisal	ii
Basic Assumptions and Limiting Conditions	iii
Subject Property Photographs & Maps	v
PREMISES OF THE APPRAISAL
Summary of Salient Facts and Conclusions	1
Property Identification	3
Sales History	3
Purpose and Scope of the Appraisal	3
Definition of Value	4
Property Rights Appraised	4
Intended Use and User of the Appraisal and Reporting	4
Exposure and Marketing Periods	4
PRESENTATION OF DATA
Regional and Area Analysis	6
Neighborhood Analysis	11
Site Analysis	14
Improvement Analysis	16
Zoning Analysis	20
Real Estate Assessment and Taxes	21
MARKET ANALYSIS
Apartment Market Analysis	23
Market Rent Analysis	28
ANALYSIS OF DATA AND CONCLUSIONS
Highest and Best Use	36
Valuation Process	38
Income Capitalization Approach	40
Sales Comparison Approach	48
Reconciliation and Final Value Conclusion	53
ADDENDA
Additional Subject Property Photographs
Improved Sales Photos
Appraiser Qualifications

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page ii

CERTIFICATE OF APPRAISAL

We, Steven J. Goldberg, MAI, CCIM and Robert T. Don, certify that to the best of our knowledge and belief:

The statements of fact contained in this appraisal are true and correct.

The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and my personal, unbiased professional analyses, opinions, and conclusions.

We have no present or prospective interest in the property that is the subject property of this appraisal, and have no personal interest or bias with respect to the parties involved.

Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event

Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) as promulgated by the Appraisal Standards Board of the Appraisal Foundation, the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute.

No one other than the undersigned assisted in the preparation of this appraisal.

Robert T. Don has made a personal inspection of the property that is the subject of this appraisal on April 21, 2010. Steven J. Goldberg, MAI did not inspect the subject property.

This appraisal was not prepared in conjunction with a request for a specific value or a value within a given range or predicated upon loan approval.

We have the knowledge and experience necessary to perform this appraisal assignment and have extensive experience in the appraisal of similar properties.

As of the date of this appraisal, Steven J. Goldberg, MAI has completed the requirements under the continuing education program of the Appraisal Institute.

The use of this report is subject to the requirements of the Appraisal Institute relating to review its duly authorized representatives.

Steven J. Goldberg, MAI, CCIM is certified to conduct business in the State of Texas as a General Real Estate Appraiser (TX-1320987G) and has been issued a Temporary Practice License by the State of Illinois to appraise the subject property (License No: 572.002881). Robert T. Don is certified to conduct business in the State of Texas as a General Real Estate Appraiser (TX-1322732G) and has been issued a Temporary Practice License by the State of Illinois to appraise the subject property (License No: 572.002871).

COGENT REALTY ADVISORS, LLC

By:	Steven J. Goldberg, MAI, CCIM	By:	Robert T. Don
	Managing Partner		Senior Appraiser

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page iii

BASIC ASSUMPTIONS AND LIMITING CONDITIONS

This appraisal report is subject to the following assumptions and limiting conditions:

1.	No responsibility is assumed for the legal description or for matters including legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated.
2.	The property is appraised free and clear of any or all liens or encumbrances unless otherwise stated.
3.	Responsible ownership and competent property management are assumed.
4.	The information furnished by others is believed to be reliable. However, no warranty is given for its accuracy.
5.	All engineering is assumed to be correct. The plot plans and illustrative material in this report are included only to assist the reader in visualizing the property.
6.	It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them.
7.	It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined, and considered in the appraisal report.
8.	It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless nonconformity has been stated, defined, and considered in the appraisal report.
9.	It is assumed that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based.
10.	It is assumed that the utilization of the land and improvements is within the boundaries or property lines of the property described and that there is no encroachment or trespass unless noted in the report.
11.	The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used.
12.	Unless otherwise stated, possession of this report, or a copy thereof, does not carry with it the right of publication.
13.	The appraiser, by reason of this appraisal, is not required to give further consultation, testimony, or be in attendance in court with reference to the property in question unless arrangements have been previously made.
14.	Unless otherwise stated, neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser, or the firm with which the appraiser is connected) shall be disseminated to the public through advertising, public relations, news, sales, or other media without prior written consent and approval of the appraisers.

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page iv

15.	Unless otherwise stated in this report, the existence of hazardous substances, including without limitation asbestos, polychlorinated biphenyls, petroleum leakage, or agricultural chemicals, which may or may not be present on the property, or other environmental conditions, were not called to the attention of nor did the appraiser become aware of such during the appraiser’s inspection. The appraiser has no knowledge of the existence of such materials on or in the property unless otherwise stated. The appraiser, however, is not qualified to test such substances or conditions. If the presence of such substances, such as asbestos, urea formaldehyde foam insulation, or other hazardous substances or environmental conditions, may affect the value of the property, the value is predicated on the assumption that there is no such condition on or in the property or in such proximity thereto that it would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired.
16.	The Americans with Disabilities Act (“ADA”) became effective January 26, 1992. The appraiser has not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since the appraiser has no direct evidence relating to this issue, he did not consider possible non-compliance with the requirements of the ADA in estimating the value of the property.
17.	Former personal property items such as kitchen and bathroom appliances are now either permanently affixed to the real estate or are implicitly part of the real estate in that tenants expect the use of such items in exchange for rent and never gain any of the rights of ownership. Furthermore, the intention of the owners is not to remove the articles which are required under the implied or express Warranty of Habitability. The accounting for the short-lived nature of such items is reflected in a reserves for replacement expense category.

EXTRAORDINARY ASSUMPTIONS/SPECIAL CONDITIONS

1.	We have not been provided with a current survey, architectural plans or other specifications for the subject property. Therefore, we have relied upon data obtained from public records, our cursory inspection of the property and client provided rent roll data and floor plans for the purpose of estimating the site and building size and other details pertaining to the existing improvements.
2.	Our inspection of the property comprised an overview of the exterior common areas as well as the interior of a random sampling of individual units. Our analysis is conditioned upon the assumption that the remaining units are representative of similar condition and layout as the units inspected.
3.	The scope of our inspection of the subject property is limited to a cursory overview for valuation purposes only. All electrical, plumbing, mechanical and structural systems are assumed to be in proper working order. An inspection by a licensed contractor and/or engineer is recommended for further detailed information regarding the condition of the subject property.

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page v

SUBJECT PROPERTY PHOTOGRAPHS

View of typical building

View of typical living area

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page vi

REGIONAL MAP

NEIGHBORHOOD MAP

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 1

	SUMMARY OF SALIENT FACTS AND CONCLUSIONS
Date of Value	April 21, 2010
Date of Inspection	April 21, 2010
Property Name	Lakeside Apartments
Property Address	4800 Lake Trail Drive
	Lisle, Illinois 60532
Property Location	East side of Fender Road north of Ogden Avenue, approximately 1/2 mile south of I-88 (Ronald Regan Memorial Tollway), in the western portion of the Lisle Township, Illinois. The subject neighborhood is a stabilized suburban area located approximately 24 miles west of downtown Chicago, Illinois.
Purpose and Use	Estimate the Market Value of the Fee Simple Interest in the subject property as of April 21, 2010, free and clear of financing. The appraisal was prepared for NPI Equity Investments, Inc. to provide valuation in conjunction with asset management purposes.
Site Size	Irregular shaped site that contains a total of 27.62 acres
Zoning	“R-4” Multifamily Residential — Township of Lisle.
Improvements	A 568-unit garden apartment complex completed in 1974 with 30 residential buildings, a freestanding management office/clubhouse building, two outdoor swimming pools, tennis courts, and asphalt-paved surface drives and parking areas. The complex is classified as a Class B apartment community by local market standards. The property is operating at stabilized occupancy and is in generally average condition.
Tax Identification	Parcel Numbers 08-09-100-027, 028 and 029 (Lisle Township Assessor)
2009 Assessed Value	$12,093,800
Highest and Best Use
As If Vacant	Eventual multifamily development.
As Improved	Continued use of the existing improvements.

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 2

VALUATION INDICATIONS

Income Capitalization	$	48,800,000
Stabilized NOI	$	3,417,094
Cap Rate		7.0	%
Value per Unit	$	85,915
Value per Sq Ft	$	101.63
Sales Comparison	$	48,300,000
Value per Unit	$	85,000
Value per Sq Ft	$	99.53
Cost Approach		N/A
APPRAISED VALUE	$	48,800,000

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 3

	PREMISES OF THE APPRAISAL
Identification	The subject property consists of the land and improvements at 4800 Lake Trail Drive within the Township of Lisle, DuPage County, Illinois. The Lisle Township Assessor identifies the property by Tax Parcel Identification Numbers 08-09-100-027, 028 and 029. The property consists of a 27.62-acre site improved with a 568-unit apartment complex known as Lakeside Apartments.
Sales History of the Subject Property	According to public records, ownership of the subject property is vested in National Property Investors III. The current owner acquired title to the property through a deed transfer recorded on December 18, 1980. We are not aware of any arms length transfers of ownership within the three-year period prior to the effective date of value. It is our understanding that the subject property is not being listed for sale and we are not aware of any contracts of sale pending as of the date this report was prepared.
Purpose and Scope of the Appraisal	The purpose of the appraisal is to estimate the market value of the subject property as of the date of value. It is the intent of the appraisers that the analysis, opinions and conclusions of this report be considered an unbiased, objective investigation performed by a disinterested third party with complete objectivity as to the outcome of the analysis.
	According to the Appraisal Institute’s Code of Professional Ethics and Uniform Standards of Professional Appraisal Practice, the scope of the appraisal is cited as “the extent of the process of collecting, confirming, and reporting data” included in an appraisal report. All appropriate data deemed pertinent to the solution of the appraisal problem has been collected and confirmed. In our appraisal of the subject property, we have:
	1.	Inspected the subject property and its environs.
	2.	Reviewed demographic and other socioeconomic trends pertaining to the city and region.
	3.	Examined regional apartment market conditions, with special emphasis on the subject property’s apartment submarket.
	4.	Investigated lease and sale transactions involving comparable properties in the influencing market.
	5.	Reviewed the existing rent roll and discussed the leasing status with the building manager and leasing agent. In addition, we have reviewed the subject property’s recent operating history and those of competing properties.
	6.	Utilized appropriate appraisal methodology to derive estimates of value.
	7.	Reconciled the estimates of value into a single value conclusion.

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 4

Definition of Market Value	Market Value is defined by the Appraisal Institute, The Dictionary of Real Estate Appraisal, Fourth Edition, Chicago, Illinois, Appraisal Institute, 2002, as:
	The most probable price which a specified interest in real property is likely to bring under all of the following conditions:
	1.	Consummation of a sale occurs as of a specified date.
	2.	An open and competitive market exists for the property interest appraised.
	3.	The buyer and seller are each acting prudently and knowledgably.
	4.	The price is not affected by undue stimulus.
	5.	The buyer and seller are typically motivated.
	6.	Both parties are acting in what they consider their best interest.
	7.	Marketing efforts were adequate and a reasonable time was allowed for exposure in the open market.
	8.	Payment was made in cash, in U.S. dollars or in terms of financial arrangements comparable thereto.
	9.	The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.
Property Rights Appraised	Fee Simple Estate. A Fee Simple Estate is defined in The Dictionary of Real Estate Appraisal, Fourth Edition, Chicago, Illinois, Appraisal Institute, 2002, as:
	“Absolute ownership unencumbered by any other interest or estate, subject only to the limitations of the four powers of government (eminent domain, escheat, police power and taxation)”.
Intended Use and Intended User	The intended user of this report is NPI Equity Investments, Inc. It is understood that this appraisal will be utilized by the intended user as an aid in asset evaluation and financial reporting. All others reading or relying on this appraisal report are considered unintended users of this appraisal. The appraisal cannot be used for any other reason than that stated above. Should anyone other than the client read or rely on this report, no fiduciary obligation is owed by the appraisers to that party. The appraisers are not responsible for unauthorized use of this report.
	This appraisal has been prepared in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP) as promulgated by the Appraisal Standards Board of the Appraisal Foundation as well as the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. The presentation of data and results of our analysis are presented in a Self-contained Report format as set forth under Standards Rule 2-2 of the USPAP.
Exposure Period	According to the previously stated definition of Market Value, the property must be allowed a reasonable time to be exposed in the open market to

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 5

achieve the appraised value. Exposure is defined by the Appraisal Institute, The Dictionary of Real Estate Appraisal, as:
•	The time a property remains on the market.
•	The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. Exposure time is always presumed to occur prior to the effective date of the appraisal. The overall concept of reasonable exposure encompasses not only adequate, sufficient and reasonable time but also adequate, sufficient and reasonable effort. Exposure time is different for various types of real estate and value ranges and under various market conditions.
Review of transfer records suggests that there is an active investor market for good quality apartment properties; however marketing times have increased over the past year. Conventional sources of capital are limited in the current economic environment. Mortgage underwriting has become more conservative over the past year and a greater level of equity is now required to obtain financing. This factor has caused overall capitalization rates and investment yields to increase over the recent past and has impacted sales activity for most types of commercial real estate.
We believe that if the subject property were exposed to the market for a reasonable period of time prior to the effective date of this appraisal, which we consider to be a period of up to 12 months, the subject property would transfer at an appropriate price, that is to say, the appraised value. Support for this exposure period is provided by the Korpacz Real Estate Investor Survey First Quarter 2010, which indicates that marketing times for apartment properties in the national market range from 1 to 18 months. The average marketing time equates to 8.06 months, up from 6.70 months reported one year ago. This marketing period is supported by data in the local market.
We acknowledge that in appraising the property to sell after the aforementioned exposure period, we must place most emphasis on the buyer’s expectations and yield requirements. The value conclusion rendered for the property through implementation of the Income Capitalization Approach has been accorded most significance as this technique most closely emulates buyer’s expectations and yield requirements. The market value estimate concluded herein assumes an exposure and marketing period of up to 12 months has occurred.

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 6

	REGIONAL AND AREA ANALYSIS
Introduction	The subject is in the western portion of Lisle Township, DuPage County, Illinois. DuPage County is just to the west of Cook County, Illinois and is a part of the Chicago-Gary-Kenosha Consolidated Metropolitan Statistical Area (CMSA). Lisle is a near western suburban community that is approximately 24 miles west of Chicago’s central business district.
Population	Chicago-Gary-Kenosha CMSA consists of the following 13 counties: Cook, DuPage, Kane, Lake, McHenry, Will, DeKalb, Grundy, Kankakee and Kendall Counties in Illinois; Lake and Porter Counties in Indiana; and Kenosha County in Wisconsin. Consolidated Metropolitan Statistical Areas (CMSA’s), sometimes called “major metropolitan areas,” are composed of two or more adjoining metropolitan areas, which have demonstrated some economic linkage. The metropolitan areas, which are joined into a CMSA, are called Primary Metropolitan Statistical Areas (PMSA). The Chicago-Gary-Kenosha CMSA consists of the Chicago, Gary, Kankakee, and Kenosha PMSA’s. The Chicago-Gary-Kenosha CMSA’s population increased from 8,239,820 in 1990 to 9,157,540 in 2000. This represented an 11.1% increase in population over the decade.
	The Chicago area continues to grow outward along major arterial routes and commuter rail lines. As a suburban community, Lisle is a near western suburb of the Chicago Metropolitan Area. The Chicago Metropolitan Area, the third largest metropolitan area in the United States, consists of more than 4,600 square miles of land and is located at the western foot of Lake Michigan. Six Illinois counties, including Cook, DuPage, McHenry, Will, Lake, and Kane, comprise Chicago’s Standard Metropolitan Statistical Area (SMSA); the City of Chicago serves as its focal point. These six counties, in conjunction with the City of Chicago, form an interlocking economic structure.
	According to a survey of forecasters by the Urban Land Institute, Chicago ranks among the top 10 cities in the nation in terms of growth potential, based on rankings in several categories including real estate, economic growth potential and relocation potential.
	The 2000 census count of the population for the City of Chicago proper was 2,896,016, an increase of 4.0% from 1990. The metropolitan Chicago area had a total population estimate of 8,091,720, indicating an 11.4% increase for the same period. Total area population has increased throughout the last census period (1990-2000).
	In the 2000 census, the City of Chicago showed its first population increase since 1950 with a 4.0% gain. However, suburban growth throughout this same period has ranged from 15.7% to 41.9% in the five collar counties. While the overall Cook County population increased by 5.3% since the last census count, suburban Cook County population grew

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 7

by 6.8%. The shift in population to suburban areas has been a nationwide, rather than a localized trend.

As of 1994, Chicago’s Primary Metropolitan Statistical Area was redefined based on 1990 census commuting data. The previous PMSA included Cook, DuPage, and McHenry Counties. The new PMSA adds DeKalb, Grundy, Kane, Kendall, Lake, and Will Counties to the previous three. The addition recognizes the expanded reach and interconnectivity of Metropolitan Chicago.

POPULATION TRENDS

	1980		1990		2000		2009
Chicago MSA		7,869,542		8,065,633		9,098,316		9,645,078
Cook County		5,253,655		5,105,067		5,376,741		5,287,037
DeKalb County		74,624		77,932		88,969		107,333
DuPage County		658,835		781,666		904,161		932,541
Will County		324,460		357,313		502,266		685,251
Kane County		278,405		317,471		404,119		511,892
Lake County		440,372		516,418		644,356		712,567
McHenry County		147,897		183,241		260,077		320,961

Employment	The economic diversification of Chicago has been a major factor contributing to its growth and stability. As displayed in the following chart, Chicago’s largest companies are not concentrated in any one industry. This characteristic of the local economy helps cushion against dramatic swings in the economic cycle.
	The primary components of the area economy are the service, trade, government and manufacturing sectors. Manufacturing, with employment of 315,300 in the nine-county PMSA, is a major component of the economic base, with the largest manufacturing sectors being fabricated metals, industrial machinery, electronic equipment, and printing & publishing. The services sector leads the industry employment groups, following long-term national trends. Within the Chicago-Joliet- Naperville MSA, the current unemployment rate is at 11.2%.
	Chicago is one of the major financial capitals of the world and its influence continues to grow. Its five stock and commodity exchanges establish the city as an international financial trading center. The exchanges headquartered here include the Midwest Stock Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade, and the Chicago Board of Options Exchange. Chicago leads the world in commodity trading, handling over 90% of the world’s futures contracts. In the past several years, over 52 foreign banks have opened offices in Chicago, an indication of the city’s growing international influence.
	All of the nation’s top 10 banks have offices here with metropolitan bank assets increasing over 45% to over $90 billion in just five years. As a manufacturing, banking, and corporate center, the Chicago central business district has over 109 million square feet of office space; the metropolitan area has about 165 million square feet. Of the 500 largest United States corporations listed in Fortune Magazine, 52 are located in

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 8

the Chicago area and most others have regional or branch offices located in Chicago.

AREA EMPLOYMENT BY INDUSTRY SECTOR

Sector	March 2010			October 2009
Mining and Other		1,200			1,400
Construction		105,000			139,700
Manufacturing		315,300			318,000
Trade, Transportation & Utilities		712,200			720,500
Information		74,400			74,800
Financial Activities		261,500			261,300
Professional and Business		564,900			591,700
Education and Health Services		540,200			541,500
Leisure and Hospitality		311,300			329,700
Other		164,500			168,700
Government		480,900			484,900
Civilian Labor Force		4,107,000			4,050,700
Employment		3,647,100			3,630,000
Unemployment		459,900			420,700
Unemployment Rate		11.2	%		10.4	%

UNEMPLOYMENT RATE TRENDS

	Chicago MSA			State of Illinois			United States
YE 2004		6.30	%		6.10	%		5.40	%
YE 2005		6.00	%		5.30	%		4.90	%
YE 2006		4.50	%		4.50	%		4.40	%
YE 2007		4.90	%		5.50	%		5.00	%
YE 2008		6.20	%		7.60	%		7.40	%
YE 2009		10.00	%		11.00	%		10.00	%

Convention Centers	Exposition centers, such as the lakefront McCormick Place, the Merchandise Mart, and Rosemont’s O’Hare Exhibition Center, make the City of Chicago a world famous trade show and business convention center. Chicago has often attained national prominence as a host city for the nominating conventions of both national political parties. Its success as a convention center is primarily attributable to such features as its central location, extensive transportation facilities, and numerous lodging accommodations, as well as the exposition facilities themselves.
	As a result of Chicago’s strategic location, it has become a central point for all forms of transportation. Located at the junction of four interstate highways, it is the nation’s largest trucking center, offering a comprehensive motor carriage system, which attracts more than 30 million tons of freight annually.
Transportation	Chicago is also a hub of the nation’s railway system, transporting approximately 23 million tons of manufactured goods annually along 18 trunk lines, which operate half the nation’s railway mileage. O’Hare International Airport, located in the far northwest portion of the city, is one of the world’s largest and busiest terminals in regard to air freight shipments and passenger arrivals. It provides connections to domestic points and to most major cities of the world. Other area airports include Midway on the southwest side of Chicago, in addition to many small aircraft airports, scattered throughout the metropolitan area.
	The Port of Chicago serves as a terminal for lake shipping and ocean traffic coming through the St. Lawrence Seaway. It also serves the

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Lisle, Illinois	Page 9

	Illinois River barge traffic from the Inland Waterway System of the Mississippi River. Furthermore, the Chicago area is served by over 630 miles of expressway and by one of the most comprehensive and efficient public transit systems (the Regional Transportation Authority) in the world.
Education/Recreation	The city of Chicago and the suburban areas surrounding it complement each other in offering educational, recreational, and cultural amenities. There are over 50 colleges and universities plus 40 professional and technical schools located throughout the area. Arts, science, and history museums, as well as the theater, opera companies, and symphony orchestras are well represented. The area’s extensive lakefront and system of parks and open spaces (Forest Preserve Districts) provide residents with year round recreational entertainment.
Economy	The following economic data was provided by Moody’s Economy.com as of Year End 2009.
	Job losses accelerated in 2009 as firms trimmed payrolls in anticipation of a sluggish year ahead, pushing Chicago-Naperville-Joliet deeper into recession. Job losses are accelerating in manufacturing and in white- collar service industries such as information and business/professional services. The jobless rate has climbed to 10.5%, making the 4% to 5% rates from earlier this decade a distant memory.
	Chicago’s recession will continue a pattern of rising unemployment among secondary, white-collar firms as construction and manufacturing declines abate. While firm-specific figures are difficult to identify due to the small size of the industries’ employers, state-level WARN notices show upcoming layoffs in a number of finance and information firms. Chicago’s metro-wide office vacancy rate is 16.8%, slightly above the national average, but is expected to rise further as office-using jobs are expected to receive the lion’s share of pink slips for the rest of 2010.
	Chicago’s housing market will weaken as distressed-home sales flood the market and homeowner equity evaporates. House prices continue to fall, according to the Case-Shiller® monthly house price index. Chicago’s house prices fell 18.6% in May from a year ago and are down 26.8% since the market’s peak in 2007. Sales were up 19.3% in May on a year-ago basis, driven by sales of foreclosed properties at deep discounts. Lower house prices and worsening unemployment rates have been driving worsening consumer credit quality. This is seen in rising delinquency and default rates, both of which are up markedly in Chicago. The housing market will not reach bottom until mid-2010.
	Chicago’s financial health will be imperiled by budget woes in the state and city governments. Mayor Daley’s recent strategy of privatizing large city resources for injections of cash has fallen into disarray with the collapse of the $2.52 billion Midway Airport privatization deal. While the deal was a victim of the financial crisis, it also effectively closes the

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Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 10

	door to future privatization deals in the short term, forcing the city to cut city jobs by 15% and trim expenses elsewhere.
	The state government is in worse shape as finances tighten and the political atmosphere remains poisoned after the removal of former Governor Blagojevich in January. Governor Quinn’s effort to close a gaping $7 billion budget deficit by raising the state income tax by 50% while cutting spending is receiving little support despite a state mandate to balance the budget. Any budget cuts or tax hikes will likely stall Chicago’s anticipated recovery.
	Chicago’s labor market and production levels will stabilize over the next year despite the dizzying bad news found in recent labor market data releases. The good news comes in jobless claims reports, which suggest that statewide claims are beginning to show small declines in recent weeks, indicating that the pace of job losses is abating. Nevertheless, some employers continue to trim payrolls to match anticipated lower demand for goods in coming quarters, but they expect employment recovery to commence in the second half of 2010. Chicago’s jobless rate will stabilize at 11% over the next year before recovering. Further credit market woes remain the greatest downside forecast risk.
Conclusion	The Chicago economy appears to be near the bottom of its recession, though recovery will be slow and will lack new job creation through 2010. Chicago’s below-average population trends and relative lack of high-technology firms will prevent a more vigorous recovery, and Chicago will remain an average performer over the long-run horizon.

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 11

	NEIGHBORHOOD ANALYSIS
	The Appraisal of Real Estate defines a neighborhood as “a group of complimentary land uses”. A neighborhood should be distinguished from a district, which is defined as “a type of neighborhood that is characterized by homogenous land use”. A neighborhood will contain land uses complimentary to one another. For example, predominantly residential neighborhoods typically contain some commercial properties that provide services for local residents. The boundaries of a neighborhood can be physical such as a lake, stream or major highway or they may be less easily discernible such as changes in prevailing land use or occupant characteristics.
Location	The subject neighborhood is situated within the western sector of the Township of Lisle, DuPage County, approximately 24 miles west of Chicago Central Business District and 15 miles southwest of Chicago O’Hare International Airport. Lisle Township is one of nine townships in DuPage County. Lisle Township covers an area of 35.91 square miles; within Lisle Township are several major population centers including the communities of Naperville, Lisle, Downer’s Grove, and Wheatland, the county seat of DuPage County.
	The subject neighborhood is defined as the area south of I-88 (Ronald Regan Memorial Tollway), east of Washington Street, west of I-355 (North-South Tollway) and north of 75th Street. The subject property is situated in the north-central portion of the defined neighborhood.
Land uses	The influencing factor of the area is I-88 which extends westerly thru the neighborhood. The Interstate 88 corridor is referred to as the Illinois Research and Technology Corridor having a heavy concentration of technology and research companies. The Fermi National Accelerator Laboratory is situated on 6,800 acres located immediately northwest of the subject neighborhood. Fermi Lab is a US Department of Energy national laboratory specializing in high-energy particle physics. Fermi lab is operated by the Fermi Research Alliance, a joint venture of the University of Chicago and the Universities Research Association (URA). The facility employs more than 2,100 people. Several other important research facilities are located in the area including the Argonne National Laboratory situated on 1,700 acres in the southeastern portion of Lisle Township. In addition to research, the area has a high concentration of private companies within headquarters or major offices. Presently, these companies include Acxiom, British Petroleum (BP), Alcatel-Lucent, Microsoft, Molex, and Tellabs. In addition, several universities have campus facilities in the area including; Illinois Institute of Technology, DeVry University, and Northern Illinois University.
	As a result of the high concentration of business, government, education and research facilities, the neighborhood also has a well developed infrastructure of shopping, entertainment, and commercial facilities.

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Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 12

Initially developed in the in the 1970s to 1980s, growth of the area continued to expand thru the 1990s. Since 1990 population within a 3-mile radius of the subject property has expanded by more than 14% and median household income has grown by 20%.

The following table is a summary of demographic trends and forecast for a 3-mile radius from the subject property.

DEMOGRAPHIC TRENDS — 3 MILE RADIUS

	2000		2009		2014 Projection
Population		76,273		82,630		84,964
Households		29,208		32,485		33,700
Median Age		35.7		37.1		36.8
Median Hsld. Income	$	76,079	$	91,003	$	98,112
Per Capita Income	$	37,411	$	48,411	$	50,183

	The subject neighborhood is approximately 90% developed with some vacant land available for future development. The subject neighborhood realized much of its growth during the 1990s and architecture/site planning of area developments reflects contemporary design standards. No blighting or other negative influences were noted. Property in the area generally demonstrates average to good quality construction that appears to have been adequately maintained.
Access	Some of Chicago’s regional transportation routes form the boundaries of the subject neighborhood including I-88 and I-355. I-88, also known as Ronald Regan Memorial Tollway, extends westerly thru DuPage County connecting with Cook County to the east and Kane County to the west. At the northeastern sector of the neighborhood, I-88 interchanges with I- 355 (North-South Tollway). I-355 traverses the eastern portion of DuPage County connecting with I-55 to the south and I-90 to the north. Regional highway access in the area is considered excellent and one of the reasons for the anticipated continued growth of the area.
	Secondary traffic arteries in the neighborhood include the north/south roadways of Naperville Road, Reynolds Street, Mill Street, and Lincoln Avenue. Each of these highways extends to the I-88 corridor providing excellent north-south connections. Important east-west roadways include Ogden Avenue and 75th Street. Ogden Avenue is the important east-west corridor thru the Township of Lisle and has a heavy concentration of retail, office, and commercial development. It interchanges with I-355 at the eastern edge of the subject neighborhood. Regularly schedule bus service, operated by PACE the Regional Transportation Authority occurs along Ogden Avenue. In addition, METRA (Northeast Illinois Regional Commuter Railroad) operates commuter service along it’s BNSF rail line with station stops in Lisle and Naperville.
	As a result of the neighborhood’s proximity to regional transportation routes and primary neighborhood roadways, employment centers, medical facilities and support facilities throughout DuPage County and Chicago area are easily accessible. Access to and within the neighborhood is rated as good.

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Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 13

Conclusion In summary, the subject neighborhood is an established and desirable area that offers a broad range of services and good access to other parts of the city. Road infrastructure throughout the subject neighborhood is considered good. The neighborhood is adequately serviced by public utilities and community facilities. The neighborhood is designed to serve the needs of local residents and businesses. There appears to be no detrimental influences upon the neighborhood which would inhibit the income- producing capabilities of the subject property. The long-term prospects for the neighborhood and the subject property are positive.

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 14

	SITE ANALYSIS
Location	East side of Fender Avenue, approximately 200 feet north of Ogden Avenue and 1/2-mile south of Interstate 88, in the central sector of Lisle Township, DuPage County, Illinois. The subject neighborhood is a stabilized suburban area located approximately 24 miles west of downtown Chicago and 17 miles southwest of the Chicago O’Hare International Airport. The physical address of the property is 4800 Lake Trail Drive, Lisle, DuPage County, Illinois.
Site Area	Total land area equates to 27.62 acres, or 1,203,153 square feet.
Street Frontage	The subject site is situated along the east side of Fender Road and south side of Old Tavern Road. The physical address of the property is 4800 Lake Trail Drive, which is a private internal right-of-way connecting with both Fender and Old Tavern Road, servicing the apartment development. The subject maintains an adequate amount of frontage along both Fender and Old Tavern Roads.
Topography	The site is gently sloping.
Shape	The parcel is irregularly shaped. The size, shape, and configuration of the subject property provide a functional layout, which is similar to competitors.
Excess/Surplus Land	Traffic circulation throughout the property and an adequate number of parking spaces is provided on asphalt paved drives and surface lots. The building setbacks allow for landscaped buffers, similar to surrounding properties. There does not appear to be excess or surplus land.
Utilities	All customary municipal services and utility hookups are provided.
Soil Information	No adverse conditions were readily apparent.
Flood Information	Based on FEMA Flood Insurance Rate Map information available through the Village of Lisle, an undetermined portion of the subject property may be located within a 100-year flood plain hazard area, and special flood hazard insurance may be required. It is suggested that a detailed site survey be conducted to determine the extent to which the property is affected by flood hazard.
Easements and Encroachments	No title report or survey showing the location of easements was provided in connection with this assignment. Thus, it is not possible to make a definitive conclusion regarding any potential impacts on value of the location of any such easements or encroachments. Visual observations of the site revealed no adverse easements or encroachments. It appears as though the site is encumbered by utility and access easements typical of a developed site. It is specifically assumed that any easements, restrictions or encroachments that might appear against the title would have no adverse impact on marketability or value.

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Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 15

Environmental	No readily observable adverse environmental site conditions were noted. No environmental reports were provided for review.
Accessibility/Visibility	Ingress and egress to the property is via two access points off of Fender Road and three points along Old Tavern Road. Accessibility of the site is good. The buildings are at street grade and visible to traffic from public streets.
Improvements	There are 30 residential buildings and a freestanding office/clubhouse building, two in-ground swimming pools, tennis courts, and asphalt-paved surface drives and parking areas.
Conclusions	The site attributes are well suited for the existing development and use.

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 16

	IMPROVEMENT ANALYSIS
Year Built/Renovated	The facility was completed in 1974 as a garden-style apartment complex. Ongoing maintenance has occurred. Between 2006 and 2009 more than $24,000,000 in property capital repairs and renovations were completed on the subject property including exterior and interior refurbishments.
Layout & Configuration	The complex consists of 568 apartment units within 30 residential buildings. Each building is two to three stories with enclosed central stairwells that provide access to individual apartments. The buildings are sited along a network of internal drives that integrate with the parking areas. A freestanding leasing/management office is located near the Fender Road entry. A large lake is the central feature of the project providing a water view amenity to the development. A clubhouse with fitness and business center as well as game room is part of the development.
Leasable Area/Unit Mix	The following chart summarizes the unit mix and sizes of the various floor plans at the subject property as indicated by a review of client provided rent roll data and floor plans.

UNIT MIX AND FLOOR AREAS

Unit Type	Mix		Size (SF)		Total Area
1BR/1BA		175		723		126,525
1BR/1BA		63		723		45,549
2BR/2BA		58		945		54,810
2BR/1BA		110		830		91,300
2BR/2BA		107		945		101,115
3BR/2BA		1		1,107		1,107
3BR/2BA		54		1,107		59,778
Totals/Average		568		845		480,184

Source: Client provided rent roll data and floor plans; compiled by CRA

Floor Plans	As indicated, the property offers a variety of one, two and three-bedroom floor plans, which is typical of the market. Each floor plan provides a living room off a small entry foyer and dining room off the kitchen area.
EXTERIOR
Structure	The foundations consist of reinforced concrete slabs, poured on grade. Structural framing is wood stud walls with interior gypsum-clad drywall.
Floors	The floors are constructed of engineered wood trusses. The ceiling height is approximately 8 to 9 feet.
Walls	The buildings are clad with brick veneer with wood trim.
Windows	Individual unit windows are double-pane glass set in aluminum frames. Entry doors are metal set in wood frames. Sliding glass doors provide access to the porches or balconies.
Roof	The buildings have single pitched roofs with composition shingles. The attic area provides ventilation and is not readily accessible to tenants.
INTERIOR FINISHES
Walls and Ceilings	Textured and painted drywall.

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Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 17

Flooring	Wall-to-wall carpeting throughout except for vinyl tile in the bathrooms, kitchens and entry foyers.
Kitchens	Typical appliance package consisting of a frost-free refrigerator/freezer, full-size electric range with oven, microwave and exhaust fan, dishwasher and garbage disposal. Cabinets are stained wood.
Bathrooms	Shower/tub, toilet, vanity with sink and mirrored medicine cabinet. Tubs have a ceramic tile wainscoting.
Amenities	Coin operated washer and dryers are available in separate laundry areas located within each building.
MECHANICAL SYSTEMS
HVAC	Air and heat is provided by individual split systems with exterior condensers. Tenants are responsible for their own utility charges. The system is similar to competing properties.
Electric Service	Adequate electric service is provided. Each apartment has a separate panel.
Plumbing	Apartment-grade plumbing systems are installed. Each unit is serviced by an electric water heater. Water and sewer charges are billed to tenants separately by the property based on a RUBS billing system.
Fire Protection	No sprinklers are at the apartments, typical for this vintage property in the market.
Security	The property has on-site management and leasing as well as courtesy patrol services.
Elevators	There are no elevators. ADA accessibility issues have not been addressed. This is similar to competitors.
ANCILLARY AREAS
Storage Spaces	No additional storage lockers are provided.
Loading Facilities	Tenant moving occurs from the parking lot. The internal drive is accessible for moving vans.
Landscaping	Landscaping is extensive and consists of mature vegetation. Native trees and shrubs are plentiful throughout the common areas and between buildings. Seasonal color is provided in planting beds at the main entrance point, near the pools and office area.
Parking	The internal driveways incorporates the surface parking lots. There are an adequate number of parking spaces provided. The drives and parking lots are asphalt surface.
Recreational Amenities	Two in-ground swimming pools, clubhouse, business and fitness center, game room, laundry facilities, tennis courts, and water view amenity. Amenities are similar to competitive properties.

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Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 18

FF&E
Personal Property	The subject property has office furnishings and equipment for the staff at the management/leasing office, fitness and business center equipment and various chairs and tables for the pool deck. Kitchen appliances are also part of personal property. The FF&E are similar to competitive properties.
CONDITION/MAINTENANCE
Exterior	Average condition. Overall maintenance appears adequate.
Roof	Average condition. No roof leaks were reported.
Interiors	Average condition. Overall maintenance appears adequate.
Common Area Amenities	Average condition. Overall maintenance appears adequate.
Sidewalks & Paving	Average condition. Overall maintenance appears adequate.
Landscaping	Average condition. Overall maintenance appears adequate.
Environmental Conditions	No readily observable adverse conditions were noted during the site visit.
ELEMENTS OF DEPRECIATION
	Based on our field inspection, we note that some elements of depreciation are present at the subject property.
Physical Deterioration	The overall physical condition is average with adequate maintenance levels. Physical deterioration is primarily limited to general aging and normal wear and tear. No material elements of deferred maintenance were noted during the appraiser’s inspection of the property.
	Between 2006 and 2009 more than $24,000,000 in capital improvements and renovations were completed on the subject property. The redevelopment consisted of site, building exterior, common area and unit interior improvements. The site improvements consisted of landscape enhancements and replacements, repair of retaining walls and correction of erosion problems, lighting upgrades and the addition of patio privacy fences. The building exterior improvements consisted of rear entrance door replacements, gutter improvements, foundation work and exterior painting. The common area improvements consisted of upgrading the leasing center, replacing the current clubhouse with a business center and conference room, fitness center with locker rooms, and addition of a boathouse for lake recreation activities. In addition, the west clubhouse was upgraded and includes a social/game room, locker rooms and new decking. The unit interior improvements consisted of kitchen and bath upgrades, replacement of original fireplaces and other interior renovations.
	According to Marshall Valuation Service, buildings similar to the subject property have an economic life of approximately 50 years. The actual average age of the property is estimated at 36 years. As a result of the recent capital improvements, the effective age is estimated to be less than

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Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 19

	the actual age of the improvements. The effective age is estimated at approximately 25 years.
Capital Improvements	We are not aware of any major capital improvements planned in the near term.
Functional Obsolescence	The subject property represents standard design, systems and floor plans consistent with traditional garden style apartment complexes. The property has operated at rental rates and occupancy levels that are consistent with that of other similar properties within the influencing market, attesting to its functional adequacy and market acceptance. Considering these factors, no adjustment for functional obsolescence is required.
External Obsolescence	External obsolescence is a loss in value resulting from conditions that are present outside the subject property and is usually incurable. No site- specific external obsolescence was noted. Most, if not all of the adjacent properties and nearby uses benefit the subject property. However, external obsolescence attributable to current market conditions is applicable.
Conclusions	The subject improvements have adequate functional utility, conform well to the general character of the neighborhood and are generally similar to competitors.

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 20

	ZONING ANALYSIS
District	The subject site is under Lisle’s zoning jurisdiction and is situated in the “R-4” Multifamily Residential District. It is the purpose of the” R-4” District to encourage the establishment and preservation of a range of medium to high density residential neighborhoods characterized by a mixture of multi-family building styles
Uses	The primary intended use of land in this district is higher intensity residential uses including multifamily development. Other complimentary uses are allowed outright or through a special use permit.
Bulk Restrictions	The following are general building restrictions applicable to developments within the “R-4” zoning district. A detailed overview of applicable restrictions is available from the Village of Lisle Community Development Department.

Maximum Building Height:	50 feet
Minimum Lot Area:	15,000 square feet
Minimum Lot Area/Dwelling Unit:	2,400 square feet
Maximum Lot Coverage:	50 percent
Parking:	2 spaces per dwelling unit

Compliance	The existing improvements are built to a density of about 1 unit per 2,111 square feet of lot area, an amount which is less than the required 2,400 square feet per unit, making the subject property non-conforming to the current “R-4” requirements.
	Based on the subject’s unit count, a total of 1,136 spaces are required. Management indicated that the existing amount of parking is sufficient to satisfy tenant’s needs, however they were not able to provide a detailed parking count. In the absence of a detailed parking count, the subject property’s compliance to the parking requirement is not known.
Conclusions	The subject property appears to be a permitted but non-conforming use with respect to density of development. Should 50% or more of the value of the property suffer damage or destruction it would have to be rebuilt in accordance with current zoning requirements.

COGENT Realty Advisors, LLC

Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 21

	REAL ESTATE ASSESSMENTS AND TAXES
Assessor’s Identification	The subject property is identified by the Lisle Township Assessor as being parcel numbers: 08-09-100-027, 028 and 029.
Overview	Real property taxes are based on multiplying the “Assessment”, which is 33.3% of the “Fair Market Value” (FMV) as determined by the Lisle Township Assessor, and the Tax Rate, which is determined by DuPage County. Real property taxes include amounts for the city, county and school as well as other municipal and special assessing districts.
	The tax year is based on a calendar year, payable in arrears. The FMV is supposed to reflect total property value as of January 1 of each year. The Tax Rate is typically determined after the assessments have been finalized prior to billing in April. Payment is due in two installments (1st half in June and 2nd half in September).
	The assessor can use all three of the standard appraisal methods to establish an equitable FMV, and the amount is not automatically changed due to a sale. Countywide revaluations are required at least every three years; however, the assessor has the authority to re-evaluate property annually. According to the assessor, a property’s sale price does not directly impact the assessment during the subsequent revaluations but is included in the general market pricing trend.
	The subject property is under the taxing jurisdiction of the Village of Lisle, Lisle Township, Unit School District 203, and DuPage County.
Assessments	The subject’s 2009 total assessment is $11,498,850, or $20,244 per unit.
Comparable Assessments	Similar properties within the subject property’s immediate vicinity were surveyed to ascertain the reasonableness of the subject property’s current assessment. The subject property’s assessment appears to be reasonable. The properties are included in the subject’s tax group by the assessor due to similarities in taxing district, building age and size.

TAX COMPARABLES

Property	YOC		Assessed Value		Total Units		Per Unit Assessment
Subject Property		1974	$	11,498,850		568	$	20,244
Green Trails		1987	$	10,559,160		440	$	23,998
Country Villas		1971	$	3,030,820		160	$	18,943
Brookdale on the Park		1986	$	7,512,840		252	$	29,813

Source: Township Assessor Records, compiled by CRA

Property Tax Abatement	The subject property does not participate in any property tax abatement programs.
Tax Rate	Tax rates have remained relatively stable over the past several years as valuations have increased modestly. The 2009 total tax rate applicable for all taxing authorities with jurisdiction over the subject property equates to $6.2199/$100 of assessed value.

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Lakeside Apartments	May 19, 2010
Lisle, Illinois	Page 22

Real Estate Tax Expense The following is a summary of the tax assessment and expenses for the three tax parcel numbers that represent the subject property.

CONSOLIDATED TAX ESTIMATE — 2010 TAX YEAR

Land Value	$	1,988,060
Improvement Value	$	9,510,790
Total Assessed Value	$	11,498,850
Tax Rate/$100		0.062199
Total Tax Due	$	715,217

The subject’s real estate tax liability is calculated at $715,200 rounded. Future increases in reassessments are expected to reflect annual increases near the anticipated inflation rate during the same period. Tax rates are expected to remain relatively stable. The total amount is anticipated to increase at a rate near the long-term average inflation rate.

COGENT Realty Advisors, LLC

Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 23

	APARTMENT MARKET ANALYSIS
Introduction	The following apartment market analysis is designed to provide the reader an understanding of the Chicago area apartment market and the local submarket within which the subject property competes. The most recent source of data available to the appraisers was the “Chicago Metro Area Apartment Market Research Update Report — First Quarter 2010”, prepared by Marcus and Millichap Real Estate Investment Services.
Chicago Area Overview	Apartment fundamentals in the city of Chicago will benefit from the in-migration of suburban renters seeking to take advantage of declining rents and elevated incentives. With completions in the city expected to spike this year and the shadow market remaining a threat, owners of existing assets will continue to ramp up concessions. For the first time in over two decades, incentives are higher in the city than in the suburbs. Operators in the Loop submarket, for example, currently offer an average of 44 days of free rent, roughly one week more than any other area. As a result, vacancy in The Loop has improved considerably in the last year, particularly in the Class A sector, where vacancy has decreased 640 basis points. Vacancy will improve further when hiring in traditional white-collar industries resumes.
	While increased renter demand bodes well for conditions in the city, transaction velocity will remain measured this year as a result of still modest listing activity. Value-add plays will dominate deal flow in the coming months, especially for mixed-use properties in gentrified neighborhoods that will allow for healthy NOI increases once economic conditions firm. While deliveries will be limited in the suburbs, key metrics will remain soft through the first half of 2010 as the local labor market contracts. Renters with stable employment continue to move to the city to capture falling rents, while other tenants are seeking properties with more affordable rents in an attempt to control costs. Vacancy rates in the Southeast Cook County, Southwest Cook County and Joliet submarkets have outperformed other suburban areas in the last year, as these areas have the lowest rents in the metro. In response to this trend, owners in the neighboring submarkets of O’Hare, Glendale Heights/Lombard and Woodridge/Lisle have enacted steep rent cuts to bring in tenants. As a result, vacancy increases in these areas will begin to taper off later this year, potentially attracting investors. Nevertheless, cap rates in these submarkets will remain roughly 25 basis points higher than the suburban average, currently in the mid-8 percent to high-9 percent range.
Economy	Through the loss of roughly 116,000 positions, payrolls in Chicago have thinned by 2.7 percent during the last 12 months. Employment is strengthening however, as approximately 30,000 jobs were generated in the first quarter of 2010. Cuts in the construction and trade, transportation and utilities sectors continue to weigh down the local labor market and hinder apartment demand. Over the past year, an aggregate of nearly 54,000 jobs have been eliminated in these segments, declines of 13.0 percent and 3.3 percent, respectively.

COGENT Realty Advisors, LLC

Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 24

	Permit issuance remains minimal as many builders await further signs of an economic recovery. During the last 12 months, single-family permitting has dropped 21 percent to 5,200 units, while multifamily builders have pulled permits for 1,970 units, down 70 percent from one year ago.
	For the first time since mid-2007, the metro median home price increased on a year-over-year basis through the first quarter 2010, advancing 2.8 percent to $199,300, driven largely by greater competition for foreclosed homes. The median household income level, meanwhile, has fallen 3.2 percent to $53,100 per year, creating a $7,500 surplus in the income needed to finance a median-priced home.
	Led by hiring rebounds in the professional and business services and trade, transportation and utilities segments, the Chicago labor market are projected to gain traction in the second half of 2010, causing payrolls to expand by 1.2 percent with the addition of 49,500 jobs. Last year, roughly 234,400 positions were eliminated.
Construction	Construction activity remains elevated in the City of Chicago. Developers have completed 1,455 units over the last 12 months, expanding inventory by 0.9 percent. In the first quarter 2010, area stock grew by 0.5 percent. Competitive threats from condos employed as rentals will increase in the near term. Nearly 3,650 for-sale units are being built in the city, 58 percent of which are in the Gold Coast submarket, which will present challenges for area Class A owners. Deliveries in the city will jump this year as many projects that broke ground before the downturn come online. Approximately 1,860 units will be delivered, following the addition of 720 units in 2009.
	Barriers to entry have kept apartment construction in the suburbs modest in recent years. Over the past 12 months, builders have completed 645 units in four developments, all of which began lease-up in the second quarter of 2009. The suburban planning pipeline consists of 5,550 units, roughly 23 percent more than one year ago. Most of these projects are scheduled for the Glenview/ Evanston submarket. Only one development is slated to debut in the suburbs this year. The 84-unit Commons at Town Center is due for delivery in the East Lake County submarket during the second quarter.
Vacancy and Rents	A spike in completions and competition from shadow stock drove up vacancy in the City of Chicago 70 basis points over the past year to 7 percent in the first quarter 2010. Most of the increase occurred in the first three months of 2010, when vacancy jumped 50 basis points. Owners continue to cut rents and expand concessions to counteract rising vacancy. Asking rents fell 2.1 percent year-over-year to $1,148 per month in the first quarter 2010, while effective rents declined 2.9 percent to $1,051 per month. Resumed hiring in the second half of 2010 will support renter demand, as vacancy is forecast to tick up just 30 basis points in 2010 to 6.8 percent. Asking rents will end 2010 at $1,141 per

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Lisle, Illinois May 19, 2010
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	month, while effective rents will reach $1,035 per month, annual decreases of 2.0 percent and 2.4 percent, respectively.
	While vacancy in the suburbs has risen 110 basis points over the last 12 months to 6.9 percent, demand has been fairly stable recently, as the average rate has increased just 20 basis points during the past two quarters. Asking rents ended the first quarter 2010 at $949 per month, an annual contraction of 3.1 percent, while effective rents slid 3.6 percent to $872 per month. Despite meager completions, vacancy will climb 40 basis points to 7.2 percent by year end 2010. Asking rents are anticipated to fall 2.8 percent to $935 per month, while effective rents will drop 3 percent to $860 per month.
Sales Trends	While the number of portfolio assemblage deals has dropped off, a considerable increase in distressed and REO sales caused transaction velocity for City of Chicago properties to accelerate modestly during the most recent 12-month period. The rise in troubled and foreclosed assets, coupled with owners adjusting pricing to match market conditions, has resulted in a 25 percent year-over-year drop in the median price to $59,500 per unit. Cap rates in the City of Chicago vary widely depending on location and product type. Initial yields for traditional apartment complexes average in the low-6 percent to high-7 percent range, while first-year returns for mixed use properties average roughly 75 basis points higher.
	Activity from value-seeking buyers has increased deal flow in the suburbs over the past year. Transaction velocity will continue to accelerate as suburban owners reduce prices to compensate for softening NOIs. With sales of distressed and REO properties elevated, the median price has fallen 17 percent in the last 12 months to $55,800 per unit; however, pricing in close-in submarkets and areas near transportation hubs has held up relatively well during that span. Deal flow in the Glenview/Evanston submarket has spiked over the past year, while sales activity in Oak Park remains the highest in the suburbs. These trends will continue through 2010 as healthy conditions persist.
Capital Markets	The yield on the 10-year U.S. Treasury crept higher near the end of the first quarter 2010, reaching almost 3.9 percent, the bond’s highest yield since June 2009. Bond yields have been rising in response to record auction volume and increasing investor concern surrounding outstanding U.S. debt. Despite some recent upward pressure on the 10-year bond yield, the Federal Reserve’s $1.25 trillion program to purchase mortgage-backed securities has kept overall rates low. The program formally ended on March 31, 2010 which may lead to higher mortgage rates in the coming quarters.
	Multifamily loan originations ticked higher in the fourth quarter 2009 but remained below year-earlier levels. Fannie Mae and Freddie Mac, which proved to be consistent sources of multifamily financing throughout the recession, slowed originations moderately at the end of last year. On average, LTVs are at 65 percent to 75 percent, while DSCRs are 1.20x

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Lisle, Illinois May 19, 2010
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to 1.30x. All-in rates for 10-year loans are in the mid-6 percent range, led by agency rates, which are averaging below 6 percent. Gentle upward pressure on rates will likely persist going forward.

The following table presents the year-over-year vacancy and rental rate data for the Chicago area submarkets. The subject property is located within the Woodridge/Lisle submarket. The data indicates that as of the 1^st quarter 2010 the submarket exhibited an average apartment vacancy of 6.4% which is an increase of 120 basis points over the prior year vacancy. During the same time frame, rental rates decreased 5.2% to a current average effective rental rate of $867 per unit per month. With respect to the operating performance of other suburban submarkets, the subject’s Woodbridge/Lisle location appears to be performing within market averages.

APARTMENT MARKET OVERVIEW BY SUBMARKET

	1st Qtr. 2010			Prior Year			1st Qtr. 2010		Change From
Submarket	Vacancy			Vacancy			Eff. Rent/Unit		Prior Year
Lincoln Park		4.5	%		2.7	%	$	1,091		-5.5	%
Belmont to Montrose		4.8	%		4.1	%	$	1,109		0.3	%
Rogers Park/Uptown		5.6	%		4.4	%	$	759		-2.2	%
South Shore		6.7	%		5.7	%	$	834		-2.0	%
Gold Coast		7.1	%		5.9	%	$	1,484		-3.7	%
City West		11.0	%		10.4	%	$	906		-3.3	%
The Loop		11.0	%		14.8	%	$	1,480		-4.0	%
O’Hare		4.9	%		4.1	%	$	796		-4.5	%
SW Cook County		5.7	%		5.6	%	$	736		-5.3	%
SE Cook County		5.9	%		5.7	%	$	730		-3.1	%
Wheeling		6.0	%		5.2	%	$	941		-3.2	%
Glendale Heights/Lombard		6.2	%		5.8	%	$	977		-2.7	%
Glenview/Evanston		6.3	%		3.9	%	$	958		-2.9	%
Woodridge/Lisle		6.4	%		5.2	%	$	867		-5.2	%
Joliet		6.6	%		6.6	%	$	723		-3.5	%
Aurora/Naperville		6.8	%		5.9	%	$	928		-4.7	%
East Lake County		7.0	%		6.5	%	$	884		-3.4	%
Schaumbaug/Hoffman		7.2	%		6.3	%	$	886		-6.3	%
McHenry County		7.8	%		7.3	%	$	862		-1.7	%
Kane County		7.9	%		6.8	%	$	918		-2.4	%
Glen Ellyn/Wheaton		8.1	%		7.6	%	$	851		-5.8	%
West Lake County		8.1	%		7.5	%	$	840		-0.2	%
Oak Park		8.6	%		4.6	%	$	851		-2.1	%
Palatine		8.6	%		7.4	%	$	1,026		-3.7	%
Downers Grove		8.7	%		6.5	%	$	872		0.2	%

Conclusion

The Chicago apartment market is realizing a great deal of new construction in the face of decreased demand resulting from weakness in the local economy. Most of the new units in the delivery pipeline were planned and started prior to the recession that has taken a grip on the economy. As a result of the high level of new construction and anticipation of only moderate improvement in economic conditions over the forthcoming 12-month period, forecasted absorption is not projected to be sufficient to bolster overall occupancy levels to any great degree. This will likely result in the continuation of rent concessions and minimal prospects for rent growth over the near term.

The subject’s Woodridge/Lisle submarket operates at an occupancy and rent that is consistent with surrounding suburban markets and has experienced similar levels of decline in rental rates and occupancy levels

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Lisle, Illinois May 19, 2010
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as competing submarkets. The Woodridge/Lisle submarket offers good access to major job centers in both the City of Chicago as well as western suburbs, and remains a desirable residential area within the region. As little to no new competitive units are planned for the subject submarket, demand is anticipated to be tied to overall economic conditions and only moderate improvement in overall occupancy is anticipated during 2010. Market conditions in the subject’s submarket are not anticipated to show noteworthy improvement until regional job growth resumes and overall economic conditions show marked improvement. Although the short term prospects for the apartment are soft, long term fundamentals are anticipated to remain stable.

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 28

	MARKET RENT ANALYSIS
Subject Property Leasing	A March 2010 Rent Roll was provided for the subject. The asking rents are summarized in the following table. It should be noted that these rents are the average asking rents only and not the rents currently being paid.
SUBJECT CURRENT ASKING RENT SUMMARY

Type	Floor Plan	Mix		Size (SF)		Total Area		Rent		Rent/SF		Total Rent
1BR/1BA	1A10		175		723		126,525	$	859	$	1.19	$	150,325
1BR/1BA	1C10		63		723		45,549	$	869	$	1.20	$	54,747
2BR/2BA	2A20		58		945		54,810	$	1,049	$	1.11	$	60,842
2BR/1BA	2B10		110		830		91,300	$	949	$	1.14	$	104,390
2BR/2BA	2C20		107		945		101,115	$	979	$	1.04	$	104,753
3BR/2BA	3A20		1		1,107		1,107	$	1,299	$	1.17	$	1,299
3BR/2BA	3B20		54		1,107		59,778	$	1,279	$	1.16	$	69,066
Totals/Average			568		845		480,184	$	960	$	1.14	$	545,422

Competitive Set	In order to determine the market rent for the subject’s apartment units, a survey of comparable apartment complexes considered most similar to the subject was conducted. The subject competes with a number of properties in the area. Due to the large size of the submarket, we included a representative sample of the competitive properties. All of the properties are in close proximity of the subject and define the range of property, unit types and rental rates available in the market. The information regarding the rent comparables was obtained through physical inspections and interviews of rental agents and property managers. The following map illustrates the location of the comparable properties in relation to the subject. Data sheets summarizing details of the subject and comparable properties follow the map.
COMPARABLE RENTAL MAP

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Lakeside Apartments
Lisle, Illinois May 19, 2010
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SUBJECT PROPERTY	Lakeside 4800 Lake Trail Drive Lisle, Illinois
Units	568
Year Built	1974/renovated 2006-2009
Occupancy	92%
Amenities	Electric kitchen appliances including microwave oven, walk-in closets (select units), mini-blinds, and ceiling fans. Complex amenities include two in-ground swimming pools, clubhouse, fitness and business center, game room, tennis courts, lake view amenity, laundry facilities and on site management/leasing.
Concessions	Reduced rents on individual floor plans when determined appropriate by management.
RENTAL DATA

Type	Mix		Size (SF)		Total Area		Rent		Rent/SF		Total Rent
1BR/1BA		175		723		126,525	$	859	$	1.19	$	150,325
1BR/1BA		63		723		45,549	$	869	$	1.20		54,747
2BR/2BA		58		945		54,810	$	1,049	$	1.11		60,842
2BR/1BA		110		830		91,300	$	949	$	1.14		104,390
2BR/2BA		107		945		101,115	$	979	$	1.04		104,753
3BR/2BA		1		1,107		1,107	$	1,299	$	1.17		1,299
3BR/2BA		54		1,107		59,778	$	1,279	$	1.16		69,066
Totals/Average		568		845		480,184	$	960	$	1.14	$	545,422

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Lisle, Illinois May 19, 2010
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COMPARABLE RENTAL 1	Brookdale on the Park 1652 Brookdale Road Naperville, Illinois
Units	252
Year Built	1986
Occupancy	93%
Amenities	Washer/dryer appliances in unit, electric kitchen appliances including microwave oven, walk-in closets, patio/balcony, fireplaces, and mini-blinds. Complex amenities include clubhouse, business and fitness center, outdoor pool, garage and carport parking.
Concessions	Prices change often and rents for individual floor plans are reduced as needed to help bolster occupancy.
RENTAL DATA

Type	Mix		Size		Total Area		Rent		Rent/SF		Total Rent
1BR/1BA		40		750		30,000	$	960	$	1.28	$	38,400
2BR/1BA		62		830		51,460	$	1,094	$	1.32	$	67,828
2BR/1BA		60		1100		66,000	$	1,197	$	1.09	$	71,820
2BR/2BA		48		950		45,600	$	1,152	$	1.21	$	55,296
2BR/2BA		42		1100		46,200	$	1,450	$	1.32	$	60,900
Total/Avg.		252		949		239,260	$	1,168	$	1.23	$	294,244

Comments Property is located three miles west of the subject property.

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Lisle, Illinois May 19, 2010
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COMPARABLE RENTAL 2	Abbey Apartments at Four Lakes 5550 Abbey Drive Lisle, Illinois
Units	200
Year Built	1975
Occupancy	90%
Amenities	Electric kitchen appliances including microwave oven, walk-in closets, patio/balcony, ceiling fans, fireplaces (select units) and mini-blinds. Complex amenities include clubhouse, tennis courts, outdoor pool and internet access.
Concessions	Rents for individual floor plans are reduced as needed to help bolster occupancy. No application fees. Property includes gas heat and other utilities. The following quoted rents were adjusted to reflect utility costs.
RENTAL DATA

Type	Mix		Size		Total Area		Rent		Rent/SF		Total Rent
Efficiency		30		375		11,250	$	710	$	1.89	$	21,300
Studio		35		545		19,075	$	831	$	1.52	$	29,085
1BR/1BA		62		700		43,400	$	957	$	1.37	$	59,334
2BR/1BA		53		950		50,350	$	1,164	$	1.23	$	61,692
3BR/2BA		20		1350		27,000	$	1,504	$	1.11	$	30,080
Total/Avg.		200		755		151,075	$	1,007	$	1.33	$	201,491

Comments Property is located approximately one mile southeast of the subject property.

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 32

COMPARABLE RENTAL 3	Green Trails 2800 Windsor Drive Lisle, Illinois
Units	440
Year Built	1987
Occupancy	95%
Amenities	Washer/dryer appliance in unit, electric kitchen appliances including microwave oven, patio/balcony, fireplaces, ceiling fans, and mini-blinds. Complex amenities include clubhouse, business and fitness center, sports court, tennis courts, outdoor pool, garage and covered parking.
Concessions	Rents for individual floor plans are reduced as needed to help bolster occupancy.
RENTAL DATA

Type	Mix		Size		Total Area		Rent		Rent/SF		Total Rent
Studio		35		525		18,375	$	749	$	1.43	$	26,215
1BR/1BA		80		525		42,000	$	830	$	1.58	$	66,400
1BR/1BA		80		714		57,120	$	999	$	1.40	$	79,920
2BR/1BA		75		925		69,375	$	1,155	$	1.25	$	86,625
2BR/2BA		75		1034		77,550	$	1,189	$	1.15	$	89,175
2BR/2BA		55		1079		59,345	$	1,299	$	1.20	$	71,445
Total/Avg.		400		809		323,765	$	1,049	$	1.30	$	419,780

Comments Property is located l.5 miles south of the subject property.

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 33

COMPARABLE RENTAL 4	Villages on Maple 1769 Robin Lane Lisle, Illinois
Units	300
Year Built	1972/renovated in 2002
Occupancy	94%
Amenities	Washer/dryer appliances in unit, electric/gas kitchen appliances, patio/balcony, and mini-blinds. Complex amenities include clubhouse, business and fitness center, outdoor pool, playground, and clothes care centers.
Concessions	Rents for individual floor plans are reduced as needed to help bolster occupancy.
RENTAL DATA

Type	Mix		Size		Total Area		Rent		Rent/SF		Total Rent
1BR/1BA		60		690		41,400	$	763	$	1.11	$	45,780
2BR/1BA		90		909		81,810	$	863	$	0.95	$	77,670
2BR/1BA		90		951		85,590	$	1,013	$	1.07	$	91,170
3BR/2BA		60		1217		73,020	$	1,250	$	1.03	$	75,000
Total/Avg.		300		939		281,820	$	965	$	1.03	$	289,620

Comments Property is located one mile southeast of the subject property.

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 34

ANALYSIS	The comparable rental properties are all in the immediate vicinity of the subject property and were built between 1972 and 1987, similar to the subject’s effective age post renovation and 1974 original date of construction. The comparables have unit and complex amenities similar to the subject. The rental rates illustrated by the comparable properties provide a good indication as to the appropriate market rent of the subject property.
One Bedroom Units	The subject property offers two (2) one-bedroom floor plans that measure 723 square feet. The rental rates for the subject units under analysis range from $859 to $869 per month, or $1.19 to $1.20 per square foot. The following chart outlines rental rates for similar sized one bedroom floor plans within the competing apartment properties.
ONE-BEDROOM FLOOR PLANS

	Unit Size (SF)	Rent/Month	Rent/SF	Comment
Subject	723	$859	$1.19
	723	$869	$1.20
Brookdale on the Park	750	$960	$1.28	Superior
Abbey Apartments	700	$957	$1.37	Similar
Green Trails	525	$830	$1.58	Superior
	714	$999	$1.40
Villages on Maple	690	$763	$1.11	Similar
Subject Range	723	$859 — $869	$1.19 — $1.20
Comparable Range	525 — 750	$763 — $999	$1.11 — $1.58

The rents for comparable one bedroom floor plans range from $763 to $999 per unit and $1.11 to $1.58 per square foot. The Brookdale on the Park and Green Trails comparable properties are considered to be slightly superior to the subject property with respect to age and amenity package. The Abbey Apartments and Villages on Maple are generally similar to the subject in terms of physical characteristics and amenities. The subject’s rent structure is bracketed by the rents exhibited by competing properties in the influencing market area, and appropriately aligned within the range indicated by the most similar rent comparables (Abbey and Villages on Maple). After considering variances for unit size and amenities offered, the subject’s quoted rent structure is well within the comparable range. The subject’s quoted rent structure appears well supported.

Two-Bedroom Units

The subject property offers three (3) two bedroom floor plans. The subject’s two-bedroom units under analysis range in size from 830 to 945 square feet with rents from $949 to $1,049 per month, or $1.04 to $1.14 per square foot. The comparable two-bedroom units range in size from 830 to 1,100 square feet and have monthly asking rents ranging from $863 to $1,450 or $0.95 to $1.32 per square foot.

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 35

TWO-BEDROOM FLOOR PLANS

	Unit Size (SF)	Rent/Month	Rent/SF	Comment
Subject	830	$949	$1.14
	945	$979	$1.04
	945	$1,049	$1.11
Brookdale on the Park	830	$1,094	$1.32	Superior
	950	$1,152	$1.21
	1,100	$1,197	$1.09
	1,100	$1,450	$1.32
Abbey Apartments	950	$1,164	$1.23	Similar
Green Trails	925	$1,155	$1.25	Superior
	1,034	$1,189	$1.15
Villages on Maple	909	$863	$0.95	Similar
	951	$1,013	$1.07
Subject Range	830 — 945	$949 — $1,049	$1.04 — $1.14
Comparable Range	830 — 1,100	$863 — $1,450	$0.95 — $1.32

	After considering variances for unit size and amenity package, the subject’s quoted rent structure is well within the comparable range. The subject’s rent structure for the two-bedroom floor plans is well supported.
Three-Bedroom Units	The subject property offers two (2) three bedroom floor plans. The subject’s three-bedroom units under analysis measure 1,107 square feet with rents from $1,279 to $1,299 per month, or $1.16 to $1.17 per square foot. The comparable three-bedroom units range in size from 1,217 to 1,350 square feet and have monthly asking rents ranging from $1,250 to $1,504 or $1.03 to $1.11 per square foot.
THREE-BEDROOM FLOOR PLANS

	Unit Size (SF)	Rent/Month	Rent/SF	Comment
Subject	1,107	$1,279	$1.16
	1,107	$1,299	$1.17
Abbey Apartments	1,350	$1,504	$1.11	Similar
Villages on Maple	1,217	$1,250	$1.03	Similar
Subject Range	1,107	$1,279 — $1,299	$1.16 — $1.17
Comparable Range	1,217 — 1,350	$1,250 — $1,504	$1.03 — $1.11

	After considering variances for unit size and amenity package, the subject’s quoted rent structure is well within the comparable range. The subject’s rent structure for the two-bedroom floor plans is well supported.
Conclusions	The subject is expected to continue to capture its fair share of the market at the indicated economic rates. The subject’s potential gross market rent is summarized in the following chart.
SUMMARY OF ECONOMIC RENT POTENTIAL

Type	Mix		Size		Total Area		Rent		Rent/SF		Total Rent
1BR/1BA		175		723		126,525	$	859	$	1.188	$	150,325
1BR/1BA		63		723		45,549	$	869	$	1.202	$	54,747
2BR/2BA		58		945		54,810	$	1,049	$	1.110	$	60,842
2BR/1BA		110		830		91,300	$	949	$	1.143	$	104,390
2BR/2BA		107		945		101,115	$	979	$	1.036	$	104,753
3BR/2BA		1		1,107		1,107	$	1,299	$	1.173	$	1,299
3BR/2BA		54		1,107		59,778	$	1,279	$	1.155	$	69,066
Totals/Average		568		845		480,184	$	960	$	1.136	$	545,422

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 36

	HIGHEST AND BEST USE
Definition	Highest and Best Use in appraisal theory is defined by the Appraisal Institute, The Dictionary of Real Estate Appraisal, 4th Edition, Appraisal Institute, Chicago, Illinois, 2002 as “the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability.”
	There are typically two highest and best use scenarios: The highest and best use of the property as improved and the highest and best use of the site as if vacant. In each case, the use must pass four “tests”; it must be physically possible, legally permissible, financially feasible, and maximally productive.
HIGHEST AND BEST USE AS VACANT
Definition	Highest and Best Use As Vacant is defined as “among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination. The use of a property based on the assumption that the parcel of land is vacant or can be made vacant by demolishing any improvements.”
Physically Possible	The subject site’s size and shape would allow for most uses. Surrounding land uses include retail to the south, single family residential to the north and east, and vacant under-utilized land to the west. Multifamily development would be a complementary land use.
Legally Permissible	The subject site is zoned for medium density multifamily uses. The legally permissible and intended use is homogeneous with surrounding development.
Financially Feasible	Apartment properties have realized decreasing occupancy and rent levels as a result of weakness in the regional and national economies. The existing supply of apartment units in the area appears to be sufficient to satisfy the existing level of demand. Given current market conditions, the financial feasibility for large-scale residential development is questionable at this time. Even if financial feasibility were pronounced, it would be difficult to obtain construction financing and capital in the currently constrained credit market.
Maximally Productive	Given the above discussion, a holding period of the site as vacant is indicated until market conditions improve to the point financial feasibility is evident. The maximally productive use of the site is future development of a multifamily use to its maximum allowed density.
Conclusion	Based upon the preceding analysis, it is our opinion that the Highest and Best Use of the site, as vacant, is for residential development consistent with surrounding land uses when economic conditions improve to a level that permits development.

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 37

HIGHEST AND BEST USE AS IMPROVED
Definition	Highest and Best Use As Improved is defined as “the use that should be made of a property as it exists. An existing property should be renovated or retained as is so long as it continues to contribute to the total market value of the property, or until the return from a new improvement would more than offset the cost of demolishing the existing building and constructing a new one”.
Physically Possible	The subject is improved with a garden-style apartment complex. The complex was built in 1974 and was 92% occupied on the date of inspection. The improvements are functional, and have been adequately maintained with no substantial repairs or renovations needed.
Legally Permissible	The subject property is an allowed use of the site; however, the current density is in excess of that permitted under the subject’s “R-4” multi-family zoning.
Financially Feasible	The complex is achieving its fair share of the market and is capable of maintaining market rents and market occupancy in its current condition. Accordingly, the subject property’s improvements contribute a positive return to value.
Maximally Productive	The property’s improvements generate a return to the real estate in excess of that generated by the underlying land, and there does not appear to be a need for remodeling or repositioning.
Conclusion	Based upon the preceding analysis, it is our opinion that the highest and best use of the site as improved is for the continued residential use.

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 38

	VALUATION PROCESS
Introduction	There are three traditional approaches that can be employed in establishing the market value of the subject property. In practice, an approach to value is included or omitted based on the property type and the quality and quantity of information available in the marketplace. These approaches and their applicability to the valuation of the subject are summarized as follows.
COST APPROACH	The application of the cost approach is based on the principle of substitution. This principle may be stated as follows: no one is justified in paying more for a property than the cost to develop a substitute property of equivalent desirability and utility. In the case of a new building, no deficiencies in the building should exist. The Cost Approach is typically only a reliable indicator of value for (a) new properties; (b) special use properties; and (c) where the cost of reproducing the improvements is easily and accurately quantified and there is no external obsolescence. In all instances, the issue of an appropriate entrepreneurial profit — the reward for undertaking the risk of construction — remains a highly subjective factor.
	In the case of income-producing real estate with some items of depreciation, the cost of construction plays a minor and relatively insignificant role in determining market value. Investors are generally not buying, selling, or lending with reliance placed on the methodology of the Cost Approach to establish value. The Cost Approach has not been processed for purposes of this valuation assignment.
INCOME APPROACH	The Income Capitalization Approach is based on the premise that value is derived by converting anticipated benefits into property value. Anticipated benefits include the present value of the net income and the present value of the net proceeds resulting from the re-sale of the property.
	There are two methods of accomplishing this: (1) direct capitalization of a single year’s income by an overall capitalization rate and; (2) the discounted cash flow in which the annual cash flows and reversionary value are discounted to a present value for the remainder of the property’s productive life or over a reasonable holding (ownership) period.
	The subject property has an adequate operations history to determine the income-producing capabilities over the near future. In addition, performance levels of competitive properties serve as an adequate check as to the reasonableness of the subject property’s actual performance. As such, the Income Capitalization Approach is utilized in this appraisal.
SALES COMPARISON	The Sales Comparison Approach is an estimate of value based upon a process of comparing recent sales of similar properties in the surrounding or competing areas to the subject property. Inherent in and central to this approach is the principle of substitution. This comparative process involves judgment as to the similarity of the subject property and the comparable sales with respect to many value factors such as location, contract rent levels, quality of construction, reputation and prestige, age and condition, and the interest transferred, among others. The value estimated through this

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Lakeside Apartments
Lisle, Illinois May 19, 2010
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	approach represents the probable price at which the subject property would be sold by a willing seller to a willing and knowledgeable buyer as of the date of value.
	The reliability of this technique is dependent upon the availability of comparable sales data, the verification of the sales data, the degree of comparability and extent of adjustment necessary for differences, and the absence of atypical conditions affecting the individual sales prices. Although the volume of sales activity is down as a result of market conditions, our research revealed adequate sales activity to form a reasonable estimation of the subject property’s market value via the Sales Comparison Approach.
RECONCILIATION	The final step in the appraisal process is to reconcile the various value indications into a single final estimate. Each approach is reviewed in order to determine its appropriateness relative to the subject property. The accuracy of the data available and the quantity of evidence are weighted in each approach. The resulting estimate represents the subject property’s market value as defined in the appraisal.

COGENT Realty Advisors, LLC

Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 40

	INCOME CAPITALIZATION APPROACH
VALUATION	We have used the Direct Capitalization method to estimate a value for the subject property. The following income and expense discussion will explain our input for the analysis.
	Direct Capitalization is defined as “a method used to convert an estimate of a single year’s income expectancy into an indication of value in one direct step, either by dividing the income estimate by an appropriate rate or by multiplying the income estimate by an appropriate factor. It further states that: only the first year’s income is considered. Yield and value change are implied, but not identified. The rate at which a stabilized net operating income is converted into value is known as an overall capitalization rate (OAR).” The major tasks involved in this approach to valuing the subject property are:
	1.    Calculate potential gross income from all sources that a competent owner could legally generate.
	2.    Estimate and deduct an appropriate vacancy and collection loss factor to arrive at effective gross income.
	3.    Estimate and deduct operating expenses that would be expected during a stabilized year to arrive at a probable net operating income.
	4.    Develop an appropriate overall capitalization rate to apply to the net operating income.
	5.    Value is estimated by dividing the net operating income by the overall capitalization rate. Any adjustments to account for differences between the current conditions and stabilized conditions are also considered.
REVENUE ANALYSIS
Potential Gross Income	The potential gross income from the apartment unit rent has been calculated to be $545,422 per month or $6,545,064 for the appraised year based on the conclusion derived in the Market Rent Analysis section.
Loss to Lease	Loss to lease considers a loss in income due to leases in effect, whereby effective rental rates are lower than asking, or market, rental rates. In the case of the subject property, the loss to lease also accounts partially for concessions that are offered in the form of reduced rent.
	The operating statements under review indicate that in 2008 the loss to lease factor was 5.9% of gross rent potential. In subsequent years (2009 and 2010 budget) there was no loss to lease reported. Review of the March 2010 rent roll indicates that current rents in place are approximately 1.6% below the market rent estimated above.
	As market fundamentals begin improve, concessions will begin to abate and effective rent levels will escalate to be more in line with asking rents. The loss to lease allowance is processed at 1.5% in the valuation pro forma.

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 41

Concessions	Concessions within the subject’s influencing area are common. Each of the properties surveyed as rent comparables offer some form of rent concession. The concessions consist of reduced rent or free rent over a portion of the lease term. As indicated above, concessions are also accounted for in the loss to lease allowance.
	As a percentage of the gross rent potential, the subject’s historical rent concessions have averaged approximately 5.2% over the preceding two years. The subject’s 2010 budget reports no allowance for concessions they are accounted for in the gross rent potential in the form of reduced rents. As market fundamentals improve, the amount of concessions that landlords are required to offer are anticipated to decline. In consideration of the preceding and our estimation of market rents, concessions are estimated at 1.0% of the gross rent potential.
Vacancy/Credit Loss	The subject has been able to maintain its fair share of market occupancy however market fundamentals have weakened over the recent past. The subject still maintains a relatively high occupancy and is currently 8% vacant.
	The subject’s current 92% level of occupancy is within the range of occupancy levels reported by competitors in the immediate vicinity. The As presented in the Apartment Market Analysis section of this report, the average vacancy within the subject’s Woodridge/Lisle apartment submarket is 6.4%, indicating a submarket occupancy of 93.6%. Occupancy levels for the competing properties in the influencing market area are outlined in the following table.
OVERVIEW OF COMPETITIVE OCCUPANCY LEVELS

Name	YOC		Total Units		Occupancy
Brookdale on the Park		1986		252		93	%
Abbey Apartments		1975		200		90	%
Green Trails		1987		400		95	%
Villages on Maple		1972		300		94	%
Averages		1980		288		93	%

	The subject property has a history of strong occupancy that is typically in the range illustrated by competing properties in the influencing market. Occupancy at the subject property was affected by the extensive amount of renovations that were being made to the property over the past few years. As a result, the average vacancy at the property was approximately 15% in 2008 and 11% in 2009. Occupancy has since recovered to the current 92% level. Collection losses at the subject property have been minimal, less than 1% over the past few years.
	Based on the average submarket occupancy and occupancy levels exhibited by competing properties sin the immediate area, a vacancy and credit loss allowance of 7.0% is processed in the valuation pro forma.
Utility Recovery	Included in this category is the revenue received from tenants paying or reimbursing ownership for their share of utilities and services including gas, water, sewer and trash collection. Utility income in 2008 was $824

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Lisle, Illinois May 19, 2010
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	per unit increasing to $909 in 2009. The 2010 budget projects utility recovery to be $810 per unit. Based on the historical and budgeted utility income receipts, we have estimated Utility Income to be $460,080 or $810 per unit. The estimated recovery represents 76% of the total utility expense, an amount which is consistent with the historical recovery for the subject property.
Other Income	Typically, apartment projects receive additional revenue from sources such as laundry income, vending, application fees, late fees, bad check charges, and deposit forfeitures. Other income receipts at the subject property have ranged from $549 to $784 per unit or 4.1% to 6.4% of the gross potential income over the past couple of years. Other income is budgeted at $810 per unit for 2010. Other income is estimated at 6.1% of gross potential income for the appraised fiscal year based on historical collections. This amounts to $700 per unit, or $397,600.
OPERATING EXPENSES	In order to estimate expenses for the subject property, we have analyzed the subject’s operating expenses for year-end 2008 and 2009, as well as the 2010 budget. Expenses for similar apartment properties in the Chicago area were also reviewed and considered. The subject’s operating statements under review have been reconstructed and summarized below.
RECONSTRUCTED OPERATING STATEMENTS — LAKESIDE APARTMENTS

	Year End 2008						Year End 2009						2010 Budget
	Total			Per Unit			Total			Per Unit			Total			Per Unit
INCOME:
Gross Potential Rent	$	7,534,134		$	13,264		$	7,013,667		$	12,348		$	6,337,311		$	11,157
Loss to Lease	$	(441,451	)	$	(777	)	$	0		$	0		$	0		$	0
Vacancy/Collection Loss	$	(1,118,916	)	$	(1,970	)	$	(770,275	)	$	(1,356	)	$	(437,739	)	$	(771	)
Concessions	$	(385,886	)	$	(679	)	$	(364,841	)	$	(642	)	$	0		$	0
Utility Recovery	$	468,080		$	824		$	516,057		$	909		$	460,303		$	810
Other Income	$	311,801		$	549		$	445,057		$	784		$	470,909		$	829
Effective Gross Income	$	6,367,762		$	11,211		$	6,839,665		$	12,042		$	6,830,784		$	12,026
EXPENSES:
Payroll and Benefits	$	747,653		$	1,316		$	718,843		$	1,266		$	574,080		$	1,011
Repairs & Maintenance	$	350,501		$	617		$	324,862		$	572		$	348,005		$	613
Administration	$	156,685		$	276		$	177,053		$	312		$	166,547		$	293
Management Fees	$	314,673		$	554		$	335,281		$	590		$	337,215		$	594
Utilities	$	609,806		$	1,074		$	578,097		$	1,018		$	604,268		$	1,064
Turnover Expenses	$	124,794		$	220		$	155,469		$	274		$	156,957		$	276
Insurance	$	144,535		$	254		$	184,562		$	325		$	213,049		$	375
Real Estate Taxes	$	780,040		$	1,373		$	823,958		$	1,451		$	886,070		$	1,560
Marketing/Leasing	$	146,952		$	259		$	154,971		$	273		$	134,214		$	236
Reserves	$	0		$	0		$	0		$	0		$	0		$	0
Total Expenses	$	3,375,639		$	5,943		$	3,453,096		$	6,079		$	3,420,405		$	6,022
Net Operating Income	$	2,992,123		$	5,268		$	3,386,569		$	5,962		$	3,410,379		$	6,004

Source: Client Submitted Information; compiled by CRA

Overview All of the expenses have fluctuated during the past couple of years. In general, expenses are consistent with market data and reflect stabilized operations. No major changes in operations are expected or appear to be required. Expenses are expected to grow at the average annual inflation rate. Each of the expense items is discussed separately below.

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Lakeside Apartments
Lisle, Illinois May 19, 2010
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Payroll and Benefits	This expense includes payroll and benefits for the property manager, leasing agent(s), housekeeping, and maintenance personnel. The payroll expense has trended downward from $1,316 to $1,266 per unit over the past two reporting periods. The 2010 budget projects a payroll expense of $1,011 per unit. Based on the subject’s historical expense data, a salary and benefits expense of $1,200 per unit or $681,600 is forecast for the subject property.
Repairs & Maintenance	This expense line item includes charges for general maintenance and repairs, grounds and roads, and landscaping. The property appears adequately maintained with no noticeable items of deferred maintenance observed during the walk-thru. The average expense level appears reasonable based on historical figures.
	The maintenance and repair expense at the subject property has trended downward from $617 to $572 per unit over the past couple of years. The 2010 budget projects an expense of $613 per unit. The repair/maintenance expense is estimated at $615 per unit, or $349,320. We include a separate Reserves category in the projection.
Administration/Office	This category includes administrative charges and costs associated with the running of the management/leasing office including telephone service, office supplies, equipment rental, computers, etc. The administrative expense at the subject property has ranged from $276 to $312 over the past two reporting periods and is budgeted at $293 for 2010. An amount of $300 per unit or $170,400 is processed for the appraised fiscal year.
Management Fee	In the local market management services are typically a function of the revenues produced by the property, usually between 3.0% and 5.0% of collections. Based on historical operating statements under review, the subject property was managed for a fee that is equivalent to 4.9% of collected income. In consideration of current market standards and competitive nature of third-party management contracts at this time, we have processed a market oriented management fee of 3.0% of the effective gross income.
Utilities	This expense line item includes charges for common area and vacant unit electricity, gas, water/sewer and trash collection. At the subject property, tenants reimburse the landlord for gas, water and trash pick-up. Utility reimbursement has been included as a separate line item in the previous revenue analysis.
	Utility expenses fluctuate with the weather and changes in supply costs and have become highly variable due to the combination of both influences. The utility expense at the subject property has ranged from $1,018 to $1,074 per unit over the past couple of years and is budgeted at $1,064 for 2010. An amount of $1,065 per unit is used and equates to $604,920 for the appraised fiscal year.

COGENT Realty Advisors, LLC

Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 44

Turnover Expenses	This category covers the expenses associated with make-ready work on vacated apartments including paint, carpet, housekeeping, and other repair and maintenance. The turnover expense at the subject property has ranged from $220 to $274 per unit over the past couple of years and is budgeted at $276 for 2010. An amount of $156,200 or $275 per unit is estimated for the appraised fiscal year.
Insurance	Insurance includes fire, liability, theft, and boiler, exclusive of the premiums paid to employee benefit plans. The historical insurance expenses at the subject property range from $254 to $325 per unit and is budgeted at $375 for 2010. Insurance expenses are projected at $350 per unit or $198,800.
Real Estate Taxes	Real estate taxes are processed as discussed within the Real Estate Assessment and Tax Analysis section of this appraisal. The real estate tax projection is $715,200.
Marketing	This expense includes advertising, the cost of resident and locator referrals, internal leasing commissions, brochures, newsletters and resident activities. The historical marketing charges at the subject property range from $259 to $273 per unit and is budgeted at $236 for 2010. Based on historical data, marketing expenses are projected at $250 per unit or $142,000.
Reserves	Prudent management budgets a certain amount each year in a sinking fund to replace short-lived items, including kitchen appliances and cabinets, bathroom fixtures and tiling, flooring repairs, HVAC replacement and common elements such as the roof, exterior wood and parking areas. Reserves for replacement, while typically not found in submitted operating statements, are necessary in estimating a realistic operating budget so as to maintain the habitability of the apartments.
	Reserves for replacement for a property of this vintage typically range from $200 to $300 per unit. In order to remain competitive, a reserve of $250 per unit is forecast. This amounts to $142,000.
Total Expenses	On a stabilized basis, the subject’s projected expenses including reserves are projected at $3,363,869, or $5,992 per unit. The indicated operating expense ratio is 49.6% when including reserves and 47.5% without reserves. These expenses are reasonable based on similar properties in the region as reported by the IREM expense survey, our review of actual operating statistics for similar properties in the Chicago area and discussions with local apartment brokers and managers. The total expenses estimated for the subject are market oriented and reasonable.
VALUATION PRO FORMA	The following valuation pro forma summarizes the stabilized income and expenses described above for the appraised fiscal year.

COGENT Realty Advisors, LLC

Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 45

VALUATION PRO FORMA

Appraisal Fiscal Year-ending	3/30/2011
	Pro Forma			Per Unit			% of GPI
INCOME:
Gross Potential Rent	$	6,545,064		$	11,523			100.00	%
Loss to Lease	$	(98,176	)	$	(173	)		-1.50	%
Vacancy/Collection Loss	$	(458,154	)	$	(807	)		-7.00	%
Concessions	$	(65,451	)	$	(115	)		-1.00	%
Utility Recovery	$	460,080		$	810			7.03	%
Other Income	$	397,600		$	700			6.07	%
Effective Gross Income	$	6,780,963		$	11,938
EXPENSES:							% of EGI
Payroll and Benefits	$	681,600		$	1,200			10.05	%
Repairs & Maintenance	$	349,320		$	615			5.15	%
Administration	$	170,400		$	300			2.51	%
Management Fees	$	203,429		$	358			3.00	%
Utilities	$	604,920		$	1,065			8.92	%
Turnover Expenses	$	156,200		$	275			2.30	%
Insurance	$	198,800		$	350			2.93	%
Real Estate Taxes	$	715,200		$	1,259			10.55	%
Marketing/Leasing	$	142,000		$	250			2.09	%
Reserves	$	142,000		$	250			2.09	%
Total Expenses	$	3,363,869		$	5,922			49.61	%
Net Operating Income	$	3,417,094		$	6,016			50.39	%

CAPITALIZATION RATE ANALYSIS
Overall Capitalization Rate	This appraisal will consider the following techniques; (a) derivation from comparable sales and (b) investor surveys.
Derivation from Sales	The recent comparable sales utilized in the Sales Comparison Approach following this section indicate a range of overall capitalization rates of 6.42% to 8.00%. Each of the sale properties are considered generally similar to the subject property in terms of location, age and physical characteristics. The capitalization rates from these sales are summarized in the following table.
SUMMARY OF MARKET-DERIVED CAPITALIZATION RATES

Property Name	Crossroads	Brookdale Lakes	Autumn Run	Arbors of Brookdale	Retreat at Danada Farms
Date of Sale	5/30/2009	6/24/2009	9/30/2009	12/20/2009	1/11/2010
Year Built	1975	1990	1986	1989	1997
Cap Rate	8.00%	6.59%	7.80%	6.42%	7.07%

	The capitalization rates produced by these sales are a reliable indication as to an appropriate rate for the subject property. Based on recent sales data, a capitalization rate within the range of approximately 6.42% to 8.0% would be expected for the subject property.
Investor Surveys	According to the PricewaterhouseCoopers Korpacz Real Estate Investor Survey, 1st Quarter 2010 rates for apartments reported by survey participants active in the market presently range as shown.

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Lakeside Apartments
Lisle, Illinois May 19, 2010
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NATIONAL APARTMENT MARKET SURVEY

Internal Rate of Return	6.50% - 14.00%	Range
	10.18%	Average
Overall Capitalization Rate	5.00% - 11.00%	Range
	7.85%	Average
Terminal Capitalization Rate	5.00% -11.00%	Range
	8.01%	Average

Source: Korpacz Real Estate Investor Survey, 4th Quarter 2009

	As indicated below, overall rates began to increase beginning Third Quarter 2008 and continue to increase through the Fourth Quarter 2009, and in the 1st Quarter 2010 rates declined by 18 basis points. This follows general trends in the overall economy that began to deteriorate in approximately the middle of 2008 and has recently seen signs of improvements.
OVERALL CAPITALIZATION RATE TRENDS

Quarter	Average			Basis Point Change
1Q10		7.85	%		-18
4Q09		8.03	%		19
3Q09		7.84	%		35
2Q09		7.49	%		61
1Q09		6.88	%		75
4Q08		6.13	%		27
3Q08		5.86	%		11
2Q08		5.75	%		-4
1Q08		5.79	%		4
4Q07		5.75	%		-1
3Q07		5.76	%		-4
2Q07		5.80	%		-9
1Q07		5.89	%		-8

Source: Korpacz Real Estate Investor Survey

Conclusion of OAR	The subject is well maintained and represents an average quality apartment complex situated in an established residential neighborhood with good access. The property is proximate to employment centers, shopping and neighborhood support facilities. The subject has unit sizes that reflect market parameters and an amenity package that is typical of the properties in the competitive market. The subject was 92% occupied as of April 21, 2010 according to submitted data. The subject property is very competitive within its market and as a result displays a risk level that is typical or average for its asset class.
	An OAR ranging from approximately 6.5% to 8.0% was suggested from a review of actual sales data. Investor surveys indicate that the average rate for garden apartments in the national market is approximately 7.85%. In consideration of the preceding data, with primary emphasis placed on the rates extracted from sales data in the local market, a rate of approximately 7.0% is suggested for the subject property. A capitalization rate of 7.0% is concluded.
VALUE BY DIRECT CAPITALIZATION
Stabilized Cash Flow	The stabilized cash flow is based on the previous income and expense discussion.
Valuation	Value is calculated by dividing the stabilized net operating income (including an allowance for Reserves) by the concluded overall

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Lakeside Apartments
Lisle, Illinois May 19, 2010
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	capitalization rate. Thus the market value of the Fee Simple interest is calculated as follows:
	$3,417,094 ÷ 7.0% = $48,815,629
Direct Capitalization Value Conclusion	The Market Value of the Fee Simple Interest in the subject property, free and clear of financing, by the Direct Capitalization method of the Income Capitalization Approach, as of April 21, 2010, is rounded to:
FORTY-EIGHT MILLION EIGHT HUNDRED THOUSAND DOLLARS ($48,800,000)

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 48

	SALES COMPARISON APPROACH
VALUATION METHODOLOGY	The basic steps in processing the sales comparison approach are outlined as follows:
	1.    Research the market for recent sales transactions, listings, and offers to purchase or sell of properties similar to the subject property.
	2.    Select a relevant unit of comparison and develop a comparative analysis.
	3.    Compare comparable sale properties with the subject property using the elements of comparison and adjust the price of each comparable to the subject property.
	4.    Reconcile the various value indications produced by the analysis of the comparables.
REGIONAL SALES MARKET	The local market has been active in terms of investment sales of similar properties. Adequate sales exist to formulate a defensible value for the subject property via sales comparison.
PRESENTATION OF COMPARABLE SALES	To estimate the property value by the sales comparison approach, we analyzed sales from the influencing market that are most similar to the subject property in terms of age, size, tenant profile and location. The sales are compared on a price-per-unit basis, as this is a common method of comparison for such properties.
	The comparable sales summarized in the chart below and plotted on the following map, range in price from $47,222 to $154,068 per unit. While these unit prices implicitly contain both the physical and economic factors affecting real estate, these statistics do not explicitly convey many of the details surrounding a specific property. Thus, this single index to the valuation of the subject property has some limitations.

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Lakeside Apartments
Lisle, Illinois May 19, 2010
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PRESENTATION OF COMPARABLE SALES DATA

Sale No.	1			2			3			4			6
Project Name	Crossroads			Brookdale Lakes			Autumn Run			Arbors of Brookdale			Retreat at Danada Farms
Address	2610 Marigold Drive			1812 Gowdey Rd.			1627 Country Lakes			1373 Ivy Lane			22 Vivaldi Ct.
Location	Sauk Village, IL			Naperville, IL			Naperville, IL			Naperville, IL			Wheaton, IL
Type	Garden			Garden			Garden			Garden			Garden
Grantor	EMP, LP			Ambassador VIII			Century Properties			Brookarbor JV			Edge Residential, LLC
Grantee	Total Equity South				N/A		Autumn Run LLC			Prime Naperville			Avalon Down REIT V
Sale Price	$	8,500,000		$	20,700,000		$	24,870,500		$	32,000,000		$	45,450,000
Date of Sale		05/30/09			06/24/09			09/30/09			12/20/09			01/11/10
Year Built		1975			1990			1986			1989			1997
No. of Units		180			200			320			281			295
No. of Stories		3.0			2.0			2.0			2.0			3.0
Net Rentable Area (NRA)		150,140			191,400			245,708			275,345			350,606
Average Unit Size (SF)		834			957			768			980			1,188
Effective Gross Income	$	1,665,165		$	2,546,800		$	3,826,154		$	3,782,550		$	5,189,815
Operating Expenses	$	985,000		$	1,181,800		$	1,886,255		$	1,728,150		$	1,976,500
Net Operating Income	$	680,165		$	1,365,000		$	1,939,899		$	2,054,400		$	3,213,315
NOI Per Unit	$	3,779		$	6,825		$	6,062		$	7,311		$	10,893
EGIM		5.10			8.13			6.50			8.46			8.76
OER		59	%		46	%		49	%		46	%		38	%
Capitalization Rate (OAR)		8.00	%		6.59	%		7.80	%		6.42	%		7.07	%
Price Per Unit	$	47,222		$	103,500		$	77,720		$	113,879		$	154,068
Price Per SF	$	56.61		$	108.15		$	101.22		$	116.22		$	129.63

COMPARABLE SALES MAP

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Lisle, Illinois May 19, 2010
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ANALYSIS OF SALES	The comparables are examined by considering the following adjustment factors.
Ownership Interest	No adjustments are necessary, since all of the sales reflect a 100% transfer of ownership interest.
Financing Terms	The comparable sales were either all cash transactions or were financed by primary lenders at market-oriented rates. Considerate of such, no adjustments for any unusual or atypical financing is required.
Conditions of Sale	Adjustments for conditions of sale usually reflect the motivations of the buyer and the seller. We are not aware of any atypical circumstances regarding any of the comparable sales. Personal property is included as all facilities have similar unit appliance requirements and miscellaneous office and common area FF&E.
Expenditures Made Immediately
After Sale	Any required major capital costs incurred by the buyer immediately after the sale is appropriately added to the purchase price. Sale #2 had approximately $1.2 million budgeted to cure deferred maintenance that was present at the time of sale, the amount of which is included in the sale price. None of the remaining sales required any specific sale price adjustment other than what is included in general comparisons based on condition.
Market Conditions (Time)	Comparable sales that occurred under different market conditions than those applicable to the subject property as of the effective date of appraisal require adjustment for any differences that affect their values. The sales occurred between May 2009 and January 2010.
	Market conditions began to deteriorate in approximately mid-year 2008 in response to weakness that was becoming pronounced in the regional and national economies. Market fundamentals remained soft thru most of 2009; however began to moderate in the third and fourth quarters of 2009 with a contraction in capitalization rates noted in the first quarter of 2010.
	Despite some improvements in capital markets, there is no transactional support for adjustment to the sale prices paid for the improved comparable sales utilized in our analysis. Accordingly, we have made no adjustment for changes in market conditions.
Location	The comparable properties are located throughout the Chicago area. Differences may exist to slight variations in apartment submarket conditions and demographic profiles. The location of each sale is analyzed individually as it compares to the subject property’s location. Adjustments are applied where warranted.
	Sales #2, #3 and #4 are located in the adjacent community of Naperville and have generally similar locational characteristics. Sale #1 is located in the community of Sauk Village on the south side of Chicago and an upward adjustment to the sale price of this comparable is warranted die to its inferior location. Sale #5 is located in Wheaton, a suburban community

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 51

	north of the subject property. This location is considered to be slightly superior to the subject location and a downward adjustment for location is warranted.
Physical Characteristics	Physical differences include differences in building size, quality of construction, building materials, age, condition, functional utility and appearance. All of the comparable properties are generally similar to the subject in terms of age and overall physical condition. Minor adjustments are applied based on perceived differences between the subject and comparable properties for quality/curb appeal.
Average Unit Size	The subject has an average unit size of 845 square feet. Properties with larger average unit sizes tend to trade at higher prices, all other factors being equal. Conversely, properties with smaller average unit sizes tend to trade at a lower price per unit. The average unit size of each comparable property is compared to the subject and applicable adjustments are applied when warranted.
Amenities	The subject offers an amenity package that is typical for a 1970s vintage property. With the exception of Sale #2 and #5, the comparable properties offer an amenity package that is similar to the subject property. Sale #1 offers an inferior amenity package and an upward adjustment for this factor has been made.
Economic Characteristics	Economic characteristics include all the attributes of a property that affect its income. All of the sales were operating at stabilized occupancy and at market rates. As such, no adjustment was applied.
	The preceding adjustments are summarized in the following chart.

COMPARABLE SALES ADJUSTMENT GRID

Sale No.	1			2			3			4			5
Name	Crossroads			Brookdale Lakes			Autumn Run			Arbors of Brookdale			Retreat at Danada Farms
Address	2610 Marigold Drive			1812 Gowdey Rd.			1627 Country Lakes			1373 Ivy Lane			22 Vivaldi Ct.
	Sauk Village, IL			Naperville, IL			Naperville, IL			Naperville, IL			Wheaton, IL
Sale Date		5/30/2009			6/24/2009			9/30/2009			12/20/2009			1/11/2010
Price per Unit	$	47,222		$	103,500		$	77,720		$	113,879		$	154,068
ADJUSTMENTS
Financing Adjustment	$	0		$	0		$	0		$	0		$	0
Adjusted for Financing per Unit	$	47,222		$	103,500		$	77,720		$	113,879		$	154,068
Conditions of Sale Adjustment	$	0		$	0		$	0		$	0		$	0
Adjusted for Special Conditions	$	47,222		$	103,500		$	77,720		$	113,879		$	154,068
Time		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Time Adjusted Price per Unit	$	47,222		$	103,500		$	77,720		$	113,879		$	154,068
Location		10	%		0	%		0	%		0	%		-5	%
Physical Characteristics		10	%		-5	%		0	%		-5	%		-10	%
Average Unit Size		0	%		-5	%		5	%		-5	%		-10	%
Amenities		0	%		-5	%		0	%		0	%		-5	%
Economics		5	%		-5	%		0	%		-5	%		-10	%
Total Adjustments (%)		25	%		-20	%		5	%		-15	%		-40	%
Adjusted Price per Unit	$	59,028		$	82,800		$	81,606		$	96,797		$	92,441

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Page 52

VALUE CONCLUSION	After analysis and adjustments, a value range of $59,028 to $96,797 per unit is indicated. The mean and median adjusted sales prices equate to $82,534 and $82,800 per unit. Sales #3 and #4 required the least adjustment and are accorded most significance in this analysis. The adjusted indicators exhibited by these sales range from $81,606 to $96,797 per unit. A value of $85,000 per unit is indicated for the subject property.
	568 x $85,000 = $48,280,000, or $48,300,000 rounded
	Applying this value to the stabilized Effective Gross Income derived for the property within the Capitalization Approach section, results in an indicated EGIM of approximately 7.1 on a stabilized basis. This indicated EGIM is within the range of 5.1 to 8.8 produced by the sales data under analysis. This indicator suggests that the value concluded for the property via comparative analysis is reasonable based on the subject property’s income-producing characteristics.
	Accordingly, the Market Value of the Fee Simple interest in the subject property as of April 21, 2010, free and clear of financing, via the Sales Comparison Approach, is rounded to:
FORTY-EIGHT MILLION THREE HUNDRED THOUSAND DOLLARS ($48,300,000)

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Lakeside Apartments
Lisle, Illinois May 19, 2010
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	RECONCILIATION AND FINAL ESTIMATE OF VALUE
Review	The purpose of this appraisal is to provide an estimate of the market value of the Fee Simple interest in the subject property, free and clear of financing. The date of value is April 21, 2010. The indicated market value estimates for the real property interest appraised are:

Cost Approach		N/A
Income Capitalization Approach	$	48,800,000
Sales Comparison Approach	$	48,300,000

Cost Approach	The cost approach value estimate relies on the cost to produce a like structure. The cost approach is not usually considered a reliable value indicator due to the fact that investors in the market area place minimal reliance on this approach because of the age of the property. The cost approach was not considered meaningful in the valuation of the subject property and was not included in the appraisal process.
Income Approach	The Income Capitalization Approach was processed. The subject is an income-producing property, and this approach provides good evidence of market value. Both the Discounted Cash Flow and Direct Capitalization methods were employed. Based on the applicable analytical methods of the most likely investors in an asset of this type, the Discounted Cash Flow method was given greatest consideration in the conclusion of value for this approach. It is similarly given greatest consideration in the final conclusion of market value.
Sales Approach	This approach provides an estimate of value based upon the recent activities of buyers and sellers in the marketplace. This approach is generally considered to be reliable in active markets where the motivations of buyers and sellers are known and the operating characteristics of the properties being transferred are available for scrutiny. Although sales volume is down significantly from historical levels as a result of current market conditions, our market research revealed several sales of properties that are considered relatively comparable to the subject property. The value conclusion derived via this approach is supportive of that concluded via the Income Approach.
Conclusions	Based upon the data, analyses and conclusions contained within this appraisal report with primary emphasis placed on the value derived within the Income Capitalization Approach, the Market Value of the Fee Simple Interest in the subject property, free and clear of financing, as of April 21, 2010 is:
FORTY-EIGHT MILLION EIGHT HUNDRED THOUSAND DOLLARS ($48,800,000)

COGENT Realty Advisors, LLC

Lakeside Apartments
Lisle, Illinois May 19, 2010
Addenda

ADDENDA

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Addenda

ADDITIONAL SUBJECT PROPERTY PHOTOGRAPHS

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Addenda

SUBJECT PROPERTY PHOTOGRAPHS

Elevation of Typical Building

Typical Building

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Addenda

SUBJECT PROPERTY PHOTOGRAPHS

Entrance to Subject Off Fender Road

Typical Water View Amenity

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Addenda

SUBJECT PROPERTY PHOTOGRAPHS

Typical Kitchen

Typical Bedroom

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Lakeside Apartments
Lisle, Illinois May 19, 2010
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SUBJECT PROPERTY PHOTOGRAPHS

Clubhouse

1 of 2 Outdoor Pools

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Lakeside Apartments
Lisle, Illinois May 19, 2010
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SUBJECT PROPERTY PHOTOGRAPHS

Tennis Courts

View of Lake Amenity

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Addenda

IMPROVED SALES PHOTOGRAPHS

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Addenda

IMPROVED SALES PHOTOGRAPHS

Crossroads Apartments

Brookdale Lakes Apartments

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Lakeside Apartments
Lisle, Illinois May 19, 2010
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IMPROVED SALES PHOTOGRAPHS

Autumn Run Apartments

Arbors of Brookdale Apartments

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Lakeside Apartments
Lisle, Illinois May 19, 2010
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IMPROVED SALES PHOTOGRAPHS

Retreat at Danada Farms Apartments

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Lakeside Apartments
Lisle, Illinois May 19, 2010
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APPRAISER QUALIFICATIONS

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Lakeside Apartments
Lisle, Illinois May 19, 2010
Addenda

STEVEN J. GOLDBERG, MAI, CCIM
MANAGING PARTNER

STEVEN J. GOLDBERG is the Managing Partner of Cogent Realty Advisors LLC, a firm specializing in commercial real estate valuation, consultation and due diligence. His responsibilities include staff supervision, appraisal management, maintaining product quality, marketing and client development.

Mr. Goldberg has over 25 years of nationwide experience in real estate valuation, investment analysis and evaluation consultation. He has performed appraisals throughout the United States and has extensive experience in most markets situated in the Southwest and Southeast regions of the country. Mr. Goldberg’s particular area of expertise is in the appraisal and analysis of multifamily apartment projects. In addition to his expertise in the multifamily market, Mr. Goldberg has extensive experience in the appraisal of other income-producing properties including office buildings, retail properties, lodging facilities, industrial properties and mixed-use projects.

Immediately prior to forming Cogent Realty Advisors, Mr. Goldberg was an Executive Vice President of a national valuation and consulting firm and managed the Southwest regional office. Mr. Goldberg has performed marketability, consultation and feasibility reports, has served as an expert witness and has testified in various state and federal courts. These activities have been performed on behalf of real estate investors, life insurance companies, pension funds, investment banking firms, foreign and domestic financial institutions, mortgage bankers, conduit lenders, real estate advisors, law firms and governmental agencies.

Mr. Goldberg received his Bachelor of Business Administration Degree from the University of Texas in Austin, with major concentrations in both Finance and Real Estate/Urban Land Economics. He is a designated member of the Appraisal Institute and the Commercial Investment Real Estate Institute having been awarded the MAI designation in 1989 and the CCIM designation in 1994. He has attended numerous continuing education courses and has completed the requirements under the continuing education program of the Appraisal Institute.

Mr. Goldberg is state certified as a General Real Estate Appraiser in Texas. He is also a licensed Real Estate Broker in the State of Texas. He is affiliated with the North Texas Commercial Association of Realtors, International Council of Shopping Centers and Mortgage Bankers Association.

COGENT Realty Advisors, LLC

Lakeside Apartments
Lisle, Illinois May 19, 2010
Addenda

ROBERT T. DON
SENIOR APPRAISER

ROBERT T. DON, Senior Appraiser with Cogent Realty Advisors, LLC, has a strong background in real estate valuation, management, marketing, and consulting. He has 15 years of national experience within the real estate industry. As a real estate appraiser, Mr. Don has been engaged to perform valuation studies on a variety of complex commercial properties including mixed use developments, regional malls, marinas, and other special use properties. He has significant valuation experience in most national markets.

Mr. Don has worked as an urban planning consultant and asset and marketing manager since 1977. He was manager of land development projects for several large real estate investment companies in Dallas, Texas. In this capacity, Mr. Don was responsible for the marketing and sale of large planned developments and the management of a diverse real estate portfolio. From 1978 to 1983, Mr. Don worked as a land use manager with the nation’s largest land owner, International Paper Company. In this capacity, he instituted a company-wide program for land use decisions, was a review appraiser, planner, and land manager of timberlands, plants, and facilities. In addition to these responsibilities, he became a specialist in timberland analysis and was the real estate manager for 1.2 million acres in the southeastern United States.

Between 1997 and 1978, Mr. Don worked as an urban planning consultant with Gruen Associates, Inc., a national architectural and engineering firm in New York City. During this time, he was consulting planner on diverse projects including expansion of the Metropolitan Museum of Modern Art; light rail transit planning for Buffalo, New York; HUD new town planning for Flower Mound, Texas; feasibility studies for the reuse of the former Penn Central Railroad properties; and community impacts of industrial facility and military base closing.

Mr. Don received his Bachelor Degree of Urban Planning and Design from the University of Cincinnati in 1997. Since then, he has completed graduate work at the Real Estate Institute of New York University and appraisal course work at the Appraisal Institute. He has lectured extensively at universities throughout the United States and has authored articles on land use planning and real estate subjects. Mr. Don is both a licensed real estate broker and State Certified general appraiser in the State of Texas. Mr. Don is a candidate for his MAI designation with the Appraisal Institute. In addition to extensive real estate course work, he has successfully completed certain requirements towards the MAI designation.

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